reference form 2014
DESCRIPTION
Reference Form 2014TRANSCRIPT
REFERENCE FORM
(Free translation of FORMULÁRIO DE REFERÊNCIA)
_______________________________________________________________
MILLS ESTRUTURAS E SERVIÇOS DE ENGENHARIA S.A. Publicly Held Company
CNPJ n.º 27.093.558/0001-15 – NIRE 33.3.0028974-7 Estrada do Guerenguê, 1381, Taquara, CEP 22.713-002
Rio de Janeiro - RJ
April 20, 2016
_______________________________________________________________
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1. DECLARATION OF THOSE RESPONSIBLE FOR THE CONTENT OF THE FORM 3
2. INDEPENDENT AUDITORS 5
3. SELECTED FINANCIAL INFORMATION 9
4. RISK FACTORS 14
5. MARKET RISKS 37
6. COMPANY HISTORY 46
7. COMPANY´S ACTIVITIES 50
8. ECONOMIC GROUP 68
9. RELEVANT ASSETS 72
10. MANAGEMENT COMMENTS 81
11. PROJECTIONS 113
12. GENERAL MEETING AND ADMINISTRATION 115
13. COMPENSATION FOR ADMINISTRATION 133
14. HUMAN RESOURCES 160
15. OWNERSHIP 170
16. TRANSACTIONS WITH RELATED PARTIES 175
17. SHARE CAPITAL 177
18. SECURITIES 186
19. BUY-BACK PLANS AND SECURITIES HELD IN TREASURY 216
20. SECURITIES TRADING POLICY 220
21. DISCLOSURE POLICY 222
22. EXTRAORDINARY BUSINESS 226
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1. DECLARATION OF THOSE RESPONSIBLE FOR THE CONTENT OF THE FORM
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1.1 Declaration of the President and Investor Relations Officer
Name of the responsible for the content of the form: Sérgio Karyia Title of the responsible Chief Executive Officer
Name of the responsible for the content of the form: Sérgio Kariya Title of the responsible Administrative Financial and IR Officer
The officers qualified above declare that: a. They reviewed the reference form (“Form”). b. All information contained in the form meets the requirements of CVM Instruction 480, especially arts. 14 to 19. c. The information contained in the form is true, accurate and complete with respect to the issuer’s financial situation and the risks inherent in its activities and the securities issued by it.
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2. INDEPENDENT AUDITORS
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2.1/2.2 – Identification and compensation of Auditors
CVM auditor code: 418-9 Name of company responsible: KPMG Auditores Independentes (Deloitte)
CPF/auditor CNPJ: 57.755.217/0022-53 Date of hired service: 28/03/2016
Service end date: -
Name of individual responsible: Luiz Claudio F de Araujo CPF of individual responsible: 079.525.807-01
Address: Avenida Almirante Barroso, 52, 0, Centro, Rio de Janeiro, Brasil, CEP 20031-000, Telephone (21) 3515-9400, Fax (21) 3515-9000, email: [email protected]
Description of contracted service: KPMG was hired to audit the financial statements
of Mills Estruturas e Serviços de Engenharia S.A. (Company or Mills) for the first quarter
of 2016.
Total amount of remuneration of auditors separated by offered services: -
CVM auditor code: 385-9 Name of company responsible: Deloitte Touche Tomahtsu Auditores Independentes
(Deloitte) CPF/auditor CNPJ: 49.928.567/0001-11
Date of hired service: April 18, 2011 Service end date: March 09, 2016
Name of individual responsible: Fernando de Souza Leite
CPF of individual responsible: 004.400.929-14 Address: Avenida Presidente Wilson, nº 231, Rio de Janeiro, RJ, Brasil, CEP 20030-02,
Telefone (21) 3981-0500, Fax (21) 3981-0600, email: [email protected]
Description of contracted service: In the fiscal year ended 2014 the services provided
by Deloitte of independent audit of the financial statements of Mills Estruturas e Serviços de Engenharia S.A. (Company or Mills) for the fiscal year ended 2014, with issuance of
the opinion, and limited review of quarterly financial statements for the periods ended March 31, June 30 and September 30, 2014, with the issuance of the related reports;
and services related to the release of previously agreed procedures (PAP) about the
financial statements ended December 31st of 2013 of the investee Rohr S.A Estruturas Tubulares.
In the fiscal year ended 2013 the following services were provided by Deloitte: (i)
independent audit of the financial statements of Mills Estruturas e Serviços de Engenharia S.A. (Company or Mills) for the fiscal year ended 2013, with issuance of the opinion,
limited review of quarterly financial statements for the periods ended March31, June 30
and September 30, 2013, with the issuance of the related reports, and limited review of Industrial Services financial statements for the purpose of its disposal.
Total amount of remuneration of auditors separated by offered services: In the
fiscal year ended in December 2014, the Company registered R$ 448.0 thousand of fees
paid to Deloitte, referring to limited reviews of financial statements and the Audit Report of that year and; R$ 30.2 thousand related to the release of previously agreed procedures
(PAP) about the financial statements ended December 31st of 2013 of the investee Rohr S.A Estruturas Tubulares.
Possible replacement of auditor:
(i) Replacement justification: Periodic rotation of auditors, in the form of CVM
308/99 Instruction. (ii) Reason presented by the auditor in the event of a discrepancy between
the statement of issuer: Not applicable.
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CVM auditor code: 287-9
Name of company responsible: Price Waterhouse Coopers Auditores Independentes (PwC)
CPF/auditor CNPJ: 61.562.112/0001-20
Date of hired service: 10/30/2009 Service end date: 4/17/2011
Name of individual responsible: Patricio Marques Roche CPF of individual responsible: 61.562.112/0001-20
Address: Rua da Candelária, 65, Centro, Rio de Janeiro, RJ, Brasil, CEP 20091-020, Phone: (21) 3232 6048 Fax (21) 2516 6591
e-mail: patrí[email protected]
Description of contracted service: For the fiscal years ended 2010 and 2011 the
following services were provided by PwC: (i) independent audit of the company's annual financial statements for the fiscal year 2010, with the issue of the related opinions, and
limited review of quarterly financial statements for the three months periods ending
March 31, June 30 and September 30, 2010 (original for the year 2010 and restatement of 2010) with the issue of the related reports; (ii) review of the prospect and issue of
comfort letter during the process of the Company´s initial public offering, held in 2010; and (iii) consulting services in information technology and processes for choosing and
implementing a new system (ERP) for the Company, including (a) mapping of processes to assist the company in the choice of ERP software, with hiring date of September 1,
2009 and duration of twelve months and (b) monitoring of the implementation of the ERP
(PA-Project assurance and QA-quality assurance)dated December 8, 2010 and term lasting less than twelve months.
Total amount of remuneration of auditors separated by offered services: PwC
did not receive fees in the year 2014.
Possible replacement of auditor:
(iii) Replacement justification: Periodic rotation of auditors, in the form of CVM 308/99 Instruction.
(iv) Reason presented by the auditor in the event of a discrepancy between
the statement of issuer: Not applicable.
2.3 Other information that the Company deems relevant:
At the Board of Directors’ meeting held on April 8, 2011, was approved the replacement of Price Waterhouse Coopers Auditores Independentes, by Deloitte Touche Tohmatsu
Auditores Independentes, already from the first quarter of the fiscal year of 2011, as
independent auditors of the Company, in compliance with CVM Instruction 308 of of May 14, 1999, as amended.
At the Board of Directors’ meeting held on March 28, 2016, was approved the replacement
of Deloitte Touche Tohmatsu Auditores Independentes, by KPMG Auditores
Independentes, already from the first quarter of the fiscal year of 2016, as independent auditors of the Company, in compliance with CVM Instruction 308 of of May 14, 1999, as
amended.
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3. SELECTED FINANCIAL INFORMATION
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3.1 - Financial Information
For the Year ended December 31
2012 2013 2014
Stockholders’ equity (in
thousands of R$) 859,326 1,016,513 1,059,397
Total Assets (in thousands of R$) 1,664,061 1,801,245 1,892,723
Net revenues (in thousands of R$) 879,274 832,262 794,166
Gross profit (in thousands of R$) 468,345 497,328 431,786
Net income (in thousands of R$) 151,516 172,592 64,268
Number of shares, excluding treasury
126,399,430 126,955,111 127,816,990
Book value per share (in R$) 6.80 7.98 8.27
Earnings per Share (in R$) 1.20 1.35 0.50
3.2 – Non accounting measures
EBITDA EBITDA is a non-accounting measurement adopted by the Company, reconciled with its financial statements, in accordance with CVM Instruction no 527/2012 of October 4th, 2012, as applicable.
The Company has calculated its EBITDA as net earnings before financial results, the effect of depreciation of assets and equipment used for rental, and the amortization of intangible assets.
EBITDA is not a measure recognized under BR GAAP, IFRS or US GAAP. It is not significantly standardized and cannot be compared to measurements with similar names provided by other
companies. The Company has reported EBITDA because it is used to measure its performance.
EBITDA should not be considered in isolation or as a substitute for "net income" or "operating income" as indicators of operational performance or cash flow, or for the measurement of liquidity
or Company´s debt repayment capacity.
Reconciliation of EBITDA with Operational Earnings:
For the Year ended December 31
2012 2013 2014
(in thousands of R$)
Operating income before financial result 249,884 293,853 157,938
(+)Depreciation and amortization 108,619 136,888 168,259
(+) Costs (Revenues) related to the ex-unit of Industrial Services¹
- (8,159) 9,496
EBITDA 358,503 422,582 335,693
1 Includes industrial services business unit, that was sold and discontinued in 2013. Reasons for using the EBITDA EBITDA is used as a performance measurement by the Company’s Management, reason why it
is important to be included in this Reference Form. The Company believes that the EBITDA is an
efficient measurement to evaluate the performance of operations, as an indicator that is less impacted by interest rates fluctuation, changes in the rates and chances of incidence of the
corporate income tax (IRPJ) and social contribution on net profits (CSLL) and depreciation levels.
Return on Invested Capital Return on Invested Capital (ROIC) is a non-GAAP measurement elaborated by the Company. It
is calculated as Operating Income before financial results and after the payment of income tax and social contribution (theoretical 30% income tax rate) on this income, includes remuneration
from affiliates, divided by average Invested Capital. ROIC is not a measure recognized under BR
GAAP, and it is not significantly standardized and cannot be compared to measurements with similar names provided by other companies.
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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 shareholder’s 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. 1.
2. ROIC calculation from the Operating Income
For the Year ended December 31
2012(4) 2013 2014
(in thousands of R$, except when percentages) Operating Income before financial results .................. 249,884 293,853 157,938 (+) Income tax and CSLL provision (1) ........................ (74,965) (88,156) (47,381) (+)Remuneration of affiliated companies 2,917 1,541 Operating profit before financial income, after taxation and remuneration of affiliated companies ..........................................................
177,836 207,238 110,557
(÷) Average invested capital .............................. 1,206,266 1,471,402 1,675,840
(=) net equity (2) .................................................. 801,123 943,023 1,058,376 (+) capital from third parties (3) ............................. 510,813 619,452 722,302 (-) Cash and Cash equivalents .............................. 105,671 91,073 104,838
ROIC (%) ........................................................... 14.70% 14.10% 6.6%
________________________________________ (1) Theoretical rate of 30%.
(2) Comprising shareholder’s equity.
(3) Comprising total loans and other liabilities that carry interest.
(4) Includes industrial services, that was sold and discontinued in 2013.
Reasons for using ROIC as a performance measure ROIC is used by the Company’s Management as a measure of return to its shareholders, which
is why the Company believes it is important its inclusion in this Reference Form. The Company believes that ROIC indicates the level of wealth generated by the Company from its sources of
funds, reflecting adequately the return on investment for its shareholders. The Company also
considers that, since ROIC is based on operating profit before financial result, it provides a more reliable measure of the wealth generated by its operating activities.
ROIC should not be considered solely or as a substitute for net income or operating income as
indicators of the Company’s performance or return effectively earned by investors.
3.3 Events subsequent to the latest financial statements
There were not subsequent events related to financial statements ended in 12/31/2014.
3.4 Policy for allocation of results
Fiscal Year Ended December 31 2012 2013 2014
Rules on retention of profits
In addition to the cases provided by the law, as provision introduced on February 8, 2010, the Company’s 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
In provision introduced on February 8, 2010, the Company’s 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 not exceed 80% of its capital.
In addition to the cases provided by the law, as provision introduced on February 8, 2010, the Company’s 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
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reservation does not exceed 80% of its capital.
reservation does not exceed 80% of its capital.
Amounts of the retention of profits
At the Ordinary Shareholder’s Meeting held in April 26, 2013, it was approved the constitution of statutory reserves in the net income in the amount of (i) R$ 103,680,234.67 of net income retention, that will be used to fund part of the planned investments in the Company’s capital budget to acquire equipment for expansion and investment in facilities and information technology to support the planned expansion; and (ii) R$ 7,575,786.13 destinated to the Legal Reserve.
At the Ordinary Shareholder’s Meeting held in April 25, 2014, 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 Company’s capital budget to acquire equipment for expansion and investment in facilities and information technology to support the planned expansion; and (ii) R$8,629,606.52 destinated to the Legal Reserve.
At the Ordinary Shareholder’s Meeting held in April 28, 2015, it was approved the constitution of statutory reserves in the net income in the amount of (i) R$ 33,567,832.00 of net income retention, that will be used to defray part of the planned investments in the Company’s capital budget to acquire equipment for expansion and investment in facilities and information technology to support the planned expansion; (ii) R$ 3,213,392.43 destinated to the Legal Reserve; and (iii) R$ 2,405,624.23 destinated to expansion Reserve.
Arrangements for distribution of dividends
The Company’s 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 Shareholder’s Meeting held in 2013, it was approved the payment of 25% of the adjusted net income recorded in 2012 to its shareholders, as interest on capital. The Company can distribute Interest on Capital, through a Board of Directors resolution and attribute it to mandatory dividends as well.
The Company’s 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 Shareholder’s 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 Company can distribute Interest on Capital, through a Board of Directors resolution and attribute it to mandatory dividends as well.
The Company’s 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 Shareholder’s Meeting held in 2014, it was approved the payment of 39% of the adjusted net income recorded in 2014, higher percent than the mandatory dividend under the form of interest on equity. The Company can distribute Interest on Capital, through a Board of Directors resolution and attribute it to mandatory dividends as well.
Frequency of dividend distribution
The dividends are distributed according to the deliberation from the Company’s AGO.
The dividends are distributed according to the deliberation from the Company’s AGO.
The dividends are distributed according to the deliberation from the Company’s AGO.
Restrictions to dividend distribution
No restrictions. No restrictions. No restrictions.
3.5 Summary of distributions of dividends and retained earnings occurred
Fiscal Year ended December 31
In R$
2012 2013 2014
Adjusted net income 143,939,936.54 163,962,523.9
0 61,054,456.2
3
Total dividend distributed 41,780,000.00 46,497,455.75 25,081,000.0
0
Dividend distributed amount 3,483,455.75
Dividend payment date 04/30/2014
Interest on Capital amount 41,780,000.00 43,014,000.00 25,081,000.0
0
Interest on Capital payment date 06/14/2013 04/30/2014 05/06/2015
Percentage of divided distributed over adjusted net income
25.0% 25.0% 39.03%
Return rate regarding the net equity of the issuer 17.6% 17.0% 5.76%
Net Income retained ¹ 103,680,234.67 118,273,166.0
8 33,567,832.0
0
Date of approval of the retention 04/26/2013 04/25/2014 04/28/2015
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¹ Includes completion of the special goodwill reserves in the amount of R$1,520 thousand in the year of 2012 and R$ 808 thousand in
2013.
3.6 Dividends declared on account of retained earnings or reserves
The dividends presented in the chart of item 3.5 were declared in the net income of the last
three fiscal years.
3.7 Debt
For the Year ended December 31, 2014: in R$ thousands, except percentages
Total amount of debt of any nature: 833,326 (÷) Stockholders’ equity: 1,059,397 Debt Ratio: 78.7%
Net Debt over EBITDA Net debt over EBITDA is a non-accounting measurement that reflects, in percentage, the total
debt amount, of any nature, or gross debt, subtracted by the total availabilities amount, divided by the EBITDA.
For the Year ended December 31, 2014 in R$ thousands, except percentages
Gross Debt................................................................................. 747,791 (-) Availabilities............................................................................ -193,659 Net debt .............................................................................. 554,132
(÷) EBITDA ......................................................................... 350,164
Net debt on EBITDA ............................................................ 158.2%
Reasons to use the Net debt / EBITDA ratio
The Net debt/EBITDA ratio is used by the Company’s management as a debt measure and there are clauses in bank credit contracts and other debt instruments that require the observance of
this financial indicator, among others. The management believes that the Net debt/EBITDA ratio
consists in an efficient debt level and payment capability indicator of the Company.
The Net debt over EBITDA ratio should not be considered solely or as a substitute for the total liabilities over shareholder’s equity ratio as the Company’s debt indicator.
3.8 Obligations of the Company
Prazo de Vencimento
Less than 1
year
Between 1 and 3 years
Between 3 and 5 years
Over 5 years Total
(in R$ thousands)
Collateral¹ 25,745 3,138 9,414 2,516 40,813 Floating Guarantee - - - - - Unsecured obligations² 195,469 172,479 367,025 57,540 792,513 Total 221,214 175,617 376,439 60,056 833,326
¹ Includes FINAME, BNDES and leasing, secured by chattel mortgage on the financed assets. ² Includes debêntures, loans in foreign currencies with swap and other unsecured debts (liabilities and obligations), without collateral or floating guarantees, besides Suppliers, Dividends and Interest on Capital, Provisions, Tax refinancing program (REFIS), Taxes payable and
other assets.
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3.9 Other information that the Company deems relevant
There are other relevant information pertaining to this item 3.
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4. RISK FACTORS
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4.1 Risk Factors
a. to the Company. Company´s activities consist of providing solutions and assistance to demand of several economy sectors, specially in civil construction, oil and gas and industrial segments. Consequently, its operations are subject to similar risks faced by other companies of the sector.
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 Company’s 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, includes macroeconomic
factors, adverse climate conditions, deterioration of the Brazilian social conditions, decreases in
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 client’s business, among others, are beyond the management’s control and may cause an adverse material effect on the Company’s operations and results.
Additionally, the Company presents relevant exposure in its revenues to companies related to the
ongoing investigations known as “Car-wash operation”. Consequences of investigations may
include reduction or even extinction of companies involved, which can bring delays on current construction works, lower future construction activity and, consequently, lower demand for
equipment and services of the Company.
The Company´s equipment are needed on projects with construction methods that require onsite
concrete. In case there is significant modification in construction firms to other construction methods, as, for instance, steel or pre-molded structures, the demand for Company´s equipment
and services can be reduced. The Company may not be able to fully implement its business strategy The continued growth depends on several factors, many of them are beyond the Company’s
control. In particular, the Company’s strategy for the expansion of its business units depends on, specially, the performance of civil construction and industrial sectors in the next years in Brazil.
The performance depends on private and public investments to improve Brazilian infrastructure in several areas, such as energy, sanitation, transportation and housing, including housing
program “Minha casa minha vida” and the package of projects which includes the “Package of
Logistics Investments - Programa de Investimentos em Logística”, among others. In case these investments are not implemented, delayed or generate a lower demand than expected, the
Company may not be able to implement its expansion strategy adequately.
The organic growth strategy of Rental business unit includes, yet, activities for geographic
expansion, counting with opening of new branches. The Company may not be able to successfully establish business in different cities and regions of Brazil due to several factors, as, for instance,
skilled labor shortage, lack of reliable suppliers in the local, local competitors, expensive and hard to find terrains, licensing term, and difficulties to brand acceptance. Even though geographic
expansion comes to happen, the Company is subject to new local economy risks.
Additionally, the Company’s future performance will depend on its ability to manage the growth
of its operations. The Company cannot warrantee 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
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have a material adverse effect on its financial condition, results of operations and the negotiation
price of its shares.
With operations growth current facilities may become insufficient to store our equipment and
provide space to maintenance and handling of the equipment in an efficient way, which can result in an increase of our operational costs or a need of moving to new facilities. In case of moving,
Company may suffer increase in rental costs, incur termination fines and may necessitate a
supplementary improvement investment on the new branches.
Adverse conditions in the financial and credit markets, or the Company’s failure to secure financing on adequate terms, may adversely affect its ability to run its business or to implement its strategy. The implementation of the Company’s expansion strategy, as well as the maintenance of its
operational capacity, could 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, for instance, 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, which includes growth rate of its revenues, cost and significance of future acquisitions, and expansion of its
business operations. Depending on the investment volume needed, or of costs that may incur,
the Company may be forced to increment cash flow and/or search alternate sources of funds, including creating strategic partnerships. Anny effort to increment cash flow, by increasing sales,
costs reduction, more efficient receivables charge, and inventory reduction, can be unsuccessful. In addition, the Company may not be able to raise funds to finance the Company’s 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 2014, total debt of
R$ 745.4 million. Pursuant to the terms of the Company’s 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. New financing contracts
may require even more severe restrictions.
In addition, some of the Company’s 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 Company’s 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 Company’s difficulty in the credit scarcity may also adversely affect its suppliers. Therefore, should the Company’s financial counterparts or
suppliers be unable to satisfactorily meet their obligations under the terms of the Company’s 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.
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Service cycle leads the Company to apply significant financial and technical resources even before engaging. Company´s services require high level of initial investment, directed to new process development
and, mainly, to machinery and equipment acquisition which will be used in clients operation, besides the constant improvement of employees. Some of these investments are performed
without any assurance that the company will be hired in a continuous base to provide service.
Thus, the company is particularly vulnerable to its equipment idleness, until it is reallocated in a project.
The loss of members of the Company’s management team may have a material adverse effect on its operations.
The Company’s 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 Company’s 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 Company’s senior executive officers, or its
failure to attract and retain experienced professionals, may adversely affect its business. Flaw in asset management can affect credibility and profitability of the Company. As a rental Company, it needs to manage efficiently its assets, being in investment and disinvestment decision or in its equipment rental contracts, equally both.
The Company performs investment and disinvestment based on a demand forecast for its services. In case this forecast does not happen or changes, the Company may have increase on
its idle capacity, affecting its profitability in terms of return on invested capital, or loss of market share.
In its rental contracts, the Company counts the amount of rented equipment in delivery versus the amount returned. In case the Company is not efficient in account of rented spare parts, it
can have its credibility affected by charging its clients improper compensation or having not enough equipment to replace lost or broken equipment, if it charges lower than payable.
All of the Company’s 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 Company’s 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 Company’s 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, and no longer require the Company’s services (or even to compete with the Company). Competition could also come from substitute products, such as
scaffolding, stairs and other types of access equipment, in the case of motorized access
equipment. All these events can lead to a reduction in demand for Company’s services, and a potential increase in competition, which may adversely affect its market stock price and results
of operations.
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The development of engineering solutions and technological innovations which add value to the Company’s services is critical to the protection of its leading market position and to the expansion of its business. Due to the nature of the Company’s 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.
In case the Company is unable to hire qualified professionals and provide training to its staff.
In case there in growth in its activities, 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. If the Company does not achieve its
strategy, it can affect operation and future results.
The Company’s 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, 2014, approximately 0.3% of the Company’s 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 Company’s success depends, to a large extent, on the quality and safety of its services and products. The Company’s 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 Company’s 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 Company’s 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 Company’s activities.
In addition, the sales contract of the Industrial Services business unit, from 2013, allow the buyer
to use the brand and expression “Mills” for 3 years. In this way, Mills brand reputation depends too on quality and safety of services and products offered by the buyer while he can use the
brand.
19
Proceeds from the Company’s insurance policies may not be sufficient to cover damages resulting from a contingent event.
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 Company’s results could be adversely affected if it receives an unfavorable judgment or decision in one or more of the administrative proceedings and lawsuits filed against the company.
As of December 31, 2014, the Company was involved in administrative proceedings and lawsuits involving contingencies amounting to R$ 93.9 million, for which it has recorded provisions of R$
12.6 million. For more information in this regard, refer to item 4.3 in this Reference Form.
The Company’s financial condition and results of operations could be materially adversely affected, if it receives an unfavorable judgment or decision with respect to a significant share of
these proceedings and lawsuits. In addition, proceedings involving alleged acts of negligence,
imprudence or failure could affect the Company’s reputation and adversely affect its operations, whether or not it receives an unfavorable decision. The Company’s 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 Company’s investment, preventing 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. b. to the controlling shareholder.
The interests of the Company’s controlling shareholder may conflict with the interests of its investors. The Company’s 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
20
the Brazilian corporate law regarding the payment of mandatory dividends. The Company’s
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.
The Company is 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. The Company does not have a shareholder holding more than 50% of its 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 Company’s 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 isn’t 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. c. to the shareholders.
An active and liquid market for the Company’s shares may not develop. The volatility and lack of liquidity of the Brazilian capital market could substantially limit the investor’s 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.
These characteristics of the Brazilian capital market may substantially limit investor’s ability to sell the Company’s 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.
As of December 31, 2014, the BM&FBOVESPA represented, with an average daily trading volume
of R$ 13.2 million during the year.
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Shareholders may not receive dividends. The Company’s bylaws provide that 25% of the net profit for any year, adjusted pursuant to the
provisions of the Brazilian corporate law, should be distributed to shareholders as mandatory dividends or as interest on stockholders’ equity. Despite the requirements regarding the payment
of mandatory dividends, the Company may limit such payment to the realized portion of the
dividends or suspend the distribution of dividends to its shareholders in any year, if the Company’s board of directors determines that such distribution would not be advisable given its financial
condition.
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 investor’s percentage interest in the Company’s 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 investor’s percentage interest.
Provisions in the Company’s 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 Company’s 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 Company’s 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 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 Company’s 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. to its subsidiaries and affiliates. 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 Company’s 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
22
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 Rohr’s 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 Rohr’s 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 Company’s operations, as well as of commodities, may adversely affect its results. Certain raw materials and components used in the Company’s 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 Company’s 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. Brazilian Real depreciation against the foreign currencies in which the Company
purchases equipment increases costs and the Company may not be able to reflect the increased cost of equipment in the rental prices charged.
The components, machinery and equipment used in the Company’s operations are manufactured and supplied by third parties. The components, machinery and equipment used in the Company’s operations are manufactured
by third-parties. 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 or renting its equipment to its
clients in a timely manner. Also, if the Company’s 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. The same can
occur if the company interrupts its purchases with a supplier and, because of the interruption, this supplier is not able to serve by having compromising its production to another client or by
any other reason. 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 client’s 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 Company’s business, in particular on the operations of the Rental business unit.
If any of the events above happens, the Company may suffer demand contraction, which,
consequently, will impair its results and financial situation.
f. to its clients. The Company is exposed to the credit risk of its clients The company is subject to the credit risk of clients for payments due by the equipment rental and
service provision. Provisions for allowance for doubtful debts made by the Company monthly,
may not be sufficient to deal with any defaults. For more information, see the section "Credit Risk
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(accounts receivable)" in table 5.1 of this reference form. Losses above Company’s expectations
(and therefore not reflected in provisions) may adversely impact the Company's results.
In 2014, allowance for doubtful debt reached 5.3% of Company´s net revenues, versus 2.0% in
2013. The Company has significant exposition to clients related to ongoing Petrobras investigation.
In 2014, approximately 22% of Company´s total net revenue derived from companies and its consortiums that are being mentioned, someway, with ongoing investigations related to Petrobras
corruption, called “Car Wash operation”. In December 31st, 2014, the Company possessed R$ 37 million in its net receivables. Investigations ramifications may cause reduction in activities,
difficulty to access credit or even the extension of involved companies, what can result in delays
or failure in payments.
By a conservative approach in relation to possible ramifications of ongoing investigations
Due to a more conservative posture in relation to the possible scenarios of current investigations,
and not because of real payment issues, we downgraded the credit risk of those clients and consortiums, regardless as if they are majority or minority participants, who are somehow related
to current investigations. This credit downgrade alone generated an increase in ADD.
The Company may have difficulty to recover its equipment if its clients enter in judicial recovery or suspends its payments In case of judicial recovery or suspension of payments, the Company may recover its shoring equipment only after the concrete structure, held by it, is able to sustain itself, which can take
months to happen. During this period, the Company might not receive rental revenue, and therefore have its profitability affected.
Client relationship can be affected by undue protest Due to increase in payment delay and, consequently, in the allowance for doubtful debts, the Company performed a procurement centralization. This change can generate undue clients
protests and, consequently, damage future relationships between the Company and 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. Ten biggest clients of the Company represent 38% of Heavy Construction billings in fiscal year ended on December 31st, 2014.
Maintaining long-standing partnerships with such companies is the key to ensure the Company’s 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
24
to offering its services at competitive prices. 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 Company’s 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:
inability to foresee the needs of its clients;
delays caused by its suppliers;
insufficient production capacity;
equipment failure;
shortage of qualified workers, strikes and labor claims;
interruption in the provision of public services, in particular power cuts;
delays or interruption of the equipment transportation system;
changes to customs regulations;
macroeconomic factors; and
natural disasters.
Besides being subject to applicable penalties, 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 or not, 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 Company’s 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 Company’s 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
Company’s clients choose to postpone new investments and/or to cancel or delay the execution of existing projects, the demand for the Company’s services would drop, which could have a
material adverse effect on its operations and financial condition.
The Company’s 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. to the economic sectors in which the issuer is involved. The demand for the Company’s 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.
According to estimates from BNDES, the public and private sectors are expected to invest R$1.5 trillion between 2015 and 2018, of which R$ 598 billion in infrastructure – sector that may present
25
higher growth, comparing to 2010-2013 period, driven by package of logistics launched in 2012
by Federal Government, which foresees R$ 187 billion in investments in highways, railways and
ports. Although there is great uncertainty about the terms of its accomplish, that depends on improving in planning and on balancing concession model and financing.
In Brazil, public investments have historically been influenced by macroeconomic, political and
legal factors, which are all beyond of the Company’s control. Such factors could determine, among
other things, the 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
Company’s 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 Company’s clients’ operations (and, consequently, the Company’s financial condition and operations) may be adversely affected.
h. to the sectors’ regulation in which the issuer acts.
Costs related to laws and workplace safety regulations as well as those third-party professionals. Such costs can be relevant and adversely impact the Company’s results. As of December 31, 2014, the Company had 2,076 employees (to further information go to section
14 in this Reference Form). Due to the nature of the services provided, both the Company’s 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 Company’s 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 to the workers involved.
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 financial 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 Company’s services. 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
Company’s labor costs and have a negative effect on its financial condition and results of operations.
The technical requirements and the use of the Company’s 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 Company’s 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
26
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 equipment to which the Company is subjected to, the way in which the Company uses its equipment and the way it render its 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 Company’s services. The Company’s 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.
The Company’s 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 Company’s 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 Company’s 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 Company’s 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
Company’s 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. aos países estrangeiros nos quais o emissor atue.
Not applicable, since the Company restricts its operations to Brazil.
4.2 Comments on the Company’s expectations to reduce or increase its exposure
to the risks factors
The Company is constantly analyzing the risks to which it is exposed to and which may adversely
affect its business, financial condition and results of operations. The Company is constantly monitoring changes in the macroeconomic and sector scenarios that can influence its activities
through monitoring of key performance indicators.
Uncertainties in economy and politics impacted markets where the Company and many of its clients act, in 2014. Many of those clients decreased its investments, discontinued investments
and slowed down the pace of constructions. This kind of market behavior impacted directly
27
Company´s performance, which reflected in higher idleness of our equipment and lead to a
revision in investment and expansion plans.
With that said, the Company adjusted previously announced investments to this new market
reality and focused its efforts in operational efficiency. If these forecasts continue being met, Company´s operation can continue to be affected.
To further information about Market risks that the Company is exposed, refer to item 5 in this Reference Form.
4.3 Legal, administrative or arbitral significant and non confidential suits
The Company is part of a judicial and administrative proceedings in the civil, tax and social
security, labor and environment, as described below. The Company’s contingency provisions are recorded in the financial statements for the total amount of probable losses. As of December 31,
2014, the total value of cases involving contingent liabilities was R$ 93.9 million and the total value involved in processes with probable loss, according to its assessment and its legal counsel,
was R$ 12.6 million, as indicated below:
Proceeding/Contingency¹ Year ended December 31,
2012 2013 2014
(in thousands of R$)
Civil proceedings
Possible losses 444 467 787
Probable losses 596 4,812 5,191
11 11 13 Tax and social security
proceedings
Possible losses
Probable losses 7,013 6,518 7,815
13,218 26,442 31,559
Labor claims 17,029 17,878 24,692
Possible losses
Probable losses
2,462 3,588 3,978
Other 6,791 10,944 15,232
Possible losses 808 3,303 4,655
Probable losses
Provisions - - -
5,000 - -
Judicial deposits - - -
Civil proceedings
Possible losses 9,919 10,573 12,580
Probable losses
11,853 10,053 10,422
The Company believes that its provisions for legal and administrative contingencies are sufficient to cover probable losses. The Company describes below the main legal and administrative
proceedings in which it is involved.
Civil Proceedings The Company is defendant in 21 proceedings concerning civil liability and indemnification
payments, regarding, above all, contract terminations and indemnification payments, whose total value was of R$ 6 million on December 31, 2014. Based on the advice of the Company’s external
legal counsel, as of December 31, 2014 it has recorded provisions of R$ 0.8 million to cover
probable losses arising from these proceedings.
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Tax and Social Security Proceedings As of December 31, 2014, the Company was defendant in 105 tax proceedings for an aggregate
amount of R$ 64 million. From this amount, R$ 7.8 million (related to probable losses) are provisioned, and the value from the net provision of judicial deposits and appellate was of R$ 2.8
million. Below is a description of its main tax proceedings:
Process nº 0533217-32.2005.4.02.5101
Jurisdiction Federal Justice
Instance 1st Instance
Date of filing 03/21/2006
Parties in the suit Mills Formas e Escoramento Ltda. (succeeded by the Company) e União Federal
Amounts, goods or rights involved R$ 2,012 Thousand on 12/31/2014
Main facts Subject Matter: This is a Tax Foreclosure seeking granted loan of tax liabilities substantiated in Tax Proceedings. Glosses of expenses incurred by Mills Formas (former Aluma), classified by contracts signed with several clients, upon which Aluma would be responsible for service execution that, henceforth, would be executed by MBES employees. Latest update on 06/07/2013: Given that present execution is warrantied through guarantee letter, prosecution is suspended until final judgment. The Company is currently awaiting trial of the appeal filed in Federal Regional Court in the 3rd Rio de Janeiro court zone (art. 32, 2nd paragraph, 6.830/80 law). PS.: Embargos to Execution nº 0529682-27.2007.4.02.5101
Chances of loss Possible
Analysis of impact in the case of losing the suit
In the event of an unfavorable decision, the Company will have to collect fiscal credit subject matter of the administrative procedures in question, in the updated amount of R$2.012 thousand (until December 31, 2014). Since this is an isolated fact, which is not a habitual practice of the Company, the Company does not believe that an unfavorable decision would have a material adverse effect on its financial situation or on its operating results.
Amount provisioned (if any) -
Process nº 0505089-94.2008.4.02.5101
Jurisdiction Federal Justice
Instance 1st Instance
Date of filing 06/07/2006
Parties in the suit Mills do Brasil Estruturas e Serviços Ltda. (succeeded by the Company) and Federal Union
Amounts, goods or rights involved R$ 2,309 thousand on 12/31/2014
Main facts Subject Matter: This is a lawsuit seeking for Annulment of Tax Liability seeking the annulment of the tax liability claimed in Administrative Proceeding No. 13708.000745/2003-12 (CDA´s Nos. 70.2.08.000115-81, 70.2.08.000116-62 and 70.6.08.000444-38), because a substantial part of the liability claimed refers to the tax on net income (ILL), which was deemed to be unconstitutional by the Federal Supreme Court, and that the full amount of the liability claimed is liable to cancellation because of the offset against the accumulated tax loss of the year. Latest update on 4/30/2014: Currently awaiting for the trial by the 1st Instance. Suspended course of present execution of annulment lawsuits no 0011682-70.2006.4.02.5101, founded on caution general evocation power, aiming to avoid possible
29
disruption in case of outstanding credit is satisfied and the executed, on the other side, succeed.
Chances of loss Possible
Analysis of impact in the case of losing the suit
If the claim is held to be invalid, the Company will have to pay the tax liability disputed, in the adjusted amount of R$2,309 million (until December 31, 2014). Since this is an isolated fact, which is not a habitual practice of the Company, the Company does not believe that an unfavorable decision would have a material adverse effect on its financial situation or on its operating results.
Amount provisioned (if any) -
Process nº 12267.000047/2007-14
Jurisdiction Receita Federal of Brasil (IRS)
Instance 1st Instance
Date of filing May/23/2005
Parties in the suit Mills do Brasil Estruturas e Serviços Ltda. (succeeded by the Company) and INSS (Social Security Administration)
Amounts, goods or rights involved R$ 2,069 mil em 12/31/2014
Main facts This is a tax-deficiency notice (NFLD n° 35.739.839-4) seeking the payment of amounts supposedly not paid by way of contribution to SAT. The Company claimed in its defense, that the amounts were deposited in Case No. 99.0012818-4 already converted into revenue for the Federal Treasury. The Company also claims that the tax assessment disregarded payments made by the Company. Latest update on 02/19/2015 Expeditions sent to the fiscal division.
Chances of loss Possible
Analysis of impact in the case of losing the suit
The Company will have to pay the tax liability in question, in the adjusted amount of R$ 2,470 thousand (on December 31, 2014), if it does succeed in proving that it has been deposited into court. 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.
Amount provisioned (if any) -
Processo nº 0026197-47.2005.4.02.5101
Jurisdiction Federal Justice
Instance 2nd Instance
Date of filing September/21/2005
Parties in the suit Mills do Brasil Estruturas e Serviços Ltda. (followed by the Company) and INSS (National Institute of Social Security)
Amounts, goods or rights involved R$ 1,967 thousand em 12/31/2014
Main facts Subject Matter: This is a Lawsuit seeking the termination of the tax liability subject matter of NFLD No. 35.102.802-1 (Education-Salary) because the respective amounts had been deposited in Provisional Remedy No. 97.0010128-2 Latest update on 12/19/2014: completed for assessment proceedings and the judge's decision
Chances of loss Possible
Analysis of impact in the case of losing the suit
The Company will have to pay the tax liability subject matter of NFLD No. 35.102.802-1, in the adjusted amount of R$1,967 million (on December 31, 2014). The Company already duly pays the education-salary. Taking into account the amount involved in the lawsuit, the Company does not believe that an unfavorable
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decision will have a material adverse effect on its financial condition or operating results.
Amount provisioned (if any) -
Processo nº E-04/062000/2011
Jurisdiction State of Rio de Janeiro’s Treasury Department
Instance 1st Instance (administrative)
Date of filing 01/31/2011
Parties in the suit Mills Estruturas e Serviços de Engenharia S.A. and State of Rio de Janeiro’s Treasury Department
Amounts, goods or rights involved R$ 2,574 thousand em 12/31/2014
Main facts Subject Matter: This is an infraction seeking to require the ICMS taxation and fine payment 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. PS: Administrative Appeal no 57.768 – 3rd chamber. Latest update on 4/08/2014: Protocol of Administrative appeal. Currently awaiting the proceeding contesting judgment.
Chances of loss Possible
Analysis of impact in the case of losing the suit
The Company will have to pay the updated in 12/31/2014 amount of R$2,574 thousand. Taking into account the amount involved in the lawsuit, the Company does not believe that an unfavorable decision will have a material adverse effect on its financial condition or operating results.
Amount provisioned (if any) -
Process nº 12259.000998/2008-65
Jurisdiction Administrative Authority
Instance Administrative Authority
Date of filing 05/23/2005
Parties in the suit National Institute of Social Security - INSS
Amounts, goods or rights involved R$ 5,707 thousand on 12/31/2014
Main facts This is a launch made to protect Fazenda Pública entitlement right to launch debit. Process discontinued until action 99.0062493-9 be judged and rendered.
Chances of loss Possible
Analysis of impact in the case of losing the suit
The Company will have to pay the updated in 12/31/2014 amount of R$5,707 thousand. Taking into account the amount involved in the lawsuit, the Company does not believe that an unfavorable decision will have a material adverse effect on its financial condition or operating results. Entering with impugnation to require default fine exclusion, since tax credit constituted has its payment suspended. Latest update on 4/30/2014: Protocol of Administrative appeal. Currently is awaiting the proceeding contesting judgement.
Amount provisioned (if any) -
Process nº 4019432-32.2013.8.26.0405
Jurisdiction 2nd Court of Treasury Department of Osasco Comarca of São Paulo´s Court of Justice.
Instance 1st Instance
Date of filing 10/31/2013
Parties in the suit State of São Paulo’s Treasury Department
Amounts, goods or rights involved R$ 2,550 thousand on 12/31/2014
Main facts This is a lawsuit to cancel debit charge encapsulated in Infraction notice no 4.017.635, considering he illegality of ICMS demand over rental contracts.
Chances of loss Remote
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Analysis of impact in the case of losing the suit
The Company will have to pay the updated in 12/31/2014 amount of R$2,550 thousand. Taking into account the amount involved in the lawsuit, the Company does not believe that an unfavorable decision will have a material adverse effect on its financial condition or operating results. Entering with impugnation to require default fine exclusion, since tax credit constituted has its payment suspended. Latest update on 2/04/2015: Protocol of Administrative appeal. Currently is awaiting the proceeding contesting judgment. Under appeal “The feat has already been reorganized being determined a performance of technical expertise, face to controverted point related to commercial operation nature. Furthermore, considering the deposit referring to provisional fees, ordered to fl. 415 to begin works”.
Amount provisioned (if any) -
Infraction Notice nº 1.396/2014
Jurisdiction Rio Grande do Norte State Department of Taxations
Instance 1st Instance (administrative)
Date of filing 09/19/2014
Parties in the suit Rio Grande do Norte State Department of Taxations
Amounts, goods or rights involved R$ 1,866 thousand on 12/31/2014
Main facts This is a total contest aiming to annul the infraction notice drawn up to demand ICMS payment supposedly incident in goods entry in Rio Grande do Norte state in several interstate operations performed by Impugner in the period between September, 2013 and March 2014.
Chances of loss Remote
Analysis of impact in the case of losing the suit
The Company will have to pay the updated in 12/31/2014 amount of R$1,866 thousand. Latest update on 12/16/2015: “ (…) By the exposed above, regardless the composition of the process, the Infraction Notice was upheld against Mills Estruturas e Serviços de Engenharia S.A., to impose the accused a penalty provided for article 340, paragraph I, v “c”, c/c article 133 of RICMS, approved by decree 13.640/97, totaling R$ 465.53 without ICMS limitation, totaled R$ 931.06. By legal requisition, I appeal the decision to E.CRF, and send the notices to 1st Regional Taxation Unit (URT), to knowledge of parts and adoption of further legal measures.” PS: After payment of Infraction Notice remaining balance, the administrative notice was sent to Tax Appeals Council to judge this appeal.
Amount provisioned (if any) -
Processo nº 2009.01.1.057971-6 Jurisdiction 7th Court of Federal District Public Treasury Instance 2nd Instance Date of filing 05/05/2009 Parties in the suit Federal District X Mills do Brasil Amounts, goods or rights involved R$ 2,003 thousand on 12/31/2014
Main facts This is an embargo to execution opposite by Federal District, through which it intends to remove coordination that concerns it (undue payments repeat – ISS over rental). In the sentence there were unenforceability of judicial instruments declaration, being necessary a verdict.
Chances of loss Remote Analysis of impact in the case of losing the suit
Company should continue with verdict on main notices nº 2001.01.1.081292-9. There shall not be tax payment condemnation, since it is embargo to judicial instruments execution through which the Company
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obtained right to receive back ISS paid during performance of rental activities. If sentence remain as it is, there will be necessary payment of attorneys fees to Federal District totaling R$ 1,000.00.
Amount provisioned (if any) -
Processo nº 2004.51.01.004267-5
Jurisdiction 12th Court Federal of Rio de Janeiro
Instance 2nd Instance (Discontinued)
Date of filing 04/11/2004
Parties in the suit Plaintiff: MILLS - ESTRUTURAS E SERVIÇOS DE ENGENHARIA LTDA., sucessor by incorporation of JAHÚ INDÚSTRIA E COMÉRCIO. Petitioned: Delegate of Federal Revenue Tax Administration Bureau and delegate of Federal Revenue Station bureau.
Amounts, goods or rights involved R$ 3,122 thousand on 12/31/2014
Main facts Secutiry mandate aiming to remove surcharge of COFINS taxation, in laws n.º 10.637/02 e 10.833/03, respectively, respecting public offence.
Chances of loss Possible
Analysis of impact in the case of losing the suit
The Company will have not to pay the updated in 12/31/2014 amount of R$ 3,122 thousand. Taking into account the amount involved in the lawsuit was paid in September, 2005. Latest update on 3/11/2004. 1st instance favorable decision. 2nd instance unfavorable decision. In 01/07/2010 extraordinary remedy was given against Regional Federal Court of 2nd region. In 02/28/2012, the decision was given by Regional Federal Court of 2nd region, which recognized general repercussion about theme existence, and discontinued notices until Extraordinary Remedy judgment no 570.122. Currently awaiting for final appeal.
Amount provisioned (if any) R$ 3,122 thousand
Labor Claims The Company is defendant in 359 labor claims, and with the advisory of an external legal counsel,
the Company has recorded provisions on the amount of R$ 4 million (corresponding to probable
losses) on December 31, 2014, to cover probable losses resulting from the labor claims filed against the Company, and net legal and appellate provision amount was of R$ 2 million.
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:
Process nº 01106.2005.134.05.00.1
Jurisdiction 4ª Vara do Trabalho (4th Labor Staff) of Camaçari/BA
Instance 1st Instance
Date of filing October/24/2005
Parties in the suit Author: Public Ministry of Labor Defendant: Mills Estruturas e Serviços de Engenharia S.A.
Amounts, goods or rights involved R$ 491 thousand on 12/31/2014
Main facts Compliance with legal quota regarding the employment of disabled workers. This public civil action deals with the allegation that we do not comply with the legal quota regarding the employment of disabled workers. The Public Labor Prosecution Office requested an injunction to compel our company to employ disabled workers in line with the minimum percentage set by the applicable legislation.
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The prosecutors also seek our conviction for collective punitive damages allegedly caused by our company. The Company claims that the principal operations carried out by our company require the employment of persons capable of meeting rigorous physical demands, such as workers for the assembly of scaffolding structures, painters, high pressure water gun operators, and workers in the provision of insulation services. These activities are performed under very demanding physical conditions, which makes the employment of disabled workers impractical, as such workers would be exposed to a significantly higher risk of accident. Latest update on 05.20.14: manifestation over embargo of declaration opposite by Public Ministry of Labor.
Chances of loss Possible
Analysis of impact in the case of losing the suit
In case of loss, the Company shall pay amount discussed and enlarge its number of employees suffering from disability, under the penalty of incurring in fines. According to external legal advisor, estimated amount is about R$ 491 thousand.
Amount provisioned (if any) -
Process nº 0120300-11.2009.5.19.0005
Jurisdiction 5ª Vara do Trabalho (5th Labor Staff) of Maceió/AL
Instance 1st Instance
Date of filing 09/05/2009
Parties in the suit Author: C.F. Defendant: Mills Estruturas e Serviços de Engenharia S.A.
Amounts, goods or rights involved R$ 506 thousand on 12/31/2014
Main facts 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.
Chances of loss Possible
Analysis of impact in the case of losing the suit
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$506 thousand (in 12/31/2014). The Company does not believe that an unfavorable outcome can have any adverse effects on its financial condition or its operational results.
Amount provisioned (if any) -
Process nº 0001793-43.2013.5.05.0134 Jurisdiction 4th Vara do Trabalho (4th Labor Staff) of Camaçari/BA
Instance 1st Instance Date of filing 08/22/2013
Parties in the suit Author: N.N. S Jr. Defendant: Mills Estruturas e Serviços de Engenharia S/A.
Amounts, goods or rights involved R$ 1,110 thousand em 12/31/2014 Main facts This is a lawsuit envolving overtime works, moral damages,
adjustment to salary ranges, meal tickets, fuel tickets, differences in profit share program (PSP), rectifying of work permit, normative fines. Expense displayed. Sentence condemned Mills to pay overtime Works, difference of PSP in 2012, readjustment in salary range coming from Collective Labor Agreement from January to April, 2012, and normative fines. Interposed appeal by Mills.
Chances of loss Possible Analysis of impact in the case of losing the suit
The Company may pay to former employee of which legal advisors forecast an amount about R$ 1,110 thousand (on 12/31/2014). Latest update on 06/11/2014: Mills interposed appeal. Currently awaiting for appeal trial.
Amount provisioned (if any) -
Process nº 0020691-64.2013.5.04.0124
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Jurisdiction 4th Vara do Trabalho (4th Labor Staff) of Rio Grande/RS
Instance 2nd Instance
Date of filing 11/21/2013
Parties in the suit Author: STMMMERG. Defendant: Mills Estruturas e Serviços de Engenharia S/A.
Amounts, goods or rights involved R$ 864 thousand on 12/31/2014 Main facts This is a lawsuit involving Salary Accretion for Unhealthy and
Hazardous Work Conditions to scaffolding assemblers – UNION. Defense introduced. Sentence was published extinguishing process in trial from merit so each employee should judge it for his own. Public sentence maintaining sentence which prohibited action without trial of merit, confirming sentence of each assembler group should enter with own action searching these advantages, because when the Sentence is from the union there is no way to confirm the work condition of all the participants.
Chances of loss Remote Analysis of impact in the case of losing the suit
Company may pay to former employee of which legal advisors forecast an amount about R$ 864 thousand (on 12/31/2014). Latest update on 06/11/2014: It was submitted the response to the lawsuit. Currently awaiting for appeal trial.
Amount provisioned (if any) -
Process nº 00114.2008.131.05.00-4 Jurisdiction 1st Vara do Trabalho (4th Labor Staff) of Camaçari/BA
Instance 3rd. Instance
Date of filing 01/15/2008
Parties in the suit Author: V. R. S. Defendant: Mills Estruturas e Serviços de Engenharia S/A.
Amounts, goods or rights involved R$ 514 thousand on 12/31/2014 Main facts This is a lawsuit involving material and moral damages due to an
work accident (injury in lumbar spine). Defense denied the facts. Published on the recognition of the right to indemnities for moral and material damages inside moral damages. Mills interposed with appeal. Agreement decided to compensate partially excluding material damages. Mills appealed for revision. Order denied.
Chances of loss Probable Analysis of impact in the case of losing the suit
Company may pay to former employee of which legal advisors forecast an amount about R$ 514 thousand (on 12/31/2014). Latest update on 12/10/2014: It was submitted the response to the lawsuit. Currently awaiting for appeal trial in Ministry of Labor.
Amount provisioned (if any) R$ 514 thousand
Process nº 0001836-27.2013.5.03.0007 Jurisdiction 7th Vara do Trabalho (7th Labor Staff) of Belo Horizonte/MG
Instance 1st Instance Date of filing 09/04/2013 Parties in the suit Author: Robson Fernando Estorco
Defendant: Mills estruturas e Serv. de Eng. S/A Amounts, goods or rights involved R$ 600 thousand on 12/31/2014 Main facts Action involving an accident at work, with alleged loss of working
capacity and right to stability. Defense denying the facts.
Chances of loss Possible Analysis of impact in the case of losing the suit
Company may pay to former employee of which legal advisors forecast an amount about R$ 600 thousand (on 12/31/2014). Latest update on 03/04/2015: Concluded to submit sin parts already, manifested about the expert clarifications. The process involves following requirements: - Nullity contractual termination and salary payment and further advantages until the author reestablish its labor capacity. - Indemnity for moral damages summing R$ 300,000.00; - Indemnity for aesthetic changes summing R$ 300,000.00; life pension until 75 years, considering monthly payments. The author claims having suffered an accident – incontrovertible fact- which would had caused permanent injury. Defense registers that the author was licensed by INSS and returned after discharge. After it, spontaneously, decided to submit himself to knee surgery that has no relation to the accident.
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The expert verified there is no sequel of the accident and that the author is able to work. Furthermore, said the knee problem is degenerative, disconnected from work activities. Process is in expertise phase awaiting for clarification.
Amount provisioned (if any) -
Process nº 00000801420115020384 Jurisdiction 4th Vara do Trabalho (4th Labor Staff) of Osasco/SP
Instance Superior
Date of filing 01/19/2011
Parties in the suit Author: Espólio de A. V. F. Defendant: Mills estruturas e Serv. de Eng. S/A
Amounts, goods or rights involved R$ 1,884 thousand on 12/31/2014 Main facts This is a lawsuit involving material and moral damages by
employee death due to a work accident. The lawsuit was rejected in a first instance, but the decision was reviewed and modified by Regional Court, which condemned Mills to a moral damage and life pension payment to the widow. Mills presented appeal to superior court, and is still awaiting for a definitive decision.
Chances of loss Possible
Analysis of impact in the case of losing the suit
According to its legal advisors, if Regional Court of Labor - SP decision is maintained, the Company shall pay to former employee an estimated value of R$ 1,884 thousand. Latest update on 02/25/2015: It was submitted the response to the lawsuit. Waiting for appeal trial in Ministry of Labor and on 03/09/2015, forwarded to general attorney to imposition of opinion.
Amount provisioned (if any) -
Process nº 00104452720145150137 Jurisdiction 3rd Vara do Trabalho (4th Labor Staff) of Piracicaba/SP
Instance 1st. Instance
Date of filing 02/28/2014
Parties in the suit Author: Espólio de V. S. D. Defendant: Mills estruturas e Serv. de Eng. S/A
Amounts, goods or rights involved R$ 1,108 thousand on 12/31/2014
Main facts It is a Lawsuit involving indemnity order for moral damage and monthly pension due to work accident causing death. There were first hearing on 05/26/2014. In 07/17/2014 was gathered to technical report notice of IPT. Currently awaiting for hearing schedule to prosecution.
Chances of loss Possible
Analysis of impact in the case of losing the suit
According to its legal advisors, if the lawsuit is upheld, the Company shall pay to the former employee the total amount of R$ 1,108 thousand (12/31/2014). Latest update: Judge´s decision in first instance, dismissing preliminaries and opening term to manifestation of parts on documents and indications to other evidences (awaiting for notification).
Amount provisioned (if any) -
Processo nº 00012042220105150023 Jurisdiction 7th Vara do Trabalho (4th Labor Staff) of Belo Horizonte/MG
Instance 2nd. Instance
Date of filing 12/11/2010
Parties in the suit Author: L. C. C. Defendant: Mills estruturas e Serv. de Eng. S/A
Amounts, goods or rights involved R$ 972 thousand on 12/31/2014
Main facts This lawsuit involves work accident, with reintegration demand, life monthly pension and indemnity by moral and aesthetic damages. The lawsuit was partially judged well-founded in first instance. Claimant and claimed recurred. Currently awaiting for appeals trial by Regional Court of Labor.
Chances of loss Remote
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Analysis of impact in the case of losing the suit
Accordingly to its legal advisors, if first instance decision is maintained, Company shall pay former employee an estimated amount of R$ 972 thousand (on 12/31/2014) Latest update: Appeals awaiting for inclusion on the agenda since 01/23/2015.
Amount provisioned (if any) -
Process nº 0026938620135020432 Jurisdiction 2nd Vara do Trabalho (2nd Labor Staff) of Santo André/SP
Instance 1st Instance
Date of filing 12/31/2013
Parties in the suit Author: E. P. O. Defendant: Mills estruturas e Serv. de Eng. S/A
Amounts, goods or rights involved R$ 533 thousand 12/31/2014
Main facts This lawsuit involves monthly life pension demand (single payment) for professional disease and indemnity for moral damages. Negative medical report to professional disease. Currently awaiting for instruction hearing scheduled for 04/13/2015.
Chances of loss Remote
Analysis of impact in the case of losing the suit
The Company shall pay to former employee and legal advisors amount of R$ 533 thousand (on 12/31/2014). Latest update on 01/21/2015: Mills agreed with negative medical report to professional disease and waits for instruction hearing scheduled for 04/13/2015.
Amount provisioned (if any) - 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 Relevant confidential lawsuit
On December 31, 2014 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 Other significant contingencies.
No other significant contingencies relating to this item 4.
4.8 Rules of the country of origin of foreign issuer and rules of the country in which
the foreign Company's securities are held in custody, if different from the country of
origin.
Not applicable to the Company.
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5. MARKET RISKS
38
5.1 Description of the main market risks. Risk factors related to macroeconomic issues
The Brazilian government has frequently intervened in the Brazilian economy and has occasionally introduced significantly changes to the country’s monetary, credit and tax policies, among others.
The Brazilian government’s actions to control inflation have often involved, among others,
increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls, and customs restrictions. The Company has no control over and cannot predict what
measures or policies may be introduced by the Brazilian government in the future. The Company’s business, financial condition and operations’ results, as well as the trading price of its shares,
may be adversely affected by Brazilian, state and municipal changes to public policies relating to tax rates and exchange controls or regulations involving or affecting factors such as:
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 Company’s operations.
Federal Government's efforts to reduce inflation may delay the Brazilian economy’s 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 2014, the SELIC medium rate was 10.86%. The annual inflation calculated by the IGP-M was of 7.82%,
5.51% and 3.39% in 2012, 2013 and 2014, respectively, and by the IPCA was of 5.84%, 5.91% and 6.41% in 2012, 2013 and 2014, 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 Company’s
business. Exchange rate instability may affect the Brazilian economy, as well as the Company’s operations and the market value of its shares. The Company is exposed to foreign exchange due to expositions of some currencies, essentially
to U.S. dollar and to Euro. The exchange risk elapses from the future importation of equipment,
mainly the aerial platforms and formworks.
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The company’s policy is reduce the cash risk related to the exchange variation, in a conservative
form, since all revenues are obtained in Brazilian Real. For this purpose, the company concludes
contracts of NDFs with financial institutions with hedging purposes. All of these contracts predict the future exchange rate. The commercial U.S. dollar was R$ 2.04, R$ 2.30 and R$ 2.70 at
December 31, 2012, 2013 and 2014 respectively. Interest Rate Risk The Company's indebtedness is denominated in reais, subject, mostly, to floating interest rates,
particularly the dollar, IPCA, Interbank deposit certificate - CDI and Long-term interest rate -TJLP rates. There is the risk of the Company incurring losses due to fluctuations in interest rates,
which would increase finance costs related to borrowings and financing obtained in the market. In December 31, 2012, 2013 and 2014, the CDI rate was of 6.9%, 9.8% and 11.57%,
respectively, the IPCA rate was of 5.84%, 5.91% and 6.41% on December 31, 2012, 2013, and
2014, respectively, the commercial dollar was R$ 2.04, R$ 2.30 and R$ 2.70 on December 31, 2012, 2013 and 2014, respectively, and the TJLP rate was of 5.5%, 5.5% and 5.0% on December
31, 2012, 2013 and 2014, respectively.
The Company, also, has contracts of loans in U.S. dollar and for cover substantially the exchane
risk, contracted the operations in swap.
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 balance
Debt Index Present
Scenario I (Probable)
Scenario II 25%
Scenario III 50%
(in R$ thousands, except %) BNDES TJLP 18,667 1,200 1,204 1,208 Working Capital USD 45,860 4,039 16,495 28,950 Swap CDI x USD (1,166) (3,965) (16,466) (28,967) Debentures - 1ª issuance CDI 184,412 16,179 20,034 23,826 Debentures - 2ª issuance, 1st series CDI 168,121 21,210 25,935 30,581 Debentures - 3ª issuance CDI 201,984 26,982 33,443 39,807
Total 617,878 65,645 80,644 95,406 Variation 22.9% 45.3%
The sensitivity analysis presented above considers changes in relation to the interest rate risk,
maintaining constant other variables, associated with other risks.
Scenario I Scenario II Scenario III
Reference Probable +25% +50%
CDI (%)¹ 12.9% 16.1% 19.3%
TJLP (%)² 5.0% 6.9% 8.3%
US$ 3 R$ 2.9 R$ 3.6 R$ 4.3
¹ 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.
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² 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.
3 The Company’s administration considered as probable premise (scenario I) the maintanance of exchange rate and a increase of the rate 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 Company’s 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 low demand periods and, therefore, of pressure on prices, the Company probably will not pass the inflation effects to the prices that charges for its products and services and, consequently,
may suffer reduction of profitability.
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 2012, 2013 and 2014, the IGP-M índex reported by FGV was of 7.8%, 5.5% and
3.7%, respectively, and the IPCA index announced by IBGE was of 5.8%, 5.9% and 6.4%, respectively.
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 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):
Outstanding debt in R$ thousand
Debt Index Present Scenario I (probable)
Scenario II 25%
Scenario III 50%
2ª Emissão de debêntures – 2ª Série IPCA 128,747 17,563 20,211 22,916
Total 128,747 17,563 20,211 229,16 Variação 15.0% 30.5%
The sensitivity analysis presented above considers changes in relation to the particular risk,
maintaining constant other variables, associated with other risks.
Scenario I
Rate Scenario II Scenario III
Referência Maintenance +25% +50%
IPCA(%)¹ 7.8% 9.7% 11.7%
¹ For financial liabilities related to the second issue of the debêntures, the Company's management considered as likely premise (scenario I), expectation of IPCA for 2015 described the FOCUS report released by the Central Bank of Brazil on March 06, 2015 since there is no evidence of a change in the short term, and a rate increase as a premise for the other two scenarios. Credit Risk (Trade Receivables)
41
The Company periodically bills amounts for rentals and sales due by its customers, for past due
periods that normally vary from 30 to 60 days, with an average payment term of 60 days. Thus,
it is subject to the risk of default on trade receivables.
Client credit risk is managed by the Company’s financial management, which evaluates clients’ financial capacity to pay. This analysis is performed before the actual commercial agreement
between the parties, and for this purpose, each client is analyzed individually, taking into
consideration mainly the following information: (i) registration information; (ii) financial information and indicators; (iii) risk ratings (methodology of credit bureau SERASA); (iv)
controlling shareholder; and (v) pending issues and protests at Serasa.
The Company believes that the concentration of credit risk is limited because the client base is broad and there is no relationship between clients. The Company does not have client
concentration in its revenue and accounts receivable, not possessing any client or group
representing 10% or more of its accounts receivable in any of its business units.
The table below shows the items from Gross Trade Receivables and Allowance for Doubtful Debts from the Company detailed by business unit and consolidated on the indicated dates:
Year ended December 31
2012 2013 2014
(in R$ thousands)
Trade Receivables ADD Trade Receivables ADD Trade Receivables ADD
Heavy Construction
52,867 10,402 68,785 13,715 88,113 25,689
Industrial Services¹
66,585 8,576 4,408 4,408 3,992 3,992
Real Estate 59,041 3,807 82,177 16,071 62,407 25,428 Rental 51,290 12,888 73,468 18,637 93,079 36,313 Events² 4,247 1,030 3,796 1,030 2,022 -
Total 234,030 36,703 232,634 53,861 249,613 91,422 ¹ Remaining amount receivable from the operations of the Industrial Services business unit, which was discontinued on November 30, 2013.
² Value to receive for the sale of the fixed asset from the Business unit events that was discontinued in 2008.
Risk of Price Fluctuation of Raw Materials and Imported Equipment
Increases in the price of commodities used for manufacturing the equipment necessary for the provision of the Company’s services, such as steel and aluminum, at rates higher than those
recorded by the Brazilian inflation indexes used for adjustments of the prices charged, may have an adverse effect on the Company’s future profitability unless these increases can be factored
into prices.
Additionally, for imported equipment contracts, as is the case of the Rental business unit, the
exchange rate increases above inflation also have a negative impact on the Company’s future profitability, until these increases can be factored into prices.
Exchange Rate Risk
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the euro. Foreign exchange risk arises from future
imports of equipment, mainly telescopic handlers, aerial platforms and formworks.
It is Company policy, conservatively, to eliminate 100% of cash risk related to exchange rate,
since all of its revenue is received in Brazilian reais. As a consequence, the Company has entered into swap and NDF (Non-Deliverable Forwards) agreements with financial institutions for hedging
purposes. All these contracts provide a simple exchange of indexes under which the financial institution assumes the foreign exchange risk and the Company, in counterpart, undertakes to
pay interest on the notional amount (corresponding to the original amount of its foreign currency
liability).
42
As a result from hedging operations, the Company had no exposure to exchange rate fluctuations
as of December 31, 2012, 2013 and 2014.
The Company had no exposure to the exchange rate for the motorized equipments already bought. However, since these equipments are not produced in Brazil, the Company is exposed to
exchange rate for future investments in such equipment either to replace and/or increase its fleet.
Credit Risk (Financial instruments and cash deposits) The credit risk for balances with banks and financial institutions is managed by the Company’s
treasury in accordance with the policy established by it. Surplus funds are invested only in approved counterparties.
The Company has a policy of using only leading financial institutions classified as investment
grade. Management does not expect any counterparty to fail to fulfill its obligations.
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 Company’s 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 Company’s reputation.
The financial department monitors ongoing forecasts of the Company’s 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 Company’s debt, fulfillment of contractual clauses and the meeting of internal targets in accordance with the Company’s strategic plan. In addition, the
Company maintains lines of credit with the main financial institutions operating in Brazil.
The table below presents the Company’s non-derivative financial liabilities per maturity bracket,
corresponding to the remaining period in the balance sheet until the contractual date of maturity.
Less than
one month
Between one months
and three
months
Between
Three months and
one year
Between one and
two years
Between two and five
years
Over five
years
As of December 31, 2014, in R$ thousands
Borrowings and financing 46,378 998 3,215 4,100 11,002 2,652 Debentures - 9,227 150,140 230,266 458,685 64,069
Derivative financial instruments
(1,166) - - - - -
Trade payables 16,510 - - - - -
Total 61,722 10,225 153,355 234,366 469,687 66,721
The interest rates (CDI, IPCA and TJLP) projected for the future compromises reflect the market
rates in each period.
5.2 Policy description for managing market risks
a. Risks for which protection is sought
The Company’s 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
43
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. Asset protection strategy (hedge)
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 revenue’s 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. Instruments used for asset protection (hedge)
In order to protect shareholder’s 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.
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
44
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, 2014, the Company had equipment purchase orders with foreign suppliers
amounting approximately to US$ 500 thousands (in December 31, 2013, such orders amounted
to US$ 71.8 million), all of them with payments expected during 2015.
In order to reduce the Company’s 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, which fair value on December 31, 2014, totalized R$
26 thousand, as presented in the table below.
Type
Notional
Value
Fair
Value
Receiva
ble/ Payable
Values
Notional
Value
Fair
Value
Receiva
ble/ Payable
Values
Notiona
l Value
Fair Valu
e
Receiva
ble/ Payable
Values
December 31, 2012
December 31, 2013 December 31, 2014
NDF
(in
thousands R$)
Dollar Term Puchase
Contracted rates : 2.49 to 2.71 (USD)
1,299 26 26
Contracted rates : 2.22 to 2.42
(USD) 168,419 7,516 7,516
Contracted rates : 2.05 to 2.15
(USD) 152,868 (800) (800)
Total 152,868 (800) (800) 168,419 7,516 7,516 1,299 26 26
The derivatives are evaluated by the market rate present value, in the base data of future flow determined by the application of contractual rates until maturity. For contracts with limiter or
double index were considered, in addition, the embedded option in the swap contract.
The Company’s hedge operations are realized in order to seek protection against fluctuations in
foreign currency of its equipments and machines importations. Such operations are classified as hedge accounting.
The company ensures it effectiveness of these instruments with the “Dollar offset” methodology, which is commonly used by derivative market participants, and consists in comparing the present
value, net of foreign currency exposure and Company commitments with the derivatives hired for such hedge.
On December 31, 2014, there was no inefficiency in the results of the hedge operations of the
Company.
Considering the fact that the Company ensures the effectiveness of the realized hedge accounting
operations, the gains and losses observed in these derivative operations are recognized in counterpart of the hedged asset (fixed asset) as part of the initial cost of the asset in the same
moment of the accounting. In December 31, 2014, the amount of R$ 1.2 million were transferred from the net equity and deducted in equipments initial cost.
45
d. Parameters used to managing these risks
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 Company’s 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. Organizational structure for risk management control The risk control politics and procedures are defined directly through the Company’s Board of
Directors and are implemented by the Company’s 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 Company’s Board of Directors analyzes its operational structure and intern controls, and
believes that the policies and procedures of adopted controls are appropriate to the Company’s
operational structure. In fiscal years ended in December 31, 2012, 2013 and 2014, the opinion of independent auditors did not identify deficiencies in those controls.
5.3 Significant changes in the main market risks
In the fiscal years ended December 31, 2012, 2013 and 2014, there were no events that could significantly change the main market risks to which the Company is exposed.
5.4 Other information that the Company deems relevant.
There is no further relevant information about this item 5.
46
6. COMPANY HISTORY
47
6.1 Constitution of the Company
The Company was established on December 1, 1980 as a limited liability company. On January 29, 2009, the Company’s shareholders approved a corporate transformation of the Company,
which became a privately held corporation. The first company of Mills’ group, named Aços 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 Brief Company History
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
Company’s 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 Form’s date.
In the 70’s and 80’s, 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 Company’s development. From 1974 to 1986, GKN plc, a large British conglomorate, was the Company’s 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 90’s, while seeking to expand the Company’s 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 Company’s 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 Company’s 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 Indústria e Comércio 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.
48
The Company’s 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 Company’s 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
Company’s 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 Management’s 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 Participações 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 Date of registration with the CVM
April 14th, 2010
6.5 Major corporate events which the Company or any of its subsidiaries or
affiliates have gone through Corporate rearrangements involving Nacht Participações In October 2012, Nacht Participações S.A. (Nacht Participações) reduced its capital through the
transfer of all shares issued by Mills held by Nacht Participações 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 Participações, by its shareholders and by Snow Petrel S.L., and, after the capital
reduction, are now exercised by Nacht Participações' shareholders jointly with Snow Petrel S.L. Such shares remains encumbered and subject to the terms of the "Shareholders Agreement of
49
Nacht Participações S.A.", executed on February 11, 2011, as amended, which also applies to
Mills.
Dissolution of Jeroboam Investments LLC
On March 14, 2012, occured the transfer of all common shares, book-entry shares, with no par
value issued by Mills held by Jeroboam Investments LLC (Jeroboam) for Snow Petrel, due to the dissolution and consequent extinction of its wholly owned subsidiary Jeroboam. Therefore, Snow
Petrel came to hold 19,233,281 shares of Mills, representing 15.3% of its capital stock on that date.
As a result of the transfer, Snow Petrel succeeded Jeroboam as part of Shareholders’ Agreement
of Nacht Participações S.A., celebrated on February 11, 2011. The dissolution of Jeroboam and
the corresponding transfer of shares issued by Mills did not result in any change in the administrative structure or the control of the Company. Additionally, this operation does not
involve change in the number of shares or in the value of thee capital of the Company.
On December 28, 2015, occurred a corporate restructuring of Snow Petrel, SL. With this change
Ms Emma Keila Nacht, become the controller of Snow Petrel.
Sale of business unit Industrial Services In July 10, 2013, the company entered into a sale agreement of its Industrial Services business unit for a total sum of R$102 million, through the sale of their participation in the company
Albuquerque Participações 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.
The transaction was closed on November 30, 2013, had net income of R$8,3 million. Agreed sale
value of R$102 million, R$25 million were received at the date of signing of the contract in July,
and the balance will be paid in installments adjusted by CDI, discounting the generation of this business case for Mills between 1 June 2013 and the closing date, which was equal to R$ 6,8
million.
Increase of the Company’s Capital The Company increased its capital, within its authorized capital, due to the exercise of stock
options, according to the Company’s Stock Option Plan (1/2010, 1/2011, 1/2012 and 1/2013), archived in the Company´s headquarters ("Programa de Outorga de Opções").
The company and the Board of Director’s approved the Company’s capital increase within the
limits of authorized capital, due to the exercise of stock options, according to the Company’s
Stock Option Plan (1/2010, 1/2011, 1/2012 and 1/2013). The dates of approval, the programs, quantity o stock options, price of stock options and the sum of these practices are detailed in
Item 17.
6.6 Bankruptcy filings based on relevant values, judicial or extrajudicial recovery of the Company
Not applicable. 6.7 Other information that the Company deems relevant
50
There is no further relevant information about this item "6”.
7. COMPANY´S ACTIVITIES
51
7.1 Summary of Company and Subsidiary activities
The Company holds as purpose: (a) the rental, commercial intermediation and sale, with or without assembly, of mobile goods of its own manufacturing or acquired from third-parties,
comprising forms, shoring, scaffolding, pressurized dwellings, floors, structures and similar equipment, steel, aluminum, metal, plastic and wood, as well as its parts, components,
accessories and raw materials; (b) the rental, with or without an operator, commercial
intermediation and sale of aerial work platforms and telescopic handlers, personnel training for the respective equipment’s operation, maintenance and technical assistance of its own equipment
or third-party; (c) import and export of the above described goods, including its parts, components and raw materials; (d) the provision of painting, blasting, thermal insulation, surface
treatment, passive protection against fires, cargo movement, boiler, refractory, inspection and nondestructive testing, including the access by rope used by the industrial climbers and other
equipment and services inherent to such activities, as wll as manufacturing, assembly and
marketing of proprietary products for such activities; (e) consulting and sale of engineering projects; (f) roofing construction in structured tent with closing a plastic or similar; (g) low voltage
electrical installations; and (h) participation as a shareholder or partner in other companies or corporations.
According to information released in 2014 by the magazine "O Empreiteiro" and by the IRN - 100 (International Rental News) publication, the Company believes to be one of the specialty
engineering services company and the largest provider of temporary concrete formwork and tubular structures and motorized access equipment for the Brazilian market. The Company offers
its clients specialized engineering services, providing differentiated solutions, skilled labor and equipment that are essential to large infrastructure projects, residential and commercial
construction and industrial. Customized engineering solutions include planning, design and
implementation of the temporary structures for civil construction (such as concrete forms, shoring and scaffolding) and motorized access equipments (such as aerial platforms and telescopic
handlers), as well as technical assistance and skilled labor.
During 60 years of history, the Company has developed relationships with most of the largest
and most active Brazilian companies in heavy construction, residential and commercial construction and industry sector. The Company enjoys strong reputation in accordance to the
provision of services on a consistent, timely, reliable, and quality manner, observing the high safety standards.
The services are offered by four business units: (i) Heavy Construction Business unit (heavy construction, large-sized, such as infrastructure), (ii) Real Estate Business unit (residential and
commercial construction) and (iii) Rental Business unit (rental of motorized access equipment).
As described in Section 6.5, the Company entered into an agreement for the sale of its Industrial Services business unit on July 10, 2013.
(Amounts in thousands of R$) Year ended December 31
2012 2013 2014
Heavy Construction Net revenue 174,059 216,956 210,996 EBITDA¹ 84,365 108,104 88,919 EBITDA margin 48.5% 49.8% 42.1% Net income 36,014 48,303 23,155 Net margin 20.7% 22.3% 11.0%
Real Estate
Net revenue 237,955 257,964 212,361 EBITDA¹ 113,472 93,771 50,163 EBITDA margin 47.7% 36.4% 23.6% Net income 49,289 26,111 (15,030) Net margin 20.7% 10.1% -7.1%
52
Rental
Net revenue 253,460 357,342 370,809 EBITDA¹ 141,256 201,212 196,673 EBITDA margin 55.7% 56.3% 53.0% Net income 61,774 87,460 58,783 Net margin 24.4% 24.5% 15.9%
Industrial Services Net revenue 213,800 208,295 n.a. EBITDA¹ 19,410 19,494 n.a. EBITDA margin 9.1% 9.4% n.a. Net income 1,225 4,918 n.a. Net margin 0.6% 2.4% n.a. ¹ 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 Brazil’s leading provider of specialty engineering
solutions and equipment in revenue. In this unit, the Company’s 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 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 client’s 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 Corrêa S.A.,
Andrade Gutierrez S.A., Construtora OAS Ltd. and Construtora Queiroz Galvão S.A., Barbosa
Mello, Construcap, and many others.
The Company’s 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 Brasília (Brazil’s
capital), the Rio de Janeiro-Niterói Bridge and the Itaipu hydroelectric plant. More recently, the
Company assisted in the construction of the State of São Paulo Beltway (Rodoanel), the subway systems in the cities of Rio de Janeiro and São Paulo, the airports and the renovated e constructed
stadiums for the World Cup, the Estreito hydroelectric plant in the north of Brazil, the João Havelange Olympic Stadium and the Olympic Park in 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.
53
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 equipment,
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 equipment for specific construction works.
The Company’s 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, 2014, the Heavy Construction Business unit had eight operational branches, located in the states of Rio de Janeiro, São Paulo, Minas Gerais, Bahia, Pernambuco, Ceará and
Maranhão 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.
This business unit comprises, on December 31, 2014, 17 operational branches, located in the
states of Amazonas, Bahia, Ceará, Distrito Federal, Espírito Santo, Goiás, Maranhão Mato Grosso,
Minas Gerais, Pará, Paraná, Pernambuco, Rio de Janeiro, Rio Grande do Sul e São 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 2014. 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. 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
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company JLG Industries Inc., world leader in access equipment manufacturing, to rent aerial
platforms and telescopic handlers, the first joint venture in JLG’s 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 Company’s 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 Company’s estimates, based on data of 2011 from Terex and Brazilian import
statistic of 2011, there are currently 34 thousands aerial platforms and telescopic handlers in Brazil. In comparison, 789,000 aerial platforms and telescopic handlers are available in the United
States based on data 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.
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 an 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, 2014, the Equipment Rental business unit was present through 30 operational branches, in the states of Amazonas, Bahia, Ceará, Espírito Santo, Goiás, Maranhão, Mato Grosso,
Mato Grosso do Sul, Minas Gerais, Pará, Paraná, Pernambuco, Rio de Janeiro, Rio Grande do norte, Rio Grande do Sul, Santa Catarina, São 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 Company’s 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
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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 2013 by the “O Empreiteiro” magazine, the Company believes to be
one of Brazil’s major players in providing structures designed to provide access for personnel and materials during the assembly of equipment 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 plant’s maintenance department in planning, erecting and dismantling structures, when and
where they are 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.
The Industrial Services business unit is present in the main industrial centers in Brazil, through
seven branches, in the states of Rio de Janeiro, São 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 unit’s 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 unit’s revenue in 2012. The Company’s clients include some of the largest industrial
groups in Brazil, such as Braskem, Camargo Corrêa, Dow do Brasil, Petrobras, Queiroz Galvão, 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 Company’s 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 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 Company’s commitment to the application of robust safety standards has also been recognized by its clients, as demonstrated by the following
awards: Destaque Petrobrás, Braskem Ouro, TOP Copene, Prêmio Isopol de Segurança, Prêmio DOW for 14 consecutive years of providing services without work loss time injuries, Prêmio 5
Estrelas Arcelor Mittal (five star award), Prêmio Excelência na Construção Bahia (excellency in construction), Prêmio Performance SSMA – Millennium Cristal , Prêmio Reconhecimento pelos
resultados de SSMA in the Braskem unit at Alagoas, Prêmio Zero Acidente Reportável - Dow.
The Company’s 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
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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 Pré-Sal.
7.2 Regarding each operational segment(s) disclosed in the consolidated financial statements for the past fiscal years
a. Commercialized products e services 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
Company’s 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. Load-bearing 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 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 load-
bearing 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
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mechanism. The lower rail supports the truss via an exclusive connecting post, eliminating
the need for additional supports. The Company’s 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 formwork 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, Mills Light, 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 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 self-alignable 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
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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.
Mills Light: Mills Light is a system of self-aligning panels, structured with steel profiles, covered with hardboard plate, and with load capacity of 50 KN/m². It is indicated for all
concrete structures of a large construction.
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 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
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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.
Carrelone is an equipment destined to transport pre-molded beams up to 45.00m of
interspace and up to 140 tons of weight. This equipment is composed of two mobile
gantries mounted above the tires, devoid of engine for its self-handling, needing a loader type cat. 930 or 966 for traction of the set and longitudinal transportation of the beams.
Carrelone has a hydraulic system for direction of the set and lifting of the beams in the
pre-molded building side and its capacity is up to 70 tons per gantry.
Stave lifting cart car equipment. This is an equipment destined to lift pre-molded staves
in bridge and viaduct constructions. This equipment has a hydraulic system for levelling ADN adjustment of the cars and of the stave and electric winches equipped with secure
braking system.
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.
Mills Lock: a system of towers with multidirectional fittings that enables several geometric
forms of towers and can be used as Access scaffold, scaffold of facade, platforms and other ways.
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.
Finally, the steel floor has the lightness demanded to build scaffolds, with the robustness
proportioned by the steel, ensuring a high resistant floor and reliability. The floor’s top coat is made of electrolytic galvanizing that ensures long use in aggressive environments
without suffering oxidation.
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 Company’s 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.
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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 millimetric
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.
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
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compared with the traditional construction system. It allows for daily concrete pouring
cycles, resulting in a home per day.
Tubular Scaffolding. Real Estate business unit’s 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 development 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 stairs are embedded to the tubular frame, making the worker’s 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.
Suspended Scaffolding. Suspended scaffolding are systems that use steel cables fixed to
the buildings’ façades. The electric suspended scaffolding is meant for the execution of services 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, allows greater
speed in façade 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 56 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 tele handlers. 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.
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IPAF Training. 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 a
member of 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 Company’s thirteen Training Centers there are courses of operation certified by
IPAF in accordance with ISO18.878, with instructors trained by IPAF and equipment
manufacturers.
The Company believes that the equipment that make up your portfolio increases the productivity of its clients and contributes to cut down delays and increase the safety of their operations.
Industrial Services
The Company operated in two fronts:
Maintenance. The majority of revenue of this business came from the services that provided maintenance in a continuous way in plants and installations already built, when
the majority of the contracts had duration between one and three years and, in large number of the cases, had been renovated during several years. Also, part of the revenue
came from interruptions in operational activities for longer periods for maintenance, which usually occur once a year in industries that operated continuously. This interruption
meant lower revenue to our clients, which emphasized the performance of the Company
in comparison to the competitors by demonstrating capacity to conduct the labors properly with safety and punctuality, reasons why the Company was repeatedly hired.
New Plants: The Company offered services in assembly of access structures in new
industrial plants, and also for platforms and ships which operated in the Oil and Gas
market. Many times the Company continued the service with the Heavy Construction unit, that operates in civil works.
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 Fiscal year ended December 31
2012 2013¹ 2014
Net Revenue
% of Total Net Revenue
Net Revenue
% of Total Net Revenue Net Revenue
% of Total Net Revenue
(in thousands of R$, except in percentage) Heavy Construction 131,638 19.4% 216,956 20.8% 211,0 26.6% Real Estate 155,761 23.0% 257,964 24.8% 212,4 26.7% Rental 175,410 25.9% 357,342 24.3% 370,8 46.7%
Industrial Services 214,783 31.7% 208,295 20.0% - -
Total 677,592 100% 1,040,557 100% 794,2 100% ¹ Pro-forma results consolidated data considering the Industrial Services business unit, until its sale date.
c. Profit or loss resulting from the segment and its participation in the Company's net income. The table below indicates the net income from each of the business unit and its share in the total
net income on the indicated periods:
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Business unit Fiscal year ended December 31
2012 2013¹ 2014
Net Revenue
% of Total Net Revenue Net Revenue
% of Total Net Revenue Net Revenue
% of Total Net Revenue
(em R$ mil, exceto percentagens) Heavy Construction 36,014 23.8% 48,303 28.0% 23,155 36.0% Real Estate 49,289 32.5% 26,111 15.1% (15,030) (23.4%) Rental 61,774 40.8% 87,460 50.7% 58,783 91.5% Industrial Services 1,225 0.8% 4,918 2.8% - - Others - - 5,800 3.4% (2,640) (4.1%)
Total 151,516 100% 172,592 100% 64,268 100% ¹ 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. Characteristics of the production process The Company outsources the entire process of production of the equipment used in their
operations. See item 7.3(e) below.
b. Characteristics of the distribution process The Company rents its equipment and provides their services according to the needs from their
clients. As of December 2014, the Company was present in 19 states with 55 branches.
For greater details about our equipment, see item 7.2 above. c. Characteristics of the markets, in particular: (i) participation in each market The Company believes to be Brazil’s 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. However, there is no public information about the exact
market share of the Company and its competitors.
(ii) Competition conditions in the markets
Minas Gerais
Rio Grande
do Sul
Santa Catarina
São Paulo
Mato Grosso
do Sul
Rio de Janeiro
(sede)
Espirito Santo
Bahia
Distrito
Federal
Goias
Sergipe
Paraiba
Rio Grande Ceará
Piaui
Maranhão
Tocantins
Pará
Rondônia
Acre
Roraima Amapá
Amazonas
Mato Grosso
Parana
Alagoas
States with Mills' Presence
Pernambuco
do Norte
Rental
Heavy Construction
Real Estate
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Each of the Company’s 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. Heavy Construction The Company believes that its Heavy Construction business unit enjoys an established leading
presence in its segments. The competition is highly qualified with companies which have been in the market for a long time. However, the competitive environment presents stability, with few
new entrants. Real Estate The sector of residential and commercial construction in Brazil is highly fragmented. In
comparison with the Heavy Construction unit, the Real Estate projects are spread, generally, through the whole country in different cities, with smaller in physical dimension terms and have
lower duration with average between four to six months. The recognized reputation of the
Company in the Brazilian market is very important for the success in activities in this business unit. The Company’s biggest advantage is the high velocity to answer the clients. With regional
coverage, the Real Estate unit is closer to its clients, attending their needs with agility and with a variety of equipment taking to better solutions.
In this market, the ability to reduce construction costs and to provide solutions for reducing
execution time and the use of labor 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. Rental
Due to the participation in a still minor market with great potential for expansion, the Rental market presents more dynamism, typified by the entry and exit of new companies and high
investments of the established competitors.
The Company believes that its Rental business unit is one of the major providers of motorized
access equipment, 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 to be leader in this segment.
Industrial Services
The Industrial Services business unit operated in highly competitive market segments. While in
the access segment the Company believed to have solid leadership, in the industrial painting and, in particular, the insulation market, the Company competed 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 information above related to Industrial Services is limited to the Company’s evaluation up to the conclusion of business unit sale, in November 2013.
d. Seasonality
The Company believes that there is not seasonality in its business.
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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 equipment 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.
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. To catch up with demand, equipment is also imported from China, through carefully verified suppliers, which must be within the Company’s high-quality standards.
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, motorized components and pieces are acquired from others suppliers, either national or foreign.
Regarding the inputs, gasoline and diesel are regularly acquired for the motorized equipment in the Rental division. For the Heavy Construction and Real Estate unit, hardboards for the
maintenance and industrialization of the equipment are acquired, 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). Additionally, the Company buys
spare parts for its motorized equipment from other Brazilian and foreign supliers.
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 Company’s 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
In the fiscal years ended December 31, 2012, 2013 and 2014, the Company had no sole clients
accounting for more than 10% of the total net revenue.
7.5 Relevant effects of state regulation on the Company's activities
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
Proteção ao Meio Ambiente, launched an investigation against the Company for the alleged
66
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 Company’s relevant legal, administrative 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 Company’s 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 also 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 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 pieces are 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
67
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 equipment 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
equipment, as detailed in Item 9.1b. In case any of these contracts are discontinued or the
regulation on patents or on the use of technology changes, the Company may have its portfolio of products reduced and its competitiveness affected.
7.6 Countries to which the Company derives revenue
a) revenue from the clients assigned to the host country and their participation share in the Company’s total net revenue;
The Company only operates in Brazil. The fiscal year ended on December 31, 2014, 99.6% 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 Company’s total net revenue;
The fiscal year ended on December 31, 2014, 0.3% of the Company's revenue came from clients located in Angola, 0.08% in Trinidad and Tobago and 0.03% in Venezuela.
c) total revenue from foreign countries and their participation share in the Company's total net revenue.
The fiscal year ended on December 31, 2014, 0.4% of the Company's revenue came from clients
located outside of Brazil.
7.7 Regulation of foreign countries in which the Company obtains relevant
revenue
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 Other information that the Company deems relevant
On May 21st, 2015, the Company´s Board of Directors approved its new code of conduct, available
in http://mills.infoinvest.com.br/enu/1936/150521_CDIGO%20DE%20CONDUTA%20MILLS_i.pdf
68
8. ECONOMIC GROUP
69
8.1 Description of the group which the Company is inserted
a. direct and indirect controllers
The Company’s capital stock is comprised exclusively of common shares. The table below presents the Company’s ownership structure, highlighting the amount of shares held by the Company, its
main shareholders and its Administrators:
NAME Date of last amendment
Participates in shareholder agreement
Controlling shareholder
Quantity of common shares
% Capital Stock
Andres Cristian Nacht 05/28/2015 Yes Yes 14,185,349 11.08%
Jytte Kjellerup Nacht 05/28/2015 Yes Yes 5,354,929 4.18%
Tomas Richard Nacht 05/28/2015 Yes Yes 2,656,845 2.07%
Antonia Kjellerup 05/28/2015 Yes Yes 2,656,845 2.07%
Pedro Kjellerup Nacht 05/28/2015 Yes Yes 2,745,345 2.14%
Francisca Kjellerup Nacht 05/28/2015 Yes Yes 1,000 0.00%
Snow Petrel S.L. 05/28/2015 Yes Yes 17,728,280 13.84%
Andres Cristian Nacht
Mr. Andres Cristian Nacht is a direct controller shareholder of the Company and is part of its board
of employees since 1969, having acted as President Director between 1978 and 1998 and currently acting as President of its Administration Board.
Snow Petrel S.L, Malachite Limited, and Emma Keila Nacht
The tables below show the share ownership of Snow Petrel S.L., member of the Company’s controller group, to the individual level, indicating holders of direct, indirect, equal to or over
5.0% of its capital stock. Both Snow Petrel S.L. and Malachite Limited have their respective ownership exclusively divided in shares with voting rights.
Snow Petrel S.L. Share
Ownership
Shareholder (%)
Malachite Limited ................... 100.0
Total .......................................... 100.0
Malachite Limited Share
Ownership
Shareholder (%)
Emma Keila Nacht............................................ 100.0
Total .................................................... 100.0
Snow Petrel S.L. is a company with headquarter in Barcelona, Spain, at Calle Johann Sebastian
Bach 20, 3rd floor, registered under CNPJ/MF n° 14.740.333/0001-61. Snow Petrel is a part of the
Company´s controlling group and its entire capital stock is held by Malachite Limited, a holding company organized under the laws of Malta and whose shares is fully held by: Miss Emma Keila
Nacht.
Shareholders' agreement of the Company
On February 28, 2014 a new Shareholders Agreement was celebrated without any change in Mills’
corporate control structure, in order to regulate controlling shareholders relationship, as indicated in item 8.1(a) above. The agreement provides, among other measures, clauses on (i) the right
70
to vote by means of a representative, and control power; (ii) nomination of Officers; (iii) share
transfer and priority to buy them.
On May 5th, 2014, the Shareholders Agreement was amended, as to include Francisca Kjellerup
Nacht.
On April 7, 2016, a new shareholder’s agreement was signed concerning the Company, to regulate
the relationship between the Company’s controlling shareholders and the shareholder Fundo de Investimento em Participações Axxon Brazil Private Equity Fund II ("2016 Agreement"). The 2016
Agreement provides for, among other provisions, clauses relating to (i) exercise of voting rights and control; (ii) appointment of directors and committee members; (iii) transfer of shares and
preferential rights for acquiring them; and (iv) restriction or binding of voting rights of members of the Board of Directors.
b. subsidiaries and affiliates.
The Company does not have subsidiaries or affiliates. c. Mills’ shareholdings in companies in the group. 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$90.0 million, paid fully on February 8, 2011.
Rohr is a privately held company specialized in access engineering and solutions for civil
construction and has 45 years of experience in this market. The company serves the following
sectors: heavy construction and infrastructure, residential and commercial construction, industrial maintenance and events.
The Company does not participate in Rohr’s administration, once this was a strategic acquisition,
in which enables the Company to broaden its exposure to the sectors it serves - infrastructure,
residential and commercial construction, the oil and gas industry, among others.
In September 2011, there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by Rohr of 9% of its shares held as treasury stock.
d. Shareholdings in Mills held by companies in the group
Not applicable.
e. companies under common control
See items 8.1(a) above and 8.2 below.
8.2 Organization chart where Company operates, compatible with information
presented in item 8.1.
Officers
2.6%
Controlling Shareholders
35.4%
MILLS ESTRUTURAS E
SERVIÇOS DE ENGENHARIA
S.A.
Others
62.0%
71
8.3 Description of the restructuring operations, such as additions, mergers, splits, incorporation of shares, corporate divestitures and acquisitions, corporate
governance, acquisitions and disposals of important assets, which may have taken
place in the Group.
Date of Operation 7/10/2013 Corporate Event Sale
Operation Description On July 10, 2013, the Company entered into an agreement to sell its Industrial Services business unit
for R$ 102 million through the sale of its stake for the
company Albuquerque Participações Ltda. This sale was in line with the Company's strategy to focus on
businesses in which its competences are able to add higher value for its shareholders and clients.
Date of Operation 12/28/2012
Corporate Event Other Description of Corporate Event Capital Reduction of Nacht Participações S.A.
Operation Description At the Extraordinary General Meeting held on October 29, 2012, the shareholders’ of Nacht Participações
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 Company’s
corporate control.
Date of Operation 3/14/2012 Corporate Event Other
Description of Corporate Event Capital Reduction of Jeroboam Investments LLC Operation Description Transference of the totality of Mills’ shares under
Jeroboam Investments LLC (Jeroboam) to Snow
Petrl, due to the dissolution and consequent extinction of its subsidiary Jeroboam. Therefore,
Snow Petrel now holds 19,233,281 Mills shares, representing 15.3% of its capital stock. There was no
change in the Company’s shareholder control.
8.4 Other information which the Company judges to be relevant.
There is no other relevant information pertaining to this item 8.
72
9. RELEVANT ASSETS
73
9.1 Description of noncurrent relevant assets for the development of the
Company’s activities
a. Fixed assets, including those subject to rent or lease, indicating its location. Most of the Company’s 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 Company’s facilities.
The Company’s main fixed assets are listed in the table below:
Assets Fiscal year ended December 31,
2012 2013 2014
Cost
Accumulated
Depreciation Net Cost
Accumulated
Depreciation Net Cost
Accumulated
Depreciation Net
(em R$ mil) Buildings and
Land 25.156 (1.080) 24.076 24.274 (1.526) 22.748 24.274 (2.196) 22.078
Facilities 1.457 (654) 803 5.470 (1.051) 4.419 7.058 (1.590) 5.468
Equipment 1.219.336 (308.424) 910.912 1.491.854 (362.749) 1.129.105 1.623.268 (489.835) 1.133.433 IT Equipment 9.501 (5.718) 3.783 13.886 (6.594) 7.292 16.003 (8.937) 7.066 Others 25.906 (8.699) 17.207 31.625 (9.799) 21.826 40.961 (14.090) 26.871
Subtotal 1.281.356 (324.575) 956.781 1.567.109 (381.719) 1.185.390 1.711.564 (516.648) 1.194.916
Construction in Progress 46.566 - 46.566 39.086 - 39.086 5.232 - 5.232
Total 1.327.922 (324.575) 1.003.347 1.606.195 (381.719) 1.224.476 1.716.796 (516.648) 1.200.148
The Company’s Facilities
The Company requires, primarily, warehouses to safely and efficiently store the equipment used
in its operations. The Company believes that the location of the warehouses, which covers most part of the Brazilian territory, consists of a relevant competitive advantage, as it is able to rapidly
deploy its equipment to its clients at various locations. The table below shows the Company’s main facilities:
Facility Plot Size Constructed
Area Status
End of Term of Lease
City State Location
Office/ Warehouse
5,000 m² 1,639 m² Rented 08/07/2019 Maceió AL AV Deputado Serzedelo de BarrosCorreia,
6839, Clima Bom - Maceió / AL
Office/ Warehouse
14,984 m²
,2428 m² Rented 05/01/2016 Manaus AM Av. Colantino Aleixo, n°1.849, Puraquequara,
Distrito Industrial II
Office/ Warehouse
4,200 m² 1,200 m² Rented 01/01/2016 Manaus AM Av. Rio Negro, n°1.170, entrada suplementar em Trav. Paraná,
n°01 - Quadra I, Lote 01, Núcleo 4,
LT Rio Piorini, Colônia Terra
Nova, bairro Novo Israel.
74
Office/ Warehouse
6,975 m² 1,558 m² Rented 04/12/2015 Camaçari BA Av. Concêntrica, 137 Centro
Office/ Warehouse
4,644 m² ,2,000 m² Rented 306/31/2015 Simões Filho BA DICA - Distrito Industrial do
Calçado, Quadra 5, Lote 1, CIA
Office/ Warehouse
4,500 m² ,1,286 m² Rented 06/31/2015 Simões Filho BA QD.05 LT.02 , dica ,Cia - Sul
Office/ Warehouse
3,636 m² 1,200 m² Rented 07/31/2019 Sorocaba BH Rua Dr. Alvim Teixeira Aguiar,
815, Lt 5W Sorocaba São
Paulo
Office/ Warehouse
13,552 m²
4,360 m² Rented 01/01/2016 Fortaleza CE Rodovia BR 116, 5360 A KM 14 Bairro Pedras
Office/ Warehouse
3,900 m² 1,750 m² Rented 05/05/2023 Brasília DF Rodovia DF 290, KM 1,2 – Núcleo
Rural Hortigranjeiro de
Santa Maria
Office/ Warehouse
20,000 m²
17,011 m² Rented 10/25/2021 Brasília DF Rodovia DF 290, KM 1,2 – Núcleo
Rural Hortigranjeiro de
Santa Maria
Office/ Warehouse
10,000 m²
3,675 m² Rented 09/03/2017 Serra ES Rua 7, nº 170, Quadra XIV –G, Lotes 01 ao 04 –
Civit II
Office/ Warehouse
11,689 m²
1,849 m² Rented 10/27/2015 Goiânia GO Rodovia BR 153, s/n Quadra CH Lote 11 e 12
Chácaras Retiro
Office/ Warehouse
47,076 m²
3,388 m² Rented 01/03/2018 São Luís MA Av. Engenheiro Emiliano Macieira, 116, BR 135, Km 2,5, Galpão 04,
Disol, Bairro Tibiri
Office/ Warehouse
5,258 m² ,2,750 m² Rented 10/29/2013 Belo Horizonte
MG Rodovia Anel Rodoviário Celso Mello Azevedo,
24.139, São Gabriel.
Office/ Warehouse
3,386 m² ,1,351 m² Rented 12/31/2013 Belo Horizonte
MG Rodovia Anel Rodoviário BR 262, nº 24277, Km 24- Dom
Silvério
Office/ Warehouse
2,000 m² 2,000 m² Rented Belo Horizonte
MG Rua Jacuí, São Gabriel, 8090
Office/ Warehouse
2,869 m² 64 m² Rented 01/11/2016 Uberlândia MG Rua Nicarágua, 1656 Tibery, Lote 01, 02, 03, 04 ,05
,06.
Office/ Warehouse
25,000 m²
4,179 m² Rented 01/31/2023 Contagem MG AV Helena Vasconcelos Costa, 785,
75
Contagem - Minas Gerais
Office/ Warehouse
3,452 m² 1,200 m² Rented 01/07/2019 Juiz de Fora MG Rua Vera Lúcia Barros de Paula, n185, Lt 02, Qd 11-A - Juiz de
Fora
Office/ Warehouse
48,370 m²
2,511 m² Rented 10/06/2019 Pouso Alegre MG Rod BR 459, S/N, KM 108, I piranga - Pouso Alegre /
MG
Office/ Warehouse
3,750 m² 848 m² Rented 08/26/2018 Três Lagoas MS Av. Ranulpho Marques Leal, 179, Lote 01 A
Quadra 21, Jardim Brasília
Office/ Warehouse
3,600 m² 940 m² Rented 05/01/2016 Cuiabá MT Rua B, n.º 632- Complemento L1 à L5 com 2-AV. B ESQ/B-E –Distrito
Industrial
Office/ Warehouse
4,320 m² Obra em andamento
Rented 05/05/2016 Cuiabá MT Av. D, n°504 – (Lot Dist Ind
Setor Industrial), área A, Distrito
Industrial
Office/ Warehouse
7,500 m² 1,280 m² Rented 11/01/2018 Parauapebas PA Rodovia PA 275, s/n KM 67 Zona
Rural
Office/ Warehouse
2,632 m² Rented 05/25/2019 Ananindeua PA Rua Leopoldo Teixeira, s/n Lt 44
e 46, Centro, Ananindeua - Pará
Office/ Warehouse
17,500 m²
1,100 m² Rented 09/30/2017 Ananindeua PA Rua Jardim Providênia, 242, BR 316, KM 4,
Distrito 2, Qd 8, Lt 255 – Águas
Lindas
Office/ Warehouse
19,740 m²
,3,888 m² Rented 09/15/2019 Cabo de Santo
Agostinho
PE Rua Interna 07, nº 645 Pontezinha
83 e 85 (Estacionamento), (Módulos 128 e 129), (Módulos
15, Parte e 130 a 133)
Office/ Warehouse
12,640 m²
1,700 m² Rented 10/30/2015 Cabo de Santo
Agostinho
PE Rua Interna 07, nº 645 Pontezinha
(Módulos 15, Parte e 130 a
133)
Office/ Warehouse
5,000 m² 2,188 m² Rented 09/19/2016 Cabo de Santo
Agostinho
PE Rua Interna 07, nº 645 Pontezinha
(Módulos 128 e 129)
Office/ Warehouse
17,982 m²
7,365 m² Rented 04/30/2018 Curitiba PR Rua Paul Granfunkel,
n°1625, Cidade Industrial,
Curitiba, PR
76
Office/ Warehouse
2,880 m² 1,331m² Rented 02/09/2016 Itaboraí RJ Avenida 22 de Maio, n.º 4.100,
Manoel dos Santos Cid
Office/ Warehouse
74,551 m²
1,000 m² Rented 01/23/2017 Itatiaia RJ Rodovia Presidente Dutra, KM 316, Galpão 2, Área “A”, Centro
Office/ Warehouse
54,793 m²
11,032 m² Owned N.A. Rio de Janeiro
RJ Estrada do Guerenguê, 1381
- Taquara
Office/ Warehouse
N.A. 293 m² Owned N.A. Rio de Janeiro
RJ Av. das Américas, 500, bloco 14,
Salas 207 e 208 , Barra da Tijuca
Office/ Warehouse
N.A. 216 m² Rented 01/24/2015 Rio de Janeiro
RJ Av. das Américas, 500, bloco 14,
loja 108, Barra da Tijuca
Office/ Warehouse
2,000 m² 972 m² Rented 05/09/2018 Macaé RJ Filial - Av. Aristeu Ferreira da Silva, SN, Granja dos
Cavaleiros, Macaé- RJ
Office/ Warehouse
8,173 m² 226 m² Rented 01/01/2018 Parnamirim RN Rodovia BR 101, S/N, Km 8, Lado
02 (oeste), Parque Industrial,
Emaús.
Office/ Warehouse
8,064 m² 1,882 m² Rented 12/01/2014 Porto Alegre RS Av. Manoel Elias,1480 Bairro Passo das Pedras
Office/ Warehouse
23,316 m²
3,015 m² Rented 07/10/2018 Cachoerinha RS Rua Engenheiro Agrônomo Bonifácio
Bernardes, 220, Qd M, Lt 1 -
Cachoerinha - Rio Grande do Sul
Office/ Warehouse
4,800 m² 700 m² Rented 01/09/2016 Rio Grande do Sul
RS AV Itália, 2240, Parte, Carreiros, Rio Grande/RS
Office/ Warehouse
5,105 m² 687 m² Rented 09/14/2016 Itajaí SC Rua José Gall, 1.700 –
Ressacada
Office/ Warehouse
6,480 m² 883 m² Rented 07/20/2018 Aracaju SE R O (Distrito Industrial de
Aracaju), 185, Inácio Barbosa
Office/ Warehouse
850 m² ,350 m² Rented 08/31/2015 São José dos Campos
SP Rodovia Presidente Dutra,
s/n KM 154,7 Edifício 36 Rio
Comprido
Office/ Warehouse
49,620 m²
18,841 m² Rented 01/31/2018 Osasco SP Rua Humberto de Campos, 271, Vila
Yolanda
77
Office/ Warehouse
30,941 m²
2,415 m² Rented 10/05/2017 Campinas SP Rodovia Anhanguera, s/n,
km 103,5 – Jardim Aparecida
Office/ Warehouse
5,060 m² 2,998 m² Rented 06/01/2018 Bauru SP Filial - Rodovia Marechal Rondon, Km 348, Bauru-SP
Office/ Warehouse
1,170 m² 343 m² Rented 01/01/2017 São Vicente SP Avenida João Franciso Bendorp, 803, Qd 135, Lt 01 a 03, Cidade Náutica - São
vicente
Office/ Warehouse
4,764 m² 160 m² Rented 02/28/2015 Ribeirão Preto
SP Estrada das Palmeiras, 1150,
Bairro das Palmeiras
Office/ Warehouse
2,291 m² 929 m² Rented 10/19/2019 Guarulhos SP Estrada Municipal (Vila Dinamarca), nº 642, LT 19 - Guarulhos / 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 Country of Location
Municipality of Location
Type of propriety
Real property Brazil Rio de Janeiro Owned
Land Brazil Rio de Janeiro Owned
Equipment for rent (formwork, shoring and equipment machines) Brazil Owned
IT Equipment Brazil Owned
Facilities Brazil Owned
Construction in progress Brazil Owned
b. Patents, trademarks, licenses, concessions, franchises and contracts for technology transfer:
DURATION REGISTRATION
# COVERAGE TERRITORY
Events that may cause the loss of
the rights
Consequences of losing the rights
Awaiting approval for extension 740164244
NATIONAL The requested brand registrations still not granted by the INPI do not have term of
effectiveness established and may still be refused. The granted registrations may be challenged through, invalidity
lawsuits, in the event of an invalid granted registration, either by
revocational applications, partial or total, in case the brand is not being
utilized, to mark all of the products or
services included in the registry
The impact cannot be qualified. The loss of rights over the brands
imply the impossibility to prevent third-parties
from using the identical brands or similar to
mark, specially, services or competing products, once the holder loses its right to use exclusively.
There is also the possibility that the
holder suffers criminal and civil lawsuits, for
misuse in case of infringement of third
parties, possibly resulting in the inability
to use the brand to conduct their activities.
Awaiting approval for extension 780190670 NATIONAL
03/25/2020 7200595 NATIONAL
12/07/2022 800121546 NATIONAL
08/30/2021 829369724 NATIONAL
02/08/2019 812940792 NATIONAL
12/18/2021 821121316 NATIONAL
12/18/2021 821121324 NATIONAL
12/18/2021 200018167 NATIONAL
10/31/2015 817692177 NATIONAL
10/31/2015 817692215 NATIONAL
10/31/2015 817692223 NATIONAL
10/31/2015 817692231 NATIONAL
09/25/2019 6989454 NATIONAL
09/25/2019 6989462 NATIONAL
78
Awaiting approval for extension 200065726
NATIONAL certificate. The brand registrations, which had requested an
extension, may still be awaiting its
approval of INPI. In the judicial sphere, despite the fact that the Company already is a holder of several brands, we cannot ensure that third-
parties will not claim that the Company
violated the intellectual property rights and eventually succeed in court. The
Company is not aware of any
procedure violation by the Company other than those described in this
Reference Form. The brand registration
maintenance is done by periodic fee
payments to the INPI.
Consequently, the Company would have to incur the costs related
to the creation and promotion of any new brand, extraordinary
marketing initiatives and use of human resources and management’s time
to deal with this situation.
Awaiting approval for extension 608965065
NATIONAL
Awaiting approval for extension 800221737
NATIONAL
09/27/2018 812987683 NATIONAL
05/30/2019 812987691 NATIONAL
09/13/2018 813141010 NATIONAL
05/30/2019 813782414 NATIONAL
Awaiting approval for extension 815236662
NATIONAL
02/12/2024 830724915 NATIONAL
Awaiting for INIP decision about brand concession
830724931
NATIONAL
04/24/2017 824647548 NATIONAL
04/24/2017 824647556 NATIONAL
03/25/2016 6268625
NATIONAL
DURATION REGISTRATION
# COVERAGE TERRITORY
Events that may cause the loss of
the rights
Consequences of losing the rights
Order Status: Awaiting for granting
PI0705035-6 NATIONAL The requested brand
registrations still not granted by the INPI do not have term of
effectiveness established and may still be refused. The
loss of rights can occur by the expiry of the concession
term set forth by law, in cases of patents and utility models,
since they cannot be extended. In the judicial sphere,
despite the fact that the Company already is a holder of several brands, we cannot ensure that third-
parties will not claim that the Company
violated the intellectual property rights and eventually succeed in court. The
Company is not aware of any
procedure violation by the Company other than those described in this
Reference Form. The brand registration
maintenance is done by periodic fee
The impact cannot be qualified. The loss of rights over the brands
imply the impossibility to prevent third-parties
from using the identical brands or similar to
mark, specially, services or competing products, once the holder loses its right to use exclusively.
There is also the possibility that the
holder suffers criminal and civil lawsuits, for
misuse in case of infringement of third
parties, possibly resulting in the inability
to use the brand to conduct their activities.
Consequently, the Company would have to incur the costs related
to the creation and promotion of any new brand, extraordinary
marketing initiatives and use of human resources and management’s time
to deal with this situation.
In requirement Status BR 30 2013 002803-8
NATIONAL
06/13/2018 BR 30 2013 002802-0
NATIONAL
Order Status: Awaiting for granting
BR 10 2013 013430-9
NATIONAL
Requirement compliance – In order status
BR 30 2013 002801-1
NATIONAL
Concession term expired MU7801603-7
NATIONAL
Concession term expired MU7903337-7
NATIONAL
Concession term expired MU7902162-0 NATIONAL
Concession term expired MU7903347-4 NATIONAL
09/11/2024. MU8901783-8 NATIONAL
Order Status: Awaiting for granting
MU8901887-7 NATIONAL
Order Status: Awaiting for granting
PI1004014-5 NATIONAL
Order Status: Awaiting for granting
PI1101068-1 NATIONAL
Order Status: Awaiting for granting
PI1003939-2 NATIONAL
Order Status: Awaiting for granting
MU9101029-2
NATIONAL
79
payments to the INPI.
c. Companies in which the Company has a share participation The Company does not have any subsidiaries or affiliated Companies 9.2 Other information the Company deems relevant
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 Gestão de Recursos Ltda., through the sale of its stake in the company Albuquerque Participações 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.
Investments
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 São Paulo,
Estado de São 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, 2014)
(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
80
(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$90.0 million. In September 2011, there was a rise in the stake held in Rohr to 27.5%, resulting from
the repurchase by Rohr of 9.0% of its shares held as treasury stock.
(x) Appreciation or depreciation of such ownership, over the last 3 fiscal years,
according to the market value, to stock price at the date of the fiscal year, when such stocks are traded on organised markets of securities: not applicable
(xi) Dividends received in the 3 last fiscal years:
2014 -> R$ 1,818 thousand as interest on capital related to the fiscal years of 2014,
registered as financial revenue of 2014.
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.
(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.
81
10. MANAGEMENT COMMENTS
82
10.1 The management should comment on.
a. Financial status and general assets
The Company presented ownership and financial favorable conditions, presenting operational profit generation, operational cash generation and reasonable leverage level. The management
of the Company believes that current cash level together with cash generation capacity, even in
a negative scenario, are sufficient for the Company to honor its financial obligations.
Mills presented in 2014 R$ 794.2 million of net revenues and free cash flow of R$ 116.1 million. This is the first time Mills achieved positive cash generation, after years of high investments,
which enabled its organic growth, geographic expansion, and manly, the consolidation of its leadership in its markets. Net revenues amounted to R$ 832.3 million in 2013 and R$ 879.3 million
in 2012.
Net earnings amounted to R$ 64.3 million in 2014, versus R$ 167.7 million of net earnings from
continuing operations in 2013. In 2013 there was a net positive effect of R$ 8.2 million due to the sale of the Industrial Services business unit. Excluding extraordinary items for both periods,
net earnings in 2014 would total R$ 81.7 million, against net earnings from continuing operations
of R$ 159.5 million in 2013. In 2012, net earnings totaled 151.1 million.
Mills’ total debt was R$ 745.4 million as of December 31, 2014 versus R$ 632.6 million at the end of 2013 and R$ 622.5 million at the end of 2012. At the end of the year our net debt position was
R$ 551.7 million, versus R$ 606.5 million at the end of 2013 and R$ 400.7 million at the end of 2012. The debt amortization schedule includes payment of R$ 206 million as principal and interest
in 2015, of which a payment of R$ 44 million was already made in January, without rolling over,
reducing our gross debt.
Our leverage, as measured by net debt/LTM EBITDA, was at 1.6 times as of December 31, 2014. The total debt/enterprise value was 42%, while interest coverage, as measured by LTM
EBITDA/LTM interest payments, was 4.8 times. At the end of 2013, our leverage, was at 1.5
times, while interest coverage (LTM EBITDA/LTM) was 8.3 times. In 2012, net debt/LTM EBITDA ratio was at 1.2%. The total debt/enterprise value was 13.2%, while interest coverage was 7.6
times.
b. Capital structure and stock redemption possibility According to the Company's balance sheet on December 31, 2014, the capital structure of Mills
was 56.0% equity, measured by the stockholders’ equity, and 44.0% capital from third party, measured by total liabilities.
According to the Company's balance sheet on December 31, 2013, the capital structure of Mills was 56.4% equity, measured by the stockholders’ equity, and 43.6% capital from third party,
measured by total liabilities.
According to the Company's balance sheet on December 31, 2012, the capital structure of Mills
was 51.6% equity, measured by the stockholders’ equity, and 48.4% capital from third party, measured by total liabilities.
On December 31, 2014, our debt was 21% short-term and 79% long-term, with an average maturity of 2.4 years, at an average cost of CDI+0.68%. In terms of currency, 100% of Mills’
debt is in Brazilian Reais. On December 31, 2013, our debt was 20% short-term and 80% long-term, with an average maturity of 2.1 years, at an average cost of CDI+1.00%. On December
31, 2012, our debt was 9% short-term and 91% long-term, with an average maturity of 3.0 years, at an average cost of CDI+1.45%.
On November 10th, 2014 Mills’ Board of Directors approved a program to repurchase common shares of Mills’ issuance, with the objective of acquiring up to 4,000,000 shares, with a deadline
of 365 days as of the date of approval, for treasury and subsequent cancellation or alienation,
83
including in the context of any exercise of options under its stock option program, in the case of
exercise of options. Up to December 31st, 2014, the Company acquired and kept in treasury
1,182,900 shares, with a total value of R$ 11 million.
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. Payment capability in relation to the financial commitments assumed The Company’s EBITDA for the year ended December 31st 2014, was R$ 335.7 million and its
financial expenses, net of financial revenue in the same period were R$ 67.6 million. Thus, the Company’s EBITDA for year ended December 31st 2014 presented a coverage ratio of 5.0 times
its net financial expenses during the same period. Only considering its financial expenses, which
amounted to R$ 67.6 million as of December 31st, 2014, the coverage ratio would be 3.6 times.
The Company’s total indebtedness for the year ended December 31st 2014, amounted to R$ 745.4 million, or 2.2 times the Company’s EBITDA for the year ended December 31st 2014. The flow of
payment from this debt, considering the debt profile as of that date, will take place in a period of seven years, of which R$ 153.8 million in less than one year, R$ 172.8 million from 1 to 3 years,
R$ 373.2 million in a period between 3 to 5 years and R$ 44.5 million in more than five years.
The Company´s 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.
In addition, on December 31st 2014, the Company had registered on its balance sheet the amount
of R$ 10.1 million, which refers to the Tax Recovery Program (“REFIS”) with a maturity of 180
months. The Company is compliant to the remainder installments amounting R$ 10.1 million, of which the last installment matures in December, 2024.
This way, the Company's management believes that its cash generation is sufficient to meet its
financial commitments. In 2014, cash generated was above investment needs for the first time
since its IPO, with a net balance of R$ 116.1 million.
The Company’s EBITDA for the year ended 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
Company’s EBITDA for year ended 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 December 31st 2013, the coverage ratio would be
6.7 times.
The Company’s total indebtedness for the year ended December 31st 2013, amounted to R$ 632.6 million, or, 1.6 times the Company’s EBITDA for the year ended December 31st 2013. In addition,
on December 31st 2013, the Company had registered on its balance sheet liabilities in the amount
of R$ 10.4 million, which refers to the Tax Recovery Program (“REFIS”).
The Company’s EBITDA for the year ended December 31st 2012, was R$ 358.4 million and its financial expenses, net of financial revenue in the same period were R$ 39.2 million. Thus, the
Company’s EBITDA for year ended December 31st 2012 presented a coverage ratio of 9.1 times its net financial expenses during the same period. Only considering its financial expenses, which
amounted to R$ 51.2 million in the year ended December 31st 2012, the coverage ratio would be
7.0 times.
84
The Company’s total indebtedness for the year ended December 31st 2012, amounted to R$ 622.5
million, or, 1.7 times the Company’s EBITDA for the year ended December 31st 2012. In addition,
on December 31st 2012, the Company had registered on its balance sheet liabilities related to the Tax Recovery Program (“REFIS”), which amounted to R$ 10.7 million.
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 December 31st of 2012, 2013 and 2014, the Company was within the limits of contractual
financial indicators.
d. Source of financing for working capital and investments in non-current assets. 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 to
capital from its shareholders or third parties, through the issuance of shares.
On April 23rd, 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 3rd, 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 August 15th, 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 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 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 Itaú BBA S.A. totaling US$ 16.9 million (equivalent to R$40.0 million). The settlement of
the loan will be made in a single installment, paid on January 30, 2015, without rolling over.
Payment of interest will occurred twice a year. In order to eliminate the foreign exchange risk on this borrowing, on the same date a swap was contracted with Banco Itaú BBA S.A. in the amount
of R$ 40 million so that the obligations (principal and interest) are fully converted into local currency and carried out on the same maturity dates.
On April 11th, 2014 the Company issued commercial promissory notes with a total amount of R$ 200.0 million. Remuneration interest charges will fall due corresponding to 106% of the
accumulated variation in the average daily Domestic Demand (DI) rates. The net proceeds of the offering were used for: (a) refinancing of Company’s debt, (b) rental equipment acquisition and
(c) Company’s general uses and expenses.
On May 30th, 2014 the Company issued a series of simple debentures for a total amount of R$
200 million, non-convertible into shares, unsecured, with maturity date on May 30rd, 2019. The nominal value of the this series debentures will be amortized in three annual installments starting
on the third year of the issuance, and the interest paid semi-annually and equal to surtax of
85
108.75% per annum of 100% of DI accrued variation. The liquid resources obtained by the
Company through the third debenture issuance were fully used to settlement of Company’s 4th
edition promissory notes, issued on 11th April, 2014.
e. Potential sources of financing used for working capital and for investments in non-current assets.
The Company’s main sources of liquidity are:
cash flow from our operations;
financing agreements and through capital market; and
increases in its capital stock.
The Company’s main liquidity requirements are:
investments for maintenance and increase of the equipment inventory;
working capital needs;
investments in the Company’s facilities and the technology center, which are necessary
to support its operations;
investments in the improvement of processes and controls;
investments in training and occupational safety; and
distribution of dividends and payment of interest on equity.
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. Debt level and composition: (i) relevant loan and financing contracts The table below shows the outstanding balances of the Company’s loans and financings,
organized by interest rate as of December 31st, 2012, 2013 and 2014:
As of December 31st,
Yearly Interest Rate¹ 2012 2013 2014
(in R$ million) Financings provided by financial institutions CDI+0.29% 27.3 40.2² 44.7² Financings provided by financial institutions TJLP+0.2% to 0.9% 26.7 23.4 18.7 Leasing agreements entered into with financial institutions
CDI + 2.5% to 3.8% 18.0 8.2 -
Non-convertible debentures 112.5% of CDI 272.5 274.4 184.4
Non-convertible debentures 1st series: CDI + 0.88% 164.7 165.9 168.1 2nd series: IPCA + 5.5% 113.3 120.6 128.7
Non-convertible debentures 108.75% of CDI 202.0 Total 622.5 632.6 746.6 ¹ In December 31, 2014. ² Including loans with financial institutions indexed to the U.S. dollar plus 2.13% interest per year in the amount of R$ 39.9 million contract or $16.9 million
and a swap operation to cancel the risk of exchange rate variation of this loan.
Short-Term Debt
As of December 31, 2014, short-term debt amounted to R$ 155.0 million, compared to R$ 125.3
million as of December 31, 2011, an increase of R$ 29.7 million or 23.7%. This increase was due to the interest and monetary adjustment of Company’s 3rd debentures issuances issued in May,
2014.
As of December 31, 2013, short-term debt amounted to R$ 125.3 million, compared to R$ 54.8
million as of December 31, 2012, an increase of R$ 70.5 million or 128.7%. This increase was primarily due to the payment of the 1st installment amortization, in April 2014, of the 1st issuance
86
of the Debentures issued in April 2011 with maturity in April 2014. Remaining amortization will
be in April 2015 and April 2016.
Long-Term Debt As of December 31st, 2014, the Company’s long-term debt amounted to R$ 590.4 million,
compared to R$ 507.3 million as of December 31, 2013, an increase of R$ 83.2 million or 16.4%.
This increase was mainly due to following points: (i) the liquid effect of 3rd debentures issuances in May 2014; and (ii) to the transfer of long-term debt to short-term debt of 2nd installment
amortization in April 2014, of debentures issued in April 2011.
As of December 31st, 2013, the Company’s 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. Relevant Financial Contracts
Borrowings were used for financing the expansion of Company’s investments and for its general
expenses and uses, being indexed to CDI, TLP and US dollars. For borrowings in foreign currency, financial instruments were contracted hedge the Company against fluctuations in foreign
exchange rates.
Financing agreement for rental equipment were agreed based on Long-Term Interest Rate (TJLP in Brazil) plus interest of 0.2% to 0.9% per year, with monthly amortization through June 2021.
The financial institutions with which the Company has borrowings as at December 31, 2014 are
as follows:
Banco do Brasil Itaú BBA Itaú BBA S.A, Sucursal Nassau
On December 6, 2013 the Company entered into a borrowing agreement with Banco Itaú BBA S.A., Nassau Branch, in the amount of US$16.9 million (equivalent to R$40.0 million). The
settlement of the loan will be made in a single installment, paid on January 30, 2015, without rolling over. Payment of interest will occurred twice a year. In order to eliminate the foreign
exchange risk on this borrowing, on the same date of the borrowing the Company entered into a
swap transaction with Banco Itaú BBA S.A. in the amount of R$40.0 million in order to convert the obligations (principal and interest) into local currency and on the same maturity dates.
Debentures
On April 8, 2011 approval was granted for the issuance by the Company of a total of 27,000 debentures in a single tranche, of non-convertible unsecured debentures, of a total amount of R$
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 August 15, 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
87
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. Transaction costs related to this issuance are recognized as capital
funding expenses, according to contract terms.
On April 23, 2014 approval was granted for the issuance by the Company of a total of 20,000 debentures in a single tranche, of non-convertible unsecured debentures, of a total amount of R$
200.0 million, and unit face value of R$ 10,000, issued on June 18, 2014. The debentures have maturity on May 30, 2019, with remuneration equivalent to 108.75% of the CDI rate and semi-
annual payments of interest and amortization in three consecutive installments, with the first
maturity date on May 30, 2017. The transaction costs associated with this issue, in the amount of R$ 0.7 million, are being recognized as Company funding expenses, in accordance with the
contractual terms of the issue.
As of December 31, 2014 the balance of debentures including transaction costs is R$ 106.3 million
in current liabilities and R$ 577.1 million in non-current liabilities, and R$ 105.3 million and R$ 575.5 million, net of transaction costs, respectively.
Promissory Notes 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 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 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.
On April 11, 2014 the Company issued in a single series 20 commercial promissory notes with unit face value of R$10,000, totaling R$200,000 and with maturity on August 8, 2014. The unit
value of the promissory notes bears interest equivalent to 106% of the accumulated fluctuation of the average daily interbank deposit (DI) rates. On June 18, 2014 the Company fully paid these
promissory notes with the proceeds from its third issue of debentures.
Finance leases Referred basically to agreements for purchase of rental equipment with periods between 36 and
60 months, maturities through 2015 and indexed to the CDI plus interest of 2.50% to 3.80% per year. This obligation was collateralized by the its own leased assets. The Company settled in
advance all the existing finance lease agreements during the third quarter of 2014.
(ii) other long-term relationships with financial institutions The Company adopts the policy of reducing the cash risk relating to foreign exchange variation
on a conservative basis since all its revenues are earned in Brazilian reais. Therefore, the Company enters into NDF contracts with financial institutions for hedging purposes. All these contracts set
the future exchange rate from reais to dollars.
88
These derivative instruments contracted by the Company have the intention to protect it, on their
equipment 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.
The Company has also borrowing agreements in dollars and in order to cover substantially the foreign exchange risk it entered into swap transactions.
On December 6, 2013 the Company entered into a borrowing agreement with Banco Itaú BBA S.A., Nassau Branch, in the amount of US$16.9 million (equivalent to R$40.0 million). Principal
was settled in a bullet payment on January 30, 2015 without rolling over. In order to eliminate the foreign exchange risk on this borrowing, on the same date of the borrowing the Company
entered into a swap transaction with Banco Itaú BBA S.A. in the amount of R$40.0 million in order to convert the obligations (principal and interest) into local currency and on the same maturity
dates.
On December 31st, 2014, the Company did not possessed purchase orders with foreign suppliers
of equipment valued, being the value presented (US$ 0.3 million) in foreign suppliers account related basically to installment purchase of equipment (in 2013 these orders totaled US$ 71.3
million, and in 2012 these orders totaled US$ 72.8 million).
(iii) degree of subordination between the debts The Debentures issued by the Company are all unsecured debentures.
Most of the guarantees offered by the Company refers to loans contracted in previous years,
when the financial situation required that the Company offered substantial guarantees to facilitate
its access to credit.
After its initial public offer of shares held in April 2010, the Company conducted financing operations with real guarantee only for FINAME, credit line from BNDES to finance investments
in manufacturing portion of its equipment, where, at the request of the financing contract, the
equipment manufactured is disposed to the end of the financing contract, presenting a balance of R$ 33.1 million in 31st of December, 2014.
The management of the Company believes that the existing terms relating to the provision of
guarantees does not significantly restrict the ability to contract new debt to meet our capital
needs.
(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 Company’s 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, 2012, 2013 and 2014, the Company was in compliance with the required levels for the indicators.
Additionally, some of the Company’s long term financial instruments have restrictions related to
(i) change of transfer of the controlling stake (direct or indirect) and (ii) asset disposals when the amount represents more than 15% of the total assets of the Company, based on the consolidated
Financial Statements of the Company. In the case the Company is in default of any of its financial
obligations, it will not be able to distribute any profits to its shareholders above the minimum mandatory dividend as determined by Law, as defined in the relevant documents.
89
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. limits of use of financing already concluded On December 31, 2014, the Company had no limits to use in financing transactions already
contracted. At the same date the Company had unsecured overdraft account, not used, reviewed
annually of 570.2 million and Secured bank credit account used of R$ 64.5 million, with varying maturities and that can be extended in a common agreement.
On December 31, 2013, the Company had no limits to use in financing transactions already
contracted. At the same date the Company had unsecured overdraft account, not used, reviewed annually of 477.5 million and Secured bank credit account used of R$ 71.5 million, with varying
maturities and that can be extended in a common agreement.
On December 31, 2012, the Company had no limits to use in financing transactions already
contracted. At the same date the Company had unsecured overdraft account, not used, reviewed annually of 492 million and Secured bank credit account used of R$ 72 million, with varying
maturities and that can be extended in a common agreement.
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. significant changes in each item of the financial statements 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, 2012, 2013 and 2014 refer only to net revenue, not to the gross revenue.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
90
Year ended December 31st (in millions of R$, except percentage)
2012 AV(1)
(%)
AH(2)
(%) 2013
AV(1)
(%)
AH(2)
(%) 2014
AV(1)
(%)
AH(2)
(%) Net revenue from sales and
services 879.3 100.0% 29.8% 832.3 100.0% -5.3% 794.2 100.0% -4.6%
Heavy Construction 174.1 19.8% 32.3% 217 26.1% 24.6% 211.0 26.6% -2.7% Real Estate 238 27.1% 52.8% 258 31.0% 8.4% 212.4 26.7% -17.7%
Industrial Services 213.8 24.3% -0.5% - - -100.0% - - - Rental 253.5 28.8% 44.5% 357.3 42.9% 41.0% 370.8 46.7% 3.8%
Cost of Sales and Services -410.9 46.7% 20.7% -334.9 40.2% -18.5% -362.4 45.6% 8.2%
Gross Profit 468.3 53.3% 38.9% 497.3 59.8% 6.2% 431.8 54.4% -13.2%
Operating Revenues (Expenses) Other operating income - - - 8.3 1.0% - - - - General and Administrative -218.5 24.8% 24.7% -225.4 27.1% 3.2% -273.8 -34.5% 21.5%
Operating Profit 249.9 28.4% 54.3% 280.2 33.7% 12.1% 157.9 19.9% -43.6%
Financial Expenses -51.2 5.8% 9.9% -60 7.2% 17.2% -92.8 11.7% 54.6%
Financial Income 12.1 1.4% -17.7% 13.2 1.6% 9.1% 25.2 3.2% 90.9% Profit Before Income Tax and
Social Contribution 210.7 24.0% 62.0% 233.4 28.0% 10.8% 90.3 11.4% -61.3%
Income Tax and Social Contribution -59.2 6.7% 55.8% -65.7 7.9% 11.0% -26.1 3.3% -60.3%
Profit from continuing operations 151.5 17.2% 64.3% 167.7 20.1% 10.7% 64.3 8.1% -61.7% Profit from discontinued operations - - - 4.9 0.6% - - - -
Net Income for the Year 151.5 17.2% 64.3% 172.6 20.7% 13.9% 64.3 8.1% -62.8% (1) Vertical analysis, which is a percentage of total net sales and services (2) Horizontal analysis, which is the percentage of variation in the income statement accounts between fiscal years indicated.
Year ended December 31st, 2014 compared with year ended December 31st, 2013 Revenue of Products Sold and Services Provided
In the year ended December 31st, 2014 the Company’s net revenue from sales and services
reached R$ 794.2 million. For comparison purposes, there was an reduction of R$ 38.1 million, or 4.6% yoy. This decrease comes mainly from the lower revenue from sales and technical
assistance. 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$ 211.0 million in 2014, with a slight drop of 2.7% compared to 2013. The management of the Company attributed this reduction
as a result of the 29.7% drop in sales revenues, technical assistance and others, due to projects not favorable to equipment purchase, instead of renting.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 212.4 million in 2014, with a drop of 17.7% compared to 2013, negatively impacted by a decrease of 17.9% in rental revenues and of
25.3%, in sales revenues. The management of the Company attributed this reduction as a result
of a deterioration of Real Estate market in Brazil, influenced by political and economic uncertainties, higher interest rates and weakness of economic activity.
Rental
Net revenue from the Rental business unit totaled R$ 370.8 million in 2014, new annual record,
being 3.8% greater than that 2013. On the evaluation of the management of the company, this
increase is mainly associated with increasing fleet of equipment and, therefore, in rented volume due to investments in organic growth since 2010.
91
Cost of products sold and services rendered and general and administrative expenses The table below shows the Company’s cost of goods sold and services rendered by nature in
fiscal years ended December 31, 2013 and 2014.
Year ended on December 31st,
2013 Year ended on December 31st,
2014 Variation 2014 x 2013(1)
Direct
cost of constructi
on and
renting
General
and Administr
ative
Expenses Total
Direct
cost of constructi
on and
renting
General
and Administr
ative
Expenses Total
Direct
cost of constructi
on and
renting
General
and Administr
ative
Expenses Total
(in R$ million)
Labor -58.8 -107.4 -166.2 -63.0 -113.3 -176.4 -4.3 -5.9 -10.2
Third-party Services -5.0 -20.4 -25.5 -6.5 -28.2 -34.7 -1.5 -7.8 -9.2
Freight -15.5 -0.8 -16.2 -16.3 -0.6 -16.9 -0.8 0.1 -0.7
Construction Material
/ Maintanance and Repair
-43.5 -6.1 -49.6 -44.5 -7.0 -51.5 -1.0 -0.9 -1.9
Rent Equipment -5.9 -15.0 -20.8 -5.3 -18.2 -23.6 0.5 -3.3 -2.8
Travel -5.0 -11.6 -16.5 -3.8 -10.5 -14.3 1.2 1.0 2.2
Cost of Sales -68.0 0.0 -68.0 -53.2 0.0 -53.2 14.9 0.0 14.9
Depreciation ad
Amortization -122.6 -8.4 -131.0 -152.9 -15.4 -168.3 -30.3 -7.0 -37.3
Asset impairment -8.9 0.0 -8.9 -13.7 0.0 -13.7 -4.9 0.0 -4.9
Allowance for Doubtful Debts
0.0 -16.2 -16.2 0.0 -42.3 -42.3 0.0 -26.1 -26.1
Stcok Option 0.0 -9.0 -9.0 0.0 -9.5 -9.5 0.0 -0.6 -0.6
Update provisions 0.0 0.2 0.2 0.0 -2.5 -2.5 0.0 -2.7 -2.7
Profit sharing 0.0 -18.8 -18.8 0.0 0.0 0.0 0.0 18.8 18.8
Others -1.9 -12.0 -13.8 -3.2 -26.2 -29.4 -1.3 -14.2 -15.6
Total -334.9 -225.4 -560.4 -362.4 -273.8 -636.2 -27.4 -48.4 -75.8
(1) Increase (decrease) of the total recorded from one period to another.
The table below shows the Company’s cost of goods sold and services rendered and general and
administrative expenses by business unit in fiscal years ended December 31st, 2013 and 2014.
The information provided in this table does not reflect the effects of depreciation on such costs.
Year ended December 31st 2014 x 2013
2013 (%) (1) 2014 (%) (1) Var. (%) (2)
(in R$ million)
Heavy Construction .........................................................
(108.9) 25.9% (122.1) 26.1% 12.1 %
Real Estate .........................................................
(164.2) 39.0% (162.3) 34.7% -1.2%
Industrial Services .........................................................
(156.1) 37.1% (174.1) 37.2% 11.6%
Rental .........................................................
8.2 -1.9% (9.5) 2.0% N.A.
Total ......................................................
(421.0) 100.0% (468.0) 100.0% 11.2%
(1) Percentage share of the business unit of goods sold and services provided and general and administrative expenses (2) Percentage increase (decrease) of the total registered from one period to another.
N.A. – Not applicable
Cost of goods sold and services provided, excluding the effects of depreciation, went from R$
421.0 million in the year ended December 31, 2013 to R$ 468.0 million year ended December 31,
2014, a increase of R$ 47.0 million, or 11.2%, mainly due to a greater allowance for doubtful debts (ADD).
The depreciation of assets used in services rendered, which is part of the costs of goods sold and
services rendered increased 28.4% due to higher investments in the past years, from R$ 131.0
92
million for the year ended on December 31, 2013 to R$ 168.3 million in the fiscal year ended
December 31, 2014, maintaining the average depreciation period of 10 years.
The ratio between the Company’s operating, general, and administrative expenses in relation to
the net operating income went from 27.1% in the fiscal year ended December 31, 2013 to 34.5% in the fiscal year ended December, 2014.
Operating Profit Operating profit before financial result increased from R$ 280.2 million in the fiscal year ended December 31, 2013 to R$ 157.9 million in the fiscal year ended December 31, 2014, a reduction
of R$ 122.3 million, or 43.6%. Such reduction was a consequence of higher depreciation, and General, administrative and operating expenses, both mainly impacted by increase in ADD of the
fiscal year. Operating profit represented 19.9% of net revenues in December 31, 2014,
compared to 33.7% of net revenues in December 31, 2013.
Financial Results Net financial expenses decreased from R$ 46.8 million in the fiscal year ended December 31,
2013 to R$ 26.1 million in the fiscal year ended December 31, 2014, representing decrease of R$ 20.8 million due to higher gross debt level and interest rates in the period. The Company's bank
debt, which was R$ 632.6 million in December 31, 2013 increased to R$ 745.4 million in December 31, 2014.
Income Tax and Social Contribution Expenditure on income tax and social contribution went from R$ 65.7 million in the fiscal year ended December 31, 2013 to R$ 26.1 million in the fiscal year ended December 31, 2014,
decreasing R$ 39.6 million, or 60.3%.
In the fiscal year ended December 31, 2014, the Company’s deducted from its income tax and
social contribution the amount of R$ 8.5 million, due to the provisioning of interest on equity for distribution of part of the annual results, while in fiscal year ended December 31, 2013 this
deduction totaled R$ 14.6 million. Moreover, the effective rate of 2014 was of 28,9%, after non-deductible tax items adjustment, against 28.2% in 2013.
Net Income The net profit increased from R$ 172.6 million in the fiscal year ended December 31, 2013 to R$ 64.3 million in the fiscal year ended December 31, 2014, a R$ 108.3 million decrease. In 2013
there was a net positive effect of R$ 8.2 million in the net earnings from continuing operations due to the sale of the Industrial Services business unit. In 2014 there were non-recurring items
with a negative effect of R$ 21.7 million, of which (i) R$ 7.1 million from the Industrial Services
business unit due to the payment of indemnity, related to events that happened before the completion of the sale, although the request for indemnity occurred this year; (ii) R$ 12.3 million
from Easy Set formwork cost adjustment, due to higher raw material use than technical specifications and to customized equipment sale as scrap ate the end of the rental contract ; and
(iii) R$ 2.3 million in cost provision and adjustments from the raw material and goods for resale
inventories. The increase of depreciation (R$ 37.3 million) and negative financial result (R$ 20.8 million) figures also contributed to the Net Income decrease.
Year ended December 31st, 2013 compared with year ended December 31st, 2012 Revenue of Products Sold and Services Provided
The following table shows the Company’s net revenue by business unit for the years ended December 31st, 2012 and 2013:
93
Year ended December 31st
2012 VA (%)(1) 2013 VA (%)(1) HA (%) (2)
(in millions of R$, except percentage)
Heavy Construction .........................................................
174.1 19.8% 217.0 26.1% 24.6%
Real Estate .........................................................
238.0 27.1% 258.0 31.0% 8.4%
Industrial Services .........................................................
213.8 24.3% - 0.0% (100.0%)
Rental .........................................................
253.5 28.8% 357.3 42.9% 41.0%
Total .......................................................
879.3 100.0% 832.3 100.0% (5.3%)
(1) Vertical analysis, which is a percentage of total net sales and services. (2) Horizontal analysis, which is the percentage of variation in the income statement accounts between fiscal years of 2011 and 2012.
In the year ended December 31st, 2013 the Company’s net revenue from sales and services
totaled R$ 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.
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 unit’s 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,
(i) R$ 25 million was received on the date of the sale agreement, in July; (ii) R$ 17 million were paid in April 2014, net of R$ 6.8 million related to adjusts settled between the Buyer and the
Company; and (iii) the outstanding amount of R$ 60 million will be paid in annual installments adjusted by the Interbank Deposit Certificate – CDI rate. 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. Taxes on Sales and Services
94
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, 2012 and 2013, 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 segment and by nature, and the information by business segment has been
presented only on a consolidated basis, excluding the effects of depreciation. The table below shows the Company’s cost of goods sold and services rendered by nature in
fiscal years ended December 31, 2012 and 2013.
Year ended on December 31st,
2012 Year ended on December 31st,
2013 Variation 2012 x 2013(1)
Direct
cost of constructi
on and renting
General
and Administr
ative Expenses Total
Direct
cost of constructi
on and renting
General
and Administr
ative Expenses Total
Direct
cost of constructi
on and renting
General
and Administr
ative Expenses Total
(in R$ million)
Labor (179.2) (109.3) (288.6) (58.8) (107.4) (166.2) 120.4 1.9 122.4
Third-party Services (6.3) (22.1) (28.4) (5.0) (20.4) (25.5) 1.3 1.7 2.9
Freight (15.0) (0.8) (15.8) (15.5) (0.8) (16.2) (0.5) 0.0 (0.4) Construction Material
/ Maintanance and Repair
(41.7) (4.8) (46.5) (43.5) (6.1) (49.6) (1.8) (1.3) (3.1)
Rent Equipment (8.3) (11.3) (19.5) (5.9) (15.0) (20.8) 2.4 (3.7) (1.3)
Travel (8.6) (11.5) (20.1) (5.0) (11.6) (16.5) 3.6 (0.1) 3.6
Cost of Sales (41.0) - (41.0) (68.0) - (68.0) (27.0) - (27.0) Depreciation ad
Amortization (104.2) (4.4) (108.6) (122.6) (8.4) (131.0) (18.4) (4.0) (22.4)
Asset impairment (4.9) - (4.9) (8.9) - (8.9) (4.0) - (4.0) Allowance for Doubtful Debts
- (16.1) (16.1) - (16.2) (16.2) - (0.1) (0.1)
Stcok Option - (5.8) (5.8) - (9.0) (9.0) - (3.2) (3.2)
Update provisions - 4.0 4.0 - 0.2 0.2 - (3.8) (3.8)
Profit sharing - (20.1) (20.1) - (18.8) (18.8) - 1.3 1.3
Others (1.6) (16.3) (17.9) (1.9) (12.0) (13.8) (0.2) 4.3 4.1
Total (410.9) (218.5) (629.4) (334.9) (225.4) (560.4) 76.0 (6.9) 69.0 (1) Increase (decrease) of the total recorded from one period to another.
The table below shows the Company’s 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.
Year ended December 31st 2012 x 2013
2012 (%) (1) 2013 (%) (1) Var. (%)
(2)
(in R$ million)
95
Heavy Construction .........................................................
(89.7) 17.2% (108.9) 25.4% 21.4%
Real Estate .........................................................
(124.5) 23.9% (164.2) 38.3% 31.9%
Industrial Services .........................................................
(194.4) 37.3% - 0.0% (100.0%)
Rental .........................................................
(112.2) 21.5% (156.1) 36.4% 39.2%
Total ......................................................
(520.8) 100.0% (429.2) 100.0% (17.6%)
(1) Percentage share of the business unit of goods sold and services provided and general and administrative expenses (2) 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 Company’s 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.
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 company’s 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 Company’s 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%. Company’s 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
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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.
Income Tax and Social Contribution Expenditure on income tax and social contribution went from R$ 59.2 million in the fiscal year
ended December 31, 2012 to R$ 65.7 million in the fiscal year ended December 31, 2013, an increase of R$ 6.5 million, or 11.0%.
In the fiscal year ended December 31, 2013, the Company’s deducted from its income tax and
social contribution the amount of R$ 14.6 million, due to the provisioning of interest on equity for
distribution of part of the annual results, while in fiscal year ended December 31, 2012 this deduction totaled R$ 14.3 million. Moreover, the effective rate of 2013 remained 28%.
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).
Year ended December 31st, 2014 compared to year ended December 31st, 2013 Current Assets The Company’s current assets increased from R$ 319.5 million as of December 31, 2013 to R$
425.3 million as of December 31, 2014, an increase of R$ 105.8 million or 33.1%. The main
reasons for such increase, in the assessment of the management of the Company, were:
increase of R$ 167.9 million in cash and cash equivalents, due to higher liquidity mainly
derived from the slower pace of investments in rental equipment. decrease of R$ 29.9 million in accounts receivable, including revenue from the sale of the
investee;
reduction of R$ 14.5 million in inventories;
reduction of R$ 10 million in recoverable taxes;
Non-current Assets The Company’s non-current assets of R$ 101.5 million as of December 31, 2013 was increased to R$ 103.7 million as of December 31, 2014, a growth of R$ 2.2 million or 2.2%.
Investment In 2014 the Company maintained the same registered investment value as 2013 of R$ 87.4 million. In January, 2011 it acquired 25.0% of the total voting capital of Rohr for R$ 90.0 million.
PP&E – Property, Plant and Equipment The Company’s PP&E increased from R$ 1,224.5 million as of December 31, 2013 to R$ 1,200.1 million at December 31, 2014, a decrease of R$ 24.4 million, or 1.99% reflecting investments in
line with book depreciation and sale of semi-new equipment.
Intangible assets
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The Company’s intangible assets increased from R$ 68.4 million as of December 31, 2013 to R$
76.1 million as of December 31, 2014, mainly due to R$ 7.7 million in software acquisition.
In the beginning of 2014, the Company concluded SAP implementation, unifying and standardizing its information systems aiming at achieving a higher efficiency level for its internal
controls, mainly on the financial and operational sides.
Current liabilities The Company’s current liabilities increased from R$ 255.0 million as of December 31, 2013, to R$
221.2 million as of December 31, 2014, a reduction of R$ 33.8 million. The main factors that led to this change, according to the management’s opinion, were:
increase of R$ 36.9 million in the short-term loans and financing balance, due to a
reclassification from long to short-term referring to installment to be settled in 2015. reduction of R$ 21.4 million in suppliers account, due to installment purchase of rental
equipment of our PPE.
reduction of R$ 19.2 million in dividends and payable interest on capital, due to the lower
level of profit distribution of 2014; decrease of R$ 18.7 million in the profit sharing payable account, since there will not be
profit sharing in 2014;
reduction of R$ 7.2 million, in the short-term debentures balance, due to the amortization
of part of the debentures in 2014.
Non-current liabilities The non-current liabilities increased from R$ 529.7 million as of December 31, 2013 to R$ 612.1
million as of December 31, 2014, an increase of R$ 82.4 million, or 15.6%. On the Company’s management evaluation, the main factor that led to this variation were:
increase of R$ 201.2 million referring to the third issuance of Debentures held by the
Company; reduction of R$ 90 million referring to amortization of principal of first Debentures
issuance;
reduction of R$ 43.9 million in long-term borrowings and financing due to its transfer to
short-term.
Stockholders’ Equity Shareholders’ equity increased from R$ 1,016.51 million as of December 31, 2013 to R$ 1,059.4
million as of December 31, 2014, an increase of R$ 42.9 million, or 4.2%. On the Company’s management evaluation, the main factor that led to this variation were:
increase of R$ 39.1 million in earnings reserve account referring to the net earning
registered in 2014 of R$ 64.3 million deducted R$ 25.1 million of dividends and payable
interest on capital registered in 2014;
increase of R$ 10.1 million in stockholders’ equity due to the exercise of options by the
beneficiaries; reduction of R$ 1.4 million in capital reserve account, due to R$ 11.0 million in buyback
of shares and to R$ 9.5 in stock option premium reserve amounting; and
reduction of R$ 5.0 million in valuation adjustment to equity, due to cash flow hedges in
2014.
Year ended December 31st, 2013 compared to year ended December 31st, 2012
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Current Assets
The Company’s 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 Company´s 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 Company’s 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.
PP&E – Property, Plant and Equipment
The Company’s 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 Company’s 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$16.5 million in software acquisition.
Current liabilities
The Company’s current liabilities increased from R$ 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 Management’s 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 Company’s 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 long-term 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
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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 management’s opinion, was the R$ 89.2 million decrease in the long-term debenture account, due to 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 Company’s income reserve that aims retain financial resource to support its
budget investment.
11. 12. CASH FLOW
Year ended December 31st,
2012 2013 2014
(in R$ millions) Cash flow from operating services ................................................... 202.3 263.4 241.4
Cash flow from investment activities ................................................ (393.1) (258.1) (125.3) Cash flow from (used in) financing activities ..................................... 199.8 (23.7) 51.7 Increase (decrease) in liquidity ....................................................... 9.0 (18.4) 167.9
Cash Flow from Operating Activities
In the fiscal years of 2012, 2013 and 2014, the company managed to substantially improve its operating results, as discussed above, thereby improving operating cash generation, which, in
2012, was R$ 202.3 million, increasing to R$ 263.4 million in 2013 and reaching R$ 241.4 million in 2014, a growth in 2013 of 30.2% and a reduction in 2014 of 8.36%. According do
management´s opinion, the reduction from 2013 to 2014 was impacted by significant drop in the Company’s operational results.
Cash Flow from Investing Activities
The gross investments in PPE for the years ended December 31, 2012, 2013 and 2014 amounted to R$ 287.4 million, R$ 489.4 million, and R$ 186.7 million, respectively.
In 2012, the Company maintained its level of investment in organic growth.
In 2013, the Company invested to continue seizing attractive opportunities in its
operating markets. In 2014 due to the market contraction due to economic and politic uncertainties, the
Company reduced its investments.
The table below shows the investments in PP&E made in 2012, 2013 and 2014:
Year ended December 31st,
2012 2013 2014
(in R$ millions) Gross investments, before PIS and COFINS credits .......................................... (287.4) (489.4) (186.7) Acquisition of GP Sul - - -
Total Gross investments ............................................................................... (287.4) (489.4) (186.7) PIS and COFINS credits ................................................................................ 25.6 43.4 18.2 Net Investments .......................................................................................... (261.8) (446.0) (168.5)
The gross investments in intangible assets in the years ended December 31st 2012, 2013 and
2014 totaled, R$ 10.1 million, R$ 16.5 million and R$ 12.4 million, respectively.
Cash Flow from Financing Activities
Year ended December 31st,
2012 2013 2014
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(in R$ million)
Capital contributions .......................................................................... 10.0 15.6 10.1 Purchase of treasury shares ............................................................... - - (11.0) Dividends and interest on capital paid................................................. (21.9) (41.8) (46.7) Repayment of borrowings .................................................................. (95.2) (38.5) (300.6) Borrowings raised .............................................................................. 306.9 41.0 400.0
The cash flow from financing activities includes new loan agreements, the amortization of the principal and payment of interest on existing loans, as well as increases in the capital stock, and
dividend payment.
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.
In 2014, the Company issued promissory notes totaling R$ 200 million, and its third debentures
issuance, in May, amounting to R$ 200 million, which were used, in June, to fully pay the promissory notes issued in April.
On April 11, 2014 the Company issued in a single series 20 commercial promissory notes with
unit face value of R$10,000, totaling R$200,000 and with maturity on August 8, 2014. The unit
value of the promissory notes bears interest equivalent to 106% of the accumulated fluctuation of the average daily interbank deposit (DI) rates. On June 18, 2014 the Company fully paid these
promissory notes with the proceeds from its third issue of debentures.
In 2014, the Company captured R$ 200.0 million through its third issue of Company debentures simple, nonconvertible, registered, unsecured, in a single series with unit face value of R$10.00.
These debentures mature on May 30, 2019 and pay interest equivalent to 108.75% of the CDI,
payable semiannually, and amortized in three annual, consecutive installments, commencing on May 30, 2017. The proceeds obtained by the Company with the third issue of debentures were
fully used to settle the commercial promissory notes amounting R$ 200 million of the Company’s fourth issue, issued on April 11, 2014.
10.2 The directors must comment on
a. Results of the Company’s operations, in particular:
(i) description of important components of revenue Net Revenue from Sales and Services On the Company’s management opinion, the Company is one of the biggest specialized
engineering service provider, leading Brazilian market of suppliers in formwork and tubular structure supply and in motorized access equipment for rental. The Company believes that its
operational areas will offer opportunities in the next years, due to, among other factors: (i)
relevant investments in heavy construction projects, as, for instance, the package of logistics concessions, concerning highways, railways, ports and airports; (ii) high housing deficit and low
penetration of housing credit; (iii) low-income market government program (Minha Casa, Minha Vida); (iv) investments needed for the Olympic Games in 2016; and (v) growing concern of
companies with safety in work and productivity gain, which may drive to the use of equipment
and services provided by our Company.
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All of these areas are directly affected by macroeconomic conditions changes in Brazil, specially
the growth of Gross Domestic Product – GDP, interest rates, inflation, credit availability, level of
unemployment, exchange rates and commodities prices, the last two affect costs of equipment used in company’s activities. Consequently, these factors affect, indirectly, its operation and
results.
The net revenues from sales and services are denominated in reais, and are derived from the
rental and sale of equipment, the provision of technical support services, and penalty payments for unreturned or damaged equipment. The table below sets forth the participation of the net
revenue for the periods indicated: Year ended December 31st,
2012 2013 2014
Equipment Rental.................................................... 69.2% 81.0% 83.5% Sale of Equipment ................................................... 8.4% 12.2% 10.1% Technical Support Services ...................................... 19.8% 2.6% 1.0% Indemnifications ..................................................... 2.6% 4.2% 5.3%
(ii) Factors that materially affected operational outcomes
Cost of Products Sold and Services Rendered and Operational, General and Administrative Expenses Its main cost of products sold and services rendered relates to costs for executing the projects in which the Company are involved, including (i) personnel for assembly and disassembly of
equipment rented to its clients when such tasks are carried out by the Company; (ii) cost of the equipment sub-leased from third parties when the Company’s inventories are insufficient to meet
demand; (iii) expenses with materials used in the provision of its services, which include individual
safety equipment, wood, paint and insulation material; and (iv) freight costs relating to the transportation of equipment between its branches and eventually to its clients. Costs related to
the execution of its projects represented 73.4%, 43.7% and 44.0% of its principal costs of sales and services rendered, excluding depreciation, in the years ended December 31, 2012, 2013 and
2014, respectively. On the evaluation of the company's management, this reduction from 2012 to 2014 was due to the expansion of equipment sales costs, mainly in the Real estate and Rental
business units and, and to the sale of the Industrial Services business unit.
In addition, the Company incurred in (i) costs deriving from the sale of equipment; (ii)
depreciation of equipment rented; (iii) expenses with equipment storage; and (iv) cost of assets sales and write-offs of assets.
The Company’s main general and administrative expenses refer to contract coordination, encompassing the project teams and engineers in the commercial area, responsible for the
management and supervision of each of its projects, which correspond basically to salaries, payroll charges and benefits, with the rest relating to travel, representation and communications
expenses, as well as the overhead of the administrative areas. Other material general and administrative expenses include: (i) administrative expenses incurred with respect to its financial,
investor relations, and human resources departments, as well as its executive management,
including salaries and benefits, (ii) expenses in connection with the Company’s employee profit-sharing plans and expenses related to its stock option plans, and (iii) other administrative
expenses, which include, in particular, expenses resulting from adjustments to its provisions for contingencies.
In 2014 there were an increase in Allowances for Doubt Debt (ADD) account due to deterioration of economic environment and the downgrading of corporate credit rating of several clients, that
lead the Company to adopt a more conservative approach. In addition, there are the
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investigations ongoing in Heavy Construction Brazilian market. ADD represented 5.3% of net
revenues in 2014, versus 2.0% in 2013 and 2.1% in 2012.
With equipment and maintenance operational synergy from Heavy Construction and Real Estate,
we will see improvement in operational efficiency and, consequently, a reduction in unit costs for maintenance. In 2014, we had intense maintenance activities, in spite of weaker demand, to
equalize deferred maintenance of our equipment. From the second half of 2015, we should
normalize the maintenance activity, with a respective cost reduction.
Furthermore, we have some initiatives underway in order to reduce Company expenses, such as (i) a leaner corporate structure and, thus, the disposal of some administrative and management
positions; (ii) procurement centralization; and (iii) insourcing of some third-party services, such as IT; among others.
Financial Results
The Company’s financial results consist of its financial expenses, net of financial revenues. The Company’s 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.
The net financial result was a negative R$ 34.3 million, R$ 46.8 million and 67.6 million in 2012,
2013 and 2014, respectively. YOY variation is explained by an increase in gross debt and higher interest rates in the period.
Impact of public politics
According to BNDES, investments in Brazil will reach R$ 1.5 trillion between 2015 and 2018, of which R$ 598 billion in infrastructure – the sector that accounts for the highest growth compared
to 2010-2013 period, driven by the package of logistics concessions launched by the federal
government in 2012, which includes R$ 187 billion in highways, railways and ports. However, there are major uncertainties regarding its execution, which depends on better planning and on
the definition of the concession model and financing terms.
The expansion or contraction of housing credit and changes in interest rates influenced Real
Estate market in the past, therefore, it can affect future revenues of Real Estate business unit.
b. Changes attributable to changes in prices, volume changes and introduction of new products and services.
The Company´s 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 segment’s 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. The increase in revenues in 2012 and 2013 was due to an increased in rented and sales volume, given the favorable market
conditions and its geographic expansion. In 2014, rental revenues were stable compared to 2013, being the consolidated revenues affected by lower sales volume in the year.
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. Company’s operations and results are directly impacted by variations of: (i) Inflation rates, which
index are used to adjustment of Company’s long-term contracts; (ii) Interest rates, that affect
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interest-bearing debt of the Company; and (iii) cost of material used in construction works or
equipment maintenance of the Company.
The Company’s 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 Company’s financial
statements or its results
a. Introduction or disposal of operating segment
In 2013, the Company sold, through the sale of the company Albuquerque Participações 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 2012, 2013 and 2014.
b. Constitution, acquisition or divestiture of shareholdings
Sale of the Industrial Services business unit
On July 10, 2013, the Company entered into an agreement for the sale of its Industrial Services business unit for $ 102 million through the sale of its stake in the company Albuquerque
Participações Ltda. For more information, see item 6.5 of this Reference Form.
The Industrial Services business unit recorded:
• for the nine months ended September 2013 (end of the last quarter before the actual
sale), net profit of R$ 6.1 million 30 representing in the same period, 4.8% of total net profit of Mills, and net income of R$ 168.4 million, over the same period, 21.3% of consolidated net
revenue of Mills;
• in fiscal year 2012, net income of R$ 2.3 million, in the same period, 1.2% of total net profit of the Mills, and net income of R$ 213.8 million, over the same period, 24.3% of
consolidated net revenue of Mills.
The sale is aligned with the Companhy’s strategy to focus on businesses in which its competencies are able to add higher value to its shareholders and clients. Therefore, the Company ceased to
operate in the Industrial Services sector, in which were offered access services, industrial painting,
surface treatment and thermal insulation, during both construction and maintenance phase of large industrial plants.
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,
(i) R$ 25 million was received on the date of the sale agreement, in July; (ii) R$ 17 million were paid in April 2014, net of R$ 6.8 million related to adjusts settled between the Buyer and the
Company; and (iii) the outstanding amount of R$ 60 million will be paid in installments adjusted by the Interbank Deposit Certificate – CDI rate. 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.
c. Unusual transactions or events
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There were no unusual transactions or events in fiscal years 2012, 2013 and 2014, except as
described above.
10.4 The directors must comment on:
a. Significant changes in accounting practices
a) New standards and interpretations and amendments to existing standards that are effective since January 1, 2014:
IAS 32/CPC 39 - Financial Instruments: Disclosures – Offsetting Financial Assets and
Financial Liabilities – The amendments introduce additional clarifications to the
application guidance in IAS 32 about the requirements relating to the offset of financial assets and financial liabilities in the statement of financial position. Management has
not identified any impact arising from these amendments to existing standards.
IFRIC 21 - Levies – New interpretation that addresses the issue as to when to recognize
a liability to pay a levy imposed by a government both for levies that are recognized in
accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those in which the amounts and taxation period are clear. Management has not
identified any impact of this new standards.
IAS 36 – Impairment of Assets (CPC 01) – The amendments to IAS 36 provide guidance
on recoverable amount disclosures for nonfinancial assets. Management has not
identified any impact of these amendments to existing standards.
IAS 39 – Financial Instruments – Recognition and Measurement (CPC 38) – The
amendments provide relief from the requirement to discontinue hedge accounting when a derivative designated as a hedging instrument is novated under certain
circumstances. Management has not identified any impact of these amendments to
existing standards.
IFRS 10, IFRS 12 and IAS 27 - the amendments to IFRS 10 define an investment entity
and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through
profit or loss in its consolidated and separate financial statements. Management has
not identified any impact of these amendments to existing standards.
To qualify as an investment entity, a reporting entity is required to:
obtain funds from one or more investors for the purpose of providing them with
investment management services;
commit to its investor(s) that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both; and
measure and evaluate performance of substantially all of its investments on a fair value
basis.
Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure
requirements for investment entities.
Management has not identified any impact of these amendments to existing standards.
b) New standards, interpretations of and amendments to existing standards that are not yet
effective at December 31, 2014:
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Effective for annual periods beginning on or after July 1, 2014:
IAS 19/CPC 33 – Employee Benefits – The amendments clarify how an entity should
account for contributions made by employees or third parties based on whether those contributions are dependent on the number of years of service provided by the
employee. Annual Improvements to IFRSs 2010-2012 and 2011-2013 Cycles – Minor amendments
to existing pronouncements.
Effective for annual periods beginning on or after January 1, 2016:
IFRS 11 – Amendments that address accounting for acquisitions of interests in joint
operations. The amendments provide guidance on how to account for the acquisition of a joint operation that constitutes a business as defined in IFRS 3, the amendments state
that the relevant principles on accounting for business combinations in IFRS 3 and other standards should be applied, except when there is a conflict with IFRS 11, and that a
joint operator is also required to disclose the relevant information required by IFRS 3 and
other standards for business combinations. Applicable both for the initial acquisition of interest in a joint operation and for the acquisition of additional interest, in the latter
case, the investment previously held is not remeasured with prospective effect.
IAS 16 and IAS 38 – Amendments to these standards to clarify the acceptable methods
of depreciation and amortization.
IAS 27 – Amendments to standard to include the option to account for investments in
subsidiaries, joint ventures and associates using the equity method in separate financial
statements.
IFRS 10 and IAS 28 – Amendments to standards to clarify how to account for the sale or
contribution of assets between an investor and its associate or joint venture whose requirements are applicable independent of the legal type of the operation.
IAS 1 – Amendments to standard to address potential hindrances identified in exercising
judgment in the preparation of financial statements. These amendments clarify that the concept of materiality should be considered both for reporting purposes, either the
information is required or not, and in the presentation of the notes to financial statements and in the use of aggregation criteria.
IFRS 10, IFRS 12 and IAS 28 – Amendments to address specific issues arisen in the
context of the application of the consolidation exception for investment entities.
Effective for annual periods beginning on or after July 1, 2016:
Annual Improvements to IFRSs 2010-2012 Cycle – Minor amendments to existing standards.
Effective for annual periods beginning on or after January 1, 2017:
IFRS 15 – Revenue from Contracts with Customers – establish 5 simple steps to be
applied to contracts with customers for revenue recognition and disclosure. It will
supersede the standards (IAS 18 and IAS 11) and interpretations (IFRIC 13, IFRIC 15 and IFRIC 18) currently effective on the matter.
Effective for annual periods beginning on or after January 1, 2018: IFRS 9 – Financial Instruments – New standard that introduces new requirements for the
classification, measurement, impairment, hedge accounting and derecognition of
financial assets and liabilities.
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The Company has analyzed the impacts of these standards and so far no material impact on
its financial statements has been identified.
Transition Tax Regime The Transition Tax Regime (RTT) was in effect until the enactment of the law that regulated the
tax effects of the new accounting methods to ensure tax neutrality. On May 13, 2014, Law 12,973
was enacted, introducing, among other issues, the repeal of the Transitional Tax Regime (RTT) and the Corporate Income Tax Return (DIPJ) and creating instead the Tax Accounting
Bookkeeping (ECF).
The Tax Accounting Bookkeeping (ECF) will consolidate the tax neutrality adjustments that were
previously filed using the Transition Tax Accounting Control (FCONT). Pursuant to the aforementioned Law, the adoption of the ECF is optional for taxable events recorded beginning
January 2014 and mandatory beginning 2015 for all corporate entities that elect taxation based on the actual profit. In 2014 the Company complied with the legal requirement, which was
formalized through the option in the DCTF (Declaration of Federal Tax Debits and Credits) of August 2014 filed with the Brazilian Federal Revenue on October 28, 2014, as regards the
prospective calculation of interest on capital, dividends and the tax treatment of stock option
plans. The other measures contained in such Law did not have material impacts on the Company, according to an analysis made by the Company with its tax advisors.
b. Significant changes in accounting practices
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, 2012, 2013 and 2014.
c. Qualifications or points on the auditor’s opinion There were no points or qualification on the auditor’s opinion
10.5 The management shall indicate and comment on critical accounting policies
adopted by the issuer, by exposing mainly the accounting estimates made by management on uncertain and relevant questions for description of the financial
situation and the results, which require subjective or complex judgments, such as:
provisions, contingencies, recognition of revenue, fiscal credits, long-term assets, useful life of non-current assets, pension plans, conversion adjustments in foreign
currency, recovery environmental costs, standards for testing the recovery of assets and financial instruments.
Estimates and judgments used in the preparation of Financial Statements
Preparation of the Company’s financial statements requires Management to make judgments and estimates and adopt premises that affect the amounts of revenues, expenses, assets and
liabilities, as well as disclosures of contingent liabilities as of the reporting date. Nevertheless, the uncertainty relating to such assumptions and estimates may lead to results that require significant
adjustment to the carrying value of the asset or liability affected in future periods.
The main assumptions relating to sources of uncertainties in the future estimates and other
importance sources of uncertainty in estimates as of the reporting date, involving significant risk of causing a major change in the carrying value of assets and liabilities in the next financial year,
are as set out below:
Impairment of non-financial assets
Transactions with payments based on shares
Taxes
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Fair value of financial instruments
Provisions for tax, civil and labor risks
Useful life of fixed assets
Revenue recognition
Following, the Company’s Management presents a discussion about what they consider relevant
as accounting practices for the presentation of Company’s 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.
(ii) Current and deferred income tax and social contribution
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.
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) PP&E: Company use and rental and operational use
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.
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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, minus 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.
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, 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) because 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.
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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.
A provision for onerous contracts is recognized where the Company has a contract under which
the 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) Stock option plans
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 shareholder’s 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.
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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.
10.7 Management comments on the use of resources from public offerings for
distribution of securities
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 August 15th, 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
were fully utilized for: (a) the financing of investments to be made by the Company, (b) the
payment of Company’s debts, and (c) general uses and expenses of the Company. The realized investments in renting goods amounted to R$463.6 million in 2013.
On April 11, 2014, the Company issued promissory notes, totaling R$ 200 million and bearing
interest at 106% of the DI rate, to be settled with the debentures offering proceeds. The proceeds
of these offerings were used to (a) refinance indebtedness of the Company; (b) purchase rental equipment and (c) general corporate purposes and expenses of the Company.
On May 18th, 2014, the Company held its third issue of simple, non-convertible, unsecured
debentures subject to public offering with restricted placement efforts. A total 20,000 debentures
were issued, each with par value of R$ 10,000.00. The net proceeds of the offering will be fully utilized for fully settlement of commercial promissory notes of Company’s fourth issuance, issued
in April 11th, 2014.
10.8 Management’s 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 Management’s comments about the obligations not accounted in financial
statements.
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
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The Company plans its investment policy in accordance with its demand prospects, cash flow and
credit availability in the market. The Company’s 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 Company’s normal operations, from the retention
of profits, was used to finance the investments made in 2012, 2013 and 2014. In 2014, the amount of R$ 2.4 million were designated to this reservation, whereas there was not any amount
for this reservation in 2012 and 2013. The management presents below the major investments made in the course of the years ended December 31, 2012, 2013 and 2014, and highlight the
investment budget for fiscal year 2015. Investments in 2012, 2013 and 2014 The Company experienced a period of rapid expansion in 2012, 2013 and 2014, mainly due to
the investments and geographic expansion of Real Estate and Rental business units. Company’s principal investments in this period are described below:
Heavy Construction
In the fiscal years ended by December, 31st, 2012, 2013 and 2014, the Heavy Construction business unit invested, mainly, in shoring structures and industrialized steel and aluminum
formwork acquisition, amounting to R$ 50.5 million in 2012, R$ 106.3 million in 2013 and R$ 47.5 million in 2013.
Real Estate
Over the past three fiscal years ended by December, 31st, 2012, 2013 and 2014, the Real Estate business unit invested mainly in acquisition of shoring equipment, suspended scaffolding and
industrialized formworks, having disbursed R$ 59.8 million in 2012, R$ 90.1 million in 2013 and
R$ 19.3 million in 2014. Rental
In 2012, 2013 and 2014, the Company continued to implement its strategy of expanding its
portfolio of aerial work platforms and telescopic handlers, investing R$ 160.9 million, R$ 267.2 million and R$ 105.3 million in the acquisition of such equipment, respectively.
The Company intends to finance its investments with (i) cash generated in its own activities, and
(ii) indebtedness.
Investments planned for 2015 In 2015, the Company aims to invest R$ 33.6 million, of which R$ 10.1 million in replacement of
rental equipment mix of Heavy Construction and Real Estate business units and R$ 23.5 million to improvements in maintenance processes , facilities of our branches and IT.
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
In 2015, we will reduce significantly our investment levels to a maximum amount of R$ 40 million, being the majority of it for maintenance processes and facilities of our branches. In the Heavy
Construction and Real Estate business units, we will invest to maintain the actual fleet, with the
acquisition of necessary spare parts to keep the equipment mix. In the Rental business unit, we will continue the geographic expansion, using the existing fleet.
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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 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 Company’s 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 Company’s 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 no other factors to comment on about operational performance of 2012, 2013 and
2014 results.
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11. PROJECTIONS
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11.1 Identification of projections
Not applicable, as the Company does not disclose guidance.
11.2 Projection monitoring
Not applicable, as the Company does not disclose guidance.
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12. GENERAL MEETING AND ADMINISTRATION
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12.1 Administrative Structure
a. Responsibilities of each body and committee 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 Company’s 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 Company´s 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. Additionally, 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 new 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 Company’s 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 Company’s Board of Directors is comprised of five 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
Age
Profession
CPF
Title
Date of Last Election
Date of Office
Term of Office
Other Titles
Elected by the
Controlling Shareholder
Andres Cristian Nacht
72 Business
Administration 098.921.337
-49 Chairman 4.25.2014 4.25.2014 2 years No Yes
Elio Demier 64
Bachelor of Social
Communication
260.066.507
-20
Vice
Chairman 4.25.2014 4.25.2014 2 years Yes Yes
Francisca Kjellerup Nacht
44 Business
Administration 124.175.657
-06 Director 4.25.2014 4.25.2014 2 years No Yes
Nicolas Arthur Jacques
Wollak
53 Executive 057.378.217
-22
Independent
Director
4.25.2014 4.25.2014 2 years Yes Yes
Jorge Marques
de Toledo Camargo
61
Geologist and
Physicist 114.400.151
-04
Independ
ent Director
4.25.2014 4.25.2014 2 years No Yes
According to the Novo Mercado Listing Rules and the Company’s bylaws, the company’s 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
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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 Company’s Board of Directors
is composed of six members, it should have at least one independent director. The Independent director should be identified as such in the minutes of the General Shareholders meeting that elects
him. Currently Mr. Nicolas Arthur Jacques Wollak and Mr. Jorge Camargo are the Company’s Independent Directors.
The decisions of the Company’s 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 Company’s 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 company’s Board of Executive Officers may also serve as members of the
Board of Directors.
The Company’s board of directors elects the members of the board of executive officers for one-year 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 Company’s bylaws, the board
of executive officers must be comprised of four to eleven 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 Company’s 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.
Name
Ag
e Profession CPF Title
Date of Last
Election
Date of
Office
Term of
Office
Other
Titles
Elected by the Controlling
Shareholder
Sérgio Kariya 41 Engineer 197.064.378
-19 Chief Executive
Officer 3.8.2016 3.8.2016
Until OSM 2017
No Yes
Avelino Pinto
da Silva Garzoni
49 Engineer 857.596.607
-30 Officer 3.8.2016 3.8.2016
Until OSM 2017
No Yes
Ricardo de Araujo
Gusmão
47 Engineer 987.271.927
-68 Officer 3.8.2016 3.8.2016
Until OSM 2017 No No
FISCAL COUNCIL
Under the Brazilian Corporate Law, the Fiscal Council 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 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
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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 Chairman 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 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. Hélio Carlos de Lamare Cox (member) and Mr. Massao Fabio Oya (substitute) were separately elected by minority shareholders.
The table below presents name, age and title of the Fiscal Council members:
Name
Age
Profession
CPF
Title
Date of Last
Election
Date of
Office
Office
Term
Other
Titles
Elected by
the Controlling
Shareholder
Eduardo Botelho Kiralyhegy
36 Lawyer 082.613.217-03 President of the Fiscal
Council
4.28.2015 4.28.2015 1 year No Yes
Maria Cristina
Pantoja da Costa Faria
38 Lawyer 886.793.577-15 Substitute
4.28.2015 4.28.2015 1 year No Yes
Marcus Vinícius Dias Severini
57 Accountant/ Engineer
632.856.067/20 Member 4.28.2015 4.28.2015 1 year No Yes
Vera Lucia de
Almeida Pereira Elias
56 Accountant
/Lawyer 492.846.497-49 Substitute
4.28.2015 4.28.2015 1 year No Yes
Helio Carlos de Lamare Cox
64 Engineer 298.152.157-87 Member 4.28.2015 4.28.2015 1 year No
No
Massao Fábio Oya 33 Accountant 297.396.878-06 Substitute 4.28.2015 4.28.2015 1 year No Yes
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, 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 José Felipe Vieira de Castro.
Committees of this type are non-permanent and therefore can be either created or extinguished
anytime by the Board of Directors.
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The table below presents the names, ages and positions of the Human Resources members:
Human Resources Committee
Name
Age Profession CPF Title
Date of Last
Election
Startin
g Date
Term of
Office
Other
positions
Elected by Controlling
Shareholder
Elio Demier 64 Bachelor of Social Communication
260.066.507-20
Member 5.22.2015 5.22.2015 1 year Yes Yes
José Felipe Vieira de Castro
62 Economist 402.760.747-
34 Member 5.22.2015 5.22.2015 1 year No Yes
INTERNAL AUDIT
The Company is currently structuring its internal audit, which will respond directly to Risk
management and Compliance internal committee, comprising CEO, chief financial and
Administrative Officer and Investor Relations officer. The internal audit will be an internal control body that will aim to assist the audit process in Company´s Income Statement.
b. Date of formation of Fiscal Council, if not permanent, and Committees The Company´s Fiscal Council is permanent.
c. Mechanisms for evaluating the performance of each body or committee
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 valuation 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.
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 individual 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. Responsibilities and individual powers of the Executive officers
Is the responsibility of the Chief Executive Officer: (i) to convene and chair meetings of the
Executive Officer’s 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
Article’s 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 Company’s 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.
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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 Description of rules, policies and practices with respect to general meetings
a. Terms of Notification Brazilian Corporate Law for listed companies requires that all general shareholders meetings are
called after three publications of the same in the Federal Gazette (Diário Oficial da União) or of
the State in which the company is based, as well as in another newspaper with a wide circulation. The Company’s publications are currently placed in the Rio de Janeiro State Gazette (Diário 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 Econômico, 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 shareholder’s 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 anticipate the term of the first convocation of the General
Assembly, allowing shareholders having information 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 Management’s Report, the Management’s accounts, the Company’s
Financial Statements and the independent auditor’s report; Approval of the capital budget;
Approval of the Management’s Proposal for the Allocation of Net Income;
Make amendments to the By-Laws;
Establishment of the remuneration of the Senior Management of the Company; assign
bonus shares and decide on possible share reverse splits and splits;
Elect and dismiss members of the Board of Directors;
Elect and dismiss members of the Fiscal Council, if installed;
Establish plan for granting call option or subscription for shares to directors and
employees of the Company and its subsidiaries; resolve on the cancellation of open capital company registration before the Brazilian Securities and Exchange Commission,
under Chapter VII of the By-Law; Resolve, under Chapter VII of the By-Law, on the delisting from the Novo Mercado; and
select among the companies indicated in a triple list by the Board of Directors, a
specialized company to be responsible for elaborating an appraisal report of the company
shares in the event of cancellation of company registration with the CVM and its delisting from the Novo Mercado.
c. Addresses (physical or electronic) at which documents relating to the General
Meeting shall be available to shareholders for their review Physical: the documents related to the issues to be decided upon at the General Shareholders’
Meeting will be available to shareholders at the Company’s headquarters, located at: Estrada do Guerenguê, 1381, Taquara, CEP 22.713-002, City and State of Rio de Janeiro.
Electronic: www.mills.com.br; www.cvm.gov.br; www.bmfbovespa.com.br
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d. Identification and handling of conflicts of interests See item 16.3 for a description of the mechanisms the Company uses to avoid and mitigate
conflicts of interest. e. Request for power-of-attorney by the directors to exercise voting rights 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 Company’s 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 Company’s 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.
In case of power of attorney by legal entity, the proxy instrument may be accompanied by supporting documentation of powers of representatives that signed it. Foreign documents must
be notarized in its country of origin, consularized, translated by a public sworn translator and
registered in Registry of Deeds and Documents office of Brazil.
The Company does not accept powers of attorney granted by electronic means. g. Internet forums and pages for shareholders comments relating to minutes The Company does not keep Internet forums and pages for shareholders to receive and share
comments. h. Transmission of meetings by live video or audio The Company does not transmit meetings by live video or audio.
i. Mechanisms allowing for inclusion of shareholders’ proposals
There are no mechanisms allowing for the inclusion of shareholders’ proposals.
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12.3 Dates of Newspaper Publications 2012 2013 2014
Date(s) of Newspaper publication
Publicated Newspaper
Date(s) of Newspaper publication
Publicated Newspaper
Date(s) of Newspaper publication
Publicated Newspaper(1)
Notice to shareholders announcing the availability of the Financial Statements
- - - - - -
General Shareholders Meeting Convening Notice
3/22/2013
DOE-RJ
Valor Econômico RJ
3/21/2014
DOE-RJ
Valor Econômico RJ
3/27/2015
DOE-RJ
Valor Econômico RJ
Minute of the General Shareholders Meeting
5/15/2013
DOE-RJ
Valor Econômico RJ
5/13/2014
DOE-RJ
Valor Econômico RJ
5/27/2015
DOE-RJ
Valor Econômico RJ
Financial Statements 3/13/2013 DOE-RJ Valor
Econômico RJ
3/20/2014 DOE-RJ Valor
Econômico RJ
3/19/2015 DOE-RJ
Valor Econômico
RJ
12.4 Board rules, policies and practices
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-year term of office and who may be reelected. In the event of a fractional number
of independent 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 On April 7, 2016 a new shareholder’s agreement of the Company (“2016 Agreement”) was
celebrated to regulate the relationship between the Controlling shareholders and the Investment
Fund Axxon Brazil Private Equity Fund II (“Parties”).
Under the 2016 Agreement, the favorable vote of the members of the Board of Directors indicated by the parties in the deliberations of the meetings of the Board of Directors of the company, with
respect to Qualified Subjects of the Board (defined in item 15.5, “d”, of this Reference form), will depend on the prior approval of the Parties at prior meeting.
The decisions taken at previous meetings shall commit the members of the Board of Administration indicated by the Parties, which should follow the guidance of vote received as the
substance in question, pursuant to art. 118 of the law No. 6.404/76, even though the Parties that indicated (i) have been dissidents in relation to the decision taken in prior meeting; (ii) they
abstained in relation to the decision taken; or (iii) have not come to the the prior meeting.
Further information about the 2016 Agreement are on item 15.5 of this Reference Form.
c. Identification rules and handling of conflicts of interest
See item 16.3.
12.5 Description of binding clause, if applicable, in the bylaws for the resolution of conflicts by and between shareholders and the Company through arbitration
123
Under article 47 of the By-Laws, the Company, its shareholders, managers and members of the
Fiscal Council obligate themselves to resolve, through arbitration, before the Market Arbitration
Chamber, any and all disputes or controversies that may arise among them, related to or arising in particular from the application, validity, effectiveness, interpretation, breach and sequelae, of
the dispositions contained in the Brazilian Corporations Law, the By-Laws, the standards issued by the National Monetary Council, the Central Bank of Brazil and the CVM, as well as other
standards applicable to the functioning of the capital markets in 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 Administration and members of the Fiscal Council
The Company´s 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
Age
Profession
CPF
Title
Date of
Last Election
Date of Office
Term
of Office
Other
Titles
Elected by the
Controlling
Shareholder
Andres Cristian Nacht
72 Business
Administration 098.921.337/
49 Chairman 4.25.2014 4.25.201
4 2 years No Yes
Elio Demier 64 Bachelor of
Social
Communication
260.066.507-
20 Vice Chairman 4.25.2014 4.25.201
4 2 years Yes Yes
Francisca
Kjellerup Nacht 44
Business
Administration
124.175.657-
06 Director 4.25.2014 4.25.201
4 2 anos Não Sim
Nicolas Arthur
Jacques Wollak 53 Executive
057.378.217-
22
Independent
Director 4.25.2014 4.25.201
4 2 years Yes Yes
Jorge Marques de Toledo Camargo
61 Geologist and
Physicist 114.400.151-
04 Independent
Director 4.25.2014 4.25.201
4 2 years No Yes
Board of Executive Officers
The Company’s executive officers are the legal representatives and are principally responsible for the day-to-day management of the business and for implementing the general policies and
guidelines established by the board of directors.
According to the Brazilian Corporate Law, each member of the executive board should be resident
in the country, and may or may not be a shareholder. In addition, up to a maximum of one-third of the positions of the board of executive officers may be occupied by members of the board of
directors.
The members of the Company’s Board of Executive Officers are elected by the Board of Directors
for one-year terms 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 Company’s bylaws,
its Board of Executive Officers must be comprised of four to eleven officers, including one Chief Executive Officer, one Chief Financial Officer and the others without specific designation.
All new members of the Board of Executive Officers must sign a Statement of Consent of Directors, conditioned on possession in their respective positions to the signing of this document.
By this Consent Agreement, the company‘s new management is personally committed to act in accordance with the Participation Agreement of the Novo Mercado, Arbitration Rules of the Market
Arbitration Committee and the Rules of the Novo Mercado.
124
The table below shows the name, age, years of experience, position, date of election and term of
the current members of the Company’s Board of Executive Officers.
Name
Ag
e
Professio
n CPF Title
Date of Last
Election
Date of
Office
Term of
Office
Other
Titles
Elected by the
Controllin
g Sharehold
er
Sérgio Kariya 41 Engineer 197.064.378-
19 Chief Executive Officer 3.8.2016
3.8.2016 Until OSN 2017
No Yes
Avelino Pinto da Silva Garzoni
49 Engineer 857.596.607-
30 Officer 3.8.2016
3.8.2016 Until OSM 2017
No Yes
Ricardo de Araujo Gusmão
47 Engineer 987.271.927-
68 Officer 3.8.2016
3.8.2016 Until OSM 2017
No Yes
Fiscal Council
At the Ordinary General Meeting held on April 20, 2012, the Fiscal Council became a permanent
body.
For the purposes of article 10 of CVM Instruction 481/2009, the controlling shareholders of the company support the reelection, in the fiscal year of 2015, of the members of the Fiscal Council
elected in the fiscal year 2014 (as indicated below), with the Company's minority shareholders to decide on the election of the other members.
The table below presents name, age and title of the Fiscal Council members, elected on the Ordinary General Meeting held on April 25, 2014.
Name
Age
Profession
CPF Position
Date of last election
Date of office
Term
of office
Other titles
Ellected by the
controlling shareholder
Eduardo Botelho Kiralyhegy
36 Lawyer 082.613.217-
03 President 4.28.2014 4.28.2014 1 year No Yes
Maria Cristina Pantoja da Costa
Faria
38 Lawyer 886.793.577-
15 Alternate 4.28.2014 4.28.2014 1 year No Yes
Marcus Vinícius Dias Severini
57 Controller/Engineer
632.856.067/20
Member 4.28.2014 4.28.2014 1 year No Yes
Vera Lucia de Almeida Pereira Elias
56 Accountant/
Lawyer 492.846.497-
49 Alternate 4.28.2014 4.28.2014 1 year No Yes
Helio Carlos de Lamare Cox
64 Engineer 298.152.157-
87 Member 4.28.2014 4.28.2014 1 year No No
Massao Fábio Oya 33 Accountant 297.396.878-
06 Alternate 4.28.2014 4.28.2014 1 year No No
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 Company’s 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
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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 Gillette’s 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 Company’s chairman from 1998 to 1999 and has been a member of the Company’s board of directors since 1998. Mr. Demier was President
of the Bomtexto Publisher, company in the book publishing business located in Rio de Janeiro.
Nicolas Arthur Jacques Wollak has been a member of the Company’s 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 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.
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 master’s degree in geophysics from the University of Texas. Currently, he is serving as a senior consultant at Statoil 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 of Ultrapar Group, member of Nexans do Brasil S.A. Strategic Advisory Council, 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 Ceará-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 Logística’s Board
of Directors in March 14, 2014 and his election is pending the annual general meeting of the company.
12.8.2 Board of Executive Officers Sérgio Kariya joined the Company in 2009 and has been the 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 Politécnica da Universidade de São Paulo (Poli-USP) and a graduate degree in Marketing from Escola Superior de Propaganda e Marketing
(ESPM). Mr. Kariya also holds an Master’s degree in Business Administration from IBMEC/SP and
a specialization course in Finance awarded by INSPER/SP. In the last five years Mr. Kariya occupied position of Executive Officer responsible fot the business unit Rental. He was elected to
Company´s Chief Executive Officer on December of 2014.
126
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 has held relevant positions at the Company, acting as the Engineer Officer for Heavy Construction and Real Estate business units since 2011.
Ricardo Gusmão is currently the Officer of Heavy Construction Division since August 1st 2013. In September 17th also Statutory Officer at Mills. He holds an undergraduate degree in Civil
Engeneering and a postgraduate degree in Economic Engeneering both from Universidade Veiga de Almeida/RJ. He joined Mills in 1993, where he worked as Regional Manager, Contracts
Superintendent, Commercial and Operations Officer.
12.8.3 Fiscal Council
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. On
the date hereof, acts as Tax Corregidor of external control, integrating the External Control
Authority of the State Secretary of Finance of Rio de Janeiro, acting on inspection of the activities of members of the State Department of Finance, including tax auditors, pointing out mistakes,
abuses, omissions and distortions, recommending its correction and, if applicable, the application of the relevant sanctions. Mr. Eduardo Botelho Kiralyhegy does not hold any management position
in listed companies.
Maria Cristina Pantoja da Costa Faria graduated in law from the Pontifical Catholic University of
Rio de Janeiro (Pontifícia Universidade Católica do Rio de Janeiro - PUC), specializing in corporate finance for lawyers by the Foundation Institute of Management from the University of São Paulo
(Fundação Instituto de Administração da Universidade de São Paulo), and earned her master‘s degree in executive management of insurances at IBMEC. Member of the Brazilian Lawyers
Association. At the date of this Reference Form, is a member of the Negreiro Office and Medeiros
& Kiralyhegy Lawyers. Ms. Maria Crustina does not hold any management position in listed companies.
Marcus Vinícius Dias Severini graduated in Accounting and Electric Engineering, post graduated
in Economic Engineering. He acted as Controller Director of Vale S.A. until March 26, 2015, having
entered the Company in 1994, coming from Arthur Andersen S/C, where he worked in auditing. Member of IBGC with fiscal advisor certification and acted as effective or alternate member of
fiscal councils of the following companies: “Fertilizantes Fosfatados S/A- Fosfértil, Associal Brasileira de Alumínio – ABAL, Uninas Minas Gerais S/A – USIMINAS, Companhia Siderúrgica de
Tubarão - CST e Caemi Mineração S.A. He was president of the deliberative council of Fundação Vale do Rio Doce de Seguridade Social – VALIA from May 2007 to March 2015.
Vera Lucia de Almeida Pereira Elias graduated in Accounting and Law, post graduated in Finance. Mrs. Vera Lucia de Almeida Pereira Elias acted as accountant of Vale S.A. until September 2013.
Since December 2013 she holds the position of International Standards Officer and CPC in the Associação Nacional dos Executivos de Finanças, Administração e Contabilidade – ANEFAC. Mrs.
Vera Lucia de Almeida Pereira acted and/or act as effective or alternate member of the fiscal
council of the following companies: Norte Energia S.A., Vale do Rio Doce de Seguridade – VALIA, Fundação Vale do Rio Doce, Ferrovia Centro-Atlântica, Caemi Mineração e Metalurgia AS and
Associação Mulheres Geniais. 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
127
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 Fábio 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 Indústria e Comércia S.A. (since October 2011); Companhia de Saneamento do
Estado de São Paulo - Sabesp (since April 2013); Cristal Pigmentos do Brasil S.A. (since April
2013); Bardella S.A. - Indústrias Mecânicas (since April 2013); Companhia Providência Ind. e Com. S.A. (since April 2014); and others.
b. Description of any of the following events which have occurred in the last 5 years:
i. Any criminal conviction:
There is not any criminal conviction involving members of the Administration and of the Fiscal Council listed above.
ii. Any conviction in a CVM administrative proceeding and the penalties
applied: There is not any conviction in a CVM administrative proceeding involving members of the
Administration and of the Fiscal Council listed above.
iii. Any final unfavorable judicial or administrative decision, which has
resulted in his suspension or impediment to the exercise of any professional or commercial activity:
There is not any final unfavorable decision involving members of the Administration and of the Fiscal Council listed above.
12.9 Relationship (as a spouse or significant other) or relationship to the second
degree between: a. Members of the Board of Directors, Executive Board and Fiscal Council Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Chairman of the Board of Directors
Related Person:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Member of the Board of Directors
128
Type of relationship: Father/Daughter.
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
Not applicable. The Company does not control, directly or indirectly, any society.
c. (i) members of management of entities controlled by the company, either directly or indirectly; and (ii) Company’s direct or indirect controlling shareholders
Administrator of the Company or Controlled Company: Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman 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
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Direct Controlling Shareholder
Type of relationship: Husband/Wife
-------------------------------------- Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Chairman 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
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Father/Son --------------------------------------
Administrator of the Company or Controlled Company: Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman 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
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Direct Controlling Shareholder
Type of relationship: Father/Daughter
-------------------------------------- Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Chairman 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
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
129
Type of relationship: Father/Son
--------------------------------------
Administrator of the Company or Controlled Company: Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person: Name: Emma Keila Nacht / CPF: NA
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 --------------------------------------
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
Serviços 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
Serviços 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
Serviços 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
Serviços 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
Serviços 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
Serviços 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
Serviços 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
130
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e
Serviços 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
Serviços de Engenharia S.A. / CNPJ: 27.093.558/0001-15 Title: Member of the Board of Directors
Related Person:
Name: Emma Keila Nacht / CPF: NA
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: Cousin
d. (i) members of the Board of Directors, Executive Board and Fiscal Council and (ii) Mills’ 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 Serviços 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
Serviços 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 administrators and:
a. Controlled entities, either directly or indirectly by the company
Not applicable. The Company does not control, directly or indirectly, any entity.
b. Direct or indirect controlling shareholders of the company Mr. Eduardo Kiralyhegy, by the entity Negreiro, Medeiros & Kiralyhegy Advogados, provided in
the last three fiscal years legal services to Mr. Andres Cristian Nacht and Ms. Jytte Kjellerup Nacht,
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controlling shareholders of the Company, by means of the Nacht Participações S.A., also
controlled by Mr. Andres Cristian 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 and Ms. Jytte Kjellerup Nacht, controlling shareholders of the Company, by means of the Nacht Participações S.A., also
controlled by Mr. Andres Cristian Nacht.
c. In case its relevant, supplier, client, debtor or creditor of the Company or its controlled or controlling shareholders
Mr. Eduardo Kiralyhegy is an associate of Negreiro, Medeiros & Kiralyhegy Advogados, which provided services of legal advisory to the Company over the past three fiscal years.
A Sra. Maria Cristina Faria is an associate of Negreiro, Medeiros & Kiralyhegy Advogados, which provided services of legal advisory to the Company over the past three fiscal years.
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, 2014 until December 31, 2015.
12.12 Other relevant information
a) Positions held by the members of the Board of Directors in other companies or entities.
Nicolas Wollak - Member of the Board of Directors
Administrative positions occupied in other companies / entities: Co-founder of Axxon Group in Brasil, serving as Managing Partner since 2001 where he manages by corporate control
enterprises such as Mundo Verde LLC, Tolstoy Investments LLC and Dickens Investments LLC;
Chairman of the Board of Directors of Luxxon S.A; Integrates Board of Directors of Knijnik Participações S.A. and of Projeto Texas Participações Ltda.; Acts as Chairman of Board of
Directors and CEO of Tolstoi Investimentos S.A. and is a member of Investment Committee of Fundo de Investimento em Participações Axxon Brazil Private Equity Fund II.
Pedro Malan - Member of the Board of Directors
Administrative positions occupied in other companies / entities: Member of the board
of Directors of EDP - Energias do Brasil S.A. and British American Tobacco P.L.C; Integrates Advisory International Council of Itaú Unibanco Holdings S.A. and of Rolls-Royce PLC.
Jorge M. T. Camargo - Member of the Board of Directors
Administrative positions occupied in other companies / entities: Integrates Advisory
Council of Energy Ventures; serves as Consultant of Karoon Petróleo e Gás and of McKinsey & Company, Inc do Brasil Consultoria Ltda.; Intagrates Strategic Advisory Council of Nexans do Brasil S.A.; member of Board of Directors of Prumo Logística Global and of Grupo Ultrapar; and is a member of the board of Officers of Instituto Brasileiro do Petróleo (IBP).
Francisca Kjellerup Nacht – Member of the Board of Directors
Administrative positions occupied in other companies / entities: Member of Board of
Directors of Bybi, Danish enterprise located in Copenhagen, Denmark since 2011.
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Eduardo Botelho Kiralyhegy – Member of the Fiscal Council
Administrative positions occupied in other companies / entities: Co-managing Partner
of Negreiro, Medeiros & Kiralyhegy Advogados; Integrates Collegiate and is external control tax inspector of Secretaria Estadual de Fazenda do Rio de Janeiro.
b) Information about the General Meetings held by the Company, after its IPO, on April
2015:
Ordinary General Meeting First Call
Realization date: 04/28/2015 Quorum: Shareholders representing 63.40% of the capital
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
Ordinary and Extraordinary General Meeting
First Call
Realization date: 04/20/2012 Quorum: Shareholders representing 72.48% of the capital
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13. COMPENSATION FOR ADMINISTRATION
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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. Objectives of the compensation policy or practices
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 Company’s 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 Company’s
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 Committee
The members of the Human Resources Committee and Strategic 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
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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:
Salary and pro-labore
The fixed remuneration of the statutory directors and non-statutory directors is designed to recognize and reflect the value of the job position internally and externally, considering the
competitors of the Company and companies of similar size in terms of their gross revenues. The comparison with the market remuneration is carried out by a hired market research consulting
firm or through database purchased from a consultant. The Company conducted market research with company Towers Watson in 2012, 2013 and 2014. Additionally, the Company uses the
database of market remuneration from the consulting company Towers Watson.
For the Board of Directors of the Company (and consequently the Advisory Committee), the
remuneration, fixed and/or variable (the last as bonus), is discretionary 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 objetive of a 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.
Direct and indirect benefits Granted exclusively to statutory directors and non-statutory directors, the direct and indirect
benefits include medical assistance, life insurance, vehicle leasing and food vouchers, aiming to
ensure competitiveness in the market. The comparison with the benefits of the market is carried out by a market research conducted by a hired consulting firm or through database purchased
from a consultant. The Company conducted market research with company Towers Watson in 2012, 2013 and 2014. Additionally, the Company uses the database with market remuneration
from the consulting company Towers Watson. The member of the Board of Directors, Fiscal
Council and Advisory Committees are not entitled to any direct and indirect benefits. Profit-sharing and bonus
Granted to statutory directors and non-statutory directors, the profit-sharing program aims to motivate management to carry out the Company’s business in its best interest, thus stimulating
an entrepreneurial and results orientated culture in line with the interests of both shareholders
and management. Eventual bonuses paid to members of the Board of Directors, discretionary determined by the general meeting with no relation with the remuneration policy applicable to
officers and other employees of the Company, have the same goal.
The members of the Fiscal Council and Advisory Committee are not entitled to the profit-sharing
program. Stock options or subscription to shares
Granted exclusively to statutory directors and non-statutory directors, the stock option or subscription to shares aim to motivate management to carry out the Company’s business in its
best interest, thus stimulating an entrepreneurial and results orientated culture in line with the
interests of both shareholders and management.
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Members of the Board of Directors, Fiscal Council and Advisory Committees are not entitled to
stock option or subscription to shares.
(ii) Proportion of each element to make up the total remuneration package:
According to the table below the ratio for the year 2014 were:
% Compared to the total compensation amount paid to
Salary and
Pro-labore¹ Direct and indirect
benefits Bonus¹ Profit sharing Grant of options Total
Board of Directors 100.00% 0.00% 0.00% 0.00% 0.00% 100.00% Executive Officers 62.73% 4.16% 0.00% 0.00% 33.11% 100.00% Human Resources Committee 100.00% 100.00%
Fiscal Council 100.00% 100.00% ¹ Including taxes.
(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, 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 segments. i.e. in a proportion of 75% in 2012 and 60% from 2013 based on
the segment’s results that the manager or employee in question is linked to, and 25% in 2012 and 40% from 2013 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 2013 the Company 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. In 2015, the Company will not distribute any amount related to the results of 2014.
Regarding the to 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 Committees), 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 Company’s 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 Committees), 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 Company’s focus on results and the target of aligning
management interests with those of the shareholders of Company.
For the members of the Board of Directors who participate on Advisory Committees are entitled
to individual monthly remuneration equivalent to 50% of the individual monthly remuneration of the Board of Directors members. Statutory officers who participate on Advisory Committees are
not entitled to any compensation.
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 Company’s 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 segment, 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
Company’s results, and the values to be distributed are directly proportionate to the Company’s
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 Company’s short-, medium- and long-term interests
The remuneration monthly paid to statutory directors and non-statutory directors is in line with
the short-term 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 Company’s 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.
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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 Company’s 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 Company’s 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 Company’s 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 (2015)
Board of Directors
Board of Executive Officers Fiscal Council Total
Number of members 7 4.08 3 14.08
Annual fixed compensation
Salaries or pro-labore fees 928,012 5,247,727 260,000 6,435,739
Direct and indirect benefits 457,291 457,291
Compensation for participation in Committees
92,573 92,573
Others 177,602 1,994,136 52,000 2,223,739
Variable Compensation
Bonus 830,322 830,322
Profit sharing 2,492,436 2,492,436
Compensation for participation in meetings
Comissions
Others 166,064 166,064
Post-employment benefits
Employment cessation benefits
Stock-based compensation¹ 3,236,926 3,236,926
Total Compensation 2,194,574 13,428,516 312,000 15,935,090
(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.
Fiscal Year Ended December 31, 2014
Board of Directors
Board of Executive Officers Fiscal Council Total
Number of members 6.67 6 3 15.67
Annual fixed compensation
Salaries or pro-labore fees 1,031,559 4,715,612 232,961 5,980,132
Direct and indirect benefits
448,315 448,315
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Compensation for participation in Committees
112,707 112,707
Others 207,513 2,046,833 46,592 2,300,938
Variable Compensation
Bonus
Profit sharing
Compensation for participation in meetings
Comissions
Others
Post-employment benefits
Employment cessation benefits
Stock-based compensation¹
3,570,000 3,570,000
Total Compensation 1,351,778 10,780,760 279,553 12,412,091
(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.
Fiscal Year Ended December 31, 2013
Board of Directors
Board of Executive Officers Fiscal Council Total
Number of members 6.08 5.17 3.00 14.25
Annual fixed compensation
Salaries or pro-labore fees 893,619 4,360,016 207,288 5,460,923
Direct and indirect benefits
- 323,743 - 323,743
Compensation for participation in Committees
164,423 - - 164,423
Others 211,608 1,658,550 41,458 1,911,616
Variable Compensation
Bonus 383,066 - - 383,066
Profit sharing - 1,224,640 - 1,224,640
Compensation for participation in meetings
- - - -
Comissions - - - -
Others 76,613 - - 76,613
Post-employment benefits
- - - -
Employment cessation benefits
- - - -
Stock-based compensation¹
- 2,694,144 - 2,694,144
Total Compensation 1,729,329 10,261,094 248,746 12,239,169
(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 2013 is estimated.
Fiscal Year Ended December 31, 2012
Board of Directors
Board of Executive Officers Fiscal Council Total
Number of members 7 5 3 15
Annual fixed compensation
Salaries or pro-labore fees 933,005 3,278,531 187,200 4,398,736
Direct and indirect benefits
- 304,444 - 304,444
Compensation for participation in Committees
111,926 - - 111,926
Others 208,986 1,185,772 37,440 1,432,198
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Variable Compensation
Bonus 168,737 - - 168,737
Profit sharing - 637,433 - 637,433
Compensation for participation in meetings
- - - -
Comissions - - - -
Others 33,747 - - 33,747
Post-employment benefits
- - - -
Employment cessation benefits
- - - -
Stock-based compensation¹
- 1,690,083 - 1,690,083
Total Compensation 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.
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 (2015)
Board of Directors Board of Executive
Officers Fiscal Council Total
(in R$ thousand, except for number of members)
Number of Members 7 4.08 3 14.08
Bonus
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
Based on EVA, net profit or other financial status metrics, to be decided by the
Board of Directors
- -
Based on EVA, net profit or other financial status metrics, to be decided by the
Board of Directors
Profit sharing
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
-
Based on EVA, net profit or other financial status metrics, to be decided by the
Board of Directors
-
Based on EVA, net profit or other financial status metrics, to be decided by the
Board of Directors
Variable remuneration of Fiscal Year ended December 31, 2014
Board of Directors Board of Executive
Officers Fiscal Council Total
(in R$ thousand, except for number of members)
Number of Members 6.67 6 3
Bonus
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
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Amount estimated by the compensation plan if pre-established goals are met
20% to 30% of Eva - - 20% to 30% of Eva
Value effectively recognized in results of the fiscal year
0 (negative EVA) - - 0 (negative EVA)
Profit sharing
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
- 20% to 30% of Eva - 20% to 30% of Eva
Value effectively recognized in results of the fiscal year
- 0 (negative EVA) - 0 (negative EVA)
Variable remuneration of Fiscal Year ended December 31, 2013
Board of Directors Board of Executive
Officers Fiscal Council Total
(in R$ thousand, except for number of members)
Number of Members 6.08 5.17 3 14.25
Bonus
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
25% of Eva - - 25% of Eva
Value effectively recognized in results of the fiscal year
383.0 - - 383.0
Profit sharing
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
- 25% of Eva - 25% of Eva
Value effectively recognized in results of the fiscal year
- 1,224.6 - 1,224.6
Variable remuneration of Fiscal Year ended December 31, 2012
Board of Directors Board of Executive
Officers Fiscal Council Total
(in R$ thousand, except for number of members)
Number of Members 7 5 3 15
Bonus
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
30.0% of EVA - - 30.0% of EVA
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Value effectively recognized in results of the fiscal year
168.7 - - 168.7
Profit sharing - - - -
Minimum amount estimated by compensation plan
- - - -
Maximum amount estimated by compensation plan
- - - -
Amount estimated by the compensation plan if pre-established goals are met
- 30.0% do EVA - 30.0% of EVA
Value effectively recognized in results of the fiscal year
- - - -
Number of Members - 637.4 - 637.4
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:
14. STOCK-BASED COMPENSATION PLANS
On December 31st, 2014, the Company had a single stock option plan for the benefit of its managers, that being the “Plano de Opções de Compra de Ações” , as described below. This plan
will remain for the fiscal year 2015, with no expectation for the creation of new plan this year. Until December 31st of 2014, a total of 764,756 options had been exercised associated with this
plan, with 659,500 previously granted but not yet redeemed purchase options remaining.
All the stock-based compensation plans created before the Company’s IPO, held in April 15th,
2010 had its granted options redeemed.
Stock Option Plan of the Company
a. Terms and general conditions:
At the Extraordinary General Shareholders’ meeting held on February 8, 2010, the Stock Option
Plan for Shares Issued by the Company was approved called “Plano de Opções de Compra de Ações 2010” (“Stock Option Plan - 2010”), with amendments approved by the Board of Directors’ Meeting held on May 31, 2010 and by the Extraordinary General Shareholders’ meeting held on
April 20, 2012. The Board of Directors approved (i) on March 11th, 2010, the Company’s Program 1/2010 Stock Options Plan (“1/2010 Program”); (ii) on March 25th, 2011, the Program 1/2011
Stock Options Plan (“1/2011 Program”); (iii) on May 30th, 2012, the Program 1/2012 Stock Options
Plan (“1/2012 Program”); (iv) on March 25th, 2013, the Program 1/2013 Stock Options Plan (“1/2013 Program”), and (v) on March 31th, 2014, the Program 1/2014 Stock Options Plan
(“1/2014 Program”).
The Stock Options Plan is managed by our Board of Directors, which considers the contribution
of each beneficiary to achieving the targets designed to create added value, the development potential of each, and the essential nature of their jobs among other characteristics considered
strategically relevant, elected as beneficiaries of the 2010 Stock Options Plan (i) for the 1/2010 Program, all the directors (or executives with similar roles) of the Company, and Company
managers who have held their positions in 2009 for more than 6 (six) months; (ii) for the 1/2011 Program, all the directors (or executives with similar roles) of the Company, and Company
managers who have held their positions in 2010 for more than 6 (six) months; (iii) for the 1/2012
Program, all the directors (or executives with similar roles) of the Company, and Company managers who have held their positions in 2011 for more than 6 (six) months; (iv) for the 1/2013
Program, all the directors (or executives with similar roles) of the Company, and Company managers who have held their positions in 2012 for more than 6 (six) months; and (v) for the
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1/2014 Program, all the directors (or executives with similar roles) of the Company, and Company
managers who have held their positions in 2013 for more than 6 (six) months .
b. Major Plan Objectives:
The aim of the Stock Options Plan is to allow for the Company’s managers or employees or those
in any of its subsidiaries, subject to determined conditions, to acquire shares in the Company, for
the purpose of (i) stimulating expansion, determining and implementing the Company’s corporate guidelines; (ii) align the interests of the Company’s 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. How the plans contribute for the achievement of these objectives:
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 Company’s compensation policy
As mentioned in Item 13.1b, this plan is part of the variable compensation package paid to the Company’s 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 maximum number of shares options to be granted:
The stock options granted within the scope of this plan confer the rights to acquire up to 5% of
shares of the Company’s 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. 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 Company’s 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, 528,077 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, 2014, 161,771 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, 2014, 53,181 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, 2014, 21,727 options have been exercised.
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As part of the 1/2014 Program, 101,852 options have been granted, which will be converted into
ordinary shares in the Company once they are exercised. Up to December 31st, 2014, 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
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 Company’s 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 Company’s 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 Company’s 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 Company’s Profit-
Sharing Program, net of taxes, which were received related to the 2012 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2014 Program, each beneficiary will have to use at least 33% of the variable component of their compensation associated with the Company’s Profit-
Sharing Program, net of taxes, which were received related to the 2013 financial year, to acquire shares issued by the Company.
Additionally, the Board of Directors approved grants within the 1/2011, 1/2012, 1/2013 and 1/2014 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. Criteria for determining the acquisition or 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 Company’s 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 (“Índice de Preços 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 Company’s Initial Public Offering (R$11.50), monetarily adjusted by the inflation
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according to the IPCA, which is disclosed by the Brazilian Institute of Geography and Statistics
(IBGE), deducting the value of dividends and interest on equity per share paid by the Company
as from the stock option date.
Regarding the 1/2011 Program, the exercise price of the options will be the average share price acquired according to brokerage invoice sent by the beneficiary to the Board of Directors or
Human Resources Committee of the Company (R$ 19.28), monetarily adjusted by the inflation
according to the IPCA 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 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 Discricionary Program, the exercise price of the options will be the average
share price on the BM&FBOVESPA in the year of 2011 (R$19.22), weighted by the trading volume, monetarily adjusted by the inflation according to the IPCA or by another index determined by the
Board of Directors or committee, according to the case, from the date of conclusion of the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2013 Basic Program, the exercise price of the options will be equal to the book
value of shares on December 31st of the fiscal year of the Company immediately preceding the stock option date (R$ 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$26.16), weighted by the trading volume, monetarily adjusted by the inflation according to the IPCA or by another index determined by the
Board of Directors or committee created for this purpose, according to the case, from the date of conclusion of the stock option agreement until the date the option is exercised, deducting the
value of dividends and interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2014 Basic Program, the exercise price of the options will be equal to the book value of shares on December 31st of the fiscal year of the Company immediately preceding the
stock option date (R$ 7.98), 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 1/2014 Discricionary Program, the exercise price of the options will be the average
share price on the BM&FBOVESPA in the year of 2013 (R$30.94), weighted by the trading volume, 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.
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j. Criteria used to determine the exercise term
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. Restrictions on the transfer of shares
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;
(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 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: (a) 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 (b) 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
147
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: (a) 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
(b) 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;
(iv) on retiring from the Company: (a) 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 (b) 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: (a) 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 (b) the rights already exercised in accordance with the Options Contract,
on the date of passing away, can be exercised by the Beneficiary’s 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:
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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, 2014.
On December 31st, 2013 Number of shares (%)
Board of Directors¹ 18,945,742 14.8%
Board of Executive Officers 383,560 0.30%
Fiscal Council - - 1 Andres Cristian Nacht and Francisca Kjellerup Nacht, the Company’s controlling shareholders and members of the Board of Directors,
were not considered. Their position as of December 31st, 2014, was 15,685,349 shares and 1,000 shares, respectively
13.6 With respect to stock-based compensation, as acknowledged in the past three accounting reference periods and as estimated for the current accounting reference
period, for Executive Board and the Board of Executive Officers.
The tables below show the impact of those stock option plans on the compensation of our
statutory directors in the years 2012, 2013 and 2014 and the estimated impact for 2015. The Company’s Board of Directors does not have stock based compensation.
Stock Option Plan
Program 1/2010 2012 2013 2014² 2015
Number of Members of the Board of Executive Officers
5 5.17 6.00 4.08
Grant Date 05/31/2010 05/31/2010 05/31/2010 05/31/2010 Number of granted options - - - - Number of non-redeemable options 269,357 134,678 - - Number of redeemable options¹ 18,639 3,769 144,575 10,628
Deadline for options to become redeemable
25% by year, from the year after the date of the Grant
25% by year, from the year
after the date of the Grant
25% by year, from the year
after the date of the Grant
25% by year, from the year
after the date of the Grant
Deadline for redeeming options 05/31/2016 05/31/2016 05/31/2016 05/31/2016 Grace period for stock transfer Quantity of options exercised 250,718 400,267 534,574 534,574 Pondered average price within accounting reference period for each of the following option groups
Outstanding at the beginning of the accounting reference period
R$ 12.22 R$ 12.63 R$ 13.01 R$ 13.89
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
R$ 12.42 R$ 12.86 R$ 13.44
Expired within accounting reference period
Fair option price on grant date - - - Potential dilution in the event of exercise of all options granted3
0.23% 0.11% 0.11% 0.01%
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 amount of shares were 126,399,430, at the end of
fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925. 4. Fair value of R$ 3.84 per option. Assumptions available in item 13.9 (b).
1/2011 Program 2012 2013 2014² 2015
Number of Members of the Board of Executive Officers
5 5.17 6.00 4.08
Grant Date 04/16/2011 04/16/2011 04/16/2011 04/16/2011 Number of granted options - - - - Number of non-redeemable options 294,034 196,023 143,442 -
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Number of redeemable options¹ 56,546 65,742 170,385 164,465
Deadline for options to become redeemable
25% by year, from the date of the
Grant
25% by year, from the date of the Grant
25% by year, from the date of the Grant
25% by year, from the date of the
Grant Deadline for redeeming options 04/16/2016 Grace period for stock transfer Quantity of options exercised 41,466 130,281 169,080 169,080 Pondered average price within accounting reference period for each of the following option groups
Outstanding at the beginning of the accounting reference period
R$ 19.77 R$ 20.60 R$ 21.50 R$ 23.02
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
R$ 20.15 R$ 20.82 R$ 22.20 -
Expired within accounting reference period
Fair option price on grant date - - - - Potential dilution in the event of exercise of all options granted3
0.28% 0.21% 0.25% 0.13%
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 amount of shares were 126,399,430, at the end of
fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$6.57 per option. Assumptions available in item 13.9 (b).
Program 1/2012 - Basic 2012 2013 2014² 2015
Number of Members of the Board of Executive Officers
5 5.17 6 4.08
Grant Date 06/30/2012 06/30/2012 06/30/2012 06/30/2012
Number of granted options 38,462 - Number of non-redeemable options
38,462 28,847 25,190 8,583
Number of redeemable options¹ - - - 8,583
Deadline for options to become redeemable
25% by year, from the date of the
Grant
25% by year, from the date of the
Grant
25% by year, from the date of the
Grant
25% by year, from the date of the
Grant
Deadline for redeeming options 30/06/2018 30/06/2018 30/06/2018 30/06/2018
Grace period for stock transfer
Quantity of options exercised - 9,615 22,210 22,210
Pondered average price within accounting reference period for each of the following option groups
Outstanding at the beginning of the accounting reference period
- R$ 5.74 R$ 5.75 R$ 6.03
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
- R$ 5.82 R$ 5.93
Expired within accounting reference period
Fair option price on grant date4 R$ 815,394 - - Potential dilution in the event of exercise of all options granted3
0.03% 0.02% 0.02% 0.01%
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 amount of shares were 126,399,430, at the end of fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$ 21.20 per option. Assumptions available in item 13.9 (b).
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Program 1/2012 - Discretionary
2012 2013 2014² 2015
Number of Members of the Board of Executive Officers
5 5.17 6 4.08
Grant Date 06/30/2012 06/30/2012 06/30/2012 06/30/2012 Number of granted options 194,000 - - Number of non-redeemable options
194,000 145,500 164,000 48,000
Number of redeemable options(¹)
- 31,500 91,500 89,000
Deadline for options to become redeemable
25% by year, from the date of the
Grant
25% by year, from the date of
the Grant
25% by year, from the date of the
Grant
25% by year, from the date of the
Grant Deadline for redeeming options 06/30/2018 06/30/2018 06/30/2018 06/30/2018 Grace period for stock transfer Quantity of options exercised - 17,000 39,000 39,000 Pondered average price within accounting reference period for each of the following option groups
Outstanding at the beginning of the accounting reference period
- R$ 19.57 R$ 20.37 R$ 21.79
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
- R$ 20.60 R$ 21.03
Expired within accounting reference period
Fair option price on grant date4 R$ 2,362,920 - - Potential dilution in the event of exercise of all options granted(3)
0.15% 0.14% 0.20% 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 amount of shares were 126,399,430, at the end of fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$ 12.18 per option. Assumptions available in item 13.9 (b).
Program 1/2013 - Basic 2013 2014² 2015
Number of Members of the Board of Executive Officers
5.17 6 4.08
Grant Date 04/30/2013 Number of granted options 105,770 - Number of non-redeemable options
105,770 104,153 35,072
Number of redeemable options¹ - - 17,536 Deadline for options to become redeemable
25% by year, from the date of the Grant
25% by year, from the date of the Grant
25% by year, from the date of the Grant
Deadline for redeeming options 04/30/2019 04/30/2019 04/30/2019 Grace period for stock transfer Quantity of options exercised - 34,717 34,717 Pondered average price within accounting reference period for each of the following option groups
Outstanding at the beginning of the accounting reference period
- R$ 6.72 R$ 7.04
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
- R$ 6.95
Expired within accounting reference period
Fair option price on grant date4 R$ 2,620,981 Potential dilution in the event of exercise of all options granted3
0.08% 0.11% 0.04%
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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 amount of shares were 126,399,430, at the end of
fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$ 24.78 per option. Assumptions available in item 13.9 (b).
Program 1/2013 - Discretionary
2013 2014² 2015
Number of Members of the Board of Executive Officers
5.17 6 4.08
Grant Date 04/30/2013 Number of granted options 105,000 - - Number of non-redeemable options
105,000 157,500 90,000
Number of redeemable options¹
- 52,500 90,000
Deadline for options to become redeemable
25% by year, from the date of the Grant
25% by year, from the date of the Grant
25% by year, from the date of the Grant
Deadline for redeeming options
04/30/2019 04/30/2019 04/30/2019
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
- R$ 26.78 R$ 28.67
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
- - -
Expired within accounting reference period
Fair option price on grant date4
R$ 1,251,600
Potential dilution in the event of exercise of all options granted3
0.08% 0.16% 0.14%
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 amount of shares were 126,399,430, at the end of
fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$ 11.92 per option. Assumptions available in item 13.9 (b).
Program 1/2014 - Basic 2014² 2015
Number of Members of the Board of Executive Officers
6 4.08
Grant Date 04/30/2014 04/30/2014 Number of granted options 101,852 Number of non-redeemable options 101,852 36,489 Number of redeemable options¹ 12,163
Deadline for options to become redeemable 25% by year, from the date of the
Grant 25% by year, from the date of the
Grant Deadline for redeeming options 04/30/2020 04/30/2020 Grace period for stock transfer Quantity of options exercised - - Pondered average price within accounting reference period for each of the following option groups
152
Outstanding at the beginning of the accounting reference period
- R$ 8.17
Not redeemed throughout accounting reference period
Redeemed within accounting reference period
- -
Expired within accounting reference period
Fair option price on grant date4 R$ 2,299,818 Potential dilution in the event of exercise of all options granted3
0.08% 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 amount of shares were 126,399,430, at the end of fiscal year 2013, the total number of shares was equal to 127,385,996 and at the end of fiscal year 2014, the total number of shares was equal to 128,057,925.
4. Fair value of R$ 22.58 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
Board of Executive Officers
Program 1/2010
Program 1/2011
Program
1/2012 - Basic
Program
1/2012 - Discretiona
ry
Program
1/2013 - Basic
Program
1/2013 - Discretion
ary
Program
1/2014 Basic
Total
Number of members 5 5 5 5 5.17 5.17 6 5.2
Non-Outstanding
options
Number 0 143,442 25,190 164,000 104,153 157,500 101,852 696,137
Deadline for
options to become redeemable
- 143,442 opções se tornam
exercíveis a cada ano
até 2015
12,595 opções se tornam
exercíveis a cada ano até
2016
82,000 opções se tornam
exercíveis a cada ano até
2016
34,717 opções se tornam
exercíveis a cada ano até
2017
52,500 opções se tornam
exercíveis a cada ano
até 2017
25,463 opções se tornam
exercíveis a cada ano
até 2018
Deadline for redeeming options
05/31/2016
04/16/2017 05/31/2018 05/31/2018 04/30/2019 04/30/2019 04/30/2020
Grace period for stock transfer
- - - -
Weighted average exercise price
Fair value of
options on the last the of the fiscal year
- R$ 0 R$ 103,531 R$ 16,400 R$ 399,948 R$ 18,900 R$ 378,889 R$ 917,668
Outstanding options
Number 10,628 170,385 - 91,500 - 52,500 - 325,013
Deadline for
redeeming options
05/31/201
6
04/16/2017 05/31/2018 05/31/2018 04/30/2019 04/30/2019 04/30/2020
Grace period for stock transfer
Weighted average exercise price
R$ 13.44 R$ 22.20 R$ 5.93 R$ 21.03 R$ 6.95 R$ 26.78 -
Fair value of options on the last the of the fiscal year
R$ 7,865 R$ 0 - R$ 9,150 - R$ 6,300 - R$ 23,315
Total fair value of the options on the
last day of the fiscal year
R$ 7,865 R$ 0 R$ 103,531 R$ 25,550 R$ 399,948 R$ 25,200 R$ 378,889
R$ 940,983
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
153
Board of Executive Officers Exercised Options – fiscal year ended in 12/31/2014
Program 1/2010
Program 1/2011
Program 1/2012 - Basic
Program 1/2012 -
Discretionary
Program 1/2013 - Basic
Program 1/2013 -
Discretionary Total
Number of Members
5 5 5 5 5.17 5.17 5.06
Redeemable Options
Number of shares 134,307 38,799 12,595 22,000 34,717 0 242,418
Pondered average price within accounting reference period
R$ 13.44 R$ 22.20 R$ 5.93 R$ 21.03 R$ 6.95 R$ 26.78 R$ 5.96
Total value of the difference between the exercise value and market value of shares related to options exercised1
R$ 903,886
-R$ 78,762
R$ 179,353
-R$ 18,920 R$
458,959 R$ 0.00
R$ 1,444,516
Shares Granted
Number of granted shares
134,307 38,799 12,595 22,000 34,717 0 242,418
Pondered average price of acquisition
R$ 13.44 R$ 22.20 R$ 5.93 R$ 21.03 R$ 6.95 R$ 26.78 R$ 5.96
Total value of the difference between the exercise value and market value of shares related to options exercised 1
R$ 903,886
-R$ 78,762
R$ 179,353
-R$ 18,920 R$
458,959 R$ 0.00
R$ 1,444,516
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 20.17 at the end of 2014.
Exercised Options – fiscal year ended in 12/31/2013
Program 1/2010
Program 1/2011
Program 1/2012 -
Basic
Program 1/2012 -
Discretionary Total
Number of Members 5.17 5.17 5.17 5.17 5.17
Redeemable Options
Number of shares 149,549 88,815 9,615 17,000 264,979
Pondered average price within accounting reference period
R$ 12.86 R$ 20.82 R$ 5.82 R$ 20.06 R$ 15.73
Total value of the difference between the exercise value and market value of shares related to options exercised1
R$ 2,703,846
R$ 898,808 R$ 241,529 R$ 184,960 R$
4,029,143
Shares Granted
Number of granted shares 149,549 88,815 9,615 17,000 264,979
Pondered average price of acquisition R$ 12.86 R$ 20.82 R$ 5.82 R$ 20.06 R$ 15.73
Total value of the difference between the exercise value and market value of shares related to options exercised 1
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.
Exercised Options – fiscal year ended in 12/31/2012
Program 1/2010
Program 1/2011
Total
Number of Members 5 5 5
Redeemable Options
Number of shares 199,467 41,466 240,993
Pondered average price within accounting reference period
R$ 12.42 R$ 20.15 R$ 13.75
154
Total value of the difference between the exercise value and market value of shares related to options exercised1
R$ 4,190,802 R$ 550,668 R$ 4,741,470
Shares Granted
Number of granted shares 199,467 41,466 240,933
Pondered average price of acquisition R$ 12.42 R$ 20.15 R$ 13.75
Total value of the difference between the exercise value and market value of shares related to options exercised 1
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.
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 measured again on every reporting date.
The portions of equity and debt are appropriated plan 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. b. Data and assumptions used in the pricing model The table below shows the data and assumptions of our pricing model:
Plans granted in 2010
Calculation of fair value 1st Grant (05/31/2010) 2nd Grant (07/05/2010)
Grant Date Exercise price R$11.50 R$11.50 Weighted average share price R$11.95 R$14.10 Expected volatility1 31% 31% Expected option life (days) 1,461 1,461 Dividend yield 1.52% 1.28% Risk-free interest rate 6.60% 6.37% Fair value per share R$3.86 R$5.49 At the end of 2010 Exercise price R$11.65 R$11.59 Weighted average share price R$20.55 R$20.55 Expected volatility1 34.92% 34.92% Expected option life (days) 1,247 1,282 Dividend yield 1.71% 1.71% Risk-free interest rate 6.08% 6.08% Fair value per share R$10.49 R$10.56 At the end of 2011 Exercise price R$12.22 R$12.16 Weighted average share price R$17.55 R$17.55 Expected volatility1 38.68% 38.68% Expected option life (days) 882 917 Dividend yield 1.06% 1.06% Risk-free interest rate 4.81% 4.83% Fair value per share R$7.27 R$7.37 At the end of 2012 Exercise price R$12.63 R$12.57 Weighted average share price R$33.43 R$33.43 Expected volatility1 35.92% 35.92% Expected option life (days) 516 551 Dividend yield 0.70% 0.70%
155
Risk-free interest rate 1.04% 1.08% Fair value per share R$20.69 R$20.75 At the end of 2013 Exercise price R$13.01 R$13.01 Weighted average share price R$33.00 R$33.00 Expected volatility1 33.86% 33.86% Expected option life (days) 182 186 Dividend yield 0.64% 0.64% Risk-free interest rate 3.06% 3.12% Fair value per share R$20.08 R$20.09 At the end of 2014 Exercise price R$13.70 R$13.70 Weighted average share price R$9.55 R$9.55 Expected volatility1 36.00% 36.00% Expected option life (days) 548 552 Dividend yield 0.54% 0.54% Risk-free interest rate 5.47% 5.47% Fair value per share R$0.74 R$0.75
1 Based on the Company’s historical EBITDA
Plans granted in 2011
Calculation of fair value 1st Grant (04/16/2010)
Grant Date Exercise price R$19.28 Weighted average share price R$21.08 Expected volatility1 35.79% Expected option life (days) 1,461 Dividend yield 1.73% Risk-free interest rate 6.53% Fair value per share R$6.57 At the end of 2011 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% At the end of 2014 Exercise price R$22.72 Weighted average share price R$9.55 Expected volatility1 36.00% Expected option life (days) 106 Dividend yield 0.54% Risk-free interest rate 2.25% Fair value per share R$0.00
1 Measured by the historical behavior of the value of the stock of the Company
Plans granted in 2012
Calculation of fair value 1/2012
Basic (06/30/2012) 1/2012
Discretionary (06/30/2012)
Grant Date Exercise price R$5.86 R$19.22 Weighted average share price R$27.10 R$27.10
156
Expected volatility1 37.41% 37.41% Expected option life (days) 1,461 1,461 Dividend yield 0.87% 0.87% Risk-free interest rate 3.92% 3.92% Fair value per share R$21.20 R$12.18 At the end of 2012 Exercise price R$5.74 R$19.57 Weighted average share price R$33.43 R$33.43 Expected volatility1 35.92% 35.92% Expected option life (days) 1,277 1,277 Dividend yield 0.70% 0.70% Risk-free interest rate 2.15% 2.15% Fair value per share R$27.30 R$16.14 At the end of 2013 Exercise price R$5.75 R$20.37 Weighted average share price R$33.00 R$33.00 Expected volatility1 33.86% 33.86% Expected option life (days) 882 882 Dividend yield 0.64% 0.64% Risk-free interest rate 4.84% 4.84% At the end of 2014 Exercise price R$5.95 R$21.51 Weighted average share price R$9.55 R$9.55 Expected volatility1 36.00% 36.00% Expected option life (days) 517 517 Dividend yield 0.54% 0.54% Risk-free interest rate 5.30% 5.30% Fair value per share R$4.11 R$0.10
1 Measured by the historical behavior of the value of the stock of the Company
Plans granted in 2013
Calculation of fair value 1/2013
Basic (04/30/2013) 1/2013
Discretionary (04/30/2013)
Grant Date Exercise price R$6.81 R$26.16 Weighted average share price R$31.72 R$31.72 Expected volatility1 35.34% 35.34% Expected option life (days) 1,461 1,461 Dividend yield 0.82% 0.82% Risk-free interest rate 3.37% 3.37% Fair value per share R$24.78 R$11.92 At the end of 2013 Exercise price R$6.72 R$26.78 Weighted average share price R$33.00 R$33.00 Expected volatility1 33.86% 33.86% Expected option life (days) 1,216 1,216 Dividend yield 0.64% 0.64% Risk-free interest rate 5.48% 5.48% At the end of 2014 Exercise price R$6.95 R$28.31 Weighted average share price R$9.55 R$9.55 Expected volatility1 36.00% 36.00% Expected option life (days) 851 851 Dividend yield 0.54% 0.54% Risk-free interest rate 5.72% 5.72% Fair value per share R$3.84 R$0.12
1 Measured by the historical behavior of the value of the stock of the Company
Plans granted in 2014
Calculation of fair value 1/2014
Basic (04/30/2013) 1/2014
Discretionary (04/30/2013)
Grant Date Exercise price R$7.98 R$30.94 Weighted average share price R$28.12 R$28.12 Expected volatility1 33.45% 35.34% Expected option life (days) 1,461 1,461 Dividend yield 0.75% 0.75% Risk-free interest rate 12.47% 12.47% Fair value per share R$22.58 R$11.16 At the end of 2014 Exercise price R$8.06 R$31.83
157
Weighted average share price R$9.55 R$9.55 Expected volatility1 36.00% 36.00% Expected option life (days) 1,216 1,216 Dividend yield 0.54% 0.54% Risk-free interest rate 6.02% 6.02% Fair value per share R$3.72 R$0.26
1 Measured by the historical behavior of the value of the stock of the Company
c. Method used and assumed premises to incorporate the effects from expected early exercise
There was no early exercise.
d. Way of determining the expected volatility
Expected volatility is determined by the volatility of the share price between April 15, 2010, date of initial public offering of the Company, and the reference date for calculating the fair
value.
e. Other characteristics incorporated in the fair value measurement option
There are none.
13.10 Private Pension Funds in force granted to members of the Board of Directors
and the Board of Executive Officers
The Company does not sponsor or pay private pension funds for the members of the Board of
Executive Officers and members of the Fiscal Council.
13.11 Administrators’ Average Compensation
Compensation Year ended December 31,
2012 2013 2014
(in R$, except when number of members) Board of Directors
Number of members 7 6.08 6.67 Highest individual compensation value 270,222 334,510 350,098 Lowest individual compensation value 190,251 248,544 257,612 Average individual compensation value 208,057 284,429 280,080
Board of Executive Officers
Number of members 5 5.17 6 Highest individual compensation value¹ 2,287,911 3,843,450 4,027,230 Lowest individual compensation value² 822,193 1,066,639 1,147,781 Average individual compensation value 1,419,253 1,984,738 1,796,793
Board of Fiscal Council Number of members 3 3 3 Highest individual compensation value 74,880 82,915 93,184 Lowest individual compensation value 74,880 82,915 93,184 Average individual compensation value 74,880 82,915 93,184
_______________________________________________
(1) The Executive Officer occupied the position for the 12 months of the year. (2) Compensation paid for the Executive Officers who occupied the position for the 12 months of the year.
The Company’s 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
158
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.
Year ended on December 31
Board or Committee 2012 2013 2014
Board of Directors 17% 14% 11% Board of Executive Officers 81% 84% 87% Fiscal Council 2% 2% 2%
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
2012, 2013 and 2014, grouped by board or committee, for any purpose other than the function they perform, such as commissions, consulting or advisory services.
13.15 In the last 3 fiscal years, indicate the amounts recognized in the result of direct or indirect companies under common control and subsidiaries of the issuer, related
compensation of Executive Officers and Fiscal Council members of Company members, grouped by body, specifying why these amounts were assigned to these
individuals
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 Company in the fiscal years ended in 2012, 2013 and 2014.
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
Ofício-Circular/CVM/SEP / No. 002/2015, as detailed in the following spreadsheet for each fiscal year:
Fiscal year 2015 (estimated)
Number of members of
Board of Directors Board of
Executive Officers Fiscal Council
January 7 5 3
February 7 4 3
March 7 4 3
April 7 4 3
May 7 4 3
June 7 4 3
July 7 4 3
August 7 4 3
September 7 4 3
October 7 4 3
November 7 4 3
December 7 4 3
159
Total 84 49 36
Number of Members (“Total” divided by the number of months)
7 4.08 3
Fiscal year 2014
Number of members of
Board of Directors Board of
Executive Officers Fiscal Council
January 6 6 3
February 6 6 3
March 6 6 3
April 6 6 3
May 7 6 3
June 7 6 3
July 7 6 3
August 7 6 3
September 7 6 3
October 7 6 3
November 7 6 3
December 7 6 3
Total 80 72 36
Number of Members (“Total” divided by the number of months)
6.67 6 3
Fiscal year 2013
Number of members of
Board of Directors Board of
Executive Officers Fiscal Council
January 7 5 3
February 6 5 3
March 6 5 3
April 6 5 3
May 6 5 3
June 6 5 3
July 6 5 3
August 6 5 3
September 6 5 3
October 6 5 3
November 6 5 3
December 6 7 3
Total 73 62 36
Number of Members (“Total” divided by the number of months)
6.08 5.17 3
Fiscal year 2012
Number of members of
Board of Directors Board of
Executive Officers Fiscal Council
January 7 5 3
February 7 5 3
March 7 5 3
April 7 5 3
May 7 5 3
June 7 5 3
July 7 5 3
August 7 5 3
September 7 5 3
October 7 5 3
November 7 5 3
December 7 5 3
Total 84 60 36
Number of Members (“Total” divided by the number of months)
7 5 3
160
14. HUMAN RESOURCES
161
14.1 Description of the Company’s Human Resources, providing the following
information
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
2012, 2013 and 2014: Year ended December 31
2012 2013 2014
Heavy Conctruction and Real Estate - shared
- - 43
Heavy Construction 597 604 238 Industrial Services¹ 2.651 - - Real Estate 852 838 239 Rental 346 423 492 Operations - - 844
Corporate 310 227 220
Total 4,756 2,092 2,076
¹ The conclusion of the sale of the Industrial Services business unit was on November 30, 2013. In December 31, 2012, 2013 and 2014, 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: 2014
States Employees
Construção
Heavy Construction
Real Estate Operations Rental Corporate Total
Alagoas 0 0 0 0 1 0 1
Amazonas 0 0 9 13 6 0 28
Bahia 2 8 11 55 27 5 108
Ceará 4 11 12 68 19 2 116
Distrito Federal 3 25 16 104 7 6 161
Espirito Santo 0 0 10 16 13 2 41
Goiás 0 0 6 6 8 0 20
Maranhão 0 11 2 18 12 0 43
Mato Grosso 0 0 13 15 5 0 33
Mato Grosso do Sul 0 0 0 0 7 0 7
Minas Gerais 3 15 11 43 36 5 113
Pará 0 0 9 13 21 0 43
Paraná 0 0 17 19 14 2 52
Pernambuco 3 17 11 53 22 5 111
Rio de Janeiro 6 33 29 149 61 108 386
Rio Grande do Norte 0 0 0 0 8 0 8
Rio Grande do Sul 1 0 21 32 17 6 77
Santa Catarina 0 0 0 0 5 0 5
São Paulo 21 118 62 240 199 79 719
Sergipe 0 0 0 0 4 0 4
Total 43 238 239 844 492 220 2076
2013
States Employees
Heavy Construction
Industrial Services¹
Real Estate Rental Corporate Total
Amazonas - - 26 7 - 33
162
Bahia 31 - 51 26 6 114
Ceará 26 - 44 14 1 85
Distrito Federal 75 - 87 4 8 174
Espírito Santo - - 26 13 2 41
Goiás - - 28 8 - 36
Maranhão 28 - 1 10 - 39
Mato Grosso - - 24 5 - 29
Mato Grosso do Sul - - - 6 - 6
Minas Gerais 16 - 54 39 10 119
Pará - - 24 26 - 50
Paraná - - 40 14 2 56
Pernambuco 54 - 43 28 4 129
Rio de Janeiro 113 - 119 77 162 471
Rio Grande do Sul - - 60 26 3 89
Santa Catarina - - - 4 - 4
São Paulo 261 - 211 114 29 615
Sergipe - - - 2 - 2
Total 604 - 838 423 227 2,092 ¹ The conclusion of the sale of the Industrial Services business unit was on November 30, 2013
2012
States Employees
Heavy Construction
Industrial Services¹ Real Estate Rental Corporate Total
Amazonas - - 27 - - 27 Bahia 45 750 52 20 23 890 Ceará - - 38 9 1 48 Distrito Federal
71 - 116 - 9 196
Espírito Santo - 12 26 9 4 51 Goiás - - 25 - - 25 Maranhão - - 6 4 - 10 Mato Grosso - - 21 - - 21 Minas Gerais 24 - 66 43 7 140 Pará - - - 31 - 31 Paraná - - 49 14 2 65
Pernambuco 49 654 42 30 17 792 Rio de Janeiro 130 460 120 65 182 957 Rio Grande do Sul
4 338 65 16 5 428
São Paulo 274 437 199 105 60 1.075 Total 597 2.651 852 346 310 4.756
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, 2012, 2013 and 2014, the Company
had, respectively, 223, 241 and 247 outsourced workers, as detailed below: 2014
State Janitorial services Security Transport Catering IT Support Total
Alagoas 1 1 0 0 0 2 Amazonas 2 8 0 0 0 10 Bahia 3 2 0 0 0 5 Distrito Federal 4 7 0 0 1 12 Espirito Santo 3 2 0 0 0 5 Fortaleza 3 10 0 0 1 14 Goiás 2 4 0 0 0 6
163
Maranhão 2 4 0 0 1 7 Mato Grosso 1 4 0 0 0 5 Mato Grosso do Sul 1 4 0 0 0 5 Minas Gerais 5 12 2 0 1 20 Pará 3 8 0 0 0 11 Paraná 2 4 0 0 0 6 Pernambuco 4 2 0 0 1 7 Rio de Janeiro 17 14 7 4 9 51 Rio Grande do Norte 1 1 0 0 0 2 Rio Grande do Sul 4 10 0 0 0 14 Santa Catarina 1 0 0 0 0 1 São Paulo 21 30 3 2 3 59 Sergipe 1 4 0 0 0 5
Total 81 131 12 6 17 247
2013
State Janitorial services Security Transport Catering IT Support Total
Rio de Janeiro 17 11 4 4 24 60
São Paulo 19 15 2 - 3 39
Minas Gerais 5 12 - - 1 18
Espírito Santo 3 2 - - 1 6
Bahia 4 8 - - 2 14
Ceará 3 8 - - 1 12
Pernambuco 4 7 2 - 2 15
Paraná 1 2 - - 1 4
Rio Grande do Sul 4 15 - - 1 20
Distrito Federal 5 6 - - 1 12
Goiás 2 2 - - - 4
Pará 2 6 - - - 8
Manaus 2 8 - - - 10
Mato Grosso 1 2 - - - 3
Rio Grande do Norte 2 3 - - - 5
Sergipe - 4 - - - 4
Maranhão 2 4 - - 1 7
Total 76 115 8 4 38 241
2012
State Janitorial services Security Transport Catering IT Support Total
Rio de Janeiro 18 23 - - 7 48
São Paulo 26 29 - - 4 59
Minas Gerais 5 4 - - 1 10
Espírito Santo 2 4 - - 1 7
Bahia 5 6 20 - 2 33
Ceará 3 6 - - 1 10
Pernambuco 4 5 2 - 2 13
Paraná 2 4 - - 1 7
164
Rio Grande do Sul 3 8 1 - - 12
Distrito Federal 5 2 - - 1 8
Goiás 2 2 - - - 4
Pará - 2 - - - 2
Manaus 1 4 - - - 5
Mato Grosso 1 4 - - - 5
Total 77 103 23 - 20 223
c. employee turnover index
The index of employee turnover (churn) in financial years ending in 2014, 2013 and 2012 was 3.13%, 3.2% and 4.6%, respectively, excluding the employees allocated in the Industrial Services
business unit in 2013, when the business unit was sold d. company's exposure to labor liabilities and contingencies See item 4.3.
14.2 Comments about any relevant change that occurred with regard to the figures
in the item “14.1" above
In 2014, the decrease of the Company's workforce is mainly related to centralization of Real
Estate and Heavy Construction maintenance operations, as well as the flattening of the organizational structure and the elimination of administrative and managerial positions for greater
synergy between these two units business.
In 2013, the reduction in the Company’s workforce is mainly related to the sale of the Industrial
Services business unit..
In 2012, the increase in the Company’s 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.
14.3 Description of Company employee remuneration policies
a. Salary and variable remuneration policy
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 Company’s 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
165
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 2014 the
Company distributed 18,762 food baskets to our employees, of which 1,523 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 Opções de Compra de Ações 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 Opções de Compra de Ações 2010”, previously granted purchase options
remaining. Plano de Opções de Compras de Ações 2010 At the Extraordinary General Shareholders’ meeting held on February 8, 2010, the Stock Option
Plan for Shares Issued by the Company was approved called “Plano de Opções de Compra de Ações 2010” (“Stock Option Plan - 2010”), with amendments approved by the Board of Directors’
Meeting held on May 31, 2010 and by the Extraordinary General Shareholders’ meeting held on April 20, 2012. The Board of Directors approved (i) on March 11th, 2010, the Company’s Program
1/2010 Stock Options Plan (“1/2010 Program”); (ii) on March 25th, 2011, the Program 1/2011
Stock Options Plan (“1/2011 Program”); (iii) on May 30th 2012, the Program 1/2012 Stock Options Plan (“1/2012 Program”); and (iv) on March 25th 2013, the Program 1/2013 Stock Options Plan
(“1/2013 Program”).
a. Groups of beneficiaries
The 2010 Stock Options Plan is managed by the Company’s Board of Directors, which considers
the contribution of each beneficiary to achieving the targets designed to create added value, the development potential of each, and the essential nature of their jobs among other characteristics
considered strategically relevant, elected as beneficiaries of the 2010 Stock Options Plan (i) for the 1/2010 Program, all the directors (or executives with similar roles) of the Company, and
Company managers who have held their positions in 2009 for more than 6 (six) months; (ii) for
the 1/2011 Program, all the directors (or executives with similar roles) of the Company, and Company managers who have held their positions in 2010 for more than 6 (six) months; (iii) for
the 1/2012 Program, all the directors (or executives with similar roles) of the Company, and Company managers who have held their positions in 2011 for more than 6 (six) months; and (iv)
for the 1/2013 Program, all the directors (or executives with similar roles) of the Company, and
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Company managers who have held their positions in 2012 for more than 6 (six)
months.Conditions for the exercise
To receive the stock options in the 1/2010 Program, each beneficiary must use at least of 33%
of the variable portion of their compensation under the Company's 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 must use at least of 33%
of the variable portion of their compensation under the Company's Profit Sharing Program, 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 must use at least of 33%
of the variable portion of their compensation under the Company's Profit Sharing Program, 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 must use at least of 33% of the variable portion of their compensation under the Company's Profit Sharing Program, which
were received related to the 2011 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2014 Program, each beneficiary must use at least of 33%
of the variable portion of their compensation under the Company's Profit Sharing Program, which were received related to the 2013 financial year, to acquire shares issued by the Company.
Additionally, the Board of directors approved grants within the 1/2010, 1/2011, 1/2012, 1/2013
and 1/2014 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. For as long as the exercise price is not fully paid, the shares acquired through the exercise of the
option under the Plan cannot be sold to third parties, except upon prior authorization from the Board of Directors, in which case the sale proceeds will be mainly used to settle the beneficiary's
debt with the Company.
Pursuant to the respective Option Agreement, each beneficiary is prohibited to trade their
acquired shares for a period of 5 years, respecting the following rules:
(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 Company’s 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 (“Índice de Preços 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
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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 Company’s 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 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.
For the 1/2014 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$7.98), 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,
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deducting the value of dividends and interest on equity per share paid by the Company as from
the stock option date.
For the 1/2014 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 2013 (R$30.94), 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. Number of shares in the plan
In the 2010/1 Program: Up to 1,475,234 common shares issued by the Company, which 795,345 designated to non-administrators employees. By December, 31, 2014, 834,320
shares were exercised (options of non-administrators employees).
In the 2011/1 Program: Up to 1,184,229 common shares issued by the Company, which 648,741 designated to non-administrators employees. By December, 31, 2014, 427,886
shares were exercised (options of non-administrators employees).
In the 2012/1 Program: Up to 1,257,467 common shares issued by the Company, which 930,410 designated to non-administrators employees. By December, 31, 2014, 338,295
shares were exercised (options of non-administrators employees).
In the 2013/1 Program: Up to 768,335 common shares issued by the Company, which 473,087 designated to non-administrators employees. By December, 31, 2014, 56,338
shares were exercised (options of non-administrators employees). In the 2014/1 Program: Up to 259,909 common shares issued by the Company, which
158,057 designated to non-administrators employees. By December, 31, 2014, no shares
were exercised.
14.4 Description of the relationships between the Company and trade unions
At December 31, 2014, approximately 0.3% of the Company´s 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.
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15. OWNERSHIP
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15.1/15.2 Controling Group:
Name Date of last
amendment
Type of
Person CNPJ/CPF Nationality
U
F
Participates in
shareholder agreement
Controlling
shareholder
Quantity of
common shares
%
Capital Stock
Andres Cristian Nacht 09/28/2015 Individual 098.921.337-49 Argentinian Yes Yes 14.185.349 11,08%
Jytte Kjellerup Nacht 02/28/2014 Individual 289.858.347-20 Brazilian Yes Yes 5.354.929 4,18%
Tomas Richard Nacht 09/28/2015 Individual 042.695.577-37 Brazilian Yes Yes 2.656.845 2,07%
Antonia Kjellerup 09/28/2015 Individual 073.165.257-62 Brazilian Yes Yes 2.656.845 2,07%
Pedro Kjellerup Nacht 09/28/2015 Individual 127.276.837-66 Brazilian Yes Yes 2.745.345 2,14%
Francisca Kjellerup Nacht 05/05/2014 Individual 124.175.657-06 Brazilian Yes Yes 1.000 0,00%
Snow Petrel S.L. 02/28/2014 Entity 14.740.333/0001-61 Spanish Yes Yes 17.728.280 13,84%
Brandes Investment Partners
09/21/2015 Entity American No No 6.710.804 5,00%
HSBC Bank Brasil S.A. 10/02/2012 Entity 01.701.201/0001-89 Brazilian No No 6.323.300 5,24%
Fama Investimentos 03/04/2016 Entity 00.156.956/0001-87 Brazilian No No 7.705.300 6.02%
BTG Pactual WM 04/13/2016 Entity 60.451.242/0001-23 Brazilian No No 7.038.900 5,50%
Shares in Treasury 03/31/2015 Entity No No 2.278.422 1,78%
Outros Yes Yes 52.672.606 41.1%
Total 128,057,925
15.3 Descrição do Capital Social
On April 28, 2015, date of the last meeting:
Number of individual shareholders 1066
Number of corporate shareholders 399
Number of institutional investors 344
On April 13, 2016:
Quantity of common shares 79,882,769
% capital stock 62.4
15.4 Organization chart of shareholders with morethan 5% of share capial
HSBC
5.0%
Controlling
shareholders
35.4%
MILLS ESTRUTURAS E
SERVIÇOS DE ENGENHARIA
S.A.
FAMA
6.02%
Brandes
5.24%
Others
42.6%
BTG Pactual
WM
5.5%
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15.5 Shareholder Agreements filed at the headquarters of the Company in which the controlling entity participates, which regulate the exercise of voting rights or
rights to transfer Company shares:
I. 2014 Agreement
On February 28, 2014, a Shareholders’ Agreement was signed concerning the Company, without
changing its control group, to regulate the relationship between the Company’s controlling shareholders, as indicated in item 8.1(a) of this Reference Form ("2014 Agreement"). The 2014
Agreement provides for, among other provisions and as detailed below, clauses related to (i) exercise of voting rights and control; (ii) appointment of directors; and (iii) transfer of shares and
preferential rights for acquiring them.
The 2014 Agreement was amended on May 5, 2014 due to Francisca Kjellerup Nacht’s adhesion to said instrument. The main characteristics of the 2014 Agreement are described below.
a. Parties
Andres Cristian Nacht, Jytte Kjellerup Nacht, Tomas Richard Nacht, Antonia Kjellerup Nacht, Pedro Kaj Kjellerup Nacht, and Francisca Kjellerup Nacht (collectively, the "Nacht Family");
Snow Petrel S.L. (collectively with the Nacht Family, "Parties"); and
Mills Estruturas e Serviços de Engenharia S.A. ("Company")
b. Execution date: 28.2.2014
c. Term: 3 years
d. Description of the clauses related to exercise of voting rights and control
The vote of the parties in general meetings will be made by shareholder Andres Cristian Nacht, except in case any other signatory of the 2014 Agreement requests the adoption of the
preliminary meeting procedure, in which case the decision will be made by majority vote within the control block, subject to veto rights in specific matters:
mergers, spin-offs, acquisitions, and any other corporate reorganization transaction involving the Company;
reduction of the Company’s mandatory dividends, in order to make it less than 25% of the net profit calculated in accordance with Act 6.404/76;
increase or decrease of the Company’s capital stock, except for capital increases under the Board of Directors’ authority;
cancelation of registration as a publicly held company and discontinuation of Novo Mercado’s differentiated practices of corporate governance;
application for bankruptcy or court-supervised or out-of-court reorganization of the Company;
approval of valuation reports submitted for the approval of the Company’s general meeting;
amendment of the Company’s corporate purpose;
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amendment of the minimum or maximum number of members of the Board of Directors, as provided for in the Company’s Bylaws, or amendment of the matters under the Board of Directors’ authority;
amendment of the provisions in the Company’s Bylaws relating to the distribution of income, establishment of reserves and retention of earnings;
amendments to Chapter VII of the Company’s Bylaws; and
liquidation and dissolution of the Company, cessation of its condition of liquidation, and approval of the accounts of liquidators.
The 2014 Agreement does not bind the vote of members of the Board of Directors or other
Company bodies.
e. Description of clauses related to appointment of directors or members of committees established in the Company’s Bylaws
In the absence of a motion for holding a preliminary meeting, Andres Cristian Nacht shall appoint
all members of the Company’s Board of Directors that the control block has the right to elect.
Should a preliminary meeting be requested in order to appoint the members of the Company’s
Board of Directors:
of the total number of members of the Board of Directors that the Parties, together, have the right to elect at the Company’s general meeting, each Party may elect a number of members proportional to their interest in the Company’s capital stock (disregarding shares held by shareholders who are not parties to the 2014 Agreement);
in the event a fractional number is found when determining the number of directors to be appointed by each Party pursuant to the item above, fractions equal to or higher than 0.5 will be rounded up to 1.0;
regardless of the rounding provided for in the item above, the member of the control block with the highest interest will have the right to appoint the majority of the members of the Board of Directors that the control block are allowed elect.
Whenever the Parties, or the members of the Board of Directors appointed by them, are allowed
to appoint the Chairperson of the Company’s Board of Directors, such appointment will be carried out by Andres Cristian Nacht.
The rules described above apply, mutatis mutandis, to the appointment of members of the Audit
Committee.
The 2014 Agreement does not contain provisions relating to the appointment of members of the
executive board.
f. Description of the clauses related to transfer of shares and preferential rights for acquiring them
The 2014 Agreement establishes, as a general rule, that the Parties’ shares may not be disposed
of (lock-up) during its term.
As an exception to the general rule of lock-up, each party may release from the 2014 Agreement,
during its term, up to 10% of their shares for purposes of disposition ("Released Shares").
In case of disposition of Released Shares, non-selling shareholder shall have right of first offer,
which will allow them to acquire the Released Shares at the price offered by the selling
shareholder.
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If non-selling shareholders do not acquire the Released Shares through the exercise of the
preferential rights, the selling shareholder may sell them on the stock market at a price not lower
than that offered to the non-selling shareholders.
g. Description of the clauses that restrict or bind the voting rights of members of the Board of Directors
There are no provisions relating to the restriction or binding of the vote of directors.
II. 2016 Agreement
On April 7, 2016, a new shareholder’s agreement was signed concerning the Company, to regulate the relationship between the Company’s controlling shareholders and the shareholder Fundo de
Investimento em Participações Axxon Brazil Private Equity Fund II ("2016 Agreement"). The 2016 Agreement provides for, among other provisions and as detailed below, clauses relating to (i)
exercise of voting rights and control; (ii) appointment of directors and committee members; (iii) transfer of shares and preferential rights for acquiring them; and (iv) restriction or binding of
voting rights of members of the Board of Directors. The main characteristics of the 2016
Agreement are described below.
a. Parties
Andres Cristian Nacht, Jytte Kjellerup Nacht, Tomas Richard Nacht, Antonia Kjellerup Nacht, Pedro Kaj Kjellerup Nacht, Snow Petrel S.L., and Francisca Kjellerup Nacht (collectively, "Controlling Shareholders");
Fundo de Investimento em Participações Axxon Brazil Private Equity Fund II ("Axxon" and, collectively with the Controlling Shareholders, "Shareholders" or "Parties"); and
Mills Estruturas e Serviços de Engenharia S.A. ("Company")
b. Execution date: 7.4.2016
c. Term: From the execution date of the 2016 Agreement until the Date of Acquisition of Political Rights (defined in item "d" below) and, after this period, for 8 years. Note that the 2016
Agreement shall automatically terminate if Axxon does not become the holder of shares representing at least 7% of the Company’s capital stock by the 5th August, 2016 (120 days from
the execution of the 2016 Agreement).
d. Description of the clauses related to exercise of voting rights and control
Acquisition of Political Rights
If Axxon, within 120 days from the execution date of the 2016 Agreement, becomes the holder
of shares representing at least 7% of the Company’s capital stock, Axxon will acquire rights relating to (i) Qualified Matters Under the Meeting’s Authority and Qualified Matters Under the
Board’s Authority (defined below), and (ii) appointment of members of the Board of Directors and
advisory committees to the Board of Directors (as detailed in item "e" below) ("Date of Acquisition of Political Rights").
Preliminary Meeting
The Shareholders or members of the Board of Directors appointed by the Shareholders shall vote
together in general meetings and in meetings of the Board of Directors. For this purpose, the
Shareholders shall meet prior to: (i) each general meeting of the Company; (ii) each meeting of the Board of Directors voting on Qualified Matters Under the Board’s Authority (defined below);
(iii) any meeting of the Board of Directors, regardless of the matter to be voted, if requested by any of the Shareholders; and (iv) each general meeting, meeting of the Board of Directors,
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meeting of executive board, or meeting of shareholders of Company’s subsidiaries that have
Qualified Matters Under the Meeting’s Authority or Qualified Matters Under the Board’s Authority
(defined below) among the matters to be decided ("Preliminary Meeting").
The resolutions of the Preliminary Meetings shall be made by majority vote, except in cases of
Qualified Matters Under the Board’s Authority and Qualified Matters Under the Board’s Authority (defined below), whose approval requires the favorable vote of the representative of Axxon and
of the Controlling Shareholders. Even if Axxon holds, directly or indirectly, interest higher than
15% of the Company’s capital stock, Axxon’s votes in the Preliminary Meetings shall be limited to those to which it would be entitled with 15% of the capital stock.
The resolutions passed at Preliminary Meetings shall bind the Parties and the members of the Board of Directors appointed by them, who shall follow the voting instructions received, pursuant
to Article 118 of Act 6.404/76 ("Stock Corporations Act"), even if the Shareholders (or the shareholders who appointed them, in the case of members of the Board of Directors) (i) dissented
from the resolution passed at the Preliminary Meeting; (ii) abstained in relation to the resolution
passed; or (iii) did not attend the Preliminary Meeting.
Qualified Matters Under the Meeting’s Authority
The favorable vote of the Shareholders in the Company’s general meetings regarding the matters listed below shall require the prior approval of Controlling Shareholders and Axxon in a Preliminary
Meeting ("Qualified Matters Under the Meeting’s Authority"):
amendments to the Company’s bylaws and/or bylaws or articles of incorporation of any subsidiary of the Company on the following matters: (i) corporate purpose; (ii) list of matters under the Board of Directors’ authority; and (iii) list of matters under the general meeting’s or shareholders meeting’s authority, to the extent that they affect the Qualified Matters Under the Meeting’s Authority or the Qualified Matters Under the Board’s Authority (as defined below);
any corporate reorganization, including mergers, acquisitions, spin-offs, or transformation involving the Company or its subsidiaries, except for transactions made exclusively between the Company and its wholly owned subsidiaries (or companies that have 99% of their capital held by the Company);
reduction of the capital stock of the Company or of a subsidiary of the Company, except if carried out exclusively for the absorption of losses;
creation of new classes of shares or modification of the current rights and preferential rights of shares issued by the Company or a subsidiary of the Company;
issuance of any security that grants its holder the right to subscribe or acquire new shares or securities (i) convertible into shares with or without voting rights in the Company or a subsidiary of the Company; or (ii) exchangeable for shares of the Company or its subsidiaries, except for public offerings for the issuance of shares of the Company or a subsidiary of the Company and in the scope of any plans involving options to purchase shares issued by the Company or a subsidiary of the Company;
approval of plans involving options to purchase shares issued by the Company or a subsidiary of the Company;
amendments to the dividend policy of the Company or of a subsidiary of the Company;
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conversion of the Company into a closely held corporation or its exit from the Novo Mercado segment of BM&FBOVESPA;
participation of the Company in groups of companies, in accordance with Article 265 of the Stock Corporations Act; and
application for bankruptcy, court-supervised or out-of-court reorganization of the Company or of a Subsidiary, as well as liquidation and dissolution, or cessation of its condition of liquidation.
Qualified Matters Under the Board’s Authority
The favorable vote of representatives appointed by the Shareholders in meetings of the Board of
Directors regarding the matters listed below require the prior approval of Controlling Shareholders
and Axxon in a Preliminary Meeting ("Qualified Matters Under the Board’s Authority"):
granting any type of encumbrance on any asset (including rights) of the Company or of of its subsidiaries as guarantee of any indebtedness, provided that (i) it is not provided for in the Company’s annual budgets; and (ii) in an amount exceeding 3 times the adjusted EBITDA of the Company for the current budgeted year, in any case, except for the creation of encumbrances to finance the acquisition of any asset, provided that the encumbrance is created solely over the asset acquired;
execution, by the Company or any of its subsidiaries, of contracts with (i) any party related to the Shareholders; (ii) members of the Board of Directors; or (iii) officers of the Company, except, with respect to the Company’s directors, through contracts exclusively related to stock-based compensation plans or employment contracts for directors under usual market conditions and consistent with the past practices of the Company;
contracting of any new indebtedness or changes in conditions, restructuring, agreements or advance payments of any indebtedness of the Company and/or its subsidiaries (i) not provided for in the annual budget; and (ii) in an amount exceeding 3 times the Company’s Adjusted EBITDA for the current budgeted year;
election or removal of the Chief Financial and Investor Relations Officer;
approval of the Company’s annual budget if (i) the disposition of lease equipment is provided for, outside the normal course of business, whose net value exceeds 10% of the Company’s fixed assets; or (ii) the sale of assets represents a net loss, in the aggregate, exceeding 10% of the Company’s Adjusted EBITDA of the immediately preceding year;
sale, exchange, or any other form of disposition to third parties of any relevant assets owned by the Company or its subsidiaries (i) if total sales or net loss have reached the ceiling approved in the annual budget; and (ii) whose total aggregate value (a) is equal to or greater than BRL 5,000,000.00; or (b) represents a net loss of BRL 1,000,000.00;
during the lock-up period (as described in item "f" below), any investment in any company (i) that conducts, at the time of investment, the same activity conducted by any investee of funds managed by The Axxon Group Private Equity Assessoria Ltda., or its controlling members, direct or indirect, or companies
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under common control; and (ii) (a) whose activities are not included in items (a) to (g) of Article 2 of the Company’s bylaws; or (b) that do not operate the business practiced by the Company; or
approval or modification of the Company’s annual budget, if, in the 12 months preceding the annual budget being prepared, a negative difference of more than 20% has been verified between the projected Adjusted EBITDA and the actual Adjusted EBITDA.
e. Description of clauses related to appointment of directors or members of
committees established in the Company’s Bylaws
The Controlling Shareholders and Axxon may appoint a number of members of the Board of Directors proportional to their percentage in the total number of shares bound by the 2016
Agreement, provided that: (i) while Axxon is the holder of shares representing at least 13% of the Company’s capital stock, Axxon shall have the right to appoint and elect at least one member
of the Board of Directors; and (ii) to the extent that the Controlling Shareholders are holder of
shares of the Company’s capital stock representing at least 50% of the shares plus one share (i.e. the majority of shares that make up the block bound by the 2016 Agreement), the Controlling
Shareholders shall have the right to appoint and elect at least the same number of members of the Board of Directors that Axxon elects, plus one member.
The chairperson of the Board of Directors shall be appointed by the Controlling Shareholders.
The Controlling Shareholders and Axxon undertake to conduct a Preliminary Meeting to determine
the names to be appointed at the Company’s general meeting to elect the members of the Board
of Directors.
The Company’s executive board will be composed of qualified and experienced professionals, who
have all the necessary qualifications for the positions held by them. The members of the executive board shall be appointed by the Board of Directors, by majority vote, and the CEO will be heard
before the choice of the other officers.
While Axxon is the holder of shares representing at least 13% of the Company’s capital stock, Axxon will have the right to appoint and elect one representative for any existing committee or
any committee that may be created to advise the Board of Directors.
f. Description of the clauses related to transfer of shares and preferential rights for acquiring them
The 2016 Agreement has clauses on the transfer of shares and preferential rights for acquiring
them, such as lock-up, right of first offer, right of first refusal, tag along rights and drag along rights, as described below.
Lock-up
As a general rule, the shares of the Parties may not be sold (lock-up) during (i) the period between
the execution date of the 2016 Agreement and the Date of Acquisition of Political Rights, and,
after this period, (ii) for a period of 30 months.
If Axxon, after 6 months from the Date of Acquisition of Political Rights, has not become the
holder of at least 13% of the Company’s capital stock, the percentage of shares subject to lock-up will be reduced to up to: (i) 10% of the Company’s capital stock between the 7th month and
the 12th month from the Date of Acquisition of Political Rights; and (ii) 5% of the capital stock
between the 13th month and the 24th month from the Date of Acquisition of Political Rights. After the 24th month from the Date of Acquisition of Political Rights, Axxon may sell its shares without
complying with the lock-up.
After the end of the lock-up, Axxon will be entitled to sell at BM&FBOVESPA, every 12 months
from the Date of Acquisition of Political Rights, 2% of the shares owned by Axxon, without the restrictions of right of first offer and right of first refusal, detailed below.
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As an exception to the general rule of lock-up, the following are considered permissible:
the sale, at BM&FBOVESPA, of up to 10% of the shares of the Controlling Shareholders existing at the execution date of the 2016 Agreement;
the sale of Axxon shares exceeding 15% of the Company’s capital stock, without the need to observe the right of first offer and the right of first refusal, described below;
the sale of shares (i) between the Controlling Shareholders and their controlling members/shareholders and/or affiliates, or, in the case of individuals, their heirs and successors, provided that the acquirer executes the 2016 Agreement, through an instrumentof adhesion, without any restrictions; or (ii) between the Shareholders without the need to observe the tag along rights, described below; and
the sale of shares between Axxon and other investment vehicles managed by The Axxon Group Private Equity Assessoria Ltda., its direct or indirect controlling members/shareholders or companies under common control, provided that the acquirer executes the 2016 Agreement, through an instrument of adhesion, without any restrictions.
Right of First Offer
If Axxon intends to dispose of all or part of its shares it must always grant the Controlling Shareholders the right of first offer for the acquisition of such shares, in accordance with the
terms and procedures provided for in the 2016 Agreement.
Right of First Refusal
If Axxon intends to sell all or part of its shares to one or more third parties (i) that are competitors
of the Company or an investment fund holding interest equal to or higher than 10% of the capital of and/or controls or has the right to appoint directors in a competitor of the Company
("Competitor"); or (ii) in the scope of a Public Offer for Acquisition of Shares, Axxon shall grant
the Controlling Shareholders the right of first refusal for acquisition of all the shares to be sold by Axxon (i) at the same price and conditions offered by the Competitor, or (ii) in the case of a Public
Offer for Acquisition of Shares, offering the shares at the same price offered in the Public Offer with a 5% discount, adjusted by the variation of the DI Rate, in accordance with the terms and
procedures provided for in the 2016 Agreement.
Tag Along Rights
If the Controlling Shareholders receive an offer from one or more third parties for the sale of at
least 41% of the shares held by them on the execution date of the 2016 Agreement in a transaction outside the stock exchange environment, Axxon will have the right to sell, to the third
party, the same proportion of the shares held by Axxon, at the same price and under the same terms and conditions provided for in the offer made by the third party, in accordance with the
terms and procedures provided for in the 2016 Agreement.
Drag Along Rights
If the Controlling Shareholders make or receive an offer from one or more third parties for the
acquisition of at least 50% of their shares, the Controlling Shareholders shall have the right to demand that Axxon sell to the third party, together with the Controlling Shareholders, all shares
held by Axxon, limited to the percentage of 15% of the Company’s capital stock, under the same
pricing terms and conditions they were offered, provided that the transaction results in the receipt, by Axxon, of an amount of their updated investment equivalent to at least 2.5x the
amount invested by Axxon until reaching an interest of 15% (or, if such interest has not been reached, the interest effectively reached), and limited, in any case, to 15% of the Company’s
178
capital stock, for which the conditions, terms, and procedures provided for in the 2016 Agreement
shall be observed.
g. Description of the clauses that restrict or bind the voting rights of members if
the Board of Directors
As described in item "d" above, the favorable vote of representatives appointed by the
Shareholders in the decisions of the meetings of the Company’s Board of Directors regarding
Qualified Matters Under the Board’s Authority require the prior approval of the Controlling Shareholders and Axxon in a Preliminary Meeting.
The resolutions passed in Preliminary Meetings shall bind the members of the Board of Directors appointed by the Parties, who shall follow the voting instruction received regarding the matter in
question, pursuant to Article 118 of the Stock Corporations Act, even if the Shareholders who appointed them (i) dissented from the resolution passed at the Preliminary Meeting; (ii) abstained
in relation to the resolution passed; or (iii) did not attend the Preliminary Meeting.
15.6 Significant Changes in the shareholdings of Members of the Control Group
and directors of the Company in the last 3 financial years
Corporate rearrangements involving Nacht Participações The company, in December 28, 2012, was notified by Nacht Participações S.A. about the
effectiveness of its capital stock reduction, with the delivery of the totality of its previously held shares issued by Mills to its shareholders, following the correspondence sent by Nacht Participações
in October 30, 2012, which informed of such capital reduction approval
According to that notice’s terms, with the effectiveness of the aforementioned capital stock
reduction, Andres Cristian Nacht and his family began to hold 27,421,713 (twenty-seven million, four hundred and twenty-one thousand, seven hundred and thirteen) shares issued by Mills,
representing 21.7% of corporate capital in that time.
Still within the notice’s terms, 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 Participações, its shareholders and Snow Petrel
S.L., and, after the capital reduction, will be exercised by Nacht Participações shareholders jointly with Snow Petrel S.L.. Furthermore, this operation did not change the number of shares or the
value of the share capital of the Company.
Liquidation of Jeroboam Investments LLC The Company was informed, on March 14, 2012, by Snow Petrel S.L., a company headquartered
in Barcelona, Spain, at Calle Johann Sebastian Bach 20, 3rd floor, and registered with the CNPJ/MF under n.º 14.740.333/0001-61 (Snow Petrel), of the transfer of all common shares,
book-entry shares, with no par value issued by Mills held by Jeroboam Investments LLC
(Jeroboam) for Snow Petrel, due to the dissolution and consequent extinction of its wholly owned subsidiary Jeroboam. Therefore, Snow Petrel came to hold 19,233,281 (nineteen million, two
hundred thirty-three thousand, two hundred eighty-one) shares of Mills, representing 15.3% of its capital stock.
Snow Petrel also reported that: (a) it does not hold, directly or indirectly, including through a person connected to it, other shares issued by the Company, subscription warrants or convertible
debentures, 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
Participações 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;
179
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 Outras informações que a Companhia julga relevantes
There are no other relevant information.
180
16. TRANSACTIONS WITH RELATED PARTIES
181
16.1 Rules, Policies and Practices for Transactions with Related Parties
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 Company’s 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 Information on Transactions with Related Parties
There has not been any transactions with related parties during the last three fiscal years.
16.3 Measures Taken to Address the Conflict of Interest
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
Company’s by-laws, the Board of Directors must approve any transaction with any of the Company's shareholders.
182
17. SHARE CAPITAL
183
17.1 Information about the share capital
Type of Capital: Authorized Capital Date of approval: 3/12/2010 Capital R$: - Quantity of common shares: 200,000,000 Total quantity of shares: 200,000,000 Type of Capital: Issued Capital Date of approval: 8/15/2014 Capital R$: R$ 563,318,463.20 Quantity of common shares: 128,057,925 Total quantity of shares: 128, 057,925 Type of Capital: Subscribed Capital Date of approval: 8/15/2014 Capital R$: R$ 563,318,463.20 Quantity of common shares: 128,057,925 Total quantity of shares: 128, 057,925 Type of Capital: Paid-up Capital Date of approval: 8/15/2014 Capital R$: R$ 563,318,463.20 Quantity of common shares: 128,057,925 Total quantity of shares: 128, 057,925
17.2 Em relação aos aumentos de capital da Companhia
1/24/2012 Board of
Directors 1/24/2012 R$ 398,490.09
Private
Subscription 32,583 0.0755
R$
12.23
R$
Unit
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 (05/31/2011),
deducted from the dividend and interest on capital
values per share paid by Mills, until the fiscal date (Jan/2012)
Cash
2/28/2012 Board of Directors
2/28/2012 R$ 4,227.33 Private
Subscription 339 0.0008
R$ 12.47
R$ Unit
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 (05/31/2011), deducted from the dividend
and interest on capital values per share paid by
Mills, until the fiscal date (Feb/2012)
Cash
4/2/2012 Board of Directors
4/2/2012 R$ 112,171.78 Private
Subscription 47,131 0.0212
R$ 2.38
R$ Unit
The price is based on the Company’s stock option
plan corrected monetarily by the agreement with the IPCA, from January 2008
until the option contract date
Cash
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
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 (05/31/2011), deducted from the dividend
and interest on capital values per share paid by Mills, until the fiscal date
(April/2012)
Cash
4/24/2012 Board of Directors
4/24/2012 R$ 892,862.10 Private
Subscription 44,421 0.1691
R$ 20.10
R$ Unit
The exercise price of
options granted under this program is equal to (i) the
average price of shares
Cash
184
purchased as brokerage note sent by the beneficiary to the human resources
Department of the company, (ii) restated
according to the IPCA, from the date of
7/2/2012 Board of Directors
7/2/2012 R$ 31,276.80 Private
Subscription 13,032 0.0059 R$2.40
R$ Unit
The price is based according to the Company’s stock option plan (Special
TopMills Plan, Special Plan)
Cash
8/9/2012 Board of
Directors 8/9/2012 R$ 886,108.00
Private
Subscription 70,550 0.1660 12.56
R$
Unit
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 (05/31/2011),
deducted from the dividend and interest on capital
values per share paid by Mills, until the fiscal date
(2010/1 Plan)
Cash
8/9/2012 Board of Directors
8/9/2012 R$ 20,000.00 Private
Subscription 1,600 0.0037 12.50
R$ Unit
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 (05/31/2011),
deducted from the dividend and interest on capital values per share paid by
Mills, until the fiscal date (2010/1 Plan)
Cash
8/9/2012 Board of Directors
8/9/2012 R$
1,633,370.82 Private
Subscription 80,422 0.3056 20.31
R$ Unit
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 (05/31/2011), deducted from the dividend
and interest on capital values per share paid by Mills, until the fiscal date
(2010/1 Plan)
Cash
11/12/2012 Board of
Directors 11/12/2012 R$ 445,178.37
Private
Subscription 35,529 0.0830% 12.53
R$
Unit
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)
Cash
11/12/2012 Board of
Directors 11/12/2012 R$ 18,660.00
Private
Subscription 1,500 0.0035% 12.44
R$
Unit
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)
Cash
11/12/2012 Board of Directors
11/12/2012 R$ 982,280.40 Private
Subscription 48,151 0.1830% 20.40
R$ Unit
The exercise price of options granted under this
program 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)
Cash
2/8/2013 Board of Directors
2/8/2013 R$ 7,494.00 Private
Subscription 600 0.0014% 12.49
R$ Unit
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
Cash
185
dividend and interest on capital values per share paid by Mills, until the fiscal
date (2010/1 Plan)
2/8/2013 Board of Directors
2/8/2013 R$ 37,820.00 Private
Subscription 3,050 0.0070% 12.40
R$ Unit
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)
Cash
2/8/2013 Board of Directors
2/8/2013 R$
1,819,309.96 Private
Subscription 88,574 0.3384% 20.54
R$ Unit
The exercise price of options granted under this program 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)
Cash
4/10/2013 Board of
Directors 4/10/2013 R$ 169,264.59
Private
Subscription 66,903 0.0314% 2.53
R$
Unit
The price is based according to the Company’s
stock option plan (Special TopMills Plan).
Cash
5/9/2013 Board of
Directors 5/9/2013
R$
2,973,204.90
Private
Subscription 230,481 0.5509% 12.9
R$
Unit
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)
5/9/2013 Board of Directors
5/9/2013 R$
2,919,849.05 Private
Subscription 138,185 0.5381% 21.13
R$ Unit
The exercise price of options granted under this
program 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)
5/9/2013 Board of Directors
5/9/2013 R$ 143,307.36 Private
Subscription 24,372 0.0263% 5.88
R$ Unit
The exercise price of options granted under this
program 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)
5/9/2013 Board of Directors
5/9/2013 R$
3,072,963.25 Private
Subscription 153,265 0.5631% 20.05
R$ Unit
The exercise price of options granted under this
program 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)
5/22/2013 Board of
Directors 5/22/2013 R$ 39,555,60
Private
Subscription 15,512 0.0072% 2.55
R$
Unit
The price is based according to the Company’s
stock option plan (Special TopMills Plan).
Cash
8/15/2013 Board of Directors 8/15/2013
R$ 1,298,869.95
Private Subscription 101,395 0.2367% 12.81
R$ Unit
The price is based on the issue price of Mills’ shares
Cash
186
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)
8/15/2013 Board of Directors 8/15/2013 R$
1,180,587.20 Private
Subscription 55,952 0.2146% 21.10 R$ Unit
The exercise price of options granted under this
program 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)
Cash
8/15/2013 Board of
Directors 8/15/2013 R$ 41,029.52 Private
Subscription 7,148 0.0074% 5.74 R$
Unit
The exercise price of
options granted under this program 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)
Cash
8/15/2013 Board of
Directors 8/15/2013 R$ 586,700.00 Private
Subscription 29,335 0.1064% 20.00 R$
Unit
The exercise price of
options granted under this program 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)
Cash
11/01/2013 Board of
Directors 11/01/2013 R$ 109,892.16
Private
Subscription 5,152 0.0199% 21.33
R$
Unit
The exercise price of
options granted under this program 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)
Cash
11/01/2013 Board of
Directors 11/01/2013 R$ 19,117.35
Private
Subscription 945 0.0035% 20.23
R$
Unit
The exercise price of
options granted under this program 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)
Cash
11/14/2013 Board of
Directors 11/14/2013
R$ 248,118
.00
Private
Subscription 19,086 0.015% 13.00
R$
Unit
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)
Cash
11/14/2013 Board of
Directors 11/14/2013 R$ 368,743.40
Private
Subscription 17,231 0.014% 21.40
R$
Unit
The exercise price of options granted under this
program is equal to (i) the average price of shares
Cash
187
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)
11/14/2013 Board of Directors
11/14/2013 R$ 10,377.40 Private
Subscription 1,780 0.001% 5.83
R$ Unit
The exercise price of options granted under this
program 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)
Cash
11/14/2013 Board of
Directors 11/14/2013 R$ 559,728.00
Private
Subscription 27,600 0.022% 20.28
R$
Unit
The exercise price of
options granted under this program 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)
Cash
01/10/2014 Board of Directors
01/10/2014 R$ 78.12 Private
Subscription 6 0.000005 13.02
R$ Unit
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)
Cash
01/10/2014 Board of Directors
01/10/2014 R$ 124,155.72 Private
Subscription 5,772 0.0045 21.51
R$ Unit
The exercise price of
options granted under this program 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)
Cash
01/10/2014 Board of Directors
01/10/2014 R$ 4,095.36 Private
Subscription 711 0.0006 5.76
R$ Unit
The exercise price of options granted under this program 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)
Cash
01/10/2014 Board of Directors
01/10/2014 R$ 61,170.00 Private
Subscription 3,000 0.0024 20.39
R$ Unit
The exercise price of options granted under this program 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)
Cash
02/05/2014 Board of
Directors 02/05/20147 R$ 658,784.62
Private
Subscription 50,174 0.0394 13.13
R$
Unit
The price is based on the issue price of Mills’ shares
during the IPO, adjusted monetarily by the IPCA, as
Cash
188
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)
02/05/2014 Board of
Directors 02/05/20147 R$ 300,002.50
Private
Subscription 13,825 0.0109 21.70
R$
Unit
The exercise price of
options granted under this program 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)
Cash
02/05/2014 Board of
Directors 02/05/20147 R$ 20,648.74
Private
Subscription 3,554 0.0028 5.81
R$
Unit
The exercise price of
options granted under this program 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)
Cash
02/05/2014 Board of
Directors 02/05/20147 R$ 231,300.00
Private
Subscription 11,250 0.0088 20.56
R$
Unit
The exercise price of
options granted under this program 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)
Cash
02/05/2014 Board of Directors
02/05/20147 R$ 52,273.80 Private
Subscription 7,710 0.0061 6.78
R$ Unit
The exercise price of
options granted under this program 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)
Cash
02/14/2014 Board of
Directors 02/14/2014 R$ 23,951.20
Private
Subscription 1,820 0.0014 13.16
R$
Unit
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)
Cash
02/14/2014 Board of Directors
02/14/2014 R$ 84,568.60 Private
Subscription 3,890 0.0031 21.74
R$ Unit
The exercise price of options granted under this
program 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)
Cash
02/14/2014 Board of Directors
02/14/2014 R$ 57,680.00 Private
Subscription 2,800 0.0022 20.60
R$ Unit
The exercise price of options granted under this
program is equal to (i) the average price of shares
purchased as brokerage note sent by the beneficiary
Cash
189
to the human resources Department of the company, (ii) restated
according to the IPCA, as from the option contract
date, (2012/1 Plan)
05/15/2014 Board of Directors 05/15/2014
R$ 3,360,053.76
Private Subscription 250,004 0.1961 13.44
R$ Unit
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)
Cash
05/15/2014 Board of Directors 05/15/2014
R$ 2,117,680.20
Private Subscription 95,391 0.0748 22.20
R$ Unit
The exercise price of
options granted under this program 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)
Cash
05/15/2014 Board of Directors 05/15/2014 R$ 147,064.00
Private Subscription 24,800 0.0195 5.93
R$ Unit
The exercise price of options granted under this program 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)
Cash
05/15/2014 Board of Directors 05/15/2014
R$ 2,135,596.50
Private Subscription 101,550 0.0797 21.03
R$ Unit
The exercise price of options granted under this program 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)
Cash
05/15/2014 Board of Directors 05/15/2014 R$ 443,597.65
Private Subscription 63,827 0.0501 6.95
R$ Unit
The exercise price of options granted under this
program 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)
Cash
08/15/2014 Board of
Directors 08/15/2014 R$ 64,128.00
Private
Subscription 4,800 0.0037 13.36
R$
Unit
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)
Cash
08/15/2014 Board of
Directors 08/15/2014 R$ 33,901.00
Private
Subscription 5,845 0.0046 5.80
R$
Unit
The exercise price of
options granted under this program 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)
Cash
190
restated according to the IPCA, as from the option contract date, (2012/1
Plan)
08/15/2014 Board of
Directors 08/15/2014 R$ 32,581.00
Private
Subscription 1,550 0.0012 21.02
R$
Unit
The exercise price of
options granted under this program 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)
Cash
08/15/2014 Board of Directors
08/15/2014 R$ 134,013.00 Private
Subscription 19,650 0.0153 6.82
R$ Unit
The exercise price of
options granted under this program 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)
Cash
17.3 Stock splits, reverse splits and bonuses.
Not applicable, as none of these operations occurred.
17.4 Regarding reductions in the Company’s share capital
Not applicable, as there wasn’t any reductions in the Company’s capital in the last three fiscal years.
17.5 Other information that the Company considers relevant
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:
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. SECURITIES
192
18.1 Description of the rights of each class and type of share issued
Type of shares: Common
Tag Along: 0.00%
Dividend rights: At each Ordinary Shareholder Meeting, the Board of Directors should make a
recommendation on the allocation of net income for the preceding fiscal year, which will be subject to approval by the shareholders. The Company's Bylaws provides that an amount
equivalent to 25% of the adjusted net income for the year should be available for the payment of dividends or interest on equity in any fiscal year. This amount represents the compulsory
dividends. If the mandatory dividend exceeds the realized portion of net income, the excess may be allocated to an unrealized profit reserve. The calculation of net income and allocations to
reserves and the amounts available for distribution are made based on financial statements
prepared pursuant to the Brazilian Corporate Law.
Voting rights: Full
Convertibility to other class or type of share: No
Right to reimbursement of capital: Yes
Description of the reimbursement of capital: The Company's statutory provisions follow, in this
subject, the rules established in the Corporate Law Act and applicable legislation.
Restrictions regarding outstanding shares: No
Circumstances where guaranteed rights of said securities may be altered: Under the Brazilian
Corporate Law, the Bylaws, or resolutions adopted by shareholders in General Meetings can restrict the shareholders from the following rights: (i) Right to profit sharing; (ii) Right to
participate in the distribution of any remaining assets in case of Company liquidation,
proportionately to their interest in the capital stock; (iii) Preemptive rights in the subscription of shares, convertible debentures or subscription rights, except in certain circumstances provided in
the Brazilian Corporate Law; (iv) The right to supervise the management of corporate businesses, as provided by the Brazilian Corporate Law; (v) The right to vote in Shareholders’ General
Meeting; (vi) The right to leave the Company, in the cases provided in the Brazilian Corporate
Law. Changes in rights assured by shares other than those listed above (e.g.: change in the minimum compulsory dividend, change in the reimbursement amount, limitations to the exercise
of voting rights, etc.) may be modified by decisions made in general shareholders’ meetings, by simple or qualified majority of the Company's shareholders, depending on the nature of the matter
to be resolved.
Other Relevant Characteristics: No further relevant information pertaining to this item 18.
18.2 Statutory regulations which limit the right to vote of relevant shareholders or
which cause them to hold a public offering.
According to Article 32, Chapter 7 of the Company’s bylaws, the transfer of shareholding Control
of the Company, directly or indirectly, whether through a single transaction, or through successive transactions, shall be contracted under a condition precedent or subsequent that the acquiring
party shall obligate itself to make a Public Tender Offer for the remaining shares of the other shareholders of the Company, subject to the conditions and periods provided for in applicable
legislation and the Novo Mercado Rules, such that they are assured treatment equal to that given to the Selling Controlling Shareholder.
Paragraph 1 – The public offering referred to in this article shall also be required: (a) when there
is encumbered assignment of subscription rights or an option to acquire shares or other securities
193
or rights 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 suspension clauses relative to ownership or political rights set forth in the bylaws
Not applicable, as there are no exceptions or suspension clauses relative to ownership or political
rights set forth in the Company’s 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.
Data Término
Trimestre Valor
Mobiliário Espécie Classe Mercado Entidade
Administrativa
Volume financeiro total
negociado
Valor maior
cotação
Valor menor
cotação Fator
cotação (R$) (R$) (R$) (R$)
03/31/2012 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
474,013,331 23.78 16.97 R$ per unit
06/30/2012 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
503,547,358 27.60 22.08 R$ per unit
09/30/2012 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
708,267,760 30.00 25.25 R$ per unit
12/31/2012 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
654,291,178 34.00 28.28 R$ per unit
03/31/2013 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
664,392,189 35.00 29.81 R$ per unit
06/30/2013 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
971,831,194 35.99 27.21 R$ per unit
09/30/2013 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
890,684,261 32.00 26.28 R$ per unit
12/31/2013 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
893,622,222 33.24 28.47 R$ per unit
03/31/2014 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
963,809,173 32.80 24.49 R$ per unit
06/31/2014 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
754,418,847 29.85 24.75 R$ per unit
09/30/2014 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
795,428,358 25.68 17.9 R$ per unit
194
12/31/2014 Shares Common - Stock
Exchange
BM&FBOVESPA - Bolsa de Valores,
Mercadorias e Futuros
757,968,011 19.70 8.21 R$ per unit
18.5 Description of other securities which are not shares
Promissory notes of the second issue, issued in a single series, now fully redeemed.
a Identification of securities Second issuance of commercial papers in a single series, now fully redeemed.
b Quantity 3 Commercial Notes
c Total amount Total Amount of R$27,000,000.00.
d Issue date December 7, 2011
Maturity date December 1, 2012
e Restrictions on trading
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
f Convertibility Not applicable. The second issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
Not applicable. The Company may not redeem the promissory notes in advance. (i) Possibility of redemption
(ii) Assumptions and method of calculating the redemption value
h if debt securities, indicate where applicable:
(i) maturity date, including conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
(ii) interest
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 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. 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 the goods used as collateral
Not applicable. The second issue of promissory notes does not have collateral or surety.
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
v. possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
195
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
Not applicable.
i
conditions for amendment of the rights conferred by such securities
Not applicable.
j other relevant characteristics The amendment of any rights conferred by each commercial note of second issuance depends on the holder’s approval.
Promissory notes of the third issue, issued in a single series, now fully redeemed.
a Identification of securities Third issuance of commercial papers in a single series, now fully redeemed.
b Quantity 30 Commercial Notes
c Total amount Total Amount of R$30,000,000.00.
d Issue date April 23, 2012
Maturity date December 3, 2012
e Restrictions on trading
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
f Convertibility Not applicable. The second issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
Not applicable. The Company may not redeem the promissory notes in advance. (i) Possibility of redemption
(ii) Assumptions and method of calculating the redemption value
h if debt securities, indicate where applicable:
(i) maturity date, including conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
(ii) interest
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. 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 the goods used as collateral
Not applicable. The third issue of promissory notes does not have collateral or surety.
196
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
(v) possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
(vi) the fiduciary agent, indicating the key terms of the contract
Not applicable.
i
conditions for amendment of the rights conferred by such securities
The amendment of any rights conferred by each note issuance depends on commercial second holder approval.
j other relevant characteristics None
Promissory notes of the fourth issue, issued in a single series, now fully redeemed.
a Identification of securities Forth issuance of commercial papers in a single series, now fully redeemed.
b Quantity 20 Commercial Notes
c Total amount Total Amount of R$200,000,000.00.
d
Issue date April 11, 2014
Maturity date August 8, 2014
e Restrictions on trading
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.
f Convertibility Not applicable. The fourth issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
(i) Possibility of redemption
The Company shall, unilaterally, and that, for the purposes of the paragraph 2º, 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.
(ii) Assumptions and method of calculating the redemption value
The amount to be paid by the Company to the holder of each commercial note of the fourth issue corresponds to the nominal value of the commercial notes 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, according to the terms and conditions set forth in the notes.
197
h if debt securities, indicate where applicable:
(i) maturity date, including conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
(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 – Depósitos 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 Fórmulas de Notas Comerciais e Obrigações – CETIP21", available at CETIP's 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, description of the goods used as collateral
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
(v) possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
(vi) the fiduciary agent, indicating the key terms of the contract
Not applicable.
i
conditions for amendment of the rights conferred by such securities
The amendment of any rights conferred by each note issuance depends on commercial second holder approval.
j other relevant characteristics None
Non-convertible Unsecured Debentures of First issuance of the Company
Securities Debentures
Identification of securities Non-convertible Unsecured Debentures of First issuance – single tranche
Issue date April 18, 2011
Maturity date April 18, 2016
Quantity 27,000
Total amount 270,000,000.00
Restrictions on trading yes
Description of trading restrictions
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
198
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
Assumptions and method of calculating the redemption value
Not applicable
If debt securities, indicate where applicable:
i. Conditions for acceleration For more information on maturity date, please refer to item 18.10 below.
ii. Interest
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. 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 the goods used as collateral
Not applicable. The first issue of debentures does not have collateral or surety.
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
vi. the fiduciary agent, indicating the key terms of the contract
For more information on the fiduciary agent, please refer to item 18.10 below.
conditions for amendment of the rights conferred by such securities
During deliberations of the General Meetings of debenture holders for each of the series, for each outstanding Debenture one vote will be granted, permitting the establishment of proxy, whether Debenture holder or not. Except for the provisions below, all deliberations to be taken in the General Meeting of debenture holders will depend on approval of debenture holders representing at least 75% of outstanding Debentures. 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 representing at least 90% of outstanding 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 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; (j) of any Event of Default.
Other relevant characteristics None
Non-convertible Unsecured Debentures of Second issuance of the Company
Securities Debentures
199
Identification of securities Non-convertible Unsecured Debentures of second issuance – double series
Quantity 27,000
Total amount R$ 270,000,000.00
Issue date August 15, 2012
Maturity date
1st series: August 15, 2017. 2nd series: August 15, 2020.
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
Assumptions and method of calculating the redemption value
Not applicable
If debt securities, indicate where applicable:
i. Conditions for acceleration For more information on maturity date, please refer to item 18.10 below.
ii. Interest
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.
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 nominal 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 the goods used as collateral
Not applicable. The second issue of debentures does not have collateral or surety.
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
200
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
For more information on the fiduciary agent, please refer to item 18.10 below.
Conditions for amendment of the rights conferred by such securities
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 Meeting of debenture holders will depend on approval of debenture holders of the second series representing at least 75% of outstanding Second Series Debentures. 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-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.
Other relevant characteristics None
Non-convertible Unsecured Debentures of Third issuance of the Company
Securities Debentures
Identification of securities Non-convertible Unsecured Debentures of third issuance – single series
Quantity 20,000
Total amount R$ 200,000,000.00
Issue date May 30, 2014
Maturity date May 30, 2019
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
Assumptions and method of calculating the redemption value
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 Optional Early Redemption Offer. The amount to be paid in respect of each Debenture indicated 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 cannot be negative redemption.
If debt securities, indicate where applicable:
i. Conditions for acceleration For more information on maturity date, please refer to item 18.10 below.
201
ii. Interest
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 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 the goods used as collateral
Not applicable. The third issue of debentures does not have collateral or surety.
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration described in item 18.10 below.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
For more information on the fiduciary agent, please refer to item 18.10 below.
Conditions for amendment of the rights conferred by such securities
During deliberations of the General Meetings of 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 Meeting of debenture holders will depend on approval of debenture holders of the second series representing at least 75% of outstanding Second Series Debentures. 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 representing at least 90% of outstanding 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-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.
Other relevant characteristics None
18.6 Description of the Brazilian markets where the company's securities are
admitted for trading
Shares The Company’s common shares are traded at the BM&FBOVESPA.
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Commercial Paper The Company’s 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 - Títulos e Valores Mobiliários, managed and operated by CETIP, trading being settled through CETIP and electronic custody of the commercial paper by CETIP. 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.
The fourth issuance of commercial paper was fully redeemed in June 20, 2014.
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 secondary market and electronic custody SND – Módulo Nacional de Debêntures, managed and operated by CETIP.
18.7 Description of the securities admitted to trading in foreign markets
a. Country
United States of America.
b. Market
The ADRs of Mills are traded in the over-the-counter market (OTC) under CUSIP 60114T103, ISIN BRMILSACNOR2 and ticker MILTY.
c. Administrative entity for the market in which securities are listed for trading
OTC (Over-The-Counter)
d. Date of listing for trading
Trading on OTC started on December 18, 2013.
e. Trading segment, if any
The ADR’s of Mills are traded in the over-the-counter (OTC) market in the OTC Pink Current
Information segment.
f. Date of first listing on trading segment
On October 29, 2013, the Board of Directors approved the decision to establish the Sponsored
Level 1 American Depositary Receipt Program (Level I ADR Program), having Mills shares as
underlying assets.
The Level I ADR Program was approved by the Brazilian Securities and Exchange Commission
(CVM) on December 9, 2013 and by the U.S. Securities and Exchange Commission (SEC) on
December 11, 2013, with start of trading on December 18, 2013.
g. Percentage of trading volume overseas when compared to the total trading volume for each class and type of security last year
There were no ADR trading in 2013. During 2014, 68,500 Mills ADRs were issued and 68,500 Mills ADRs were cancelled, according to total volume of trades of 68,500 ADRs.
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d. Proportion of certificates of deposit overseas, if any, when compared to each class and type of shares
1:1 (one ADR for each common share).
e. Depositary bank, if any
JPMorgan Chase Bank
f. Trust agent, if any
Itaú Unibanco S.A.
18.8 Description of the public offerings made by the Company or by third parties, including controlling companies and subsidiaries, relating to the Company’s securities
Public offerings of distribution of commercial promissory 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. The third issue of
commercial papers were already fully redeemed on June 20, 2014. 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
Promissory notes of the second issue, issued in a single series, now fully redeemed.
a Identification of securities Second issuance of commercial papers in a single series, now fully redeemed
b Quantity 3 Commercial Notes
c Total amount Total Amount of R$27,000,000.00.
d
Issue date December 7, 2011
Maturity date December 1, 2012
e
Restrictions on trading
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
f Convertibility
Not applicable. The second issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
Not applicable. The Company may not redeem the promissory notes in advance.
(i) Possibility of redemption
(ii) Assumptions and method of calculating the redemption value
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h if debt securities, indicate where applicable:
(i) maturity date, including conditions for acceleration
Regular maturity on December 1, 2012, when should be paid the value of the principal and the remuneration (interest). 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.
(ii) interest
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 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. 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 the goods used as collateral
Not applicable. The second issue of promissory notes does not have collateral or surety.
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
v. possible restrictions imposed on the issuer
See accelerated maturity conditions described above.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
Not applicable.
i conditions for amendment of the rights conferred by such securities
Not applicable.
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j other relevant characteristics None.
Promissory notes of the third issue, issued in a single series, now fully redeemed
a Identification of securities Third issuance of commercial papers in a single series, now fully redeemed.
b Quantity 30 Commercial Notes
c Total amount Total Amount of R$30,000,000.00.
d
Issue date April 23, 2012
Maturity date December 3, 2012
e
Restrictions on trading
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
f Convertibility
Not applicable. The second issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
Not applicable. The Company may not redeem the promissory notes in advance.
(i) Possibility of redemption
(ii) Assumptions and method of calculating the redemption value
h if debt securities, indicate where applicable:
(i) maturity date, including conditions for acceleration
Regular maturity on December 3, 2012, when should be paid the value of the principal and the remuneration (interest). 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.
(ii) interest
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. 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
206
(iii) . guarantee and, if in the form of collateral, description of the goods used as collateral
Not applicable. The second issue of promissory notes does not have collateral or surety.
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
(v) possible restrictions imposed on the issuer
See accelerated maturity conditions described above.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
(vi) the fiduciary agent, indicating the key terms of the contract
Not applicable.
i conditions for amendment of the rights conferred by such securities
The amendment of any rights conferred by each note issuance depends on commercial second holder approval.
j other relevant characteristics None
Promissory notes of the fourth issue, issued in a single series, now fully redeemed
a Identification of securities Forth issuance of commercial papers in a single series, now fully redeemed.
b Quantity 20 Commercial Notes
c Total amount Total Amount of R$200,000,000.00.
d
Issue date April 11, 2014
Maturity date August 8, 2014
e Restrictions on trading
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.
f Convertibility Not applicable. The fourth issue of promissory notes are not convertible into shares issued by the company.
g Possibility of redemption:
(i) Possibility of redemption
The Company shall, unilaterally, and that, for the purposes of the paragraph 2º, 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.
(ii) Assumptions and method of calculating the redemption value
The amount to be paid by the Company to the holder of each commercial note of the fourth issue corresponds to the nominal value of the commercial notes 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, according to the terms and conditions set forth in the notes.
h if debt securities, indicate where applicable:
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(i) maturity date, including conditions for acceleration
Regular maturity August 8, 2014, when should be paid the value of the principal and the remuneration (interest).
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.
(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 – Depósitos 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 Fórmulas de Notas Comerciais e Obrigações – CETIP21", available at CETIP's 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, description of the goods used as collateral
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
(iv) in the absence of a guarantee, if the credit is secured or subordinate
The credit of the promissory note is unsecured.
(v) possible restrictions imposed on the issuer
See accelerated maturity conditions described above.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
(vi) the fiduciary agent, indicating the key terms of the contract
Not applicable.
i
conditions for amendment
of the rights conferred by such securities
The amendment of any rights conferred by each note issuance depends on commercial second holder approval.
j other relevant characteristics None
Non-convertible Unsecured Debentures of First issuance of the Company
Securities Debentures
Identification of securities Non-convertible Unsecured Debentures of First issuance – single tranche
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Issue date April 18, 2011
Maturity date April 18, 2016
Quantity 27,000
Total amount 270,000,000.00
Restrictions on trading Yes
Description of trading restrictions
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
Assumptions and method of calculating the redemption value
Not applicable
If debt securities, indicate where applicable:
Conditions for acceleration
Maturity date on April 18, 2016. Payment of the nominal value of each debenture in 3 (three) successive yearly instalments, in the following order: (i) 2 (two) instalments, each corresponding to matured 33.3333% of nominal value (without considering any amortization) of each of the debentures, being the first installment of this sub-item due in April 18, 2014 and the second installment of this sub-item due in April 18, 2015; and (ii) 1 (one) installment, in the amount of the outstanding amount, due on the maturity date. 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 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; 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
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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.
ii. Interest
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. 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 the goods used as collateral
Not applicable. The first issue of debentures does not have collateral or surety.
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
PENTÁGONO S.A. DISTRIBUIDORA DE TÍTULOS E VALORES MOBILIÁRIOS 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 and/or debenture holders and/or 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 Fundação Getúlio 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 Program – 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
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the trustee shall be calculated in proportion to the months of operation of the fiduciary agent, based on the 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 values 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 debenture holders, 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 replacement is indicated by the institution and approved by general meeting of debenture holders, and assume their functions effectively; (iv) shall be performed, within the maximum period of 30 (thirty) days from the date of the event that determine, general meeting of debenture holders, for choosing the new fiduciary agent; (v) replacement, on a permanent basis, the fiduciary agent (a) shall be subject to prior notification 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; payments to the trustee replaced shall be effected in accordance with the proportionality to the period of effective service delivery; (vi) the trustee will be entitled to the same salary replacement perceived by the previous, if (a) the company has not agreed with the new value of the remuneration of the trustee proposed by general meeting of debenture holders, or (b) the general meeting of debenture holders does not act on the matter; (vii) the fiduciary agent should substitute, immediately after his appointment, communicate it to the company and to debenture holders; and (viii) shall apply to cases of substitution of Trustee the norms and precepts from the Securities and Exchange Commission.
Conditions for amendment of the rights conferred by such securities
During deliberations of the General Meetings of debenture holders for each of the series, for each outstanding Debenture one vote will be granted, permitting the establishment of proxy, whether Debenture holder or not. Except for the provisions below, all deliberations to be taken in the General Meeting of debenture holders will depend on approval of debenture holders representing at least 75% of outstanding Debentures. 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 representing at least 90% of outstanding 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 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; (j) of any Event of Default.
Other relevant characteristics None
Non-convertible Unsecured Debentures of Second issuance of the Company
Securities Debentures
Identification of securities Non-convertible Unsecured Debentures of second issuance – double series
Issue date August 15, 2012
Maturity date
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1st series: August 15, 2017. 2nd series: August 15, 2020.
Quantity 27,000
Total amount R$ 270,000,000.00
Restrictions on trading Yes
Description of trading restrictions
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
Assumptions and method of calculating the redemption value
Not applicable
If debt securities, indicate where applicable:
Conditions for acceleration
Maturity date of the first series on August 15, 2017. 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 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 non-financial 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
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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 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,
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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 ("Índices 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 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.
ii. Interest
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.
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 nominal 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,
Not applicable. The first issue of debentures does not have collateral or surety.
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description of the goods used as collateral
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration.
· the dividend distribution
· the sale of certain assets
· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
PENTÁGONO S.A. DISTRIBUIDORA DE TÍTULOS E VALORES MOBILIÁRIOS 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 instalment by the change in the general price index-market, published by Fundação Getúlio 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 Program – 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 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
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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 for 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).
Conditions for amendment of the rights conferred by such securities
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 Meeting of debenture holders will depend on approval of debenture holders of the second series representing at least 75% of outstanding Second Series Debentures. 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-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.
Other relevant characteristics None
Non-convertible Unsecured Debentures of Third issuance of the Company
Securities Debentures
Identification of securities Non-convertible Unsecured Debentures of third issuance – single series
Issue date May 30, 2014
Maturity date May 30, 2019
Quantity 20,000
Total amount R$ 200,000,000.00
Restrictions on trading Yes
Description of trading restrictions
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
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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 As described in item 18.5.
Assumptions and method of calculating the redemption value
As described in item 18.5.
If debt securities, indicate where applicable:
Conditions for acceleration
The maturity of the Debentures will be five (5) years from the Date of Issue, thus maturing on May 30, 2019. Payment of Face Value of the Debentures and will be amortized over three (3) successive annual installments, each corresponding to 33.33% (thirty-three and thirty-three percent) of the nominal value, payable in 30 May, 2017, May 30, 2018 and May 30 2019. The obligations of the Company may be declared as early maturity subject to the terms and conditions set forth in the Indenture, upon the occurrence of any of the certain events summarized below: I. Default by the Company of any monetary obligation on the debentures, as described in the Indenture, at the date of payment stated in the Indenture. II. default by the Company of any non-monetary obligation in Scripture, that (a) is not adequately remedied within specific remediation; or (b) there is no specific period of remediation, is not adequately remedied within fifteen (15) days from the date of the default, and the period provided in this subsection shall not apply to obligations for which a deadline has been set specific cure or where the period of cure has been expressly excluded; III. Judicial inquiry of the Indenture by the Company, and / or any parent, directly or indirectly company (as defined control provided for in Article 116 of the Corporations Act) of the Company ("Parent"), and / or any subsidiary (as defined control under Article 116 of the Corporations Act) by the Company ("Subsidiary"); IV. Judicial inquiry of the Indenture by the Company by any person not mentioned in paragraph III above, not cured or suspended within fifteen (15) days from the date on which the Company becomes aware of the filing of such inquiry; V. assignment, promise of assignment, or any form of transfer or promise of transfer to third parties, in whole or in part, by the Company, of any of its obligations under the Indenture, without the prior written consent of Bondholders representing at least 75% (seventy five percent) of the outstanding Debentures; VI. Invalidity, unenforceability or invalidity of the Indenture and / or the Distribution Agreement, that is not remedied within fifteen (15) days from the date of the relevant event; VII. (A) bankruptcy of the Company, any controlling company and / or any subsidiary; (B) voluntary bankruptcy filed by the company, by 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
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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. discontinuation by the Company and / or by any Subsidiary of insurance, according to current best practices in the market performance of 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
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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.
iii. guarantee and, if in the form of collateral, description of the goods used as collateral
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 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.
iv. in the absence of a guarantee, if the credit is secured or subordinate
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
v. possible restrictions imposed on the issuer
See terms of acceleration. · the dividend distribution
· the sale of certain assets
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· the possibility of new debt
· the issue of new securities
vi the fiduciary agent, indicating the key terms of the contract
PENTÁGONO S.A. DISTRIBUIDORA DE TÍTULOS E VALORES MOBILIÁRIOS 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 Fundação Getúlio 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 Program – 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 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 for 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 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
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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).
Conditions for amendment of the rights conferred by such securities
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 Meeting of debenture holders will depend on approval of debenture holders of the second series representing at least 75% of outstanding Second Series Debentures. 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-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.
Other relevant characteristics None
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19. BUY-BACK PLANS AND SECURITIES HELD IN TREASURY
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19.1 Provide the following information about issuer’s stock buyback plans
Meeting date Buy-back
Available reserves
and profits (Reais) Type Class
Quantity
envisaged (units)
Percentage in relation
to outstanding
Approved amount
purchased (units)
Weighted
Average Price
Quote factor
% purchased
Outras caracter.
11/10/2014 11/10/2014 to
11/09/2014
Common 4.000.000 5.069199% 2,285,300 8.65 R$ per unit
57%
For the purposes of article 8 of CVM Instruction 10/80 the Directors determined and clarify that: (a) the Company’s objective in the Repurchase Program is to
acquire shares of the Company's issuance, for treasury and subsequent cancellation or alienation, including in the context of any exercise of options under the Company's stock option plan; (b) up to 4,000,000 common shares of the Company’s issuance, all book-entry and without par value, may be acquired under the Repurchase Program, subject to maintaining the minimum float of 25% of the shares (as required by the BM&FBovespa Novo Mercado Listing Regulations)
and to the requirement under article 3 of CVM Instruction 10/80 that the number of shares held in treasury shall not exceed 10% of the shares in circulation in the market; (c) the deadline for effecting transactions in the context of the Program is 365 days as of the date hereof; (d) the number of common shares of
the Company’s issuance that are in circulation in the market, as defined by CVM Instruction 10/80, is 82,907,932 (eighty-two million, nine hundred seven thousand, nine hundred thirty-two), according to the registry for the share deposit account on November 3, 2014, as reported by the depositary institution;
and (e) the purchases in the context of the Repurchase Program will be effected over the exchange at market prices, with the intermediation of any of the following brokers: (i) Votorantim Corretora de Títulos e Valores Mobiliários Ltda., headquartered in the City and State of São Paulo at Avenida das Nações Unidas 14171, Torre A, 14º andar, CEP 04794-000, registered with the CNPJ/MF under n.º 01.170.892/0001-31; (ii) J.P. Morgan Corretora de Câmbio e Valores
Mobiliários S.A., headquartered in the City and State of São Paulo at Avenida Brigadeiro Faria Lima 3.729, 13º andar, CEP 04538-905, registered with the CNPJ/MF under n.º 32.588.139/0001-94; (iii) Bradesco S.A. Corretora de Títulos e Valores Mobiliários, headquartered in the City and State of São Paulo at
Avenida Paulista 1.450, 7º andar, CEP 01310-100, registered with the CNPJ/MF under n.º 061.855.045/0001-32; (iv) BTG Pactual Corretora de Títulos e Valores Mobiliários S.A., headquartered in the City and State of São Paulo at Avenida Brigadeiro Faria Lima 3.477, 14º andar, CEP 04538-133, registered with the CNPJ/MF under n.º 43.815.158/0001-22; (v) Itaú Corretora de Valores S.A., headquartered in the City and State of São Paulo at Avenida Brigadeiro Faria Lima
3.500, 3º andar, parte, CEP 04538-132, registered with the CNPJ/MF under n.º 61.194.353/0001-64; (vi) Credit Suisse (Brasil) S.A. CTVM, headquartered in the City and State of São Paulo at Rua Leopoldo Couto de Magalhães Jr. 700, 12º andar, CEP 04542-000, registered with the CNPJ/MF under n.º
42.584.318/0001-07; and (vii) J. Safra Corretora de Valores e Câmbio Ltda., headquartered in the City and State of São Paulo at Avenida Paulista 2.100, 19º andar, CEP 01310-930, registered with the CNPJ/MF under n.º 60.783.503/0001-02.
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19.2 Ending balance and beginning balance Securities held in Treasury
Fiscal year December 31, 2012
Class of stock: Common
Quantity (Units)
Total amount (R$ thousand)
Weighted average price (R$)
Beginning balance - - - Acquisitions 4,000 23.4 5.86 Disposal - - - Cancellations (4,000) (23.4 ) 5.86 Ending balance - - -
Fiscal year December 31, 2013
Class of stock: Common
Quantity (Units)
Total amount (R$ thousand)
Weighted average price (R$)
Beginning balance - - - Acquisitions - - - Disposal - - - Cancellations - - - Ending balance - - -
Fiscal year December 31, 2014
Movimentação Quantity (Units)
Total amount (R$ thousand)
Weighted average price (R$)
Beginning balance - - - Acquisitions 1,182,900 10,985 9.29 Disposal - - - Cancellations - - - Ending balance 1,182,900 10,985 9.29
19.3 Indicate shares held in treasury as of the last fiscal year-end, in tabular format,
segregated by type and class.
Acquisition date
Approved purchased (units)
Approved purchased (R$ thousands)
Weighted Average Price (R$/share)
Outstanding shares in the end of period
% in relation to outstanding shares in the end of period
11/10/2014 1,181,900 10,985 9.29 81,726,032 1.45%
19.4. Other information that the Company considers relevant
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the Extraordinary General Meeting held on April 20, 2012, the Company repaid to the unrealized
profit reserve, issuing 4,000 of its own shares, for R$ 23.4 thousand, and these shares were
subsequently cancelled, as the approval of the Board of Directors on June 21, 2012.
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the Extraordinary General Meeting held on November 10, 2014, the Company reimburse to the
unrealized profit reserve, 2,285,300 of its own shares, for R$ 19.76 million, and these shares
await for cancelation or alienation, as the approval of the Board of Directors on November 10, 2014.
After the end of fiscal year 2014 and the publication date of this Reference form, the Company
acquired and held in treasury 1,102,400 shares, summing R$ 8.8 million, totaling 2,285,300
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shares bought and held in treasury respecting the share buyback program approved in November
10, 2014.
In May 21, 2015, the Board of Directors approved alienation of 5,434 Company´s shares held in
treasury to serve the exercise of stock option under the option plan of Company's Stock Option Program (“Program 2010”).
In June 17, 2015, the Board of Directors approved alienation of 1,444 Company´s shares held in treasury to serve the exercise of stock option under the option plan of Company's Stock Option
Program (“Program 2012”).
Date of acquisition Total amount of acquisition/
alienation
Total amount of acquisition
(R$ thousand)
Total amount of alienation
(R$ thousand)
Weighted average
price (R$)
4th quarter 2014 1,181,900 10,985 9.29
1st quarter 2015 1,102,400 8,792 7.98
2nd quarter 2015 -6,878 -59 8.65
Total 2,278,422 19,777 -59 8.65
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20. SECURITIES TRADING POLICY
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20.1 Description of the Company’s 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 Company’s 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.
d. Prohibitions on trading and description of monitoring procedures
When Material Fact not yet disclosed is pending; after the disclosure of material fact, provided
that negotiations could adversely affect business conditions described in the act or fact in
question; Related Parties may not trade securities over a 15-day period prior to the disclosure, as applicable, of Company's quarterly information (ITR) or standard financial statements (DFP);
by former Administrators, for the period of six months after they leave the position or until the material information is disclosed;.
All trading activities with securities issued by the Company carried out by Bound Persons shall
only be performed through one of the accredited brokers included in the list sent by the
Company to CVM, updated on a regular basis.
20.2 Other information that the Company considers relevant – Trading Policy
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. DISCLOSURE POLICY
228
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.
Material Information will be disclosed to the public, as permitted by CVM Instruction 358/02, in
the news portal of the newspaper Valor Econômico (www.valor.com.br/valor-ri) and at the Company’s Investor Relations website (www.mills.com.br/ri), both on the world wide web
(Internet), without prejudice to its communication to the CVM and BM&FBOVESPA, in the form required by current regulations.
At the discretion of the Investor Relations Officer, the announcement referred to at paragraph above can be made in addition, upon publication in newspapers of wide circulation normally used
by the company, provided, in this case, the adoption of a summary indicating that the full report can be accessed at the electronic address 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 [email protected].
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 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
229
question should send an email with the information to the address [email protected] 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.
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) The anticipated dissemination of results may be accepted in the case of preliminary
information, not yet audited, clearly presented for each of the items and timeframes, memories of the assumptions and calculations used;
(ii) The results or information prepared in accordance with foreign accounting standards should provide a reconciliation to the Brazilian accounting practices, as well as
reconciliation with the accounting items expressed directly in the financial statements of
the Company and, therefore, obtained by the accounting principles adopted in Brazil; (iii) If disclosures involves the preparation of projections, a comparison with the actual
results must be submitted, on the occasion of the release of Form ITR of the Company;
(iv) 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. (v) to disclose full information to shareholders and investors;
(vi) to ensure prompt widespread dissemination of Material information; (vii) to allow equity access to public information on the Company by every shareholder and
investor; (viii) to protect secrecy of any undisclosed Material information;
(ix) to contribute to the stabilization and fostering of the Brazilian capital market; and (x) to strengthen the Company’s good corporate governance practices.
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:
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(i) disclose the confidential information strictly to those people who absolutely need
to know it;
(ii) 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; (iii) not to discuss confidential information in conference calls in case one cannot be
sure of who actually will participate in it;
(iv) 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; (v) create documents and electronic files related to confidential information always
with password protection systems; (vi) to circulate internally documents containing confidential information in sealed
envelopes, which should always be delivered directly to the recipient;
(vii) 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 (viii) 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, maintenance, evaluation and
supervision of the information disclosure policy
Investor Relations Officer.
21.4 Other information that the Company deems relevant
The full version of Mills’ “Policy on Disclosure of Material Information” can be obtained in the
following address: http://ir.mills.com.br/fck_temp/12_4/file/Politica%20de%20Divulga%C3%A7%C3%A3o_2016_
03_28_i.pdf
231
22. EXTRAORDINARY BUSINESS
232
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, 2012, 2013 and 2014, 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 Significant changes in the running of the Company’s business
In fiscal years ended in December 31, 2012, 2013 and 2014, there were no significant changes
in the running of the Company’s 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, 2012, 2013 and 2014, no relevant contracts were concluded by the Company and its subsidiaries which are not directly connected to its operations.
22.4 Other information that the Company deems relevant
There is no other relevant information for this item 22.