As
filed with the Securities and Exchange Commission on June 18,
2008
|
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington,
D.C. 20549
FORM 20-F
o
|
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
|
OR
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
|
For
the fiscal year ended December 31, 2007
|
|
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
|
OR
|
o
|
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 13(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
Date
of the event requiring this shell company
report……………………
|
|
For
the transition period from ________________ to
________________
|
Commission file number:
001-33356
_________________________
(Exact
name of Registrant as specified in its charter)
_________________________
(Translation
of Registrant’s name into English)
The
Federative Republic of Brazil
(Jurisdiction
of incorporation or organization)
Av. Nações
Unidas No. 8,501, 19th
Floor
05425-070
- São Paulo, SP - Brazil
phone: +
55 (11) 3025-9000
Att.:
Alceu Duílio Calciolari - Chief Financial Officer and Investor Relations
Officer
(Address
of principal executive offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
Title
of each class
|
Name
of each exchange on which registered
|
Common
Shares, without par value*
|
New
York Stock Exchange
|
* Traded
only in the form of American Depositary Shares (as evidenced by American
Depositary Receipts), each representing two common shares which are registered
under the
Securities Act of 1933.
_________________________
Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
_________________________
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report.
The
number of outstanding shares of each class as of December 31,
2007.
Title
of Class
|
Number
of Shares Outstanding
|
Common
Stock
|
132,577,093*
|
* Includes
3,124,972 common shares that are held in treasury.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. x Yes o No
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities
Exchange Act of 1934. o
Yes x No
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing: o U.S
GAAP o
International Financial Reporting Standards as issued by the
International Accounting Standards Board x
Other If “Other” has been checked in
response to the previous question, indicate by check mark which financial
statement item the registrant has elected to follow. o Item 17
x Item
18
If this is
an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange
Act). o
Yes x No
____________________
In this
annual report, references to “Gafisa,” “we,” “our,” “us,” “our company” and “the
company” are to Gafisa S.A. and its consolidated subsidiaries (unless the
context otherwise requires). In addition, the term “Brazil” refers to the
Federative Republic of Brazil, and the phrase “Brazilian government” refers to
the federal government of Brazil. All references to “real,” “reais” or “R$” are to the
Brazilian real, the official currency of Brazil, and all references to “U.S.
dollar,” “U.S. dollars” or “US$” are to U.S. dollars, the official currency of
the United States. References to “Brazilian GAAP” are to generally accepted
accounting principles in Brazil and references to “U.S. GAAP” are to generally
accepted accounting principles in the United States. All references to “American
Depositary Shares” or “ADSs” are to Gafisa’s American Depositary Shares, each
representing two common shares.
Financial
Information
We
maintain our books and records in reais. We prepare our
financial statements in accordance with Brazilian GAAP, which are based
on:
|
·
|
Brazilian
Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97, Brazilian Law
No.10,303/01 and Brazilian Law No. 11,638/07, which we refer to
hereinafter as “Brazilian corporate
law”;
|
|
·
|
the
rules and regulations of the Brazilian Securities and Exchange Commission
(Comissão de Valores
Mobiliários), or the “CVM;”
and
|
|
·
|
the
accounting standards issued by the Brazilian Institute of Independent
Accountants (Instituto
dos Auditores Independentes do Brasil), or the “IBRACON,” and the
Brazilian Federal Accounting Council (Conselho Federal de
Contabilidade), or the
“CFC.”
|
The
Brazilian Central Bank and the CVM set 2010 as the deadline for adoption of
International Financial Reporting Standards, or IFRS, for the consolidated
financial statements of financial institutions and publicly-held companies. As a
result, on December 28, 2007, Law No. 11,638/07 was enacted, amending the
Brazilian corporate law regarding the accounting practices adopted in Brazil as
from the year ended on December 31, 2008.
When we reconcile our financial statements to IFRS to comply with this
requirement and Brazilian GAAP migrates toward IFRS, percentage of completion
accounting is unlikely to be acceptable (IFRIC D21). As a result, our financial
statements may be materially different from those presented under Brazilian
GAAP.
Brazilian
GAAP differs in significant respects from U.S. GAAP. The notes to our financial
statements included elsewhere in this annual report contain a reconciliation of
shareholders’ equity and net income as determined under Brazilian GAAP and under
U.S. GAAP. Unless otherwise indicated, all financial information of our company
included in this annual report is derived from our Brazilian GAAP financial
statements.
Our
consolidated financial statements reflect income statement and balance sheet
information for all of our subsidiaries, and also break out the interest of
minority shareholders therein. With respect to our jointly-controlled entities,
as a result of the existence of shareholders agreements, we
consolidate income statement and balance sheet information relating
to those entities in proportion to the equity interest we hold in the
capital of such investee.
In 2006,
we changed the Brazilian GAAP accounting practice adopted with respect to the
deferral of selling expenses and presentation of construction costs and have
amended our Brazilian GAAP financial statements for the years ended December 31,
2006, (retrospectively). See note 3(v) to our financial statements included
elsewhere in this annual report for this amendment and other reclassifications
to our Brazilian GAAP financial statements. All periods presented have been
modified to reflect such new accounting practices.
Market
Information
Certain
industry, demographic, market and competitive data, including market forecasts,
used in this annual report were obtained from internal surveys, market
research, publicly available information and industry publications. We have made
these statements on the basis of information from third-party sources that we
believe
are
reliable, such as the Brazilian Property Studies Company (Empresa Brasileira de Estudos de
Patrimônio), or the “EMBRAESP,” the Association of Managers of Real
Estate Companies (Associação
de Dirigentes de Empresas do Mercado Imobiliário), or the “ADEMI,” the
Brazilian Association of Real Estate Credit and Savings Entities (Associação Brasileira das Entidades
de Crédito Imobiliário e Poupança), or the “ABECIP,” the Real Estate
Companies’ Union (Sindicato
das Empresas de Compra, Venda, Locação e Adminsitração de Imóveis Residenciais e
Comerciais), or the “SECOVI,” the Brazilian Institute of Geography and
Statistics (Instituto
Brasileiro de Geografia e Estatística), or the “IBGE” and the Brazilian
Central Bank (Banco Central do
Brasil), or the “Central Bank,” among others. Industry and government
publications, including those referenced here, generally state that the
information presented therein has been obtained from sources believed to be
reliable, but that the accuracy and completeness of such information is not
guaranteed. Although we have no reason to believe that any of this information
or these reports are inaccurate in any material respect, such information has
not been independently verified by us. Accordingly, we do not make any
representation as to the accuracy of such information.
Rounding
and Other Information
Some
percentages and certain figures included in this annual report have been subject
to rounding adjustments. Accordingly, figures shown as totals in certain
tables in this annual report may not be an arithmetic aggregation of the
figures that precede them.
In this
annual report, all references to “contracted sales” are to the aggregate amount
of sales resulting from all agreements for the sale of units (including
residential communities and land subdivisions) entered into during a certain
period, including new units and units in inventory.
In
addition, we present information in square meters in this annual report.
One square meter is equal to approximately 10.76 square feet.
The
statements contained in this annual report in relation to our plans, forecasts,
expectations regarding future events, strategies, and projections, are
forward-looking statements which involve risks and uncertainties and which are
therefore not guarantees of future results. Our estimates and forward-looking
statements are mainly based on our current expectations and estimates on
projections of future events and trends, which affect or may affect our
businesses and results of operations. Although we believe that these estimates
and forward-looking statements are based upon reasonable assumptions, they are
subject to several risks and uncertainties and are made in light of information
currently available to us. Our estimates and forward-looking statements may be
influenced by the following factors, among others:
|
·
|
changes
in real
estate market prices and demand, estimated budgeted costs and the
preferences and financial condition of our
customers;
|
|
·
|
demographic
factors and available income;
|
|
·
|
our
ability to repay our indebtedness and comply with our financial
obligations;
|
|
·
|
our
ability to arrange financing and implement our expansion
plan;
|
|
·
|
our
ability to compete and conduct our businesses in the
future;
|
|
·
|
changes
in our business;
|
|
·
|
inflation
and interest rate fluctuations;
|
|
·
|
changes
in the laws and regulations applicable to the real estate
market;
|
|
·
|
government
interventions, resulting in changes in the economy, taxes, rates or
regulatory environment;
|
|
·
|
other
factors that may affect our financial condition, liquidity and results of
our operations; and
|
|
·
|
other
risk factors discussed under “Item 3.D. Key Information—Risk
Factors.”
|
The words
“believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,”
“expect” and similar words are intended to identify estimates and
forward-looking statements. Estimates and forward-looking statements speak only
as of the date they were made, and we undertake no obligation to update or to
review any estimate and/or forward-looking statement because of new information,
future events or other factors. Estimates and forward-looking statements involve
risks and uncertainties and are not guarantees of future performance. Our future
results may differ materially from those expressed in these estimates and
forward-looking statements. In light of the risks and uncertainties described
above, the estimates and forward-looking statements discussed in this annual
report might not occur and our future results and our performance may differ
materially from those expressed in these forward-looking statements due to,
inclusive of, but not limited to, the factors mentioned above.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS
|
Not
applicable.
|
OFFER
STATISTICS AND EXPECTED TIME TABLE
|
Not
applicable.
A. Selected
Financial Data
The
following selected financial data have been derived from our financial
statements. The selected financial data as of December 31, 2007, 2006 and 2005
and for the three years ended December 31, 2007 have been derived from our
audited consolidated financial statements included elsewhere in this annual
report. The selected financial data as of December 31, 2004 and 2003 and for the
two years ended December 31, 2004 have been derived from our audited
consolidated financial statements that are not included in this annual
report.
Our
financial statements are prepared in accordance with Brazilian GAAP, which
differs in significant respects from U.S. GAAP. For a discussion of the
significant differences relating to these consolidated financial statements and
a reconciliation of net income and shareholders’ equity from Brazilian GAAP to
U.S. GAAP, see notes to our audited consolidated financial statements included
elsewhere in this annual report. In 2006, we changed the Brazilian GAAP
accounting practice adopted with respect to the deferral of selling expenses and
presentation of construction costs and have amended our Brazilian GAAP financial
statements for the years ended December 31, 2006 (retrospectively). See note
3(v) to our financial statements included elsewhere in this annual report for
this amendment and other reclassifications to our Brazilian GAAP financial
statements. All periods presented have been modified to reflect such new
accounting practices.
This
financial information should be read in conjunction with our audited
consolidated financial statements and the related notes included elsewhere in
this annual report.
Solely for
convenience of the reader, certain amounts included in the tables below and
elsewhere in this annual report have been converted from reais into U.S. dollars
using the exchange rate as reported by the Central Bank as of December 31, 2007
of R$1.771 to US$1.00 or the indicated dates (subject to rounding adjustments).
These translations should not be considered representations that any such
amounts have been, could have been or could be converted into U.S. dollars at
that or at any other exchange rate as of that or any other date. In addition,
translations should not be construed as representations that the real amounts represent or
have been or could be converted into U.S. dollars as of that or any other
date.
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands except per share, per ADS and operating data)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
operating revenue
|
|
US$ |
687,573 |
|
|
R$ |
1,217,692 |
|
|
R$ |
697,479 |
|
|
R$ |
480,774 |
|
|
R$ |
439,254 |
|
|
R$ |
428,721 |
|
Net
operating revenue
|
|
|
661,871 |
|
|
|
1,172,174 |
|
|
|
663,847 |
|
|
|
457,024 |
|
|
|
416,876 |
|
|
|
410,621 |
|
Operating
costs
|
|
|
(449,980 |
) |
|
|
(796,914 |
) |
|
|
(465,795 |
) |
|
|
(318,211 |
) |
|
|
(292,391 |
) |
|
|
(268,672 |
) |
Gross
profit
|
|
|
211,891 |
|
|
|
375,260 |
|
|
|
198,052 |
|
|
|
138,813 |
|
|
|
124,485 |
|
|
|
141,949 |
|
Operating
expenses, net(4)
|
|
|
(115,213 |
) |
|
|
(204,042 |
) |
|
|
(103,371 |
) |
|
|
(79,355 |
) |
|
|
(59,688 |
) |
|
|
(70,952 |
) |
Stock
issuance expenses
|
|
|
(17,038 |
) |
|
|
(30,174 |
) |
|
|
(27,308 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Financial
income (expenses), net
|
|
|
7,993 |
|
|
|
14,155 |
|
|
|
(11,943 |
) |
|
|
(31,162 |
) |
|
|
(34,325 |
) |
|
|
(17,095 |
) |
Non-operating
income (expenses), net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,024 |
) |
|
|
(1,450 |
) |
|
|
— |
|
Income
before taxes on income, statutory profit sharing and minority
interest
|
|
|
87,633 |
|
|
|
155,199 |
|
|
|
55,430 |
|
|
|
27,272 |
|
|
|
29,022 |
|
|
|
53,902 |
|
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands except per share, per ADS and operating data)(3)
|
|
Taxes
on income
|
|
|
(17,474 |
) |
|
|
(30,946 |
) |
|
|
(6,024 |
) |
|
|
3,405 |
|
|
|
(5,575 |
) |
|
|
(10,471 |
) |
Statutory
profit sharing
|
|
|
(1,265 |
) |
|
|
(2,240 |
) |
|
|
(3,350 |
) |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Minority
interest
|
|
|
(4,749 |
) |
|
|
(8,410 |
) |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
income
|
|
|
64,145 |
|
|
|
113,603 |
|
|
|
46,056 |
|
|
|
30,677 |
|
|
|
23,447 |
|
|
|
43,431 |
|
Share
and ADS data(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share—R$ per share
|
|
|
0.4955 |
|
|
|
0.8775 |
|
|
|
0.4455 |
|
|
|
1.2457 |
|
|
|
1.2188 |
|
|
|
2.2576 |
|
Number
of preferred shares outstanding as at end of period
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,222,209 |
|
|
|
11,037,742 |
|
|
|
11,037,742 |
|
Number
of common shares outstanding as at end of period
|
|
|
129,452,121 |
|
|
|
129,452,121 |
|
|
|
103,369,950 |
|
|
|
8,404,185 |
|
|
|
8,199,743 |
|
|
|
8,199,743 |
|
Earnings
per ADS—R$ per ADS (pro forma)(5)
|
|
|
0.9910 |
|
|
|
1.7551 |
|
|
|
0.8911 |
|
|
|
2.4914 |
|
|
|
2.4376 |
|
|
|
4.5152 |
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating revenue
|
|
|
615,828 |
|
|
|
1,090,632 |
|
|
|
674,740 |
|
|
|
439,011 |
|
|
|
442,913 |
|
|
|
— |
|
Operating
costs
|
|
|
(488,852 |
) |
|
|
(865,756 |
) |
|
|
(503,172 |
) |
|
|
(329,775 |
) |
|
|
(339,653 |
) |
|
|
— |
|
Gross
profit
|
|
|
126,976 |
|
|
|
224,876 |
|
|
|
171,568 |
|
|
|
109,236 |
|
|
|
103,260 |
|
|
|
— |
|
Operating
expenses, net
|
|
|
(107,527 |
) |
|
|
(190,430 |
) |
|
|
(139,188 |
) |
|
|
(77,305 |
) |
|
|
(52,770 |
) |
|
|
— |
|
Financial
income (expenses), net
|
|
|
15,383 |
|
|
|
27,243 |
|
|
|
4,022 |
|
|
|
(17,684 |
) |
|
|
(31,645 |
) |
|
|
— |
|
Income
before income taxes, equity in results and minority
interest
|
|
|
34,832 |
|
|
|
61,689 |
|
|
|
36,402 |
|
|
|
14,247 |
|
|
|
18,845 |
|
|
|
— |
|
Taxes
on income
|
|
|
(1,122 |
) |
|
|
(1,988 |
) |
|
|
(11,187 |
) |
|
|
(1,886 |
) |
|
|
(3,530 |
) |
|
|
— |
|
Equity
in results
|
|
|
4,799 |
|
|
|
8,499 |
|
|
|
894 |
|
|
|
22,593 |
|
|
|
11,674 |
|
|
|
— |
|
Minority
interest
|
|
|
(2,675 |
) |
|
|
(4,738 |
) |
|
|
(1,125 |
) |
|
|
(571 |
) |
|
|
252 |
|
|
|
— |
|
Cumulative
effect of a change in an accounting principle:
|
|
|
- |
|
|
|
— |
|
|
|
(157 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net
income(6)
|
|
|
35,834 |
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
27,241 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share and ADS data(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
preferred share data—R$ per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share—Basic
|
|
|
— |
|
|
|
— |
|
|
|
0.1518 |
|
|
|
0.6056 |
|
|
|
0.4910 |
|
|
|
— |
|
Earnings
per share—Diluted
|
|
|
— |
|
|
|
— |
|
|
|
0.1498 |
|
|
|
0.6023 |
|
|
|
0.4910 |
|
|
|
— |
|
Weighted
average number of shares outstanding – in thousands
|
|
|
— |
|
|
|
— |
|
|
|
1,701 |
|
|
|
42,803 |
|
|
|
33,113 |
|
|
|
— |
|
Dividends
declared and interest on shareholders’ equity
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Per
common share data—R$ per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share—Basic
|
|
|
0.2844 |
|
|
|
0.5036 |
|
|
|
0.2487 |
|
|
|
0.3469 |
|
|
|
0.4464 |
|
|
|
— |
|
Earnings
per share—Diluted
|
|
|
0.2831 |
|
|
|
0.5013 |
|
|
|
0.2458 |
|
|
|
0.3453 |
|
|
|
0.4464 |
|
|
|
— |
|
Weighted
average number of shares
outstanding
– in thousands
|
|
|
126,032 |
|
|
|
126,032 |
|
|
|
98,796 |
|
|
|
24,394 |
|
|
|
24,599 |
|
|
|
— |
|
Dividends
declared and interest on shareholders’ equity
|
|
|
15,235 |
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Per
ADS data—R$ per ADS(5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per ADS—Basic (pro forma)(5)
|
|
|
0.5687 |
|
|
|
1.0072 |
|
|
|
0.4974 |
|
|
|
0.6938 |
|
|
|
0.8928 |
|
|
|
— |
|
Earnings
per ADS—Diluted (pro forma)(5)
|
|
|
0.5661 |
|
|
|
1.0026 |
|
|
|
0.4916 |
|
|
|
0.6907 |
|
|
|
0.8928 |
|
|
|
— |
|
Weighted
average number of ADSs outstanding – in thousands
|
|
|
63,016 |
|
|
|
63,016 |
|
|
|
48,398 |
|
|
|
12,197 |
|
|
|
12,300 |
|
|
|
— |
|
Dividends
declared and interest on shareholders’ equity
|
|
|
15,235 |
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
bank and financial investments
|
|
US$ |
290,484 |
|
|
R$ |
514,447 |
|
|
R$ |
266,159 |
|
|
R$ |
133,891 |
|
|
R$ |
45,888 |
|
|
R$ |
34,382 |
|
Properties
for sale
|
|
|
521,915 |
|
|
|
924,311 |
|
|
|
440,989 |
|
|
|
304,329 |
|
|
|
237,113 |
|
|
|
177,169 |
|
Working
capital(7)(12)
|
|
|
781,787 |
|
|
|
1,384,544 |
|
|
|
802,810 |
|
|
|
464,589 |
|
|
|
205,972 |
|
|
|
192,087 |
|
Total
assets
|
|
|
1,666,004 |
|
|
|
2,950,493 |
|
|
|
1,494,217 |
|
|
|
944,619 |
|
|
|
748,508 |
|
|
|
856,308 |
|
Total
debt(8)
|
|
|
389,247 |
|
|
|
689,356 |
|
|
|
295,443 |
|
|
|
316,933 |
|
|
|
151,537 |
|
|
|
194,400 |
|
Total
shareholders’ equity
|
|
|
864,350 |
|
|
|
1,530,763 |
|
|
|
814,087 |
|
|
|
270,188 |
|
|
|
146,469 |
|
|
|
122,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands except per share, per ADS and operating data)(3)
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
bank and financial investments
|
|
|
294,769 |
|
|
|
522,036 |
|
|
|
260,919 |
|
|
|
136,153 |
|
|
|
42,803 |
|
|
|
— |
|
Properties
for sale
|
|
|
643,862 |
|
|
|
1,140,280 |
|
|
|
483,411 |
|
|
|
376,613 |
|
|
|
214,744 |
|
|
|
— |
|
Working
capital(7)(12)
|
|
|
731,325 |
|
|
|
1,295,176 |
|
|
|
788,351 |
|
|
|
473,794 |
|
|
|
195,392 |
|
|
|
— |
|
Total
assets
|
|
|
1,631,304 |
|
|
|
2,889,040 |
|
|
|
1,633,886 |
|
|
|
901,387 |
|
|
|
601,220 |
|
|
|
— |
|
Total
debt(8)
|
|
|
387,648 |
|
|
|
686,524 |
|
|
|
289,416 |
|
|
|
294,149 |
|
|
|
141,476 |
|
|
|
— |
|
Total
shareholders’ equity
|
|
|
814,156 |
|
|
|
1,441,870 |
|
|
|
795,251 |
|
|
|
290,604 |
|
|
|
160,812 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
(280,073 |
) |
|
|
(496,010 |
) |
|
|
(306,243 |
) |
|
|
(112,947 |
) |
|
|
23,616 |
|
|
|
— |
|
Investing
activities
|
|
|
(63,381 |
) |
|
|
(112,247 |
) |
|
|
(8,577 |
) |
|
|
(5,576 |
) |
|
|
(1,509 |
) |
|
|
— |
|
Financing
activities
|
|
|
483,650 |
|
|
|
856,545 |
|
|
|
447,087 |
|
|
|
206,526 |
|
|
|
10,601 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of new developments
|
|
|
—
|
|
|
|
53 |
|
|
|
30 |
|
|
|
21 |
|
|
|
11 |
|
|
|
20 |
|
Number
of units launched(9)
|
|
|
—
|
|
|
|
10,315 |
|
|
|
3,052 |
|
|
|
2,363 |
|
|
|
1,132 |
|
|
|
1,790 |
|
Launched
usable area (m2)(10)
|
|
|
—
|
|
|
|
1,927,821 |
|
|
|
407,483 |
|
|
|
502,520 |
|
|
|
233,393 |
|
|
|
179,437 |
|
Sold
usable area (m2)(10)
|
|
|
—
|
|
|
|
2,364,173 |
|
|
|
357,723 |
|
|
|
372,450 |
|
|
|
131,275 |
|
|
|
185,273 |
|
Units
sold
|
|
|
—
|
|
|
|
6,120 |
|
|
|
3,049 |
|
|
|
1,795 |
|
|
|
1,192 |
|
|
|
1,595 |
|
Average
sales price (R$/m2)(10)(11)
|
|
|
—
|
|
|
|
2,835 |
|
|
|
3,045 |
|
|
|
2,878 |
|
|
|
2,934 |
|
|
|
2,822 |
|
(1)
|
Translated
using the exchange rate as reported by the Central Bank as of December 31,
2007 for reais
into U.S. dollars of R$1.771 to
US$1.00.
|
(2)
|
The
financial information in relation to receivables from clients, properties
for sale, real estate
development obligations, other current liabilities, working capital, total
assets and unearned income from property sales from 2004 and thereafter is
not comparable to prior periods as a result of the adoption of CFC
Resolution No. 963 for real estate
developments launched after January 1, 2004. See “Item 5.A. Operating and
Financial Review and Prospects—Operating Results—Critical Accounting
Policies and Estimates.”
|
(3)
|
On
January 26, 2006, all our preferred shares were converted into common
shares. On January 27, 2006, a stock split of our common shares was
approved, giving effect to the split of one existing share into three
newly issued shares, increasing the number of shares from 27,774,775 to
83,324,316. All information relating to the numbers of shares and ADSs
have been adjusted retroactively to reflect the share split on January 27,
2006. All U.S. GAAP earnings per share and ADS amounts have been adjusted
retroactively to reflect the share split on January 27, 2006. Brazilian
GAAP earnings per share and ADS amounts have not been adjusted
retrospectively to reflect the share split on January 27,
2006.
|
(4)
|
Excludes
stock issuance expenses.
|
(5)
|
Earnings
per ADS is calculated based on each ADS representing two common
shares.
|
(6)
|
The
following table sets forth reconciliation from U.S. GAAP net income to
U.S. GAAP net income available to common
shareholders:
|
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
from U.S. GAAP net income to U.S. GAAP net income available to common
shareholders (Basic):
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP net income (Basic)
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
27,241 |
|
Preferred
Class G exchange*
|
|
|
— |
|
|
|
— |
|
|
|
(9,586 |
) |
|
|
— |
|
Undistributed
earnings for Preferred Shareholders (Basic earnings)
|
|
|
— |
|
|
|
(258 |
) |
|
|
(16,334 |
) |
|
|
(16,260 |
) |
U.S.
GAAP net income available to common shareholders (Basic
earnings)
|
|
|
63,462 |
|
|
|
24,569 |
|
|
|
8,463 |
|
|
|
10,981 |
|
Reconciliation
from US GAAP net income to US GAAP net income available to common
shareholders (Diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
GAAP net income
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
27,241 |
|
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Class G exchange*
|
|
|
— |
|
|
|
— |
|
|
|
(9,586 |
) |
|
|
— |
|
Undistributed
earnings for Preferred Shareholders (Diluted earnings)
|
|
|
— |
|
|
|
(259 |
) |
|
|
(16,373 |
) |
|
|
(16,260 |
) |
US
GAAP net income available to common shareholders (Diluted
earnings)
|
|
|
63,462 |
|
|
|
24,568 |
|
|
|
8,424 |
|
|
|
10,981 |
|
*
|
Pursuant
to EITF Topic D-42 “The Effect on the Calculation of Earnings per Share
for the Redemption or Induced Conversion of Preferred Stock,” following
the exchange of Class A for Class G Preferred shares, the excess of the
fair value of the consideration transferred to the holders of the
preferred stock over the carrying amount of the preferred stock in the
balance sheet was subtracted from net income to arrive at net earnings
available to common shareholders in the calculation of earnings per share.
For purposes of displaying earnings per share, the amount is treated in a
manner similar to the treatment of dividends paid to the holders of the
preferred shares. The conceptual return or dividends on preferred shares
are deducted from net earnings to arrive at net earnings available to
common shareholders.
|
(7)
|
Working
capital equals current assets less current
liabilities.
|
(8)
|
Total
debt comprises loans, financings and short term and long term debentures.
Amounts exclude loans from real estate
development partners.
|
(9)
|
The
units delivered in exchange for land pursuant to swap agreements are not
included.
|
(10)
|
One
square meter is equal to approximately 10.76 square
feet.
|
(11)
|
The
average sales price in
reais per square meter excludes land subdivisions. The average
sales value in reais
per square meter, including land subdivisions, was R$1,137,
R$2,776, R$1,291, R$2,061 and R$2,580 in 2007, 2006, 2005, 2004 and 2003,
respectively.
|
(12)
|
With
the objective of improving the presentation of the classification between
current and non current assets, we reclassified certain amounts to non
current. Amounts were not considered to have materially affected the
presentation of the financial statements taken as a whole. See note
3 (v) of our financial statements.
|
Exchange
Rates.
Until
March 4, 2005, there were two legal foreign exchange markets in Brazil, the
commercial rate exchange market, or the “Commercial Market,” and the floating
rate exchange market, or the “Floating Market.” The Commercial Market was
reserved primarily for foreign trade transactions and transactions that
generally required prior approval from Brazilian monetary authorities, such as
registered investments by foreign persons and related remittances of funds
abroad (including the payment of principal and interest on loans, notes, bonds
and other debt instruments denominated in foreign currencies and registered with
the Central Bank). The Floating Market rate generally applied to specific
transactions for which Central Bank approval was not required. Both the
Commercial Market rate and the Floating Market rate were reported by the Central
Bank on a daily basis.
On March
4, 2005, the Central Bank issued Resolution No. 3,265, providing for several
changes in Brazilian foreign exchange regulation, including: (1) the unification
of the foreign exchange markets into a single exchange market; (2) the easing of
several rules for acquisition of foreign currency by Brazilian residents; and
(3) the extension of the term for converting foreign currency derived from
Brazilian exports. It is expected that the Central Bank will issue further
regulations in relation to foreign exchange transactions, as well as on payments
and transfers of Brazilian currency between Brazilian residents and
non-residents (such transfers being commonly known as the international transfer
of reais), including
those made through the so-called non-resident accounts (also known as CC5
accounts).
From March
1995 through January 1999, the Central Bank allowed the gradual devaluation of
the real against the
U.S. dollar under an exchange rate policy that established a band within which
the real/U.S. dollar
exchange rate could fluctuate. Responding to pressure on the real, on January 13, 1999,
the Central Bank widened the foreign exchange rate band. Because the pressure
did not ease, on January 15, 1999, the Central Bank abolished the band system
and allowed the real to
float freely.
Since the
beginning of 2001, the Brazilian exchange market has been increasingly volatile,
and, until early 2003, the value of the real declined relative to
the U.S. dollar, primarily due to financial and political instability in Brazil
and Argentina. According to the Central Bank, in 2004, 2005, 2006 and 2007,
however, the period-end value of the real appreciated in relation
to the U.S. dollar 8.8%, 13.4%, 9.5% and 20.7%, respectively. Although the
Central Bank has intervened occasionally to control unstable movements in the
foreign exchange rates, the exchange market may continue to be volatile as a
result of this instability or other factors, and, therefore, the real may substantially
decline or appreciate in value in relation to the U.S. dollar in the
future.
The
following table shows the selling rate, expressed in reais per U.S. dollar
(R$/US$), for the periods and dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(per
U.S. dollar)
|
|
Year
Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2003
|
|
R$ |
2.889 |
|
|
R$ |
3.242 |
|
|
R$ |
2.822 |
|
|
R$ |
3.662 |
|
December
31, 2004
|
|
|
2.654 |
|
|
|
2.930 |
|
|
|
2.654 |
|
|
|
3.205 |
|
December
31, 2005
|
|
|
2.341 |
|
|
|
2.463 |
|
|
|
2.163 |
|
|
|
2.762 |
|
December
31, 2006
|
|
|
2.138 |
|
|
|
2.215 |
|
|
|
2.059 |
|
|
|
2.371 |
|
December
31, 2007
|
|
|
1.771 |
|
|
|
1.793 |
|
|
|
1.762 |
|
|
|
1.823 |
|
Month
Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2008
|
|
|
1.760 |
|
|
|
1.786 |
|
|
|
1.741 |
|
|
|
1.830 |
|
February
2008
|
|
|
1.683 |
|
|
|
1.720 |
|
|
|
1.672 |
|
|
|
1.768 |
|
March
2008
|
|
|
1.749 |
|
|
|
1.716 |
|
|
|
1.679 |
|
|
|
1.753 |
|
April
2008
|
|
|
1.687 |
|
|
|
1.705 |
|
|
|
1.657 |
|
|
|
1.753 |
|
May
2008
|
|
|
1.629 |
|
|
|
1.662 |
|
|
|
1.629 |
|
|
|
1.694 |
|
June
2008 (through June 17)
|
|
|
1.613 |
|
|
|
1.628 |
|
|
|
1.613 |
|
|
|
1.643 |
|
(1)
|
Average
of the lowest and highest rates in the periods
presented.
|
On June
17, 2008, the selling rate was R$1.613 to US$1.00. The real/dollar exchange rate
fluctuates and, therefore, the selling rate at June 17, 2008
may not be indicative of future exchange rates.
We have
translated certain amounts included in “Item 3.A. Key Information—Selected
Financial Data” and elsewhere in this annual report from reais into U.S. dollars
using the exchange rate as reported by the Central Bank as of December 31, 2007
of R$1.771 to US$1.00 or the indicated dates (subject to rounding adjustments).
These translations should not be considered representations that any such
amounts have been, could have been or could be converted into U.S. dollars at
that or at any other exchange rate as of that or any other date. In addition,
translations should not be construed as representations that the real amounts represent or
have been or could be converted into U.S. dollars as of that or any other
date.
B.
Capitalization and Indebtedness
Not
applicable.
C. Reasons
for the Offer and Use of Proceeds
Not
applicable.
D. Risk
Factors
This
section is intended to be a summary of the more detailed discussion included
elsewhere in this annual report. Our business, results of operations, financial
condition or prospects could be adversely affected if any of these risks occurs,
and as a result, the trading price of our common shares and ADSs could decline.
The risks described below are those known to us and those that we currently
believe may materially affect us.
Risks
Relating to Our Business and to the Brazilian Real Estate Industry
Our
business and results of operations may be adversely affected by weaknesses in
general economic, real estate and other
conditions.
The
residential homebuilding and land development industry is cyclical and is
significantly affected by changes in general and local economic conditions, such
as:
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consumer
confidence, stability of income levels and interest
rates;;
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availability
of financing for land home site acquisitions, and the availability of
construction and permanent
mortgages;
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inventory
levels of both new and existing
homes;
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supply
of rental properties; and
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conditions
in the housing resale market.
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Furthermore,
the market value of undeveloped land, buildable lots and housing inventories
held by us can fluctuate significantly as a result of changing economic and real estate market
conditions. If there are significant adverse changes in economic or real estate market
conditions, we will have to sell homes at a loss or hold land in inventory
longer than planned. For example, in 2003 and 2004, high interest rates in
Brazil adversely affected consumer confidence which negatively impacted the
sales of our units. Inventory carrying costs can be significant and can result
in losses in a poorly performing project or market. We may be particularly
affected by changes in local market conditions in São Paulo and Rio de Janeiro,
where we derive a large portion of our revenue.
The real estate industry in
Brazil is highly competitive. Failure to compete successfully could have a
material adverse effect on our business, our financial condition and the results
of our operations.
The
Brazilian real estate industry is
highly competitive and fragmented. We compete with Brazilian as well as
international developers on availability and location of land, price, funding,
design, quality, and reputation as well as for partnerships with other
developers. Because our industry does not have high barriers to entry, new
competitors, including international companies working in partnerships with
Brazilian developers, may enter into the industry, further intensifying this
competition. Some of our current potential competitors may have greater
financial and other resources than we do. Furthermore, a significant portion of
our real estate development and
construction activity is conducted in the states of São Paulo and Rio de
Janeiro, areas where the real estate market is highly
competitive due to a scarcity of properties in desirable locations and the
relatively large number of local competitors. If we are not able to compete
effectively, our business, our financial condition and the results of our
operations could be adversely affected.
Problems
with the construction and timely completion of our real estate projects may
damage our reputation, expose us to civil liability and decrease our
profitability.
The
quality of work in the construction of our real estate projects and the
timely completion of these projects are major factors that determine our
reputation, and therefore our sales and growth. Delays in the construction of
our projects or defects in materials and/or workmanship may occur. Any defects
could delay the completion of our real estate projects,
or, if such defects are discovered after completion, expose us to civil lawsuits
by purchasers or tenants. Construction projects often involve delays in
obtaining, or the inability to obtain, permits or approvals from
the
relevant authorities. In the past, we have encountered circumstances where we
had obtained the necessary environmental permits from state authorities, but we
were prevented from commencing our construction due to investigations by the
local prosecutor’s office in response to complaints regarding our tree-cutting
activities. Such investigations delayed the start of construction by us and the
delivery of completed units to our customers. In addition, construction projects
may also encounter delays due to adverse weather conditions, natural disasters,
fires, delays in the provision of materials or labor, accidents, labor disputes,
unforeseen engineering, environmental or geological problems, disputes with
contractors and subcontractors, or other events. In addition, we may encounter
previously unknown conditions at or near our construction sites that may delay
or prevent construction of a particular project. If we encounter a previously
unknown condition at or near a site, we may be required to correct the condition
prior to continuing construction and there may be a delay in the construction of
a particular project. The occurrence of any one or more of these problems in
our real estate projects could
adversely affect our reputation and our future sales.
Construction
delays, cost overruns and addressing newly discovered conditions may increase
project development costs. In addition, delays in the completion of a project
may result in a delay in the commencement of cash flow, which would increase our
capital needs. We may also incur construction and other development costs for a
project that exceed our original estimates due to increases over time in
interest rates, material costs, labor costs or other costs. We may not be able
to pass these increased costs on to purchasers and thus the increases may
decrease our profitability.
Our
inability to acquire adequate capital to finance our projects could delay the
launch of new projects.
We expect
that the continuing expansion and development of our business will require
significant capital, which we may be unable to obtain on acceptable terms, or at
all, to fund our capital expenditures and operating expenses, including working
capital needs. We may fail to generate sufficient cash flow from our operations
to meet our cash requirements. Furthermore, our capital requirements may vary
materially from those currently planned if, for example, our revenues do not
reach expected levels or we have to incur unforeseen capital expenditures and
make investments to maintain our competitive position. If this is the case, we
may require additional financing sooner than anticipated, or we may have to
delay some of our new development and expansion plans or otherwise forgo market
opportunities. We may not be able to obtain future equity or debt financing on
favorable terms, if at all. Future borrowing instruments such as credit
facilities are likely to contain restrictive covenants and may require us to
pledge assets as security for borrowings under those facilities. Our inability
to obtain additional capital on satisfactory terms may delay or prevent the
expansion of our business.
Changing
market conditions may adversely affect our ability to sell our home inventories
at expected prices, which could reduce our margins.
As a
homebuilder, we must constantly locate and acquire new tracts of land for
development and development home sites to support our homebuilding operations.
There is a lag between the time we acquire land for development or developed
home sites and the time that we can bring the properties to market and sell
homes. Lag time varies on a project-by-project basis; however, historically, we
have experienced a lag time of 12 to 24 months. As a result, we face the
risk that demand for housing may decline, costs of labor or materials may
increase, interest rates may increase, currencies may fluctuate and political
uncertainties may occur during this period and that we will not be able to
dispose of developed properties at expected prices or profit margins or within
anticipated time frames or at all. Significant expenditures associated with
investments in real estate, such as
maintenance costs, construction costs and debt payments, cannot generally be
reduced if changes in the economy cause a decrease in revenues from our
properties. The market value of home inventories can fluctuate significantly
because of changing market conditions. In addition, inventory carrying costs
(including interest on funds unused to acquire land or build homes) can be
significant and can adversely affect our performance. Because of these factors,
we may be forced to sell homes at a loss or for prices that generate lower
profit margins than we anticipate. We may also be required to make material
write-downs of the book value of our real estate assets in
accordance with Brazilian GAAP if values decline.
We
are subject to risks normally associated with permitting our purchasers to make
payments in installments; if there are higher than anticipated defaults or if
our costs of providing that financing increase, then our profitability could be
adversely affected.
As is
common in our industry, we and the special purpose entities, or “SPEs,” in which
we participate permit some purchasers of the units in our projects to make
payments in installments. As a result, we are subject to the risks associated
with this financing, including the risk of default in the payment of principal
or interest on the loans we make as well as the risk of increased costs for the
funds raised by us. As of December 31, 2007, our receivables relating to such
financing amounted to R$2.4 billion. Our customer default rate in the last five
years was 2% and as a result, on average, we recovered 98 cents of every dollar
loaned that is overdue. Our term sales agreements usually provide for an
inflation adjustment linked to the National Index of Construction Cost (Índice Nacional de Custo da
Construção), or “INCC,” during the construction phase of the projects, to
the General Market Price Index (Índice Geral de
Preços—Mercado), or “IGP-M,” after completion of the construction and 12%
per annum fixed-rate interest rate after delivery of the units. If the rate of
inflation increases, the loan payments under these term sales agreements may
increase, which may lead to a higher rate of payment default. If the default
rate among our purchasers increases, our cash generation and, therefore, our
profitability could be adversely affected.
In the
case of a payment default after the delivery of financed units, Brazilian law
provides for the filing of a collection claim to recover the amount owed or to
repossess the unit following specified procedures. The collection of overdue
amounts or the repossession of the property is a lengthy process, which usually
takes two years, and involves additional costs. It is uncertain that we can
recover the full amount owed to us or that if we repossess the unit, we can
re-sell the unit at favorable terms or at all.
If
we or the SPEs in which we participate fail to comply with or become subject to
more onerous government regulations, our business could be adversely
affected.
We and the
SPEs we participate in are subject to various federal, state and municipal laws
and regulations, including those relating to construction, zoning, use of soil,
environmental protection, historical patrimony and consumer protection. We are
required to obtain, maintain and renew on a regular basis permits, licenses and
authorizations from various governmental authorities in order to carry out our
projects. We strive to maintain compliance with these laws and regulations. If
we are unable to maintain or achieve compliance with these laws and regulations,
we could be subject to fines, project shutdowns, cancellation of licenses and
revocation of authorizations or other restrictions on our ability to develop our
projects, which could have an adverse impact on our financial condition. In
addition, our contractors and subcontractors are required to comply with various
labor and environmental regulations and tax obligations. Because we are
secondary obligors to these contractors and subcontractors, if they fail to
comply with these regulations or obligations, we may be subject to penalties by
the relevant regulatory bodies.
Regulations
governing the Brazilian real estate industry as well
as environmental laws have tended to become more restrictive over time. We
cannot assure you that new and stricter standards will not be adopted or become
applicable to us, or that stricter interpretations of existing laws and
regulations will not occur. For example, we have encountered circumstances where
we had obtained the necessary environmental permits from state authorities, but
subsequently became subject to investigations by the local prosecutor’s office
in response to complaints regarding our tree-cutting activities based on a
different interpretation of the applicable regulations. Any such event may
require us to spend additional funds to achieve compliance with such new rules
and therefore make the development of our projects more costly.
If
there is a scarcity of financing and/or increased interest rates, this may
decrease the demand for real estate properties,
which could negatively affect our business.
The
scarcity of financing and/or an increase in interest rates may adversely affect
the ability or willingness of prospective buyers to purchase our products and
services. A majority of the bank financing obtained by prospective buyers comes
from the Housing Financial System (Sistema Financeiro de
Habitação), or “SFH,” which is financed by funds raised from savings
account deposits. The Brazilian Monetary Council (Conselho Monetário Nacional),
or the “CMN,” might change the amount of such funds that banks are required to
make available for real estate financing.
If the CMN restricts the amount of available funds that can be used to finance
the purchase of real estate properties, or if there is an increase in interest
rates, there may be a decrease in the demand for our residential and commercial
properties and for the development of lots of land, which may adversely affect
our financial position and results of operations.
Because
we recognize sales income from our real estate properties under
the percentage of completion method of accounting, an adjustment in the cost of
a development project may reduce or eliminate previously reported revenue and
income.
We
recognize income from the sale of units in our properties based on the
percentage of completion method of accounting, which requires us to recognize
income as we incur the cost of construction. Revenue and total cost estimates
are revised on a regular basis as the work progresses, and adjustments based
upon the percentage of completion are reflected in contract revenue in the
period when these estimates are revised. To the extent that these adjustments
result in an increase, a reduction or an elimination of previously reported
income, we will recognize a credit to or a charge against income, which could
have an adverse effect on our previously reported revenue and
income.
Our
participation in SPEs creates additional risks, including potential problems in
our financial and business relationships with our partners.
We invest
in SPEs with other real estate developers and
construction companies in Brazil. The risks involved with SPEs include the
potential bankruptcy of our SPE partners and the possibility of diverging or
inconsistent economic or business interests between us and our partners. If an
SPE partner fails to perform or is financially unable to bear its portion of the
required capital contributions, we could be required to make additional
investments and provide additional services in order to make up for our
partner’s shortfall in return for an increased share in the venture. In
addition, under Brazilian law, the partners of an SPE may be liable for
obligations of an SPE in particular areas, including tax, labor, environmental
and consumer protection.
We
may experience difficulties in finding desirable land tracts and increases in
the price of land may increase our cost of sales and decrease our
earnings.
Our
continued growth depends in large part on our ability to continue to acquire
land and to do so at a reasonable cost. As more developers enter or expand their
operations in the Brazilian home building industry, land prices could rise
significantly and suitable land could become scarce due to increased demand or
decreased supply. A resulting rise in land prices may increase our cost of sales
and decrease our earnings. We may not be able to continue to acquire suitable
land at reasonable prices in the future.
Increases
in the price of raw materials may increase our cost of sales and reduce our
earnings.
The basic
raw materials used in the construction of our homes include concrete, concrete
block, steel, aluminum, bricks, windows, doors, roof tiles and plumbing
fixtures. Increases in the price of these and other raw materials, including
increases that may occur as a result of shortages, duties, restrictions, or
fluctuations in exchange rates, could increase our cost of sales. Any such cost
increases could reduce our earnings to the extent we are unable to pass on these
increased costs to our buyers.
If
we are not able to implement our growth strategy as planned, or at all, our
business, financial condition and results of operations could be adversely
affected.
We plan to
grow our business by selectively expanding to meet the growth potential of the
Brazilian residential market. We believe that there is increasing competition
for suitable real estate development
sites. We may not find suitable additional sites for development of new projects
or other suitable expansion opportunities.
We
anticipate that we will need additional financing to implement our expansion
strategy and we may not have access to the funding required for the expansion of
our business or such funding may not be available to us on
acceptable
terms. We may finance the expansion of our business with additional indebtedness
or by issuing additional equity securities. We could face financial risks
associated with incurring additional indebtedness, such as reducing our
liquidity and access to financial markets and increasing the amount of cash flow
required to service such indebtedness, or associated with issuing additional
stock, such as dilution of ownership and earnings.
Our
level of indebtedness could have an adverse effect on our financial health,
diminish our ability to raise additional capital to fund our operations and
limit our ability to react to changes in the economy or the real estate
industry.
As of
December 31, 2007, our total debt was R$689.4 million. For the fiscal year 2007,
our annual debt service obligation was approximately R$68.7
million.
Our level
of indebtedness could have important negative consequences for us. For example,
it could:
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require
us to dedicate a large portion of our cash flow from operations to fund
payments on our debt, thereby reducing the availability of our cash flow
to fund working capital, capital expenditures and other general corporate
purposes;
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increase
our vulnerability to adverse general economic or industry
conditions;
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limit
our flexibility in planning for, or reacting to, changes in our business
or the industry in which we
operate;
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limit
our ability to raise additional debt or equity capital in the future or
increase the cost of such funding;
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restrict
us from making strategic acquisitions or exploring business
opportunities;
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make
it more difficult for us to satisfy our obligations with respect to our
debt; and
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place
us at a competitive disadvantage compared to our competitors that have
less debt.
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Our
indebtedness has variable interest rates. At December 31, 2007, the principal
amount of our aggregate outstanding variable rate indebtedness was R$689.4
million. A hypothetical 1% adverse change in interest rates would have had an
annualized unfavorable impact of approximately R$6.9 million on our earnings and
cash flows, based on the debt level at December 31, 2007.
Risks
Relating to Brazil
Brazilian
economic, political and other conditions, and Brazilian government policies or
actions in response to these conditions, may negatively affect our business and
results of operations and the market price of our common shares or the
ADSs.
The
Brazilian economy has been characterized by frequent and occasionally extensive
intervention by the Brazilian government and unstable economic cycles. The
Brazilian government has often changed monetary, taxation, credit, tariff and
other policies to influence the course of Brazil’s economy. For example, the
government’s actions to control inflation have at times involved setting wage
and price controls, blocking access to bank accounts, imposing exchange controls
and limiting imports into Brazil. We have no control over, and cannot predict,
what policies or actions the Brazilian government may take in the
future.
Our
business, results of operations, financial condition and prospects, as well as
the market prices of our common shares or the ADSs, may be adversely affected
by, among others, the following factors:
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exchange
rate movements;
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exchange
control policies;
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expansion
or contraction of the Brazilian economy, as measured by rates of growth in
gross domestic product, or “GDP;”
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other
economic, political, diplomatic and social developments in or affecting
Brazil;
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liquidity
of domestic capital and lending markets;
and
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social
and political instability.
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Uncertainty
over whether the Brazilian government may implement changes in policy or
regulations may contribute to economic uncertainty in Brazil and to heightened
volatility in the Brazilian securities markets as well as securities issued
abroad by Brazilian issuers. As a result, these uncertainties and other future
developments in the Brazilian economy may adversely affect us and our business
and results of operations and the market price of our common
shares.
Inflation,
and government measures to curb inflation, may adversely affect the Brazilian
economy, the Brazilian securities market, our business and operations and the
market prices of our common shares or the ADSs.
At times
in the past, Brazil has experienced high rates of inflation. According to the
IGP-M, the inflation rates in Brazil were 1.2% in 2005, 3.8% in 2006 and 7.7% in
2007 and 4.7% for the five month period ended in May 2008. In addition,
according to the National Extended Consumer Price Index (Índice Nacional de Preços ao
Consumidor Amplo), or “IPCA,” published by the IBGE, the Brazilian price
inflation rates were 5.7% in 2005, 3.1% in 2006 and 4.5% in 2007 and 2.9% for
the five month period ended in May 2008. The Brazilian government’s measures to
control inflation have often included maintaining a tight monetary policy with
high interest rates, thereby restricting availability of credit and reducing
economic growth. Inflation, actions to combat inflation and public speculation
about possible additional actions have also contributed materially to economic
uncertainty in Brazil and to heightened volatility in the Brazilian securities
markets.
Brazil may
experience high levels of inflation in future periods. Periods of higher
inflation may slow the rate of growth of the Brazilian economy, which could lead
to reduced demand for our products in Brazil and decreased net sales. Inflation
is also likely to increase some of our costs and expenses, which we may not be
able to pass on to our customers and, as a result, may reduce our profit margins
and net income. In addition, high inflation generally leads to higher domestic
interest rates, and, as a result, the costs of servicing our reais-denominated debt may
increase, resulting in lower net income. Inflation and its effect on domestic
interest rates can, in addition, lead to reduced liquidity in the domestic
capital and lending markets, which could affect our ability to refinance our
indebtedness in those markets. Any decline in our net sales or net income and
any deterioration in our financial condition would also likely lead to a decline
in the market price of our common shares and the ADSs.
Fluctuations
in interest rates may have an adverse effect on our business and the market
prices of our common shares and the ADSs.
The
Central Bank establishes the basic interest rate target for the Brazilian
financial system by reference to the level of economic growth of the Brazilian
economy, the level of inflation and other economic indicators. Debts of
companies in the real estate industries, including ours, are subject to the
fluctuation of market interest rates, as established by the Central Bank. Should
such interest rates increase, the costs relating to the service of our debt
obligations would also increase.
At
December 31, 2007, all of our indebtedness was denominated in reais and subject to
Brazilian floating interest rates, such as the Reference Interest Rate (Taxa Referencial), or “TR,”
and, the Interbank Deposit Certificate Rate (Certificado de Depósito
Interbancário), or “CDI rate.” Any increase in the TR rate or the CDI
rate may have an adverse impact on our financial expenses and our results of
operations.
Restrictions
on the movement of capital out of Brazil may adversely affect your ability to
receive dividends and distributions on, or the proceeds of any sale of, our
common shares or the ADSs.
Brazilian
law permits the Brazilian government to impose temporary restrictions on
conversions of Brazilian currency into foreign currencies and on remittances to
foreign investors of proceeds from their investments in Brazil, whenever there
is a serious imbalance in Brazil’s balance of payments or there are reasons to
expect a pending serious imbalance. The Brazilian government last imposed
remittance restrictions for approximately six months in 1989 and early 1990. The
Brazilian government may take similar measures in the future. Any imposition of
restrictions on conversions and remittances could hinder or prevent holders of
our common shares or the ADSs from converting into U.S. dollars or other foreign
currencies and remitting abroad dividends, distributions or the proceeds from
any sale in Brazil of our common shares. Exchange controls could also prevent us
from making payments on our U.S. dollar-denominated debt obligations and hinder
our ability to access the international capital markets. As a result, exchange
controls restrictions could reduce the market prices of our common shares and
the ADSs.
Changes
in tax laws may increase our tax burden and, as a result, adversely affect our
profitability.
The
Brazilian government regularly implements changes to tax regimes that may
increase our and our customers’ tax burdens. These changes include modifications
in the rate of assessments and, on occasion, enactment of temporary taxes, the
proceeds of which are earmarked for designated governmental purposes. In April
2003, the Brazilian government presented a tax reform proposal, which was mainly
designed to simplify tax assessments, to avoid internal disputes within and
between the Brazilian states and municipalities, and to redistribute tax
revenues. The tax reform proposal provided for changes in the rules governing
the federal Social Integration Program (Programa de Integração
Social), or “PIS,” the federal Contribution for Social Security Financing
(Contribuição para
Financiamento da Seguridade Social), or “COFINS,” the state Tax on the
Circulation of Merchandise and Services (Imposto Sobre a Circulação de
Mercadorias e Serviços), or “ICMS,” and some other taxes. The effects of
these proposed tax reform measures and any other changes that result from
enactment of additional tax reforms have not been, and cannot be, quantified.
However, some of these measures, if enacted, may result in increases in our
overall tax burden, which could negatively affect our overall financial
performance.
Risks
Relating to Our Common Shares and the ADSs
International
economic and market conditions, especially in the United States, may adversely
affect the market price of the ADSs.
The market for securities issued by
Brazilian companies is influenced, to a varying degree, by international economic and market
conditions generally. Because our ADSs are listed on the New York Stock
Exchange, or the “NYSE” adverse market conditions and economic and/or politic
crisis especially in the United States, such as the subprime mortgage lending
crisis in 2007 and 2008, have at times resulted in significant
negative impacts on the market price of our ADSs. Despite the fact that our clients, whether financed
by us or by Brazilian banks through resources obtained in the local market, are
not directly exposed to the mortgage lending crisis in the United States,
there are still uncertainties as to whether such crisis may indirectly affect
homebuilders worldwide. The uncertainties generated by the subprime crisis may
affect the market prices of our ADSs and could also make it more difficult for
us to access the capital markets and finance our operations in the future on
acceptable terms or at all.
Developments
and the perception of risks in other countries, especially emerging market
countries, may adversely affect the market prices of our common shares and the
ADSs.
The market
for securities issued by Brazilian companies is influenced, to varying degrees,
by economic and market conditions in other emerging market countries, especially
other Latin American countries. Although economic conditions are different in
each country, the reaction of investors to developments in one country may
cause the
capital markets in other countries to fluctuate. Developments or adverse
economic conditions in other emerging market countries have at times resulted in
significant outflows of funds from, and declines in the amount of foreign
currency invested in, Brazil. For example, in 2001, after a prolonged recession,
followed by political instability, Argentina announced that it would no longer
continue to service its public debt. The economic crisis in Argentina negatively
affected investors’ perceptions of Brazilian securities for several years.
Economic or political crises in Latin America or other emerging markets may
significantly affect perceptions of the risk inherent in investing in the
region, including Brazil.
The
Brazilian economy is also affected by international economic and market
conditions generally, especially economic and market conditions in the United
States. Share prices on the São Paulo Stock Exchange (Bolsa de Valores de São Paulo S.A. –
BVSP), or the “BOVESPA,” for example, have historically been sensitive to
fluctuations in U.S. interest rates as well as movements of the major U.S. stock
indexes. Developments in other countries and securities markets could adversely
affect the market prices of our common shares and the ADSs and could also make
it more difficult for us to access the capital markets and finance our
operations in the future on acceptable terms or at all.
The
relative volatility and the lack of liquidity of the Brazilian securities market
may adversely affect you.
The
Brazilian securities market is substantially smaller, less liquid, more
concentrated and more volatile than major securities markets in the United
States. This may limit your ability to sell our common shares and the common
shares underlying your ADSs at the price and time at which you wish to do so.
The BOVESPA, the only Brazilian stock exchange, had a market capitalization of
approximately US$1.4 trillion as of December 31, 2007 and an average daily
trading volume of approximately US$2.6 billion for 2007. In
comparison, “NYSE,” had a market capitalization of US$30.5 trillion as of
December 31, 2007 and an average daily trading volume of approximately US$141
billion for 2007.
There is
also a large concentration in the Brazilian securities market. The ten largest
companies in terms of market capitalization represented approximately 61.4% of
the aggregate market capitalization of the BOVESPA as of December 31, 2007. The
top ten stocks in terms of trading volume accounted for approximately 14.9% of
all shares traded on the BOVESPA in 2007. Gafisa’s average daily trading volume
on the BOVESPA and in the NYSE in 2007 were US$13.8 million and US$13.6 million,
respectively.
Shares
eligible for future sale may adversely affect the market value of our common
shares and the ADSs.
Certain of
our shareholders have the ability, subject to applicable Brazilian laws and
regulations and applicable securities laws in the relevant jurisdictions, to
sell our shares and the ADSs. We cannot predict what effect, if any, future
sales of our shares or ADSs may have on the market price of our shares or the
ADSs. Future sales of substantial amounts of such shares or the ADSs, or the
perception that such sales could occur, could adversely affect the market prices
of our shares or the ADSs.
The
economic value of your investment in our company may be diluted.
We may
need additional funds and, in the case public or private financing is
unavailable or if our shareholders decide, we may issue additional common
shares. Any additional funds obtained by such a capital increase may dilute your
interest in our company. Moreover, because we may pay the remaining 40% of
Alphaville’s acquisition price with our common shares, you may experience
additional dilution of your investment in our company. See “Item 4.A.
Information on the Company—History and Development of the Company.”
Holders
of our common shares or the ADSs may not receive any dividends or interest on
shareholders’ equity.
According
to our by-laws, we must generally pay our shareholders at least 25% of our
annual net profit as dividends or interest on shareholders’ equity, as
calculated and adjusted under the Brazilian corporate law method. This adjusted
net profit may be capitalized, used to absorb losses or otherwise retained as
allowed under the Brazilian corporate law method and may not be available to be
paid as dividends or interest on shareholders’ equity. Additionally, the
Brazilian corporate law allows a publicly traded company like ours to suspend
the mandatory
distribution
of dividends in any particular year if our board of directors informs our
shareholders that such distributions would be inadvisable in view of our
financial condition or cash availability. For 2003, 2004 and 2005, we did not
distribute dividends. In 2007, we distributed dividends in the total amount of
approximately R$11 million, or R$0.11 per share, for fiscal year 2006. In April
2008, our shareholders approved the distribution of dividends for the fiscal
year 2007 in the amount of approximately R$ 27 million, or R$0.21 per share,
which were fully paid to our shareholders on April 29, 2008. See “Item 8.A.
Financial Information—Consolidated Statements and Other Financial
Information—Dividend Policy.”
Holders
of ADSs may find it difficult to exercise voting rights at our shareholders’
meetings.
Holders of
ADSs may exercise voting rights with respect to our common shares represented by
ADSs only in accordance with the terms of the deposit agreement governing the
ADSs. Holders of ADSs will face practical limitations in exercising their voting
rights because of the additional steps involved in our communications with ADS
holders. For example, we are required to publish a notice of our shareholders’
meetings in specified newspapers in Brazil. Holders of our common shares will be
able to exercise their voting rights by attending a shareholders’ meeting in
person or voting by proxy. By contrast, holders of ADSs will receive notice of a
shareholders’ meeting from the ADR depositary following our notice to the
depositary requesting the depositary to do so. To exercise their voting rights,
holders of ADSs must instruct the ADR depositary on a timely basis. This voting
process necessarily will take longer for holders of ADSs than for holders of our
common shares. Common shares represented by ADSs for which no timely voting
instructions are received by the ADR depositary from the holders of ADSs shall
not be voted.
Holders of
ADSs also may not receive the voting materials in time to instruct the
depositary to vote the common shares underlying their ADSs. In addition, the
depositary and its agents are not responsible for failing to carry out voting
instructions of the holders of ADSs or for the manner of carrying out those
voting instructions. Accordingly, holders of ADSs may not be able to exercise
voting rights, and they will have little, if any, recourse if the common shares
underlying their ADSs are not voted as requested.
No
single shareholder or group of shareholders holds more than 50% of our capital
stock, which may increase the opportunity for alliances between shareholders as
well as conflicts between them.
No single
shareholder or group of shareholders holds more than 50% of our capital stock.
There is no guidance in Brazilian corporate law for publicly-held companies
without an identified controlling shareholder. Due to the absence of a
controlling shareholder, we may be subject to future alliances or agreements
between our new shareholders, which may result in the exercise of a controlling
power over our company by them. In the event a controlling group is formed and
decides to exercise its controlling power over our company, we may be subject to
unexpected changes in our corporate governance and strategies, including the
replacement of key executive officers. The absence of a controlling group may
also jeopardize our decision-making process as the minimum quorum required by
law for certain decisions by shareholders may not be reached. Any unexpected
change in our management team, business policy or strategy, any dispute between
our shareholders, or any attempt to acquire control of our company may have an
adverse impact on our business and result of operations.
Holders
of ADSs will not be able to enforce the rights of shareholders under our by-laws
and Brazilian corporate law and may face difficulties in protecting their
interests because we are subject to different corporate rules and regulations as
a Brazilian company.
Holders of
ADSs will not be direct shareholders of our company and will be unable to
enforce the rights of shareholders under our by-laws and Brazilian corporate
law.
Our
corporate affairs are governed by our by-laws and Brazilian corporate law, which
differ from the legal principles that would apply if we were incorporated in a
jurisdiction in the United States, such as the State of Delaware or New York, or
elsewhere outside Brazil. Although insider trading and price manipulation are
crimes under Brazilian law, the Brazilian securities markets are not as highly
regulated and supervised as the U.S. securities markets or the markets in some
other jurisdictions. In addition, rules and policies against self-dealing or for
preserving shareholder interests may be less well-defined and enforced in Brazil
than in the United States and
certain
other countries, which may put holders of the ADSs at a potential disadvantage.
Corporate disclosures also may be less complete or informative than for a public
company in the United States or in certain other countries.
Holders
of ADSs may face difficulties in serving process on or enforcing judgments
against us and other persons.
We are a
corporation (sociedade
anônima) organized under the laws of Brazil, and all of our directors and
executive officers and our independent public accountants reside or are based in
Brazil. Most of the assets of our company and of these other persons are located
in Brazil. As a result, it may not be possible for holders of ADSs to effect
service of process upon us or these other persons within the United States or
other jurisdictions outside Brazil or to enforce against us or these other
persons judgments obtained in the United States or other jurisdictions outside
Brazil. Because judgments of U.S. courts for civil liabilities based upon the
U.S. federal securities laws may be enforced in Brazil only if certain
conditions are met, holders may face greater difficulties in protecting their
interests in the case of actions by us or our directors or executive officers
than would shareholders of a U.S. corporation.
Changes
in Brazilian tax laws may have an adverse impact on the taxes applicable to a
disposition of the ADSs.
According
to Law No. 10,833 of December 29, 2003, the disposition of assets located in
Brazil by a non-resident to either a Brazilian resident or a non-resident is
subject to taxation in Brazil, regardless of whether the disposition occurs
outside or within Brazil. In these terms, gains arising from a disposition of
our common shares by a non-resident of Brazil to another non-resident of Brazil
are subject to income of tax. There is no case law regarding the application of
Law No. 10,833 of December 29, 2003 and, accordingly, we are unable to predict
whether Brazilian courts would apply it to dispositions of our ADSs between
non-residents of Brazil. However, if a disposition of our ADSs is considered a
disposition of assets, this tax law would result in the imposition of
withholding taxes on the disposition of our ADSs by a non-resident of Brazil to
another non-resident of Brazil. See “Item 10.E. Additional
Information—Taxation—Brazilian Tax Considerations—Gains.”
Because
any gain or loss recognized by a U.S. Holder (as defined in “Item 10.E.
Additional Information—Taxation—Material U.S. Federal Income Tax
Considerations”) will generally be treated as U.S. source gain or loss unless
such credit can be applied (subject to applicable limitations) against tax due
on the other income treated as derived from foreign sources, such U.S. Holder
would not be able to use the foreign tax credit arising from any Brazilian tax
imposed on the disposition of our common shares.
Judgments
of Brazilian courts with respect to our common shares will be payable only
in reais.
If
proceedings are brought in the courts of Brazil seeking to enforce our
obligations in respect of the common shares, we will not be required to
discharge our obligations in a currency other than reais. Under Brazilian
exchange control limitations, an obligation in Brazil to pay amounts denominated
in a currency other than reais
may be satisfied in Brazilian currency only at the exchange rate, as
determined by the Central Bank, in effect on the date the judgment is obtained,
and such amounts are then adjusted to reflect exchange rate variations through
the effective payment date. The then, prevailing exchange may not afford
non-Brazilian investors with full compensation for any claim arising out of or
related to our obligations under our common shares or the ADSs.
Holders
of ADSs may be unable to exercise preemptive rights with respect to our common
shares underlying the ADSs.
Holders of
ADSs will be unable to exercise the preemptive rights relating to our common
shares underlying ADSs unless a registration statement under the U.S. Securities
Act of 1933, as amended, or the “Securities Act,” is effective with respect to
those rights or an exemption from the registration requirements of the
Securities Act is available. We are not obligated to file a registration
statement with respect to the shares relating to these preemptive rights or to
take any other action to make preemptive rights available to holders of ADSs. We
may decide, in our discretion, not to file any such registration statement. If
we do not file a registration statement or if we, after consultation with the
ADR depositary, decide not to make preemptive rights available to holders of
ADSs, those
holders
may receive only the net proceeds from the sale of their preemptive rights by
the depositary, or if they are not sold, their preemptive rights will be allowed
to lapse.
An
exchange of ADSs for common shares risks loss of certain foreign currency
remittance and Brazilian tax advantages.
The ADSs
benefit from the certificate of foreign capital registration, which permits
Citibank N.A., as depositary, to convert dividends and other distributions with
respect to our common shares into foreign currency, and to remit the proceeds
abroad. Holders of ADSs who exchange their ADSs for common shares will then be
entitled to rely on the depositary’s certificate of foreign capital registration
for five business days from the date of exchange. Thereafter, they will not be
able to remit non-Brazilian currency abroad unless they obtain their own
certificate of foreign capital registration, or unless they qualify under
Resolution CMN 2,689, which entitles certain investors to buy and sell shares on
Brazilian stock exchanges without obtaining separate certificates of
registration.
If holders
of ADSs do not qualify under Resolution CMN 2,689, they will generally be
subject to less favorable tax treatment on distributions with respect to our
common shares. There can be no assurance that the depositary’s certificate of
registration or any certificate of foreign capital registration obtained by
holders of ADSs will not be affected by future legislative or regulatory
changes, or that additional Brazilian law restrictions applicable to their
investment in the ADSs may not be imposed in the future.
If
we are not able to adequately implement the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 and are the subject of sanctions or investigation,
our results of operations and our ability to provide timely and reliable
financial information may be adversely affected.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and related regulations
implemented by the SEC are creating uncertainty for public companies, increasing
legal and financial compliance costs and making some activities more time
consuming. We are evaluating our internal control over financial reporting to
allow management to report on, and our registered - independent public
accounting firm to attest to, our internal controls over financial reporting. We
will be performing the system and process evaluation and testing (and any
necessary remediation) required to comply with the management certification and
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which
we are required to comply with in our annual report which we will file in 2009
for our 2008 fiscal year. As a result, we expect to incur substantial additional
expenses and diversion of management’s time. While we anticipate being able to
fully implement the requirements relating to internal controls and all other
aspects of Section 404 by our deadline, we cannot be certain as to the timing of
completion of our evaluation, testing and any remediation actions or the impact
of the same on our operations since there is presently no precedent available by
which to measure compliance adequacy. If we are not able to implement the
requirements of Section 404 in a timely manner or with adequate compliance, we
might be subject to sanctions or investigation by regulatory authorities such as
the SEC. Any such action could adversely affect our financial results or
investors’ confidence in our company and could cause the price of our securities
to fall. In addition, if we fail to develop and maintain effective controls and
procedures, we may be unable to provide the financial information in a timely
and reliable manner.
A.
History and Development of the Company
General
Gafisa
S.A. is a corporation (sociedade anônima) organized
under the laws of Brazil. We were incorporated on December 16, 1997
for an indefinite term. Our registered and
principal executive offices are located at Av. Nações Unidas No.
8,501, 19th floor,
05425-070, São Paulo, SP,
Brazil, and our general telephone and fax numbers are + 55 (11) 3025-9000 and +
55 (11) 3025-9348, respectively.
We are one
of Brazil’s leading homebuilders. Over the last 50 years, we have been
recognized as one of the foremost professionally-managed and
geographically-diversified homebuilders in Brazil. Our core business is the
development of high-quality residential buildings in attractive locations. We
are also engaged in the development of land subdivisions, also known as
residential communities, and affordable entry-level housing. In addition, we
provide construction services to third parties.
Our agent
for services of process in the United States is National Corporation Research,
Ltd. located at 225 West 34th Street,
Suite 910, New York, NY.
Historical
Background and Recent Developments
Gomes de
Almeida Fernandes Ltda., or “GAF,” was established in 1954 in the city of Rio de
Janeiro with operations in the real estate markets in the cities of Rio de
Janeiro and São Paulo. In December 1997, GP Investimentos S.A. and its
affiliates, or “GP,” entered into a partnership with the shareholders of GAF to
create Gafisa S.A. In 2004, as a result of a corporate restructuring, GP assumed
a controlling position in our company. In 2005, an affiliate of Equity
International Management, LLC, or “Equity International,” acquired approximately
32% of our company through a capital contribution. In February 2006, we
concluded our initial public offering in Brazil, resulting in a public float of
approximately 47% of our total share capital at the conclusion of the
offering.
In
September 2006, we created a new subsidiary, Gafisa Vendas Intermediação
Imobiliária Ltda., or “Gafisa Vendas,” to function as our internal sales
division in the state of São Paulo. Gafisa Vendas has strengthened our market
position and reduced our need for external brokerage companies. This
wholly-owned subsidiary promotes sales of our projects in the state of São
Paulo. Gafisa Vendas focuses its efforts on: (1) launches – our internal sales
force focuses on promoting launches of our developments; however, we also use
outside brokers, thus creating what we believe is a healthy competition between
our sales force and outside brokers; (2) inventory – Gafisa Vendas has a team
focused on selling units launched in prior years; and (3) web sales – Gafisa
Vendas has a sales team dedicated to internet sales as an alternative source of
revenues with lower costs.
In October
2006, we entered into an agreement to acquire 100% of Alphaville Urbanismo S.A.,
or “Alphaville,” one of the largest residential community development company in
Brazil focused on the identification, development and sale of high quality
residential communities in the metropolitan regions throughout Brazil targeted
at upper and upper-middle income families. On January 8, 2007, we successfully
completed the acquisition of 60% of Alphaville’s shares for R$198.4 million, of
which R$20 million was paid in cash and the remaining R$178.4 million was paid
in exchange for 6.5 million common shares of Gafisa. The acquisition agreement
provides that we will purchase the remaining 40% over the next five years (20%
within three years from the acquisition date and the remaining 20% within five
years from the acquisition date) in cash or shares, at our sole discretion.
Alphaville is operating as one of our subsidiaries based in the city of Barueri,
within the metropolitan region of São Paulo.
On
February 1, 2007 we created a branch of Gafisa Vendas in Rio de Janeiro, or
“Gafisa Vendas Rio,” to function as our internal sales division in the
metropolitan region of Rio de Janeiro. Gafisa Vendas Rio has
strengthened our market position and reduced our need for external brokerage
companies in the metropolitan region of Rio de Janeiro. Gafisa Vendas
Rio focuses its efforts in the same activities of Gafisa Vendas.
On
February 14, 2007, we entered into an agreement with Odebrecht Empreendimentos
Imobiliários Ltda., or “Odebrecht Empreendimentos,” to form a partnership for
the development, construction and management of low income residential projects
in large scale each with more than 5,000 units. In connection with the
partnership, we have incorporated a company called Bairro Novo Empreendimentos
Imobiliários S.A., or “Bairro Novo,” in respect of which we and Odebrecht
Empreendimentos each own 50% equity stake. Upon the formation of such holding
company, we have also entered into a shareholders’ agreement with Odebrecht
Empreendimentos which govern, among other matters, our respective voting rights
and management of the partnership. In December 2007, Bairro Novo launched its
first development, which is comprised of five phases and around 2,400 units, in
the city of Cotia, state of São Paulo. The first phase of the development has
503 units and was launched in December 2007.
On March
15, 2007, we created a new wholly-owned subsidiary, Fit Residencial
Empreendimentos Imobiliários Ltda., or “FIT,” for the development, construction
and management of low and mid low income residential projects. FIT is increasing
its national presence by leveraging our existing national partnerships and
expanding our presence throughout Brazil. With the launch in September of FIT
Coqueiro in Belém in the state of Pará and FIT Cittá in Salvador in the state of
Bahia, FIT is providing our local partners with an entry strategy into the
affordable entry-level segment while building on our overall strategy of segment
and geographic diversification.
On March
17, 2007, we concluded our initial public offering of common shares in the
United States, resulting in a public float of approximately 78.6% of our total
share capital at the conclusion of the offering. Upon completion of the
offering, entities related to Equity International and GP beneficially owned
approximately 14.2% and 7.3% of our total capital stock,
respectively. In June
2007, Brazil Development Equity Investments, LLC, a company affiliated to GP,
sold its remaining stake in our company (approximately 7.1% of our capital stock
at the time).
On October
26, 2007, Gafisa acquired 70% of Cipesa Engenharia S.A., or “Cipesa,” the
leading homebuilder in the state of Alagoas. Since 2006, Cipesa has been an
important partner to Gafisa, and under our current partnership agreement, Gafisa
and Cipesa established a new company named Cipesa Empreendimentos Imobiliários
Ltda., or “Nova Cipesa,” in which 70% interest ownership is held by Gafisa and
the remaining 30% by Cipesa. Gafisa capitalized Nova Cipesa with R$50
million in cash and acquired shares of Nova Cipesa held by Cipesa in the
amount of R$15 million (which will be payable over a period of one year).
Cipesa is entitled to an earn-out
of 2% of the potential sales value launched by Nova Cipesa until 2014. This
earn-out is capped at R$25 million.
In June
2008, we filed with CVM our third debenture program under which we can issue up
to R$1.0 billion in non-convertible debentures. The first issuance under the
third debenture program will be comprised of 25,000 nominal, non
convertible debentures with a face value of R$10,000, to be issued in two series
totaling R$250 million. The debentures provide for the payment of annual
interest equivalent to 107.2% of the CDI rate,calculated from the
subscription date, with a maturity of 10 years.
Capital
Expenditures
In 2004,
we invested R$1.5 million in property and equipment to update our information
technology system and to purchase furniture for our new corporate
headquarters.
In 2005,
we invested R$1.6 million in property and equipment, mainly to update our
information technology system and office facilities.
In 2006 we
invested R$4.6 million in property, equipment and investments, primarily
information technology equipment and new office facilities in Rio de Janeiro and
in São Paulo to accommodate our recently created internal sales force. See “—
Business Overview—Sales of Units Through Our Brokerage
Subsidiaries.”
In 2007 we
invested R$24.2 million in property, equipment and investments, primarily
information technology equipment, software and new office facilities in Rio de
Janeiro and São Paulo. Our main investment during the period was the SAP
implementation project that amounted to R$7.5 million. In addition, investments
in information technology equipment and software totaled R$1.5 million, and
office facilities totaled R$2.3 million.
B.
Business Overview
General
Overview
We are one
of Brazil’s leading homebuilders. Over the last 50 years, we have been
recognized as one of the foremost professionally-managed homebuilders, having
completed and sold more than 950 developments and constructed over 40 million
square meters of housing, which we believe is more than any other residential
development company in Brazil. We believe our brands “Gafisa,” “Alphaville,”
“FIT” and “Bairro Novo” are well-known brands in the Brazilian real estate
development market, enjoying a reputation among potential homebuyers, brokers,
lenders, landowners and competitors for quality, consistency and
professionalism.
Our core
business is the development of high-quality residential buildings in attractive
locations. For the year ended December 31, 2007, approximately 70% of our
launches were derived from residential developments under the Gafisa brand. We
are also engaged in the development of land subdivisions, also known as
residential communities, and affordable entry-level housing. In addition, we
provide construction services to third parties.
We are one
of Brazil’s most geographically-diversified homebuilders currently operating in
49 markets, including São Paulo, Rio de Janeiro, Salvador, Fortaleza, Natal,
Curitiba, Belo Horizonte, Manaus, Porto Alegre and Belém, across 17 states,
representing approximately 88% of the national population and 86% of the gross
domestic product on December 31, 2007. Many of these developments are located in
markets where few large competitors currently operate. For the year ended
December 31, 2007, approximately 33% of our launches were derived from our
operations outside the states of São Paulo and Rio de Janeiro.
We believe
we are one of the few Brazilian homebuilders with developments outside of
Brazil. We have developed three residential communities in Portugal: “Quinta da
Beloura” and “Quinta da Beloura II” in the city of Sintra and “Quinta dos
Alcountins” in Lisbon.
Our
Markets
We have
already launched projects in 49 markets Ananindeua, Aparecida de Goiânia,
Barueri, Belém, Cabo Frio, Cajamar, Camaçari, Campinas, Campo Grande, Cotia,
Cuiabá, Curitiba, Duque de Caxias, Eusébio, Fortaleza, Goiânia, Gramado,
Gravataí, Guarulhos, Iguaraçu, Itu, João Pessoa, Londrina, Macaé, Maceió,
Manaus, Natal, Niterói, Nova Iguaçu, Nova Lima, Osasco, Parnamirim, Pinhais,
Porto Alegre, Recife, Rezende, Jaboatão dos Guararapes, Ribeirão Preto, Rio das
Ostras, Rio de Janeiro, Salvador, Santana de Parnaíba, Santo André, Santos, São
Caetano, São Luiz do Maranhão, São Paulo, Serra and Volta Redonda, across 17
states throughout Brazil.
Our
Real Estate Activities
Our real
estate business includes the following activities:
|
·
|
developments
for sale of:
|
|
·
|
land
subdivisions (also known as residential communities),
and
|
|
·
|
construction
services to third parties;
and
|
|
·
|
sale
of units through our brokerage subsidiaries, Gafisa Vendas and Gafisa
Vendas Rio, jointly referred as “Gafisa
Vendas.”
|
The table
below sets forth the amounts generated for each of our real estate activities
and as a percentage of total real estate amount generated during the periods
presented:
|
|
For
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
Residential
Buildings
|
|
|
1,348,811 |
|
|
|
81.2 |
|
|
|
824,812 |
|
|
|
81.1 |
|
|
|
371,031 |
|
|
|
76.8 |
|
Land
Subdivisions
|
|
|
249,916 |
|
|
|
15.0 |
|
|
|
32,172 |
|
|
|
3.2 |
|
|
|
62,663 |
|
|
|
13.0 |
|
Commercial
|
|
|
27,877 |
|
|
|
1.7 |
|
|
|
138,090 |
|
|
|
13.6 |
|
|
|
16,460 |
|
|
|
3.4 |
|
Pre
Sales
|
|
|
1,626,604 |
|
|
|
97.9 |
|
|
|
995.074 |
|
|
|
97.9 |
|
|
|
450,154 |
|
|
|
93.1 |
|
Construction
Services
|
|
|
35,121 |
|
|
|
2.1 |
|
|
|
21,480 |
|
|
|
2.11 |
|
|
|
33,118 |
|
|
|
6.9 |
|
Total
Real Estate Sales
|
|
|
1,661,725 |
|
|
|
100.0 |
|
|
|
1,016,554 |
|
|
|
100.0 |
|
|
|
483,272 |
|
|
|
100.0 |
|
Developments
for Sale.
The table
below provides information on our developments for sale activities during the
periods presented:
|
|
As
of and For Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
São
Paulo
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
11 |
|
|
|
11 |
|
|
|
10 |
|
Usable
area (m2)(1)
|
|
|
250,185 |
|
|
|
198,732 |
|
|
|
140,722 |
|
Units
launched(2)
|
|
|
2,040 |
|
|
|
1,452 |
|
|
|
1,120 |
|
Average
sales price (R$/m2)(1)
|
|
|
2,969 |
|
|
|
2,813 |
|
|
|
2,771 |
|
Rio
de Janeiro
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
11 |
|
|
|
7 |
|
|
|
5 |
|
Usable
area (m2)(1)
|
|
|
177,428 |
|
|
|
87,032 |
|
|
|
172,254 |
|
Units
launched(2)
|
|
|
2,020 |
|
|
|
1,116 |
|
|
|
696 |
|
Average
sales price (R$/m2)(1)(3)
|
|
|
2,878 |
|
|
|
3,427 |
|
|
|
2,809 |
|
Other
States
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
14 |
|
|
|
12 |
|
|
|
6 |
|
Usable
area (m2)(1)
|
|
|
166,321 |
|
|
|
121,718 |
|
|
|
189,543 |
|
Units
launched(2)
|
|
|
1,804 |
|
|
|
483 |
|
|
|
547 |
|
Average
sales price (R$/m2)(1)(3)
|
|
|
2,675 |
|
|
|
2,776 |
|
|
|
2,720 |
|
Total
Gafisa
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
36 |
|
|
|
30 |
|
|
|
21 |
|
Usable
area (m2)(1)
|
|
|
593,935 |
|
|
|
407,483 |
|
|
|
502,520 |
|
Units
launched(2)
|
|
|
5,864 |
|
|
|
3,052 |
|
|
|
2,363 |
|
Average
sales price (R$/m2)(1)(3)
|
|
|
2,859 |
|
|
|
2,963 |
|
|
|
2,776 |
|
Alphaville
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
Usable
area (m2)(1)
|
|
|
1,160,427 |
|
|
|
— |
|
|
|
— |
|
Units
launched(2)
|
|
|
1,489 |
|
|
|
— |
|
|
|
— |
|
|
|
As
of and For Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
Average
sales price (R$/m2)(1)(3)
|
|
|
686 |
|
|
|
|
|
|
|
|
|
FIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
10 |
|
|
|
— |
|
|
|
— |
|
Usable
area (m2)(1)
|
|
|
149,842 |
|
|
|
— |
|
|
|
— |
|
Units
launched(2)
|
|
|
2,459 |
|
|
|
— |
|
|
|
— |
|
Average
sales price (R$/m2)(1)(3)
|
|
|
1,896 |
|
|
|
— |
|
|
|
— |
|
Bairro
Novo
|
|
|
|
|
|
|
|
|
|
|
|
|
Developments
launched
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Usable
area (m2)(1)
|
|
|
23,618 |
|
|
|
— |
|
|
|
— |
|
Units
launched(2)
|
|
|
503 |
|
|
|
— |
|
|
|
— |
|
Average
sales price (R$/m2)(1)(3)
|
|
|
1,567 |
|
|
|
— |
|
|
|
— |
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
(2)
|
The
units delivered in exchange for land pursuant to swap agreements are not
included.
|
(3)
|
Average
sales price per square meter excludes the land subdivisions. Average sales
price per square meter (including land subdivisions) was R$1,137, R$2,776
and R$1,291 in 2007, 2006 and 2005,
respectively.
|
Our
developments for sale are divided into three broad categories: (1) residential
buildings, (2) land subdivisions, and (3) commercial buildings.
Residential
Buildings
We have
over 50 years of experience in the development of residential buildings. Since
our inception, we have developed more than 950 residential buildings and more
than 40 million square meters of total residential usable area.
In the
residential buildings product category, we develop three main types of products:
(1) luxury buildings targeted at upper-income customers; (2) buildings targeted
at middle-income customers; and (3) affordable entry-level housing targeted at
lower-income customers. Quality residential buildings for middle- and
upper-income customers are our core products and we have developed them since
our inception. A significant portion of our residential developments is located
in São Paulo and Rio de Janeiro where we have held a leading position over the
past five years based upon area of total construction. However, we began our
national expansion to pursue highly profitable opportunities in residential
buildings outside these cities. For the year ended December 31, 2007,
approximately 26% of our launches were derived from our operations outside the
states of São Paulo and Rio de Janeiro.
Luxury
Buildings
Luxury
buildings are a high margin niche. Units usually have over 180 square meters of
private area, at least four bedrooms and three parking spaces. Typically, this
product is fitted with modern, top-quality materials designed by brand-name
manufacturers. The development usually includes swimming pools, gyms, visitor
parking, and other amenities. Average price per square meter generally is higher
than R$3,600 (US$2,033). Luxury building developments are targeted to families
with monthly household incomes in excess of R$20,000 (US$11,293).
The table
below sets forth our luxury building developments launched between January 1,
2005 and December 31, 2007:
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
Units
Sold (%) (As of December 31, 2007)
|
|
VP—Jazz
Duet
|
|
2005
|
|
|
100 |
|
|
|
|
13,400 |
|
2008
|
|
|
50 |
|
|
|
|
98 |
|
|
VP—Domaine
du Soleil
|
|
2005
|
|
|
100 |
|
|
|
|
8,225 |
|
2008
|
|
|
25 |
|
|
|
|
100 |
|
|
The
Gold
|
|
2005
|
|
|
100 |
|
|
|
|
10,465 |
|
2008
|
|
|
28 |
|
|
|
|
86 |
|
|
Vistta
Ibirapuera
|
|
2006
|
|
|
100 |
|
|
|
|
9,963 |
|
2008
|
|
|
41 |
|
|
|
|
100 |
|
|
Espacio
Laguna
|
|
2006
|
|
|
80 |
|
|
|
|
16,364 |
|
2008
|
|
|
80 |
|
|
|
|
63 |
|
|
Riviera
Nice
|
|
2006
|
|
|
50 |
|
|
|
|
6,761 |
|
2009
|
|
|
31 |
|
|
|
|
31 |
|
|
VP—Parides
|
|
2006
|
|
|
100 |
|
|
|
|
13,093 |
|
2009
|
|
|
50 |
|
|
|
|
100 |
|
|
Península
Fit B 01
|
|
2006
|
|
|
100 |
|
|
|
|
11,845 |
|
2008
|
|
|
93 |
|
|
|
|
65 |
|
|
Supremo
|
|
2007
|
|
|
100 |
|
|
|
|
34,864 |
|
2010
|
|
|
192 |
|
|
|
|
61 |
|
|
Vision
|
|
2007
|
|
|
100 |
|
|
|
|
19,712 |
|
2010
|
|
|
284 |
|
|
|
|
21 |
|
|
Horto
|
|
2007
|
|
|
50 |
|
|
|
|
44,563 |
|
2010
|
|
|
180 |
|
|
|
|
94 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
Middle
Income Buildings
Buildings
targeted at middle-income customers account for the majority of our sales since
our inception. Units usually have between 90 and 180 square meters of private
area, three or four bedrooms and two to three underground parking spaces.
Buildings are usually developed in large tracts of land as part of
multi-building developments and, to a lesser extent, in smaller lots in
attractive neighborhoods. Average price per square meter ranges from R$2,000 to
R$3,600 (US$1,129 to US$2,033). Developments in Rio de Janeiro tend to be larger
due to the large tracts of land available in Barra da Tijuca. Middle-income
building developments are tailored to customers with monthly household incomes
between R$5,000 and R$20,000 (US$2,823 and US$11,293).
The table
below sets forth our middle-income building developments launched between
January 1, 2005 and December 31, 2007:
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
Units
Sold (%) (As of December 31, 2007)
|
|
Lumiar
|
|
2005
|
|
|
100 |
|
|
|
|
7,193 |
|
2007
|
|
|
31 |
|
|
|
|
97 |
|
|
CSF—Saint
Etiene
|
|
2005
|
|
|
100 |
|
|
|
|
11,261 |
|
2007
|
|
|
111 |
|
|
|
|
97 |
|
|
Weber
Art
|
|
2005
|
|
|
100 |
|
|
|
|
5,812 |
|
2007
|
|
|
57 |
|
|
|
|
96 |
|
|
The
House
|
|
2005
|
|
|
100 |
|
|
|
|
5,313 |
|
2008
|
|
|
28 |
|
|
|
|
100 |
|
|
Olimpic
Condominium Resort
|
|
2005
|
|
|
100 |
|
|
|
|
21,851 |
|
2008
|
|
|
213 |
|
|
|
|
99 |
|
|
Palm
D’Or
|
|
2005
|
|
|
100 |
|
|
|
|
8,493 |
|
2008
|
|
|
77 |
|
|
|
|
100 |
|
|
Arena
|
|
2005
|
|
|
100 |
|
|
|
|
29,256 |
|
2008
|
|
|
274 |
|
|
|
|
100 |
|
|
Sunpecial
|
|
2005
|
|
|
100 |
|
|
|
|
21,189 |
|
2007
|
|
|
115 |
|
|
|
|
64 |
|
|
Peninsula
Fit—Bl 2
|
|
2005
|
|
|
100 |
|
|
|
|
12,235 |
|
2008
|
|
|
99 |
|
|
|
|
67 |
|
|
Blue
Land—Bl. 2
|
|
2005
|
|
|
100 |
|
|
|
|
9,083 |
|
2008
|
|
|
80 |
|
|
|
|
46 |
|
|
Blue
Star
|
|
2005
|
|
|
50 |
|
|
|
|
9,367 |
|
2008
|
|
|
78 |
|
|
|
|
72 |
|
|
Beach
Park
|
|
2005
|
|
|
90 |
|
|
|
|
9,770 |
|
2008
|
|
|
180 |
|
|
|
|
91 |
|
|
Campo
D’Ourique
|
|
2005
|
|
|
50 |
|
|
|
|
11,775 |
|
2008
|
|
|
53 |
|
|
|
|
32 |
|
|
Bem
Querer
|
|
2005
|
|
|
100 |
|
|
|
|
11,136 |
|
2007
|
|
|
186 |
|
|
|
|
100 |
|
|
Town
Home
|
|
2005
|
|
|
100 |
|
|
|
|
8,319 |
|
2008
|
|
|
40 |
|
|
|
|
90 |
|
|
Paço
das Águas
|
|
2006
|
|
|
45 |
|
|
|
|
24,080 |
|
2008
|
|
|
184 |
|
|
|
|
90 |
|
|
VP—Mirabilis
|
|
2006
|
|
|
100 |
|
|
|
|
23,355 |
|
2008
|
|
|
100 |
|
|
|
|
94 |
|
|
Blue
Vision—Sky e Infinity
|
|
2006
|
|
|
50 |
|
|
|
|
18,514 |
|
2008
|
|
|
178 |
|
|
|
|
79 |
|
|
Blue
Land—Bl.01
|
|
2006
|
|
|
100 |
|
|
|
|
9,169 |
|
2008
|
|
|
120 |
|
|
|
|
73 |
|
|
Beach
Park—Living
|
|
2006
|
|
|
80 |
|
|
|
|
14,913 |
|
2009
|
|
|
130 |
|
|
|
|
62 |
|
|
Belle
Vue—Porto Alegre
|
|
2006
|
|
|
100 |
|
|
|
|
4,264 |
|
2008
|
|
|
22 |
|
|
|
|
86 |
|
|
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
Units
Sold (%) (As of December 31, 2007)
|
|
Espaço
Jardins
|
|
2006
|
|
|
100 |
|
|
|
|
28,926 |
|
2008
|
|
|
235 |
|
|
|
|
100 |
|
|
Forest
Ville
|
|
2006
|
|
|
50 |
|
|
|
|
15,556 |
|
2008
|
|
|
110 |
|
|
|
|
100 |
|
|
Garden
Ville
|
|
2006
|
|
|
50 |
|
|
|
|
11,998 |
|
2008
|
|
|
112 |
|
|
|
|
100 |
|
|
Quinta
Imperial
|
|
2006
|
|
|
100 |
|
|
|
|
8,422 |
|
2008
|
|
|
128 |
|
|
|
|
80 |
|
|
CSF—Santtorino
|
|
2006
|
|
|
100 |
|
|
|
|
14,979 |
|
2009
|
|
|
160 |
|
|
|
|
99 |
|
|
Olimpic
Chácara
|
|
2006
|
|
|
100 |
|
|
|
|
24,988 |
|
2009
|
|
|
219 |
|
|
|
|
98 |
|
|
Fit
Niterói
|
|
2006
|
|
|
100 |
|
|
|
|
8,523 |
|
2008
|
|
|
72 |
|
|
|
|
63 |
|
|
Felicitá
|
|
2006
|
|
|
100 |
|
|
|
|
11,323 |
|
2009
|
|
|
91 |
|
|
|
|
78 |
|
|
Ville
Du Soleil
|
|
2006
|
|
|
100 |
|
|
|
|
8,920 |
|
2008
|
|
|
64 |
|
|
|
|
34 |
|
|
Mirante
do Rio
|
|
2006
|
|
|
60 |
|
|
|
|
8,125 |
|
2009
|
|
|
96 |
|
|
|
|
99 |
|
|
Paradiso
|
|
2006
|
|
|
100 |
|
|
|
|
16,286 |
|
2009
|
|
|
144 |
|
|
|
|
79 |
|
|
Collori
|
|
2006
|
|
|
50 |
|
|
|
|
39,462 |
|
2009
|
|
|
333 |
|
|
|
|
85 |
|
|
VP—Agrias
|
|
2006
|
|
|
100 |
|
|
|
|
21,390 |
|
2009
|
|
|
100 |
|
|
|
|
80 |
|
|
Vivance
Residence Service
|
|
2006
|
|
|
100 |
|
|
|
|
14,717 |
|
2008
|
|
|
187 |
|
|
|
|
78 |
|
|
Isla
|
|
2007
|
|
|
100 |
|
|
|
|
31,423 |
|
2010
|
|
|
240 |
|
|
|
|
77 |
|
|
Grand
Valley
|
|
2007
|
|
|
100 |
|
|
|
|
16,908 |
|
2009
|
|
|
240 |
|
|
|
|
58 |
|
|
Acqua
Residence (Phase 1)
|
|
2007
|
|
|
100 |
|
|
|
|
28,400 |
|
2009
|
|
|
380 |
|
|
|
|
43 |
|
|
Celebrare
|
|
2007
|
|
|
100 |
|
|
|
|
14,679 |
|
2009
|
|
|
188 |
|
|
|
|
74 |
|
|
Reserva
do Lago
|
|
2007
|
|
|
50 |
|
|
|
|
16,800 |
|
2009
|
|
|
96 |
|
|
|
|
73 |
|
|
CFS
– Prímula
|
|
2007
|
|
|
100 |
|
|
|
|
13,897 |
|
2009
|
|
|
96 |
|
|
|
|
68 |
|
|
CSF
– Dália
|
|
2007
|
|
|
100 |
|
|
|
|
9,000 |
|
2009
|
|
|
68 |
|
|
|
|
72 |
|
|
CSF
– Acácia
|
|
2007
|
|
|
100 |
|
|
|
|
23,461 |
|
2009
|
|
|
192 |
|
|
|
|
85 |
|
|
Jatiuca
Trade Residence
|
|
2007
|
|
|
50 |
|
|
|
|
32,651 |
|
2010
|
|
|
500 |
|
|
|
|
54 |
|
|
Horizonte
|
|
2007
|
|
|
60 |
|
|
|
|
7,505 |
|
2010
|
|
|
29 |
|
|
|
|
98 |
|
|
Secret
Garden
|
|
2007
|
|
|
100 |
|
|
|
|
15,344 |
|
2009
|
|
|
252 |
|
|
|
|
55 |
|
|
Evidence
|
|
2007
|
|
|
50 |
|
|
|
|
23,487 |
|
2010
|
|
|
144 |
|
|
|
|
38 |
|
|
Acquarelle
|
|
2007
|
|
|
85 |
|
|
|
|
17,742 |
|
2009
|
|
|
259 |
|
|
|
|
39 |
|
|
Palm
Ville
|
|
2007
|
|
|
50 |
|
|
|
|
13,582 |
|
2009
|
|
|
112 |
|
|
|
|
91 |
|
|
Art
Ville
|
|
2007
|
|
|
50 |
|
|
|
|
16,157 |
|
2009
|
|
|
263 |
|
|
|
|
94 |
|
|
Jatiuca
Trade Residence (Phase 2)
|
|
2007
|
|
|
50 |
|
|
|
|
8,520 |
|
2010
|
|
|
140 |
|
|
|
|
8 |
|
|
Orbit
|
|
2007
|
|
|
100 |
|
|
|
|
11,332 |
|
2010
|
|
|
185 |
|
|
|
|
13 |
|
|
Enseada
das Orquídeas
|
|
2007
|
|
|
80 |
|
|
|
|
52,589 |
|
2010
|
|
|
475 |
|
|
|
|
40 |
|
|
London
Green
|
|
2007
|
|
|
50 |
|
|
|
|
28,998 |
|
2010
|
|
|
300 |
|
|
|
|
56 |
|
|
Privilege
|
|
2007
|
|
|
80 |
|
|
|
|
16,173 |
|
2010
|
|
|
194 |
|
|
|
|
51 |
|
|
Parc
Paradiso (Phase 2)
|
|
2007
|
|
|
60 |
|
|
|
|
10,427 |
|
2010
|
|
|
108 |
|
|
|
|
66 |
|
|
Parc
Paradiso
|
|
2007
|
|
|
60 |
|
|
|
|
35,987 |
|
2010
|
|
|
324 |
|
|
|
|
90 |
|
|
Solares
da Vila Maria
|
|
2007
|
|
|
100 |
|
|
|
|
13,376 |
|
2010
|
|
|
100 |
|
|
|
|
66 |
|
|
Acqua
Residence (Phase 2)
|
|
2007
|
|
|
100 |
|
|
|
|
7,136 |
|
2009
|
|
|
72 |
|
|
|
|
4 |
|
|
Bella Vista (Phase 1)
|
|
2007
|
|
|
100 |
|
|
|
|
15,406 |
|
2010
|
|
|
116 |
|
|
|
|
26 |
|
|
Grand Park - Parque das Águas (Phase 1)
|
|
2007
|
|
|
50 |
|
|
|
|
20,854 |
|
2010
|
|
|
240 |
|
|
|
|
38 |
|
|
Grand Park - Parque Árvores (Phase 2)
|
|
2007
|
|
|
50 |
|
|
|
|
29,932 |
|
2010
|
|
|
400 |
|
|
|
|
31 |
|
|
London Green Stake
Acquisition
|
|
2007
|
|
|
100 |
|
|
|
|
— |
|
2010
|
|
|
— |
|
|
|
|
46 |
|
|
Parc Paradiso Stake
Acquisition
|
|
2007
|
|
|
90 |
|
|
|
|
— |
|
2010
|
|
|
— |
|
|
|
|
79 |
|
|
SunValley
|
|
2007
|
|
|
100 |
|
|
|
|
7,031 |
|
2010
|
|
|
58 |
|
|
|
|
16 |
|
|
Reserva Santa Cecília
|
|
2007
|
|
|
80 |
|
|
|
|
15,854 |
|
2010
|
|
|
122 |
|
|
|
|
20 |
|
|
Olimpic
Bosque da Saude
|
|
2007
|
|
|
100 |
|
|
|
|
19,150 |
|
2010
|
|
|
148 |
|
|
|
|
67 |
|
|
Magic
|
|
2007
|
|
|
100 |
|
|
|
|
31,487 |
|
2010
|
|
|
268 |
|
|
|
|
15 |
|
|
GrandValley
Niteroi
|
|
2007
|
|
|
100 |
|
|
|
|
17,905 |
|
2010
|
|
|
161 |
|
|
|
|
76 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
We have
made an initial successful entry into lower income housing developments. In
November 1999, we launched our first project for lower income customers named
“Reserva do Bosque” in the neighborhood of Cambuci in the state of São Paulo,
with an average sale value of R$55,000 (US$31,056) per unit. In Rio de Janeiro,
our first project intended for lower income development was “Colinas de Campo
Grande”, launched in 2000 in the neighborhood of Campo Grande, with an average
sale value of R$38,000 (US$21,457). Affordable entry-level housing consists of
building and house units. Units usually have between 42 to 60 square meters of
indoor private area and two to three bedrooms. Average price per square meter
ranges from R$1,500 to R$2,000 (US$847 to US$1,130). Affordable entry-level
housing developments are tailored to families with monthly household incomes
between R$1,600 and R$5,000 (approximately US$903 and US$2,823)
As part of
our strategy of expanding our foothold in the affordable entry-level residential
market, we incorporated on March 15, 2007 a new wholly-owned subsidiary, FIT, to
focus exclusively on this market. The principal emphasis of FIT is on five
standardized residential developments in the outer parts of large metropolitan
regions. Financing for FIT’s developments primarily come from one of the
Brazilian largest government-owned banks called Caixa Econômica Federal, or the
“CEF,” and such financing is structured so that customers pay low monthly
installments without increasing our credit risk. Since its inception, FIT has
launched ten developments comprising 2,459 units (our stake) throughout the
states of São Paulo, Bahia, Maranhão, Goiania and Pará.
On
February 14, 2007, we entered into an agreement with Odebrecht Empreendimentos
to form a partnership for the development, construction and management of
large-scale low income residential projects with more than 5,000 units. In
connection with the partnership, we have incorporated a company called Bairro
Novo, in respect of which we and Odebrecht Empreendimentos each own 50% equity
stake. Financing for Bairro Novo’s Cotia development come from ABN AMRO. Such
financing is structured so that customers pay low monthly installments without
increasing our credit risk. In December 2007, Bairro Novo launched its first
development, which is comprised of five phases and around 2,400 units, in the
city of Cotia, state of São Paulo. The first phase of the development, which has
503 units that were launched in December 2007.
The table
below sets forth our affordable entry-level housing developments launched
between January 1, 2005 and December 31, 2007:
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
Units
Sold (%) (as of December 31, 2007)
|
|
Side
Park—Ed. Style
|
|
2006
|
|
|
100 |
|
|
|
|
3,862 |
|
2008
|
|
|
63 |
|
|
|
|
89 |
|
|
FIT
Jaçana
|
|
2007
|
|
|
100 |
|
|
|
|
9,164 |
|
2008
|
|
|
184 |
|
|
|
|
91 |
|
|
FIT
Maceió
|
|
2007
|
|
|
50 |
|
|
|
|
4,207 |
|
2009
|
|
|
54 |
|
|
|
|
45 |
|
|
FIT
Cittá
|
|
2007
|
|
|
50 |
|
|
|
|
13,389 |
|
2009
|
|
|
204 |
|
|
|
|
66 |
|
|
FIT
Coqueiro
|
|
2007
|
|
|
60 |
|
|
|
|
30,095 |
|
2009
|
|
|
621 |
|
|
|
|
21 |
|
|
FIT Mirante do Sol
|
|
2007
|
|
|
100 |
|
|
|
|
18,661 |
|
2009
|
|
|
56 |
|
|
|
|
0 |
|
|
FIT Taboão
|
|
2007
|
|
|
100 |
|
|
|
|
16,041 |
|
2009
|
|
|
374 |
|
|
|
|
3 |
|
|
FIT Maria
Inês
|
|
2007
|
|
|
60 |
|
|
|
|
14,535 |
|
2009
|
|
|
270 |
|
|
|
|
10 |
|
|
MA - Grand Park
|
|
2007
|
|
|
50 |
|
|
|
|
53,041 |
|
2010
|
|
|
894 |
|
|
|
|
10 |
|
|
Jd Botânico
|
|
2007
|
|
|
55 |
|
|
|
|
22,107 |
|
2009
|
|
|
432 |
|
|
|
|
0 |
|
|
FIT Jaraguá
|
|
2007
|
|
|
100 |
|
|
|
|
11,582 |
|
2009
|
|
|
260 |
|
|
|
|
17 |
|
|
FIT Vila Augusta
|
|
2007
|
|
|
100 |
|
|
|
|
16,223 |
|
2010
|
|
|
264 |
|
|
|
|
12 |
|
|
Bairro Novo Cotia (Phases
1-2)
|
|
2007
|
|
|
50 |
|
|
|
|
47,235 |
|
2009
|
|
|
1,006 |
|
|
|
|
33 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
Land
Subdivisions under our Gafisa Brand
In 2001,
we started developing residential land subdivisions for sale upon which
residential buildings can be developed. Land subdivisions under our Gafisa brand
are usually smaller than our Alphaville residential communities and do not
include some of the facilities available in our Alphaville residential
communities, such as various amenities, shopping centers and schools. We usually
provide the infrastructure for a given land subdivision planning such as the
electric, water and sewage systems, paved streets, and common recreational
areas. Our land subdivisions are typically located in affluent suburban areas
close to major highways leading to the states of São Paulo and Rio de Janeiro. A
typical lot has between 250 and 1,500 square meters. Average price per square
meter ranges from R$150 to R$800 (approximately US$85 to US$452). We
target clients with monthly household incomes in excess of R$5,000
(approximately US$2,823) for these land subdivisions.
The table
below sets forth our land subdivision developments launched between January 1,
2005 and December 31, 2007:
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
Units
Sold (%) (as of December 31, 2007)
|
|
Costa
Paradiso
|
|
2005
|
|
|
100 |
|
|
|
|
63,041 |
|
2006
|
|
|
255 |
|
|
|
|
55 |
|
|
Montenegro
Boulevard
|
|
2005
|
|
|
100 |
|
|
|
|
174,862 |
|
2007
|
|
|
358 |
|
|
|
|
100 |
|
|
Del
Lago Residências
|
|
2005
|
|
|
80 |
|
|
|
|
62,022 |
|
2008
|
|
|
108 |
|
|
|
|
80 |
|
|
Alta
Vistta
|
|
2006
|
|
|
50 |
|
|
|
|
95,584 |
|
2009
|
|
|
173 |
|
|
|
|
34 |
|
|
O
Bosque
|
|
2006
|
|
|
30 |
|
|
|
|
89,260 |
|
2007
|
|
|
76 |
|
|
|
|
30 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
Land
Subdivision under our Alphaville Brand
On January
8, 2007, we successfully completed the acquisition of 60% of our subsidiary
Alphaville, the largest residential community development company in Brazil
focused on the identification, development and sale of high quality residential
communities in the metropolitan regions throughout Brazil targeted at upper and
upper-middle income families. Following this acquisition, our new residential
communities are sold exclusively under the Alphaville brand.
The
Alphaville brand was created in the 1970s when the first Alphaville community
was developed in the cities of Barueri and Santana do Paranaíba in the
metropolitan region of São Paulo. Beginning in the 1990s, Alphaville developed
residential communities in several other cities in Brazil, such as Campinas,
Goiânia, Curitiba, Londrina, Maringá, Salvador, Fortaleza, Belo Horizonte,
Natal, Gramado, Manaus, Cuiabá and São Luis, as well as Sintra and Lisbon in
Portugal.
Whenever
we develop a new Alphaville community, we provide all the basic civil works for
supporting the construction on the lots, such as electrical, telephone and data
communications cabling, hydraulic (water and sewer) mains and treatment
facilities, landscaping and gardening, lighting and paving of the streets and
driveways and security fencing. In most Alphaville communities, we also build a
social and sports club for the residents, with soccer, golf and tennis fields,
jogging and bicycle tracks, saunas, swimming pools, ballrooms, restaurants and
bars, and other facilities. In addition, most Alphaville projects have a
shopping center where residents can shop for clothes and groceries.
Additionally, whenever we develop a new Alphaville community far from large
urban centers, we seek to assist in establishing schools near the community by
forming partnerships with renowned educational institutions. Throughout our
Alphaville communities, we also seek to stimulate the local economy by drawing
new businesses to that area.
We believe
that the maintenance of a development’s quality is essential. For this reason,
we impose on every Alphaville community a series of building and occupancy
standards that are more rigorous than those required by applicable local
legislation. Every Alphaville community has an Alphaville association (the
“Association”) formed by us before delivery of the community starts, and is
funded by maintenance fees paid by the residents. The purpose
of the
Association is to allow community involvement in the management and maintenance
of the premises and to ensure orderly and harmonious relationships among the
residents.
Upon
completion of a sale, a purchaser of an Alphaville property will receive, along
with the purchase and sale contract, documentation that sets out the regulations
on land use and occupancy, and these will serve as private zoning regulations
that are binding on the resident. These regulations set forth, among other
things, the maximum number of floors allowed in an Alphaville building, the
minimum number of meters between buildings and land coverage limits, thereby
maintaining the uniformity and quality of the Alphaville
properties.
The table
below sets forth our residential communities launched between January 1, 2005
and December 31, 2007:
|
|
|
|
|
|
|
Usable
Area (m2)(1)(100%)
|
|
|
|
|
|
|
|
|
Units
Sold (%) (As of December 31, 2007)
|
|
Alphaville
Natal
|
|
2005
|
|
|
63 |
|
|
|
|
493,620 |
|
|
2007
|
|
|
|
941 |
|
|
|
|
100 |
|
|
Alphaville
Burle Marx
|
|
2005
|
|
|
50 |
|
|
|
|
274,516 |
|
|
2008
|
|
|
|
585 |
|
|
|
|
30 |
|
|
Residencial
Ivaí—Alphaville Maringá
|
|
2005
|
|
|
67 |
|
|
|
|
82,056 |
|
|
2007
|
|
|
|
163 |
|
|
|
|
23 |
|
|
Alphaville
Manaus
|
|
2005
|
|
|
63 |
|
|
|
|
221,426 |
|
|
2008
|
|
|
|
404 |
|
|
|
|
100 |
|
|
Alphaville
Eusébio
|
|
2005
|
|
|
65 |
|
|
|
|
248,529 |
|
|
2008
|
|
|
|
504 |
|
|
|
|
70 |
|
|
Alphaville
Salvador 2
|
|
2006
|
|
|
55 |
|
|
|
|
354,982 |
|
|
2008
|
|
|
|
527 |
|
|
|
|
93 |
|
|
Alphaville
Gravataí
|
|
2006
|
|
|
64 |
|
|
|
|
216,180 |
|
|
2008
|
|
|
|
487 |
|
|
|
|
42 |
|
|
Alphaville
Francisco Brennand
|
|
2006
|
|
|
65 |
|
|
|
|
272,361 |
|
|
2008
|
|
|
|
402 |
|
|
|
|
94 |
|
|
AlphaVille
- Campo Grande
|
|
2007
|
|
|
67 |
|
|
|
|
225,342 |
|
|
2009
|
|
|
|
489 |
|
|
|
|
57 |
|
|
AlphaVille
- Rio Costa do Sol
|
|
2007
|
|
|
58 |
|
|
|
|
313,400 |
|
|
2009
|
|
|
|
616 |
|
|
|
|
87 |
|
|
AlphaVille
– Cajamar
|
|
2007
|
|
|
55 |
|
|
|
|
674,997 |
|
|
n/a
|
|
|
|
2 |
|
|
|
|
100 |
|
|
AlphaVille
– Araçagy
|
|
2007
|
|
|
38 |
|
|
|
|
236,118 |
|
|
2009
|
|
|
|
332 |
|
|
|
|
83 |
|
|
Alphaville
Jacuhy
|
|
2007
|
|
|
65 |
|
|
|
|
374,290 |
|
|
2010
|
|
|
|
775 |
|
|
|
|
76 |
|
|
Alphaville Londrina
II
|
|
2007
|
|
|
62.5 |
|
|
|
|
214,591 |
|
|
2010
|
|
|
|
277 |
|
|
|
|
14 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
Commercial
Buildings
We have in
the past launched commercial building developments for sale. As of December 31,
2007, we had two commercial buildings under development for sale: Sunplaza
Personal Office and Icaraí Corporate, both in the state of Rio de
Janeiro.
In
December 2007, we delivered the Eldorado Business Tower in São Paulo, a triple A
standard office building developed in partnership with São Carlos
Empreendimentos e Participações S.A. and Banco Modal S.A. The Eldorado Business
Tower brings together cutting edge technology and environmental innovation. The
building is the fourth building in the world and the only building in Latin
America to be pre-certified by U.S. Green Building Council as a Leed CS 2.0
Platinum building for leadership in energy and environmental
design.
As part of
our strategy, we do not intend to develop further corporate buildings in order
to focus on our core residential housing business.
Construction
Services.
We provide
construction services to third parties, building residential and commercial
projects for some of the most well-known developers in Brazil. This practice
allows us to benchmark our construction costs, exposes us to new constructions
materials, techniques and service providers such as architects and
sub-contractors, and provides larger economies of scale. Third-party
construction services are a significant, less volatile source of revenues, which
does not require us to allocate capital. Our principal construction services
clients are large companies, many of them
developers
that do not build their own projects. We also provide construction services on
certain developments where we retain an equity interest.
The table
below sets forth the real estate building developments we have constructed
exclusively for third parties between January 1, 2005 and December 31,
2007:
|
|
First
Year of Construction
|
|
|
|
|
Cinemark
(Eldorado Shopping)
|
|
2005
|
|
Verpar
Com. Participações Ltda.
|
|
Theater
|
Genesis
II
|
|
2005
|
|
Takaoka
Empreendimentos S.A.
|
|
Land
Subdivisions
|
Piazza
Del´acqua
|
|
2004
|
|
Civilcorp
Incorporações Ltda.
|
|
Residential
|
Tendency
|
|
2005
|
|
Rezende
Imóveis e Construção Ltda.
|
|
Residential
|
Edge
|
|
2006
|
|
Sequóia
Desenvolvimento Imobiliário Ltda
|
|
Residential
|
Forte
do Golf
|
|
2006
|
|
Camargo
Corrêa Desenvolvimento Imobiliário S.A.
|
|
Residential
|
Boulevard
Jardins
|
|
2006
|
|
Contrutora
MKF Ltda
|
|
Residential
|
Porto
Pinheiros
|
|
2007
|
|
Camargo
Corrêa Desenvolvimento Imobiliário S.A.
|
|
Residential
|
Holiday
Inn
|
|
2007
|
|
Ypuã
Empreendimentos Imobiliários SPE Ltda.
|
|
Hotel
|
Wave
|
|
2007
|
|
Camargo
Corrêa Desenvolvimento Imobiliário S.A.
|
|
Residential
|
The table
below sets forth the real estate developments we have constructed for third
parties, in which we also have an equity interest, between January 1, 2005 and
December 31, 2007:
|
|
First
Year of Construction
|
|
|
|
|
|
|
Villaggio
Panamby—Double View
|
|
2005
|
|
100
|
|
|
Atlântica
Residencial
|
|
Residential
|
Grand
Vue
|
|
2005
|
|
50
|
|
|
MC
- Mauricio Cukierkorn Construtora Ltda.
|
|
Residential
|
Belle
Vue
|
|
2005
|
|
70
|
|
|
Modal
Participações Ltda.
|
|
Residential
|
Icon
Residence Service
|
|
2005
|
|
50
|
|
|
Redevco
do Brasil Ltda.
|
|
Residential
|
Hype
Residence Service
|
|
2005
|
|
50
|
|
|
Redevco
do Brasil Ltda.
|
|
Residential
|
Illuminato
Perdizes
|
|
2005
|
|
70
|
|
|
MC
- Mauricio Cukierkorn Construtora Ltda.
|
|
Residential
|
Blue
One
|
|
2005
|
|
100
|
|
|
Redevco
do Brasil Ltda.
|
|
Residential
|
Riv.
Ponta Negra - Ed.Nice
|
|
2005
|
|
50
|
|
|
RN
Incorporações Ltda.
|
|
Residential
|
Riv.
Ponta Negra - Ed.Cannes
|
|
2005
|
|
50
|
|
|
RN
Incorporações Ltda.
|
|
Residential
|
Campo
D’Ourique
|
|
2006
|
|
50
|
|
|
MELF
Empreendimentos
|
|
Residential
|
Del
Lago
|
|
2006
|
|
80
|
|
|
Plarcon
Engenharia S/A
|
|
Land
Subdivisions
|
Beach
Park – Living
|
|
2006
|
|
80
|
|
|
Aquatic
Resort Desenvolvimento Imobiliário Ltda.
|
|
Residential
|
Belle
Vue Porto Alegre
|
|
2006
|
|
80
|
|
|
Ivo
Rizzo Construtora e Incorporadora Ltda
|
|
Residential
|
O
Bosque
|
|
2006
|
|
30
|
|
|
Ivo
Rizzo Construtora e Incorporadora Ltda
|
|
Land
Subdivisions
|
Beach
Park – Acqua
|
|
2006
|
|
90
|
|
|
Aquatic
Resort Desenvolvimento Imobiliário Ltda.
|
|
Residential
|
Tiner
Campo Belo
|
|
2007
|
|
45
|
|
|
Tiner
Empreendimentos e Participações Ltda.
|
|
Residential
|
Forest
Ville - Salvador
|
|
2007
|
|
50
|
|
|
OAS
Empreendimentos Imobiliários Ltda.
|
|
Residential
|
Garden
Ville - Salvador
|
|
2007
|
|
50
|
|
|
OAS
Empreendimentos Imobiliários Ltda.
|
|
Residential
|
Reserva
do Lago – 1st. phase
|
|
2007
|
|
50
|
|
|
Invest
Empreendimentos & Participações Ltda.
|
|
Residential
|
Alta
Vista – 1st. phase
|
|
2007
|
|
50
|
|
|
Cipesa
Engenharia S/A
|
|
Residential
|
Collori
|
|
2007
|
|
50
|
|
|
Park
Empreendimentos Ltda.
|
|
Residential
|
Jatiuca
Trade Residence
|
|
2007
|
|
50
|
|
|
Cipesa
Engenharia S/A
|
|
Residential
|
Espacio
Laguna
|
|
2007
|
|
80
|
|
|
Tembok
Desenvolvimento Imobiliário Ltda.
|
|
Residential
|
Del
Lago Res. Casas
|
|
2007
|
|
80
|
|
|
Plarcon
Engenharia S.A
|
|
Residential
|
Sale
of Units Through Our Brokerage Subsidiaries
In
September 2006, we created a new subsidiary, Gafisa Vendas, to function as our
internal sales division in the state of São Paulo. In April 2007, we created
another new subsidiary, Gafisa Vendas Rio, to function as our internal sales
division in the metropolitan region of Rio de Janeiro. These wholly-owned
subsidiaries promotes sales of our projects in the states of São Paulo and Rio
de Janeiro and focus their efforts on: (1) launches – our internal sales force
focuses on promoting launches of our developments; however, we also use outside
brokers, thus creating what we believe is a healthy competition between our
sales force and outside brokers; (2) inventory – Gafisa Vendas and Gafisa Vendas
Rio have each a team focused on selling units launched in prior years; and (3)
web sales – Gafisa Vendas and Gafisa Vendas Rio have each a sales team dedicated
to internet sales as an alternative source of revenues with lower
costs.
Our
Clients
Our
clients consist of development and construction service clients. Development
clients are those who purchase units in our developments. As of December 31,
2007, our development-client database was compromised of more than 48,000
individuals. We currently have approximately 30,000 active clients. Our
construction-services clients are large companies, many of them developers that
do not build their own projects. On December 31, 2007, we had, among our main
construction services clients, the following companies: Cyrela Brazil Realty
S.A., Empreendimentos e Participações, Rossi Residencial S.A., Redevco do Brasil
Ltda., Tiner Empreendimentos e Participações Ltda., Camargo Correa
Desenvolvimento Imobiliário S.A., AK Realty Participação e Incorporação Ltda.,
Takaoka Empreendimentos S.A., Maurício Cukierkorn Construtora Ltda. and
Multiplan—Planejamento, Participações e Administração Ltda. No individual client
represents more than 5% of our revenues from residential developments or
construction services.
Our
Operations
The stages
of our development process are summarized in the diagram below:
Land
Acquisition
We use
results from our extensive market research to guide our land reserves strategy
and process. Our marketing and development teams monitor market fundamentals and
trends. We have developed a sophisticated database to support our search for and
analysis of new investment opportunities. Key decision factors used by our
management for land acquisition and new developments include location, type of
product to be developed, expected demand for the new developments, current
inventory of units in the region and acquisition cost of the land.
Whenever
we identify an attractive tract of land, we first conduct a study of the project
to define the most appropriate use of the space. Afterwards, the basic design of
the project enters the economic feasibility study stage, where we consider
preliminary revenues and expenses associated with the project. This study will
determine project profitability. We will initiate a legal due diligence of the
property to identify liens, encumbrances and restrictions. Before acquiring the
land, we conduct a thorough due diligence process including an environmental
review. We collect and analyze information on competition, construction budget,
sales policy and funding structure to ensure economic viability of the new
development. Each decision to acquire land is analyzed and approved by
our
investment
committee. See “Item 6.C. Directors, Senior Management and Employees —Board
Practices—Investment Committee” elsewhere in this annual report for further
information on the activities of our committees and boards.
The stages
of our land acquisition process are summarized in the diagram
below:
We seek to
finance land acquisition through swaps, in which we grant the seller a certain
number of units to be built on the land or a percentage of the proceeds from the
sale of units in such development. As a result, we reduce our cash requirements
and increase our returns. In the event we cannot do so or in order to obtain
better terms or prices, we acquire land for cash, alone or in partnership with
other developers. We purchase land both for immediate development and for
inventory.
As of
December 31, 2007, we had an inventory of 136 land parcels in which we estimate
we could develop a total of 56,911 residential units with sales value of
approximately R$10,195 billion (US$5,757 billion), of which 82% represents land
acquired through swaps. The table below sets forth the breakdown of our land
reserves by location and by the type of development.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
Sales
(%
Gafisa)
|
|
|
%
Swap
|
|
|
Future
Sales (% Gafisa)
|
|
|
%
Swap
|
|
|
Future
Sales (% Gafisa)
|
|
|
%
Swap
|
|
|
Future
Sales (% Gafisa)
|
|
|
%
Swap
|
|
Land
bank - Per geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
São
Paulo
|
|
|
2,741 |
|
|
|
32.5 |
|
|
|
1,049 |
|
|
|
98 |
|
|
|
713 |
|
|
|
16 |
|
|
|
48 |
|
|
|
0 |
|
Rio
de Janeiro
|
|
|
956 |
|
|
|
73 |
|
|
|
131 |
|
|
|
100 |
|
|
|
55 |
|
|
|
0 |
|
|
|
230 |
|
|
|
81 |
|
Other
states
|
|
|
2,033 |
|
|
|
70 |
|
|
|
1,750 |
|
|
|
96 |
|
|
|
205 |
|
|
|
4 |
|
|
|
285 |
|
|
|
89 |
|
Total
|
|
|
5,730 |
|
|
|
63 |
|
|
|
2,930 |
|
|
|
97 |
|
|
|
973 |
|
|
|
12 |
|
|
|
563 |
|
|
|
77 |
|
Project
Design
In order
to meet evolving preferences of our customers, we invest considerable resources
in creating an appropriate design and marketing strategy for each new
development, which includes determining the size, style and price range of
units. Our staff, including engineers and marketing and sales professionals,
works with recognized independent architects on the planning and designing of
our developments. Their activities include designing the interior and exterior,
drafting plans for the execution of the project, and choosing the finishing
construction materials. A team responsible for preparing the business plan and
budget and assessing the financial viability for each of our projects is also
involved. Simultaneously with the planning and designing of our developments, we
seek
to obtain
all the necessary licenses and regulatory approvals from local authorities,
which usually takes three to six months in the case of our residential buildings
and three years in the case of our residential communities.
Marketing
and Sales
Our
marketing efforts are coordinated by our internal dedicated staff of
approximately 15 professionals. Our specialized team leads 24 independent
brokerage companies with a combined sales force of more than 5,000
representatives, monitoring them in order to gain their loyalty and ensure
performance. Our marketing team is also responsible for gathering information on
the needs and preferences of potential customers to provide guidance on our land
acquisition and project design activities. Gafisa Vendas was
created as our internal sales division consisting of 154 sales
consultants and 8 sales managers. Most of our competitors rely exclusively on
third-party brokers.
The
creation of Gafisa Vendas was intended to establish a strategic channel for us
to access our clients and to reduce our dependence on outside brokers for
marketing. Because the sales force at Gafisa Vendas are trained to sell our
products exclusively, we believe that they are able to focus on the sale of our
developments, articulate the unique features of our development better, manage
our current customer and capture new customers more
effectively. Gafisa
Vendas was initially established in São Paulo and in 2007 rolled-out in Rio de Janeiro. In 2007, Gafisa Vendas was
our number one sales team, responsible for
39% of our sales in the states of São Paulo and Rio de Janeiro.
We will
continue to utilize independent real estate brokerage firms as we believe the
creation of Gafisa Vendas has created a healthy competition between our internal
sales force and outside brokers. Independent brokers provide us with a broad
reach, access to a specialized and rich database of prospective customers, and
flexibility to accommodate the needs of our diverse offering and clientele. In
line with our results-oriented culture, we compensate brokers based on their
profit contribution rather than on sales. Brokers’ performance is monitored on a
daily basis and the most effective brokers are financially rewarded at year end.
Brokers are required to attend periodic specialized training sessions where they
are updated on customer service and marketing techniques, competing
developments, construction schedules, and marketing and advertising plans. We
emphasize a highly transparent sales approach, as opposed to the traditional
high-pressure techniques, in order to build customer loyalty and to develop a
sense of trust between customers and us. At our showrooms, brokers explain the
project and financing plans, answer questions and encourage customers to
purchase or sign on to receive a visit or additional information.
We
initiate our marketing efforts simultaneously with the launch of a development.
We normally have a showroom on or near the construction site, which includes a
model unit furnished with appliances and furniture. We leverage on our
reputation for quality, consistency, on-time delivery and professionalism to
increase sales velocity. We have been successful with this strategy, usually
selling approximately 70% of the units before construction starts.
Our
subsidiary Alphaville has also been successful in its sales and marketing
efforts; for example, in Natal, it took the sales force only 16 hours to market
and sell all of its residential lots; in Manaus, 100% of the Alphaville lots
available were sold in one day; in Minas Gerais, 70% of the “Alphaville Lagoa
dos Ingleses” lots were sold on the first day of their launch; and in Salvador,
all of the Alphaville lots available were sold in 48 hours, before the launch of
the sales activities commenced.
We market
our developments through newspapers, direct mail advertising and by distributing
leaflets in neighboring areas, as well as through telemarketing and websites. In
addition, on a quarterly basis, we publish magazines named “Revista Living News”
and “Revista Vero Alphaville” which are distributed to our customers and offers
news on our most recent developments and progress updates on buildings under
construction.
FIT
marketing and sales efforts include direct sales, telemarketing, websites,
newspapers, busdoor and distribution leaflets in neighboring
areas. FIT has also initiated a training sales program with the
brokerage company to improve its sales.
Although
Bairro Novo has been in operations for only a few months now, it has already
achieved successful market and sales results. In its first development
launched in December 2007 Bairro Novo sold 168 units out of 503 by that same
month. In order
to be the first choice for the low income consumer, Bairro Novo’s strategy is
based on the following principles: (1) reaching the low income consumer through
different sales channels (i.e. different points of purchase and not only a
single show room near the construction site); (2) proving to the consumer that
Bairro Novo is really affordable, due to exclusive financing, provided by ABN
AMRO on special mortgage terms for Cotia´s development; (3) gaining credibility
through Gafisa and Odebrecht brand’s strength, in a institutional campaign
before each launch; and (4) offering a unique concept in the market which
include: (i) more than just a house or apartment, but a new location to live;
and (ii) infra-structure: projects generally include recreational areas and
are near public transportation and commercial centers.
Under
Brazilian law, we may establish a term within and the conditions under which we
are entitled to cancel the development. According to our regular purchase
contracts, if we are not able to sell at least 60% of the units within 180 days
of launching, we can cancel the development. Under those circumstances, we
usually consider changing the project or selling the land, but, in any of those
cases, we have to return the cash payment made by our customers adjusted for
inflation but with no interest. Customers, however, are not entitled to other
remedies. During the three years ended December 31, 2007, we have only
cancelled one out of over 100 developments.
Construction
We have
been engaged in the construction business for over 50 years. Our experience
spans across the entire construction chain. Before engaging in each new project,
we develop sketches and research and develop projects and plans to create the
most appropriate product possible. Our standardized construction techniques and
unique control system are designed to optimize productivity and minimize raw
material losses. Our monitoring tools are available on our intranet where all
employees regularly review costs and key performance indicators of each
development such as actual versus budget comparisons, volume consumption for
each raw material, and construction schedule.
We use
strict quality control methods. Procedures manuals describe in significant
detail each task of each stage of the construction project. These manuals are
also used for the training sessions we require all our workers to attend. In
addition, we make quarterly reviews of projects delivered. The reviews focus on
identifying problems, in order to take corrective and preventive actions in
projects underway and thus avoid costly repetition. We have adopted a quality
management system that was certified for ISO 9002 by Fundação Carlos Alberto
Vanzollini, from Universidade de São Paulo. We received in 2007 a
certification from Programa Brasileiro de Qualidade e
Produtividade do Habitat (PBQP-H), which is part of the Ministry of
Cities. In addition,the Eldorado Business Tower building was
certified as a Green Building, category Platinum, by U.S. Green Building
Council, which attests that it is environmentally sustainable, through the
rational use of energy, natural lighting, pollution control and
recycling. There are only three other buildings in the world that
have achieved this category.
We invest
in technology. Our research and development costs amounted to approximately
R$1.5 million, R$1.2 million and R$0.8 million in each of 2007, 2006 and 2005,
respectively. We believe we have pioneered the adoption of cutting-edge
construction techniques such as dry wall and plane pre-stressed slabs, which
present numerous advantages over traditional techniques. Dry wall, for instance,
is a wall made of lighter material that is faster to install, allowing for easy
layout changes. We also optimize costs by synchronizing our projects’ progress
so as to coordinate the purchase of raw material and benefit from economies of
scale. We have long-term arrangements with a number of suppliers which allow us
to build our developments with quality, brand name construction materials and
equipments, and advanced technology. Moreover, our centralized procurement
center enables us to achieve significant economies of scale in the purchase of
materials and retention of services.
We do not
own heavy construction equipment and we employ directly only a small fraction of
the labor working on our sites. We generally act as a contractor, supervising
construction while subcontracting more labor-intensive activities. Substantially
all on-site construction is performed for a fixed price by independent
subcontractors. We hire reputable, cost-oriented and reliable service providers
that are in compliance with labor laws and have performed their work diligently
and on time in the past. Hiring subcontractors instead of employing
them
directly
has some financial and logistical advantages. For instance, we do not need to
incur fixed costs to maintain a specialized labor force even when they are not
actively working at a construction site and we do not need to pay for frequent
transfers of labor to different construction locations.
Our
construction engineering group coordinates the activities of service providers
and suppliers, guarantees compliance with safety and zoning codes, and ensures
completion of the project on a timely basis. We provide a five-year limited
warranty covering structural defects in all our developments. In the past three
years, we have not had any material litigation or claims involving warranties
rendered on the construction of our developments.
Risk
Control
Our risk
control procedures require the approval of all our projects by our investment
committee, which meets on a monthly basis, or more frequently on an as-needed
basis, and consists of our chief executive officer and two members of our board
of directors (one representative from Equity International). Our investment
committee carefully reviews the various studies conducted by us and described
above. In addition, we have a board of officers, which meets monthly, and is in
charge of overseeing and approving major decisions. See “Item 6.E. Directors,
Senior Management and Employees—Share Ownership” in this annual
report.
Customer
Financing
The
availability of financing for our potential customer, especially during the
construction of the development, is of fundamental importance to our business.
The scarcity of real estate financing sources requires us to finance a
significant proportion of our sales. We offer several financing plans to
prospective customers with our own capital or with the financing provided by the
bank of our customer’s choice, tailored for each of our developments. We have
developed a strict credit policy in order to minimize risks. Our credit analysis
process is summarized below:
|
·
|
trained
independent brokers interview each potential customer to collect personal
and financial information and fill out a registration
form;
|
|
·
|
registration
forms are delivered, along with a copy of the property deed, to us and, if
the bank providing the financing requests, to an independent company
specialized in real estate credit
scoring;
|
|
·
|
credit
is automatically extended by us to customers if their credit analysis is
favorable. However, if the credit analysis report raises concerns, we will
carefully review issues and accept or reject the customer’s application
depending on the degree of risk. To the extent the financing is provided
by a bank, such financial institution will follow their own credit review
procedures; and
|
|
·
|
after
approving the application, our staff prepares the sale files and deposits
the upfront payment check given as a guarantee for the purchase of a
unit.
|
We often
offer customers two basic financing alternatives: (1) a “short-term plan,” in
which financing is extended up to the end of construction; and (2) a “long-term
plan,” in which we finance the purchase for up to 120 months after the end of
the construction. The “short-term plan” consists of a down payment of 20-30% and
financing of the balance on monthly installments up to the delivery of the unit.
The “long-term plan” for finished units requires a down payment of 30% and
financing of the remaining balance in up to 120 monthly installments. The
“long-term plan” for units under construction requires a down payment of 10% and
provides financing of 20-30% in up to 30 monthly installments until delivery of
the unit and financing of the remaining 60-70% in up to 120 additional monthly
installments. All of our financing plans are guaranteed by a conditional sale
(alienação fiduciária)
of the unit, with the transfer of the full property rights relating to the unit
to the customer upon the condition of full payment of the outstanding
installments.
Financing
for FIT’s developments primarily come from one of Brazil’s largest
government-owned financial institutions called Caixa Econômica Federal, or the
“CEF.” The financing is structured so that customers with monthly income of up
to ten times the Brazilian minimum wage pay low monthly installments without
increasing our credit risk. Additionally, FIT is currently working with three private banks in addition to
CEF to provide financing to
homebuyers with monthly income
between five to 20 times Brazilian minimum wage (which was
R$415.00 as of December 31, 2007) under similar terms to CEF`s
financing.
Financing
for the Bairro Novo Cotia´s development is available from ABN AMRO Real S.A.
through special mortgage terms such as: (1) 90% loan-to-value;
(2) interest rates beginning at TR plus 6.0 to
8.16% per annum; and (3) 25 year term.
The table
below provides details about the current terms of financing of a given project
in each type of our developments:
|
|
|
|
|
|
|
|
Affordable
Entry-Level(1)
|
|
|
|
|
36
months
|
|
|
45 |
|
|
|
20 |
|
|
|
— |
|
|
|
50 |
|
60
months
|
|
|
40 |
|
|
|
5 |
|
|
|
— |
|
|
|
50 |
|
Mortgage
Lending (delivery)
|
|
|
10 |
|
|
|
65 |
|
|
|
90 |
|
|
|
— |
|
120
months
|
|
|
5 |
|
|
|
10 |
|
|
|
10 |
|
|
|
— |
|
(1)
|
Includes
both FIT and Bairro Novo
developments.
|
(2)
|
Includes
both Gafisa and Alphaville land
subdivisions.
|
Our sales
contracts generally provide for adjustment of the sales price according to the
INCC during construction and at an annual interest rate of 12% plus IGP-M over
the receivables balance only after the release of the certificate of acceptance
of occupancy by the relevant local authority. We have historically experienced a
low rate of customer default on our sales. In the last five years, we had 2%
customer default. We attribute our low default rate to the fact that:(1) we
conduct database research on the socio-economic background of our prospective
customers; (2) our agreements discourage default and cancellation of the
purchase by imposing immediate penalty fees and interests and liquidated damages
which are adjusted for inflation (correção monetária); (3) we
only return 80% of the amount that the defaulted clients have already paid us
and we hold a claim to the unpaid portion of the purchase price; and (4) we
offer several options to our customers if they experience financial
difficulties, such as allowing for a greater number of installment payments or
exchanging the unit bought for a less expensive one. In case of default, we
endeavor to renegotiate the outstanding debt with our customers before taking
legal action. In any case, we will only transfer title of the units to a buyer
after the release of the certificate of acceptance of occupancy by local
authority and/or the full payment of all outstanding installments. We have
decreased the percentage of mortgage that our customers obtain from us from 84%
in 2005 to 36% in 2007. This decrease reflects the growing interest of
commercial banks in financing the Brazilian housing industry.
We release
capital for new projects by seeking not to maintain receivables after our
projects are completed. We may choose one of the following options (or a
combination thereof):
|
·
|
Receivables
securitization. We have been active in the securitization market.
We are capitalizing on an increasing investor demand for mortgage-backed
securities. The securitization (mortgage-backed securities) market in
Brazil is relatively new but we believe it is rapidly expanding. This
expansion is helped significantly by the development in Brazilian
foreclosure laws.
|
|
·
|
Bank mortgages. Our
customers can also obtain a mortgage loan from a financial institution. In
these cases, a bank pays us the total amount outstanding on the date the
unit is delivered. Commercial banks offer residential financing to their
customers, giving them the opportunity to borrow money on a longer term
than the financing arrangements we
offer.
|
The
following table sets forth the limits established by the real estate credit
sources available nationally:
|
|
|
|
|
|
|
|
|
Mortgage
portifolio (Carteira
Hipotecária) or CH
|
|
≤
13% annually + TR(1)
Or
|
|
No
limit
|
|
|
No
limit
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
rate (limited to 14.2%
annually)
|
|
|
|
|
|
|
Housing
Finance System (Sistema
Financeiro da Habitação) or SFH
|
|
≤
12% annually + TR
Or
Fixed
rate (limited to 14.2%
annually)
|
|
R$350,000
|
|
|
R$245,000
|
|
Government
Severance Indemnity Fund for Employees (Fundo de Garantia sobre Tempo
de Serviços) or FGTS.
|
|
≤ 9%
annually + TR
|
|
R$130,000
|
|
|
R$130,000
|
|
(1)
|
TR
refers to the daily reference rate.
|
With the
growing availability of mortgages from commercial banks and the increasing
liquidity of mortgage-backed securities (CRIs), we expect to reduce our role as
a financing provider to our clients. Our goal is to optimize our working capital
by transferring the financing activities to securitization companies and
banks.
Main
Raw Materials and Suppliers
We
purchase a wide variety of raw materials for our operations. Even though these
raw materials have represented on average, over the last three years, 35% of our
total costs of development, aside from land, the only raw material that
represents more than 7% of our total costs is steel. Prices of some raw
materials have significantly increased over the last two years at a rate much
higher than inflation. The index that measures the fluctuation of construction
costs, the INCC, increased 19.1% during the three year period ended December 31,
2007. During that same period, prices for units, which are adjusted for
inflation at IGP-M, increased 13.2%. We have been working on the development of
new construction techniques and the utilization of alternative materials in
order to reduce costs.
We
contract with major suppliers for the materials used in the construction of the
buildings. We receive general pricing proposals from various suppliers of raw
materials, we then enter into specific written agreements with a particular
supplier to fulfill the needs of each development. In addition to pricing, we
select our suppliers by the quality of their materials. We set forth specific
minimum quality requirements for each construction, and the chosen supplier must
meet this quality requirement. The materials for our developments are readily
available from multiple sources.
Our five
largest suppliers in terms of volume are Gerdau Açominas S.A., Elevadores
Atlas-Schindler S.A., Votorantim Cimentos S.A., Alcoa Aluminio S.A. and Lafarge
Brasil S.A. In general terms, we purchase products for our construction based on
the scheduled requirements, and we are given approximately 28 days to pay. The
products we purchase generally come with a five-year warranty. We do not have
any exclusive arrangements with our suppliers. We work closely with suppliers,
enabling them to schedule their production in order to meet our demand or notify
us in advance in the event they anticipate delays. We have good relationships
with our suppliers and have experienced no significant construction delays due
to shortages of materials in recent years. We do not maintain inventories of
construction materials.
We achieve
significant economies of scale in our purchases because we
|
·
|
use
standard construction techniques,
|
|
·
|
engage
in a large number of projects simultaneously,
and
|
|
·
|
have
long-term relationships with our suppliers. We periodically evaluate our
suppliers. In the event of problems, we generally replace the supplier or
work closely with them to solve the
problems.
|
Customer
Services
In our
industry, customer satisfaction is based in large part on our ability to respond
promptly and courteously to buyers before, during and after the sale of our
properties, including providing an owner’s guide containing all the documents of
the unit delivered. We use innovative and personalized customer service
techniques beginning with the initial encounter with a potential customer. Our
customer service techniques are innovative as we believe we were one of the
first homebuilders in Brazil to introduce services such as breakfast for
customers at construction sites and providing monthly photos to customers on the
progress of the construction. These services are provided with the objective of
educating customers on the progress of the construction and improving customers’
experience with the purchase of our units. Other customer services efforts
include:
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a
dedicated outsourced call center with consultants and specialists trained
to answer our customers’ inquiries;
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the
development of the “Gafisa Open Door” portal, through which our customers
can, for example, follow the project’s progress, alter their registration
information, simulate unit designs and check their outstanding balances;
and
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·
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the
development of the “Comunidade Alphaville” portal, which aims to foster a
sense of community among the residents of our residential
communities.
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As part of
our customer service program in our residential developments, we conduct
pre-delivery inspections to promptly address any outstanding construction
issues. Prior to the delivery of each unit, we maintain regular contact with the
customer by sending the customer our magazines “Revista Living News,” “Revista
Vero Alphaville” and “Gafisa Way.” We also conduct monitored inspections of our
developments to allow buyers to gather more information from our technical
personnel. In addition, we send a monthly status report on the construction of
the unit. We conduct another evaluation of the customer’s satisfaction with his
or her unit, as well as the customer’s experience with our sales personnel and
our various departments (customer services, construction and title services) 18
months after the release of the certificate of acceptance of occupancy by the
relevant local authority. We also provide a five-year limited warranty covering
structural defects, which is required by Brazilian law.
We also
promote a program called the “Alphaville Clubes – Lazer Brasil,” which allows
owners of the Alphaville developments and other registered members to use the
facilities of all Alphaville clubs throughout the country. News on our
Alphaville communities are posted on Alphaville’s website, which also contains
documents and information related to each of our Alphaville developments
exclusively for owners of Alphaville developments.
Competition
The real
estate market in Brazil is highly fragmented and competitive with low barriers
to entry. The main competitive advantages include price, financing, design,
quality, reputation, reliability, meeting delivery expectations, partnerships
with developers and the availability and location of the land. In particular,
certain of our competitors have greater financial resources than we do, which
could be an advantage over us in the acquisition of land using cash. In
addition, some of our competitors have a better brand recognition in certain
regions, which could give them a competitive advantage in increasing the
velocity of their sales. Because of our geographic diversification, we believe
that we have access to different markets within Brazil that have different
demand drivers. We believe that the economy in the northern region is driven by
iron and electronic goods exports, the northeastern region by tourism and hence
has a high demand for second homes, the southeastern and southern regions have a
high per capita income and therefore are strategically important to us and the
mid-west region is driven by agriculture.
Because of
the high fragmentation of the markets we operate in, no single developer or
construction company is likely to obtain a significant market share. With the
exception of São Paulo and Rio de Janeiro where we face competition from major
competitors such as Cyrela Brazil Realty S.A., Empreendimentos e Participações,
Rossi Residencial S.A., Even Construtora e Incorporadora S.A. and Klabin Segall
S.A., in other regions we generally face
competition
from small and medium-sized local competitors that are not as well-capitalized.
We expect additional entrants, including foreign companies in partnership with
Brazilian entities, into the real estate industry in Brazil, particularly the
São Paulo and Rio de Janeiro markets.
The table
below sets forth the most recent data available on our market share in the São
Paulo and Rio de Janeiro markets:
São
Paulo (1) – Gafisa’s Market Share
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|
|
|
|
|
|
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(Launches
in R$ million)
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|
Local
Market
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17,537 |
|
|
|
11,513 |
|
|
|
9,048 |
|
Gafisa(2)
|
|
|
747 |
|
|
|
498 |
|
|
|
340 |
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Gafisa’s
Market Share
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|
|
4.3 |
% |
|
|
4.3 |
% |
|
|
3.8 |
% |
Source:
EMBRAESP and SECOVI.
Rio
de Janeiro (1) – Gafisa’s Market Share
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Launches
in R$ million)
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|
Local
Market
|
|
|
3,464 |
|
|
|
2,887 |
|
|
|
2,275 |
|
Gafisa(2)
|
|
|
265 |
|
|
|
204 |
|
|
|
186 |
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Gafisa’s
Market Share
|
|
|
7.7 |
% |
|
|
7.1 |
% |
|
|
8.2 |
% |
We believe
we are the leader in residential community developments with no major
competitors to date. Our subsidiary Alphaville has a sizable and what we believe
to be non-replicable land reserves, which will foster our future growth in the
upcoming years with relatively low risk.
Seasonality
Although
the Brazilian real estate market is not generally seasonal, there are a few
months of the year when the market slows down (January, February and July) of
each year. These months coincide with school vacations and result in the
postponement of investment decisions. We are impacted similarly as the rest of
the market during such period.
Subsidiaries
We carry
out our real estate developments directly or through our subsidiaries and our
jointly-controlled entities in partnership with third parties. As of December
31, 2007, we had 28 subsidiaries and 24 jointly-controlled entities under
operations, all of them incorporated as special purpose entities and
headquartered in Brazil. Our subsidiaries and jointly-controlled entities
operate exclusively in the real estate sector, except for Gafisa SPE 33
Empreendimentos Imobiliários Ltda. and FIT, which are wholly-owned subsidiaries
that also invest in other companies.
Intellectual
Property
Trademarks
Our
trademarks are filed or registered in Brazil with the Brazilian Institute of
Industrial Property (Instituto
Nacional de Propriedade Industrial), or the “INPI.” Currently, the
registration process takes approximately 60 months from the date of filing of
the application for a definitive registration to be granted. From the date of
filing of the application to the date of the definitive registration, the
applicant has an expectation of right for the use of the trademark in connection
with the products and services for which the trademark was applied
for.
Each
trademark registration is effective for a 10-year period and is renewable for
equal and successive periods. Renewal of registration is granted by request
accompanied by payment of renewal fees during the final year of the trademark’s
registration or within the 6-month waiting period after the registration has
expired. In the latter case, if the request is not accompanied by due payment,
the registration is cancelled by the INPI.
A
trademark registration is terminated by (i) expiration of its term; (ii) the
trademark holder’s total or partial waiver of the rights granted by
registration; (iii) forfeiture, in the case of the applicant’s or the holder’s
failure to use a registered trademark in connection with goods or services for a
period of more than five years; or (iv) failure to appoint a Brazilian resident
with powers to represent the applicant or holder in administrative or judicial
proceedings, in cases where the applicant or the holder resides
abroad.
As of the
date of this annual report, we had approximately 77 pending trademark
applications and 47 trademark registrations in Brazil with the INPI, including
our subsidiaries (except for (i) Alphaville, which had 123 pending trademark
applications and 9 trademark registrations under its name; and (ii) FIT, which
had six trademarks applications ). Our most significant trademark is “Gafisa”,
which is duly registered with the INPI in the relevant market segment. Our
trademark registrations will expire, unless renewed, between July 2008 and
December 2016. Alphaville’s trademark registrations will expire, unless renewed,
between July 2008 and November 2017.
Our only
trademark application outside Brazil is an application for “Gafisa” filed in the
United States. We are awaiting our certificate of registration
for the trademark “Gafisa,” nº 827279582, so that we can present it to the USPTO
for registration in the United States.
Domain
Name
As of the
date of this annual report, we together with our subsidiaries were the owner of
approximately 200 domain names including our and our subsidiaries principal
websites. The term of each domain name registration is one year and is renewable
for equal and successive periods. An annual fee payment is necessary for the
maintenance of the domain name registrations. Other than non-payment of the
annual fee, domain name registration may be cancelled by: (1) express waiver of
the owner; (2) irregularities in the data form as requested by the respective
agency; (3) non-compliance with applicable regulations; (4) judicial order; or
(5) in the case of foreign companies, non-compliance with the obligation to
initiate the company’s activities in Brazil. Our domain names will, unless
renewed, expire between June 2008 and December 2010.
Patents
We have no
patents registered in our name.
Insurance
We
maintain insurance policies with leading and financially sound Brazilian
insurance companies, such as AGF Brasil Seguros S.A., UBF Garantias &
Seguros S.A. and Áurea Seguros S.A. Our insurance policies cover potential risks
from the commencement of construction, including property damages, business
interruption, engineering risks, fire, falls, collapse, lightning, gas
explosion, and possible construction errors. Such insurance policies contain
customary specifications, limits and deductibles. We do not maintain any
insurance policy for our properties after construction is completed. Our
management believes that the insurance coverage for our properties is adequate.
No assurance
can be given, however, that the amount of insurance we carry will be sufficient
to protect us from material loss in the future.
Regulatory
Framework
Brazilian
Government and Real Estate Sector Regulations
The real
estate sector is directly regulated by the Brazilian government and is
indirectly impacted by the government’s regulations on the availability of
credit. Regulations include development policies, zoning restrictions and
environmental laws which can determine the availability of different products
offered in the market. For example, city master plans restrict the types of real
estate developments that can be constructed in a given area. The
development policies of the cities are governed by Law No. 10,257 of July
10, 2001 (Estatuto da
Cidade) and also by the municipal zoning code of each city.
As a
general rule, the NBCC requires that the transfer of title of real estate
properties, as well as the assignment, transfer, change or waiver of rights on
real estate properties, be carried out by means of a public deed, except in
certain cases, such as when the Real Estate Finance System (Sistema Financeiro
Imobiliario), or SFI, or the SFH, are involved. The intent of this rule
is to increase the security of property transfers.
According
to applicable law, transfer of real estate title is only deemed effective upon
the registration of the transfer with the relevant Real Estate Registry Office.
The procedure for the execution of public deeds and also the
respective registration with the Real Estate Registry Office (Registro Imobiliário) is
regulated by the Brazilian Law of Public Registers (Lei de Registros
Públicos).
Real
Estate Development
Real
estate development activities are regulated by Law No. 4,591 of December 16,
1964, as amended, or Law No. 4,591. The main duties of a developer are to: (1)
obtain all required construction approvals and authorizations from the proper
authorities; (2) register the development with the Real Estate Registry Office
(without registration, the developed units cannot be sold); (3) indicate in the
preliminary documents the deadline for the developer to withdraw from the
development; (4) indicate in all advertisements and sales contracts the
registration number of the development with the Real Estate Registry Office; (5)
oversee the construction of the project established by the contract which must
be in accordance with the approval granted by the authorities; (6) deliver to
the final owner the completed units, in accordance with the contractual
specifications, and transfer to the final owner the title of the unit by signing
the final sale deed; (7) assume sole responsibility for the delivery of the
developed units to the respective purchasers; (8) assume sole responsibility in
the event the construction of the unit is not in accordance with the
advertisements and sale contracts; and (9) provide construction blueprints and
specifications along with the joint ownership agreement to the proper Real
Estate Registry Office. The final owner is obligated, in turn, to pay the price
related to the cost of the land and the construction.
The
construction of the real estate units may be contracted and paid for by the
developer or by the final owners of the units. Brazilian law provides for two
pricing methods in real estate development: (1) construction under contract and
(2) construction under a system of management. In construction under contract,
the contracting parties will either set a fixed price, stipulated before the
construction begins, or agree on an adjustable price pegged to an index
determined by the contracting parties. In construction under a system of
management, an estimated price is agreed upon by the contracting parties, but no
fixed final price is provided at the beginning of the construction process. The
actual amount that purchasers of the units pay depends on the monthly costs of
the developer or contractor.
Urban
Land Subdivisions
Urban land
subdivisions consist of subdivisions of urban land parcels into building lots,
and the construction of new roads and other infrastructure. The Urban Land
Subdivision Act governs urban land subdivisions and establishes, among other
things, the planning and technical requirements for this form of land parceling
and the obligations of the developers, and also provides for fines and sanctions
in the event of violation of its provisions.
Under the
Urban Land Subdivision Act, land subdivisions are intended for the creation of
lots in urban areas or urban expansion zones, as defined by the planning
director or approved by municipal law.
For the
construction of land subdivisions, the developer must proceed through the
following steps: (1) prior to developing the land subdivision plan, it must
request the municipality in which the development will be located to issue
directives on use policies specifically to the land, such as, the delineation of
lots, road and street systems and areas reserved for municipal or community
properties; (2) pursuant to the directives issued by the municipality, it must
develop a plan for the proposed land subdivision and present it to the
municipality for approval, including the plans, designs, descriptions, and
schedule for performance of the work, among other documents; and (3) after
approval for the land subdivision project is obtained, it must be submitted for
recording in the property registry of the appropriate Real Estate Registry
Office within 180 days.
In
addition to the approval of the project by the municipality in which the
development will be located, the approval of other governmental bodies may be
necessary in cases where the land subdivision: (i) is located in an area of
particular interest, such as a protected cultural heritage site, as defined by
state or federal legislation; (ii) is located in the boundary area of a city,
belongs to more than one municipality, or is in a metropolitan region as defined
in state or federal law; or (iii) has an area greater than 1,000,000 m², in
which case the state where the development will be located will be responsible
for reviewing and approving it prior to the approval by the municipality, and
will also determine the regulations to which the development must be
subject.
The legal
requirements for the approval of the land subdivision by a municipality include:
(1) the developer must preserve a percentage of the land used for
residential communities as open spaces for public use and for municipal or
community properties, with the percentage determined by each municipal zoning
code; (2) each lot must have a minimum area of 125 m² and the distance between
the building and the street must be at least five meters; and (3) the developer
must reserve 15 meters of land on either side of running or still water and of
strips of public domain land for roads and highways.
The Urban
Land Subdivision Act also sets forth locations where subdivisions are not
permitted, such as: (1) on wetlands and those subject to flooding, until
measures have been taken to assure water drainage; (2) on land that has been
filled with material that is a public health hazard, unless previously cleaned
up; (3) on land that has a slope equal to or greater than 30 degrees, unless the
requirements of the appropriate authorities have been met; (4) on lands where
geological conditions make buildings inadvisable; and (5) in ecological
preserves or areas where pollution creates unacceptable sanitary conditions,
until corrected.
In order
to offer greater security to the property market, the Urban Land Subdivision Act
prohibits the sale or promise of sale of any lot that is the result of a
subdivision where the developer has not previously obtained approval by the
appropriate municipality and the development has not been recorded with the
respective Real Estate Registry Office.
Assets
for Appropriation (Patrimônio de Afetação)
Law No.
4,591 provides for certain protection of real estate assets. Accordingly, such
protected assets are segregated from other properties, rights and obligations of
the developer, including other assets previously appropriated, and such
appropriated assets can only be used to guarantee debts and obligations related
to the respective development. The appropriated assets are considered bankruptcy
free and will not be affected in the event of bankruptcy or insolvency of the
developer. In the event of a bankruptcy or insolvency of the developer, joint
ownership of the construction may be instituted by a resolution of the
purchasers of the units or by judicial decision. The joint owners of the
construction will decide whether the project will proceed or the assets
appropriated will be liquidated. Developers may also opt to submit a project to
appropriation in order to benefit from a special tax system. Under this system,
land and objects built on the land, financial investments in the land, and any
other assets and rights with respect to the land are considered to be protected
for benefit of the construction of that development and the delivery of the
units to the final owners, and are thus separate from the remaining assets of
the developer.
We have
not yet utilized the appropriation system for any of our real estate
developments. We prefer to use our subsidiaries and our jointly-controlled
entities for each specific real estate development. Our subsidiaries and jointly-controlled
entities allow us to borrow funds by segregating the credit risk taken on by the
financial institutions.
Credit
Policy Regulations
The real
estate sector is highly dependent on the availability of credit in the market,
and the Brazilian government’s credit policy significantly affects the
availability of funds for real estate financing, thus influencing the supply and
demand for properties.
Housing
Finance System, or “SFH”
Law No.
4,380 of August 21, 1964, as amended, created the SFH to promote the
construction and ownership of private homes, especially for low income earners.
Financing resources under the SFH’s control are provided by the Government
Severance Indemnity Fund for Employees (Fundo de Garantia por Tempo de
Serviço), or “FGTS”, and from savings account deposits. The FGTS, created
by Law No. 5,107 of September 13, 1966 and regulated by Law No. 8,036 of May 11,
1990, imposes a mandatory 8% employee payroll deduction on all employees in
Brazil. Employees maintain FGTS accounts, which are similar to pension funds,
and are allowed, among other, to use the funds deposited in the accounts for the
acquisition of real estate property under certain circumstances, as set forth by
applicable law. CEF is the agency responsible for managing the funds deposited
in the FGTS. The amount of the FGTS funds that an employee may use to finance
the acquisition of a real estate property is limited to (1) the lower of R$55
thousand or 60% of the real estate price for units under construction; and (2)
the lower of R$245 thousand or 70% of the real estate price for units already
built. In both cases, in order to be eligible for the financing, the beneficiary
must: (1) not own or be the committed purchaser of, any residential real estate
financed by SFH within Brazil; (2) not own or be the committed purchaser of, any
real estate property built or under construction in both his or her current city
of residence and the city where the beneficiary conducts his or her main
activities; (3) reside for at least one year in the city where the property
is located; (4) pay the FGTS; and (5) be registered for at least three years
with the FGTS regime. The unemployed also have access to the FGTS to purchase
real estate property provided that he or she still has funds on the FGTS account
(where the 8% payroll deduction was deposited while employed).
Financings
that originate from savings account deposits in the entities comprising the
Brazilian Saving and Loan System (Sistema Brasileiro de Poupança e
Empréstimo), or “SBPE,” are regulated by the Central Bank. Such
financings can be obtained through the SFH, which is strictly regulated by the
Brazilian government, or through the mortgage portfolio system, where banks are
free to set the financing conditions. SFH financing offers fixed interest rates
lower than the market rates, capped at 12% per year, and SFH financing contract
terms vary, in general, between 15 and 30 years. The mortgage portfolio system
financing offers market interest rates as determined by the financial
institutions, generally varying between 12% and 14% per year.
CMN
Resolution No. 3,347 of February 8, 2006, as amended, or Resolution No. 3,347,
provides for the allocation of the funds deposited in savings accounts in the
entities comprising SBPE and states that the following conditions must be met
for SFH financing: (1) loans, including principal and related expenses, are
limited to R$245,000; (2) the maximum sale prices for the units financed is
R$350,000; (3) the maximum actual cost for the borrower, which includes charges
such as interest, fees and other financial costs, except insurance, may not
exceed 12% per year; and (4) in the event of an outstanding balance at the end
of the financing term, such term will be extended by half of the initial
term.
SFH
financings need to be secured by at least one of the following: (1) a first
mortgage over the unit that is being financed; (2) a conditional sale (alienação fiduciária) over
the unit that is being financed, as prescribed by Law No. 9,514 of November 20,
1997, as amended by Law No. 10,931 of August 2, 2004, or Law No. 9,514; (3) a
first mortgage or conditional sale, as determined by Law No. 9,514, of other
property of the borrower or a third party; or (4) some other guarantee, as
established by the financing agent. SFH funds are only released upon the
formalization of one of these methods of guaranteeing the loan.
The
federal government has recently announced changes in the regulations on
financing and construction in order to promote growth in the real estate market.
Among the measures announced are: (1) financial institutions
have the
option to grant financing with previously fixed rates; (2) lenders have the
option of excluding the TR index (Taxa Referencial) from the financing and
applying only the limit of 12% per year; (3) allowing financing installment
payments to be directly deducted from a borrower’s wage; (4) establishing a new
credit program from CEF to real estate developers; and (5) reducing the Tax on
Manufactured Products (Imposto
sobre Produtos Industrializados), or “IPI,” for products utilized in the
construction segment.
Mortgage
Portfolio
While a
large portion of the funds in the deposits in saving accounts are allocated to
SFH, some of the funds are allocated to loans granted at market rates. CMN
Resolution No. 3,005 of July 30, 2002, as amended, before the enactment of
Resolution No. 3,347, increased the financing of new real estate projects from
R$2 billion in 2003 to R$3 billion in 2004 and established that at least 65% of
these deposits should be used for real estate financing, with a minimum of 80%
of the financing going to housing loans under the SFH and the remaining balance
for loans granted at market rates which are usually higher than in SFH loans,
including mortgage portfolio used by banks for the concession of housing
loans.
In early
2005 the Brazilian government took a number of measures to better regulate the
use of the funds raised in savings account deposits in order to promote growth
of the real estate sector, these measures included: (1) cancellation of payment
to the Central Bank of funds not invested in real estate financing in January,
February and March; (2) creation of a real estate interbank deposit market to
allow financial institutions with excessive investments in real estate to trade
with financial institutions that has capacity for more real estate credits; (3)
increase of the operating limits of the SFH to R$350,000 and the maximum
financing amount to 70% of this amount, or R$245,000; (4) review of the factors
used in the calculation guidelines of the SFH in order to stimulate financing
for the acquisition of new real estate properties at a low cost, applicable as
of January 1, 2005; and (5) authorization for the SFH to provide financing to
legal entities for the construction of development projects for their employees,
provided that such entities follow all SFH guidelines. These changes have
significantly increased the funds available for investments in the Brazilian
real estate sector.
Real
Estate Finance System, or “SFI”
The SFI
was created by Law No. 9,514 to establish assignment, acquisition and
securitization criteria for real estate credits. The system seeks to develop
primary (loans) and secondary (trading of securities backed by receivables)
markets for the financing of real estate properties by creating advantageous
payment conditions and special protection of creditors’ rights. The SFI
supervises real estate financing transactions carried out by savings banks,
commercial banks, investment banks, real estate credit portfolio banks, housing
loan associations, savings and loan associations, mortgage companies and other
entities authorized by the CMN to provide such financing. SFI real estate
credits may be freely negotiated by the parties, under the following conditions:
(1) the amount loaned and the related adjustments must be fully reimbursed; (2)
interest must be paid at the rates established by the contract; (3) interest
must be capitalized; and (4) borrowers must purchase life and permanent
disability insurance.
Real
estate sales, rental, or other real estate property financing in general, can be
negotiated with non-financial institutions under the same conditions permitted
by authorized entities under the SFI. In these cases, non-financial entities are
authorized to charge capitalized interest rates greater than 12% per
year.
The
following types of guarantees are applicable to loans approved by the SFI: (1)
mortgages; (2) fiduciary assignment of credit rights resulting from sales
contracts; (3) guarantee of credit rights resulting from contracts of sale or
promise of sale of property; and (4) conditional sale of real estate
property.
Law No.
9,514 also reformed securitizations of real estate assets provisions, making
them less expensive and more attractive. The securitization of credits in the
context of the SFI is made through real estate securitization companies,
non-financial institutions formed as joint stock companies whose objective is to
acquire and securitize real estate credits. Funds raised by the securitizing
companies can be made through the issuance of debentures or notes, or the
creation of a new type of Real Estate Receivable Certificates (Certificados de Recebíveis
Imobiliários), or “CRIs.” According to applicable law, CRIs are
nominative credit securities issued exclusively by securitizing companies,
backed by real estate credits, freely negotiated, and payable in cash. CRIs tend
to have, among others,
the
following characteristics: they are issued in book-entry form, they may have
fixed or floating interest rates and can be paid in installments, they may
contain adjustment provisions, they are registered and traded through
centralized systems of custody and financial settlement of private securities
and they can be secured by the assets of the issuing company.
Municipal
Legislation
Municipal
planning is regulated by articles 182 and 183 of the Federal Constitution and by
Law No. 10,257 of July 10, 2001 (Estatuto da Cidade). Law No.
10,257 provides, among other things, for the establishment of (1) rules for the
parceling, use and occupation of urban tracts of land in each municipality for
the collective welfare and environmental balance of the community; and (2) a
master plan (the “Master Plan”), which shall be reviewed every 10
years.
The Master
Plan is the guiding tool used to plan developments in the urban areas of each
municipality and is used as a reference by all public and private agents acting
within the municipality. It establishes the strategic goals and general
guidelines for urban construction, the objectives and guidelines for
differentiated areas of planning and the instruments for their
deployment.
We set out
below certain details of the laws governing the municipal planning of the two
major cities in which we operate, São Paulo and Rio de Janeiro:
São
Paulo Municipality
City laws
govern the zoning, construction, parceling, use and occupation of land in the
municipality of São Paulo. They set forth technical and urban planning
requirements for parceling, and provide that the division, subdivision or
segregation of urban tracts of land are subject to the prior approval of the São
Paulo municipal government. Moreover, the zoning laws describe the types of
permissible uses for the land and their respective characteristics, by dividing
São Paulo into areas of use with fixed locations, limits and boundaries. They
also provide for fines and sanctions for noncompliance.
Municipal
Law No. 13,430 of September 13, 2002, approved the master plan and created the
Planning System of the municipality of São Paulo. In addition, Law No. 11,228 of
June 25, 1992, approved the Code of Works and Construction, regulated by Decree
32,329 of September 23, 1992, which governs administrative and executive
procedures and sets forth the rules to be followed in the planning, licensing,
execution, maintenance and use of public works and construction within
properties in the municipality of São Paulo, and provides for sanctions and
fines applicable in cases of non-compliance with these rules.
Rio
de Janeiro Municipality
Decree 322
of March 3, 1976, of the municipality of Rio de Janeiro, and Decree “E” 3,800 of
April 20, 1970, of the then State of Guanabara, jointly created the
municipality’s Zoning Regulation, Land Parceling Regulation and Construction
Regulation. These regulations control the use of the municipality land,
including urban zoning, use of properties, development of construction sites and
conditions for the use of each zone in the municipality. The Ten-Year Master
Plan of the municipality, approved pursuant to Supplementary Law 16 of June 4,
1992, establishes rules and procedures related to urban policy of the
municipality, determines guidelines, provides instruments for its execution and
defines area policies and their related programs, aiming at meeting the social
needs of the city.
Environmental
Issues
We are
subject to a variety of Brazilian federal, state and local laws and regulations
concerning the protection of the environment, as described below. Applicable
environmental laws may vary according to the development’s location, the site’s
environmental conditions and the present and former uses of the site. These
environmental laws may result in delays, cause us to incur substantial
compliance and other costs, and prohibit or severely restrict development.
Before we purchase any real estate property, we conduct investigations of all
necessary and applicable environmental issues, including the possible existence
of hazardous or toxic materials, waste substances, springs,
trees,
vegetation and the proximity of the real estate property to permanent
preservation areas. We generally condition the consummation of real estate
property acquisitions on obtaining the required regulatory approvals prior to
closing.
We have
adopted certain practices to further our commitment to environmental protection
and landscape development. As of December 31, 2007, we believe we were the only
company in our industry to recycle cement bags used in our projects, making us a
pioneer in our industry on recycling. Through our Selective Collection Project,
we have partnered with private and governmental entities, including
non-governmental organizations (Reviverde, Papel da Gente
and Associação Ecos da
Vitória), the Secretariat of Environment of the State of São Paulo, the
Sub-municipality of the State of Rio de Janeiro, the Technical Assistance and
Rural Extension Institute and the Urban Cleaning Municipal Company of the State
of Rio de Janeiro, among others, to educate others about the environment. For
example, through our partnership with Reviverde and Associação Ecos da Vitória,
we provide training to all of our outsourced workers before we begin work on any
particular project that focuses on the importance of preserving the environment
and how to effectively collect, store and control recycling materials. In
recognition of our commitment to environmental preservation, we were awarded the
Selo Verde Award (Green
Seal Award) in 2003. In addition, our subsidiary Alphaville was given the “ECO
Award” in 2006 and 2007 by the American Chamber of Commerce and the “Top
Ambiental Award” (Top Environmental Award) in 2007 by the Brazilian Association
of Marketing and Sales Agents, in recognition for its socially responsible
practices. Our Eldorado Business Tower building is the fourth building in the
world , and the only building in Latin American, to be pre-certified by U.S.
Green Building Council as a Leed CS 2.0 Platinum building for leadership in
energy and environmental design.
Environmental
Licenses and Authorizations
Brazilian
environmental policy requires environmental licenses and permits for the
construction of development projects. This procedure is necessary for both
initial constructions and improvements of existing developments, and the
licenses must be periodically renewed. The Brazilian Institute of Environment
and Renewable Natural Resources (Instituto Brasileiro do Meio
Ambiente e dos Recursos Naturais Renováveis), or the IBAMA, is
responsible for granting such licenses in regional or national developments
affecting the environment of more than one state or the country
borders. In other cases, state entities are responsible for granting
such environmental licenses.
The
environmental licensing process is comprised of three stages: initial license,
construction license and operational license. The licensing process imposes a
fee of at least 0.5% of the total cost of construction for all projects
significantly affecting the environment and constructed since July 2000. If an
environmental license is mandatory for a project, starting work without such a
license is an environmental crime, and is subject to injunctions from continuing
the development activities and fines of up to R$10 million. The construction,
maintenance and sale of our projects may be hampered or halted by delays in or a
failure to receive the applicable licenses, or by our inability to meet the
requirements set forth in the licenses or otherwise established by the
environmental authorities.
The
construction of real estate developments often requires land moving activities,
and in many cases, the cutting down of trees. These activities may require prior
authorization of the relevant environmental authorities. As conditions to
granting these authorizations, the relevant environmental authorities may
require the licensees to plant new trees or acquire forests to repair the areas
affected. Unauthorized activity in these protected areas or the cutting down of
protected trees are environmental crimes, and could also result in
administrative and legal penalties or other liabilities.
Solid
Residues
Brazilian
environmental legislation regulates the treatment of solid residues, including
those arising from construction. A violation of these regulations could result
in penalties. See “—Environmental Responsibility.”
Contaminated
Areas
We develop
and construct projects in several states within Brazil. Each state member has
its Environmental Secretary and/or Environmental Agency. The São Paulo State
Secretary of Environment (Secretaria de Estado do Meio
Ambiente de São Paulo), or the SMA, and the Environmental Sanitation
Technology Company (Companhia
de Tecnologia de Saneamento Ambiental), or CETESB, are the principal
environmental regulatory entities of the State of São Paulo, and they have
adopted procedures with regard to the management of contaminated areas,
including the creation of environmental standards to preserve the quality of
land and underground water. In addition, the Rio de Janeiro State Secretary of
Environment (Secretaria de
Estado do Meio Ambiente e Desenvolvimento Urbano do Rio de Janeiro) and
the State Environmental Foundation, or FEEMA, also maintain quality standards
established by CONAMA Resolutions. Other member states have similar
requirements. Non-compliance with the guidelines established by the
environmental and health entities may result in criminal as well as
administrative and legal penalties. Moreover, the owners of properties may be
required to pay for costs relating to the clean-up of any contaminated soil or
groundwater at their properties, even if they did not cause the
contamination.
To ensure
that we will be able to comply with these and other environmental requirements,
we conduct investigations of all necessary and applicable environmental issues,
including the possible existence of hazardous or toxic materials, waste
substances, springs, trees, vegetation and the proximity of the real estate
property to permanent preservation areas, and we work towards ensuring the
proper solutions to any environmental issues given the relevant requirements of
law.
Environmental
Responsibility
The
Brazilian environmental legislation establishes criminal, civil and
administrative penalties for individuals and legal entities carrying out
activities considered to be environmental infringements or crimes, independent
of the obligation to repair any environmental damage. The penalties to which we
may be subject as a result of environmental crimes and infringements include the
following:
|
·
|
the
imposition of fines that, at the administrative level, may amount to R$50
million, depending on the infringer’s financial condition, the facts of
the case, and any prior violations by the infringer. Fines may be doubled
or tripled in the case of repeated
infringements;
|
|
·
|
suspension
of development activities;
|
|
·
|
loss
of tax benefits and incentives; and
|
The
directors, executive officers and other individuals acting as our
representatives or attorneys-in-fact are jointly responsible for the
environmental crimes related to us, and are subject, according to their relative
level of responsibility, to penalties and possibly the loss of their rights and
liberty.
In Brazil,
environmental damages involve strict liability. This means that the costs of
remedying the problems may be imposed on all persons directly or indirectly
involved, without regard to who was responsible for the damage or contamination.
Accordingly, we may be responsible for any environmental damages or costs
relating to projects developed by subsidiaries or by jointly-controlled
entities. In addition, we are responsible for costs relating to
environmental damages on our projects caused by third parties who are rendering
services for us, such as cutting trees or moving soil, if they are not in
compliance with environmental requirements. Moreover, Brazilian environmental
legislation provides that the controlling legal entity can be found liable
despite a limited liability legal status if this will assist in the collection
of damages.
C.
Organizational Structure
The
following chart shows our organizational structure for our principal
subsidiaries, all of them incorporated in Brazil, as of December 31,
2007:
For more
information on our remaining subsidiaries and jointly controlled entities, see
“Item 4.B. Information on the Company—Business Overview—Subsidiaries.” A list of
our significant subsidiaries as determined in accordance with Rule 1-02(w) of
Regulation S-X is being filed as exhibit 8.1. to this annual
report.
D.
Property, Plants and Equipment
We lease
our headquarters located at Av. Nações Unidas No. 8,501, 19th floor,
São Paulo, SP – Brazil. We also lease our branch office located at Avenida das
Américas, 500, block 19—rooms 101 and 102, in Rio de Janeiro,
RJ- Brazil. Our subsidiary Alphaville leases its headquarters located
at Avenida Cauaxi,293, in Barueri, SP – Brazil. Our subsidiary FIT leases its
headquarters located at Rua Dr. Eduardo de Souza Aranha,153, blocks 1 and 2, São
Paulo, SP - Brazil. Our subsidiary Bairro Novo leases its headquarters located
at Rua Paes Leme,524, 13th floor,
São Paulo, SP – Brazil. As of December 31, 2007, we and our main subsidiaries
leased approximately 7,800 square meters. We believe our current facilities are
adequate for the full development of our operations.
Our
properties for sale, including both completed and uncompleted units, are
recorded as current assets at their cost of purchase and construction plus
capitalized interest from project-specific financing, provided that it does not
exceed their expected realizable value.
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS
A.
Operating Results
The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements as of and for the years
ended December 31, 2007, 2006 and 2005 and the related notes thereto and with
the financial information presented under “Item 3.A. Key Information— Selected
Consolidated Data” included elsewhere in this annual report. The following
discussion contains estimates and forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those discussed
in these estimates and forward-looking statements as a result of various
factors, including, without limitation, those set forth under “Cautionary
Statement Regarding Forward-Looking Statements” and “Item 3.D. Key
Information—Risk Factors” included elsewhere in this annual report. Our
financial statements as of and for the years ended December 31, 2007, 2006 and
2005 included in this annual report, together with the report of our independent
registered public accounting firm, have been prepared in accordance with
Brazilian GAAP.
Overview
We
generate our revenues mainly from the development and sale of real estate
developments. We recognize revenues from the sale of real estate developments
over the course of their construction periods, based on a physical or financial
measure of completion and not at the time that the sales agreements are
executed. To a lesser extent, we also generate revenues from real estate
services such as construction, technical and real estate management we render to
third parties. We structure some of our projects through either our subsidiaries
or jointly-controlled entities both organized as special purpose
vehicles.
Brazilian
Economic Environment
Our
business and results of operations are significantly affected by changes in the
Brazilian economic environment, including changes in employment levels,
population growth, consumer confidence and stability of income levels,
availability of financing for land homesite acquisitions.
In
September 2004, the Central Bank implemented a policy of increasing interest
rates because inflation targets for 2005 were not being reached. The increase of
interest rates had immediate consequences on the country’s economic activity,
which did not grow in 2005 at the same pace as it did in 2004. GDP grew by
approximately 2.3% in 2005. In September 2005, after one year of tightened
monetary policy, the Central Bank started a process of gradual loosening of the
Sistema Especial de Liquidação
e Custódia, or “SELIC,” which is the Brazilian Central Bank’s system for
performing open market operations, as the estimated inflation rates for 2005 and
the following 12 months started to converge to the established target. The SELIC
closed the 2005 year at the rate of 18%. The principal reason for the lower
growth of the GDP in 2005 was the maintenance of SELIC at high levels. The
inflation rate, as measured by the IPCA, was 5.7%, above the target established
by the Central Bank of 5.1%. The real appreciated by 13.4%
against the U.S. dollar. Notwithstanding the real’s appreciation, Brazil
achieved a trade surplus of US$44.7 billion, its highest trade surplus
ever.
In 2006,
the Central Bank continued to reduce the SELIC rate, which attained 13.25% as of
December 31, 2006. During this period, average inflation according to the IPCA
was 3.1%. The real
appreciated 9.5% in relation to the dollar, reaching R$2.1380 per US$1.00 as of
December 31, 2006. Notwithstanding the real’s appreciation, Brazil’s
account balance was US$46.5 billion in 2006.
The global
economic scenario remained favorable and global growth continued to be strong
throughout the year ended December 31, 2007. Favorable liquidity conditions
continue despite the recent increase in the international markets’ long-term
interest rates. However, the recent crisis in the United States
mortgage market affected credit markets, which had a negative impact on emerging
markets and on stock exchanges throughout the world. During this
period, average inflation according to the IPCA was 4.5%. The SELIC rate closed
the 2007 year at the rate of 11.25%. The real appreciated 20.7%in
relation to the dollar, reaching R$1.77 per US$1.00 as of December 31, 2007.
Notwithstanding the real’s appreciation, Brazil’s
account balance was US$40 billion in 2007.
The table
below shows the actual growth of the Brazilian GDP, inflation, interest rates
and dollar exchange rates for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(%)
|
|
Real
growth in GDP
|
|
|
5.4 |
|
|
|
3.8 |
|
|
|
2.3 |
|
Inflation
rate (IPCA)(1)
|
|
|
4.5 |
|
|
|
3.1 |
|
|
|
5.7 |
|
Inflation
rate (IGP–M)(2)
|
|
|
7.7 |
|
|
|
3.8 |
|
|
|
1.2 |
|
National
Construction Index (INCC)(3)
|
|
|
6.2 |
|
|
|
5.0 |
|
|
|
6.8 |
|
TJLP
rate (4)
|
|
|
6.3 |
|
|
|
6.8 |
|
|
|
9.6 |
|
CDI
rate (5)
|
|
|
11.8 |
|
|
|
15.0 |
|
|
|
18.2 |
|
Appreciation
of the real vs.
US$
|
|
|
20.7 |
|
|
|
9.5 |
|
|
|
13.4 |
|
Exchange
rate (closing) — US$1.00
|
|
R$ |
1.77 |
|
|
R$ |
2.14 |
|
|
R$ |
2.34 |
|
Exchange
rate (average)(6) — US$1.00
|
|
R$ |
1.95 |
|
|
R$ |
2.18 |
|
|
R$ |
2.43 |
|
(1)
|
IPCA:
consumer price index measured by the Brazilian Institute of Geography and
Statistics (Instituto
Brasileiro de Geografia e Estatística), or
“IBGE.”
|
(2)
|
General
Market Price Index (Índice Geral de
Preços—Mercado) measured by Getulio Vargas Foundation (Fundação Getulio
Vargas), or “FGV.”
|
(3)
|
National
Index of Construction Cost (Índice Nacional de Custo da Construção)
measured by FGV.
|
(4)
|
Represents
the interest rate used by the National Bank of Economic and Social
Development (Banco
Nacional de Desenvolvimento Econômico e Social), or “BNDES” for
long-term financing (end of
period).
|
(5)
|
Represents
an average of interbank overnight rates in Brazil (accumulated for
period-end month, annualized).
|
(6)
|
Average
exchange rate for the last day of each month in the period
indicated.
|
Brazilian
Real Estate Sector
The
Brazilian real estate sector is characterized by cyclical performance influenced
by various macroeconomic factors. Demand for housing, the availability of
financing and growth in population and incomes are, among others, factors that
influence the performance of the real estate market.
Since
1994, Brazil’s ability to control inflation has contributed to the country’s
economic recovery (particularly at the lower income level) and allowed Brazil to
assert itself more effectively into the global economic context. For example,
during the second half of the 1990s, policies that promoted economic
liberalization and privatization of public services facilitated a significant
influx of foreign investment. This environment generated pressure among the
Brazilian financial and business communities to encourage responsible and
transparent public management, promoting economic stability. In general, the
current and previous presidential administrations have adopted comparatively
austere economic policies, characterized by increased independence on the
Central Bank, transparency and control over public accounts. Another significant
effect of Brazil’s heightened international profile and economic stability was
an increase in the competitiveness of various economic sectors, with a notable
improvement in standards of corporate administration and governance. This
pattern, along with favorable conditions in the global economy, have contributed
to improved economic indicators in Brazil.
The
significant features of this incentive package include:
|
·
|
Provisional
Measure No. 321 enacted on September 12, 2006, later converted into Law
No. 11,434 enacted on December 28, 2006, gave banks the option to charge
fixed interest rates on mortgages;
|
|
·
|
Decree
No. 5,892 enacted on September 12, 2006, amended Decree No. 4,840 enacted
on September 17, 2003, allowing payroll deductible
mortgage loans to employees of both public and private
entities;
and
|
|
·
|
the
tax terms of this incentive program were consolidated in Decree No. 6,006
enacted on December 28, 2006 through a 50% tax cut on Tax on Manufactured
Products (Imposto sobre
Produtos Industrializados), or IPI, levied on the acquisition of
important construction products, including certain types of tubes,
ceilings, walls, doors, toilets and other
materials.
|
Critical
Accounting Policies and Estimates
Our
financial statements included elsewhere in this annual report were
prepared in accordance with Brazilian GAAP. The preparation of financial
statements in accordance with Brazilian GAAP requires management to make
judgments and estimates that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Estimates are used for, among other things, the
selection of the useful lives of movable assets and equipment, provisions
necessary for contingent liabilities, taxes, budgeted costs and other similar
charges. Although we believe that our judgments and estimates are based on
reasonable assumptions that are subject to several risks and uncertainties and
are made in light of information available to us, our actual results may differ
from these judgments and estimates.
In this
sense, we set forth below summarized information related to our critical
accounting policies. See the notes to our financial statements included
elsewhere in this annual report for further information on these and other
accounting policies we adopt.
Recognition
of Revenues and Costs
Development
and Sale of Real Estate
In
installment sales of finished units, revenue and costs are recognized when the
sale is made, regardless of the term for receipt of the contractual price,
provided that the following conditions are met: (a) the value thereof can be
estimated, i.e. the receipt of the sale price is known or the sum that will not
be received may be reasonably estimated, and (b) the process of recognition of
the sales revenues is substantially completed, i.e. we are released from
our obligation to perform a considerable part of our activities that will
generate future expenses related to the sale of the finished unit.
In sales
of unfinished units, the procedures and rules established by CFC Resolution No.
963 are:
|
·
|
the
cost incurred (including the cost of land) corresponding to the units sold
is fully appropriated to the
result;
|
|
·
|
the
percentage of the cost incurred in the units sold (including land) is
calculated in relation to the total estimated cost, and this percentage is
applied on the revenues from units sold, as adjusted pursuant to the
conditions of the sales agreements, and on selling expenses, thus
determining the amount of revenues and selling expenses to be
recognized;
|
|
·
|
the
amounts of sales revenues determined, including monetary correction, net
of the installments already received, are accounted for as accounts
receivable, or as advances from customers, when
applicable;
|
|
·
|
interest
monetary variation on accounts receivable as from the delivery of the
keys, are appropriated to the result from the development and sale of real
estate using the accrual basis of
accounting;
|
|
·
|
the
financial charges on accounts payable from the acquisition of land and
real estate credit operations incurred during the construction period are
appropriated to the cost incurred, and recognized in results upon the sale
of the units of the venture to which they are directly
related;
|
|
·
|
the
taxes on the difference between the revenues from real estate development
and the accumulated revenues subject to tax are calculated and recognized
in the books when the difference in revenues is recognized;
and
|
|
·
|
the
other income and expenses, including advertising and publicity, are
appropriated to the results as they are incurred using the accrual basis
of accounting.
|
Construction
Services
Revenues
from supply of real estate services consist basically of amounts received
related to the management of construction work for third parties, technical
management and management of real estate. The revenues are recognized, net of
the corresponding costs incurred, as services are provided.
Consolidation
We
structure some of our projects through either our subsidiaries or
jointly-controlled entities in partnership with third parties both incorporated
as special purposes vehicles. Our consolidated financial statements
include our accounts and those of all our subsidiaries, with separate
disclosure of the participation of minority shareholders. The proportional
consolidation method is used for investments in jointly-controlled entities,
which are all governed by shareholder agreements; as a consequence, the assets,
liabilities, revenues and costs are consolidated based on the proportion of the
equity interest we hold in the capital of the investee.
Sales
of Receivables for Securitization
When we
sell our accounts receivables, the amount of the mortgage-backed securities, or
“CRI,” issued by the real estate securitization company, is recorded as a
reduction of accounts receivable on our balance sheet. The financial discount,
which represents the difference between the amounts received and the book value
of the CRI on the date of the assignment, and the fee paid to the issuer of the
CRI, are reflected in the Receivables from clients account and are reflected on
our income statement as “Financial expense.” Receivables from clients are only
removed from the balance sheet when a true sale has been concluded and no
beneficial interests are retained in the receivables sold.
Properties
For Sale
Completed
units for sale are recorded at construction cost, which does not exceed their
net realizable value. In the case of uncompleted units, the portion in
inventories corresponds to the cost incurred in units that have not yet been
sold.
The cost
is made up of construction (materials, own or outsourced labor and other related
items) and land, including financial charges allocated to the venture as
incurred during the construction phase.
Land is
recorded at acquisition cost. See “Item 4.B. Information on the Company—Business
Overview — Land Acquisition.” We acquire part of the land through swaps in
which, in exchange for the land acquired, we undertake (1) to deliver real
estate units of developments in progress; or (2) part of the sales revenues
originating from the sale of the real estate units of the developments. The
effective construction cost of the exchanged units is diluted in the other
unsold units.
We
capitalize interest on the developments during the construction phase, due on
the National Housing System and other credit lines that are used for financing
the construction of developments (limited to the corresponding financial expense
amount).
Taxes
on Income
Deferred
income and social contribution taxes are calculated to take into account all tax
timing differences as follows: (1) amounts not yet taxed due to the fact that
net income from real estate activities is taxed when the sales price is
collected in cash as opposed to when revenue is recognized on an accrual basis;
(2) income or expenses which are not yet taxable or deductible, such as
provisions for contingencies; and (3) net operating losses, when realization or
recovery in future periods is considered probable. In the event our
jointly-controlled subsidiaries elect to change from the “taxable profit” regime
to the “presumed profit” regime, accumulated tax loss carryforwards will be
forfeited.
New
Developments and Contracted Sales
New
Developments
The table
below presents detailed information on our new developments for the periods
presented, including developments launched by our jointly-controlled entities in
partnership with third parties:
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
New
developments
|
|
|
|
|
|
|
|
|
|
Number
of projects launched
|
|
|
53 |
|
|
|
30 |
|
|
|
21 |
|
Number
of units launched(1)
|
|
|
10,315 |
|
|
|
3,052 |
|
|
|
2,363 |
|
Launched
usable area (m2)(2)
|
|
|
1,927,812 |
|
|
|
407,483 |
|
|
|
502,520 |
|
Average
price of new developments (R$/m2)(2)(3) |
|
|
2,835 |
|
|
|
3,045 |
|
|
|
2,878 |
|
Percentage
of Gafisa investment
|
|
|
77 |
% |
|
|
82 |
% |
|
|
96 |
% |
(1)
|
The
units delivered in exchange for land pursuant to swap agreements are not
included.
|
(2)
|
One
square meter is equal to approximately 10.76 square
feet.
|
(3)
|
The
average sales price in reais per square meter
excludes land subdivisions. The average sales value in reais per square meter
including land subdivisions was R$1,137, R$2,776, R$1,291 in 2007, 2006,
and 2005, respectively.
|
In 2007 we
launched 53 residential developments with total sales value (Valor Geral de Vendas, i.e.,
sales value of projects launched) of R$2.2 billion. This sales value was 122%
higher than that achieved in 2006, during which
we
launched residential developments amounting to R$1.0 billion. This
increase is a reflection of our strategy of segment (primarily high-potential
and less explored markets) and geographic diversification.
Seventeen
of the 53 developments launched by us during 2007 were located in the state of
São Paulo, while another 11 developments were located in the state of Rio de
Janeiro. The remaining 25 residential developments launched were located in the
cities of Goiânia and Aparecida de Goiânia, both in the state of Goias; Maceio,
in the state of Alagoas; São Luis, in the state of Maranhão; Belem, in the state
of Pará; Manaus, in the state of Amazonas; Salvador, in the state of Bahia;
Curitiba and Londrina in the state of Paraná; Campo Grande in the state of Mato
Grosso do Sul; and Serra, in the state of Espírito Santo.
During
2007, 33% of our total sales value derived from launches outside the states
of São Paulo and Rio de Janeiro. Our segment
diversification through our entrance into the affordable entry level (through
our subsidiaries FIT and Bairro Novo) accounted for 13% of our total sales value
for the year ended December 31, 2007.
The
average sale price per square meter for the developments launched during 2007
was R$2,835, compared to R$3,045 in 2006. This represented a 4.3% decrease in
the average price of the units sold, and is a result of the different
characteristics of the developments launched by us during these periods, mainly
in the affordable entry segment (developments launched by FIT and Bairro
Novo).
In 2006 we
launched 28 residential developments and 2 commercial developments, with total
sales value of R$1,005.1 million. This sales value was 54.2% higher than that
achieved in 2005, during which we launched 21 residential developments amounting
to R$651.8 million. This increase is a reflection of our sales strategy, which
aims to support sales growth through the increase in the number of developments
we launch. We also believe that our sales growth is a result of the rise in
consumer confidence, decrease in interest rates and strong inflow of commercial
bank mortgages to the industry.
Eleven of
the 30 developments launched by us during 2006 were located in the state of São
Paulo, while another seven developments were located in the state of Rio de
Janeiro. The remaining twelve residential developments launched were located in
the cities of Gramado and Porto Alegre, both in the state of Rio Grande do Sul,
Fortaleza, in the state of Ceará, Salvador, in the state of Bahia, Curitiba, in
the state of Paraná, Manaus, in the state of Amazonas, Belém, in the state of
Pará, and Maceió, in the state of Alagoas. The launches outside of São Paulo and
Rio de Janeiro reflect our strategy towards geographical
diversification.
The
average sale price per square meter for the developments launched during 2006
was R$3,045, compared to R$2,878 in 2005. This represented a 7% increase in the
average price of the units sold, and is a result of the different
characteristics of the developments launched by us during these
periods.
Contracted
Sales
The
following table shows the evolution of our contracted sales by the type of
development, divided between the units sold during the same year that they were
launched and the units sold in the years after they were launched, as well as
their respective percentage in relation to total sales for the periods
presented:
|
|
For
the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
Type
of development
|
|
|
|
|
|
|
|
Luxury
buildings
|
|
R$ |
255,855 |
|
|
R$ |
144,882 |
|
|
R$ |
31,675 |
|
Middle-income
buildings
|
|
|
1,028,907 |
|
|
|
647,062 |
|
|
|
315,579 |
|
Affordable
entry-level housing
|
|
|
64,026 |
|
|
|
32,868 |
|
|
|
23,777 |
|
Commercial
|
|
|
27,900 |
|
|
|
138,090 |
|
|
|
16,460 |
|
Lots
|
|
|
249,916 |
|
|
|
32,172 |
|
|
|
62,663 |
|
Total
contracted sales
|
|
|
1,626,604 |
|
|
|
995,074 |
|
|
|
450,154 |
|
|
|
For
the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
Sale
of units launched in the year
|
|
R$ |
1,139,113 |
|
|
R$ |
555,264 |
|
|
R$ |
294,888 |
|
Percentage
of total contracted sales
|
|
|
70.0 |
% |
|
|
55.8 |
% |
|
|
65.5 |
% |
Sale
of units launched during prior years
|
|
|
487,491 |
|
|
|
439,809 |
|
|
|
155,266 |
|
Percentage
of total contracted sales
|
|
|
30.0 |
% |
|
|
44.2 |
% |
|
|
34.5 |
% |
The
following table shows our and our main subsidiaries contracted sales for the
periods presented:
|
|
For
the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
Company
|
|
|
|
|
|
|
|
|
|
Gafisa
|
|
R$ |
1,328,785 |
|
|
R$ |
995,074 |
|
|
R$ |
450,154 |
|
AlphaVille
|
|
|
238,317 |
|
|
|
— |
|
|
|
— |
|
FIT
|
|
|
47,143 |
|
|
|
— |
|
|
|
— |
|
Bairro
Novo
|
|
|
12,359 |
|
|
|
— |
|
|
|
— |
|
Total
contracted sales
|
|
R$ |
1,626,604 |
|
|
R$ |
995,074 |
|
|
R$ |
450,154 |
|
In 2007,
we sold 51% of the units launched during the year, which together with the sale
of units launched in previous periods, resulted in a total contracted sales of
R$1,626.6 million, a 63.5% increase over 2006. This increase is a result, among
others, of better economic conditions, our segment
strategy (primarily focuses in the entry affordable
segment) and better financing structures provided to our customers by public
private banks .
In 2006,
we sold 55.2% of the units launched in 2006, which together with the sales of
units launched during prior periods, resulted in total contracted sales of
R$995.1 million, an increase of 121.1% compared to 2005. In 2005, we sold 49.3%
of the units launched during the period. This, together with the sales of units
launched during prior periods, resulted in a total contracted sales of R$450.2
million. The higher percentage of new releases sold during 2006 is a result of
better market conditions, improved acceptance of our development designs by
potential clients, favorable locations of the developments and better financing
structures provided by commercial banks.
The
following table sets forth the growth of our contracted sales to be recognized,
as well as the amount corresponding to the cost of units sold, and the expected
margin, all of them to be recognized in future periods, for the periods
presented:
|
|
As
of and For the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
Sales
to be recognized—beginning of the year
|
|
R$ |
795,320 |
|
|
R$ |
436,115 |
|
|
R$ |
366,261 |
|
Net
sales for units closed in the year
|
|
|
1,893,190 |
|
|
|
881,210 |
|
|
|
490,557 |
|
Revenues
recognized in the year
|
|
|
(1,161,913 |
) |
|
|
(522,005 |
) |
|
|
(420,703 |
) |
Sales
to be recognized—end of the year
|
|
|
1,526,597 |
|
|
|
795,320 |
|
|
|
436,115 |
|
Cost
of units sold to be recognized
|
|
|
(943,200 |
) |
|
|
(484,073 |
) |
|
|
(266,886 |
) |
Expected
profit—yet to be recognized(1)
|
|
|
583,397 |
|
|
|
297,883 |
|
|
|
169,229 |
|
Expected
margin
|
|
|
38.2 |
% |
|
|
37.5 |
% |
|
|
38.8 |
% |
(1)
|
Based
on management’s estimates.
|
Gross
Operating Revenues
Our
revenues are derived mainly from the development and sale of real estate and, to
a lesser extent, the rendering of construction services to third parties, as
follows:
|
|
For
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(%)
|
|
Real
estate development and sales
|
|
|
97.1 |
|
|
|
96.9
|
|
|
|
93.1 |
|
Construction
services rendered
|
|
|
2.9 |
|
|
|
3.1 |
|
|
|
6.9 |
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Real
Estate Development and Sales
Real
estate development revenues, including monetary adjustments and interest from
credit sales, comprise revenues from the sale of units in the residential
buildings we develop, and to a lesser extent, from the sale of lots and
commercial buildings.
Construction
Services Rendered
Our
revenues derived from real estate services consist basically of amounts received
in connection with construction management activities for third parties,
technical management and real estate management.
Operating
Costs
Our costs
comprised real estate development costs and, to a lesser extent, costs of
services rendered.
Real
Estate Development Costs
Real
estate development costs consist of costs of land, construction (which includes
costs for a broad variety of raw materials and labor), capitalized interest
(financial costs) from project specific financing, projects, foundations,
structuring and furnishing, as well as costs for outsourced labor. The items
comprising our costs, as a total percentage of our total cost, were the
following for the periods presented:
|
|
For
the Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(%)
|
|
Land
|
|
|
13.6 |
|
|
|
15.2 |
|
|
|
15.2 |
|
Construction
costs
|
|
|
81.8 |
|
|
|
83.1 |
|
|
|
81.6 |
|
Financial
costs
|
|
|
2.2 |
|
|
|
1.7 |
|
|
|
3.2 |
|
Development
costs
|
|
|
2.4 |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
One of the
principal real estate development costs is the cost of land. In the last three
years, land represented approximately 14.7% of our total cost of development.
However, this is an extremely volatile component, varying according to
characteristics of land, the region where the land is located and the type of
development to be launched. Land can be acquired for cash, through the exchange
of units once the building is constructed, through a financial exchange (whereby
a portion of sales is given to the owner of land as a form of financing for the
land), or through a combination of the three options.
No single
raw material alone represents a significant portion of our total costs of
development, but in total in the last three fiscal years, raw materials
represented, on average, approximately 35% of our total cost of development. The
index that measures construction cost variation, the INCC, increased by 6.2%,
5.0% and 6.8% in 2007, 2006 and 2005, respectively. Although some of the
principal raw materials, such as steel, have experienced
significant
price
increases well above the level of inflation, in the last three years, we have
reduced our raw materials costs by developing and using new construction
techniques and materials.
During the
last three years, labor represented on average approximately 15.0% of our total
cost of real estate development.
Over the
last three fiscal years, we have incurred most of our construction costs from
the 1st to the
18th.
month of construction of a development, as shown in the table
below:
|
|
Percentage
of costs incurred(1)
|
|
1st
to 6th month
|
|
|
28 |
|
7th
to 12th month
|
|
|
30 |
|
13th
to 18th month
|
|
|
27 |
|
19th
to 24th month
|
|
|
15 |
|
(1)
|
Including
cost of land.
|
Real
Estate Services
Our costs
of real estate services consist of direct and indirect labor fees and outsourced
services.
Operating
Expenses
Our
operating expenses include selling, general and administrative expenses and
financial expenses and revenues.
Selling
Expenses
Selling
expenses consist mainly of the creation of showrooms and furnished model
apartments, sales commissions, marketing and advertising. In 2006, we changed
our accounting practice with respect to the deferral of selling expenses. All
periods presented have been modified to take into account this change. The
selling expenses directly related to the construction of the sales stand and
facilities, and related furnishings, such as model apartments, are deferred
and allocated to the income statement based on the percentage of completion
of the respective development. Deferred selling expenses balances as of December
31, 2007, 2006 and 2005 are included in our financial statements included
elsewhere in this annual report.
General
and Administrative Expenses
General
and administrative expenses principally include the following:
|
·
|
employee
compensation and related expenses;
|
|
·
|
fees
for outsourced services, such as legal, auditing, consulting and
others;
|
|
·
|
management
fees and social expenses;
|
|
·
|
overhead
corporate expenses; and
|
|
·
|
legal
expenses related to public notaries and commercial registers, among
others.
|
Stock
Issuance Expenses
For
purposes of our Brazilian GAAP financial statements, costs incurred in issuing
shares, including brokerage commissions and professional services fees, are
charged as operating expenses.
Financial
Expenses and Revenues
Financial
expenses generally comprise interest payable on loans, financing and debentures.
Financial revenues include income from financial investments. Interest revenues
are recognized at the time the effective profit accrues from the asset based on
the accrual method.
Taxes
on Income
In
general, taxes on income in Brazil consist of federal income tax (25%) and
social contribution (9%); the composite statutory tax rate is 34%. We calculate
our income and social contribution taxes according to the “taxable profit”
regime. Our subsidiaries and jointly-controlled entities, however, with annual
billings lower than a specified amount, may calculate their respective income
and social contribution taxes through either this “taxable profit” regime or
through the “presumed profit” regime, depending on our general tax planning. For
the companies that opt for the “presumed profit” regime, the income tax basis is
calculated at the rate of 8% on gross revenues and the social contribution basis
is calculated at 12% on gross revenues to which income tax and social
contribution rates of 25% and 9%, respectively, are applied.
Results
of Operations
The
following discussion of our results of operations is based on our consolidated
financial statements prepared in accordance with the Brazilian GAAP. References
to increases or decreases in any given period relate to the corresponding
preceding period, except unless otherwise indicated.
Results
of Operations for the Years Ended December 31, 2006 and 2007
Net
Operating Revenue
Net
operating revenue increased by 76.6%, from R$663.8 million in 2006 to R$1,172.2
million in 2007. Gross revenues generated from the sales of real estate
properties totaled R$1,182.6 million, an increase of R$506.6 million or 75.0% as
compared to the same period in 2006, when revenues generated from the sales of
real estate properties totaled R$675.9 million. This increase is mainly due to
the recognition of revenues from sales contracted in prior periods. Net revenues
derived from services increased by 63.5%, from R$21.5 million in 2006 to R$35.1
million in 2007, reflecting the overall growth of the real estate market in
Brazil.
The
following table sets forth the final completion of the construction in progress
in 2007 and 2006 and the related revenue recognized during those
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
Participation(%)
|
|
|
For
the Year Ended December 31, 2007
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
sold-accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
AlphaVille
Maringá
|
|
Nov
02
|
|
|
510,710 |
|
|
|
100 |
|
|
|
0 |
|
|
|
36 |
|
|
|
0 |
|
|
|
67 |
|
|
|
563 |
|
|
|
0 |
|
Sunshine
|
|
Nov
02
|
|
|
10,979 |
|
|
|
100 |
|
|
|
100 |
|
|
|
98 |
|
|
|
92 |
|
|
|
60 |
|
|
|
989 |
|
|
|
261 |
|
Reserva
das Palmeiras
|
|
Feb
03
|
|
|
16,912 |
|
|
|
100 |
|
|
|
96 |
|
|
|
100 |
|
|
|
100 |
|
|
|
90 |
|
|
|
1,320 |
|
|
|
3668 |
|
New
Point
|
|
Apr
03
|
|
|
12,034 |
|
|
|
100 |
|
|
|
60 |
|
|
|
99 |
|
|
|
97 |
|
|
|
90 |
|
|
|
5,035 |
|
|
|
1205 |
|
Sunview
|
|
Jun
03
|
|
|
14,268 |
|
|
|
99 |
|
|
|
92 |
|
|
|
100 |
|
|
|
92 |
|
|
|
100 |
|
|
|
1,719 |
|
|
|
8,678 |
|
Blue
Land
|
|
Aug
03
|
|
|
18,252 |
|
|
|
71 |
|
|
|
36 |
|
|
|
66 |
|
|
|
36 |
|
|
|
100 |
|
|
|
15,166 |
|
|
|
6,846 |
|
Alphaville
Cuiabá
|
|
Nov
03
|
|
|
545,631 |
|
|
|
100 |
|
|
|
0 |
|
|
|
95 |
|
|
|
0 |
|
|
|
55 |
|
|
|
1,782 |
|
|
|
0 |
|
Grand Vue
|
|
Nov
03
|
|
|
5,230 |
|
|
|
100 |
|
|
|
84 |
|
|
|
100 |
|
|
|
100 |
|
|
|
50 |
|
|
|
2,127 |
|
|
|
2,945 |
|
Sundeck
|
|
Nov
03
|
|
|
13,043 |
|
|
|
100 |
|
|
|
90 |
|
|
|
98 |
|
|
|
80 |
|
|
|
100 |
|
|
|
12,201 |
|
|
|
23,110 |
|
Sunprime
|
|
Nov
03
|
|
|
11,802 |
|
|
|
100 |
|
|
|
92 |
|
|
|
100 |
|
|
|
93 |
|
|
|
100 |
|
|
|
1,796 |
|
|
|
9,588 |
|
Riviera Ponta Negra - Cannes e
Marseille
|
|
Jan
04
|
|
|
22,332 |
|
|
|
100 |
|
|
|
94 |
|
|
|
73 |
|
|
|
63 |
|
|
|
100 |
|
|
|
5,630 |
|
|
|
14,056 |
|
AlphaVille Litoral
Norte
|
|
Mar
04
|
|
|
798,893 |
|
|
|
100 |
|
|
|
0 |
|
|
|
84 |
|
|
|
0 |
|
|
|
63 |
|
|
|
1,806 |
|
|
|
0 |
|
La
Place
|
|
May
04
|
|
|
8,416 |
|
|
|
100 |
|
|
|
83 |
|
|
|
100 |
|
|
|
79 |
|
|
|
100 |
|
|
|
5,145 |
|
|
|
13,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
Participation(%)
|
|
|
For
the Year Ended December 31, 2007
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
|
|
Total
area
(m2)(1)
(100%)
|
|
|
|
|
|
Percentage
sold-accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
Alphaville
Gramado
|
|
Jun
04
|
|
|
431,663 |
|
|
|
98 |
|
|
|
0 |
|
|
|
43 |
|
|
|
0 |
|
|
|
67 |
|
|
|
3,216 |
|
|
|
0 |
|
Riv. Ponta Negra - Cannes e
Marseille
|
|
Jun
04
|
|
|
22,332 |
|
|
|
97 |
|
|
|
63 |
|
|
|
78 |
|
|
|
69 |
|
|
|
50 |
|
|
|
3,742 |
|
|
|
3,512 |
|
Side Park - Ed.
Style
|
|
Jul
04
|
|
|
10,911 |
|
|
|
98 |
|
|
|
68 |
|
|
|
100 |
|
|
|
97 |
|
|
|
200 |
|
|
|
3,193 |
|
|
|
11,103 |
|
Terras
de São Francisco
|
|
Jul
04
|
|
|
114,160 |
|
|
|
100 |
|
|
|
98 |
|
|
|
97 |
|
|
|
88 |
|
|
|
50 |
|
|
|
3,749 |
|
|
|
4,108 |
|
Eldorado
|
|
Nov
04
|
|
|
— |
|
|
|
100 |
|
|
|
73 |
|
|
|
100 |
|
|
|
100 |
|
|
|
39 |
|
|
|
6,165 |
|
|
|
74,759 |
|
Empresarial
Pinheiros
|
|
Nov
04
|
|
|
17,149 |
|
|
|
100 |
|
|
|
49 |
|
|
|
100 |
|
|
|
11 |
|
|
|
39 |
|
|
|
29,136 |
|
|
|
3,027 |
|
Lumiar
|
|
Feb
05
|
|
|
7,193 |
|
|
|
94 |
|
|
|
35 |
|
|
|
100 |
|
|
|
52 |
|
|
|
100 |
|
|
|
11,613 |
|
|
|
2,820 |
|
Sunspecial Resid.
Service
|
|
Mar
05
|
|
|
21,189 |
|
|
|
96 |
|
|
|
42 |
|
|
|
86 |
|
|
|
83 |
|
|
|
100 |
|
|
|
31,268 |
|
|
|
20,070 |
|
Alphaville
Burle Max
|
|
Apr
05
|
|
|
1,305,022 |
|
|
|
69 |
|
|
NA
|
|
|
|
21 |
|
|
NA
|
|
|
|
50 |
|
|
|
2,601 |
|
|
|
0 |
|
Montenegro
Boulevard
|
|
Jun
05
|
|
|
174,862 |
|
|
|
100 |
|
|
|
69 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
10,439 |
|
|
|
6702 |
|
Weber Art
|
|
Jun
05
|
|
|
5,812 |
|
|
|
97 |
|
|
|
34 |
|
|
|
97 |
|
|
|
86 |
|
|
|
100 |
|
|
|
10,882 |
|
|
|
4,346 |
|
The
House
|
|
Oct
05
|
|
|
5,313 |
|
|
|
38 |
|
|
|
25 |
|
|
|
96 |
|
|
|
89 |
|
|
|
100 |
|
|
|
1,507 |
|
|
|
1,152 |
|
Beach
Park Acqua
|
|
Nov
05
|
|
|
9,770 |
|
|
|
67 |
|
|
|
12 |
|
|
|
89 |
|
|
|
83 |
|
|
|
90 |
|
|
|
18,339 |
|
|
2035
|
|
Bem Querer
|
|
Nov
05
|
|
|
11,136 |
|
|
|
100 |
|
|
|
19 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
19,329 |
|
|
|
4,174 |
|
Town Home
|
|
Nov
05
|
|
|
8,319 |
|
|
|
74 |
|
|
|
24 |
|
|
|
80 |
|
|
|
50 |
|
|
|
100 |
|
|
|
10,527 |
|
|
|
3,412 |
|
Campo
D’Ourique
|
|
Dec
05
|
|
|
11,775 |
|
|
|
65 |
|
|
|
11 |
|
|
|
32 |
|
|
|
9 |
|
|
|
50 |
|
|
|
1,116 |
|
|
|
127 |
|
Península
Fit
|
|
Mar
06
|
|
|
24,080 |
|
|
|
73 |
|
|
|
6 |
|
|
|
61 |
|
|
|
54 |
|
|
|
100 |
|
|
|
33,182 |
|
|
|
3,222 |
|
Sunplaza Personal
Office
|
|
|
|
|
6,328 |
|
|
|
92 |
|
|
|
16 |
|
|
|
98 |
|
|
|
70 |
|
|
|
100 |
|
|
|
24,370 |
|
|
|
3,625 |
|
Villagio Panamby-
Mirabilis
|
|
|
|
|
23,355 |
|
|
|
69 |
|
|
|
43 |
|
|
|
94 |
|
|
|
75 |
|
|
|
100 |
|
|
|
28,227 |
|
|
|
24,746 |
|
Alphaville
Gravataí
|
|
Jun
06
|
|
|
1,309,397 |
|
|
|
41 |
|
|
|
0 |
|
|
|
40 |
|
|
|
0 |
|
|
|
64 |
|
|
|
5,565 |
|
|
|
0 |
|
Beach
Park - Living
|
|
|
|
|
14,913 |
|
|
|
23 |
|
|
|
0 |
|
|
|
69 |
|
|
|
49 |
|
|
|
80 |
|
|
|
3,358 |
|
|
|
0 |
|
Blue Vision - Sky e
Infinity
|
|
|
|
|
18,514 |
|
|
|
78 |
|
|
|
37 |
|
|
|
84 |
|
|
|
77 |
|
|
|
50 |
|
|
|
13,045 |
|
|
|
7,373 |
|
Reserva
do Lago
|
|
|
|
|
16,800 |
|
|
|
8 |
|
|
|
0 |
|
|
|
74 |
|
|
|
0 |
|
|
|
50 |
|
|
|
707 |
|
|
|
0 |
|
Quinta
Imperial
|
|
Jul
06
|
|
|
8,422 |
|
|
|
45 |
|
|
|
4 |
|
|
|
79 |
|
|
|
72 |
|
|
|
100 |
|
|
|
4,135 |
|
|
|
536 |
|
Espacio
Laguna
|
|
Aug
06
|
|
|
16,364 |
|
|
|
38 |
|
|
|
0 |
|
|
|
32 |
|
|
|
3 |
|
|
|
80 |
|
|
|
8,827 |
|
|
|
0 |
|
Ville
Du Soleil
|
|
Oct
06
|
|
|
8,920 |
|
|
|
46 |
|
|
|
0 |
|
|
|
29 |
|
|
|
0 |
|
|
|
100 |
|
|
|
3,205 |
|
|
|
0 |
|
Collori
|
|
Nov
06
|
|
|
39,462 |
|
|
|
42 |
|
|
|
0 |
|
|
|
48 |
|
|
|
0 |
|
|
|
50 |
|
|
|
7,035 |
|
|
|
0 |
|
CSF
- Paradiso
|
|
|
|
|
16,286 |
|
|
|
12 |
|
|
|
0 |
|
|
|
75 |
|
|
|
0 |
|
|
|
100 |
|
|
|
2,791 |
|
|
|
0 |
|
Villagio Panamby -
Agrias
|
|
|
|
|
21,390 |
|
|
|
45 |
|
|
|
0 |
|
|
|
80 |
|
|
|
18 |
|
|
|
100 |
|
|
|
23,954 |
|
|
|
2,581 |
|
Villagio Panamby -
Parides
|
|
|
|
|
13,093 |
|
|
|
64 |
|
|
|
47 |
|
|
|
100 |
|
|
|
61 |
|
|
|
100 |
|
|
|
17,882 |
|
|
|
13,347 |
|
Icaraí
Corporate
|
|
Dec
06
|
|
|
5,683 |
|
|
|
33 |
|
|
|
0 |
|
|
|
85 |
|
|
|
0 |
|
|
|
100 |
|
|
|
10,718 |
|
|
|
0 |
|
Alphaville Campo
Grande
|
|
Mar
07
|
|
|
517,869 |
|
|
|
40 |
|
|
|
0 |
|
|
|
48 |
|
|
|
0 |
|
|
|
67 |
|
|
|
5,052 |
|
|
|
0 |
|
Celebrare
|
|
|
|
|
14,679 |
|
|
|
17 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
100 |
|
|
|
4,918 |
|
|
|
0 |
|
FIT Jaçanã
|
|
|
|
|
9,181 |
|
|
|
32 |
|
|
|
0 |
|
|
|
91 |
|
|
|
0 |
|
|
|
100 |
|
|
|
7,686 |
|
|
|
0 |
|
Grand Valley
|
|
|
|
|
16,908 |
|
|
|
34 |
|
|
|
0 |
|
|
|
51 |
|
|
|
0 |
|
|
|
100 |
|
|
|
4,180 |
|
|
|
0 |
|
Isla
|
|
|
|
|
31,423 |
|
|
|
18 |
|
|
|
0 |
|
|
|
76 |
|
|
|
0 |
|
|
|
100 |
|
|
|
11,119 |
|
|
|
0 |
|
Evidence
|
|
Apr
07
|
|
|
23,487 |
|
|
|
19 |
|
|
|
0 |
|
|
|
32 |
|
|
|
0 |
|
|
|
50 |
|
|
|
2,041 |
|
|
|
0 |
|
Secret
Garden
|
|
May
07
|
|
|
15,344 |
|
|
|
15 |
|
|
|
0 |
|
|
|
54 |
|
|
|
0 |
|
|
|
100 |
|
|
|
3,200 |
|
|
|
0 |
|
CSF -
Acácia
|
|
Jun
07
|
|
|
23,461 |
|
|
|
25 |
|
|
|
0 |
|
|
|
70 |
|
|
|
0 |
|
|
|
100 |
|
|
|
2,849 |
|
|
|
0 |
|
CSF - Dália
|
|
|
|
|
9,000 |
|
|
|
25 |
|
|
|
0 |
|
|
|
88 |
|
|
|
0 |
|
|
|
100 |
|
|
|
549 |
|
|
|
0 |
|
CSF -
Prímula
|
|
|
|
|
13,897 |
|
|
|
24 |
|
|
|
0 |
|
|
|
37 |
|
|
|
0 |
|
|
|
100 |
|
|
|
927 |
|
|
|
0 |
|
Privilege
Residencial
|
|
|
|
|
— |
|
|
|
12 |
|
|
|
0 |
|
|
|
58 |
|
|
|
0 |
|
|
|
80 |
|
|
|
1,769 |
|
|
|
0 |
|
Art Ville
|
|
Apr
07
|
|
|
16,157 |
|
|
|
37 |
|
|
|
0 |
|
|
|
80 |
|
|
|
0 |
|
|
|
50 |
|
|
|
2,852 |
|
|
|
0 |
|
Palm Ville
|
|
Apr
07
|
|
|
13,582 |
|
|
|
8 |
|
|
|
0 |
|
|
|
75 |
|
|
|
0 |
|
|
|
50 |
|
|
|
1,153 |
|
|
|
0 |
|
Alphaville D.
Pedro
|
|
Aug
04
|
|
|
616,224 |
|
|
|
94 |
|
|
|
0 |
|
|
|
100 |
|
|
|
0 |
|
|
|
58 |
|
|
|
7,638 |
|
|
|
0 |
|
Belle Vue
|
|
Aug
04
|
|
|
7,565 |
|
|
|
100 |
|
|
|
35 |
|
|
|
50 |
|
|
|
46 |
|
|
|
70 |
|
|
|
1,806 |
|
|
|
2,445 |
|
Alphaville
Manaus
|
|
Aug
05
|
|
|
464,688 |
|
|
|
69 |
|
|
|
0 |
|
|
|
100 |
|
|
|
0 |
|
|
|
63 |
|
|
|
13,900 |
|
|
|
0 |
|
Alphaville
Recife
|
|
Aug
06
|
|
|
704,051 |
|
|
|
38 |
|
|
|
0 |
|
|
|
94 |
|
|
|
0 |
|
|
|
65 |
|
|
|
7,816 |
|
|
|
0 |
|
CSF -
Santtorino
|
|
Aug
06
|
|
|
14,979 |
|
|
|
42 |
|
|
|
8 |
|
|
|
100 |
|
|
|
87 |
|
|
|
100 |
|
|
|
8,261 |
|
|
|
2290 |
|
Fit Niterói
|
|
Aug
06
|
|
|
8,523 |
|
|
|
42 |
|
|
|
22 |
|
|
|
83 |
|
|
|
63 |
|
|
|
100 |
|
|
|
4,575 |
|
|
|
3,131 |
|
Olimpic - Chácara Sto
Antonio
|
|
Aug
06
|
|
|
24,988 |
|
|
|
43 |
|
|
|
20 |
|
|
|
99 |
|
|
|
80 |
|
|
|
100 |
|
|
|
18,857 |
|
|
|
9,162 |
|
Alphaville
Araçagy
|
|
Aug
07
|
|
|
195,829 |
|
|
|
25 |
|
|
|
0 |
|
|
|
85 |
|
|
|
0 |
|
|
|
50 |
|
|
|
5,711 |
|
|
|
0 |
|
Parc
Paradiso
|
|
Aug
07
|
|
|
35,987 |
|
|
|
9 |
|
|
|
0 |
|
|
|
98 |
|
|
|
0 |
|
|
|
90 |
|
|
|
6,958 |
|
|
|
0 |
|
Supremo
|
|
Aug
07
|
|
|
— |
|
|
|
39 |
|
|
|
0 |
|
|
|
52 |
|
|
|
0 |
|
|
|
100 |
|
|
|
16,533 |
|
|
|
0 |
|
Arena
|
|
Dec
05
|
|
|
29,256 |
|
|
|
87 |
|
|
|
32 |
|
|
|
100 |
|
|
|
99 |
|
|
|
100 |
|
|
|
40,590 |
|
|
|
21,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
Participation(%)
|
|
|
For
the Year Ended December 31, 2007
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
|
|
Total
area
(m2)(1)
(100%)
|
|
|
|
|
|
Percentage
sold-accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
Blue II e
Concept
|
|
Dec
05
|
|
|
28,296 |
|
|
|
92 |
|
|
|
61 |
|
|
|
65 |
|
|
|
57 |
|
|
|
150 |
|
|
|
14,942 |
|
|
|
11,578 |
|
Cuiabá
|
|
Dec
05
|
|
|
11,775 |
|
|
|
80 |
|
|
|
16 |
|
|
|
34 |
|
|
|
12 |
|
|
|
50 |
|
|
|
1,788 |
|
|
|
124 |
|
The Gold
|
|
Dec
05
|
|
|
10,465 |
|
|
|
90 |
|
|
|
48 |
|
|
|
86 |
|
|
|
61 |
|
|
|
100 |
|
|
|
18,468 |
|
|
|
10,654 |
|
Felicitá - Evangelina
2
|
|
Dec
06
|
|
|
11,323 |
|
|
|
32 |
|
|
|
0 |
|
|
|
78 |
|
|
|
0 |
|
|
|
100 |
|
|
|
6,397 |
|
|
|
0 |
|
Riviera Nice
|
|
Dec
06
|
|
|
6,761 |
|
|
|
21 |
|
|
|
0 |
|
|
|
34 |
|
|
|
0 |
|
|
|
50 |
|
|
|
733 |
|
|
|
0 |
|
AlphaVille
Natal
|
|
Feb
05
|
|
|
1,028,722 |
|
|
|
97 |
|
|
|
0 |
|
|
|
100 |
|
|
|
0 |
|
|
|
63 |
|
|
|
1,112 |
|
|
|
0 |
|
Alphaville Salvador
II
|
|
Feb
06
|
|
|
853,344 |
|
|
|
46 |
|
|
|
0 |
|
|
|
88 |
|
|
|
0 |
|
|
|
55 |
|
|
|
15,775 |
|
|
|
0 |
|
CSF - Saint
Etienne
|
|
May
05
|
|
|
11,261 |
|
|
|
91 |
|
|
|
31 |
|
|
|
96 |
|
|
|
93 |
|
|
|
100 |
|
|
|
18,311 |
|
|
|
6,581 |
|
Del Lago
|
|
May
05
|
|
|
62,022 |
|
|
|
96 |
|
|
|
36 |
|
|
|
98 |
|
|
|
86 |
|
|
|
100 |
|
|
|
21,128 |
|
|
|
13,608 |
|
Espaço
Jardins
|
|
May
06
|
|
|
28,926 |
|
|
|
48 |
|
|
|
12 |
|
|
|
100 |
|
|
|
87 |
|
|
|
100 |
|
|
|
23,829 |
|
|
|
7,041 |
|
Paço das
Águas
|
|
May
06
|
|
|
24,080 |
|
|
|
63 |
|
|
|
36 |
|
|
|
80 |
|
|
|
64 |
|
|
|
45 |
|
|
|
11,781 |
|
|
|
8,246 |
|
Vistta
Ibirapuera
|
|
May
06
|
|
|
9,963 |
|
|
|
77 |
|
|
|
36 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
15,851 |
|
|
|
13140 |
|
Villagio Panamby - Double
View
|
|
Oct
03
|
|
|
10,777 |
|
|
|
100 |
|
|
|
83 |
|
|
|
100 |
|
|
|
84 |
|
|
|
100 |
|
|
|
3,184 |
|
|
|
7,149 |
|
Olimpic
Resort
|
|
Oct
05
|
|
|
21,851 |
|
|
|
93 |
|
|
|
39 |
|
|
|
100 |
|
|
|
98 |
|
|
|
100 |
|
|
|
30,601 |
|
|
|
20,457 |
|
Mirante do Rio
|
|
Oct
06
|
|
|
8,125 |
|
|
|
26 |
|
|
|
1 |
|
|
|
99 |
|
|
|
91 |
|
|
|
60 |
|
|
|
2,996 |
|
|
|
158 |
|
Enseada das
Orquídeas
|
|
Oct
07
|
|
|
52,589 |
|
|
|
21 |
|
|
|
0 |
|
|
|
72 |
|
|
|
0 |
|
|
|
80 |
|
|
|
10,881 |
|
|
|
0 |
|
Fit Jaraguá
|
|
Oct
07
|
|
|
14,345 |
|
|
|
20 |
|
|
|
0 |
|
|
|
18 |
|
|
|
0 |
|
|
|
100 |
|
|
|
547 |
|
|
|
0 |
|
Grand Valley Niterói
|
|
Oct
07
|
|
|
— |
|
|
|
17 |
|
|
|
0 |
|
|
|
73 |
|
|
|
0 |
|
|
|
100 |
|
|
|
6,974 |
|
|
|
0 |
|
Horto
|
|
Oct
07
|
|
|
— |
|
|
|
35 |
|
|
|
0 |
|
|
|
95 |
|
|
|
0 |
|
|
|
50 |
|
|
|
27,735 |
|
|
|
0 |
|
Olimpic Bosque da
Saúde
|
|
Oct
07
|
|
|
— |
|
|
|
25 |
|
|
|
0 |
|
|
|
76 |
|
|
|
0 |
|
|
|
100 |
|
|
|
8,971 |
|
|
|
0 |
|
Villagio Panamby -
Anthurium
|
|
Sep
02
|
|
|
16,579 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
96 |
|
|
|
100 |
|
|
|
340 |
|
|
|
2,578 |
|
Blue One
|
|
Sep
03
|
|
|
15,973 |
|
|
|
100 |
|
|
|
98 |
|
|
|
78 |
|
|
|
81 |
|
|
|
67 |
|
|
|
1,795 |
|
|
|
5712 |
|
CSF - Benne
Sonanz
|
|
Sep
03
|
|
|
9,437 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
87 |
|
|
|
50 |
|
|
|
1,274 |
|
|
|
2,991 |
|
CSF - Verti
Vita
|
|
Sep
03
|
|
|
6,439 |
|
|
|
100 |
|
|
|
97 |
|
|
|
100 |
|
|
|
78 |
|
|
|
100 |
|
|
|
886 |
|
|
|
4,018 |
|
Verdes
Praças
|
|
Sep
04
|
|
|
19,005 |
|
|
|
100 |
|
|
|
49 |
|
|
|
50 |
|
|
|
38 |
|
|
|
100 |
|
|
|
3,361 |
|
|
|
6,835 |
|
Alphaville
Eusébio
|
|
Sep
05
|
|
|
534,314 |
|
|
|
74 |
|
|
|
0 |
|
|
|
60 |
|
|
|
0 |
|
|
|
65 |
|
|
|
10,818 |
|
|
|
0 |
|
Palm D’Or
|
|
Sep
05
|
|
|
8,493 |
|
|
|
90 |
|
|
|
35 |
|
|
|
100 |
|
|
|
65 |
|
|
|
100 |
|
|
|
18,314 |
|
|
|
6,163 |
|
Villagio Panamby - Domaine Du
Soleil
|
|
Sep
05
|
|
|
8,225 |
|
|
|
97 |
|
|
|
57 |
|
|
|
100 |
|
|
|
76 |
|
|
|
100 |
|
|
|
19,863 |
|
|
|
14,523 |
|
Villagio Panamby - Jazz
Duet
|
|
Sep
05
|
|
|
13,400 |
|
|
|
95 |
|
|
|
54 |
|
|
|
98 |
|
|
|
57 |
|
|
|
100 |
|
|
|
33,124 |
|
|
|
15,195 |
|
Forest Ville
|
|
Sep
06
|
|
|
15,556 |
|
|
|
18 |
|
|
|
12 |
|
|
|
98 |
|
|
|
84 |
|
|
|
50 |
|
|
|
936 |
|
|
|
1,126 |
|
Garden
Ville
|
|
Sep
06
|
|
|
11,998 |
|
|
|
21 |
|
|
|
14 |
|
|
|
100 |
|
|
|
95 |
|
|
|
50 |
|
|
|
1,209 |
|
|
|
2,108 |
|
Alphaville Rio Costa do
Sol
|
|
Sep
07
|
|
|
1,521,753 |
|
|
|
4 |
|
|
|
0 |
|
|
|
53 |
|
|
|
0 |
|
|
|
58 |
|
|
|
2,666 |
|
|
|
0 |
|
Fit Imbui
|
|
Sep
07
|
|
|
22,442 |
|
|
|
11 |
|
|
|
0 |
|
|
|
67 |
|
|
|
0 |
|
|
|
50 |
|
|
|
1,122 |
|
|
|
0 |
|
Parc Paradiso (Fase
2)
|
|
Sep
07
|
|
|
— |
|
|
|
9 |
|
|
|
0 |
|
|
|
57 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,170 |
|
|
|
0 |
|
AlphaVille
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,430 |
|
|
|
0 |
|
Other
developments(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,217 |
|
|
|
196,808 |
|
Total
development revenues recognized during the periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,182,571 |
|
|
|
675,999 |
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
(2)
|
Includes
other developments where individual revenues for those periods are not
significant.
|
Operating
Costs
Operating
costs in 2007 totaled R$796.9 million, an increase of 71.1% as compared to
R$465.8 million in 2006. This increase is due to the greater volume of
construction in progress in the year as compared to 2006. As a percentage of
total costs, the cost of land increased by 53.3% in 2007 from 2006. Construction
costs payable to third parties presented a small decrease in 2007, totaling
81.8% of total operating costs, as compared to 83.1% in 2006. Operating costs,
as a percentage of net operating revenue, decreased to 68.0% in 2007 as compared
to 70.2% in 2006, mainly due to the greater mix in the types of developments
under construction during the year, as a result of
our
segment diversification strategy and our entry into the affordable entry level
segment through FIT and Bairro Novo.
Gross
Profit
Gross
profit in 2007 totaled R$375.3 million, representing a significant increase of
89.5%, as compared to R$198.1 million in 2006. This increase
was mainly attributable to high gross revenue from the greater number
of developments. In 2007, the gross margin generated from the sale of our
developments increased to 32.0% as compared to 29.8% in the same period of 2006.
This increase was due sales at higher margins as we have recognized revenue from
developments launched in 2005 and 2006 and extraordinary revenue derived from
services rendered by us at our commercial development Eldorado Business Tower in
the total amount of R$97.9 million.
Selling
Expenses
Selling
expenses in of 2007 totaled R$79.4 million, representing an increase of 53.6%,
as compared to R$51.7 million in 2006. This increase reflects our aggressive
growth strategy, through geographic and segment diversification. Selling
expenses in 2007 represented 6.8% of our net operating revenue compared to 7.8%
in the same period of 2006.
General
and Administrative Expenses
General
and administrative expenses totaled R$124.7 million in 2007, representing an
increase of 141.1%, as compared to R$51.7 million in 2006. This increase is
mainly due to our growth strategy and investment in infrastructure for future
growth. The current general and administrative expenses proportion to sales
revenue will be diluted as we increase our revenues in the
future. General and administrative expenses in 2007 represented 10.6%
of our net operating revenue as compared to 7.8% in 2006.
Stock
Issuance Expenses
On March
17, 2007, we concluded our initial public offering of common shares in the
United States, resulting in a capital increase of R$ 487.8 million with the
issuance of 18,761,992 common shares. As a result of our NYSE initial public
offering, we incurred stock issuance expenses totaling R$30.2 million, which
were recorded as a charge to income under Brazilian GAAP.
Financial
Expenses and Income, Net
Net
financial results totaled R$14.2 million in 2007 compared to a negative R$11.9
million in 2006. Financial expenses during 2007 totaled R$35.3
million, a decrease of 46% over R$65 million in 2006, after capitalizing R$33
million. Financial income decreased from R$53.0 million in 2006 to
R$49.4 million in 2007.
Taxes
on Income
Income and
social contribution taxes in 2007 totaled R$30.9 million, or 413.7%
higher than in 2006, when income and social contribution taxes totaled R$6.0
million. In 2007, the combined effective income and social contribution tax
rates, calculated as a percentage of income before taxes on income, were 20.2%
and 11.6%, respectively. The combined effective rates during this year were
lower than the composite statutory rate of 34% due as some of our
jointly-controlled subsidiaries calculated their taxes on the presumed profit
regime and recorded tax loss carryforward from previous periods. This increase
in 2007 reflects an increase in our income taxes and social contribution expense
(which is proportional to the growth of our pre-tax income).
Net
Income
Net income
for the year ended December 31, 2007 totaled R$113.6 million, an increase of
146.7% over the previous year, when net income was R$46.1 million. The increase
in net income was primarily due to our aggressive growth strategy through
segment and geographic diversification and the increase of launches during the
period.
Results
of Operations for the Years Ended December 31, 2005 and 2006
Net
Operating Revenue
Net
operating revenue increased by 45.3%, from R$457.0 million in 2005 to R$663.8
million in 2006. Gross revenues generated from the sales of real estate
properties totaled R$675.9 million, an increase of R$228.3 million or 50.0% as
compared to the same period in 2005, when revenues generated from the sales of
real estate properties totaled R$447.7 million. This increase is attributable to
the completion of the construction of projects launched primarily in 2004 and
2005. Net revenues derived from services decreased by 35.4%, from R$21.5 million
in 2006 to R$33.1 million in 2005, reflecting the lower volume of construction
services contracted to third parties in this period.
The
following table sets forth the final completion of the construction in progress
in 2006 and 2005 and the related revenue recognized during those
periods:
|
|
|
|
Total
Area (m2)(100%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
Participation(%)
|
|
|
For
the Year Ended December 31, 2006
|
|
|
For
the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
Percentage
sold-accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
Empresarial
Pinheiros
|
|
Nov
04
|
|
|
17,149 |
|
|
|
73 |
|
|
|
20 |
|
|
|
100 |
|
|
|
11 |
|
|
|
39 |
|
|
|
76,435 |
|
|
|
2,070 |
|
Verdes
Praças
|
|
Sep
04
|
|
|
19,005 |
|
|
|
96 |
|
|
|
32 |
|
|
|
97 |
|
|
|
68 |
|
|
|
100 |
|
|
|
32,806 |
|
|
|
9,744 |
|
Villaggio
Panamby— Mirabilis
|
|
Mar
06
|
|
|
23,355 |
|
|
|
43 |
|
|
|
0 |
|
|
|
75 |
|
|
|
0 |
|
|
|
100 |
|
|
|
24,627 |
|
|
|
— |
|
Sundeck
|
|
Nov
03
|
|
|
13,043 |
|
|
|
90 |
|
|
|
35 |
|
|
|
80 |
|
|
|
52 |
|
|
|
100 |
|
|
|
24,577 |
|
|
|
9,302 |
|
Sunspecial
Resid Service
|
|
Mar
05
|
|
|
21,189 |
|
|
|
42 |
|
|
|
6 |
|
|
|
100 |
|
|
|
95 |
|
|
|
100 |
|
|
|
21,660 |
|
|
|
4,160 |
|
Arena
|
|
Dec
05
|
|
|
29,256 |
|
|
|
32 |
|
|
|
0 |
|
|
|
99 |
|
|
|
50 |
|
|
|
100 |
|
|
|
20,915 |
|
|
|
— |
|
Olimpic
Resort
|
|
Oct
05
|
|
|
21,851 |
|
|
|
39 |
|
|
|
2 |
|
|
|
98 |
|
|
|
76 |
|
|
|
100 |
|
|
|
20,320 |
|
|
|
589 |
|
La
Place Resid Service
|
|
May
04
|
|
|
8,416 |
|
|
|
93 |
|
|
|
26 |
|
|
|
85 |
|
|
|
64 |
|
|
|
100 |
|
|
|
18,210 |
|
|
|
3,683 |
|
Riviera
Ponta Negra— Cannes e Marseille
|
|
Jan
04
|
|
|
22,332 |
|
|
|
90 |
|
|
|
29 |
|
|
|
63 |
|
|
|
45 |
|
|
|
50 |
|
|
|
17,790 |
|
|
|
6,252 |
|
Sunview
Resid Service
|
|
Jun
03
|
|
|
14,268 |
|
|
|
100 |
|
|
|
82 |
|
|
|
98 |
|
|
|
92 |
|
|
|
100 |
|
|
|
16,933 |
|
|
|
27,547 |
|
Villaggio
Panamby—
Double
View
|
|
Oct
03
|
|
|
10,777 |
|
|
|
100 |
|
|
|
60 |
|
|
|
92 |
|
|
|
88 |
|
|
|
100 |
|
|
|
15,734 |
|
|
|
12,741 |
|
Villaggio
Panamby—
Jazz
Duet
|
|
Sep
05
|
|
|
13,400 |
|
|
|
54 |
|
|
|
0 |
|
|
|
57 |
|
|
|
15 |
|
|
|
100 |
|
|
|
15,213 |
|
|
|
— |
|
Villaggio
Panamby— Domaine du Soleil
|
|
Sep
05
|
|
|
8,225 |
|
|
|
57 |
|
|
|
0 |
|
|
|
76 |
|
|
|
24 |
|
|
|
100 |
|
|
|
14,476 |
|
|
|
0 |
|
Del
Lago
|
|
May
05
|
|
|
62,022 |
|
|
|
62 |
|
|
|
10 |
|
|
|
86 |
|
|
|
46 |
|
|
|
80 |
|
|
|
13,995 |
|
|
|
1,733 |
|
Sunprime
Resid Service
|
|
Nov
03
|
|
|
11,802 |
|
|
|
95 |
|
|
|
69 |
|
|
|
100 |
|
|
|
97 |
|
|
|
100 |
|
|
|
13,951 |
|
|
|
25,214 |
|
Villaggio
Panamby—Parides
|
|
Nov
06
|
|
|
13,093 |
|
|
|
47 |
|
|
|
0 |
|
|
|
61 |
|
|
|
0 |
|
|
|
100 |
|
|
|
13,315 |
|
|
|
— |
|
Vistta
Ibirapuera
|
|
May
06
|
|
|
9,963 |
|
|
|
36 |
|
|
|
0 |
|
|
|
100 |
|
|
|
0 |
|
|
|
100 |
|
|
|
13,012 |
|
|
|
— |
|
Belle
Vue
|
|
Aug
04
|
|
|
7,565 |
|
|
|
90 |
|
|
|
21 |
|
|
|
100 |
|
|
|
81 |
|
|
|
70 |
|
|
|
12,054 |
|
|
|
2,600 |
|
Side
Park—Ed. Style
|
|
Jan
06
|
|
|
7,050 |
|
|
|
67 |
|
|
|
0 |
|
|
|
88 |
|
|
|
0 |
|
|
|
100 |
|
|
|
11,461 |
|
|
|
768 |
|
The
Gold
|
|
Dec
05
|
|
|
10,465 |
|
|
|
48 |
|
|
|
0 |
|
|
|
61 |
|
|
|
11 |
|
|
|
100 |
|
|
|
10,616 |
|
|
|
— |
|
Blue
I
|
|
Sep
03
|
|
|
15,973 |
|
|
|
98 |
|
|
|
78 |
|
|
|
81 |
|
|
|
72 |
|
|
|
67 |
|
|
|
9,496 |
|
|
|
14,722 |
|
Olimpic—Chácara
Sto Antonio
|
|
Aug
06
|
|
|
24,988 |
|
|
|
20 |
|
|
|
0 |
|
|
|
80 |
|
|
|
0 |
|
|
|
100 |
|
|
|
9,049 |
|
|
|
— |
|
Terras
de São Francisco
|
|
Nov
04
|
|
|
114,160 |
|
|
|
98 |
|
|
|
91 |
|
|
|
90 |
|
|
|
76 |
|
|
|
50 |
|
|
|
8,531 |
|
|
|
25,321 |
|
Paço
das Águas
|
|
May
06
|
|
|
24,080 |
|
|
|
36 |
|
|
|
0 |
|
|
|
64 |
|
|
|
0 |
|
|
|
45 |
|
|
|
8,181 |
|
|
|
— |
|
CSF—Verti
Vita
|
|
Sep
03
|
|
|
6,439 |
|
|
|
100 |
|
|
|
69 |
|
|
|
100 |
|
|
|
93 |
|
|
|
100 |
|
|
|
7,845 |
|
|
|
7,779 |
|
Villaggio
Panamby—Majuy
|
|
May
03
|
|
|
9,854 |
|
|
|
100 |
|
|
|
82 |
|
|
|
100 |
|
|
|
98 |
|
|
|
100 |
|
|
|
7,691 |
|
|
|
14,475 |
|
Illuminato
Perdizes
|
|
Jun
04
|
|
|
5,652 |
|
|
|
95 |
|
|
|
45 |
|
|
|
100 |
|
|
|
100 |
|
|
|
70 |
|
|
|
7,261 |
|
|
|
6,225 |
|
Espaço
Jardins
|
|
May
06
|
|
|
28,926 |
|
|
|
12 |
|
|
|
0 |
|
|
|
87 |
|
|
|
0 |
|
|
|
100 |
|
|
|
6,902 |
|
|
|
— |
|
Villaggio
Panamby—
Doppio
Spazio
|
|
Nov
02
|
|
|
13,952 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
90 |
|
|
|
100 |
|
|
|
6,720 |
|
|
|
12,336 |
|
Montenegro
Boulevard
|
|
Jul
05
|
|
|
174,862 |
|
|
|
69 |
|
|
|
52 |
|
|
|
100 |
|
|
|
91 |
|
|
|
100 |
|
|
|
6,629 |
|
|
|
14,119 |
|
CSF—Saint
Etienne
|
|
May
05
|
|
|
11,261 |
|
|
|
31 |
|
|
|
6 |
|
|
|
93 |
|
|
|
79 |
|
|
|
100 |
|
|
|
6,561 |
|
|
|
756 |
|
CSF—Benne
Sonanz
|
|
Sep
03
|
|
|
9,437 |
|
|
|
100 |
|
|
|
60 |
|
|
|
87 |
|
|
|
47 |
|
|
|
49 |
|
|
|
6,335 |
|
|
|
3,709 |
|
Blue
Vision
|
|
Jun
06
|
|
|
18,514 |
|
|
|
43 |
|
|
|
0 |
|
|
|
77 |
|
|
|
0 |
|
|
|
50 |
|
|
|
6,292 |
|
|
|
— |
|
|
|
|
|
Total
Area (m2)(100%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
Participation(%)
|
|
|
For
the Year Ended December 31, 2006
|
|
|
For
the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
Percentage
sold-accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
Palm
D´Or
|
|
Nov
05
|
|
|
8,493 |
|
|
|
35 |
|
|
|
0 |
|
|
|
65 |
|
|
|
21 |
|
|
|
100 |
|
|
|
6,147 |
|
|
|
0 |
|
Villaggio
Panamby— Anthurium
|
|
Sep
02
|
|
|
16,579 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
92 |
|
|
|
100 |
|
|
|
6,015 |
|
|
|
15,887 |
|
Costa
Paradiso
|
|
Jun
05
|
|
|
63,041 |
|
|
|
98 |
|
|
|
3 |
|
|
|
49 |
|
|
|
39 |
|
|
|
100 |
|
|
|
5,999 |
|
|
|
156 |
|
Península
2
|
|
Dec
02
|
|
|
16,294 |
|
|
|
100 |
|
|
|
94 |
|
|
|
96 |
|
|
|
88 |
|
|
|
50 |
|
|
|
5,799 |
|
|
|
15,543 |
|
Doppia
Emozione
|
|
Nov
03
|
|
|
7,912 |
|
|
|
100 |
|
|
|
64 |
|
|
|
100 |
|
|
|
100 |
|
|
|
50 |
|
|
|
5,697 |
|
|
|
8,817 |
|
Lumiar
|
|
Feb
05
|
|
|
7,193 |
|
|
|
56 |
|
|
|
3 |
|
|
|
56 |
|
|
|
40 |
|
|
|
100 |
|
|
|
4,827 |
|
|
|
159 |
|
Weber
Art
|
|
Jun
05
|
|
|
5,812 |
|
|
|
34 |
|
|
|
5 |
|
|
|
86 |
|
|
|
60 |
|
|
|
100 |
|
|
|
4,359 |
|
|
|
459 |
|
Bem
Querer
|
|
Nov
05
|
|
|
11,136 |
|
|
|
19 |
|
|
|
0 |
|
|
|
100 |
|
|
|
40 |
|
|
|
100 |
|
|
|
4,172 |
|
|
|
— |
|
L’Authentique
Paraíso
|
|
Nov
03
|
|
|
2,713 |
|
|
|
100 |
|
|
|
59 |
|
|
|
100 |
|
|
|
100 |
|
|
|
50 |
|
|
|
3,958 |
|
|
|
5,190 |
|
Sunplaza
|
|
Mar
06
|
|
|
6,328 |
|
|
|
16 |
|
|
|
0 |
|
|
|
70 |
|
|
|
0 |
|
|
|
100 |
|
|
|
3,642 |
|
|
|
— |
|
Sunshine
Resid Service
|
|
Nov
02
|
|
|
10,979 |
|
|
|
100 |
|
|
|
100 |
|
|
|
92 |
|
|
|
80 |
|
|
|
60 |
|
|
|
3,444 |
|
|
|
8,094 |
|
Villaggio
Panamby— Hibiscus
|
|
Mar
02
|
|
|
11,002 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
94 |
|
|
|
100 |
|
|
|
3,201 |
|
|
|
4,041 |
|
Península
1
|
|
May
02
|
|
|
16,886 |
|
|
|
100 |
|
|
|
100 |
|
|
|
96 |
|
|
|
94 |
|
|
|
50 |
|
|
|
2,670 |
|
|
|
5,461 |
|
Other
developments(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,412 |
|
|
|
178,004 |
|
Total
development revenues recognized during the periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
675,999 |
|
|
|
447,656 |
|
(1)
|
Includes
other developments where individual revenues for those periods are not
significant.
|
Operating
Costs
Operating
costs in 2006 totaled R$465.8 million, an increase of 46.4% as compared to
R$318.2 million in 2005. This increase is due to the greater volume of
construction in progress in the year as compared to 2005. As a percentage of
total costs, the cost of land remained unchanged at 15.2% in 2006 from 2005.
Construction costs payable to third parties showed a small increase in 2006,
totaling 83.1% of total operating costs, as compared to 81.6% in 2005. Operating
costs, as a percentage of net operating revenue, increased to 70.2% in 2006 as
compared to 69.6% in 2005, mainly due to a different mix in the types of
developments under construction during the year.
Gross
Profit
Gross
profit in 2006 totaled R$198.1 million, representing a significant increase of
42.7%, as compared to R$138.8 million in 2005. This arose mainly from the
increase in gross revenue arising from the increased number of our developments.
In 2006, however, the gross margin generated from the sale of our developments
decreased to 29.8% as compared to 30.4% in the same period of 2005. This
decrease was partially due to the fact that in 2006 we were still recognizing
revenue from the sale of developments launched in 2003 and 2004. During that
period, our sales policy of increasing inventory liquidity by offering price
discounts contributed to the reduction of our gross margins and, as a result,
negatively affected our results.
Selling
Expenses
Selling
expenses in of 2006 totaled R$51.7 million, representing an increase of 23.1%,
as compared to R$42.0 million in 2005. This increase reflects the costs
associated with the increased number of launches in 2006, when we launched 30
developments as compared to 21 in 2005. In 2006 we adopted a new accounting
principle for selling expenses. Under this new accounting practice,
institutional marketing, project specific advertising, marketing and other
selling costs are expensed as incurred and only those expenses directly related
to the construction of the sales stands and facilities, and related furnishings,
such as model apartments, are deferred and allocated to the income
statement as the development progresses. We amended the presentation of our 2005
selling expenses to be consistent with the preferable accounting principle.
Selling expenses in 2006 represented 7.8% of our net operating revenue compared
to 9.2% in the same period of 2005.
General
and Administrative Expenses
General
and administrative expenses totaled R$51.7 million in 2006, representing an
increase of 41.6%, as compared to R$36.5 million in 2005. This increase is
mainly due to: (1) our higher number of employees, which resulted in an increase
of approximately R$6.1 million in payroll and related expenses; and (2) the
accrual of performance based-compensation for our employees and management
totaled R$13.8 million which was R$7.4 million higher than the compensation
expenses in 2005. Stock option expenses are not recorded through income under
Brazilian GAAP. General and administrative expenses in 2006 represented 7.8% of
our net operating revenue as compared to 7.9% in 2005.
Stock
Issuance Expenses
In
February 2006, we completed our Brazilian initial public offering of common
shares in an aggregate amount of R$927.0 million, of which R$494.4 million was
attributable to a primary offering and R$432.6 million was attributable to a
secondary offering. As a result of our Brazilian initial public offering, we
incurred stock issuance expenses in the total amount of R$27.3 million which
were recorded as a charge to income.
Financial
Expenses and Income, Net
In 2006
net financial expenses totaled R$11.9 million, representing a decrease of 38.3%,
as compared to R$31.2 million in 2005. This decrease is mainly due to (1) an
increase in our average balance of cash and financial investments as a result of
the proceeds from our Brazilian initial public offering, and (2) the renewal of
debt with more favorable payment terms and conditions, partially offset by an
increase in the level of our indebtedness in the first six months of 2006 as a
result of an increased average volume of indebtedness, particularly with respect
to SFH loans and debentures. Financial income in 2006 totaled R$53.0 million
compared to R$8.3 million in 2005. Financial expenses totaled R$64.9 million in
2006 compared to R$39.5 million in 2005.
Taxes
on Income
Income and
social contribution taxes in 2006 totaled R$6.0 million, or
76.5% higher than in 2005, when income and social contribution taxes
totaled a tax credit of R$3.4 million. In 2006, the combined effective income
and social contribution tax rates, calculated as a percentage of income before
taxes on income, were 11.6% and 12.5% , respectively. The combined effective
rates during these periods were lower than the composite statutory rate of 34%
due to the fact that some of our jointly-controlled subsidiaries calculated
their taxes on the presumed profit regime.
Net
Income
Net income
for the year ended December 31, 2006 totaled R$46.1 million, an increase of
50.2% over the previous year, when net income was R$30.7 million. The increase
in net income was primarily due to our increased operating revenues for the year
that are attributable to the completion of the construction of projects launched
primarily in 2004 and 2005. However, our total expenses in 2006 were also higher
than in 2005, mainly due to the expenses incurred in the beginning of 2006 with
our Brazilian initial public offering of common shares and GDSs, resulting in an
increase in net profit margin to 6.9% in 2006 from 6.7% in 2005.
Business
Segments
Starting
in 2007, following the acquisition, formation and incorporation of our
subsidiaries Alphaville, FIT and Bairro Novo, respectively, our chief executive
officer has begun to assess segment information primarily on the basis of
different business segments rather than geographic regions in Brazil. The prior
periods have been retrospectively adjusted to conform to our new segment
reporting structure and the only segment from this structure in prior years is
Gafisa S.A.
Our chief
executive officer, who is responsible for allocating resources among our
businesses and monitoring their progress, uses economic present value data,
which is derived from a combination of historical operating results and
forecasted operating results. We provide below a measure of historical profit or
loss, selected segment assets
and other
related information for each reporting segment. This information is the basis of
the internal data that is used by our management to develop economic present
value estimates and provided to our chief executive officer for making operating
decisions, which include the allocation of resources among segments and segment
performance. The information below is derived from our statutory accounting
records which are maintained in accordance with Brazilian GAAP. The reporting
segments do not separate operational expenses, total assets and depreciation.
Revenues from no individual customer represented more than 10% of our net sales
and/or services.
|
|
For Year
Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands
of reais except
for percentages)
|
|
Net
operating revenue
|
|
|
963,411 |
|
|
|
199,829 |
|
|
|
8,934 |
|
|
|
— |
|
|
|
1,172,174 |
|
Operating
costs
|
|
|
(659,889 |
) |
|
|
(128,692 |
) |
|
|
(8,333 |
) |
|
|
— |
|
|
|
(796,914 |
) |
Gross
profit
|
|
|
303,522 |
|
|
|
71,137 |
|
|
|
601 |
|
|
|
— |
|
|
|
375,260 |
|
Gross
margin
|
|
|
31.5 |
% |
|
|
35.6 |
% |
|
|
6.7 |
% |
|
|
— |
|
|
|
32.0 |
% |
(1)
|
Includes
all subsidiaries, except Alphaville Urbanismo S.A., Fit Residencial and
Bairro Novo.
|
B.
Liquidity and Capital Resources
Our
transactions are financed mainly through the contracting of real estate
financing, securitization of receivables and, more importantly, cash flows
generated by our operations. When necessary and in accordance with market
demands, we carry out long-term financing for the sale of our developments. In
the residential developments, approximately 15% of the unit price is paid before
construction, 15-20% during construction and 65-70% after completion, generally
up to 48 months on average. In order to turn over our capital and accelerate its
return, we try to transfer to banks and sell to insurance companies the
receivables portfolio of our completed units.
From time
to time, we examine the opportunities for acquisition and investments. We
consider different types of investments, either direct or through our
subsidiaries and jointly controlled entities. We finance such investments using
cash generated from our operations, through capital market financing or
through a combination thereof.
The
following table shows the balance of our receivables from clients’ portfolio for
the development and sale of properties for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Real
estate development receivables:
|
|
(amended) |
|
Current
|
|
R$ |
524,818 |
|
|
R$ |
365,741 |
|
|
R$ |
274,390 |
|
Long-term
|
|
|
497,933 |
|
|
|
194,097 |
|
|
|
95,169 |
|
Total
|
|
|
1,022,751 |
|
|
|
559,838 |
|
|
|
369,559 |
|
Sales
consummated after December 31, 2004 for which revenue not yet recognized
(not recorded in the financial statements):
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
R$ |
486,794 |
|
|
R$ |
30,161 |
|
|
R$ |
62,961 |
|
Long-term
|
|
|
881,352 |
|
|
|
729,810 |
|
|
|
233,848 |
|
Total
|
|
|
1,368,146 |
|
|
|
759,971 |
|
|
|
296,809 |
|
Total
clients’ portfolio
|
|
R$ |
2,390,897 |
|
|
R$ |
1,319,809 |
|
|
R$ |
666,367 |
|
The total
clients’ portfolio balances have the following maturity profile:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
2004
|
|
R$ |
— |
|
|
R$ |
— |
|
|
R$ |
— |
|
2005
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
2006
|
|
|
— |
|
|
|
— |
|
|
|
337,350 |
|
2007
|
|
|
— |
|
|
|
548,508 |
|
|
|
100,422 |
|
2008
|
|
|
1,011,612 |
|
|
|
290,391 |
|
|
|
94,258 |
|
2009
|
|
|
609,237 |
|
|
|
223,715 |
|
|
|
44,531 |
|
2010
|
|
|
433,213 |
|
|
|
58,714 |
|
|
|
27,114 |
|
2011
and later
|
|
|
336,835 |
|
|
|
198,481 |
|
|
|
62,693 |
|
Total
|
|
R$ |
2,390,897 |
|
|
R$ |
1,319,809 |
|
|
R$ |
666,367 |
|
Loans made
to our clients are generally adjusted on a monthly basis: (1) during
construction, by the INCC alone in São Paulo, Rio de Janeiro and other Brazilian
cities; and (2) after delivery of the units, by the IGP-M plus 12% per annum in
all markets.
We limit
our exposure to credit risk by selling to a broad customer base and by
continuously analyzing the credit of our clients. As of December 31, 2007, 2006
and 2005, our clients’ default level was 2.0%, 3.1% and 2.3%, respectively, of
our revenues. This level was reduced as we recovered units from non-performing
clients. We did not record a provision because we considered the allowance for
doubtful accounts not to be necessary taking into account that our financing
with clients is mainly related to developments under construction and that deeds
are not granted to the clients until after payment and/or negotiation of the
clients’ debt. In addition, our risk of loss is limited to the stage when we
negotiate our agreements with our clients, after which it is substantially
transferred to financial institutions.
Cash
Flows
Operating
Activities
In 2007,
there was a significant increase in the operating expenditures as compared to
2006 mainly due to the increased number of launches from 30 in 2006 to 53 in
2007, the acquisition of land to support future launches and the higher level of
ongoing construction projects. As a result, net cash used in operating
activities amounted to R$496.0 million in 2007 as compared to R$ 306.2 million
in 2006.
In 2006,
we had a significantly higher level of operational expenditures as compared to
2005 due to the increased number of launches from 21 in 2005 to 30 in 2006 and
the acquisition of land to support future launches. As a result, net cash used
in operating activities totaled R$306.2 million in 2006 as compared to R$112.9
million in 2005.
In 2005,
we launched a number of new developments and we believe that we regained the
level of launches sufficient to drive an increase in our sales volume. During
2005, we had a higher level of operational expenditures than in the prior year
due to the greater number of new developments launched and the higher level of
ongoing construction projects. As a result, net cash used in operating
activities totaled R$112.9 million in 2005 compared to the net cash provided by
operating activities of R$23.6 million in 2004.
Investment
Activities
Net cash
used in investment activities, including the acquisition of property, equipment
and new investments, was R$112.2 million, R$8.6 million and R$5.6 million in
2007, 2006 and 2005, respectively. Our expenditure in 2007 was related to the
acquisition of investments in subsidiaries and property and equipment. The
increase of our cash used in investments activities in 2007 was primarily due to
the acquisition of (1) shares of Catalufa Participações Ltda., whose principal
asset consisted of an investment in AUSA; and (2) all shares held by
Redevco do Brasil in
the following jointly-controlled entities: Blue I SPE Planejamento,
Promoção, Incorporação e Venda Ltda.; Blue II SPE Planejamento, Promoção,
Incorporação e Venda Ltda.; Jardim I Planejamento, Promoção e Venda Ltda. and
Sunplace SPE Ltda.
Our
expenditure in 2006 was related to the acquisition of property, equipment and
investments in certain subsidiaries. The increase in our net cash used in
investment activities in 2005 was primarily related to the acquisition of our
subsidiary, Diodon Participações Ltda., in September.
Financing
Activities
In 2007,
net cash provided by financing activities totaled R$856.5 million a significant
increase of 91.6% compared to R$447.1 million in 2006. The increase of our net
cash provided by financing activities in 2007 is mainly due to the following:
(1) capital increase of R$487.8 million as a result of the initial public
offering in the United States completed on March 17, 2007 and (2) debt issuances
in the amount of R$427.0 million, of which R$200 million was raised in November
for working capital purposes. In addition we paid R$57.8 million in loans and
financings, mainly SFH and working capital loans.
In 2006,
net cash provided by financing activities totaled R$447.1 million, a significant
increase compared to R$206.5 million in 2005. This increase results from the
capital increase of R$494.3 million attributable to the initial public offering
that we completed in February 2006.
Net cash
provided by financing activities in 2005 totaled R$206.5 million, an increase of
R$217.1 million, compared to the net cash used in financing activities in 2004
of R$10.6 million. The cash provided in 2005 was attributable to (1) two
issuances of debentures for a total amount of R$176.3 million; (2) capital
increases totaling R$145.4 million, R$135.2 million of which was raised in June
2005 and R$10.3 million of which was raised in December 2005; and (3) other debt
issuances totaling R$93.5 million. These transactions allowed us to repay
R$190.1 million in loans and financings and to change the maturity profile of
our indebtedness, with terms and conditions more aligned to our business
strategy.
Capital
Expenditures
In 2005,
we invested R$1.6 million in property and equipment, primarily information
technology equipment and office facilities.
In 2006 we
invested R$4.6 million in property, equipment and investments, primarily
information technology equipment and new office facilities in Rio de Janeiro and
in São Paulo to accommodate our recently created internal sales
force.
In 2007 we
invested R$24.2 million in property, equipment and investments, primarily
information technology equipment, software and new office facilities in Rio de
Janeiro and in São Paulo. Our main investment during the period was the SAP
implementation project that amounted to R$7.5 million. In addition, investments
in information technology equipment and software totaled to R$1.5 million, and
office facilities totaled to R$2.3 million.
Indebtedness
When
appropriate, we have incurred indebtedness within SFH, which offers lower
interest rates than the private market, and by transferring our debt to our
customers. We intend to continue our strategy of maintaining low levels of debt
comprised mainly of transactions within SFH or long-term
transactions.
As of
December 31, 2007 we had outstanding loans and financing in the total amount of
R$689.4 million, an increase of 133.4% as compared to December 31, 2006. This
increase was mainly due to: (1) working capital loans in the total amount of
R$200.0 million; (2) other loans (mainly SFH and working capital loans) obtained
throughout 2007 in the total amount of R$225.9 million; (3) accrued interest in
the amount of R$25.8 million; and (4) payment of debts in the total amount of
R$57.8 million, primarily related to SFH and working capital loans.
In order
to minimize exchange rate fluctuation risks, we have entered
into cross-currency interest rate swap contracts in the total amount
of our fixed-rate loans denominated in foreign currency, which amounted to
R$200.0 million as of December 31, 2007.
As of
December 31, 2006 we had outstanding loans and financing of R$295.4 million, a
decrease of 6.8% in comparison with December 31, 2005. The decrease from 2005
was mainly due to: (1) the pre-payment of R$176.4 million of outstanding
debentures in December 2006, as part of our company’s strategy to improve
indebtedness terms; and (2) the payment of R$26.0 million debt related to our
former controlling shareholder, Urucari Participações Ltda., which was
incorporated into our balance sheets in December 2005.
The table
below sets forth information on our loans, financing and debentures as of
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of reais)
|
|
Debentures
|
|
|
249,190 |
|
|
|
9,190 |
|
|
|
48,000 |
|
|
|
96,000 |
|
|
|
96,000 |
|
Housing
Finance System (SFH)
|
|
|
98,700 |
|
|
|
44,860 |
|
|
|
42,793 |
|
|
|
11,047 |
|
|
|
— |
|
Working
capital
|
|
|
325,453 |
|
|
|
8,082 |
|
|
|
207,265 |
|
|
|
28,402 |
|
|
|
81,704 |
|
Acquisitions
|
|
|
16,013 |
|
|
|
6,584 |
|
|
|
5,987 |
|
|
|
2,948 |
|
|
|
494 |
|
Total
|
|
|
689,356 |
|
|
|
68,716 |
|
|
|
304,045 |
|
|
|
138,397 |
|
|
|
178,198 |
|
Debenture
Program
Our first
debenture program was approved by and registered with the CVM on April 29, 2005.
This enabled us to make public offerings of non-convertible debentures, secured
on property and/or with guarantees subordinated to our general creditors. The
offer of debentures through the program was limited to a maximum value of R$200
million.
On April
29, 2005 we issued R$64 million aggregate principal amount of debentures due
March 1, 2009 under our first debenture program. This second issuance of our
debentures comprised 6,400 nominal, non-convertible debentures with a face value
of R$10,000.00 each and are guaranteed by certain real estate credit rights held
by us. The debentures provide for the payment of annual interest corresponding
to 100% of the CDI rate, calculated from the subscription date, plus a 2.85%
annual spread. As of December 31, 2006, there was no outstanding balance under
this second issuance.
On
December 1, 2005 we issued R$112.5 million aggregate principal amount of
debentures due December 1, 2010 under our first debenture program. This third
issuance comprised 11,250 nominal, non-convertible debentures with a face value
of R$10,000.00 each and guaranteed by certain real estate credit rights held by
us. The debentures provide for the payment of annual interest corresponding to
100% of the CDI rate, calculated from the date of issuance, plus a 2% annual
spread. As of December 31, 2006, there was no outstanding balance under this
second issuance.
On
September 29, 2006, our second public offering of debentures was approved by the
CVM. Under the second debenture program we can issue up to R$500.0 million in
debentures that are not convertible into shares. The debentures are
subordinated, and may be secured or unsecured.
On
September 29, 2006, we issued one series of debentures under the second
debenture program for R$240.0 million aggregate principal amount due September
1, 2011. This is our fourth issuance which consists of 24,000 nominal,
non-convertible debentures with a face value of R$10,000.00 each with
subordinated guarantees. The debentures provide for the payment of annual
interest corresponding to 100% of CDI rate, calculated from the date of
issuance, plus a 1.3% annual spread (based on a 252 business-day
year).
The first
issuance under the second debenture program provides that the following indices
and limits be calculated on a semi-annual basis by the trustee based on our
consolidated financial statements, drawn-up according to Brazilian GAAP, that we
file with the CVM: (1) total debt minus SFH debt minus cash does not exceed
75% of shareholders’ equity; (2) total receivables plus post-completion
inventory is equal to or greater than 2.0 times total debt; and (3) total debt
minus available funds
is less than R$1.0 billion, as adjusted for inflation, where:
|
·
|
available
funds is the sum of our cash, bank deposits and financial
investments;
|
|
·
|
SFH
debt is the sum of all our loan agreements that arise from resources of
the SFH;
|
|
·
|
total
receivables is the sum of our short and long-term “development and sale of
properties” accounts, as provided in our financial
statements;
|
|
·
|
post-completion
inventory is the total value of units already completed for sale, as
provided on our balance sheet; and
|
|
·
|
total
debt is the sum of our outstanding debt, including loans and financing
with third parties and fixed income securities, convertible or not, issued
in local or international capital
markets.
|
Our
indenture under the debenture program contains various covenants including,
among other things:
|
·
|
limitations
on our ability to incur debt;
|
|
·
|
limitations
on the existence of liens on our
properties;
|
|
·
|
limitations
on transactions with related parties, which generally must be on terms no
less favorable than those that could be obtained in a comparable
arm’s-length transaction; and
|
|
·
|
maintenance
of certain financial ratios calculated based on Brazilian
GAAP.
|
As of the
date of this annual report , we are in compliance with these
covenants.
In June
2008, we filed with CVM our third debenture program under which we can issue up
to R$1.0 billion in non-convertible debentures. The first issuance under the
third debenture program will be comprised of 25,000 nominal, non
convertible debentures with a face value of R$10,000, to be issued in two series
totaling R$250 million. The debentures provide for the payment of annual
interest corresponding to 107.2% of the CDI rate, calculated from the
subscription date, with a maturity of 10 years.
Financing
through the Housing Finance System (SFH)
Most of
our financing is incurred directly or through our subsidiaries or
jointly-controlled entities from the principal banks that operate within SFH. On
December 31, 2007, the interest rates on these loans generally varied between
6.2% and 11.4% per annum, plus TR (Taxa Referencial), and the
loans generally mature through December 2009. This financing is secured by
mortgages on property and by security interests on the receivables from clients.
On December 31, 2007 we had 15 loan agreements in effect, with a balance of
R$98.7 million. At the same date we also had R$622.5 million financing
agreements with SFH, the funds of which were not released and will not be
released until the completion of the developments to which they are
related.
Investments
Our
investment activities include mainly the acquisition of property, equipment and
new investments, through acquisition of entities.
Our
expenditure of R$112.2 million in 2007 was related to the acquisition of
investments in subsidiaries and property and equipment. Investments activities
in 2007 consisted primarily of the acquisition of (1) shares of Catalufa
Participações Ltda., which main asset comprised an investment in Alphaville; and
(2) all shares held by Redevco do Brasil.
In
addition, we invested R$24.2 million in property, equipment and investments,
primarily information technology equipment, software and new office facilities
in Rio de Janeiro and São Paulo. Our main investment during the period was the
SAP implementation project that amounted to R$7.5 million.
We prepare
our financial statements in accordance with Brazilian GAAP, which differs in
significant respects from U.S. GAAP. Our net income, in accordance with
Brazilian GAAP, was R$113.6 million, R$46.1 million and R$30.7 million, in 2007,
2006 and 2005, respectively. Under U.S. GAAP, we would have reported a net
income of R$63.5 million, R$24.8 million and R$34.4 million, in 2007, 2006 and
2005, respectively.
Our
shareholders’ equity, in accordance with Brazilian GAAP, was R$1,530.8 million
as of December 31, 2007, R$814.1 million as of December 31, 2006 and R$270.2
million as of December 31, 2005. Under U.S. GAAP, we would have reported
shareholders’ equity of R$1,441.9 million, R$795.3 million and R$290.6 million
as of December 31, 2007, 2006 and 2005, respectively.
The
following items generated the most significant differences between Brazilian
GAAP and U.S. GAAP in determining net income and shareholders’
equity:
|
·
|
discounting
of accounts receivable;
|
|
·
|
deferred
selling expenses;
|
|
·
|
stock
issuance expense;
|
|
·
|
land
barter transactions;
|
|
·
|
effects
of deferred taxes on the differences above;
and
|
For a
discussion of the principal differences between Brazilian GAAP and U.S. GAAP as
they relate to our financial statements and a reconciliation of net income and
shareholders’ equity see note 22 to our consolidated financial statements
included elsewhere in this annual report and “Item 3.A. Key Information—Selected
Financial Data.”
C.
Research and Development, Patents and Licenses, etc.
We have a
research and development department for new products, processes and
methodologies focused on reducing the construction
cycle. As of December 31, 2007 and 2006 we had 12 and 9
employees engaged in research and development activities, respectively. As of
December 31, 2005, we had no employee engaged in research and development
activities. Our research and development expenditures in 2007, 2006 and 2005
were immaterial.
Other than
as disclosed elsewhere in this annual report including under “Item 3.D. Key
Information—Risk Factors” and “Item 5.A. Operating and Financial Review and
Prospects—Operating Results—Brazilian Real Estate Sector,” we are not aware of
any trends, uncertainties, demands, commitments or events which are reasonably
likely to have a material effect upon our net sales or revenues, income from
continuing operations, profitability, liquidity or capital resources, or that
would cause reported financial information to not necessarily be indicative of
future operating results or financial condition.
E. Off
Balance Sheet Arrangements
We
currently do not have any off-balance sheet arrangements or significant
transactions with unconsolidated entities not reflected in our consolidated
financial statements. All of our interests in and/or relationships with our
subsidiaries or jointly-controlled entities are recorded in our consolidated
financial statements.
F. Tabular
Disclosure of Contractual Obligations
The table
below presents the maturity of our significant contractual obligations, as of
December 31, 2007, which comprises loans and financing, debentures, developments
and purchase of properties. The table does not include deferred income tax
liability and obligations with operating leases, assignment of credits payable,
other accounts payable or costs to be incurred on the units not yet
sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
Loans
and financing
|
|
|
440,166 |
|
|
|
59,526 |
|
|
|
256,045 |
|
|
|
42,397 |
|
|
|
82,198 |
|
Debentures
|
|
|
249,190 |
|
|
|
9,190 |
|
|
|
48,000 |
|
|
|
96,000 |
|
|
|
96,000 |
|
Interest(1)
|
|
|
129,601 |
|
|
|
21,747 |
|
|
|
45,372 |
|
|
|
37,718 |
|
|
|
24,764 |
|
Real
estate development obligations(2)
|
|
|
772,757 |
|
|
|
428,088 |
|
|
|
272,553 |
|
|
|
72,116 |
|
|
|
— |
|
Obligations
for land purchase
|
|
|
236,241 |
|
|
|
163,034 |
|
|
|
6,710 |
|
|
|
19,402 |
|
|
|
47,095 |
|
Total
|
|
|
1,827,955 |
|
|
|
681,585 |
|
|
|
628,680 |
|
|
|
267,633 |
|
|
|
250,057 |
|
(1)
|
Estimated
interest payments are determined using the interest rate at December 31,
2007. However, our long-term debt is subject to variable interest rates
and inflation indices, and these estimated payments may differ
significantly from payments actually
made.
|
(2)
|
Including
obligations not reflected in the balance—CFC Resolution No.
963.
|
We have
agreed to purchase the remaining 40% of AUSA’s capital, not yet measurable and
consequently not recorded, that will be based on a fair value appraisal of AUSA
prepared at the future acquisition dates.
We also
made provisions for contingencies in relation to labor and civil lawsuits in the
amounts of R$3.7 million and R$17.6 million in current and non-current
liabilities, respectively, as of December 31, 2007.
Pursuant
to Brazilian GAAP, and since the adoption of CFC Resolution No. 963, the total
costs to be incurred on the units launched but not sold are not recorded on our
balance sheet. Our obligations recognized as liabilities until December 31, 2003
refer exclusively to the estimated costs related to units sold. Costs to be
incurred on the units not yet sold are not recorded on our balance sheet. As of
December 31, 2007, the amount of “real estate development obligations” related
to units launched but not sold was R$598.1 million.
A. Directors
and Senior Management
The table
below shows the names, positions, and terms of office of the members of our
board of directors:
|
|
|
|
|
|
|
|
|
Gary
R. Garrabrant
|
|
|
|
Chairman
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Renato
de Albuquerque(2)
|
|
|
|
Director
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Caio
Racy Mattar(2)(3)
|
|
|
|
Director
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Richard
L. Huber(2)(3)
|
|
|
|
Director
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Thomas
J. McDonald
|
|
|
|
Director
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Gerald
Dinu Reiss (2)(3)
|
|
|
|
Director
|
|
April
4, 2008
|
|
Annual
Shareholders’ General Meeting in 2010
|
Jose Ecio Pereira da Costa
Junior (2)(3)
|
|
|
|
Director
|
|
June
6, 2008
|
|
Next
Shareholders’ General Meeting to be
called
|
(1)
|
Under
Brazilian corporate law, an annual shareholders’ general meeting must take
place within the first four months of the calendar
year.
|
(2)
|
Independent
member pursuant to NYSE rules.
|
(3)
|
Independent
member pursuant to Brazilian Law. According to Brazilian Law, a
director is considered independent when: (i) he/she has no relationship
with the company, except for holding shares; (ii) he/she is not a
controlling shareholder, spouse or relative of the controlling
shareholder, has not been in the past three years linked to any company or
entity related to the controlling shareholder; (iii) he/she has not been
in the past three years an employee nor an executive of the company, of
the controlling shareholder or of any subsidiary of the company; (iv)
he/she is not a supplier or buyer, direct or indirect, of the company
where the arrangement exceeds a certain amount; (v) he/she is not an
employee or manager of any company which renders services to the company
or which uses services or products from the company; (vi) he/she is not a
spouse or relative of any member of the company’s management; and (vii)
he/she does not receive any compensation from the company, except for the
compensation related to its position as a board
member.
|
None of
our directors is entitled to any severance compensation in the event of
dismissal from office, except for unpaid portions related to prior
years. Our directors are not subject to mandatory retirement due to
age.
The
following is a summary of the business experience and principal outside business
interests of the current members of our board of directors.
Gary R.
Garrabrant. Mr. Garrabrant is the chief executive officer and
co-founder of Equity International and executive vice-president of Equity Group
Investments, LLC. He is also vice chairman of Desarrolladora Homex
S.A. de C.V., a leading real estate company in Mexico, and a member of the board
of directors of various other companies in the portfolio of Equity
International. He is also a member of the Real Estate Advisory Board
of Cambridge University. Mr. Garrabrant holds a bachelor’s degree in
finance from the University of Notre Dame. He co-founded and led
Genesis Realty Capital Management, a real estate securities investment
management firm based in New York. From 1981 to 1994, Mr. Garrabrant
was a senior real estate investment banker, first with Chemical Bank and then
with The Bankers Trust Company. He is currently the chairman of our
board of directors, and his current term commenced on April 4,
2008. His business address is Two North Riverside Plaza, Suite 700,
Chicago, Illinois, United States.
Renato de
Albuquerque. Mr. Albuquerque was one of the founders of
Construtora Albuquerque, Takaoka S.A., in 1951, which launched the first
Alphaville Community in 1973. In 1995, he founded our subsidiary
Alphaville Urbanismo S.A. Mr. Albuquerque holds a bachelor’s degree
in civil engineering and architecture from Universidade de São
Paulo. He is currently a member of our board of directors, and his
current term commenced on April 4, 2008. His business address is
Alameda Noruega, No. 316, Alphaville Residencial 1, Barueri, SP,
Brazil.
Caio Racy
Mattar. Mr. Mattar is currently the investment and
construction officer of Companhia Brasileira de Distribuição (CBD- Pão de Açúcar
Group). He is also a member of the board of directors of Sendas
Distribuidora S.A. and Paramount Têxteis Indústrias e Comércio S.A. Mr. Mattar
holds a bachelor’s degree in civil engineering and a master’s degree in business
administration from the London Business School. He is currently a
member of our board of directors, and his current term commenced on April 4,
2008. His business address is Av. Nações Unidas No. 8,501,
19th floor 05425-070 - São Paulo, SP - Brazil.
Richard L.
Huber. Mr. Huber is an investor in different companies from
various segments, especially in Latin America. He is currently the
chairman of Antarctic Shipping, a Chilean company that operates maritime cruises
in the Antarctic, Vina San Rafael in Chile, Covanta Energy Corporation, and
other companies in the United States and other countries. He also
manages private equity portfolios. Mr. Huber holds a bachelor’s
degree in chemistry from Harvard University. He started his career as
a trainee at First National Bank in 1959. Until February 2000, he
worked in the financial area and as the chief executive officer and chairman of
Aetna Inc. He was also a member of the board of directors of many
United States and Latin American companies. He is currently a member
of our board of directors, and his current term commenced on April 4,
2008. His business address is 139 W. 78th Street,
New York, New York, United States.
Thomas J.
McDonald. Mr. McDonald joined Equity International Management,
LLC in 1999, and he is currently its executive vice-president, in charge of the
company’s investments. He is also a director at several companies
held in the portfolio of Equity International’s group. Mr. McDonald
holds a bachelor’s degree in international relations and Spanish from the
University of Notre Dame. He is currently a member of our board of
directors, and his current term commenced on April 4, 2008. His
business address is Two North Riverside Plaza, Suite 700, Chicago, Illinois,
United States.
Gerald Dinu Reiss. Mr. Reiss
is the founder and the officer of the business consulting firm Reiss &
Castanheira Consultoria e Empreendimentos Ltda since 1987. He is the Planning
and Controlling Officer of Grupo Ultra from 1980 to 1986 and member of its
Executive Committee as of 1984. Professor of Business Planning of Escola de
Administração de Empresas de São Paulo at Fundação Getulio Vargas from1974 to
1986. Mr. Reiss was also a member of the Board of Directors of various Brazilian
companies, as CAEMI, Petrobrás S.A., Petrobrás Distribuidora S.A, COMERC and
Grupo Pão de Açúcar. Mr. Reiss holds a bachelor’s degree in electric engineering
from Escola Politécnica da Universidade de São Paulo and a PHD in Business
Administration from California University, Berkeley, USA. He is currently a
member of our board of directors, and his current term commenced on April 4,
2008. His business address is Rua Cordeiro Galvão, 301, 05450-020 – São Paulo,
SP - Brazil
José Ecio Pereira da Costa
Junior. Mr. Pereira is currently head of the
Administrative Council of IBEF - Instituto Brasileiro dos Executivos
Financeiros. He started his auditing career in 1974 and became in 1986 partner
of Arthur Andersen & Co. In June 2002 he was admitted as an audit partner at
Deloitte Touche Tohmatsu in Brazil. Mr. Pereira is also the founder of the
business consulting firm JEPereira Consultoria em Gestão de Negócios.
Mr. Pereira holds a bachelor’s degree in business
administration from Fundação Getúlio Vargas and a bachelor´s degree in
accounting from Faculdade São Judas Tadeu. He is currently a member of our board
of directors and the chairman of our Audit Committee. His business address is
Av. República Argentina, 665, No. 906/907, 80240-210 – Curitiba, PR –
Brazil.
The table
below shows the names, positions, and terms of office of our executive
officers:
|
|
|
|
|
|
|
|
|
Wilson
Amaral de Oliveira
|
|
|
|
Chief
Executive Officer
|
|
December
22, 2006
|
|
December
31, 2009
|
Alceu
Duílio Calciolari
|
|
|
|
Chief
Financial Officer and
|
|
December
22, 2006
|
|
December
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
Relations Officer
|
|
|
|
|
Antônio
Carlos Ferreira Rosa
|
|
|
|
Officer
|
|
December
22, 2006
|
|
December
31, 2009
|
Mário
Rocha Neto
|
|
|
|
Officer
|
|
December
22, 2006
|
|
December
31, 2009
|
Odair
Garcia Senra
|
|
|
|
Officer
|
|
December
22, 2006
|
|
December
31, 2009
|
None of
our executive officers is entitled to any severance compensation in the event of
dismissal from office, except the unpaid portions related to prior
years. The business address of each of our executive officers is
Av. Nações Unidas No. 8,501, 19th floor,
05425-070 - São Paulo,
SP – Brazil.
The
following is a summary of the business experience and principal outside business
interests of the current members of our board of executive
officers.
Wilson Amaral de
Oliveira. Mr. Amaral is currently our chief executive officer,
and his current term commenced in December 2006. He holds a
bachelor’s degree in business administration from Fundação Getúlio Vargas and a
marketing certificate from ESPM. Previously, he was a member of the
board of directors and officer of Playcenter S.A., a member of the board of
officers of Hopi Hari S.A. and of the fiscal council of Lojas Americanas S.A, an
officer of Artex Ltda., as well as sales and marketing officer of Fundação Tupy
S.A., Tupy Tubos e Conexões Ltda. and CLC Alimentos
Ltda. He was also a member of the executive board of directors of
Americanas.com S.A., Kuala Ltda. (successor of Artex Ltda.), Toalia
S.A. and ABC Supermercados S.A. Mr. Amaral was also the managing partner of
Finexia, country manager of DHL Worldwide Express do Brasil Ltda. and managing
director of Tupi Perfis S.A.
Alceu Duílio
Calciolari. Mr. Calciolari is currently our chief financial
officer and investor relations officer, and his current term commenced in
December 2006. He holds a bachelor’s degree in business
administration from Faculdades Metropolitanas Unidas and a master’s degree in
controllership from Pontifícia Universidade de São Paulo. Mr.
Calciolari started his career as a trainee at ABN AMRO Real S.A. in 1978 and
worked as an auditor, from 1983 to 1996, at Arthur Andersen LLP. He
was also chief finance officer at Tupy S.A., from 1996 to 1998, and ALL—America
Latina Logística S.A., from 1998 to 2000. Mr. Calciolari has been our
chief financial officer since 2000.
Antônio Carlos Ferreira
Rosa. Mr. Rosa is currently our new markets executive officer,
and his current term commenced in March 2006. He holds a bachelor’s
degree in civil engineering from Universidade de São Paulo. He joined
Gafisa as an intern, holding several positions, including construction manager
and development manager.
Mário Rocha
Neto. Mr. Rocha Neto is currently our operation executive
officer, and his current term commenced in December 2006. He holds a
bachelor’s degree in civil engineering from the Polytechnical School of the
Universidade de São Paulo. Mr. Rocha Neto joined the former Gomes de
Almeida in 1978 as an intern. He was also a member of the management
of Y. Takaoka Empreendimentos S.A. and, from 2003 to 2004, a member of the São
Paulo Construction Union.
Odair Garcia
Senra. Mr. Garcia Senra is currently our executive officer
responsible for developments in São Paulo, and his current term commenced in
December 2006. He holds a bachelor’s degree in civil engineering from
the civil engineering school of Mauá. Mr. Garcia Senra joined the
former Gomes de Almeida in 1970 as an intern, and he has worked as a
construction engineer, a construction manager and a construction
officer. He was also a professor at the Civil Engineering School of
Mauá in 1972, and director of Secovi—Sindicato de Compra e Venda de Imóveis in
São Paulo.
Our
Relationship with our Executive Officers and Directors
As of
December 31, 2007, there were no contracts of any type or any other material
agreements entered into by us with the members of our board of directors and our
board of officers and such members do not hold any direct or indirect interest
of greater than 1% of our share capital. Also, as of December 31, 2007, some of
our executive officers held interests in our subsidiaries as partners, minority
shareholders, and/or directors and executive officers.
In none of
these cases, as of the referenced date, were the interests held
material. In addition, there is no family relationship among our
executive officers, directors or controlling shareholders, if any.
B. Compensation
Under
Brazilian corporate law, the company’s shareholders are responsible for
establishing the aggregate amount paid to members of the board of directors, the
board of officers and the members of the fiscal council, when
installed. Once the shareholders establish an aggregate amount of
compensation, the members of the board of directors are then responsible for
setting individual compensation levels.
In 2005,
the aggregate compensation we paid to the members of our board of directors and
our consulting committees totaled R$1.1 million. For 2006, the
aggregate compensation of the members of our board of directors and our
consulting committees totaled R$700 thousand. For 2007, the aggregate
compensation of the members of our board of directors and our consulting
committees totaled R$700 thousand.
For each
of 2005, 2006 and 2007, the aggregate compensation we paid to our executive
officers totaled R$4.1 million, R$4.3 million and R$4.2 million, respectively.
50% of our employee compensation is determined based on the attainment of
certain corporate goals.
C. Board
Practices
General
Information
We are
managed by a board of directors (Conselho de Administração)
consisting of up to nine directors and a board of officers (Diretoria Executiva)
consisting of up to eight officers. Our directors are elected for a
two-year term and our executive officers are elected for a three-year
term. Reelection of officers and directors is
permitted. We also have a fiscal council (Conselho Fiscal), which is
currently not installed as a permanent body, an investment committee, an audit
committee, a compensation committee, a nominating and corporate governance
committee, and a finance committee. See “Item 6.A. Directors and Senior
Management.”
Board
of Directors
Our board
of directors is our decision-making body responsible for formulating general
guidelines and policies for our business, including our long term strategies.
Among other things, our board of directors is responsible for appointing and
supervising our executive officers.
Our board
of directors meets at least once every quarter and at any other times when a
meeting is called by its chairman or by at least two other
members. The decisions of our board of directors are taken by the
majority vote of its members. In the event of a tie vote, the
chairman of our board of directors has, in addition to his personal vote, the
right to cast a tie-breaking vote. In addition, pursuant to Brazilian
corporate law, a member of our board of directors is prevented from voting in
any shareholders’ or board of directors’ meeting, or from acting in any business
or transaction, in which he may have a conflict of interest with our
company.
Under
Brazilian corporate law, a company’s board of directors must have at least three
members, and each of the members of the board of directors must be a shareholder
of the company, although there is no requirement as to the minimum number of
shares that an individual must hold in order to serve as a
director. Our bylaws provide for a board of directors of up to nine
members, from which at least 20% shall be independent members, as determined by
the Listing Rules of the Novo
Mercado. Our directors are elected at our annual general
shareholders’ meeting for a two-year term of office, with reelection permitted,
and are subject to removal at any time by our shareholders at a shareholders’
general meeting. Although the Listing Rules of the Novo Mercado require only one
independent director, in accordance with our bylaws, our board of directors has
four independent members.
Paragraph
4 of Article 141 of Brazilian corporate law provides that shareholders with at
least 10% of a company’s total capital stock may request the adoption of the
multiple voting procedure for the election of the board of directors, even where
there is no provision for this in the company’s bylaws. The multiple
voting procedure grants
each share as many votes as the number of board members, and allows shareholders
to allocate either all of their votes to a single candidate or to distribute
their votes among several candidates.
All the
voting proceedings discussed in the previous paragraphs currently apply to our
company.
As
prescribed by CVM Instruction No. 282, of June 26, 1998, the minimum voting
capital percentage required for the adoption of the multiple voting procedure in
publicly-held companies may be reduced as a result of the amount of its capital
stock. Based on the current amount of our capital stock, shareholders
representing 5% of our total capital stock may request the adoption of the
multiple voting procedure in order to elect the members to our board of
directors. The referred minimum percentage may vary from 5% to 10%
depending on the amount of our capital stock, as prescribed in the
aforementioned CVM instruction. If the adoption of the multiple
voting procedure is not requested, directors are elected by a majority vote of
our shareholders, and such shareholders who, individually or collectively,
represent at least 10% of our shares, are entitled to appoint, in a separate
vote, a director and its alternate.
The
Listing Rules of the Novo
Mercado also provide that all members of our board of directors and our
board of officers must comply, by means of the execution of a management
compliance statement, with obligations set forth under the Novo Mercado Listing
Agreement, the Market Arbitration Chamber Rules and the Listing Rules of the
Novo Mercado,
including, but not limited, to: (1) any shareholder that becomes our controlling
shareholder, or becomes part of our controlling group, must comply, by means of
executing of the controlling shareholder compliance statement, with the
obligations set forth under the Novo Mercado Listing
Agreement, the Market Arbitration Chamber Rules and the Listing Rules of the
Novo Mercado; (2) any
indirect controlling shareholder of our company must fully comply with the
obligations established in the Novo Mercado Listing
Agreement, the Market Arbitration Chamber Rules, the Listing Rules of the Novo Mercado, Brazilian
corporate law, Brazilian Securities Regulations and our bylaws; (3) use best
efforts to ensure that our shares are widely held through public share
offerings; (4) re-establish the minimum percentage of outstanding floating
stock, in case additional shares are issued or the controlling power over our
company is transferred; (5) inform BOVESPA with respect to the trading of the
securities held by our controlling shareholders; (6) comply with the rules
imposed on our directors in the event our public company registration with the
CVM is cancelled; and (7) comply with rules and regulations applicable in the
event of the delisting of our company from the Novo Mercado.
Board
of Officers
Under
Brazilian corporate law, a company’s board of officers must have at least two
members, and each of such members must be a resident in Brazil but is not
required to be a shareholder of the company. Furthermore, no more
than one-third of our directors may serve as members of our board of officers at
any given time.
The
members of our board of officers are our legal representatives and are primarily
responsible for managing our day-to-day operations and implementing the general
policies and guidelines set forth in our shareholders’ general meetings and by
our board of directors. Our bylaws require that our board of officers
be composed of at least two members and a maximum of eight
members. Currently, our board of officers consists of five members,
elected at the meeting of our board of directors on July 6, 2006. The
members of our board of officers are appointed by our board of directors for
three-year terms, and may be reelected or removed by our board of directors at
any time. Our board of directors is responsible for determining the
role of our executive officers. Currently our executive officers are
made up of a chief executive officer, a chief financial and investor relations
officer and various other executive officers without a specific
designation.
The chief
executive officer submits to the board of directors for their approval the
business plan, annual budget, investment plans and new expansion plans for
Gafisa and our subsidiaries. The chief executive officer enacts these
plans and develops our strategy and operational plan, including the manner in
which we will execute the resolutions approved at the shareholders’ meeting and
by the board of directors. Together with the other officers, he also
supervises and coordinates our activities. The officer in charge of
investor relations supplies our financial information to investors, the CVM and
the BOVESPA and is also responsible for keeping an updated register based on the
applicable regulations.
Audit
Committee
Under the
applicable rules of the NYSE, a company listing in connection with its initial
public offering is permitted to phase in its compliance with the independent
audit committee requirements set forth in NYSE Rule 303A on the same schedule as
it is permitted to phase in its compliance with the independent audit committee
requirement pursuant to Rule 10A-3(b)(1)(iv)(A) under the Securities Exchange
Act, that is, (1) one independent member at the time of listing; (2) a majority
of independent members within 90 days of listing; and (3) all independent
members within one year of listing.
Our
directors have established an Audit Committee that convenes as often as it
determines is appropriate to carry out its responsibilities, but at least
quarterly. The Audit Committee currently comprises Jose Ecio Pereira da Costa
Junior, Richard L. Huber and Gerald Dinu Reiss, each of whom is a director of
our company. Our board of directors has determined that Jose Ecio Pereira da
Costa Junior, Richard L. Huber and Gerald Dinu Reiss are each independent as set
forth in the NYSE Listed Companies Manual as well as being independent for the
purpose of Rule 10A-3 of the Securities Exchange Act. Our board of directors has
determined that Jose Ecio Pereira da Costa Junior is an audit committee
financial expert within the meaning of the regulations promulgated by the
Securities and Exchange Commission.
This
committee has responsibility for planning and reviewing our annual and quarterly
reports and accounts with the involvement of our auditors in that process,
focusing particularly on compliance with legal requirements and accounting
standards, and ensuring that an effective system of internal financial controls
is maintained. The ultimate responsibility for reviewing and
approving our annual and quarterly reports and accounts remains with our
directors.
Fiscal
Council
Under
Brazilian corporate law, the fiscal council is a corporate body independent from
the management of the company and its external auditors. The fiscal
council is not a permanent body, and whenever installed, must consist of no less
than three and no more than five members. The primary responsibility
of the fiscal council is to review management’s activities and the company’s
financial statements and to report its findings to the shareholders of the
company. The fiscal council is not equivalent to an audit committee
as contemplated by the Securities Exchange Act, as amended. Under
Brazilian corporate law, a fiscal council must be established at a shareholders’
general meeting upon request of shareholders representing at least 10% of the
shares with voting rights, or 5% of the shares with no voting rights, and its
members shall remain in office until the annual general shareholders’ meeting of
the year following their election. Each member of the fiscal council
is entitled to receive compensation in an amount equal to at least 10% of the
average amount paid to each executive officer (excluding benefits and profit
sharing).
Individuals
who are also employees or members of the administrative bodies of our company,
the controlling shareholder, or the controlling shareholder’s group, as well as
spouses or parents of our management, cannot serve on the fiscal
council.
Our
by-laws provide for a non-permanent fiscal council composed of three members,
which can be formed and have its members elected at the shareholders’ general
meeting, as requested by the shareholders, in the events set forth by Brazilian
corporate law. When in operation, our fiscal council consists of
three members, and its compensation is set at the shareholders’ general meeting
that elects them.
Currently,
we do not have a fiscal council in operation and therefore no member has been
appointed. We have established an audit committee. See “Item 6.C.
Director, Senior Management and Employees— Board Practices— Audit
Committee.”
Investment
Committee
On January
13, 2006, our board of directors modified the structure of our incorporation and
new business committee renaming it the investment committee. The
investment committee is composed of the chairman of our board of directors, our
chief executive officer and another member of our board of
directors. Our investment
committee
is a non-permanent body and its duties are to: (1) analyze, discuss and
recommend land acquisitions and new real estate developments; (2) advise our
executive officers during the negotiation of new deals and the structuring of
new developments; (3) supervise the beginning of new projects and their related
cash flows; and (4) in special cases, assist in the negotiation and structuring
of new types of business. Each decision by our investment committee
to acquire land is made by ensuring that the investment meets the minimum return
threshold set by us and comparing it with other potential
investments. Such decision is made independent of the geographical
location of the investment in order to maximize return on our capital allocation
as a whole.
Currently,
our investment committee is in operation and is comprised of
Messrs. Gary R. Garrabrant, Wilson Amaral de Oliveira and Thomas J.
McDonald.
Compensation
Committee
Our
directors have established a Compensation Committee composed of three members;
currently, they are Gary R. Garrabrant, Caio Racy Mattar and Thomas J. McDonald.
This committee reviews and makes recommendations to our directors regarding its
compensation policies and all forms of compensation to be provided to our
executive officers and other employees.
Nominating
and Corporate Governance Committee
Our
directors have established a Nominating and Corporate Governance Committee
composed of three members; currently, they are Thomas J. McDonald,
Richard L. Huber and Caio Racy Mattar. This committee considers and
periodically reports on matters relating to the size, identification, selection
and qualification of the board of directors, executive officers and
candidates nominated for the board of directors and its committees; and
develops and recommends governance principles applicable to us.
Finance
Committee
Our
directors have established a Finance Committee composed of three members;
currently, they are Wilson Amaral de Oliveira, Alceu Duilio Calciolari and
Nelson Martinez. This committee evaluates and makes periodic recommendations to
our board of directors regarding risk and financial investments
policies.
Summary
of Significant Differences of Corporate Governance Practices
NYSE
Corporate Governance Rules provide that we are required to disclose any
significant differences on our corporate governance practices from those
required to be followed by U.S. companies under NYSE listing
standard. We have summarized these significant differences
below.
We are
permitted to follow practice in Brazil in lieu of the provisions of the NYSE
Corporate Governance Rules, except that we will be required to have a qualifying
audit committee under Section 303A.06 of the Rules, or avail ourselves of an
appropriate exemption. In addition, Section 303A.12(b) provides that
our chief executive officer is obligated to promptly notify the NYSE in writing
after any of our executive officers becomes aware of any material non-compliance
with any applicable provisions of the NYSE Corporate Governance
Rules.
Majority
of Independent Directors
NYSE Rule
303A.01 provides that each NYSE-listed company must have a majority of
independent directors. Neither Brazilian corporate law nor our
by-laws require that we have a majority of independent
members. Notwithstanding this, the majority of our board members
qualify as independent directors under NYSE rules.
Separate
Meetings of Non-Management Directors
NYSE Rule
303A.03 provides that the non-management directors of each NYSE-listed company
must meet at regularly scheduled executive sessions without
management. According to Brazilian corporate law, up to one-third of
the members of the board of directors can also hold management
positions. The remaining non-management board members are not
expressly empowered to serve as a check on management and there is no
requirement that those
board members meet regularly without management. Notwithstanding the
foregoing, our board of directors consists entirely of non-management directors
and as such we believe we are in compliance with the NYSE Rule
303A.03.
Nominating
and Corporate Governance Committee
NYSE Rule
303A.04 provides that each U.S. listed company must have a nominating/corporate
governance committee composed entirely of independent directors. We are not
required to have such a committee under Brazilian
law. However, our board of directors formed such a committee to
consider and periodically report on matters relating to the size,
identification, selection and qualification of the board of directors and
candidates nominated for the board of directors and its committees; and develop
and recommend governance principles applicable to us. With respect to
compensation, under Brazilian corporate law, the shareholders determine the
total and individual compensation of our board members and executive officers,
including benefits and allowances, at a general shareholders’ meeting. See “Item
6.B. Directors, Senior Management and Employees—Compensation.”
Compensation
Committee
NYSE Rule
303A.05 provides that each U.S. listed company must have a compensation
committee composed entirely of independent directors. We are not
required to have such a committee under Brazilian law. However, our board
of directors formed such a committee to review and make recommendations to
our directors regarding its compensation policies and all forms of compensation
to be provided to our executive officers and other employees.
Audit
Committee
NYSE Rule
303A.06 and the requirements of Rule 10A-3 of the SEC provide that each U.S.
listed company is required to have an audit committee consisting entirely of
independent members that comply with the requirements of Rule
10A-3. In addition, the audit committee must have a written charter
compliant with the requirements of NYSE Rule 303.A.07(c), have an internal
audit function and otherwise fulfill all other requirements of the NYSE and Rule
10A-3. The SEC recognized that due to the local legislation for
foreign private issuers, some of the functions of the audit committee could be
subordinated by local laws to our other bodies.
We are not
required under Brazilian law to have an audit committee. However, we formed such
a committee with the following responsibilities:
|
·
|
Pre-approve
services to be provided by our independent
auditor;
|
|
·
|
Choose
and oversee the work of any accounting firm engaged for the purpose of
preparing or issuing an audit report or performing any other
service;
|
|
·
|
Review
auditor independence issues and rotation
policy;
|
|
·
|
Supervise
the appointment of our independent
auditors;
|
|
·
|
Discuss
with management and auditors major audit
issues;
|
|
·
|
Review
quarterly financial statements prior to their publication, including the
related notes, management’s report and auditor’s
opinion;
|
|
·
|
Review
our annual report and financial
statements;
|
|
·
|
Provide
recommendations to the board on the audit committee’s policies and
practices;
|
|
·
|
Review
recommendations given by our independent auditor and internal audits and
management’s responses;
|
|
·
|
Evaluate
the performance, responsibilities, budget and staffing of our internal
audit function and review the internal audit plan;
and
|
|
·
|
Provide
recommendations on the audit committee’s
bylaws.
|
Equity
Compensation Plans
NYSE Rule
303A.08 provides that shareholders must be given the opportunity to vote on all
equity compensation plans and material revisions thereto, with certain limited
exemptions as described in the rule. Under Brazilian corporate law,
shareholder pre-approval is required for the adoption of equity compensation
plans and any material revision thereto.
Corporate
Governance Guidelines
NYSE Rule
303A.09 provides that each U.S. listed company must adopt and disclose their
corporate governance guidelines. We do not have a similar requirement
under Brazilian law. However, we have listed our common shares on the
Novo Mercado (New
Market) of the São Paulo Stock Exchange, which requires adherence to the
corporate governance standards of that Exchange specified under “Item 10.B.
Additional— Memorandum and Bylaws.” In addition, we have adopted a written
policy of trading of securities and disclosure matters.
Code
of Business Conduct and Ethics
NYSE Rule
303A.10 provides that each U.S. listed company must adopt and disclose a code of
business conduct and ethics for directors, officers and employees and promptly
disclose any waivers of the code for directors or executive officers. On July
10, 2007 we have adopted a Code of Business Conduct and Ethics that applies to
our chief executive officer, chief financial officer, principal accounting
officer and persons performing similar functions, as well as to our directors,
other officers and employees. See “Item 16B. Code of Business Conduct and
Ethics.”
D. Employees
As of
December 31, 2007, we had 873 employees, 647 in the State of São Paulo, 183 in
the State of Rio de Janeiro and 43 in other markets.
The table
below shows the number of employees for the periods presented
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
642
|
|
78
|
|
73
|
|
14
|
|
66
|
|
873
|
2006
|
|
337
|
|
76
|
|
60
|
|
14
|
|
43
|
|
530
|
2005
|
|
321
|
|
77
|
|
29
|
|
24
|
|
24
|
|
475
|
Our
administrative employees carry out management, accounting, IT, development,
sale, legal and construction activities, in addition to negotiating with
suppliers. Our construction site employees focus on management and
oversight of our construction workers, a majority of whom is
outsourced. The outsourced employees are hired by the contractors to
carry out various tasks on the construction sites. Currently, we estimate that
approximately 7,800 outsourced professionals are providing services to
us. There are 4,185 in the State of São Paulo, 3,069 in the State of
Rio de Janeiro, and 546 in our other markets.
We offer
training programs to our employees, subcontractors and outsourced employees. All
of our professionals involved in the construction of our developments are
trained prior to the commencement of their work and are supervised directly by
our engineers.
The
majority of our employees and outsourced professionals of the State of São Paulo
are enrolled with the Civil Construction Industries Workers’ Union (SINTRACON).
As a rule, the Civil Construction of Large Building Industry in the State of São
Paulo (SINDUSCON-SP) annually negotiates with SINTRACON collective bargaining
agreements applicable to our employees. The most recent collective
bargaining agreement for our employees and
outsourced
professionals in the State of São Paulo was signed in May 2008, establishing a
salary adjustment of 8.5% as of May 2008. This collective bargaining
agreement became effective on May 2008 and will expire on April 30,
2009. The majority of our employees and outsourced professionals of
the State of Rio de Janeiro are members of the Civil Construction, Tiles,
Cement, Marble and Granite Products, Road Construction, Paving, and Land Moving
and Industrial Maintenance and Assembly Industries’ Workers Union of the Rio de
Janeiro Municipality (SINTRACONST-RIO). As a rule, the Civil
Construction of Large Building Industry in the State of Rio de Janeiro
(SINDUSCON-RIO) annually negotiates with SINTRACONST-RIO the collective
bargaining agreements applicable to our employees. The most recent
collective bargaining agreement for our employees and outsourced professionals
in the State of Rio de Janeiro was signed in March 2008, establishing a salary
adjustment of 7.5% as of March 2008. This collective bargaining
agreement became effective in March 2008 and will expire in February 2009. We
believe our relations with our employees and unions are good. In the
last three years, we have not experienced any work stoppage or collective claims
proposed by the unions.
The
benefits we offer to our permanent employees include life insurance, dental
plan, health insurance, medical assistance plan, meal reimbursements and profit
sharing.
Health
and Safety
We are
committed to preventing work-related accidents and
diseases. Accordingly, we maintain an environmental risk prevention
program which seeks to maintain and enhance the health and physical conditions
of our employees, by anticipating, recognizing, evaluating and controlling any
existing or potential environmental risks in the workplace. In
addition, we have an internal committee for the avoidance of accidents, which
seeks to prevent diseases and accidents from occurring in the
workplace. We make significant investments in this area, providing
frequent training programs for both our construction employees and our
subcontractors’ employees, and we require our subcontractors to follow strict
guidelines.
E. Share
Ownership
As of the
date of this annual report, our directors and executive officers do not hold, on
an aggregate basis, any direct or indirect interest of greater than 1.7% of our
total share capital or of the share capital of any of our subsidiaries or
jointly-controlled entities. Also, as of December 31, 2007, some of our
executive officers held interests in our subsidiaries and jointly-controlled
entities as partners, minority shareholders, and/or directors and executive
officers. In none of these cases, as of the date of this annual
report, were the interests held material.
The table
below sets forth the number of our total shares beneficially owned by each of
our directors and executive officers as of the date of this annual
report:
|
|
|
|
|
Thomas
J. McDonald
|
|
Director
|
|
1
|
Gary
R. Garrabrant
|
|
Director
|
|
1
|
Caio
Racy Mattar
|
|
Director
|
|
1
|
Richard
L. Huber
|
|
Director
|
|
16,217
|
Renato
De Albuquerque
|
|
Director
|
|
1,121,622
|
Gerald
Dinu Reiss
|
|
Director
|
|
1
|
Jose
Ecio Pereira da Costa Junior
|
|
Director
|
|
1
|
Wilson
Amaral De Oliveira
|
|
Chief
Executive Officer
|
|
214,600
|
Alceu
Duilio Calciolari
|
|
Chief
Financial Officer and Investor Relations Officer
|
|
331,420
|
Odair
Garcia Senra
|
|
Officer
|
|
205,320
|
Antonio
Carlos Ferreira Rosa
|
|
Officer
|
|
58,891
|
Mario
Rocha Neto
|
|
Officer
|
|
299,820
|
Total
|
|
|
|
2,247,895
|
Stock
Option Plans
Existing
Stock Option Plan
At our
annual special shareholders’ general meeting held on April 30, 2002, our
shareholders ratified the terms and conditions of our stock option plan as
approved by our board of directors during the meeting held on April 3, 2000, in
which a standard stock option plan was approved for the granting of subscription
rights related to our preferred shares.
Our stock
option plan seeks to: (1) encourage our expansion and success, allowing our
directors, executive officers and senior employees to acquire shares of our
capital stock to assist in their integration into our company; (2) permit us to
obtain and retain the services of directors, executive officers and senior
employees by offering them the additional benefit of becoming one of our
shareholders; and (3) align the interests of our directors, executive officers
and senior employees with the interests of our shareholders.
In the
context of our stock option plan, we entered into individual agreements with our
employees, directors and executive officers, under which they are entitled to
purchase shares of our capital stock pursuant to the terms and conditions of the
stock option plan and the specific conditions set forth by their
agreements.
As a
result of our entry in the Novo Mercado segment of the
BOVESPA, our preferred shares were converted into common shares, and therefore
all stock options relating to the existing stock option plan currently grant
subscription rights related to our common shares.
As of the
date of this annual report, options to purchase 2,145,000 shares of our common
shares have been issued to employees, directors and executive officers pursuant
to executed stock option plan agreements. Of these, 1,677,900 shares
have been already been acquired or expired pursuant to such
agreements.
New
Stock Option Plan
In view of
our entry in the Novo
Mercado segment of the BOVESPA, and in order to protect the rights of the
beneficiaries of the existing stock option plan, we decided to maintain this
plan and, in addition, we approved a new stock option plan on February 3, 2006
during a jointly-held annual and special shareholders’ general
meeting. With respect to this new stock option plan, our board of
directors may release further programs on a regular basis, of options to
purchase up to 5% of the total outstanding shares of our company as set forth in
the new stock option plan. Such new programs would grant our managers
and senior employees the right to acquire our shares for a set price, under
terms and conditions laid down in stock option plan agreements entered into with
each participant.
As of the
date of this annual report, options to purchase 4,580,043 shares of our common
shares have been issued to employees, directors and executive officers pursuant
to executed stock option plan agreements and options to purchase an additional
467,079 shares of our common shares may be issued under the plan.
A. Major
Shareholders
The
following table sets forth information relating to the ownership of our common
shares as of December 31, 2007, by each holder of 5.0% or more of our common
shares and all of our directors and officers as a group, as well as common
shares held in treasury. Each holder of common shares has the same
rights.
Shareholders
|
|
|
|
|
|
|
EIP
Brazil Holdings LLC (1)
|
|
|
18,229,605 |
|
|
|
13.8 |
|
Directors
and officers
|
|
|
2,040,201 |
|
|
|
1.5 |
|
Other
shareholders
|
|
|
109,182,315 |
|
|
|
82.4 |
|
Treasury
Shares
|
|
|
3,124,972 |
|
|
|
2.4 |
|
Total
|
|
|
132,577,093 |
|
|
|
100.0 |
|
(1)
|
EIP
Brazil Holding LLC is an affiliate of Equity
International.
|
Approximately
71% of our total common shares outstanding is held in Brazil and 15% of our
record holders are in Brazil. We are not aware of any shareholders’
agreement currently in force with our main shareholder.
In June
2007, Brazil Development Equity Investments, LLC, a company affiliated to GP,
sold its remaining stake in our company (approximately 7% of our total capital
stock at the time).
B. Related
Party Transactions
Other than
arrangements which are described in “Item 6.A. Directors, Senior Management and
Employees— Directors and Senior Management— Our Relationship with our Executive
Officers and Directors” and the transaction described below, since January 1,
2005, there has not been, and there is not currently proposed, any material
transaction or series of similar transactions to which we were or will be a
party in which any director, executive officer, holder of 5% of our capital
stock or any member of their immediate family had or will have a direct or
indirect interest.
Under
Brazilian corporate law, our directors and executive officers cannot vote on any
matter in which they have a conflict of interest and such transactions can only
be approved on reasonable and fair terms and under conditions that are no more
favorable than the terms and conditions prevailing in the market or offered by
third parties.
In 2004,
we sold a portfolio of securitized receivables with a book value of R$59.7
million to Altere Securitizadora S.A., a securitization company which at the
time was controlled by GP Investimentos S.A. Altere then issued mortgage-backed
securities to the market with terms of up to 52 months. We received
R$52.2 million in proceeds from this sale. We were charged a fee of
1.5% of the transaction value which was recorded as an expense equaling R$0.8
million. The mortgage-backed securities are indexed to the IGP-M and
accrue interest of up to 15.25% per annum. The balance of receivables
from clients is presented net of the value of the mortgage-backed securities and
of escrow deposits, which at December 31, 2005 totaled R$8.7
million. In April 2006, GP Investimentos S.A. sold 100% of its stake
in Altere to a third-party investor group.
As of
December 31, 2007, we have not entered into any loan or other type of financing
agreement with our directors or executive officers.
C. Interests
of Experts and Counsel
Not
applicable.
A. Consolidated
Statements and Other Financial Information
For our
consolidated financial statements and notes thereto see “Item 18. Financial
Statements.”
Legal
Proceedings
We are
currently party to several legal and administrative proceedings arising from the
normal course of our business, principally relating to civil, environmental, tax
and labor claims. We establish provisions in our balance sheets relating to
potential losses from litigation based on estimates of probable
losses. Brazilian GAAP requires us to establish provisions in
connection with probable losses and we record a provision when, in the opinion
of our management, we feel that an adverse outcome in a litigation is probable
and a loss can be estimated. The
determination
of the amounts provisioned is based on the amounts involved in the claims and
the opinion of our management.
Civil
Claims
As of
December 31, 2007, we were a party to 524 civil actions, totaling approximately
R$172.6 million. Of these actions, we were the plaintiff in 122 actions and the
defendant in 402 actions, with aggregate amounts of approximately R$10.5 million
and R$162.1 million, respectively. For three of the claims where we are the
defendant, the plaintiffs are seeking an aggregate amount of approximately
R$48.0 million. As of December 31, 2007, we have filed defense to
these claims. While we believe these claims are unfounded, we are of
the view that the likelihood of loss is possible. In two of the three claims,
our liability is limited because there are three other defendants. The third
claims involve an amount of approximately R$27.8 million of the proceeds from
our Brazilian initial public offering that was withheld in an escrow deposit
attached by court order to guarantee a writ of execution (ação de execução). We have
recorded no provisions for this claim.
Most of
these civil claims involve ordinary course matters relating to the development
of our properties, including annulment of contractual clauses, termination of
agreements with the reimbursement of the amounts paid and indemnification for
labor accidents.
As of
December 31, 2007, the provision for our civil claims amounted to R$2.3
million.
Environmental
Claims
On August
27, 2004, the Federal Public Prosecution Office filed a Public Civil Action
against us and others, including the Superintendência Estadual de Rios e
Lagoas, or SERLA, which is responsible for managing the water resources
of the State of Rio de Janeiro, alleging intervention in a permanent
preservation area. The Federal Public Prosecution Office sought
indemnification payment of R$1.0 million to repair the damaged area, as well as
penalties for the damages caused to the environment. We are currently
not able to estimate the recovery amounts to be paid in this claim.
In
addition, we are periodically party to other administrative environmental
inquiries or claims by the Public Prosecution Offices of the States of São Paulo
and Rio de Janeiro or by other governmental agencies or third
parties. These inquiries may result in public environmental claims
against us and the findings in these inquires may give rise to other
administrative and criminal claims. However, based on currently
available information, we do not believe these matters are, or are likely to be
in the future, material to our business or financial condition.
As of
December 31, 2007, we have made no provisions for environmental
claims.
Tax
Claims
We have
challenged the constitutionality of the amendment of the tax basis for payment
of the Social Integration Program Contribution (Contribuição para o Programa de
Integração Social), or PIS, as determined by Laws No. 9,715/98 and No.
9,718/98. We obtained a favorable preliminary injunction in the case
and have not paid approximately R$8.0 million to the tax
authorities. While we believe the likelihood of a favorable final
outcome to be probable, nonetheless, we recorded the taxes under dispute in our
consolidated financial statements as taxes and contributions in our current
liabilities in accordance with Brazilian regulation.
We are
also challenging the constitutionality of the amendment of the tax basis and
rate increase for payment of the Contribution for Social Security Financing
(Contribuição para o
Financiamento da Seguridade Social), or COFINS, as determined by Law
9,718/98. We obtained a partially favorable preliminary injunction
and did not pay approximately R$3.5 million, which amount is fully
accrued. We believe the likelihood of a favorable final outcome is
probable with respect to the amendment of the contribution calculation basis and
remote with respect to the rate increase. However, we recorded the
taxes under dispute in our consolidated financial statements as taxes and
contributions in our current liabilities.
We are
party to two tax claims arising from tax assessments filed by the Brazilian
Federal Revenue Service—SRF, because we deducted from the IRPJ (Corporate Income
Tax) and CSLL (Social Contribution on Net Income) calculation basis in fiscal
years 1998 and 1999 expenses that were considered non-deductible by the
authorities. The lowers courts have partially accepted our defense for the
fiscal year 1998 claim but have rendered an unfavorable decision for the fiscal
year 1999 claim. We filed administrative appeals on both claims. On
February 1, 2007, we were notified of a higher administrative court’s decision
to uphold the lower court’s decision in its entirety on the fiscal year 1998
claim. We are discussing the administrative decision for fiscal year 1998,
secured by a bank guarantee. We are awaiting for the judicial first level
decision. If it is unfavorable, we plan to appeal the
decision. Although we believe it is possible that our position will not
prevail, we do not believe loss is probable. We believe we are more likely
than not to prevail on this claim in court because we will have an opportunity
to provide further evidence in our favor that was not presented at the
administrative level. Such further evidence includes the appraisal of our
books by a court-appointed expert which was not permitted at the administrative
proceedings. In addition, our argument that the tax claim was
inappropriate is based on the position that the tax authorities erroneously
re-characterized our service agreement with a third party as a purchase and
sales agreement and disallowed the deduction of expenses from the IRPJ and CSLL
tax bases based on this re-characterization of the agreement. We will rely
on prior court rulings that have rejected similar attempts by tax authorities to
impose taxes by re-characterizing leasing agreements as purchase and sales
agreements. In those prior cases, the appeals court concluded that such
re-characterization of the agreements was inappropriate and annulled the tax
claims. In the opinion of management, this matter is a contingent
liability that arises from an interpretation of the tax authorities with which
we disagree and is not a tax obligation. Based on the foregoing,
management has determined not to record the amount at this time. We are
still awaiting for the higher administrative court’s final decision on the
fiscal year 1999 claim. If this administrative decision is unfavorable, we
intend to appeal as we did for fiscal year 1998. The aggregate amount
involved in these two claims is approximately R$16.5 million, including
interest, penalties and legal fees, which do not include attorney’s
fees.
In
addition, we have requested payment in installments for amounts not collected by
the PIS and COFINS for the period from March 2004 to April 2005. As
of December 31, 2007, such installment plan had been deferred and an amount of
R$9.8 million is fully accrued as accounts payable.
As a
result of our acquisition of Alphaville, we have become party to administrative
and judicial tax claims relating to the Excise Tax (Imposto Sobre Produtos
Industrializados), or IPI, and the State Value Added Tax (Imposto Sobre a Circulação de
Mercadorias e Serviços), or ICMS, regarding Alphaville’s alleged failure
to pay taxes on its import of two aircrafts. The total amount
involved in these claims is approximately R$49.2 million and approximately R$1.6
million has been deposited by Alphaville with the relevant
courts. Alphaville is waiting for the final decision by the courts on
these proceedings. According to our acquisition agreement of
Alphaville, the selling shareholders must reimburse any loss suffered by us or
Alphaville arising from acts occurring before January 8, 2007, including the
claims set forth above.
As of
December 31, 2007, the provision for tax claims amounts to R$16.8
million.
Labor
Claims
As of
December 31, 2007, we were a defendant in approximately 2,096 labor claims
resulting from our ordinary course of business, of which approximately 96% were
filed by outsourced workers and approximately 4% were filed by our former
employees. On December 31, 2007, the total value involved in the
labor claims filed against us was approximately R$45.5 million. As of
December 31, 2007, the provision for labor claims amounts to R$2.2
million.
Dividend
Policy
The amount
of any of our distributions of dividends and/or interest on shareholders’ equity
will depend on a series of factors, such as our financial conditions, prospects,
macroeconomic conditions, tariff adjustments, regulatory changes, growth
strategies and other issues our board of directors and our shareholders may
consider relevant, as discussed below. In consideration of these factors and our
intention to recommend reinvestment of our
total
adjusted net profits, our board of directors has recommended that we pay the
mandatory 25% dividends on shareholders’ equity for the fiscal year
2007.
Amounts
Available for Distribution
At each
annual general shareholders’ meeting, our board of directors is required to
propose to our shareholders how our earnings of the preceding fiscal year are to
be allocated. For purposes of Brazilian corporate law, a company’s
income after federal income tax for such fiscal year, net of any accumulated
losses from prior fiscal years and amounts allocated to employees’ and
management’s participation in earnings, represents its “net income” for such
fiscal year. In accordance with Brazilian corporate law, an amount
equal to the company’s “net income,” as adjusted, will be available for
distribution to shareholders in any particular year. The
distributable amount may be affected by the following:
|
·
|
reduced
by amounts allocated to the legal
reserve;
|
|
·
|
reduced
by amounts allocated to the statutory reserve, if
any;
|
|
·
|
reduced
by amounts allocated to the contingency reserve, if
any;
|
|
·
|
reduced
by amounts allocated to the investment
reserve;
|
|
·
|
increased
by reversals of contingency reserves recorded in prior years;
and
|
|
·
|
increased
by amounts allocated to the investment reserve, when realized and if not
absorbed by losses.
|
Our
calculation of net profits and allocation of funds to our reserves for any
fiscal year are determined on the basis of our audited unconsolidated financial
statements for the immediately preceding fiscal year.
Allocation
of Net Income
According
to Brazilian corporate law, we have two principal reserve accounts: (1) revenue
reserve and (2) capital reserve.
Revenue
Reserve.
Our
revenue reserve account is comprised of:
|
·
|
Legal
Reserve. Under Brazilian corporate law and our bylaws,
we are required to maintain a legal reserve to which we must allocate 5%
of our net income for each fiscal year until the aggregate amount of the
reserve equals 20% of our share capital. However, we are not
required to make any allocations to our legal reserve in a fiscal year in
which the legal reserve, when added to our other established capital
reserves, exceeds 30% of our total share capital. The amount of
our legal reserve must be approved by our annual general shareholders’
meeting and may only be used to increase our share capital or to absorb
losses, but is unavailable for the payment of dividends. As of December
31, 2007, our legal reserve amounted to R$15.6
million.
|
|
·
|
Statutory
Reserve. Under Brazilian corporate law, we are permitted
to provide for the allocation of part of our net income to discretionary
reserve accounts that may be established in accordance with our
bylaws. The allocation of our net income to discretionary
reserve accounts may not be made if it serves to prevent distribution of
the mandatory distributable amount. As of December 31, 2007, our statutory
reserve amounted to R$80.9 million.
|
|
·
|
Contingency
Reserve. Under Brazilian corporate law, a percentage of
our net income may be allocated to a contingency reserve for anticipated
losses that are deemed probable in future years. Management
must indicate the cause of the anticipated loss and justify the
establishment of the reserve for allocation of a percentage of our net
income. Any amount so allocated in a prior year either must be
reversed in the year
|
in which
the loss had been anticipated, if the loss does not occur as projected, or
charged off in the event that the anticipated loss occurs. The
allocations to the contingency reserve are subject to the approval of our
shareholders in a shareholders’ general meeting. As of December 31, 2007, there
was no amount allocated to our contingency reserve.
|
·
|
For Investment
Reserve. Under Brazilian corporate law, the amount by
which the mandatory distributable amount exceeds the “realized” net income
in a given fiscal year, as proposed by the board of directors, may be
allocated to the investment reserve. Brazilian corporate law
defines “realized” net profits as the amount by which net profits exceed
the sum of (1) the net positive results, if any, from the equity method of
accounting and (2) the profits, gains or returns resulting from a
transaction that occurred in the relevant fiscal year but to be received
after the end of the following fiscal year. All amounts
allocated to the investment reserve must be paid as mandatory dividends
when those “unrealized” profits are realized if they have not been
designated to absorb losses in subsequent periods. As of December 31,
2007, our investment reserve amounted to R$63.2
million.
|
|
·
|
Retained Earnings
Reserve. Under Brazilian corporate law, a portion of our
net income may be reserved for investment projects in an amount based on a
capital expenditure budget approved by our shareholders. If
such budget covers more than one fiscal year, it might be reviewed
annually at the shareholders’ general meeting. The allocation
of this reserve cannot jeopardize the payment of the mandatory dividends.
As of December 31, 2007, there was no amount allocated to our retained
earnings reserve.
|
Capital
Reserve
Under
Brazilian corporate law, the capital reserve is the special reserve for the
issuance of shares, debentures, tax incentives, donations and investments
subsidies, incorporation, and sale of participation certificates and
subscription bonds. The amount allocated to our capital reserve is
not included in the calculation of the mandatory dividend. Under
Brazilian corporate law, capital reserve may only be applied to, among other
things: (1) absorb losses that exceed accumulated earnings and revenue reserves;
(2) redeem, repair or buy our own shares; (3) increase our share
capital.
As of
December 31, 2007, our capital reserve amounted to R$167.3 million.
Mandatory
Distribution of Dividends
Brazilian
corporate law generally requires that the bylaws of each Brazilian company
specify a minimum percentage of the amounts available for distribution by such
company for each fiscal year that must be distributed to shareholders as
dividends or as interest on shareholders’ equity, also known as the mandatory
distribution.
The
mandatory distribution is based on a percentage of adjusted net income, not
lower than 25%, rather than a fixed monetary amount per share. Under
our bylaws, at least 25% of our adjusted net income, as calculated under
Brazilian GAAP and adjusted under Brazilian corporate law (which differs
significantly from net income as calculated under U.S. GAAP), for the preceding
fiscal year must be distributed as a mandatory dividend. Adjusted net
income means the distributable amount before any deductions for statutory
reserves and reserves for investment projects.
Under
Brazilian corporate law, however, we are allowed to suspend the distribution of
the mandatory dividends in any year in which our board of directors report to
our shareholders’ general meeting that the distribution would be inadvisable in
view of our financial condition. Such suspension is subject to the
approval at the shareholders’ meeting and review by members of the fiscal
council if it is in place at the time. In the case of publicly held
company, the board of directors must file a justification for such suspension
with the CVM within five days of the relevant shareholders’ general
meeting. If the mandatory dividend is not paid, the unpaid amount
shall be attributed to a special reserve account. If not absorbed by
subsequent losses, those funds shall be paid out as dividends as soon as the
financial condition of the company permits.
Pursuant
to Brazilian corporate law, the shareholders’ general meeting of a publicly held
company, as we are, may, provided there is no
objection from any of the shareholders in attendance, decide on the distribution
of dividends in an amount lower than the mandatory dividends, or decide to
retain the total net income, exclusively to raise funds for payment of unmatured
debentures that are not convertible into shares.
The
mandatory dividend may also be paid in the form of interest attributable to
shareholders’ equity, being considered as a deductible expense for purpose of
calculating our income and social contribution tax obligations.
Payment
of Dividends
We are
required by Brazilian corporate law to hold an annual general shareholders’
meeting within the first four months following the end of each fiscal year, at
which time, among other things, the shareholders have to decide on the
allocation of the results from the preceding year and on the payment of
dividends.
Under
Brazilian corporate law, dividends are generally required to be paid to the
holder of record on the date of the dividend declaration date within 60 days
following the date the dividend was declared, unless a shareholders’ resolution
sets forth another date of payment, which, in either case, must occur prior to
the end of the fiscal year in which such dividend was declared. A
shareholder has a three-year period from the date of the dividend payment to
claim dividends, which do not bear interest and are not monetarily restated,
after which the aggregate amount of any unclaimed dividends shall legally revert
to us.
Our board
of directors may declare interim dividends to be deducted from the retained
earnings or profit reserves in our semi-annual or annual financial
statements. In addition, our board of directors may pay dividends
from our net income based on our net income registered on semi-annual or
quarterly balance sheet. The dividends paid in each semester may not
exceed the amounts accounted for in our capital reserve accounts. Any
payment of interim dividends may be set off against the amount of mandatory
dividend relating to the net profit earned in the year in which the interim
dividends were paid.
In
general, shareholders who are not residents of Brazil must register their equity
investment with the Central Bank to have dividends, sales proceeds or other
amounts with respect to their shares eligible to be remitted outside of
Brazil. The common shares underlying the ADSs are held in Brazil by
Banco Itaú S.A., also known as the custodian, as agent for the depositary, who
is the registered owner on the records of the registrar for our
shares. The depositary registers the common shares underlying the
ADSs with the Central Bank and, therefore, it is possible to have dividends,
sales proceeds or other amounts with respect to the common shares remitted
outside Brazil.
Payments
of cash dividends and distributions, if any, are made in reais to the custodian on
behalf of the depositary, which then converts such proceeds into U.S. dollars
and causes such U.S. dollars to be delivered to the depositary for distribution
to holders of ADSs. In the event that the custodian is unable to
convert immediately the reais received as dividends
into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be
adversely affected by depreciations of the reais that occur before the
dividends are converted. Under the current Brazilian tax law,
dividends paid to persons who are not Brazilian residents, including holders of
ADSs, will not be subject to Brazilian withholding tax, except for dividends
declared based on profits generated prior to December 31, 1995, which will be
subject to Brazilian withholding income tax at varying tax rates.
See “Item
10.E. Additional Information—Taxation.”
Holders of
ADSs have the benefit of the electronic registration obtained from the Central
Bank, which permits the depositary and the custodian to convert dividends and
other distributions or sales proceeds with respect to the common shares
represented by ADSs into foreign currency and remit the proceeds outside of
Brazil. In the event the holder exchanges the ADSs for common shares,
the holder will be entitled to continue to rely on the depositary’s certificate
of registration for five business days after the
exchange. Thereafter, in order to convert foreign currency and remit
outside of Brazil the sales proceeds or distributions with respect to the common
shares, the holder must obtain a new certificate of registration in its own name
that will permit the conversion and remittance of such payments through the
commercial rate exchange market.
Under
current Brazilian legislation, the Brazilian government may impose temporary
restrictions of foreign capital abroad in the event of a serious imbalance or an
anticipated serious imbalance of Brazil’s balance of payments. See
“Item 3.D. Key Information—Risk Factors—Risks Relating to Our
ADSs.”
Interest
on Shareholders’ Equity
Under the
Brazilian tax legislation effective January 1, 1996, Brazilian companies are
permitted to pay “interest” to holders of equity securities and treat such
payments as an expense for Brazilian income tax purposes and, from 1997, for
social contribution purposes. The purpose of the tax law change is to
encourage the use of equity investment, as opposed to debt, to finance corporate
activities. Payment of such interest may be made at the discretion of
our board of directors, subject to the approval of the shareholders at a
shareholders’ general meeting. The amount of any such notional
“interest” payment to holders of equity securities is generally limited in
respect of any particular year to the greater of:
|
·
|
50%
of net income (after the deduction of the provisions for social
contribution on net profits but before taking into account the provision
for income tax and the interest attributable to shareholders’ equity) for
the period in respect of which the payment is made;
or
|
|
·
|
50%
of the sum of retained earnings and profit reserves as of the beginning of
the year in respect to which such payment is
made.
|
For tax
deduction purposes, the rate applied in calculating interest attributable to
shareholders’ equity cannot exceed the pro rata die variation of the
Long Term Interest Rate (Taxa
de Juros de Longo Prazo), or TJLP.
For
accounting purposes, although the interest should be reflected in the income
statement for tax deduction, the charge is reversed before the calculation of
the net income in the statutory financial statements and deducted from the
shareholders’ equity in the same way as the dividend. Any payment of
interest with respect of the common shares is subject to income tax at the rate
of 15% (or 25%, in the case of a shareholder domiciled in tax haven
jurisdictions).
The amount
distributed to shareholders as interest attributable to shareholders’ equity,
net of any withholding tax, may be included as part of the minimum mandatory
dividend. In accordance with applicable law, we are required to pay
to shareholders an amount sufficient to ensure that the net amount they receive
in respect of interest attributable to shareholders’ equity, after payment of
the applicable withholding tax, plus the amount of declared dividends, is at
least equivalent to the amount of the minimum mandatory dividend. A
shareholder has a three-year period from the date of the interest payment to
claim interest attributable to shareholders’ equity, after which the aggregate
amount of any unclaimed interest shall legally revert to us.
History
of Payment of Dividends and Interest on Shareholders’ Equity
For 2003,
2004 and 2005, we did not distribute dividends. In 2007, we distributed
dividends in the total amount of approximately R$11.0 million, or R$0.11 per
share, for fiscal year 2006. Dividends for fiscal year 2007, in the amount of
approximately R$ 27.0 million, or R$0.21 per share, were proposed by management
and approved at our Annual General Shareholders Meeting held on April 4,
2008.
B. Significant
Changes
None.
A. Offer
and Listing Details
Our common
shares started trading on the BOVESPA on February 17, 2006 and the ADSs started
trading on the NYSE on March 16, 2007. The table below sets forth, for the
indicated periods, the high and low closing prices of the ADSs on the NYSE, in
U.S. dollars, and the common shares on the BOVESPA, in reais:
|
|
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|
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|
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(in
US$ per ADS)
|
|
|
|
(in
reais per common
shares)
|
|
|
Year
Ended
|
|
|
|
|
|
|
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|
|
|
|
|
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December
31, 2006
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
35.20 |
|
|
|
|
17.70 |
|
|
|
|
430,555.87 |
|
December
31, 2007
|
|
|
40.50 |
|
|
|
|
23.10 |
|
|
|
|
418,005.55 |
|
|
|
35.61 |
|
|
|
|
22.50 |
|
|
|
|
897,085.11 |
|
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Quarter
|
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First
quarter 2006 (2)
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
26.85 |
|
|
|
|
18.50 |
|
|
|
|
1,208,044.83 |
|
Second
quarter 2006
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
26.80 |
|
|
|
|
17.70 |
|
|
|
|
450,739.34 |
|
Third
quarter 2006
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
29.05 |
|
|
|
|
20.57 |
|
|
|
|
227,525.00 |
|
Fourth
quarter 2006
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
35.20 |
|
|
|
|
28.51 |
|
|
|
|
247,769.49 |
|
First
quarter 2007 (3)
|
|
|
27.77 |
|
|
|
|
24.89 |
|
|
|
|
1,164,963.64 |
|
|
|
35.30 |
|
|
|
|
25.70 |
|
|
|
|
466,779.54 |
|
Second
quarter 2007
|
|
|
35.32 |
|
|
|
|
24.65 |
|
|
|
|
310,953.97 |
|
|
|
34.02 |
|
|
|
|
25.25 |
|
|
|
|
889,111.29 |
|
Third
quarter 2007
|
|
|
35.09 |
|
|
|
|
23.10 |
|
|
|
|
405,016.83 |
|
|
|
33.41 |
|
|
|
|
22.50 |
|
|
|
|
1,141,404.76 |
|
Fourth
quarter 2007
|
|
|
40.50 |
|
|
|
|
30.00 |
|
|
|
|
407,786.80 |
|
|
|
35.61 |
|
|
|
|
27.01 |
|
|
|
|
1,089,472.88 |
|
First
quarter 2008
|
|
|
41.50 |
|
|
|
|
29.96 |
|
|
|
|
771,929.00 |
|
|
|
34.60 |
|
|
|
|
25.50 |
|
|
|
|
1,128,515.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2008
|
|
|
36.99 |
|
|
|
|
29.96 |
|
|
|
|
615,328.24 |
|
|
|
32.27 |
|
|
|
|
25.50 |
|
|
|
|
997,166.67 |
|
February
2008
|
|
|
40.58 |
|
|
|
|
30.39 |
|
|
|
|
740,686.00 |
|
|
|
33.80 |
|
|
|
|
26.61 |
|
|
|
|
1,082,105.26 |
|
March
2008
|
|
|
41.50 |
|
|
|
|
33.36 |
|
|
|
|
967,602.80 |
|
|
|
34.60 |
|
|
|
|
29.01 |
|
|
|
|
1,310,520.00 |
|
April
2008
|
|
|
43.55 |
|
|
|
|
34.75 |
|
|
|
|
782,962.82 |
|
|
|
36.49 |
|
|
|
|
29.70 |
|
|
|
|
854,080.95 |
|
May
2008
|
|
|
46.50 |
|
|
|
|
38.71 |
|
|
|
|
1,261,705.48 |
|
|
|
38.26 |
|
|
|
|
32.12 |
|
|
|
|
1,189,685.00 |
|
June
2008 (through June 17)
|
|
|
42.86 |
|
|
|
|
37.34 |
|
|
|
|
837,835.00 |
|
|
|
35.20 |
|
|
|
|
30.29 |
|
|
|
|
934,075.35 |
|
(1)
|
Average
number of shares traded per day.
|
(2)
|
Our
common shares started trading on the BOVESPA on February 17,
2006.
|
(3)
|
The
ADSs started trading on the NYSE on March 16,
2007.
|
In
September 2007, we joined the BOVESPA Index, or “IBOVESPA,” the main indicator
of the Brazilian stock market’s average performance and the IBrX-50, an index
measuring the total return on a theoretical portfolio composed of 50 stocks
selected among BOVESPA’s most actively traded securities. Additionally, we are
part of the MSCI Emerging Markets Index, which is a free float-adjusted market
capitalization index that is designed to measure equity market performance in
the global emerging markets. Through the inclusion on these indices, our stock
has expanded opportunity for increased liquidity. Prior to joining the indices,
we traded at a daily average of R$38.1 million (or 1.3 million shares), and
after joining the indices, it increased to an average of R$57.4 million (or 2.1
million shares).
B. Plan
of Distribution
Not
applicable.
C. Markets
Our common
shares are listed on the BOVESPA under the symbol “GFSA3” and the ADSs are
listed on the NYSE under the symbol “GFA.”
Trading
on the BOVESPA
The CVM
and the BOVESPA have discretionary authority to suspend trading in shares of a
particular issuer under certain circumstances. Trading in securities listed on
the BOVESPA, including the Novo Mercado and Levels 1 and
2 segments, may be effected off the exchanges in the unorganized
over-the-counter market in certain circumstances.
The shares
of all companies listed on the BOVESPA, including the Novo Mercado and Level 1 and
Level 2 companies, are traded together.
Settlement
of transactions occurs three business days after the trade date. Delivery of and
payment for shares are made through the facilities of separate clearing houses
for each exchange, which maintain accounts for brokerage firms. The seller is
ordinarily required to deliver the shares to the clearing house on the second
business day following the trade date. The clearing house for the BOVESPA is the
CBLC.
In order
to reduce volatility, the BOVESPA has adopted a “circuit breaker” system
pursuant to which trading sessions may be suspended for a period of 30 minutes
or one hour whenever specified indices of the BOVESPA fall below the limits of
10% and 15%, respectively, in relation to the index levels for the previous
trading session.
Although
the Brazilian equity market is the largest in Latin America in terms of
capitalization, it is smaller and less liquid than the major U.S. and European
securities markets. The BOVESPA is significantly less liquid than the NYSE, or
other major exchanges in the world. The BOVESPA, had a market capitalization of
approximately US$1.4 trillion as of December 31, 2007 and an average daily
trading volume of approximately US$2.6 billion for 2007. In comparison, the NYSE
had a market capitalization of US$30.5 trillion as of December 31, 2007 and an
average daily trading volume of approximately US$141 billion for 2007. Although
any of the outstanding shares of a listed company may trade on the BOVESPA, in
most cases fewer than half of the listed shares are actually available for
trading by the public, the remainder being held by small groups of controlling
persons, by government entities or by one principal shareholder. The relative
volatility and illiquidity of the Brazilian securities markets may substantially
limit your ability to sell the common shares at the time and price you desire
and, as a result, could negatively impact the market price of these
securities.
Trading on
Brazilian stock exchanges by non-residents of Brazil is subject to registration
procedures. See “— Investment in Our Common Shares by Non-Residents of
Brazil.”
Regulation
of Brazilian Securities Markets
The
Brazilian securities markets are principally governed by Law No. 6,385, of
December 7, 1976, and Brazilian corporate law, each as amended and supplemented,
and by regulations issued by the CVM, which has authority over stock exchanges
and the securities markets generally; the National Monetary Council; and the
Central Bank, which has, among other powers, licensing authority over brokerage
firms and regulates foreign investment and foreign exchange
transactions.
These laws
and regulations, among others, provide for licensing and oversight of brokerage
firms, governance of the Brazilian stock exchanges, disclosure requirements
applicable to issuers of traded securities, restrictions on price manipulation
and protection of minority shareholders. They also provide for restrictions on
insider trading. However, the Brazilian securities markets are not as highly
regulated and supervised as the U.S. securities markets or securities markets in
some other jurisdictions. Accordingly, any trades or transfers of our equity
securities by our officers and directors, our controlling shareholders or any of
the officers and directors of our controlling shareholders must comply with the
regulations issued by the CVM. See “Item 10.B. Additional Information—
Memorandum and Bylaws— Policy for the Trading of our securities— Disclosure
Requirements.”
Under
Brazilian corporate law, a corporation is either public (companhia aberta), as we are,
or closely held (companhia
fechada). All public companies are registered with the CVM and are
subject to reporting requirements. Our common shares are listed on Novo Mercado segment of the
BOVESPA.
We have
the option to ask that trading in our securities on the BOVESPA be suspended in
anticipation of a material announcement. Trading may also be suspended on the
initiative of the BOVESPA or the CVM, based on or due to, among other reasons, a
belief that a company has provided inadequate information regarding a material
event or has provided inadequate responses to inquiries by the CVM or the
BOVESPA.
The
Brazilian over-the-counter market consists of direct trades between individuals
in which a financial institution registered with the CVM serves as intermediary.
No special application, other than registration with the CVM, is necessary for
securities of a public company to be traded in this market. The CVM requires
that it be given notice of all trades carried out in the Brazilian
over-the-counter market by the respective intermediaries.
Investment
in Our Common Shares by Non-Residents of Brazil
Investors
residing outside Brazil are authorized to purchase equity instruments, including
our common shares, or foreign portfolio investments on the BOVESPA, provided
that they comply with the registration requirements set
forth in
Resolution No. 2,689 of the National Monetary Council (or Resolution No. 2,689),
and CVM Instruction No. 325.
With
certain limited exceptions, Resolution No. 2,689 investors are permitted to
carry out any type of transaction in the Brazilian financial capital market
involving a security traded on a stock, future or organized over-the-counter
market. Investments and remittances outside Brazil of gains, dividends, profits
or other payments under our common shares are made through the foreign exchange
market.
In order
to become a Resolution No. 2,689 investor, an investor residing outside Brazil
must:
|
·
|
appoint
a representative in Brazil with powers to take actions relating to the
investment;
|
|
·
|
appoint
an authorized custodian in Brazil for the investments, which must be a
financial institution duly authorized by the Central Bank and
CVM;
|
|
·
|
appoint
a tax representative in Brazil;
|
|
·
|
through
its representative, register itself as a foreign investor with the CVM and
the investment with the Central Bank;
and
|
|
·
|
through
its representative, register itself with the Brazilian Internal Revenue
(Receita Federal)
pursuant to the Regulatory Instructions No. 461 and
568.
|
Securities
and other financial assets held by foreign investors pursuant to Resolution No.
2,689 must be registered or maintained in deposit accounts or under the custody
of an entity duly licensed by the Central Bank or the CVM. In addition,
securities trading by foreign investors is generally restricted to transactions
involving securities listed on the Brazilian stock exchanges or traded in
organized over-the-counter markets licensed by the CVM.
Foreign
direct investors under Law No. 4,131/62 may sell their shares in both private or
open market transactions, but these investors will generally be subject to less
favorable tax treatment on gains.
A foreign
direct investor under Law No. 4,131/62 must:
|
·
|
register
as a foreign direct investor with the Central
Bank;
|
|
·
|
obtain
a taxpayer identification number from the Brazilian tax
authorities;
|
|
·
|
appoint
a tax representative in Brazil; and
|
|
·
|
appoint
a representative in Brazil for service of process in respect of suits
based on Brazilian corporate law.
|
Resolution
No. 1,927 of the National Monetary Council, which restated and amended Annex V
to Resolution No. 1,289 of the National Monetary Council, provides for the
issuance of depositary receipts in foreign markets in respect of shares of
Brazilian issuers. We filed an application to have the ADSs approved under
Resolution 1,927 by the CVM, and we received final approval on March 8,
2007.
If a
holder of ADSs decides to exchange ADSs for the underlying common shares, the
holder will be entitled to (1) sell the common shares on the BOVESPA and rely on
the depositary’s electronic registration for five business days from the date of
exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our
common shares; (2) convert its investment into a foreign portfolio investment
under Resolution No. 2,689/00; or (3) convert its investment into a foreign
direct investment under Law No. 4,131/62.
If a
holder of ADSs wishes to convert its investment into either a foreign portfolio
investment under Resolution No. 2,689/00 or a foreign direct investment under
Law No. 4,131/62, it should begin the process of obtaining his
own
foreign investor registration with the Central Bank or with the CVM as the case
may be, in advance of exchanging the ADSs for common shares.
The
custodian is authorized to update the depositary’s electronic registration to
reflect conversions of ADSs into foreign portfolio investments under Resolution
No. 2,689/00. If a holder of ADSs elects to convert its ADSs into a foreign
direct investment under Law 4,131/62, the conversion will be effected by the
Central Bank after receipt of an electronic request from the custodian with
details of the transaction.
If a
foreign direct investor under Law No. 4,131/62 wishes to deposit its shares into
the ADR program in exchange for ADSs, such holder will be required to present to
the custodian evidence of payment of capital gains taxes. The conversion will be
effected by the Central Bank after receipt of an electronic request from the
custodian with details of the transaction. Please refer to “Item 10.E.
Additional Information—Taxation—Brazilian Tax Considerations” for a description
of the tax consequences to an investor residing outside Brazil of investing in
our common shares in Brazil.
D. Selling
Shareholders
Not
applicable.
E. Dilution
Not
applicable.
F. Expenses
of the Issue
Not
applicable.
A. Share
Capital
Not
applicable.
B. Memorandum
and Bylaws
Registration
We are
currently a publicly-held company (sociedade por ações de capital
aberto) incorporated under the laws of Brazil, registered with the Board
of Trade of the State of São Paulo (JUCESP) under NIRE 35300147952 and with the
CVM under No. 01610-1, and enrolled with the Brazilian Taxpayer’s Authorities
under CNPJ/MF No. 01,545,826/0001-07.
Corporate
Purposes
Article 3
of our bylaws provides that our corporate purpose is to: (1) promote and manage
any type of real estate development, owned by us or by third parties; (2)
purchase, sell and negotiate real estate properties; (3) provide civil
construction and civil engineering services; (4) develop and implement marketing
strategies of any real estate developments, owned by us or by third parties; and
(5) hold interests in the capital stock of other companies and enterprises, in
Brazil or abroad.
Issued
Share Capital
As of the
December 31, 2007, our share capital was R$1,221,846,425.31, all of which was
fully subscribed and paid-in. Our share capital is comprised of
132,577,093 registered, book-entry common shares, without par value (of which
3,124,972 are common shares held in treasury). Under our bylaws, our
board of directors may increase our share capital to the limit of our authorized
capital by issuing up to 200,000,000 common shares without the need of specific
shareholder approval. Our shareholders must approve any capital
increase above that amount at a
shareholders’
general meeting. Pursuant to the agreement entered into with the
BOVESPA for the listing of our shares on the Novo Mercado, we are not
permitted to issue preferred shares.
Novo
Mercado
Our shares
were accepted for trading on the Novo Mercado on February 17,
2006. In order to delist our shares from the Novo Mercado, we must conduct
a tender offer for the purchase of the shares of our capital stock outstanding
in the market. See “—Issued Share Capital—Delisting from the Novo Mercado.” In
the Novo Mercado,
listed companies are required to (1) only issue common shares, (2) maintain at
least 25% of the company’s outstanding shares, (3) detail and include additional
information in the quarterly information and (4) make available the annual
financial statements in English and based on international accounting
standards.
The rules
imposed by the Novo
Mercado aim at providing transparency in relation to the activities and
economic situation of the companies to the market, as well as more power to the
minority shareholders in the management of the companies, among other
rights. The main rules relating to the Novo Mercado, and that the
company is subject to, are summarized below.
CMN
Resolution No. 3,121 of November 25, 2003, as subsequently amended, provides new
rules for the investment of funds in private pension funds. Shares of
the capital stock of companies that adopt differentiated corporate governance
practices, such as those companies accepted for trading in the Novo Mercado or Level 1 or
Level 2 of the Differentiated Corporate Governance Practices of the BOVESPA, may
acquire a higher interest in the investment portfolio of private pension
funds. Accordingly, shares of companies that adopted differentiated
corporate governance practices after the enactment of Resolution No. 3,121,
started to be considered significant and attractive investments for the private
pension funds, which are large investors in the Brazilian capital
market. This fact might improve the development of the Novo Mercado, benefiting the
companies whose securities are traded on the Novo Mercado.
Authorization
for Trading on the Novo Mercado
Firstly,
the company that is authorized to list its securities on the Novo Mercado shall keep
updated its listed company register with the CVM, which allows the trading of
the company’s common shares at the stock market. Furthermore, the
company, among other conditions, shall have signed a Listing Agreement in the
Novo Mercado and
adapted its bylaws to comply with the minimum requirements of the
BOVESPA. As regards the capital structure, it shall be exclusively
divided into common shares, and a minimum portion of such shares, representing
25% of the capital stock, shall be maintained outstanding by the
company. The existence of founders’ shares by the companies listed on
the Novo Mercado is
prohibited.
Board
of Directors
The board
of directors of companies authorized to have their shares traded on the Novo Mercado shall be
comprised of at least five members of which at least 20% shall be independent,
as defined in the Listing Rules of the Novo Mercado. The
members of the board of directors shall be elected by a shareholders’ general
meeting for a maximum two-year term of office, and are eligible for
reelection. All new members of the board of directors and of the
board of officers shall sign a Management Compliance Statement which subjects
the investiture of the corresponding positions to the signing of this
document. Through the Compliance Statement, the company’s directors
and officers are personally responsible for complying with the Listing Agreement
in the Novo Mercado,
the Rules of the Market Arbitration Chamber and the Listing Rules of the Novo Mercado.
Other
Novo Mercado Characteristics
Novo Mercado rules cover
other areas designed to foster high levels of corporate governance and market
transparency. Companies are required to keep the minimum stock
percentage floating in the market, in order to foster dispersion of share
ownership. In addition, companies are obliged to assign tag-along
rights to their shareholders in order to ensure equal treatment if a controlling
shareholder plans to sell its controlling stake. The Novo Mercado rules require
companies to provide quarterly information on the number of shares held by
the
controlling
shareholder, if any, company directors and officers, members of the Supervisory
Council and the number of outstanding shares, in addition to other information
required by the Listing Rules of the Novo
Mercado. Companies are also required to give more disclosure
regarding related party transactions in which a company may be
involved. Finally, controlling shareholders, directors, officers and
members of a company’s fiscal council are required to submit to arbitration any
disputes or conflicts related to or arising from the Listing Rules of the Novo Mercado and the Listing
Agreement in the Novo
Mercado, specifically with regard to their application, validity,
effectiveness and interpretation. The arbitrations take place before
the Market Arbitration Chamber established by the BOVESPA and are conducted in
accordance with the Rules of the Market Arbitration Chamber.
Company
Management
We are
managed by a board of directors (Conselho de Administração)
and an board of officers (Diretoria Executiva). See “—
Board Practices”.
The
members of the board of directors must be shareholders irrespectively of the
number of shares of the capital stock of the company he/she holds. The members
of the board of officers must be Brazilian residents and may, or may
not, be shareholders.
Conflict
of Interests
According
to Brazilian corporate law a director or an officer shall not take part in any
corporate transaction in which he/she has an interest which conflicts with the
interest of the company. In this case, he/she shall disclose his/her
disqualification to the other directors or officers and shall cause the nature
and extent of his/her interest to be recorded in the minutes of the board of
directors or board of officers’ meeting, as the case may be.
With due
compliance with the rules above relating to conflict of interests, a director or
an officer may only contract with the company under reasonable and fair
conditions, identical to those which prevail in the market or under which the
corporation would contract with third parties. Any business contracted otherwise
is voidable and the director or the officer concerned shall be obliged to
transfer to the corporation all benefits which he/she may have obtained in such
business.
According
to Brazilian corporate law, any director or officer may not:
|
·
|
perform
any act of generosity to the detriment of the
company;
|
|
·
|
without
prior approval of the shareholders’ general meeting or the board of
directors, borrow money or property from the company or use its property,
services or taking advantage of its standing for his/her own benefit or
for the benefit of a company in which he/she has an interest or of a third
party; and
|
|
·
|
by
virtue of his position, receive any type of direct, or indirect, personal
advantage from third parties, without authorization in the bylaws or from
a shareholders’ general meeting.
|
According
to our bylaws, any business or agreement between the company and any director or
officer must be previously approved by the board of directors, except if
specified in our annual budget or business plan.
Rules
for Retirement
There is
no retirement age relating to directors or officers pursuant to the Brazilian
law and our bylaws.
Policy
for the Trading of Our Securities
On March
4, 2005, our board of directors approved our Conduct Manual on Information
Disclosure and Use and Securities Trading Policy, which establishes the
following procedures regarding the policy for the trading of our
securities:
|
·
|
all
trades conducted by us and persons that must comply with the Trading
Policy (executive officers, directors, employees and shareholders involved
in our management) can only be conducted with the intermediation of
certified brokers, according to the list sent to CVM, to which all updates
made will be reported;
|
|
·
|
such
persons are also restricted from trading their shares during all periods
when the investor relations officer gives notice of a black-out period,
and the investor relations officer has no obligation to provide the reason
for the black-out period, which will be handled confidentially by its
recipients;
|
|
·
|
all
our directors, executive officers, employees, members of the other bodies
with technical or consultant duties, our possible controlling
shareholders, and whoever by virtue of his/her position, job, or post at
our company or our subsidiaries and affiliates, and who has signed the
compliance statement and becomes aware of information of a material
transaction or event involving our company, are restricted from trading
our securities until such material transaction or event is disclosed to
the market, except as regards treasury stock transactions, through private
trading, the exercise of options to purchase shares of our capital stock,
or a possible buyback carried out by us. This restriction is
extended to periods prior to the announcement of such information or
annual or interim financial
statements;
|
|
·
|
to
be valid, trading of our securities or transactions related to our
securities carried out by the aforementioned persons must consist of
long-term investments, as defined in the Trading Policy;
and
|
|
·
|
the
restrictions of the Trading Policy also apply to our former directors and
executive officers (a) for the six month period following the end of their
duties with the company, or (b) until the disclosure of the material event
or the related financial statements, and also cover indirect trading
carried out by the aforementioned
persons.
|
Rights
of Common Shares
Each of
our common shares entitles its holder to one vote at an annual or special
shareholders’ general meeting. A holder of ADS have the right under the deposit
agreement to instruct the depositary to exercise the voting rights for the
common shares represented by his/hers ADSs. See “Item 3.D. Key Information—Risk
Factors—Risks Relating to Our Common Shares and the ADSs.” Pursuant
to our bylaws and Brazilian corporate law, owners of common shares are entitled
to dividends, or other distributions made in respect of common shares, in
proportion to their ownership of outstanding shares. See “Item 8.A.
Financial Information—Consolidated Statements and Other Financial
Information—Dividend Policy” and “Item 9.C. The Offer and Listing—Markets—
Investment in Our Common Shares by Non-Residents of Brazil” for a more complete
description of payment of dividends and other distributions on our common
shares. In addition, upon our liquidation, holders of our shares are
entitled to share all our remaining assets, after payment of all our
liabilities, ratably in accordance with their respective participation in the
total amount of our issued and outstanding shares. Holders of our common shares
are entitled to participate on a pro rata basis in, but are not liable for,
future capital calls by our company. Our common shares have tag along
rights, which enable their holders to, upon the sale of a controlling interest
in us, receive 100% of the price paid per common share of the controlling
block.
Options
According
to our bylaws, we may, within our authorized share capital and upon resolution
of the shareholders’ general meeting, grant stock options to (1) our directors,
executive officers and employees, (2) individuals who provide services to us or
(3) companies we control.
Withdrawal
Rights
Shareholders
who dissent or abstain from voting on certain actions taken during a
shareholders’ general meeting have the right under Brazilian corporate law to
withdraw from our company and to receive the value of their shares.
According
to Brazilian corporate law, shareholder withdrawal rights may be exercised in
the following circumstances, among others:
|
·
|
a
spin-off (cisão)
of our company;
|
|
·
|
a
reduction in the percentage of our mandatory
dividends;
|
|
·
|
a
change in our corporate purpose;
|
|
·
|
an
acquisition of a controlling stake in our company if the acquisition price
is outside of the limits established by Brazilian corporate
law;
|
|
·
|
a
merger (fusão) of
our company with another company if we are not the surviving entity or our
consolidation (incorporação) with
another company; or
|
|
·
|
an
approval of our participation in a group of companies (as defined in
Brazilian corporate law).
|
Brazilian
corporate law further provides that any resolution regarding a spin-off will
also entitle shareholders to withdraw if the spin-off:
|
·
|
causes
a change in our corporate purpose, except if the equity is spun-off to a
company whose primary activities are consistent with our corporate
purposes;
|
|
·
|
reduces
our mandatory dividends; or
|
|
·
|
causes
us to join a group of companies (as defined in Brazilian corporate
law).
|
In cases
where (1) our company merges with another company in circumstances in which we
are not the surviving company, or (2) we are consolidated with another company,
or (3) we participate in a group of companies (as defined in Brazilian corporate
law), our shareholders will not be entitled to withdraw from our company if
their respective shares are (a) liquid, defined as part of the BOVESPA index or
some other traded stock exchange index (as defined by the CVM) and (b) widely
held, such that the controlling shareholder or companies it controls hold less
than 50% of our shares.
The right
to withdraw expires 30 days after publication of the minutes of the relevant
shareholders’ general meeting. We are entitled to reconsider any
action giving rise to withdrawal rights for 10 days after the expiration of
those rights if the redemption of shares of dissenting or non-voting
shareholders would jeopardize our financial stability. If
shareholders exercise withdrawal rights, they are entitled to receive net book
value for the shares, based on the last balance sheet approved by the
shareholders. If the resolution giving rise to the rights is made
later than 60 days after the date of the last approved balance sheet, the
shareholder may demand that his or her shares be valued according to a new
balance sheet dated no less than 60 days before the resolution
date. In this case, we must immediately pay 80% of the equity value
of the shares according to the most recent balance sheet approved by our
shareholders, and the balance must be paid within 120 days after the date of the
resolution of the shareholders’ general meeting.
Redemption
of Shares
According
to Brazilian corporate law, we may redeem our shares by a decision taken in a
special shareholders’ general meeting by shareholders representing at least 50%
of our share capital. The share redemption may be paid with our
profit, profit reserves or capital reserves. If the share redemption
is not applicable to all shares, the redemption will be made by
lottery. If custody shares are picked in the lottery and there are no
rules established in the custody agreement, the financial institution will
specify on a pro rata basis, the shares to be redeemed.
Registration
of Shares
Our shares
are held in book-entry form with Banco Itaú S.A., which will act as the
custodian agent for our shares. Transfer of our shares will be
carried out by means of book entry by Banco Itaú S.A., debiting the share
account of the seller and crediting the share account of the buyer, with the
presentation of a written order of the transferor or a judicial authorization or
order to effect such transfers.
Preemptive
Rights
Except as
provided below, our shareholders have a general preemptive right to participate
in any issuance of new shares, convertible debentures and warrants, in
proportion to their respective shareholding at such time, but the conversion of
debentures and warrants into shares, the granting of options to purchase shares
and the issuance of shares as a result of its exercise, are not subject to
preemptive rights. In addition, Brazilian corporate law allows for
companies’ bylaws to give the board of directors the power to exclude preemptive
rights or reduce the exercise period of such rights with respect to the issuance
of new shares, debentures convertible into shares and subscription warrants up
to the limit of the authorized share capital if the distribution of those shares
is effected through a stock exchange, through a public offering or through an
exchange of shares in a tender offer the purpose of which is to acquire control
of another company. Shareholders are allowed to exercise the
preemptive rights for a period of at least 30 days following the publication of
notice of the issuance of shares, convertible debentures and warrants, and the
right may be transferred or disposed of for consideration.
Holders of
ADSs may be unable to exercise preemptive rights with respect to our common
shares underlying the ADSs. See “Item 3.D. Key Information—Risk Factors—Risks
Relating to Our Common Shares and the ADSs—Holders of ADSs may be unable to
exercise preemptive rights with respect to our common shares underlying the
ADSs.”
Shareholders’
General Meetings
Under
Brazilian corporate law, at our shareholders’ meetings, shareholders are
empowered to take any action relating to our corporate purpose and to pass any
such resolutions as they deem necessary. The approval of our
financial statements and the determination of the allocation of our net profits
with respect to each fiscal year take place at our annual general shareholders’
meeting immediately following such fiscal year. The election of our
directors and members of our fiscal council—if the requisite shareholders
request its establishment—typically takes place at the annual general
shareholders’ meeting, although under Brazilian law it may also occur at a
special shareholders’ general meeting.
A special
shareholders’ general meeting may be held concurrently with the annual general
shareholders’ meeting. Pursuant to our bylaws and Brazilian corporate
law, the following actions, among others, may only be taken at a general
shareholders’ meeting:
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amendment
of our bylaws;
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election
and dismissal, at any time, of our directors and members of our fiscal
council, if we eventually form a fiscal
council;
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determination
of the aggregate compensation of our board of directors and board of
officers, as well as the fiscal council’s compensation, if the requisite
shareholders request its
establishment;
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approval
of stock splits and reverse stock
splits;
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approval
of a stock ownership plan or the subscription of shares by our management
or our employees;
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approval
of the management’s accounts and the financial statements prepared by the
management;
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resolution
upon the destination of our net income and distribution of
dividends;
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election
of the fiscal council to function in the event of our
dissolution;
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cancellation
of our registration with the CVM as a publicly-held
company;
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authorization
for the issuance of convertible debentures or secured
debentures;
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suspension
of the rights of a shareholder who has violated Brazilian corporate law or
our bylaws;
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acceptance
or rejection of the valuation of in-kind contributions offered by a
shareholder in consideration for shares of our capital
stock;
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approval
of our transformation into a limited liability company (sociedade limitada) or
any other corporate form;
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delisting
of our common shares from the Novo
Mercado;
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appointment
of a financial institution responsible for our valuation, in the event
that a tender offer for our common shares is carried out in connection
with a corporate transformation or delisting of our common shares from the
Novo
Mercado;
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reduction
in the percentage of mandatory
dividends;
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participation
in a centralized group of
companies;
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change
in our core business or corporate
purpose;
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approval
of any merger (fusão), consolidation
(incorporação)
with another company or spin-off (cisão);
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approval
of any dissolution or liquidation, the appointment and dismissal of the
respective liquidator and the official review of the reports prepared by
him or her; and
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authorization
to petition for bankruptcy or request for judicial or extrajudicial
restructuring.
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According
to Brazilian corporate law, neither a company’s bylaws nor actions taken at a
shareholders’ meeting may deprive a shareholder of specific rights, such
as:
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the
right to participate in the distribution of
profits;
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the
right to participate equally and ratably in any remaining residual assets
in the event of liquidation of the
company;
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the
right to preemptive rights in the event of subscription of shares,
convertible debentures or subscription warrants (bônus de subscrição),
except in some specific circumstances under the Brazilian law described in
“—Preemptive Rights”;
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the
right to inspect and monitor the management of the company’s business in
accordance with Brazilian corporate
law;
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the
right to withdraw from the company in the cases specified in Brazilian
corporate law, described in “—Withdrawal
Rights.”
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Quorum
for our Shareholders’ General Meetings
As a
general rule, Brazilian corporate law provides that a quorum at a shareholders’
general meeting consists of shareholders representing at least 25% of a
company’s issued and outstanding voting capital on the first call and, if that
quorum is not reached, any percentage on the second call. A quorum
for the purposes of amending our bylaws
consists
of shareholders representing at least two-thirds of our issued and outstanding
voting capital on the first call and any percentage on the second
call.
As a
general rule, the affirmative vote of shareholders representing at least the
majority of our issued and outstanding common shares present in person or
represented by proxy at a shareholders’ general meeting is required to ratify
any proposed action, with abstentions not taken into
account. However, the affirmative vote of shareholders representing
one-half of our issued and outstanding voting capital is required
to:
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reduce
the percentage of mandatory
dividends;
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change
our corporate purpose;
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merge
or consolidate our company with another
company;
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spin-off
a portion of our assets or
liabilities;
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approve
our participation in a group of companies (as defined in Brazilian
corporate law);
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apply
for cancellation of any voluntary
liquidation;
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approve
our dissolution; and
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approve
the merger of all our shares into another
company.
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According
to our bylaws and for so long as we are listed on the Novo Mercado, we may not
issue preferred shares or founders’ shares and we will have to conduct a tender
offer in order to delist ourselves from the Novo Mercado.
A quorum
smaller than the quorum established by Brazilian corporate law may be authorized
by the CVM for a publicly-held company with widely-traded and widespread shares
that has had at least half of the holders of its voting shares in attendance at
its last three shareholders’ meetings.
Notice
of our Shareholders’ General Meetings
According
to Brazilian corporate law, notice of our shareholders’ general meetings must be
published at least three times in the Diário Oficial do Estado de São
Paulo, the official newspaper of the State of São Paulo, and in another
widely circulated newspaper in the same State, previously chosen at an annual
shareholders meeting, which in our case is Valor
Econômico. The first notice must be published no later than 15
days before the date of the meeting on the first call, and no later than eight
days before the date of the meeting on the second call. However, in
certain circumstances, the CVM may require that the first notice be published 30
days in advance of the meeting. In addition, upon request of any
shareholder, the CVM may suspend for up to 15 days the required prior notice of
the special shareholders’ general meeting so that the requesting shareholder may
become familiar with and analyze the proposal to be voted upon at such
meeting. Such call notice in all circumstances shall contain the
agenda for the meeting and, in case of an amendment to our bylaws, a summary of
the proposed amendment.
Location
of our Shareholders’ General Meetings
Our
shareholders’ meetings shall take place at our head offices at
Av. Nações Unidas No. 8,501, 19th floor,
05425-070 - São Paulo, SP - Brazil. Brazilian corporate law allows
our shareholders to hold meetings outside our head offices in the event of force majeure, provided that
the relevant notice contains a clear indication of the place where the meeting
will occur.
Who
May Call our Shareholders’ General Meetings
According
to Brazilian corporate law, the chairman of our board of directors may call a
shareholders’ general meeting. Shareholders’ general meetings may
also be called by:
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any
shareholder, if our directors fail to call a shareholders’ general meeting
within 60 days after the date they were required to do so under applicable
laws and our bylaws;
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shareholders
holding at least 5% of our share capital if our directors fail to call a
meeting within eight days after receipt of a request to call the meeting
by those shareholders, and such request must indicate the proposed
agenda;
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shareholders
holding at least 5% of our share capital if our directors fail to call a
meeting within eight days after receipt of a request to call the meeting
to convene a fiscal council;
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our
fiscal council, if one is in place, if our board of directors delays
calling an annual shareholders’ meeting for more than one
month. The fiscal council may also call a special general
shareholders’ meeting at any time if it believes that there are
significant or urgent matters to be addressed;
and
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The
chairman of our board of directors, shall call a shareholders’ general meeting
if: (1) we are controlled by a shareholder holding less than 50% of our voting
capital (i.e., control power exercised in a diffuse manner); and (2) BOVESPA
establishes that the price of our shares must be disclosed separately or that
the trading of our shares on the Novo Mercado must be
suspended due to non-compliance with the listing rules of Novo Mercado. At
such a meeting all members of our board of directors must be
replaced.
Conditions
for Admission at our Shareholders’ General Meetings
A
shareholder may be represented at a shareholders’ general meeting by a proxy, as
long as the proxy is appointed less than a year before such shareholders’
general meeting. The proxy must be either a shareholder, an executive
officer of our company, a lawyer or a financial institution. An
investment fund must be represented by its investment fund officer.
Shareholders
attending a shareholders’ general meeting must deliver proof of their status as
shareholders and proof that they hold the shares they intend to vote by delivery
of proper identification and a receipt issued by the custodian agent of our
shares.
Arbitration
Any
disputes or controversies relating to or arising from the Listing Agreement in
the Novo Mercado,
Listing Rules of the Novo
Mercado, our bylaws, Brazilian corporate law, the rules published by the
CMN, the Central Bank, the CVM, any shareholders’ agreement filed at the our
headquarters, and other rules applicable to the Brazilian capital markets in
general, must be submitted to arbitration conducted in accordance with the Rules
of the Market Arbitration Chamber established by the
BOVESPA. According to Chapter Twelve of such Rules, the parties may
consensually agree to use another arbitration chamber or center to resolve their
disputes.
Going
Private Process
We may
become a private company by the decision of our controlling shareholder or group
of controlling shareholders only if we or our controlling shareholders conduct a
public tender offer to acquire all of our outstanding shares in accordance with
the rules and regulations of Brazilian corporate law and the CVM
regulations. The minimum price offered for the shares in the public
tender offer will correspond to the economic value of such shares, as determined
by a valuation report issued by a specialized firm.
The
valuation report must be prepared by a specialized and independent firm of
recognized experience chosen by the shareholders representing the majority of
the outstanding shares (excluding, for such purposes, the shares held by the
controlling shareholder, its partner and any dependents included in the income
tax statement, should the controlling shareholders be an individual, treasury
shares, shares held by our affiliates and by other companies that are a part of
our economic group, as well as blank votes) from a list of three institutions
presented by our board of directors. All the expenses and costs
incurred in connection with the preparation of the valuation report must be paid
for by the controlling shareholder.
Shareholders
holding at least 10% of our outstanding shares may require our management to
call a special shareholders’ general meeting to determine whether to perform
another valuation using the same or a different valuation
method. This request must be made within 15 days following the
disclosure of the price to be paid for the shares in the public
offering. The shareholders who make such request as well as those who
vote in its favor must reimburse us for any costs involved in preparing the new
valuation, if the new valuation price is not higher than the original valuation
price. If the new valuation price is higher than the original
valuation price, the public offering must be made at the higher
price.
If our
shareholders determine to take us private and at that time we are controlled by
a shareholder holding less than 50% of our total share capital or by a
shareholder that is not a member of a group of shareholders, we must conduct the
public tender offer, within the limits imposed by law. In this case,
we may only purchase shares from shareholders that have voted in favor of us
becoming a private company after purchasing all shares from the other
shareholders that did not vote in favor of such deliberation and that have
accepted the public tender offer.
We may, at
any time, delist our common shares from the Novo Mercado, provided that
shareholders approve the decision and that the BOVESPA is notified in writing at
least 30 days in advance. Delisting of shares from the Novo Mercado does not require
delisting from the BOVESPA.
If our
common shares are delisted from the Novo Mercado, we or our
controlling shareholders, if any, will be required to conduct a tender offer for
the acquisition of our outstanding common shares within the time limit
established in CVM Instruction No. 361 of March 5, 2002. In addition,
we will not be permitted to list securities on the Novo Mercado for a period of
two years after the delisting date, unless there is a change in control after
the delisting. The minimum price offered for the shares in the public
tender offer will correspond to the economic value of the shares, as determined
by a valuation report issued by a specialized firm chosen by the shareholders
representing a majority of the outstanding shares (excluding, for such purposes,
shares held by the controlling shareholders, if any, and their affiliates,
treasury shares, shares held by our affiliates, and blank votes) from a list of
three institutions presented by our board of directors. All the
expenses and costs incurred in connection with the preparation of the valuation
report must be paid for by the controlling shareholder or by us.
If our
delisting from the Novo
Mercado occurs due to the cancellation of our registration as a publicly
held company, our eventual controlling shareholders will need to follow all the
other requirements established by such modality of delisting. See
“—Going Private Process.”
In the
event that we delist due to a corporate reorganization where the surviving
company is not admitted for listing on the Novo Mercado, the
then-controlling shareholders will need to carry out a public tender offer for
the acquisition of the shares held by other shareholders, and the minimum price
offered per share shall be the economic value of the shares. The
notice of public tender offer shall be given to the BOVESPA and released to the
market immediately after the shareholders’ general meeting that has approved the
corporate reorganization.
If our
share control is sold within twelve months of our delisting from the Novo Mercado, the selling
controlling shareholder and the acquirer shall offer to acquire the shares of
all other shareholders under the same conditions offered to the selling
controlling shareholder.
Sale
of a Controlling Stake in our Company
Under the
Listing Rule of the Novo
Mercado, the sale of a controlling interest in our company, either
through a single transaction or through successive transactions, takes place
under a suspension or resolution condition, where the acquirer agrees to, within
the time specified under Brazilian corporate law and the Listing Rules of the
Novo Mercado, make a
tender offer of the remaining shares of the other shareholders under the same
terms and conditions granted to the selling controlling
shareholder.
A tender
offer is also required under the following conditions:
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when
rights are assigned for a subscription of shares and other securities or
rights related to securities convertible into shares that results in the
sale of the company’s controlling
stake;
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when,
if the controlling shareholder is an entity, the control of such
controlling entity is transferred;
and
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when
a current shareholder acquires a controlling stake through an agreement
for the purchase of shares. In this case, the acquiring
shareholder is obligated to make a tender offer under the same terms and
conditions granted to the selling shareholders and reimburse the
shareholders from whom he/she had purchased the shares traded on stock
exchanges within the six months before the sale date of the company’s
share control. The reimbursement value is the difference
between the price paid to the selling controlling shareholder and the
amount traded on stock exchanges per share, during this period, adjusted
by the inflation in the period.
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The buyer,
when necessary, must take the necessary measures to recompose the minimum 25% of
outstanding shares in the market within the subsequent six months.
Purchases
by us of our own Shares
Our bylaws
entitle our board of directors to approve the acquisition of our own
shares. The decision to acquire our shares, to maintain the acquired
shares in treasury or to cancel them may not, among other things:
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result
in the reduction of our share
capital;
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require
the use of resources greater than our accumulated profits and available
reserves;
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create,
as a result of any action or inaction, directly or indirectly, any
artificial condition relating to demand, supply or share
price;
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involve
any unfair practice; or
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be
used for the acquisition of shares held by our controlling
shareholders.
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We may not
keep in treasury more than 10% of our common shares, including the shares held
by our subsidiaries and affiliates.
Any
acquisition by us of our own shares must be made on a stock exchange and cannot
be made in a private transaction, except if previously approved by
CVM. Moreover, we may acquire or issue put or call options related to
our shares.
Disclosure
Requirements
We are
subject to the reporting requirements established by Brazilian corporate law and
the CVM. Furthermore, because we are listed with the Novo Mercado, we must also
follow the disclosure requirements provided for in the Listing Rules of the
Novo
Mercado.
Disclosure
of Information
The
Brazilian securities regulations require that a publicly-held corporation
provide the CVM and the relevant stock exchanges with periodic information that
includes annual information statements, quarterly financial statements,
quarterly management reports, independent auditor reports, notices and minutes
of shareholders’ meetings. In addition, we also must disclose any
material development related to our business to the CVM and the
BOVESPA.
We observe
the Novo Mercado
disclosure standards and are required to, among things:
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present
a consolidated balance sheet, a consolidated statement of results and the
accompanying letter to
shareholders;
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disclose
any direct or indirect ownership interest, including beneficial ownership
interest, known to us, exceeding 5% of our capital
stock;
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disclose
the amount and characteristics of our securities held directly or
indirectly by insiders;
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disclose
changes in the amount of securities held by insiders within the preceding
12 months;
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include,
in the explanatory notes to our financial statements, a cash flow
statement;
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disclose
the amount of free float shares and their respective percentage in
relation to total shares
outstanding;
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prepare
annual and quarterly financial statements in accordance with U.S. GAAP or
IFRS; and
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disclose
the existence of and compliance with the arbitration clauses, as defined
in the Listing Rules of the Novo
Mercado.
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Disclosure
of Trading by Insiders
Pursuant
to the rules of the Novo
Mercado, each of our possible controlling shareholders must disclose to
the BOVESPA regarding information in connection with the total amount and
characteristics of securities owned, directly or indirectly, by them and issued
by us, or any derivatives referenced in such securities, as well as any
subsequent trading of such securities and derivatives. In the case of
individuals, such information shall also include securities held by the spouse,
companion or dependents of such persons, included in the annual income tax
statement of such controlling shareholder. This information must be
communicated to the BOVESPA within 10 days following the end of each
month.
CVM
regulations require our directors, executive officers, members of the fiscal
council, and members of any other technical or advisory body to disclose to us,
to the CVM and to the BOVESPA, the total amount, the characteristics and form of
acquisition of securities issued by us, listed companies under our control or
the control of our listed controlling shareholders, including derivatives
referenced in such securities that are held by each of them, as well as any
change in such investments within 10 days after the end of the month when the
securities were traded. In the case of individuals, such information
shall also include securities held by the spouse, companion or dependents of
such persons, included in the annual income tax statement and companies
controlled directly or indirectly by such person.
In
addition, our controlling shareholders, our shareholders who have caused the
election of members of our board of directors or fiscal council, as well as any
individual, legal entity or group of persons acting jointly that holds directly
or indirectly 5% or more of our shares, must provide to us, the CVM and the
BOVESPA the following information:
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the
name and qualification of the person providing the
information;
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amount,
price, type, and/or class, in the case of acquired shares, or
characteristics, in the case of
securities;
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form
of acquisition (private placement or purchase through a stock exchange,
among others);
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reason
and purpose for the acquisition;
and
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information
on any agreement regarding the exercise of voting rights or the purchase
and sale of our securities.
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The
disclosure requirement referred to above will also apply to any person or group
acting jointly, holding participation equal to or in excess of 5%, each time
such person increases or decreases its participation in our shares by an amount
equal to 5% of our shares.
According
to the Listing Rules of the Novo Mercado, in case we are
subject to widespread control, the selling shareholders will only be required to
provide the information listed above while holding 10% or more of our total
capital stock and only during the first 6 months from the date that the
announcement of commencement of the offering is published.
Disclosure
of Material Developments
According
to Law No. 6,385 of December 7, 1976, and subsequent amendments, and CVM
Instruction No. 358 of January 3, 2002, and subsequent amendments, we must
disclose any material development related to our business to the CVM and to the
BOVESPA and must publish a notice of the material development. A
development is deemed to be material if it has a material impact on the price of
our securities, is the decision of investors to trade in our securities or is
the decision of investors to exercise any rights as holders of any of our
securities.
Under
special circumstances, we may request confidential treatment of certain material
developments from the CVM, when our management believes that public disclosure
could result in adverse consequences to us.
C.
Material Contracts
In October
2006, we entered into an agreement to acquire 100% of Alphaville the largest
residential community development company in Brazil focused on the
identification, development and sale of high quality residential communities in
the metropolitan regions throughout Brazil targeted at upper and upper-middle
income families. On January 8, 2007, we successfully completed the acquisition
of 60% of Alphaville’s shares for R$198.4 million, of which R$20 million was
paid in cash and the remaining R$178.4 million was paid in exchange for 6.5
million common shares of Gafisa. The acquisition agreement provides that we will
purchase the remaining 40% over the next five years (20% within three years from
the acquisition date and the remaining 20% within five years from the
acquisition date) in cash or shares, at our sole discretion. Alphaville is
operating as one of our subsidiaries based in the city of Barueri, within the
metropolitan region of São Paulo.
D. Exchange
Controls
There are
no restrictions on ownership of our common shares by individual or legal
entities domiciled outside Brazil. However, the right to convert dividend
payments and proceeds from the sale of our shares into foreign currency and to
remit such amounts abroad is subject to restrictions under foreign investment
legislation which generally require, among other things, that the relevant
investment be registered with the Central Bank and the CVM. See “Item 3.D. Key
Information—Risk Factors—Risk Relating to Brazil—Restrictions on the movement of
capital out of Brazil may adversely affect your ability to receive dividends and
distributions on, or the proceeds of any sale of, the ADS” and “Item 9.C. The
Offer and Listing —Markets—Investment in Our Common Shares by Non-Residents of
Brazil.”
E. Taxation
The
following discussion contains a description of material Brazilian and U.S.
federal income tax consequences of the acquisition, ownership and disposition of
common shares or ADSs. The discussion is based upon the tax laws of
Brazil and regulations thereunder and on the tax laws of the United States and
regulations thereunder as in effect on the date hereof, which are subject to
change.
Although
there is at present no income tax treaty between Brazil and the United States,
the tax authorities of the two countries have had discussions that may culminate
in such a treaty. No assurance can be given, however, as to whether
or when a treaty will enter into force or how it will affect the U.S. Holders
(as defined below) of common shares or ADSs. Prospective holders of
common shares or ADSs should consult their own tax advisors as to the tax
consequences of the acquisition, ownership and disposition of common shares or
ADSs in their particular circumstances.
Brazilian
Tax Considerations
The
following discussion summarizes the principal Brazilian tax consequences of the
acquisition, ownership and disposition of our common shares or ADSs by a holder
that is not domiciled in Brazil for purposes of Brazilian taxation (a
“Non-Resident holder”). This discussion is based on Brazilian law as
currently in effect. Any change in that law may change the
consequences described below.
The tax
consequences described below do not take into account the effects of any tax
treaties or reciprocity of tax treatment entered into by Brazil and other
countries. Please note that Brazil has not entered into any tax
treaty with the United States. The discussion also does not address
any tax consequences under the tax laws of any state or municipality of
Brazil. The description below is not intended to constitute a
complete analysis of all tax consequences relating to the acquisition, exchange,
ownership and disposition of our common shares or ADSs.
Income
tax
Dividends. Dividends
paid by a Brazilian corporation, such as our company, including stock dividends
and other dividends paid to a Non-Resident holder of common shares or ADSs, are
currently not subject to withholding income tax in Brazil, as far as such
amounts are related to profits generated after January 1,
1996. Dividends paid from profits generated before January 1, 1996
may be subject to Brazilian withholding income tax at varying rates, according
to the tax legislation applicable to each corresponding year. We
generally expect to pay dividends from profits generated after January 1,
1996.
Interest on Shareholders’
Equity. Law No. 9,249, dated December 26, 1995, as amended,
permits a Brazilian corporation, such as our company, to make distributions to
shareholders of interest on shareholders’ equity as an alternative to making
dividend distributions. These distributions may be paid in
cash. For tax purposes, the deductible amount of interest on
shareholders’ equity is limited to the daily pro rata variation of the TJLP, as
determined by the Central Bank from time to time, and the amount of this
interest may not exceed the greater of:
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·
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50%
of net income (after the deduction of the provisions for social
contribution on net profits but before taking into account the provision
for income tax and the interest on shareholders’ equity) for the period in
respect of which the payment is made;
and
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|
·
|
50%
of the sum of retained profits and profit reserves as of the date of the
beginning of the period in respect of which the payment is
made.
|
Payments
of interest on shareholders’ equity to a Non-Resident holder may be deducted for
Brazilian corporate income tax as far as the limits described above are
observed. Such payments are subject to withholding income tax at the
rate of 15%, or 25% if the Non-Resident holder is domiciled in a tax haven—that
is, a country or location that does not impose income tax or where the income
tax rate is lower than 20% or where the local legislation imposes restrictions
on disclosing the shareholding composition or the ownership of the investment
(“Tax Haven Residents”). These payments may be included, at their net
value, as part of any mandatory dividend. To the extent payment of
interest on shareholders’ equity is so included, the corporation is required to
distribute to shareholders an additional amount to ensure that the net amount
received by them, after payment of the applicable withholding income tax, plus
the amount of declared dividends is at least equal to the mandatory
dividend.
Gains
According
to Law No. 10,833/03, the disposition or sale of assets located in Brazil by a
Non-Resident holder, whether to another non-Brazilian resident or to a Brazilian
resident, may be subject to capital gains taxes in Brazil.
With
respect to the disposition of common shares, as they are assets located in
Brazil, the Non-Resident holder may be subject to income tax on the gains
assessed, following the rules described below, regardless of whether the
transactions are conducted in Brazil or with a Brazilian resident.
As to the
ADSs, although the matter is not entirely clear, arguably the gains realized by
a Non-Resident holder upon the disposition of ADSs to another Non-Resident
holder are not taxed in Brazil. For more information, please
refer to
“Item 3.D. Key Information—Risks Factors—Risks Relating to Our Common Shares and
the ADSs—Changes in Brazilian tax laws may have an adverse impact on the taxes
applicable to a disposition of the ADSs.”
As a
general rule, gains realized as a result of a disposition or sale transaction of
common shares or ADSs are the positive difference between the amount in reais realized on the sale or
exchange of the security and its acquisition cost measured in reais (without correction for
inflation).
Under
Brazilian law, however, income tax rules on such gains can vary, depending on
the domicile of the Non-Resident holder, the type of registration of the
investment by the Non-Resident holder with the Central Bank and how the
disposition is carried out, as described below.
Gains
assessed on a disposition of common shares carried out on the Brazilian stock
exchange (which includes the transactions carried out on the organized
over-the-counter market) are subject to the following rules:
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·
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Gains
are exempt from income tax when assessed by a Non-Resident holder that (1)
has registered its investment in Brazil with the Central Bank under rules
of Resolution No. 2,689/01 (“2,689 Holder”) and (2) is not a Tax Haven
Resident; or
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·
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Gains
are subject to income tax at a rate of up to 25% in any other case,
including a case of gains assessed by a Non-Resident holder that is not a
2,689 Holder, or is a Tax Haven
Resident.
|
In these
cases, a withholding income tax of 0.005% of the sale value will be applicable
and can be later offset with the eventual income tax due on the capital
gain. This 0.005% withholding income tax is not levied in day trade
transactions.
Any other
gains assessed on a disposition of the common shares that is not carried out on
a Brazilian stock exchange are subject to income tax at the rate of 15%, except
for Tax Haven Residents which, in this case, are subject to income tax at the
rate of 25%. In the case that these gains are related to transactions
conducted on the Brazilian non-organized over-the-counter market with
intermediation, the withholding income tax of 0.005% shall also be applicable
and can be offset against the eventual income tax due on the capital
gain. This 0.005% withholding income tax is not levied in day trade
transactions.
In the
case of a redemption of common shares or ADSs or a capital reduction by a
Brazilian corporation, such as our company, the positive difference between the
amount received by the non-resident and the acquisition cost of the common
shares or ADSs redeemed in reais is treated as capital
gain derived from the sale or exchange of shares not carried out on a Brazilian
stock exchange market and is therefore subject to income tax at the rate of 15%,
or 25%, as the case may be.
Any
exercise of preemptive rights relating to the common shares or ADSs will not be
subject to Brazilian income tax. Gains realized by a Non-Resident
holder on the disposition of preemptive rights in Brazil will be subject to
Brazilian income tax according to the same rules applicable to the sale or
disposition of common shares.
As a
Non-Resident holder of ADSs, you may cancel your ADSs and exchange them for
common shares and no income tax may be levied on such exchange, as long as the
appropriate rules are complied with in connection with the registration of the
investment with the Central Bank.
The
deposit of common shares by the Non-Resident holders in exchange for ADSs may be
subject to Brazilian income tax if the acquisition cost of the common shares is
lower than (a) the average price per common share on a Brazilian stock exchange
on which the greatest number of such common shares were sold on the day of
deposit; or (b) if no common shares were sold on that day, the average price on
a Brazilian stock exchange on which the greatest number of common shares were
sold in the 15 trading sessions immediately preceding such
deposit. The difference between the acquisition cost and the average
price of the common shares will be considered to be a capital gain subject to
income tax at a rate of 15% or 25%, as the case may be. In some
circumstances, there may be arguments to claim that this taxation is not
applicable in the case of a Non-Resident holder that is a 2,689 Holder and is
not a Tax Haven Resident.
There can
be no assurance that the current favorable treatment of 2,689 Holders will
continue in the future.
Tax
on Foreign Exchange and Financial Transactions
Foreign Exchange
Transactions. Brazilian law imposes a Tax on Foreign Exchange
Transactions, or “IOF/Exchange Tax”, on the conversion of reais into foreign currency
and on the conversion of foreign currency into reais. As from
January, 2008, IOF/Exchange Tax rate applicable to almost all foreign currency
exchange transactions was increased to 0.38%. Specifically in case of inflow
related to transactions that are not carried out in the Brazilian stock exchange
by 2,689 Holders, the applicable rate is 1.5%. The IOF/Exchange Tax rate is zero
in the following hypotheses:
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inflow
and outflow related to transactions entered in the Brazilian stock
exchange by 2,689 Holders;
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·
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outflow
related to transactions that are not carried out in the Brazilian stock
exchange by 2,689 Holders;
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·
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inflow
related to acquisition of shares in a public offering, provided the public
offer is registered with the CVM and the issuer of the securities is
listed in the Brazilian stock exchange;
and
|
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·
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payment
of dividends and interests on
capital.
|
Tax on Transactions Involving Bonds
and Securities. Brazilian law imposes a Tax on Transactions
Involving Bonds and Securities, or “IOF/Bonds Tax”, due on transactions
involving bonds and securities, including those carried out on a Brazilian stock
exchange. The rate of IOF/Bonds Tax applicable to transactions
involving common shares is currently zero, although the Minister of Finance is
permitted to increase such rate at any time up to 1.5% of the transaction amount
per day, but only in respect of future transactions.
Temporary
Contribution on Financial Transactions
As a
general rule, until December 31, 2007 transactions carried out in Brazil that
resulted in the transfer of reais from an account
maintained with a Brazilian financial institution were subject to the Temporary
Contribution on Financial Transactions, or “CPMF tax,” at the rate of
0.38%. Therefore, transactions carried out by the depositary or by a
holder of common shares which involved the transfer of Brazilian currency
through Brazilian financial institutions could be subject to the
CPMF.
Funds
transferred for the acquisition of shares on the Brazilian stock exchange and
the remittance abroad of the proceeds earned from the disposition of shares in
Brazil were exempt from the CPMF. In addition, according to Law No.
11,312/06, the CPMF rate was reduced to zero on withdrawals from bank accounts
used to buy common shares in a public offering whenever (1) the public offering
was registered with the CVM; and (2) the issuer was listed on the Brazilian
stock exchange.
The CPMF
is no longer due as of December 31, 2007.
Other
Brazilian Taxes
There are
no Brazilian inheritance, gift or succession taxes applicable to the ownership,
transfer or disposition of common shares or ADSs, except for gift and
inheritance taxes that may be imposed by some Brazilian states. There
are no Brazilian stamp, issue, registration, or similar taxes or duties payable
by holders of common shares or ADSs.
U.S.
Federal Income Tax Considerations
Material
U.S. Federal Income Tax Considerations
The
following are the material U.S. federal income tax consequences to U.S. Holders
described herein of owning and disposing of common shares or ADSs, but it does
not purport to be a comprehensive description of all of the tax considerations
that may be relevant to a particular person’s decision to hold such
securities. The discussion
applies
only if you hold common shares or ADSs as capital assets for U.S. federal tax
purposes and it does not describe all of the tax consequences that may be
relevant to holders subject to special rules, such as:
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certain
financial institutions;
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·
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dealers
and traders in securities;
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|
·
|
persons
holding common shares or ADSs as part of a hedge, “straddle,” integrated
transaction or similar transaction;
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|
·
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persons
whose functional currency for U.S. federal income tax purposes is not the
U.S. dollar;
|
|
·
|
partnerships
or other entities classified as partnerships for U.S. federal income tax
purposes;
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|
·
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persons
liable for the alternative minimum
tax;
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·
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tax-exempt
organizations;
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|
·
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persons
holding common shares or ADSs that own or are deemed to own ten percent or
more of our voting stock; or
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|
·
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persons
who acquired our ADSs or common shares pursuant to the exercise of any
employee stock option or otherwise as
compensation.
|
If an
entity that is classified as a partnership for U.S. federal income tax purposes
holds common shares or ADSs, the U.S. federal income tax treatment of a partner
will generally depend on the status of the partner and upon the activities of
the partnership. Partnerships holding common shares or ADSs and
partners in such partnerships should consult their tax advisers as to the
particular U.S. federal income tax consequences of holding and disposing of the
common shares or ADSs.
This
discussion is based on the Internal Revenue Code of 1986, as amended (the
“Code”), administrative pronouncements, judicial decisions and final, temporary
and proposed Treasury regulations, all as of the date hereof. These
laws are subject to change, possibly with retroactive effect. It is
also based in part on representations by the Depositary and assumes that each
obligation under the Deposit Agreement and any related agreement will be
performed in accordance with its terms.
You are a
“U.S. Holder” if you are a beneficial owner of our common shares or ADSs and if
you are, for U.S. federal tax purposes:
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·
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a
citizen or individual resident of the United
States;
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|
·
|
a
corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or any political
subdivision thereof; or
|
|
·
|
an
estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
|
The
summary of U.S. federal income tax consequences set out below is intended for
general informational purposes only. U.S. Holders of common shares or
ADSs are urged to consult with their own tax advisers with respect to the
particular tax consequences to them of owning or disposing of common shares or
ADSs, including the applicability and effect of state, local, non-U.S. and other
tax laws and the possibility of changes in tax laws.
In
general, if you own ADSs, you will be treated as the owner of the underlying
shares represented by those ADSs for U.S. federal income tax
purposes. Accordingly, no gain or loss will be recognized if you
exchange ADSs for the underlying shares represented by those ADSs.
The U.S.
Treasury has expressed concerns that parties to whom American depositary
receipts are pre-released or intermediaries in the chain of ownership between
U.S. Holders and the issuer of the security underlying the American depositary
receipts may be taking actions that are inconsistent with the claiming of
foreign tax credits for U.S. Holders of ADSs. Such actions would also
be inconsistent with the claiming of the reduced rate of tax, described below,
applicable to dividends received by certain non-corporate
holders. Accordingly, the analysis of the creditability of Brazilian
taxes, and the availability of the reduced tax rate for dividends received by
certain non-corporate holders, each described below, could be affected by
actions taken by such parties or intermediaries.
Please
consult your tax advisers concerning the U.S. federal, state, local and foreign
tax consequences of purchasing, owning and disposing of common shares or ADSs in
your particular circumstances.
This
discussion assumes that the Company is not, and will not become, a passive
foreign investment company, as described below.
Taxation
of Distributions
Distributions
paid on ADSs or common shares will generally be treated as dividends to the
extent paid out of current or accumulated earnings and profits (as determined
under U.S. federal income tax principles). Because the Company does
not maintain calculations of its earnings and profits under U.S. federal income
tax principles, it is expected that distributions will be reported to U.S.
holders as dividends.
Subject to
applicable limitations and the discussion above regarding concerns expressed by
the U.S. Treasury, dividends paid by qualified foreign corporations to certain
non-corporate U.S. Holders in taxable years beginning before January 1, 2011,
are taxable at a maximum rate of 15%. A foreign corporation is
treated as a qualified foreign corporation with respect to dividends paid on
stock that is readily tradable on a securities market in the United States, such
as the NYSE where our ADSs are traded. You should consult your tax
advisers to determine whether the favorable rate will apply to dividends you
receive and whether you are subject to any special rules that limit your ability
to be taxed at this favorable rate.
Bills have
been introduced in both the U.S. House and the U.S. Senate which would, if
enacted, deny the favorable tax rates described in the preceding paragraph for
dividends paid in respect of certain securities where the issuer of the
securities is allowed a deduction under the tax laws of a foreign country with
respect to such dividend. It is unclear how the proposed legislation
would apply to securities such as the common shares where distributions may be
made in the form of interest on capital. The proposed legislation
would apply to dividends received after the date of its enactment. It
is not possible to predict whether the proposed legislation will be enacted,
either in its present form or any other form. Non-corporate U.S.
Holders should consult their tax advisers with respect to the potential
enactment of currently proposed legislation and its application in their
particular circumstances.
The amount
of a dividend will include any amounts withheld by us in respect of Brazilian
taxes on the distribution. The amount of the dividend will be treated
as foreign-source dividend income to you and will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations under the
Code. Dividends will be included in your income on the date of your,
or in the case of ADSs, the Depositary’s, receipt of the
dividend. The amount of any dividend income paid in reais will be a U.S. dollar
amount calculated by reference to the exchange rate in effect on the date of
such receipt regardless of whether the payment is in fact converted into U.S.
dollars. If the dividend is converted into U.S. dollars on the date
of receipt, you generally should not be required to recognize foreign currency
gain or loss in respect of the dividend income. You may have foreign
currency gain or loss if the amount of such dividend is not converted into U.S.
dollars on the date of such receipt. See “—Brazilian Tax
Considerations—Tax on Foreign Exchange and Financial Transactions.”
Subject to
applicable limitations that may vary depending upon your circumstances and
subject to the discussion above regarding concerns expressed by the U.S.
Treasury, Brazilian income taxes withheld from dividends on common shares or
ADSs will be creditable against your U.S. federal income tax
liability. The rules governing foreign tax credits are complex and,
therefore, you should consult your tax adviser regarding the availability of
foreign tax credits in your particular circumstances.
Instead of claiming a credit, you may, at your election, deduct such Brazilian
taxes in computing your taxable income, subject to generally applicable
limitations
under U.S.
law. An election to deduct foreign taxes instead of claiming foreign
tax credits must apply to all taxes paid or accrued in the taxable year to
foreign countries and possessions of the United States.
Sale
and Other Disposition of Common Shares or ADSs
For U.S.
federal income tax purposes, gain or loss you realize on the sale or other
disposition of common shares or ADSs will be capital gain or loss, and will be
long-term capital gain or loss if you held the common shares or ADSs for more
than one year. The amount of your gain or loss will equal the
difference between your tax basis in the common shares or ADSs disposed of and
the amount realized on the disposition, in each case as determined in U.S.
dollars. If a Brazilian tax is withheld on the sale or disposition of
common shares or ADSs, a U.S. Holder’s amount realized will include the gross
amount of the proceeds of such sale or disposition before deduction of the
Brazilian tax. See “—Brazilian Tax Considerations— Gains” for a description of
when a disposition may be subject to taxation by Brazil. Such gain or
loss will generally be U.S.-source gain or loss for foreign tax credit purposes.
Consequently, if a Brazilian withholding tax is imposed on the sale or
disposition of common shares or ADSs, and a U.S. Holder does not receive
significant foreign source income from other sources, such U.S. Holder may not
be able to derive effective U.S. foreign tax credit benefits in respect of such
Brazilian withholding tax.
Passive
Foreign Investment Company Rules
The
Company believes that it was not a “passive foreign investment company” (“PFIC”)
for U.S. federal income tax purposes for its 2007 taxable
year. However, since PFIC status depends upon the composition
of a company’s income and assets and the market value of its assets from time to
time, which may be determined in large part by reference to the market value of
the Company’s stock, there can be no assurance that the Company will not be a
PFIC for any taxable year. If the Company were a PFIC for any taxable
year during which a U.S. Holder held common shares or ADSs, gain recognized by
such U.S. Holder on a sale or other disposition (including certain pledges) of
the common shares or ADSs would be allocated ratably over the U.S. Holder’s
holding period for the common shares or ADSs. The amounts allocated
to the taxable year of the sale or other disposition and to any year before the
Company became a PFIC would be taxed as ordinary income. The amount
allocated to each other taxable year would be subject to tax at the highest rate
in effect for individuals or corporations, as appropriate, for such taxable
year, and an interest charge would be imposed on the amount allocated to such
taxable year. Further, similar rules would apply to any distribution
in respect of common shares or ADSs in excess of 125% of the average of the
annual distributions on common shares or ADSs received by a U.S. Holder during
the preceding three years or such holder’s holding period, whichever is
shorter. Certain elections may be available that would result in
alternative treatments (such as a mark-to-market treatment) of the common shares
or ADSs. U.S. Holders should consult their tax advisers to determine
whether such elections are available and, if so, what the consequences of the
alternative treatments would be in those holders’ particular
circumstances.
Information
Reporting and Backup Withholding
Payments
of dividends and sales proceeds that are made within the United States or
through certain U.S.-related financial intermediaries generally are subject to
information reporting and to backup withholding unless (1) you are a corporation
or other exempt recipient or (2) in the case of backup withholding, you provide
a correct taxpayer identification number and certify that you are not subject to
backup withholding.
The amount
of any backup withholding from a payment to you will be allowed as a credit
against your U.S. federal income tax liability and may entitle you to a refund,
provided that the required information is timely furnished to the Internal
Revenue Service.
U.S.
HOLDERS OF OUR COMMON SHARES OR ADSs SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO
THE BRAZILIAN, U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES OR ADSs BASED UPON THEIR
PARTICULAR CIRCUMSTANCES.
F. Dividends
and Paying Agents
Not
applicable.
G.
Statement by Experts
Not
applicable.
H. Documents
on Display
Statements
contained in this annual report as to the contents of any contract or other
document referred to are not necessarily complete, and each of these statements
is qualified in all respects by reference to the full text of such contract or
other document filed as an exhibit hereto. A copy of the complete annual report
including the exhibits and schedules filed herewith may be inspected without
charge at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC’s regional
offices located at 233 Broadway, New York, N.Y., 10279 and North Western Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 – 2511.
Copies of such materials may be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports and other information may also be inspected at
the offices of the NYSE, 11 Wall Street, New York, New York 10005, on which our
ADSs are listed. In addition the SEC maintains a website that contains
information filed electronically with the SEC, which can be accessed over the
Internet at http://www.sec.gov.
We are
subject to the information and periodic reporting requirements of the Securities
Exchange Act and, in accordance therewith, file periodic reports and other
information with the SEC. However, as a foreign private issuer, we are exempt
from the rules under the Securities Exchange Act relating to the furnishing and
content of proxy statements and relating to short-swing profits reporting and
liability.
We furnish
to Citibank, N.A., as depositary, copies of all reports we are required to file
with the SEC under the Securities Exchange Act, including our annual reports in
English, containing a brief description of our operations and our audited annual
consolidated financial statements which are prepared in accordance with
accounting practices adopted in Brazil and include a reconciliation to U.S.
GAAP. In addition, we are required under the deposit agreement to furnish the
depositary with copies of English translations to the extent required under the
rules of the SEC of all notices of meetings of shareholders and other reports
and communications that are generally made available to shareholders. Under
certain circumstances, the depositary will arrange for the mailing, at our
expense, of these notices, other reports and communications to all ADS
holders.
We also
file financial statements and other periodic reports with the CVM located at Rua
Sete de Setembro, 111, Rio de Janeiro, Brazil 20159-900, which are available to
the public from CVM’s website at http://www.cvm.gov.br.
I. Subsidiary
Information
Not
applicable.
We are
exposed to market risks arising from the normal course of our business. These
market risks mainly involve the possibility that changes in interest rates may
impact the value of our financial liabilities. See “Item 3.D. Key
Information—Risk Factors—Risks Relating to Our Business and to the Brazilian
Real Estate Industry—Risks Relating to Brazil.”
Interest
rates
Our
revenues and profitability are affected by changes in interest rates due to the
impact that these changes have on our interest expenses relating to our variable
interest rates debt instruments and on our purchase and sale contracts and on
our interest income generated from our financial investments.
The table
below provides information about our significant interest rate-sensitive
instrument (fixed and variable) as of December 31, 2007. Amounts generally
approximate their fair values.
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
accordance with Brazilian GAAP) (in thousands of R$)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
financing and debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentures
|
|
|
249,190 |
|
|
|
9,190 |
|
|
|
48,000 |
|
|
|
96,000 |
|
|
|
96,000 |
|
|
CDI
|
|
|
|
250,127 |
|
Loans
and financing (working capital)
|
|
|
325,453 |
|
|
|
8,082 |
|
|
|
207,265 |
|
|
|
28,402 |
|
|
|
81,704 |
|
|
CD1
|
|
|
|
327,882 |
|
Loans
and financing
|
|
|
16,013 |
|
|
|
6,584 |
|
|
|
5,986 |
|
|
|
2,948 |
|
|
|
495 |
|
|
TR
|
|
|
|
16,013 |
|
Loans
and financing - SFH
|
|
|
98,700 |
|
|
|
44,860 |
|
|
|
42,793 |
|
|
|
11,047 |
|
|
|
—
|
|
|
TR
|
|
|
|
98,700 |
|
Interest
|
|
|
129,601 |
|
|
|
21,747 |
|
|
|
45,372 |
|
|
|
37,718 |
|
|
|
24,764 |
|
|
|
—
|
|
|
|
129,601 |
|
Total
loans and financing(1)
|
|
|
818,957 |
|
|
|
90,463 |
|
|
|
349,416 |
|
|
|
176,114 |
|
|
|
202,963 |
|
|
|
—
|
|
|
|
822,323 |
|
Real
estate development obligations(2)
|
|
|
772,757 |
|
|
|
428,088 |
|
|
|
272,553 |
|
|
|
72,117 |
|
|
|
—
|
|
|
INCC
|
|
|
|
772,757 |
|
Obligations
for purchase of land
|
|
|
236,241 |
|
|
|
163,034 |
|
|
|
6,710 |
|
|
|
19,402 |
|
|
|
47,095 |
|
|
|
—
|
|
|
|
236,241 |
|
Total
|
|
|
1,827,955 |
|
|
|
681,585 |
|
|
|
628,679 |
|
|
|
267,633 |
|
|
|
250,058 |
|
|
|
—
|
|
|
|
1,831,321 |
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
bank and financial investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and bank
|
|
|
79,590 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
—
|
|
|
|
79,590 |
|
Financial
investments (current and non-current, including
derivatives)
|
|
|
434,857 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
CDI
|
|
|
|
437,286 |
|
Receivables
from clients
|
|
|
2,390,898 |
|
|
|
1,011,614 |
|
|
|
609,237 |
|
|
|
433,213 |
|
|
|
336,834 |
|
|
|
|
|
|
|
2,390,898 |
|
Receivables
from clients(2)
|
|
|
682,926 |
|
|
|
288,953 |
|
|
|
174,020 |
|
|
|
123,741 |
|
|
|
96,212 |
|
|
IGP-M
|
|
|
|
|
|
Receivables
from clients(2)
|
|
|
1,707,972 |
|
|
|
722,661 |
|
|
|
435,217 |
|
|
|
309,472 |
|
|
|
240,622 |
|
|
INCC
|
|
|
|
|
|
Total
client receivables
|
|
|
2,390,898 |
|
|
|
1,011,614 |
|
|
|
609,237 |
|
|
|
433,213 |
|
|
|
336,834 |
|
|
|
—
|
|
|
|
|
|
Total
|
|
|
2,904,275 |
|
|
|
1,011,614 |
|
|
|
609,237 |
|
|
|
433,213 |
|
|
|
336,834 |
|
|
|
—
|
|
|
|
2,907,774 |
|
(1)
|
See
notes 11 and 12 to our consolidated financial statements for information
about the interest rates on our loans, financing and
debentures.
|
(2)
|
Includes
obligations and receivables arising from units sold after January 1, 2004
for which balances have not been recorded in our balance sheet—CFC
Resolution No. 963.
|
We borrow
funds at different rates and linked to different indices in order to try to
match the financing that we provide to some of our clients. The mismatch between
rates and terms on our funds borrowed and the financing we provide may adversely
affect our cash flow. We constantly monitor and evaluate the impact of
indexation on our assets and liabilities. If we anticipate the possibility of an
interest rate mismatch between our assets and obligations, we may use derivative
financial instruments in order to hedge against the risk that arises from
interest rate variations.
As of
December 31, 2007, we had one derivative deal recorded on our balance sheet in
the total amount of R$200.0 million and related to cross-currency interest rate
swap contracts as hedge against foreign exchange fluctuation.
Foreign
Exchange Rate
As of
December 31, 2007, we had debt in foreign currency in the total amount of
R$200.0 million. In order to minimize our foreign exchange risk, we
have entered into cross-currency interest rate swap contracts covering 100% of
our foreign currency debt.
Not
applicable.
None.
None.
(a)
Disclosure Controls and Procedures
As of
December 31, 2007, under management’s supervision and with its participation,
including our chief executive officer and chief financial officer, we performed
an evaluation of our disclosure control and procedures. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures. Accordingly, even effective disclosure controls and procedures can
only provide reasonable assurance of achieving their control objectives. Based
on this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures were effective as of
December 31, 2007 for gathering, analyzing and disclosing the information we are
required to disclose in the reports we file under the Exchange Act, within the
time periods specified in the SEC’s rules and regulations.
(b)
Management’s Annual Report on Internal Control over Financial
Reporting
This
annual report does not include a report of management’s assessment regarding
internal controls over financial reporting or an attestation report of the
company’s registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.
(c)
Attestation Report of the Registered Public Accounting Firm
This
annual report does not include a report of management’s assessment regarding
internal controls over financial reporting or an attestation report of the
company’s registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.
(d)
Changes in Internal Control over Financial Reporting
There was
no change in our internal control over financial reporting that occurred during
the period covered by this annual report that has materially effected, or is
reasonably likely to materially effect, our internal control over financial
reporting.
For the
purposes of the of Sarbanes-Oxley Act of 2002, our directors established an
Audit Committee that convenes as often as it determines is appropriate to carry
out its responsibilities, but at least quarterly. This committee has
responsibility for planning and reviewing our annual and quarterly reports and
accounts with the involvement of our auditors in that process, focusing
particularly on compliance with legal requirements and accounting standards, and
ensuring that an effective system of internal financial controls is
maintained. The ultimate responsibility for reviewing and approving
our annual and quarterly reports and accounts remains with our
directors.
The Audit
Committee convened three times in 2007. The Audit Committee currently comprises
Jose Ecio Pereira da Costa Junior, Richard L. Huber and Gerald D. Reiss, each of
whom is a director of our company. Our board of
directors has determined that Jose Ecio Pereira da Costa Junior, Richard L.
Huber and Gerald D. Reiss are each independent as set forth in the NYSE
Listed Companies Manual as well as being independent for the purpose of Rule
10A-3 of the Securities Exchange Act. Our board of directors has determined that
Jose Ecio Pereira da Costa Junior is an audit committee financial expert within
the meaning of the regulations promulgated by the Securities and Exchange
Commission.
On July
10, 2007, we adopted a Code of Business Conduct and Ethics that applies to our
chief executive officer, chief financial officer, principal accounting officer
and persons performing similar functions, as well as to our directors, other
officers and employees. The objective of this code is (1) to reduce the
subjectivity of personal interpretations of ethical principles; (2) to be a
formal and institutional benchmark for the professional conduct of the
employees, including the ethical handling of actual or apparent conflicts of
interests, becoming a standard for the internal and external relationship of the
Company with its shareholders, clients, employees, partners, suppliers, service
providers, labor unions, competitors, society, government and the communities in
which we operate; and (3) to ensure that the daily concerns with
efficiency, competitiveness and profitability do not override ethical behavior.
Our Code of Business Conduct and Ethics is filed as an exhibit to this annual
report and is available, free of charge by requesting a copy from our Investor
Relations Department at the following address: Av. Nações Unidas No.
8,501, 19th floor,
05425-070 - São Paulo, SP - Brazil, telephone 55-11-3025-9242, fax
55-11-3025-9217 and e-mail [email protected].
We have
also created in July 2007, a “whistleblower channel” in order to receive
“complaints,” by any person (provided such complaint is first reported to the
Ethics Committee or Audit Committee), regarding any “dishonest or
unethical conduct” and “accounting, internal accounting controls, or auditing
matters” and equally confidential and anonymous submissions of
“concerns” of the same type by our employees and affiliates. The “whistleblower
channel” can be accessed through our intranet or website or letter forwarded to
our headquarters under the attention of our Ethics Committee and/or Audit
Committee. Since its establishment, three issues were reported to our
“whistleblower channel,” all of them related to personal conduct and, therefore,
without any financial impact in our results of operations.
The
relationship with our independent auditors in respect to the contracting of
services unrelated to the external audit is based on principles that preserve
the independence of the auditor. Our board of directors approves our financial
statements, the performance by our auditors of audit and permissible non-audit
services, and associated fees, supported by our Audit Committee.
The
following table describes the total amount billed to us by
PricewaterhouseCoopers Auditores Independentes for services performed in 2007,
2006 and 2005 and the respective remuneration for these services.
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of reais)
|
|
Audit
fees (1)
|
|
|
1,346 |
|
|
|
885 |
|
|
|
180 |
|
Audit
related fees (2)
|
|
|
498 |
|
|
|
910 |
|
|
|
590 |
|
Total
consolidated audit fees
|
|
|
1,844 |
|
|
|
1,795 |
|
|
|
770 |
|
(1)
|
“Audit
Fees” are the aggregate fees billed by PricewaterhouseCoopers Auditores
Independente for the audit of our consolidated and annual financial
statements, reviews of interim financial statements and attestation
services that are provided in connection with statutory and regulatory
filings or engagements.
|
(2)
|
“Audit-Related
Fees” are fees charged by PricewaterhouseCoopers Auditores Independente
for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and in 2006
and 2007 were principally related to audit services on the comfort letter
relating to our public offerings.
|
Audit
Committee Pre-Approval Policies and Procedures
Our board
of directors has established pre-approval policies and procedures for the
engagement of registered public accounting firm for audit and non-audit
services. Under such pre-approval policies and procedures, our board of
directors reviews the scope of the services to be provided by each registered
public accounting firm to be engaged in order to ensure that there are no
independence issues and the services are not prohibited services as defined by
Sarbanes-Oxley Act of 2002.
None.
None.
We have
responded to Item 18 in lieu of responding to this Item.
See our
audited consolidated financial statements beginning on page F-1.
We are
filing the following documents as part of this Annual Report Form
20F:
1.1. Bylaws
of Gafisa S.A., as amended (English)*
2.1. Deposit
Agreement, date March 21, 2007, among Gafisa S.A., Citibank, N.A., as
depositary, and the Holders and Beneficial Owners from time to time of American
Depositary Shares issued thereunder, which is incorporated by reference to our
registration statement filed on Form F-6 with the Securities and Exchange
Commission on February 22, 2007.
4.1. Investment Agreement dated October 2,
2006 among Alphaville Participações S.A., Renato de Albuquerque and Nuno
Luis de Carvalho Lopes Alves, as shareholders, and Gafisa S.A., as investor, and
Alphaville Urbanismo S.A.,
Fate Administração e
Investimentos Ltda. and NLA Administração e Participações Ltda., which is incorporated
by reference to our registration statement filed on Form F-1 with the Securities
and Exchange Commission on February 22, 2007.
8.1. List
of Subsidiaries*
11.1. Code
of Business Conduct and Ethics (English)*
12.1. Certification pursuant to section 302 of
the Sarbanes-Oxley act of 2002 of the Chief Executive Officer*
12.2. Certification pursuant
to section 302 of the Sarbanes-Oxley act of 2002 of the Chief Financial
Officer*
13.1. Certification
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002, of the Chief Executive Officer*
13.2. Certification
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley act of 2002, of the Chief Financial Officer*
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant certifies that it meets all requirements for filing on Form 20-F and
has duly caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
GAFISA
S.A.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Wilson Amaral de Oliveira
|
|
|
|
Name:
|
Wilson
Amaral de Oliveira
|
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
By:
|
/s/
Alceu Duilio Calciolari
|
|
|
|
Name:
|
Alceu
Duilio Calciolari
|
|
|
|
Title:
|
Chief
Financial and Investor Relations Officer
|
|
Date:
June
18, 2008
|
|
Pages
|
|
|
|
Audited
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
|
F-4
|
|
|
|
|
|
F-6
|
|
|
|
|
|
F-7
|
|
|
|
|
|
F-8
|
|
|
|
|
|
F-9
|
To
the Board of Directors and Shareholders
Gafisa
S.A.
1
|
We have audited the accompanying
consolidated balance sheets of Gafisa S.A. and its subsidiaries as of
December 31,
2007, 2006 and 2005
and the related
consolidated statement of income, of change in shareholders' equity and of changes in
financial position for each of the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
|
2
|
We conducted
our audits in accordance with auditing standards generally accepted in
Brazil and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our
opinions.
|
3
|
In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Gafisa S.A.
and its subsidiaries as of December 31, 2007, 2006 and 2005, and the
results of their operations, the change in shareholders' equity and of
changes in their financial position for each of the years then ended in
conformity with accounting practices adopted in
Brazil.
|
4
|
Our audits
were performed for the purpose of issuing an opinion on the financial
statements referred to in the first paragraph, prepared in conformity with
accounting practices adopted in Brazil. The consolidated statement of cash
flows, which provides supplemental information about the Company and its
subsidiaries, is not a required component of the
financial
|
statements. We also
applied audit procedures described above to the statement of cash flows for each
of the three years ended December 31, 2007 and, in our opinion, it is fairly
stated in all material respects in relation to the financial statements taken as
a whole.
5
|
Accounting
practices adopted in Brazil vary in certain significant respects from
accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is
presented in Supplemental Information Note 22 to the consolidated
financial statements.
|
São
Paulo, June 12, 2008
PricewaterhouseCoopers
Auditores
Independentes
Assets
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
Cash and banks
|
|
|
79,590 |
|
|
|
45,231 |
|
|
|
26,053 |
|
Financial investments
|
|
|
434,857 |
|
|
|
220,928 |
|
|
|
107,838 |
|
Receivables from
clients
|
|
|
524,818 |
|
|
|
365,741 |
|
|
|
274,390 |
|
Properties for sale
|
|
|
774,908 |
|
|
|
377,576 |
|
|
|
270,968 |
|
Other accounts
receivable
|
|
|
101,920 |
|
|
|
111,600 |
|
|
|
81,646 |
|
Deferred selling
expenses
|
|
|
37,023 |
|
|
|
17,032 |
|
|
|
6,463 |
|
Prepaid expenses
|
|
|
8,824 |
|
|
|
5,446 |
|
|
|
2,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,961,940 |
|
|
|
1,143,554 |
|
|
|
770,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
current
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
497,933 |
|
|
|
194,097 |
|
|
|
95,169 |
|
Properties for sale
|
|
|
149,403 |
|
|
|
63,413 |
|
|
|
33,361 |
|
Deferred taxes
|
|
|
61,322 |
|
|
|
53,134 |
|
|
|
35,102 |
|
Other
|
|
|
42,797 |
|
|
|
29,329 |
|
|
|
4,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
751,455 |
|
|
|
339,973 |
|
|
|
168,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill on acquisition of
subsidiaries
|
|
|
207,400 |
|
|
|
— |
|
|
|
— |
|
Investments in
subsidiaries
|
|
|
2,289 |
|
|
|
2,544 |
|
|
|
— |
|
Property and equipment
|
|
|
19,513 |
|
|
|
6,933 |
|
|
|
5,043 |
|
Intangible assets
|
|
|
7,896 |
|
|
|
1,213 |
|
|
|
1,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,098 |
|
|
|
10,690 |
|
|
|
6,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
988,553 |
|
|
|
350,663 |
|
|
|
174,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,950,493 |
|
|
|
1,494,217 |
|
|
|
944,619 |
|
Gafisa
S.A.
Consolidated
Balance Sheets at December 31
|
(continued) |
Liabilities
and shareholders' equity
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Loans and financings
|
|
|
59,526 |
|
|
|
17,305 |
|
|
|
48,286 |
|
Debentures
|
|
|
9,190 |
|
|
|
11,038 |
|
|
|
6,118 |
|
Real estate development
obligations
|
|
|
— |
|
|
|
6,733 |
|
|
|
62,623 |
|
Obligations for purchase of
land
|
|
|
163,034 |
|
|
|
120,239 |
|
|
|
32,928 |
|
Materials and service
suppliers
|
|
|
86,709 |
|
|
|
26,683 |
|
|
|
27,878 |
|
Taxes and contributions
|
|
|
70,293 |
|
|
|
41,574 |
|
|
|
47,248 |
|
Taxes, payroll charges and profit
sharing
|
|
|
38,512 |
|
|
|
18,089 |
|
|
|
10,431 |
|
Advances from clients - real estate and
services
|
|
|
47,662 |
|
|
|
76,146 |
|
|
|
47,790 |
|
Acquisition of
investments
|
|
|
48,521 |
|
|
|
— |
|
|
|
— |
|
Dividends proposed
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
Provision for
contingencies
|
|
|
3,668 |
|
|
|
4,105 |
|
|
|
4,422 |
|
Other
|
|
|
23,300 |
|
|
|
7,894 |
|
|
|
17,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
577,396 |
|
|
|
340,744 |
|
|
|
305,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
current
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financings
|
|
|
380,640 |
|
|
|
27,100 |
|
|
|
86,218 |
|
Debentures
|
|
|
240,000 |
|
|
|
240,000 |
|
|
|
176,310 |
|
Real estate development
obligations
|
|
|
— |
|
|
|
— |
|
|
|
2,071 |
|
Obligations for purchase of
land
|
|
|
73,207 |
|
|
|
6,184 |
|
|
|
20,811 |
|
Deferred taxes
|
|
|
63,268 |
|
|
|
32,259 |
|
|
|
12,884 |
|
Unearned income from property
sales
|
|
|
— |
|
|
|
2,439 |
|
|
|
27,606 |
|
Provision for
contingencies
|
|
|
17,594 |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
18,179 |
|
|
|
29,107 |
|
|
|
25,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
792,888 |
|
|
|
337,089 |
|
|
|
351,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income on acquisition of
subsidiary
|
|
|
32,223 |
|
|
|
2,297 |
|
|
|
17,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
17,223 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares, comprising
16,222,209
shares outstanding (*)
|
|
|
— |
|
|
|
— |
|
|
|
147,496 |
|
Common shares, comprising 129,452,121
shares
outstanding (2006: 103,369,950; 2005:
8,404,185) (*)
|
|
|
1,221,846 |
|
|
|
591,742 |
|
|
|
79,867 |
|
Treasury shares 3,124,972 Common
shares
(2006 - 8,141,646; 2005 - 1,533,334)
(*)
|
|
|
(18,050
|
) |
|
|
(47,026
|
) |
|
|
(47,026
|
) |
Capital reserves
|
|
|
167,276 |
|
|
|
167,276 |
|
|
|
22,874 |
|
Revenue reserves
|
|
|
159,691 |
|
|
|
102,095 |
|
|
|
66,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,530,763 |
|
|
|
814,087 |
|
|
|
270,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
|
2,950,493 |
|
|
|
1,494,217 |
|
|
|
944,619 |
|
(*)
|
No retrospective adjustment made
for the stock split (Note
15(a)).
|
The accompanying
notes are an integral part of these consolidated financial
statements.
Gafisa
S.A.
Years
Ended December 31
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Gross
operating revenue
|
|
|
|
|
|
|
|
|
|
Real estate development and
sales
|
|
|
1,182,571 |
|
|
|
675,999 |
|
|
|
447,656 |
|
Construction services
rendered, net of costs of R$ 26,546
(2006 - R$ 46,053; 2005
- R$ 36,871)
|
|
|
35,121 |
|
|
|
21,480 |
|
|
|
33,118 |
|
Taxes on services and
revenues
|
|
|
(45,518
|
) |
|
|
(33,632
|
) |
|
|
(23,750
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating revenue
|
|
|
1,172,174 |
|
|
|
663,847 |
|
|
|
457,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate development
|
|
|
(796,914
|
) |
|
|
(465,795
|
) |
|
|
(318,211
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
375,260 |
|
|
|
198,052 |
|
|
|
138,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(expenses) income
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(79,378
|
) |
|
|
(51,670
|
) |
|
|
(41,992
|
) |
General and administrative
expenses
|
|
|
(87,629
|
) |
|
|
(35,492
|
) |
|
|
(24,717
|
) |
Profit sharing
|
|
|
(23,185
|
) |
|
|
(13,279
|
) |
|
|
(6,030
|
) |
Stock issuance expenses
|
|
|
(30,174
|
) |
|
|
(27,308
|
) |
|
|
— |
|
Depreciation and
amortization
|
|
|
(14,823
|
) |
|
|
(4,302
|
) |
|
|
(2,584
|
) |
Other
|
|
|
973 |
|
|
|
1,372 |
|
|
|
(4,032
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(234,216
|
) |
|
|
(130,679
|
) |
|
|
(79,355
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses
|
|
|
(35,291
|
) |
|
|
(64,932
|
) |
|
|
(39,527
|
) |
Financial income
|
|
|
49,446 |
|
|
|
52,989 |
|
|
|
8,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
155,199 |
|
|
|
55,430 |
|
|
|
28,296 |
|
Non-operating expenses,
net
|
|
|
— |
|
|
|
— |
|
|
|
(1,024
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before taxes on income, statutory profit
|
|
|
|
|
|
|
|
|
|
|
|
|
sharing and minority
interest
|
|
|
155,199 |
|
|
|
55,430 |
|
|
|
27,272 |
|
Current income tax and social
contribution expense
|
|
|
(12,217
|
) |
|
|
(4,631
|
) |
|
|
(4,136
|
) |
Deferred income tax and social
contribution (expense)/benefit
|
|
|
(18,729
|
) |
|
|
(1,393
|
) |
|
|
7,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,946
|
) |
|
|
(6,024
|
) |
|
|
3,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before statutory profit sharing and minority interest
|
|
|
124,253 |
|
|
|
49,406 |
|
|
|
30,677 |
|
Statutory profit sharing
|
|
|
(2,240
|
) |
|
|
(3,350
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before minority interest
|
|
|
122,013 |
|
|
|
46,056 |
|
|
|
30,677 |
|
Minority interest
|
|
|
(8,410
|
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the year
|
|
|
113,603 |
|
|
|
46,056 |
|
|
|
30,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding at the end of the year (in thousands) (*)
|
|
|
129,452 |
|
|
|
103,370 |
|
|
|
24,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per share outstanding at the end of the year - R$ (*)
|
|
|
0.8775 |
|
|
|
0.4455 |
|
|
|
1.2457 |
|
(*)
|
No
retrospective adjustment made for the stock split (Note
15(a)).
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
company (Note 2(b))
|
|
Preferred
shares
|
|
|
Common
shares
|
|
|
Total
capital
|
|
|
Treasury
shares
|
|
|
Capital
reserves
|
|
|
Legal
reserve
|
|
|
Statutory
reserve
|
|
|
For
investments
|
|
|
Retained
earnings (deficit)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2004
|
|
|
49,638 |
|
|
|
36,876 |
|
|
|
86,514 |
|
|
|
— |
|
|
|
2,717 |
|
|
|
6,230 |
|
|
|
— |
|
|
|
85,303 |
|
|
|
(33,207
|
) |
|
|
147,557 |
|
Capital increase - Equity
International
|
|
|
84,049 |
|
|
|
51,131 |
|
|
|
135,180 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
135,180 |
|
Redemption of shares (cash) -
Urucari
|
|
|
8,140 |
|
|
|
(8,140
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,000
|
) |
|
|
— |
|
|
|
(4,000
|
) |
Redemption of shares (assumption of
debt/cash) - Cimob
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,583
|
) |
|
|
— |
|
|
|
(1,583
|
) |
Redemption of shares (cash) - First
Stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,437
|
) |
|
|
— |
|
|
|
(16,437
|
) |
Capital increase - Havertown
|
|
|
5,669 |
|
|
|
— |
|
|
|
5,669 |
|
|
|
— |
|
|
|
4,590 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,259 |
|
Downstream merger
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Tax asset
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,567 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,567 |
|
Debt assumed, net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(47,026
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
|
|
(47,032
|
) |
Appropriation of net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income for the year
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,677 |
|
|
|
30,677 |
|
Legal reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,372 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,372
|
) |
|
|
— |
|
Investments reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
26,070 |
|
|
|
(26,070
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2005
|
|
|
147,496 |
|
|
|
79,867 |
|
|
|
227,363 |
|
|
|
(47,026
|
) |
|
|
22,874 |
|
|
|
7,602 |
|
|
|
— |
|
|
|
89,347 |
|
|
|
(29,972
|
) |
|
|
270,188 |
|
Conversion of all preferred shares to
common shares
|
|
|
(147,496
|
) |
|
|
147,496 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Capital increase
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Initial public
offering
|
|
|
— |
|
|
|
352,756 |
|
|
|
352,756 |
|
|
|
— |
|
|
|
141,637 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
494,393 |
|
Havertown
|
|
|
— |
|
|
|
3,414 |
|
|
|
3,414 |
|
|
|
— |
|
|
|
2,765 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,179 |
|
Exercise of stock options
|
|
|
— |
|
|
|
8,209 |
|
|
|
8,209 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,209 |
|
Net income for the year
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
46,056 |
|
|
|
46,056 |
|
Appropriation of net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Legal reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,303 |
|
|
|
— |
|
|
|
— |
|
|
|
(2,303
|
) |
|
|
— |
|
Dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,938
|
) |
|
|
(10,938
|
) |
Investments reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,843 |
|
|
|
(2,843
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2006
|
|
|
— |
|
|
|
591,742 |
|
|
|
591,742 |
|
|
|
(47,026
|
) |
|
|
167,276 |
|
|
|
9,905 |
|
|
|
— |
|
|
|
92,190 |
|
|
|
— |
|
|
|
814,087 |
|
Capital increase
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Public offering
|
|
|
— |
|
|
|
487,813 |
|
|
|
487,813 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
487,813 |
|
Exchange of shares - acquisition of
Alphaville Urbanismo S.A.
(Note 15(a))
|
|
|
— |
|
|
|
134,029 |
|
|
|
134,029 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
134,029 |
|
Exercise of stock options
|
|
|
— |
|
|
|
8,262 |
|
|
|
8,262 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,262 |
|
Cancellation of treasury shares
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,976 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(28,976
|
) |
|
|
— |
|
|
|
— |
|
Net income for the year
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
113,603 |
|
|
|
113,603 |
|
Appropriation of net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Legal reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,680 |
|
|
|
— |
|
|
|
— |
|
|
|
(5,680
|
) |
|
|
— |
|
Mandatory dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(26,981
|
) |
|
|
(26,981
|
) |
Additional 2006
dividends
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(50 |
) |
|
|
(50 |
) |
Statutory reserve
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
80,892 |
|
|
|
— |
|
|
|
(80,892
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2007
|
|
|
— |
|
|
|
1,221,846 |
|
|
|
1,221,846 |
|
|
|
(18,050
|
) |
|
|
167,276 |
|
|
|
15,585 |
|
|
|
80,892 |
|
|
|
63,214 |
|
|
|
— |
|
|
|
1,530,763 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Gafisa
S.A.
Years
Ended December 31
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Financial
resources were provided by
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
113,603 |
|
|
|
46,056 |
|
|
|
30,677 |
|
Expenses (income) not affecting working
capital
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Depreciation and
amortization
|
|
|
14,823 |
|
|
|
4,302 |
|
|
|
2,584 |
|
Net book value of fixed asset
disposals
|
|
|
84 |
|
|
|
— |
|
|
|
— |
|
Deferred income tax and social
contribution
|
|
|
18,729 |
|
|
|
1,343 |
|
|
|
(7,542
|
) |
Amortization of negative
goodwill
|
|
|
— |
|
|
|
(15,386
|
) |
|
|
(2,721
|
) |
Minority interest
|
|
|
8,410 |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
1,265 |
|
|
|
— |
|
|
|
(1,782
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Resources provided by
operations
|
|
|
156,914 |
|
|
|
36,315 |
|
|
|
21,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital subscription
|
|
|
630,104 |
|
|
|
508,781 |
|
|
|
145,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third parties
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financings
|
|
|
353,539 |
|
|
|
4,573 |
|
|
|
214,346 |
|
Obligations for purchase of
land
|
|
|
67,022 |
|
|
|
— |
|
|
|
6,256 |
|
Assignment of credits
payable
|
|
|
200 |
|
|
|
— |
|
|
|
— |
|
Increase in other accounts
payable
|
|
|
— |
|
|
|
6,344 |
|
|
|
12,026 |
|
Decrease in other accounts
receivable
|
|
|
— |
|
|
|
4,079 |
|
|
|
26,741 |
|
Long-term liabilities net, arising from
purchase
|
|
|
30,479 |
|
|
|
— |
|
|
|
— |
|
Negative goodwill on acquisition of
jointly-controlled subsidiary
|
|
|
29,926 |
|
|
|
— |
|
|
|
20,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
resources provided
|
|
|
1,268,184 |
|
|
|
560,092 |
|
|
|
446,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
resources were used for
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
303,836 |
|
|
|
98,928 |
|
|
|
— |
|
Properties for sale
|
|
|
85,990 |
|
|
|
30,052 |
|
|
|
33,361 |
|
Advances for future capital
increase
|
|
|
1,425 |
|
|
|
— |
|
|
|
— |
|
Other receivables
|
|
|
13,671 |
|
|
|
28,969 |
|
|
|
2,140 |
|
Assignment of credits
receivable
|
|
|
1,123 |
|
|
|
2,223 |
|
|
|
906 |
|
Investments
|
|
|
208,089 |
|
|
|
2,544 |
|
|
|
— |
|
Property and equipment
|
|
|
34,087 |
|
|
|
6,035 |
|
|
|
1,598 |
|
Tax benefits from downstream
merger
|
|
|
— |
|
|
|
— |
|
|
|
15,567 |
|
Debt pushdown from downstream
merger
|
|
|
— |
|
|
|
— |
|
|
|
31,465 |
|
Share redemptions
|
|
|
— |
|
|
|
— |
|
|
|
22,020 |
|
Transfer from long-term to current
liabilities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Real estate development
obligations
|
|
|
— |
|
|
|
2,071 |
|
|
|
24,895 |
|
Unearned income from property
sales
|
|
|
1,995 |
|
|
|
25,167 |
|
|
|
55,859 |
|
Other accounts payable
|
|
|
8,766 |
|
|
|
— |
|
|
|
3,017 |
|
Decrease in real estate development
obligations
|
|
|
— |
|
|
|
14,627 |
|
|
|
— |
|
Provision for
contingencies
|
|
|
437 |
|
|
|
317 |
|
|
|
(3,017
|
) |
Proposed dividends
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
Additional dividends for
2006
|
|
|
50 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
resources used
|
|
|
686,450 |
|
|
|
221,871 |
|
|
|
187,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in working capital
|
|
|
581,734 |
|
|
|
338,221 |
|
|
|
258,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year
|
|
|
1,961,940 |
|
|
|
1,143,554 |
|
|
|
770,138 |
|
At beginning of year
|
|
|
1,143,554 |
|
|
|
770,138 |
|
|
|
611,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
818,386 |
|
|
|
373,416 |
|
|
|
159,032 |
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year
|
|
|
577,396 |
|
|
|
340,744 |
|
|
|
305,549 |
|
At beginning of year
|
|
|
340,744 |
|
|
|
305,549 |
|
|
|
405,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,652 |
|
|
|
35,195 |
|
|
|
(99,585
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in working capital
|
|
|
581,734 |
|
|
|
338,221 |
|
|
|
258,617 |
|
The accompanying notes are an
integral part of these consolidated financial statements.
Gafisa
S.A.
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Gafisa S.A. and
its subsidiaries (collectively, the "Company") started its operations in 1997
with the objectives of: (a) promoting and managing all forms of real estate
ventures, on its own behalf or for third parties; (b) purchasing, selling and
negotiating real estate properties in general, including provision of financing
to real estate clients; (c) carrying out civil construction and civil
engineering services; (d) developing and implementing marketing strategies
related to its own or third party real estate ventures, and; (e) investing in
other Brazilian or foreign companies which have similar objectives as the
Company's.
The
Company forms jointly-controlled ventures and participates in consortia with
third parties as a means of meeting its objectives.
In
2005, the Company concluded a corporate restructuring program which resulted in
the Company acquiring the shares of a former shareholder, CIMOB Companhia
Imobiliária ("Cimob") and introduced Equity International Properties, LLC
("EIP") and Havertown Investments Holding, LLC ("Havertown") as new strategic
shareholders. EIP is part of Equity Group Investments, LLC, a global real estate
investor with interests in the United States and Latin America.
In
February 2006, the Company concluded its Brazilian initial public offering on
the Novo Mercado of the Bolsa de Valores de São Paulo - BOVESPA (the Brazilian
stock exchange), raising proceeds of R$ 494,393 through issuance of
26,724,000 Common shares.
On
October 2, 2006, the Company signed an agreement to acquire 100% of the capital
of Alphaville Urbanismo S.A. ("AUSA"), a company which develops and sells
residential condominiums throughout Brazil (Note 22(a)(x)(a)).
In
March 2007, the Company completed an initial public offer of stock on the New
York Stock Exchange - NYSE, resulting in a capital increase of R$ 487,813
with the issue of 18,761,992 Common shares.
In
March 2007, Gafisa began to operate in the lower income real estate market,
through one of its subsidiaries, FIT Residencial Empreendimentos Imobiliários
Ltda. ("FIT Residential").
On
March 26, 2007, the Company, together with Odebrecht Empreendimentos
Imobiliários Ltda., formed Bairro Novo Empreendimentos Imobiliários S.A.
("Bairro Novo"), a jointly-controlled entity. In November 2007, Bairro Novo
launched property developments directed at the Brazilian lower income market,
called "Bairro Novo Cotia".
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
On
October 26, 2007, Gafisa completed the acquisition of 70% of Cipesa Engenharia
S.A. ("Cipesa") (Note 22(a)(x)(b)), a real estate developer in the state of
Alagoas.
2
|
Presentation
of Financial Statements
|
These financial
statements were approved by the Board of Directors for issuance on March 4,
2008.
(a)
|
Basis
of presentation
|
The
financial statements were prepared in accordance with accounting practices
adopted in Brazil as determined by the Brazilian Corporate law (Law 6,404, as
amended) ("Corporate Law"), the Federal Accounting Council ("CFC"), the IBRACON
- Institute of Independent Auditor of Brazil ("IBRACON") and additional
regulations and resolutions of the "Comissão de Valores Mobiliários" (the
Brazilian Securities Commission - ("CVM")) (collectively, "Brazilian
GAAP").
The
financial statements have been prepared in Brazilian reais and differ from the
Corporate Law financial statements previously issued due to the number of
periods presented. The financial statements prepared by the Company for
statutory purposes, which include the consolidated financial statements and the
stand alone financial statements of the parent company, Gafisa S.A., were filed
with the CVM in March 2008. The financial statements presented herein do not
include the parent company's stand alone financial statements and are not
intended to be used for statutory purposes. The consolidated statement of cash
flows, which is presented as supplementary information (Note 21), is not
required by Brazilian GAAP but is prepared under IBRACON Standard NPC 20 and
conforms to International Accounting Standard 7, "Cash Flow Statements".
Similarly, the Summary of Principal Differences between Brazilian GAAP and US
GAAP (Note 22) is not required by Corporate Law and is presented only for
purposes of these financial statements.
The
preparation of financial statements in conformity with Brazilian GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates are used for, but not limited
to, the selection of the useful lives of property and equipment, provisions
necessary for contingent liabilities, fair values, revenue recognition, taxes,
budgeted costs and other similar charges. Actual results may differ from the
estimates.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(b)
|
Consolidation
of financial statements
|
The
consolidated financial statements include the accounts of the Company and those
of all its subsidiaries (Note 8), with separate disclosure of the participation
of minority shareholders. The proportional consolidation method is used for
investments in jointly-controlled investees, which are all governed by
shareholder agreements; as a consequence, the assets, liabilities, revenues and
costs are consolidated based on the proportion of the equity interest the
Company holds in the capital of the investee.
All
significant intercompany accounts and transactions are eliminated upon
consolidation, including, investments, current accounts, dividends receivable,
income and expenses among consolidated companies and unrealized results.
Transactions and balances with related parties, primarily shareholders and
investees, are described in the notes herewith.
The
statement of changes in shareholders' equity reflects the changes in Gafisa
S.A.'s, the parent company's, books. Provisions between the parent company and
the subsidiaries' books reflecting net capital deficiencies of subsidiaries were
recorded in 2005, resulting in a difference between the statement of changes in
shareholders' equity and balance sheet accounts in prior years.
3
|
Significant
Accounting Practices
|
The
more significant accounting practices adopted in the preparation of the
financial statements are as follows:
(i)
|
Real
estate development and sales
revenue
|
Revenues, as well
costs and expenses directly related to real estate development units sold are
recognized over the course of the construction period of the projects, based on
a financial measure of completion, and not at the time of execution of the
agreements for the sale of units or the receipt of the amounts corresponding to
the sale of units.
For
completed units, the result is recognized when the sale is made, regardless of
the receipt of the contractual amount; profit is recognized in full when real
estate is sold, provided (i) the profit is determinable, that is, the
collectibility of the sales price is reasonably assured or the amount that will
not be collectible can be estimated, and (ii) the earnings process is
virtually
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
complete, that is,
the Company is not obliged to perform significant activities after the sale to
earn the profit. The collectibility of the sales price is demonstrated by the
client's commitment to pay, which in turn is supported by substantial initial
and continuing investment.
The
general rules established by CFC approved Resolution 963 for recognition of
revenue for real estate transactions and presentation of financial statements of
real estate companies are:
|
|
the incurred
cost (including costs related to land) corresponding to the units sold is
fully appropriated to allocated income;
|
|
|
|
|
|
the percentage
of incurred cost, including costs related to land, projects and
construction, is measured in relation to total budgeted
costs;
|
|
|
|
|
|
in order to
determine the amount of revenues to be recognized in any given period, the
percentage of incurred costs is applied to the total sales of the units
sold, determined in accordance with the terms established in the sales
contracts;
|
|
|
|
|
|
any amount of
revenues recognized that exceeds the amount received from clients is
recorded as current or long-term assets. Any amount received in connection
with the sale of units that exceeds the amount of revenues recognized is
recorded as "Advances from clients - real estate and services" on the
balance sheet;
|
|
|
|
|
|
interest and
inflation-indexation charges on accounts receivable as from the time the
customer takes possession of the property, are appropriated to income from
the development and sale of real estate using the accrual basis method;
and
|
|
|
|
|
|
the financial
charges on accounts payable from the acquisition of land and real estate
credit operations incurred during the construction period are appropriated
to the cost incurred, and recognized in income upon the sale of the units
of the venture to which they are directly
related.
|
The
taxes on the difference between the revenues from real estate development and
the accumulated revenues subject to tax are calculated and recognized when the
difference in revenues is recognized.
The
other income and expenses, including advertising and publicity, are appropriated
to income as they are incurred using the accrual basis method.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(ii)
|
Construction
services
|
Revenues derived
from real estate services consist primarily of amounts received in connection
with construction management activities for third parties, technical management
and real estate management. Revenue is recognized as services are rendered, and
is recorded, net of respective costs incurred to deliver such services, as
"Construction services rendered, net of costs".
(b)
|
Cash,
banks and financial investments
|
Consist primarily of
time bank certificate of deposits and investment funds, denominated in reais,
having a ready market and an original maturity of 90 days or less, or which at
all times throughout their terms can be put to the issuer within three months
with insignificant early withdrawal penalty clauses. At December 31, 2007, 2006
and 2005, the amount related to investment funds is recorded at market
value.
(c)
|
Receivables
from clients
|
These are stated at
cost plus accrued interest. Allowances are provided, when necessary, in an
amount considered sufficient by management to meet expected losses. Installments
due are indexed based on the National Civil Constructions Index ("INCC") during
the construction phase of the projects and the balances indexed based on the
General Market Prices Index ("IGP-M") after delivery of the units. The balances
generally accrue annual interest at 12%. Financial income from client
receivables is recorded as "Gross operating revenue".
(d)
|
Sale
of receivables for securitization
|
When the Company
sells its accounts receivables, which sale is made generally without recourse,
the amount of the mortgage-backed securities ("CRI") issued by the real estate
securitization company is recorded as a reduction of accounts receivable. When
this transaction involves recourse, the accounts receivable sold is maintained
on the balance sheet. The financial discount, which represents the difference
between the amounts received and the book value of the CRI on the date of the
assignment, is presented as "Receivables from clients" and reflected in the
statement of income ("Financial expense") over the duration of the contract. Any
fee paid to the issuer of the CRIs is taken directly to income. When a retained
interest ("Subordinated CRI") is provided as collateral to the receivables sold,
these are recorded on the balance sheet at fair values. When recourse is
provided the receivables from clients are presented net of the amounts received
from the sale.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
This account
includes land, construction costs and related expenses relating to projects
under construction and already concluded but for which units have not yet been
sold. Amounts are stated at cost of purchase and construction (materials, own or
outsourced labor and other related costs), land and financial charges
appropriated during the construction phase, which do not exceed net realizable
values. The Company at times acquires land through barter transactions, in which
it grants the seller (i) a certain number of units to be built on the land or
(ii) a percentage of the proceeds from the sale of the units in such
development. The land acquired and the corresponding obligations to deliver the
units are diluted with other units sold. The Company capitalizes interest as
part of properties for sale when a property is under development, which is
limited to interest expense. Interest capitalized in "Properties for sale"
totaled R$ 36,686 in the year ended December 31, 2007 (2006 - R$ 5,236, 2005 -
R$ 4,714).
(f)
|
Deferred
selling expenses
|
Following a change
in accounting policy in 2006, which was applied retrospectively to all periods
presented (Note 22(a)(iv)), this account includes costs related to tangible
assets (sales stands, facilities, model apartments and related furnishings) as
well as the related brokerage costs incurred by the Company (sale commissions
due by the real estate buyer are not recorded as income or expenses of the
Company). The balance is amortized to selling expenses (sales stands,
facilities, model apartments and related furnishings) or as a deduction of the
gross operating revenue (brokerage costs), based on the percentage-of-completion
method (Note 3(a)).
The
Company provides a five-year limited warranty, covering structural defects of
the developments sold. As warranty work is normally carried out under the
responsibility and costs of the Company's subcontractors, the amounts payable by
the Company are not significant and, therefore, they are recognized as
incurred.
These refer to
sundry expenses, including debt issuance expenses relating to debenture
placements and the deferral of shares issuance expenses, which are taken to
income in the period to which they relate.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(i)
|
Property
and equipment
|
Stated at cost.
Depreciation is calculated on the straight-line basis, based on the estimated
useful life of the assets, as follows: (i) vehicles - 5 years; (ii) office
equipment and other installations - 10 years; (iii) computer and software
licenses - 5 years. Software acquisition and implementation costs are
capitalized.
This account
comprises mainly pre-operating expenses, reorganization expenses and product and
new market development costs, which are amortized over a period of up to five
years as from the date benefits first accrue.
(k)
|
Goodwill
and negative goodwill on the
acquisition of investments
|
Goodwill is
determined at the acquisition date and represents the excess purchase price over
the proportion of the underlying book value, to the interest in the
shareholders' equity acquired. Negative goodwill is also determined at the
acquisition date and represents the excess of the book value of assets acquired
over the price paid. Goodwill is amortized on a variable basis over its
estimated useful life (limited to ten years) (Note 10). Negative goodwill which
can be justified economically is recorded in "Goodwill on acquisition of
subsidiaries" and appropriated to income as the assets are realized. The
Company's management determines the estimated useful life of the investments
based on its evaluation of the acquired companies, considering factors such as
the land bank, the ability to generate results from developments launched and/or
to be launched and other inherent factors. Goodwill that cannot be justified
economically is immediately charged to results for the year. Negative goodwill
that is not justified economically is recognized in the results only upon
disposal of the investment. At the balance sheet date, the Company evaluates
whether there are any indications of permanent loss and records an impairment
provision, if required, to adjust the carrying value of goodwill to recoverable
amounts or to realizable values.
(l)
|
Real
estate development obligations
|
This balance
represented the estimated cost to be incurred, including a provision for
guarantees, on the unit sales launched through December 31, 2003. The counter
entry was to "Unearned income from property sales". Costs already incurred on
the unsold units were recorded in "Properties for sale". Upon adoption of CFC
Resolution 963, no new additions are made to this account.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(m)
|
Obligations
for purchase of land
|
These are
contractual obligations established for purchases of land in inventory
("Property for sale"). They are stated at the amortized cost plus interest and
charges, when applicable. The obligations related to the barter transactions for
land in exchange for units to be developed are not recognized in the
financial statements.
(n)
|
Unearned
income from property sales
|
This represents the
residual net amount of the sales values of units launched up to December 31, 2003,
less estimated construction costs (with a counter entry to "Real estate
development obligations"), land purchase cost and charges arising from
construction financing. Upon adoption of CFC Resolution 963, no new additions
are made to this account.
This balance
includes advertising, promotion, brokerage fees and similar expenses, which is
recorded on an accrual basis.
Taxes on income in
Brazil comprise Federal income tax (25%) and social contribution (9%), as
recorded in the statutory accounting records, for entities on the taxable profit
regime, for which the composite statutory rate is 34%. Deferred taxes are
provided on all temporary tax differences (Note 16).
As
permitted by tax legislation, certain subsidiaries and jointly-controlled
companies, the annual billings of which were lower than a specified amount,
opted for the presumed profit regime. For these companies, the income tax basis
is calculated at the rate of 8% on gross revenues plus financial income and for
the social contribution basis at 12% on gross revenues plus financial income,
upon which the income tax and social contribution rates, 25% and 9%
respectively, are applied.
All
tax losses expected to be recovered through offset are recorded as deferred tax
assets. Deferred tax assets arising from net operating losses have no expiration
dates, though offset is restricted to 30% of annual taxable income. Taxable
entities on the presumed profit regime cannot offset prior year losses against
tax payable.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(q)
|
Other
current and long-term liabilities
|
These liabilities
are stated on the accrual basis at their known or estimated amounts, plus, when
applicable, the corresponding indexation charges and foreign exchange gains and
losses. Gafisa S.A. and its subsidiaries do not have private pension plans or
any retirement plan or benefits for employees once they leave the
Company.
(r)
|
Cross-currency
interest rate swap transactions
|
The
nominal amounts of the cross-currency, interest rate swap transactions are not
recorded on the balance sheet. The Company has derivative instruments for the
purposes of mitigating the risk of its exposure to the volatility of currencies,
indices and interest rates. These transactions are measured at cost based on the
contractual conditions between the Company and the counter parties and their net
results are recorded in financial income (expenses). In accordance with its
treasury policies, the Company does not acquire or issue derivative financial
instruments for speculative purposes.
The
Company operates stock option plans, the guidelines for their structuring and
implementation of which were approved by General Shareholders' Meetings (Note
15(d)). Stock options granted to executive officers and employees under stock
option plans do not generate a charge to income. In 2007, 961,563 shares (2006 -
1,532,724) with no par value were subscribed and paid up and the Company
received R$ 8,262 (2006 - R$ 8,209) (Note
15(a)).
(t)
|
Employee
profit sharing plan
|
The
Company provides for the distribution of profit sharing benefits to employees
(included in "General and administrative expenses") which totaled R$ 23,185 for
the year ended December 31, 2007
(2006 - R$ 13,279). Additionally, the Company's bylaws establish the
distribution of profit sharing to executive officers (in an amount that does not
exceed the lower of (i) their annual compensation or (ii) 10% of the Company's
net income), which is recorded in "Statutory profit sharing" in the amount of R$
2,240 at December 31, 2007 (2006 - R$ 3,350). The bonus
systems operate on a three-tier performance-based structure in which the
corporate efficiency targets as approved by our Board of Directors must first be
achieved, followed by targets for the business units and finally individual
performance targets. Amounts paid with respect to the program may differ from
the liability accrued.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Calculated based on
the number of shares outstanding at the end of each year, net of treasury
shares. The 2005 earnings per share were not retrospectively conformed following
the stock split on January 27, 2006.
Certain
reclassifications have been made to the financial statements for the years ended
December 31, 2006 and 2005 for better presentation and consistency with the
current financial statements, the main items are: (i) accounts receivable from
clients from current to long-term (2006 - R$ 152,606; 2005 - zero); (ii) balance
of the cancelled units from gross sales deduction to the real estate
developments and sales (2006 - R$ 6,456; 2005 - zero); (iii) balance of the Tax
on Bank Account Withdrawals - CPMF from general and administrative expenses to
financial expenses (2006 - zero; 2005 - R$ 3,190); and (iv) land which was
included in property for sale from current to long-term (2006 - R$ 63,413; 2005
- R$ 33,361). These reclassifications are considered immaterial and do not
impact shareholders' equity or net income or covenants.
Following is a
summary of the effects of the reclassification as at
December 31:
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
365,741 |
|
|
|
518,347 |
|
Properties for sale
|
|
|
377,576 |
|
|
|
440,989 |
|
Long-term
assets
|
|
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
194,097 |
|
|
|
41,491 |
|
Properties for sale
|
|
|
63,413 |
|
|
|
— |
|
Working
capital (i)
|
|
|
802,810 |
|
|
|
1,018,829 |
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Properties for sale
|
|
|
270,968 |
|
|
|
304,329 |
|
Long-term
assets
|
|
|
|
|
|
|
|
|
Properties for sale
|
|
|
33,361 |
|
|
|
— |
|
Working
capital (i)
|
|
|
464,589 |
|
|
|
497,950 |
|
(i) - Total current
assets less total current liabilities
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
4
|
Cash
and Banks and Financial Investments
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
banks
|
|
|
79,590 |
|
|
|
45,231 |
|
|
|
26,053 |
|
Financial
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment funds, purchase and sale
commitments
|
|
|
415,449 |
|
|
|
2,059 |
|
|
|
51,897 |
|
Bank certificates of deposits
(CDB)
|
|
|
18,338 |
|
|
|
218,869 |
|
|
|
59,775 |
|
Unrealized
gain on derivative financial instruments, net
|
|
|
1,070 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
514,447 |
|
|
|
266,159 |
|
|
|
137,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
514,447 |
|
|
|
266,159 |
|
|
|
133,891 |
|
Non
current
|
|
|
— |
|
|
|
— |
|
|
|
3,834 |
|
Pursuant to CVM
Instruction 408/04, investment funds in which the Company has an exclusive
interest have been consolidated. Certain investment fund investments are
provided as guarantees to loans and financing (Note 11).
On
December 31, 2007, bank certificates of deposits accrue interest of 98.0% to
104% (2006 - 100.0% to
100.8%; 2005 - 99.5% to 102%) of the Interbank Deposit Certificate (CDI)
rate.
5
|
Receivables
from Clients
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
524,818 |
|
|
|
365,741 |
|
|
|
274,390 |
|
Long-term
|
|
|
497,933 |
|
|
|
194,097 |
|
|
|
95,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,022,751 |
|
|
|
559,838 |
|
|
|
369,559 |
|
Since the Company
adopted CFC Resolution 963 in 2004, accounts receivables are only recorded as
revenue is recognized (Note 3(a)(i)).
Advances from
clients for real estate development projects in excess of the revenues
recognized on the percentage-of-completion method totaled R$ 47,662 at December
31, 2007 (2006 - R$ 76,146; 2005 - R$ 47,790) and are included in "Advances
from clients - real estate and services".
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
An
allowance for doubtful accounts is not considered necessary since the
receivables from clients relate mainly to real estate developments in progress
for which the transfer of property deeds only takes place upon settlement and/or
sale of the receivables.
Interest earned from
Receivables from clients, included in "Gross operating revenue", was
R$
20,061 in the year ended December 31, 2007 (2006 - R$ 39,832; 2005 - R$
28,966).
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(As
amended, Note 3(v)) |
|
|
(As
amended, Note 3(v)) |
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
379,068 |
|
|
|
160,333 |
|
|
|
60,223 |
|
Property under
construction
|
|
|
503,417 |
|
|
|
249,287 |
|
|
|
209,609 |
|
Units
completed
|
|
|
41,826 |
|
|
|
31,369 |
|
|
|
34,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
924,311 |
|
|
|
440,989 |
|
|
|
304,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
774,908 |
|
|
|
377,576 |
|
|
|
270,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
149,403 |
|
|
|
63,413 |
|
|
|
33,361 |
|
Properties under
construction provided as guarantee for loans and financing totaled R$ 178,426 at
December 31, 2007 (2006 - R$ 60,512).
The
Company has unrecorded commitments for construction of units which have been
exchanged for land, which affect the balance sheet as follows: (a) estimated
construction cost of units bartered is diluted with other units sold ("Real
estate development obligations"); and (b) actual cost of
construction of units exchanged is diluted with other unsold units ("Properties
under construction").
Financial interest
expense was capitalized for the year ended December 31, 2007 in the total amount
of R$ 32,572.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
7
|
Other
Accounts Receivable
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Sundry current
accounts (*)
|
|
|
17,928 |
|
|
|
47,272 |
|
|
|
34,042 |
|
Advances for
future capital increase
|
|
|
10,350 |
|
|
|
— |
|
|
|
— |
|
Credit
assignment receivables
|
|
|
8,748 |
|
|
|
10,773 |
|
|
|
9,761 |
|
Client
refinancing to be released
|
|
|
8,510 |
|
|
|
10,413 |
|
|
|
8,580 |
|
Recoverable
taxes
|
|
|
8,347 |
|
|
|
11,005 |
|
|
|
3,310 |
|
Deferred
COFINS and PIS taxes
|
|
|
8,274 |
|
|
|
7,940 |
|
|
|
7,983 |
|
Advances to
suppliers
|
|
|
840 |
|
|
|
10,765 |
|
|
|
10,939 |
|
Other
|
|
|
38,923 |
|
|
|
13,432 |
|
|
|
7,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,920 |
|
|
|
111,600 |
|
|
|
81,646 |
|
(*)
The
Company participates in jointly-controlled ventures or consortia with other
partners, either directly or through related parties, to develop real estate
properties. The management frameworks of these ventures, including cash
management, are centralized in the lead partner, which supervises the
construction, financing and budgets. Thus, the lead partner assures that the
investments of the necessary funds are made and allocated as planned. The
Company's shares of the funds pertaining to these ventures, which are not
remunerated, have no predetermined maturity dates. On average, the property
developments are completed within three years. Other accounts payable to the
venture partners are presented separately.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
|
|
|
Investee's
|
|
|
|
|
|
|
Company's
interest - %
|
|
|
Shareholders'
equity
|
|
|
Investee's
net Income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investees
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
00008 -
Península SPE1 S.A. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
(1,390
|
) |
|
|
(963
|
) |
|
|
(948
|
) |
|
|
(427
|
) |
|
|
(261
|
) |
|
|
(1,577
|
) |
00010 -
Península SPE2 S.A. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
(955
|
) |
|
|
(3,222
|
) |
|
|
(3,042
|
) |
|
|
2,267 |
|
|
|
(119
|
) |
|
|
(4,383
|
) |
00018 - Res.
Das Palmeiras SPE Ltda. - 18 (i)
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
2,039 |
|
|
|
1,443 |
|
|
|
1,375 |
|
|
|
596 |
|
|
|
349 |
|
|
|
847 |
|
00036 - Gafisa
SPE 36 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
4,145 |
|
|
|
(54 |
) |
|
|
74 |
|
|
|
4,199 |
|
|
|
848 |
|
|
|
73 |
|
00038 - Gafisa
SPE 38 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
5,088 |
|
|
|
439 |
|
|
|
1 |
|
|
|
4,649 |
|
|
|
1,165 |
|
|
|
— |
|
00040 - Gafisa
SPE 40 Ltda. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
99.80 |
|
|
|
1,713 |
|
|
|
(512
|
) |
|
|
1 |
|
|
|
2,225 |
|
|
|
(348
|
) |
|
|
— |
|
00041 - Gafisa
SPE 41 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
20,793 |
|
|
|
6,855 |
|
|
|
(92 |
) |
|
|
13,938 |
|
|
|
6,696 |
|
|
|
(93 |
) |
00042 - Gafisa
SPE 42 Ltda. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
99.80 |
|
|
|
(33 |
) |
|
|
(293
|
) |
|
|
— |
|
|
|
260 |
|
|
|
(293
|
) |
|
|
(1 |
) |
00043 - Gafisa
SPE 43 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(3 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
00044 - Gafisa
SPE 44 Ltda. (i)
|
|
|
40.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(534
|
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(533
|
) |
|
|
(1 |
) |
|
|
(1 |
) |
00045 - Gafisa
SPE 45 Ltda. (Gafisa Vendas)
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(475
|
) |
|
|
406 |
|
|
|
— |
|
|
|
(882
|
) |
|
|
20 |
|
|
|
(1 |
) |
00046 - Gafisa
SPE 46 Ltda. (i)
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
99.80 |
|
|
|
212 |
|
|
|
(966
|
) |
|
|
— |
|
|
|
1,178 |
|
|
|
(966
|
) |
|
|
(1 |
) |
00047 - Gafisa
SPE 47 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(18 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(18 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
00048 - Gafisa
SPE 48 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(718
|
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(718
|
) |
|
|
(1 |
) |
|
|
(1 |
) |
00049 - Gafisa
SPE 49 Ltda.
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
00053 - Gafisa
SPE 53 Ltda. (i)
|
|
|
60.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
205 |
|
|
|
— |
|
|
|
— |
|
|
|
204 |
|
|
|
— |
|
|
|
— |
|
00055 - Gafisa
SPE 55 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
00059 - Gafisa
SPE 59 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
00064 - Gafisa
SPE 64 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
00065 - Gafisa
SPE 65 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
00070 - Gafisa
SPE 70 Ltda. (Bairro novo) (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
10,298 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,902
|
) |
|
|
— |
|
|
|
— |
|
00087 - DV BV
SPE S.A. - 87 (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
(464
|
) |
|
|
(234
|
) |
|
|
(202
|
) |
|
|
(231
|
) |
|
|
115 |
|
|
|
(715
|
) |
00089 - DV SPE
S.A. - 89 (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
1,658 |
|
|
|
964 |
|
|
|
2,096 |
|
|
|
695 |
|
|
|
(728
|
) |
|
|
94 |
|
00091 -
Vilagio de Panamby Trust - 91
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
5,587 |
|
|
|
3,923 |
|
|
|
3,804 |
|
|
|
1,664 |
|
|
|
119 |
|
|
|
(175
|
) |
00122 - Gafisa
SPE 22 Ltda.
|
|
|
100.00 |
|
|
|
49.00 |
|
|
|
49.00 |
|
|
|
4,314 |
|
|
|
(1,080
|
) |
|
|
(766
|
) |
|
|
250 |
|
|
|
(37 |
) |
|
|
90 |
|
00125 - Gafisa
SPE 25 Ltda. (v)
|
|
|
100.00 |
|
|
|
66.67 |
|
|
|
66.67 |
|
|
|
14,904 |
|
|
|
13,551 |
|
|
|
5,585 |
|
|
|
419 |
|
|
|
1,392 |
|
|
|
2,259 |
|
00126 - Gafisa
SPE 26 Ltda. (v)
|
|
|
100.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
121,767 |
|
|
|
28,635 |
|
|
|
20,352 |
|
|
|
(19 |
) |
|
|
(7,417
|
) |
|
|
988 |
|
00127 - Gafisa
SPE 27 Ltda. (v)
|
|
|
100.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
15,160 |
|
|
|
14,007 |
|
|
|
14,232 |
|
|
|
1,215 |
|
|
|
(77 |
) |
|
|
11,008 |
|
00128 - Gafisa
SPE 28 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(1,299
|
) |
|
|
(800
|
) |
|
|
(170
|
) |
|
|
(499
|
) |
|
|
3 |
|
|
|
(166
|
) |
00129 - Gafisa
SPE 29 Ltda. (i)
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
2,311 |
|
|
|
5,443 |
|
|
|
509 |
|
|
|
(2,532
|
) |
|
|
5,732 |
|
|
|
1,173 |
|
00130 - Gafisa
SPE 30 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
15,923 |
|
|
|
7,897 |
|
|
|
1,834 |
|
|
|
8,026 |
|
|
|
7,482 |
|
|
|
1,836 |
|
00131 - Gafisa
SPE 31 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
22,507 |
|
|
|
21,746 |
|
|
|
2,573 |
|
|
|
761 |
|
|
|
11,391 |
|
|
|
2,613 |
|
00132 - Gafisa
SPE 32 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
00133 - Gafisa
SPE 33 Ltda.
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
11,256 |
|
|
|
9,559 |
|
|
|
11,767 |
|
|
|
1,696 |
|
|
|
(2,091
|
) |
|
|
7,419 |
|
00134 - Gafisa
SPE 34 Ltda. (Fit. Resid. Imob.)
|
|
|
100.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(14,974
|
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(14,975
|
) |
|
|
(1 |
) |
|
|
(2 |
) |
00135 - Gafisa
SPE 35 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
2,671 |
|
|
|
(48 |
) |
|
|
25 |
|
|
|
2,719 |
|
|
|
849 |
|
|
|
25 |
|
00137 - Gafisa
SPE 37 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
8,529 |
|
|
|
5,868 |
|
|
|
2,631 |
|
|
|
2,661 |
|
|
|
3,461 |
|
|
|
2,630 |
|
00139 - Gafisa
SPE 39 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
5,693 |
|
|
|
1,261 |
|
|
|
255 |
|
|
|
4,432 |
|
|
|
1,819 |
|
|
|
254 |
|
00250 - Gafisa
SPE 50 Ltda. (i)
|
|
|
80.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(121
|
) |
|
|
— |
|
|
|
— |
|
|
|
(121
|
) |
|
|
— |
|
|
|
|
|
00251 - Gafisa
SPE 251 Ltda. (i)
|
|
|
90.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
8,387 |
|
|
|
— |
|
|
|
— |
|
|
|
1,602 |
|
|
|
— |
|
|
|
— |
|
00263 - Gafisa
SPE 63 Ltda.
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(11 |
) |
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
|
— |
|
00265 - Cipesa
- holding
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
47,954 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,359
|
) |
|
|
— |
|
|
|
— |
|
00760 - Gafisa
SPE 760 (Tiner Empr. e Part.) (i) (iv)
|
|
|
45.00 |
|
|
|
45.00 |
|
|
|
0.00 |
|
|
|
10,980 |
|
|
|
5,649 |
|
|
|
— |
|
|
|
5,331 |
|
|
|
4,687 |
|
|
|
— |
|
00763 - Gafisa
SPE 763 (O Bosque) (i) (iii)
|
|
|
30.00 |
|
|
|
30.00 |
|
|
|
0.00 |
|
|
|
9,176 |
|
|
|
2,667 |
|
|
|
— |
|
|
|
79 |
|
|
|
(166
|
) |
|
|
— |
|
177700 - Alta
Vista (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
(644
|
) |
|
|
(233
|
) |
|
|
— |
|
|
|
(618
|
) |
|
|
(253
|
) |
|
|
— |
|
177800 - Dep.
José Lages (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
(399
|
) |
|
|
12 |
|
|
|
— |
|
|
|
(410
|
) |
|
|
(8 |
) |
|
|
— |
|
177900 - Sítio
Jatiuca (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
(2,829
|
) |
|
|
(79 |
) |
|
|
— |
|
|
|
(3,361
|
) |
|
|
(99 |
) |
|
|
— |
|
178000 -
Spazio Natura (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
1,429 |
|
|
|
(26 |
) |
|
|
— |
|
|
|
(28 |
) |
|
|
(46 |
) |
|
|
— |
|
AUSA
|
|
|
60.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
42,718 |
|
|
|
— |
|
|
|
— |
|
|
|
20,905 |
|
|
|
— |
|
|
|
— |
|
Franere -
Parque das Águas (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(281
|
) |
|
|
— |
|
|
|
— |
|
|
|
(280
|
) |
|
|
— |
|
|
|
— |
|
Franere -
Parque das Árvores (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(625
|
) |
|
|
|
|
|
|
— |
|
|
|
(625
|
) |
|
|
— |
|
|
|
— |
|
77998 - Diodon
Participações (ii)
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
36,556 |
|
|
|
31,920 |
|
|
|
34,074 |
|
|
|
4,637 |
|
|
|
(869
|
) |
|
|
4,962 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
|
|
|
Investee's
net
|
|
|
|
|
|
|
Company's
interest - %
|
|
|
operating
revenue
|
|
|
Investee's
total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investees
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
00008 -
Península SPE1 S.A. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
614 |
|
|
|
2,587 |
|
|
|
10,563 |
|
|
|
8,097 |
|
|
|
8,827 |
|
|
|
20,232 |
|
00010 -
Península SPE2 S.A. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
912 |
|
|
|
5,695 |
|
|
|
30,295 |
|
|
|
7,740 |
|
|
|
9,477 |
|
|
|
26,147 |
|
00018 - Res.
Das Palmeiras SPE Ltda. - 18 (i)
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
1,437 |
|
|
|
2,848 |
|
|
|
7,160 |
|
|
|
8,139 |
|
|
|
8,020 |
|
|
|
12,912 |
|
00036 - Gafisa
SPE 36 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
19,652 |
|
|
|
— |
|
|
|
70 |
|
|
|
36,466 |
|
|
|
— |
|
|
|
19,171 |
|
00038 - Gafisa
SPE 38 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
17,689 |
|
|
|
5,921 |
|
|
|
— |
|
|
|
15,921 |
|
|
|
6,669 |
|
|
|
5,238 |
|
00040 - Gafisa
SPE 40 Ltda. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
99.80 |
|
|
|
3,150 |
|
|
|
217 |
|
|
|
— |
|
|
|
7,294 |
|
|
|
1,196 |
|
|
|
132 |
|
00041 - Gafisa
SPE 41 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
38,920 |
|
|
|
20,001 |
|
|
|
— |
|
|
|
47,548 |
|
|
|
14,922 |
|
|
|
29,880 |
|
00042 - Gafisa
SPE 42 Ltda. (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
99.80 |
|
|
|
1,646 |
|
|
|
— |
|
|
|
— |
|
|
|
3,671 |
|
|
|
1 |
|
|
|
— |
|
00043 - Gafisa
SPE 43 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
1 |
|
|
|
— |
|
00044 - Gafisa
SPE 44 Ltda. (i)
|
|
|
40.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
996 |
|
|
|
1 |
|
|
|
— |
|
00045 - Gafisa
SPE 45 Ltda. (Gafisa Vendas)
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
7,160 |
|
|
|
874 |
|
|
|
— |
|
|
|
3,734 |
|
|
|
1,006 |
|
|
|
— |
|
00046 - Gafisa
SPE 46 Ltda. (i)
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
99.80 |
|
|
|
3,350 |
|
|
|
(328
|
) |
|
|
— |
|
|
|
1,710 |
|
|
|
533 |
|
|
|
— |
|
00047 - Gafisa
SPE 47 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
20,626 |
|
|
|
— |
|
|
|
— |
|
00048 - Gafisa
SPE 48 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
10,488 |
|
|
|
— |
|
|
|
— |
|
|
|
22,049 |
|
|
|
— |
|
|
|
— |
|
00049 - Gafisa
SPE 49 Ltda.
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
2,870 |
|
|
|
— |
|
|
|
— |
|
00053 - Gafisa
SPE 53 Ltda. (i)
|
|
|
60.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
858 |
|
|
|
— |
|
|
|
— |
|
|
|
1,151 |
|
|
|
— |
|
|
|
— |
|
00055 - Gafisa
SPE 55 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
647 |
|
|
|
— |
|
|
|
— |
|
00059 - Gafisa
SPE 59 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
00064 - Gafisa
SPE 64 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
1,839 |
|
|
|
— |
|
|
|
— |
|
00065 - Gafisa
SPE 65 Ltda.
|
|
|
99.80 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
795 |
|
|
|
— |
|
|
|
— |
|
00070 - Gafisa
SPE 70 Ltda. (Bairro novo) (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
11,046 |
|
|
|
— |
|
|
|
— |
|
00087 - DV BV
SPE S.A. - 87 (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
194 |
|
|
|
94 |
|
|
|
104 |
|
|
|
1,279 |
|
|
|
1,412 |
|
|
|
1,728 |
|
00089 - DV SPE
S.A. - 89 (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
28 |
|
|
|
34 |
|
|
|
262 |
|
|
|
1,285 |
|
|
|
1,008 |
|
|
|
2,823 |
|
00091 -
Vilagio de Panamby Trust - 91
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
1,252 |
|
|
|
283 |
|
|
|
(260
|
) |
|
|
4,723 |
|
|
|
3,923 |
|
|
|
7,480 |
|
00122 - Gafisa
SPE 22 Ltda.
|
|
|
100.00 |
|
|
|
49.00 |
|
|
|
49.00 |
|
|
|
2,440 |
|
|
|
6,108 |
|
|
|
7,194 |
|
|
|
5,005 |
|
|
|
4,339 |
|
|
|
11,114 |
|
00125 - Gafisa
SPE 25 Ltda. (v)
|
|
|
100.00 |
|
|
|
66.67 |
|
|
|
66.67 |
|
|
|
1,924 |
|
|
|
9,575 |
|
|
|
22,453 |
|
|
|
41,538 |
|
|
|
21,597 |
|
|
|
27,373 |
|
00126 - Gafisa
SPE 26 Ltda. (v)
|
|
|
100.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
45,857 |
|
|
|
17,493 |
|
|
|
6,156 |
|
|
|
142,709 |
|
|
|
49,206 |
|
|
|
89,215 |
|
00127 - Gafisa
SPE 27 Ltda. (v)
|
|
|
100.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
4,953 |
|
|
|
8,360 |
|
|
|
48,644 |
|
|
|
25,331 |
|
|
|
28,229 |
|
|
|
52,710 |
|
00128 - Gafisa
SPE 28 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
11,579 |
|
|
|
3,211 |
|
|
|
— |
|
|
|
17,139 |
|
|
|
4,514 |
|
|
|
4,557 |
|
00129 - Gafisa
SPE 29 Ltda. (i)
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
2,232 |
|
|
|
— |
|
|
|
3,583 |
|
|
|
2,874 |
|
|
|
— |
|
|
|
17,337 |
|
00130 - Gafisa
SPE 30 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
31,528 |
|
|
|
20,962 |
|
|
|
4,086 |
|
|
|
37,835 |
|
|
|
16,674 |
|
|
|
43,563 |
|
00131 - Gafisa
SPE 31 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
5,335 |
|
|
|
31,613 |
|
|
|
9,409 |
|
|
|
27,456 |
|
|
|
28,693 |
|
|
|
31,494 |
|
00132 - Gafisa
SPE 32 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,692 |
|
|
|
12 |
|
|
|
114 |
|
00133 - Gafisa
SPE 33 Ltda.
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
4,408 |
|
|
|
— |
|
|
|
44,046 |
|
|
|
26,131 |
|
|
|
27,100 |
|
|
|
42,932 |
|
00134 - Gafisa
SPE 34 Ltda. (Fit. Resid. Imob.)
|
|
|
100.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
8,934 |
|
|
|
— |
|
|
|
— |
|
|
|
73,852 |
|
|
|
— |
|
|
|
(1 |
) |
00135 - Gafisa
SPE 35 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
11,330 |
|
|
|
— |
|
|
|
153 |
|
|
|
11,154 |
|
|
|
— |
|
|
|
6,834 |
|
00137 - Gafisa
SPE 37 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
10,806 |
|
|
|
6,391 |
|
|
|
13,639 |
|
|
|
18,254 |
|
|
|
18,895 |
|
|
|
20,642 |
|
00139 - Gafisa
SPE 39 Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
17,666 |
|
|
|
6,260 |
|
|
|
730 |
|
|
|
15,172 |
|
|
|
7,172 |
|
|
|
13,562 |
|
00250 - Gafisa
SPE 50 Ltda. (i)
|
|
|
80.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
1,704 |
|
|
|
— |
|
|
|
— |
|
|
|
4,256 |
|
|
|
— |
|
|
|
— |
|
00251 - Gafisa
SPE 251 Ltda. (i)
|
|
|
90.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
7,717 |
|
|
|
— |
|
|
|
— |
|
|
|
11,945 |
|
|
|
— |
|
|
|
— |
|
00263 - Gafisa
SPE 63 Ltda.
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
00265 - Cipesa
- holding
|
|
|
100.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
00760 - Gafisa
SPE 760 (Tiner Empr. e Part.) (i) (iv)
|
|
|
45.00 |
|
|
|
45.00 |
|
|
|
0.00 |
|
|
|
12,712 |
|
|
|
8,092 |
|
|
|
— |
|
|
|
14,245 |
|
|
|
20,494 |
|
|
|
— |
|
00763 - Gafisa
SPE 763 (O Bosque) (i) (iii)
|
|
|
30.00 |
|
|
|
30.00 |
|
|
|
0.00 |
|
|
|
543 |
|
|
|
512 |
|
|
|
— |
|
|
|
3,078 |
|
|
|
1,604 |
|
|
|
— |
|
177700 - Alta
Vista (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
151 |
|
|
|
— |
|
|
|
— |
|
|
|
662 |
|
|
|
— |
|
|
|
— |
|
177800 - Dep.
José Lages (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
(10 |
) |
|
|
— |
|
|
|
— |
|
|
|
248 |
|
|
|
— |
|
|
|
— |
|
177900 - Sítio
Jatiuca (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
(358
|
) |
|
|
— |
|
|
|
— |
|
|
|
4,370 |
|
|
|
— |
|
|
|
— |
|
178000 -
Spazio Natura (i)
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
808 |
|
|
|
— |
|
|
|
— |
|
AUSA
|
|
|
60.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
199,830 |
|
|
|
— |
|
|
|
— |
|
|
|
249,631 |
|
|
|
— |
|
|
|
— |
|
Franere -
Parque das Águas (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
561 |
|
|
|
— |
|
|
|
— |
|
Franere -
Parque das Árvores (i)
|
|
|
50.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
685 |
|
|
|
— |
|
|
|
— |
|
77998 - Diodon
Participações (ii)
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
4,501 |
|
|
|
22,635 |
|
|
|
17,708 |
|
|
|
45,385 |
|
|
|
45,469 |
|
|
|
72,956 |
|
(i)
|
These
investees are jointly-controlled with the Company's real estate partners.
All entities have been consolidated on a proportional consolidation
basis.
|
(ii)
|
On September
13, 2005, the Company acquired the total share capital of Diodon
Participações Ltda. and Villaggio de Panamby Trust S.A., the shareholders'
equity and total assets of which represented 50% of the Villaggio Panamby
development project and recorded negative goodwill ("Deferred income on
acquisition of subsidiary") of R$ 20,554, which will be amortized as the
underlying portfolio is realized.
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(iii)
|
In 2006, the
Company acquired a 30% interest in the O Bosque development for R$ 3,564
and recorded goodwill of R$ 2,544 (included in "Property and equipment")
which will be amortized as the underlying development is
realized.
|
(iv)
|
In 2006, the
Company acquired a 45% interest in the Tiner Campo Belo development for R$
433.
|
(v)
|
In 2007, the
Company acquired the remaining ownership percentage of these entities for
R$ 40,000 and recorded negative goodwill of R$
32,223.
|
9
|
Pro
Forma Consolidated Statements, Assuming
the Acquisition of AUSA
|
The
unaudited condensed pro forma consolidated statements of income for 2006,
assuming the acquisition of AUSA (Note 22(a)(x)(a)) as of the beginning of
fiscal year ended December 31, 2006 are as follows:
|
|
2006
|
|
|
|
(Unaudited) |
|
|
|
|
|
Net operating
revenue
|
|
|
795,159 |
|
Net
income
|
|
|
30,045 |
|
Shares
outstanding at the end of the year (in thousands)
|
|
|
103,370 |
|
Earnings per
thousand shares outstanding at the end of the year - R$
|
|
|
0.29 |
|
This pro forma
statement has been prepared for comparative purposes only and is not intended to
be indicative of what the Company's results would have been had the acquisition
occurred at the beginning of the period presented or the results which may occur
in the future.
10
|
Goodwill
on Acquisition of Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investees
|
|
Amortization
criteria
|
|
Cost
|
|
|
Accumulated
amortization
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUSA
|
|
Projected
results up to10 years
|
|
|
170,941 |
|
|
|
(7,500
|
) |
|
|
163,441 |
|
Cipesa
|
|
Projected
results up to10 years
|
|
|
40,686 |
|
|
|
— |
|
|
|
40,686 |
|
Others
|
|
|
|
|
3,273 |
|
|
|
— |
|
|
|
3,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,900 |
|
|
|
(7,500
|
) |
|
|
207,400 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
On
January 8, 2007, the Company acquired all the shares of Catalufa Participações
Ltda. ("Catalufa") in exchange for its own shares for an amount of
R$ 134,029. At the same time, Catalufa, the main asset of which comprised
an investment in AUSA, was merged into the Company based on its book value at
the acquisition date. As a result of this transaction, the Company recorded
goodwill in the amount of R$ 170,941, which was based on expected future
profitability and will be amortized based on the estimated projected income
before tax of AUSA. For the year ended December 31, 2007, goodwill amortization
totaled R$ 7,500.
On
October 26, 2007, the Company acquired 70% of Cipesa. The Company and Cipesa
formed a new company, Cipesa Empreendimentos Imobiliários Ltda. ("Nova Cipesa"),
in which Gafisa has 70% of the capital and Cipesa has 30%. Gafisa contributed to
Nova Cipesa R$ 50,000 in cash and acquired shares of Cipesa in Nova Cipesa
in the amount of R$ 15,000 payable over one year. Additionally, Cipesa is
entitled to receive from the Company a variable portion of 2% of the Total Sales
Value ("VGV") of the projects launched by Nova Cipesa through 2014, not to
exceed R$ 25,000. As a result of this transaction, the Company recorded
goodwill of
R$ 40,686, which is based on expected future profitability and will be
amortized based on the estimated projected income before tax of Nova Cipesa. For
the year ended December 31, 2007, no goodwill had been amortized as Nova Cipesa
presented an operating loss for the period.
Through November
2007, the Company held interests in investees together with Redevco do Brasil
Ltda. through special purpose entities which were are proportionally
consolidated, as follow (Company's interest): Blue I (66.67%), Blue II (50%),
Jardim Lorean (50%) and Sunplace (50%). In November 2007, the Company acquired
the remaining interests in each entity for R$ 40,000 and recorded negative
goodwill of R$ 32,223, in "Deferred income on acquisition of subsidiary" on
the balance sheet.
Gafisa
S.A.
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
Annual
interest rate
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital
|
104% to 105%
of CDI (i)
CDI (i)+ 0.66% to 3.29%
|
|
|
325,453 |
|
|
|
— |
|
|
|
— |
|
National
Housing System (SFH)
|
TR (ii) + 6.2%
to 11.4%
|
|
|
98,700 |
|
|
|
26,378 |
|
|
|
51,969 |
|
Downstream
merger obligations
|
TR (ii) +
10.0% to 12.0%
|
|
|
13,311 |
|
|
|
18,027 |
|
|
|
46,540 |
|
Funding for
developments
|
TR (ii) +
6.2%
|
|
|
2,702 |
|
|
|
— |
|
|
|
8,268 |
|
Bank Credit
Certificates
|
INPC (iii)+
14.1% to16.0%
|
|
|
— |
|
|
|
— |
|
|
|
27,440 |
|
Brazilian
Social and Economic
Development Bank (BNDES)
|
TJLP (iv) +
11.0 %
|
|
|
— |
|
|
|
— |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
440,166 |
|
|
|
44,405 |
|
|
|
134,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
59,526 |
|
|
|
17,305 |
|
|
|
48,286 |
|
Long-term
|
|
|
|
380,640 |
|
|
|
27,100 |
|
|
|
86,218 |
|
(i) CDI -
Interbank Deposit Certificate.
(ii) TR -
Interest Reference Rate.
(iii) INPC
- Consumer Price Index.
(iv) TJLP
- Long-term Interest Rate.
|
Funding for
working capital and for developments correspond to credit lines from
financial institutions to raise the necessary funds.
|
|
|
|
SFH - the
Company has financing agreements with the SFH, the resources from which
are released as construction progresses for the related
developments.
|
|
|
|
Downstream
merger obligations - Relate to the debts assumed from former shareholders
and fall due through 2013.
|
Loans and financing
are guaranteed by sureties of the investors, mortgage of the units, assignment
of rights, interest on the receivables from clients and the proceeds from the
sale of our properties. At December 31, 2007, R$ 9,851 of financial
investments were given as loan guarantees (2006 - no guarantee was provided;
2005 - R$ 156).
The
Company is subject to a number of covenants including, among others: (a)
limitations on its ability to incur debt; (b) limitations on the existence of
liens on its properties; (c) limitations on transactions with related parties,
which generally must be on terms on less favorable than those that could be
obtained in a comparable arm's length transaction; and (d) maintenance of
certain financial ratios calculated based on the financial statements prepared
in accordance with the Brazilian GAAP. The Company was in compliance with all
covenants during each period presented.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
In
November 2007, the Company raised loans for working capital in the amount of
R$ 200,000 with highly-rated financial institutions and simultaneously
contracted cross-currency interest rate swaps (Note 17).
The
long-term installments as of December 31, 2007 mature as follows: in 2009 -
R$ 256,045; 2010 - R$ 42,396; 2011 - R$ 28,417; 2012 -
R$ 30,071; 2013 and thereafter - R$ 23,711.
In
April 2005, the Company's "First Debenture Placement Program" was approved by
the CVM to place R$ 200,000 non-convertible single series debentures, for
public distribution. On September 29, 2006 the Company is "Second Debenture
Distribution Program" was approved by the CVM to place R$ 500,000
non-convertible single series debentures, for public distribution. The Company
has made the following placements:
|
First
program
|
|
|
|
Second
program
|
|
|
|
|
|
|
|
|
|
1st
issuance
|
|
2nd
issuance
|
|
1st
issuance
|
|
|
|
|
|
|
|
|
Issuance
date
|
April 1,
2005
|
|
December 1,
2005
|
|
October 1,
2006
|
|
Amount -
R$
|
64,000
|
|
112,310
|
|
240,000
|
|
Number
|
6,400
|
|
11,231
|
|
24,000
|
|
Grace
period
|
24
months
|
|
30
months
|
|
60
months
|
|
Installments -
monthly
|
From April 1,
2007
|
|
From July 1,
2008
|
|
From September
1, 2009
|
|
Final
installment maturity
|
March 1,
2009
|
|
December 1,
2010
|
|
September 1,
2011
|
|
Annual
remuneration
|
CDI +
2.85%
|
|
CDI +
2.00%
|
|
CDI +
1.30%
|
|
At
December 31, 2007, balances due from the Second Debenture Placement Program, of
R$ 240,000, is presented below:
Program/issuances
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Second/1st
issuance
|
|
|
249,190 |
|
|
|
251,038 |
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
9,190 |
|
|
|
11,038 |
|
|
|
|
|
|
|
|
|
|
Long-term,
principal
|
|
|
240,000 |
|
|
|
240,000 |
|
The
debenture programs are subject to semi-annual covenants which include, among
others, maintenance of net debt and receivables coverage ratios. Additional
guarantees are provided through fiduciary credits and include receivables from
clients. In addition to the normal accelerated amortization clauses, which would
be triggered in an event of default, a further
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
default trigger
would apply if the Company's credit rating were to fall below a predetermined
level. The Company was in compliance with all debenture programs covenants
during each period presented.
13
|
Other
Current Liabilities
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Loans from
real estate development partners
|
|
|
8,255 |
|
|
|
2,079 |
|
|
|
5,234 |
|
Credit
assignments
|
|
|
1,442 |
|
|
|
1,358 |
|
|
|
1,363 |
|
Sundry current
accounts
|
|
|
— |
|
|
|
87 |
|
|
|
2,812 |
|
Obligation
from Diodon acquisition
|
|
|
— |
|
|
|
— |
|
|
|
4,542 |
|
Other
|
|
|
13,603 |
|
|
|
4,370 |
|
|
|
3,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,300 |
|
|
|
7,894 |
|
|
|
17,825 |
|
Loans from real
estate partners relate to amounts due under current accounts agreement, which
accrue financial charges of IGP-M plus 12% p.a.
14
|
Commitments
and Provision for Contingencies
|
The
Company and its subsidiaries are parties in lawsuits and administrative
proceedings at several courts and government agencies that arise from the normal
course of business, involving tax, labor, civil and other matters. Management,
based on information provided by its legal counsel and analysis of the pending
claims and, with respect to the labor claims, based on past experience regarding
the amounts claimed, recognized a provision in an amount considered sufficient
to cover the estimated losses.
The
changes in the provision for contingencies are summarized below:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the
beginning of the period
|
|
|
4,105 |
|
|
|
4,422 |
|
|
|
1,000 |
|
New provisions and interest
charges
|
|
|
2,258 |
|
|
|
725 |
|
|
|
4,500 |
|
New provision from AUSA
acquisition
|
|
|
16,695 |
|
|
|
— |
|
|
|
— |
|
Payments
|
|
|
(1,613
|
) |
|
|
(856
|
) |
|
|
(1,078
|
) |
Reversal
|
|
|
(183
|
) |
|
|
(186
|
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the
end of the period
|
|
|
21,262 |
|
|
|
4,105 |
|
|
|
4,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
|
|
|
17,594 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
3,668 |
|
|
|
4,105 |
|
|
|
4,422 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(a)
|
Tax,
labor and civil lawsuits
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Tax
lawsuits
|
|
|
16,768 |
|
|
|
— |
|
|
|
— |
|
Labor
claims
|
|
|
2,171 |
|
|
|
3,169 |
|
|
|
3,413 |
|
Civil
lawsuits
|
|
|
2,323 |
|
|
|
936 |
|
|
|
1,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,262 |
|
|
|
4,105 |
|
|
|
4,422 |
|
Our
subsidiary AUSA is party in judicial lawsuits and administrative proceedings
related to Excise Tax (IPI) and Value-added Tax on Sales and Services (ICMS) on
two imports of aircraft in 2001 and 2005, respectively, under leasing agreements
without purchase option. The chances of loss in the ICMS case are estimated by
its legal counsel that is handling it as: (i) probable in
regard to the principal and interest, and (ii) remote in regard to the fine for
noncompliance with the ancillary obligation. The amount of the contingency
estimated by the legal counsel as a probable loss amounts to R$ 16,768,
which is recorded in "Provision for contingencies" as of December 31,
2007.
Furthermore, at
December 31, 2007 the Company is aware of other lawsuits and risks, the outcome
of which, based on the opinion of its legal counsel is a possible, but not
probable, loss, amounting to approximately R$ 67,430 (2006 -
R$ 44,437, 2005 - R$ 26,000), and for which the Company's management
believes that the recognition of a provision for losses is not
necessary.
An
amount of R$ 27,979 of the proceeds of the Company's initial public
offering was whitheld in an escrow deposit attached by court order to guarantee
a writ of execution. The Company is appealing the decision and considers that
the claim has no merit. No provision has been recorded.
(b)
|
Commitment
to complete developments
|
The
Company is committed to deliver units to owners of land who exchange land for
real estate units developed by the Company. The Company is also committed to
complete units sold and to comply with the requirements of the building
regulations and licenses approved by the proper authorities.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
At
December 31, 2007, the Company's capital was R$ 1,221,846 (2006 -
R$ 591,742, 2005 - R$ 227,363), represented by 132,577,093 nominative
Common shares without par value (2006 - 111,511,596 nominative Common
shares without par value, 2005 - 9,937,519 Common shares and 16,222,209
preferred shares), 3,124,972 of which were treasury shares (2006 - 8,141,646;
2005 - 1,533,334).
At
December 31, 2006, Gafisa S.A.'s outstanding share capital comprised 103,369,950
(voting) Common shares.
At
December 31, 2005, Gafisa S.A.'s outstanding share capital comprised 8,404,185
(voting) Common shares and 16,222,209 (non-voting) Preferred shares of which
there are 14,972,209 Class A and 1,250,000 Class F fully subscribed registered,
book-entry shares, without par value.
On
January 13, 2006, the Board of Directors approved the conversion of all
14,972,209 Class A Preferred shares and 1,250,000 Class F Preferred shares into
16,222,209 Common shares.
On
January 17, 2006, Havertown subscribed and paid-in 411,348 Common shares
totaling R$ 6,179 as
approved by the Board of Directors on December 23, 2005.
On
January 26, 2006, the shareholders approved the conversion of all Preferred
shares into Common shares. On the same date, the Board of Directors approved the
terms and conditions of the initial public offering and the new bylaws, adapted
to the Novo Mercado of the Bolsa de Valores de São Paulo - BOVESPA
rules.
On
January 27, 2006, in a shareholders' general meeting, the shareholders approved
a stock split of the Common shares, based on a ratio of one existing share for
every three newly issued shares increasing the number of shares from 27,774,775
to 83,324,316 (of which 8,280,534 remained in treasury). Share data and earnings
per share in the Brazilian GAAP financial statements have not been presented
retrospectively to conform to the split.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
On
February 16, 2006 a capital increase of R$ 352,756 was approved upon
issuance, for public subscription, on the Novo Mercado of 26,724,000 new Common
shares, without par value, and simultaneously through an issuance of primary and
secondary equity Global Depositary Receipts pursuant to Rule 144A and Regulation
S of the US Securities Act of 1933. The public offering generated proceeds of
R$ 494,393 of which R$ 141,637 was allocated to a share premium
reserve (capital reserve). Stock issuance expenses directly related to the
initial public offering of R$ 27,308 were charged to the statement of
income for the year ended December 31, 2006.
During 2006 the
Board of Directors approved a capital increase of R$ 8,209 in connection
with the stock option program and the exercise of 1,532,724
options.
At
December 31, 2006, shares in treasury comprise 8,141,646 Common shares (2005 -
1,533,334 Preferred Class B and 1,226,844 Preferred Class C). During 2006,
138,888 common shares held in treasury were cancelled.
In
January 2007, upon the acquisition of 60% of AUSA arising from the merger of
Catalufa Participações Ltda., a capital increase of R$ 134,029 was approved
through the issuance, for public subscription, of 6,358,616 new Common
shares.
In
January 2007, the cancellation of 5,016,674 Common shares which had been held in
treasury, amounting to R$ 28,976, was approved.
In
January 2007, a capital increase of R$ 996, related to the stock option
plan and the exercise of 153,900 Common shares, was approved.
In
March 2007, a capital increase of R$ 487,813 was approved through the
issuance for public subscription, of 18,761,992 new common shares, without par
value, at the issue price of R$ 26.00 per share.
In
May 2007, the capital increase of R$ 5,217, related to the stock option
plan and the exercise of 507,068 Common shares, was approved.
In
June 2007, the capital increase of R$ 693, related to the stock option plan
and the exercise of 105,900 Common shares, was approved.
In
August 2007, the capital increase of R$ 52, related to the stock option
plan and the exercise of 2,481 Common shares, was approved.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
In
December 2007, the capital increase of R$ 1,304, related to the stock
option plan and the exercise of 192,214 Common shares, was
approved.
Under the bylaws, as
amended on January 8, 2007, the Board of Directors ("Conselho de Administração")
may increase share capital up to the limit of the authorized capital of
200,000,000 Common shares.
The
changes in the number of shares in the three years ended December 31, 2007 were
as follows (without reflecting the effect of retrospectively applying the
January 27, 2006 stock split):
|
Thousands
of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
shares
|
|
|
|
|
Common
shares
|
|
Class
A
|
|
Class
B
|
|
Class
C
|
|
Class
D
|
|
Class
E
|
|
Class
F
|
|
Class
G
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2004
|
8,200
|
|
11,038
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19,238
|
|
Common shares
converted into Preferred shares
|
(3,200
|
)
|
—
|
|
1,800
|
|
1,250
|
|
50
|
|
100
|
|
—
|
|
—
|
|
—
|
|
Conversion
between classes of preferred shares
|
—
|
|
(1,094
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,094
|
|
—
|
|
Shares
issuance
|
3,404
|
|
5,029
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,250
|
|
—
|
|
9,683
|
|
Repurchase and
cancellation of shares
|
—
|
|
—
|
|
(267
|
)
|
(23
|
)
|
(50
|
)
|
(100
|
)
|
—
|
|
(1,094
|
)
|
(1,534
|
)
|
Repurchase of
shares for treasury
|
—
|
|
—
|
|
(1,533
|
)
|
(1,227
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2005
|
8,404
|
|
14,973
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,250
|
|
—
|
|
24,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of
all preferred shares to common shares
|
16,223
|
|
(14,973
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,250
|
)
|
—
|
|
—
|
|
Share
issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Havertown
|
411
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
411
|
|
Stock
split
|
50,075
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
50,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
75,113
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
75,113
|
|
Share
issuance
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Exercise of
stock options
|
1,533
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,533
|
|
Initial public
offering
|
26,724
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
26,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2006
|
103,370
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
103,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issuance
(AUSA acquisition)
|
6,359
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,359
|
|
Exercise of
stock options
|
961
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
961
|
|
Public
offering
|
18,762
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
18,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2007
|
129,452
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
129,452
|
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(b)
|
Corporate
restructuring
|
In
June 2005, a capital increase of R$ 135,180 was approved through issuance
of 9,000,000 new shares (3,404,182 Common shares, 4,345,818 Preferred Class A
shares and 1,250,000 Preferred Class F shares) fully subscribed and paid-in by
Equity International, through its subsidiary Campsas Participações Ltda.
("Campsas").
In
December 2005, the Company effected a corporate restructuring whereby (i) Cimob
returned the Common shares it held in the Company as payment for the Company
having assumed this shareholders' debt which it had subsequently transferred to
Urucari Participações Ltda ("Urucari") and (ii) the Company merged with its
shareholders Urucari, Campsas and S.P.E.L. Empreendimentos e Participações S.A.
("S.P.E.L."). The objective of the downstream merger was to rationalize the
operating structure and optimize the tax deductible goodwill which Urucari and
Campsas held through their investments in the Company amounting to
R$ 15,031 and R$ 32,024 respectively, the tax effect of which totaled
R$ 15,567.
As
a result of the downstream mergers, the former shareholders' shares were
cancelled and their net assets passed to the Company:
|
In the case of
Urucari, no shares were issued in favor of Urucari shareholders. The
1,533,334 Preferred Class B and 1,250,000 Preferred Class C shares
previously held by Urucari and which had been approved for redemption by
the Extraordinary General Meetings ("EGM") on April 4, 2005 and May 18,
2005, amounting to R$ 47,026, were transferred to treasury shares for
subsequent cancellation.
|
|
|
|
In the case of
Campsas and S.P.E.L., 8,404,181 Common shares and 5,595,818 Preferred
shares were cancelled pursuant to Brazilian Corporate Law, in exchange for
the same number and classes of new shares of the Company which were
delivered to the shareholders of Campsas and S.P.E.L. in the same
proportion as previously held. Accordingly, no changes were made to the
composition of the Company's
capital.
|
The
net assets pertaining to the shareholders were merged at book values based on
the balances at September 30, 2005. Accordingly, the Company's shareholders'
equity was reduced by R$ 31,465 (debt assumed net of tax asset
acquired).
On
December 23, 2005, a new issue of 1,094,340 shares was approved, of which
411,348 were Common and 682,992 were Preferred Class A shares, all nominative
and of no par value. Preferred Class A shares totaled R$ 10,259, which were
fully subscribed and paid-up by Havertown, including an amount of R$ 4,590
recorded as a Capital reserve.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Share redemption -
during 2005, the shareholders approved various conversions of shares owned by
Urucari, Cimob and First Stock Fund into new classes of redeemable stock which
resulted in the withdrawal of Cimob and First Stock Fund as shareholders of the
Company:
|
Urucari - the
April 8, 2005 EGM approved the redemption of all of the 1,800,000
redeemable Class B Preferred shares, owned by Urucari as follows; (i)
266,666 shares valued at R$ 4,000, were redeemed 45 days after the
EGM; (ii) 1,533,334 shares were to be redeemed in monthly installments
commencing in May 2007 and through April 2013. Furthermore, the EGM of May
18, 2005 approved the redemption of all of the 1,250,000 Class C Preferred
shares owned by Urucari as follows: (i) 23,156 redeemable on
December 2, 2005 and (iii) 1,226,884 shares in monthly installments
commencing on January 2, 2006. As a consequence of the merger with
Urucari, the Company's obligation to redeem the shares was cancelled
by the Company having assumed debt of Urucari to financial institutions
which held a surety over the same shares to the same value and terms. The
shares in treasury will be cancelled as the debt is amortized and
guarantees lifted.
|
|
|
|
Cimob - the
October 27, 2005 EGM approved the issue of non-voting Class D redeemable
Preferred shares and the conversion of 50,000 Common shares owned by Cimob
into the same number of Class D Preferred shares. Concurrently, the
redemption of all the 50,000 shares was approved, without reduction of
capital by charge to revenue reserves of an amount of R$ 683. This
amount was to be paid in eight equal quarterly installments, indexed to
the TR plus 12% p.a., the first installment due on August 15, 2006. All
Class D Preferred shares were cancelled. On December 12, 2005, a new class
of non voting redeemable shares, Preferred Class E shares was issued.
Concurrently, the conversion of three Preferred Class A shares and 99,740
Common shares owned by Cimob, was approved for conversion into 99,743
Preferred Class E shares and the redemption of these 99,743 shares,
without reduction of capital by charge to revenue reserves upon payment of
R$ 900. The shares were cancelled.
|
|
|
|
The First
Stock Equity Fund - on December 9, 2005, Preferred Class G shares, a new
class of non voting redeemable shares was issued. Concurrently, the
conversion into Class G Preferred shares and redemption of the 1,094,340
Class A Preferred shares owned by The First Stock Equity Fund, LLC was
approved by charge to revenue reserves. The redemption value was
R$ 16,437 and was paid in full to The First Stock Equity Fund, LLC.
All Class G Preferred shares were
cancelled.
|
(c)
|
Appropriation
of net income
|
Pursuant to the
Company's bylaws, the net income for the year, after absorbing any accumulated
losses, is appropriated as follows: (i) 5% to the legal reserve, up to 20% of
paid-up capital, and (ii) 25% of the remaining balance for the payment of
mandatory dividends to all shareholders.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
For
the year ended December 31, 2005 management proposed not to distribute a
dividend and instead designate the funds to an investments reserve to be applied
to grow the Company's business, which proposals was approved by the
shareholders. The provision made at December 31, 2007 and 2006 to reflect the
proposed minimum mandatory dividend was determined as follows (approved by the
Annual General Meeting hold on April 4, 2008):
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Net income for
the year
|
|
|
113,603 |
|
|
|
46,056 |
|
Legal reserve
(5%)
|
|
|
(5,680
|
) |
|
|
(2,303
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
107,923 |
|
|
|
43,753 |
|
|
|
|
|
|
|
|
|
|
Compulsory
minimum dividends - 25%
|
|
|
(26,981
|
) |
|
|
(10,938
|
) |
The
retention of earnings for 2006 was approved at the AGM (Annual General Meeting)
- Minutes 55 hold on March 21, 2007.
Pursuant to Article
36 of the Company's bylaws, amended on March 21, 2007, the recognition of a
statutory reserve became mandatory. In accordance with said article, the amount
of such reserve may not exceed 71.25% of net income for the purpose of financing
the expansion of the activities of the Company and its subsidiaries, including
the subscription of capital increases or creation of new ventures, participation
in consortiums or other forms of association for the achievement of the
Company's purpose.
The
five stock option plans are offered by the Company. The first plan was launched
in 2000 and is managed by a committee that periodically creates new stock option
plans, determining their terms, which, among other things, (i) define the length
of service that is required for employees to be eligible to the benefits of the
plans (vesting requirements), (ii) select the employees that will be entitled to
participate, and (iii) establish the purchase prices of the preferred shares to
be exercised under the plans.
In
order to be eligible for the grants, participant employees are required to
contribute 10% of the value of total benefited options on the date the option is
granted and, additionally, for each of the following five years, 18% of the
price of the grant per year. The exercise price is adjusted by IGP-M plus annual
interest of 6%. The stock option may be exercised in one to three years
subsequent to the vesting period established in each plan. The shares are
generally available to employees over a period of ten years after their
contribution.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
The
Company records the cash receipt against a liability account to the extent the
employees make advances for the purchase of the shares during the vesting period
(usually five years). On December 31, 2006 and 2005, advanced payments totaled
R$ 996 and R$ 2,397, respectively.
There was no
advanced payment for the year ended December 31, 2007.
The
Company may decide to issue new shares or transfer its treasury shares to the
employees in accordance with the clauses established in the plans. The Company
has the right of first refusal on shares issued under the plans, in the event of
dismissals or retirement. In such case, the advances are returned to the
employees, in certain circumstances, at an amount that correspond to the greater
of the market value of the shares (as established in the rules of the plans) or
the amount paid plus monetary correction based on the variation in the IGP-M and
annual interest of 6% p.a.
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Temporary differences
|
|
|
39,482 |
|
|
|
24,800 |
|
|
|
11,737 |
|
Net operating loss
carryforwards
|
|
|
12,499 |
|
|
|
15,880 |
|
|
|
7,798 |
|
Tax credits from downstream
merger
|
|
|
9,341 |
|
|
|
12,454 |
|
|
|
15,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,322 |
|
|
|
53,134 |
|
|
|
35,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences between income taxed
on
a cash basis and the amount
recorded
on the accrual basis
|
|
|
63,268 |
|
|
|
32,259 |
|
|
|
12,884 |
|
The
Company calculates its taxes based on the recognition of results proportionally
to the receipt of the contracted sales, in accordance with the rules determined
by the Federal Internal Revenue Department (SRF) Instruction 84/79, which
differs from the calculation of the accounting revenues based on the costs
incurred versus estimated cost. The taxation will occur over an average period
of two years, considering the term for the receipt of the sales and the
completion of the corresponding constructions.
On
December 31, 2007, the Company had tax losses available for offset against
future taxable income of R$ 104,147 (2006 - R$ 67,971, 2005 -
R$ 22,285), with corresponding tax benefits of R$ 35,410 (2006 -
R$ 23,110, 2005 - R$ 7,798).
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
The
Company did not record a deferred income tax asset on the tax losses and social
contribution tax loss carryforwards of its subsidiaries, which adopt the taxable
income regime and do not have a history of taxable income for the past three
years.
Based on the
projections of generation of future taxable income of the Parent Company, the
estimated recovery of the deferred income tax and social contribution asset is
as follows: 2008 - R$ 6,530 and 2009 - R$ 29,580.
Estimated of future
taxable income are based on, among other things, the Company's performance, its
market and certain economic factors. The actual amounts could differ from these
estimates.
The
reconciliation of the statutory to effective tax rate is as
follows:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Income before
taxes on income, statutory
profit sharing and minority
interest
|
|
|
155,199 |
|
|
|
55,430 |
|
|
|
27,272 |
|
Tax expense at
statutory rates - 34%
|
|
|
(52,768
|
) |
|
|
(18,846
|
) |
|
|
(9,272
|
) |
Net effect of
jointly-controlled subsidiaries
on the presumed tax
regime
|
|
|
16,194 |
|
|
|
12,439 |
|
|
|
11,303 |
|
Tax losses
recorded from prior years
|
|
|
6,125 |
|
|
|
— |
|
|
|
— |
|
Other
permanent differences, net
|
|
|
(497
|
) |
|
|
383 |
|
|
|
1,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and
social contribution(expense)/benefit
|
|
|
(30,946
|
) |
|
|
(6,024
|
) |
|
|
3,405 |
|
The
Company mitigates credit risks related to banks and financial investments by
investing in short-term securities with highly-rated financial institutions. It
also limits its credit risks by having a broad base of clients and through
continuous credit rating analyses. At December 31, 2007, there was no
significant concentration of credit risks related to clients. For the years
presented, the Company did not operate with derivative financial instruments.
The market values of financial instruments approximated their book values and
were substantially represented by financial investments, loans and
financings.
These risks are
managed by control policies, specific strategies and determination of limits, as
follows:
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
The
Company restricts its exposure to credit risks associated with banks and
financial investments, investing in highly-rated financial institutions in
short-term securities.
With regards to
accounts receivables, the Company restricts its exposure to credit risks through
sales to a broad base of customers and ongoing credit analysis. The Company has
no history of losses from liens in the cases of default during the construction
period.
On
December 31, 2007, 2006 and 2005, the Company's management did not deem
necessary the recognition of a provision to cover losses on the recovery of
receivables related to real estate developments delivered. In the same period,
there was no material concentration of credit risk associated with
customers.
The
Company participates in operations involving derivative financial instruments
for the purposes of mitigating the effects of fluctuations in foreign exchange
rates.
At
December 31, 2007, R$ 1,070 related to the net positive result from the
cross-currency interest rate swap operations was recognized in "Financial income
(expenses)".
The
nominal value of the swap contracts was R$ 200,000 at December 31, 2007.
The unrealized gains (losses) of these operations are recorded in the balance
sheet as follows:
|
|
|
|
Percentage
|
|
|
|
Net
unrealized gains (loss
|
)
|
|
|
Rate
swap contracts
|
|
Nominal
value
|
|
Original
index
|
|
Swap
|
|
from
derivative instruments
|
|
Market
value unrecorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco ABN Amro
Real S.A.
|
|
100,000
|
|
Yen +
1.4%
|
|
105%
CDI
|
|
(541
|
)
|
955
|
|
Banco
Votorantim S.A.
|
|
100,000
|
|
U.S. dollar +
7%
|
|
104%
CDI
|
|
1,611
|
|
2,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
1,070
|
|
3,499
|
|
The
Company does not make sales denominated in foreign currency.
Interest accrues on
loans and financing transactions (Note 11). Interest accrues on financial
investments (Note 4). Accounts receivable from clients (Note 5) are subject to
an interest rate of 12% per year.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
A
significant portion of the balances maintained with related parties and with
partners in the ventures is not subject to financial charges (Notes 7 and
13).
(b)
|
Financial
instruments valuation
|
The
main financial instruments receivable and payable and criteria for their
valuation, are as follows:
(i)
|
Cash
and banks and financial investments
|
The
market value of these assets does not differ significantly from the amounts
presented in the financial statements (Note 4). The contracted rates agreed
reflect usual market conditions. The financial investments are recorded based on
effectively contracted remuneration rates as the Company intends to maintain
these investments until they are effectively redeemed.
(ii)
|
Loans
and financing and debentures
|
Loans and financing
are recorded based on the contractual interest rates of each operation. For the
calculation of their market value, interest rate estimates were used for
contracting operations with similar terms and amounts. The terms and conditions
of loans and financing and debentures obtained are presented in Notes 11 and
12.
The
amount for the settlement of these liabilities does not significantly differ
from the amounts presented in the financial statements.
Gafisa S.A. and its
subsidiaries maintain insurance policies against engineering risk, barter
guarantee, guarantee for the completion of the work and civil liability related
to unintentional personal damages caused to third parties and material damages
to tangible assets, as well as against fire hazards, lightning strikes,
electrical damages, natural disasters and gas explosion. The contracted coverage
is considered sufficient by management to cover possible risks involving its
assets and/or responsibilities.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Starting in 2007,
following the acquisition, formation and incorporation of the entities AUSA, Fit
Residencial and Bairro Novo, respectively, the Company's chief executive officer
assesses segment information primarily on the basis of different business
segments rather than geographic regions in Brazil. The prior periods have been
retrospectively adjusted to conform to the Company's new segment reporting
structure and the only segment from this structure in prior years is Gafisa
S.A.
The
Company's chief executive officer, who is responsible for allocating resources
among the businesses and monitoring their progress, uses economic present value
data, which is derived from a combination of historical operating results and
forecasted operating results. The Company provides below a measure of historical
profit or loss, selected segment assets and other related information for each
reporting segment. This information is the basis of the internal data that is
used by management to develop economic present value estimates and provided to
the chief executive officer for making operating decisions, which include the
allocation of resources among segments and segment performance. The information
is derived from the statutory accounting records which are maintained in
accordance with Brazilian GAAP. The reporting segments do not separate
operational expenses, total assets and depreciation. Revenues from no individual
customer represented more than 10% of our net sales and/or
services.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A. (* ) |
|
|
AUSA
|
|
|
Fit
Residencial
|
|
|
Bairro
Novo
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
963,411 |
|
|
|
199,829 |
|
|
|
8,934 |
|
|
|
— |
|
|
|
1,172,174 |
|
Operating
costs
|
|
|
(659,889
|
) |
|
|
(128,692
|
) |
|
|
(8,333
|
) |
|
|
— |
|
|
|
(796,914
|
) |
Gross
profit
|
|
|
303,522 |
|
|
|
71,137 |
|
|
|
601 |
|
|
|
— |
|
|
|
375,260 |
|
Gross margin -
%
|
|
|
31.5 |
|
|
|
35.6 |
|
|
|
6.7 |
|
|
|
— |
|
|
|
32.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
116,952 |
|
|
|
12,543 |
|
|
|
(14,941
|
) |
|
|
(951
|
) |
|
|
113,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
from clients
(current and
long-term)
|
|
|
922,170 |
|
|
|
98,224 |
|
|
|
2,357 |
|
|
|
— |
|
|
|
1,022,751 |
|
Properties for
sale
|
|
|
785,879 |
|
|
|
91,519 |
|
|
|
44,514 |
|
|
|
2,399 |
|
|
|
924,311 |
|
Other
assets
|
|
|
907,916 |
|
|
|
59,888 |
|
|
|
26,980 |
|
|
|
8,647 |
|
|
|
1,003,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,615,965 |
|
|
|
249,631 |
|
|
|
73,851 |
|
|
|
11,046 |
|
|
|
2,950,493 |
|
(*) Includes
all subsidiaries, except Alphaville Urbanismo S.A., Fit Residencial and
Bairro
Novo.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Law no. 11638, enacted on December 28, 2007, amended Brazilian Corporate Law in
relation to certain accounting practices, maintenance of bookkeeping records and
the presentation of financial statements, as from the year ending December 31, 2008.
Under Law no. 11638 accounting regulations issued by the CVM
should be consistent with international accounting standards. The CVM will adopt the standards of the International Accounting
Standards Board - IASB as its reference for international accounting
standards. The CVM will be
regulating and codifying new standards throughout 2008. The Company is
carrying out studies to evaluate the possible impact of Law no. 11638.
Among the new accounting policies which
will be incorporated into
Brazilian GAAP by the new law are those listed below. Management believes
that certain of these changes to accounting policies may impact its financial
position and results of operations to be reported as at and for the year ending
December 31, 2008. Because of the inherent uncertainties
until such time as Law no. 11638 is codified and further regulated,
the Company's management is unable to estimate the
effects will have on its financial statements.
Major changes introduced which may
affect the presentation of
the annual financial statements for the year ending December 31, 2008 include:
•
|
within property, plant
and equipment, the
Law creates (a)
subgroup for
intangible assets; (b) restricts the use of the
deferred charges account to pre-operating expenses and
additional
restructuring costs; (c) includes acquired goodwill in
intangible assets,
and (d) includes assets arising from any
transactions which transfer to the company the benefits, control and
risks, regardless of whether there is a transfer of
ownership;
|
|
|
|
creates, in
shareholders' equity, an asset valuation
adjustments account to record the counter-entry of the foreign exchange
translation effects of investments in foreign subsidiaries when the
functional currency of the investee differs from that of the
parent company, as well as the counter-entry to record changes in the fair
market value of assets and liabilities that are
marked-to-market;
|
|
|
|
establishes new criteria for the
classification and valuation of financial instruments, including derivatives,
credit rights and notes, consistent with international accounting
standards, and classifies them into three
categories trading securities; securities available-for-sale; and
securities held-to-maturity. Investments classified in the first two categories
are recorded at fair value and the
latter at cost plus
accrued interest;
|
|
|
|
introduces the requirement that
noncurrent and significant current assets and liabilities be adjusted to present their present
value;
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
establishes that the Company must periodically
evaluate the extent
to which the amounts recorded in property, plant and equipment, intangible
assets and deferred charges are recoverable;
|
|
|
|
eliminates the option of revaluing
property, plant and equipment. Companies may elect to maintain existing
revaluation reserves, which should be realized in accordance with the
current standards, or reverse these balances by the end of
2008;
|
|
|
|
modifies the treatment of tax
incentives, which are to be recorded in
results;
|
|
|
|
upon merger, combination or spin-off
transactions between unrelated parties when there is a change in control,
the assets and liabilities of the merged, combined or spun-off company
must be recorded at fair
value.
|
The
CVM has determined that the Comitê de Praticas Contábeis ("CPC"), a Brazilian
accounting standards setting board, will be responsible for introducing changes
to Brazilian GAAP beginning in 2008 which will align Brazilian GAAP to IFRS.
Such changes to Brazilian GAAP are expected to have a significant effect on the
measurement of the results of operations and presentation of the statement of
position of the Company.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
21
|
Additional
Information - Consolidated Statement of Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
113,603 |
|
|
|
46,056 |
|
|
|
30,677 |
|
Expenses (income) not affecting cash
and banks and
financial investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
14,823 |
|
|
|
4,302 |
|
|
|
2,584 |
|
Permanent assets
disposals
|
|
|
(84 |
) |
|
|
— |
|
|
|
— |
|
Amortization of negative
goodwill
|
|
|
— |
|
|
|
(15,386
|
) |
|
|
(2,721
|
) |
Unrealized interest and charges,
net
|
|
|
35,819 |
|
|
|
39,437 |
|
|
|
25,715 |
|
Deferred income tax and social
contribution
|
|
|
18,729 |
|
|
|
1,393 |
|
|
|
(7,541
|
) |
Minority interest
|
|
|
8,410 |
|
|
|
— |
|
|
|
— |
|
Decrease (increase) in
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
(462,913
|
) |
|
|
(190,279
|
) |
|
|
25,562 |
|
Properties for sale
|
|
|
(481,527
|
) |
|
|
(136,660
|
) |
|
|
(33,511
|
) |
Other receivables
|
|
|
(6,011
|
) |
|
|
(54,260
|
) |
|
|
5,226 |
|
Deferred selling
expenses
|
|
|
(19,991
|
) |
|
|
(10,569
|
) |
|
|
2,230 |
|
Prepaid expenses
|
|
|
(3,323
|
) |
|
|
(2,666
|
) |
|
|
1,353 |
|
Decrease (increase) in
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate development
obligation
|
|
|
(6,733
|
) |
|
|
(57,963
|
) |
|
|
(133,481
|
) |
Obligations for purchase of
land
|
|
|
109,817 |
|
|
|
72,684 |
|
|
|
4,463 |
|
Taxes and contributions
|
|
|
28,718 |
|
|
|
(5,674
|
) |
|
|
9,850 |
|
Tax, labor and other
contingencies
|
|
|
|
|
|
|
(317
|
) |
|
|
3,017 |
|
Trade accounts payable
|
|
|
60,025 |
|
|
|
(1,195
|
) |
|
|
6,596 |
|
Advances from customers
|
|
|
(28,484
|
) |
|
|
28,354 |
|
|
|
17,633 |
|
Payroll, charges and provision for
bonuses payable
|
|
|
20,428 |
|
|
|
7,658 |
|
|
|
3,058 |
|
Other accounts payable
|
|
|
105,717 |
|
|
|
(4,801
|
) |
|
|
(7,158
|
) |
Assignment of credits
payables
|
|
|
(1,038
|
) |
|
|
(1,140
|
) |
|
|
(946
|
) |
Unearned income from property
sales
|
|
|
(1,995
|
) |
|
|
(25,168
|
) |
|
|
(65,553
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in
operating activities
|
|
|
(496,010
|
) |
|
|
(306,194
|
) |
|
|
(112,947
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment and
expenditure on
deferred charges
|
|
|
(34,087
|
) |
|
|
(4,580
|
) |
|
|
(1,598
|
) |
Acquisition of investments, net of
cash of R$ 1,965 in 2007
|
|
|
(78,160
|
) |
|
|
(3,997
|
) |
|
|
(3,978
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in
investing activities
|
|
|
(112,247
|
) |
|
|
(8,577
|
) |
|
|
(5,576
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital increase
|
|
|
496,075 |
|
|
|
508,781 |
|
|
|
145,439 |
|
Shares redeemed
|
|
|
— |
|
|
|
— |
|
|
|
(17,337
|
) |
Increase in loans and
financing
|
|
|
427,019 |
|
|
|
303,189 |
|
|
|
269,758 |
|
Repayments of loans and
financing
|
|
|
(57,786
|
) |
|
|
(364,165
|
) |
|
|
(190,055
|
) |
Assignment of credits receivable,
net
|
|
|
2,225 |
|
|
|
(766
|
) |
|
|
(1,279
|
) |
Additional 2006
dividends
|
|
|
(10,988
|
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by financing activities
|
|
|
856,545 |
|
|
|
447,039 |
|
|
|
206,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
in cash and banks and financial investments
|
|
|
248,288 |
|
|
|
132,268 |
|
|
|
88,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and banks and financial
investments
|
|
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the
year
|
|
|
266,159 |
|
|
|
133,891 |
|
|
|
45,888 |
|
At the end of year
|
|
|
514,447 |
|
|
|
266,158 |
|
|
|
133,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
in cash and banks and financial investments
|
|
|
248,288 |
|
|
|
132,268 |
|
|
|
88,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
2007 |
|
|
|
2006 |
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year
for
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social
contribution
|
|
|
6,699 |
|
|
|
6,261 |
|
|
|
4,661 |
|
Interest
|
|
|
40,530 |
|
|
|
52,911 |
|
|
|
31,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
non-cash information
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of AUSA
|
|
|
178,400 |
|
|
|
— |
|
|
|
— |
|
Assumption of debt on
downstream-merger
|
|
|
— |
|
|
|
— |
|
|
|
(47,026
|
) |
Redemption of shares (assumption of
debt) - Cimob
|
|
|
— |
|
|
|
— |
|
|
|
(683
|
) |
Acquisition of Diodon (assumption of
debt)
|
|
|
— |
|
|
|
— |
|
|
|
4,541 |
|
22
|
Supplemental
Information - Summary of Principal Differences between Brazilian
GAAP and US GAAP
|
(a)
|
Description
of the GAAP differences
|
The
Company's accounting policies comply with, and its consolidated financial
statements are prepared in accordance with Brazilian GAAP. A summary of the
Company's principal accounting policies that differ significantly from US GAAP
is set forth below.
(i)
|
Principles
of consolidation
|
Under Brazilian
GAAP, the consolidated financial statements include the accounts of the Company
and those of all its subsidiaries listed in Note 8, with separate disclosure of
the participation of minority shareholders. The proportional consolidation
method is used for investments jointly-controlled investees, which are all
governed by shareholders' agreement; as a consequence, the assets, liabilities,
revenues and costs are consolidates based on the proportion of the equity
interest held in the capital of the corresponding investee.
Under US GAAP, while
certain investments in subsidiaries meet the criteria for consolidation as
defined by the Financial Accounting Standard Board ("FASB") Statement of
Financial Accounting Standard no. ("SFAS") 94, Consolidation of All
Majority-Owned Subsidiaries, because such investments provide substantive
participating rights granted to the minority shareholder they preclude the
Company from consolidating the entities. Accordingly, for purposes of US GAAP
these investments are treated on the equity basis of accounting.
Under US GAAP, proportional
consolidation is permitted only in limited circumstances, including for the
construction sector. In the case of the Company's investees, the conditions
specified in EITF 00-01 are only met by Bairro Novo consortium. Accordingly, for
purposes of US GAAP the remaining investments are treated on the equity basis of
accounting. Although these differences in GAAP do not affect the Company's net
income or shareholders' equity, the line items in the
consolidated balance sheet and statement of income are
affected.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Under Brazilian
GAAP, real estate development revenues, costs and related expenses are
recognized using the percentage-of-completion method of accounting by measuring
progress towards completion in terms of actual costs incurred versus total
budgeted expenditures for each stage of a development. Land is treated as a
portion of budgeted construction costs and is appropriated proportionally to
development. Under the percentage-of-completion method of accounting, revenues
for work completed are recognized prior to receipt of actual cash proceeds or
vice-versa. Revenues and costs are recognized under the percentage-of-completion
when certain tests are met.
Under US GAAP, SFAS
66, Accounting for Sales of Real Estate, the basis for the measurement to
determine if construction is beyond a preliminary stage is different from
Brazilian GAAP. US GAAP requires construction to be beyond a preliminary stage
and substantial sales to have been incurred to ensure the project will not be
discontinued before revenue can be recognized. Construction is not beyond a
preliminary stage if engineering and design work, execution of construction
contracts, site clearance and preparation, excavation, and completion of the
building foundation are incomplete.
For
purposes of the shareholders' equity reconciliation, R$ (63,822) and
R$ (7,973) were adjusted for US GAAP as at December 31, 2007 and 2006; and
R$ (55,849) and R$ (7,973) for the years then ended (gross amounts:
Net operating revenue R$ 152,064 (2006 - R$ 32,970); Operating costs
R$ 96,215 (2006 - R$ 24,997). For the year ended in 2005, no
significant differences affected the reconciliation.
(iii)
|
Discounting
of receivables
|
Certain of the
Company's receivables bear only inflation-indexation charges (without interest)
until the units are delivered (generally up to 36 months after sale) and
thereafter bear inflation-indexation charges plus interest (considered to be
sectorial "market interest"). The sales price includes estimated interest for
the construction period. Under Brazilian GAAP, these amounts are presented at
face value. Under US GAAP, APB 21, Interest on Receivables and Payables, the
receivables which bear only inflation-indexation charges (without interest) are
discounted to present values.
For
purposes of the shareholders' equity reconciliation, R$ (59,484),
R$ (19,931) and R$ (3,080) were adjusted for US GAAP as at December
31, 2007, 2006 and 2005 and for the purposes of the income statement
reconciliation, R$(39,553), R$ (16,851) and R$ (1,666) were adjusted
for the years ended December 31, 2007, 2006 and 2005.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(iv)
|
Deferred
selling expenses
|
Under Brazilian
GAAP, through to December 31, 2005, institutional marketing costs were expensed,
project specific advertising, marketing and other selling costs were deferred
and amortized to income in proportion to costs incurred. Under US GAAP, only
costs related to tangible assets (mold units and related furnishings, sales
facilities and other costs) are deferred.
The
Company adopted a preferable accounting policy in 2006 (retrospectively to 2004)
which aligned Brazilian GAAP accounting practices with those adopted under US
GAAP. The Company recalculated the deferral under Brazilian GAAP to defer only
costs related to tangible assets for properties which were unsold and amortized
the deferred balance based on the percentage-of-completion method.
Under Brazilian GAAP
the Company capitalizes interest on the developments during the construction
phase, due on the National Housing System and other credit lines that are used
for financing the construction of developments (limited to the corresponding
financial expense amount). Under US GAAP, interest cost incurred during the
period that assets are under construction is included in the cost of such
assets. SFAS 34, Capitalization of Interest Cost, states that interest cost
should be included as a component of the historical cost of assets intended for
sale or lease that are constructed as separate projects and discrete
projects.
For
purposes of the shareholders' equity reconciliation, R$ 19,804,
R$ 47,682 and R$ 34,225 were adjusted for US GAAP as at December 31,
2007, 2006 and 2005 for the purposes of the income statement reconciliation, and
R$ (27,878), R$13,457 and R$ 11,234 were adjusted for the years ended
December 31, 2007, 2006 and 2005.
(vi)
|
Stock
issuance expenses
|
Under Brazilian
GAAP, costs incurred in issuing capital stock are expensed in income. Under US
GAAP, stock issuance costs are deducted from the proceeds of the
issuance.
For
purposes of the reconciliation, R$ 30,174 (R$ 19,915, net of income
taxes), R$ 27,308 (R$18,023, net of income taxes) and R$ 410 was
adjusted for US GAAP as at for the years ended December 31, 2007, 2006 and 2005,
respectively.
Under Brazilian
GAAP, the rights to acquire shares granted to employees and executive officers
under the stock options plan do not result in any expense being recorded. The
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
purchase of the stock by the
employees is recorded as an increase in capital stock for the amount of the
purchase price.
Under US GAAP,
through December 31, 2005, as the exercise price was above the fair value for
all periods presented, no adjustments were required for purposes of the
reconciliation.
Under US GAAP,
beginning in 2006, the Company adopted SFAS 123R, Share-based Payment. As the
awards are indexed to the IGP-M plus annual interest of 6%, the employee share
options have been accounted for as a liability under the terms of SFAS 123R. The
liability-classified awards are remeasured at fair value at each reporting
period until settlement. The fair value of employee share options and similar
instruments is estimated using the Black-Scholes option-pricing
model.
For
purposes of the shareholders' equity reconciliation, a stock option compensation
income (expenses) of R$ 4,864 for the year ended December 31, 2007 and
R$ (34,063), including a cumulative effect of a change in an accounting
principle of R$ (157), was adjusted for US GAAP for the year
ended December 31, 2006, and a liability of R$ 29,356 and R$34,220 was
recorded at December 31, 2007 and 2006.
(viii)
|
Charges
arising from redeemable shares
with characteristics of
debt
|
Under US GAAP, as
determined by SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, the Company recorded as a
liability, the fair value of the redeemable shares issued to Urucari (the
Preferred Class B and C shares). The shares were issued in April and May, 2005,
respectively. Following the initial recognition, the Company accreted interest
on these preferred shares through the date of the merger with Urucari in
December 2005.
For
purposes of the reconciliation, a charge of R$ (3,455) was recorded for US
GAAP purposes for the year ended December 31, 2005.
Under Brazilian
GAAP, net income per share is calculated based on the number of shares
outstanding at the balance sheet date. Information is disclosed per lot of one
thousand shares, because, generally, this is the minimum number of shares that
can be traded on the BOVESPA. The 10% premium to which the Preferred
shareholders were entitled on distributed earnings was not allocated when
calculating EPS under Brazilian GAAP. Under Brazilian GAAP, 2005 share data and
earnings per share was not adjusted retrospectively to conform with a subsequent
share split.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Under US GAAP,
because the Preferred and Common shareholders have different voting, dividends
and liquidation rights, Basic and Diluted earnings per share have been
calculated using the "two-class" method, pursuant to SFAS 128, Earnings per
Share, which provides computation, presentation and disclosure requirements for
earnings per share. Additionally, for US GAAP purposes, in 2006 the Company
recorded a R$9,586 charge to reflect the exchange of non-voting Class A
preferred into non-voting Class G redeemable preferred shares for redemption.
This charge was based on the excess of (i) fair value of the Class G shares
issued over (ii) the carrying amount of the Class A preferred stock in the
Company's balance sheet. This charge was subtracted from net earnings to arrive
at net earnings available to Common shareholders in the calculation of earnings
per share.
The
table below presents the determination of net income available to Common and
Preferred shareholders and weighted average Common and Preferred shares
outstanding used to calculate basic and diluted earnings per share for each of
the years presented.
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
|
|
Basic
numerator
|
|
|
|
|
|
|
Dividends proposed
|
|
|
26,981 |
|
|
|
26,981 |
|
US GAAP undistributed
earnings
|
|
|
36,481 |
|
|
|
36,481 |
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available for
common shareholders
|
|
|
63,462 |
|
|
|
63,462 |
|
|
|
|
|
|
|
|
|
|
Basic
denominator (in thousand of shares)
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares
|
|
|
126,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
per thousand shares - US GAAP - R$
|
|
|
503.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
numerator
|
|
|
|
|
|
|
|
|
Dividends proposed
|
|
|
26,981 |
|
|
|
26,981 |
|
US GAAP undistributed
earnings
|
|
|
36,481 |
|
|
|
36,481 |
|
|
|
|
|
|
|
|
|
|
Allocated US
GAAP undistributed earnings available for
common shareholders
|
|
|
63,462 |
|
|
|
63,462 |
|
|
|
|
|
|
|
|
|
|
Diluted
denominator (in thousand of shares)
|
|
|
|
|
|
|
|
|
Weighted average number of
shares
|
|
|
126,032 |
|
|
|
126,032 |
|
Stock options
|
|
|
577 |
|
|
|
577 |
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares
|
|
|
126,609 |
|
|
|
126,609 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per thousand shares - US GAAP - R$
|
|
|
501.25 |
|
|
|
501.25 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Basic
numerator
|
|
|
|
|
|
|
|
|
|
Dividends proposed
|
|
|
— |
|
|
|
10,938 |
|
|
|
10,938 |
|
US GAAP undistributed
earnings
|
|
|
258 |
|
|
|
13,631 |
|
|
|
13,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available
for common and preferred
shareholders
|
|
|
258 |
|
|
|
24,569 |
|
|
|
24,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic denominator (in thousand of
shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares
|
|
|
1,701 |
|
|
|
98,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per thousand shares -
US GAAP - R$
|
|
|
151.77 |
|
|
|
248.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends proposed
|
|
|
— |
|
|
|
10,938 |
|
|
|
10,938 |
|
US GAAP undistributed
earnings
|
|
|
259 |
|
|
|
13,630 |
|
|
|
13,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available
for common and preferred
shareholders
|
|
|
259 |
|
|
|
24,568 |
|
|
|
24,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted denominator (in thousand of
shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares
|
|
|
1,701 |
|
|
|
98,796 |
|
|
|
|
|
Stock options
|
|
|
29 |
|
|
|
1,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average number of
shares
|
|
|
1,730 |
|
|
|
99,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per thousand shares -
US GAAP - R$
|
|
|
149.75 |
|
|
|
245.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Basic
numerator
|
|
|
|
|
|
|
|
|
|
Preferred Class G exchange
(ii)
|
|
|
9,586 |
|
|
|
— |
|
|
|
9,586 |
|
Allocated undistributed
earnings
|
|
|
16,334 |
|
|
|
8,463 |
|
|
|
24,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP net income to common
and
preferred shareholders
|
|
|
25,920 |
|
|
|
8,463 |
|
|
|
34,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
denominator (in thousand of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares
|
|
|
42,803 |
|
|
|
24,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
per thousand shares - US GAAP - R$
|
|
|
605.57 |
|
|
|
346.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
(i) |
|
|
|
Preferred
|
|
|
Common
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Class G exchange
(ii)
|
|
|
9,586 |
|
|
|
— |
|
|
|
9,586 |
|
Allocated undistributed
earnings
|
|
|
16,373 |
|
|
|
8,424 |
|
|
|
24,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available
for common and preferred
shareholders
|
|
|
25,959 |
|
|
|
8,424 |
|
|
|
34,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
denominator (in thousand of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares
|
|
|
42,803 |
|
|
|
24,394 |
|
|
|
|
|
Stock options
|
|
|
297 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average number of shares
|
|
|
43,100 |
|
|
|
24,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per thousand shares - US GAAP - R$
|
|
|
602.28 |
|
|
|
345.34 |
|
|
|
|
|
(i)
|
All share
amounts have been adjusted retrospectively to reflect the share split on
January 27, 2006.
|
|
|
(ii)
|
Pursuant to
EITF Topic D-42, The Effect on the Calculation of Earnings per Share for
the Redemption or Induced Conversion of Preferred Stock, following the
exchange of Class A for Class G Preferred shares, the excess of the fair
value of the consideration transferred to the holders of the preferred
stockholder over the carrying amount of the preferred stock in the balance
sheet was subtracted from net income to arrive at net earnings available
to Common shareholders in the calculation of earnings per share. For
purposes of displaying earnings per share, the amount is treated in a
manner similar to the treatment of dividends paid to the holders of the
preferred shares. The conceptual return or dividends, on preferred shares
are deducted from net earnings to arrive at net earnings available to
Common shareholders.
|
Under Brazilian
GAAP, goodwill arises from the difference between the amount paid and the
Brazilian GAAP book value (normally also the tax basis) of the net assets
acquired. This goodwill is normally attributed to the difference between the
book value and the market value of assets acquired or justified based on
expectation of future profitability and is amortized over the remaining useful
lives of the assets or up to ten years. Negative goodwill arises under Brazilian
GAAP when the book value of assets acquired exceeds the purchase consideration;
negative goodwill is not generally amortized but is realized upon disposal of
the investment. For US GAAP purpose, when a business combination process
generates a negative goodwill, this amount is allocated first to non-current
assets acquired and any remaining amount is recognized as an extraordinary gain.
Additionally, investments in affiliates, including the corresponding goodwill on
the acquisition of such affiliates are tested, at least, annually for
impairment.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Under US GAAP, pursuant to SFAS 141, Business
Combinations, fair values
are assigned to acquired assets and
liabilities in business combinations, including identifiable assets. Any
residual amount is allocated to goodwill. Under
US GAAP, SFAS 142,
Goodwill and Other Intangible Assets, goodwill is not amortized but, instead,
is assigned to an entity's reporting unit and tested for
impairment at least annually. The differences in relation to Brazilian GAAP
arise principally from the measurement of the consideration paid under US GAAP using the fair value
of shares and put options issued, and the effects of amortization which
are no longer recorded for US GAAP
purposes.
On
October 2, 2006, the Company signed an agreement to acquire 100% of the capital
of AUSA, a company which develops and sells residential condominiums throughout
Brazil. This transaction was consummated on January 8, 2007 and was approved by
the Brazilian anti-trust authority (CADE) on June 18, 2007 without any
restriction. The Company initially acquired 60% of AUSA's shares for
R$ 198,400, of which R$20,000 was paid in cash and the remaining
R$ 178,400 in the Company's own shares. In connection with the acquisition,
the Company issued 6,358,616 new Common shares with a book value of
R$ 134,029 which were contributed in full settlement of the amount due in
shares as part of the purchase consideration. For purpose of determining the
purchase consideration, the fair value of these shares was based on the average
BOVESPA quoted stock price over a thirty day period prior to the date the
agreement was signed. The Company has a commitment to purchase the remaining 40%
of AUSA's capital, not yet measurable and consequently not recorded, that will
be based on a fair value appraisal of AUSA prepared at the future acquisition
dates. The acquisition
agreement provides that the Company has a commitment to purchase the remaining
40% of AUSA over the next five years (20% in January of 2010 and the remaining
20% in January of 2012) in cash or shares, at the Company's sole
discretion.
The
total cost of the acquisition has been allocated to the assets acquired and the
liabilities assumed based on their respective fair values in accordance with
SFAS 141, Business Combinations. Goodwill, none of which is deductible for tax
purposes, and other intangibles recorded in connection with the acquisition
totaled R$ 4,052 and R$ 184,656, respectively.
Acquired intangible
assets include, R$ 168,072 assigned to existing development contracts,
which will be amortized as developments are sold and R$ 16,583 assigned to
registered trademarks, which were determined to have indefinite useful
lives.
The
fair values of assets acquired and liabilities assumed at the acquisition date
are as follows:
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
Fair
value - %
|
|
|
|
|
|
|
|
|
|
|
At
100
|
|
|
At
60
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
69,371 |
|
|
|
41,623 |
|
Long-term
receivables
|
|
|
73,478 |
|
|
|
44,087 |
|
Other
assets
|
|
|
17,379 |
|
|
|
10,427 |
|
Intangible
assets
|
|
|
307,760 |
|
|
|
184,656 |
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
467,988 |
|
|
|
280,793 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities assumed
|
|
|
144,064 |
|
|
|
86,438 |
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
323,924 |
|
|
|
194,355 |
|
On
October 26, 2007, the Company acquired 70% of Cipesa. The Company and Cipesa
formed a new company, Cipesa Empreendimentos Imobiliários Ltda. ("Nova Cipesa"),
in which Gafisa has 70% of the capital and Cipesa has 30%. Gafisa contributed to
Nova Cipesa R$ 50,000 in cash and acquired shares of Cipesa in Nova Cipesa
in the amount of R$ 15,000 payable over one year. Additionally, Cipesa is
entitled to receive from the Company a variable portion of 2% of the Total Sales
Value ("VGV") of the projects launched by Nova Cipesa through 2014, not to
exceed R$ 25,000, totaling the acquisition amount of
R$ 90,000.
The
total cost of the acquisition has been allocated to the assets acquired and the
liabilities assumed based on their respective fair values in accordance with
SFAS 141, Business Combinations. Goodwill, none of which is deductible for tax
purposes, and inventory recorded in connection with the acquisition totaled
R$ 24,091 and R$ 51,597, respectively.
The
fair values of assets acquired and liabilities assumed at the acquisition date
are as follows:
|
|
Fair
value - %
|
|
|
|
|
|
|
|
|
|
|
At
100
|
|
|
At
60
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
96,675 |
|
|
|
67,673 |
|
Other
assets
|
|
|
8 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
96,683 |
|
|
|
67,678 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities assumed
|
|
|
2,527 |
|
|
|
1,769 |
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
94,156 |
|
|
|
65,909 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
Through November
2007, the Company held interests in investees together with Redevco do Brasil
Ltda. through special purpose entities, as follow: Blue I (66.67%), Blue II
(50%), Jardim Lorean (50%) and Sunplace (50%). In November 2007, the Company
acquired the remaining interests in each entity for R$ 40,000.
The
total cost of the acquisition has been allocated to the assets acquired and the
liabilities assumed based on their respective fair values in accordance with
SFAS 141, Business Combinations. Negative goodwill for those entities totaled
R$ 11,434, which was allocated as a pro rata reduction to the acquired
assets. This negative goodwill results primarily from market and business
conditions, in which the fair value assigned mainly to inventories and
receivables exceeded the respective acquisition cost.
The
combined fair values of assets acquired and liabilities assumed at the
acquisition date are as follows:
|
|
Combined
fair value at 100%
|
|
|
|
|
|
Current
assets
|
|
|
139,983 |
|
Long-term
receivables
|
|
|
16,813 |
|
Other
assets
|
|
|
170 |
|
|
|
|
|
|
Total assets acquired
|
|
|
156,966 |
|
|
|
|
|
|
Total
liabilities assumed
|
|
|
76,745 |
|
|
|
|
|
|
Net assets acquired
|
|
|
80,221 |
|
For Brazilian GAAP purposes, the net
balance of goodwill at December 31, 2007 was R$ 207,400, which is being amortized to income
over a period of up to 10 years; negative goodwill at December 31,
2007 was R$ 32,223 which was classified as "Deferred income on acquisition of
subsidiary". Additionally, R$ 48,521 was recorded as "Acquisition of investments" related mainly to payables for the
acquisition of Redevco and Cipesa in the amounts of R$ 36,000 and R$ 10,000,
respectively.
For US GAAP purposes, the total net balance of goodwill at December 31, 2007 was R$ 31,416.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(xi)
|
Financial
instruments
|
Under Brazilian GAAP, derivative
instruments are recorded at the lower of cost plus
accrued interest and fair market value. Additionally, unrealized gains or
losses arising from
transactions, which are designated as hedge instruments,
entered to mitigate risks on purchase of raw materials, are deferred and recognized in the
statement of operations when realized.
Under US GAAP,
SFAS 133, Accounting
for Derivative Instruments
and Hedging Activities, establishes accounting and reporting
standards for derivative instruments and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair value.
For purposes of the reconciliation, we
have recorded unrealized gains totaling R$ 2,429 in income under US GAAP, arising from the
mark-to-market adjustment of our derivative instruments at
December 31,
2007.
(xii)
|
Barter
transactions
|
Under Brazilian
GAAP, barter transactions are not recorded on the balance sheet as part of the
transactions which involve the acquisition of land in exchange for units to be
constructed. Estimated costs to complete are diluted by the additional units. No
revenues are recorded for units delivered. Under US GAAP, APB 29, Accounting for
Nonmonetary Transactions, and SFAS 153, Exchanges of Nonmonetary Assets and
Statement of Position 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts, the purchase of the land would be recorded at
the fair value of the asset and the revenue and costs recognized upon sale of
the units. The asset and liability amount, measured at fair value at December
31, 2007 was R$ 101,652 (2006 - R$ 100,225; 2005 -
R$ 93,678).
For
purposes of the net income reconciliation, revenue and costs related to bartered
units sold amounted to R$ 120,072 (2006 - R$ 59,299 and 2005 -
R$ 31,264).
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(xiii)
|
Classification
of balance sheet
line items
|
Under Brazilian
GAAP, the classification of certain balance sheet items is presented differently
from US GAAP. The Company has recast its consolidated balance sheet under
Brazilian GAAP to present a condensed consolidated balance sheet in accordance
with US GAAP (Note 22(d)(i)). The reclassifications are summarized as
follows:
Under US GAAP, the
proportional consolidation of investees and subsidiaries is eliminated and in
its place the associated companies are presented using the equity method of
accounting and controlled subsidiaries are fully consolidated presenting their
respective minority interests.
For
purposes of US GAAP, the sale of receivables is not considered a true sale, if
the entities do not meet the pre-requisites of a qualifying special purpose
entity, as defined by SFAS 140, Accounting for Transfer and Servicing of
Financial Assets and Extinguishment of Liabilities - a replacement of SFAS 125.
These receivables from clients continue to be reported as receivable balances.
The cash proceeds received from the transfer of the receivables are presented as
a liability. For purpose of the reconciliation, R$ 22,390, R$19,402 and
R$8,757 were adjusted for US GAAP as at December 31, 2007, 2006 and 2005,
reflecting an increase in receivables from clients, which is offset by an
increase of a liability.
Under Brazilian
GAAP, barter transactions are not recorded on the balance sheet. Under
US GAAP, land barter transactions are treated as acquisitions at fair
value. Under Brazilian
GAAP, the deferred gain recorded on the acquisition of the Diodon receivables
portfolio is recorded on the balance sheet in "Deferred income on acquisition of
a subsidiary". Under US GAAP, the gain is treated as a component of the fair
value of the assets acquired.
Under Brazilian
GAAP, deferred income taxes are not netted and assets are shown separately from
liabilities. For US GAAP purposes, deferred tax assets and liabilities are
netted and classified as current or non-current based on the classification of
the underlying temporary difference.
(xiv)
|
Classification
of statement of income
line items
|
Under Brazilian
GAAP, in addition to the issues noted above, the classification of certain
income and expense items is presented differently from US GAAP. The Company has
recast
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
its
statement of income under the Brazilian GAAP to present a condensed consolidated
statement of income in accordance with US GAAP (Note 22(d)(ii)). The
reclassifications are summarized as follows:
|
Brazilian
listed companies are required to present the investment in
jointly-controlled associated companies on the proportional consolidation
method. For purposes of US GAAP, the
Company has eliminated the effects of the proportional consolidation and
reflected its interest in the results of investees on a single line item
("Equity in results") in the recast consolidated statement of income under
US GAAP.
|
|
|
|
Under
Brazilian GAAP, revenue from construction services rendered are recorded
net of respective costs incurred to deliver such services, as
"Construction and services rendered, net" as the Company considers it acts
as an agent in providing construction services to clients. For purposes of
US GAAP, construction service costs are classified in "Operating costs" as
the Company is considered the primary obligor and principal in the
arrangement.
|
|
|
|
The Company at
times acquires land by granting the seller a certain number of units to be
built on the land or a percentage of the proceeds from the sale of units
in such development. Under Brazilian GAAP, barter transactions are not
recorded on the balance sheet as part of the transactions which involve
the acquisition of land in exchange for units to be constructed. Estimated
costs to complete are diluted by the additional units. No revenues are
recorded for units delivered. Under US GAAP, under APB 29, Accounting for
Nonmonetary Transactions and SFAS 153, Exchanges of Nonmonetary Assets,
the purchase of the land would be recorded at the fair value of the asset
and the revenue and costs recognized upon sale of the units. The fair
value of the asset surrendered (the finished unit) is used to measure the
cost as it is more clearly evident than the fair value of the asset
received (the land).
|
|
|
|
Interest
income and interest expense, together with other financial charges, are
displayed within operating income in the statement of income presented in
accordance with Brazilian GAAP. Such amounts have been reclassified to
non-operating income and expenses in the condensed consolidated statement
of income in accordance with US GAAP.
|
|
|
|
The net income
differences between Brazilian GAAP and US GAAP (Note 22(b)(i)) were
incorporated in the statement of income in accordance with US
GAAP.
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(b)
|
Reconciliation
of significant differences between
Brazilian GAAP and US GAAP
|
|
|
Ref.
- Note
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Net income
under Brazilian GAAP
|
|
|
|
113,603
|
|
46,056
|
|
30,677
|
|
Revenue recognition - net
operating
revenue
|
|
22(a)(ii)
|
|
(152,064
|
)
|
(32,970
|
)
|
—
|
|
Revenue recognition -
operating
costs
|
|
22(a)(ii)
|
|
96,215
|
|
24,997
|
|
—
|
|
Land barter transactions -
net
operating revenue
|
|
22(a)(xii)
|
|
120,072
|
|
59,299
|
|
31,264
|
|
Land barter transactions -
operating
costs
|
|
22(a)(xii)
|
|
(120,072
|
)
|
(59,299
|
)
|
(31,264
|
)
|
Discounting of
receivables
|
|
22(a)(iii)
|
|
(39,553
|
)
|
(16,851
|
)
|
(1,666
|
)
|
Capitalized interest
|
|
22(a)(v)
|
|
4,666
|
|
30,291
|
|
23,774
|
|
Amortization of capitalized
interest
|
|
22(a)(v)
|
|
(32,544
|
)
|
(16,834
|
)
|
(12,540
|
)
|
Stock issuance expenses
|
|
22(a)(vi)
|
|
30,174
|
|
27,308
|
|
410
|
|
Stock compensation expense
from
prior periods arising from
effect
of a change in an
accounting
principle
|
|
22(a)(vii)
|
|
—
|
|
(157
|
)
|
—
|
|
Stock compensation
(expense)
reversal
|
|
22(a)(vii)
|
|
4,864
|
|
(34,063
|
)
|
—
|
|
Charges from accretion of
interest
in redeemable preferred
stock
|
|
22(a)(viii)
|
|
—
|
|
—
|
|
(3,455
|
)
|
Financial instruments - SFAS
133
|
|
22(a)(xi)
|
|
2,429
|
|
—
|
|
—
|
|
Reversal of goodwill
amortization
of AUSA
|
|
|
|
7,500
|
|
—
|
|
—
|
|
Other
|
|
|
|
2
|
|
(7
|
)
|
354
|
|
Minority interest on
adjustments
above
|
|
|
|
844
|
|
2,447
|
|
113
|
|
Deferred income tax on
adjustments
above
|
|
|
|
27,326
|
|
(5,390
|
)
|
(3,284
|
)
|
|
|
|
|
|
|
|
|
|
|
Net income
under US GAAP
|
|
|
|
63,462
|
|
24,827
|
|
34,383
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares outstanding in the
year
(in thousands) (i)
|
|
|
|
|
|
|
|
|
|
Preferred shares
|
|
|
|
—
|
|
1,701
|
|
42,803
|
|
Common shares
|
|
|
|
126,032
|
|
98,796
|
|
24,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ref.
- Note
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
Preferred (i)
|
|
22(a)(ix)
|
|
|
|
|
|
|
|
Basic
|
|
|
|
—
|
|
151.77
|
|
605.57
|
|
Diluted
|
|
|
|
—
|
|
149.75
|
|
602.28
|
|
Common (i)
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
503.55
|
|
248.68
|
|
346.92
|
|
Diluted
|
|
|
|
501.25
|
|
245.81
|
|
345.34
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
from US GAAP net income
to US GAAP net income
available
to Common shareholders
|
|
|
|
|
|
|
|
|
|
US GAAP net Income
|
|
|
|
63,462
|
|
24,827
|
|
34,383
|
|
Preferred Class G exchange
(ii)
|
|
|
|
—
|
|
—
|
|
(9,586
|
)
|
Undistributed earnings for
preferred
shareholders (basic
earnings)
|
|
|
|
—
|
|
(258
|
)
|
(16,334
|
)
|
|
|
|
|
|
|
|
|
|
|
US GAAP net
income available to
common shareholders (basic
earnings)
|
|
|
|
63,462
|
|
24,569
|
|
8,463
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
from US GAAP net
income to US GAAP net
income
available to Common
shareholders
|
|
|
|
|
|
|
|
|
|
US GAAP net Income
|
|
|
|
63,462
|
|
24,827
|
|
34,383
|
|
Preferred Class G exchange
(ii)
|
|
|
|
—
|
|
—
|
|
(9,586
|
)
|
Undistributed earnings for
preferred
shareholders (diluted
earnings)
|
|
|
|
—
|
|
(259
|
)
|
(16,373
|
)
|
US GAAP net
income available to common
shareholders (diluted
earnings)
|
|
|
|
63,462
|
|
24,568
|
|
8,424
|
|
(i)
|
All share
amounts have been adjusted retrospectively to reflect the share split on
January 27, 2006.
|
|
|
(ii)
|
Pursuant to
EITF Topic D-42, The Effect on the Calculation of Earnings per Share for
the Redemption or Induced Conversion of Preferred Share, following the
exchange of Class A for Class G Preferred shares, the excess of the fair
value of the consideration transferred to the holders of the Preferred
shareholders over the carrying amount of the Preferred shares in the
balance sheet was subtracted from net income to arrive at net earnings
available to Common shareholders in the calculation of earnings per share.
For purposes of displaying earnings per share, the amount is treated in a
manner similar to the treatment of dividends paid to the holders of the
Preferred shares. The conceptual return or dividends, on Preferred shares
are deducted from net earnings to arrive at net earnings available to
Common shareholders.
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(ii)
|
Shareholders'
equity
|
|
|
Ref.
- Note
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity under Brazilian GAAP
|
|
|
|
1,530,763
|
|
814,087
|
|
270,188
|
|
Revenue recognition - net
operating
revenue
|
|
22(a)(ii)/
22(a)(xii)
|
|
(185,034
|
)
|
(32,970
|
)
|
—
|
|
Revenue recognition - operating
costs
|
|
22(a)(ii)/
22(a)(xii)
|
|
121,212
|
|
24,997
|
|
—
|
|
Land barter transactions -
net
operating revenue
|
|
22(a)(xii)
|
|
(210,635
|
)
|
(90,563
|
)
|
(31,264
|
)
|
Land barter transactions -
operating
costs
|
|
22(a)(xii)
|
|
210,635
|
|
90,563
|
|
31,264
|
|
Discounting of
receivables
|
|
22(a)(iii)
|
|
(59,484
|
)
|
(19,931
|
)
|
(3,080
|
)
|
Capitalized interest
|
|
22(a)(v)
|
|
104,573
|
|
99,907
|
|
69,616
|
|
Amortization of capitalized
interest
|
|
22(a)(v)
|
|
(84,769
|
)
|
(52,225
|
)
|
(35,391
|
)
|
Stock issuance expenses
|
|
22(a)(vi)
|
|
—
|
|
—
|
|
410
|
|
Liability-classified stock
options
|
|
22(a)(vii)
|
|
(29,356
|
)
|
(34,220
|
)
|
—
|
|
Receivables from clients - SFAS
140
|
|
22(a)(xiii)
|
|
22,390
|
|
19,402
|
|
8,757
|
|
Liability assumed - SFAS
140
|
|
22(a)(xiii)
|
|
(22,390
|
)
|
(19,402
|
)
|
(8,757
|
)
|
Inventories - Land barter
transactions
|
|
22(a)(xii)
|
|
101,652
|
|
100,225
|
|
93,678
|
|
Liability assumed - land
barter
transactions
|
|
22(a)(xii)
|
|
(101,652
|
)
|
(100,225
|
)
|
(93,678
|
)
|
Financial instruments - SFAS
133
|
|
22(a)(xi)
|
|
2,429
|
|
—
|
|
—
|
|
Reversal of goodwill
amortization
of AUSA
|
|
|
|
7,500
|
|
—
|
|
—
|
|
Other
|
|
|
|
206
|
|
(292
|
)
|
(695
|
)
|
Minority interest on adjustments
above
|
|
|
|
2,955
|
|
2,623
|
|
176
|
|
Deferred income tax on
adjustments
above
|
|
|
|
30,875
|
|
(6,725
|
)
|
(10,620
|
)
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity under US GAAP
|
|
|
|
1,441,870
|
|
795,251
|
|
290,604
|
|
(c)
|
US
GAAP supplemental information
|
(i)
|
Recent
US GAAP accounting pronouncements
|
The
FASB recently issued a number of SFAS and interpretations, as
follows:
|
In September 2006, the FASB
issued
SFAS 157, Fair value
measurements, which
defines fair value,
establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements,
the FASB having previously concluded in those accounting
pronouncements that fair value is the
relevant
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
measurement attribute.
Accordingly, this Statement does not require any new fair value
measurements. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. The Company continues to
evaluate the impact of this statement on its consolidated financial
statements but believes that such pronouncement will not generate a
material impact on the Company's consolidated results of
operations or financial position. |
|
|
|
In February
2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS 159, including an amendment of SFAS
115, Accounting for Certain Investments in Debt and Equity Securities.
SFAS 159 permits companies to choose to measure many financial instruments
and certain other items at fair value in order to mitigate volatility in
reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions.
SFAS 159 is effective for the Company's fiscal year that begins after
November 15, 2007. The Company is currently assessing the impact of this
statement on its consolidated financial statements but believes that such
pronouncement will not generate a material impact on the Company's consolidated results of
operations or financial position.
|
|
|
|
In December
2007, the FASB issued SFAS 141 (revised 2007), Business Combination, which
replaces SFAS 141, Business Combinations. SFAS 141(R) retains the
fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each
business combination. SFAS 141(R) defines the acquirer as the entity that
obtains control of one or more businesses in the business combination and
establishes the acquisition date as the date that the acquirer achieves
control. SFAS 141(R) did not define the acquirer, although it included
guidance on identifying the acquirer. SFAS 141(R)'s scope is broader than
that of SFAS 141, which applied only to business combinations in which
control was obtained by transferring consideration. The result of applying
SFAS 141's guidance on recognizing and measuring assets and liabilities in
a step acquisition was to measure them at a blend of historical costs and
fair values. In addition, SFAS 141(R) requires measuring the
noncontrolling interest in the acquiree at fair value which results in
recognizing the goodwill attributable to the noncontrolling interest in
addition to that attributable to the acquirer. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. An entity may not apply it before that
date. The effective date of this Statement is the same as that of the
related SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements - an amendment of ARB 51 (described below). The Company will
apply such pronouncement on a prospective basis for each new business
combination.
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
In December
2007, the FASB issued SFAS 160, which clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated
entity that should be reported as equity in the consolidated financial
statements. SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008.
Earlier adoption is prohibited. SFAS 160 shall be applied prospectively as
of the beginning of the fiscal year in which this Statement is initially
applied, except for the presentation and disclosure requirements. The
presentation and disclosure requirements shall be applied retrospectively
for all periods presented. The Company is currently evaluating the impact
of such new pronouncement in its consolidated financial statements but
believes that it will not generate a material impact on the Company's
consolidated results of operations or financial
position.
|
|
|
|
In March 2008,
the FASB issued FASB Statement 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to
improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2008, with early application encouraged. The Company is currently
evaluating the impact of adopting SFAS 161 on its financial
statements.
|
(ii)
|
Additional
information - stock option plan
|
The
Company has adopted the modified prospective transition method of SFAS 123R and
the liability-classified awards were measured at fair market value as of January
1, 2006. The assumptions were: weighted historical volatility of 29%; expected
dividend yield of 0%; annual risk-free interest rate of 8%, and; expected
average total lives of 1.6 years.
The
adoption of SFAS 123R resulted in a charge for the cumulative effect in the
change in an accounting principles of R$ (157).
As
of December 31, 2007, all the liability-classified awards were remeasured at
their fair value and amounted to R$ 29,356 (2006 - R$ 34,220). The reversal
of stock compensation expense ("General and administrative expenses") related to
the stock option plans totaled R$ 4,864 in the year ended December 31, 2007
(2006 - expense of R$ (34,063)). The assumptions were: weighted historical
volatility of 47% (2006 - 50%); expected dividend yield of 0.6% (2006 - 0%);
average annual risk-free interest rate of 12% (2006 - 8%), and; expected average
total lives of 2.6 years (2006 - 3.2 years). As of December 31, 2007, the
compensation cost related to nonvested stock options to be recognized in future
periods was R$ 14,063 (2006 - R$ 8,385) and its weighted average
recognition period was approximately 2.6 years (2006 - 3.2 years).
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
The
pro forma disclosure of net income and earnings per share (both basic and
diluted) for the year ended December 31, 2006 had the prior method under APB 25,
Accounting for Stock Issued to Employees, been applied, is presented
below:
|
|
2006
|
|
|
|
|
|
Net income for
the year
|
|
|
|
As reported
|
|
|
24,827 |
|
Plus - reversal of stock compensation
recorded based
on the fair value method of SFAS
123R
|
|
|
34,220 |
|
Less - stock compensation based on APB
25
|
|
|
(29,093
|
) |
|
|
|
|
|
Pro forma net
income for the year
|
|
|
29,954 |
|
|
|
|
|
|
Basic income
per share - R$ per thousand shares (*)
Preferred shares - as
reported
|
|
|
151.77 |
|
Preferred shares - pro
forma
|
|
|
207.79 |
|
Common shares - as
reported
|
|
|
248.68 |
|
Common shares - pro
forma
|
|
|
299.61 |
|
|
|
|
|
|
Dilutive
income per share - R$ per thousand shares (*)
Preferred shares - as
reported
|
|
|
149.75 |
|
Preferred shares - pro
forma
|
|
|
205.02 |
|
Common shares - as
reported
|
|
|
245.81 |
|
Common shares - pro
forma
|
|
|
296.15 |
|
(*)
All
share amounts have been adjusted retrospectively to reflect the share split on
January 27, 2006.
The
pro forma disclosure, presented below, of net income and earnings per share
(both basic and diluted) for the year ended December 31, 2005 has been
determined under the fair value method prescribed by SFAS 123:
|
|
2005
|
|
|
|
|
|
Net income for
the year
|
|
|
|
As reported
|
|
|
34,383 |
|
Plus - stock compensation cost - SFAS
123
|
|
|
(396
|
) |
|
|
|
|
|
Pro forma net
income
|
|
|
33,987 |
|
|
|
|
|
|
Basic earnings
per share - R$ per thousand of shares (*)
|
|
|
|
|
Preferred shares - as
reported
|
|
|
605.57 |
|
Preferred shares - pro
forma
|
|
|
599.47 |
|
Common shares - as
reported
|
|
|
346.92 |
|
Common shares - pro
forma
|
|
|
341.38 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
Diluted
earnings per share - R$ per thousand of shares (*)
Preferred shares - as
reported
|
|
|
602.28 |
|
Preferred shares - pro
forma
|
|
|
596.22 |
|
Common shares - as
reported
|
|
|
345.34 |
|
Common shares - pro
forma
|
|
|
339.83 |
|
(*)
All
share amounts have been adjusted retrospectively to reflect the share split on
January 27, 2006.
|
|
2007
|
|
|
2006
|
|
|
2005
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
options
|
|
|
Weighted
average exercise price
|
|
|
Number
of
options
|
|
|
Weighted
average exercise price
|
|
|
Number
of
options
|
|
|
Weighted
average exercise price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at the
beginning of the year
(i)
|
|
|
3,977,630 |
|
|
|
16.04 |
|
|
|
1,848,150 |
|
|
|
6.29 |
|
|
|
3,415,500 |
|
|
|
5.72 |
|
Options granted
|
|
|
2,320,599 |
|
|
|
30.36 |
|
|
|
3,201,432 |
|
|
|
17.14 |
|
|
|
252,000 |
|
|
|
5.35 |
|
Options exercised (ii)
|
|
|
(858,582
|
) |
|
|
12.50 |
|
|
|
(1,021,950
|
) |
|
|
6.27 |
|
|
|
(252,000
|
) |
|
|
5.35 |
|
Options cancelled (iii)
|
|
|
(265,306
|
) |
|
|
18.61 |
|
|
|
(50,002
|
) |
|
|
18.23 |
|
|
|
(1,567,350
|
) |
|
|
5.42 |
|
Options
outstanding at the end
of the year
|
|
|
5,174,341 |
|
|
|
25.82 |
|
|
|
3,977,630 |
|
|
|
16.04 |
|
|
|
1,848,150 |
|
|
|
6.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at the end
of the year
|
|
|
2,597,183 |
|
|
|
22.93 |
|
|
|
1,066,151 |
|
|
|
6.56 |
|
|
|
1,498,500 |
|
|
|
5.59 |
|
(i)
|
All share
amounts and options have been adjusted retrospectively to reflect the
share split on January 27, 2006.
|
(ii)
|
In the year
ended December 31, 2007, 2006, and 2005, the total cash received from
exercised options was R$ 7,267, R$ 6,398 and R$ 2,216,
respectively.
|
(iii)
|
In the year
ended December 31, 2007, 2006 and 2005 no options were forfeited due to
expiration of prescriptive terms.
|
(d)
|
US
GAAP condensed consolidated financial
information
|
Based on the
reconciling items and discussion above, the Gafisa S.A. consolidated balance
sheet, statement of income, and statement of changes in shareholders' equity
under US GAAP have been recast in condensed format as follows:
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(i)
|
Condensed
consolidated balance sheets
under US GAAP
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
522,036 |
|
|
|
260,919 |
|
|
|
136,153 |
|
Receivables from
clients
|
|
|
269,363 |
|
|
|
184,595 |
|
|
|
127,641 |
|
Properties for sale
|
|
|
990,877 |
|
|
|
419,998 |
|
|
|
343,252 |
|
Other accounts
receivable
|
|
|
101,279 |
|
|
|
303,258 |
|
|
|
91,176 |
|
Dividends receivable
|
|
|
- |
|
|
|
- |
|
|
|
4,886 |
|
Prepaid expenses
|
|
|
45,003 |
|
|
|
33,750 |
|
|
|
9,401 |
|
Investments
|
|
|
46,249 |
|
|
|
53,804 |
|
|
|
30,118 |
|
Property and equipment
|
|
|
27,336 |
|
|
|
8,146 |
|
|
|
10,256 |
|
Intangibles
|
|
|
184,656 |
|
|
|
— |
|
|
|
— |
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from
clients
|
|
|
505,073 |
|
|
|
259,174 |
|
|
|
109,437 |
|
Properties for sale
|
|
|
149,403 |
|
|
|
63,413 |
|
|
|
33,361 |
|
Deferred taxes
|
|
|
— |
|
|
|
— |
|
|
|
5,104 |
|
Other
|
|
|
47,765 |
|
|
|
46,829 |
|
|
|
602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,889,040 |
|
|
|
1,633,886 |
|
|
|
901,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt, including current
portion of long-term debt
|
|
|
59,196 |
|
|
|
17,202 |
|
|
|
25,728 |
|
Debentures
|
|
|
9,190 |
|
|
|
11,038 |
|
|
|
6,118 |
|
Obligations for purchase of
land
|
|
|
244,696 |
|
|
|
106,213 |
|
|
|
25,439 |
|
Materials and services
suppliers
|
|
|
82,334 |
|
|
|
24,680 |
|
|
|
22,823 |
|
Taxes and labor
contributions
|
|
|
60,996 |
|
|
|
36,434 |
|
|
|
40,051 |
|
Advances from clients - real
estate
and services
|
|
|
26,485 |
|
|
|
3,938 |
|
|
|
19,985 |
|
Credit assignments
|
|
|
1,442 |
|
|
|
1,358 |
|
|
|
1,363 |
|
Acquisition of
investments
|
|
|
48,521 |
|
|
|
— |
|
|
|
— |
|
Dividends payable
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
Others
|
|
|
73,541 |
|
|
|
202,368 |
|
|
|
97,208 |
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
378,138 |
|
|
|
21,176 |
|
|
|
85,993 |
|
Debentures
|
|
|
240,000 |
|
|
|
240,000 |
|
|
|
176,310 |
|
Deferred income tax
|
|
|
3,728 |
|
|
|
828 |
|
|
|
— |
|
Obligations for purchase of
land
|
|
|
73,056 |
|
|
|
98,398 |
|
|
|
98,729 |
|
Others
|
|
|
79,290 |
|
|
|
63,014 |
|
|
|
10,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
39,576 |
|
|
|
1,050 |
|
|
|
197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
1,441,870 |
|
|
|
795,251 |
|
|
|
290,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
|
2,889,040 |
|
|
|
1,633,886 |
|
|
|
901,387 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(ii)
|
Condensed
consolidated statements of income
under US GAAP
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Gross
operating revenue
|
|
|
|
|
|
|
|
|
|
Real estate development and
sales
|
|
|
1,091,071 |
|
|
|
693,591 |
|
|
|
417,995 |
|
Construction and services
rendered
|
|
|
35,053 |
|
|
|
66,941 |
|
|
|
67,904 |
|
Taxes on services and
revenues
|
|
|
(35,492
|
) |
|
|
(85,792
|
) |
|
|
(46,888
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
1,090,632 |
|
|
|
674,740 |
|
|
|
439,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs (sales and services)
|
|
|
(865,756
|
) |
|
|
(503,172
|
) |
|
|
(329,775
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
224,876 |
|
|
|
171,568 |
|
|
|
109,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
(192,025
|
) |
|
|
(139,053
|
) |
|
|
(70,914
|
) |
Other
|
|
|
1,595 |
|
|
|
(135
|
) |
|
|
(6,391
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
34,446 |
|
|
|
32,380 |
|
|
|
31,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
|
48,924 |
|
|
|
55,158 |
|
|
|
9,584 |
|
Financial expenses
|
|
|
(21,681
|
) |
|
|
(51,136
|
) |
|
|
(27,268
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income tax, equity in results
and minority interest
|
|
|
61,689 |
|
|
|
36,402 |
|
|
|
14,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on
income
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(21,559
|
) |
|
|
(2,248
|
) |
|
|
(1,196
|
) |
Deferred
|
|
|
19,571 |
|
|
|
(8,939
|
) |
|
|
(690
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contribution
expense
|
|
|
(1,988
|
) |
|
|
(11,187
|
) |
|
|
(1,886
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
equity in results, cumulative effect
of a change in an accounting principles
and
minority interest
|
|
|
59,701 |
|
|
|
25,215 |
|
|
|
12,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in results
|
|
|
8,499 |
|
|
|
894 |
|
|
|
22,593 |
|
Stock compensation expense related to
cumulative
effect of a change in an accounting
principles
|
|
|
— |
|
|
|
(157
|
) |
|
|
— |
|
Minority interest
|
|
|
(4,738
|
) |
|
|
(1,125
|
) |
|
|
(571
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
from US GAAP net income to US GAAP
net income available to Common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP net Income
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
Preferred Class G exchange
(*)
|
|
|
— |
|
|
|
— |
|
|
|
(9,586
|
) |
Undistributed earnings for Preferred
Shareholders
(Basic earnings)
|
|
|
— |
|
|
|
(258
|
) |
|
|
(16,334
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP net
income available to common shareholders (Basic earnings)
|
|
|
63,462 |
|
|
|
24,569 |
|
|
|
8,463 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
from US GAAP net income to US GAAP
net income available to Common
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP net Income
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
Preferred Class G exchange
(*)
|
|
|
— |
|
|
|
— |
|
|
|
(9,586
|
) |
Undistributed earnings for Preferred
Shareholders
(Diluted earnings)
|
|
|
— |
|
|
|
(259
|
) |
|
|
(16,373
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP net
income available to Common shareholders (Diluted earnings)
|
|
|
63,462 |
|
|
|
24,568 |
|
|
|
8,424 |
|
(*)
Pursuant to EITF
Topic D-42, The Effect on the Calculation of Earnings per Share for the
Redemption or Induced Conversion of Preferred Share, following the exchange of
Class A for Class G Preferred shares, the excess of the fair value of the
consideration transferred to the holders of the Preferred shareholder over the
carrying amount of the Preferred share in the balance sheet was subtracted from
net income to arrive at net earnings available to Common shareholders in the
calculation of earnings per share. For purposes of displaying earnings per
share, the amount is treated in a manner similar to the treatment of dividends
paid to the holders of the Preferred shares. The conceptual return or dividends,
on Preferred shares are deducted from net earnings to arrive at net earnings
available to Common shareholders.
(iii)
|
Additional
information - taxes
|
Change in the
valuation allowance for net operating losses was as follows:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
At January
1
|
|
|
(7,230
|
) |
|
|
— |
|
|
|
(6,999
|
) |
Valuation allowance - relates to
jointly-controlled subsidiaries subject to the taxable profit
regime
|
|
|
(9,177
|
) |
|
|
(7,230
|
) |
|
|
— |
|
Reversal
|
|
|
— |
|
|
|
— |
|
|
|
6,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December
31
|
|
|
(16,407
|
) |
|
|
(7,230
|
) |
|
|
— |
|
The
Company adopted the provisions of FASB Interpretation 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007 which requires it to record the
financial statement effects of an income tax position when it is more likely
than not, based on the technical merits, that it will be sustained upon
examination. A tax position that meets the more-likely-than-not recognition
threshold is measured and recorded as the largest amount of tax benefit that is
greater than
50
percent likely of being realized upon ultimate settlement with a taxing
authority.
The
adoption of FIN 48 did not have any impact in the Company's statements of
operations and financial position and did not result in a cumulative adjustment
to retained earnings at adoption. As of December 31, 2007, we have no amount
recorded for any uncertainty in income taxes. The Company allocates the income
taxes interest and penalties to income statements.
The
Company or its subsidiaries file income tax returns in Brazil and other foreign
federal and state jurisdictions. Brazilian income tax returns are normally open
to audit for five years.
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(iv)
|
Statement
of comprehensive income
|
Under Brazilian
GAAP, the concept of comprehensive income is not recognized. Under US GAAP,
SFAS 130, Reporting Comprehensive Income, requires the disclosure of
comprehensive income. Comprehensive income is comprised of net income and other
comprehensive income that include charges or credits directly to equity which
are not the result of transactions with owners. In the case of the Company,
comprehensive income is the same as net income.
(v)
|
Condensed
changes in shareholders'equity
under US GAAP
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
At beginning
of the year
|
|
|
795,251 |
|
|
|
290,604 |
|
|
|
160,812 |
|
Capital increase, net of issuance
expenses
|
|
|
476,159 |
|
|
|
490,758 |
|
|
|
135,180 |
|
Redemption of shares -
Urucari
|
|
|
— |
|
|
|
— |
|
|
|
(4,000
|
) |
Redemption of shares -
Cimob
|
|
|
— |
|
|
|
— |
|
|
|
(1,583
|
) |
Redemption of shares - First
Stock
|
|
|
— |
|
|
|
— |
|
|
|
(16,437
|
) |
Capital increase -
Havertown
|
|
|
— |
|
|
|
— |
|
|
|
10,259 |
|
Downstream merger
|
|
|
— |
|
|
|
— |
|
|
|
(28,010
|
) |
Capital increase - AUSA
|
|
|
134,029 |
|
|
|
— |
|
|
|
— |
|
Net income
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
Minimum mandatory
dividend
|
|
|
(26,981
|
) |
|
|
(10,938
|
) |
|
|
— |
|
Additional 2006
dividends
|
|
|
(50 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the
year
|
|
|
1,441,870 |
|
|
|
795,251 |
|
|
|
290,604 |
|
(vi)
|
Condensed
shareholders' equity under
US GAAP
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
Preferred shares, comprising
48,666,627
shares outstanding in
2005
|
|
|
— |
|
|
|
— |
|
|
|
157,082 |
|
Common shares, comprising
129,452,121
shares outstanding (2006:
103,369,950
and 2005: 25,212,555
shares)
|
|
|
1,191,827 |
|
|
|
583,305 |
|
|
|
79,867 |
|
Treasury shares
|
|
|
(14,595
|
) |
|
|
(43,571
|
) |
|
|
(43,571
|
) |
Appropriated retained
earnings
|
|
|
182,861 |
|
|
|
177,180 |
|
|
|
30,476 |
|
Unappropriated retained
earnings
|
|
|
81,777 |
|
|
|
78,337 |
|
|
|
66,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,441,870 |
|
|
|
795,251 |
|
|
|
290,604 |
|
Gafisa
S.A.
Notes
to the Consolidated Financial Statements
at
December 31, 2007, 2006 and 2005
In
thousands of reais, unless otherwise stated
(vii)
|
Summarized
financial information
|
The
following table presents condensed combined financial information prepared under
Brazilian GAAP of the significant investments in unconsolidated affiliates
accounted for under the equity method. The significant investments include the
following entities:
As
at and for the year ended December 31, 2006 - Gafisa SPE 26 Ltda.
As
at and for the year ended December 31, 2005 - Cyrela Gafisa SPE Ltda.
(investment held through the subsidiary Gafisa SPE 33 Ltda.) and Jardim I SPE
Ltda.
Combined
condensed balance sheet - December
31,
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
95,381 |
|
|
|
63,778 |
|
Total
assets
|
|
|
98,414 |
|
|
|
86,730 |
|
Current
liabilities
|
|
|
42,348 |
|
|
|
34,357 |
|
Long term
liabilities
|
|
|
27,431 |
|
|
|
19,936 |
|
Combined
condensed statement of income - year
ended December 31,
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
34,987 |
|
|
|
84,241 |
|
Operating
costs
|
|
|
(29,052
|
) |
|
|
(53,125
|
) |
Income before
taxes
|
|
|
(5,495
|
) |
|
|
26,080 |
|
Net income
(loss)
|
|
|
(7,417
|
) |
|
|
23,893 |
|
No
investments were deemed to be significant as at and for the year ended December
31, 2007.
* * *
F-68