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_______________________________________________________________
May 5, 2015
_______________________________________________________________
2. INDEPENDENT AUDITORS
4. RISK FACTORS
15
5. MARKET RISKS
36
6. COMPANY HISTORY
46
7. COMPANYS ACTIVITIES
51
8. ECONOMIC GROUP
72
9. RELEVANT ASSETS
78
85
11. PROJECTIONS
118
120
139
165
15. OWNERSHIP
173
179
181
18. SECURITIES
190
216
218
220
224
1.
1.1
Srgio Karyia
Chief Executive Officer
2.
INDEPENDENT AUDITORS
(ii)
3.
2011
736,140
1,280,619
677,592
337,170
92,177
125,656,724
5.86
0.73
2013
1,016,513
1,801,245
832,262
497,328
172,592
127,385,996
7.98
1.35
EBITDA
EBITDA is a non-accounting measurement adopted by the Company, reconciled with its financial
statements, in accordance with CVM Instruction 527/2012, as applicable. The Company has calculated its
EBITDA as net earnings before financial results, the effect of depreciation of assets and equipment used for
rental, and the amortization of intangible assets. EBITDA is not a measure recognized under BR GAAP, IFRS
or US GAAP. It is not significantly standardized and cannot be compared to measurements with similar
names provided by other companies. The Company has reported EBITDA because it is used to measure its
performance. EBITDA should not be considered in isolation or as a substitute for "net income" or "operating
income" as indicators of operational performance or cash flow, or for the measurement of liquidity or debt
repayment capacity.
2011
2012
2013
161,968
76,188
238,156
272,046
131,042
403,088
ROIC: (Annual Operational Income (30% Income Tax Rate) + remuneration from affiliates) / Average
Invested Capital of the last thirteen months.
For the Company, invested capital is defined as the sum of its own capital (net equity or shareholders
equity) and capital from third parties (total loans and other liabilities that carry interest, from banks or
not), both being average capital from the beginning to the end of the period considered.
177,836
207,238
932,708
694,680
433,887
97,929
1,206,266
801,123
510,813
105,671
1,471,402
943,023
619,452
91,073
12.3%
14.7%
14.1%
________________________________________
(1)
Effective tax rate on operational Income before financial result, and since 2011 theoretical rate of 30%.
(2)
Comprising shareholders equity.
(3)
Comprising total loans and other liabilities that carry interest.
(4)
Includes industrial services , that was sold and discontinued in 2013.
The subsequent events listed ahead refere to financial statements ended in 12/31/2013.
10
Program
Program
Program
Program
Program
Program
Program
Program
Program
Program
2012
2012
2010
2011
2012
2012
2013
2010
2011
2012
01/10/2014
01/10/2014
02/05/2014
02/05/2014
02/05/2014
02/05/2014
02/05/2014
02/14/2014
02/14/2014
02/14/2014
711
3,000
50,174
13,825
3,554
11,250
7,710
1,820
3,890
2,800
104,512
5.76
20.39
13.13
21.70
5.81
20.56
6.78
13.16
21.74
20.60
4
61
659
300
21
231
52
24
85
58
1,619
Because of the stock options issued by the company in 2014, the Companys share capital raised R$
1,618,708.66 passing R$ 553,231,139.43, divided in 127,385,996 common, nominative shares with no
par value at the end of 2013 for R$ 554,849,848.09 divided in 127,490,508 common, nominative
shares with no par value until 03/11/2014, date of the disclosure of the 2013 financial statements.
Shareholders Agreement
On February 28, 2014, the Company announced the execution of the new shareholders agreement, which
maintains the bases and assumptions of the previous shareholders agreement in force and effect until the
mentioned date.
The execution of the new shareholders agreement does not result in any amendment to the management
structure or in any change to the corporate control of Mills, which continues to be held by the parties of
shareholders agreement, in the same proportion previously held by them.
The shareholders agreement has been made available to the public in accordance with CVM regulation.
3.4
2011
In addition to the
cases provided by the
law,
as
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year could be allocated
to
the
expansion
reserve, as long as the
11
2012
In
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year could be allocated
to
the
expansion
reserve, as long as the
recorded amount in
such reservation does
2013
In addition to the
cases provided by the
law,
as
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year could be allocated
to
the
expansion
reserve, as long as the
Frequency of dividend
distribution
Restrictions to dividend
distribution
3.5
recorded amount in
such reservation does
not exceed 80% of its
capital.
At
the
Ordinary
Shareholders Meeting
held in April 20, 2012,
it was approved the
constitution
of
statutory reserves in
the net income in the
amount
of
(i)
R$63,741,776.68
of
net income retention,
that will be used to
fund part of the
planned investments
in the Companys
capital
budget
to
acquire equipment for
expansion
and
investment in facilities
and
information
technology to support
the
planned
expansion; and (ii)
R$4,608,857.70
destinated to the Legal
Reserve.
The
Companys
shareholders
are
entitled to receive the
mandatory minimum
dividend of 25% from
the
adjusted
net
income
(after
allocation to the legal
reserve).
At
the
Ordinary Shareholders
Meeting held in 2012,
it was approved the
payment of 25% of the
adjusted net income
recorded in 2011 to its
shareholders,
as
dividends and interest
on capital.
The dividends are
distributed according
to the deliberation
from the Companys
AGO.
No restrictions. The
debt contained in the
clause of prepayment
to the payment of
dividends
in
an
amount greater than
50% of the adjusted
net income for the
year. was settled in
2011.
recorded amount in
such reservation does
not exceed 80% of its
capital.
At
the
Ordinary
Shareholders Meeting
held in April 26, 2013,
it was approved the
constitution
of
statutory reserves in
the net income in the
amount of (i) R$
118.273.166,08 of net
income retention, that
will be used to defray
part of the planned
investments in the
Companys
capital
budget to acquire
equipment
for
expansion
and
investment in facilities
and
information
technology to support
the
planned
expansion; and (ii)
R$8.629.606,52
destinated to the Legal
Reserve.
The
Companys
shareholders
are
entitled to receive the
mandatory minimum
dividend of 25% from
the
adjusted
net
income
(after
allocation to the legal
reserve).
At
the
Ordinary Shareholders
Meeting held in 2014,
it was approved the
payment of 25% of the
adjusted net income
recorded in 2013 to its
shareholders,
as
dividends and interest
on capital.
The dividends are
distributed according
to the deliberation
from the Companys
AGO.
No restrictions.
12
In R$
Adjusted net income
Dividend distributed regarding the adjusted net income
Return rate regarding the net equity of the issuer
Total dividend distributed
Net Income retained
Date of approval of the retention
2011
87,568,296.26
25.0%
12.5%
25,346,519.58
63,741,776.68
4/20/2012
2012
143,939,936.54
25.0%
17.6%
41,780,000.00
103,680,234.67
4/26/2013
2013
163,962,523.90
25.0%
17.0%
46,497,455.75
118,273,166.08
4/25/2014
In R$
Dividend amount
Payment
Interest on equity amount
Payment
2011
946,519.58
30/4/2012
24,400,000.00
4/30/2012
2012
41,780,000.00
6/14/2013
2013
3,483,455.75
30/4/2014
43,014,000.00
4/30/2014
Includes completion of the special goodwill reserves in the amount of R$1,520 thousand in the years of 2011 and 2012 and R$ 808 thousand in 2013.
3.6
The dividends presented in the chart of item 3.5 were declared in the net income of the fiscal year.
3.7
Debt
632,550
(25,798)
606,752
() EBITDA ........................................................................
411,247
147.5%
Between 1 and 3
years
13
Prazo de Vencimento
Between 3 and 5
years
Over 5 years
Total
Collateral
Floating Guarantee
Unsecured obligations
Total
12,764
112,532
125,296
3,821
299,079
302,900
(in R$ thousands)
9,414
116,651
126,066
Includes FINAME, BNDES and leasing, secured by chattel mortgage on the financed assets.
Includes debntures, loans in foreign currencies with swap and other unsecured debts (liabilities and obligations).
3.9
14
5,581
72,707
78,288
31,581
600,968
632,550
4.
15
RISK FACTORS
4.1
Risk factors
a.
to the Company
The Company may not be able to fully implement its business strategy
One of the Companys key objectives over the next few years is to sustain its accelerated annual growth
rate. The continued growth depends on several factors, many of which are beyond the Companys control.
In particular, the Companys strategy for the expansion of its business units is based on the assumption
that the Brazilian construction, industrial, and oil and gas sectors will experience significant growth in coming
years, driven, to a large extent, by public and private investments aimed at improving Brazils infrastructure
for energy, sanitation, public transportation and housing, including Minha Casa, Minha Vida, the Brazilian
governments low income housing program, and the set of projects that include the Logisitc Investment
Program (PIL) and others. If these investments are not made, the Company would expect a significant
decrease in the demand for its products and services and would not be able to implement its growth strategy
satisfactorily.
The Companys organic growth strategy also includes substantial geographic expansion of its operations
through the opening of new branches. The Company may not be able to successfully expand its operations
to additional Brazilian cities and regions for a number of reasons, including shortages of qualified workers,
lack of reliable suppliers in such cities and regions, competition from local players, and difficulties in securing
market acceptance of its brands. Although the geographic expansion occurs satisfactorily, the Company will
be subjected to risks from the local economy of these new regions.
Additionally, the Companys future performance will depend on its ability to manage the rapid and significant
growth of its operations. The Company cannot guarantee that it will be able to manage its growth
successfully, or that this growth will not have an adverse effect on its existing business. If the Company is
unable to manage its growth, it may lose its leading market position, which could have a material adverse
effect on its financial condition, results of operations and the negotiation price of its shares.
The Company provides solutions for companies that operate in a number of industries,
primarily the residential, commercial and heavy construction sectors and the oil and gas
sectors. As a result, the Companys business is exposed to risks that are similar to those faced
by companies that operate in these and in other sectors.
The Heavy Construction business unit offers customized solutions to companies involved in the
implementation of large infrastructure projects, while the Real Estate business unit provides services to
residential and commercial construction companies. The products offered by Rental business unit are leased
to companies operating in a broad number of industrial segments. Consequently, the Companys financial
condition and results of operations are directly linked to the growth and performance of these several
industries, and the Company is exposed to many of the risks faced by companies operating in these
industries.
Events that may negatively affect these industries in such sectors, including macroeconomic factors, adverse
climate conditions, deterioration of the Brazilian social conditions, decreases in public investment, changes
to laws and regulations that adversely affect these industries, credit restrictions, supplier problem,
reductions in client purchasing power, and difficulties in the management of the clients business, among
others, are beyond the managements control and may cause an adverse material effect on the Companys
operations and results.
Adverse conditions in the financial and credit markets, or the Companys failure to secure
financing on adequate terms, may adversely affect its ability to run its business or to
implement its strategy.
16
The implementation of the Companys expansion strategy will demand additional investments and require
additional capital, which may not result in an equivalent increase in its operating income. In addition, the
Company may face an increase in operating costs as a result of other factors, as shortages of raw materials,
equipment or skilled labor, increased equipment costs and increased competition in the segments in which
it operates. The Company may need to raise additional funds through securities offerings, including offerings
of its shares or debt instruments, or through credit financings, in order to meet its future capital needs. The
Company may not be able to secure such funds on favorable terms, or at all.
The Company future capital needs will be determined by a number of factors, including the growth rate of
its revenues, the cost and significance of future acquisitions, and the expansion of its business operations.
The Company may need to increase its cash flow and/or seek alternative funding by entering into strategic
partnership agreements. Efforts to increase its cash flow by means of an increase in sales, reduction in
operating expenses, introduction of more efficient processes for the collection of receivables, or inventory
cuts may not be successful. In addition, the Company may not be able to raise funds to finance the
Companys operations on favorable terms, in which case it may be unable to take advantage of future
opportunities, to react to an increase in competition, or to meet its existing debt obligations. Any of the
events mentioned above could have a material adverse effect on its financial condition, operation results
and the negotiation price of its shares.
The current funding lines from the Company represented, on December 31 of 2013, a short-term debt of
R$ 125.3 million, and long-term debt of R$ 507.3 million. Pursuant to the terms of the Companys existing
financing agreements it must comply with certain conditions which restrict, among other things, its ability
to incur additional debt, pay dividends and carry out capital reductions. As a result of these restrictions, the
Company may have difficulty in securing additional financing to run its operations.
In addition, some of the Companys clients are dependent on the credit availability to finance their
investments. A scenario of credit shortages and high interest rates may adversely affect its clients ability
to fund their projects and, consequently, purchase the Companys services, which may have a material
adverse effect on its financial condition and results of operations.
The Company is also exposed to the fact that counterparts to its financing agreements may be prevented
from fulfilling their obligations toward the company, should they go bankrupt or into receivership due to a
sharp decrease in their liquidity levels, so great that such institutions may be prevented from fulfilling their
obligations. The Companys difficulty in the credit scarcity may also adversely affect its suppliers. Therefore,
should the Companys financial counterparts or suppliers be unable to satisfactorily meet their obligations
under the terms of the Companys existing agreements, the Company may need to secure alternative
financing and/or approach alternative suppliers in order to meet its own obligations toward its clients. Such
events could also lead to litigation with its partners or clients, which could have a significant adverse impact
on its reputation, operation and financial condition.
The Companys growth may be adversely affected if it fails to identify and complete strategic
acquisitions. Difficulties in the integration of acquisitions could adversely affect its results of
operations.
The Company operates in a fragmented market, where the credit access is limited. The Company believes,
therefore, that its sector will go through a process of consolidation over the next few years, which may
significantly change the existing competitive landscape. The Company believes that identifying and
executing strategic acquisitions is one way it could successfully implement its growth strategy and quickly
and efficiently expand its operations and geographic footprint. However, this strategy could be adversely
affected if the Company fails to identify suitable acquisition opportunities and/or fail to execute such
acquisitions on favorable terms. In addition, the Company may not be able to integrate companies it
acquires into its operations within the timeframe and in the manner determined by its management. Any
such failure could have an adverse effect on the rate of return on the Companys investment, preventing
17
from taking full advantage of the potential synergies of any such acquisition and result in an adverse effect
on its financial condition and results of operations.
The loss of members of the Companys management team may have a material adverse effect
on its operations.
The Companys current market position and its ability to maintain this position is largely dependent on the
skill of its highly experienced management team. None of the Companys executive officers are subject to
long-term employment contracts or non-compete agreements. The Company cannot guarantee that it will
be able to retain its current executive officers or hire other qualified professionals. The loss of a few of the
Companys senior executive officers, or its failure to attract and retain experienced professionals, may
adversely affect its business.
The Companys expansion strategy could be adversely affected if it is unable to hire qualified
professionals and provide training to its staff.
As part of the execution of its expansion strategy, the Company will need to hire new qualified professionals
active in the most various business sectors. However, it faces significant competition in the hiring of qualified
personnel from other providers of engineering and industrial services and there can be no assurance that it
will be able to attract the number of professionals necessary to implement its expansion plan in the desired
timeframe. In addition, the Company may face difficulties in retaining its current staff if it is unable to
preserve its corporate culture and offer competitive compensation packages. The Company believes that
the hiring and retention of skilled labor is a critical factor for business success and its growth strategy. The
Companys financial condition and results of operations could be adversely affected if it fails to implement
this strategy.
The Companys operations have already been interrupted in the past by labor issues, and the
Company cannot guarantee that such interruptions will not occur in the future.
As of December 31, 2013, approximately 0.3% of the Companys employees were members of labor unions,
primarily in the civil construction and trade industries. The Company has entered into collective bargaining
agreements with each of these unions, which agreements are renegotiated on an annual basis. The
renegotiation of these agreements could become more difficult as unions campaign for salary increases on
the basis of the growth of its operations. During the last three years, the operations of Industrial Services
business unit have been interrupted during negotiation of new collective bargaining agreements, the
segment was sold in 2013.
The Companys success depends, to a large extent, on the quality and safety of its services and
products.
The Companys success depends, to a large extent, on the quality and safety of the machinery and
equipment that it uses in the provision of its services or that are rented to its clients. If the Companys
products are in any way defective, incorrectly assembled or unsafe, if they cause any kind of accident or
delay in its clients operations, or if they do not meet the expected quality and safety standards, the
Companys relationships with its clients and partners could suffer, its reputation and strength of its brand
could be adversely affected, and the Company could lose market share, besides being exposed to
administrative proceedings and lawsuits in connection with any potential failures of its machinery or
equipment and incur significant expenses. The occurrence of any of these factors could adversely affect the
Companys business, financial condition and results of operations.
Proceeds from the Companys insurance policies may not be sufficient to cover damages
resulting from a contingent event.
18
The Company cannot guarantee that proceeds from its insurance policies will be sufficient to cover the
damages resulting from any event covered by such policies. Accordingly, certain risks may not be covered
under the terms of its insurance policies (such as war, fortuitous events, force majeure and interruption of
certain operations). Therefore, if any non-covered event occurs, the Company may incur additional
expenses to rebuild or refurbish its buildings, or to repair or replace its equipment. Furthermore, the
Company cannot guarantee that the proceeds from its insurance policies will be sufficient to cover the
damages caused by any event for which its insurance policies provide coverage. There can be no assurance
that the Company will be able to renew its insurance policies on favorable or acceptable terms, or at all, or
enter into new insurance policies with alternate providers.
The nature of the services rendered by the Company requires making significant financial and
technical investments before knowing whether or not it will be hired.
Due to the nature of the services the Company provides, it is required to make substantial initial investments
in the development of new processes, the provision of constant training to its employees and, in particular,
the acquisition of machinery and equipment to be used in the provision of its services. Some of these
investments are carried out before the Company knows whether its services will be used on a continuous,
successive basis and it is exposed to the risk that significant initial investments will not generate the returns
that are anticipated. The Company is particularly vulnerable to a sudden decrease in the level of demand
for its services that would result in an increase in its spare capacity and leave its revenue-generating assets
idle, which could have an adverse affect on its financial condition and results of operations.
All of the Companys business units face significant competition in the markets in which they
operate.
The Company faces strong competition in all of the segments in which it operates. Moreover, the Company
may be exposed in the future to additional competition from new market players, as well as from foreign
competitors entering the Brazilian market. The Company operates in a fragmented market which
demonstrates considerable potential for growth and is served by a substantial number of companies offering
less sophisticated and, therefore, less cost services. The Companys clients decision to hire a particular
service provider is influenced by a number of factors, including the quality of the services, the reliability of
the contractor and its ability to offer innovative solutions, and the price charged for the services required.
The Companys competitors are making substantial efforts to improve their market positions and the
Company may lose certain clients to these competitors, including long-standing clients that regularly employ
its services.
In addition, if construction companies and industries create new in-house departments to complement their
core operations, so as to no longer require the Companys services (or even to compete with the Company),
it may experience a reduction in the demand for its services, and a potential increase in competition, which
may adversely affect its market stock price and results of operations.
19
The development of engineering solutions and technological innovations which add value to
the Companys services is critical to the protection of its leading market position and to the
expansion of its business.
Due to the nature of the Companys business, it must remain abreast of the latest engineering solutions
and technological innovations in its industry. The Company must employ qualified personnel, maintain an
adequate infrastructure, and expand relationships with suppliers that have a successful track record. Should
the Company fail to provide value-added engineering solutions, or to buy or license new technologies
developed by third-parties on acceptable terms, the services rendered by the Company could become
outdated or obsolete in comparison to the services offered by its competitors. Any failure to remain at the
technological forefront of the industry would adversely affect its relationship with clients and, consequently,
its financial condition and results of operations.
b.
The interests of the Companys controlling shareholder may conflict with the interests of its
investors.
The Companys controlling shareholder has the ability, among other things, to elect the majority of the
members of its board of directors and determine the outcome of decisions requiring shareholder approval,
including with respect to transactions with related parties, corporate restructurings, asset sales and
partnership agreements, and will have power to influence the amount and timing of any dividends to be
distributed in the future, subject to the provisions of the Brazilian corporate law regarding the payment of
mandatory dividends. The Companys controlling shareholder may choose to pursue acquisition
opportunities, dispose of assets, and enter into partnership and financing agreements or similar operations
which may conflict with the interests of its other shareholders.
After the completion of the public offering, the Company came to be a diffused controlled
company, since it does not have a controlling shareholder or group of shareholders holding
more than 50% of its voting capital, which can allow it be susceptible to alliances and conflicts
between shareholders and other events resulting from the absence of a controlling
shareholder or shareholder group holding more than 50% of the voting capital.
After the completion of the public offering, the Company came to not have a shareholder holding more than
50% of its voting capital. There is no established practice in Brazil of a public company with no controlling
shareholder of the voting capital. Alliances or agreements can be made between the new shareholders,
which could have the same effect as having a group of shareholders. In the event of a group of shareholders
and this group takes a hold of the decision power of the company, it can suffer sudden and unexpected
changes in the corporate policies and strategies, including through mechanisms such as the replacement of
the Companys management staff. Besides this, the Company may be more vulnerable to hostile attempts
to acquire control and conflicts from this outcome.
Additionally, the Company's shareholders can possibly change or exclude these provisions from its bylaws
which provide a public offering for share acquisition by a shareholder who becomes holder of 20% of its
share capital and then disregard their obligation to make a public offering to acquire shares as it is required
by its bylaws. The absence of a controlling shareholder or controlling group of shareholders of more than
50% of the voting shares of the Company may also hinder certain decision-making processes, which could
not be reached the quorum required by law for certain decisions. In the case that there isnt a controlling
shareholder holding the absolute majority of the voting shares of the Company, the Company's shareholders
may not use of the same protection granted by Share Companies Law against abuses practiced by other
shareholders and, consequently, may have difficulty in repairing the damage caused. Any sudden or
unexpected change in the Company's management team in its business policy or strategic direction, attempt
to acquire control or any dispute among shareholders concerning their respective rights may adversely
affect the Company's business and operating results.
20
c.
to the shareholders.
An active and liquid market for the Companys shares may not develop. The volatility and lack
of liquidity of the Brazilian capital market could substantially limit the investors ability to sell
their shares at the desired price and time.
An investment in securities traded in emerging market countries such as Brazil frequently involves a greater
degree of risk when compared to investments in securities of issuers located in major international securities
markets, and are generally considered to be more speculative in nature. The Brazilian securities market is
substantially smaller, less liquid, more concentrated and usually more volatile than major international
securities markets such as the United States. As of December 31, 2013, the BM&FBOVESPA represented a
market capitalization of approximately R$ 2.5 trillion (US$ 1.2 trillion), with an average daily trading volume
of R$ 7.4 billion during the year. The Brazilian capital market is significantly concentrated. The ten most
liquid shares had their annual daily average financial volume traded on the BM&FBOVESPA accounting for
approximately 41% of the total volume in 2013.
These characteristics of the Brazilian capital market may substantially limit investors ability to sell the
Companys shares for the desired price and at the desired time, which in turn may have a significant adverse
effect on the price of its shares.
The average daily trading volume of the Companys shares, in 2013, was of R$ 13.8 million.
The Company may need additional funds in the future and may issue additional securities to
secure such funds. This may adversely affect the price of the shares and result in a dilution of
the investors percentage interest in the Companys shares.
The Company may need to raise funds in the future through an additional public or private offering of
shares or securities convertible into or exchangeable for shares. Any additional funds raised by the
distribution of shares or securities convertible into or exchangeable for shares may impact their price and
dilute the investors percentage interest.
Provisions in the Companys bylaws may discourage, delay or make more difficult a change of
control of the company or the approval of transactions that might otherwise in the best
interests of its shareholders.
The Companys bylaws contain provisions intended to avoid the concentration of ownership of its shares in
small groups of investors and to foster a dispersed ownership. These provisions require that any shareholder
that: (a) acquires or becomes the holder, of the Companys shares with 20% (twenty percent) or more of
emited shares of the company shall, within sixty (60) days from the date of acquisition or event that resulted
in the ownership of shares in an amount equal to or exceeding 20% (twenty percent) of the total shares
issued by the Company; (b) acquires or becomes the holder of other rights such as (i) other Corporate
Rights over a volume equal to or greater than 20% (twenty percent) of the total shares issued by the
Company or that might result in the acquisition of shares issued by the Company in an amount equal to or
greater than 20% (twenty percent) of the total shares issued by the Company, or (ii) derivatives that give
21
the right to shares of the Company representing 20% (twenty percent) or more of the shares of the
company, or that give the right to receive corresponding to 20% (twenty percent) or more of the shares of
the Company, shall apply or request for registration for subsequent realization of an OPA of all shares issued
by the Company, observing the applicable CVM regulations, to the Novo Mercado, the other regulations of
BM&FBOVESPA and the terms of the Company's Bylaws. These provisions could have the effect to
discourage, delay or even prevent the Company to merge with another company or be acquired by another
company, including transactions in which the investor may receive a bonus over the market value of the
Companys shares. Likewise, statutory provision might allow the maintenance or perpetuation of the staff
members of the Company nominated and elected by shareholders holding less predominant portion of the
Company's capital.
d.
The Company does not have subsidiaries or affiliates. The only society in which the Company holds a stake
is Rohr S/A Estruturas Tubulares (Rohr). Since Rohr operates in the same market of the Company, the
Companys management believes that both societies are subject to the same risks listed in the items (a)
above and (e), (f) and (g) below.
In addition, the minority stake held by the Company in Rohr does not allow it to prevail in the deliberations
of its general meetings or elect administrators, and shall only be facultative to elect a fiscal council member
and exercise the rights of shareholders provided for in corporate law. Consequently, the Company is exposed
to various risks, such as (i) does not receive dividends beyond the minimum required in Rohrs bylaws, the
corresponding amount, in each fiscal year of 6% of its capital, (ii) to not be able to influence the executive
administration and management of Rohr, including the case of disagreeing with decisions made by its
officers, and (iii) eventual difficulty to access Rohrs documents and information, or related to its operations.
e.
to its suppliers.
Fluctuations in the price of raw materials, components and equipment used in the Companys
operations, as well as of commodities, may adversely affect its results.
Certain raw materials and components used in the Companys operations are prone to sudden and
significant fluctuations in price, over which it has no control. The final price of components, machinery and
equipment that are acquired or rented from third parties correlates to a significant extent with the price of
commodities such as steel and aluminum. A substantial increase in the price of such commodities generally
results in an equivalent increase in the Companys suppliers operating costs and, consequently, in an
increase in the prices they charge for their products. The Company may not be able to pass these price
increases on to its clients, which could have an adverse effect on its operating costs and financial condition
and results of operations.
In addition, all of the equipment used by the Rental business unit is imported, as there is no equipment of
comparable quality available locally, and their prices are defined in foreign currencies. Should the Brazilian
Real depreciate against the foreign currencies in which the Company purchases equipment, its purchase
costs will increase and it may be unable to reflect the increased cost of equipment in the rental prices
charged.
The components, machinery and equipment used in the Companys operations are
manufactured and supplied by third parties.
The components, machinery and equipment used in the Companys operations are manufactured by thirdparties. The Company also buys other materials used in its operations from local or foreign companies. The
Company generally does not carry a very large inventory of equipment in its warehouses, only the minimum
required for the provision of its services. As a result, the Company is vulnerable to delays in the delivery of
equipment or increases in the prices charged by its suppliers, which could prevent from providing its services
22
or renting its equipment to its clients in a timely manner. Also, if the Companys suppliers are not prepared
for and are unable to meet potential increases in the demand for their products, it may not be able to buy
the amount of equipment or volume of raw materials necessary to carry out its operations. If such delays
in delivery or lack of products become recurrent, the company may not be able to find new suppliers quickly
enough to meet its clients needs. In addition, the introduction of restrictions on the acquisition of imported
goods, or the increase of taxes due on imported equipment, may have a negative impact on the Companys
business, in particular on the operations of the Rental business unit. Any delays or price increases resulting
from the actions or failures of the Companys suppliers, or due to new import regulations, could result in
increased costs for the Company, requiring a price increase, in which case the demand for the Companys
services could be adversely affected, affecting its financial condition and operation results.
f.
to its clients.
The success of the Heavy Construction business unit depends on the development of long-term
relationships with a limited number of large companies operating in the Brazilian civil
construction sector.
According to O Empreiteiro magazine, the revenue of the ten largest Brazilian construction companies
represented, in the year 2012, 58.3% of the revenues from the 50 largest construction companies in the
country. Maintaining long-standing partnerships with such companies is the key to ensure the Companys
involvement in the implementation of prestigious and innovative activities and execute its operations, in
particular, more complex projects. Should the Company lose any of its main clients, or in case the Company
is unable to maintain a close relationship with such clients, the operations and revenue from the Heavy
Construction business unit could be materially adversely affected.
The Company may be unable to attract new clients or to develop new business at the pace
required for the expansion of the Real Estate and Rental business units.
The average term of the service agreements between the Real Estate and Rental business units and their
clients is generally shorter than that of the service agreements negotiated by the other business units. As
a result, both the Real Estate and Rental business units rely on the constant generation of new business in
order to maintain their revenue at a constant level. Due to the high degree of competition faced by the Real
Estate and Rental business units, the Company must make significant investments in order to attract new
clients and retain existing ones, in addition to offering its services at competitive prices. In 2013, the Real
Estate and Rental business units accounted for 33% and 41%, respectively, of the Companys net revenue,
compared to 27% and 29%, respectively, of the Companys net revenue in 2012. If the Company is unable
to generate new business at the rate required by the Real Estate and Rental business units, the operations
and expansion of the activities carried out by these business units could be adversely affected.
The Company may be unable to meet the needs of all of its clients or deliver its services in a
timely manner.
The Company owns a limited number of machinery and equipment, which must be properly allocated to
each project in which it is involved. Delays or interruptions in the manufacturing and maintenance of such
equipment and its component parts, as well as sudden increases in the demand for the Companys services,
could prevent from providing its services in the agreed timeframe or from meeting the needs of its clients
satisfactorily and efficiently, as a result of any of the following factors:
23
If the Company is unable to meet its deadlines, either due to internal problems, or as a result of events
over which it has no control, it may lose the trust of its clients and, therefore, experience a decrease in the
demand for its services, which could adversely affect its financial condition and operation results.
Fluctuations in the price of commodities may impact the Companys clients investment
decisions and the cost of equipment and, consequently, the Company may face cancellations
or delays affecting its existing and future projects or loss of revenue.
Fluctuation in commodity prices may affect the Companys clients in many areas. For example, for clients
engaged in the oil and gas, copper and fertilizers business, fluctuation in their product prices may have a
direct impact in the profit margins and cash flows, and consequently influence decisions between
maintaining existing investments or making new expenditures. Should the Companys clients choose to
postpone new investments and/or to cancel or delay the execution of existing projects, the demand for the
Companys services would drop, which could have a material adverse effect on its operations and financial
condition. The Companys operations and financial situation has been adversely affected in the past, and
could be substantially affected in the future, due to cancellations and delays in connection with projects in
which it was or is involved.
g.
The demand for the Companys services is directly linked to the volume of public investment
in the engineering, construction and infrastructure sectors.
The public sector is generally involved in the implementation of large engineering and infrastructure projects
in Brazil, either by means of direct investment in such projects or through financing agreements. For
example, over the coming years, the Company expects that approximately R$955 billion will be invested
between the 2011 to 2014 period to fund public construction projects linked to the Brazilian governments
PAC 2 program. According to estimates from BNDES, the public and private sectors are expected to invest
R$4,0 trillion between 2014 and 2017, of which R$ 510 billion in infrastructure. Brazil has the worst
infrastructure quality among the BRICs, according to the latest World Economic Forum (WEF) and has only
invested 2% of their GDP in the sector for the last twenty years, versus 5% GDP investment in the 70s.
In 2012 the government launched a new logistics investment program which predicts investments of R$
194 billion, of which R$ 91 billion in railroads, R$ 54 billion in ports, R$ 42 billion in roads and R$ 7 billion
in airports. A new road concession project was announced early 2014, with total investments of R$ 17.5
billion. The Company believes that the involvement of the public sector will be the key in the viability of
such enterprises and in the execution of such new projects.
In Brazil, public investments have historically been influenced by macroeconomic, political and legal factors,
which are all beyond of the Companys control. Such factors could determine, among other things, the
24
suspension or cancelation of projects that require the involvement of the public sector. Any such suspension
or cancellation could have a material adverse effect on the Companys clients operations and on the demand
for its services. If estimates regarding the level of future investments in construction and infrastructure are
not correct, or if such investments are not made, the Companys clients operations (and, consequently, the
Companys financial condition and operations) may be adversely affected.
h.
Costs related to laws and workplace safety regulations as well as those third-party
professionals. Such costs can be relevant and adversely impact the Companys results.
As of December 31, 2013, the Company had 2,093 employees. Due to the nature of the services provided,
both the Companys employees and employees of third parties face risks when executing its projects, which
could result in serious injury or death. In accordance with existing labor laws and regulations, the Company
is required to provide and ensure the use of safety equipment for its employees and other individuals
working on its projects, under the Companys responsibility. If the Company fails to provide all necessary
safety equipment and ensure its proper use, or if it works with companies that are not sufficiently committed
to ensuring the safety of their staff, the Company could be deemed responsible for any accidents that take
place at the worksites where it provides services. Any accidents at the worksites where it provides its
services could potentially reduce the number of able bodied employees available to carry out its operations
and would expose the Company to the payment of fines and penalties. Any changes to existing safety
regulations may impose additional obligations on the Company and result in an increase in its expenses
with respect to safety equipment and procedures. The Company cannot predict whether any such changes
would have a significant impact on its operations. For example, changes imposing a reduced work day, for
safety reasons, could result in a drop in employee productivity, therefore forcing the Company to hire
additional staff. Similarly, provisions requiring the Company to install additional safety components could
increase the cost of its equipment and, therefore, adversely impact its operating costs and results.
In addition, the Company engaged a third-party labor provider to hire temporary employees during periods
of rapid increases in the demand for the Companys services, particularly for the Companys Industrial
Services business unit. As a result, the Company could be considered responsible for meeting any
employment obligations relating to such professionals, or deemed to be their employer under the terms of
existing laws and regulations, and would be subject to potential costs associated with failure to comply with
workplace safety regulations with respect to such professionals. Besides, the editing of stricter legal and
regulatory provisions regarding the use of outsourced personnel, or of provisions imposing additional
obligations on the contractor of outsourced services, could increase the Companys labor costs and have a
negative effect on its financial condition and results of operations.
The technical requirements and the use of the Companys equipments, as well as, the way
which the Company renders its services, may suffer relevant changes due to the incident of
drastic climate change. Moreover, the Companys inability to adapt to climate change may
adversely affect its business and financial results. Additionally, the Company is subjected to
several environmental laws and regulations that may become stricter in the future, as a
response to the drastic climate changes, and may result in higher duties and greater capital
investment.
Climate change, including flooding or erosion caused by increased rainfall, could adversely affect the
technical requirements in the projects and equipments to which the Company is subjected to, the way in
which the Company uses its equipment and the way it render its services. For instance, increased rainfall
could interfere with the Companys ability to perform industrial painting services. In addition, variations in
weather caused by climate change may lead to postponements in project schedules, which in turn may lead
to a decrease in the demand for the Companys services. The Companys inability to adapt its operations to
such climate change and maintain its quality standards from our equipment and services, may lead to a
decrease in its market share, adversely affecting its business and financial results.
25
The Companys operations are subject to several federal, state and municipal environmental laws and
regulations, including protocols and international treaties to which Brazil is party. Such regulatory framework
may become more stringent in the future due to, among other things, climate change. Compliance with the
provisions of these laws and regulations is monitored by certain governmental bodies and agencies that are
responsible for applying administrative sanctions in the event of the breach of any relevant provisions.
These sanctions may consist of fines ranging from R$500 to R$50,000,000, result in the cancelation of our
licenses and, ultimately, the temporary or permanent suspension of the Companys operations, among other
penalties. Environmental laws and regulations may become stricter in the future, which may require the
Company to make additional investments in compliance and, as a result, affect its existing investment
program. Such changes may cause an adversely affect to its financial condition and results of operations.
Besides, the failure to comply with such laws and regulations, such as operating without the necessary
environmental licenses and permits, or failing to adequately dispose of residues arising from the Companys
painting and equipment maintenance services, may result in the application of criminal and administrative
sanctions, as well as the obligation to repair the alleged harm or pay penalties for any potential damage to
the environment. Criminal sanctions may include, among other things, the arrest of the persons responsible
for the breach, the revocation or restriction of tax incentives and the cancelation or suspension of credit
facilities provided by public financial institutions. The Company could also be prohibited from providing
services to the public sector. The application of any of these sanctions could have an adverse effect on the
Companys revenues and prevent us from being able to raise capital in the financial markets. The
introduction of additional environmental obligations in the future as a result of legal or regulatory changes
or as a consequence of an increase in the environmental impact of the Companys operations, or failure to
obtain any necessary environmental licenses and permits, may result in additional and substantial
compliance costs and have an adverse effect on its business, financial condition and results of operations.
i.
The Company is part of a judicial and administrative proceedings in the civil, tax and social security, labor
and environment, as described below. The Companys contingency provisions are recorded in the financial
statements for the total amount of probable losses. As of December 31, 2013, the total value of cases
involving contingent liabilities was R$ 74.0 million and the total value involved in processes with probable
loss, according to its assessment and its legal counsel, was R$ 10.5 million, as indicated below:
Proceeding/Contingency
Civil proceedings
Possible losses
Probable losses
2011
2013
2,349
440
596
444
4,812
467
13,743
9,902
13,218
7,013
26,442
6,518
Possible losses
Probable losses
26
Labor claims
Possible losses
Probable losses
9,004
1,396
6,791
2,462
10,944
3,588
Other
Possible losses
Probable losses
5,000
1,096
5,000
-
12,834
9,919
10,573
7,666
11,853
10,053
Provisions
Judicial deposits
For the fiscal year 2011, the judicial deposits were presented on a net basis, for which had been constituted
a contingent liability. For the fiscal years 2012 and 2013, the provisions for contingencies are presented in
their entirety, unlike previous years.The Company believes that its provisions for legal and administrative
contingencies are sufficient to cover probable losses. The Company describes below the main legal and
administrative proceedings in which it is involved.
Civil Proceedings
The Company is defendant in 15 proceedings concerning civil liability and indemnification payments,
regarding, above all, contract terminations and indemnification payments, whose total value was of R$ 5.3
million on December 31, 2013. Based on the advice of the Companys external legal counsel, as of December
31, 2013 it has recorded provisions of R$ 0.5 million to cover probable losses arising from these proceedings.
Federal Justice
Instance
1st Instance
Date of filing
03/21/2006
Main facts
Chances of loss
Possible
27
Chances of loss
Analysis of impact in the case of losing
the suit
Federal Justice
1st Instance
06/07/2006
Mills Indstria e Comrcio Ltda. (succeeded by the Company) and
Federal Union
R$851 thousand on 12/31/2013
Subject Matter: This is a Lawsuit seeking the cancellation of the tax
liabilities
substantiated
in
Administrative
Proceedings
Nos.
13707.002177/93-71 (CDA No. 70.2.06.003889-75) (IRPJ) and
13707.002178/93-34 (CDA No. 70.6.06.007170-64) (FINSOCIAL). The
taxpayer executed with its affiliate Mills Equipamentos Ltda a lease
agreement of some equipment of its production. At first, the agreement
provided that the amounts would be paid on a monthly basis and
adjusted at the OTN rate. On January 5, 1998, the parties entered into
a new agreement whereby the rent would be paid annually, but that the
adjustment would still be made on a monthly basis. However, on August
3, 1998, there was the execution of the re-ratification agreement
whereby the parties ratified the agreement that the payment would be
annual and agreed that the adjustment would also be made at the
average rate of OTN. The Tax Authority understood that the lessee
should have paid, until January 5, 1998, the IRPJ and the CSLL levied
upon the amounts supposed received by way of rent in the first seven
months of the year. In the Companys defense, it claimed that no
amount was due in the period, because according to the terms of the
agreement executed with the affiliate the amount would only be paid to
the Company at the end of the fiscal year, for which reason the taxable
event of the said taxes had not yet occurred.
Latest update on 4/30/2013: Waiting for the entry of judgment.
Possible
If the claim is held to be invalid, the Company will have to pay the tax
liability disputed, in the adjusted amount of R$840 thousand (until
December 31, 2013). Since this is an isolated fact, which is not a
habitual practice of the Company, the Company does not believe that an
unfavorable decision would have a material adverse effect on its financial
situation or on its operating results..
-
Federal Justice
Instance
1st Instance
Date of filing
06/07/2006
28
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 12267.000047/2007-14
Jurisdiction
Instance
1st Instance
Date of filing
May/23/2005
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 37280.000387/2006-17
Jurisdiction
Instance
1st Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
May/23/2005
Mills do Brasil Estruturas e Servios Ltda. (succeeded by the Company)
and INSS (National Institute of Social Security)
R$1,018 thousand on 12/31/2012
This is a tax-deficiency notice (NFLD n 35.739.841-6) seeking the
payment of amounts supposedly not paid by way of social-security
contributions, because the tax authority acknowledged the employment
29
Remote
In the event of an unfavorable decision, the Company will have to pay
the tax liability in question, in the updated amount of R$1.018 million
(on December 31, 2013). Since this is an isolated fact, which is not a
habitual practice of the Company, the Company does not believe that an
unfavorable decision would have a material adverse effect on its financial
situation or on its operating results.
-
Process n 2005.51.01.026197-3
Jurisdiction
Federal Justice
Instance
2nd Instance
Date of filing
September/21/2005
Chances of loss
Analysis of impact in the case of losing
the suit
Process n E-04/0620000/2011
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
01/31/2011
Mills Estruturas e Servios de Engenharia S.A. and State of Rio de
Janeiros Treasury Department
R$2,481 thousand on 12/31/2013
Subject Matter: this infraction seeking to require the ICMS and fine as a
result of the transfer of operations to a third party without collect tax
allegedly owing. As the State Treasury claims, the society would not be
a "trading company", which is why the ICMS would be due. In:
01.31.2011 challenge of administrative acts Protocol.
30
Possible
The Company will have to pay the updated in 12/31/2013 amount of
R$2,481 thousand. Taking into account the amount involved in the
lawsuit, the Company does not believe that an unfavorable decision will
have a material adverse effect on its financial condition or operating
results.
-
Process n E-04/371.092/98
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of losing
the suit
Labor Claims
The Company is defendant in 405 labor claims, and with the advisory of an external legal counsel, the
Company has recorded provisions on the amount of R$ 3.6 million on December 31, 2013, to cover probable
losses resulting from the labor claims filed against the Company.
The labor claims filed against the Company relate to the following matters: (i) payment of indemnifications
for material damages; (ii) payment of risk, hazard, transfer and night shift allowances; (iii) length of lunch
and shift breaks; (ix) payment of equal pay for equal work; (v) workplace accidents; (vi) re-hiring as a
result of the development of professional illness; (vii) recognition of employment relationships; and (viii)
existence of subsidiary (or joint and several) responsibility between the Company and its services providers,
with respect to outsourced workers employed by such providers and allocated to providing services for the
Company. Below, the Company included a structured summary of the major labor claims that it is part:
Action n 01106. 5.134.05.00.1
Jurisdiction
Instance
1st Instance
Date of filing
October/24/2005
31
Chances of loss
Possible
In the event of loss, the Company will have to pay the amount in dispute
and will have to extend the number of employees that suffer from
deficiency, under penalty of fine. According to the external consulting
lawyer, the estimated value for the condemnation would be R$ 440
thousand (in 12/31/2013).
Action n 0120300-11.2009.5.19.0005
Jurisdiction
Instance
1st Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
09/05/2009
Author: C.F.
Defendant: Mills Estruturas e Servios de Engenharia S.A.
R$ 457 thousand on 12/31/2013
This is a labor claim by a former employee in order to obtain
compensation for moral and material damages due to occupational
illness, overtime, sundays and holidays and reflexes, severance plots,
fine according to article 467, salary differences.
Latest update on 04.30.13: Currently in medical investigation phase.
32
Chances of loss
Possible
The Company will have to collect the amount in favor of the former
employee, which is estimated by its advisors in the amount of R$457
thousand (in 12/31/2013). The Company does not believe that an
unfavorable outcome can have any adverse effects on its financial
condition or its operational results.
Action n 0122700-66.2007.5.05.0131
Jurisdiction
1 Vara do Trabalho (1st labor staff) of Camaari
Instance
1st Instance
Date of filing
11/16/2007
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
Author: F. T. P. L
Defendant: Mills Estruturas e Servios de Engenharia S.A
R$ 388 thousand on 12/31/2013
This is a labor claim by a former employee in order to obtain compensation
for moral and material damages due to occupational illness.
Latest update on 4/30/2014 were oposed by Mills Embargos to Execution.
Possible
The Company will have to collect the amount in favor of the former
employee, which is estimated by its advisors in the amount of R$ 388
thousand (in 12/31/2013). The Company does not believe that an
unfavorable outcome can have any adverse effects on its financial
condition or its operational results.
Action n 0000196-42.2013.5.05.0133
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
0001836-27.2013.5.03.0007
33
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
0110600-41.2005.5.05.0134
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
34
4.4
Judicial, administrative or arbitral awards, which are not under confidentiality, in which
the company or its subsidiaries are part and whose appellees are administrators or former
administrators, owners or ex-owners or investors of the company or its subsidiaries.
Not applicable to the Company.
4.5
On December 31, 2011, 2012 and 2013 the Company was not part of any confidential lawsuit.
4.6
Judicial, administrative or arbitral lawsuits, repetitive or related, non confidential and
based on similar legal facts and causes, which are not under confidentiality and which
together, are relevant.
Not applicable to the Company.
4.7
35
5.
36
MARKET RISKS
5.1
interest rates;
exchange controls and restrictions on remittances abroad;
fluctuations in exchange rates;
inflation;
social and political instability;
expansion or contraction of the global or Brazilian economies;
liquidity of domestic capital and financial markets;
tax burden and policy; and
other political, social and economic developments in or affecting Brazil.
Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting
these or other factors in the future may contribute to economic uncertainty in Brazil and heightened volatility
in the Brazilian securities markets. The Company cannot predict whether the current or future Brazilian
government will implement changes to existing policies on taxation, exchange controls, monetary strategy
and social security, among others, nor estimate the possible impact of any such changes on the Brazilian
economy or the Companys operations.
Federal Government's efforts to reduce inflation may delay the Brazilian economys growth
and affect the Company's business negatively.
In the past, Brazil experienced extremely high inflation rates and, consequently, adopted monetary policies
that resulted in one of the largest real interest rates in the world. In 2013, the SELIC medium rate was
8.1%. The annual inflation calculated by the IGP-M was of 5.10%, 7.82% and 5.51% in 2011, 2012 and
2013, respectively, and by the IPCA was of 6.50%, 5.84% and 5.91% in 2011, 2012 and 2013, respectively.
Inflation and measures taken by the Federal Government to combat it, especially through the Central Bank,
had and can return to have significant impact on the Brazilian economy and on the Company's business.
The strict monetary policy with high interest rates may limit the Brazilian growth and the credit availability.
Conversely, looser government and monetary policies, the decline in interest rates and the intervention in
the exchange and stock markets to adjust or fix the real value may trigger increases in inflation rates and,
consequently, the volatility of growth and the need for sudden and significant interest rate increases.
Besides this, the Company may not have conditions to adjust the prices to offset the effects of inflation on
its cost structure. Any of these factors could adversely affect the Companys business.
Exchange rate instability may affect the Brazilian economy, as well as the Companys
operations and the market value of its shares.
37
Over the last few decades, the Brazilian currency faced frequent and substantial exchange rate fluctuations
in relation to the U.S. dollar and other foreign currencies. The real showed significant devaluation against
the U.S. dollar between 2000 and 2002, reaching an exchange rate of R$ 3.53 per U$ 1.00 by the end of
2002. On the other hand, the real appreciated substantially against the U.S. dollar in the period from 2003
to mid-2008 as a result of stability in the macroeconomic environment and strong growth in foreign
investments in the country, reaching an exchange rate of R$ 1.56 per US$ 1.00 in August 2008. As a result
of the global financial crisis in mid-2008, the real depreciated 31.9% against the U.S. dollar, reaching an
exchange rate of R$ 2.34 per US$ 1.00 by the end of 2008. In 2009, due to the recovery of the Brazilian
economy at a faster rate than the global economy, the real once again appreciated 25.2% against the U.S.
dollar, reaching an exchange rate of R$ 1.74 per U$ 1.00 by December 31, 2009. This recovery also
happened in 2010, when the real increased 3.4% in comparison to U.S. dollar, reaching the exchange rate
of R$ 1.67 per U$ 1.00 in December 31, 2010. In 2011, the dollar reached its lower price on July 26, when
it reached the level of R$ 1.53 per US$ 1.00, or an appreciation of 7.1% in the year. Yet, at the end of the
year it showed a devaluation of 13.6% in the year, reaching an exchange rate of R$ 1.66 per U$ 1.00 on
December 31, 2010. In 2012 the real depreciated 9.4%, reaching R$ 2.04 per US$ 1.00 in December 31,
2012. In 2013 the real appreciated 15.1% against the U.S. dollar, reaching a exchange rate of R$ 2.36 per
US$ 1.00 in December 31, 2013.
The depreciation of the real against the U.S. dollar could create additional inflationary pressures in the
Brazilian economy and lead to increase the interest rates, which could negatively impact Brazilian economic
growth as a whole, as well as the Companys financial condition and results of operations, besides limiting
access to international financial markets and lead to governmental interventions, which could include the
introduction of recessive policies. In the context of the current slowdown in global economic activity, the
depreciation of the real against the U.S. dollar could also trigger a drop in consumer spending, as well as
create deflationary pressures and result in lower economic growth. On the other hand, the appreciation of
the real in comparison to the U.S. dollar and other foreign currencies in turn lead to deterioration in the
Brazilian balance of payments and a drop in export-based growth. Depending on the circumstances, the
depreciation or appreciation of the real could have a material adverse effect on the countrys economic
growth, as well as on the Companys business and the market value of the Companys shares.
Events and the perception of risk in other countries, especially the United States and emerging
market countries, may adversely affect the market price of Brazilian securities, including that
of the Companys shares.
The market price of securities issued by Brazilian companies is affected to varying degrees by economic
and market conditions in other countries, including the United States and other Latin American and emerging
market countries. Therefore, investors reactions to developments in these other countries may have an
adverse effect on the market value of securities of Brazilian issuers. Crisis in other emerging market
countries may reduce investor interest in securities issued by Brazilian companies, including those issued
by the Company.
38
The Company takes a dynamic approach to analyzing its exposure to interest rates. Various scenarios are
simulated, taking into consideration refinancing, financing and hedging. Based on these scenarios, the
Company determines a reasonable change in the interest rate. The scenarios are prepared only for liabilities
that represent the main positions with interest. See below the sensitivity analysis of possible fluctuations in
interest rates.
Sensitivity analysis
The following table shows the sensitivity analysis of the financial instruments, describing the risks that could
generate material losses for the Company, with the most probable scenario (scenario I), as assessed by
management, considering an annual horizon. Two other scenarios are also shown, as required by the
Brazilian Securities Commission - CVM, in Instruction No. 475/2008, in order to show deterioration of 25%
and 50% of the risk variable considered, respectively (scenarios II and III):
Debt
BNDES
Leasing
Working Capital
Debentures - 1 issuance
Debentures - 2 issuance, 1st series
Index
TJLP
CDI
CDI
CDI
CDI
Total
Present
23,427
8,154
39,932
275,530
166,938
513,981
Scenario I
(probable)
1,493
2,683
4,244
25,626
16,699
50,745
Variation
The sensitivity analysis presented above considers changes in relation to the interest rate risk, maintaining
constant other variables, associated with other risks.
Reference
CDI (%)
TJLP (%)
Scenario I
Rate
Maintenance
10.5%
5.0%
Scenario II
+25%
13.1%
6.3%
Scenario III
+50%
15.8%
7.5%
Regarding interest risk, the Company's management considered as a probable premise (scenario I) for its financial instruments a 10,5% rate, considering an
increase in the CDI rate in line with the expected increase in the Selic rate, since there is a direct relationship between the rates, and a rate increase as premise
for the other two scenarios.
For financial liabilities related to loans and financing - BNDES, the Company's management considered as a probable premise (scenario I) would be the
maintenance of the TJLP, since there is no evidence of a change in the short term, and a rate increase as a premise for the other two scenarios.
Inflation risk
The Company seeks to reflect inflation rates in the prices that are charged for its products and services.
However, Brazilian laws and regulations provide that long-term agreements may only be adjusted for
inflation once every 12 months. The main inflation indexes used by the Company to adjust prices under
long-term agreements are IGP-M and IPCA, released by the Brazilian Institute of Geography and Statistics
(IBGE). In addition, the Companys payroll is affected by salary increases negotiated under collective
bargaining agreements, which are usually in line with increases in the main Brazilian inflation indexes.
In 2012, the Company issued debentures with an interest rate linked to the inflation index IPCA. This way,
there is a risk that the Company will incur losses due to fluctuations in the IPCA index, which increase
financial expenses relating to the second series of the 2nd issue of debentures issued by the Company.
In the years 2011, 2012 and 2013, the IGP-M ndex reported by FGV was of 5.1%, 7.8% and 5.5%,
respectively, and the IPCA ndex announced by IBGE was of 6.5%, 5.8% and 5.9%, respectively.
Sensitivity analysis
39
The following table shows the sensitivity analysis of the financial instruments, describing the risks that could
generate material losses for the Company, with the most probable scenario (scenario I), as assessed by the
management, considering an annual horizon. Two other scenarios are also shown, as required by the
Brazilian Securities Commission - CVM, in Instruction No. 475/2008, in order to show deterioration of 25%
and 50% of the risk variable considered, respectively (scenarios II and III):
Debt
Debentures - 2 Issue 2 tranche
Index
IPCA
Total
Present
120,803
120,803
The sensitivity analysis presented above considers changes in relation to the particular risk, maintaining
constant other variables, associated with other risks.
Reference
IPCA(%)
Scenario I
Rate
Maintenance
6.0%
Scenario II
+25%
7.5%
Scenario III
+50%
9.0%
For financial liabilities related to the second issue of the debntures, the Company's management considered as likely premise (scenario I), expectation of IPCA
for 2014 described the FOCUS report released by the Central Bank of Brazil on February 14, 2014 since there is no evidence of a change in the short term, and a
rate increase as a premise for the other two scenarios.
40
2011
Heavy Construction
Industrial Services
Real Estate
Rental
Events
Total
Trade
Receivables
52,867
66,585
59,041
51,290
4,247
234,030
2013
Trade
Receivables
68,785
4,408
82,145
73,468
3,796
232,602
ADD
13,715
4,408
16,071
18,637
1,030
53,861
Remaining amount receivable from the operations of the Industrial Services business unit, which was discontinued on November 30, 2013.
Value to receive for the sale of the fixed asset from the Business unit events that was discontinued in 2008
Liquidity risk
Liquidity risk is the risk of the Company encountering difficulties in fulfilling its obligations associated with
its financial liabilities that are settled with cash payments or with another financial asset. The Companys
41
approach to managing liquidity is to ensure, to the greatest extent possible, that there is always sufficient
liquidity to fulfill its obligations as they fall due, under normal and stress conditions, without causing
unacceptable losses or risking harming the Companys reputation.
The financial department monitors ongoing forecasts of the Companys liquidity requirements to ensure that
it has sufficient cash to meet its operating needs. The monthly forecasts take into consideration the plans
for financing the Companys debt, fulfillment of contractual clauses and the meeting of internal targets in
accordance with the Companys strategic plan. In addition, the Company maintains lines of credit with the
main financial institutions operating in Brazil.
The table below presents the Companys non-derivative financial liabilities per maturity bracket,
corresponding to the remaining period in the balance sheet until the contractual date of maturity.
As of December 31, 2013,in R$ thousands
Between
Between two
Over five
one and
and five
years
two years
years
49,475
11,652
5,910
131,129
374,963
167,429
1,084
267
181,955
386,615
173,339
Less than
one year
Borrowings and financing
Debentures
Finance leases
Derivative financial instruments
Trade payables
Total
6,144
139,418
7,612
37,904
191,078
5.2
a.
The Companys activities are exposed to several financial risks (including risks of interest rate, inflation,
exchange rate, price fluctuation from raw materials and imported equipment and credit risk). The risk
management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Company's financial performance. The Company uses derivative financial instruments
to hedge against certain risk exposures and has a policy not to participate in any trading of derivatives for
speculative purposes.
Risk management is carried out by the Finance department, under policies approved by the Board of
Directors. The Finance department identifies, evaluates and protects the Company from financial risks in
co-operation with the Company's operating units. The Finance department establishes principles for overall
risk management, as well as for specific areas, such as foreign exchange risk, interest rate risk, credit risk,
use of derivative financial instruments and non-derivative financial instruments, and investment of cash
surplus.
b.
The Company intends on using financial derivative instruments locally and abroad to manage the exchange
and interest rate fluctuation risks. In accordance with the accounting principles generally accepted in Brazil,
the derivative contracts are going to be recorded in the balance sheet based on the fair market value
recognized in the revenues statements, unless in cases when the specific hedging criteria are met. The
market value estimations are going to be held on a specific date, usually based on the mark-to-market.
c.
In order to protect shareholders equity from exposure to foreign currency commitments, the Company
developed a strategy to mitigate the market risk. When applied, the objective of the strategy is to reduce
the volatility of the desirable cash flow, maintaining the planned disbursement of resources.
42
The Company considers management of these risks essential to support its growth strategy without
potential financial losses reducing its operating income, as the Company does not seek financial gains from
derivatives. Foreign currency risk management is carried out by the Financial Management and Director,
who assess the potential exposure to risks and establish guidelines for measurement, monitoring and
management of the risks of the Company's operations.
Based on this objective, the Company contracts derivative operations, normally swaps and NDF (Non
Deliverable Forwards), with prime financial institutions (brAAA credit rating - national scale, Standard &
Poor's or similar), to guarantee the commercial value agreed on ordering the item to be imported. Similarly,
swap or NDF contracts should be contracted to guarantee the payment flow (amortization of principal and
interest) of foreign currency financing. Under the Company's by-laws, any contract or assumption of
obligation in excess of R$ 10.0 million) must be approved by the Board of Directors, unless foreseen in the
Business Plan. It is not necessary to contract hedge operations for amounts of less than R$ 100,000, with
maturities of less than 90 days. Other commitments should be protected against foreign exchange exposure.
Swap and NDF transactions are carried out to translate future foreign currency financial commitments into
reais. By contracting these operations, the Company minimizes the foreign exchange risk by leveling both
the amount of the commitment and the exposure period. The cost of contracting the derivative is tied to
the interest rate, normally to the CDI (Interbank deposit certificate) percentage. Swaps and NDFs maturing
before or after the final maturity of the commitments may, in time, be renegotiated so that their final
maturities are the same as - or close to - the final maturity of the commitment. In this way, on the settlement
date, the result of the swap and the NDF may offset part of the impact of the exchange variation of the
foreign currency against the real, assisting stabilization of the cash flow.
As derivatives, the monthly position is calculated by the fair value methodology, calculating the present
value by applying the market rates that are impacted on the determination dates. This widely used
methodology may result in monthly distortions in relation to the curve of the derivative contracted, however,
the Company is of the opinion that this is the best methodology to use, as it measures the financial risk in
the event of the need for early settlement of the derivative.
By monitoring the commitments assumed and the monthly valuation of the fair value of the derivatives, it
is possible to monitor the financial results and the impact on the cash flow and to ensure that the original
objectives are achieved. The calculation of the fair value of the positions is provided monthly for
management supervision.
The derivative instruments contracted by the Company are intended to protect its equipment import
operations against fluctuations in the exchange rate in the interval between placing the order and the
corresponding formal receipt in Brazil. They are not used for speculative purposes.
As of December 31, 2013, the Company had equipment purchase orders with foreign suppliers amounting
approximately to US$ 71.8 million (in December 31, 2012, such orders amounted to US$ 78.2 million), all
of them with payments expected during 2014.
In order to reduce the Companys exposure to exchange rate fluctuations between the date of the order
and the date of the settlement of these obligations, the Company hired derivative instruments represented
by swap contracts in the aggregate amount of R$ 168.4 million, which fair value on December 31, 2013,
totalized R$ 7.5 million, as presented in the table below.
The derivatives are evaluated by the market rate present value, in the base data of future flow determined
by the application of contractual rates until maturity. For contracts with limiter or double index were
considered, in addition, the embedded option in the swap contract.
The Companys hedge operations are realized in order to seek protection against fluctuations in foreign
currency of its equipments and machines importations. Such operations are classified as hedge accounting.
43
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2011
Type
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2012
NDF
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2012
67,958
2,842
152,868
(800)
(800)
152,868
(800)
(800)
168,419
7,516
7,516
168,419
7,516
7,516
2,842
206
(1)
(1)
68,164
2,841
2,841
The company ensures it effectiveness of these instruments with the Dollar offset methodology, which is
commonly used by derivative market participants, and consists in comparing the present value, net of
foreign currency exposure and Company commitments with the derivatives hired for such hedge.
On December 31, 2013, there was no inefficiency in the results of the hedge operations of the Company.
Considering the fact that the Company ensures the effectiveness of the realized hedge accounting
operations, the gains and losses observed in these derivative operations are recognized in counterpart of
the hedged asset (fixed asset) as part of the initial cost of the asset in the same moment of the accounting.
In December 31, 2013, the amount of R$ 2.3 million were transferred from the net equity and deducted in
equipments initial cost.
d.
Regarding the exchange rate risk, The Company's policy is to not be exposed to any commitments in foreign
currency. For the interest rate risk, the Companys policy is to operate with floating interest rates, since
their revenues also grow along with inflation. The Company does not use protection against the inflation
risk caused by momentary mismatch between its revenues and costs.
e.
If the Company uses various financial instruments with various objectives for
asset protection (hedge) and what these objectives are
The Company operates financial instruments in order to maintain the price of imported equipments and,
consequently with foreign currency prices, in Brazilian reais, solely for hedge purposes.
f.
The risk control politics and procedures are defined directly through the Companys Board of Directors and
are implemented by the Companys Executive Officers. The Board of Directors are also responsible for
monitoring the fulfillment of these practices.
g.
Adequacy of the operational structure and internal controls to verify the effectiveness
of the adopted policy
The Companys Board of Directors analyzes its operational structure and intern controls, and believes that
the policies and procedures of adopted controls are appropriate to the Companys operational structure. In
44
fiscal years ended in December 31, 2011, 2012 and 2013, the opinion of independent auditors did not
identify deficiencies in those controls.
5.3
In the fiscal years ended December 31, 2011, 2012 and 2013, there were no events that could significantly
change the main market risks to which the Company is exposed.
5.4
45
6.
46
COMPANY HISTORY
6.1
The Company was established on December 1, 1980 as a limited liability company. On January 29, 2009,
the Companys shareholders approved a corporate transformation of the Company, which became a
privately held corporation. The first company of Mills group, named Aos Firth Brown SA was established
in 1952 in the city of Rio de Janeiro, State of Rio de Janeiro, in the form of privately held corporation.
6.2
Company Lifetime
Undetermined.
6.3
The Company was formed in 1952 by the Nacht family, as a scaffold and shoring company which provided
services to the civil construction sector. Mr. Andres Cristian Nacht was a member of the Companys
management team from 1969 to 1998, being President Director from 1978 until 1998. In 1998, Mr. Andres
Cristian Nacht became Chairman of the Board of Directors of the Company, position that occupies until this
Reference Forms date.
In the 70s and 80s, the Company had substantial growth due to the significant civil construction and
industrial sectors expansion in Brazil. Among its activities from this period can be highlighted the
construction of the Rio-Niteroi Bridge (1971), the Itaipu Hydroelectric Plant (1979) and the first Brazilian oil
drilling platform (1983), among other projects.
During this period the Company made important partnerships with international companies that cooperated
with the Companys development. From 1974 to 1986, GKN plc, a large British conglomorate, was the
Companys shareholder, strengthening the beginning of good governance and credibility. In 1980, the
Company signed a partnership with the Canadian company Aluma Systems Inc., the Aluma Systems
Concrete Forms and Formwork Ltda., which had as main objective the introduction of aluminum formworks
in the civil construction sector in Brazil which lasted until 2001.
In the 90s, while seeking to expand the Companys portfolio of services, it made new strategic partnerships.
In 1996, the Company entered into a licensing contract with the German company NOE-Schaltechnik Georg
Meyer-Keller GmbH, to produce and supply modular steel and aluminum panels formwork to the Brazilian
civil construction market. In 1997, the Company entered into a joint venture partnership with the American
company JLG Industries, Inc., to begin activities in the equipment rental sector in Brazil.
In 2001, the Argentine company Sullair Argentina S.A., replaced JLG Industries, Inc. as the Companys
partner in the in the industrial equipment rental venture, and subsequently acquired its stake in 2003.
In 2007, the private equity funds, Peninsula FIP, managed by IP, and the Natipriv Global L.L.C., managed
by the Axxon Group, became the Companys shareholders, acquiring, each one, 10% of the Company for
R$ 20 million. The resources from these investments were used, mainly, to acquire equipment.
In 2008, the Company returned to its activities in the rental unit in an organic way, with the establishment
of the Rental business unit, and suspended the operations of its Events business unit, which was responsible
for providing temporary structures, such as outdoor stages and grandstands for the sports and
entertainment segment, as an objective to focus on the segments where it has competitive advantages.
Also in 2008, the Company acquired Jahu Indstria e Comrcio Ltda. (Jahu), which became the Real Estate
business unit, focused on providing engineering services to the residential and commercial civil construction
industry, complementing its activities in the Heavy Construction segment.
47
The Companys IPO was on April 2010, with a transaction totaling R$ 685 million, of which R$ 411 million
related to the primary offering that, consequently, were used to enable its growth plan. Shortly after the
offer, the Companys free float was of 48%.
In October 2010, after the expiration from the lock-up period, due to the IPO, the private equity funds,
Peninsula FIP and Natipriv Global L.L.C., sold the joint participation of 6.2% of the Companys capital,
increasing its free float to 57.2%.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr S/A Estrutura Tubulares (Rohr), a privately held company specialized
in access engineering and solutions for civil construction, for R$90.0 million. This strategic acquisition will
enable the Company to broaden its exposure to the sectors it serves, especially in the areas of infrastructure
and the oil and natural gas industry. In September 2011, there was a rise in the stake held in Rohr to
27.5%, resulting from the repurchase by Rohr of 9% of its shares held as treasury stock.
In May 2011, the Company entered into a purchase and sales agreement to acquire 100% of the voting
and total capital stock of GP Sul, one of the largest players in the suspended scaffold rental market to
residential and commercial construction in the state of Rio Grande do Sul, for R$5.5 million, which was
merger into the Company in August 2011. This strategic acquisition, according to Managements opinion,
enabled the Company to become the leader in the suspended scaffold rental market in the state of Rio
Grande do Sul and to broaden its exposure to the residential and commercial construction market in the
South region, in line with the geographic expansion plan of the Real Estate business unit.
In July 10, 2013, the company entered into an agreement for the sale of its Industrial Services business
unit for a total sum of R$102 million, through the sale of their participation in the company Albuquerque
Participaes Ltda. On November 30, 2013, the transaction was completed and the Company recorded a
net gain of R$8,3 million. This sale was made in line with the Company's strategy to focus on businesses
where their skills are able to generate greater value for its shareholders and customers. Therefore, the
Company ceased to operate in the Industrial Services sector where they were offered access services,
industrial painting, surface treatment and thermal insulation, both during construction and in the
maintenance phase of large industrial plants.
6.4
48
In October 2012, Nacht Participaes S.A. (Nacht Participaes) reduced its capital through the transfer of
all shares issued by Mills held by Nacht Participaes to its shareholders, with the transaction completed on
December 28, 2012
As a result of such transfer, the shareholders Andres Cristian Nacht and his family members, held directly,
27,421,713 common nominative shares with no par value, issued by Mills, representing 21.7% of Mills
capital.
Neither the capital reduction, nor the related transfer of the shares issued by Mills, resulted in any change
of Mills' corporate control, which, before the capital reduction, was formerly exercised jointly, by Nacht
Participaes, by its shareholders and by Snow Petrel S.L., and, after the capital reduction, are now
exercised by Nacht Participaes' shareholders jointly with Snow Petrel S.L. Such shares remains
encumbered and subject to the terms of the "Shareholders Agreement of Nacht Participaes S.A.",
executed on February 11, 2011, as amended, which also applies to Mills.
49
and (ii) take advantage of the tax benefit resulting from the amortization of R$ 4.7 million generated in its
acquisition of at least five years, as from the 2011 fiscal year.
50
7.
51
COMPANYS ACTIVITIES
52
2013
Heavy Construction
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
131,638
57,821
43.9%
20,064
15.2%
174,059
84,365
48.5%
36,014
20.7%
216,956
108,104
49.8%
48,303
22.3%
Real Estate
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
155,761
65,978
42.4%
28,188
18.1%
237,955
113,472
47.7%
49,289
20.7%
257,964
93,771
36.4%
26,111
10.1%
Rental
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
175,410
93,629
53.4%
39,374
22.4%
253,460
141,256
55.7%
61,774
24.4%
357,342
201,212
56.3%
87,460
24.5%
Industrial Services
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
214,783
20,728
9.7%
3,205
1.5%
213,800
19,410
9.1%
1,225
0.6%
208,295
19,494
9.4%
4,918
2.4%
EBITDA EBITDA is a non-accounting measurement prepared by the Company in accordance with CVM Instruction 527/2012, when
applicable. The calculation of the EBITDA consists of our operating results before financial expenses, from the depreciation and
goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no standardized meaning and our definition may not be
comparable to that used by other companies. The Company uses the EBITDA to measure its performance. The EBITDA should not be
considered as alternatives to net income, as an indicator of our operating performance, or as alternatives to cash flow as an indicator
of liquidity or debt payment capability.
Heavy Construction
The Company estimates, according to data published by the O Empreiteiro magazine in 2013, that its
Heavy Construction business unit is Brazils leading provider of specialty engineering solutions and
equipment in revenue. In this unit, the Companys focus is directed to large engineering projects, including
infrastructure projects toward the logistics sectors (specially railways, underground urban networks,
highways, airports, ports and shipyards), social and urban infrastructure (including sanitation networks) and
energy (primarily regarding hydroelectric, thermoelectric and nuclear plants), besides the industrial and
large building construction projects. Such projects are characterized by long-term (usually over one year),
usually developed by the major construction companies in Brazil.
The Heavy Construction business unit offers its clients specific and customized engineering solutions for
every type of construction, considering all the peculiarities and specificities inherent to the location and
complexity of the construction works, with the objective of facilitating the project execution, ensuring safety,
cost, speed and schedule compliance optimization. In many situations, due to its vast experience, the
Company is looked for by its clients to participate in preliminary studies that will provide structuring for its
proposals in the biddings for the construction of large engineering projects.
The Company offers to the clients of the Heavy Construction business unit customized engineering solutions
according to the specific characteristics of each project, the peculiarities of the construction or development
location, and the complexity of the work to be undertaken, which the Company believes helps to facilitate
execution and reduce costs. Given the Companys extensive experience in the sectors in which the Heavy
Construction business unit operates, at the request of its clients the Company often participates in the initial
studies to help prepare bidding proposals for large engineering projects.
53
The Company believes that its main competitive advantages are its expertise, agility, reliability, quality and
safety standards, as well as its ability to provide equipment on a large scale, factors that contribute to the
reduction of overall duration and costs from its clients projects. The Company provides services throughout
the Brazilian territory and also in international projects from its customers, providing high value service and
providing equipment. The Company has a history of long-standing relationships with almost all of the largest
and best-known companies in the construction sector, including Construtora Norberto Odebrecht S.A.,
Camargo Corra S.A., Andrade Gutierrez S.A., Construtora OAS Ltd. and Construtora Queiroz Galvo S.A.,
and many others.
The Companys extensive track record includes participation on several of the largest and most important
infrastructure projects in Brazil, such as the construction of the city of Braslia (Brazils capital), the Rio de
Janeiro-Niteri Bridge and the Itaipu hydroelectric plant. More recently, the Company assisted in the
construction of the State of So Paulo Beltway (Rodoanel), the subway systems in the cities of Rio de
Janeiro and So Paulo, the Santos Dumont and Congonhas airports in the cities of Rio de Janeiro and So
Paulo, respectively, the Santo Antnio and Jirau hydroelectric plants in the north of Brazil and the Joo
Havelange Olympic Stadium in the city of Rio de Janeiro. Typical contract terms for this business unit range
from six to 24 months, as the services that the Company provides are critical during an extended phase of
major civil construction projects.
In order to facilitate the implementation of solutions that the Company idealizes, its offered to the clients,
through rental contracts and in some cases sales, a wide range of equipments, including concrete forms
and shoring structures, which include projects and technical studies, technical support and necessary
training for its proper use. Taking into account the specific needs from a particular project, there is flexibility
to hire the manufacture of special shaped equipments for specific construction works.
The Companys clients generally use their own employees to implement the solutions developed by the
Heavy Construction business unit. However, for complex projects or at the request of its clients, the
Company is able provide labor for the assembly and disassembly of its equipment.
As of December 31, 2013, the Heavy Construction Business unit had eight operational branches, located in
the states of Rio de Janeiro, So Paulo, Minas Gerais, Bahia, Pernambuco, Cear and Maranho also in the
Federal District.
Real Estate
While the Heavy Construction business unit is focused on large engineering and infrastructure projects, the
Real Estate Business unit attends, primarily, the residential and commercial construction contractors,
developing projects and providing services of concrete formwork, scaffolding, shoring and access
equipment. The Company also provides engineering services in connection with building refurbishing and
maintenance, primarily through the provision of suspended scaffolding. Inside of this business unit's
activities, the Company provides planning, project development, technical supervision, equipment and
related services.
With outstanding performance in the sector for over 50 years and being one of the major leaders for ten
years in net revenue terms, Jahu was a recognized company in the residential and commercial construction
market, acquiring an extensive client base along its history. Due to that, as part of its expansion and
diversification strategy, in June 2008 the Company acquired Jahu, which was incorporated to the Group
and became one of the business units, called Real Estate. Since then the Company has been improving Real
Estate performance by introducing the concrete formwork in the product portfolio, increasing significantly
the equipment inventory, capitalizing on the strong brand name of Mills and therefore increasing its client
base.
54
The residential and commercial construction sector in Brazil is fragmented. When compared to the Heavy
Construction market, the projects from this business unit, are generally dispersed within cities, are smaller
in size and have shorter durations, being the average contract term of four and a half months. The
recognized reputation on the Brazilian market is a really important factor for the Companys success in the
activities from this business unit. Its main competitive advantage is the extensive presence at a large
number of worksites, which enables it, together with its clients, to analyze the job needs and to supply the
requested services and equipment on demand.
The main clients of this business unit are Brookfield, Construtora OAS S.A., Capital Engenharia Ltda.,
Construcap, Encalso Construes Ltda., Engevix, Kallas Engenharia Ltda., Joo Fortes, Gafisa, Mtodo, MRV,
Odebrecht Realizaes, PDG Realty S.A, Racional, Rossi, Th, Via Engenharia S.A., entre outros.
This business unit comprises, on December 31, 2013, 17 operational branches, located in the states of
Amazonas, Bahia, Cear, Distrito Federal, Esprito Santo, Gois, Maranho Mato Grosso, Minas Gerais, Par,
Paran, Pernambuco, Rio de Janeiro, Rio Grande do Sul e So Paulo.
Rental
The Company is one of the largest providers of motorized access equipment, in Brazil, supplying aerial work
platforms and telescopic handlers, to lift people and cargo to considerable heights, based on data published
in the O Empreiteiro magazine in 2013. The equipment enables safe, fast, versatile and precise access for
professionals to perform tasks safely and efficiently at heights from two to 48 meters. The handlers allows
materials weighing up to 4,500 kg to be lifted, transported and delivered to heights of over 17 meters, at a
job site or within an industrial plant.
The Rental business unit serves the same sectors as the other business units, such as heavy or residential
and commercial construction and industrial construction, as well as other economic sectors, as the
automotive, retail and logistics sectors, among others. Therefore, its client base is diverse, including clients
from the other business units, such as Camargo Corra S.A., Construtora OAS Ltd., Construtora Norberto
Odebrecht S.A., Construtora Queiroz Galvo S.A., UTC Engenharia S.A. and etc. Generally, the Company
rents equipment on a monthly basis, being the average contract length from two to three months, although
18-month or even longer contracts.
The Company introduced the large-scale use in Brazil of motorized access equipment specific for height
purposes in 1997, when it entered into a joint venture agreement with the American company JLG Industries
Inc., world leader in access equipment manufacturing, to rent aerial platforms and telescopic handlers, the
first joint venture in JLGs history.
In 1999, the Company introduced the large-scale use of telescopic handlers in the Brazilian market. This
motorized equipment can be used to transport loads to various heights and replaces a number of other
pieces of equipment traditionally used at construction sites, such as cranes, munck trucks and service lifts,
among other equipment. In 2001, Sullair, an Argentine equipment rental company, replaced JLG as the
Companys partner. In 2003, due to unfavorable market conditions in Brazil and the lack of capital necessary
to carry out essential investments, the Company suspended its equipment rental operations and transferred
the joint venture to Sullair.
In December 2007, as part of its diversification strategy and based on favorable market and credit
conditions, the Company established its Rental business unit and began renting aerial platforms and
telescopic handlers again.
According to the Companys estimates, based on data of 2011 from Terex and Brazilian import statistic of
2011, there are currently 13,812 aerial platforms and 1,965 telescopic handlers in Brazil. In comparison,
614,000 aerial platforms and 175,000 telescopic handlers are available in the United States based on data
55
provided by Yengst Associates. The Company believes that this gap, together with the current favorable
economic conditions in Brazil, indicates that this rental market is incipient in Brazil, offering significant
opportunities for expansion in the segment. The Company believes that its scale, specific industrial sector
expertise, reliability and safety record have been the primary factors driving the growth of the Rental
business unit since the beginning of its activities in 2008.
In addition, the Company may benefit from the introduction of stricter technical norms and procedures, in
particular with respect to safety regulations for work performed at significant heights or in areas that are
difficult to access. Among other provisions, Regulatory Norm 18 establishes that workers must be lifted with
the use of motorized access equipment, rather than manual equipment, which has resulted in an expansion
of the potential market for rental of its equipment. The Company believes that the long-term outlook for
the Rental business unit is strong as a result of favorable macroeconomic conditions in Brazil, including
exchange rate stability, considerable infrastructure construction investments under the Brazilian
governments PAC program, the Brazilian governments low income housing program and the overall growth
of the real estate industry in Brazil, anticipated industrial plant expansions (including major investments in
the oil and gas sector), investments related to the 2014 FIFA World Cup and 2016 Olympic Games, and the
multitude of other projects that will require safe working conditions at elevated heights.
With the Equipment Rental business unit, the Company won in 2014 the IAPA Awards, in the category Best
IPAF training center of the year. IPAF is a international association that promotes the safe use of motorized
access equipment. In 2012, the Company also won the IAPA award for Best Company of the Access World,
which is considered to be the Oscars equivalent in this business unit.
As of December 31, 2013, the Equipment Rental business unit was present through 17 operational branches,
in the states of Amazonas, Bahia, Cear, Esprito Santo, Gois, Maranho, Mato Grosso, Minas Gerais, Par,
Paran, Pernambuco, Rio de Janeiro, Rio Grande do norte, Rio Grande do Sul, Santa Catarina, So Paulo
and Sergipe and the Federal District.
Industrial Services
The Industrial Services business unit is focused on the provision of services to the oil and gas sector, as
well as to the chemical and petrochemical, naval, steel, pulp and paper, and mining industries. The Industrial
Services business unit was established in the 1980s with the recognition that certain equipment used in its
civil construction projects could also be employed to provide access to the structures and facilities of large
industrial plants. At that time, the Company began renting access equipment, such as scaffolding systems,
to carry out maintenance work in industrial plants, rapidly, expanding its services in the industrial sector to
include assembly and disassembly, a sector that the Company believed could easily exploit in view of its
past expertise in civil construction, and in sequence, it also began offering specialized maintenance services,
in particular, industrial painting and thermal insulation, which started to compete with companies that had
regularly rented the Companys access equipment for these purposes of providing such surface treatment
services and helping its clients manage their costs more effectively as they were able to reduce the number
of suppliers contracted for the provision of such services. This way, the Industrial Services business unit
provides the equipment and also the labor required for the provision of its services, being labor-intensive.
Based on data published on 2012 by the O Empreiteiro magazine, the Company believes to be one of
Brazils major players in providing structures designed to provide access for personnel and materials during
the assembly of equipments and pipes, during the construction of industrial plants, as in the maintenance
phase, preventive and corrective. The Company also offers industrial painting services, surface treatments
and thermal insulation.
The Industrial Services business unit works, generally, together with the industrial contractor or the plants
maintenance department in planning, erecting and dismantling structures, when and where they are
56
needed, and performing painting and insulation, with own labor, as a way to guarantee the quality and
safety of its execution.
The contracts from the Industrial Services business unit with its clients are usually long-term, from one to
three years, being able to be renewed at the end of the contracted period. On most cases, this Business
unit is generally paid based on units of finished services or in service levels, such as meters of erected
scaffolding, or square meters of painted or insulated surface, being able to hire on a man-hour based price.
Currently, the Company provides two types of services:
Maintenance. Most of the revenue from this business unit, 63.5% of net revenue in 2012, are from
maintenance services in existing plants and facilities on a continuous basis, where most contracts have from
one to two years term, which are often successively renewed for equal terms. Additional revenue is
generated by the provision of scheduled maintenance services usually carried out once a year and which
generally require an extended interruption of its clients operations. Because its clients necessarily suffer
losses as a result of any extended interruptions, the Company believes that it has a competitive advantage
based on its proven ability to provide maintenance services quickly and safely, as evidenced by its high rate
of repeat business.
New Plants. The Company also offers services in connection with the assembly of new industrial plants, oil
and gas platforms and vessels, which are often provided as a natural extension of the services rendered by
the Heavy Construction business unit. The revenue generated through the assembly of new projects and
structures represented 36.5% of the total revenue of the Industrial Services business unit in 2012. The
Company expects that future investments in the sectors in which the Industrial Services business unit
operates, in particular the petrochemical and oil and gas sectors, will lead to a significant increase in revenue
generated from assembly services rendered by the Industrial Services business unit. The Company also
seeks to develop long-term relationships with its new plants clients, with the objective of establishing
agreements for the provision of maintenance services.
The Industrial Services business unit is present in the main industrial centers in Brazil, through seven
branches, in the states of Rio de Janeiro, So Paulo, Minas Gerais, Bahia, Pernambuco and Rio Grande do
Sul, and has a long history of developing innovative solutions and making on-time or early delivery of
projects, including with respect to deep sea oil platforms.
The Company believes that the Industrial Services business units clients value its reliability, consistent
quality and award-winning safety performance. These qualifications have yielded high client renewal rates
(80% in 2012), and have allowed us to develop long-lasting relationships with clients such as the corporate
groups Dow do Brasil and Braskem, for whom the Company has worked continually for up to 16 years.
Clients seek the Company for expert, fast and flexible delivery of equipment and highly skilled installation,
as well as in-depth understanding of local needs.
The main sectors served by the Industrial Services business unit are oil and gas, petrochemicals, steel,
paper and pulp, mining, and naval. Oil and gas represented 65.5% of the Industrial Services Business units
revenue in 2012. The Companys clients include some of the largest industrial groups in Brazil, such as
Braskem, Camargo Corra, Dow do Brasil, Petrobras, Queiroz Galvo, among others. The Industrial Services
business unit has significant synergies with the Heavy Construction business unit. After the completion of
the concrete structures in large industrial projects, such as plants or refineries, its clients often engage the
Industrial Services business unit to support the industrial construction of the plant and subsequently to
provide preventive and corrective maintenance.
The Companys commitment to safety, which is reflected in all of its operations, is particularly critical to the
clients from this business unit, many of which operate according to international safety standards
established by their headquarters. Many of its clients operations involve the use of flammable and toxic
57
substances. Seeking continuous improvement, along the years, the Industrial Services business unit has
secured several international safety certifications, such as OHSAS 18001, ISO 9001 and ISO 14001. The
Companys commitment to the application of robust safety standards has also been recognized by its clients,
as demonstrated by the following awards: Destaque Petrobrs, Braskem Ouro, TOP Copene, Prmio Isopol
de Segurana, Prmio DOW for 14 consecutive years of providing services without work loss time injuries,
Prmio 5 Estrelas Arcelor Mittal (five star award), Prmio Excelncia na Construo Bahia (excellency in
construction), Prmio Performance SSMA Millennium Cristal , Prmio Reconhecimento pelos resultados de
SSMA in the Braskem unit at Alagoas, Prmio Zero Acidente Reportvel - Dow.
The Companys strategy for this business unit is to raise its profitability through the identification of
complementary services with higher added value, and, as a consequence, of higher profitability, to offer its
clients, mainly on the offshore market. The investments in the Oil and gas sector in Brazil are the main
growth drivers for this business unit. The 2013 business plan form Petrobras estimates investments
amounting to US$ 236.7 billion for the period of 2013-2017, of which US$ 147.5 billion in Exploration and
Production (E&P) in Brazil, seeking to raise production from 2 million bpd (Mbpd) in 2011 to 2.75 Mbpd in
2017, of which 1.0 Mbpd related to the Pr-Sal.
7.2
Regarding each operational segment(s) disclosed in the consolidated financial
statements for the past fiscal years
a.
Heavy Construction
Offered Equipment
The main equipment offered by the Company to the clients of the Heavy Construction business unit includes:
Steel Shoring Equipment. The primary shoring equipment the Company provides are Millstour
shoring posts, a versatile system capable of supporting loads ranging from 24 to over 156 tons per
post, depending on the configuration. In accordance with the Companys market perception, its
shoring equipment is considered the most flexible and versatile shoring system in Brazil. This system
provides for ease of assembly with its heaviest component parts weighing less than 13 kilograms.
Each shoring post has an automatic locking element and can support loads of up to six tons. Loadbearing capacity may be doubled or even tripled with the use of connecting trusses. In addition,
these telescopic shoring posts are fully adjustable to meet nearly any height requirement and may
be used in multiple applications. Millstour is typically used in the construction of bridges, viaducts
and dams, as well as in large-scale industrial projects.
Shoring Aluminium. The main equipment used is the Alu-Mills, a system of aluminum shoring with
load capacity up to 14 tons, which can be connected by trusses forming isolated towers of different
heights. This system also allows total displacement of the joint without the need for disassembly
also bringing significant labor savings. Compared to the shoring post systems or conventional steel
shoring, this system is the one with the lightest weight / resistance ratio, being up to 2.5x lighter,
saving very much in the amount of equipment deployed in the works. The Alu-Mills can be used in
buildings and even heavy construction works reaching a wide range of application.
Trusses. The Aspen Launching is a motorized horizontal truss able to transport and position precast
beams weighing up to 140 tons and spanning up to 45 meters. This truss may be used during all
stages of a construction project, from the delivery of the beams at the construction site to
positioning the beams on permanent supports. The truss may also be used to launch braces for the
construction of viaducts with a high degree of safety and minimum labor. No additional equipment
is required to launch such braces, as the Aspen Launching Truss also transports the supports, stands
58
and other accessories required for launching such braces. Moreover, the truss may be operated at
inclines as steep as 6% without additional components and without any deterioration in its loadbearing capacity. The Aspen Launching Truss is typically used in the construction of bridges,
viaducts and industrial structures. The M150 Truss is a horizontal heavy duty truss used for laying
concrete. The Company believes that the M150 Truss has the highest load-bearing capacity among
similar products in the market, while remaining as light as conventional trusses. The M150 can bear
positive stress of 150 tons per meter and negative stress of 100 tons per meter, thus requiring
fewer modules than for conventional trusses and less movement of materials, which reduces costs
for labor and secondary equipment. The Company believe that the M150 Truss is the only truss
available in the market which is able to absorb negative stress and which includes a curvature
adjustment mechanism. The lower rail supports the truss via an exclusive connecting post,
eliminating the need for additional supports. The Companys Truss can be operated either with the
use of supporting structures, or through the even distribution of weight, providing it with the
capacity to be operated at significant heights over great spans.
Balanced Cantilevers. Balanced Cantilevers are used to build bridges and overpasses under
conditions where the constructive approach does not allow for shoring directly from the ground,
when there is a need to implement large spans, and when work has to be carried out without
interrupting the traffic on urban roads. The principle behind the Balanced Cantilever is the use of
specific equipment (Mills' metal trusses and profiles) implementing portions of the superstructure
"hanging" right on the transversal section (staves) that go on swings, from the pillars, stave to
stave, until the entire span has been completed. The trusses are always anchored on the previous,
already prestressed staves, and all forces coming from the concrete are transferred to and then
supported by them.
Reusable metallic formowrk systems: The formworks are used as molds for concrete. There are two
different formworks: vertical walls and pillars and horizontal beams and slabs for such as: SL 2000,
ALU-L, ALUMA, TOP MILLS, climbing, automatic climbing and special.
SL 2000: Using the German NOE technology, and with easy application and handling as its main
feature, the 2000 SL formwork system allows a single worker to assemble and disassemble the
panels.
It was designed especially for work for which there is no equipment available, such as cranes and
hoists. It consists of panels made of steel and coated with a plasticized 12-mm plywood plate that
can
withstand
concrete
pouring
pressures
of
up
to
55
KN/sq.m.
The SL 2000 formwork panel is light, 33 kgf/sq.m, and affords quick and easy assembly (few
components) in any situation and on any surface. It also allows any geometry to be formed, whether
rectangular or circular, with varying heights and radii. It is ideal for blocks and straps, adjustment
layers, gutters, beam sides and for pillars and walls. The SL 2000 supersedes any conventional
formwork of the same nature and can be used even for the simplest concrete tasks, cutting labor
costs by up to 70% compared to conventional formwork.
Top Mills: The Top Mills system consists of industrialized panels, made in steel and coated with a
21-mm plywood plate specially designed to withstand concrete pressures of up to 80 KN/sq.m. It
is ideal for broad area formwork and is very efficient not only for use with reservoir walls,
powerhouses and spillways, elevator shafts and stairwells, but also to build large pillars. Panel
modulation is smart and allows one to form a large variety of heights and widths, significantly
reducing the use of wood and conventional formwork complements and, thus, allowing for excellent
concrete surface finishing. With Top Mills, no complement needs to be larger than 15 cm. The
panels are interconnected by means of staples and may be transported to the next stage of the
work in isolation or coupled to form a rigid assembly providing a reduction of up to a third of the
59
time in the concrete pouring cyclic. Formwork assembly takes place at a rate of 0.22 Mh/sq.m,
while the disassembly rate is 0.11 Mh/sq.m.
ALU-L: ALU-L is an aluminum formwork system manufactured in Brazil using the cutting-edge
German NOE technology. It is a large-area formwork panel system made with special aluminum
profiles and coated with a 15-mm high-resistance plasticized plywood plate that can withstand
concrete pouring pressures of up to 60 KN/sq.m, affording excellent concrete finishing. It is selfalignable and ideal for application on large wall formwork, whether in reservoirs, canals, galleries,
cooling towers, rectangular silos or any other structure that has large concrete pouring sides and
repetitive formwork cycles. It is also used as a formwork solution for pillars. This formwork system
was developed for work that requires large cranes or hoists, but it can also be used manually. The
lightweight panels (average weight = 20 kg/sq.m) can be handled individually or joined to form a
single panel measuring up to 30 sq.m, and then transported to the next concrete pouring stage.
The large panels that are put together, as long as they are assembled at the application site, do
not require full support from the hoist, which can be used to tend to other needs at the construction
site. Hoist support is only required when the panels are positioned and/or transported. This affords
great savings, not only in assembly and disassembly (0.17 Mh/sq.m - assembly and 0.08 Mh/sq.m),
but also in machine usage time, freeing them for other activities at the site. ALU-L can also form
circular walls using the same accessories as SL 2000. It is also compatible with the SL 2000
formwork system and it is possible to join panels from both of these two systems using joining
clamps
Aluma System: The Aluma Formwork System comprises broad area panels made with highly
resistant aluminum beams and headers that afford the work multiple applications in several
geometries: walls, pillars, galleries, tunnels and slabs. Its lightweight components allow broad
panels to be built in any dimension with little weight (40 kg/sq.m), high load capacity and easy
assembly, doing away with the need for specialized labor and allowing for excellent productivity.
Its aluminum beams and headers have high impact absorption capacities, performing three times
better than steel. The advantage of aluminum, combined with the best weight/strength ratio
afforded by the Aluma panels, is that it allows for greater flexibility in projects that require speed.
It is necessary to use a machine to operate the panels.
Climbing Formwork System: The Mills Climbing System was conceived to address the challenge of
very high walls and pillars, having been designed for vertical concrete structures where a single
concrete pouring operation is not feasible. It should be applied, preferably, in similar and repetitive
stages, although this is not essential. Its application is recommended for special industrial building
structures, bridges and overpass pillars and, especially, hydroelectric power plants. It can also be
used to build elevator boxes and stairwells and for blind gables in residential and commercial
buildings. The basic principle behind the climbing formwork is its reuse in a subsequent concrete
pouring stage, always supported on an anchor made in the previous poured layer. A first concrete
pouring stage is carried out leaving a concrete anchorage point in the concrete, typically formed by
a small steel tail and a positioning cone (recoverable). After the removal of the formwork, the
positioning cone is substituted for a support cone, which will serve as a support for the next layer.
The set will be raised when the concrete has hardened. It is moved with the aid of the crane. The
next stage is raised, formwork and scaffolding both, with no need for additional scaffolding. It is
compatible with all Mills panels: ALU-l, Top Mills and Aluma.
Automatic Climbing Formwork System: Mills' Automatic Climbing Formwork System comprises metal
platforms and form panels that move vertically, driven by a special hydraulic system, with no need
for a crane. The process takes place with maximum safety and the whole set (platforms and forms)
is lifted to the next phase of the work all at once. The Self-climbing System has advantages over
the sliding formwork system: (a) When necessary, the concrete pouring can be interrupted and
then restarted; (b) It allows for labor cost reductions as it does not use uninterrupted work
60
processes (overtime) and specialized teams; (c) Improved final looks of the finished concrete, with
improved geometric control and greater accuracy; (d) Does not require special concrete,
accelerators and steel frame reinforcements; (e) Greater operating safety.
Modular Formwork and Shoring System. The SM Mills modular system is the new formwork and
shoring solution in a single system. This equipment has high load capacity and it is indicated for
complex geometries and can be moved, making the reuse without disassembly possible, with great
labor savings. The SM Mills is formed by the combination of metallic sections, that, when unified
through special connections and combined with aluminum beams, can form a variety of geometrical
formations, attending various types of concrete structures, such as tunnels, galleries, inclined slabs,
suction, diversion and transition tunnels in big hydroelectric plants. The modular steel composition,
in the above described situations, replaces advantageously the traditional shoring systems made of
towers, tubes and clamps, increasing productivity and safety in the construction site. SM Mills is
ideal for repetitive sections, because it allows vertical shoring and horizontal formwork in a single
system, and, with the help of deformation and displacement equipment it is possible to lower it
after the concreting and displace it to the next work phase without the need for disassembly.
Access Scaffolding. The Company offers a scaffolding system called Elite, which is a tubular metal
tower system that can be assembled into access structures of varying heights and dimensions. Elite
is a simple system composed of only three types of pieces: support posts, transverse pieces and
diagonal supports, manufactured from galvanized steel. Each post can bear loads of up to three
tons. No tools, bolts or screws are required to assemble the scaffolding system as each part is
simply slotted into each other part. On average, a single worker is generally able to assemble 15
linear meters of scaffolding per hour.
Another access product are the assembled stairs, measuring 2.00 m x 3.30 m, with flat areas every
1.50 m vertically, railing at heights of 0.70 and 1.20, and measuring 80 cm in working width. All
measurements comply with Standard NR18. Assembly (0.5 m in height/MH) and disassembly (1.0
m in height/MH) productivity exceeds customer expectations.
Real Estate
Offered Equipment
The Real Estate business unit offers specialty engineering solutions and equipment, such as
concrete formwork, access and maintenance scaffolding and shoring equipment. The Companys
employees are generally responsible for the development of engineering solutions, as well as for
supervising the use of its equipment, while its clients are usually in charge of the assembly and
disassembly of such equipment. However, for more complex projects, the Company may provide
the labor for the assembly and disassembly of equipment.
Steel shoring. The main steel shoring system is the metallic modular towers, formed by the fitting
of braced tubular frames, which allows loads of up to 8 tons per tower. Connecting brackets make
it possible to aggregate additional frames to the tower, increasing its load capacity, and adjustable
shoes and brackets allow the milimetric adjustment of the top and base of the towers, providing
great time reduction not only in the leveling but also in the formwork removal. Metallic sections
complete the system, allowing the perfect union of the slab structure, providing great savings to
the shoring. The shoring and bracing system for of buckets enables form removal keeping the slab
re-shored. It consists of metal guides to support buckets and drop heads on the heads of the struts
for quick formwork removal without strut removal. Re-shoring and conventional shoring for towers
and struts. Greater alignment and ease in positioning of the buckets. The system provides for the
locking of the buckets, preventing them from moving during the framework assembly, thus
increasing safety.
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Aluminum shoring. The Aluma Light Flying Table form is a shoring system designed with highly
resistant aluminum trusses conceived to expedite residential and commercial building construction
with large pieces of flagstone, preferably smooth. The major benefit offered by this form is that it
saves labor in operations, as it does not require the shoring to be disassembled and later
reassembled for concrete pouring. We can make these flying tables of up to 80 square meters fully
ready to execute the frames. The set is hoisted by the crane and positioned on the upper level of
the slab, in the case of vertical repetition, or slid forward, in the case of horizontal repetition. The
system is ideal for a short work schedule or for work involving a structural design that has a lot of
repetitions, whether vertical or horizontal, such as large commercial and residential buildings,
shopping centers and industrial facilities. It allows any type of slab to be made, with or without
beams, with higher productivity and with all of the indirect gains resulting from a reduction in the
schedule. Aluma Light Flying Table form is 50% lighter than anything on the market (only 35
kg/sq.m).
Formwork for concrete in modular reusable panels. The formwork is used as molds for the concrete.
There are two types of formwork: vertical, for walls and pillars, and horizontal, for beams and slabs,
such as: SL 2000 and Mills Deck.
SL 2000: The SL 2000 Formwork was designed to expedite concrete pouring for pillars, curtains,
walls, stairwells or elevators, suspended or buried reservoirs, foundation blocks, beams and walls
in general. It affords increased safety and a substantial reduction in time and labor costs thanks to
its ease of assembly. Design based on technology provided by the German company NOE; Easy to
assemble, disassemble and transport, this framework requires no training or skilled labor, a fact
that affords gains in safety and finish quality; Its use enables a 50 to 70% reduction in labor
compared with conventional wooden formwork; Manufactured under strict quality controls, this
framework allows for superior concrete finishing; Because it is a highly versatile product made in
different dimensions, the SL 2000 Formwork allows for a simple, safe application for assemblers in
any work situation and geometry.
Mills Deck Light. The Mills Deck Light is a system of forms of flat slab formworks for the residential
and commercial segment. Formed by struts, aluminum panels and "dropheads" which allow the
removal of the bottom panels from the slabs keeping them shored, the Deck System provides the
economy of a form set to the builder and also provides more speed to the construction work.
Easy-set Formwork (used in the government program Minha Casa, Minha Vida). Easy-Set is a
formwork system that was conceived and developed by Aluma Systems Canada for residential,
house and multiple floor building work and withstands pressures of up to 60 KN/sq.m. With the
Easy-Set system, execution time is reduced to less than half compared with the traditional
construction system. It allows for daily concrete pouring cycles, resulting in a home per day.
Tubular Scaffolding. Real Estate business units scaffolding, of great tradition in the Brazilian civil
construction market, are present in the daily lives of countless workers in Brazil, which doubtlessly
makes for a big operational advantage un the delevopment of the construction work. With fast and
simple assembly, the scaffolding towers are put together through the fitting of tubular frames,
braced by diagonals embedded in the frames through extremely functional latches. All types of
frames used by the Company are a result of technological and market research, aiming to ensure
maximum safety and versatility upon use. As an example, the access staris are embedded to the
tubular frame, making the workers access easier and contributing to the structural rigidity. They
are also equipped of frames and trusses that makes it ideal for use in urban centers, allowing the
pedestrian to walk freely, without being blocked by the tubular structure.
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Suspended Scaffolding. Suspended scaffoling are systems that use steel cables fixed to the
buildings faades. The electric suspended scaffolding is meant for the execution of servies that
require extreme speed and agility without any effort from its user, since it has a powerful engine
and a simplified operation that allows a constant speed of approximately ten meters/minute. The
platforms have a non slip flooring and can be modulated in various lengths with a minimum
configuration of 2 meters and a maximum of 8 meters, and cable lengths that reach up to 150
meters. The Real Estate Light Lifter/Puller Cable suspended scaffolding is suitable for work that
requires extreme speed and agility, but not a high load capacity. Using it in painting, wall cleaning
and waterproofing jobs or in facility or external piping renovation speeds the work up.
Mast Climbing Platform. The mast climbing platform, as it is automatic, aloows greater speed in
faade works than traditional scaffolding, also providing much greater safety in its operation.
Rental
Offered Equipment
The Rental business unit offers aerial platforms, new or semi-used, which allow workers to perform tasks
at different altitudes, and telescopic handlers, which are used to lift loads to varying heights.
Boom Platforms. Offered both telescopic and articulated boom platforms, which provide access to
heights ranging from 2 to 48 meters. Offered with several options, as two or four-wheel, all-terrain
kits, models with a narrow or wide base, and either diesel or electric engines.
Scissor Platforms. Scissor platforms provide an alternative to boom platforms that allow access to
narrow spaces. These platforms have a platform extension sliding system, and are available with
either diesel or silent electric engines. These platforms are available in a number of models which
may be used in various types of terrain and provide access to heights ranging from 6.4 to 18 meters.
Telescopic Handlers. Telescopic handlers are an extremely versatile type of equipment able to lift
loads weighting up to 4,500 kilos to a height of up to 17 meters.
Technical Assistance. To provide support both to rentals and equipment sales, the Company has
highly qualified technical staff trained to deal with the entire line of aerial work platforms and
telehandlers. The staff is constantly trained by equipment manufacturers and take regular refresher
courses through an internal training program. The Company owns a fleet of workshop vehicles,
equipped with the tooling needed to carry out preventive and minor corrective maintenance ,
thereby speeding up technical services and ensuring greater equipment availability.
Treinamento IPAF. Mills is the first company to provide training for IPAF Operators and
demonstrators in Brazil, and the second to do so in Latin America. Additionally, it is at the helm of
the CBI - the Brazilian Council of the IPAF. One of the main goals of this initiative pioneered by Mills
is to instruct these professionals on the concepts of risk perception/assessment and drive their
ability to ensure the proper and efficient operation of Aerial Work Platforms, increasing productivity
and compliance with standards related to safety at work.
In the Companys seven Training Centres there are courses of operation certified by IPAF in
accordance with ISO18.878, with instructors trained by IPAF and equipment manufacturers.
Industrial Services
Access. The Industrial Services business unit offered engineering solutions, equipment and labor
relating to the provision of access to construction sites, plants and other structures, for the
63
performance of maintenance and assembly work. Most of the equipment used for this purpose has
been designed by the Company, and the main products adopted in the provision of these services
are the scaffolding systems TuboMills, Elite and Mills Lock. The latter two have slotting mechanisms
and can therefore be assembled without clamps, which results in reduced assembly time. The
platforms for these systems are being transitioned from wood to metal, either steel or aluminum,
due to the longer useful life, higher load-bearing capacity, and slotting mechanisms of such metal
platforms. In addition, the Company offers customized safety products, such as skirting boards,
that help prevent objects from falling. Finally, the Company uses specially designed ladders and in
some cases mechanical lifts for quick movement between levels.
Assembly and Disassembly of Access Equipment. In most cases, the Companys clients required to
assemble the access structures for the provision of maintenance services. The Company provides
continuous technical operation and safety training to its employees for the use of such equipment
specific to the needs of the work to be performed at the plants and facilities of its clients. The
Companys employees used individual safety equipment in compliance with the characteristics of
each workplace during the complete operation in which its equipment is in use, as evidenced by
technical reports prepared by its safety engineers.
Industrial Painting. The industrial painting process included the following stages: (1) evaluation of
the technical treatment needs of each surface, which is performed in partnership with its clients;
(2) use of its equipment or aerial platforms provided by the Rental business unit to access the
surface to be painted (if the Company is unable to access the surface with the use of its equipment,
the Company engages its specialized climbing painters in the performance of the work); (3)
preparation of the surface to be painted, which is a critical stage in the process and consists of the
removal of the existing layer of paint with the use of high pressure water guns (or other abrasive
means complying with national and international technical norms and procedures); (4) priming of
the surface for the application of the new layer of paint and anti-corrosive treatment; and (5)
application of the new layer of paint. The Company also performs industrial painting operations
inside boilers, furnaces and tanks. Environmental concerns led the Company to invest heavily in
additional employee training for its employees and the progressive suspension of the use of abrasive
chemicals and other materials for paint removal and their replacement with high pressure water
guns. The Company has also adopted new models of painting chambers that allow the workspace
to be completely isolated from the surrounding environment.
Insulation. The provision of services relating to the removal and replacement of insulation is key to
the operation of companies that work with fluids, due to the high temperatures to which volatile
fluids are exposed while travelling through pipes, ducts and equipment. The Company used a special
foam for basic insulation and external coating, the characteristics of which differ according to the
type of structure to be insulated. In most cases, the existing insulation cannot be repaired, requiring
the removal of the existing layer of foam and the application of a new layer of insulation whenever
a pipe or similar insulated equipment requires maintenance work.
Mills Habitat. Mills Habitat is an advanced pressurized compartment intended for use in places
where there are special safety requirements for hot work, such as welding, cutting and grinding.
The compartments are generally used in offshore oil production rigs and at petrochemical plants
and terminals. The positive pressure enclosure has proved to be the best solution in terms of cost
and operation for many different applications, such as the installation and modification of support
structures, to repair and service critical equipment, work in oil tanks and on pipe junctions. This
includes meeting the strict QSEH (Quality, Safety, Environment and Health) standards expected by
the world's leading oil and gas enterprises. In addition to the security provided for the company's
employees and facilities, eliminating any risk of explosion, the main benefit afforded by the
equipment is that it allows hot work to be done without shutting down the unit's production, which
on a platform can amount to 180,000 barrels per day. In addition to the European Ex/ATEX
64
certificate, Mills Habitat is certified by UL-BR, which is accredited by INMETRO, and bears the SBAC
(Brazilian System of Conformity Assessment) seal of conformity identification for use in potentially
explosive atmospheres - Zones 1 and 2. There is no need for power tools or manuals for installation,
just a basic tubular structure to provide anchoring points. Moreover, all components are light, the
heaviest of which weighing in at only 25 kg. There is no waste because the panels and equipment
can be reused.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
The Company believes that the equipments that make up your portfolio increases the productivity of its
clients and contributes to cut down delays and increase the safety of their operations.
b.
Revenue from the segment and its participation in the Company's net revenues
The table below indicates the net revenue from each of the business units and its share in the total net
revenue on the indicated periods:
Business unit
2011
Net Revenue
Heavy Construction
Real Estate
Rental
Industrial Services
Total
131,638
155,761
175,410
214,783
677,592
Pro-forma results consolidated data considering the Industrial Services business unit, until its sale date.
c.
Profit or loss resulting from the segment and its participation in the Company's net
income.
The table below indicates the net income from each of the business unit and its share in the total net income
on the indicated periods:
Business unit
Heavy Construction
Real Estate
Rental
Industrial Services
Others
Total
Pro-forma results consolidated data considering the Industrial Services business unit, until its sale date.
7.3
Products and services that correspond to the operating segments disclosed in
item "7.2
a.
The Company outsources the entire process of production of the equipment used in their operations. See
item 7.3(e) below.
b.
65
The Company rents its equipment and provides their services according to the needs from their clients. As
of December 2013, the Company was present in 17 states with 51 branches.
For greater details about our equipment, see item 7.2 above.
c.
(i)
The Company believes to be Brazils leading provider of specialty engineering solutions and equipment, such
as formwork, shoring and scaffolding, and in the access motorized equipment rental for the for the Brazilian
market, according to the Brazilian magazine O Empreiteiro and the IRN 100 from International Rental
News, both published about the market in 2012. The Company also acted in the industrial services business
unit (access equipment, industrial painting and insulation), which was one of the major players in this
market, until the sale of this business unit in November 2013. However, there is no public information about
the exact market share of the Company and its competitors.
(ii)
Each of the Companys business units faces significant competition in the segments in which it operates.
However, the Company believes its ability to offer innovative solutions at competitive prices and its capacity
to meet or beat client deadlines are a significant competitive advantages in the segments in which it
operates. By the Companys understandings, the considerable size and importance of the Brazilian
engineering and construction services market creates numerous business opportunities in the segments in
which it operates, which generally provides incentives for new competitors to try enter the market.
Heavy Construction
66
The Company believes that its Heavy Construction business unit enjoys an established leading presence in
its segments, having as main competitors Doka, Estub, Pashal, Peri, Rohr (in which the Company is owner
of 27.5% of its participation), SH Formas and Ulma.
Real Estate
Since the demand in the residential and commercial construction markets tends to be more constant and
fragmented than demand from the heavy construction market, the Company faces a higher number of
companies, some of them with strong regional operations.
In this market, the ability to reduce construction costs and to provide solutions for reducing execution time
and the use of manpower is crucial to attracting new clients and securing participation in new construction
projects.
The Company believes that its Real Estate business unit is a leader in the residential and commercial
construction market. Despite the lack of public data about the competition, the Company believes that it
has maintained a leading position for the past ten years. The main competitors in this sector are Aliana,
Cofix, Doka, Estub, Jirau, Metax, Pashal, Peri, SF Formas, SH Formas, Tensor and Ulma.
Rental
Due to the participation in a still minor market with great potential for expansion, the Rental business unit
faces a moderate level of competition when compared to the other business units.
The Company believes that its Rental business unit is one of the major providers of motorized access
equipments, aerial platforms and telescopic handlers, both for lifting personnel and cargo to considerable
heights in Brazil. Besides the lack of public information about its competitors, the Company believes that its
main competitors are A Geradora, Bilden, Degraus, Estaf, Locar, Orguel, Solaris and Trimak.
Industrial Services
The Industrial Services business unit operates in highly competitive market segments. While in the access
segment the Company believes to have solid leadership, in the industrial painting and, in particular, the
insulation market, the Company competes with larger competitors.
The Company believes that the competitive in this sector consists on offering solutions both innovative and
high level of excellence at low cost, building long-term commercial relationships with its clients. The main
competitors in the markets served by the Industrial Services Business unit are Calorisol, Fast, Kaefer
IsoBrasil, Mecan, NM Engenharia, RIP, Rohr in which the Company is owner of 27.5% of its participation),
and SH Formas.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
d.
Possible seasonality
The demand for the services rendered by the Industrial Services business unit increases significantly during
periods when industries suspend normal operations and use such down-time to carry out maintenance
work. However, suspensions of operations are not concentrated at any particular time of the year, but
rather are determined in accordance with the operational practices adopted by each industry. The
operations of the other three business units are not affected by seasonality. The information above related
to Industrial Services is limited to the Companys evaluation up to the conclusion of business unit sale, in
November 2013.
67
e.
Key inputs and raw materials: (i) description of the relationships with suppliers,
including whether they are subject to governmental control or regulation, identifying the
bodies and the respective legislation; (ii) potential dependence on few suppliers; and (iii)
possible volatility in their prices
To the Heavy Construction, Industrial Services and Real Estate business units are acquired from habitual
suppliers, the raw material necessary for the manufacture of equipments offered by the Company, primarily
steel and aluminum sheets, which prices paid for such materials are directly impacted by fluctuations in
commodity prices. The Company has a large number of options when choosing its raw material suppliers
and the choice is influenced mainly by the charged price. In the fiscal year ended December 31, 2013, the
main raw material suppliers to the Companys business units were Indstria Santa Clara, Araya do Brasil,
Solues Usiminas, Alcoa and CBA.
After purchasing the raw materials, the Company outsources the entire manufacturing process to third
parties, as well as subsequent to the assembly. In this manner, all of the equipment manufactured is done
by third-parties. Due to the very high quality standards that are needed from the equipment, the Company
has very careful restricted selected companies to perform the manufacturing which are, Caldren, Jesiana,
and Fundiferro. To catch up with demand, equipment is also imported from China, through criteriously
verified suppliers, which must be within the Companys high-quality standards, such as Kitsen, East Grace
and Aluma.
In addition, the Industrial Services business unit occasionally rent equipment from third-parties, in particular
from S Leone and Construservice, and enters into agreements with AGM for the provision of temporary
labor.
Regarding the Equipment Rental unit, the aerial platforms and telescopic manipulators used are acquired
from third parties. The criterion that guides the choice of suppliers for these products is based on its quality
and on after-sale services. The main suppliers of finished products are JLG, Terex and Skyjack, of whom
the Company is partially dependent on, due to the small number of suppliers in the market. Furthermore,
parts and motor components are acquired, especially from Cummins, Deutz and Perkins, in addition to axles
from Dana and ZF do Brasil. The Company has made efforts in parts location and replacement seeking to
reduce dependence on the suppliers for these parts, besides obtaining productivity and cost gains.
Regarding the inputs, industrial paints are regularly acquired and used in the Industrial Services unit,
supplied mainly by Akzo Nobel and Renner, besides gasoline and diesel for the motorized equipment in the
Rental division. For the Heavy Construction and Real Estate unit, the companies Madewal and Ecomader
are the main suppliers of hardboards for the maintenance and industrialization of the equipment, with the
plasticized hardboards used to equip the formwork in the aluminum chassis systems (Mills Deck-Light, Mills
Deck and ALU-L), and in the steel chassis systems, (SL 2000 formworks). Still for the industrialization and
maintenance of the equipment, paints and solvents are acquired for the painting of equipment mainly by
the companies Mepco, Solventex and Toulon.
Generally, the agreements with the suppliers are short-term. The charged prices by the suppliers may
experience volatility as a result from the labor prices, and commodities that are used in the equipment
manufacturing, especially steel and aluminum. The Rental Business unit equipment, are impacted by the
exchange rate fluctuations.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
7.4
Clients accounted for more than 10% of total net revenues of the Company
68
In the fiscal years ended December 31, 2013, 2012 and 2011, the Company had no sole clients accounting
for more than 10% of the total net revenue.
7.5
a.
The need for government authorization to exercise the activities and long-standing
relationships with the government to obtain such permits
There is no specific regulation on the activities that the Company carries. The Company does not need to
obtain permission or license in addition to those required to all commercial companies.
On July 5, 2006, environmental authorities in the state of Rio de Janeiro, the Delegacia de Proteo ao Meio
Ambiente, launched an investigation against the Company for the alleged breach of articles 54 and 60 from
the Environmental Crimes Law (Lei de Crimes Ambientais) resulting from the alleged inadequate disposal
of solid and liquid waste. The investigation has not yet been completed, though the Company has started
the necessary works to remedy the irregularities appointed by the authorities and requested the
environmental licenses required for the works carried out at the construction site. For further information
regarding relevant non-confidential judicial, administrative or arbitrary lawsuits, see item 4.3 from this
Reference Form.
The Delegacia de Meio Ambiente e produtos controlados of Osasco initiated the Police inquiry, based on the
Police report dated October 18, 2011, to investigate the alleged practice of crime against the environment,
provided for in Article 56 of Law 9.605/98, due to (i) irregularities in the artesian well, (ii) irregular use and
storage of chemicals and (iii) irregular disposal of waste in the Company's subsidiary in Osasco/SP. The
investigation is not complete, but the Company is now taking all measures to search, verify and correct the
deficiencies pointed out, together with the police authority and the environmental agencies of the State of
Sao Paulo.
For more information on the Companys relevant legal, adminstrative or arbitration processes, see item 4.3
in this Reference Form.
b.
environmental policy of the Company and costs incurred for compliance with
environmental regulation and, where appropriate, other environmental practices,
including adherence to international standards of environmental protection.
Considering the nature of the Companys activities, it does not adopt environmental policies and regulations
and is not subjected to specific environmental regulations.
The main environmental impacts of the Company regard the maintenance process of its equipment, which
involves, among others, hardboard, paint and lubricant oils. The Company seeks to mitigate the possible
environmental impacts coming from its activities through the survey of the aspects and research of its
proper disposal. As an example, the proper disposal of lubricant oils through separation and disposal in
licensed companies. Investments are alos made in the separation systems of water and oil from the
lubrication and washing of machines.
With the objective of reducing use of oils in the lubrication of its equipment, the Company has invested
expressive resources in docking scaffolding for the industrial environment, which exempts the use of clamps
and bolted connection sleeves, and uses instead a system of fitting wedges, which, other than dismissing
the need for maintenance with lubricant oils, also provide gains in productivity and competitiveness.
Since early 2003, the Company has invested expressive amounts of resources to gradually replace wooden
scaffolding floors with aluminum ones, that are more durable and environmentally correct, thus contributing
to the reduction of the extraction of trees, helping to raise a greener planet. Beyond that, the Company has
69
products that reduce environmental impact, especially the new formwork and shoring systems and the
metallic structures, which reduce the use of wood in the construction process.
The Company acts with environmental responsibility when acquiring the wood that will be used in the
execution of its services. All of the wood used in its equipment come from legal sources licensed by the
Brazilian Ministry Of Environment Brazilian Environment and Natural Renewable Resources Institute, and
the Company maintains archived copies of all the legal documentation regarding the origin, transport and
registry of its suppliers, with focus on: (2) DOF Forest Origin Document; (b) CTF Federal Technical
Certificate of Regularity for the use of Natural Resources; and (c) GF3 Forest Guide for the transport of
forest products.
The equipment that is damaged in the construction work, when classified as improper for reuse, are turned
into pieces of smaller sizes or discarded and sent to further recycling. In the discarding, carbon steel
piecesare sent to steel makers and turn into other metallic products; aluminum beams and floors are sent
for reprocessing in plants, returning to the Company in the form of new products with the same
characteristics; and the wooden floors are sent to accredited partners who transform this residue into an
energy source.
c.
reliance on patents, trademarks, licenses, concessions, franchises, contracts,
royalties for the development of relevant activities.
In case the Company may not use its main brand, Mills, or if such brand loses distinctiveness, the Company
may have problems in relationships with their clients to tailor their services and equipments in the market,
which may prevent the development from its activities in a satisfactory condition. The development from
its activities does not dependent on secondary brands, patents, concessions, franchises and contracts,
royalties.
The Company has contracts of technology transfer for the exclusive manufacturing of several equipments,
as detailed in Item 9.1b. In case any of these contracts are discontinued or the regulation on patends or
on the use of technology changes, the Company may have its portfolio of products reduced and its
competitivity affected.
7.6
The Company only operates in Brazil. The fiscal year ended on December 31, 2013, 98.7% of the Company's
revenue came from clients located in Brazil.
b) revenue from the clients assigned to each foreign country and their participation
share in the Companys total net revenue;
The fiscal year ended on December 31, 2013, 1.3% of the Company's revenue came from clients located in
the United States.
c) total revenue from foreign countries and their participation share in the Company's
total net revenue.
The fiscal year ended on December 31, 2013, 1.3% of the Company's revenue came from clients located
outside of Brazil.
7.7
70
Not applicable.
7.8
Description of long-term relationships relevant to the Company that are not listed in
this form.
The company does not publish sustainability report or similar. Considering the significant increase of
transparency about the sustainability issue, the Company is considering formalizing a process of analysis
(diagnosis) and action plan to improve its sustainability practices.
7.9
71
8.
72
ECONOMIC GROUP
8.1
a.
The Companys capital stock is comprised exclusively of common shares. The table below presents the
Companys ownership structure, highlighting the amount of shares held by the Company, its main
shareholders and its Administrators:
Name
Andres Cristian Nacht
Date of last
amendment
5/5/2014
Participates in
shareholder
agreement
Yes
Controlling
shareholder
Yes
Quantity of
common shares
15,595,249
% Capital
Stock
12.2%
2/28/2014
Yes
Yes
5,354,929
4.2%
2/28/2014
Yes
Yes
2,156,845
1.7%
Antonia Kjellerup
2/28/2014
Yes
Yes
2,156,845
1.7%
2/28/2014
Yes
Yes
2,245,345
1.8%
5/5/2014
Yes
Yes
1,000
0.0%
2/28/2014
Yes
Yes
17,728,280
13.8%
10/2/2012
No
No
6,323,300
4.9%
4/27/2015
No
No
6,547,466
5.1%
64,268,842
50.2%
(1)
(2)
11/28/2014
On October 2, 2012. According to information received officially by the Company and released to the CVM.
On April 23, 2015. According to information received officially by the Company and released to the CVM.
Snow Petrel S.L. is a company with headquarter in Barcelona, Spain, at Calle Johann Sebastian Bach 20, 3 rd
floor, registered under CNPJ/MF n 14.740.333/0001-61. Snow Petrel is a part of Mills Estruturas e Servios
de Engenharia S.A.s controlling group and its entire capital stock is held by Malachite Limited, a holding
73
company organized under the laws of Malta and whose shares are fully held by: (i) Mr. Nicolas Nacht, the
brother of Mr. Andres Cristian Nacht; (ii) Mrs. Helen Anne Margaret Ahrens, the wife of Mr. Nicolas Nacht;
and (iii) other shareholders, also members of the Nacht family.
Shareholders' agreement of Nacht Participaes S/A
Aiming to regulate its relationship as shareholders of the Company and continue to be qualified jointly as
the controlling group of the Company, all shareholders of Nacht Participaes S.A. on February 11, 2011,
which included at the time Jeroboam Investments L.L.C and the members of the Nacht family (Nacht
Family), executed a shareholders agreement regulating the voting rights and the transfer of shares of Nacht
and the Company.
The main terms of the shareholders agreement are: (a) maintenance of the Nacht Family and Jeroboam
(succeeded as a Companys shareholder by Snow Petrel) as the group controlling shareholder, (b) joint
exercise of voting rights in each and any resolution pertaining to the Company, (c) Andres Nacht's
appointment as representative of the controlling group on the Board of Directors and on the Companys
Shareholder Meetings, and (d) prohibition of sale of the Companys shares of more than 10% interest that
each shareholder owns, individually, to third parties.
Due to the extinction of Jeroboam Investments L.L.C, Snow Petrel S.L., as its sole member, succeeded all
of its rights and obligations, including as a party to the Nacht Participaes S.A. Shareholders Agreement
executed on February 11, 2011.
In October 2012, Nacht Participaes reduced its capital through the delivery of the entire stake held by it
in Mills to its shareholders, with the transaction completed in December 28, 2012.
As a consequence of such transfer, the shareholders Andres Cristian Nacht and his family members, now
hold, directly, 27,421,713 common nominative shares with no par value, issued by Mills, representing 21.7%
of Mills capital stock.
Neither the capital reduction nor the related transfer of the shares issued by Mills resulted in any change of
Mills corporate control, which, before the capital reduction, was formerly exercised jointly by Nacht
Participaes, its shareholders and Snow Petrel S.L., and, after the capital reduction, are now exercised by
Nacht Participaes shareholders jointly with Snow Petrel S.L. Such shares remains encumbered and subject
to the terms of the "Shareholders Agreement of Nacht Participaes S.A.", executed on February 11, 2011,
as amended, which also applies to Mills.
On February 28, 2014 a new Shareholders Agreement was celebrated without any change in Mills corporate
control structure. On May 5, 2014, the Shareholders Agreement was ammended, as to include Francisca
Kjellerup Nacht.
HSBC Bank Brasil S.A. Banco Mltiplo
HSBC Bank Brasil S.A. Banco Mltiplo (HSBC) is a legal entity of private law, headquartered at the city of
Curitiba, Paran, Travessa Oliveira Bello n. 34, 4th floor, Brazil, under corporate number CNPJ
01.710.201/0001-89.
MFS Investment Management
MFS Investment Management (MFS) is a fund manager based in Boston, United States.
b.
74
c.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr for R$90.0 million, paid fully on February 8, 2011.
Rohr is a privately held company specialized in access engineering and solutions for civil construction and
has 45 years of experience in this market. The company serves the following sectors: heavy construction
and infrastructure, residential and commercial construction, industrial maintenance and events.
The Company does not participate in Rohrs administration, once this was a strategic acquisition, in which
enables the Company to broaden its exposure to the sectors it serves - infrastructure, residential and
commercial construction, the oil and gas industry, among others.
In September 2011, there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by
Rohr of 9% of its shares held as treasury stock.
d.
Not applicable.
e.
8.2
Organization chart where Company operates, compatible with information presented
in item 8.1.
Nacht
Family
21.4%
Snow
Petrel S.L.
13.8%
Administr
ators
2.8%
HSBC
5.0%
MFS
5.1%
Others
50.2%
MILLS ESTRUTURAS E
SERVIOS DE ENGENHARIA
S.A.
8.3
Description of the restructuring operations, such as additions, mergers, splits,
incorporation of shares, corporate divestitures and acquisitions, corporate governance,
acquisitions and disposals of important assets, which may have taken place in the Group.
Date of Operation
Corporate Event
7/10/2013
Sale
75
Operation Description
Date of Operation
Corporate Event
Description of Corporate Event
Operation Description
12/28/2012
Other
Capital Reduction of Nacht Participaes S.A.
At the Extraordinary General Meeting held on October 29,
2012, the shareholders of Nacht Participaes S.A.
approved its capital reduction. The aforementioned capital
reduction occured through the delivery of the totality of
its previously held shares issued by Mills to its
shareholders (27,421,713 shares), after the 60-day
statutory period provided by article 174 of Law 6,404, of
December 15, 1976, as amended. There was no change
in the Companys corporate control.
Date of Operation
3/14/2012
Corporate Event
Other
Operation Description
Date of Operation
08/01/2011
Corporate Event
Merger
Operation Description
Date of Operation
05/27/2011
Corporate Event
Acquisition.
76
Operation Description
Date of Operation
02/17/2011
Corporate Event
Other
Operation Description
Date of Operation
01/19/2011
Corporate Event
Operation Description
8.4
77
9.
78
RELEVANT ASSETS
9.1
Description of noncurrent relevant assets for the development of the Companys
activities
a.
Fixed assets, including those subject to rent or lease, indicating its location.
Most of the Companys revenues are generated by the rental and use of equipment, as well the provision
of services related to such equipment, including insulation, industrial painting and equipment assembly and
disassembly.
The Company also owns several fixed assets for its own use; mainly warehouses to storage the equipment
described above, offices, furniture, fixtures, and other general equipment used at the Companys facilities.
The Companys main fixed assets are listed in the table below:
Assets
11,049
1,197
1,001,891
8,526
28,645
1,051,308
57,503
(884)
(569)
(223,549)
(4,999)
(5,924)
(235,925)
-
10,165
628
778,342
3,527
22,721
815,383
57,503
1,108,811
(235,925)
872,886
1,327,922
Cost
Buildings and Land
Facilities
Equipment
IT Equipment
Others
Subtotal
Construction in Progress
Total
2011
Accumulated
Depreciation
Net
(324,575)
1,003,347
2013
Accumulated
Depreciation
Cost
Net
24,274
5,470
1,491,854
13,886
31,625
1,567,109
39,086
(1,526)
(1,051)
(362,749)
(6,594)
(9,799)
(381,719)
-
22,748
4,419
1,129,105
7,292
21,826
1,185,390
39,086
1,606,195
(381,719)
1,224,476
Plot Size
Constructed
Area
Status
End of Term of
Lease
City
State
Office/Warehouse
14,984 m
2,428 m
Rented
5/1/2016
Manaus
AM
Office/Warehouse
4,200 m
1,200 m
Rented
1/1/2016
Manaus
AM
Office/Warehouse
6,975 m
1,558 m
Rented
4/12/2015
Camaari
BA
Office/Warehouse
4,500 m
1,286 m
Rented
12/31/2014
Simes Filho
BA
Office/Warehouse
4,644 m
2,000 m
Rented
12/31/2014
Simes Filho
BA
Office/Warehouse
13,552 m
4,360 m
Rented
1/1/2016
Fortaleza
CE
Office/Warehouse
20,000 m
17,011 m
Rented
10/25/2021
Braslia
DF
Office/Warehouse
3,900 m
1,750 m
Rented
5/6/2023
Braslia
DF
79
Location
Avenida Colantino Aleixo, n
1,849 Bairro Puraquequara
Distrito Industrial II
Travessa Anduzeiro, 19
Loteamento Rio Piorini Bairro
Colnia Terra Nova
Av, Concntrica, 137 Centro
DICA - Distrito Industrial do
Calado, Quadra 5, Lote 1,
CIA
DICA - Distrito Industrial do
Calado, Quadra 5, Lote 2,
CIA
Rodovia BR 116, 5360 A KM
14 Bairro Pedras
Rodovia DF 290, KM 1,2
Ncleo Rural Hortigranjeiro de
Santa Maria
Rodovia DF 290, KM 1,2
Ncleo Rural Hortigranjeiro de
Santa Maria
Office/Warehouse
10,000 m
3,675 m
Rented
9/3/2017
Serra
ES
Office/Warehouse
11,689 m
1,849 m
Rented
10/27/2015
Goinia
GO
Office/Warehouse
47,076 m
3,388 m
Rented
1/3/2018
So Lus
MA
Office/Warehouse
3,386 m
1,351 m
Rented
In effect
indefinetly
Belo
Horizonte
MG
Office/Warehouse
5,258 m
2,750 m
Rented
In effect
indefinetly
Belo
Horizonte
MG
Office/Warehouse
2,000 m
2,000 m
Rented
4/30/2014
Belo
Horizonte
MG
Office/Warehouse
25,000 m
4,179 m
Rented
1/31/2023
Contagem
MG
Office/Warehouse
2,869 m
64 m
Rented
1/11/2016
Uberlndia
MG
Juiz de Fora
MG
Office/Warehouse
3,452 m
610 m
Rented
Office/Warehouse
3,750 m
848 m
Rented
8/26/2018
Trs Lagoas
MS
Office/Warehouse
3,600 m
940 m
Rented
5/1/2016
Cuiab
MT
Office/Warehouse
4,320 m
Under
construction
Rented
5/5/2016
Cuiab
MT
Office/Warehouse
17,500 m
1,100 m
Rented
9/30/2017
Ananindeua
PA
Office/Warehouse
7,500 m
1,280 m
Rented
11/1/2018
Parauapebas
PA
Office/Warehouse
5,000 m
2,188 m
Rented
9/19/2016
Office/Warehouse
12,640 m
1,700 m
Rented
10/30/2015
Office/Warehouse
17,982 m
7,365 m
Rented
4/30/2018
Curitiba
PR
Office/Warehouse
2,880 m
1,331m
Rented
2/9/2016
Itabora
RJ
Office/Warehouse
74,551 m
1,000 m
Rented
1/23/2017
Itatiaia
RJ
Office
2,000 m
972 m
Rented
5/9/2018
Maca
RJ
54,793 m
11,032 m
Owned
N.A.
Rio de
Janeiro
RJ
Headquarter/Office
N.A.
293 m
Owned
N.A.
Rio de
Janeiro
RJ
Headquarter/Office
N.A.
216 m
Rented
1/24/2015
Rio de
Janeiro
RJ
Office/Warehouse
80
Cabo de
Santo
Agostinho
Cabo de
Santo
Agostinho
PE
PE
Office/Warehouse
8,173 m
226 m
Rented
1/1/2018
Parnamirim
RN
Office/Warehouse
23,316 m
3,015 m
Rented
7/10/2018
Cachoeirinha
RS
Office/Warehouse
8,064 m
1,882 m
Rented
12/1/2014
Porto Alegre
RS
Office/Warehouse
4,800 m
700 m
Rented
1/9/2016
Rio Grande
RS
Office/Warehouse
5,105 m
687 m
Rented
9/14/2016
Itaja
SC
Office/Warehouse
6,480m
883 m
Rented
7/20/2018
Aracaju
SE
Office/Warehouse
5,060 m
2,998 m
Rented
6/1/2018
Bauru
SP
Office/Warehouse
30,941 m
2,415 m
Rented
10/5/2017
Campinas
SP
Office/Warehouse
49,620 m
18,841 m
Rented
1/31/2018
Osasco
SP
Office/Warehouse
4,764 m
160 m
Rented
2/28/2015
Ribeiro
Preto
SP
Office/Warehouse
850 m
350 m
Rented
8/31/2015
So Jos dos
Campos
SP
Office/Warehouse
1,170m
343 m
Rented
1/1/2017
So Vicente
SP
All facilities used by the Company, whether they are owned or leased from third parties, are free of liens
and charges.
Description of the fixed asset
Real property
Land
Equipment for rent (formwork, shoring and equipment machines)
IT Equipment
Facilities
Construction in progress
Country of
Location
Municipality
of Location
Type of
propriety
Brasil
Brasil
Brasil
Brasil
Brasil
Brasil
Rio de Janeiro
Rio de Janeiro
Owned
Owned
Owned
Owned
Owned
Owned
REGISTRATION #
COVERAGE
TERRITORY
740164244
NATIONAL
780190670
NATIONAL
3/25/2020
7200595
NATIONAL
12/7/2022
800121546
NATIONAL
8/30/2021
829369724
NATIONAL
2/8/2019
812940792
NATIONAL
12/18/2021
821121316
NATIONAL
12/18/2021
821121324
NATIONAL
12/18/2021
200018167
NATIONAL
The requested brand registrations still The impact cannot be qualified. The loss
not granted by the INPI do not have
of rights over the brands imply the
term of effectiveness established and
impossibility to prevent third-parties
may still be refused. The granted
from using the identical brands or
registrations may be challenged
similar to mark, specially, services or
through, invalidity lawsuits, in the event
competing products, once the holder
of an unvalid granted registration, either loses its right to use exclusively. There
by revocational applications, partial or
is also the possibility that the holder
total, in case the brand is not being
suffers criminal and civil lawsuits, for
utilized, to mark all of the products or
misuse in case of infringement of third
services included in the registry
parties, possibly resulting in the inability
certificate. The brand registrations,
to use the brand to conduct their
81
10/31/2015
817692177
NATIONAL
10/312015
817692215
NATIONAL
10/31/2015
817692223
NATIONAL
10/31/2015
817692231
NATIONAL
9/25/2019
6989454
NATIONAL
9/25/2019
Awaiting approval for
extension
Awaiting approval for
extension
Awaiting approval for
extension
9/27/2018
6989462
NATIONAL
200065726
NATIONAL
608965065
NATIONAL
800221737
NATIONAL
812987683
NATIONAL
5/30/2019
812987691
NATIONAL
9/13/2018
813141010
NATIONAL
5/30/2019
Awaiting approval for
extension
2/12/2024
Awaiting decision
from the INPI
regarding the brand
concession
4/24/2017
813782414
NATIONAL
815236662
NATIONAL
830724915
NATIONAL
830724931
NATIONAL
824647548
NATIONAL
4/24/2017
824647556
NATIONAL
3/25/2016
6268625
NATIONAL
DURATION
REGISTRATION #
COVERAGE
TERRITORY
PI0705035-6
NATIONAL
BR 30 2013 002803-8
NATIONAL
BR 30 2013 002802-0
NATIONAL
BR 10 2013 013430-9
NATIONAL
x
Concession term
expired
Concession term
expired
9/20/2014
BR 30 2013 002801-1
NATIONAL
MU7801603-7
NATIONAL
MU7903337-7
NATIONAL
MU7902162-0
NATIONAL
9/3/2014
MU7903347-4
NATIONAL
MU8901783-8
NATIONAL
MU8901887-7
NATIONAL
PI1004014-5
NATIONAL
PI1101068-1
NATIONAL
PI1003939-2
NATIONAL
MU9101029-2
NATIONAL
c.
Discontinued Operations
In July 10, 2013, the company entered into a sale agreement of its Industrial Services business unit to FIP
Leblon Equities Partners V, a fund managed by Leblon Equities Gesto de Recursos Ltda., through the
82
sale of its stake in the company Albuquerque Participaes Ltda. The sale price set on May 31, 2013, trading
date base, was R$ 102,0 million. During the 3-year period, beginning on the closing date, the parties entered
into a mutual agreement not to compete.
The transaction was closed on November 30, 2013, and the price was updated based on CDI, adjusted by
partial performance of the business and settled, after adjustments, in local currency.
Investiments
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25% of the
voting and total capital of Rohr for R$ 90 million, paid on February 8, 2011.
Rohr is a private company specializing in access engineering and the provision of construction solutions,
with more than 45 years of experience in the market. The company operates in the heavy construction and
infrastructure, building construction, industrial maintenance and events sector.
The Company does not participate in the management of Rohr, as this is a strategic acquisition, whereby
the Company aimed to increase its presence in its areas of activity - infrastructure, residential and
commercial construction, oil and gas, etc. In September 2011, Rohr acquired 9.0% of its own stock, and,
as a result, the Company expanded its participation from 25.0% to 27.5% in Rohr.
(i) Company Name: Rohr S.A. Estruturas Tubulares
(ii) Headquarter: Avenida Francisco Matarazzo, 1400 Conjunto 181, cidade de So Paulo, Estado de So
Paulo, Brasil.
(iii) Activities developed: Rohr is a private company specializing in access engineering and the provision
of construction solutions, with more than 45 years of experience in the market. The company operates in
the heavy construction and infrastructure, building construction, industrial maintenance and events sector.
(iv) Ownership: 27.5%
(v) Ownership profile: investment recorded at the cost of acquisition.
(vi) CVM registration: not applicable
(vii) Book value of participation: R$87.4 million (as of December 31, 2013)
(viii) Market value of ownership according to stock price at the date of the fiscal year, when
such stocks are traded on organised markets of securities: not applicable
(ix) Appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the book value: not applicable. On January 19, 2011, the Company entered into a purchase and sale
agreement to acquire 25.0% of the voting and total capital of Rohr for R$90.0 million. In September 2011,
there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by Rohr of 9.0% of its
shares held as treasury stock.
(x) Appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the market value, to stock price at the date of the fiscal year, when such stocks are traded on
organised markets of securities: not applicable
(xi) Dividends received in the 3 last fiscal years:
2013 -> R$ 1,648 thousand as interest on capital related to the fiscal years of 2013, registered as
financial revenue of 2013.
2012 > R$ 3,214 thousand as interest on capital related to the fiscal years of 2011 and 2012,
registered as financial revenue of 2012.
2011 > R$ 3,954 thousand, of which (i) R$ 1,346 thousand as extraordinary dividend related to
the fiscal year of 2011 and registered as financial revenue in 2011; (ii) R$2,035 thousand (net of
taxes) of interest on capital and dividends related to the fiscal year of 2010 and registered reducing
the value of the investment as it is figures for the years prior to the date of acquisition of the shares
83
of the investee; and (iii) R$573 thousand (net of taxes) of interest on capital related to the year of
2007 and registered reducing the value of the investment as it is dividends from profits or reserves
existing at the date of acquisition of the shares of the investee.
(xii) reasons for the ownership acquisition and its maintenance: through this acquisition, the
Company aimed to increase its presence in its areas of activity - infrastructure, residential and commercial
construction and oil and gas.
84
10.
85
MANAGEMENT COMMENTS
10.1
a.
The management of the Company believes that the Company is one of the largest providers of specialized
engineering services, the leading supplier of concrete formwork and tubular structures and motorized access
equipment for the Brazilian market. The company offers to its clients specialized engineering services,
providing creative and differentiated solutions, specialized workforce and main equipment to major
infrastructure projects and residential and commercial construction. The customized engineering solutions
of the Company include planning, design and the temporary structures for civil construction (such as
formwork, shoring and scaffolding) and motorized access equipment (such as aerial work platforms and
telescopic handlers), as well as technical assistance and specialized workforce.
The Company believes that the sectors in which it operates will have a strong growth in coming years due
(i) the favorable macroeconomic fundamentals and the increasing availability of credit in Brazil; (ii) the
significant investment in infrastructure projects like the new Logistics Investments Program, aimed at roads,
railways, ports and airports; (iii) the Brazilian governments low income housing program ( Minha Casa,
Minha Vida); (iv) the investments required for the World Cup in 2014 and the 2016 Olympic Games; and
(v) the growing concern of companies with safety and productivity, which can boost the use of services and
equipment offered by the Company.
The Company's revenues come mainly from rental of equipment which accounted to 81.0% of Companys
total net revenues which correspond to an amount of R$ 832.3 million in the fiscal year ended December
31, 2013. The revenue from the performance of services is recognized based on the measurement of the
stages for performance of the services carried out through the reporting date. Revenue from the sale of
merchandise is recognized when the significant risks and benefits of ownership of the merchandise are
transferred to the buyer. Accordingly, the Company adopts the date on which the product is delivered to
the buyer as the basis for its revenue recognition policy. Rental revenue is recognized on a prorated basis
in monthly results on a straight-line basis, according to the equipment lease agreements.
The management of the Company believes that the current availabilities and its operational cash, together
with its borrowing capacity, with proper leverage of EBITDA in relation to the Company's net debt are
sufficient to comply with the investment plan and the need for working capital during the same period. For
more information on the Companys debt, see item 3.7 of this Form.
The Management of the Company believes that the Company has financial conditions and sufficient assets
in order to implement its business plan and to comply with its short and medium term obligations.
Impact of Brazilian general macroeconomic conditions on its financial condition and results of
operations.
The Heavy Construction business unit offers customized solutions to companies involved in major
construction and infrastructure projects, while the Real Estate business unit is dedicated to providing
services to residential and commercial construction companies. The Rental business units products, focused
on the rental, technical assistance and sale of motorized access equipment, are needed by companies
operating in various industries. All these sectors are directly affected by changes in macroeconomic
conditions in Brazil, especially the growth of gross domestic product - GDP, interest rates, inflation, credit
availability, unemployment level, exchange rates and commodity prices, the latter two because they affect
the cost of equipment the Company uses in its activities. Consequently, these factors affect, indirectly, its
operations and results.
In addition, the Companys operations and results of operations are directly affected by changes in (i)
inflation rates, which are used as a reference for the adjustment of the prices paid under long-term
86
contracts; (ii) interest rates, which affect the Companys financial obligations; and (iii) prices of materials
consumed in the construction job or fluctuating of the prices of maintenance of the equipment of the
Company.
b.
According to the Company's balance sheet on December 31, 2013, the capital structure of the Mills was
56.4% equity, measured by the stockholders equity, and 43.6% capital from third party, measured by total
liabilities.
The management of the Company typically use both equity, from operating cash generation, and capital
from third-party, though the contraction of new loans and/or the issuance of debt securities, to finance the
needs for investments in non-current assets and working capital of the company. For strategic operations,
when necessary, the company may resort to the capital from their shareholders or third parties, through
the issuance of shares.
There are no hypotheses of redemption of shares issued by the Company in addition to the legally provided
for.
c.
Financial commitments
The Company calculates and discloses its EBITDA in accordance with CVM Instruction 527/12. For further
information on the calculation of EBITDA and its reconciliation to net income in each period, see item 3.3
of this Reference Form.
The Companys EBITDA for the year ended on December 31st 2013, was R$ 403.1 million and its financial
expenses, net of financial revenue in the same period were R$ 46.8 million. Thus, the Companys EBITDA
for year ended on December 31st 2013 presented a coverage ratio of 8.6 times its net financial expenses
during the same period. Only considering its financial expenses, which amounted to R$ 60.0 million in the
year ended on December 31st 2013, the coverage ratio would be 6.7 times.
The Companys total debt for the year ended on December 31st 2013, amounted to R$ 632.6 million, or,
1.6 times the Companys EBITDA for the year ended December 31st 2013. The flow of payment from this
debt, considering the debt profile as of that date, will take place in a period of eight years, of which R$
118.3 million in less than one year, R$ 303.5 million from 1 to 3 years, R$ 116.7 million in a period between
3 to 5 years and R$ 94.1 million in more than five years. The Companys long-term debt profile has a policy
for contracting loans and financing aimed at ensuring that all financial commitments are honored, if
necessary, through its cash generation. This way, the Company's management believes that its cash
generation is sufficient to meet its financial commitments.
In addition, on December 31st 2013, the Company had registered on its balance sheet the amount of R$
10.4 million, which refers to the Tax Recovery Program (REFIS) with a maturity of 180 months, with 130
remaining installments. The Company is compliant to the aforementioned installment program.
With regard to contractual limitations for assumption of new debt, there are clauses in the Company's bank
credit contracts that require adherence to certain financial indicators, among which: the ratio between
EBITDA and net debt, the ratio of net short-term debt and total net debt, and the ratio between net financial
expenses and EBITDA. On the date of this Reference Form, the Company was within the limits of contractual
financial indicators.
d.
87
The investments from the Company in non-current assets and working capital are financed by its own cash
generation and third party capital, through the contraction of new loans and/or the issuance of debt
securities. For strategic operations, when necessary, the Company can turn tocapital from its shareholders
or third parties, through the issuance of shares.
On March 29, 2011, the Company conducted its first issuance of 30 commercial promissory notes with a
unit value of R$ 1.0 million, totaling R$ 30 million, each note with a maturity of 90 days as of the respective
issue. Interest charges will fall due corresponding to 105% of the accumulated variation in the average
daily Domestic Demand (DI) rate. Remuneration was fully paid upon the maturity date.
On April 18, 2011, the Company issued R$270 million in non-convertible unsecured debentures, with
maturity on April 18th, 2016. The nominal value will be amortized in three annual installments starting on
the third year of the issuance, and shall pay semi-annually interest of 112.5% of accrued variation of the
CDI interest rate. The net proceeds from the Offering were used for (a) the redemption of all commercial
papers, issued under the first public offering of the Company, totaling R$ 30 million, (b) investments defined
in the Mills expansion plan, including estimated investments of R$ 337 million in 2011, (c) rearrangement
of cash balance following disbursement of R$ 90 million in February 2011 in connection with the acquisition
of 25% of the Rohr S/A Estruturas Tubulares (Rohr) total capital stock, and (d) general corporate purposes
and expenses of the Company.
On December 7th, 2011 the Company issued a single series of 3 (three) commercial promissory notes with
unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1st, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration will be fully paid upon
the maturity date.
On April 23th, 2012, the Company issued a single series of 30 commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with maturity on December 3 rd, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 4.9% per annum. Remuneration will be fully paid upon the
maturity date.
On September 18th, 2012, the Company held its second issuance, in two series of simple debentures, non
convertible into shares, unsecured, public offering object with limited placement efforts, pursuant to CVM
Instruction 476. 27,000 debentures were issues, each with a nominal value of R$ 10,000.00, of which: i)
16,094 debentures of the first series, amounting to R$ 160.9 million, with maturity date on August 15, 2017,
not subject to monetary adjustment. The nominal value of the first series debentures will be amortized in
two annual installments starting on the fourth year of the issuance, and the interest paid semi-annually and
equal to surtax of 0.88% per annum of 100% of DI accrued variation; ii) 10,906 debentures of the second
series, amounting to R$ 109.1 million, with maturity date on August 15, 2020, subject to monetary
adjustment by the accrued variation of the IPCA. The nominal value of the second series debentures will
be amortized in three annual installments starting on the sixth year of the issuance, and the interest paid
annually and equal to 5.50% per annum of the above mentioned monetarily adjusted amount.
On December 6, 2013 the Company entered into a loan agreement with the Nassau Branch of Banco Ita
BBA S.A. totaling US$ 16.9 million (equivalent to R$40.0 million). Principal will be settled in a bullet payment
on January 30, 2015 and interest will be paid semiannually. In order to eliminate the foreign exchange risk
on this borrowing, on the same date a swap was contracted with Banco Ita BBA S.A. in the amount of R$
40 million so that all obligations (principal and interest) are fully converted into local currency and carried
out on the same maturity dates.
e.
Potential sources of financing used for working capital and for investments in noncurrent assets.
88
The management of the Company believes that the existing resources and the cash flow to be generated
from its operations, along with its borrowing capacity, with proper leverage, will be sufficient to cover its
investment plan and the need for working capital during the same period.
f.
2011
As of December 31st,
2012
2013
CDI+0.29%
TJLP+0.2% to 0.9%
62.1
22.1
27.3
26.7
40.2
23.4
52.2
18.0
8.2
112.5% of CDI
1st series: CDI + 0.88%
2nd series: IPCA + 5.5%
274.6
410.9
272.5
164.7
113.3
622.5
274.4
165.9
120.6
632.6
(in R$ million)
89
As of December 31st, 2012, the Companys long-term debt amounted to R$ 567.7 million, compared to R$
339.5 million as of December 31, 2011, an increase of R$ 228.2 million or 67.2%. This increase was mainly
due to the need to finance, among other things, the investments to be made and the payment of the
Companys debts, for what there was debentures issued, in September 2012, in the amount of R$ 270
million.
As of December 31st, 2013, the Companys long-term debt amounted to R$ 507.3 million, compared to R$
567.7 million as of December 31, 2012, a decrease of R$ 60.4 million or 10.6%. This reduction was due to
the transfer of long-term debt to short term debt of the 1st installment amortization, in April 2014, of the
1st issuance of debentures, issued in April 2011.
BNDES
The Company celebrated with financial agents from Banco do Brasil and Ita BBA the financing contracts
for the purchase of equipment through FINAME, as described on the table below:
Contract Number
ITAU N 106509120003700
ITAU N 006950006211200
ITAU N 006950006221200
ITAU N 006950006221400
ITAU N 006950006211300
BRASIL 00399-X
BRASIL 40-00402-3
Issue Date
06.22.2010
10.02.2011
03.09.2011
08.12.2011
12.15.2011
02.15.2010
06.22.2010
Maturity Date
03.16.2015
11.16.2020
09.30.2020
01.29.2021
04.15.2021
02.17.2020
03.16.2020
Original Value
(in R$ thousands)
6,000
4,294
3,069
7,194
3,627
10,000
1,921
Outstanding as of
Decemberst, 2013
(in R$ thousands)
2,020
3,901
2,619
3,843
1,809
7,727
1,504
23,427
90
On April 18th, 2008, the Company issued a CCB in favor of Banco Bradesco S.A., in the amount of R$ 5.0
million. Payments on the note must be made in 48 monthly installments. The obligations assumed under
the banking credit note above are secured by a pledge of receivables owed to the Company by Dow
Chemical. The contract includes customary events of default, and provides for the acceleration of the debt
upon a change of control, as well as in case of incorporation, spin-off, and merger or corporate
reorganization of the Company. The amount was fully paid on the maturity date.
Debentures
On April 8, 2011 approval was granted for the issuance by the Company of a total of 27,000 debentures in
a single tranche, of non-convertible unsecured debentures, of a total amount of R$ 270.0 million, and unit
face value of R$ 10,000, issued on April 18, 2011. The debentures have maturity on April 18, 2016, with
remuneration equivalent to 112.5% of the CDI rate and semi-annual payments of interest and amortization
in three consecutive installments, with the first maturity date on April 18, 2014. The transaction costs
associated with this issue, in the amount of R$ 2.4 million, are being recognized as Company funding
expenses, in accordance with the contractual terms of the issue.
On August 3, 2012 approval was granted for the issuance by the Company, in two series of simple
debentures, non convertible into shares, unsecured, public offering object with limited placement efforts,
pursuant to CVM Instruction 476. On September 18, 2012, 27,000 debentures were issued, each with a
nominal value of R$ 10,000.00, of which: i) 16,094 debentures of the first series, amounting to R$ 160.9
million, with maturity date on August 15, 2017, not subject to monetary adjustment. The nominal value of
the first series debentures will be amortized in two annual installments starting on the fourth year of the
issuance, and the interest paid semi-annually and equal to surtax of 0.88% per annum of 100% of DI
accrued variation. ii) 10,906 debentures of the second series, amounting to R$ 109.1 million, with maturity
date on August 15, 2020, subject to monetary adjustment by the accrued variation of the IPCA. The nominal
value of the second series debentures will be amortized in three annual installments starting on the sixth
91
year of the issuance, and the interest paid annually and equal to 5.50% per annum of the above mentioned
monetarily adjusted amount.
As of December 31, 2013 the balance of debentures including transaction costs is R$ 113.3 million in current
liabilities and R$ 450.0 million in non-current liabilities, and R$ 112.5 million and R$ 448.2 million, net of
transaction costs, respectively.
Promissory Notes
On March 29, 2011 the Company held its first issuance of 30 commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with a maturity date of 90 days as of the
respective date of issue. Remuneration interest charges will fall due corresponding to 105% of the
accumulated variation in the average daily Domestic Demand (DI) rates. Remuneration was fully paid upon
the maturity date.
On December 7, 2011 the Company issued a single series of three commercial promissory notes with unit
face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1 st, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration was fully paid upon the
maturity date.
On April 23, 2012 the Company issued a single series of thirty commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with maturity on December 3, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 4.9% per annum. Remuneration was fully paid upon the
maturity date.
Leasing Agreements
Several leasing agreements which the Company entered are guaranteed through promissory notes. The
table below shows the promissory notes which amounts are considered relevant:
Contract binding
615556-1
615800-5
615587-1
19340110471
19340115341
19340116534
Bank
SANTANDER
SANTANDER
SANTANDER
HSBC
HSBC
HSBC
Issue Date
07.27.2009
08.27.2009
05.08.2009
09.15.2009
12.29.2009
02.05.2010
Maturity Date
07.28.2014
08.25.2014
08.04.2014
09.15.2014
12.29.2014
02.02.2015
Outstanding as of
December 31st, 2013
(in R$ million)
587
1,312
308
647
1,538
774
As of the date of this Reference Form, the Company is part of several leasing agreements with several
financial entities, representing obligations of R$ 8.2 million as of December 31st, 2013. The Company
entered into such agreements as lessee, with the purpose of leasing (or in certain cases purchasing) the
equipment and other assets necessary for running its operations. Upon maturity of each leasing agreement,
the Company has the option to return the equipment or assets to the respective lessor, or exercise an option
to buy such equipment or asset, upon payment of a residual value. The amounts owed under these leasing
agreements are repaid in monthly installments, subject to a minimum guaranteed payment corresponding
to the lower amount for which the equipment or assets could be sold to a third-party.
92
import operations, in the interval between the placing of orders and nationalization against the risk of
fluctuation in the exchange rate, and are not used for speculative means.
On December 31st, 2013, the Company possessed purchase orders with foreign suppliers of equipment
valued at approximately US$ 71.3 million (in 2012, these orders amounted to US$ 72.8 million, and in 2011,
it amounted to US$ 69.2 million), all scheduled for payment until December, 2014.
(iv) any restrictions imposed on the issuer, in particular, for limits of indebtedness and contracting of new
debts, the distribution of dividends, disposal of assets, the issuance of new securities or disposal of corporate
control
Some of the Companys long-term financial instruments contain obligations relating to the maintenance of
certain levels for determined financial indicators. The main conditions imposed on financial instruments
entered into by the Company are: (i) the ratio between EBITDA and net debt (total bank debt minus cash
equivalents); and (ii) the ratio between EBITDA and net financial expenses. Thus, the Company is required
to maintain a relatively low indebtedness and a satisfactory capacity to pay its financial obligations, and the
hiring of new borrowings should meet these prerequisites. On the fiscal years ended December 31st, 2011,
2012 and 2013, the Company was in compliance with the required levels for the indicators.
The management of the Company believes that the current provisions will not significantly restrict the ability
to recruit new debt to meet its capital needs.
g.
On December 31, 2013, the Company had credit limits in the major financial institutions in Brazil, plus your
debts already contracted of R$ 632 million, but had no limits to use in financing transactions already
contracted. The Company maintains relationships with major financial institutions operating in Brazil and,
the evaluation of its board has conditions and the risk rating of credit that enable the Company to contract
new debt in the amount required to meet the current needs of cash for short and long term.
h.
93
In accordance with the existing accounting policies adopted in Brazil, the revenue reported in the income
statement should include only the gross inflows of economic benefits received and receivable by the
Company, when originating from their own activities. Amounts collected on behalf of third parties - such as
sales taxes, taxes on goods and services and from taxes on added value - do not generate benefits for the
Company and do not result in an increase in equity and therefore are excluded from revenue. Thus, the
comments below relating to variations between the results for the years ended December 31st, 2011, 2012
and 2013 refer only to net revenue, not to the gross revenue.
2011
677.6
131.6
155.8
214.8
175.4
VA(1) (%)
100%
19.4%
23.0%
31.7%
25.9%
(340.4)
50.2%
33.6%
(410.9)
46.7%
20.7%
(334.9)
-40.2%
(18.5%)
Gross Profit
337.2
49.8%
14.3%
468.3
53.3%
38.9%
497.3
59.8%
6.2%
(175.2)
25.9%
18.7%
(218.5)
24.8%
24.7%
8.3
(225.4)
1.0%
-27.1%
3.2%
Operating Profit
162.0
23.9%
9.8%
249.9
28.4%
54.3%
280.2
33.7%
12.1%
Financial Expenses
Financial Income
(46.6)
14.7
6.9%
2.2%
91.6%
(21.3%)
(51.2)
12.1
5.8%
1.4%
9.9%
(17.7%)
(60.0)
13.2
-7.2%
1.6%
17.2%
9.1%
130.1
(38.0)
19.2%
5.6%
-8.3%
(1.4%)
210.7
(59.2)
24.0%
6.7%
62.0%
55.8%
233.4
(65.7)
28.0%
-7.9%
10.8%
11.0%
167.7
4.9
172.6
20.1%
0.6%
20.7%
10.7%
13.9%
HA(2) (%)
(5.3%)
24.6%
8.4%
(100.0%)
41.0%
Year ended December 31st, 2013 compared with year ended December 31st, 2012
Revenue of Products Sold and Services Provided
The following table shows the Companys net revenue by business unit for the years ended December 31st,
2012 and 2013:
Year ended December 31st
2012
VA (%)(1)
174.1
238.0
213.8
253.5
879.3
19.8%
27.1%
24.3%
28.8%
100.0%
2013
VA (%)(1)
HA (%) (2)
217.0
258.0
357.3
832.3
26.1%
31.0%
0.0%
42.9%
100.0%
24.6%
8.4%
(100.0%)
41.0%
(5.3%)
In the year ended December 31st, 2013 the Companys net revenue from sales and services totaled R$
832.3 million. For comparison purposes, excluding the result of the Industrial Services business unit, which
was sold in 2012, there was an increase of R$ 166.8 million, or 25.1%. This increase comes mainly from
the incremental revenue from the Rental and Heavy Construction business units. The analysis of the
Company's management regarding the factors that led to these changes is listed below.
94
Heavy Construction
Net revenue from the Heavy Construction business unit, totaled R$ 217.0 million in 2013, with an increase
of 24.6% or R$ 42.9 million compared to the previous year. The management of the Company attributed
this expansion as a result of the investments in organic growth made in this business unit, since 2010.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 258.0 million in 2013, with an increase of 8.4%
or R$ 20.0 million compared to 2012, including expansion of 15.9% of the revenue from equipment rental.
The branches opened since November 2009 contributed with 55% of this business units revenue in the
year 2013. The management of the Company attributed this expansion as a result of the investments in
organic growth made in this business unit, since 2010.
Industrial Services
The sale of the Industrial Services business unit was concluded in November 30, 2013, and the Company
recorded gain of R$ 8.3 million with the sale. Of the agreed sales price of R$ 102 million, we received R$
25 million on the date of the sale agreement, in July. We will receive the outstanding amount in installments
adjusted by the Interbank Deposit Certificate CDI rate, discounting the cash generation of this business
for Mills between June 1st, 2013 and the closing date, which was equal to R$ 6.8 million. This disposal is in
line with Mills strategy to focus on businesses in which its competences are able to add higher value for its
shareholders and clients.
Rental
Net revenue from the Rental business unit totaled R$ 357.3 million in 2013, which was 41.0% or R$ 103.8
million greater than that 2012. The branches opened since 2010 contributed with 69% of 2013 revenue.
On the evaluation of the management of the company, this increase is mainly associated with increasing
fleet of equipment, with investments in organic growth since 2010.
Cost of products sold and services rendered and general and administrative expenses
Since 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by business unit and by nature, and the information by business unit has been presented only on a
consolidated basis, excluding the effects of depreciation.
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years
ended December 31, 2012 and 2013.
Year ended on December 31st, 2012
Direct cost
General
Total
of
and
95
constructio
n and
renting
Administrat
ive
Expenses
constructio
n and
renting
(179.2)
(6.3)
(15.0)
(109.3)
(22.1)
(0.8)
(288.6)
(28.4)
(15.8)
(58.8)
(5.0)
(15.5)
(41.7)
(4.8)
(46.5)
(8.3)
(8.6)
(41.0)
(11.3)
(11.5)
-
(19.5)
(20.1)
(41.0)
(104.2)
(4.4)
(4.9)
(1.6)
(410.9)
Administrat
ive
Expenses
constructio
n and
renting
Administrat
ive
Expenses
(in R$ million)
Labor
Third-party Services
Freight
Construction Material /
Maintanance and Repair
Rent Equipment
Travel
Cost of Sales
Depreciation ad
Amortization
Asset impairment
Allowance for Doubtful
Debts
Stcok Option
Update provisions
Profit sharing
Others
Total
(1)
(107.4)
(20.4)
(0.8)
(166.2)
(25.5)
(16.2)
120.4
1.3
(0.5)
1.9
1.7
0.0
122.4
2.9
(0.4)
(43.5)
(6.1)
(49.6)
(1.8)
(1.3)
(3.1)
(5.9)
(5.0)
(68.0)
(15.0)
(11.6)
-
(20.8)
(16.5)
(68.0)
2.4
3.6
(27.0)
(3.7)
(0.1)
-
(1.3)
3.6
(27.0)
(108.6)
(122.6)
(8.4)
(131.0)
(18.4)
(4.0)
(22.4)
(4.9)
(8.9)
(8.9)
(4.0)
(4.0)
(16.1)
(16.1)
(16.2)
(16.2)
(0.1)
(0.1)
(5.8)
4.0
(20.1)
(16.3)
(218.5)
(5.8)
4.0
(20.1)
(17.9)
(629.4)
(1.9)
(334.9)
(9.0)
0.2
(18.8)
(12.0)
(225.4)
(9.0)
0.2
(18.8)
(13.8)
(560.4)
(0.2)
76.0
(3.2)
(3.8)
1.3
4.3
(6.9)
(3.2)
(3.8)
1.3
4.1
69.0
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by business unit in fiscal years ended December 31st, 2012 and 2013. The
information provided in this table does not reflect the effects of depreciation on such costs.
2012
(%)
(1)
2012
x
2013
Var. (%)
(2)
(in R$ million)
Heavy Construction ...................................
Real Estate................................................
Industrial Services .....................................
Rental .......................................................
Total......................................................
(1)
(2)
(89.7)
(124.5)
(194.4)
(112.2)
(520.8)
17.2%
23.9%
37.3%
21.5%
100.0%
(108.9)
(164.2)
(156.1)
(429.2)
25.4%
38.3%
0.0%
36.4%
100.0%
21.4%
31.9%
(100.0%)
39.2%
(17.6%)
Percentage share of the business unit of goods sold and services provided and general and administrative expenses
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services provided, excluding the effects of depreciation, went from R$ 520.8 million
in the year ended December 31, 2012 to R$ 492.2 million year ended December 31, 2013, a decrease of
R$ 91.6 million, or 17.6%, mainly due to the sale of the Industrial Services business unit.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 17.7% due to higher investments in the past years, from R$ 104.2 million for the year
ended on December 31, 2012 to R$ 122.6 million in the fiscal year ended December 31, 2013, maintaining
the average depreciation period of 10 years.
Considering the depreciation costs, the Companys cost of goods sold and services rendered totaled R$
334.9 million in the fiscal year ended December 31, 2013, compared with R$ 410.9 million in the fiscal year
ended December 31, 2012, representing a decrease of 18.5%, mainly due to the sale of the Industrial
Services business unit.
As a result of the sale of the Industrial Services business unit, compared to net revenues, the total cost of
goods sold and services provided, excluding the effects of depreciation, decreased from 34.9% in the year
ended December 31, 2012 to 25.5% in the year ended December 31, 2013. Including the effects of
depreciation, the same ratio decreased from 46.7% in the year ended December 31, 2012 to 40.2% in the
fiscal year ended December 31, 2013.
96
The general and administrative expenses increased from R$ 218.5 million in the fiscal year ended December
31, 2012 to R$ 225.4 million in the fiscal year ended December 31, 2013, an increase of R$ 6.9 million, or
3.2%. In 2013, we continued the technical and commercial team expansion and improvement and some
branches were transferred to larger spaces, consistent with the growth of the companys businesses.
Despite the Company, at a first glance, incurred in greater general and administrative expenses and
consequent compression of margin, the management of the Company believes that these are fundamental
measures to enable its growth with productivity improvements in the operation of its warehouses and
maintaining the high technical quality of its services.
The ratio between the Companys operating, general, and administrative expenses in relation to the net
operating income went from 24.8% in the fiscal year ended December 31, 2012 to 27.1% in the fiscal year
ended December, 2013.
Operating Profit
Operating profit before financial result increased from R$ 249.9 million in the fiscal year ended December
31, 2012 to R$ 280.2 million in the fiscal year ended December 31, 2013, an increase of R$ 30.3 million, or
12.1%. Companys management believes that such increase was a consequence of the maturity of the
investments made, as mentioned above. Operating profit represented 33.7% of net revenues in December
31, 2013, compared to 28.4% of net revenues in December 31, 2012.
Financial Results
Net financial expenses increased from R$ 39.2 million in the fiscal year ended December 31, 2012 to R$
46.8 million in the fiscal year ended December 31, 2013, representing an increase of R$ 7.6 million. The
Company's bank debt, which was R$ 622.5 million in December 31, 2012 increased to R$ 632.6 million in
December 31, 2013.
Net Income
The net profit increased from R$ 151.5 million in the fiscal year ended December 31, 2012 to R$ 172.6
million in the fiscal year ended December 31, 2013, an increase of R$ 21.1 million, or 13.9%. This expansion
is due to the decrease of cost of goods sold and services provided and general and administrative expenses
(R$ 69.0 million), partially offset by the decrease of net revenue (R$ 47.0 million) and negative net financial
result (R$ 7.6 million).
97
Year ended December 31st, 2012 compared with year ended December 31st, 2011
Revenue of Products Sold and Services Provided
The following table shows the Companys net revenue by business unit for the years ended December 31st,
2011 and 2012:
Year ended December 31st
VA (%)(1)
2012
2011
VA (%)(1)
HA (%)
(2)
131.6
19.4%
174.1
19.8%
155.8
23.0%
238.0
27.1%
32.3%
52.8%
214.8
31.7%
213.8
24.3%
(0.5%)
Rental ..............................................................
175.4
25.9%
253.5
28.8%
44.5%
Total ................................................................
677.6
100%
879.3
100.0%
29.8%
(1)
Vertical analysis, which is a percentage of total net sales and services.
(2)
Horizontal analysis, which is the percentage of variation in the income statement accounts between fiscal years of 2011 and 2012.
In the year ended December 31st, 2012 the Companys net revenue from sales and services totaled R$879.3
million, a new annual record, compared with R$677.6 million in the year 2011, an increase of R$201.7
million, or 29.8%. This increase comes from the incremental revenue from the Rental, Real Estate and
Heavy Construction business units. The analysis of the Company's management regarding the factors that
led to these changes is listed below.
Heavy Construction
Net revenue from the Heavy Construction business unit, totaled R$ 174.1 million in 2012, with an increase
of 32.3% or R$ 42.5 million compared to the previous year. The management of the Company attributes
that this increase was mainly due to the recovery of the Heavy Construction market, which had been through
a period of weakened demand during most of 2011.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 238.0 million in 2012, with an increase of 52.8%
or R$ 82.2 million compared to 2011, including expansion of 45.9% of the revenue with equipment rental.
The branches opened since November 2009 contributed with 51% of this segments revenue in the year.
The management of the Company attributed this expansion as a result of the investments in organic growth
made in this segment, since 2010.
Industrial Services
Net revenues for the Industrial Services business unit totaled R$ 213.8 million in 2012, in line with the
revenue for 2011, which was of R$ 214.8 million. On the evaluation of the management of the Company,
this revenue increase is mainly due to the adopted strategy of optimizing existing contracts, prioritizing
improvement of profitability over revenue growth.
Rental
Net revenue from the Rental business unit totaled R$ 253.5 million in 2012, which was 44.5% or R$ 78.1
million greater than that of 2011, with the larger volume of rented equipment contributed with 98.5% of
the revenue expansion between years. The branches opened since 2010 contributed with 62% of this years
revenue. On the evaluation of the management of the company, this increase is mainly associated with
increasing fleet of equipment, with investments in organic growth since 2010.
98
In accordance with existing accounting policies adopted in Brazil, the revenue reported in the financial
statement should include only the gross inflows of economic benefits received and receivable by the
Company, when originating from their own activities. Amounts collected on behalf of third parties - such as
sales taxes, taxes on goods and services and from taxes on added value - do not generate benefits for the
Company and do not result in an increase in equity and therefore are excluded from revenue. Thus, the
Company has not reported for the years ended December 31, 2011 and 2012, figures comparable to this
item.
Cost of products sold and services rendered and general and administrative expenses
Since 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by business unit and by nature, and the information by business unit has been presented only on a
consolidated basis, excluding the effects of depreciation.
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years
ended December 31, 2010 and 2011.
A tabela abaixo mostra os custos dos produtos vendidos e servios prestados abertos da Companhia por
natureza nos exerccios sociais encerrados em 31 de dezembro de 2011 e 2012.
Year ended on December 31st, 2011
General
and
Direct cost of
Administra
construction
tive
and renting
Expenses
Total
(in R$ million)
Labor
Third-party Services
Freight
Construction Material
/ Maintanance and
Repair
Rent Equipment
Travel
Depreciation
Amortization of
intangilbe assets
Asset impairment
Allowance for
Doubtful Debts
Stcok Option
Update provisions
Profit sharing
Others
Total
(1)
(162.3)
(7.0)
(13.4)
(89.9)
(17.4)
(0.6)
(252.3)
(24.4)
(14.0)
(179.2)
(6.3)
(15.0)
(109.3)
(22.1)
(0.8)
(288.6)
(28.4)
(15.8)
(16.9)
0.7
(1.6)
(19.4)
(4.7)
(0.2)
(36.3)
(4.0)
(1.8)
(35.2)
(4.1)
(39.3)
(41.7)
(4.8)
(46.5)
(6.5)
(0.7)
(7.2)
(10.0)
(8.6)
(73.0)
(9.5)
(11.4)
(2.5)
(19.4)
(20.0)
(75.5)
(8.3)
(8.6)
(104.2)
(11.3)
(11.5)
(3.3)
(19.5)
(20.1)
(107.5)
1.7
0.0
(31.2)
(1.8)
(0.1)
(0.8)
(0.1)
(0.1)
(32.0)
(0.7)
(0.7)
(1.1)
(1.1)
(0.4)
(0.4)
(4.6)
(4.6)
(4.9)
(4.9)
(0.3)
(0.3)
(11.4)
(11.4)
(16.1)
(16.1)
(4.7)
(4.7)
(26.3)
(340.4)
(3.1)
(1.7)
(7.9)
(15.0)
(175.2)
(3.1)
(1.7)
(7.9)
(41.3)
(515.6)
(42.6)
(410.9)
(5.8)
4.0
(20.1)
(16.3)
(218.5)
(5.8)
4.0
(20.1)
(58.9)
(629.4)
(16.3)
(70.5)
(2.7)
5.7
(12.2)
(1.3)
(43.3)
(2.7)
5.7
(12.2)
(17.6)
(113.8)
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by business unit in fiscal years ended December 31st, 2011 and 2012. The
information provided in this table does not reflect the effects of depreciation on such costs.
2011
(%)
(1)
2011
x
2012
Var. (%)
(in R$ million)
Heavy Construction ...................................
Real Estate................................................
Industrial Services .....................................
(73.8)
(89.8)
(194.1)
16.8%
20.4%
44.2%
99
(89.7)
(124.5)
(194.4)
17.2%
23.9%
37.3%
21.5%
38.6%
0.2%
(2)
Rental ......................................................
Total......................................................
(1)
(2)
(81.8)
(439.4)
18.6%
100.0%
(112.2)
(520.8)
21.5%
100.0%
37.2%
18.5%
Percentage share of the segment of goods sold and services provided and general and administrative expenses
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services provided, excluding the effects of depreciation, went from R$ 439.4 million
in the year ended December 31, 2011 to R$ 520.8 million year ended December 31, 2012, an increase of
R$ 81.4 million, or 18.5%, mainly due to growth of the Companys business in 2012.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 42.7% due to higher investments in the past years, from R$ 73.0 million for the year
ended on December 31, 2011 to R$ 104.2 million in the fiscal year ended December 31, 2012, maintaining
the average depreciation period of 10 years.
Considering the depreciation costs, the Companys cost of goods sold and services rendered totaled R$
410.9 million in the fiscal year ended December 31, 2012, compared with R$ 340.4 million in the fiscal year
ended December 31, 2011, representing an increase of 20.7%.
As a result of the maturity of the Companys investments and the recovery in Heavy Construction demand,
compared to net revenues, the total cost of goods sold and services provided, excluding the effects of
depreciation, decreased from 39.5% in the year ended December 31, 2011 to 34.9% in the year ended
December 31, 2012. Including the effects of depreciation, the same ratio decreased from 50.2% in the year
ended December 31, 2011 to 46.7% in the fiscal year ended December 31, 2012.
The general and administrative expenses increased from R$ 175.2 million in the fiscal year ended December
31, 2011 to R$ 218.5 million in the fiscal year ended December 31, 2012, an increase of R$ 43.3 million, or
24.7%. In 2012, the technical and commercial team was expanded and some branches were transferred to
larger spaces, consistent with the growth of the companys businesses. Despite the Company, at a first
glance, incurred in greater general and administrative expenses and consequent compression of margin,
the management of the Company believes that these are fundamental measures to enable its growth with
productivity improvements in the operation of its warehouses and maintaining the high technical quality of
its services.
The ratio between the Companys operating, general, and administrative expenses in relation to the net
operating income went from 25.9% in the fiscal year ended December 31, 2011 to 24.8% in the fiscal year
ended December, 2012.
Operating Profit
Operating profit before financial result increased from R$ 162.0 million in the fiscal year ended December
31, 2011 to R$ 249.9 million in the fiscal year ended December 31, 2012, an increase of R$ 87.9 million, or
54.3%. Companys management believes that such increase was a consequence of the recovery of the
Heavy Construction business unit and the maturity of the investments made, as mentioned above. Operating
profit represented 28.4% of net revenues in December 31, 2012, compared to 23.9% of net revenues in
December 31, 2011.
Financial Results
Net financial expenses increased from R$ 31.8 million in the fiscal year ended December 31, 2011 to R$ 39.2
million in the fiscal year ended December 31, 2012, representing an increase of R$ 7.4 million, as the increase
in bank debt was partially compensated by lower interest rates. The Company's bank debt, which was R$
410.9 million in December 31, 2011 increased to R$ 622.5 million in December 31, 2012. On August 2012,
the Company issued its second debentures offering, a total amount of R$ 270.0 million. The Company used
100
the net proceeds from the issuance for (a) the financing of investments to be made by the Company (b) the
payment of the Companys debts (c) general uses and expenses.
Expenditure on income tax and social contribution went from R$ 38.0 million in the fiscal year ended
December 31, 2011 to R$ 59.2 million in the fiscal year ended December 31, 2012, an increase of R$ 21.2
million, or 55.8%.
In the fiscal year ended December 31, 2012, the Companys deducted from its income tax and social
contribution the amount of R$ 14.2 million, due to the provisioning of interest on equity for distribution of
part of the annual results, while in fiscal year ended December 31, 2011 this deduction totaled R$ 8.3
million. Moreover, the effective rate of 2012 was 28.1% after adjustment of expenses not deductible,
compared to 29.2% in 2011.
Net Income
The net profit increased from R$ 92.2 million in the fiscal year ended December 31, 2011 to R$151.5 million
in the fiscal year ended December 31, 2012, an increase of R$ 59.3 million, or 64.3%. This expansion in
due to the increase of net revenue (R$ 201.7 million), partially compensated by the expansion in the
amounts of cost of goods sold and services provided and general and administrative expenses (R$ 113.8
million) and negative net profits (R$ 7.3 million).
Year ended December 31st, 2013 compared to year ended December 31 st, 2012
Current Assets
The Companys current assets increased from R$ 473.7 million as of December 31, 2012 to R$ 319.5 million
as of December 31, 2013, a decrease of R$ 154.2 million or 32.6%. The main reasons for such decrease,
in the assessment of the Management of the Company, were:
a reduction of R$ 159.6 million in securities and marketable securities, due to the use of the
proceeds from the Companys second offering of non convertible debentures held in September
2012;
a reduction of R$ 17.4 million in accounts receivable, due to the sale of the Industrial Services
business unit;
an increase of R$ 26.8 million in other accounts receivable sale o investee due to the outstanding
receivable amount related to the sale of the Industrial Services business unit;
Non-current assets
The Companys non-current assets increased from R$ 45.1 million as of December 31, 2012 was increased
to R$ 101.5 million as of December 31, 2013, an increase of R$ 56.4 million or 125.0%. The main variations
in the non-current assets was in other accounts receivable sale o investee due to the outstanding
receivable amount related to the sale of the Industrial Services business unit.
Investment
In December 31, 2013, the Company maintained the same registered investment value as of December 31,
2012, R$ 87.4 million. In January, 2011 the Company acquired 25.0% of the total voting capital of Rohr for
R$ 90 million. The Company received in 2011, R$ 2.6 million of shareholder remuneration from Rohr related
to previous fiscal years than 2011, and therefore was recorded as a reduction for the acquisition investment.
101
The Companys PPE increased from R$ 1,003.3 million at December 31, 2012 to R$ 1,224.5 million at
December 31, 2013, an increase of R$ 221.1 million, or 22.0%. On the evaluation of the Company, the
increase in this category, plus depreciation and write-offs, reflects the investments made by the Company
to meet the increasing demand in its markets.
Intangible assets
The Companys intangible assets increased from R$ 54.5 million as of December 31, 2012 to R$ 68.4 million
as of December 31, 2013, mainly due to R$16.5 million in software acquisition.
Current liabilities
The Companys current liabilities increased from R$ 214.5 million as of December 31, 2012, to R$ 255.0
million as of December 31, 2013, an increase of R$ 40.5 million. The main factors that led to this change,
according to the Managements opinion, were:
increase of R$ 18.6 million in the short-term loans and financing balance, due to the issuance of
promissory notes in December 2011, to enable the Companys investments in 2011;
a reduction of R$ 11.5 million in taxes payable, due to lower taxes on revenues, such as PIS, COFINS
and ICMS;
increase of R$ 99.5 million, in the short-term debentures balance, due to the reclassification from longterm debentures to short-term liability related to a debt amount to be paid in 2014;
decrease of R$ 29.0 million in the short-term borrowing and financing account, due to the settlement
of debt due in 2013;
Non-current liabilities
The non-current liabilities increased from R$ 590.2 million as of December 31, 2012 to R$ 529.7 million as
of December 31, 2013, a reduction of R$ 60.5 million, or 10.3%. The main factor that led to this variation,
according to the managements opinion, was the R$ 89.2 million decrease in the long-term debenture
account, due to the the reclassification from long-term debentures to short-term liability related to a debt
amount to be paid in 2014, and the R$ 28.5 million increase in the long-term borrowing and financing
account, due to a new borrowing contract of R$ 40.0 million signed in December 2013.
Stockholders Equity
Shareholder's equity increased from R$ 859.3 million as of December 31, 2012 to R$ 1,016.5 million as of
December 31, 2013, an increase of R$ 157.2 million, or 18.3%, substantially due to the increase of the
Companys income reserve that aims retain financial resource to support its budget investment.
Year ended December 31st, 2012 compared to year ended December 31 st, 2011
Current Assets
The Companys current assets increased from R$ 224.9 million as of December 31, 2011 to R$ 473.7 million
as of December 31, 2012, an increase of R$ 248.8 million or 110.6%. The main reasons for such increase,
in the assessment of the management of the Company, were:
an increase of R$ 159.6 million in securities and marketable securities, due to the proceeds from the
Companys second offering of debentures held in September 2012;
an increase of R$ 55.6 million in accounts receivable, reflecting an increase in the Companys revenue;
an increase of R$ 15.7 million in inventories due to the expanding activities of the Company;
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an increase of R$ 13.0 million in recoverable taxes, due to PIS and COFINS credit over permanent
asset acquisitions;
a reduction of R$ 4.8 million in advanced payments to suppliers, as a consequence of the receiving
payments.
Non-current Assets
The Companys non-current assets of R$ 50.0 million as of December 31, 2011 was decreased to R$ 45.1
million as of December 31, 2012, a decrease of R$ 4.9 million or 9.8%. The main variation in the noncurrent assets was in the deferred taxes account due to the settlements and to write-downs of financial
leases.
Investment
In 2012 the Company maintained the same registered investment value as 2011 of R$ 87.4 million. In
January, 2011 it acquired 25.0% of the total voting capital of Rohr for R$ 90.0 million. The Company
received in 2011, R$ 2.6 million of shareholder remuneration from Rohr related to previous fiscal years than
2011, and therefore was recorded as a reduction for the acquisition investment.
Intangible assets
The Companys intangible assets increased from R$ 45.5 million as of December 31, 2011 to R$ 54.5 million
as of December 31, 2012, mainly due to R$ 9.2 million in software acquisition.
Current liabilities
The Companys current liabilities increased from R$ 177.7 million as of December 31, 2011, to R$ 214.5
million as of December 31, 2012, an increase of R$ 36.8 million. The main factors that led to this change,
according to the managements opinion, were:
increase of R$ 14.3 million in dividends and payable interest on capital, due to the good result of
the Company and consequent increase in shareholder remuneration;
increase of R$ 12.2 million in the profit sharing payable account, due to the expansion of the
variable remuneration program EVA in the year of 2012, in comparison with 2011;
increase of R$ 11.9 million in the trade payables account, due to the higher investment volume in
2012;
increase of R$ 10.5 million in the taxes payables account, due to the tax revenues such as PIS,
CONFINS and ICMS;
increase of R$ 6.9 million, in the short-term debentures balance, due to the debentures offering in
September 2012, in the amount of R$270 million;
reduction of R$ 23.5 million in the short-term loans and financing balance, due to the liquidation of
the promissory notes in December 2012.
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Non-current liabilities
The non-current liabilities increased from R$ 366.7 million as of December 31, 2011 to R$ 590.2 million as
of December 31, 2012, an increase of R$ 223.5 million, or 60.9%. On the Companys management
evaluation, the main factor that led to this variation was the R$ 269.0 million increase in the long-term
debenture account, due to the second debenture issuance in September 2012, in the amount of R$ 270
million.
Stockholders Equity
Shareholders equity increased from R$ 736.1 million as of December 31, 2011 to R$ 859.3 million as of
December 31, 2012, an increase of R$ 123.2 million, or 16.7%, substantially due to the increase of the
Companys income reserve.
CASH FLOW
2011
2013
(in R$ millions)
Cash flow from operating services..............................................................
Cash flow from investment activities ..........................................................
Cash flow from (used in) financing activities ...............................................
Increase (decrease) in liquidity ..................................................................
140.6
(359.4)
247.8
29.0
202.3
(393.1)
199.8
9.0
263.4
(258.1)
(23.7)
(18.4)
(430.3)
(2.8)
(433.5)
29.5
(404.0)
(in R$ millions)
(287.4)
(287.4)
25.6
(261.8)
(489.4)
(489.4)
43.4
(446.0)
The gross investments in intangible assets in the years ended December 31st 2011, 2012 and 2013 totaled,
R$ 2.6 million (excluding the goodwill from GP Suls acquisition), R$ 10.1 million and R$ 16.5 million,
respectively.
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In 2011, the Company completed its first debentures issuance on a total amount of R$ 270.0 million with
maturity of five years, and issued commercial promissory notes totaling R$ 30.0 million and R$ 27.0 million,
maturing on June 27, 2011 and December 1, 2012, respectively.
In 2012, the Company captured R$ 270.0 million through its second non-convertible debentures issuance,
made in two series. The first series, at the value of R$ 160.9 million, has a 5-year term, with amortization
starting from the fourth year, and interest rates equivalent to CDI + 0.88%. The second series, at the value
of R$ 109.1 million, has an 8-year term, with amortization starting from the sixth year, and interest rates
equivalent to IPCA + 5.50%. The net proceeds of the offering will be used for the financing of investments
in 2013, general uses and expenses and for the payment of debts, allowing the reduction of cost and
expansion of its average term. The Company also issued, in April 2012, promissory notes at the amount of
R$ 30.0 million, with maturity date in December 3rd, 2012.
10.2
a.
(i)
(ii)
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The cost of products sold and services rendered by its Heavy Construction, Real Estate and Rental business
units tends to grow less than their net revenues, as some components of these costs do not grow at the
same rate of the revenue.
Financial Results
The Companys financial results consist of its financial expenses, net of financial revenues. The Companys
main financial expenses include interest payments on loans, leasing operations, and costs associated with
discounting to present value certain long-term receivables derived from the sale of equipment owned by its
former Events division. Its main financial revenues consist of income from its financial investments and
interest in connection with late payments by its clients.
b.
The Companys revenues have a direct correlation with changes in price and volume of equipment rented
to clients. Introduction of new products and services also directly impact revenue. As for inflation, the
correlation of its revenue is indirect, in the extent that the adjustments take place only in the renewal or
closing of new contracts, reflecting the past inflation. As regards to the exchange rate fluctuation, currently
there is no correlation to its revenue, except that the Rental segments equipment are imported and hence
have their acquisition cost in foreign currency. Consequently, in the future, the rental revenue from this
division may be influenced by possible in exchange rates variations. In terms of volume, the revenue
variation for the Heavy Construction business unit was affected by the volume decrease from the end of
2010, and only recovering at the second half of 2011. The increased revenue from the Real Estate and
Rental business units over the past three years are the result of the increase in the volume of rented
equipment and sales, given favorable market conditions and its geographic expansion.
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c.
Impact of inflation, price variations of main inputs and products, exchange rate and
interest rate on operating profit and the issuer's financial result.
The Companys expenses are subject to impact of inflation via wage increases for employees, a raise in the
cost of the hired services, such as freight, and inputs used in the provision of services and through financial
expenditure due to the remuneration of the debentures which are subject to monetary restatement by the
accumulated variation of IPCA. Moreover, the equipment the Company invests in to use at its services are
also subject to increases due to inflation and changes in commodity prices, mainly steel and aluminum. In
the case of Rental business unit, the prices of the equipment the Company uses can increase according to
the fluctuation of the exchange rate, because they are imported.
10.3 The directors must comment on the relevant effects that the events listed below may
have caused or are expected to cause on the Companys financial statements or its results
a.
In 2013, the Company sold, through the sale of the company Albuquerque Participaes Ltda., the Industrial
Services business unit, as described in item (b) below. The Company did not introduce or dispose of any
segment in fiscal years 2011, 2012 and 2013.
b.
Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sale agreement to acquire 100% of the voting
and total capital of GP Sul for R$ 5.5 million.
GP Sul is a privately held company located in Porto Alegre, and one of the largest players in the suspended
scaffold rental market to residential and commercial construction in the state of Rio Grande do Sul.
On the evaluation of the Management of the Company, this strategic acquisition enabled the Company to
become the leader in the suspended scaffold rental market in the state of Rio Grande do Sul and to broaden
its exposure to the residential and commercial construction market in the South region, in line with the
geographic expansion plan of Real Estate business unit.
On August 1st, 2011, was approved, in Extraordinary Shareholders Meeting, the merger of GP Sul by the
Company, in its protocol and merger justification terms. The objectives of the merger were (i) optimize and
centralize the activities developed by GP Sul in the Companys management, therefore, rationalizing the
107
operations and consequently reducing costs; and (ii) take advantage of the tax benefit resulting from the
amortization of R$ 4.7 million generated in its acquisition of at least five years, as from the 2011 fiscal year.
c.
There were no unusual transactions or events in fiscal years 2011, 2012 and 2013, except as described
above.
10.4
a.
New and revised standards and interpretations issued and not yet adopted
Several standards and amendments to standards and interpretations issued by IASB have not yet entered
into force for the period ended December 31, 2013, these being:
(i) IFRS 9 Financials Instruments
Financial Instruments, establishes the principles of disclosure of assets and liabilities that will present
relevant and useful for assessing values, timing and uncertainty of future cash flows of information.
The Company's management expects that IFRS 9 to be adopted in the financial statements will not have a
material effect on the balances reported in relation to financial assets and liabilities of the Company.
However, the detailed review of potential impacts has not been completed.
(ii) Amendments to IFRS 10, IFRS 12 and IAS 27 entities investment
108
The amendments to IFRS 10 define an investment entity and require the reporting entity and which meets
the definition of an investment entity not consolidated subsidiaries, but instead, measure its subsidiaries at
fair value through profit or loss in their consolidated and separate financial statements. To be characterized
as investment entity, a reporting entity must: (a) obtain funds from one or more investors in order to
provide them with professional investment management services, (b) commit to their investors that their
corporate purpose is to invest resources only for returns on capital appreciation and investment income, or
both and (c) measure and evaluate the performance of substantially all of its investments based on fair
value. Such changes do not cause effects on the financial statements.
(iii) Amendments to IAS 32
Clarify the requirements related to the compensation of financial assets and liabilities. Specifically, these
amendments clarify the meaning of "currently has the legal right to offset" and "simultaneous realization
and settlement".
Management does not believe that the adoption of the amendments to IAS 32 will have a material impact
on the consolidated financial statements since the Company has no assets or financial liabilities that qualify
for compensation.
Amendments to IFRS mentioned above have not yet been issued by the CPC. However, due to the
commitment of the CPC and CVM to keep the set of standards issued based on the updates and changes
made by the IASB, it is expected that such changes and modifications are issued by the CPC and approved
by CVM until the date of its mandatory.
(1) Effective for annual periods beginning on or after January 1, 2015.
(2) Effective for annual periods beginning on or after January 1, 2014.
While it awaits the approval of the international standards by the CPC, the Company is analyzing the impacts
of these new standards on its financial statements.
b.
There was no change in significant accounting practices, methods of calculation, judgments, estimates and
accounting assumptions in the financial statements of the company for the fiscal years ended December
31, 2011, 2012 and 2013.
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c.
Following, the Companys Management presents a discussion about what they consider relevant as
accounting practices for the presentation of Companys financial information.
(i)
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the respective instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognized immediately in profit or loss.
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(ii)
Income tax expense comprises current and deferred taxes. Taxes on income are recognized in the income
statement, except when they relate to items that are recognized directly in equity or in other comprehensive
income, in which case, the tax is also recognized in equity or in other comprehensive income.
The current income tax and social contribution expense is calculated based on tax rates prevailing in Brazil
at the end of the reporting period, which are 15% for income tax, plus a 10% surtax on taxable profit
exceeding R$ 240, and 9% on taxable profit for social contribution. Management periodically reviews
positions taken in respect of tax matters that are subject to interpretation and recognizes a provision when
the payment of income tax and social contribution according to the tax bases is expected.
Deferred income tax and social contribution are calculated on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit. The tax rates currently defined are 25% for income tax and 9% for social
contribution.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be
sufficient against which the deductible temporary differences can be utilized, based on projections of future
results prepared on the basis of internal assumptions and future economic scenarios that are, therefore,
subject to changes.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
For purposes of calculating income tax and social contribution, the Company adopted the Transition Tax
Regime (RTT), as prescribed by Law 11,941/09, that is, in the determination of the taxable profit it
considered the accounting criteria of Law 6,404/76, before the changes introduced by Law 11,638/07.
Current and deferred taxes are recognized in profit or loss, except when they relate to items that are
recognized in Other comprehensive income or directly in equity, in which case, current and deferred taxes
are also recognized in Other comprehensive income or directly in equity, respectively Where current and
deferred taxes arise from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
(iii)
A majority of the Company revenues come from property, plant and equipment for operational rental and
use, either solely through rental, or rental combined with assembly and disassembly.
Property, plant and equipment for own use consists mainly of facilities to store equipment, office,
improvements, furniture and equipment necessary for the operation of these facilities.
Property, plant and equipment are carried at historical cost, less accumulated depreciation and accumulated
impairment losses. Historical cost includes expenditure directly attributable to the acquisition of the
property, plant and equipment items.
The items of PP&E are valued at historic cost, less accumulated depreciation. The historic cost includes
expenditures as well as any exchange rate hedge gain or loss cash flow directly attributed to the acquisition
of such fixed assets.
Subsequent costs are added to the residual value of property, plant and equipment or recognized as a
specific item, as appropriate, only if the future economic benefits associated to these items are probable
and the amounts can be reliably measured.
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The residual value of the replaced item is derecognized. Other repair and maintenance costs are immediately
recognized when incurred.
Depreciation is calculated under the straight-line method, taking into consideration the estimated economic
useful lives of assets. Land is not depreciated.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the term of the relevant lease.
Any gain or loss arising on the disposal of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is included in operating
income or expense.
The residual values and estimated useful lives of assets are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for on a prospective basis.
(iv)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of
the business less accumulated impairment losses, if any.
Goodwill is allocated to cash-generating units (CGUs) for impairment testing purposes. Goodwill is allocated
to each of the cash-generating units (or groups of cash-generating units) that is expected to benefit from
the synergies of the combination and is identified according to the operating segment.
(v)
Impairment of assets
Property, plant and equipment and other non-current assets, including goodwill and intangible assets, are
tested to identify evidences of impairment on an annual basis or whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. When applicable, the recoverable
amount is calculated to determine if there is an impairment loss.
When an impairment loss is identified, it is recognized in the amount by which the carrying amount of the
asset exceeds its recoverable amount, which is the higher of the net selling price and the value in use of an
asset. For impairment testing purposes, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units - CGUs). Non-financial assets other than goodwill
that suffered impairment are reviewed for the analysis of a possible reversal of the impairment at the
reporting date.
(vi)
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The provisions for tax, civil and labor claims are recognized at the amount of probable losses, according to
the nature of each provision. Based on the opinion of its legal counsel, management believes that the
recognized provisions are sufficient to cover any losses on ongoing lawsuits. Provisions are measured at the
present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognized as expense on the Companys results.
A provision for onerous contracts is recognized where the Company has a contract under which the
112
unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to
be received from the contract. The provision is measured at present value at the lower of the expected cost
of terminating the contract and the expected net cost of continuing with the contract.
(vii)
The Company offers stock option plans to certain employees and executives. The fair value of the options
granted is recognized as an expense during the period over which the right is vested, that is, period during
which specific vesting conditions should be met. At the end of the reporting period, the Company reviews
its estimates of the number of options whose rights must be vested based on the conditions. It recognizes
the impact of the review of the initial estimates, if any, in the income statement, as a balancing item to the
capital reserve in equity.
The amounts received, net of any directly attributable transaction costs, are credited to capital when options
are exercised.
(viii)
Revenue recognition
Revenue from a contract to provide services is recognized by reference to the stage of completion of the
contract at the end of the reporting period.
Revenue from the sale of goods is recognized when the Company has transferred to the buyer the significant
risks and rewards of ownership of the goods. Therefore, the Company adopts as revenue recognition policy
the date in which goods are delivered to the buyer.
Rental income is recognized on a straight-line basis over the term of the equipment lease agreements.
The Company separates the identifiable components of a single contract or a group of contracts to reflect
the essence of the contract or group of contracts, recognizing the revenue of each of the elements
proportionally to its fair value. Thus, the Company's revenue is split into lease, technical assistance, sales
and indemnities/recoveries of expenses.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate through maturity, when it is determined whether such income will accrue to the Company.
Dividend income from investments is recognized when the shareholders right to receive such dividends has
been established (provided that it is probable that future economic benefits will flow to the Company and
the amount of income can be measured reliably).
Income, expenses and assets are recognized net of taxes on sales.
10.6 Regarding the internal controls adopted to ensure the preparation of reliable financial
statements, the management shall comment on:
a.
Efficiency of such controls, indicating any flaws and the steps taken to correct them
The management of the Company believes that its internal controls are adequate to ensure the elaboration
of reliable financial statements.
b.
Weaknesses and recommendations on internal controls present in the report of the
independent auditor
No deficiencies or recommendations were submitted by the independent auditors in their report about the
effectiveness of internal controls adopted by the Company.
113
10.7 Management comments on the use of resources from public offerings for distribution
of securities
In April, 2010, the Initial Public Offering of shares of the Company provided net proceeds of R$ 411 million,
which enabled the Company to expand its investments in all business units to meet the growing demand in
markets where it operates and to settle higher cost debts.
In the fiscal years ended December 31st, 2010 and 2011, the Company invested R$ 348.5 million and R$
430.4 million, respectively, mainly in equipment acquisition.
The Company also invested the amount of R$ 95.5 million in acquisitions in 2011. On January 19th, 2011,
the Company entered into a purchase and sale agreement to acquire 25% of the voting and total capital of
Rohr, a private company specializing in access engineering and the provision of construction solutions, for
R$ 90 million. On May 27th, 2011, the Company entered into a purchase and sale agreement to acquire
100% of the voting and total capital of GP Sul, one of the largest players in the suspended scaffold rental
market to residential and commercial construction in the state of Rio Grande do Sul, for R$ 5.5 million.
To obtain sufficient resources for such investments, the Company used the resources from its Initial Public
Offering, cash generation and debt issuance.
On March 29th, 2011, the Company conducted its first issue of 30 promissory notes, each with par value of
R$1.0 million, totaling R$30.0 million. The net proceeds were used to finance investments, as planned.
On April 18th, 2011, the Company conducted its first issue of 27,000 debentures, each with par value of R$
10,000.00, totaling of R$ 270.0 million.
In terms of their deed of issuance, it was established the following destination for net resources of this
offering (i) the redemption of commercial papers of 90 days issued in March 2011, totaling R$ 30 million,
(ii) the investments defined in the expansion plan of Mills, including estimated investments of R$ 337 million
in 2011, (iii) rearrangement of cash balance following disbursement of R$ 90 million in February 2011 in
connection with the acquisition of 25% of the Rohr total capital stock, and (iv) general corporate purposes
and expenses of the Company. Management used the funds raised in accordance with the planned
allocation.
On December 7th, 2011 the Company issued a single series of 3 (three) commercial promissory notes with
unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million. The net proceeds of the issue were
fully used to: (i) rearrangement of cash balance following investments made in 2011, and finance (ii) general
corporate purposes of the Company.
In April 23rd, 2012, the Company issued a single series of 30 promissory notes with par value of R$ 1.0
million, totaling R$ 30.0 million. The net proceeds of the issue were fully used to: (i) reinforcement of
working capital of the company; and (ii) debt refinancing of the company.
In September 18th, 2012, the Company held its second issue of simple, non-convertible, unsecured
debentures subject to public offering with restricted placement efforts. A total of 27,000 debentures were
issued, each with par value of R$ 10,000.00. The net proceeds of the offering will be fully utilized for: (a)
the financing of investments to be made by the Company, (b) the payment of Companys debts, and (c)
general uses and expenses of the Company. The realized investments in renting goods amounted to R$
463.6 million in 2013.
The resources used for strategic acquisitions until December 31st, 2013, totaled R$ 95.5 million, R$ 61.7
million, or 39%, less than the amount estimated at the date of the prospectus for Initial Public Offering
shares issued by the Company.
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10.8 Managements comments on significant items not included in the balance sheet and
their effects on the consolidated financial statements
In the evaluation of the management, there are no significant items not included in the balance sheet of
the Company.
10.9
In the evaluation of the management, there are no significant obligations not included on the financial
statements of the Company.
10.10 Management shall indicate and comment on key elements of the Company's business,
specifically exploring the following topics:
a.
Investments, including: (i) quantitative and qualitative description of investments in
progress and forecasted investments; (ii) financing sources of investments and (iii) relevant
alienations in progress and forecasted alienations
The Company plans its investment policy in accordance with its cash flow and credit availability in the
market. The Companys internal policy is to maintain its leverage around 1.0x net debt to EBITDA. To ensure
the necessary amount of capital for the implementation of its investment plan, the Company constituted a
statutory reserve, of which the shareholders may allocate up to 75% of net income, provided that such
reservation does not exceed the limit of 80% of the capital. The cash generation of the Companys normal
operations, from the retention of profits was used to partially finance the investments made in 2011, 2012
and 2013, without any value being allocated to the above mentioned reserve during that period.
The management presents below the major investments made in the course of the years ended December
31, 2011, 2012 and 2013, and highlight the investment budget for fiscal year 2014.
Heavy Construction
In the fiscal years ended by December, 31st, 2011, 2012 and 2013, the Heavy Construction business unit
invested, mainly, in shoring structures and industrialized steel and aluminum formwork, amounting to R$
47.3 million in 2011, R$ 50.5 million in 2012 and R$ 106.3 million in 2013.
Real Estate
Over the past three fiscal years ended by December, 31 st, 2011, 2012 and 2013, the Real Estate business
unit invested mainly in acquisition of shoring equipment, suspended scaffolding and industrialized
formworks, having disbursed R$ 185.0 million in 2011, R$ 59.8 million in 2012 and R$ 90.1 million in 2013.
In 2011, there was the acquisition of GP Sul by R$ 5.5 million, amounting to R$ 190.5 million.
115
Rental
In 2011, 2012 and 2013, the Company continued to implement its strategy of expanding its portfolio of
aerial work platforms and telescopic handlers, investing R$ 162.8 million, R$ 160.9 million and R$ 267.2
million in the acquisition of such equipment, respectively.
Acquisition of Rohr
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25% of the
voting and total capital of Rohr, a private company specializing in access engineering and the provision of
construction solutions, for R$ 90 million. This strategic acquisition enabled the Company to broaden its
exposure to the sectors it serves infrastructure, residential and commercial construction, oil & gas industry,
among others.
Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sales agreement to acquire 100% of the voting
and total capital stock of GP Sul, which the Companys Management believed to be one of the largest players
in the suspended scaffold rental market to residential and commercial construction in the state of Rio Grande
do Sul, by the time of the acquisition, for R$ 5.5 million. This strategic acquisition, as evaluated by the
Management, enabled the Company to become the leader in the suspended scaffold rental market in the
state of Rio Grande do Sul and to broaden its exposure to the residential and commercial construction
market in the South region, in line with the geographic expansion plan of the Real Estate business unit.
The Company intends to finance its investments through (i) cash generated from its own activities, and (ii)
indebtedness.
Project
Acquisition of equipment, primarily shoring
structures and industrialized formwork.
Acquisition of equipment, primarily expanding of
its portfolio of shoring structures, industrialized
steel and aluminum formwork and suspended
access equipment.
Acquisition of motorized access equipment.
Investments
(in R$ millions)
37
25
169
b.
Since it has already disclosed, indicate the purchase of plants, equipment, patents or
other assets that should materially affect the productive capacity of the Company
The Company has in its estimated budget the continued expansion of its operations, through the purchase
of equipment, part of which orders have already been made, besides continuing its geographical expansion
process, through the opening of new branches.
c.
New products and services, by indicating: (i) description of researches in progress
already disclosed; (ii) total amounts paid by the issuer in researches for development of new
116
products or services; (iii) projects under development already disclosed and (iv) total amounts
paid by the issuer for the development of new products or services
The Companys management believes that providing innovative solutions is a constant mark of its activities
and a key aspect to retain its customers. In this sense, although the Company does not carry out in-house
research and development activities, it annually visits the main national and international fairs of equipment
from the industrial and construction sectors to meet the main technological innovations available to the
industry in which the company operates.
Furthermore, the Companys representatives visit the factories of leading national and international
manufacturers of equipment and construction sites around the world to assess the functioning and operation
of advanced equipment available for purchase.
The Company does not develop new products and services, so it does not incur expenses related to the
research and development department. All the technology and innovation present in its equipment and
offered to its clients come from its suppliers. For this, the Company seeks to acquire or license new
technologies from third parties on acceptable terms in the domestic and international market, preferably
with usual suppliers with whom the Company seeks to establish long term partnerships. As an example of
such partnerships, the Company entered into a licensing contract in 1996 with the German company NOE
Schaltechnik, to produce and supply modular steel and aluminum panel formwork (replacing the wood) for
the Brazilian construction market, an innovation in the Brazilian market.
10.11 Management is expected to discuss and analyze other material factors that influenced
operating performance, which were not discussed under previous items in this section.
There are other factors that have significantly affected the operating performance in fiscal years 2011,
2012 and 2013 and which have not been identified or discussed in other items of this section.
117
11.
118
PROJECTIONS
11.1
Identification of projections
Projection monitoring
119
12.
120
12.1
Administrative Structure
a.
BOARD OF DIRECTORS
The Board of Directors is a decision-making body responsible for both formulating and monitoring the
implementation of the general guidelines and policies of its business, including long-term strategies, and
appointing and supervising the Executive Officers.
In accordance with the Companys bylaws, the Board of Directors shall be comprised of a minimum of five
and a maximum of 11 members, shareholders or not, in accordance with the Novo Mercado Listing Rules.
Members of the Board of Directors are to be elected for a continuous two-year term at the General
Shareholders meeting. Further, such members may be reelected and removed from office at any time by
a decision of the Companys shareholders, at the General shareholders meeting.
Pursuant to the Brazilian corporate law and CVM Instruction No. 282, dated June 26, 1998, the minimum
percentage of voting capital required to adopt cumulative voting in publicly-held companies is 5%. If the
adoption of cumulative voting is not required, the directors will be elected by a majority vote of the
shareholders that are present, or represented by proxy. The CVM Board elected by majority on November
8, 2005 established that shareholders who, individually or collectively, represent at least 10% of the total
capital of publicly-held companies, are entitled to appoint a director and its substitute in separate voting.
All members of the Board of Directors must a sign a Consent Agreement of the Administrators, in which
their respective position will depend on the signing of the document. Through the Consent Agreement, the
Companys new members of the Board of Directors are personally responsible to act in accordance with the
Contract of Novo Mercado, Regulation of the Market Arbitration Chamber and the Rules of the Novo
Mercado.
Currently the Companys Board of Directors is comprised of seven members (without any substitutes), of
which were elected at Ordinary Shareholders Meeting held on April 25, 2014. The members were elected
for a two-year term expiring in the 2016 Ordinary General Meeting. The table below indicates the name,
age and title of the board of directors.
The table below presents the information related to the members of the Board of Directors.
Name
Andres Cristian
Nacht
Age
71
Elio Demier
63
Francisca Kjellerup
Nacht
43
70
Nicolas Arthur
Jacques Wollak
Pedro Sampaio
Malan
Jorge Marques de
Toledo Camargo
52
Profession
Business
Administration
Bachelor of Social
Communication
Business
Administration
Business
Administration
Elected by
the
Controlling
Shareholder
CPF
Title
Date of Las
Election
Date of
Office
Term of
Office
Othe
r
Titles
098.921.337/49
Chairman
4.25.2014
4.25.2014
2 years
No
Yes
260.066.507-20
Vice Chairman
4.25.2014
4.25.2014
2 years
Yes
Yes
124.175.657-06
Director
4.25.2014
4.25.2014
2 years
No
Yes
Director
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
Yes
Yes
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
No
Yes
060.903.038-87
Executive
057.378.217-22
71
Economist
028.897.227-91
60
Geologist and
Physicist
114.400.151-04
Independent
Director
Independent
Director
Independent
Director
According to the Novo Mercado Listing Rules and the Companys bylaws, the companys board of directors
must have at least 20% independent members. Whenever the percentage of 20% mentioned above results
in fractional number of members, the number shall be rounded to reach a whole number: (i) immediately
above, if fractional number is equal to or higher than 0.5; or (ii) immediately below, if fractional number is
lower than 0.5. Since the Companys Board of Directors is composed of six members, it should have at least
121
one independent director. The Independent director should be identified as such in the minutes of the General
Shareholders meeting that elects him. Currently Mr. Pedro Malan, Mr. Nicolas Arthur Jacques Wollak and Mr.
Jorge Camargo are the Companys Independent Directors.
The decisions of the Companys Board of Directors are taken by a majority vote of the members that are
present. Under Brazilian corporate law, members of the board of directors are prohibited to vote in any
meeting ou General Meeting, on any matter or intervene in any transaction that would create a conflict of
interest between the Company and that board member.
EXECUTIVE BOARD
The Companys Executive Officers are responsible for the management of daily operations of the business
and for implementing the general policies and guidelines established by the Board of Directors.
The Brazilian corporate law provides that executive officers must reside in Brazil and that they may or may
not be shareholders of the company in which they serve. In addition, up to one-third of the members of a
companys Board of Executive Officers may also serve as members of the Board of Directors.
The members of the board of executive officers are elected by the Companys board of directors for oneyear term and they may be reelected. Any executive officer may be removed by the board of directors
before the expiration of his or her term. According to the Companys bylaws, the board of executive officers
must be comprised of four to 11 officers, including one chief executive officer, one chief financial officer
and the remaining without specific designation.
All the members of the Board of executive officers must a sign a Consent Agreement of the Administrators,
in which their respective position will depend on the signing of the document. Through the Consent
Agreement, the Companys new members of the Board of executive officers are personally responsible to
act in accordance with the Contract of Novo Mercado, Regulation of the Market Arbitration Chamber and
the Rules of the Novo Mercado.
The table below indicates the name, age and title of the board of executive officers.
Age
Profession
CPF
Title
Date of
Last
Election
Srgio Kariya
40
Engineer
197.064.37819
09.3.2015
09.3.2015
Frederico tila
Silva Neves
56
Engineer
595.166.40710
09.3.2015
09.3.2015
Alessandra Eloy
Gadelha
39
Engineer
021.092.59736
09.3.2015
09.3.2015
Avelino Garzoni
49
Engineer
857.596.60730
Officer
04.28.201
5
04.28.201
5
Name
Date of
Office
As specified in the Companys Board of Directorss meeting held on March 4th 2013, Mr. Frederic Atila Silva Neves will
Othe
r
Titles
Elected by
the
Controlling
Shareholder
Term of
Office
Until
OSM
No
Yes
2016
Until
OSM
Yes
Yes
2016
Until
OSM
Yes
Yes
2016
Until
OSM
No
Yes
2016
operate under the title of Senior
FISCAL COUNCIL
Under the Brazilian Corporate Law, the Fiscal Concil is responsible for: (i) reviewing, by any of its members, the
actions of management and verify compliance with its legal and statutory duties; (ii) opine on management's
annual report, including in its opinion the additional information it deems necessary or useful to the General
Meeting decision; (iii) give their opinion on the administrations proposals, to be submitted to the General
Meeting, relating to changes in capital, issuance of debentures or warrants, capex plans or capital budget, capital
122
distribution, dividend distribution, transformations, incorporations, merger or split up; (iv) report, by any of its
members, to the administrators or, if they do not take the necessary action to protect the interests of the
company, to the general meeting, the mistakes, fraud or crimes they find out, and suggest necessary measures
to the company; (v) convene the ordinary shareholder meeting, if the administrative bodies delay for more than
one month calling, and extraordinary, whenever there are serious or urgent matters, including in the agenda the
subjects they deem relevant; (vi) analyze, at least quarterly, the balance sheet and other financial statements
periodically prepared by the company; (vii) review and give an opinion on the financial statements of the fiscal
year; and (viii) exercise those powers during the settlement, in view of the special rules that govern it.
According to the Company's Bylaws, the Fiscal Council works on a permanent basis, and consists of three
members and an equal number of alternates, shareholders or not, resident in Brazil and elected at the General
Meeting, when will determine their remuneration. The Chrairman of the Fiscal Council is elected at the General
Meeting.
All new members of the Fiscal Council must sign a Fiscal Council Compliance Statement, conditioned on
possession in their respective offices the signing of this document. Through the Compliance Agreement, new
members of its Board of Directors are personally responsible to act in accordance with the Novo Mercado, with
the Rules of the Arbitration Chamber and the Novo Mercado Listing Rules.
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders
requested the installation of the Fiscal Council and elected three members and three alternates. At the
Extraordinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body. The Fiscal
Council members indicated by the controlling shareholders were reelected at the General Shareholders' Meeting
held on April 25, 2014, when Mr. Hlio Carlos de Lamare Cox and Mr. Massao Fabio Oya were separately elected
by minority shareholders.
The table below presents name, age and title of the Fiscal Council members:
Name
Eduardo Botelho
Kiralyhegy
Marcus Vincius Dias
Severini
Maria Cristina Pantoja da
Costa Faria
Helio Carlos de Lamare
Cox
Vera Lucia de Almeida
Pereira Elias
Massao Fbio Oya
Date of Last
Election
Date of
Office
Office
Term
Other
Titles
Elected by
the
Controlling
Shareholder
4.28.2015
4.28.2015
1 year
No
Yes
Member
4.28.2015
4.28.2015
1 year
No
Yes
886.793.577-15
Substitute
4.28.2015
4.28.2015
1 year
No
Yes
298.152.157-87
Member
4.28.2015
4.28.2015
1 year
No
No
Substitute
4.28.2015
4.28.2015
1 year
No
Yes
Substitute
4.28.2015
4.28.2015
1 year
No
No
Age
Profession
CPF
35
Lawyer
082.613.217-03
57
Accountant
632.856.06720
37
Lawyer
63
Engineer
56
Accountant
32
Accountant
492.846.49749
297.396.878-06
Title
President of
the Fiscal
Council
ADVISORY COMMITTEES
With the goal of improving the decision-making process, sustaining the execution of our growth plan, and
supporting it in its functions, the Board of Directors has approved the creation of the Human Resources
Committee and the Management Risk Committee, in line with the best practices of corporate governance.
The Human Resources Committee is responsible for: (a) supervision and support during the development,
planning and execution of strategies that enable the company to attract and retain talent, as well as the
improvement of the work environment, and (b) proposals for the remuneration of Mills executive officers
for analysis and approval by the Board of Directors.
The current members of the Human Resources Committee are Elio Demier (Vice-Chairman of Mills Board
of Directors) and Jos Felipe Vieira de Castro.
123
The Management Risk Committees purpose will be to monitor and assess the Companys management to
ensure it is conducted in compliance with applicable law, and to monitor matters relating to business risks,
ethics and conduct, including: (a) monitoring and assessing the mapping, planning and implementation of
strategies toward increasing the Companys capacity to identify, manage and mitigate the risks to which it
is exposed in its operations; (b) presenting, for purposes of the Companys risk management policy,
proposals for tolerance limits for the different risks identified, for examination and approval by the Board of
Directors; and (c) other attributes established by the Board of Directors within the scope of the above
activities.
The current members of the Management Risk Committee are Jorge Marques de Toledo Camargo
(Independent Director), Frederico tila Silva Neves (Chief Financial and Administrative Officer) and
Alessandra Eloy Gadelha (Investor Relations Officer).
Committees of this type are non-permanent and therefore can be either created or extinguished anytime
by the Board of Directors.
The table below presents the names, ages and positions of the Human Resources Committee and the
Management Risk Committee members:
Human Resources Committee
Name
Age
Elio Demier
63
61
Profession
Bachelor of Social
Communication
Economist
CPF
260.066.50720
402.760.74734
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
Member
05.22.2014
05.22.2014
1 year
Yes
Yes
Member
05.22.2014
05.22.2014
1 year
No
Yes
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positio
ns
Elected by
Controlling
Shareholder
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
Name
Alessandra Eloy Gadelha
Frederico tila Silva Neves
Jorge Marques de Toledo
Camargo
b.
Age
39
56
60
Profession
Engineer
Engineer
Geologist and
Physicist
CPF
021.092.59736
595.166.40710
114.400.15104
The Companys Board of Directors approved, in a meeting held on September 15, 2010, the establishment
of the Human Resources Committee, to support in its functions, aiming to improve the decision making
process and to sustain the execution of the Companys growth plan.
c.
The activities of the Executive Officers are supervised and evaluated by the Board of Directors, whose
performance is an object of appreciation by its shareholders.
Until the end of 2010, the Company did not adopt mechanisms or pre-set avaliation methods to measure
the performance of its Administration. In 2011 a Performance Management Program was established,
aiming to map the competence gaps and guide the development programs to improve the attributes that
lead to high performance, and establish and evaluate individual goals, which continues in effect until the
date of this Reference Form.
124
For compensation and calculation purposes of the aggregated economic value that will determine the output
participation, the organs of its Administration are, jointly with its employees, evaluated based on the results
obtained by the Company.
Each member of the Committee shall be entitled to compensation equivalent to 50% (fifty percent) of the
Board of Directors monthly payment. The members of the Committee who are Executive Officers or
employees of the Company shall not be entitled to any compensation.
d.
Is the responsibility of the Chief Executive Officer: (i) to convene and chair meetings of the Executive
Officers meetings; (ii) to maintain permanent coordination between the Executive Board and the Board of
Directors; (iii) To Comply with and enforce, within his authority, these Articles provisions and the resolutions
made by the Executive Board, Board of Directors and Shareholders Meetings.
The Director of Investor Relations is responsible: (i) release and inform CVM and BM&FBOVESPA, if
necessary, any act or relevant fact occurred or related to the Companys business. As well as, ensure the
immediate dissemination, simultaneously in all markets where such securities are negotiated, besides other
duties established by the Board of Directors; (ii) provide information to the investors; and (iii) keep the
registration of the Company in accordance with the applicable rules of the CVM.
The remaining Directors will have the assignments that may be established by the Board of Directors upon
his election, as set forth in the Company's Bylaws.
e.
Mechanisms for evaluating the performance of the Board of Directors, committees and
the Executive Board
See item 12.1(c).
12.2
a.
Notification
Brazilian Corporate Law for listed companies requires that all general shareholders meetings are convened
after three publications of the same in the Federal Gazette (Dirio Oficial da Unio) or of the State in which
the company is based, as well as in another newspaper with a wide circulation. The Companys publications
are currently placed in the Rio de Janeiro State Gazette ( Dirio Oficial do Rio de Janeiro), the official means
of communication used by the state government of Rio de Janeiro, as well as in the daily newspaper in Rio
de Janeiro, Valor Econmico, with the first call made at least 15 days before the meeting, and the second
eight days before, as stipulated in its bylaws. However, the CVM can, in specified circumstances, determine
that the first call for a general shareholders meeting be made with 30 days prior notification from the date
on which the documents related to the issues to be decided upon are made available to shareholders. The
Company, when possible, seeks to antecipate the term of the first convocation of the General Assembly,
allowing shareholders having informations of the General Meeting in advance to that required by law.
b.
Powers
Without prejudice to the other matters provided for by law, General Shareholders Meeting solely shall:
Appreciation of the Managements Report, the Managements accounts, the Companys Financial
Statements and the independent auditors report;
Approval of the capital budget;
Approval of the Managements Proposal for the Allocation of Net Income;
Make amendments to the By-Laws;
125
d.
See item 16.3 for a description of the mechanisms the Company uses to avoid and mitigate conflicts of
interest.
e.
Requests for power of attorney and proxy are based on the legal and regulatory requirements. To date, its
management has never made any public request for power of attorney or proxy.
f.
Necessary formalities to accept powers-of-attorney granted for shareholders,
indicating if the Company receives powers from shareholders electronically
Subject to the provisions of Article 126 of Law 6404/76, to shareholders who are represented by proxy, are
requested to deliver at the Companys headquarter the documents that prove the powers of the legal
representative, preferably with advance of 2 (two) days from the date of the Meeting.
As defined in the Companys bylaws, shareholders may be represented at General Meetings of the Company
by a proxy appointed less than 1 year, who is a shareholder or officer of the Company, attorney or financial
institution. The supporting document evidencing his commission shall be filed with the Companys registered
office within the maximum period of 48 hours before the date scheduled for each General Meeting.
The Company does not accept powers of attorney granted by electronic means.
g.
The Company does not keep Internet forums and pages for shareholders to receive and share comments.
h.
126
i.
Notice to shareholders
announcing the
availability of the
Financial Statements
General Shareholders
Meeting Convening
Notice
Date(s) of
Newspaper
publication
-
3/21/2012
04/25/2012
Financial Statements
3/5/2012
12.4
2012
Publicated
Newspaper
Date(s) of
Newspaper
publication
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
3/22/2013
5/15/2013
3/13/2013
2013
Publicated
Newspaper
Date(s) of
Newspaper
publication
Publicated
Newspaper
3/21/2014
DOE-RJ
Valor Econmico RJ
5/13/2014
DOE-RJ
Valor Econmico RJ
3/20/2014
DOE-RJ
Valor Econmico RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
The Board of Directors shall consist of a minimum of five (5) and a maximum of eleven (11) members,
shareholders or not, of which 20% shall be independent, elected at a General Meeting for a unified 2 (two)year term of office and who may be reelected. In the event of a fractional number of directors as a result,
due to the compliance with this percentage, the fractional number shall be rounded off to: (i) the next
higher whole number, where the fraction is equal or higher than 0.5 (five tenths); or (ii) next lower whole
number, where the fraction is lower than 0.5 (five tenths).
a.
Frequency of meetings
The Board of Directors holds ordinary meetings once a month, and extraordinary meetings, whenever
corporate interests so require.
b.
Shareholder provisions establishing voting restrictions on members of the Board of
Directors
Does not exist
c.
127
general, beyond those contained in the Novo Mercado Rules, the Sanctions Regulation, the Contract for
Participation in the Novo Mercado and the Arbitration Rules of the Market Arbitration Chamber.
12.6
Board of Directors
The Companys Board of Directors is currently comprised of seven members, elected at the Ordinary
Shareholders Meeting held on April 25, 2014. The members were elected for a two-year term expiring in
the 2016 Ordinary General Meeting. The table below indicates the name, age and title of the board of
directors.
Name
Andres Cristian
Nacht
Age
71
Elio Demier
63
Francisca Kjellerup
Nacht
43
70
Nicolas Arthur
Jacques Wollak
Pedro Sampaio
Malan
Jorge Marques de
Toledo Camargo
52
Profession
Business
Administration
Bachelor of Social
Communication
Business
Administration
Business
Administration
Term of
Office
Othe
r
Titles
Elected by
the
Controlling
Shareholder
CPF
Title
Date of
Last
Election
098.921.337/49
Chairman
4.25.2014
4.25.2014
2 years
No
Yes
260.066.507-20
Vice Chairman
4.25.2014
4.25.2014
2 years
Yes
Yes
124.175.657-06
Director
4.25.2014
4.25.2014
2 anos
No
Sim
Director
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
Yes
Yes
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
No
Yes
060.903.038-87
Executive
057.378.217-22
71
Economist
028.897.227-91
60
Geologist and
Physicist
114.400.151-04
Independent
Director
Independent
Director
Independent
Director
Date of
Office
128
The table below shows the name, age, years of experience, position, date of election and term of the current
members of the Companys Board of Executive Officers.
Name
Age
Profession
40
Engineer
Srgio Kariya
Frederico tila Silva
Neves
Alessandra Eloy
Gadelha
Avelino Garzoni
56
Engineer
39
Engineer
49
Engineer
CPF
197.064.37819
595.166.40710
021.092.59736
857.596.60730
Title
Date of
Last
Election
Date of
Office
40
09.3.2015
09.3.2015
09.3.2015
09.3.2015
09.3.2015
09.3.2015
Officer
04.28.2015
4.28.2015
Term of
Office
Until OSN
2016
Until OSM
2016
Until OSM
2016
Until OSM
2016
Other
Titles
Elected by
the
Controlling
Shareholder
No
Yes
No
Yes
No
Yes
No
Yes
Fiscal Council
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders have
requested the installation of the Fiscal Council and elected three members and three alternates. At the
Extraordinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body. The members
were reelected at the Ordinary General Meeting held on April 25, 2014, in which Hlio Carlos de Lamare Cox and
Massao Fbio Oya were separately elected by minority shareholders.
The table below presents name, age and title of the Fiscal Council members:
Name
Eduardo Botelho
Kiralyhegy
Marcus Vincius Dias
Severini
Maria Cristina Pantoja da
Costa Faria
Helio Carlos de Lamare
Cox
Vera Lucia de Almeida
Pereira Elias
Massao Fbio Oya
Office
Term
Othe
r
Titles
Elected by
the
Controlling
Shareholder
4.28.2015
1 year
No
Yes
4.28.2015
4.28.2015
1 year
No
Yes
Date of
Last
Election
Date of
Office
4.28.2015
Member
Age
Professio
n
CPF
35
Lawyer
082.613.217-03
57
Accountant
632.856.06720
37
Lawyer
886.793.577-15
Substitute
4.28.2015
4.28.2015
1 year
No
Yes
63
Engineer
298.152.157-87
Member
4.28.2015
4.28.2015
1 year
No
No
Substitute
4.28.2015
4.28.2015
1 year
No
Yes
Substitute
4.28.2015
4.28.2015
1 year
No
No
56
Accountant
32
Accountant
492.846.49749
297.396.878-06
Title
President of
the Fiscal
Council
12.7 Provide information mentioned in item 12.6 related to the members of the statutory
committees, as well as audit, risk financial and remuneration committees even if such
committees or structures are not statutory
Human Resources Committee
Name
Age
Elio Demier
63
Jos Felipe
Vieira de
Castro
61
Profession
Bachelor of Social
Communication
CPF
260.066.50720
Economist
402.760.74734
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
Member
5.22.2014
5.22.2014
1 year
Yes
Yes
Member
5.22.2014
5.22.2014
1 year
Yes
Yes
129
Name
Alessandra Eloy Gadelha
Frederico tila Silva Neves
Jorge Marques de Toledo
Camargo
Age
Profession
Engineer
39
Engineer
56
60
Geologist and
Physicist
CPF
021.092.59736
595.166.40710
114.400.15104
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positio
ns
Elected by
Controlling
Shareholder
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
Member
07.21.2014
07.21.2014
1 year
Yes
Yes
12.8 Summary of the business experience, activities and areas of expertise of members of
administration and Fiscal Council
12.8.1 Board of Directors
Andres Cristian Nacht has been the Chairman of the Companys board of directors since 1998. The son of
Mr. Jose Nacht, one of the founders of the Company, Mr. Nacht has a degree in Engineering from Cambridge
University, England. In 1965, Mr. Nacht joined GKN, a British engineering company, where he worked for
three years, holding engineering posts in the UK. In 1967, has worked for one year as Engeneer in
Echafaudages Tubulaires Mills from France. Mr. Nacht became a director of the company in 1969 and was
appointed managing director in 1978, a position he held until 1998 when he became the Chairman of the
Board of Directors.
Francisca Kjellerup Nacht holds a degree in Business Administration and Economy from the Copenhagen
Business School, Denmark, since 1995. The granddaughter of Mr. Jose Nacht, one of the founders of the
Company, and daughter of Andres Cristian Nacht, Chairman of the Board of Directors of the Company, has
built her career in Europe, where she lives since 1990. Francisca worked for Procter & Gamble Nordic
between 1997 and 2010, mainly in the fields of leadership and business development. Among other
positions, Francisca was responsible for the commercial integration after Gillettes acquisition, as well as for
the business with the largest retailer of Denmark. In her last position at P&G, she was responsible for
initiating and leading the pharmaceutical division in the Nordic region. In the last five years, besides her
position at P&G, Francisca has
Elio Demier is a graduate of Social Communication from the Fluminense Federal University. He also holds
an MBA from the Institute of Post-Graduation and Research in Administration of the Rio de Janeiro Federal
University. He served as the Companys chairman from 1998 to 1999 and has been a member of the
Companys board of directors since 1998. Mr. Demier was President of the Bomtexto Publisher, company in
the book publishing business located in Rio de Janeiro.
Diego Jorge Bush is a graduate in Business Administration from Yale University in 1967 and also holds an
MBA from Harvard Business School in 1971. Having worked as Chairman of the Boston Finance, Boston
Distributor and Boston Leasing, companies connected to the Bank Boston, an office he held until 1973. After
leaving Boston bank, Mr. Bush founded a specialist finance brokerage company, Edim Comercial e
Imobiliria Ltda., which he manages to-date. Between 1988 and 1996 he has been Chairman of So Paulo
Alpargatas S.A. Mr. Bush has been a member of the Companys Board of Directors since 1998.
Nicolas Arthur Jacques Wollak has been a member of the Companys Board of Directors since 2007.
Graduated from Harvard University, Mr. Wollack is a founder of the Axxon Group in Brazil, where is Managing
Partner since 2001. Mr. Wollak has nearly 20 years of private equity investment experience having already
been a partner of BISA fund (Argentina) prior to founding the Axxon Group. Current chairman of the board
of directors from Guerra S.A (manufacturer of road implements), member of Luxxon S.A., which controls
Aspro Ltda (manufacturer of compressed natural gas), director of MV Investimentos S.A. (investment vehicle
which controller of the franchise network of Mundo Verde), and also a member of the Deliberative Board of
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the Brazilian Private Equity Association (ABVCAP). In the past five years, Mr. Wollack has been (i) managing
partner of the Axxon Group in Brazil, as one of the responsible for its investments in their Investment Funds,
(ii) Chairman of the Board of Director from Guerra S.A (as described above) since July 2008 until the present
date, (iii) director in MV Investimentos S.A. (as described above) since August 2009 until the present date,
(iv) member of the Deliberative Board from ABVCAP since March 2010 until the present date, (v) member
of the Board of Directors from Luxxon S.A (as described above) since December 2007 until the present
date, and (vi) member of the Board of Directors from Lupatech S.A. (equipment and services supplier mainly
for the oil and gas industry) sinde March 2005 until October 2007.
Pedro Sampaio Malan obtained a degree in electrical engineering in 1965 from Polytechnic School at
Pontifical Catholic University of Rio de Janeiro (PUC-RJ). He holds a PhD in economics from the University
of Berkeley. Mr. Malan is a professor at the Department of Economics at PUC-RJ, has published essays and
articles in economic journals and books, both in Brazil and abroad and is a member of the Board of Trustees
of the IFRS Foundation. He served as Brazils Minister of Finance for eigth years, from 1995 to 2002.
President of the Central Bank of Brazil from 1993 to 1994. Special Counsel and Chief External Debt
Negotiator of the Ministry of Finance from 1991 to 1993. Executive Director of the World Bank from 1986
to 1990, and again from 1992 to 1993. Executive Director of the Inter-American Development Bank from
1990 to 1992. Director of the Center of Transnational Corporations of UN in New York from 1983 to 1984.
Director of the UN Department of International Economic and Social Affairs in New York from 1985 to 1986.
Mr. Malan has been an independent member of the board of director since March 2010. In the last five
years, Mr. Malan has been a member of the advisory board of ALCOA Latin America (since 2004); member
of the board of directors of Globex Ponto Frio (since 2004); Chairman of the board of directors of Unibanco
(from 2004 until 2008); member of the board of directors of EDP Energias do Brasil (since 2006); member
of the board of directors of OGX (since 2008); chairman of the advisory board of Unibanco-Itau (since
august 2009); member of the board of directors of Souza Cruz S.A. (since March 2010), director of Thomson
Reuters Founders Share Company (since 2011); member of the advisory board of BUNGE - Brazil (since
2012); and member of Temasek International Panel (since 2012).
Jorge Marques de Toledo Camargo has been for 37 years in the oil industry. He is graduated in geology
from the University of Brasilia and obtained a masters degree in geophysics from the University of Texas.
Currently, he is serving as a senior consultant at Stateoil in Brazil, at Karoon Oil and Gas and at
McKinsey&Company in Brazil. Mr. Camargo is also a member of of the board of directors of the Brazilian Oil
Institute (IBP) and a member of the advisory board and associate in Brazil of Energy Ventures. Previously,
he has worked for 27 years in Petrobras in Brazil and abroad, holding various technical and management
positions, such as Superintendent of Cear-Potiguar Exploration Districts, General Manager of Petrobras in
the UK, Director of Exploration and Production and then President of Braspetro, and, from 2000 to 2003, a
member of the Executive Board as Director of the International Sector. In 2003, he worked for Statoil,
initially as Vice-President at the headquarter in Stavanger, Norway, and, from 2005 to 2009, as president
of Statoil in Brazil. Mr. Camargo was appointed to become a member of the Prumo Logsticas Board of
Directors in March 14, 2014 and his election is pending the annual general meeting of the company.
Over the past five years, none of the members of our Board of Directors has suffered any (a) criminal
conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has become
final in the judicial or administrative area, that has suspended or disqualified our members of the practice
of professional or commercial activity whatsoever.
12.8.2 Board of Executive Officers
Srgio Kariya has been the Companys Chief Executive Officer since January 2015, Prior to that, worked in
the company Elevadores Otis for more than 10 years. Mr. Kariya has a degree in Mechanical Engineering
from Escola Politcnica da Universidade de So Paulo (Poli-USP) and a graduate degree in Marketing from
Escola Superior de Propaganda e Marketing (ESPM). Mr. Kariya also holds an Masters degree in Business
Administration from IBMEC/SP and a specialization course in Finance awarded by INSPER/SP. In the last
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five years Mr. Kariya occupied position of Executive Officer responsible fot the business unit Rental. He was
elected to Companys Chief Executive Officer on December 12 of 2014.
Avelino Garzoni joined Mills as an engineer in the Heavy Construction business unit and accumulates more
than 19 years of experience in the Company. He holds a degree in Civil Engineer from PUC/RJ and an MBA
in Project Management from FGV RJ. In the last five years, he hold relevant positions in the Company,
acting as the Engineer Officer for Heavy Construction and Real Estate business units since 2011.
Frederico tila Silva Neves currently holds the position Vice President of Finance. Mr. Neves took over as
Director in the Company in 1997, being named in 1999 the Chief Financial Officer, and has accumulated,
until July 2010 the position of Investor Relations Officer. Mr. Neves has a degree in Civil Engineering from
the Rio de Janeiro Federal University (Universidade Federal do Rio de Janeiro - UFRJ), and in 1984 was
awarded a Masters Degree in Business Administration by the Institute of Post-Graduation and Research in
Administration (COPPEAD) of the Federal University of Rio de Janeiro. Mr. Neves worked for six years at
large multinational companies in the industrial and financial sectors, before before joining Ceras Johnson
Ltda. in 1990, last position held as a controller.
Alessandra Eloy Gadelha has a bachelors degree in chemical engineering from the Universidade Federal do
Rio de Janeiro (UFRJ) and a masters degree in Business Administration from Rensselaer Polytechnic
Institute, located in the state of New York, in the US. In the past five years, Mrs. Gadelha worked in the
Investors Relations department at Vale S.A., before coming to the Company to become the Investor
Relations Officer since July 2010.
Over the past five years, none of the members of our Board of Executive Officers has suffered any (a)
criminal conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has
become final in the judicial or administrative area, that has suspended or disqualified our members of the
practice of professional or commercial activity whatsoever.
12.8.3 Fiscal Council
Rubens Branco da Silva obtained a degree in Law from the Federal University of Rio de Janeiro (UFRJ) and
in Accounting by the Accounting and Administrative School Moares Junior. He worked professionally at
Arthur Andersen for 29 years, being 20 years as an associate responsible for the Tax and Legal area.
Currently a member of the Advisory Board of the SR-Rating, the American Chamber of Commerce for BrazilRio de Janeiro, and the Board of Mediation and Arbitration of Rio de Janeiro. He is also a member of the
Brazilian Institute of Financial Executives (IBEF), Brazilian Association of Financial Law (ABDF) and the
International Fiscal Association (IFA), the Chamber of Commerce and Industry Brazil-Germany (AHK),
Business Council of Commerce Association of RJ (ACRJ) and a vowel from the Board of Commerce of the
State of Rio de Janeiro. He is currently a partner at the Branco Consultores Tributrios Ltda.
Eduardo Botelho Kiralyhegy graduated in Law from the Candido Mendes University, a member of the
Brazilian Lawyers Association, and founding partner of the Negreiro Office, Medeiros & Kiralyhegy Lawyers,
in Rio de Janeiro, specializing in Tax Law, Administrative and Regulatory. Currently a member of the Special
Committee of Tax Issues of the Brazilian Lawyers Association, the Special Committee of the Federal Justice
of the Brazilian Lawyers Association, the Brazilian Academy of Tax Law, and the Brazilian Association of
Financial Law and the International Fiscal Association.
Daniel Oliveira Branco Silva graduated in law from the Pontifical Catholic University of Rio de Janeiro (PUC)
in 2004 and has a postgraduate degree in Corporate Law, specialization in tax Law at the fundao Getlio
Vargas (FGV). Mr. Daniel is a legal manager at Branco Consultores Tributrios and a member of Branco
Advogados since 2003.
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Maria Cristina Pantoja da Costa Faria graduated in law from the Pontifical Catholic University of Rio de
Janeiro (PUC), specializing in corporate finance for lawyers by the Foundation Institute of Management from
the University of So Paulo, and earned her masters degree in executive management of insurances at
IBMEC. Member of the Brazilian Lawyers Association. Currently a member of the Negreiro Office and
Medeiros & Kiralyhegy Lawyers.
Helio Carlos de Lamare Cox is graduated in Civil Engineering from the State University of Rio de Janeiro UERJ, is specialized in Accounting and Financial Management at the Superior Institute of Accounting Studies
- ISEC / FGV, and has a postgraduate degree in Capital Markets from School of Postgraduate Degree in
Economics - EPGE/FGV and holds an MBA in Finance from IBMEC. Mr. Helio has worked for over 25 years
as Financial and Administrative Officer responsible for managing areas such as Finance, Accounting,
Technology Information, Legal and Human Resources. In the period from 1995 to 2010 was Officer of
Usiminas and ThyssenKrupp Groups, working in companies as Dufer S/A, Thyssen Trading S/A, Rio Negro
Steel Trade S/A and Zamprogna NSG Technology Steel S/A, all focused on production, marketing and
distribution of flat steel products. Over the past four years he has been working in financial and business
consulting as Managing Partner of Delamare Financial Advisory and Consultancy Ltd., specially in providing
industrial relations services to the Association of Maritime Support Companies - ABEAM. Mr. Helio is also
member of the Fiscal Council of AW Faber-Castell S/A.
Massao Fbio Oya is graduated in Accounting and postgraduate in Financial Management and Accounting
at University Center Padre Anchieta. Mr. Massao is currently an independent consultant providing services
in the administrative, financial, corporate, auditing and corporate governance areas, especially in Fiscal
Councils as member and alternate, such as in the following companies:WLM Indstria e Comrcia S.A. (since
October 2011); Companhia de Saneamento do Estado de So Paulo - Sabesp (since April 2013); Cristal
Pigmentos do Brasil S.A. (since April 2013); Bardella S.A. - Indstrias Mecnicas (since April 2013);
Companhia Providncia Ind. e Com. S.A. (since April 2014); and others.
12.9 Relationship (as a spouse or significant other) or relationship to the second
degree between:
a.
b.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii)
members of management of entities controlled by the Company, either directly or indirectly
There is no marital relationship, stable union or any kind of relationship up to the second degree between
the Administrators of the Company and any of the persons indicated in items (a) and (b) above.
c.
(i) members of management of entities controlled by the company, either directly or
indirectly; and (ii) Companys direct or indirect controlling shareholders
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134
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling Company and shareholder
Type of relationship: Brother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Jytte Kjellerup Nacht/ CPF: 289.858.347-20
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Daughter/Mother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Tomas Richard Nacht / CPF: 042.695.577-37
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Sister/Brother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Antonia Kjellerup Nacht / CPF: 073.165.257-62
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Sisters
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Pedro Kjellerup Nacht / CPF: 127.276.837-66
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
135
d.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii) Millss
direct or indirect controlling shareholders
Administrator of the Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer or controlled company: Mills Estruturas e Servios de Engenharia S.A.
/ CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling company and shareholder
Type of relationship: Brother
Additionally, Mr. Andres Cristian Nacht is the Chairman of the Board of Directors of the Company since 1998
and is a shareholder of the Company.
Administrator of the Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling company and shareholder
Type of relationship: Niece/Uncle
12.10 Subordination, rendering of services or control relationships for the previous three
fiscal years between directors/officers and:
a.
Not applicable. The Company does not control, neither directly or indirectly, any entity.
b.
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Mr. Rubens Branco, by the entity Tax Consultants Ltda., provided in the last three fiscal years legal,
accounting and tax services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by means
of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Mr. Daniel Oliveira Branco Silva, by the entity Tax Consultants Ltda., provided in the last three fiscal years
legal, accounting and tax services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by
means of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Mr. Eduardo Kiralyhegy, by the entity Negreiro, Medeiros & Kiralyhegy Advogados, provided in the last three
fiscal years legal services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by means
of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Ms. Maria Cristina Faria, by the entity Negreiro, Medeiros & Kiralyhegy Advogados, provided in the last three
fiscal years legal services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by means
of the Nacht Participaes S.A., also controlled by Mr. Nacht.
c.
In case its relevant, supplier, client, debtor or creditor of the Company or its controlled
or controlling shareholders
Not applicable, as there is no information about relationships of subordination, provision of service or control
over the past three fiscal years, between the Administrators of the Company and any of the persons
indicated in items (a) to (c) above.
12.11 Directors Insurance
The Company has held civil responsibility insurance since 2009, for administration and proxy holders acting
on behalf of them, with full cover for fines and civil penalties, statutory responsibilities, regulatory risks,
responsibility for errors and omissions, among others, excluding intentional acts, complaints arising from
acts known about prior to the policy date, responsibilities associated with product failures (already covered
by civil responsibility insurance), among other events.
The policy contract was renewed for the period December 31, 2013 until December 31, 2014.
12.12 Other relevant information
a) As mentioned in item 12.1, in the last meeting of the board of directors on December 12, 2014, it
was accepted the resignation presented by Mr. Ramon Nunes Vazquez as Chief Executive Officer of
the Company. The Directors stated that the effective resignation of Mr. Ramon Nunes Vazquez
occured on January 1, 2015. Immediately thereafter, the members of the Board of Directors
approved the election of Mr. Srgio Kariya, for the position of Chief Executive Officer, with term of
office from January 1st, 2015 until the OSM of 2015.
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Co-founder of the Axxon Group in Brazil, where is Managing Partner since 2001; Chairman of the
Board of Director from Guerra S.A since July 2008; member of the Board of Directors of Luxxon S.A
since December 2007; Director of MV Investimentos S.A. since August 2009; and member of the
Deliberative Board from ABVCAP since March 2010 until April 2012; member of the Board of
Directors of BR Marinas S/A since September 2012; member of the Board of Directors of BR Marinas
S/A since September 2012; member of the Board of Directors of Axxon Med Investimentos since
March 2013.
Pedro Malan - Member of the Board of Directors
Administrative positions occupied in other companies / entities:
Member of the Board of Directors of Globex / Nova Casa Bahia S.A; EDP-Energias do Brazil S.A.;
OGX Petrleo e Gs Participaes S.A. and Souza Cruz S.A, Chairman of the International Advisory
Council of Ita Unibanco and member of the Advisory Council of BUNGE Fertilizantes S.A.
Jorge M. T. Camargo - Member of the Board of Directors
Administrative positions occupied in other companies / entities:
Member of the Board of Directors of Deepflex until May 2013 and of the Brazilian Oil Institute (IBP)
until March 2014. Also is part of the Advisory Council of Energy Ventures; a Consultant for Statoil
do Brasil, Karoon Oil & Gas and McKinsey & Company, Inc do Brasil Consultoria Ltda; and member
of the Board of Officers of Brazilian Oil Institute (IBP).
c) Information about the General Meetings held by the Company, after its IPO, on April 12, 2010:
Ordinary General Meeting
First Call
Realization date: 04/25/2014
Quorum: Shareholders representing 61.66% of the capital
Extraordinary General Meeting
First Call
Realization date: 02/25/2014
Quorum: Shareholders representing 53.90% of the capital
Ordinary General Meeting
First Call
Realization date: 04/26/2013
Quorum: Shareholders representing 61.23% of the capital
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139
140
13.1 Description of the compensation policy or practices for the Executive Board, the
Statutory and Non-Statutory Boards, the Fiscal Committee, the Statutory Committees and the
Audit, Risk, Finance and Compensation Committees, covering the following topics:
a.
Board of Directors
For the Board of Directors of the Company, the total remuneration is fixed in a discretionary amount
determined by the general meeting, with no relationship with the remuneration policy applicable to officers
and other employees of the Company and, therefore there is no goal of the policy or specific remuneration
practice of this body defined by the human resources department of the Company.
As part of total discretionary remuneration approved by the general meeting, there is a fixed component
and a variable component, according to the results of the Company. The Company believes that the variable
remuneration of the members of the Board of Directors is a way to encourage them to successfully lead the
Company's business by aligning the interests of members of the Board of Directors with those of
shareholders.
Statutory Directors and Non-Statutory Directors
For statutory directors and non-statutory directors of the Company, the remuneration policy aims to attract
and guarantee that the qualified professionals required remain in the Company and have a proper
remuneration. The fixed amount of the remuneration of the Directors includes the salary and direct and
indirect benefits tailored for statutory directors and non-statutory directors. In addition to the fixed
compensation, there is a variable component, which includes profit-sharing in the Companys results and
the granting of stock options or subscribing to shares issued. The Company believes that the profit-sharing
and stock option programs benefiting statutory directors and non-statutory directors is a way to motivate
them to carry out the Companys business in its best interest, thus stimulating an entrepreneurial and results
orientated culture in line with the interests of both shareholders and management.
Fiscal Council
Members of the Fiscal Council are entitled to remuneration equivalent to 10% of the average remuneration
of the statutory directors, corresponding to the minimum set by law. In this way, their remuneration is not
correlated to the remuneration policy applicable to officers and other employees of the Company and
therefore there is no objective of the policy or practice of remuneration for that body.
Advisory Committees
The members of the Human Resources Committee and Management Risk Committee will be entitled to
remuneration equivalent to 50% of the monthly remuneration of the members the Board of Directors. The
Committee members who are officers, managers or employees of the Company shall not be entitled to
remuneration. The remuneration of members of the Committee may be amended at any time by the Board.
The purpose of this remuneration policy is to adequately compensate Committee members for time spent
in office, except by those who are already paid by the Company as its directors or employees.
b.
Composition of compensation packages: (i) description of the different elements of the
compensation packages and the objectives of each of them; (ii) proportion of each element to
make up the total compensation package; (iii) the method for calculating and adjusting each
of the elements in the compensation packages; and (iv) reasons for the composition of
remuneration
(i) Description of the different elements of the compensation packages:
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142
Board of Directors
Executive Officers
Human Resources Committee
Fiscal Council
Including taxes.
Salary and
Pro-labore
73.4%
58.7%
100.0%
73.4%
Direct and
indirect benefits
Bonus
26.6%
3.2%
Profit sharing
Grant of
options
11.9%
26.3%
26.6%
Total
100.0%
100.0%
100.0%
100.0%
(iii) Method for calculating and adjusting each of the elements in the compensation packages:
The fixed portion of compensation paid to statutory directors and non-statutory directors is determined
based on market standards, and readjusted annually at regular levels to account for the loss in currency
value or for merit by performance.
In terms of the profit-sharing program granted to statutory directors and non-statutory directors, and to
bonus, payed to the members of Board of Directors, this plan is based on the aggregate economic value,
which consists of the adjusted net profit deducted from shareholder remuneration. If positive, 25% for 2011
and a percentage between 20% and 30%, which will be annually decided by the Board of Directors starting
from 2012, of the Economic Value Added (EVA) will be distributed to management and employees, and
whose portion will be defined in an increasing manner in accordance with their hierarchical level in the
Company and results obtained by their respective business units. i.e. in a proportion of 50% until 2011 and
75% starting from 2012, based on the segments results that the manager or employee in question is linked
to, and 50% until 2011 and 75% starting from 2012 based on the result of our Company as a whole. For
the employees of corporate areas, the program considers the total result of the company. In 2012 the
Company distributed R$ 7.9 million related to the results of 2011, in 2013 distributed R$ 20.1 million for
the results of 2012 and in 2014 will be distributed R$ 18.7 million for the results of 2013.
Regarding the stock option plan to purchase or subscribe shares, granted to the statutory directors and
non-statutory directors, the number of options granted is proportional to the investment made in the
Company's shares with resources obtained from the profit sharing program described above. Additionally,
the Board of Directors may distribute discretionary stock options or subscription shares to statutory directors
and non-statutory directors, that is, independent of the investment made in the Company's shares with
resources obtained from the profit sharing program described above, based on merit, performance and/or
outcome.
For the Board of Directors of the Company (and the Advisory Committee), the remuneration is discretionary
determined by the general meeting with no relation with the remuneration policy applicable to officers and
other employees of the Company and therefore there is no goal at the policy or remuneration practice of
this body. Members of the Fiscal Council are entitled to remuneration equivalent to 10% of the average
remuneration of the statutory board, corresponding to the minimum set by law. In this way, their
remuneration is not correlated to the remuneration policy applicable to officers and other employees of the
Company and therefore there is no aim of policy or practice of remuneration for that body. So, there is no
method of calculation and adjustment of each element of remuneration.
(iv) Reasons for the composition of remuneration:
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For the statutory directors and non-statutory directors, the policy aims in the remuneration of professionals
based on the responsibilities inherent in their job positions, market practices and the Companys level of
competiveness.
For the Board of Directors, the Advisory Committee and the Fiscal Council, the remuneration paid by the
Company is fixed, in a discretionary amount determined by the general meeting, in case of Board of
Directors (and consequently the Advisory Committee), and according to the law, in case of Fiscal Council.
The remuneration of the members of these bodies has no relation with the remuneration policy applicable
to officers and other employees of the Company and therefore there is no goal at the policy or remuneration
practice of this body.
For the statutory directors and non-statutory directors and the members of the Board of Directors, the
variable portion is justified by the Companys focus on results and the target of aligning management
interests with those of the shareholders of Company.
c.
Main performance indicators that are taken into consideration when determining each
element of the compensation package
The main performance indicator used to determine the variable component of management remuneration
is the Companys Economic Value Added (EVA), which is calculated from the net profit of the Company,
deducting from this remuneration the capital invested in the Company by the shareholders, which is the
invested capital in the Company at book value multiplied by the weighted average cost of capital of the
Company. The variable portion of remuneration is determined from the economic value generated in the
Company and in the business unit, under its responsibility.
d.
How the compensation package is structured to reflect the development of the
performance indicators
The remuneration consists of a significant variable portion, represented by profit-sharing of the Companys
results, and the values to be distributed are directly proportionate to the Companys Economic Value Added
(EVA), calculated annually in accordance with the formula described in item (c) above.
e.
How the compensation policy is aligned with the Companys short-, medium- and longterm interests
The remuneration monthly paid to statutory directors and non-statutory directors is in line with the shortterm interests of the Company to attract and retain qualified professionals. The profit-sharing and stock
options plan are aligned with the medium-to-long-term interests of the Company to motivate management
to carry out the Companys business, stimulating an entrepreneurial and results-orientated culture, to the
extent that both shareholders and directors benefit from improvements in the results and increases in the
price of the shares.
For the Board of Directors of the Company (and consequently the Advisory Committees), the remuneration
is fixed in discretionary amount determined by the general meeting with no relation with the remuneration
policy applicable to officers and other employees of the Company, and therefore there is no goal at the
policy or remuneration practice of this body. The members of the Fiscal Council are entitled to remuneration
equivalent to 10% of the average remuneration of the statutory board, corresponding to the minimum set
by law. In this way, their remuneration is not correlated to the remuneration policy applicable to officers
and other employees of the Company and therefore there is no aim of policy or practice of remuneration
for that body.
144
For the Board of Directors, the bonus, which is based on profit-sharing, being also directly proportional to
the Economic Value Added (EVA), is in line with the Companys mid and long term best interest of stimulating
an entrepreneurial and results orientated culture.
f.
Existence of compensation supported by subsidiaries, and direct or indirect affiliates or
holding companies
Not applicable. There is not any remuneration supported by subsidiaries, and direct or indirect affiliates or
holding companies.
g.
Existence of any compensation or benefits connected to the occurrence of a given
corporate event, such as the sale of the Companys controlling interest
Not applicable. There is no remuneration or benefits connected to the occurrence of a given corporate
event, such as the sale of the Companys controlling interest.
13.2 With respect to compensation acknowledged in the results of the last 3 accounting
reference periods and the estimated compensation for the current accounting reference period
for the Executive Board, the Statutory Board and the Fiscal Council:
Estimated for Current Fiscal Year (2014)
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
18
1,292,330
5,247,727
260,000
6,800,057
457,291
457,291
80,771
80,771
Others
274,620
1,994,136
52,000
2,320,757
830,322
830,322
2,492,436
2,492,436
Comissions
166,064
166,064
Post-employment benefits
Number of members
Annual fixed compensation
Variable Compensation
Bonus
Profit sharing
Others
Stock-based compensation
Total Compensation
3,236,926
2,644,107
13,428,516
3,236,926
312,000
16,384,623
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option. The number of options granted on the discretionary plan 2014 is
estimated.
Number of members
Board of Directors
6.08
Board of Executive
Officers
5.17
145
Fiscal Council
3.00
Total
14.25
Annual fixed
compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for
participation in Committees
Others
893.619
4.360.016
207.288
5.460.923
323.744
323.743
164.423
164.423
211.608
1.658.550
41.458
1.911.616
Variable Compensation
Bonus
383.066
383.066
Profit sharing
Compensation for
participation in meetings
Comissions
1.224.640
1.224.640
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
76.613
76.613
2.694.144
2.694.144
1.729.329
10.261.094
248.746
12.239.169
Total Compensation
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option. The number of options granted on the discretionary plan
2014 is estimated.
Number of members
Annual fixed
compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for
participation in Committees
Others
Board of Directors
7
Board of Executive
Officers
5
Fiscal Council
3
Total
15
933,005
3,278,531
187,200
4,398,736
304,444
304,444
111,926
111,926
208,986
1,185,772
37,440
1,432,198
Variable Compensation
Bonus
168,737
168,737
Profit sharing
Compensation for
participation in meetings
Comissions
637,433
637,433
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
33,747
33,747
1,690,083
1,690,083
1,456,401
7,096,263
224,640
8,777,304
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option.
Number of members
Annual fixed
compensation
Salaries or pro-labore fees
Board of Directors
6.75
Board of Executive
Officers
5
Fiscal Council
3
Total
14.75
850,800
3,038,949
120,000
4,009,749
146
354,261
354,261
65,000
65,000
183,160
1,087,908
24,000
1,295,068
168,162
168,162
Profit sharing
Compensation for
participation in meetings
Comissions
523,747
523,747
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
33,632
33,632
1,121,894
1,121,894
1,300,754
6,126,759
144,000
7,571,513
Variable Compensation
Bonus
(1) According to maximum total remuneration of R$9,100,000.00 for the Board of Directors and Executive Officers approved at the Ordinary General
Meeting of April 19, 2011, excluding stock based compensation.
(2) Based on salary or pro-labor average of the Executive Officers in April 2011.
(3) Includes one month of occupation of the position of member of the Board of Directors by Gustavo Felizolla, who resigned in January 2011, and eight
months in the same position occupied by Jorge Camargo, who took office in May 2011.
13.3 With respect to variable compensation in the last 3 accounting reference periods and
compensation estimated for the current accounting reference period for the Board of Directors,
the Board of Executive Officers and the Fiscal Council:
Estimated for Current Fiscal Year (2014)
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Variable remuneration
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
18
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
6.08
5.17
14.25
147
25% of Eva
25% of Eva
383.0
383.0
25% do Eva
25% do Eva
1,224.6
1,224.6
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized
in results of the fiscal year
Variable remuneration
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized
in results of the fiscal year
Number of Members
15
30.0% of EVA
30.0% of EVA
168.7
168.7
30.0% do EVA
30.0% of EVA
637.4
637.4
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized
in results of the fiscal year
Variable remuneration
6.75
14.75
25.0% of EVA
25.0% of EVA
168.2
168.2
148
25.0% of EVA
25.0% of EVA
523.7
523.7
13.4 With respect to the stock-based compensation plan for the Executive Board and the
Board of Executive Officers, which was in force in the last accounting reference period and
which is estimated for the current accounting reference period:
149
stimulating expansion, determining and implementing the Companys corporate guidelines; (ii) align the
interests of the Companys shareholders with those of its managers and employees or other entities it
controls; and (iii) allow the Company or its subsidiaries to attract and retain the managers and employees
it requires.
c.
As most of the options are available over the long term, the beneficiaries tend to stay with the Company
until at least the time they can contribute to its long-term results.
d. How the plan is included in the Companys compensation policy
As mentioned in Item 13.1b, this plan is part of the variable compensation package paid to the Companys
officers.
e. How the plans promote the alignment between management and the Company interests at short,
mid and long term
The stock option plan, in general, aligns the medium and long term interests to encourage the
Administration to conduct the company's business success, stimulating entrepreneurial and results-oriented
culture, to the extent that both the shareholders and the directors benefit from improvements in income
and increases in stock market quotation. The establishment of a waiting period before which the options
cannot be exercised (vesting period), ensures that this alignment is found in the short, medium and long
term.
f.
The stock options granted within the scope of this plan confer the rights to acquire up to 5% of shares of
the Companys capital stock, throughout the period of validity of the plan, considering all the options already
granted under the Plan, exercised or not, except those which have been extinct and not exercised as long
as the total number of shares issued or can be issued under the Plan is always within the boundary the
authorized capital of the company. Options issued by the company granted until December 31, 2009 are
not subject to the Plan or its limits. In addition, the aim of the Plan is to grant share purchase options in an
amount that does not exceed 1% of shares of the Companys total capital each year, as verified on the date
the plan was approved.
As part of the 1/2010 Program, 538,714 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 400,267 options have been exercised.
As part of the 1/2011 Program, 392,046 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 130,281 options have been exercised.
As part of the 1/2012 Program, 232,462 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 26,615 options have been exercised.
As part of the 1/2013 Program, 210,770 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, no options have been exercised.
g. The maximum number of stock options to be granted
As a result of the number of shares that can be acquired within the scope of the stock option plan. The
maximum total number of shares to be issued is up to 5% of total stock.
h. Conditions for acquiring the shares
150
To receive the stock options in the 1/2010 Program, each beneficiary had to use at least 33% of the variable
component of their compensation associated with the Companys Profit-Sharing Program, net of taxes,
which were received related to the 2009 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2011 Program, each beneficiary had to use at least 33% of the variable
component of their compensation associated with the Companys Profit-Sharing Program, net of taxes,
which were received related to the 2010 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2012 Program, each beneficiary will have to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2011 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2013 Program, each beneficiary will have to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2012 financial year, to acquire shares issued by the Company.
Additionally, the Board of Directors approved grants within the 1/2011, 1/2012 and 1/2013 Programs,
independent of the investment in the Company's shares to certain employees of the Company, due to its
performance in the exercise of their jobs.
i.
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising their
option rights were determined by the Companys Board of Directors or committee created for this purpose
based exclusively on the average share price on the BM&FBOVESPA, weighted by the trading volume in the
month or the two months prior to the granting of the stock option, monetarily adjusted by the inflation
index IPCA (ndice de Preos ao Consumidor Amplo), and deducting the value of dividends and interest
on equity per share paid by the Company as from the stock option date. On April 20, 2012, according to
the resolution of the General Meeting held on that date, the criterion for fixing the exercise price of the
options that have as a counterpart the acquisition of shares by its beneficiary was changed and was defined
as the equity value of the shares on the last day of the subsequent fiscal year. This change does not affect
the options granted prior to that General Meeting and the new criterion does not apply to options granted
that have no counterpart of the acquisition of shares by the beneficiary, which continues to be applied the
criterion of market price, described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, which is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), deducting the value
of dividends and interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2011 Program, the exercise price of the options will be the average share price acquired
according to brokerage invoice sent by the beneficiary to the Board of Directors or Human Resources
Committee of the Company (R$ 19.28), monetarily adjusted by the inflation according to the IPCA, which
is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index determined
by the Board of Directors or committee, according to the case, from the date of conclusion of the stock
option agreement until the date the option is exercised, deducting the value of dividends and interest on
equity per share paid by the Company as from the stock option date.
Regarding the 1/2012 Basic Program, the exercise price of the options will be the average share price
acquired according to brokerage invoice sent by the beneficiary to the Board of Directors or Human
Resources Committee of the Company (R$ 5.86), monetarily adjusted by the inflation according to the IPCA,
which is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
151
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2012 Discricionary Program, the exercise price of the options will be the average share
price on the BM&FBOVESPA in the year of 2011 (R$19.22), weighted by the trading volume, monetarily
adjusted by the inflation according to the IPCA, which is disclosed by the Brazilian Institute of Geography
and Statistics (IBGE), or by another index determined by the Board of Directors or committee, according to
the case, from the date of conclusion of the stock option agreement until the date the option is exercised,
deducting the value of dividends and interest on equity per share paid by the Company as from the stock
option date.
Regarding the 1/2013 Basic Program, the exercise price of the options will be equal to the book value of
shares on December 31st of the fiscal year of the Company immediately preceding the stock option date
(R$ 6.80), monetarily adjusted by the inflation according to the IPCA or by another index determined by
the Board of Directors or committee created for this purpose, according to the case, from the date of
conclusion of the stock option agreement until the date the option is exercised, deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2013 Discricionary Program, the exercise price of the options will be the average share
price on the BM&FBOVESPA in the year of 2012 (R$26.16), weighted by the trading volume, monetarily
adjusted by the inflation according to the IPCA, which is disclosed by the Brazilian Institute of Geography
and Statistics (IBGE), or by another index determined by the Board of Directors or committee created for
this purpose, according to the case, from the date of conclusion of the stock option agreement until the
date the option is exercised, deducting the value of dividends and interest on equity per share paid by the
Company as from the stock option date.
j.
The options granted under the terms of this plan will be subject to grace periods of up to 72 (seventy two)
months for the conversion of options into shares.
k.
Form of liquidation/settlement
The shares resulting from the exercising of purchase options will be integrated and/or acquired by their
respective beneficiaries in cash, in current national currency.
l.
Until the exercise price is fully paid, the shares acquired through exercising the option rights under the
terms of the Plan cannot be sold to third parties, except with the prior authorization of the Board, based on
the hypothesis that the product of the sale will preferably be used to settle any debt the beneficiary has
with the Company.
Based on the terms of the respective Option Contract, no beneficiary will be allowed to trade the shares
acquired for a period of 5 (five) years, observing the following rules:
(i) after a period of one year after signing the respective Option Contract, beneficiaries will be free to trade
up to 25% of the shares acquired;
(ii) after a period of one year after the term defined in item i, beneficiaries will be free to trade an
additional 25% of the shares acquired;
152
(iii) after a period of one year after the term defined in item ii, beneficiaries will be free to trade an
additional 25% of the shares acquired; and
(iv) after a period of one year after the term defined in item iii, beneficiaries will be free to trade the
outstanding balance of the shares acquired.
m. criteria and events that, when verified, will lead to the suspension, alteration or extinction of the
plan
The stock option rights granted under the terms of the Plan will automatically all be cancelled in the following
cases: (i) on the complete and full exercising of the same; (ii) after the option term has expired; (iii) through
the mutual rescission of the stock option; (iv) if the Company is dissolved, liquidated or files for bankruptcy;
or (v) if the beneficiary fails to observe the trading restriction rules described in item n below.
In addition, in the event the beneficiary is laid off, with or without due cause, resigns or steps down from
their job, retires, or suffers from permanent disability, or dies, the option rights granted can either be
cancelled or modified, as described in item n below.
In addition, in the event the beneficiary is laid off, with or without just cause, resigns or steps down from
their job, retires, or suffers from permanent disability, or dies, the option rights granted can either be
cancelled or modified, as described in item n below.
n.
Effects generated by the Company`s Board and Committee Manager`s departure upon his/her
rights as provided by the stock-based compensation plan
If at any time during the validity of the Stock Options Plan, the beneficiary:
(i)
resigns voluntarily from the Company or leave their management role: (i) the rights not exercised
in accordance with the respective Option Contract on the date they leave the Company will automatically
all be cancelled, with no need for any prior warning or notification, and with no right to any indemnity; and
(ii) the rights already exercised in accordance with the respective Option Contract on the date they leave
the Company may be exercised within a period of 30 days from the same date, after which all rights will
automatically all be cancelled, with no need for any prior warning or notification, and with no right to any
indemnity;
(ii)
leaves the Company as a result of being fired with due cause, or failure to fulfill their duties
adequately as a manager, all the right (exercised and not exercised) in accordance with the respective
Option Contract on the date they leave the Company will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity;
(iii)
leaves the Company as a result of being fired without due cause, or failure to fulfill their duties
adequately as a manager: (i) the rights not exercised in accordance with the respective Option Contract on
the date they leave the Company will automatically all be cancelled, with no need for any prior warning or
notification, and with no right to any indemnity; except if the Board decides to anticipate the grace period
term for some or all of these rights, and the beneficiary leaves the Company within a period of up to 12
(twelve) months after the change in share control in the Company all the unexercised rights in accordance
with the respective Option Contract on the date they leave the Company may be exercised within a period
of 30 days from the same date, after which all rights will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity, will have their grace period anticipated;
and (ii) the rights already exercised in accordance with the respective Option Contract on the date they
leave the Company may be exercised within a period of 30 days from the same date, after which all rights
will automatically all be cancelled, with no need for any prior warning or notification, and with no right to
any indemnity;
153
(iv)
on retiring from the Company: (i) the rights not exercised in accordance with the respective Option
Contract on the date they leave the Company will automatically all be cancelled, with no need for any prior
warning or notification, and with no right to any indemnity, except if the Board decides to anticipate the
grace period term for some or all of these rights; and (ii) the rights already exercised in accordance with
the Options Contract on the date of leaving the Company will have their grace period anticipated, allowing
the Beneficiary to exercise the respective stock option, as long as this is within a period of 12 (twelve)
months from the date of retirement, after which all the remaining rights will automatically all be cancelled,
with no need for any prior warning or notification, and with no right to any indemnity;
(v)
leaving the Company due to death or permanent disability: (i) the rights not exercised in accordance
with the respective Option Contract on the date they leave the Company will automatically all be cancelled,
with no need for any prior warning or notification, and with no right to any indemnity, except if the Board
decides to anticipate the grace period term for some or all of these rights; and (ii) the rights already
exercised in accordance with the Options Contract, on the date of passing away, can be exercised by the
Beneficiarys legal successors, as long as this is done within a period of 12 (twelve) months from the
aforementioned date, after which all the remaining rights will automatically all be cancelled, with no need
for any prior warning or notification, and with no right to any indemnity.
Over and above mentioned item, the Board or Committee (whichever is the case) can, at their exclusive
criteria, whenever they deem social interests are better met by this approach, chose not to abide by the
rules stipulated above, and treat a determined beneficiary in a differentiated and individual manner.
13.5
Number of stocks or direct or indirect stock holdings, either in Brazil or overseas, and
other securities that might be converted into stock or quotas, issued by the Company, direct
or indirect affiliates, subsidiaries or companies under common control, by members of the
Executive Board, of the Board of Executive Officers or the Fiscal Board, grouped per board or
committee, on the closing date of the last accounting reference period:
The table below indicates the number of our shares held directly by our administrators and the percentage
that their direct individual contributions represent of the total number of shares issued by our Company, in
the last fiscal year, December 31st, 2013.
On December 31st, 2013
Board of Directors
Number of shares
(%)
18,311,429
14.4%
505,531
0.4%
2011
2012
2013
2014
5.17
404,035
83,428
269,357
18,639
134,678
3,769
144,575
154
25% by year,
from the year
after the date of
the Grant
05/31/2015
51,251
250,718
250,718
400,267
R$11.65
R$12.22
R$12.63
R$ 13.01
R$12.05
R$12.42
R$ 12.86
0.39%
0.39%
0.39%
0.43%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the resigning
terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total shares
of the Company's capital at beginning of year. At the end of fiscal year 2011, the amount of shares were 125,656,724, at the end of fiscal year 2012, the total number
of shares was equal to 125,399,430 and at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
1/2011 Program
Number of Members of the Board of
Executive Officers
Grant Date
Number of granted options
Number of non-redeemable options
Number of redeemable options()
Deadline for options to become
redeemable
Deadline for redeeming options
Grace period for stock transfer
Quantity of options exercised
Pondered average price within accounting
reference period for each of the following
option groups
Outstanding at the beginning of the
accounting reference period
Not redeemed throughout accounting
reference period
Redeemed within accounting reference
period
Expired within accounting reference
period
Fair option price on grant date4
Potential dilution in the event of exercise
of all options granted3
2011
2012
2013
2014
5.17
294,034
56,546
25% by year, from the
date of the Grant
196,023
65,742
25% by year, from the
date of the Grant
143,443
209,184
25% by year, from
the date of the Grant
41,466
130,281
130,281
R$ 19.77
R$ 20.60
R$ 21.50
R$ 20.15
R$ 20.82
R$ 2,575,742
0.31%
0.31%
0.31%
0.38%
04/16/2011
392,046
392,046
25% by year, from
the date of the Grant
04/16/2016
-
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the resigning
terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2011, the amount of shares were 125,656,724, at the end of fiscal year 2012, the total
number of shares was equal to 125,399,430 and at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$6.57 per option. Assumptions available in item 13.9 (b).
2012
2013
2014
5.17
06/30/2012
155
38,462
38,462
25% by year, from the date of
the Grant
06/30/2017
28,847
0
25% by year, from the date
of the Grant
27,800
9,985
25% by year, from the date
of the Grant
9,615
9,615
R$ 5.74
R$ 5.75
R$ 5.82
R$ 815,394
0.03%
0.03%
0.04%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the resigning
terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total shares
of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 125,399,430 and at the end of fiscal year 2013,
the total number of shares was equal to 127,385,996.
4. Fair value of R$ 21.20 per option. Assumptions available in item 13.9 (b).
2012
2013
2014
5.17
06/30/2012
194,000
194,000
25% by year, from the date of
the Grant
06/30/2017
145,500
31,500
25% by year, from the date
of the Grant
167,750
109,750
25% by year, from the
date of the Grant
17,000
17,000
R$ 19.57
R$ 20.37
R$ 20.60
R$ 2,362,920
0.15%
0.15%
0.23%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount
of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the
resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and at the end of fiscal
year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 12.18 per option. Assumptions available in item 13.9 (b).
2013
156
2014
5.17
04/30/2013
105,770
105,770
25% by year, from the date of the
Grant
04/30/2018
113,585
25,285
25% by year, from the date of the
Grant
R$ 6.72
R$ 2,620,981
0.08%
0.11%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total
amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on
the resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers
the total shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and at
the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 24.78 per option. Assumptions available in item 13.9 (b).
2013
2014
5.17
04/30/2013
105,000
105,000
25% by year, from the date of the
Grant
04/30/2018
157,500
52,500
25% by year, from the date of the
Grant
R$ 26.78
R$ 1,251,600
0.08%
0.16%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total
amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on
the resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers
the total shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and at
the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 11.92 per option. Assumptions available in item 13.9 (b).
13.7 With respect to outstanding options for the Board of Directors and the Board of
Executive Officers at the closing of the last accounting reference period
157
Number of members
Non-Outstanding
options
Number
Program
1/2010
Program
1/2011
134,678
134,678
options
become
redeemable
every year
until 2013
Program
1/2013 Discretionar
y
5.17
Total
5.17
196,023
28,847
145,500
105,770
105,000
715,818
98,011 options
become
redeemable
every year
until 2013
9,616 options
become
redeemable
every year
until 2013
48,500 options
become
redeemable
every year
until 2013
26,442 options
become
redeemable
every year
until 2013
26,250 options
become
redeemable
every year
until 2013
Until 2017
05/31/2015
04/16/2016
05/31/2017
05/31/2017
04/30/2018
04/30/2018
04/30/2018
R$ 2,704,443
R$ 2,505,174
R$ 789,831
R$ 2,213,055
R$ 2,825,117
R$ 1,336,650
R$ 12,374,269
3,769
65,742
31,500
101,011
05/31/2015
04/16/2016
05/31/2017
05/31/2017
05/31/2017
R$ 12.86
R$ 20.82
R$ 5.82
R$ 20.06
R$ 20.29
R$ 75,685
R$ 840,183
R$ 0
R$ 479,115
R$ 1,394,982
R$
2,780,127
R$
3,345,357
R$ 789,831
R$
2,692,170
R$
2,825,117
R$
1,336,650
R$
13,769,252
Board of Directors
Board of Directors has no stock-based compensation.
13.8 With respect to redeemed and delivered options for the Board of Directors and the
Board of Executive Officers, in the past three accounting reference periods
Number of Members
Redeemable Options
Number of shares
Pondered average price within accounting
reference period
Total value of the difference between the
exercise value and market value of shares related
to options exercised1
Shares Granted
Number of granted shares
Pondered average price of acquisition
Program
1/2010
5.17
Program
1/2011
5.17
Program
1/2012 Basic
5.17
Program
1/2012 Discretionary
5.17
149,549
88,815
9,615
17,000
264,979
R$ 12.86
R$ 20.82
R$ 5.82
R$ 20.06
R$ 15.73
R$ 2,703,846
R$ 898,808
R$ 241,529
R$ 184,960
R$ 4,029,143
149,549
R$ 12.86
88,815
R$ 20.82
9,615
R$ 5.82
17,000
R$ 20.06
264,979
R$ 15.73
158
Total
5.17
R$ 2,703,846
R$ 898,808
R$ 241,529
R$ 184,960
R$ 4,029,143
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 30.94 at the end of 2013.
Program
1/2010
5
Program
1/2011
5
Total
5
199,467
41,466
240,933
R$ 12.42
R$ 20.15
R$ 13.75
R$ 4,190,802
R$ 550,668
R$ 4,741,470
199,467
R$ 12.42
41,466
R$ 20.15
240,933
R$ 13.75
R$ 4,190,802
R$ 550,668
R$ 4,741,470
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 33.43 at the end of 2012.
2010/1
Program
2
51,251
R$12.05
R$281,881
51,251
R$12.05
R$281,881
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 17.55 at the end of 2011.
Board of Directors
Board of Directors has no stock-based compensation.
13.9 Summary of relevant information aiming at a broader understanding of data presented
under items 13.6 through 13.8 above, as well as an explanation of the pricing method used for
stock and option values
a. Pricing model
The programs granted from 2010 onwards were classified as equity instruments, which the weighted
average fair value of options is determined using the Black-Scholes valuation model using as premises: (a)
weighted average share price, (b) exercise price, (c) expected volatility, (d) dividend yield, (e) expected
option life and (f) annual risk-free interest rate. The equity portion is priced only at the grant date and the
fair value is not remeasured on every reporting date. The portions of equity and debt are appropriated plan
159
by plan, taking into consideration the respective lock up periods (period in which shares are blocked for
trading), based on management's best estimate as to their end dates.
R$11.50
R$11.95
31%
1,461
1.52%
6.60%
R$3.86
R$11.50
R$14.10
31%
1,461
1.28%
6.37%
R$5.49
R$11.65
R$20.55
34.92%
1,247
1.71%
6.08%
R$10.49
R$11.59
R$20.55
34.92%
1,282
1.71%
6.08%
R$10.56
R$12.22
R$17.55
38.68%
882
1.06%
4.81%
R$7.27
R$12.16
R$17.55
38.68%
917
1.06%
4.83%
R$7.37
R$12.63
R$33.43
35.92%
516
0.70%
1.04%
R$20.69
R$12.57
R$33.43
35.92%
551
0.70%
1.08%
R$20.75
R$13.01
R$33.00
33.86%
182
0.64%
3.06%
R$20.08
R$13.01
R$33.00
33.86%
186
0.64%
3.12%
R$20.09
160
Exercise price
R$19.77
Weighted average share price
R$17.55
Expected volatility1
38.68%
Expected option life (days)
1,202
Dividend yield
1.06%
Risk-free interest rate
4.94%
Fair value per share
R$4.70
At the end of 2012
Exercise price
R$20.60
Weighted average share price
R$33.43
Expected volatility1
35.92%
Expected option life (days)
836
Dividend yield
0.70%
Risk-free interest rate
1.70%
Fair value per share
R$14.36
At the end of 2013
Exercise price
R$21.50
Weighted average share price
R$33.00
Expected volatility1
33.86%
Expected option life (days)
471
Dividend yield
0.64%
Risk-free interest rate
3.77%
Fair value per share
R$12.78
Measured by the historical behavior of the value of the stock of the Company
1/2012
Calculation of fair value
Basic (06/30/2012)
Grant Date
Exercise price
R$5.86
Weighted average share price
R$27.10
Expected volatility1
37.41%
Expected option life (days)
1,461
Dividend yield
0.87%
Risk-free interest rate
3.92%
Fair value per share
R$21.20
At the end of 2012
Exercise price
R$5.74
Weighted average share price
R$33.43
Expected volatility1
35.92%
Expected option life (days)
1,277
Dividend yield
0.70%
Risk-free interest rate
2.15%
Fair value per share
R$27.30
At the end of 2013
Exercise price
R$5.75
Weighted average share price
R$33.00
Expected volatility1
33.86%
Expected option life (days)
882
Dividend yield
0.64%
Risk-free interest rate
4.84%
Fair value per share
R$27.38
Measured by the historical behavior of the value of the stock of the Company
1/2012
Discretionary (06/30/2012)
R$19.22
R$27.10
37.41%
1,461
0.87%
3.92%
R$12.18
R$19.57
R$33.43
35.92%
1,277
0.70%
2.15%
R$16.14
R$20.37
R$33.00
33.86%
882
0.64%
4.84%
R$15.21
1/2013
Basic (04/30/2013)
1/2013
Discretionary (04/30/2013)
R$6.81
R$31.72
35.34%
1,461
0.82%
3.37%
R$24.78
R$26.16
R$31.72
35.34%
1,461
0.82%
3.37%
R$11.92
161
Exercise price
R$6.72
Weighted average share price
R$33.00
Expected volatility1
33.86%
Expected option life (days)
1,216
Dividend yield
0.64%
Risk-free interest rate
5.48%
Fair value per share
R$26.71
Measured by the historical behavior of the value of the stock of the Company
R$26.78
R$33.00
33.86%
1,216
0.64%
5.48%
R$12.73
c. Method used and assumed premises to incorporate the effects from expected early exercise
There was no early exercise.
Board of Directors
Number of members
Highest individual compensation value
Lowest individual compensation value
Average individual compensation value
6.75
261,336
180,732
192,704
7
270,222
190,251
208,057
6.08
334,510
248,544
284,429
5
2,009,980
687,584
1,232,078
5
2,287,911
822,193
1,419,253
5.17
3,843,450
1,066,639
1,984,738
3
48,000
48,000
48,000
3
74,880
74,880
74,880
3
82,915
82,915
82,915
_______________________________________________
(1)
Compensation paid for the Executive Officers who occupied the position for the 12 months of the year.
The Companys Fiscal Council was installed in the Ordinary General Meeting of April 19th, 2011, and became
a permanent body in the Ordinary and Extraordinary General Meeting of April 20th, 2012.
13.12 Contract agreements, insurance policies or other instruments that might underlie the
compensation or indemnity mechanisms applicable to managers in the occurrence of dismissal
or retirement
162
Not applicable. The Company has no contract agreements, insurance policies or other instruments that
might underlie the compensation or indemnity mechanisms applicable to managers in the occurrence of
dismissal or retirement.
13.13 With respect to the last three accounting reference periods, disclose the percentage of
total compensation for each board or committee as acknowledged in the Company results and
which applies to members of the Executive Board, of the Board of Executive Officers or the
Fiscal Board, that are somehow connected to direct or indirect affiliates, in compliance with
the accounting rules that govern this matter.
Board or Committee
Board of Directors
Board of Executive Officers
Fiscal Council
2011
16%
-
2013
14%
-
13.14 With respect to the last three accounting reference periods, disclose the amounts as
acknowledged in the Company results for compensation paid to members of the Executive
Board, of the Board of Executive Officers or the Fiscal Board, grouped by board or committee,
for any purpose other than the function they perform, such as commissions, consulting or
advisory services.
Not Applicable. There were no compensation of the Board of Directors, Executive Officers and Fiscal Council
members recognized in the results of the Company in the fiscal years ended in 2011, 2012 and 2013,
grouped by board or committee, for any purpose other than the function they perform, such as
commissions, consulting or advisory services.
13.15 Compensation of Executive Officers and Fiscal Council members recognized in the results
of controlling companies, direct or indirect, of companies under common control of subsidiaries
of the issuer
Not Applicable. There were no compensation of Executive Officers and Fiscal Council members recognized
in the results of controlling companies, direct or indirect, of companies under common control of subsidiaries
of the issuer in the fiscal years ended in 2011, 2012 and 2013.
13.16 Other relevant information
The number of members of the Management Board, Fiscal Council and Board of Executive Officers of the
Company specified in this Section 13 have been calculated in line with the requirements of OfcioCircular/CVM/SEP / No. 001/2014, as detailed in the following spreadsheet for each fiscal year:
Fiscal year 2014 (estimated)
January
February
March
April
May
June
July
August
September
October
November
Number of members of
Board of
Board of Directors
Executive Officers
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
163
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
December
Total
Number of Members (Total
divided by the number of months)
8
96
7
84
3
36
Number of members of
Board of
Board of Directors
Executive Officers
7
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
7
73
62
6.08
5.17
Number of members of
Board of
Board of Directors
Executive Officers
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
84
60
7
Number of members of
Board of
Board of Directors
Executive Officers
7
5
6
5
6
5
6
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
164
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
3
36
3
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
3
36
3
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
December
Total
Number of Members (Total
divided by the number of months)
7
81
5
60
3
36
6.75
165
14.
166
HUMAN RESOURCES
14.1
a.
the number of employees (total, by groups based on activity and by geographic
location)
The chart below shows the number of our employees in the financial years ended December 2011, 2012
and 2013:
2011
534
2,777
687
294
249
4,541
Heavy Construction
Industrial Services
Real Estate
Rental
Corporate
Total
2013
604
838
423
227
2,092
The conclusion of the sale of the Industrial Services business unit was on November 30, 2013.
In December 31, 2011, 2012 and 2013, all employees were allocated in Brazil. The table below indicates
the location of the employees of the Company, considering the business units and departments to which
they belong, as indicated below:
2013
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Maranho
Mato Grosso
Mato Grosso do
Sul
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do Sul
Santa Catarina
So Paulo
Sergipe
Total
Employees
Real
Estate
Rental
26
7
51
26
44
14
87
4
26
13
28
8
1
10
24
5
Heavy
Construction
31
26
75
28
-
Industrial
Services
-
16
54
113
261
604
54
24
40
43
119
60
211
838
Corporate
6
1
8
2
-
Total
33
114
85
174
41
36
39
29
39
26
14
28
77
26
4
114
2
423
10
2
4
162
3
29
227
119
50
56
129
471
89
4
615
2
2,092
The conclusion of the sale of the Industrial Services business unit was on November 30, 2013.
2012
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Maranho
Mato Grosso
Heavy
Construction
45
71
-
Industrial
Services
750
12
-
Employees
Real
Estate
Rental
27
52
20
38
9
116
26
9
25
6
4
21
-
167
Corporate
23
1
9
4
-
Total
27
890
48
196
51
25
10
21
2012
States
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do
Sul
So Paulo
Total
Heavy
Construction
24
49
130
Industrial
Services
654
460
Corporate
7
2
17
182
Total
140
31
65
792
957
338
65
16
428
274
597
437
2,651
199
852
105
346
60
310
1,075
4,756
Heavy
Construction
38
76
19
36
144
1
Industrial
Services
927
38
103
421
416
283
Corporate
23
1
5
3
6
12
159
1
Total
8
1,055
24
176
73
24
8
228
29
57
524
878
352
220
534
589
2,777
39
249
1,105
4,541
2011
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Mato Grosso
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do
Sul
So Paulo
Total
Employees
Real
Estate
Rental
66
43
31
49
14
42
30
120
65
Employees
Real
Estate
Rental
8
48
19
17
6
89
6
23
9
24
8
59
41
29
44
13
31
24
112
47
56
11
168
687
89
294
b.
the number of outsourced employees (total, by groups based on activity and by
geographic location)
The Company has outsourced certain activities which are not directly related to its core business, such as
janitorial services, security, transport, meal preparation, and IT support, among others. In addition, the
Company signs short-term employment contracts in accordance with the fluctuation in demand for their
services. In December 31, 2011, 2012 and 2013, the Company had, respectively, 172, 223 and 241
outsourced workers, as detailed below:
2013
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Janitorial
services
17
19
5
3
4
3
4
1
4
5
2
2
2
Security
11
15
12
2
8
8
7
2
15
6
2
6
8
Transport
4
2
2
-
168
Catering
4
-
IT Support
24
3
1
1
2
1
2
1
1
1
-
Total
60
39
18
6
14
12
15
4
20
12
4
8
10
2013
State
Mato Grosso
Rio Grande do Norte
Sergipe
Maranho
Total
Janitorial
services
1
2
2
76
Security
2
3
4
4
115
Transport
8
Catering
4
IT Support
1
38
Janitorial
services
18
26
5
2
5
3
4
2
3
5
2
1
1
77
Security
23
29
4
4
6
6
5
4
8
2
2
2
4
4
103
Transport
20
2
1
23
Catering
-
IT Support
7
4
1
1
2
1
2
1
1
20
Total
48
59
10
7
33
10
13
7
12
8
4
2
5
5
223
Janitorial
services
14
24
5
2
4
1
3
10
1
64
Security
15
20
12
4
3
5
2
5
9
4
4
83
Transport
3
3
Catering
-
IT Support
8
5
1
1
2
1
2
1
1
22
Total
40
49
18
7
9
7
7
6
9
11
5
4
172
Total
3
5
4
7
241
2012
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Mato Grosso
Total
2011
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Total
c.
The index of employee turnover (churn) in financial years ending in 2013, 2012 and 2011 was 3.2%, 4.6%
and 5.5%, respectively, excluding the employees allocated in the Industrial Services business unit in 2013,
when the business unit was sold.
d.
169
In 2012, the increase in the Companys workforce is related to the growth of their businesses, especially
due to formation of technical and commercial teams in the new branches, except in the Industrial Services
business unit, where there has been a reduction in the workforce.
In 2011, the increase in the Company's workforce is related to the growth of their businesses, mainly in the
Real Estate and Rental business units, especially due to formation of technical and commercial teams in the
new branches.
14.3
a.
The Company believes one of its key competitive advantages is the quality of its skilled labor. The Company
has developed, over the years, a human resources development culture based on achievement, employee
participation and transparency. The Company also has profit sharing programs and offer opportunities for
professional development. The Company believes this culture promotes the loyalty, engagement and
enthusiasm of the employees, which leads to a historically low rate of substitution of skilled labor (turnover)
and increases our ability to provide quality services to our customers.
The Companys compensation policy includes the payment of salaries consistent with those in the market.
Additionally, the Company offers the Profit Sharing Program to all its employees.
b.
Benefits policy
As a standard policy, the Company offers its employees the following benefits and facilities, which may
change due to contracts executed with its clients:
health insurance with coverage for hospital stays: employees contribute part of the cost of this
benefit (15% to 35%, according to their salary);
group life insurance fully funded by the Company;
dental care fully funded by the employees opting in for this benefit;
essential food baskets partially funded by the Company (50%) for employees who receive up to six
times the minimum wage, and that have not missed a workday or arrived late in the month. Each
of these employees receives one food basket per month. In 2013 the Company distributed 40,608
food baskets to our employees, of which 1,578 were in December.
meal allowance: 10% to 20% of the cost of the benefit is discounted from the employee's paycheck;
loans to employees under the "Desafogo" Project: the funds should be allocated to specific purposes
and cannot exceed one nominal salary of the employee, limited to the amount of 6 minimum wages;
pharmacy benefit agreement;
lending of a car to the executives, who must bear all maintenance costs of the vehicle (except for
insurance and IPVA property tax); and
stock option plan (only for our directors and executives).
c.
Characteristics of compensation plans based on stock options of non-administrator
employees
The Company has one stock option plan that benefits their employees, Plano de Opes de Compra de
Aes 2010, previously granted purchase options remaining.
The Company has two stock option plans that benefit their employees, namely, " Plano Especial Top Mills
and Plano de Opes de Compra de Aes 2010, previously granted purchase options remaining.
170
171
(i)
After one year as of the execution of the respective Option Agreement, beneficiaries are free to
trade up to 25% of their acquired shares;
(ii)
After one year as of the term defined in item i, beneficiaries are free to trade another 25% of
their acquired shares;
(iii)
After one year as of the term defined in item ii, the beneficiary is free to trade another 25% of
the acquired shares; and
(iv)
After one year as of the term defined in item iii, each beneficiary is free to trade the remainder of
their acquired shares;
b. Exercise price
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising their
option rights were determined by the Companys Board of Directors or committee based exclusively on the
average share price on the BM&FBOVESPA, weighted by the trading volume in the month or the two months
prior to the granting of the stock option, monetarily adjusted by the inflation index IPCA (ndice de Preos
ao Consumidor Amplo), and deducting the value of dividends and interest on equity per share paid by the
Company as from the stock option date. On April 20, 2012, according to the resolution of the General
Meeting held on that date, the criterion for fixing the exercise price of the options that have as a counterpart
the acquisition of shares by its beneficiary was changed and was defined as the equity value of the shares
on the last day of the subsequent fiscal year. This change does not affect the options granted prior to that
General Meeting and the new criterion does not apply to options granted that have no counterpart of the
acquisition of shares by the beneficiary, which continues to be applied the criterion of market price,
described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, deducting the value of dividends and interest on equity per share paid by the Company as from the
stock option date.
For the 1/2011 Program, the exercise price of the options will be (i) the average share price acquired
according to brokerage invoice sent by the beneficiary to the Board of Directors or Human Resources
Committee of the Company (R$ 19.28), (ii) monetarily adjusted by the inflation according to the IPCA,
disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index determined by
the Board of Directors or committee, according to the case, from the date of conclusion of the stock option
agreement until the date the option is exercised, (iii) deducting the value of dividends and interest on equity
per share paid by the Company as from the stock option date.
For the 1/2012 Program, regarding the Basic Grant, the exercise price of the options will be the amount of
the shares net worth in December 31 of the fiscal year immediately after the stock option date of the
Company (R$5.86), monetarily adjusted by the inflation according to the IPCA, or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
For the 1/2012 Program, regarding the Discretionary Grant, the exercise price of the options will be the
average, weighed by the trading volume, of the ordinary shares of the Company in BM&FBOVESPA, during
the fiscal year of 2011 (R$19.22), monetarily adjusted by the inflation according to the IPCA, or by another
index determined by the Board of Directors or committee, according to the case, from the date of conclusion
172
of the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
For the 1/2013 Program, regarding the Basic Grant, the exercise price of the options will be the amount of
the shares net worth in December 31 of the fiscal year immediately after the stock option date of the
Company (R$6.81), monetarily adjusted by the inflation according to the IPCA, or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
For the 1/2013 Program, regarding the Discretionary Grant, the exercise price of the options will be the
average, weighed by the trading volume, of the ordinary shares of the Company in BM&FBOVESPA, during
the fiscal year of 2011 (R$26.16), monetarily adjusted by the inflation according to the IPCA, or by another
index determined by the Board of Directors or committee, according to the case, from the date of conclusion
of the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
The options granted under this plan will be subject to vesting periods of up to 72 months for the conversion
of options into shares.
c.
In the 2010/1 Program: Up to 1,475,234 common shares issued by the Company, which 936,520 designated
to non-administrators employees. By December, 31, 2013, 661,823 shares were exercised (options of nonadministrators employees).
In the 2011/1 Program: Up to 1,184,229 common shares issued by the Company, which 792,183 designated
to non-administrators employees. By December, 31, 2013, 347,807 shares were exercised (options of nonadministrators employees).
In the 2012/1 Program: Up to 1,257,467 common shares issued by the Company, which 792,183 designated
to non-administrators employees. By December, 31, 2013, 217,830 shares were exercised (options of nonadministrators employees).
In the 2013/1 Program: Up to 768,335 common shares issued by the Company, which 557,565 designated
to non-administrators employees. By December, 31, 2013, no shares were exercised.
14.4
At December 31, 2013, approximately 0.3% of the Companys employees were represented by a trade
union, especially the Civil Construction Trade Union and the Commerce Union. The Company has
agreements with each trade union, and renegotiates them every year. The Company maintains a good
relationship with the main trade unions its employees are represented by.
173
15.
174
OWNERSHIP
15.1/15.2
Controling Group:
The table below presents the ownership structure of company to date, emphasizing the quantity of shares
of capital stock held by direct controlling and administrators:
MILLS ESTRUTURAS E SERVIOS DE ENGENHARIA S.A.
Date of last
amendment
Type of
Person
5/5/2014
Individual
2/28/2014
Individual
Tomas Richard
Nacht
Antonia Kjellerup
2/28/2014
Individual
2/28/2014
Individual
Pedro Kjellerup
Nacht
Francisca Kjellerup
Nacht
Snow Petrel S.L.
2/28/2014
Individual
5/5/2014
Individual
2/28/2014
Entity
10/2/2012
Entity
4/27/2015
Entity
4/10/2015
Individual
Name
Andres Cristian
Nacht
Jytte Kjellerup Nacht
Treasury shares
3/31/2015
Others
11/28/2014
Participates in
shareholder agreement
Controlling
shareholder
Argentinia
n
Brazilian
Yes
Yes
Quantity of
common
shares
15,595,249
Yes
Yes
5,354,929
4.2%
Brazilian
Yes
Yes
2,156,845
1.7%
Brazilian
Yes
Yes
2,156,845
1.7%
Brazilian
Yes
Yes
2,245,345
1.8%
Brazilian
Yes
Yes
1,000
0.0%
Spanish
Yes
Yes
17,728,280
13.8%
Brazilian
No
No
6,323,300
4.9%
American
No
No
6,547,466
5.1%
No
No
3,394,524
2.7%
No
No
CNPJ/CPF
Nationality
098.921.33749
289.858.34720
042.695.57737
073.165.25762
127.276.83766
124.175.65706
14.740.333/0
001-61
01.701.201/0
001-89
UF
% Capital
Stock
12.2%
2,285,300
1.8%
64,268,842
50.2%
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
3/14/2012
Entity
N/A
Malta
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
3/14/2012
Entity
734.150.811-68
Argentino
UF
Participates
in
Controlling
shareholder shareholder
agreement
Yes
Quantity of
common
shares
Yes
%
Capital
Stock
100%
Malachite Limited
Name
Nicolas Nacht
15.3
788
725
29
4/25/2014
79,335,808
175
UF
Participates
in
Controlling
shareholder shareholder
agreement
Yes
Yes
Quantity of
common
shares
%
Capital
Stock
5,000
100%
% free float
15.4
62.0
Members:
Andres Cristian Nacht, Jytte Kjellerup Nacht, Tomas Richard Nacht, Antonia Kjellerup Nacht, Pedro
Kjellerup Nacht and Francisca Kjellerup Nacht (jointly, Famlia Nacht);
Snow Petrel S.L. (together with the Natch Family, Members, and
b.
Date: 02.28.2014
c.
Term: 3 years
d.
Description of the clauses concerning the exercise of voting rights and control power.
The vote of the parties with respect to general meetings will be done by shareholder Andres Cristian
Nacht, unless any member of the agreement requires a previous meeting, when the resolution will
be set by the majority of votes within the controlling block, subject to veto rights for specific
matters:
Mergers, splits, incorporations and any other corporate reorganization related to the
Company
Reduction of the mandatory dividend paid by the Company, if below the 25% over net
earnings, as determined by Law 6.404/76;
Capital increase or reduction, apart from when the capital increase is the Board of Directors
responsibility;
Cancelling the register of public company and discontinuing the best practices in corporate
governance as determined by Novo Mercado;
Request from judicial reorganization or voluntary bankruptcy
Approval of evaluation reports to be sent to general shareholders meeting approval
Change in the corporate object of the Company
176
The agreement does not bind the votes of the Board of Directors members or of other bodies of the
Company.
e.
When a previous meeting is not requested, Andres Cristian Nacht will be responsible for appointing all
members of the Companys Board of Directors that the controlling block is allowed to elect.
In the case a previous meeting is requested for the appointment of the members of the Board of
Directors:
Out of the total number of members of the Board of Directors that the parts, altogether,
can elect on the General Shereholders Meeting, each member of the agreement is entitled
to elect a number of members that is proportional to its stake in the share capital of the
Company (regardless of the shares of shareholders who are not part of the Shareholders
Agreement);
In the case the result of the calculation above is a fraction, the ones superior to 0.5 will be
rounded up to 1.0;
Regardless of the rounding above mentioned, the member of the agreement with the
highest stake will have the right to appoint the majority of members of the Board of
Directors which the controlling group is entitled to elect.
Whenever the Chairman is appointed by the members of the controlling group or by the Board of
Directors, the appointment will be under Andres Cristian Nachts responsibility.
The rules abovementioned shall apply mutatis mutandis to the the Fiscal Council,
The Shareholders Agreement does not contain prepositions related to the appointment of the Board
of Officers members.
f.
Description of the clauses concerning the transfer of shares and the preference for buying them.
The Shareholders Agreement states that the shares of its members can not be sold (lock-up) during
its term.
As an exception from the general lock-up rule, each member of the Agreement can sell, during its
term, up to 10% of its shares (Released Shares).
In the case Released Shares are being sold by one member, the other members shall have the
preemptive right to acquire the shares for the price asked by the selling member.
177
In the case the non selling shareholders do not acquire Released Shares using their preemptive
rights, the selling shareholders may sell them on the stock exchange at a price which is not less
than that offered to non selling members of the Agreement.
g.
Description of the clauses restricting or binding the voting rights of members of the board. See item
d. There are no prepositions concerning the transfer of shares and the preference for buying them.
15.6 Significant Changes in the shareholdings of Members of the Control Group and
directors of the Company in the last 3 financial years
178
subscription rights or an option to purchase shares issued by the Company; (b) due to the transfer of the
shares, Snow Petrel will succeed Jeroboam as a party to the Nacht Participaes S.A. Shareholders
Agreement executed on February 11, 2011; (c) Snow Petrel, as was Jeroboam until its extinction, is
controlled by Sr. Nicolas Nacht; (d) Snow Petrel intends to continue to hold shared control of the Company,
this being the main objective of its participation; and (e) since all of the capital of Jeroboam was already
held by Snow Petrel, the transfer discussed in this notice does not impact, in any way, control of the
Company.
15.7
On May 15, 2014, was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, as follows: (i) issuance of 250,004 new common stocks, totalizing on the amount of R$ 3,360,053.76
due to the exercise of stock option, according to the Companys Stock Option Plan, archived in the
Companys headquarters (1/2010); (ii) issuance of 95,391 new common stocks, totalizing on the amount
of R$ 2,117,680.20 due to the exercise of stock option, according to the Companys Stock Option Plan,
archived in the Companys headquarters (1/2011); (iii) issuance of 24,800 new common stocks, totalizing
on the amount of R$ 147,064.00 due to the exercise of stock option, according to the Companys Stock
Option Plan, archived in the Companys headquarters (1/2012); (iv) issuance of 101,550 new common
stocks, totalizing on the amount of R$ 2,135,596.50 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters (1/2012); and (v) issuance of
63,827 new common stocks, totalizing on the amount of R$ 443,597.65 due to the exercise of stock option,
according to the Companys Stock Option Plan, archived in the Companys headquarters (1/2013).
On August 15, 2014, was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, as follows: (i) issuance of 4,800 new common stocks, totalizing on the amount of R$ 64,128.00
due to the exercise of stock option, according to the Companys Stock Option Plan, archived in the
Companys headquarters (1/2010); (ii) issuance of 5,845 new common stocks, totalizing on the amount of
R$ 33,901.00 due to the exercise of stock option, according to the Companys Stock Option Plan, archived
in the Companys headquarters (1/2012); (iii) issuance of 1,550 new common stocks, totalizing on the
amount of R$ 32,581.00 due to the exercise of stock option, according to the Companys Stock Option Plan,
archived in the Companys headquarters (1/2012); and (iv) issuance of 19,650 new common stocks,
totalizing on the amount of R$ 134,013.00 due to the exercise of stock option, according to the Companys
Stock Option Plan, archived in the Companys headquarters (1/2013).
The amount of shares in circulation mentioned in 15.3 already has the modifications described above,
according to orientation from the Ofcio Circular/CVM/SEP/n01/2014.
179
16.
180
16.1
The business and transactions with related parties of the Company are always performed by observing price
and usual market conditions and they do not generate any benefit or detriment to the Company or any
other party.
Under the Companys bylaws, the Board must approve any transaction with any of the Company's
shareholders.
As of December 31, 2013, the Company did not hold any consulting services contracts with members from
the Board of Directors. There has not been any loans between the Company and its administrators during
the fiscal year of 2013.
16.2
There has not been any transactions with related parties during the last three fiscal years.
16.3
The Company adopts corporate governance practices and those recommended and/or required by
applicable regulations including those set out in Novo Mercado regulations. The Board of Directors must
approve the policies and make necessary arrangements for directors and shareholders to not be involved
in conflict of interest situations. Additionally, pursuant to the Companys by-laws, the Board of Directors
must approve any transaction with any of the Company's shareholders.
181
17.
182
SHARE CAPITAL
17.1
17.2
Resolution
Date
Corporate
Body that
ruled the
increase
Issue Date
Total amount
of the increase
Type of
Increase
Shares
issued
Subscription
/ previous
capital
Issue
price
Rate
Unit
Form of
Payment
7/27/2011
Board of
Directors
7/27/2011
R$1,548,424.09
Private
Subscription
128,287
0.2949
R$
12.07
R$ Unit
9/23/2011
Board of
Directors
9/23/2011
R$110,495.40
Private
Subscription
48,028
0.0210
R$
2.30
R$ Unit
Cash
9/23/2011
Board of
Directors
9/23/2011
R$14,142.18
Private
Subscription
18,598
0.0027
R$0.76
R$ Unit
Cash
10/24/2011
Board of
Directors
10/24/2011
R$790,329.68
Private
Subscription
65,642
0.1498
R$
12.04
R$ Unit
1/24/2012
Board of
Directors
1/24/2012
R$ 398,490.09
Private
Subscription
32,583
0.0755
R$
12.23
R$ Unit
183
Cash
Cash
Cash
2/28/2012
Board of
Directors
2/28/2012
R$ 4,227.33
Private
Subscription
339
0.0008
R$
12.47
R$ Unit
4/2/2012
Board of
Directors
4/2/2012
R$ 112,171.78
Private
Subscription
47,131
0.0212
R$
2.38
R$ Unit
4/24/2012
Board of
Directors
4/24/2012
R$ 4,613,384.16
Private
Subscription
371,448
0.8736
R$
12.42
R$ Unit
4/24/2012
Board of
Directors
4/24/2012
R$ 892,862.10
Private
Subscription
44,421
0.1691
R$
20.10
R$ Unit
7/2/2012
Board of
Directors
7/2/2012
R$ 31,276.80
Private
Subscription
13,032
0.0059
R$2.40
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 886,108.00
Private
Subscription
70,550
0.1660
12.56
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 20,000.00
Private
Subscription
1,600
0.0037
12.50
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 1,633,370.82
Private
Subscription
80,422
0.3056
20.31
R$ Unit
11/12/2012
Board of
Directors
11/12/2012
R$ 445,178.37
Private
Subscription
35,529
0.0830%
12.53
R$ Unit
11/12/2012
Board of
Directors
11/12/2012
R$ 18,660.00
Private
Subscription
1,500
0.0035%
12.44
R$ Unit
184
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
11/12/2012
Board of
Directors
11/12/2012
R$ 982,280.40
Private
Subscription
48,151
0.1830%
20.40
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 7,494.00
Private
Subscription
600
0.0014%
12.49
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 37,820.00
Private
Subscription
3,050
0.0070%
12.40
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 1,819,309.96
Private
Subscription
88,574
0.3384%
20.54
R$ Unit
4/10/2013
Board of
Directors
4/10/2013
R$ 169,264.59
Private
Subscription
66,903
0.0314%
2.53
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 2,973,204.90
Private
Subscription
230,481
0.5509%
12.9
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 2,919,849.05
Private
Subscription
138,185
0.5381%
21.13
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 143,307.36
Private
Subscription
24,372
0.0263%
5.88
R$ Unit
185
Cash
Cash
Cash
Cash
Cash
5/9/2013
Board of
Directors
5/9/2013
R$ 3,072,963.25
Private
Subscription
153,265
0.5631%
20.05
R$ Unit
5/22/2013
Board of
Directors
5/22/2013
R$ 39,555,60
Private
Subscription
15,512
0.0072%
2.55
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 1,298,869.95
Private
Subscription
101,395
0.2367%
12.81
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 1,180,587.20
Private
Subscription
55,952
0.2146%
21.10
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 41,029.52
Private
Subscription
7,148
0.0074%
5.74
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 586,700.00
Private
Subscription
29,335
0.1064%
20.00
R$ Unit
11/01/2013
Board of
Directors
11/01/2013
R$ 109,892.16
Private
Subscription
5,152
0.0199%
21.33
R$ Unit
11/01/2013
Board of
Directors
11/01/2013
R$ 19,117.35
Private
Subscription
945
0.0035%
20.23
R$ Unit
186
Cash
Cash
Cash
Cash
Cash
Cash
Cash
11/14/2013
Board of
Directors
11/14/2013
R$ 248,118
.00
Private
Subscription
19,086
0.015%
13.00
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 368,743.40
Private
Subscription
17,231
0.014%
21.40
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 10,377.40
Private
Subscription
1,780
0.001%
5.83
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 559,728.00
Private
Subscription
27,600
0.022%
20.28
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 78.12
Private
Subscription
0.000005
13.02
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 124,155.72
Private
Subscription
5,772
0.0045
21.51
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 4,095.36
Private
Subscription
711
0.0006
5.76
R$ Unit
187
Cash
Cash
Cash
Cash
Cash
Cash
Cash
01/10/2014
Board of
Directors
01/10/2014
R$ 61,170.00
Private
Subscription
3,000
0.0024
20.39
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 658,784.62
Private
Subscription
50,174
0.0394
13.13
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 300,002.50
Private
Subscription
13,825
0.0109
21.70
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 20,648.74
Private
Subscription
3,554
0.0028
5.81
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 231,300.00
Private
Subscription
11,250
0.0088
20.56
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 52,273.80
Private
Subscription
7,710
0.0061
6.78
R$ Unit
02/14/2014
Board of
Directors
02/14/2014
R$ 23,951.20
Private
Subscription
1,820
0.0014
13.16
R$ Unit
02/14/2014
Board of
Directors
02/14/2014
R$ 84,568.60
Private
Subscription
3,890
0.0031
21.74
R$ Unit
188
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
02/14/2014
Board of
Directors
02/14/2014
R$ 57,680.00
Private
Subscription
2,800
0.0022
20.60
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 3,360,053.76
Private
Subscription
250,004
0.1961
13.44
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 2,117,680.20
Private
Subscription
95,391
0.0748
22.20
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 147,064.00
Private
Subscription
24,800
0.0195
5.93
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 2,135,596.50
Private
Subscription
101,550
0.0797
21.03
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 443,597.65
Private
Subscription
63,827
0.0501
6.95
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 64,128.00
Private
Subscription
4,800
0.0037
13.36
R$ Unit
189
of
shares
purchased
as
brokerage note sent by the
beneficiary to the human
resources Department of the
company,
(ii)
restated
according to the IPCA, as from
the option contract date,
(2011/1 Plan)
The exercise price of options
granted under this programme
is equal to (i) the average price
of
shares
purchased
as
brokerage note sent by the
beneficiary to the human
resources Department of the
company,
(ii)
restated
according to the IPCA, as from
the option contract date,
(2012/1 Plan)
The price is based on the issue
price of Mills shares during the
IPO, adjusted monetarily by
the IPCA, as from the option
contract date, deducted from
the dividend and interest on
capital values per share paid by
Mills, until the fiscal date
(2010/1 Plan)
The exercise price of options
granted under this programme
is equal to (i) the average price
of
shares
purchased
as
brokerage note sent by the
beneficiary to the human
resources Department of the
company,
(ii)
restated
according to the IPCA, as from
the option contract date,
(2011/1 Plan)
The exercise price of options
granted under this programme
is equal to (i) the value of the
shareholders equity of the
shares on December 31 of the
tax year immediately preceding
the date of the award (ii)
restated according to the IPCA,
as from the option contract
date, (2012/1 Plan)
The exercise price of options
granted under this programme
is equal to (i) the average price
of
shares
purchased
as
brokerage note sent by the
beneficiary to the human
resources Department of the
company,
(ii)
restated
according to the IPCA, as from
the option contract date,
(2012/1 Plan)
The exercise price of options
granted under this programme
is equal to (i) the value of the
shareholders equity of the
shares on December 31 of the
tax year immediately preceding
the date of the award (ii)
restated according to the IPCA,
as from the option contract
date, (2013/1 Plan)
The price is based on the issue
price of Mills shares during the
IPO, adjusted monetarily by
the IPCA, as from the option
contract date, deducted from
the dividend and interest on
Cash
Cash
Cash
Cash
Cash
Cash
Cash
08/15/2014
Board of
Directors
08/15/2014
R$ 33,901.00
Private
Subscription
5,845
0.0046
5.80
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 32,581.00
Private
Subscription
1,550
0.0012
21.02
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 134,013.00
Private
Subscription
19,650
0.0153
6.82
R$ Unit
17.3
Not applicable, as there wasnt any reductions in the Companys capital in the last three fiscal years.
17.5
At the Ordinary and Extraordinary General Meeting held on April 19, 2011, it was approved the amendment
of the caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors
taken on April 14, 2010 and November 30, 2010, which approved the increase of capital stock within the
limit of authorized capital.
At the Extraordinary General Meeting held on April 20, 2012, it was approved the amendment of the caput
of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors taken on July
27, 2011, September 23, 2011, October 24, 2011, January 24, 2012 and February 28, 2012, which approved
the increase of capital stock within the limit of authorized capital.
At the Extraordinary General Meeting held on February 25, 2014, it was approved the amendment of the
caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors taken
on April 2, 2012, April 24, 2012, June 21, 2012, July 2, 2012, August 9, 2012, November 12, 2012, February
8, 2013, April 10, 2013, May 9, 2013, May 22, 2013, August 15, 2013, November 1, 2013, November 14,
2013 and January 10, 2010, which approved the increase of capital stock within the limit of authorized
capital, passing the relevant article to henceforth as the following wording:
190
Cash
Cash
Cash
5th Article - The capital, fully subscribed and paid, is R$553,420,638.63 (five hundred fifty-three million,
four hundred twenty thousand, six hundred thirty eight reais and sixty-three centavos), represented by
127.395.485 (one hundred twenty-seven million, three hundred ninety-five thousand, four hundred,
eighty-five) common, nominative, inscribed and without par value shares.
191
18.
192
SECURITIES
18.1
193
relating to securities convertible into shares, or that give the right to their subscription or acquisition, as
applicable, which comes to result in the sale of Control of the Company, and (b) in the case of a transfer of
control of company(ies) holding the Power of Control of the Company, in which case, the Selling Controlling
Shareholder shall be obliged to declare to the BM&FBOVESPA the value assigned to the Company in such
transaction and provide supporting documentation.
18.3 Description of exceptions and suspensive clauses relative to ownership or
political rights set forth in the bylaws
Not applicable, as there are no exceptions or suspensive clauses relative to ownership or political rights set
forth in the Companys bylaws.
18.4 Information on the volume of trading as well as minimum and maximum values
for securities traded on the stock exchange or the over-the-counter market, in each of the
quarters in the last 3 fiscal years.
Quarter
ended
Securities
Type
Class
Market
03/31/2011
Shares
Common
Stock
Exchange
06/30/2011
Shares
Common
Stock
Exchange
09/30/2011
Shares
Common
Stock
Exchange
12/31/2011
Shares
Common
Stock
Exchange
03/31/2012
Shares
Common
Stock
Exchange
06/30/2012
Shares
Common
Stock
Exchange
09/30/2012
Shares
Common
Stock
Exchange
12/31/2012
Shares
Common
Stock
Exchange
03/31/2013
Shares
Common
Stock
Exchange
06/30/2013
Shares
Common
Stock
Exchange
09/30/2013
Shares
Common
Stock
Exchange
12/31/2013
Shares
Common
Stock
Exchange
18.5
Administrative
Authority
Total financial
volume traded
(Reais)
Highest
price
(Reais)
Lowest
price
(Reais)
Factor
price
(Reais)
389,456,322
23.27
17.13
R$ per
unit
393,427,101
23.49
18.06
R$ per
unit
273,785,519
23.77
16.56
R$ per
unit
337,269,490
18.95
14.49
R$ per
unit
474,013,331
23.78
16.97
R$ per
unit
503,547,358
27.60
22.08
R$ per
unit
708,267,760
30.00
25.25
R$ per
unit
654,291,178
34.00
28.28
R$ per
unit
664,392,189
35.00
29.81
R$ per
unit
971,831,194
35.99
27.21
R$ per
unit
890,684,261
32.00
26.28
R$ per
unit
893,622,222
33.24
28.47
R$ per
unit
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
194
Promissory notes of the first issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
Issue date
Deadline
e Restrictions on trading
The Commercial Papers were the object of a public distribution offer with restricted placement efforts,
targeted at qualified investors, as defined in Article 4 of CVM Rule 476, on a firm guarantee basis.
f Convertibility
Not applicable. The first issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time from the
date of issue, at the discretion of the company, provided that its holder is notified within 5 (five)
working days in advance of the date set for the rescue. Additionally, the Company was obliged to
(i) hypotheses of redemption
redeem all the notes in advance of the first issue on the date of subscription of the debentures of the
first issue, described below. Therefore, all commercial notes of first issue were fully redeemed on April
28, 2011, and are no longer in circulation.
(ii) Assumptions and method The amount to be paid by the Company to the holder of each commercial note first issued
of calculating the redemption corresponded to their nominal value plus the remuneration, calculated pro rata temporis since the
value
date of issue until the date of effective payment, but without payment of prize or penalty.
if debt securities, indicate
h
where applicable:
(i) maturity date, including
conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
The nominal value of each commercial note of first issue was not subject to monetary correction.
On the nominal value of each note were added remuneration interest focused corresponding to the
variation of accumulated 105% (one hundred and five per cent) of the DI rate (Remuneration), from
the date of issue until the date of the effective payment of their commercial note, and followed the
criteria for calculating the Trade Notes formulas and Obligations CETIP21, which is available on the
Web (www.cetip.com.br).
(ii) interest
The remuneration was paid in full on the date of early redemption, subject to the terms and conditions
provided for in each commercial note first issued.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of default
to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one percent) per
month or fraction of a month, calculated pro rata from the date of default until the date of actual
payment .
(iii)
guarantee and, if in
the
form
of
collateral,
Not applicable
description of the goods used
as collateral
(iv.)
in the absence of a
guarantee, if the credit is The credit represented by each commercial note of first issued were unsecured.
secured or subordinate
(v)
possible restrictions
imposed on the issuer
distribution
assets
debt
the dividend
the sale of certain See terms of acceleration described in item 18.10 below.
195
i
j
None
Promissory notes of the second issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
Issue date
December 7, 2011
Maturity date
December 1, 2012
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of
that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii)
guarantee and, if in
the
form
of
collateral,
Not applicable. The second issue of promissory notes does not have collateral or surety.
description of the goods used as
collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
v.
possible restrictions
See terms of acceleration described in item 18.10 below.
imposed on the issuer
196
distribution
assets
debt
the dividend
securities
The amendment of any rights conferred by each commercial note of second issuance depends
on the holders approval.
Promissory notes of the third issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
Issue date
Maturity date
December 3, 2012
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently,
can only be traded between qualified investors. The trading restriction period laid down in
article 13 of that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and
197
(ii) interest of 1% (one percent) per month or fraction of a month, calculated pro rata from
the date of default until the date of actual payment
(iii) .
guarantee and, if in
the form of collateral, description Not applicable. The third issue of promissory notes does not have collateral or surety.
of the goods used as collateral
(iv)
in the absence of a
guarantee, if the credit is secured The credit of the promossory note is unsecured.
or subordinate
(v)
possible restrictions
imposed on the issuer
assets
debt
securities
None
Promissory notes of the fourth issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
20 Commercial Notes
c Total amount
Issue date
Maturity date
August 8, 2014
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment and, consequently, can only be traded between
qualified investors. The trading restriction period laid down in article 13 of that 90 days after the
statement expired date of issue.
Not applicable. The fouth issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
The Company shall, unilaterally, and that, for the purposes of the paragraph 2, article 7, CVM
Instruction 134, the holders will have given their express prior consent, irrevocably and irreversibly, at
the moment of the subscription of the Notes in the primary market or acquisition in the secondary
market, as appropriate, perform, at any time, from the 31st (thirty first) day counted from the Issue
Date. In case of partial early redemption, the same will take place by lot, pursuant paragraph 4, article
7, CVM Instruction 134, and all the steps in this process, such as license, qualification, verification and
validation of the number of Notes to be redeemed will be held outside of CETIP. The Company shall
communicate the holders, the Payment Agent and CETIP, about the redemption with at least 2 (two)
business days of the date of the event.
198
The amount to be paid by the Company to the holder of each commercial note of the fourth issue
(ii) Assumptions and method
corresponds to the nominal value of the commercial notes plus the remuneration, calculated pro rata
of calculating the redemption
temporis since the date of issue until the date of effective payment, but without payment of prize or
value
penalty, according to the terms and conditions set forth in the notes.
h
(ii) interest
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible restrictions
imposed on the issuer
distribution
assets
the dividend
new debt
the possibility of
securities
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
199
Total amount
270,000,000.00
Restrictions on trading
yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
For more information on maturity date, please refer to item 18.10 below.
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest
rate of CDI.
ii.
Interest
The remuneration provided above shall be paid every six months from the date of issue, being
the first payment on October 18, 2011, and the last payment of the maturity date, or on the
date of any settlement.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The first issue of debentures does not have collateral or surety.
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
None
200
Securities
Debentures
Identification of securities
Quantity
27,000
Total amount
R$ 270,000,000.00
Issue date
Maturity date
Restrictions on trading
Yes. The debentures were subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment to the placement of 20,000
debentures, and under the best-efforts placement in relation to the remaining debentures. The
debentures can only be traded between qualified investors and after a 90 days period from the
date of subscription or purchase according to the articles 13 and 15 of CVM Instruction 476,
and compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
For more information on maturity date, please refer to item 18.10 below.
The remuneration of each of the First Series Debentures will be as follows:
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will
incur interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge
of 0.88% (eighty-eight per cent) per year.
ii.
Interest
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First
Series Compensation will be paid semiannually from the Issue Date, with the first payment on
February 15, 2013 and the last, on the maturity date of the First Series.
The remuneration of each of the Second Series Debentures will be as follows:
I. Monetary Adjustment: The nomeinal of each Second Series Debentures will be adjusted by
the National Index of Consumer Prices Broad, released by the Brazilian Institute of Geography
and Statistics ("IPCA"), since the Issue Date until the date of actual payment, being the update
incorporated into the Nominal value of each Second Series Debentures automatically ("Second
Series Monetary Adjustment"). Notwithstanding the payments due to early redemption of the
Debentures and/or acceleration of the obligations under the Debentures, pursuant to the Deed
of Issue, the Second Series Monetary Adjustment will be paid on the same dates and the same
amount of amortization of nominal value of each Second Series Debentures, as provided in the
Deed of Issue.
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The second issue of debentures does not have collateral or surety.
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
See terms of acceleration described in item 18.10 below.
201
assets
debt
securities
None
Debentures
Identification of securities
Quantity
20,000
Total amount
R$ 200,000,000.00
Issue date
Maturity date
Restrictions on trading
Yes. The debentures were subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment to the placement of 20,000
debentures, and under the best-efforts placement in relation to the remaining debentures. The
debentures can only be traded between qualified investors and after a 90 days period from the
date of subscription or purchase according to the articles 13 and 15 of CVM Instruction 476,
and compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Yes
The Company may, at its sole discretion, make, at any time, optional early redemption offer,
total or partial, of the outstanding Debentures, with the consequent cancellation of such
Debentures, which will be sent to all Bondholders, without distinction, assured equal conditions
to all Bondholders to accept the early redemption of the Debentures held by them, through an
Assumptions and method of Optional Early Redemption Offer. The amount to be paid in respect of each Debenture indicated
calculating the redemption value by their respective holders into joining the Optional Early Redemption Offer will be equal to the
outstanding balance of the Par Value, plus (a) Remuneration, calculated pro rata from the date
issuance or payment date immediately preceding Compensation, as appropriate, until the date
of actual payment; and (b) if applicable, the redemption premium to be offered to the
Bondholders, at the sole discretion of the Company, which can not be negative redemption.
202
For more information on maturity date, please refer to item 18.10 below.
I. Monetary Adjustment: The nominal value of the debentures of the third issue will not be
monetarily updated.
ii.
Interest
II. Compensatory Interest: on the outstanding balance of the Nominal Value of the Debentures
outstanding focus interest corresponding to 108.75% (one hundred and seventy-eight point five
percent) of the accumulated variation of average daily DI - Interbank Deposits one day,
calculated and published daily by CETIP in the daily bulletin on its website (http://
www.cetip.com.br) calculated exponentially and cumulatively pro rata by days elapsed from the
Issue Date or payment date immediately preceding Compensation form as the case until the
date of actual payment. Without prejudice to the payments related to early redemption of the
Debentures and / or early maturity of obligations on the Debentures, the remuneration will be
payable semiannually from the Issue Date, on the 30th of May and November of each year, with
the first payment on November 30, 2014 and the last on the Maturity Date.
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The third issue of debentures does not have collateral or surety.
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
assets
debt
securities
None
18.6 Description of the Brazilian markets where the company's securities are admitted for
trading
Shares
203
Commercial Paper
The Companys first, second, third and fourth issuance of commercial paper, described in table 18.5 of this
Reference Form, were registered for trading in the secondary market, through CETIP21 - Ttulos e Valores
Mobilirios, managed and operated by CETIP, trading being settled through CETIP and electronical custody
of the commercial paper by CETIP. The first issue of commercial papers were already fully redeemed on
April 28, 2011. The second issue of commercial papers were already fully redeemed on November 30, 2012.
The third issue of commercial papers were already fully redeemed on December 3, 2012.
Debentures
The debentures issued by the Company, first, second and third issuance, described at table 18.5 of this
Reference Form, were registered for trading in the seconday market and electronic custody SND Mdulo
Nacional de Debntures, managed and operated by CETIP.
18.7
a. Country
United States of America.
d. Market
The ADRs of Mills are traded in the over-the-counter market (OTC) under CUSIP 60114T103, ISIN
BRMILSACNOR2 and ticker MILTY.
e. Administrative entity for the market in which securities are listed for trading
OTC (Over-The-Counter)
i. Percentage of trading volume overseas when compared to the total trading volume for each
class and type of security last year
204
j. Proportion of certificates of deposit overseas, if any, when compared to each class and type
of shares
1:1 (one ADR for each commom share).
Public offerings of distribution of commercial promissary notes and debentures, with restricted placement
efforts
Promissory notes of first, second, third and fourth issue and the debentures of the first, second and third
issue were subject of public offerings, with restricted efforts of placement, in accordance with CVM
Instruction No. 476, of January 16, 2009, intended exclusively for qualified investors. The first issue of
commercial papers were already fully redeemed on April 28, 2011. The second issue of commercial papers
were already fully redeemed on November 30, 2012. The third issue of commercial papers were already
fully redeemed on December 3, 2012. All relevant characteristics of these securities are described in section
18.5 of this Reference Form.
18.9
Description of takeover bids made by Company for shares issued by third parties
Not applicable, as the Company did not make takeover bids for shares issued by third parties.
18.10 Other information which the Company deems relevant
Promissory notes of the first issue, issued in a single series, now fully redeemed
a Identification of securities
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
d Issue date
Deadline
e
f
Restrictions on trading
Convertibility
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time from the
date of issue, at the discretion of the company, provided that its holder is notified within 5 (five)
working days in advance of the date set for the rescue. Additionally, the Company was obliged to
redeem all the notes in advance of the first issue on the date of subscription of the debentures of the
first issue, described below. Therefore, all commercial notes of first issue were fully redeemed on April
28, and are no longer in circulation.
205
The amount to be paid by the Company to the holder of each commercial note first issued
corresponded to their nominal value plus the remuneration, calculated pro rata temporis since the
date of issue until the date of effective payment, but without payment of prize or penalty.
Maturing on June 27, 2011. The notes were redeemed when the Company issued debentures, on
April 28, 2011.
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare early
maturity of the obligations under the Commercial Paper, and may demand immediate payment of the
Nominal Amount plus the remuneration, the occurrence of any of the following events, provided in
addition to other cartouches and those provided by law (each event, an "Event of Default"): (i)
declaration of acceleration of any other Commercial Paper; (ii) default by the Company of any
monetary obligation due under the Commercial Paper; (iii) default by the Company of any nonpecuniary obligation due under the Commercial Paper; (iv) sale, assignment or pledge any form of
transfer or promise to transfer to third parties in whole or in part, by the Company of any of the
Obligations, without the prior consent in writing of the Holder; (v) transformation of the Company
into a privately held Company or any other social arrangement; (vi) approval of any corporate
reorganization involving the Company, without the prior consent in writing of the Holder; (vii) change
in the Company's Control; (viii) Changing the corporate purpose, unless such change does not result
in changing the company's main activity; (ix) acceleration of any financial obligation of the Company
and/or any Subsidiary of the Company, the value of which, individually or in aggregate, be less than
R$ 5,000,000.; (x) default by the Company due to mandatory early redemption of subscription and
payment of the Debentures, as provided under "Early Redemption" above, or (xi) the Company does
not use the net proceeds of the offering as described under "Use of Proceeds" in the cartouche.
The nominal value of each commercial note of first issue was not subject to monetary correction.
On the nominal value of each note were added remuneration interest focused corresponding to the
variation of accumulated 105% (one hundred and five per cent) of the DI rate (Remuneration), from
the date of issue until the date of the effective payment of their commercial note, and followed the
criteria for calculating the Trade Notes formulas and Obligations CETIP21, which is available on the
Web (www.cetip.com.br).
(ii) interest
The remuneration was paid in full on the date of early redemption, subject to the terms and conditions
provided for in each commercial note first issued.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of default
to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one percent) per
month or fraction of a month, calculated pro rata from the date of default until the date of actual
payment .
(iii)
guarantee and, if in
the
form
of
collateral,
Not applicable
description of the goods used
as collateral
(iv.)
in the absence of a
guarantee, if the credit is The credit represented by each commercial note of first issued were unsecured.
secured or subordinate
(v)
possible restrictions
imposed on the issuer
distribution
assets
debt
the dividend
securities
206
i
j
None
Promissory notes of the second issue, issued in a single series, now fully redeemed
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
d Issue date
December 7, 2011
Maturity date
e
Restrictions on trading
f
Convertibility
December 1, 2012
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of
that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
(ii) interest
Over the nominal value of each note there will be remuneration interest of 100% of
accumulated variation of the DI rate plus spread 1.10% per annum from the date of issue
until the date of the effective payment of their commercial note.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
207
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii)
guarantee and, if in
the
form
of
collateral,
Not applicable. The second issue of promissory notes does not have collateral or surety.
description of the goods used as
collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
v.
possible restrictions
imposed on the issuer
distribution
assets
debt
the dividend
securities
None.
Promissory notes of the third issue, issued in a single series, now fully redeemed
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
d Issue date
Maturity date
e
Restrictions on trading
f
Convertibility
December 3, 2012
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently,
can only be traded between qualified investors. The trading restriction period laid down in
article 13 of that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
208
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
early maturity of the obligations under the Commercial Paper, and may demand immediate
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper;
(iii) default by the Company of any non-pecuniary obligation due under the Commercial
Paper; (iv) sale, assignment or pledge any form of transfer or promise to transfer to third
parties in whole or in part, by the Company of any of the Obligations, without the prior
consent in writing of the Holder; (v) transformation of the Company into a privately held
Company or any other social arrangement; (vi) approval of any corporate reorganization
involving the Company, without the prior consent in writing of the Holder; (vii) change in the
Company's Control; (viii) Changing the corporate purpose, unless such change does not
result in changing the company's main activity; (ix) acceleration of any financial obligation
of the Company and/or any Subsidiary of the Company, the value of which, individually or
in aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory
early redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of the promissory note will not be updated monetarily.
Over the nominal value of each note there will be remuneration interest of 100% of
accumulated variation of the DI rate plus spread 4.9% per annum from the date of issue
until the date of the effective payment of their commercial note.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
(ii) interest
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and
(ii) interest of 1% (one percent) per month or fraction of a month, calculated pro rata from
the date of default until the date of actual payment
(iii) .
guarantee and, if in
the form of collateral, description Not applicable. The second issue of promissory notes does not have collateral or surety.
of the goods used as collateral
(iv)
in the absence of a
guarantee, if the credit is secured The credit of the promossory note is unsecured.
or subordinate
(v)
possible restrictions
imposed on the issuer
assets
debt
securities
None
209
b Quantity
20 Commercial Notes
c Total amount
Issue date
Maturity date
August 8, 2014
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment and, consequently, can only be traded between
qualified investors. The trading restriction period laid down in article 13 of that 90 days after the
statement expired date of issue.
Not applicable. The fouth issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
The Company shall, unilaterally, and that, for the purposes of the paragraph 2, article 7, CVM
Instruction 134, the holders will have given their express prior consent, irrevocably and irreversibly, at
the moment of the subscription of the Notes in the primary market or acquisition in the secondary
market, as appropriate, perform, at any time, from the 31st (thirty first) day counted from the Issue
Date. In case of partial early redemption, the same will take place by lot, pursuant paragraph 4, article
7, CVM Instruction 134, and all the steps in this process, such as license, qualification, verification and
validation of the number of Notes to be redeemed will be held outside of CETIP. The Company shall
communicate the holders, the Payment Agent and CETIP, about the redemption with at least 2 (two)
business days of the date of the event.
The amount to be paid by the Company to the holder of each commercial note of the fourth issue
(ii) Assumptions and method
corresponds to the nominal value of the commercial notes plus the remuneration, calculated pro rata
of calculating the redemption
temporis since the date of issue until the date of effective payment, but without payment of prize or
value
penalty, according to the terms and conditions set forth in the notes.
h
(ii) interest
The Principal of each of the Notes shall not be subject to monetary adjustment. The outstanding
balance of the Principal of each Note shall bear interest at the rate of 106% (one hundred and six
percent) of accumulated variation of daily average rates of the Interbank Deposits DI (DI Depsitos
Interfinanceiros) for one day, over extra-group, denominated in percentage form per annum, based
on 252 (two hundred and fifty-two) business days, calculated and disclosed by CETIP in its daily report
available at its website (http://www.cetip.com.br) ("DI Rate") ("Interest"), calculated on an
exponential and cumulative basis, pro rata temporis based on the number of business days elapsed
from the Date of Issuance to the effective payment date, and shall comply with the calculation criteria
of the "Caderno de Frmulas de Notas Comerciais e Obrigaes CETIP21", available at CETIP's
210
website (http://www.cetip.com.br). The Interest shall be fully paid on the Maturity Date or on the
date of the eventual early maturity, according to the terms and conditions set forth in the Notes.
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible restrictions
imposed on the issuer
distribution
assets
the dividend
new debt
the possibility of
securities
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
Total amount
270,000,000.00
Restrictions on trading
Yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
211
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue are maintained, in the occurrence of any of the events summarized below: I.
Default by non-payment of the Nominal Value, of Remuneration, premium, or any other
amounts owed to the debenture holders; V. assignment or pledge any form of transfer or
promise of transfer to third parties in whole or in part by the Company, any of its obligations
under the Deed, without the prior consent in writing of Debenture Holders representing at least
75% of the outstanding; VI. invalidity, unenforceability or invalidity of the deed and / or the
Distribution Agreement, is not remedied within 10 days from the date of the respective event;
VII. (a) bankruptcy of the Company, and /or any of its subsidiary or controlling Company; (b)
voluntary bankruptcy application made by the Company and / or any of its subsidiary or
controlling Company; (c) bankruptcy filing by the Company, and /or any of its subsidiary or
controlling Company, formulated by others, not elided within legal; (d) petition for judicial or
extrajudicial recovery of the Company and /or any of its subsidiary or controlling Company,
regardless of approval of the request; or (e) liquidation, dissolution or extinction of the
Company, and /or any of its subsidiary or controlling Company, unless the liquidation, dissolution
and / or extinction during the course of a corporate transaction which does not constitute an
Event of Default; VIII. changing the company into a limited liability company, pursuant to
articles 220 to 222 of Law No. 6,404/76;IX. approval of incorporation, merger or split of the
company or sale, by the company, of all or substantially all of its assets or its mining properties,
with some exceptions: (a) if the transaction has been approved in advance by the Debenture
Holders representing at least 75% of the outstanding Debentures; or (b) if the Debenture
Holders that wish to do so, be assured that, during the minimum period of six months from the
date of publication of the minutes of corporate acts in the transaction, the redemption of the
Debentures held by them, by paying the outstanding balance of the Nominal Value, plus
Remuneration, calculated pro rata from the Issue Date or the date of payment of compensation
immediately preceding, whichever is applicable until the date of actual paymentse; or (c) by the
incorporation of the Company (so that the Company is the remaining entity), of any Subsidiary;
or (d) if the operation is carried out solely between Subsidiaries; X. capital reduction, except if
previously approved by Debenture Holders representing at least 75% of the outstanding
Debentures, pursuant to Article 174, paragraph 3, of Law No. 6,404/76; XI. change or transfer
of control (as defined under Article 116 of Law No. 6,404/76), direct or indirect, of the Company,
from any Controlling Company and / or any Subsidiary, except if previously approved by
Debenture Holders representing at least 75% of the outstanding Debentures; XV. early maturity
of any financial obligation of the Company and / or any Subsidiary, which amount, individual or
aggregate, is equal to or greater than R$ 5,000,000.00 or its equivalent in other currencies,
and/or occurrence of any event or default of any obligation which, after the expiration of any
period provided in their document, or in other cases, within 10 days from the date of their
default, give rise to the declaration of acceleration any financial obligation of the Company and
/ or any Subsidiary, which amount, individual or aggregate, is equal to or greater than R$
5,000,000.00 or its equivalent in other currencies.
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest
rate of CDI.
ii.
Interest
The remuneration provided above shall be paid every six months from the date of issue, being
the first payment on October 18, 2011, and the last payment of the maturity date, or on the
date of any settlement.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from
the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest
of 1% (one percent) per month or fraction of a month, calculated pro rata from the date of
default until the date of actual payment
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The first issue of debentures does not have collateral or surety.
the goods used as collateral
212
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
assets
debt
securities
Remuneration: The performance of duties and tasks assigned to compete in accordance with
the law and its deed of issue, the fiduciary agent, or the institution which will replace him in
that capacity, he shall receive a remuneration: (i) R$13,000.00 per year, due from the company,
being the first instalment of remuneration payable within 30 days from the date of conclusion
of the deed of issue, and the other, on the same day of subsequent years; (ii) Additionally, in
the event of a close-out netting of obligations of the company under the debentures of the first
emission, equivalent to R$500.00 per hour-working man devoted to activities related to the
issue and the debentures, to be paid within 5 days from the date of attestation of delivery by
the trustee and approval by the company, of the report, concerning hours of activities (a) advice
to debenture holders in the process of renegotiation required by the company; (b) attendance
at formal meetings with the company eou debentureholders eou general meetings of debenture
holders; and (c) implementation of the decisions taken by the debenture holders (iii) brought
out yearly since the date of payment of the first annual instalment by the change in the general
price index-market, published by Fundao Getlio Vargas, or by any other that eventually is
replaced, calculated pro rata temporis, if necessary; (iv) plus the sales tax of any kind TAXES,
contributing to the Social Integration Programme PIS, Social contribution on net income
CSLL, contributing to the financing of Social Security COFINS and any other taxes that may
relate to the remuneration payable to the trustee, except for tax on income and proceeds of
Any Nature GOunder existing rates for the dates of each payment; (v) due to maturity,
redemption or cancellation of debentures of the first issue, and even after its maturity,
redemption or cancellation in the event of actions of the trustee in charge of any defaults on
bonds not remedied by the company, in cases where the remuneration payable to the trustee
vi the fiduciary agent, indicating shall be calculated in proportion to the months of operation of the fiduciary agent, based on the
the key terms of the contract
value specified in item i, readjusted as the paragraph iii; and (vi) plus, where lives in your
payment, regardless of notice, judicial or extrajudicial notification or notification, on the valores
arrears, (a) fine 2 moratorium; and (b) interest on arrears of 1 month, calculated pro rata
temporis since the date of default until the payment date.
Reimbursement of expenses: the Trustee shall be repaid by the company for all reasonable
costs incurred that have proven to protect the rights and interests of the debenture holders or
to perform their claims within 30 (thirty) days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be deemed to be approved if the company does not appear within 2 (two)
working days from the date of receipt of their request by fiduciary agent.
Obligations. The fiduciary agent, as provided for in the deed of issue, will have the functions
laid down in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission, and use of any action to protect rights or defend interests of the
debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial
or extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer of
the debentures of the first issue, proceed with the replacement of the trustee and the indication
of his replacement, general meeting of debenture holders especially convened for this purpose;
(ii) if the Trustee is unable to continue to perform their duties by supervening circumstances to
the deed of issue, shall immediately communicate the fact to debentureholders, requesting his
replacement and convene a general meeting of debenture holders for this purpose; (iii) if the
fiduciary agent, renounces functions, should remain in the exercise of their duties until a
213
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
Total amount
27,000
R$ 270,000,000.00
Restrictions on trading
Yes
The debentures were subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures,
and under the best-efforts placement in relation to the remaining debentures. The debentures
can only be traded between qualified investors and after a 90 days period from the date of
subscription or purchase according to the articles 13 and 15 of CVM Instruction 476, and
compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
Payment of the nominal value of each first series debenture in 2 (two) successive yearly
installments, each one corresponding to matured 50% (fifty percent) of nominal value of each
214
of the debentures of the first series, being the first installment due in August 15, 2016 and the
second installment on the maturity date of the first series.
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue.
Maturity date of the second series on August 15, 2020.
Payment of the nominal value of each second series debenture in 3 successive yearly
installments, in the following order: (a) 2 installments, each corresponding to matured 33.33%
of nominal value of each of the debentures of the second series monetarily adjusted, due to
August 15, 2018 and August 15, 2019; and (b) 1 installment, in the amount of the outstanding
amount of nominal value of each of the debentures of the second series monetarily adjusted,
due to the maturity date of second series debenture.
The obligations may be declared mature in advance, on the terms and conditions set forth in
the Deed of Issue, in the occurrence of any of the events summarized below: I. Default by the
Company of any financial obligation on the Debentures, due under the Deed of Issue, at the
date of payment provided for in the Deed of Issue; II. Default by the Company of any nonfinancial obligation on the Debentures foreseen in the Deed of Issue (a) that is not properly
solved within specific remedy; or (b) not having specific term remediation, if it is not properly
solved within 15 days from the date of such default, being the period provided in this subsection
does not apply to obligations to which it has a deadline stipulated or specific cure for which the
period of cure has been expressly excluded; III. judicial questioning by the Company for any
controlling company, directly or indirectly (controlling as defined in article 116 of the Corporate
Law) of the Company (Controlling), and / or controlled company (controlled as defined in
article 116 of the Corporate Law) by the Company (Controlled), of the Issue of Deed; IV.
judicial questioning by any person not mentioned in section III above, the Issue of Deed,
suspended or not remedied within 15 days from the date on which the Company becomes aware
of the judging of such legal challenge; V. assignment or pledge any form of transfer or promise
of transfer to third parties in whole or in part by the Company, any of its obligations under the
Deed, without the prior consent in writing of Debenture Holders representing at least 75% of
the outstanding; VI. invalidity, unenforceability or invalidity of the Deed and/or the Distribution
Agreement, is not remedied within 15 days from the date of the respective event; VII. (a)
bankruptcy of the Company, and/or any of its subsidiary or controlling Company; (b) voluntary
bankruptcy application made by the Company and / or any of its subsidiary or controlling
Company; (c) bankruptcy filing by the Company, and/or any of its subsidiary or controlling
Company, formulated by others, not suppressed within the legal deadline; (d) petition for
judicial or extrajudicial recovery of the Company and /or any of its subsidiary or controlling
Company, regardless of approval of the request; or (e) liquidation, dissolution or extinction of
the Company, and/or any of its subsidiary or controlling Company, unless the liquidation,
dissolution and/or extinction during the course of a corporate transaction which does not
constitute an Event of Default, pursuant to section IX below; VIII. changing the company into
a limited liability company, pursuant to articles 220 to 222 of Law No. 6,404/76; IX. approval of
incorporation, merger or split of the company or sale, by the company, of all or substantially all
of its assets or its mining properties, with some exceptions: (a) if the transaction has been
approved in advance by the Debenture Holders representing at least 75% of the outstanding
Debentures; or (b) if the Debenture Holders that wish to do so, be assured that, during the
minimum period of 6 months from the date of publication of the minutes of corporate acts in
the transaction, the redemption of the Debentures held by them, by paying the outstanding
balance of the Nominal Value, plus Remuneration, calculated pro rata from the Issue Date or
the date of payment of compensation immediately preceding, whichever is applicable until the
date of actual payments; or (c) by the incorporation of the Company (so that the Company is
the remaining entity), of any Subsidiary; or (d) if the operation is carried out solely between
Subsidiaries; X. capital reduction, except if previously approved by Debenture Holders
representing at least 75% of the outstanding Debentures, pursuant to Article 174, paragraph 3,
of Law No. 6,404/76; XI. change or transfer of control (as defined under Article 116 of Law No.
6,404/76), direct or indirect, of the Company, from any Controlling Company and / or any
Subsidiary, except if previously approved by Debenture Holders representing at least 75% of
the outstanding Debentures; XII. amendment of the Company's purposes and / or any
Subsidiary, as provided in its bylaws or social contract as applicable, in effect on the Issue Date,
unless such amendment: (a) if the transaction has been approved in advance by the Debenture
Holders representing at least 75% of the outstanding Debentures; (b) does not lead to a change
in the principal activity of the Company or its Subsidiary; XIII. non-renewal, cancellation,
revocation or suspension of licenses and permits, including environmental, required by the
competent bodies to carry out regular activities of the Company, since its effects have not solved
or suspended within 15 days from the date of its non-renewal, cancellation, revocation or
215
suspension respective (s) permit (s) or license (s); XIV. occurrence of any event that causes (a)
in relation to the Company, (i) any material adverse effect on the condition (financial or of any
nature), business, property, results of operations and/or prospects; (ii) any adverse effect on
the powers or legal capacity and/or economic-financial to fulfill any of the obligations under the
Deed of Issue, and/or (iii) any event or condition that, after the deadline, formal notice, or both,
may result in a Default event, or (b) with respect to Deed of Issue, any adverse effect on (i)
the proper execution, legality, validity and / or enforceability of the obligations documents, and
/ or (ii) the rights contained in the Debenture Deed of Issue, since it has not solved its effects
or suspended within 15 days from the date of knowledge of event the Company ("Material
Adverse Effect"); XV. non maintenance by the Company and/or any Subsidiary, insurance, as
the current best practices in the market segment of the Company with respect to its material
operating assets, not solved within 15 days from whatever happens first: (a) the date on which
the Company becomes aware of the event, and promptly notifies the Fiduciary Agent or (b) the
date on which the Company receives written notice from the Fiduciary Agent; XVI. early maturity
of any financial obligation of the Company and/or any Subsidiary, which amount, individual or
aggregate, is equal to or greater than R$ 10,000,000.00, annually updated, from the Issue Date,
by the positive variation of the IPCA, or its equivalent in other currencies, and / or the occurrence
of any event or default of any obligation which, after the expiration of any cure period provided
for in the respective document, may give rise, immediately the declaration of acceleration of
any financial obligation of the Company and/or any Subsidiary, which amount, individual or
aggregate, is equal to or greater than R$ 10,000,000.00, annually updated, from the Issue Date,
by the positive variation of the IPCA, or its equivalent in other currencies XVII. securities protest
against the Company and / or any Subsidiary, which amount, individual or aggregate, is equal
to or greater than R$ 10,000,000.00(ten million reais), annually updated, from the Issue Date,
by the positive variation of the IPCA, or its equivalent in other currencies, unless, within 10 (ten)
days from the date of their protest has been proven that (a) the protest has been made in error
or bad faith of the third and was taken to the appropriate judicial order restraining or
cancellation of their effects; b) the protest was canceled, or (c) the value (s) of title (s) protested
(s) was deposited in court; XVIII. default by the Company and / or any subsidiary of any decision
or final court judgment or any judgment or arbitral award not subject to appeal against the
Company and / or any Subsidiary, which amount, individual or aggregate, is equal to or greater
than R$ 10,000,000.00, annually updated, from the Issue Date, by the positive variation of the
IPCA, or its equivalent in other currencies, not paid within the stipulated payment for their
decision or judgment XIX. attachment or sequestration of assets of the Company and / or any
Subsidiary, which amount, individual or aggregate, is equal to or greater than R$ 10,000,000.00,
annually updated, from the Issue Date, by the positive variation of the IPCA, or its equivalent
in other currencies, unless, within ten days from the date of their arrest or abduction, has been
proven that the arrest or abduction was challenged or replaced by other security; XX.
expropriation, confiscation or any other measure of any governmental entity in any jurisdiction
that results in loss by the Company and / or any Subsidiary of the property and / or the direct
or indirect ownership of a substantial portion of its assets; XXI. sale, assignment, or alienation
in any form or constitution of mortgage, pledge, lien, Fiduciary assignment agreement, usufruct,
trust, promise to sell, purchase option, right of first refusal, charge, encumbrance or onus,
judicial or extrajudicial, voluntary or involuntary, or any other action which has the practical
effect similar to any of the above expressions ("Onus"), whether in a single transaction or a
series of transactions, related or not, on assets of the Company and/or any subsidiary amounting
more than 15% of the total assets of the Company, based on the latest Company's Consolidated
Financial Statements (as defined in Section 7.1 of Deed of Issue), unless (a) if the transaction
has been approved in advance by the Debenture Holders representing at least 75% of the
outstanding Debentures; or (b) the establishment of liens on any asset acquired by the Company
or any Subsidiary, provided that the lien consists exclusively on assets acquired and to finance
the acquisition of such asset; XXII. verifying that any of the statements made by the Company
in the Issue Deed and / or the Underwriting Agreement is false, inconsistent, inaccurate,
incomplete, insufficient or incorrect in any material respect, not cured within ten (10) days from
the earlier of (a) the date upon which the Company is aware of the incorrectness or (b) the date
upon which the Company receives written notice from the Fiduciary Agent; XXIII. non-use by
the Company, the net resources obtained of the Issue strictly in terms the Deed of Issue; XXIV.
distribution and/or payment by the Company of dividends, interest on capital or other
distributions of profits to shareholders, if the Company is in default of any of its obligations
under the Issuance Deed, except for the payment of dividend must not exceed 25% of net
income under Article 202 of the Corporations Act, except for the payment of the mandatory
dividend of no more than 25% of net income under Article 202 of the Law No. 6,404/76, and
XXV. non-compliance by the Company of any financial ratios below ("ndices Financeiros"), to
be determined by the Company under the Deed of Issue and verified by the Fiduciary agent
within 10 days from the date of receipt by the Fiduciary agent, the information referred to the
Deed of Issue based on the Consolidated Financial Statements of the Company for each quarter
of the calendar year, from and including the Consolidated Financial Statements of the Company
216
on December 31, 2012: (a) the financial index due to the quotient of dividing Net Debt (as
defined in the Issue Deed) to EBITDA (as defined in the Issue Deed), which must be less than
or equal to 3 and (b) the financial index due to the quotient of dividing EBITDA by Net Financial
Expenses (as defined in the Issue Deed), which should be equal or higher than 2.
The remuneration of each of the First Series Debentures will be as follows:
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will
incur interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge
of 0.88% (eighty-eight per cent) per year.
ii.
Interest
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First
Series Compensation will be paid semiannually from the Issue Date, with the first payment on
February 15, 2013 and the last, on the maturity date of the First Series.
The remuneration of each of the Second Series Debentures will be as follows:
I. Monetary Adjustment: The nomeinal of each Second Series Debentures will be adjusted by
the National Index of Consumer Prices Broad, released by the Brazilian Institute of Geography
and Statistics ("IPCA"), since the Issue Date until the date of actual payment, being the update
incorporated into the Nominal value of each Second Series Debentures automatically ("Second
Series Monetary Adjustment"). Notwithstanding the payments due to early redemption of the
Debentures and/or acceleration of the obligations under the Debentures, pursuant to the Deed
of Issue, the Second Series Monetary Adjustment will be paid on the same dates and the same
amount of amortization of nominal value of each Second Series Debentures, as provided in the
Deed of Issue.
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The first issue of debentures does not have collateral or surety.
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
assets
debt
securities
Compensation: The performance of duties and tasks assigned to compete in accordance with
the law and its deed of issue, the fiduciary agent, or the institution which will replace him in
that capacity, shall receive a remuneration: (i) R$3,500.00 per year, due from the company,
being the first installment of remuneration payable on the fifth business day following the date
of celebration of the deed of issue, and the remaining, on the same day of subsequent years,
until the maturity of the issue, or as long as the fiduciary agent is representing the debentures
holders interests;(ii) monetary adjustment yearly from the date of payment of the first annual
vi the fiduciary agent, indicating
instalment by the change in the general price index-market, published by Fundao Getlio
the key terms of the contract
Vargas, or by any other that eventually is replaced, calculated pro rata temporis, if necessary;
(iii) plus the sales tax of any kind TAXES, contributing to the Social Integration Programme
PIS, Social contribution on net income CSLL, contributing to the financing of Social Security
COFINS and any other taxes that may relate to the remuneration payable to the trustee, except
for tax on income and proceeds of Any Nature go under existing rates for the dates of each
payment; (iv) due to maturity, redemption or cancellation of debentures, and even after its
maturity, redemption or cancellation in the event of actions of the trustee in charge of any
defaults on debentures not remedied by the Company, in cases where the remuneration payable
to the fiduciary agent shall be calculated in proportion to the months of operation of the fiduciary
217
agent, based on the value specified in item i, readjusted as the paragraph ii above; (v) plus, in
cases of delay in payment, regardless of notice, judicial or extrajudicial notification, on the
delinquent amounts, without prejudice to monetary restatement, (a) interest for late payment
of 1% per month, calculated pro rata temporis since the date of default until the date of actual
payment; (b) moratorium fine of 2%, non-compensatory and rigid; (c) restatement by IGPM
variation, calculated pro rata from the date of default until the date of actual payment; and (vi)
realized upon deposit held in the current account to be specified in writing by the Fiduciary
Agent to the Company, serving the receipt as settlement of payment.
Reimbursement of expenses: the Fiduciary Agent shall be refunded by the company for all
reasonable costs incurred that have proven to protect the rights and interests of the debenture
holders or to perform their claims within 30 days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be considered approved if the company does not appear within 2 working
days from the date of receipt of their request by the Fiduciary Agent.
Obligations. The Fiduciary Agent, as provided for in the deed of issue, will have its duties
established in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission of Brazil (CVM), and use of any action to protect rights or defend interests
of the debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial
or extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer, to
proceed with the replacement of the fiduciary agent and the indication of its replacement at
general meeting of debenture holders especially convened for this purpose; (ii) if the fiduciary
agent is unable to continue to perform its duties by supervening circumstances to the deed of
issue, shall immediately communicate the fact to debenture holders, requesting its replacement
and convene a general meeting of debenture holders for this purpose; (iii) if the fiduciary agent,
renounces its functions, should remain in the exercise of its duties until another institution is
indicated by the Company fot its replacement and approved by general meeting of debenture
holders, and assume their functions effectively; (iv) shall be performed, within the maximum
period of 30 days from the date of the event that determine, general meeting of debenture
holders, for choosing the new fiduciary agent, that may be called by the fiduciary agent to be
replaced, by the Company, by debenture holders of the first series representing at least 10% of
the debentures of the first series in circulation, or for debenture holders of the second series
representing at least 10% of the second series ' debentures in circulation, or by CVM; in the
event of convocation notice do not occur within 15 days before the expiration of the time limit
here predicted, it will be up to the Company making it, being sure that the CVM may appoint
interim replacement pending consummating the process of choosing the new trustee; (v)
replacement, on a permanent basis, of the fiduciary agent (a) shall be subject to prior notice to
the CVM and its manifestation on the attendance to the requirements provided for in article 9
of CVM Instruction No. 28, November 23, 1983, as amended, and (b) shall be subject to the
addition to the deed of issue; (vi) payments to the fiduciary agent replaced shall be effected in
accordance with the proportionality to the period of effective service delivery; (vii) the fiduciary
agent will be entitled to the same compensation of the perceived by the previous, if (a) the
company has not agreed with the new value of the remuneration of the fiduciary agent proposed
by general meeting of the debenture holders, referred to in item iv above, or (b) the general
meeting of debenture holders referred to in item iv above does not act on the matter; (vii)
the fiduciary agent should replace, immediately after his appointment, communicate it to the
company and to debenture holders; and (viii) shall apply to cases of substitution of fiduciary
agent the norms and precepts from the brazilian Securities and Exchange Commission (CVM).
During deliberations of the General Meetings of first series debenture holders and General
Meetings of second series debenture holders, for each outstanding Debenture one vote will be
granted, permitting the establishment of proxy, whether Debenture holder or not. Except for
the provisions below, (i) all deliberations to be taken in the General Meeting of debenture
holders will depend on approval of debenture holders of the first series representing at least
75% of outstanding First Series Debentures; and (ii) all deliberations to be taken in the General
Conditions for amendment of the Meeting of debenture holders will depend on approval of debenture holders of the second series
rights
conferred
by
such representing at least 75% of outstanding Second Series Debentures.
securities
Not included in the quorum above are: (i) quorums expressly provided for in other clauses of
the deed of issue; and (ii) changes, which should be approved by debenture holders of the first
series representing at least 90% of outstanding first series debentures and by debenture holders
of the second series representing at least 90% of outstanding second series debentures, (a) of
the provisions of this clause; (b) of the quorums for approval provided for in the Deed of issue;
(c) the remuneration, except for changes resulting from extinction, limitation and / or non-
218
disclosure of the DI rate or IPCA, as provided in Clause of the Deed of issuance; (d) any dates
for payment of any amounts provided for in the Deed of issuance; (e) of the term of the
Debentures; (f) of the type of Debentures; (g) creation of a repricing event; (h) the provisions
relating to optional early redemption; (i) the provisions relating to early amortization (j) of any
Event of Default.
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
20,000
Total amount
Restrictions on trading
R$ 200,000,000.00
Yes
The debentures were subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures,
and under the best-efforts placement in relation to the remaining debentures. The debentures
Description of trading restrictions
can only be traded between qualified investors and after a 90 days period from the date of
subscription or purchase according to the articles 13 and 15 of CVM Instruction 476, and
compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
219
any controlling company and / or any subsidiary; (C) bankruptcy filing by the Company of any
controlling company and / or any subsidiary, prepared by third parties, not suppressed within
the statutory period; (D) application for judicial or extrajudicial reorganization of the Company,
any controlling company and / or any subsidiary, regardless of approval of their application; or
(e) liquidation, dissolution or termination of the Company, any controlling company and / or any
subsidiary, unless the liquidation, dissolution and / or termination during a corporate transaction
which does not constitute an Event of Default under subsection IX below; VIII. transformation
of the corporate form of Company from public to a limited company or other corporate type, in
accordance with Articles 220 to 222 of the Corporations Law; IX. split, merger or any other form
of corporate reorganization involving the Company and / or any Subsidiary, except (a) if the
operation has been previously approved by debenture holders representing at least 75%
(seventy five percent) of the Debentures outstanding; or (b) if it is secured to the Bondholders
who wish, for a minimum period of 6 (six) months from the date of publication of the minutes
of corporate documents relating to the transaction, the redemption of the Debentures held by
them upon payment of the outstanding balance of the Face Value plus Remuneration, calculated
pro rata from the Issue Date or payment date immediately preceding Compensation, as
appropriate, until the date of actual payment; or (c) the incorporation by the Company (so that
the Company is the surviving entity) of any Subsidiary; or (d) if the operation is conducted
exclusively among Subsidiaries; X. capital reduction of the Company, unless previously approved
by debenture holders representing at least 75% (seventy five percent) of the outstanding
Debentures, pursuant to article 174, paragraph 3, of the Law of Corporations; XI. change or
transfer of control (as defined control provided for in Article 116 of the Corporations Act), directly
or indirectly, by the Company, any Company and / or any Subsidiary, unless the transaction has
been previously approved by Holders representing at least 75% (seventy five percent) of the
outstanding Debentures; XII. changing the corporate purposes of the Company and / or any
Subsidiary, as provided in its bylaws or articles of association, as applicable, in effect on the
Issue Date, unless such amendment (a) has been previously approved by debenture holders
representing at least 75% (seventy five percent) of the outstanding Debentures, or (b) does
not result in change of principal activity of the Company or its Subsidiary; XIII. non-renewal,
cancellation, revocation or suspension of licenses and permits, including environmental, required
by the competent bodies for the regular exercise of the activities of the Company, provided it
has not solved or suspended their effects within fifteen (15) days from the date non-renewal,
cancellation, revocation or suspension (s) thereof (s) permit (s) or license (s); XIV. occurrence
of any event that causes (a) in relation to the Company, (i) any material adverse effect on the
condition (financial or otherwise), business, property, operating results and / or prospects; (Ii)
any adverse effect on the powers or legal capacity and / or economic-financial to fulfill any of
the obligations under the Indenture; and / or (iii) any event or condition that, after the lapse of
time or giving notice, or both, can result in an Event of Default; or (b) with respect to the
Indenture, any adverse effect (i) the correct formalization, legality, validity and / or
enforceability of the Notes Documents; and / or (ii) the rights of Bondholders contained in the
Indenture, provided it has not resolved his or suspended within 15 (fifteen) days from the date
of acknowledgment of the event by the Company ("Material Adverse Effect") effects; X. capital
reduction of the Company, unless previously approved by debenture holders representing at
least 75% (seventy five percent) of the outstanding Debentures, pursuant to article 174,
paragraph 3, of the Corporations Act; XI. change or transfer of control (as defined control
provided for in Article 116 of the Corporations Act), directly or indirectly, by the Company, any
controlling company and / or any subsidiary, unless the transaction has been previously
approved by Holders representing at least 75% (seventy five percent) of the outstanding
Debentures; XII. Change in the corporate purposes of the Company and / or any Subsidiary, as
provided in its bylaws or articles of association, as applicable, in effect on the Issue Date, unless
such amendment (a) has been previously approved by debenture holders representing at least
75% (seventy five percent) of the outstanding Debentures, or (b) does not result in change of
principal activity of the Company or its Subsidiary; XIII. non-renewal, cancellation, revocation
or suspension of licenses and permits, including environmental, required by the competent
bodies for the regular exercise of the activities of the Company, provided it has not solved or
suspended their effects within fifteen (15) days from the date of the non-renewal, cancellation,
revocation or suspension (s) of permit (s) or license (s); XIV. occurrence of any event that
causes (a) in relation to the Company, (i) any material adverse effect on the condition (financial
or otherwise), business, property, operating results and / or prospects; (Ii) any adverse effect
on the powers or legal capacity and / or economic-financial to fulfill any of the obligations under
the Indenture; and / or (iii) any event or condition that, after the deadline or notice, or both,
can result in an Event of Default; or (b) with respect to the Indenture, any adverse effect (i)
the correct formalization, legality, validity and / or enforceability of the Notes Documents; and
/ or (ii) the rights of Bondholders contained in the Indenture, provided it has not resolved his
or suspended within 15 (fifteen) days from the date of acknowledgment of the event by the
Company ("Material Adverse Effect") effects; XV. descontinuation by the Company and / or by
any Subsidiary of insurance, according to current best practices in the market performance of
220
the Company with respect to its principal operating assets, not cured within fifteen (15) days
from whichever earlier between (a) the date on which the Company becomes aware of the
event, and promptly notify the Trustee; or (b) the date the Company receives written notice to
that effect to the Trustee; XVI. acceleration of any financial obligation of the Company and / or
any Subsidiary, the value of which, individually or in aggregate, is equal to or greater than R $
10,000,000.00 (ten million reais), updated from the Issue Date annually by the positive variation
of the IPCA, or its equivalent in other currencies, and / or occurrence of any event or default of
any obligation after the expiration of any cure period provided for in the respective document,
may give rise immediately to early redemption of any financial obligation of the Company and /
or any Subsidiary, which amount, individually or in aggregate, is equal to or greater than R $
10,000,000.00 (ten million reais), updated annually, from the Issue Date, by the variation of
IPCA, or its equivalent in other currencies; XVII. protest of securities against the Company and
/ or any Subsidiary, which amount, individually or in aggregate, is equal to or greater than R $
10,000,000.00 (ten million reais), updated from the Issued annually, by the positive variation
IPCA, or its equivalent in other currencies, unless, within ten (10) days from the date of their
protest has been proven that (a) the protest was made in error or bad faith of third and has
proper remedy been taken for the annulment or restraining their effects; (B) the protest was
canceled; or (c) the value (s) of title (s) protested (s) was filed in court; XVIII. default by the
Company and / or any Subsidiary of any decision or final judgment or any judgment or arbitral
award not subject to appeal against the Company and / or any Subsidiary, with a value,
individually or in the aggregate, equal or superior R $ 10,000,000.00 (ten million reais), updated
annually, from the Issue Date, by the positive variation of the IPCA, or its equivalent in other
currencies, is not remedied within the time stipulated for payment in its decision or judgment;
XIX. attachment or restraint of assets of the Company and / or of any Subsidiary, which value,
individually or collectively, is equal to or greater than R $ 10,000,000.00 (ten million reais),
updated from the Issue Date annually by the positive variation of the IPCA, or its equivalent in
other currencies, unless, within ten (10) days from the date of their restraint or abduction, has
been proven that the arrest or abduction was challenged or replaced by other security; XX.
expropriation, confiscation or any other action of any governmental authority of any jurisdiction
that results in the loss for the Company and / or any Subsidiary of the property and / or the
direct or indirect ownership of a substantial portion of its assets; XXI. sale, assignment, or sale,
of any form, or constitution of mortgage, pledge, chattel mortgage, chattel mortgage, usufruct,
trust, promise to sell or purchase option, right of first refusal, charge, encumbrance or lien,
judicial or extrajudicial, voluntary or involuntary, or other act that has the practical effect similar
to any of the above expressions ("Lien"), whether in a single transaction or a series of
transactions, related or not, on assets of the Company and / or any Subsidiary whose value
represents more than 15% (fifteen percent) of the total value of assets of the Company, based
on the most recent Consolidated Financial Statements of the Company (as defined in Section
7.1 of the Indenture), unless (a) the operation has been previously approved by debenture
holders representing at least 75% (seventy five percent) of the outstanding Debentures; or (b)
the creation of Liens on any asset acquired by the Company or any Subsidiary, provided that
the Lien consists exclusively of the assets acquired and to finance the acquisition of such asset;
XXII. evidence that any of the statements made by the Company in the Indenture and / or the
Distribution Agreement is false, inconsistent, inaccurate, incomplete, incorrect or insufficient in
any material respect, not cured within ten (10) days from the earlier of (a) the date on which
the Company has knowledge of the incorrectness; or (b) the date the Company receives written
notice to that effect to the Trustee; XXIII. non utilization by the Company of the net proceeds
from the Issue strictly in terms of the Indenture; XXIV. distribution and / or payment by the
Company of dividends, interest on capital or other distributions of profits to shareholders, if the
Company is in default of any of its obligations under the Indenture, except for the payment of
the minimum mandatory dividend of 25% (twenty five percent) of net income under Article 202
of the Corporations Act; and XXV. non-compliance by the Company with any financial ratios
below (collectively, "Financial Ratios"), to be determined by the Company pursuant to the
Indenture and verified by the Trustee within ten (10) days from the date of receipt by the
Trustee of the information referred to in the Indenture based on the Consolidated Financial
Statements of the Company for each quarter of the calendar year from and including the
Consolidated Financial Statements of the Company for the 31 December 2013: (a) the financial
index resulting from the quotient of dividing Net Debt (as defined in the Indenture) by the
EBITDA (as defined in the Indenture), which must be equal to or less than 3 (three); and (b)
the financial index resulting from the quotient of dividing EBITDA by Net Interest Expense (as
defined in the Indenture), which must be equal to or greater than 2 (two).
ii.
Interest
For more information on maturity date, please refer to item 18.10 below.
221
I. Monetary Adjustment: The nominal value of the debentures of the third issue will not be
monetarily updated.
II. Compensatory Interest: on the outstanding balance of the Nominal Value of the Debentures
outstanding focus interest corresponding to 108.75% (one hundred and seventy-eight point five
iii.
guarantee and, if in the percent) of the accumulated variation of average daily DI - Interbank Deposits one day,
form of collateral, description of calculated and published daily by CETIP in the daily bulletin on its website (http://
the goods used as collateral
www.cetip.com.br) calculated exponentially and cumulatively pro rata by days elapsed from the
Issue Date or payment date immediately preceding Compensation form as the case until the
date of actual payment. Without prejudice to the payments related to early redemption of the
Debentures and / or early maturity of obligations on the Debentures, the remuneration will be
payable semiannually from the Issue Date, on the 30th of May and November of each year, with
the first payment on November 30, 2014 and the last on the Maturity Date.
iv.
in the absence of a
guarantee, if the credit is secured The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
assets
debt
securities
Compensation: The performance of duties and tasks assigned to compete in accordance with
the law and its deed of issue, the fiduciary agent, or the institution which will replace him in
that capacity, shall receive a remuneration: (i) R$3,000.00 per year, due from the company,
being the first installment of remuneration payable on the fifth business day following the date
of celebration of the deed of issue, and the remaining, on the same day of subsequent years,
until the maturity of the issue, or as long as the fiduciary agent is representing the debentures
holders interests;(ii) monetary adjustment yearly from the date of payment of the first annual
instalment by the change in the general price index-market, published by Fundao Getlio
Vargas, or by any other that eventually is replaced, calculated pro rata temporis, if necessary;
(iii) plus the sales tax of any kind TAXES, contributing to the Social Integration Programme
PIS, Social contribution on net income CSLL, contributing to the financing of Social Security
COFINS and any other taxes that may relate to the remuneration payable to the trustee, except
for tax on income and proceeds of Any Nature go under existing rates for the dates of each
payment; (iv) due to maturity, redemption or cancellation of debentures, and even after its
maturity, redemption or cancellation in the event of actions of the trustee in charge of any
defaults on debentures not remedied by the Company, in cases where the remuneration payable
to the fiduciary agent shall be calculated in proportion to the months of operation of the fiduciary
vi the fiduciary agent, indicating
agent, based on the value specified in item i, readjusted as the paragraph ii above; (v) plus, in
the key terms of the contract
cases of delay in payment, regardless of notice, judicial or extrajudicial notification, on the
delinquent amounts, without prejudice to monetary restatement, (a) interest for late payment
of 1% per month, calculated pro rata temporis since the date of default until the date of actual
payment; (b) moratorium fine of 2%, non-compensatory and rigid; (c) restatement by IGPM
variation, calculated pro rata from the date of default until the date of actual payment; and (vi)
realized upon deposit held in the current account to be specified in writing by the Fiduciary
Agent to the Company, serving the receipt as settlement of payment.
Reimbursement of expenses: the Fiduciary Agent shall be refunded by the company for all
reasonable costs incurred that have proven to protect the rights and interests of the debenture
holders or to perform their claims within 30 days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be considered approved if the company does not appear within 2 working
days from the date of receipt of their request by the Fiduciary Agent.
Obligations. The Fiduciary Agent, as provided for in the deed of issue, will have its duties
established in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission of Brazil (CVM), and use of any action to protect rights or defend interests
of the debenture holders.
222
None
223
19.
224
19.1
In fiscal years ended in December 31, 2011, 2012 and 2013 the Company did not have a share buyback
plan.
19.2
Quantity
(Units)
99,140
(99,140)
-
Total amount
(R$ thousand)
534.4
(534.4)
-
Weighted average
price (R$)
5.36
5.36
-
Total amount
(R$ thousand)
23.4
(23.4 )
-
Weighted average
price (R$)
5.86
5.86
-
Total amount
(R$ thousand)
-
Weighted average
price (R$)
-
Quantity
(Units)
4,000
(4,000)
-
Quantity
(Units)
-
19.3 Indicate shares held in treasury as of the last fiscal year-end, in tabular format,
segregated by type and class.
As of December 31, 2013, the Company did not have shares in Treasury.
19.4.
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the
Extraordinary General Meeting held on August 1, 2011, the Company repaid to the unrealized profit reserve,
issuing 99,140 of its own shares, for R$ 535 thousand, and these shares were subsequently cancelled, as
the approval of the Board of Directors on September 23, 2011.
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the
Extraordinary General Meeting held on April 20, 2012, the Company repaid to the unrealized profit reserve,
issuing 4,000 of its own shares, for R$ 23.4 thousand, and these shares were subsequently cancelled, as
the approval of the Board of Directors on June 21, 2012.
225
20.
226
20.1 Description of the Companys policy for trading of securities by major shareholders,
direct or indirect, directors, members of the Board of Directors, or of any body with
consultative or technical functions, created by any statutory provision
a. Date of approval
February 8, 2010
b. Related parties
The Company, the Controlling Shareholder, the Administrators, members of the Fiscal Council, employees
(when they have insider information regarding the Company) and any person who adopted this trading
policy (Securities Trading Policy) due to their title, job or position in companies that control or are
controlled by the Company (Persons Bound to the Trading Policy).
c. Main characteristics
The main characteristics of the Trading Policy are:
I.
prohibiting the trading of securities issued by the Company by Bound Persons who have material
information about the Company;
II.
prohibiting the trading of securities issued by the Company by Bound Persons who leave board
positions, for the period of six months after they leave the position or until the material information
is disclosed;
III.
prohibiting the trading of securities issued by the Company by Related Parties whenever a purchase
or sale of shares issued by the Company is in progress, or execution of any agreement or contract
for the transfer of Companys share control, existence of intention of promoting amalgamation, total
or partial spin-off, transformation or corporate restructuring involving the Company. This restriction
only applies to controlling shareholders, direct or indirect, and administrators when the ongoing
purchase or sale of shares of the Company by the Company; and
IV.
prohibiting on trading in securities issued by the Company by persons linked to negotiating policy
within fifteen days prior to the release of quarterly and annual required by the CVM.
The full version of Mills Securities Trading Policy can be obtained in the following address:
http://mills.infoinvest.com.br/static/enu/arquivos/Politica_de_Negociacao_MILL_RCA_2010_02_08_i.pdf
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21.
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DISCLOSURE POLICY
21.1 Rules, bylaws or procedures adopted to ensure that information to be disclosed publicly
is collected, processed and reported accurately and in a timely manner
It is incumbent on the Investor Relations Officer to report and communicate the Material Information to
CVM and Market Entities, through the institutional media, as well as adopting the procedures described
under this policy.
The information should be disclosed to the public: (i) by means of an advertisement published in the
newspaper of wide circulation habitually used by the Company and (ii) availability of the announcement,
whose content at least identical to that provided to CVM and the Market Entities, in the Internet
(www.mills.com.br/ri).
At the discretion of the Investor Relations Officer, the announcement referred to in item above can be a
summarized description of the information in question in which case reference shall be made to the webpage
www.mills.com.br/ri, where a full description of the Material Information can be found.
The information should be presented in a clear and precise manner, in language accessible to the investing
public. Whenever a technical concept that used at the discretion of the Investor Relations Officer, is
considered more complex, an explanation of its meaning must be on the information disclosed.
Whenever Material Information is released by any means of communication, including information to the
press or in meetings with professional associations, investors, analysts or selected public, in the Country or
abroad, that Investor Relations Officer shall release the Material information simultaneously to the market.
The controlling shareholders, the members of the Board of Directors and Fiscal Council, and any employee,
who have knowledge of the information related to the Material Information, and signed the adherence
instrument containing the policy on disclosure of Material Information, shall immediately notify the Investor
Relations Officer about such Material information, in case the Officer is not yet aware of the information, as
well as verify that the Investor Relations Officer have taken the measures described in this document.
The communication to the Investor Relations Officer mentioned in item 4.4 above, must be carried out by
email, to the email address ri@mills.com.br.
If the groups mentioned in item above certify that there has been omission in the disclosure of that Material
Information by the Investor Relations, and the terms provided by the policy on disclosure of Material
Information, such group must immediately communicate the Material information to CVM for their
exemption from liability imposed by non-compliance with the rules on disclosure.
Whenever the CVM or any market entity require further explanation from the Investor Relations Officer
about the disclosed Material Information, or if an atypical variation in price or trading volume of securities
issued by the Company or related thereto, the the Investor Relations Officer should inquire persons with
access to Material Information, in order to establish whether they are aware of information that must be
disclosed to the market.
The administrators and employees inquired in item above, should respond to the request of the Investor
Relations Officer immediately. If not able to meet personally or talk on telephone with the Investor Relations
Officer on the same day of the request, administrators and employees in question should send an email
with the information to the address ri@mills.com.br regarding the information relevant to.
The disclosure of any Material information, should be simultaneously to CVM and Market entities, and shall
take place before the opening or after the closing of trading on the Stock Exchanges, and in case of hour
incompatibility with other markets, the Brazilian market trading hours shall prevail.
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If, exceptionally, it is imperative that the communication of Material information occurs during trading hours,
the Investor Relations Officer when disclosing the Material information, may simultaneously request the
Market entities in Brazil and abroad, the suspension of trading of securities issued by the Company or
related thereto, the time necessary to properly disclose their information. The Investor Relations Officer
must prove to Brazilian Market entities that the requested suspension of trading also was accomplished in
foreign Market entities.
The Company can disclose to the market expectations of future performance (guidance), for short and long
term, especially with regard to financial and operational figures of their businesses, by decision of the board
of directors, noted that such guidance shall be in accordance with CVM regulations, paragraph 4 of article
13 of CVM Instruction No. 358/02.
In the event that disclosure of such expectations, should be subject to the following assumptions:
(i)
(ii)
(iii)
If the projections are discontinued, it should be informed, together with the reasons that led to its loss of
validity in the form of Material Information.
21.2 Disclosure policy for relevant events or facts adopted by the issuer, indicating the
procedures for maintaining secrecy about relevant information not disclosed
The Companys policy on Disclosure of Material information is based on the following principles and
objectives:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
The controlling shareholder, directors, members of the board of directors and the fiscal council, as well as
other employees and agents of the Company, shall preserve the confidentiality of the information pertaining
Material Information to which they have privileged access due to the position they hold, until their actual
release to the market and ensure that subordinates and third parties they trust to do the same, being jointly
responsible with them in case of noncompliance.
For the purpose of maintaining confidentiality referred to in item 6.1 above, the individuals mentioned
therein shall observe and ensure observance of the following, without prejudice to the adoption of other
measures that are appropriate in front of each situation:
(i)
disclose the confidential information strictly to those people who absolutely need to know
it;
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(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
not discuss confidential information in the presence of third parties who are not aware of
such information, though if expected that third party cannot understand the meaning of
the conversation;
not to discuss confidential information in conference calls in case one cannot be sure of
who actually will participate in it;
maintain documents of any kind relating to confidential information, including handwritten
personal notes in a safe, locked cabinet or file, to which only authorized persons have
access to the information;
create documents and electronic files related to confidential information always with
password protection systems;
to circulate internally documents containing confidential information in sealed envelopes,
which should always be delivered directly to the recipient;
not to send confidential documents through facsimile, unless there is certainty that only
authorized personnel to take notice of such information will have access to the receiver,
and
without prejudice to the responsibility of those who are transmitting confidential
information, require a third party outside the Company who need access to information to
sign a confidentiality agreement, which shall specify the nature of information and include
in the statement that it recognizes its confidential nature, pledging not to disclose it to
anyone else and do not trade securities issued by the Company prior to disclosure of
information to the market.
When confidential information needs to be disclosed to any employee of the Company or other person
holding title, function or position in the Company, its controlling shareholders, subsidiaries or affiliates, other
than a director, member of the Board of directors or the Fiscal Council of the Company, the individual
responsible for the transmission of information should make sure that the person receiving it is aware of
the Policy Disclosure of Material Information of the Company, requiring even to sign the Policy Disclosure
of Material Information before providing access to information.
21.3 Administrators responsible for implementation,
supervision of the information disclosure policy
maintenance,
evaluation
and
The full version of Mills Policy on Disclosure of Material Information can be obtained in the following
address:
http://mills.infoinvest.com.br/fck_temp/12_1//Politica_de_Divulgacao_MILLS_RCA_2010_02_08_i.pdf
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22.
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EXTRAORDINARY BUSINESS
22.1 Acquisition or disposal of any significant asset which does not belong to the normal
operations of the Company
In fiscal years ended in December 31, 2011, 2012 and 2013, there was no acquisition or disposal of any
significant assets which does not belong to the normal operations of the Company, except for the sale of
the Industrial Services business unit, as described in item 6.5 of this Reference Form.
22.2
In fiscal years ended in December 31, 2011, 2012 and 2013, there were no significant changes in the
running of the Companys business.
22.3 Identify relevant contracts concluded by the Company and its subsidiaries which are
not directly connected to its operations
In fiscal years ended in December 31, 2011, 2012 and 2013, no relevant contracts were concluded by the
Company and its subsidiaries which are not directly connected to its operations.
22.4
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