Earnings and Fleury ON (Bovespa FLRY3) (Bloomberg FLRY3 BZ; Thomson FLRY3-BR) Debentures: BRFLRYDBS007, BRFLRYDBS015 e BRFLRYDBS023 On December 31 st : Shares Outstanding 156.293.356 shares Shares Outs Diluted 157.870.148 shares Adjusted Free float 62.354.926 (39,9%) Share price R$ 16,00 / US$ 4,10 Market cap R$ 2,501 MM / US$ 640 MM Cash and Cash Equivalents R$ 625 MM / US$ 160 MM Investor Relations Phone +55 11 5014-7413 ri@grupofleury.com.br www.fleury.com.br/ir Conference Call March 4 th Portuguese with simultaneous translation into English 11:00 (09:00 EDT) Phones Participants from Brasil: + 55 11 2188-0155 Participants from abroad: + 55 11 2188-0155 +1 646-843-6054 Replay: +55 11 2188-0400 Code: Fleury Webcast: www.fleury.com.br/ri São Paulo, March 3 rd 2016 Grupo Fleury (BM&FBOVESPA: FLRY3) announces today its 4 th quarter () and full year (FY15) results. All figures are compared to the same period of 2013, unless otherwise stated. Management comments: With significant advances in its differentiation strategy, Grupo Fleury produced in important growth of its activities with profitability expansion of its businesses, demonstrating the competitiveness of the Company, despite the unfavorable macroeconomic environment that characterized the period. This performance has been established through three main pillars: the expansion of Fleury Medicina e Saúde brand, the repositioning of a+ brand focused on the high-intermediate segment in the different markets where it is present and the turnaround process of our operations in Rio de Janeiro. Important to highlight that these pillars support the growth and profitability strategies of the Company as from its reputation, reinforced by increasing customer satisfaction indicators (NPS) in all geographies and public we serve. Gross revenue advanced 11.6%, reaching R$ 2.1 billion. This growth was registered in all markets and in all Company's business segments. At the same time, the better management in collecting cycle resulted in reduction of cancellations, allowing net revenue to expand 12.9%. These actions, together with the continued costs and expenses control, resulted in EBITDA (excluding non-recurring items) of R$ 382.0 MM, with a 20.2% margin, an increase of 232 bps when compared to. Net income, excluding non-recurring, presented strong growth and reached R$ 125.7 MM, a 72.2% higher result vs. The operating cash flow was record at R$ 368.9 MM (EBITDA LTM conversion rate of 103%), reflecting among other factors the consistent improvement in receivables management, with reduction in average collection period of 78 days in to 71 days in and the aging profile (current receivables represented 73.1% of receivables in versus 58.6 % in ). The return measured by adjusted ROIC without the goodwill showed strong growth reaching 22.9% in (15.3% in ). The leverage indicators remain at healthy levels, as net debt reached R$ 365.4 MM and the Net Debt/adjusted EBITDA LTM fell from 1.8x in to 1.0x at the end of. This financial performance is accompanied by an evolution in customer satisfaction indicators, which demonstrates the sustainability of the growth and margin expansion of the Company. In a consolidated view of all the Company's brands, the Net Promoter Score (NPS), which measures the level of recommendation to family and friends after the use of services, reached 73.5% in, an increase of 3.7% over the previous year. The satisfaction index reached the note 8.9, 2% more than in. Finally, we highlight that the Company enters 2016 confident in its fundamentals, anchored in the compound of technical, medical, service and management excellences. The combination of these attributes certainly enables Grupo Fleury to handle scenarios to come, as well as to capture gradually superior results. 1
Financial highlights : Gross revenue of R$ 521.8 MM, 11.0% growth (+11.9% excluding the CADE RJ PSCs' sale 1 ). Patient Service Centers (PSCs): gross revenue of R$ 437.9 MM, a 11.3% growth or 12.4% excluding the CADE RJ PSCs' sale (+11.4% in Same Store Sales) Fleury brand grows 12.5%. Regional brands excl-rj grows 13.4%. RJ expands 6.1% or 11.0%, excluding the CADE RJ PSCs' sale. Diagnostic Operations in Hospitals: gross revenue of R$ 76.4 MM, 9.8% growth (+10.1% SSS). Gross profit reached R$ 114.8 MM (+16.4%), with 24.3% margin (+92 bps) EBITDA of R$ 85.1 MM (+23.2%), a 18.0% margin (+164 bps). EBIT of R$ 54.4 MM, a 11.5% margin. Net income of R$ 25.9 MM (+108.7%) and "Cash Net Income" 2 of R$ 37.7 MM (+49.2%). Operating cash flow of R$ 118.9 MM (R$ 86.8 in ). 1 "Effect of the PSCs' sale due to CADE agreement": negative effect on revenue from the sale of 5 PSCs in Rio de Janeiro (material fact of November 11th ) in compliance with the agreement signed with CADE in. 2 All comparisons with the, unless otherwise indicated. Quarterly financial indicators R$ MM Gross Revenue 521.8 470.1 11.0% Net Revenue 473.0 422.5 11.9% Gross Profit 114.8 98.6 16.4% EBITDA 85.1 69.1 23.2% Net Income 25.9 12.4 108.7% Net Income Cash¹ 37.7 25.3 49.2% Operating Cash 118.9 86.8 37.0% Gross Margin % 24.3% 23.3% 92 bps EBITDA Margin % 18.0% 16.3% 164 bps Effective Tax Rate - 36.8% - 51.0% 1412 bps Net Income Margin 5.5% 2.9% 253 bps Net Income Cash / Net Revenue 8.0% 6.0% 199 bps Operating Cash / Net Revenue 25.1% 20.5% 460 bps 1. Cash Net Income : excludes the impact of deferred income tax 2
In and, some indicators are impacted by the effects of non-recurring items* from 1Q15 and 1Q14, as detailed below: Financial highlights : Gross revenue of R$ 2.1 bn, 11.6% growth or 11.8% excluding the CADE RJ PSCs' sale. PSCs: gross revenue of R$ 1.8bn, 11.1% growth or 11.3% excluding the CADE RJ PSCs' sale (10.2% in Same Store Sales) Fleury brand grows 12.4%. Regional brands excl. RJ grows 8.7%. RJ grows 9.8% or 10.9% excluding the CADE RJ PSCs' sale. Diagnostic Operations in Hospital: revenue of R$ 307.1 MM, a 15.7% growth (11.6% Same Hospital Sales). Gross profit reaches R$ 502.9 MM, a 26.5% margin with a 271 bps expansion. Adjusted EBITDA reaches R$ 382.0 MM (+27.5%) and 20.2% margin (+232 bps). Adjusted EBIT of R$ 259.6 MM and 13.7% margin. Adjusted Net profit of R$ 125.7 MM (+72.2%) and "Cash Net Income" of R$ 175.0 MM (+33.8%). ROIC without goodwill of 22.9%, a 757 bps evolution when compared to. Operating cash flow record of R$ 368.9 MM (R$ 285.7 MM in ). Financial Indicators - Excluding non-recurring Reported R$ MM Gross Revenue 2,097.2 1,879.4 11.6% 2,097.2 1,879.4 11.6% Net Revenue 1,895.0 1,678.9 12.9% 1,895.0 1,678.9 12.9% Gross Profit 502.9 400.0 25.7% 502.9 400.0 25.7% EBITDA 382.0 299.6 27.5% 358.0 308.3 16.1% Net Income 125.7 73.0 72.2% 107.3 85.8 25.1% Net Income Cash¹ 175.0 130.8 33.8% 156.6 143.6 9.1% Operating Cash 368.9 285.7 29.1% 368.9 285.7 29.1% Gross Margin % 26.5% 23.8% 271 bps 26.5% 23.8% 271 bps EBITDA Margin % 20.2% 17.8% 232 bps 18.9% 18.4% 53 bps Effective Tax Rate - 37.8% - 40.2% 248 bps - 37.8% - 40.2% 248 bps Net Income Margin 6.6% 4.3% 229 bps 5.7% 5.1% 55 bps Net Income Cash / Net Revenue 9.2% 7.8% 144 bps 8.3% 8.6% - 29 bps Operating Cash / Net Revenue 19.5% 17.0% 245 bps 19.5% 17.0% 245 bps EV/EBITDA (LTM) 7.5 10.3-27.0% 8.0 10.0-19.8% P/E (LTM) 14.3 19.5-26.5% 16.0 17.7-9.9% ROE (LTM) 7.8% 4.5% 331 bps 6.6% 5.3% 139 bps ROIC (LTM) 8.3% 5.8% 253 bps 7.5% 6.0% 149 bps Adjusted ROIC (LTM) 22.9% 15.3% 759 bps 20.8% 16.0% 475 bps 1.) Cash Net Income: excludes the impact of deferred income tax EV/EBITDA = [(End of quarter price) x (number of shares) + (Non-Current Debentures, Borrowings and Financings) (Cash and Equivalents)] / (EBITDA LTM) P/E = [(End of quarter price) x (number of shares)] / (Net Income LTM) ROIC without Goodwill (LTM): NOPAT LTM (IR = 34%) / Invested Capital (PL + Net Debt - Goodwill) * Non-recurring items: 1Q15 results were impacted by the joining of the Company to the Installment Incentive Program of São Paulo City Hall to settle debts related to Health s Solid Waste Tax (TRSS). The agreement covered the debts from 2003 to 2013 and recognized the year liabilities, totaling R$ 27.2MM, already considered the discounts of 75% fine and 85% interest set out in that program. 1Q14 results were favored by the reversal of R$ 18.4 million in ICMS provisions on the import of equipment after the Supreme Court decides on the enforceability of the tax. 3
General highlights: Also in December, Grupo Fleury launched in all its brands the molecular test for amniotic fluid to evaluate the possible association between zika viruses and microcephaly in fetuses. The result of the test, developed by the R&D area in six months, is ready in up to 4 days. In addition, there is in the portfolio the test by serology IgG and IgM that detects antibodies to Zika virus, indicating if the patient had the disease or not. Serology avoids unnecessary collection of amniotic fluid, which is an invasive procedure for diagnosis. In January they entered in the routine blood or urine by PCR tests to detect the presence of Zika virus during the period in which the patient has symptoms, or up to about five days after being stung by a mosquito Aedes Aegypti. In December, Grupo Fleury published the updated version of its Information Disclosure and Securities Trading Policy, which changes the media outlet for disclosure of the Company s material facts. Since then, this communication is made on Valor Econômico online (www.valor.com.br/fatosrelevantes). On November 27 th, it was announced that Grupo Fleury entered the BM&FBOVESPA s Sustentability Index (ISE) for the third consecutive year. On November 5 th, the sale of CADE RJ PSCs to Rise of Brazil was finalized, after the deal has completed all precedent conditions, such as the approval of the sale by the Administrative Council for Economic Defense (CADE). On October 28 th, Grupo Fleury announced the hiring of KPMG to replace PricewaterhouseCoopers as the Company's independent auditor to audit the financial statements and perform the review of quarterly information (ITR) of the Company as of the year 2016. The change is due to the need for periodic change of independent auditors regulated by CVM. Also in October, the expansion of the Fleury Jundiaí was launched, located in a 549m2 service area on the same avenue as the old location, the Antonio Segre. The PSC has an even broader portfolio of services, including tests of fetal medicine, echocardiography, colposcopy, mammography and bone densitometry, as well as ultrasound, already offered in the old site. There is also a Woman s Heath Site, where women have an exclusive space to do their exams. On October 06 th, Core and Core shareholders (physicians-partners) completed the sale of 13% stake of the Company's shares to Advent International. On the same date, the new Board of Directors was elected. The new composition is available at this link. Economic scenario and sector Macroeconomics The main Brazilian macroeconomic indicators deteriorated in. In a report released in March of 2016, the IBGE, informed a contraction of 3.8% in the Gross Domestic Product (GDP) in. The Consumer Price Index (IPCA) reached 10.67% in, the highest level since 2002. The SELIC rate set at the last meeting of the Monetary Policy Committee (Copom) on March 2 nd, was 14.25%. The Focus survey, released by the Brazilian Central Bank on February 26, points out that GDP must decrease 3.45% in 2016. According to the same survey, the IPCA should reach 7.57% this year. Employment Data from the Ministry of Labor and Employment show that Brazil has closed 1.5 MM formal jobs in the worst performance since 1994 when this indicator started. 4
Sector In December, the National Health Agency (ANS in Portuguese) published new rules for adjustments to be applied to contracts between private health plans and hospitals. The calculation base set is the National Index of Consumer Price (IPCA in Portuguese), in which will apply a Quality Factor, established by ANS to reach the adjustment percentage. Defined by Law 13.003, in December, the rules apply only when negotiations between the companies fails. And only when there is no index in the contract or agreement between the parties to the free trade adjustments. In January, ANS set new rules to insurance plans regarding requests for procedures and assistance service coverage. Large companies will have to offer a personal assistance unit, during business hours on working days in the capital cities or regions of greater activity and telephone service for 24 hours seven days a week, among other settings. The rules take effect on May 15 2016. Since January 02, the beneficiaries of health plans have the right to 21 more procedures. The new list included the rapid blood test for dengue and chikungunya. The ANS reviews the list of treatments required every two years based on technical criteria for inclusion of new treatments. Gross revenue Financial Performance Gross revenue reaches R$ 521.8 MM in the quarter, a 11.0% growth over. In, the revenue was R$ 2.1bn (+11.6% vs. ). Gross revenue (R$ MM) Quarter YTD 470 11.0% 522 1,879 11.6% 2,097 In, highlight to Fleury brand (+12.5%) and regional brands excl. RJ (+13.4%), mainly the operations of the a+ SP and a+ PR with an 18.1 % and 28.2% increase, respectively. In, highlight again to Fleury brand (+12.4%) and RJ brands excluding the CADE RJ PSCs' sale, with growth of 10.9% and a+ PR with an increase of 21.4%. In, the sale of five PSCs in Rio de Janeiro, called Cruzeiro do Sul, was completed (CADE RJ PSCs' sale) as material fact released on November 5th, fulfilling the performance agreement term signed with CADE in. Due to this sale, the quarter's revenue was impacted by the non-occurrence of revenue from these PSCs in November and December. For a better understanding of the growth of our operations, we show below the PSCs' growth excluding this effect. Business line performance vs. Regional brands excl. RJ 13.4% Regional brands RJ 6.1% 5.0% 11.0% Operations in Hospitals 9.8% Effect of the sale of PSCs CADE RJ Grupo Fleury 11.0% 0.9% 11.9% PSCs 11.3% 1.1% 12.4% Fleury brand 12.5% Business line performance vs. Regional brands excl. RJ 8.7% Regional brands RJ 9.8% 1.0% 10.9% Operations in Hospitals 15.7% Effect of the sale of PSCs CADE RJ Grupo Fleury 11.6% 0.2% 11.8% PSCs 11.1% 0.2% 11.3% Fleury brand 12.4% 5
Portfolio distribution Portfolio distribution 16.3% 16.1% 15.7% 16.1% 17.7% 16.9% 17.5% 17.2% 16.2% 16.5% 16.8% 16.3% 49.8% 50.5% 50.0% 50.4% B2B Fleury brand Regional brands excl. RJ Regional brands RJ B2B Fleury brand Regional brands excl. RJ Regional brands RJ Patient Service Centers (PSCs) and PSCs Assets Efficiency Revenue from PSCs reached R$ 437.9 MM in and R$ 1.8 bn in. The asset efficiency measured by gross revenue per square meter grew 17.0% in compared to the same period in, while the efficiency of gross revenue by PSC grew 18.2% to R$ 3.0 MM/PSC in. 3.7 98.1 Gross Revenue per m² per quarter 3.6 3.6 104.3 106.6 4.0 3.7 106.0 107.4 17.0% 3.9 4.2 106.7 106.5 4.3 4.3 106.3 102.1 Gross Revenue per PSC (R$ million) 18.2% 3.0 2.6 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 PSCs Quarterly Average Gross Revenue per m² (R$ thousand) Thousands m² PSCs Grupo Fleury's gross revenue per exam presented a 5.5% and 3.5% growth in and, respectively. PSCs showed growth of 6.2% in the 4QT15 and 6.4% in. The increase in the average price per exam reflects the price adjustments made in the period as well as the tests mix divided in Clinical Analysis (CA), with a lower average ticket, and Imaging Diagnostic Center (Imaging), with a higher average ticket. Operations in hospitals maintained its average prices while reference laboratory showed strong growth of 69.7% in the and 31.3% in. The average price evolution in the reference laboratory segment can be explained by the business repositioning with improvement in the mix of exams (ennobling) and price adjustments. Average Gross Revenue per test (R$) Grupo Fleury 37.0 35.1 5.5% 36.1 34.9 3.5% - Patient Service Centers 52.0 48.9 6.2% 50.6 47.6 6.4% - Operations in Hospitals 14.0 13.9 1.3% 13.8 13.8-0.1% - Lab to Lab 36.1 21.3 69.7% 33.4 25.4 31.3% 6
In the, the PSCs grew 12.4%, with an 11.4% increase in Same Store Sales (SSS). In, PSCs grew 11.3%, with a 10.2% increase in SSS. Rio de Janeiro presented growth of 10.7% in the SSS. In, Fleury brand reported continued growth driven by solid expansion in Same Store Sales (+11.0%) with maturation of existing PSCs and opening of Jundiaí PSC expansion in October. In May, the Advanced Diagnostic Center for Women was launched (+540 m2 in service area) and in October was carried out the expansion of the PSC Jundiaí (+549 m2 in service area). In, the gross revenue of Fleury brand increased by 12.4% (10.2% in SSS). In regional brands excluding Rio de Janeiro, highlight on the qualification of revenue after repositioning to intermediate and high intermediate segments and selection of payers. In, 13.4% growth in gross revenue, 12.6% in SSS and 11.0% increase in the average price per exam. In, there was an increase of 8.7% in gross revenue (+ 10.1% in SSS), 8.2% growth in the average price per exam. Gross revenue of the brands in Rio de Janeiro grew 11.0% in the quarter, excluding the CADE RJ PSCs' sale. The average price per test decreased by 3.9%, effect of the increase of CA tests in the mix of gross revenue, which have lower average prices. Analyzing separately the average price between CA and Imaging, both of them presented growth above inflation growth. In, gross revenue increased 10.9%, excluding the CADE RJ PSCs' sale. The average price per test showed a decrease of 0.7% only by the increase of CA tests in the mix that expanded 370 bps in its relevance in gross revenue. The increase of CA volume is one of the Company's strategies to improve the profitability in Rio de Janeiro s operations. Disregarding the mix effect, we present growth in average prices in both CA and Imaging tests. Comparision vs. Indicators PSCs Fleury Brand Regional Brands excl. RJ Brands RJ T o t Total (PSCs) - Gross Revenue 12.5% 13.4% 6.1% 11.3% - Gross Revenue (excl. effect of the sale of PSCs CADE RJ) 12.5% 13.4% 11.0% 12.4% - SSS 11.0% 12.6% 11.4% 11.4% - Gross Revenue / Number of Tests 7.0% 11.0% -3.9% 6.2% - Gross Revenue / Sq. Meter 10.1% 18.3% 23.8% 17.0% - Gross Revenue / PSC 7.8% 18.0% 22.2% 18.2% Indicators PSCs Comparison vs. Fleury Brand Regional Brands excl. RJ Brands RJ T o t Total (PSCs) - Gross Revenue 12.4% 8.7% 9.8% 11.1% - Gross Revenue (excl. effect of the sale of PSCs CADE RJ) 12.4% 8.7% 10.9% 11.3% - SSS 10.2% 10.1% 10.7% 10.2% - Gross Revenue / Number of Tests 5.2% 8.2% -0.7% 6.4% - Gross Revenue / Sq. Meter 9.1% 9.1% 15.8% 11.8% - Gross Revenue / PSC 8.8% 11.2% 14.7% 13.5% 7
B2B 1. Diagnostic operations in hospitals Gross revenue of R$ 76.4 MM on, 9.8% growth. In, gross revenue grew 15.7%, reaching R$ 307.1 MM. The average price was stable +1.3% in and -0.1% in. Same Hospital Sales (SHS) grew 10.1% in and 11.6% in. 2. Reference laboratory (Lab-to-lab) Gross revenue reaches R$ 6.7 MM in and R$ 26.9 MM in ; a 4.1% and 0.7% growth, respectively. 3. Preventive Medicine Health Promotion achieves gross revenue of R$ 719 thousand in and R$ 3.1MM in. Revenue s Tax and Cancellations/Deductions Revenue s taxes revenue remained stable: 6.2% in the compared to 6.3% in the and 6.2% in from 6.3% in. Allowances and deductions amount to 3.1% of gross revenue in (R$ -16.4 MM), a 70 bps decrease vs.. In, allowances and deductions represented 3.4% of gross revenue (R$ -71.7 MM), a 90 bps decrease comparing to (4.3% of gross revenue / R$ -81.7 MM). Provisions related to over 120 days cover 69.3% of the amount (63.0% in ). Accounts unpaid for more than 121 days represent 14.7% of total receivables (18.1% in ). Provisions can be reverted if a payment related to receivables due to more than 120 days is identified. Cancellations and deductions (R$ MM) e Cancellations and deductions/gross revenue (%) Quarter YTD 3.8% (-17.9) -70 bps 3.1% (-16.4) 4.3% (-81.7) -90 bps 3.4% (-71.7) 8
Net revenue Net revenue amounts to R$ 473.0 MM in the quarter, an 11.9% growth. In, it reached R$ 1.9 bn (+12.9%). Net revenue (R$ MM) Quarter YTD 423 +11.9% 473 1,679 +12.9% 1,895 As a result of growth in gross revenue and deductions in taxes and the reduction of cancellations, the composition of net revenues by business line is as follows: Net revenue breakdown R$ MM % R$ MM % Patient Service Centers 396.0 83.7% 354.8 84.0% 11.6% Operations in Hospitals 70.4 14.9% 61.0 14.4% 15.4% Reference Laboratory 6.0 1.3% 6.1 1.4% -1.4% Preventive Medicine 0.6 0.1% 0.8 0.2% -20.4% Total Net Revenue 473.0 100% 422.5 100% 11.9% R$ MM % R$ MM % Patient Service Centers 1,585.5 83.7% 1,407.7 83.8% 12.6% Operations in Hospitals 281.8 14.9% 243.0 14.5% 16.0% Reference Laboratory 24.8 1.3% 24.9 1.5% -0.3% Preventive Medicine 2.8 0.1% 3.3 0.2% -15.0% Total Net Revenue 1,895.0 100% 1,678.9 100% 12.9% 9
Cost of Services The cost of the services in the amounted R$ 358.2 MM, representing 75.7% of net revenue, a 100 bps reduction over. Cost control and productivity improvements reflected in the dilution of fixed costs, mainly in the costs relating to 'General Services, Rents and Utilities. Cost of services (R$ MM) Personnel and medical (R$ MM) 321 301 340 323 305 321 329 324 322 10.6% 352 360 358 158 150 166 157 150 152 158 158 162 12.1% 178 182 177 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 General Services, rentals and public. (R$ MM) General (R$ MM) 57 62 69 69 66 70 70 70 68 4.6% 72 73 73 32 35 37 33 31 33 32 30 27 16.7% 32 32 35 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 The analysis of the main lines of costs follows below: Personnel and Medical Services (+ 10.6%) are the Company s main cost, representing 37.5% of net revenue in the quarter, same level recorded in. Salaries, payroll taxes and medical expenses increased below the inflation while costs related to benefits had variation above the revenue growth, impacted mainly by costs related to healthcare insurance for employees. This line was also impacted by the provision of R$ 3.9 MM in profit participation as well as a reversal of R$ 0.5 million in. General Services, Rents and Utilities (+ 4.6%) accounted for 15.5% of net revenue, down 110 bps compared to the same period of. The efficiency gain in this account can be explained by: i) economy of 2.3% on PSCs rental; ii) increase of 2.0% in contracted cleaning and security services accounting; and iii) improvements in the efficiency of costs related to logistics operations presenting a decline of 1%. Materials and Outsourcing (+ 15.8%) account for 10.6% of net revenues versus 10.2% in. Despite the increase of these costs in, it kept stable over due to negotiations with suppliers resulting in increases below the inflation, compensating the fx impact on imported exams. General expenses (+ 16.5%) amounted to 7.3% of net revenue compared to 7.0% in. The loss of efficiency of this line is mainly related to increases in expenses related to maintenance of IT systems and consulting, increase in volume of tests reports impressions and contingencies costs. In, the cost of general expenses showed gains in efficiency with zero nominal growth. Depreciation and amortization (+ 0.4%) account for 4.8% of net revenue, down 50 bps compared to the previous period. 10
Cost of Services R$ MM % Net Revenue R$ MM % Net Revenue % Net Revenue Personnel and medical services 177,5 37,5% 158,4 37,5% 36,9% 36,8% General services, rent and utilities 73,5 15,5% 70,2 16,6% 15,2% 16,4% Materials and outsourcing 49,9 10,6% 43,1 10,2% 10,0% 10,1% General expenses 34,6 7,3% 29,7 7,0% 6,6% 7,5% Depreciation and Amortization 22,7 4,8% 22,6 5,3% 4,8% 5,3% Cost of Services 358,2 75,7% 323,9 76,7% 73,5% 76,2% Gross profit In, gross profit reaches R$ 114.8 MM with a 24.3% margin, representing a 16.4% growth and 100 bps, respectively, over. In, o gross profit reached R$ 502.9 MM with a 26.5% margin, a 25.7% growth and 271 bps, respectively, over. Operating Expenses Operating Expenses amount to R$ 60.4 MM in (12.8% of net revenues vs. 13.9% in ). Excluding Reported non-recurring R$ MM % Net Revenue R$ MM % Net Revenue % Net Revenue % Net Revenue General and Administrative (Excl. Depreciation) 50.9 10.8% 53.9 12.7% 10.1% 11.0% 10.1% 11.0% Depreciation and Amortization 8.0 1.7% 6.7 1.6% 1.6% 1.5% 1.6% 1.5% Other Operating Income (Expenses), net 0.8 0.2% -0.5-0.1% 0.7% 0.1% 2.0% -0.4% Provision for Contingency 0.6 0.1% -1.2-0.3% 0.4% 0.2% 0.4% 0.2% Subsidiaries' share of profits 0.0 0.0% 0.1 0.0% 0.0% 0.0% 0.0% 0.0% Operating Expenses 60.4 12.8% 58.9 13.9% 12.8% 12.8% 14.1% 12.3% General and administrative expenses, excluding depreciation and amortization (-5.6%) totaled R$ 50.9 MM in (R$ 53.9 million in ), 10.8% of net sales (vs. 12.7%). The reduction of this line is mainly related to efficiency improvements on the costs of wages and payroll taxes that decreased 1.9% and reductions in consulting, events and advertising accounts. Other income/(expenses) accumulated R$ 0.8 million, but without affecting the cash, impacted by provisions related to judicial process and CADE RJ PSCs' sale. 11
Equity pickup: Grupo Papaiz, a dental diagnostic company in São Paulo, was acquired by Grupo Fleury and Odontoprev in the end of 2012. The figures have been reported as Equity pickup because the operation is characterized as a Joint Venture and Grupo Fleury holds 51% of this business. Find below the performance in : Equity pickup R$ thousand % Net Revenues Net Revenue 14,700.5 EBITDA 1,816.3 12.4% Net Income 74.1 0.5% Net Income attributed to Grupo Fleury (51%) 38.0 EBITDA EBITDA reached R$ 85.1 MM in, with a margin of 18.0%, 170 bps higher than. In FY, excluding the effect of waste tax in 1Q15, EBITDA reached R$ 382.0 million and margin of 20.2%, an increase of 232 bps compared to the adjusted value. EBITDA (R$ MM) and Margin (%) 69 (16.3%) Quarter 23.2% 85 (18.0%) Excluding non-recurring 300 (17.8%) 27.5% 382 (20.2%) YTD 308 (18.4%) Reported +16.1% 358 (18.9%) R$ MM % Net Revenue R$ MM % Net Revenue % Net Revenue Net Income 25.9 5.5% 12.4 2.9% 253.4 bps 5.7% 5.1% Financial Result 13.4 2.8% 14.4 3.4% -57.1 bps 3.3% 3.0% Depreciation and Amortization 30.7 6.5% 29.3 6.9% -44.5 bps 6.5% 6.8% Income Tax and Social Contribution 15.1 3.2% 12.9 3.0% 14.2 bps 3.4% 3.4% Subsidiaries share of profits 0.0 0.0% 0.1 0.0% -1.8 bps 0.0% 0.0% EBITDA 85.1 18.0% 69.1 16.3% 164.2 bps 18.9% 18.4% EBITDA excluding non-recurring items 20.2% 17.8% Segment analysis: In PSCs, EBITDA reached R$ 75.5 MM in and R$ 336.1 MM in. B2B (Integrated Medicine) EBITDA amounts to R$ 9.6 MM in and R$ 45.9 MM in. 12
EBIT It reaches R$ 54.4 MM in, an 11.5% margin (9.4% in ). In, excluding non-recurring items, the EBIT was R$ 259.6 MM with 13.7% margin (11.0% in ). EBIT (R$ MM) and Margin (%) 40 (9.4%) Quarter +36.8% 54 (11.5%) Excluding non-recurring 185 (11.0%) 40.0% 260 (13.7%) YTD 194 (11.6%) Reported +21.3% 236 (12.4%) Financial result Financial result reaches R$ (13.4) MM vs. R$ (14.4) MM in. In, excluding non-recurring items effect, the result amount to R$ (60.0) MM vs. R$ (61.2) MM in. R$ million Financial income (expenses), net (13.4) (14.4) Financial income 24.7 20.4 Interest and inflation adjustment 3.4 3.6 Exchange rate change and hedge 0.2 0.0 Interest received 22.4 16.8 Other expenses (1.2) 0.0 Financial expenses (38.2) (34.8) Interest and inflation adjustment (37.3) (33.2) Exchange rate change and hedge (0.0) (0.7) Other expenses (0.8) (1.0) Excl - Non-recurring Items Reported R$ MM Financial income (expenses), net (60.0) (61.2) (63.2) (50.5) Financial income 84.7 66.6 84.7 66.6 Interest and inflation adjustment 14.2 9.7 14.2 9.7 Exchange rate change and hedge 0.4 0.1 0.4 0.1 Interest received 72.6 56.8 72.6 56.8 Other expenses (2.5) 0.0 (2.5) 0.0 Financial expenses (144.7) (127.9) (147.8) (117.2) Interest and inflation adjustment (140.5) (123.9) (143.7) (113.2) Exchange rate change and hedge (0.4) (0.9) (0.4) (0.9) Other expenses (3.7) (3.0) (3.7) (3.0) 13
Financing The Company issued three series of debentures in the last three years, amounting to R$ 950 million to be paid until February, 2020 as follows: 1st Issuance (First Series): R$ 150 MM; maturity in 2016; remuneration of CDI + 0.94% per year. 1st Issuance (Second Series): R$ 300 MM; maturity in 2018; remuneration of CDI + 1.20% per year. 2nd Issuance: R$ 500 MM; maturity in 2020; remuneration of CDI + 0.85% per year. The second payment of the 1st Issuance occurred in, of which R$ 50 million in principal and R$ 30.0 million related to interest (R$ 7.4 million of the 1st series and R$ 22.6 million of the 2nd series). In August, the Company signed a contract for a loan of R$ 155 MM with FINEP (Funding of Studies and Projects). Of this amount, R$ 101.7 MM was released in October. The payment of the loan will be done in 97 months (24 months of grace period and 73 months for principal repayments), from the signing the contract, with an annual interest rate of 4%. This loan is related to projects like: (i) expansion plan; (ii) technologies to increase productivity; (iii) development of the attendance process; (iv) education and staff development. R$ MM 3Q15 Next 12 months Gross Financial Debt 1,038.8 1,037.8 990.0 188.4 Cash & Cash Equivalents (505.3) (617.1) (624.6) Net Debt 533.5 420.7 365.4 Net Debt / Adjusted EBITDA LTM 1.8 1.1 1.0 Adjusted EBITDA LTM / Adjusted Financial Income LTM 4.9 6.0 6.4 Net Debt / EBITDA LTM 1.7 1.2 1.0 Income Tax and Social Contribution The effective tax rate was 36.8%, totaling a tax of R$ 15.1MM (R$ 3.2MM current) in. In, the effective tax was 37.8%, resulting in R$ 65.1 MM (R$ 15.9 MM current). (R$ MM) Earnings Before Taxes (EBT) 40.9 25.3 172.5 143.6 Combined income tax and social contribution rate 13.9 8.6 58.6 48.8 Non- deductible Expenses and interest on capital 1.2 4.3 6.4 9.0 Equity Pickup (0.0) (0.1) 0.1 0.0 Income tax and social contribution 15.1 12.9 65.1 57.8 % EBT 36.8% 51.0% 37.8% 40.2% Current 3.2 0.0 15.9 0.0 Deferred 11.8 12.9 49.3 57.8 In and during and, the Company has been taking benefit for tax purposes of the amortization of goodwill from acquisitions and tax losses, resulting in a current tax in of R$ 15.9 million and zero for. Below we inform the expectation for the amortization of goodwill for tax purposes. Expected Amortization of Goodwill Period Balance R$ MM 2016 166 2017 159 14
Net profit Net income reached R$ 25.9 million in the quarter, a 5.5% margin (2.9% in ). Excluding only the impact of deferred taxes (net cash income), the result is R$ 37.7 million (R$ 25.3 million in ), with an 8.0% margin. In, excluding non-recurring items, net income reaches R$ 125.7 million (a 6.6% margin). The evolution of net income compared to was 72.2% with 229 bps increase in net margin. Net cash income, excluding non-recurring items, in was R$ 175.0 MM, with a 9.2% margin. Net income (R$ MM) and margin (%) 12 (2.9%) Quarter 108.7% 26 (5.5%) Excluding non-recurring 73 (4.3%) 72.2% 126 (6.6%) YTD 86 (5.1%) Reported +25.1% 107 (5.7%) Net cash income (R$ MM) and Margin (%) 25 (6.0%) Quarter 49.2% 38 (8.0%) Excluding non-recurring 131 (7.8%) 33.8% 175 (9.2%) YTD 144 (8.6%) Reported +9.1% 157 (8.3%) 15
Cash flow The operating cash flow registered R$ 118.9 MM in the quarter, with a 37.0% growth compared to. In, operating cash flow reached R$ 368.9 MM, a historical record, with an operating cash conversion in EBITDA of 103%. In comparison with, the operating cash flow increased 29.1%. In, as can be seen in the table below, the operating cash flow was boosted by the growth of net income before non-cash effects, an increase of 21.9% compared to, and positive impact on the change in working capital, mainly in the higher turn in accounts receivables, which decreased from 78 days in to 71 days in. R$ MM Net Income 25.9 12.4 109% 107.3 85.8 25.1% Items not affecting cash: Finance Income (costs) 13.4 14.4-6.8% 63.2 50.5 25.0% Depreciation and amortization 30.7 29.3 4.7% 122.5 114.2 7.2% Income tax and social contribution 15.1 12.9 17.2% 65.1 57.8 12.7% Provisions (Reversals) 22.6 10.8 108.0% 96.8 79.9 21.1% Others 0.6 3.7-83.7% 13.6 (4.0) 440.0% Net Income before non-cash effects 108.2 83.5 29.6% 468.5 384.2 21.9% Working capital: Trade accounts receivables 19.5 11.6 67.6% (76.2) (69.7) -9.3% Suppliers 12.9 15.3-15.5% (1.6) (0.1) -1032% Salaries / Charges (14.3) (16.6) 13.8% 11.3 0.2 5618% Others Assets and Liabilities 1.0 (5.8) 117.8% (9.2) (25.0) 63.2% Other Operating Cash Flow: Financial Expenses paid (1.4) (1.2) -14.8% (4.4) (3.9) -13.0% Income tax and social contribution paid with credits (7.0) 0.0 0.0% (19.5) 0.0 0.0% Operating Cash Flow 118.9 86.8 37.0% 368.9 285.7 29.1% Investment Activities: Others Investments Activities (47.8) (40.8) -17.1% (119.1) (116.8) -1.9% Acquisitions (4.0) 0.0 0.0% (9.3) (3.7) -154.4% Financing Activities Others Financing Activities (59.6) 40.5-247.2% (105.0) 0.1-112061% Dividends and/or interest on own capital 0.0 (100.0) 100.0% (16.2) (200.0) 91.9% Cash Flow 7.5 (13.5) 155.4% 119.3 (34.7) 444% Conversion (Operating Cash Flow / EBITDA) 140% 126% 1408.1 bps 103% 93% 1038.7 bps The historical evolution of operating cash flow and its conversion into EBITDA is shown in the chart below. Between 2010 and, we presented average growth of 26.4% per year. Operating cash flow (R$ MM) and EBITDA conversion (%) 123 (61.6%) 167 (53.1%) CAGR: 31.6% 210 (75.4%) 286 (92.7%) 369 (103.1%) 2011 2012 2013 16
Account Receivables Comparing the quarters, there was an improvement in the aging profile with current receivables accounting for 73.1% of the total compared to 58.6 % in. The amount over 121 days decreased from 18.1% to 14.7% this quarter. R$ MM 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 Trade Receivables 510.4 497.0 495.0 440.4 524.6 497.9 482.5 442.7 - Current 261.2 259.2 281.4 258.3 315.2 334.1 352.2 323.6 - Up to 120 days past due 106.1 79.7 103.0 102.4 116.6 77.3 57.8 54.0-121 to 360 days past due 64.6 68.2 59.2 50.6 54.8 50.6 42.7 37.8 - Over 360 days past due 78.5 89.9 51.4 29.1 37.9 35.9 29.7 27.3 Sales Deductions Provisions (87.4) (103.9) (73.3) (50.2) (60.7) (60.3) (49.6) (45.1) Total 423.0 393.1 421.7 390.2 463.9 437.6 432.8 397.5 Current / Receivables 51.2% 52.2% 56.9% 58.6% 60.1% 67.1% 73.0% 73.1% Until 120 days / Receivables 20.8% 16.0% 20.8% 23.3% 22.2% 15.5% 12.0% 12.2% Over 120 days / Receivables 28.0% 31.8% 22.3% 18.1% 17.7% 17.4% 15.0% 14.7% Provisions / Over 121 days past due 61.1% 65.7% 66.3% 63.0% 65.4% 69.7% 68.6% 69.3% Investments CAPEX (additions to fixed and intangible assets) totaled R$ 111.7 MM in, mainly concentrated in (i) strategic IT projects, including SAP reimplementation and integration of front office system Rio de Janeiro; and (ii) the Fleury brand expansion plan. (R$ 41.3 MM) (R$ 111.7 MM) Renewal of equipments 6.2% Renewal of equipments 11.0% Infrastructure 27.1% IT 34.0% Infrastructure 21.3% IT 37.3% Expansion 32.8% Expansion 30.4% 17
Stock Market Performance Fleury shares (BM&FBOVESPA: FLRY3) end up at R$ 16.00. Average Daily Trade Volume (ADTV) in period was R$ 3.2 MM, 15.8% lower than. Average Daily Trade Volume (ADTV) R$ MM 0.125% 0.118% NI* ADTV 0.100% 0.088% 0.078% 5.3 4.5 7.6 7.1 6.2 0.081% 0.074% 0.066% 0.055% 0.050% 5.2 0.037% 3.8 3.7 2.8 3.2 2.0 2011 2012 2013 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 * Negotiability Index Investor Relations Department Phone: + 55 11 5014-7413 E-mail: ri@grupofleury.com.br Website: www.fleury.com.br/ir Address: Avenida General Valdomiro de Lima, 508-04344-903 - São Paulo, SP Brasil 18
Performance Indicators Income Statment Description Unit 1Q14 2Q14 3Q14 1Q15 2Q15 3Q15 Gross Revenue Gross Revenue R$ MM 443 462 505 470 497 532 547 522 Net Revenue Gross Revenue - Tax (ISS) - Cancellations R$ MM 395 409 452 423 447 480 496 473 COGS Personnel and Medical Services + Materials and Outsourcing + General Services, Rent and Utilities + General Expenses + Depreciation R$ MM (305) (321) (329) (324) (322) (352) (360) (358) SG&A Adjusted EBIT Adjusted EBITDA Adjusted Finance Income Does not include Other Operating Expenses / Revenues neither Contingency Provisions Earnings Before Interest and Taxes - non recurring items Earnings Before Interest, Taxes, Depreciation and Amortization - non-recurring items Interest Revenue - Interest Expenses - non recurring items R$ MM (52) (47) (50) (61) (52) (54) (58) (59) R$ MM 35.7 41.3 68.6 39.8 67.1 67.5 70.6 54.4 R$ MM 63 70 98 69 97 98 102 85 R$ MM (14.5) (15.7) (16.5) (14.4) (15.6) (15.0) (15.9) (13.4) Adjusted Net Income Adjusted Net Profit - non recurring items R$ MM 13 16 31 12 32 33 35 26 Adjusted Net Income Cash Adjusted Net Income - The deferred income tax 28 26 52 25 41 46 50 38 Cancellation Index Cancellations / Gross Revenue % -4.6% -5.1% -4.0% -3.8% -3.8% -3.6% -3.2% -3.1% Gross Margin Gross Profit / Net Revenue % 22.9% 21.5% 27.2% 23.3% 27.9% 26.7% 27.3% 24.3% Adjusted EBIT Margin Adjusted EBITDA Margin Adjusted Earnings Before Interest and Tax / Net Revenue Adjusted Earnings Before Interest, Tax, Depreciation and Amortization / Net Revenue % 9.0% 10.1% 15.2% 9.4% 15.0% 14.1% 14.3% 11.5% % 16.0% 17.0% 21.6% 16.3% 21.6% 20.5% 20.6% 18.0% Effective Tax Rate Current Tax / Earnings Before Tax % -35.5% -36.4% -40.6% -51.0% -44.6% -37.4% -35.8% -36.8% Adjusted Net Margin Adjusted Net Profit / Net Revenue % 3.4% 4.0% 6.9% 2.9% 7.1% 6.9% 7.1% 5.5% Adjusted Net Income Cash Margin (Adjusted Net Income - The deferred income tax) / Net Revenue % 7.0% 6.3% 11.5% 6.0% 9.2% 9.7% 10.1% 8.0% Market and Multiples Price Closing price in the last day of the quarter R$ 19.3 16.8 14.2 16.3 16.0 18.3 16.3 16.0 Adjusted P/E LTM (Price-to-Earnings Ratio) Quarter Closing Price / Net Cash Income LTM / # Shares Multiple 27.8 28.9 20.5 19.5 17.3 17.4 15.6 14.3 P/B (Price-to-Book Ratio) EV / Adjusted EBITDA LTM Quarter Closing Price / (Asset excl. Intangibles) / # Shares (Market Capitalization + Short and Long Term Debt - Cash and Equivalents) / Adjusted EBITDA LTM Multiple 1.8 1.6 1.3 1.6 1.5 1.6 1.4 1.5 Multiple 13.0 12.3 9.7 10.3 9.2 9.3 8.1 7.5 Financial Debt Cash & Equivalents Cash & Equivalents R$ MM 522 482 519 505 471 544 617 625 Gross Debt Trades Receivables R$ MM 984 985 985 1,039 1,035 1,039 1,038 990 Net Debt Trades Receivables - Cash and Cash equivalents R$ MM 461 503 466 534 564 494 421 365 Net Debt / Adjusted EBITDA LTM (Trades Receivables - Cash and Cash equivalents) / Adjusted EBITDA LTM R$ MM 1.7 2.0 1.7 1.8 1.7 1.4 1.1 1.0 Profitability and Return Adjusted NOPAT LTM (tax= 34%) / Capital Adjusted ROIC with no Goodwill (LTM) Employed (Shareholders Equity + Net Debt - Goodwill and Customer Contracts) % 12.7% 11.8% 13.4% 15.3% 17.0% 20.0% 20.7% 22.9% 19
Assets 12/31/ 12/31/ Equity and Liabilities 12/31/ 12/31/ FLEURY S.A. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, AND DECEMBER 31, (In thousands of Brazilian - R$) Current Assets Current Liabilities Cash and cash equivalents 624,586 505,274 Financing 9,080 3,706 Securities 4,703 - Trade payables 104,517 105,172 Trades receivables 397,521 390,193 Payroll and related taxes 83,890 53,946 Inventories 16,406 13,678 Taxes and contributions payable 24,949 24,017 Taxes recoverable 74,913 101,560 Payables - business acquisitions 4,616 3,536 Other assets 14,081 6,730 Other payables 11,263 146 Total current assets 1,132,210 1,017,435 Total current liabilities 417,658 265,081 Non-current Assets Non-current Liabilities Long-term assets: Debentures 700,000 850,000 Taxes recoverable 14,758 - Financing 101,604 110,556 Judicial deposits 42,238 31,465 Deferred income tax and social contribution 240,951 191,669 Receivables 31,052 12,703 Provision for tax, labor and civil risks 33,759 20,334 Other assets 19,205 17,076 Taxes and contributions payable 48,095 52,068 Total non-current liabilities 1,130,900 1,239,645 Investments 7,634 7,741 Equity Property and equipment 443,183 458,496 Share capital 1,379,747 1,379,747 Intangible assets 1,513,717 1,532,775 Capital reserve - stock options 5,709 5,809 Legal reserve 43,213 37,846 Investment reserve 215,762 148,941 Total Equity 1,655,439 1,572,964 Total Assets 3,203,997 3,077,690 Total Liabilities and Equity 3,203,998 3,077,690 Consolidated Consolidated Debentures 179,343 74,558 Total long-term assets 107,253 61,243 Payables - business acquisitions 6,491 15,018 Total non-current assets 2,071,787 2,060,256 Revaluation reserve 242 621 Additional dividend proposed 10,766-20
FLEURY S.A. CONSOLIDATED NET INCOME STATEMENT FOR THE PERIODS ENDED DECEMBER 31, AND DECEMBER 31, (In thousands of Brazilian - R$) Consolidated Consolidated Service revenue 472,984 422,545 1,894,960 1,678,900 Cost of services (358,227) (323,931) (1,392,074) (1,278,921) Gross Profit 114,757 98,614 502,886 399,979 Operating (expenses) income General and administrative expenses (58,904) (60,558) (222,211) (209,440) Other operating income (expenses), net (845) 507 (37,686) 7,032 Provision for tax, labor and civil risks (628) 1,198 (7,467) (3,452) Share of profits (losses) of subsidiaries/ investees (11) (85) 117 16 Operating profit before finance income (costs) 54,369 39,676 235,639 194,135 - - - - Finance income 24,731 20,417 84,683 66,636 Finance costs (38,167) (34,832) (147,842) (117,173) Finance costs, net (13,436) (14,415) (63,159) (50,537) Profit before income tax and social contribution 40,933 25,261 172,480 143,598 Income tax and social contribution: Current (3,237) - (15,855) - Deferred (11,840) (12,871) (49,282) (57,796) Profit for the period 25,856 12,390 107,343 85,802 Earnings per share attributable to owners of the Company Basic earnings per share (weighted average) 0.17 0.08 0.69 0.55 Diluted earnings per share (weighted average) 0.17 0.08 0.68 0.55 21
FLEURY S.A. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONSOLIDATED) FOR THE PERIOD ENDED DECEMBER 30, (In thousands of Brazilian - R$) Capital Capital Reserve Revaluation reserve Earnings Reserves Capital Share issue costs Stock options Revaluation reserve Legal Reserve Investment Reserve Additional dividend proposed Retained earnings Equity Balances at 12/31/2013 1,402,531 (22,784) 7,680 968 33,556 267,082 - - 1,689,033 - - - - - - - - - Realization of revaluation reserve - - - (347) - - - 347 - Stock option plan - - (1,871) - - - - - (1,871) Profit for the period (R$0.27 per share) - - - - - - - 85,802 85,802 Allocation of profit for the period: - - - - - - - - - Dividends - - - - - (130,258) - (69,742) (200,000) Legal reserve - - - - 4,290 - - (4,290) - Investment reserve - - - - - 12,117 - (12,117) - Balances at 12/31/ 1,402,531 (22,784) 5,809 621 37,846 148,941 - - 1,572,964 Realization of revaluation reserve - - - (379) - - - 379 - Stock option plan - - (100) - 2,036 - - 1,936 Profit for the period - - - - - - - 107,343 107,343 Allocation of profit: - - - - - - - - Dividends - - - - - - 10,766 (27,861) (17,095) Interest on own capital - - - - - - - (9,709) (9,709) Legal Reserve - - - - 5,367 - - (5,367) - Investment reserve - - - - - 64,785 - (64,785) - Balances at 12/31/ 1,402,531 (22,784) 5,709 242 43,213 215,762 10,766-1,655,439 22
FLEURY S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED DECEMBER 31, AND DECEMBER 31, (In thousands of Brazilian - R$) Consolidated Consolidated Profit for the period 25,856 12,390 107,343 85,802 Items not affecting cash: Income tax and social contribution 15,077 12,869 65,137 57,796 Finance income (costs) 13,436 14,415 63,159 50,537 Depreciation and amortization 30,686 29,295 122,457 114,189 Share of profits (losses) of subsidiaries/ investees 11 85 (117) (16) Earnings before interest, taxes, depreciation and amortization 85,066 69,054 357,979 308,308 Stock option plan (293) (3,586) 1,936 (1,870) Recognition (reversal) of provision for tax, labor and civil risks 628 (1,199) 7,466 3,452 Allowance for doubtful debts and disallowances 15,794 16,201 68,735 74,039 Profit sharing 6,421 (575) 18,622 4,300 Capital gain on equity interests (778) - (778) - Other 1,364 3,569 14,494 (3,987) Cash flows from operating activities before changes in assets and liabilities 108,202 83,464 468,455 384,242 Trade receivables 19,460 11,611 (76,179) (69,693) Inventories (1,956) (1,749) (3,451) 2,478 Trade payables 12,938 15,317 (1,604) (142) Payroll and related taxes (14,319) (16,608) 11,322 198 Changes in other assets 13,340 1,244 19,844 (11,716) Changes in other liabilities (10,356) (5,276) (25,582) (15,751) Total changes in assets and liabilities 19,107 4,539 (75,650) (94,626) Finance costs paid (1,387) (1,209) (4,416) (3,910) Income tax and social contribution paid (7,026) - (19,467) - Net cash provided by operating activities 118,896 86,794 368,922 285,709 Purchase of property and equipment and IT systems (41,310) (40,804) (111,697) (117,948) Sale of property and equipment - - 166 1,134 Securities (4,702) - (4,703) - Capital increase in investees (1,764) - (2,848) - Payments of acquired businesses (4,006) - (9,303) (3,658) Net cash (used in) investing activities (51,782) (40,804) (128,386) (120,472) New borrowings and debentures - 102,953-102,953 Settlement of borrowings and debentures (50,909) (50,839) (53,705) (52,622) Interest paid on borrowings (1,126) (956) (4,610) (1,435) Interest paid on debentures (29,990) (27,390) (119,408) (105,703) Interest received on financial investments 22,377 16,759 72,616 56,820 Dividends and/or interest on own capital - (100,000) (16,209) (200,000) Dividends received Papaiz - - 91 81 Net cash (used in) financing activities (59,648) (59,473) (121,225) (199,905) Increase (decrease) in cash and cash equivalents 7,466 (13,483) 119,312 (34,669) Cash and cash equivalents At the beginning of the period 617,120 518,756 505,274 539,943 At the end of the period 624,586 505,274 624,586 505,274 Increase (decrease) in cash and cash equivalents 7,466 (13,482) 119,312 (34,669) 23
FLEURY S.A. CONSOLIDATED STATEMENTS OF VALUE ADDED FOR THE PERIODS ENDED DECEMBER 31, AND DECEMBER 31, (In thousands of Brazilian - R$) Consolidated Revenues 2,044,029 1,821,714 Sales of goods and services 2,097,239 1,879,359 Allowance for doubtful debts and disallowances (68,735) (74,039) Other revenues 15,525 16,394 Inputs purchased from third parties (779,556) (752,678) Cost of sales and services (584,414) (552,694) Materials, electric power, outside services and other (194,419) (199,279) Impairment/Recovery of assets (723) (705) Gross value added 1,264,473 1,069,036 Depreciation and amortization (122,457) (114,189) Net value added 1,142,016 954,847 Value added received through transfer 84,800 66,652 Share of profits (losses) of subsidiaries/ investees 117 16 Finance income 84,683 66,636 Total value added 1,226,816 1,021,499 Distribution of value added (1,226,816) (1,021,499) Personnel and payroll charges (571,733) (485,371) Taxes and contributions (203,133) (184,260) Interest, rentals and other operating expenses (344,607) (266,066) Dividends and/or interest on own capital (37,570) (69,742) Retained earnings (69,773) (16,060) 24
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