|
|
As
filed with the Securities and Exchange Commission on June 5,
2009
|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from ________________ to
________________
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________________
(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 Duilio 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.
|
Title
of Class
|
Number
of Shares Outstanding
|
|
Common
Stock
|
133,087,518*
|
* 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):
x Large
Accelerated
Filer o Accelerated
Filer o Non-accelerated
Filer
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
Page
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 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,” the
Brazilian Federal Accounting Council (Conselho Federal de
Contabilidade), or the “CFC” and the Accounting Standards Committee
(Comitê de
Pronunciamentos Contábeis), or the
“CPC.”
|
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. On December 28, 2007, Law No. 11,638/07 was enacted,
amending the Brazilian corporate law regarding the accounting practices adopted
in Brazil. When we reconcile our financial statements to IFRS to comply with
this requirement and as Brazilian GAAP migrates towards IFRS,
percentage-of-completion accounting will not be acceptable. As a
result, our financial statements under IFRS may be materially different from
those presented under Brazilian GAAP.
We
restated our Brazilian GAAP financial statements as of and for the years ended
December 31, 2007 and 2006 when we adopted, beginning January 1, 2006, the
changes introduced by Law 11,638/07 and the new accounting standards issued by
the CPC in 2008. Brazilian GAAP encourages companies to make such
restatements from the date the accounting changes were introduced in order to
provide comparative information within the financial statements. See
note 2(a) to our financial statements included elsewhere in this annual report
for this amendment and other reclassifications to our Brazilian GAAP financial
statements. Selected financial information presented as of and for
the years ended December 31, 2005 and 2004 has not been represented on the basis
of the new accounting policies introduced in 2008, as the cost and time required
to prepare such information would be prohibitive. As a result, such
information is not comparative to the financial information reported herein as
of and for the years ended December 31, 2008, 2007 and 2006.
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 from Brazilian GAAP to 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 separately disclose the
interest of minority shareholders. With respect to our jointly-controlled
entities, in accordance with the 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
investees.
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 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 the overall economic conditions, including employment levels,
population growth and consumer
confidence;
|
|
·
|
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.
Not
applicable.
Not
applicable.
A. Selected
Financial Data
The
following selected financial data have been derived from our consolidated
financial statements. The selected financial data as of and for the years ended
December 31, 2008, 2007 and 2006 have been derived from our audited consolidated
financial statements included elsewhere in this annual report. The selected
financial data as of and for the years ended December 31, 2005 and 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. Our company and subsidiaries have
retroactively applied changes to Brazilian GAAP introduced by the newly formed
CPC and the provisions of Law No. 11,638/07 from January 1, 2006 to ensure
consistency of presentation in our financial statements. See note 2(a) 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 from January 1, 2006 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands except per share, per ADS and operating data)(3)
|
|
|
Income
statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
operating revenue
|
|
R$ |
1,805,468 |
|
|
R$ |
1,251,894 |
|
|
R$ |
681,791 |
|
|
R$ |
480,774 |
|
|
R$ |
439,254 |
|
|
Net
operating revenue
|
|
|
1,740,404 |
|
|
|
1,204,287 |
|
|
|
648,158 |
|
|
|
457,024 |
|
|
|
416,876 |
|
|
Operating
costs
|
|
|
(1,214,401 |
) |
|
|
(867,996 |
) |
|
|
(464,766 |
) |
|
|
(318,211 |
) |
|
|
(292,391 |
) |
|
Gross
profit
|
|
|
526,003 |
|
|
|
336,291 |
|
|
|
183,392 |
|
|
|
138,813 |
|
|
|
124,485 |
|
|
Operating
expenses, net(3)
|
|
|
(357,798 |
) |
|
|
(236,861 |
) |
|
|
(118,914 |
) |
|
|
(79,355 |
) |
|
|
(59,688 |
) |
|
Financial
income (expenses), net
|
|
|
41,846 |
|
|
|
28,628 |
|
|
|
(11,943 |
) |
|
|
(31,162 |
) |
|
|
(34,325 |
) |
|
Non-operating
income (expenses), net
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,024 |
) |
|
|
(1,450 |
) |
|
Income
before taxes on income, and minority interest
|
|
|
210,051 |
|
|
|
128,058 |
|
|
|
52,535 |
|
|
|
27,272 |
|
|
|
29,022 |
|
|
Taxes
on income
|
|
|
(43,397 |
) |
|
|
(30,372 |
) |
|
|
(8,525 |
) |
|
|
3,405 |
|
|
|
(5,575 |
) |
|
Minority
interest
|
|
|
(56,733 |
) |
|
|
(6,046 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net
income
|
|
|
109,921 |
|
|
|
91,640 |
|
|
|
44,010 |
|
|
|
30,677 |
|
|
|
23,447 |
|
|
Share
and ADS data(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share—R$ per share
|
|
|
0.8458 |
|
|
|
0.7079 |
|
|
|
0.4258 |
|
|
|
1.2457 |
|
|
|
1.2188 |
|
|
Number
of preferred shares outstanding as at end of period
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,222,209 |
|
|
|
11,037,742 |
|
|
Number
of common shares outstanding as at end of period
|
|
|
129,962,546 |
|
|
|
129,452,121 |
|
|
|
103,369,950 |
|
|
|
8,404,185 |
|
|
|
8,199,743 |
|
|
Earnings
per ADS—R$ per ADS (pro forma)(4)
|
|
|
1.6916 |
|
|
|
1.4158 |
|
|
|
0.8516 |
|
|
|
2.4914 |
|
|
|
2.4376 |
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating revenue
|
|
|
1,692,706 |
|
|
|
1,090,632 |
|
|
|
674,740 |
|
|
|
439,011 |
|
|
|
442,913 |
|
|
Operating
costs
|
|
|
(1,198,256 |
) |
|
|
(865,756 |
) |
|
|
(503,172 |
) |
|
|
(329,775 |
) |
|
|
(339,653 |
) |
|
Gross
profit
|
|
|
494,450 |
|
|
|
224,876 |
|
|
|
171,568 |
|
|
|
109,236 |
|
|
|
103,260 |
|
|
Operating
expenses, net
|
|
|
(142,771 |
) |
|
|
(190,430 |
) |
|
|
(139,188 |
) |
|
|
(77,305 |
) |
|
|
(52,770 |
) |
|
Financial
income (expenses), net
|
|
|
40,198 |
|
|
|
27,243 |
|
|
|
4,022 |
|
|
|
(17,684 |
) |
|
|
(31,645 |
) |
|
Income
before income taxes, equity in results and minority
interest
|
|
|
391,877 |
|
|
|
61,689 |
|
|
|
36,402 |
|
|
|
14,247 |
|
|
|
18,845 |
|
|
Taxes
on income
|
|
|
(70,756 |
) |
|
|
(1,988 |
) |
|
|
(11,187 |
) |
|
|
(1,886 |
) |
|
|
(3,530 |
) |
|
Equity
in results
|
|
|
26,257 |
|
|
|
8,499 |
|
|
|
894 |
|
|
|
22,593 |
|
|
|
11,674 |
|
|
Minority
interest
|
|
|
(47,900 |
) |
|
|
(4,738 |
) |
|
|
(1,125 |
) |
|
|
(571 |
) |
|
|
252 |
|
|
Cumulative
effect of a change in an accounting principle:
|
|
|
— |
|
|
|
— |
|
|
|
(157 |
) |
|
|
— |
|
|
|
— |
|
|
Net
income(5)
|
|
|
299,658 |
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
27,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
share and ADS data(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
2.3109 |
|
|
|
0.5036 |
|
|
|
0.2487 |
|
|
|
0.3469 |
|
|
|
0.4464 |
|
|
Earnings
per share—Diluted
|
|
|
2.3024 |
|
|
|
0.5013 |
|
|
|
0.2458 |
|
|
|
0.3453 |
|
|
|
0.4464 |
|
|
Weighted
average number of shares outstanding – in thousands
|
|
|
129,671 |
|
|
|
126,032 |
|
|
|
98,796 |
|
|
|
24,394 |
|
|
|
24,599 |
|
|
Dividends
declared and interest on shareholders’ equity
|
|
|
26,104 |
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
|
|
— |
|
|
Per
ADS data—R$ per ADS(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per ADS—Basic (pro forma)(4)
|
|
|
4.6218 |
|
|
|
1.0072 |
|
|
|
0.4974 |
|
|
|
0.6938 |
|
|
|
0.8928 |
|
|
Earnings
per ADS—Diluted (pro forma)(4)
|
|
|
4.6048 |
|
|
|
1.0026 |
|
|
|
0.4916 |
|
|
|
0.6907 |
|
|
|
0.8928 |
|
|
Weighted
average number of ADSs outstanding – in thousands
|
|
|
64,836 |
|
|
|
63,016 |
|
|
|
48,398 |
|
|
|
12,197 |
|
|
|
12,300 |
|
|
Dividends
declared and interest on shareholders’ equity
|
|
|
26,104 |
|
|
|
26,981 |
|
|
|
10,938 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
cash equivalents and marketable securities
|
|
R$ |
605,502 |
|
|
R$ |
517,420 |
|
|
R$ |
266,159 |
|
|
R$ |
133,891 |
|
|
R$ |
45,888 |
|
|
Properties
for sale
|
|
|
2,028,976 |
|
|
|
1,022,279 |
|
|
|
486,397 |
|
|
|
304,329 |
|
|
|
237,113 |
|
|
Working
capital(6)
|
|
|
2,448,305 |
|
|
|
1,315,406 |
|
|
|
926,866 |
|
|
|
464,589 |
|
|
|
205,972 |
|
|
Total
assets
|
|
|
5,538,858 |
|
|
|
3,004,785 |
|
|
|
1,558,590 |
|
|
|
944,619 |
|
|
|
748,508 |
|
|
Total
debt(7)
|
|
|
1,552,121 |
|
|
|
695,380 |
|
|
|
295,445 |
|
|
|
316,933 |
|
|
|
151,537 |
|
|
Total
shareholders’ equity
|
|
|
1,612,419 |
|
|
|
1,498,728 |
|
|
|
807,433 |
|
|
|
270,188 |
|
|
|
146,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
510,504 |
|
|
|
512,185 |
|
|
|
260,919 |
|
|
|
136,153 |
|
|
|
42,803 |
|
|
Properties
for sale
|
|
|
2,208,124 |
|
|
|
1,140,280 |
|
|
|
483,411 |
|
|
|
376,613 |
|
|
|
214,744 |
|
|
Working
capital(6)
|
|
|
2,510,382 |
|
|
|
1,295,176 |
|
|
|
788,351 |
|
|
|
473,794 |
|
|
|
195,392 |
|
|
Total
assets
|
|
|
5,179,403 |
|
|
|
2,889,040 |
|
|
|
1,633,886 |
|
|
|
901,387 |
|
|
|
601,220 |
|
|
Total
debt(7)
|
|
|
1,525,138 |
|
|
|
686,524 |
|
|
|
289,416 |
|
|
|
294,149 |
|
|
|
141,476 |
|
|
Total
shareholders’ equity
|
|
|
1,723,095 |
|
|
|
1,441,870 |
|
|
|
795,251 |
|
|
|
290,604 |
|
|
|
160,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazilian
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
(812,512 |
) |
|
|
(451,929 |
) |
|
|
(271,188 |
) |
|
|
(112,947 |
) |
|
|
23,616 |
|
|
Investing
activities
|
|
|
(78,300 |
) |
|
|
(149,290 |
) |
|
|
(25,609 |
) |
|
|
(5,576 |
) |
|
|
(1,509 |
) |
|
Financing
activities
|
|
|
911,817 |
|
|
|
842,629 |
|
|
|
429,065 |
|
|
|
206,526 |
|
|
|
10,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of new developments
|
|
|
64 |
|
|
|
53 |
|
|
|
30 |
|
|
|
21 |
|
|
|
11 |
|
|
Potential
sales value(11)
|
|
|
2,763,043 |
|
|
|
2,235,928 |
|
|
|
1,005,069 |
|
|
|
651,815 |
|
|
|
206,992 |
|
|
Number
of units launched(8)
|
|
|
10,963 |
|
|
|
10,315 |
|
|
|
3,052 |
|
|
|
2,363 |
|
|
|
1,132 |
|
|
Launched
usable area (m2)(9) (10)
|
|
|
1,838,000 |
|
|
|
1,927,821 |
|
|
|
407,483 |
|
|
|
502,520 |
|
|
|
233,393 |
|
|
Sold
usable area (m2)(9) (10)
|
|
|
1,339,729 |
|
|
|
2,364,173 |
|
|
|
357,723 |
|
|
|
372,450 |
|
|
|
131,275 |
|
|
Units
sold
|
|
|
11,803 |
|
|
|
6,120 |
|
|
|
3,049 |
|
|
|
1,795 |
|
|
|
1,192 |
|
______________
|
(1)
|
We
restated our Brazilian GAAP financial statements as of and for the years
ended December 31, 2007 and 2006 when we adopted, beginning January 1,
2006, the changes introduced by Law 11,638/07 and the new accounting
standards issued by the CPC in 2008. Brazilian GAAP
|
encourages
companies to make such restatements from the date the accounting changes were
introduced in order to provide comparative information within the financial
statements. See note 2(a) to our financial statements included
elsewhere in this annual report for this amendment and other reclassifications
to our Brazilian GAAP financial statements. However, selected
financial information presented as of and for the years ended December 31, 2005
and 2004 has not been represented on the basis of the new accounting policies
introduced in 2008, as the cost and time required to prepare such information
would be prohibitive. As a result, such information is not
comparative to the financial information reported herein as of and for the years
ended December 31, 2008, 2007 and 2006.
|
(2)
|
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.
|
|
(3)
|
Excludes
stock issuance expenses.
|
|
(4)
|
Earnings
per ADS is calculated based on each ADS representing two common
shares.
|
|
(5)
|
The
following table sets forth reconciliation from U.S. GAAP net income to
U.S. GAAP net income available to common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Reconciliation
from U.S. GAAP net income to U.S. GAAP net income available to common
shareholders (Basic):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP net income (Basic)
|
|
|
299,658 |
|
|
|
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)
|
|
|
299,658 |
|
|
|
63,462 |
|
|
|
24,569 |
|
|
|
8,463 |
|
|
|
10,981 |
|
|
Reconciliation
from U.S. GAAP net income to U.S. GAAP net income available to common
shareholders (Diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
GAAP net income
|
|
|
299,658 |
|
|
|
63,462 |
|
|
|
24,827 |
|
|
|
34,383 |
|
|
|
27,241 |
|
|
Preferred
Class G exchange*
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,586 |
) |
|
|
— |
|
|
Undistributed
earnings for Preferred Shareholders (Diluted earnings)
|
|
|
— |
|
|
|
— |
|
|
|
(259 |
) |
|
|
(16,373 |
) |
|
|
(16,260 |
) |
|
U.S.
GAAP net income available to common shareholders (Diluted
earnings)
|
|
|
299,658 |
|
|
|
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.
|
|
(6)
|
Working
capital equals current assets less current
liabilities.
|
|
(7)
|
Total
debt comprises loans, financings and short term and long term debentures.
Amounts exclude loans from real estate
development partners.
|
|
(8)
|
The
units delivered in exchange for land pursuant to swap agreements are not
included.
|
|
(9)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(10)
|
Does
not include data for FIT and Tenda.
|
(11) Potential
sales value is calculated by multiplying the number of units sold in a
development by the unit sales price.
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 rate 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. In 2008, the
period-end value of the real depreciated in relation
to the U.S. dollar by 24.2%. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
2.654
|
|
|
R$
|
2.930 |
|
|
R$
|
2.654 |
|
|
R$
|
3.205 |
|
|
|
|
|
2.341 |
|
|
|
2.463 |
|
|
|
2.163 |
|
|
|
2.762 |
|
|
|
|
|
2.138 |
|
|
|
2.215 |
|
|
|
2.059 |
|
|
|
2.371 |
|
|
|
|
|
1.771 |
|
|
|
1.793 |
|
|
|
1.762 |
|
|
|
1.823 |
|
|
|
|
|
2.337 |
|
|
|
2.030 |
|
|
|
1.559 |
|
|
|
2.500 |
|
|
Month
Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
2008
|
|
|
2.337 |
|
|
|
2.419 |
|
|
|
2.337 |
|
|
|
2.500 |
|
|
January
2009
|
|
|
2.316 |
|
|
|
2.285 |
|
|
|
2.189 |
|
|
|
2.380 |
|
|
February
2009
|
|
|
2.378 |
|
|
|
2.318 |
|
|
|
2.245 |
|
|
|
2.392 |
|
|
March
2009
|
|
|
2.315 |
|
|
|
2.330 |
|
|
|
2.238 |
|
|
|
2.422 |
|
|
April
2009
|
|
|
2.178 |
|
|
|
2.229 |
|
|
|
2.169 |
|
|
|
2.289 |
|
|
May
2009
|
|
|
1.973 |
|
|
|
2.060 |
|
|
|
1.973 |
|
|
|
2.198 |
|
______________
|
(1)
|
Average
of the lowest and highest rates in the periods
presented.
|
On May
28, 2009, the selling rate was R$2.0144 to US$1.00. The real/dollar exchange rate
fluctuates and, therefore, the selling rate at May 28, 2009 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, 2008
of R$2.337 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:
|
·
|
consumer
demand, confidence, stability of income levels and interest
rates;
|
|
·
|
availability
of financing for land home site acquisitions, and the availability of
construction and permanent
mortgages;
|
|
·
|
inventory
levels of both new and existing
homes;
|
|
·
|
supply
of rental properties; and
|
|
·
|
conditions
in the housing resale market.
|
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 2008, the global financial crisis adversely impacted Brazil’s gross
domestic product resulting in a decrease in both the number of developments
launched and the rate of sales of our units. Worldwide financial
market volatility has been unprecedented and extraordinary since September 2008,
and the resulting economic turmoil may have unforeseen consequences, including
adversely impacting government plans for the Brazilian homebuilding
industry. Continuation or worsening of general economic conditions
would have a material adverse effect on our business, our financial condition
and the results of operations.
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. In the event a major Brazilian real
estate company were to go bankrupt or experience significant financial
difficulties, the real estate market as a whole could be negatively
impacted.
Problems
with the construction and timely completion of our real estate projects, as
well as third party projects for which we have been hired as a contractor, 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. Such factors may also adversely affect our reputation
as a contractor for third party projects, since we are responsible for our
construction services and the building itself for five
years. 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, unforeseen conditions at construction sites,
disputes with surrounding landowners 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, scarcity of skilled workers, 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 exceeds our original
estimates due to increases over time in interest rates, real estate taxes,
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. Problems with the construction and timely completion of our real
estate projects, as well as third party projects for which we have been hired as
a contractor, may damage our reputation, expose us to civil liability and
decrease our profitability.
Our
growth depends significantly on the availability of financing for our
clients.
Our
results depend significantly on the availability of credit lines to our clients.
Most real estate purchasers require financing to pay for their acquisitions. The
regulations affecting governmental and private financings are subject to changes
that are outside of our control. Unpredicted changes in these rules may force us
to offer other types of financing to our clients. Terms and conditions of these
new types of financing may not be as favorable as currently available terms and
conditions. If there are no governmental or private credit lines available, our
clients do not have access to these credit lines, or the interest rates on
available credit lines are not attractive, our results may be adversely
affected.
We
are subject to the risks associated with providing financing to our
clients.
We and
other companies in the real estate industry frequently extend credit to our
clients. As a result, we are subject to risks associated with providing
financing, including the risk of default on amounts owed to us (principal and
interest), as well as the risk of increased costs of funding our operations. An
increase in inflation would raise the nominal amounts due from our clients,
pursuant to their sales agreements, which may increase their rates of default.
If this were to occur, our cash generation and, therefore, our operating results
may be adversely affected. In addition, we obtain financings from financial
institutions at different rates and subject to different indexes and may be
unable to match our debt service
requirements
with the terms of the financings we grant to our clients. The mismatch of rates
and terms between the funds we obtain and the financings we grant may adversely
affect us.
Our
construction and development activities, as well as our activities relating to
our provision of financing, are subject to extensive regulation. These
regulations are subject to change and may increase our costs and limit our
ability to pursue our strategy of expanding our business.
The
Brazilian real estate industry is subject to extensive federal, state and
municipal laws and regulations regarding construction and zoning. In addition,
the Brazilian real estate industry depends on the availability of official and
private credit lines on attractive terms. We are required to obtain approval
from several governmental authorities prior to beginning construction on a given
real estate development project. Approval is based on legislation in force at
the time it is granted. A substantial part of financings to our clients is
granted through the Housing Financing System (Sistema Financeiro de
Habitação), or SFH. The SFH is financed with funds from savings accounts
and regulated by the CMN. Regulation by the CMN may change at any time and the
regulation covers a wide array of real estate development and construction
activities, including land acquisition, construction, environmental
and consumer protection and available financings and interest rates, and any
change to such regulation may adversely affect our business.
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. The current global credit markets have impacted our ability to
secure financing at favorable interest rates. We may not be able to obtain
future equity or debt financing on favorable terms, if at all, particularly in
light of the recent economic downturn and unavailability of credit discussed
above. 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.
In
addition, as of the date of this annual report, our net debt level was in excess
of the R$1.0 billion set forth in the covenants of our debentures issued in 2006
(our “Obligation to venture partners” balance is not considered to be part of
debt for purposes of this covenant). We are currently not in breach of the
covenant as it is only measured at June 30 and December 31 of each year. We are
currently renegotiating an amendment to the covenant with the debenture holders,
which may result in a higher interest rate. However, if at June 30,
2009 our net debt level remains in excess of that stipulated in the covenant and
we are not able to amend the covenant or receive a waiver from debenture
holders, the 2006 debentures could be accelerated and the amount due immediately
would be R$240 million. If we are in default under the 2006
debentures, other indebtedness in the amount of R$670 million may be accelerated
and due immediately by us, which may have a material adverse effect on our
financial position and results of operations. See “Item 5. Operating and
Financial Review and Prospects—Indebtedness—Debenture Program.”
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 and U.S. 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. 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.
The
scarcity of real estate financing sources to home buyers requires us to finance
a significant proportion of our sales. The growth of our affordable entry-level
business significantly depends on the availability of financing for our
customers. The merger of our wholly-owned subsidiary Fit Residencial
Empreendimentos Imobiliários Ltda. into Construtora Tenda S.A., a developer of
low income residential projects, has increased our entry-level customer
base. The scarcity of financing and/or an increase in interest rates
could, in particular, adversely affect the ability of such entry-level home
buyers to obtain financing. As a result, this could decrease future
demand from these buyers.
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 and covenant
restrictions 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
insurance policies may not be sufficient to cover damages that we may
suffer.
Our
insurance policies may not provide sufficient coverage for certain damages
resulting from natural disasters such as floods, land slides and earth quakes.
In addition, we are required to pay penalties and other fines whenever there is
delay in the delivery of our units, and such penalties and fines are not covered
by our insurance policies. As a result, insufficient coverage of our insurance
could have an adverse effect on our financial condition and results of
operations.
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, 2008, our total debt was R$1,552.1 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, 2008, the amount of
our aggregate outstanding variable rate indebtedness, taking into consideration
our indebtedness denominated in foreign currency where we entered into
cross-currency interest rate swaps, was R$1,552.1 million. A hypothetical 1%
adverse change in interest rates would have had an annualized unfavorable impact
of R$15.5 million on our earnings and cash flows, based on the net debt level at
December 31, 2008. In addition, as of the date of this annual report,
our net debt level was in excess of the R$1.0 billion set forth in the covenants
of our debentures issued in 2006 (our “Obligation to venture partners” balance
is not considered to be part of debt for purposes of this covenant). We are
currently not in breach of the covenant as it is only measured at June 30 and
December 31 of each year. We are currently renegotiating an amendment to the
covenant with the debenture holders, which may result in a higher interest
rate. However, if at June 30, 2009 our net debt level remains in
excess of that stipulated in the covenant and we are not able to amend the
covenant or receive a waiver from debenture holders, the 2006 debentures could
be accelerated and the amount due immediately would be R$240 million. If we are
in default under the 2006 debentures, other indebtedness in the amount of R$670
million may be accelerated and due immediately by us, which may have a material
adverse effect on our financial position and results of operations. See “Item 5.
Operating and Financial Review and Prospects—Indebtedness—Debenture
Program.”
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
General Market Price Index (Índice Geral de
Preços—Mercado), or IGP-M, inflation rates in Brazil were 1.2% in 2005,
3.8% in 2006, 7.7% in 2007 and 9.8% in 2008 and compared to a deflation of 1.1%
for the four month period ended April 30, 2009. In addition, according to the
National Extended Consumer Price Index (Índice Nacional de Preços ao
Consumidor Amplo), or “IPCA,” published by the IBGE, Brazilian consumer
price inflation rates were 5.7% in 2005, 3.1% in 2006, 4.5% in 2007 and 5.9% in
2008 and 1.7% for the four month period ended April 30, 2009. Our term sales
agreements usually provide for an inflation adjustment linked to the INCC. The
INCC increased by 5.0% in 2006, 6.2% in 2007 and 11.9% in 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 operating revenue 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, 2008, our indebtedness was denominated in reais, other than our
indebtedness denominated in foreign currency which are covered by our
cross-currency interest rate swaps, 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 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 political crises, especially in the United States, such as the subprime
mortgage lending crisis in 2007 and 2008 and the financial and credit crises in
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 (BM&F Bovespa SA - Bolsa de
Valores Mercadorias e Futuros), 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, particularly in the current worldwide
economic downturn. 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$588 billion as of December 31, 2008 and an average daily
trading volume of US$3.1 billion for 2008. In comparison, the NYSE had a market
capitalization of US$8.3 trillion as of December 31, 2008 and an average daily
trading volume of approximately US$41 billion for 2008.
There is
also a large concentration in the Brazilian securities market. The ten largest
companies in terms of market capitalization represented 52.4% of the aggregate
market capitalization of the BOVESPA as of December 31, 2008. The top ten stocks
in terms of trading volume accounted for 53.1% of all shares traded on the
BOVESPA in 2008. Gafisa’s average daily trading volume on the BOVESPA and in the
NYSE in 2008 were US$16.5 million and US$26.1 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 R$11.0 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 R$27.0 million, or R$0.21 per share, which
were fully paid to our shareholders on April 29, 2008. On April 30, 2009, our
shareholders approved the distribution of dividends for the fiscal year 2008 in
the amount of R$26.1 million, or R$0.20 per share, which will be fully paid to
our shareholders during the fiscal year 2009 upon board approval. 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 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.”
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”) would be
treated as U.S. source gain or loss for all foreign tax credit purposes. U.S.
Holders should consult their tax advisers as to whether the Brazilian tax on
gain would be creditable against the holder’s U.S. federal income tax on
foreign-source income from other sources.
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.
General
Gafisa
S.A. is a corporation 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 Corporate Research,
Ltd. located at 10 East 40th Street, 10th floor, New York, NY
10016.
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 companies 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% by
January 2012 (20% within three years from the acquisition date and the remaining
20% within five years from the acquisition date) in cash or shares issued by us,
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 March
15, 2007, we created a new wholly-owned subsidiary, Fit Residencial
Empreendimentos Imobiliários Ltda., or “FIT,” (which, on October 21, 2008, was
merged into Construtora Tenda S.A., as described below) for the development,
construction and management of low and mid low income residential
projects.
On March
17, 2007, we concluded our initial public offering of common shares in the
United States, resulting in a public float of 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 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 (7.1% of our capital stock at the
time).
In
October 2007, we entered into an agreement with Cipesa Engenharia S.A., or
“Cipesa,” the leading homebuilder in the state of Alagoas. Under the agreement,
Gafisa and Cipesa established a new company named Cipesa Empreendimentos
Imobiliários S.A., or “Nova Cipesa,” in which 70% of the interest ownership is
held by Gafisa and the remaining 30% is held 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 was 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
January 2008, we formed an unincorporated venture represented by 13,084,000
Class A quotas fully paid by us and 300,000,000 Class B quotas from our venture
partner, of which R$300.0 million was subscribed by our venture partner. The
venture, which will use these funds to acquire equity investments in real estate
developments, has a term that ends on January 31, 2017 at which time we are
required to fully redeem our venture partner’s interest. The venture partner
receives an annual dividend substantially equivalent to the variation in the
Interbank Certificate of Deposit (CDI) rate. The venture’s charter provides that
we must comply with certain covenants in our capacity as lead partner, which
include the maintenance of minimum net debt and receivables. We and the venture
are currently in compliance with these covenants. The redemption of Class B
quotas will start on January 31, 2012.
On
October 21, 2008, Gafisa and Construtora Tenda S.A., or “Tenda,” a publicly-held
company listed on the Novo Mercado segment of the BOVESPA, concluded a business
combination in which Gafisa’s wholly-owned subsidiary FIT was merged into Tenda.
The purpose of the merger was to consolidate the activities of FIT and Tenda in
the low income
sector in
Brazil and to develop real estate units with an average value of less than
R$200,000. As a result of the business combination, Gafisa now owns 60.0% of the
total and voting capital stock of Tenda and FIT was merged into Tenda. Because
Tenda launched very few units in 2008, we believe the full impact of the merger
are not reflected until 2009.
On
February 27, 2009, Gafisa and Odebrecht Empreendimentos entered into an
agreement to terminate the partnership created in February 2007 for the
development, construction and management of large scale, low income residential
projects with more than 1,000 units each. Gafisa withdrew from Bairro Novo
Empreendimentos Imobiliários S.A. and, as a consequence, terminated the
shareholders’ agreement it had entered into with Odebrecht Empreendimentos. The
ongoing real estate developments which were being jointly developed by Gafisa
and Odebrecht Empreendimentos were separated as follows: Gafisa continued
developing the “Empreendimento Imobiliário Bairro Novo Cotia” and Odebrecht
Empreendimentos continued developing the other real estate developments of the
partnership as well as the operations of Bairro Novo Empreendimentos
Imobiliários S.A.
In May
2009, Tenda issued R$600 million aggregate principal amount of non-convertible
debentures under its first debenture program. The debentures provide for payment
of annual interest at a spread of 8% + TR, calculated from the subscription
date, with a maturity in five years.
Capital
Expenditures
In 2006,
we invested R$21.6 million in property and equipment, primarily information
technology equipment, expenditures incurred for the construction of sales
stands, facilities, model apartments and related furnishings, and new office
facilities in Rio de Janeiro and in São Paulo to accommodate our recently
created internal sales force. See “— Business Overview—Our Real Estate
Activities—Sale of Units Through Our Brokerage Subsidiaries.”
In 2007,
we invested R$61.3 million in property and equipment, primarily information
technology equipment, software, expenses for the construction of sales stands,
facilities, model apartments and related furnishings and new office facilities
in Rio de Janeiro and in São Paulo. Our main investments during the period were
construction of sales stands of R$37.0 million and the implementation of SAP
that totaled 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.
In 2008,
we invested R$63.1 million in property and equipment, primarily information
technology equipment, software, expenses for the construction of sales stands,
facilities, model apartments and related furnishings and new office facilities
in Rio de Janeiro and in São Paulo. Our main investments during the period were
the construction of sales stands, which totaled R$35.5 million, investments in
information technology equipment and software, which totaled R$3.7 million, in
office facilities, which totaled R$4.2 million and the SAP implementation, which
totaled R$2.0 million.
Our
capital expenditures are all made in Brazil and are usually funded by internal
sources. We currently do not have any significant capital
expenditures in progress.
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 970 developments and constructed over 11 million
square meters of housing, which we believe is more than any other residential
development company in Brazil. We believe our brands “Gafisa,” “Alphaville,” and
“Tenda” 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, 2008, approximately 50% of the value
of our launches were derived from high and mid high-level residential
developments under the Gafisa brand. We are also engaged in the development of
land subdivisions, also known as residential communities, representing
approximately 15% of the value of our launches, and affordable entry-level
housing, which represents approximately 8% of the value of our total launches.
Other mid-level and commercial buildings represent approximately 27% of the
value of our total launches. In addition, we provide construction services to
third parties.
We are
one of Brazil’s most geographically-diversified homebuilders currently operating
in 94 municipalities, including São Paulo, Rio de Janeiro, Salvador, Fortaleza,
Natal, Curitiba, Belo Horizonte, Manaus, Porto Alegre and Belém, across 18
states, which represents approximately 90% of the national population and
approximately 89% of the gross domestic product on December 31, 2008. Many of
these developments are located in markets where few large competitors currently
operate. For the year ended December 31, 2008, approximately 38% of the value of
our launches were derived from our operations outside the states of São Paulo
and Rio de Janeiro.
Our
Markets
We have
already launched projects in 94 municipalities: Ananindeua, Anápolis, Aparecida
de Goiânia, Aracajú, Araucária, Barbacena, Barueri, Bauru, Belém, Belford Roxo,
Belo Horizonte, Betim, Cabo Frio, Cajamar, Camaçari, Campinas, Campo Grande,
Campo Limpo Paulista, Canoas, Caxias do Sul, Contagem, Cotia, Cuiabá, Curitiba,
Duque de Caxias, Eusébio, Ferraz de Vasconcelos, Fortaleza, Goiânia, Gramado,
Gravataí, Guarulhos, Guarujá, Iguaraçu, Ipatinga, Itaboraí, Itanhaém, Itapevi,
Itaquaquecetuba, Itu, Jaboatão dos Guararapes, João Pessoa, Juiz de Fora, Lauro
de Freitas, Londrina, Macaé, Maceió, Manaus, Maricá, Marilia, Mauá, Mogi das
Cruzes, Mossoró, Natal, Niterói, Nova Iguaçu, Nova Lima, Osasco, Paulista,
Parnamirim, Pinhais, Poá, Porto Alegre, Porto Velho, Queimados, Recife, Rezende,
Ribeirão Neves, Ribeirão Preto, Rio das Ostras, Rio de Janeiro, Salvador, Santa
Luzia, Santana de Parnaíba, Santo André, Santos, São Bernardo do Campo, São
Caetano, São Gonçalo, São José dos Campos, São José dos Pinhais, São Leopoldo,
São Luiz do Maranhão, São Paulo, Sarzedo, Serra, Sete Lagoas, Sobradinho,
Sorocaba, Suzano, Uberlândia, Valparaíso, Votorantim and Volta Redonda, across
18 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 to 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
|
(in
thousands of R$)
|
|
|
(%
of total)
|
|
|
Residential
buildings
|
|
|
1,829,780 |
|
|
|
80.4 |
|
|
|
1,348,811 |
|
|
|
81.2 |
|
|
|
824,812 |
|
|
|
81.1 |
|
|
Land
subdivisions
|
|
|
405,678 |
|
|
|
17.8 |
|
|
|
249,916 |
|
|
|
15.0 |
|
|
|
32,172 |
|
|
|
3.2 |
|
|
Commercial
|
|
|
3,100 |
|
|
|
0.1 |
|
|
|
27,877 |
|
|
|
1.7 |
|
|
|
138,090 |
|
|
|
13.6 |
|
|
Pre-sales
|
|
|
2,238,558 |
|
|
|
98.4 |
|
|
|
1,626,604 |
|
|
|
97.9 |
|
|
|
995,074 |
|
|
|
97.9 |
|
|
Construction
services
|
|
|
37,268 |
|
|
|
1.6 |
|
|
|
35,121 |
|
|
|
2.1 |
|
|
|
21,480 |
|
|
|
2.1 |
|
|
Total
real estate sales
|
|
|
2,275,826 |
|
|
|
100.0 |
|
|
|
1,661,725 |
|
|
|
100.0 |
|
|
|
1,016,554 |
|
|
|
100.0 |
|
Developments
for Sale
The table
below provides information on our developments for sale activities during the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
|
São
Paulo
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
918,156 |
|
|
|
742,712 |
|
|
|
497,916 |
|
|
Developments
launched
|
|
|
13 |
|
|
|
11 |
|
|
|
11 |
|
|
Usable
area (m2)(2)
|
|
|
288,028 |
|
|
|
250,185 |
|
|
|
198,732 |
|
|
Units
launched(3)
|
|
|
2,301 |
|
|
|
2,040 |
|
|
|
1,452 |
|
|
Average
sales price (R$/m2)(2)
|
|
|
3,188 |
|
|
|
2,969 |
|
|
|
2,813 |
|
|
Rio
de Janeiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
443,516 |
|
|
|
510,639 |
|
|
|
239,007 |
|
|
Developments
launched
|
|
|
8 |
|
|
|
11 |
|
|
|
7 |
|
|
Usable
area (m2)(2)
|
|
|
196,189 |
|
|
|
177,428 |
|
|
|
87,032 |
|
|
Units
launched(3)
|
|
|
837 |
|
|
|
2,020 |
|
|
|
1,116 |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
2,261 |
|
|
|
2,878 |
|
|
|
3,427 |
|
|
Other
States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
551,728 |
|
|
|
444,852 |
|
|
|
268,146 |
|
|
Developments
launched
|
|
|
15 |
|
|
|
14 |
|
|
|
12 |
|
|
Usable
area (m2)(2)
|
|
|
163,610 |
|
|
|
166,321 |
|
|
|
121,718 |
|
|
Units
launched(3)
|
|
|
1,811 |
|
|
|
1,804 |
|
|
|
483 |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
3,372 |
|
|
|
2,675 |
|
|
|
2,776 |
|
|
Total
Gafisa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
1,913,400 |
|
|
|
1,698,203 |
|
|
|
1,005,069 |
|
|
Developments
launched
|
|
|
36 |
|
|
|
36 |
|
|
|
30 |
|
|
Usable
area (m2)(2)
|
|
|
647,827 |
|
|
|
593,935 |
|
|
|
407,483 |
|
|
Units
launched(3)
|
|
|
4,949 |
|
|
|
5,864 |
|
|
|
3,052 |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
2,954 |
|
|
|
2,859 |
|
|
|
2,963 |
|
|
Alphaville
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
312,515 |
|
|
|
237,367 |
|
|
|
— |
|
|
Developments
launched
|
|
|
11 |
|
|
|
6 |
|
|
|
— |
|
|
Usable
area (m2)(2)
|
|
|
956,665 |
|
|
|
1,160,427 |
|
|
|
— |
|
|
Units
launched(3)
|
|
|
1,818 |
|
|
|
1,489 |
|
|
|
— |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
327 |
|
|
|
205 |
|
|
|
— |
|
|
Tenda(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
15,670 |
|
|
|
— |
|
|
|
— |
|
|
Developments
launched
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
Usable
area (m2)(2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Units
launched(3)
|
|
|
112 |
|
|
|
— |
|
|
|
— |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
FIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
496,147 |
|
|
|
263,359 |
|
|
|
— |
|
|
Developments
launched
|
|
|
16 |
|
|
|
10 |
|
|
|
— |
|
|
Usable
area (m2)(2)
|
|
|
— |
|
|
|
149,842 |
|
|
|
— |
|
|
Units
launched(3)
|
|
|
3,759 |
|
|
|
2,459 |
|
|
|
— |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
— |
|
|
|
1,896 |
|
|
|
— |
|
|
Bairro
Novo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
sales value of units launched(1)
|
|
|
25,311 |
|
|
|
37,000 |
|
|
|
— |
|
|
Developments
launched
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
Usable
area (m2)(2)
|
|
|
16,487 |
|
|
|
23,618 |
|
|
|
— |
|
|
Units
launched(3)
|
|
|
325 |
|
|
|
503 |
|
|
|
— |
|
|
Average
sales price (R$/m2)(2)(4)
|
|
|
1,535 |
|
|
|
1,567 |
|
|
|
— |
|
|
(1)
|
Potential
sales value is calculated by multiplying the number of units sold in a
development by the unit sales
price.
|
|
(2)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(3)
|
The
units delivered in exchange for land pursuant to swap agreements are not
included.
|
|
(4)
|
Average
sales price per square meter excludes the land subdivisions. Average sales
price per square meter (including land subdivisions and excluding Tenda’s
ventures) was R$1,225, R$1,137 and R$2,776 in 2008, 2007 and 2006,
respectively.
|
|
(5)
|
Because
Tenda launched very few units in 2008, we believe the full impact of the
merger are not reflected until
2009.
|
Our
developments for sale are divided into three broad categories: (1) residential
buildings, (2) land subdivisions, and (3) commercial buildings.
Overview
of Residential Buildings
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, 2008,
approximately 38% of the value 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 approximately R$3,600 (US$1,540). Luxury building developments are targeted
to families with monthly household incomes in excess of approximately R$20,000
(US$8,558).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Espacio
Laguna
|
|
2006
|
|
100
|
|
16,364
|
|
2009
|
|
80
|
|
76
|
|
Riviera Nice
|
|
2006
|
|
50
|
|
6,761
|
|
2009
|
|
31
|
|
41
|
|
VP—Parides
|
|
2006
|
|
100
|
|
13,093
|
|
2009
|
|
50
|
|
100
|
|
Vistta
Ibirapuera
|
|
2006
|
|
100
|
|
9,963
|
|
2008
|
|
41
|
|
100
|
|
Península FIT B
01
|
|
2006
|
|
100
|
|
11,845
|
|
2008
|
|
93
|
|
79
|
|
VP-Mirabilis
|
|
2006
|
|
100
|
|
23,355
|
|
2009
|
|
100
|
|
100
|
|
VP-Agrias
|
|
2006
|
|
100
|
|
21,390
|
|
2009
|
|
100
|
|
100
|
|
Horto—Fase
1
|
|
2007
|
|
50
|
|
44,563
|
|
2010
|
|
180
|
|
98
|
|
Vision
|
|
2007
|
|
100
|
|
19,712
|
|
2010
|
|
284
|
|
76
|
|
Supremo
|
|
2007
|
|
100
|
|
34,864
|
|
2010
|
|
193
|
|
86
|
|
London Green–Fase
2
|
|
2008
|
|
100
|
|
15,009
|
|
2010
|
|
140
|
|
67
|
|
Horto—Fase
2
|
|
2007
|
|
50
|
|
22,298
|
|
2011
|
|
92
|
|
97
|
|
Costa
Maggiore
|
|
2008
|
|
50
|
|
9,386
|
|
2010
|
|
60
|
|
87
|
|
Alphaville Berra da
Tijuca
|
|
2008
|
|
65
|
|
170,010
|
|
2011
|
|
259
|
|
88
|
|
Chácara
Sant’Anna
|
|
2008
|
|
50
|
|
30,517
|
|
2011
|
|
158
|
|
54
|
|
Details
|
|
2008
|
|
100
|
|
7,802
|
|
2011
|
|
38
|
|
10
|
|
Quintas do
Pontal
|
|
2008
|
|
100
|
|
21,915
|
|
2010
|
|
91
|
|
20
|
|
Laguna di
Mare
|
|
2008
|
|
80
|
|
17,454
|
|
2011
|
|
146
|
|
17
|
|
Nouvelle
|
|
2008
|
|
100
|
|
5,367
|
|
2011
|
|
12
|
|
7
|
|
MontBlanc
|
|
2008
|
|
80
|
|
30,479
|
|
2011
|
|
112
|
|
22
|
|
Manhattan Square – Fase 1
Com
|
|
2008
|
|
50
|
|
25,804
|
|
2011
|
|
716
|
|
40
|
|
Reserva
Laranjeiras
|
|
2008
|
|
100
|
|
11,740
|
|
2010
|
|
108
|
|
97
|
________________
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
Middle
Income Buildings
Buildings
targeted at middle-income customers have accounted 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
approximately R$2,000 to R$3,600 (US$856 to US$1,540). 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 approximately R$5,000 and R$20,000
(approximately US$2,139 and US$8,558).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paço das
Águas
|
|
2006
|
|
45
|
|
24,080
|
|
2008
|
|
184
|
|
98
|
|
Blue Vision-Sky e
Infinity
|
|
2006
|
|
50
|
|
18,514
|
|
2008
|
|
178
|
|
78
|
|
Blue
Land-Bl.01
|
|
2006
|
|
100
|
|
9,169
|
|
2008
|
|
120
|
|
66
|
|
Beach
Park-Living
|
|
2006
|
|
80
|
|
14,913
|
|
2009
|
|
130
|
|
87
|
|
Belle Vue-Porto
Alegre
|
|
2006
|
|
100
|
|
4,264
|
|
2009
|
|
22
|
|
54
|
|
Espaço
Jardins
|
|
2006
|
|
100
|
|
28,926
|
|
2009
|
|
235
|
|
100
|
|
Forest Ville
|
|
2006
|
|
50
|
|
15,556
|
|
2009
|
|
110
|
|
99
|
|
Garden
Ville
|
|
2006
|
|
50
|
|
11,998
|
|
2009
|
|
112
|
|
98
|
|
Quinta
Imperial
|
|
2006
|
|
100
|
|
8,422
|
|
2009
|
|
128
|
|
77
|
|
CSF-Santtorino
|
|
2006
|
|
100
|
|
14,979
|
|
2009
|
|
160
|
|
99
|
|
Olimpic
Chácara
|
|
2006
|
|
100
|
|
24,988
|
|
2009
|
|
219
|
|
99
|
|
FIT Niterói
|
|
2006
|
|
100
|
|
8,523
|
|
2009
|
|
72
|
|
84
|
|
Felicitá
|
|
2006
|
|
100
|
|
11,323
|
|
2009
|
|
91
|
|
90
|
|
Ville Du
Soleil
|
|
2006
|
|
100
|
|
8,920
|
|
2009
|
|
64
|
|
72
|
|
Mirante do Rio
|
|
2006
|
|
60
|
|
8,125
|
|
2009
|
|
96
|
|
100
|
|
Paradiso
|
|
2006
|
|
100
|
|
16,286
|
|
2009
|
|
144
|
|
90
|
|
Collori
|
|
2006
|
|
50
|
|
39,462
|
|
2009
|
|
333
|
|
94
|
|
Vivance Residence
Service
|
|
2006
|
|
100
|
|
14,717
|
|
2009
|
|
187
|
|
81
|
|
Isla
|
|
2007
|
|
100
|
|
31,423
|
|
2010
|
|
240
|
|
88
|
|
Grand Valley
|
|
2007
|
|
100
|
|
16,908
|
|
2009
|
|
240
|
|
61
|
|
Acqua Residence (Phase
1)
|
|
2007
|
|
100
|
|
28,400
|
|
2009
|
|
380
|
|
40
|
|
Celebrare
|
|
2007
|
|
100
|
|
14,679
|
|
2009
|
|
188
|
|
77
|
|
Reserva do
Lago
|
|
2007
|
|
50
|
|
16,800
|
|
2009
|
|
96
|
|
81
|
|
CFS –
Prímula
|
|
2007
|
|
100
|
|
13,897
|
|
2009
|
|
96
|
|
84
|
|
CSF – Dália
|
|
2007
|
|
100
|
|
9,000
|
|
2009
|
|
68
|
|
85
|
|
CSF –
Acácia
|
|
2007
|
|
100
|
|
23,461
|
|
2009
|
|
192
|
|
96
|
|
Jatiuca Trade
Residence
|
|
2007
|
|
50
|
|
32,651
|
|
2010
|
|
500
|
|
47
|
|
Horizonte
|
|
2007
|
|
60
|
|
7,505
|
|
2010
|
|
29
|
|
100
|
|
Secret Garden
|
|
2007
|
|
100
|
|
15,344
|
|
2009
|
|
252
|
|
66
|
|
Evidence
|
|
2007
|
|
50
|
|
23,487
|
|
2010
|
|
144
|
|
59
|
|
Acquarelle
|
|
2007
|
|
85
|
|
17,742
|
|
2009
|
|
259
|
|
66
|
|
Palm Ville
|
|
2007
|
|
50
|
|
13,582
|
|
2009
|
|
112
|
|
88
|
|
Art Ville
|
|
2007
|
|
50
|
|
16,157
|
|
2009
|
|
263
|
|
92
|
|
Jatiuca Trade Residence (Phase
2)
|
|
2007
|
|
50
|
|
8,520
|
|
2010
|
|
140
|
|
47
|
|
Orbit
|
|
2007
|
|
100
|
|
11,332
|
|
2010
|
|
185
|
|
30
|
|
Enseada das
Orquídeas
|
|
2007
|
|
80
|
|
52,589
|
|
2010
|
|
475
|
|
72
|
|
London Green
|
|
2007
|
|
50
|
|
28,998
|
|
2010
|
|
300
|
|
67
|
|
Privilege
|
|
2007
|
|
80
|
|
16,173
|
|
2010
|
|
194
|
|
82
|
|
Parc Paradiso (Phase
2)
|
|
2007
|
|
60
|
|
10,427
|
|
2010
|
|
108
|
|
95
|
|
Parc
Paradiso
|
|
2007
|
|
60
|
|
35,987
|
|
2010
|
|
324
|
|
95
|
|
Solares da Vila
Maria
|
|
2007
|
|
100
|
|
13,376
|
|
2010
|
|
100
|
|
100
|
|
Acqua Residence (Phase
2)
|
|
2007
|
|
100
|
|
7,136
|
|
2009
|
|
72
|
|
40
|
|
Bella Vista (Phase
1)
|
|
2007
|
|
100
|
|
15,406
|
|
2010
|
|
116
|
|
36
|
|
Grand Park - Parque das Águas (Phase
1)
|
|
2007
|
|
50
|
|
20,854
|
|
2010
|
|
240
|
|
13
|
|
Grand Park - Parque Árvores (Phase
2)
|
|
2007
|
|
50
|
|
29,932
|
|
2010
|
|
400
|
|
11
|
|
London Green Stake
Acquisition
|
|
2007
|
|
100
|
|
—
|
|
2010
|
|
—
|
|
67
|
|
Parc Paradiso Stake
Acquisition
|
|
2007
|
|
90
|
|
—
|
|
2010
|
|
—
|
|
95
|
|
SunValley
|
|
2007
|
|
100
|
|
7,031
|
|
2010
|
|
58
|
|
44
|
|
Reserva Santa
Cecília
|
|
2007
|
|
80
|
|
15,854
|
|
2010
|
|
122
|
|
22
|
|
Olimpic Bosque da
Saude
|
|
2007
|
|
100
|
|
19,150
|
|
2010
|
|
148
|
|
81
|
|
Magic
|
|
2007
|
|
100
|
|
31,487
|
|
2010
|
|
268
|
|
42
|
|
GrandValley
Niteroi
|
|
2007
|
|
100
|
|
17,905
|
|
2010
|
|
161
|
|
93
|
|
Nova
Petrópolis
|
|
2008
|
|
100
|
|
36,789
|
|
2010
|
|
300
|
|
36
|
|
Terraças - Alto da
Lapa
|
|
2008
|
|
100
|
|
23,248
|
|
2010
|
|
192
|
|
68
|
|
Raízes Granja
Viana
|
|
2008
|
|
50
|
|
17,282
|
|
2010
|
|
73
|
|
35
|
|
Verdemar
|
|
2008
|
|
100
|
|
13,084
|
|
2010
|
|
80
|
|
55
|
|
Carpe Diem
|
|
2008
|
|
80
|
|
12,515
|
|
2010
|
|
116
|
|
47
|
|
Carpe Diem –
Belém
|
|
2008
|
|
70
|
|
13,951
|
|
2011
|
|
90
|
|
53
|
|
Grand Park Águas Fase
2
|
|
2008
|
|
50
|
|
12,960
|
|
2011
|
|
150
|
|
55
|
|
Parque
Barueri
|
|
2008
|
|
100
|
|
58,437
|
|
2011
|
|
677
|
|
50
|
|
Manhattan Square (Office Wall Street)
|
|
2008
|
|
50
|
|
25,804
|
|
2011
|
|
716
|
|
40
|
|
Manhattan Square (Soho)
|
|
2008
|
|
50
|
|
28,926
|
|
2011
|
|
270
|
|
20
|
|
Manhattan Square (Tribeca)
|
|
2008
|
|
50
|
|
37,880
|
|
2011
|
|
621
|
|
22
|
|
Terraças
Tatuapé
|
|
2008
|
|
100
|
|
8,350
|
|
2011
|
|
92
|
|
3
|
|
Mistral
|
|
2008
|
|
70
|
|
14,849
|
|
2010
|
|
200
|
|
47
|
|
Terraças
Tatuapé
|
|
2008
|
|
100
|
|
14,386
|
|
2011
|
|
105
|
|
28
|
|
Grand Park Árvores Fase
2
|
|
2008
|
|
50
|
|
11,152
|
|
2011
|
|
150
|
|
64
|
|
Alegria
|
|
2008
|
|
100
|
|
29,199
|
|
2011
|
|
278
|
|
45
|
|
Dubai
|
|
2008
|
|
50
|
|
19,316
|
|
2010
|
|
240
|
|
43
|
|
Patio Condominio Clube -
F1a
|
|
2008
|
|
100
|
|
20,741
|
|
2011
|
|
192
|
|
21
|
|
Mansão Imperial -
F1
|
|
2008
|
|
100
|
|
18,778
|
|
2011
|
|
87
|
|
17
|
|
Reserva do Bosque - Lauro Sodré -
Phase 2
|
|
2008
|
|
60
|
|
16,801
|
|
2011
|
|
141
|
|
50
|
|
Brink - Campo Limpo
F1
|
|
2008
|
|
100
|
|
17,280
|
|
2011
|
|
191
|
|
50
|
|
Neo Garden
|
|
2008
|
|
100
|
|
12,255
|
|
2011
|
|
122
|
|
50
|
|
Reserva do
Bosque
|
|
2008
|
|
50
|
|
16,606
|
|
2011
|
|
134
|
|
100
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
|
|
Affordable
Entry-Level Developments
|
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 approximately R$55,000 (US$23,534) 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 approximately R$38,000 (US$16,260). 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 approximately R$1,500 to R$2,000
(approximately US$642 to US$856). Affordable entry-level housing developments
are tailored to families with monthly household incomes between approximately
R$1,600 and R$5,000 (approximately US$685 and US$2,139).
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 was on five standardized residential developments in the outer parts of
large metropolitan regions. Financing for FIT’s developments primarily came from
one of the Brazilian largest government-owned banks called Caixa Econômica
Federal, or the “CEF,” and such financing was structured so that customers paid
low monthly installments without increasing our credit risk.
On
October 21, 2008, Gafisa and Tenda, a publicly-held company listed with the Novo
Mercado segment of the BOVESPA, concluded a business combination in which
Gafisa’s wholly-owned subsidiary FIT was merged into Tenda. The purpose of the
merger was to consolidate the activities of FIT and Tenda in the low income
sector in Brazil and to develop real estate units with an average value of less
than R$200,000. As a result of the business combination, Gafisa
received
60.0% of the total and voting capital stock of Tenda and FIT was merged into
Tenda. Because Tenda launched very few units in 2008, we believe the full impact
of the merger are not reflected until 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Side
Park - Ed. Style
|
|
2006
|
|
100
|
|
3,862
|
|
2008
|
|
63
|
|
98
|
|
FIT
Jaçana
|
|
2007
|
|
100
|
|
9,164
|
|
2008
|
|
184
|
|
100
|
|
FIT
Maceió
|
|
2007
|
|
50
|
|
4,207
|
|
2009
|
|
54
|
|
73
|
|
FIT
Cittá
|
|
2007
|
|
50
|
|
13,389
|
|
2009
|
|
204
|
|
88
|
|
FIT
Coqueiro
|
|
2007
|
|
60
|
|
30,095
|
|
2009
|
|
621
|
|
97
|
|
FIT Mirante do
Sol
|
|
2007
|
|
100
|
|
18,661
|
|
2009
|
|
56
|
|
53
|
|
FIT Taboão
|
|
2007
|
|
100
|
|
16,041
|
|
2009
|
|
374
|
|
100
|
|
FIT Maria
Inês
|
|
2007
|
|
60
|
|
14,535
|
|
2009
|
|
270
|
|
59
|
|
MA - Grand Park
|
|
2007
|
|
50
|
|
53,041
|
|
2010
|
|
894
|
|
67
|
|
Jd Botânico
|
|
2007
|
|
55
|
|
22,107
|
|
2009
|
|
432
|
|
94
|
|
FIT Jaraguá
|
|
2007
|
|
100
|
|
11,582
|
|
2009
|
|
260
|
|
100
|
|
FIT Vila Augusta
|
|
2007
|
|
100
|
|
16,223
|
|
2010
|
|
264
|
|
90
|
|
Bairro Novo Cotia (Phases
1-2)
|
|
2007
|
|
50
|
|
47,235
|
|
2009
|
|
1,006
|
|
69
|
|
Bairro Novo
Camacari
|
|
2008
|
|
50
|
|
16,487
|
|
2010
|
|
650
|
|
71
|
|
FIT Vila Allegro
|
|
2008
|
|
50
|
|
11,106
|
|
2011
|
|
297
|
|
77
|
|
FIT Terra
Bonita
|
|
2008
|
|
51
|
|
11,357
|
|
2010
|
|
304
|
|
15
|
|
Città Lauro de
Freitas
|
|
2008
|
|
50
|
|
8,826
|
|
2010
|
|
304
|
|
86
|
|
FIT Coqueiro - Stake
Acquisition
|
|
2008
|
|
20
|
|
6,077
|
|
2009
|
|
570
|
|
89
|
|
FIT Mirante do Lago Fase
1
|
|
2008
|
|
70
|
|
21,734
|
|
2010
|
|
462
|
|
63
|
|
FIT Mirante do
Parque
|
|
2008
|
|
60
|
|
18,618
|
|
2010
|
|
420
|
|
60
|
|
FIT
Palladium
|
|
2008
|
|
70
|
|
10,345
|
|
2010
|
|
228
|
|
79
|
|
FIT Parque da
Lagoinha
|
|
2008
|
|
75
|
|
10,225
|
|
2010
|
|
212
|
|
20
|
|
FIT
Planalto
|
|
2008
|
|
100
|
|
25,023
|
|
2010
|
|
472
|
|
52
|
|
FIT Jardim Botânico
Paraíba
|
|
2008
|
|
50
|
|
9,998
|
|
2010
|
|
309
|
|
27
|
|
FIT Parque
Maceió
|
|
2008
|
|
50
|
|
13,494
|
|
2010
|
|
470
|
|
76
|
|
FIT Cristal
|
|
2008
|
|
70
|
|
6,419
|
|
2010
|
|
154
|
|
41
|
|
FIT Vivai
|
|
2008
|
|
90
|
|
37,376
|
|
2011
|
|
640
|
|
48
|
|
FIT
Filadélfia
|
|
2008
|
|
50
|
|
11,771
|
|
2011
|
|
374
|
|
55
|
|
Novo Osasco
|
|
2008
|
|
60
|
|
17,672
|
|
2011
|
|
444
|
|
8
|
|
Le Grand Orleans
Tower
|
|
2008
|
|
100
|
|
14,643
|
|
2010
|
|
112
|
|
1
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
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 approximately R$150 to R$800 (approximately US$64 to
US$342). We target clients with monthly household incomes in excess
of approximately R$5,000 (approximately US$2,139) for these land
subdivisions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alta
Vistta
|
|
2006
|
|
50
|
|
95,584
|
|
2010
|
|
173
|
|
36
|
|
O
Bosque
|
|
2006
|
|
30
|
|
89,260
|
|
2007
|
|
76
|
|
30
|
|
Alphaville
Barra da Tijuca
|
|
2008
|
|
65
|
|
133,251
|
|
2011
|
|
251
|
|
90
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
Land
Subdivisions under our Alphaville Brand
On
January 8, 2007, we successfully completed the acquisition of 60.0% 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, São Luis and Rio de Janeiro.
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
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alphaville
Salvador 2
|
|
2006
|
|
55
|
|
354,982
|
|
2008
|
|
527
|
|
97
|
|
Alphaville
Gravataí
|
|
2006
|
|
64
|
|
216,180
|
|
2008
|
|
487
|
|
74
|
|
Alphaville
Francisco Brennand
|
|
2006
|
|
65
|
|
272,361
|
|
2008
|
|
402
|
|
93
|
|
Alphaville
- Campo Grande
|
|
2007
|
|
67
|
|
225,342
|
|
2009
|
|
489
|
|
81
|
|
Alphaville
- Rio Costa do Sol
|
|
2007
|
|
58
|
|
313,400
|
|
2009
|
|
616
|
|
97
|
|
Alphaville
– Cajamar
|
|
2007
|
|
55
|
|
674,997
|
|
n/a
|
|
2
|
|
100
|
|
Alphaville
– Araçagy
|
|
2007
|
|
38
|
|
236,118
|
|
2009
|
|
332
|
|
90
|
|
Alphaville
Jacuhy
|
|
2007
|
|
65
|
|
374,290
|
|
2010
|
|
775
|
|
97
|
|
Alphaville
Londrina II
|
|
2007
|
|
63
|
|
134,120
|
|
2010
|
|
554
|
|
64
|
|
Alphaville
Jacuhy II
|
|
2008
|
|
65
|
|
177,981
|
|
2010
|
|
330
|
|
48
|
|
Alphaville
Cuiabá II
|
|
2008
|
|
60
|
|
150,896
|
|
2010
|
|
424
|
|
42
|
|
Alphaville
João Pessoa
|
|
2008
|
|
100
|
|
61,782
|
|
2010
|
|
124
|
|
100
|
|
Alphaville
Rio Costa do Sol II
|
|
2008
|
|
58
|
|
349,186
|
|
2010
|
|
366
|
|
18
|
|
Alphaville
Manaus II
|
|
2008
|
|
63
|
|
166,938
|
|
2010
|
|
335
|
|
80
|
|
Alphaville
Litoral Norte II
|
|
2008
|
|
66
|
|
150,813
|
|
2010
|
|
391
|
|
33
|
|
Alphaville
Manaus Comercial
|
|
2008
|
|
60
|
|
48,252
|
|
2010
|
|
42
|
|
27
|
|
Alphaville
Barra da Tijuca
|
|
2008
|
|
35
|
|
173,251
|
|
2011
|
|
251
|
|
90
|
|
Alphaville
Votorantim
|
|
2008
|
|
30
|
|
246,315
|
|
2010
|
|
472
|
|
71
|
|
Alphaville
Mossoró
|
|
2008
|
|
70
|
|
65,912
|
|
2010
|
|
170
|
|
99
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
Commercial
Buildings
We have
in the past launched commercial building developments for sale. As of December
31, 2008 we had four commercial buildings under development for sale: Sunplaza
Personal Office and Icaraí Corporate, both in the state of Rio de Janeiro,
Manhattan Wall Street in Salvador and JTR in Maceio.
In
December 2007, we completed 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.
Construction
Service
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, 2006 and December 31,
2008:
|
|
|
First
Year of Construction
|
|
|
|
|
|
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
|
|
Corcovado
|
|
2007
|
|
Camargo Corrêa Desenvolvimento
Imobiliário S/A
|
|
Residential
|
|
Open View (Oscar
Freire)
|
|
2008
|
|
Grupo Sisan
|
|
Residential
|
|
Open View (Oscar
Freire)
|
|
2008
|
|
Grupo Sisan
|
|
Residential
|
|
New Age
|
|
2008
|
|
Incols Curitiba Empreedimentos Imobiliários
SPE
|
|
Residential
|
|
Duetto
Volare
|
|
2008
|
|
Fibra Empreendimentos
imobiliários
|
|
Residential
|
|
Duetto
Fioratta
|
|
2008
|
|
Fibra Empreendimentos
imobiliários
|
|
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, 2006 and
December 31, 2008:
|
|
|
First
Year of Construction
|
|
|
|
|
|
|
|
Campo
D’Ourique
|
|
2006
|
|
50
|
|
MELF
Empreendimentos
|
|
Residential
|
|
Dell
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
|
|
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
|
|
Carpe Diem
|
|
2008
|
|
80
|
|
Mattos e Matoos
Ltda.
|
|
Residential
|
|
Carpe Diem –
Belém
|
|
2008
|
|
70
|
|
Yuni Incorporadora
S/A
|
|
Residential
|
|
Grand Park Águas Fase
2
|
|
2008
|
|
50
|
|
Franere Comércio e Construções
Imobiliárias Ltda.
|
|
Residential
|
|
Manhattan Square (Walll Street)
|
|
2008
|
|
50
|
|
OAS Empreendimentos Imobiliários
Ltda.
|
|
Commercial
|
|
Manhattan Square (Soho)
|
|
2008
|
|
50
|
|
OAS Empreendimentos Imobiliários
Ltda.
|
|
Residential
|
|
Manhattan Square (Tribeca)
|
|
2008
|
|
50
|
|
OAS Empreendimentos Imobiliários
Ltda.
|
|
Residential
|
|
Mistral
|
|
2008
|
|
70
|
|
Premium Participações
Ltda.
|
|
Residential
|
|
Grand Park Árvores Fase
2
|
|
2008
|
|
50
|
|
Franere Comércio e Construções
Imobiliárias Ltda.
|
|
Residential
|
|
MontBlanc
|
|
2008
|
|
80
|
|
Yuni Incorporadora
S/A
|
|
Residential
|
|
Laguna di
Mare
|
|
2008
|
|
80
|
|
GM Engenharia e Construção
Ltda.
|
|
Residential
|
|
Reserva do
Bosque
|
|
2008
|
|
60
|
|
GM Engenharia e Construção
Ltda.
|
|
Residential
|
|
Reserva do Bosque - Lauro Sodré -
Phase 2
|
|
2008
|
|
60
|
|
GM Engenharia e Construção
Ltda.
|
|
Residential
|
|
Chácara
Sant’Anna
|
|
2008
|
|
50
|
|
Monza Incorporadora
S/A
|
|
Residential
|
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 promote 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,
2008, our development-client database was comprised of more than 130,000
individuals. We currently have approximately 45,000 active clients. Our
construction-services clients are large companies, many of them developers that
do not build their own projects. On December 31, 2008, we had, among our main
construction services clients, the following companies: Tiner Empreendimentos e
Participações Ltda., Camargo Correa Desenvolvimento Imobiliário S.A.,
Sisan-Grupo Silvio Santos and Banco Fibra. 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 diagrams
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.
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, 2008, we had an inventory of 247 land parcels in which we estimate
we could develop a total of 115,224 residential units with a sales value of
R$17.8 billion (US$7.6 billion), of which approximately 72% represents land
acquired through swaps. The table below sets forth the breakdown of our land
reserves by location and by the type of development.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
bank - Per geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
São
Paulo
|
|
|
3,547 |
|
|
|
33 |
|
|
|
1,054 |
|
|
|
99 |
|
|
|
2,113 |
|
|
|
22 |
|
|
|
48 |
|
|
|
0 |
|
|
Rio
de Janeiro
|
|
|
992 |
|
|
|
29 |
|
|
|
131 |
|
|
|
88 |
|
|
|
1,868 |
|
|
|
26 |
|
|
|
230 |
|
|
|
81 |
|
|
Other
states
|
|
|
3,146 |
|
|
|
53 |
|
|
|
1,847 |
|
|
|
96 |
|
|
|
2,344 |
|
|
|
16 |
|
|
|
524 |
|
|
|
92 |
|
|
Total
|
|
|
7,685 |
|
|
|
40 |
|
|
|
3,032 |
|
|
|
97 |
|
|
|
6,325 |
|
|
|
20 |
|
|
|
802 |
|
|
|
82 |
|
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 twelve 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 25 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 178 sales
consultants and 14 sales managers.
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 and 2008, Gafisa
Vendas was our number one sales team, responsible for approximately 39% and 34% of our sales in the states of
São Paulo and Rio de Janeiro, respectively.
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 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 usually 30 days before 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 Vitória, Alphaville Jacuhy was 85% sold in
its month of launch; in João Pessoa, Paraiba, the sales force needed only 2 days
to market and sell all of its residential lots; in Barra da Tijuca, Rio de
Janeiro, 90% of the Alphaville lots available were sold in their month of
launch; and, in Mossoró, Rio Grande do Norte, 100% of Alphaville lots were sold
on the first day of their launch.
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 the magazines “Gafisa Way” and
“Revista Vero Alphaville” which are distributed to our customers and offer news
on our most recent developments and progress updates on buildings under
construction.
Tenda
marketing and sales efforts include direct sales, telemarketing, websites,
newspapers, bus doors and distribution leaflets in neighboring
areas. Tenda has also initiated a training sales program with the
brokerage company to improve its sales.
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. Over the last five years, we have only cancelled seven
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. Procedure 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 of 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 Bureau Veritas, 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 R$1.8 million,
R$1.5 million and R$1.2 million in each of 2008, 2007 and 2006,
respectively. We believe that 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.
Risk
Control
Our risk
control procedures require that all of our projects be approved 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 (including 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 table
below sets forth the terms of customer financing we provide for each type of our
developments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
lending (delivery)
|
|
|
40%
|
|
|
|
75% |
|
|
|
60% |
|
|
|
— |
|
|
Caixa
Econômica Federal
|
|
|
— |
|
|
|
— |
|
|
|
40% |
|
|
|
— |
|
|
Gafisa
36 months
|
|
|
35% |
|
|
|
10% |
|
|
|
— |
|
|
|
40% |
|
|
Gafisa
60 months
|
|
|
20% |
|
|
|
5% |
|
|
|
— |
|
|
|
60% |
|
|
Gafisa
120 months
|
|
|
5% |
|
|
|
10% |
|
|
|
— |
|
|
|
— |
|
|
(1)
|
Includes
both Tenda and Bairro Novo
developments.
|
|
(2)
|
Includes
both Gafisa and Alphaville land
subdivisions.
|
Mortgages.
In 2008, 72% of our sales value was financed by bank mortgages, where the
customer paid us approximately 20% to 30% of the sales price of the property
during the period of construction, and upon delivery of the property paid the
balance of the sales price through a bank mortgage. We analyze the
credit history of each customer at the time of sale to see if the customer would
qualify for a bank mortgage based on banks’ standard credit rating
policies. Although there is no assurance that the customer will
qualify for a mortgage at the time of delivery, our analyses have been fairly
successful in predicting whether the customer would qualify for a
mortgage.
The
following table sets forth the credit limits established by mortgage sources
available in Brazil:
|
|
|
|
|
|
|
|
|
Mortgage
portfolio (Carteira
Hipotecária) or CH
|
|
≤
13% annually + TR(1)
Or
Fixed
rate (limited to 14.2%
annually)
|
|
No
limit
|
|
No
limit
|
|
Housing
Finance System (Sistema
Financeiro da Habitação) or SFH
|
|
≤
12% annually + TR
Or
Fixed
rate (limited to 14.2%
annually)
|
|
R$500,000
|
|
R$450,000
|
|
Government
Severance Indemnity Fund for Employees (Fundo de Garantia sobre Tempo
de Serviços) or FGTS.
|
|
≤
8.16% annually + TR
|
|
R$130,000
|
|
R$130,000
|
(1)
TR refers
to the daily reference rate.
Mortgage
financing for Tenda’s developments primarily comes from Caixa Econômica Federal,
or the “CEF”, one of Brazil’s largest government-owned financial institutions.
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, Tenda is currently working with three private banks in addition to the CEF to provide
financing for homebuyers with monthly income between five and 20 times
the Brazilian minimum wage (which was approximately R$415 as of December 31,
2008) with similar terms as the
financing provided by the CEF.
Financing by Gafisa during
construction. We finance some of our own sales during the construction
period, with a down payment of 20-30% and financing of the balance through
monthly installments up to the delivery of the unit.
Financing by Gafisa after
delivery. In addition, we offer financing plans to prospective
customers using our own capital, where we finance purchases for up to 120 months
after the completion of the construction. For completed units we
require a down payment of 30% and financing of the remaining balance with up to
120 monthly installments. For units under construction we require a
down payment of 10% and provide financing of 20-30% with up to 30 monthly
installments until the delivery of the unit and financing of the remaining
60-70% with up to 120 additional monthly installments. All of our financing
plans are guaranteed by a conditional sale of the unit, with the transfer of the
full property rights of the unit to the customer upon the full payment of the
outstanding installments.
We have
developed a strict credit policy in order to minimize risks. We take the
following steps whenever we conduct a credit review process:
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trained
independent brokers interview each potential customer to collect personal
and financial information and fill out a registration
form;
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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;
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credit
is automatically extended by us to the customer if his or her credit
analysis is favorable. However, if the credit analysis report raises
concerns, we will carefully review the issues and accept or reject the
customer’s application depending on the degree of risk. To the extent
financing is provided by a bank, such financial institution will follow
their own credit review procedures;
and
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after
approving the application, our staff accepts the upfront down payment
which is given as a deposit on the purchase of the
unit.
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Sales contracts. 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 after a stated date in our sales contracts. We have
historically experienced a low rate of customer default on our sales. As of
April 30, 2009, our clients’ default level was 3.7% of our accounts receivable.
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, interest and
liquidated damages which are adjusted for inflation, and we retain approximately
20% of the total purchase price plus expenses incurred by us, which in general
represents all or a substantial portion of the amount that the defaulted clients
have already paid us; and (3) we offer several options to our customers if they
experience financial difficulties, such as offering them a greater number of
installment payments or exchanging the unit bought for a less expensive one.
When a default occurs, we endeavor to renegotiate the outstanding loan with our
customers before taking any legal action. We will only transfer title of the
unit 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 mortgages that our customers obtain from us
from approximately 84% in 2005 to 28% in 2008. This decrease reflects the
growing interest of commercial banks in financing the Brazilian housing
industry.
Receivables securitization.
We release capital for new projects by seeking not to maintain receivables after
our projects are completed. We have been active in the securitization market and
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 recent development in Brazilian foreclosure laws.
With the
growing availability of mortgages from commercial banks and the increasing
liquidity of mortgage-backed securities (CRIs), we expect to further reduce our
role as a financing provider to our customers. 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,
approximately 26% of our total costs of development, aside from land, the only
raw material that represents more than approximately 5% 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 24.74% during the three
year period ended December 31, 2008. During that same period, prices for units,
which are adjusted for inflation at IGP-M, increased 22.86%. 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., Votorantim
Cimentos Brasil Ltda., Elevadores Atlas-Schindler S.A., Cecrisa Revestimentos
Cerâmicos S.A. and Supermix Concreto 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
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use
standard construction techniques,
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engage
in a large number of projects simultaneously,
and
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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.
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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 Viver Bem” 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;
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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;
and
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the
development of the “Gafisa Personal Line,” through which buyers of certain
units are able to customize their units in accordance with plans and
finishing touches offered by Gafisa. Such options vary by
development.
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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 “Gafisa Way” and “Revista Vero
Alphaville.” 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., MRV Engenharia e
Participações S.A., and PDG Realty S.A. Empreendimentos e Participações, 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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(Launches
in R$ million)
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Local
market
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17,365 |
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17,537 |
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11,513 |
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Gafisa(2)
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1,187 |
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747 |
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498 |
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Gafisa’s
market share
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6.8 |
% |
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4.3 |
% |
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4.3 |
% |
_____________
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
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4,260 |
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3,464 |
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2,887 |
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Gafisa(2)
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629 |
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265 |
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204 |
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Gafisa’s
market share
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14.8 |
% |
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7.7 |
% |
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7.1 |
% |
________________
Source:
ADEMI.
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.
We carry
out our real estate developments directly or through our subsidiaries or our
jointly-controlled entities in partnership with third parties. As of December
31, 2008, we had 47 subsidiaries and 32 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.
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 48 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 (1) expiration of its term; (2) the
trademark holder’s total or partial waiver of the rights granted by
registration; (3) 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 (4) 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 135 pending trademark
applications and 71 trademark registrations in Brazil with the INPI, including
our subsidiaries (except for (1) Alphaville, which had 68 pending trademark
applications and 100 trademark registrations under its name; and (2) Tenda,
which had 24 pending trademark applications and 4 trademark registrations). 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 May 2010 and January 2019. Alphaville’s trademark registrations
will expire, unless renewed, between April 2011 and January 2019 and Tenda’s
trademark registrations will expire, unless renewed, between January 2016 and
May 2016.
Our only
trademark registration outside of Brazil is for the trademark “Gafisa,” which is
registered in the United States.
Domain
Name
As of the
date of this annual report, we, together with our subsidiaries, were the owners
of approximately 100 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 May 2009 and January 2012.
Patents
We have
no patents registered in our name.
Licenses
Under
Brazilian laws, we are required to obtain a variety of licenses for each of our
new developments. As of the date of this annual report, we have obtained all
necessary licenses and permits to operate our business.
Insurance
We
maintain insurance policies with leading and financially sound Brazilian
insurance companies, such as Allianz Seguros S.A., UBF Garantias & Seguros
S.A., Itau Unibanco Seguros e J.Malluceli 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.
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, and are
regulated by Law No. 6,766 from December 19, 1979. 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, and must comply with Law No. 6,766 from
December 19, 1979.
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: (1) is located in an area of
particular interest, such as a protected cultural heritage site, as defined by
state or federal legislation; (2) 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 (3) has an area greater than 1 million 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. If any such lot is sold or
contracted to be sold, the developer and any person or legal entity benefiting
from such sale or promise of sale shall be jointly liable for the resulting
damages to the purchaser and the public authorities.
Assets
for Appropriation
Law No.
10,931 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.
In
addition, in order to encourage the use of the appropriation system, a new rule
was enacted on March 30, 2009, which granted tax benefits for the adoption of
the system by reducing tax rates on appropriated assets from 7% to 6% and, in
the case of the appropriated assets under the public housing program “Minha
Casa, Minha Vida,” from 7% to 1%.
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 things, 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. In order to be eligible for the financing, the
beneficiary must purchase either (1) a new unit priced between R$80,000 and
R$130,000 with a minimum down payment of 5% or (2) a completed unit or unit
under construction priced at up to R$450,000. In addition, in both
cases, the beneficiary shall (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 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) the maximum amount of the financing is R$450,000; (2) the
maximum sales price for the financed unit is R$500,000; (3) the maximum actual
cost to 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 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
approximately R$2 billion in 2003 to approximately 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 units with a maximum sales price of R$350,000;
(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.
“Minha
Casa, Minha Vida” Program
Provisional
Measure No. 459 enacted on March 25, 2009, created a public housing program
called “Minha Casa, Minha Vida,” which calls for government investment of more
than R$30 billion and is focused on building one million houses for families
with monthly incomes of up to ten times the minimum wage. Under this program,
the government is authorized to spend up to R$2.5 billion on families with
monthly incomes of up to six times the minimum wage purchasing houses with
assessed values between R$80,000 and R$130,000.
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, 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, 2008, 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. 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 up to 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 prohibiting 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:
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·
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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;
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|
·
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suspension
of development activities;
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|
·
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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,
2008:
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. Currently, we and our main subsidiaries leased
approximately 5,000 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.
On
December 31, 2008, our property and equipment recorded on our balance sheet were
mainly comprised of sales stands, facilities, model apartments, computer
equipment, vehicles and leasehold improvements, among others, the balance of
which was R$50.3 million.
None.
A. Operating
Results
We have
retroactively applied changes to Brazilian GAAP introduced by the newly formed
CPC and the provisions of Brazilian Law No. 11,638/07 from January 1, 2006 to
ensure consistency of presentation in our financial statements. See
note 2(a) to our financial statements included elsewhere in this annual report
for amendments and other reclassifications to our Brazilian GAAP financial
statements. All periods presented as from January 1, 2006 have been
modified to reflect such new accounting practices.
Following
the acquisition, formation and incorporation of the entities Alphaville, FIT and
Bairro Novo in 2007 and following the merger of FIT into Tenda in 2008, our
financial results for 2007 and 2008 included the results of the following
segments: Gafisa S.A., Alphaville, Tenda, FIT (merged with Tenda in October
2008) and Bairro Novo (following 2008, however, FIT and Bairro Novo will cease
to be included in our results, for the reasons explained herein). See “Item 4.
Information on the Company—A. History and Development of the Company—Historical
Background and Recent Developments.” Our chief executive officer, who is
responsible for allocating resources among these businesses and monitoring their
progress, uses economic present value data, which is derived from a combination
of historical operating results and forecasted operating results, has begun to
assess segment information primarily on the basis of different business segments
rather than geographic regions in Brazil. Beginning in 2007, the prior periods
were retrospectively adjusted to conform to our new segment reporting structure
and the only segment for this structure in prior years is Gafisa
S.A.
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 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 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, stability of income levels and
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 2008 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 5.9%. The SELIC rate closed the 2008 year at
the rate of 11.8%. The real depreciated 24.2% in
relation to the dollar, reaching R$2.337 per US$1.00 as of December 31,
2008.
The table
below shows the actual growth of the Brazilian GDP, inflation, interest rates
and dollar exchange rates for the periods indicated:
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|
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|
|
|
|
|
|
|
|
|
(%,
unless otherwise stated)
|
|
Real
growth in GDP
|
5.1
|
|
5.7
|
|
4.0
|
|
Inflation
rate (IPCA)(1)
|
5.9
|
|
4.5
|
|
3.1
|
|
Inflation
rate (IGP–M)(2)
|
9.8
|
|
7.7
|
|
3.8
|
|
National
Construction Index (INCC)(3)
|
11.9
|
|
6.2
|
|
5.0
|
|
TJLP
rate (4)
|
6.3
|
|
6.3
|
|
6.8
|
|
CDI
rate (5)
|
12.4
|
|
11.8
|
|
15.0
|
|
Appreciation
(devaluation) of the real vs.
US$
|
(24.2)
|
|
20.7
|
|
9.5
|
|
Exchange
rate (closing) — US$1.00
|
R$2.34
|
|
R$1.77
|
|
R$2.14
|
|
Exchange
rate (average)(6) — US$1.00
|
R$2.03
|
|
R$1.95
|
|
R$2.18
|
|
(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).
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|
(5)
|
Represents
an average of interbank overnight rates in Brazil (accumulated for
period-end month, annualized).
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|
(6)
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Average
exchange rate for the last day of each month in the period
indicated.
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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 from 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.
In
addition, since 2006, the Brazilian government has enacted incentives in the
real estate sector, including the following:
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·
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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;
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·
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Decree
No. 5,892 enacted on September 12, 2006, amended Decree No. 4,840 enacted
on September 17, 2003,
allowed payroll
deductible mortgage loans to employees of both public and private
entities;
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·
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Provisional
Measure No. 459 enacted on March 25, 2009, created a public housing
program called “Minha Casa, Minha Vida,” which calls for government
investment of more than R$30 billion and is focused on building one
million houses for families with monthly incomes of up to ten times the
minimum wage; and
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·
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Decree
No. 6,006 enacted on December 28, 2006, implemented 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. In 2009, other decrees
eliminated the IPI levied on the acquisition of similar products, but were
implemented for a limited term only and are set to expire in July
2009.
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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.
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 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:
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·
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the
cost incurred (including the cost related to land) corresponding to the
units sold is fully included in our
results;
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·
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the
percentage of the cost incurred for units sold (including costs related to
land) is calculated as a percentage of total estimated costs, and this
percentage is included in revenues from units sold, as adjusted pursuant
to the conditions of the sales agreements, and in selling expenses, thus
determining the amount of revenues and selling expenses to be
recognized;
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·
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any
amount of revenues recognized that exceeds the amount received from
clients is recorded as current or non-current “Receivables from clients”.
Any amount received in connection with the sale of units that exceeds the
amount of revenues recognized is recorded as “Obligations for purchase of
land and advances from clients”;
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·
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interest
and inflation adjustments on accounts receivable from the time the client
takes possession of the property, as well as adjustments to present value
of accounts receivable, are included in our results for the development
and sale of real estate using the accrual basis of accounting;
and
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·
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financial
charges on accounts payable from the acquisition of land and real estate
credit operations incurred during the construction period are included in
the costs incurred, and recognized in our results upon the sale of the
units of the venture to which they are directly
related.
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Taxes on
the difference between revenues from real estate development and taxable
accumulated revenues are calculated and recognized when the difference in
revenues is recognized. Other income and expenses, including advertising and
publicity, are included in results as they are incurred using the accrual basis
of accounting.
Allowance
for doubtful accounts
The
allowance for doubtful accounts is recorded under selling expenses in an amount
we consider sufficient to cover any probable losses on realization of our
accounts receivable from our customers; no adjustment is made to net operating
revenues.
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. Under U.S. GAAP, in the event a minority interest
partner is able to veto our critical operating decisions, we treat our
investment in these subsidiaries using the equity method of
accounting.
Goodwill
and amortization of gain on the acquisition of investments
We
calculate goodwill at the acquisition date, for purposes of Brazilian GAAP, as
the excess purchase price over the proportion of the underlying book value,
based on the interest in the shareholders’ equity acquired. Amortization of gain
is also calculated at the acquisition date, for purposes of Brazilian GAAP, as
the excess of the book value of assets acquired over the purchase
consideration.
We
amortized goodwill, for purposes of Brazilian GAAP, through 2008 (no longer
amortized from 2009 following a change to Brazilian GAAP) in accordance with the
underlying economic basis which considers 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. Amortization of gain that is not
justified economically is recognized in the results only upon disposal of the
investment. We evaluate whether there are any indications of permanent loss and
record an impairment provision, if required, to adjust the carrying value of
goodwill to recoverable amounts or to realizable values. The amortization of
gain on the sale of FIT to Tenda in exchange for a 60% interest in Tenda is
classified as “Deferred gain on sale of investment” for purposes of Brazilian
GAAP and will be credited to income over the average estimated period of
construction of the FIT real estate ventures. FIT was merged into Tenda on
October 21, 2008.
Sales
of Receivables for Securitization
When we
sell our accounts receivable, the amount of the mortgage-backed securities
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
mortgage-backed securities on the date of the assignment, and the fee paid to
the issuer of the mortgage-backed securities, are reflected in receivables from
clients account and are included in 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
Our
properties for sale are recorded at the lower of cost or fair value. In the case
of uncompleted units, the portion in inventories corresponds to the costs
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—Our Operations—Land Acquisition.” We acquire portions of land through
swaps where, in exchange for the land acquired, we undertake to deliver either
real estate units of developments in progress or part of the sales revenues
originating from the sale of the real estate units in the developments. Land
acquired through barter transactions are recorded at fair value.
We
capitalize interest on the developments during the construction phase under the
National Housing System credit line and other credit lines that are used for
financing the construction of developments (limited to the corresponding
financial expense amount).
When
construction costs exceed the undiscounted cash flows expected from sales of
completed units, properties under construction or land under development, an
impairment loss is recorded in the period in which it is determined that the
carrying amount is not recoverable. The same analysis applies equally
to our high, medium and low income residential developments and our land
developments, irrespective of geographic location or stage of
completion.
Our properties for sale are considered
long-lived assets and we regularly review the carrying value of each of our
developments whenever events or changes in circumstances indicate that
their carrying value may not be recoverable. If the carrying value of a
development is not recoverable from its estimated future undiscounted cash
flows, it is impaired and written down to its estimated fair value. In
estimating the future undiscounted cash flows of a property, we use various
estimates such as (1) expected sales price, based upon general economic
conditions of the market, the location of our development and competition within
the market and (2) costs expended to date and costs expected to be incurred in
the future, which are associated with all future expenditures necessary to
develop our properties for sale, including interest payments that will be
capitalized as part of the costs of the asset.
We have
evaluated all of our developments for impairment and have not identified any
cases of impairment for any of our properties for sale and no impairment
provisions have been recorded for any of our developments for the years ended
December 31, 2006, 2007 or 2008.
Adjustment
to present value of assets and liabilities
The INCC
inflation-indexed receivables from installment sales of unfinished units, which
are generated prior to delivery of the units and do not accrue interest, are
discounted to present value. The present value adjustment is accreted to net
operating revenue as we finance our clients through to the delivery of the
units. As interest from funds used to finance the acquisition of land for
development and construction is capitalized, the accretion of the present value
adjustment arising from the obligation is recorded in real estate development
operating costs or against inventories of properties for sale, as the case may
be, until the construction phase of the venture is completed. The selection of
the discounting rate is subjective and is based on management’s best estimates
of the value of money over time and the specific risks of the asset and the
liability.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
developments
|
|
|
|
|
|
|
|
|
|
|
Number
of projects launched
|
|
|
64 |
|
|
|
53 |
|
|
|
30 |
|
|
Number
of units launched (1)
|
|
|
10,963 |
|
|
|
10,315 |
|
|
|
3,052 |
|
|
Launched
usable area (m2) (2) (3)
|
|
|
1,838,000 |
|
|
|
1,927,812 |
|
|
|
407,483 |
|
|
Percentage
of Gafisa investment
|
|
|
70 |
% |
|
|
77 |
% |
|
|
82 |
% |
|
(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)
|
Does
not include data for FIT and Tenda in
2008.
|
In 2008,
we launched 64 residential developments with a total sales value of R$2.7
billion. This sales value was approximately 23% higher than that achieved in
2007, during which we launched residential developments totaling R$2.2 billion.
This increase is a reflection of our business combination with Tenda, our target
segment strategy (primarily high-potential and less explored markets) and our
strategy for geographic diversification.
Sixteen
of the 64 developments we launched during 2008 were located in the state of São
Paulo, while another 10 developments were located in the state of Rio de
Janeiro. The remaining 38 residential developments launched were located in the
cities of Salvador and Camaçari in the state of Bahia, Curitiba and Londrina in
the state of Paraná, Belém and Ananindeua in the state of Pará, João Pessoa in
the state of Paraíba, Maceió in the state of Alagoas, Porto Alegre in the state
of Rio Grande do Sul, Serra in the state of Espirito Santo, Cuiabá in the state
of Mato Grosso, Manaus in the state of Amazonas, Mossoró in the state of Rio
Grande do Norte, Goiânia in the state of Goiás, São Luis in the state of
Maranhão, Porto Velho in the state of Rondonia and Aracajú in the state of
Sergipe.
During
2008, approximately 40% of our total sales value was generated from launches
outside the states of São Paulo and Rio de Janeiro. Our
diversification into the affordable entry-level business (through our
subsidiaries Tenda, FIT and Bairro Novo) accounted for approximately 27% of our
total sales value for the year ended December 31, 2008. In the year ended
December 31, 2007, the affordable entry-level business represented approximately
4% of our total sales value.
In 2007,
we launched 53 residential developments with a total sales value of R$2.2
billion. This sales value was approximately 122% higher than that achieved in
2006, during which we launched residential developments
totaling R$1.0 billion. This increase is a reflection of
our target segment strategy (primarily high-potential and less explored markets)
and our strategy for geographic diversification.
Seventeen
of the 53 developments we launched during 2007 were located in the state of São
Paulo, while another 11 developments were located in the state of Rio de
Janeiro. The remaining 25 residential developments launched were located in the
cities of Goiânia and Aparecida de Goiânia, both in the state of Goiás; Maceió,
in the state of Alagoas; São Luis, in the state of Maranhão; Belem, in the state
of Pará; Manaus, in the state of Amazonas; Salvador, in the state of Bahia;
Curitiba and Londrina in the state of Paraná; Campo Grande in the state of Mato
Grosso do Sul; and Serra in the state of Espírito Santo.
During
2007, approximately 33% of our total sales value was generated from launches
outside the states of São Paulo and Rio de Janeiro. Our segment
diversification through our entrance into the affordable entry-level business
(through our subsidiaries FIT and Bairro Novo) accounted for approximately 13%
of our total sales value for the year ended December 31, 2007.
Contracted
sales
The
following table shows the development of our contracted sales by the type of
development, according to units sold during the same year that they were
launched and the units sold in the years after they were launched, as well as
their respective percentages in relation to total sales for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
Type
of development
|
|
|
|
|
|
|
|
|
Luxury
buildings
|
|
R$ |
472,846 |
|
|
R$ |
255,855 |
|
|
R$ |
144,882 |
|
|
Middle-income
buildings
|
|
|
755,728 |
|
|
|
1,028,907 |
|
|
|
647,062 |
|
|
Affordable
entry-level housing
|
|
|
601,206 |
|
|
|
64,026 |
|
|
|
32,868 |
|
|
Commercial
|
|
|
3,100 |
|
|
|
27,900 |
|
|
|
138,090 |
|
|
Lots
|
|
|
405,678 |
|
|
|
249,916 |
|
|
|
32,172 |
|
|
Total
contracted sales
|
|
|
2,238,558 |
|
|
|
1,626,604 |
|
|
|
995,074 |
|
|
Sale
of units launched in the year
|
|
R$ |
1,362,425 |
|
|
R$ |
1,139,113 |
|
|
R$ |
555,292 |
|
|
Percentage
of total contracted sales
|
|
|
61 |
% |
|
|
70.0 |
% |
|
|
55.8 |
% |
|
Sale
of units launched during prior years
|
|
|
876,133 |
|
|
|
487,491 |
|
|
|
439,781 |
|
|
Percentage
of total contracted sales
|
|
|
39 |
% |
|
|
30.0 |
% |
|
|
44.2 |
% |
The following table shows our and our
main subsidiaries, contracted sales for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
Gafisa
|
|
R$ |
1,345,411 |
|
|
R$ |
1,328,785 |
|
|
R$ |
995,074 |
|
|
FIT
|
|
|
394,090 |
|
|
|
47,143 |
|
|
|
— |
|
|
Tenda
|
|
|
167,800 |
|
|
|
— |
|
|
|
— |
|
|
Bairro
Novo
|
|
|
31,368 |
|
|
|
12,359 |
|
|
|
— |
|
|
Alphaville
|
|
|
299,889 |
|
|
|
238,317 |
|
|
|
— |
|
|
Total
contracted sales
|
|
R$ |
2,238,558 |
|
|
r$ |
1,626,604 |
|
|
R$ |
995,074 |
|
In 2008,
we sold approximately 49% of the units launched that year, which together with
the sales of units launched during prior periods, resulted in total contracted
sales of R$2.2 billion, an increase of approximately 38% compared to
2007. In 2007, we sold approximately 51% of the units launched during
that year. This, together with the sales of units launched during
prior periods, resulted in a total contracted sales of R$1.6 billion, a 63.5%
increase over 2006. The increase in 2008 is a result, among others,
of better economic conditions, our target segment strategy (primarily a focus on
the affordable entry-level segment) and better financing structures provided to
our customers by public as well as private banks.
The
following table sets forth the growth of our contracted sales to be recognized,
as well as the amount corresponding to the cost of units sold, and the expected
margin, all of them to be recognized in future periods, for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$, unless otherwise stated)
|
|
|
Sales
to be recognized—end of the year
|
|
R$ |
2,996,905 |
|
|
R$ |
1,526,597 |
|
|
R$ |
795,320 |
|
|
Net
sales(1)
|
|
|
2,887,518 |
|
|
|
1,470,876 |
|
|
|
766,291 |
|
|
Cost
of units sold to be recognized
|
|
|
(1,872,927 |
) |
|
|
(943,200 |
) |
|
|
(484,073 |
) |
|
Expected
profit—yet to be recognized(2)
|
|
|
1,014,591 |
|
|
|
527,676 |
|
|
|
282,218 |
|
|
Expected
margin
|
|
|
33.9 |
% |
|
|
34.6 |
% |
|
|
35.5 |
% |
|
(1)
|
Excludes
indirect PIS and COFINS taxes of
3.65%.
|
|
(2)
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(%)
|
|
|
Real
estate development and sales
|
|
|
97.9 |
|
|
|
97.2 |
|
|
|
96.8 |
|
|
Construction
services rendered
|
|
|
2.1 |
|
|
|
2.8 |
|
|
|
3.2 |
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
Real
estate development and sales
Real
estate development revenues, including inflation adjustments and interest from
credit sales, make up revenues from the sales of units in the residential
buildings we develop, and to a lesser extent, the sales of lots and commercial
buildings.
Construction
services rendered
Our
revenues generated by real estate services consist substantially of amounts
received in connection with construction management activities for third
parties, technical management and real estate management.
Operating
Costs
Our
operating costs consist of 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
making up our costs, as a total percentage of our total cost, were the following
for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(%)
|
|
|
Land
|
|
|
12.1 |
|
|
|
12.5 |
|
|
|
15.2 |
|
|
Construction
costs
|
|
|
80.9 |
|
|
|
83.3 |
|
|
|
83.1 |
|
|
Financial
costs
|
|
|
4.4 |
|
|
|
2.1 |
|
|
|
1.7 |
|
|
Development
costs
|
|
|
2.6 |
|
|
|
2.1 |
|
|
|
— |
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
One of
our principal real estate development costs is the cost of land. Over the last
three years, land represented 13.3% of our total cost of development. However,
this is an extremely volatile component, varying according to characteristics of
the land, the region where the land is located, the type of development to be
launched and market conditions. 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 over the last three fiscal years, raw materials
represented, on average, approximately 22% of our total cost of development. The
index that measures construction cost variation, the INCC, increased by 11.9%,
6.2% and 5.0% in 2008, 2007 and 2006, respectively. Although some of the
principal raw materials, such as steel, have experienced significant price
increases well above the level of inflation over 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 42% 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
|
|
29%
|
|
7th
to 12th month
|
|
27%
|
|
13th
to 18th month
|
|
30%
|
|
19th
to 24th month
|
|
14%
|
|
(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
depreciation and amortization expenses and revenues.
Selling
expenses
Selling
expenses include advertising, promotion, brokerage fees and similar
expenses.
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;
|
|
·
|
stock
option plan expenses;
|
|
·
|
overhead
corporate expenses; and
|
|
·
|
legal
expenses related to public notaries and commercial registers, among
others.
|
Depreciation
and amortization
Depreciation
expenses consist of depreciation of our property and equipment. Amortization
expenses are related to the amortization of goodwill, net of negative goodwill
amortization.
Amortization
of deferred gain on partial sale of FIT
The
amortization of gain that resulted from the gain on the partial sale of FIT to
the shareholders of Tenda for the Tenda merger is amortized over the average
construction period of the real estate ventures of FIT as of October 21, 2008,
the date of FIT’s merger into Tenda. The construction period, used for
amortization of negative goodwill, which began in October 2008 is twelve
months.
Financial
Income and Expenses
Financial
income include income from financial investments and interest from present value
adjustment which accreted to our real estate development revenue. Interest
revenues are recognized at the time the effective profit accrues
from the
asset, based on the accrual method. Financial expenses generally consist of
interest payable on loans, financings and debentures.
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 being 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 tax planning. For the
companies that opt for the “presumed profit” regime, the income tax basis is
calculated as 8% of gross revenues and the social contribution basis is
calculated as 12% of 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.
Net
operating revenue
Net
operating revenue increased by 44.5%, from R$1,204.3 million in 2007 to
R$1,740.4 million in 2008. Gross revenues generated from the sales of real
estate properties totaled R$1,768.2 million in 2008, an increase of R$551.4
million or 45.3% as compared to the same period in 2007, when revenues generated
from the sales of real estate properties totaled R$1,216.8 million. This
increase is mainly due to the recognition of revenues from sales contracted in
prior periods. Net revenues generated from services increased by 6.3%, from
R$35.1 million in 2007 to R$37.3 million in 2008, reflecting the overall growth
of the real estate market in Brazil.
The
following table sets forth the percent completion of constructions in progress
at the end of 2008 and 2007 and the related net operating revenue from real
estate development and sales recognized during those years:
| |
|
|
Total
|
|
|
As
of December 31,
|
|
|
|
|
|
For
the year ended
December 31,
|
|
| |
|
|
area
(m2) |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Gafisa |
|
|
2008 |
|
|
2007 |
|
|
Development
|
Month/Year
launched |
|
|
(1)(2) |
|
|
Final
completion(%)
|
|
|
Percentage
sold-
accumulated (%)
|
|
|
Participation(%)
|
|
|
Revenue
recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Alphaville
Barra Da Tijuca
|
Dec
08
|
|
|
170,010 |
|
|
|
50 |
|
|
|
— |
|
|
|
90 |
|
|
|
— |
|
|
|
65 |
|
|
|
47,956 |
|
|
|
— |
|
|
London
Green
|
Jul
07
|
|
|
44,007 |
|
|
|
54 |
|
|
|
33 |
|
|
|
67 |
|
|
|
49 |
|
|
|
100 |
|
|
|
44,656 |
|
|
|
17,449 |
|
|
Enseada
Das Orquídeas
|
Jun
07
|
|
|
52,589 |
|
|
|
36 |
|
|
|
21 |
|
|
|
72 |
|
|
|
72 |
|
|
|
80 |
|
|
|
29,628 |
|
|
|
10,488 |
|
|
Espaço
Jardins
|
May
06
|
|
|
28,926 |
|
|
|
93 |
|
|
|
48 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
35,903 |
|
|
|
23,582 |
|
|
Collori
|
Nov
06
|
|
|
39,462 |
|
|
|
64 |
|
|
|
28 |
|
|
|
94 |
|
|
|
84 |
|
|
|
50 |
|
|
|
22,158 |
|
|
|
7,276 |
|
|
Vp
Agrias
|
Nov
06
|
|
|
21,390 |
|
|
|
87 |
|
|
|
45 |
|
|
|
100 |
|
|
|
80 |
|
|
|
100 |
|
|
|
42,550 |
|
|
|
23,140 |
|
|
Parque
Barueri
|
May
08
|
|
|
58,437 |
|
|
|
13 |
|
|
|
— |
|
|
|
50 |
|
|
|
— |
|
|
|
100 |
|
|
|
10,206 |
|
|
|
— |
|
|
Islã
Residence Clube
|
Mar
07
|
|
|
31,423 |
|
|
|
56 |
|
|
|
18 |
|
|
|
88 |
|
|
|
76 |
|
|
|
100 |
|
|
|
29,782 |
|
|
|
10,717 |
|
|
Olimpic
Chac. Santo Antonio
|
Aug
06
|
|
|
24,988 |
|
|
|
85 |
|
|
|
43 |
|
|
|
99 |
|
|
|
99 |
|
|
|
100 |
|
|
|
34,747 |
|
|
|
18,023 |
|
|
Vp
– Mirabilis
|
Mar
06
|
|
|
23,355 |
|
|
|
98 |
|
|
|
69 |
|
|
|
100 |
|
|
|
94 |
|
|
|
100 |
|
|
|
35,049 |
|
|
|
27,481 |
|
|
Arena
|
Dec
05
|
|
|
29,256 |
|
|
|
100 |
|
|
|
87 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
22,342 |
|
|
|
38,908 |
|
|
Parc
Paradiso
|
Aug
07
|
|
|
23,991 |
|
|
|
26 |
|
|
|
9 |
|
|
|
95 |
|
|
|
57 |
|
|
|
90 |
|
|
|
23,766 |
|
|
|
8,286 |
|
|
Felicita
|
Dec
06
|
|
|
11,323 |
|
|
|
79 |
|
|
|
32 |
|
|
|
96 |
|
|
|
78 |
|
|
|
100 |
|
|
|
16,839 |
|
|
|
6,213 |
|
|
CSF
Paradiso
|
Nov
06
|
|
|
16,286 |
|
|
|
79 |
|
|
|
12 |
|
|
|
90 |
|
|
|
76 |
|
|
|
100 |
|
|
|
20,223 |
|
|
|
6,926 |
|
|
CSF
Santtorino
|
Aug
06
|
|
|
14,979 |
|
|
|
88 |
|
|
|
42 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
19,415 |
|
|
|
8,277 |
|
|
Vp
Parides
|
Nov
06
|
|
|
13,093 |
|
|
|
98 |
|
|
|
64 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
20,143 |
|
|
|
16,867 |
|
|
Península
FIT
|
Mar
06
|
|
|
24,080 |
|
|
|
100 |
|
|
|
73 |
|
|
|
79 |
|
|
|
61 |
|
|
|
100 |
|
|
|
38,848 |
|
|
|
33,953 |
|
|
CSF
Acácia
|
Jun
07
|
|
|
23,461 |
|
|
|
64 |
|
|
|
25 |
|
|
|
96 |
|
|
|
70 |
|
|
|
100 |
|
|
|
24,004 |
|
|
|
2,799 |
|
|
Vistta
Ibirapuera
|
May
06
|
|
|
9,963 |
|
|
|
100 |
|
|
|
77 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
13,914 |
|
|
|
15,432 |
|
|
Acqua
Residence
|
Dec
07
|
|
|
35,536 |
|
|
|
46 |
|
|
|
15 |
|
|
|
40 |
|
|
|
34 |
|
|
|
100 |
|
|
|
12,743 |
|
|
|
5,270 |
|
| |
|
|
Total
|
|
|
As
of December 31,
|
|
|
|
|
|
For
the year ended
December 31,
|
|
| |
|
|
area
(m2) |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Gafisa |
|
|
2008 |
|
|
2007 |
|
|
Development
|
Month/Year
launched |
|
|
(1)(2) |
|
|
Final
completion(%)
|
|
|
Percentage
sold-
accumulated (%)
|
|
|
Participation(%)
|
|
|
Revenue
recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Espacio
Laguna
|
Aug
06
|
|
|
16,364 |
|
|
|
85 |
|
|
|
28 |
|
|
|
76 |
|
|
|
63 |
|
|
|
100 |
|
|
|
18,465 |
|
|
|
12,220 |
|
|
Celebrare
(Caxias)
|
Mar
07
|
|
|
14,679 |
|
|
|
40 |
|
|
|
17 |
|
|
|
77 |
|
|
|
0 |
|
|
|
100 |
|
|
|
7,763 |
|
|
|
4,804 |
|
|
Rcb
Paço Das Águas
|
May
06
|
|
|
24,080 |
|
|
|
99 |
|
|
|
63 |
|
|
|
98 |
|
|
|
80 |
|
|
|
45 |
|
|
|
21,265 |
|
|
|
5,438 |
|
|
Terraças
Alto Da Lapa
|
Mar
08
|
|
|
23,248 |
|
|
|
37 |
|
|
|
— |
|
|
|
73 |
|
|
|
— |
|
|
|
100 |
|
|
|
18,354 |
|
|
|
— |
|
|
Blue
Land
|
Jun
06
|
|
|
18,252 |
|
|
|
100 |
|
|
|
51 |
|
|
|
66 |
|
|
|
59 |
|
|
|
100 |
|
|
|
19,549 |
|
|
|
20,284 |
|
|
CSF
Prímula
|
Jun
07
|
|
|
13,897 |
|
|
|
64 |
|
|
|
24 |
|
|
|
84 |
|
|
|
37 |
|
|
|
100 |
|
|
|
12,248 |
|
|
|
2,345 |
|
|
Verdemar
|
Mar
08
|
|
|
13,084 |
|
|
|
30 |
|
|
|
— |
|
|
|
56 |
|
|
|
— |
|
|
|
100 |
|
|
|
7,499 |
|
|
|
— |
|
|
Vision
|
Dec
07
|
|
|
19,712 |
|
|
|
45 |
|
|
|
— |
|
|
|
76 |
|
|
|
47 |
|
|
|
100 |
|
|
|
24,444 |
|
|
|
1 |
|
|
Vivance
Res. Service
|
Nov
06
|
|
|
14,717 |
|
|
|
53 |
|
|
|
15 |
|
|
|
81 |
|
|
|
75 |
|
|
|
100 |
|
|
|
10,443 |
|
|
|
2,900 |
|
|
Supremo
|
Aug
07
|
|
|
34,864 |
|
|
|
44 |
|
|
|
39 |
|
|
|
86 |
|
|
|
52 |
|
|
|
100 |
|
|
|
22,673 |
|
|
|
32,474 |
|
|
Icaraí
Corporate
|
Dec
06
|
|
|
5,683 |
|
|
|
70 |
|
|
|
28 |
|
|
|
94 |
|
|
|
87 |
|
|
|
100 |
|
|
|
8,507 |
|
|
|
12,849 |
|
|
Magic
|
Oct
07
|
|
|
31,487 |
|
|
|
40 |
|
|
|
22 |
|
|
|
42 |
|
|
|
15 |
|
|
|
100 |
|
|
|
14,128 |
|
|
|
— |
|
|
Grand
Valley
|
Mar
07
|
|
|
16,908 |
|
|
|
57 |
|
|
|
34 |
|
|
|
61 |
|
|
|
51 |
|
|
|
100 |
|
|
|
9,995 |
|
|
|
4,522 |
|
|
Olimpic
Condominium Resort
|
Oct
05
|
|
|
21,851 |
|
|
|
100 |
|
|
|
93 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
12,696 |
|
|
|
29,935 |
|
|
Olimpic
Bosque Da Saúde
|
Oct
07
|
|
|
19,150 |
|
|
|
50 |
|
|
|
25 |
|
|
|
81 |
|
|
|
76 |
|
|
|
100 |
|
|
|
13,463 |
|
|
|
8,652 |
|
|
Reserva
Do Lago
|
Feb
07
|
|
|
16,898 |
|
|
|
47 |
|
|
|
8 |
|
|
|
81 |
|
|
|
69 |
|
|
|
50 |
|
|
|
6,204 |
|
|
|
785 |
|
|
Town
Home
|
Nov
05
|
|
|
8,319 |
|
|
|
100 |
|
|
|
74 |
|
|
|
98 |
|
|
|
80 |
|
|
|
100 |
|
|
|
11,819 |
|
|
|
11,470 |
|
|
Ville
Du Soleil
|
Oct
06
|
|
|
8,920 |
|
|
|
100 |
|
|
|
37 |
|
|
|
72 |
|
|
|
47 |
|
|
|
100 |
|
|
|
14,912 |
|
|
|
7,638 |
|
|
Star
Res. Service/Blue Concept
|
Dec
05
|
|
|
9,367 |
|
|
|
100 |
|
|
|
92 |
|
|
|
98 |
|
|
|
65 |
|
|
|
100 |
|
|
|
9,195 |
|
|
|
17,998 |
|
|
Icon
Residence Service
|
Oct
04
|
|
|
8,175 |
|
|
|
100 |
|
|
|
44 |
|
|
|
82 |
|
|
|
65 |
|
|
|
100 |
|
|
|
6,099 |
|
|
|
9,168 |
|
|
Secret
Garden
|
May
07
|
|
|
15,344 |
|
|
|
41 |
|
|
|
15 |
|
|
|
66 |
|
|
|
61 |
|
|
|
100 |
|
|
|
8,236 |
|
|
|
3,291 |
|
|
Art
Ville
|
Apr
07
|
|
|
16,157 |
|
|
|
36 |
|
|
|
10 |
|
|
|
92 |
|
|
|
79 |
|
|
|
50 |
|
|
|
3,507 |
|
|
|
2,892 |
|
|
Sunspecial
Residence Service
|
Mar
05
|
|
|
21,189 |
|
|
|
100 |
|
|
|
96 |
|
|
|
99 |
|
|
|
86 |
|
|
|
100 |
|
|
|
16,035 |
|
|
|
32,913 |
|
|
Mirante
Do Rio
|
Oct
06
|
|
|
8,125 |
|
|
|
79 |
|
|
|
26 |
|
|
|
100 |
|
|
|
99 |
|
|
|
60 |
|
|
|
8,635 |
|
|
|
2,181 |
|
|
Carpe
Diem Belém
|
May
08
|
|
|
13,951 |
|
|
|
19 |
|
|
|
— |
|
|
|
52 |
|
|
|
— |
|
|
|
70 |
|
|
|
3,113 |
|
|
|
— |
|
|
Forest
Ville
|
Sept
06
|
|
|
15,556 |
|
|
|
51 |
|
|
|
17 |
|
|
|
99 |
|
|
|
98 |
|
|
|
50 |
|
|
|
5,330 |
|
|
|
2,516 |
|
|
Beach
Park Living
|
Jun
06
|
|
|
14,913 |
|
|
|
100 |
|
|
|
14 |
|
|
|
87 |
|
|
|
67 |
|
|
|
80 |
|
|
|
17,236 |
|
|
|
8,143 |
|
|
Solares
Da Vila Maria
|
Dec
07
|
|
|
13,376 |
|
|
|
29 |
|
|
|
— |
|
|
|
100 |
|
|
|
67 |
|
|
|
100 |
|
|
|
9,085 |
|
|
|
14 |
|
|
Manhattan
Office Wall Street
|
Jun
08
|
|
|
25,804 |
|
|
|
14 |
|
|
|
— |
|
|
|
39 |
|
|
|
— |
|
|
|
50 |
|
|
|
2,823 |
|
|
|
— |
|
|
Acquarelle
|
Apr
07
|
|
|
17,742 |
|
|
|
24 |
|
|
|
2 |
|
|
|
66 |
|
|
|
39 |
|
|
|
85 |
|
|
|
3,730 |
|
|
|
364 |
|
|
Privilege
Residencial Spe
|
Sept
07
|
|
|
16,173 |
|
|
|
27 |
|
|
|
12 |
|
|
|
82 |
|
|
|
58 |
|
|
|
80 |
|
|
|
5,668 |
|
|
|
1,363 |
|
|
Magnific
|
Mar
08
|
|
|
9,225 |
|
|
|
27 |
|
|
|
— |
|
|
|
63 |
|
|
|
— |
|
|
|
100 |
|
|
|
5,057 |
|
|
|
— |
|
|
Palm
D’or
|
Sept
05
|
|
|
8,493 |
|
|
|
100 |
|
|
|
90 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
6,698 |
|
|
|
17,697 |
|
|
Orbit
|
Aug
07
|
|
|
11,332 |
|
|
|
45 |
|
|
|
— |
|
|
|
30 |
|
|
|
13 |
|
|
|
100 |
|
|
|
3,535 |
|
|
|
— |
|
|
Grand
Valley Niterói
|
Oct
07
|
|
|
17,905 |
|
|
|
27 |
|
|
|
17 |
|
|
|
93 |
|
|
|
73 |
|
|
|
100 |
|
|
|
5,511 |
|
|
|
6,736 |
|
|
Alphaville
Jacuhy
|
Dec
07
|
|
|
307,598 |
|
|
|
31 |
|
|
|
0 |
|
|
|
97 |
|
|
|
76 |
|
|
|
65 |
|
|
|
31,966 |
|
|
|
— |
|
|
Alphaville
Barra da Tijuca
|
Dec
08
|
|
|
60,638 |
|
|
|
50 |
|
|
|
0 |
|
|
|
66 |
|
|
|
0 |
|
|
|
35 |
|
|
|
25,824 |
|
|
|
— |
|
|
Alphaville
Campo Grande
|
Mar
07
|
|
|
150,029 |
|
|
|
96 |
|
|
|
49 |
|
|
|
81 |
|
|
|
52 |
|
|
|
67 |
|
|
|
20,045 |
|
|
|
9,841 |
|
|
Alphaville
Rio Costa do Sol
|
Sept
07
|
|
|
181,772 |
|
|
|
41 |
|
|
|
4 |
|
|
|
97 |
|
|
|
85 |
|
|
|
58 |
|
|
|
19,847 |
|
|
|
2,665 |
|
|
Alphaville
Recife
|
Aug
06
|
|
|
176,041 |
|
|
|
94 |
|
|
|
53 |
|
|
|
93 |
|
|
|
94 |
|
|
|
65 |
|
|
|
19,828 |
|
|
|
15,768 |
|
|
Alphaville
Salvador II
|
Feb
06
|
|
|
193,135 |
|
|
|
99 |
|
|
|
65 |
|
|
|
97 |
|
|
|
93 |
|
|
|
55 |
|
|
|
19,639 |
|
|
|
23,743 |
|
|
Alphaville
Gravataí
|
Jun
06
|
|
|
138,355 |
|
|
|
98 |
|
|
|
59 |
|
|
|
74 |
|
|
|
44 |
|
|
|
64 |
|
|
|
13,750 |
|
|
|
7,967 |
|
|
Alphaville
Burle Marx
|
Mar
05
|
|
|
129,772 |
|
|
|
99 |
|
|
|
84 |
|
|
|
37 |
|
|
|
24 |
|
|
|
50 |
|
|
|
12,859 |
|
|
|
12,406 |
|
|
Alphaville
Londrina II
|
Dec
07
|
|
|
67,060 |
|
|
|
48 |
|
|
|
0 |
|
|
|
72 |
|
|
|
17 |
|
|
|
63 |
|
|
|
11,753 |
|
|
|
— |
|
|
Alphaville
Eusébio
|
Sept
05
|
|
|
160,656 |
|
|
|
100 |
|
|
|
86 |
|
|
|
86 |
|
|
|
69 |
|
|
|
65 |
|
|
|
11,230 |
|
|
|
16,640 |
|
|
Others
and CPC adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
378,664 |
|
|
|
585,062 |
|
|
Bairro
Novo ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,743 |
|
|
|
— |
|
|
Tenda’s
ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,258 |
|
|
|
— |
|
|
Total
development revenues recognized during the periods (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,768,200 |
|
|
|
1,216,773 |
|
|
(1)
|
One
square meter is equal to approximately 10.76 square
feet.
|
|
(2)
|
Values
for 100% of the building
development.
|
|
(3)
|
Includes
other developments where individual revenues for those periods are not
significant.
|
Operating
costs
Operating
costs in 2008 totaled R$1,214.4 million, an increase of 39.9% as compared to
R$868.0 million in 2007. This increase is due to the greater volume of
construction in progress in 2008 as compared to 2007. The cost of land increased
by 34.7% in 2008 from 2007. Construction costs payable to third parties
decreased in 2008, totaling 80.9% of total operating costs, as compared to 83.3%
in 2007. Operating costs, as a percentage of net operating revenue, decreased to
69.8% in 2008 as compared to 72.1% in 2007, mainly due to the greater mix in the
types of developments under construction during 2008, as a result of our market
segment diversification strategy and our entry into the affordable entry-level
business through Tenda, FIT and Bairro Novo.
Gross
profit
Gross
profit in 2008 totaled R$526.0 million, representing an increase of 56.4%, as
compared to R$336.3 million in 2007. This increase was mainly attributable to
higher gross revenue from a greater number of developments. In 2008, the gross
margin generated from our activities increased to 30.2% as compared to 27.9% in
2007. This increase was due to the strong demand for Gafisa properties in all
segments and geographies and sales at higher margins as we recognized revenue
from developments launched in 2007 and 2008.
Selling
expenses
Selling
expenses in 2008 totaled R$154.4 million, representing an increase of 121.2%, as
compared to R$69.8 million in 2007. This increase reflects our aggressive growth
strategy, through geographic and segment diversification. In 2008, we had 64
launches compared to 53 in 2007 which caused higher sales commissions, and
marketing and advertising expenses. Selling expenses in 2008 represented 8.9% of
our net operating revenue compared to 5.8% in 2007.
General
and administrative expenses
General
and administrative expenses totaled R$180.8 million in 2008, representing an
increase of 38.1%, as compared to R$130.9 million in 2007. This increase is
mainly due to (1) our growth strategy reflected in general and administrative
expenses of Tenda, FIT and Bairro Novo totaling R$28.7 million, R$20.7 million
and R$8.1 million, respectively and (2) stock option plan expenses, a non cash
expense, totaling R$26.1 million in 2008 and R$17.8 million in 2007. The current
general and administrative expenses in proportion to sales revenue has been
diluted as we increased our revenues. General and administrative
expenses in 2008 represented 10.4% of our net operating revenue as compared to
10.9% in 2007.
Depreciation
and amortization
Depreciation
and amortization in 2008 totaled R$52.6 million, representing an increase of
35.9%, as compared to R$38.7 million in 2007. The increase is mainly
due to the increase in expenditures on sales stands, facilities, model
apartments and related furnishings, and new office facilities in Rio de Janeiro
and São Paulo in 2008 and the depreciation of the capital expenditures recorded
in 2007.
Amortization
of gain on partial sale of FIT
The
amortization of gain that resulted from the deferred gain on the partial sale of
FIT totaled R$41.0 million in 2008. The amortization of gain is amortized over
the average construction period of the real estate ventures of FIT as of October
21, 2008, the date of FIT’s merger into Tenda. Deferred gain is amortized over a
12-month period.
Financial
income and expenses, net
Net
financial results totaled an income of R$41.9 million in 2008 compared to R$28.6
million in 2007. Financial expenses during 2008 totaled R$61.0
million, an increase of 72.8% over R$35.3 million in 2007 due to higher debt.
Our outstanding debt as of December 31, 2008, increased 123.2% as compared to
December 31, 2007, mainly due to (1) the first issuance of the third debenture
program of R$250 million, (2) working capital loans of R$285.0 million obtained
in 2008; (3) other loans, mainly SFH and working capital loans, obtained in 2008
of R$240.9 million; and (4) accrued interest of R$116.8 million, which was
partially offset by the repayment of debt of R$145.7 million, primarily related
to SFH and working capital loans. Financial income increased from R$63.9 million
in 2007 to R$102.9 million in 2008 mainly due to interest received on cash
balances.
Taxes
on income
Income
and social contribution taxes in 2008 totaled R$43.4 million, or 42.8% higher
than in 2007, when income and social contribution taxes totaled R$30.4 million.
In 2008 and 2007, the combined effective income and social contribution tax
rates, calculated as a percentage of income before taxes on income, were 20.7%
and 23.7%, respectively. The combined effective rates during these years were
lower than the composite statutory rate of 34% as some of our jointly-controlled
subsidiaries calculated their taxes on the presumed profit regime and the
amortization of negative goodwill adjustment on the Tenda business combination.
The increase in 2008 reflects the growth of our pre-tax income.
Net
income
Net
income in 2008 totaled R$109.9 million, an increase of 20.0% over the previous
year, when net income was R$91.6 million. The increase in net income was
primarily due to our continuing growth strategy through segment and geographic
diversification and the increase of launches during 2008.
Net
operating revenue
Net
operating revenue increased by 85.8%, from R$648.2 million in 2006 to R$1,204.3
million in 2007. Gross revenues generated from the sales of real estate
properties totaled R$1,216.8 million, an increase of R$556.5 million or 84.3% as
compared to the same period in 2006, when revenues generated from the sales of
real estate properties totaled R$660.3 million. This increase is mainly due to
the recognition of revenues from sales contracted in prior periods. Net revenues
generated from services increased by 63.3%, from R$21.5 million in 2006 to
R$35.1 million in 2007, reflecting the overall growth of the real estate market
in Brazil.
The
following table sets forth the final completion of the construction in progress
in 2007 and 2006 and the related net operating revenue from real estate
development and sales recognized during those years:
| |
|
|
Total
|
|
|
As
of December 31,
|
|
|
|
|
|
For
the year ended
December 31,
|
|
| |
|
|
area
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Gafisa |
|
|
2007 |
|
|
2006 |
|
|
Development
|
Month/Year
launched |
|
(m2)(1)(3) |
|
|
Final
completion(%)
|
|
|
Percentage
sold-
accumulated (%)
|
|
|
Participation(%)
|
|
|
Revenue
recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Alphaville
Maringá
|
Nov
02
|
|
|
510,710 |
|
|
|
100 |
|
|
|
— |
|
|
|
36 |
|
|
|
— |
|
|
|
67 |
|
|
|
563 |
|
|
|
— |
|
|
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 |
|
|
|
3,668 |
|
|
New
Point
|
Apr
03
|
|
|
12,034 |
|
|
|
100 |
|
|
|
60 |
|
|
|
99 |
|
|
|
97 |
|
|
|
90 |
|
|
|
5,035 |
|
|
|
1,205 |
|
|
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 |
|
|
|
— |
|
|
|
95 |
|
|
|
— |
|
|
|
55 |
|
|
|
1,782 |
|
|
|
— |
|
|
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 |
|
|
|
— |
|
|
|
84 |
|
|
|
— |
|
|
|
63 |
|
|
|
1,806 |
|
|
|
— |
|
|
La
Place
|
May
04
|
|
|
8,416 |
|
|
|
100 |
|
|
|
83 |
|
|
|
100 |
|
|
|
79 |
|
|
|
100 |
|
|
|
5,145 |
|
|
|
13,831 |
|
|
Alphaville
Gramado
|
Jun
04
|
|
|
431,663 |
|
|
|
98 |
|
|
|
— |
|
|
|
43 |
|
|
|
0 |
|
|
|
67 |
|
|
|
3,216 |
|
|
|
— |
|
|
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 |
|
|
|
— |
|
|
Montenegro
Boulevard
|
Jun
05
|
|
|
174,862 |
|
|
|
100 |
|
|
|
69 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
10,439 |
|
|
|
6,702 |
|
|
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 |
|
|
|
2,035 |
|
|
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
|
Mar
06
|
|
|
6,328 |
|
|
|
92 |
|
|
|
16 |
|
|
|
98 |
|
|
|
70 |
|
|
|
100 |
|
|
|
24,370 |
|
|
|
3,625 |
|
| |
|
|
Total
|
|
|
As
of December 31,
|
|
|
|
|
|
For
the year ended
December 31,
|
|
| |
|
|
area
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Gafisa |
|
|
2007 |
|
|
2006 |
|
|
Development
|
Month/Year
launched |
|
(m2)(1)(3) |
|
|
Final
completion(%)
|
|
|
Percentage
sold-
accumulated (%)
|
|
|
Participation(%)
|
|
|
Revenue
recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Villagio Panamby-
Mirabilis
|
Mar
06
|
|
|
23,355 |
|
|
|
69 |
|
|
|
43 |
|
|
|
94 |
|
|
|
75 |
|
|
|
100 |
|
|
|
28,227 |
|
|
|
24,746 |
|
|
Alphaville
Gravataí
|
Jun
06
|
|
|
1,309,397 |
|
|
|
41 |
|
|
|
— |
|
|
|
40 |
|
|
|
0 |
|
|
|
64 |
|
|
|
5,565 |
|
|
|
— |
|
|
Beach
Park – Living
|
Jun
06
|
|
|
14,913 |
|
|
|
23 |
|
|
|
— |
|
|
|
69 |
|
|
|
49 |
|
|
|
80 |
|
|
|
3,358 |
|
|
|
— |
|
|
Blue Vision - Sky e
Infinity
|
Jun
06
|
|
|
18,514 |
|
|
|
78 |
|
|
|
37 |
|
|
|
84 |
|
|
|
77 |
|
|
|
50 |
|
|
|
13,045 |
|
|
|
7,373 |
|
|
Reserva
do Lago
|
Jun
06
|
|
|
16,800 |
|
|
|
8 |
|
|
|
— |
|
|
|
74 |
|
|
|
— |
|
|
|
50 |
|
|
|
707 |
|
|
|
— |
|
|
Quinta
Imperial
|
Jul
06
|
|
|
8,422 |
|
|
|
45 |
|
|
|
4 |
|
|
|
79 |
|
|
|
72 |
|
|
|
100 |
|
|
|
4,135 |
|
|
|
536 |
|
|
Espacio
Laguna
|
Aug
06
|
|
|
16,364 |
|
|
|
38 |
|
|
|
— |
|
|
|
32 |
|
|
|
3 |
|
|
|
80 |
|
|
|
8,827 |
|
|
|
— |
|
|
Ville
Du Soleil
|
Oct
06
|
|
|
8,920 |
|
|
|
46 |
|
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
100 |
|
|
|
3,205 |
|
|
|
— |
|
|
Collori
|
Nov
06
|
|
|
39,462 |
|
|
|
42 |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
50 |
|
|
|
7,035 |
|
|
|
— |
|
|
CSF
– Paradiso
|
Nov
06
|
|
|
16,286 |
|
|
|
12 |
|
|
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
100 |
|
|
|
2,791 |
|
|
|
— |
|
|
Villagio Panamby -
Agrias
|
Nov
06
|
|
|
21,390 |
|
|
|
45 |
|
|
|
— |
|
|
|
80 |
|
|
|
18 |
|
|
|
100 |
|
|
|
23,954 |
|
|
|
2,581 |
|
|
Villagio Panamby -
Parides
|
Nov
06
|
|
|
13,093 |
|
|
|
64 |
|
|
|
47 |
|
|
|
100 |
|
|
|
61 |
|
|
|
100 |
|
|
|
17,882 |
|
|
|
13,347 |
|
|
Icaraí
Corporate
|
Dec
06
|
|
|
5,683 |
|
|
|
33 |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
100 |
|
|
|
10,718 |
|
|
|
— |
|
|
Alphaville Campo
Grande
|
Mar
07
|
|
|
517,869 |
|
|
|
40 |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
67 |
|
|
|
5,052 |
|
|
|
— |
|
|
Celebrare
|
Mar
07
|
|
|
14,679 |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
|
|
4,918 |
|
|
|
— |
|
|
FIT Jaçanã
|
Mar
07
|
|
|
9,181 |
|
|
|
32 |
|
|
|
— |
|
|
|
91 |
|
|
|
— |
|
|
|
100 |
|
|
|
7,686 |
|
|
|
— |
|
|
Grand Valley
|
Mar
07
|
|
|
16,908 |
|
|
|
34 |
|
|
|
— |
|
|
|
51 |
|
|
|
— |
|
|
|
100 |
|
|
|
4,180 |
|
|
|
— |
|
|
Isla
|
Mar
07
|
|
|
31,423 |
|
|
|
18 |
|
|
|
— |
|
|
|
76 |
|
|
|
— |
|
|
|
100 |
|
|
|
11,119 |
|
|
|
— |
|
|
Evidence
|
Apr
07
|
|
|
23,487 |
|
|
|
19 |
|
|
|
— |
|
|
|
32 |
|
|
|
— |
|
|
|
50 |
|
|
|
2,041 |
|
|
|
— |
|
|
Secret
Garden
|
May
07
|
|
|
15,344 |
|
|
|
15 |
|
|
|
— |
|
|
|
54 |
|
|
|
— |
|
|
|
100 |
|
|
|
3,200 |
|
|
|
— |
|
|
CSF –
Acácia
|
Jun
07
|
|
|
23,461 |
|
|
|
25 |
|
|
|
— |
|
|
|
70 |
|
|
|
— |
|
|
|
100 |
|
|
|
2,849 |
|
|
|
— |
|
|
CSF – Dália
|
Jun
07
|
|
|
9,000 |
|
|
|
25 |
|
|
|
— |
|
|
|
88 |
|
|
|
— |
|
|
|
100 |
|
|
|
549 |
|
|
|
— |
|
|
CSF –
Prímula
|
Jun
07
|
|
|
13,897 |
|
|
|
24 |
|
|
|
— |
|
|
|
37 |
|
|
|
— |
|
|
|
100 |
|
|
|
927 |
|
|
|
— |
|
|
Privilege
Residencial
|
Jun
07
|
|
|
—- |
|
|
|
12 |
|
|
|
— |
|
|
|
58 |
|
|
|
— |
|
|
|
80 |
|
|
|
1,769 |
|
|
|
— |
|
|
Art Ville
|
Apr
07
|
|
|
16,157 |
|
|
|
37 |
|
|
|
— |
|
|
|
80 |
|
|
|
— |
|
|
|
50 |
|
|
|
2,852 |
|
|
|
— |
|
|
Palm Ville
|
Apr
07
|
|
|
13,582 |
|
|
|
8 |
|
|
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
50 |
|
|
|
1,153 |
|
|
|
— |
|
|
Alphaville D.
Pedro
|
Aug
04
|
|
|
616,224 |
|
|
|
94 |
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
58 |
|
|
|
7,638 |
|
|
|
— |
|
|
Belle Vue
|
Aug
04
|
|
|
7,565 |
|
|
|
100 |
|
|
|
35 |
|
|
|
50 |
|
|
|
46 |
|
|
|
70 |
|
|
|
1,806 |
|
|
|
2,445 |
|
|
Alphaville
Manaus
|
Aug
05
|
|
|
464,688 |
|
|
|
69 |
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
63 |
|
|
|
13,900 |
|
|
|
— |
|
|
Alphaville
Recife
|
Aug
06
|
|
|
704,051 |
|
|
|
38 |
|
|
|
— |
|
|
|
94 |
|
|
|
— |
|
|
|
65 |
|
|
|
7,816 |
|
|
|
— |
|
|
CSF –
Santtorino
|
Aug
06
|
|
|
14,979 |
|
|
|
42 |
|
|
|
8 |
|
|
|
100 |
|
|
|
87 |
|
|
|
100 |
|
|
|
8,261 |
|
|
|
2,290 |
|
|
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 |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
50 |
|
|
|
5,711 |
|
|
|
— |
|
|
Parc
Paradiso
|
Aug
07
|
|
|
35,987 |
|
|
|
9 |
|
|
|
— |
|
|
|
98 |
|
|
|
— |
|
|
|
90 |
|
|
|
6,958 |
|
|
|
— |
|
|
Supremo
|
Aug
07
|
|
|
— |
|
|
|
39 |
|
|
|
— |
|
|
|
52 |
|
|
|
— |
|
|
|
100 |
|
|
|
16,533 |
|
|
|
— |
|
|
Arena
|
Dec
05
|
|
|
29,256 |
|
|
|
87 |
|
|
|
32 |
|
|
|
100 |
|
|
|
99 |
|
|
|
100 |
|
|
|
40,590 |
|
|
|
21,213 |
|
|
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 |
|
|
|
— |
|
|
|
78 |
|
|
|
— |
|
|
|
100 |
|
|
|
6,397 |
|
|
|
— |
|
|
Riviera Nice
|
Dec
06
|
|
|
6,761 |
|
|
|
21 |
|
|
|
— |
|
|
|
34 |
|
|
|
— |
|
|
|
50 |
|
|
|
733 |
|
|
|
— |
|
|
Alphaville
Natal
|
Feb
05
|
|
|
1,028,722 |
|
|
|
97 |
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
63 |
|
|
|
1,112 |
|
|
|
— |
|
|
Alphaville Salvador
II
|
Feb
06
|
|
|
853,344 |
|
|
|
46 |
|
|
|
— |
|
|
|
88 |
|
|
|
— |
|
|
|
55 |
|
|
|
15,775 |
|
|
|
— |
|
|
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 |
|
|
|
13,140 |
|
|
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 |
|
|
|
— |
|
|
|
72 |
|
|
|
— |
|
|
|
80 |
|
|
|
10,881 |
|
|
|
— |
|
|
FIT Jaraguá
|
Oct
07
|
|
|
14,345 |
|
|
|
20 |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
100 |
|
|
|
547 |
|
|
|
— |
|
|
Grand Valley Niterói
|
Oct
07
|
|
|
— |
|
|
|
17 |
|
|
|
— |
|
|
|
73 |
|
|
|
— |
|
|
|
100 |
|
|
|
6,974 |
|
|
|
— |
|
|
Horto
|
Oct
07
|
|
|
— |
|
|
|
35 |
|
|
|
— |
|
|
|
95 |
|
|
|
— |
|
|
|
50 |
|
|
|
27,735 |
|
|
|
— |
|
|
Olimpic Bosque da
Saúde
|
Oct
07
|
|
|
— |
|
|
|
25 |
|
|
|
— |
|
|
|
76 |
|
|
|
— |
|
|
|
100 |
|
|
|
8,971 |
|
|
|
— |
|
|
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 |
|
|
|
5,712 |
|
|
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 |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
65 |
|
|
|
10,818 |
|
|
|
— |
|
|
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 |
|
|
|
— |
|
|
|
58 |
|
|
|
2,666 |
|
|
|
— |
|
|
FIT Imbui
|
Sep
07
|
|
|
22,442 |
|
|
|
11 |
|
|
|
0 |
|
|
|
67 |
|
|
|
— |
|
|
|
50 |
|
|
|
1,122 |
|
|
|
— |
|
|
Parc
Paradiso (Fase 2)
|
Sep
07
|
|
|
—
|
|
|
|
9
|
|
|
|
0
|
|
|
|
57
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,170
|
|
|
|
—
|
|
| |
|
|
Total
|
|
|
As
of December 31,
|
|
|
|
|
|
For
the year ended
December 31,
|
|
| |
|
|
area
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
Gafisa |
|
|
2007 |
|
|
2006 |
|
|
Development
|
Month/Year
launched |
|
(m2)(1)(3) |
|
|
Final
completion(%)
|
|
|
Percentage
sold-
accumulated (%)
|
|
|
Participation(%)
|
|
|
Revenue
recognized
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Alphaville
|
—
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93,430 |
|
|
|
— |
|
|
Other
developments(2)
|
—
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
194,419 |
|
|
|
181,120 |
|
|
Total
development revenues recognized during the periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,216,773 |
|
|
|
660,311 |
|
|
(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.
|
|
(3)
|
Values
for 100% of the building
development.
|
Operating
costs
Operating
costs in 2007 totaled R$868.0 million, an increase of 86.7% as compared to
R$464.8 million in 2006. This increase is due to the greater volume of
construction in progress in 2007 as compared to 2006. The cost of land increased
by 53.3% in 2007 from 2006. Construction costs payable to third parties
increased slightly in 2007, totaling 83.3% of total operating costs, as compared
to 83.1% in 2006. Operating costs, as a percentage of net operating revenue,
increased to 72.1% in 2007 as compared to 71.7% in 2006, mainly due to the
greater mix in the types of developments under construction during 2007, 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$336.3 million, representing an increase of 83.4%, as
compared to R$183.4 million in 2006. This increase was mainly attributable to
higher gross revenue from a greater number of developments. In 2007, the gross
margin generated from our activities decreased to 27.9% as compared to 28.3% in
2006. This decrease was due to an increase in operating costs, despite sales at
higher margins as we have recognized revenue from developments launched in 2005
and 2006 and extraordinary revenue derived from services we rendered at our
commercial development Eldorado Business Tower in the total amount of R$97.9
million.
Selling
expenses
Selling
expenses in 2007 totaled R$69.8 million, representing an increase of 35.0%, as
compared to R$51.7 million in 2006. This increase reflects our aggressive growth
strategy, through geographic and segment diversification. In 2007, we had 53 new
developments compared to 30 new developments in 2006, which increase resulted in
the need to construct showrooms and furnished model apartments and caused higher
sales commissions, and marketing and advertising expenses. Selling expenses in
2007 represented 5.8% of our net operating revenue compared to 8.0% in
2006.
General
and administrative expenses
General
and administrative expenses totaled R$130.9 million in 2007, representing an
increase of 103.6%, as compared to R$64.3 million in 2006. This increase is
mainly due to (1) our acquisition and internal growth strategy, including
increases in our personnel expenses, as reflected in the acquisition, formation
and incorporation of the entities Alphaville, FIT and Bairro Novo in 2007; (2)
general and administrative expenses of Alphaville, FIT and Bairro Novo totaling
R$20.4 million, R$12.2 million and R$0.8 million, respectively; (3) an increase
in our profit sharing expenses of R$9.9 million in 2007 as compared to 2006; and
(4) stock options plan expenses totaling R$17.8 million, representing an
increase of R$8.7 million as compared to 2006, primarily related to Gafisa in
the amount of R$16.5 million and Alphaville in the amount of R$1.3
million. The proportion of current general and administrative
expenses to sales revenue will be diluted as we increase our revenues in the
future. General and administrative expenses in 2007 represented 10.9% of our net
operating revenues as compared to 9.9% in 2006.
Depreciation
and amortization
Depreciation
and amortization in 2007 totaled R$38.7 million, representing an increase of
R$31.3 million, as compared to R$7.4 million in 2006. The increase is
mainly due to the increase in depreciation as a result of capital expenditures
in the amount of R$61.3 million in 2007 for sales stands, facilities, model
apartments and related furnishings, and new office facilities.
Financial
expenses and income, net
Net
financial results totaled an income of R$28.6 million in 2007 compared to an
expense of R$11.9 million in 2006. Financial expenses in 2007 totaled
R$35.3 million, a decrease of 45.6% compared to R$64.9 million in 2006, while
our outstanding loans and financing in 2007 were higher than in 2006, which was
offset by a capitalization of interest of R$36.7 million and lower interest
rates in 2007 as compared to 2006. Our outstanding debt as of
December 31, 2007, increased 135.4% as compared to December 31, 2006, mainly due
to (1) working capital loans of R$200.0 million obtained in 2007; (2) other
loans, mainly SFH and working capital loans obtained in 2007, of R$227.0
million; and (3) accrued interest of R$22.9 million, which was partially offset
by the repayment of debt of R$51.7 million, primarily related to SFH and working
capital loans. Financial income increased from R$53.0 million in 2006
to R$63.9 million in 2007, primarily as a result of financial income from
present value adjustments to our real estate development sales, despite lower
interest rates in 2007 as compared to 2006.
Taxes
on income
Income
and social contribution taxes in 2007 totaled R$30.4 million, 257.6%
higher than in 2006, when income and social contribution taxes totaled R$8.5
million. In 2007, the combined effective income and social contribution tax
rates, calculated as a percentage of income before taxes on income, were 23.7%
and 16.2%, respectively. The combined effective rates for 2007 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. The increase in 2007 reflects the
increase in of our pre-tax income.
Net
income
Net
income in 2007 totaled R$91.6 million, an increase of 108.2% over the previous
year, when net income was R$44.0 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.
Business
Segments
Following
the acquisition, formation and incorporation of the entities Alphaville, FIT and
Bairro Novo in 2007 and following the merger of FIT into Tenda in 2008, our
financial results for 2007 and 2008 included the results of the following
segments: Gafisa S.A., Alphaville, Tenda, FIT (which merged with and into Tenda
in October 2008) and Bairro Novo (following 2008, however FIT and Bairro Novo
will cease to be included in our results, for the reasons explained herein). See
“Item 4. Information on the Company—A. History and Development of the
Company—Historical Background and Recent Developments.” Because Tenda launched
very few units in 2008, we believe the full impact of the merger are not
reflected until 2009. Our chief executive officer, who is responsible for
allocating resources among these businesses and monitoring their progress, uses
economic present value data, which were derived from a combination of historical
operating results and forecasted operating results, 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 for this structure in 2006 is Gafisa S.A.
We
provide below a measure of historical profit or loss, selected segment assets
and other related information for each reporting segment. The information below
is derived from our statutory accounting records which are maintained in
accordance with Brazilian GAAP. Revenues from no individual customer represented
more than 10% of our net operating revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands
of reais except for percentages)
|
|
|
Net
operating revenue
|
|
|
1,214,562 |
|
|
|
163,897 |
|
|
|
249,586 |
|
|
|
78,467 |
|
|
|
33,892 |
|
|
|
1,740,404 |
|
|
Operating
costs
|
|
|
(847,617 |
) |
|
|
(111,920 |
) |
|
|
(167,043 |
) |
|
|
(60,082 |
) |
|
|
(27,739 |
) |
|
|
(1,214,401 |
) |
|
Gross
profit
|
|
|
366,945 |
|
|
|
51,977 |
|
|
|
82,543 |
|
|
|
18,385 |
|
|
|
6,153 |
|
|
|
526,003 |
|
|
Gross
margin
|
|
|
30.2 |
|
|
|
31.7 |
|
|
|
33.1 |
|
|
|
23.4 |
|
|
|
18.2 |
|
|
|
30.2 |
|
|
(1)
|
Includes
all subsidiaries, except Alphaville, Tenda, FIT and Bairro
Novo.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands
of reais except for percentages)
|
|
|
Net
operating revenue
|
|
|
1,004,418 |
|
|
|
192,700 |
|
|
|
7,169 |
|
|
|
— |
|
|
|
1,204,287 |
|
|
Operating
costs
|
|
|
(726,265 |
) |
|
|
(136,854 |
) |
|
|
(4,877 |
) |
|
|
— |
|
|
|
(867,996 |
) |
|
Gross
profit
|
|
|
278,153 |
|
|
|
55,846 |
|
|
|
2,292 |
|
|
|
— |
|
|
|
336,291 |
|
|
Gross
margin
|
|
|
27.7 |
|
|
|
29.0 |
|
|
|
32.0 |
|
|
|
— |
|
|
|
27.9 |
|
(1) Includes
all subsidiaries, except Alphaville, FIT and Bairro Novo.
|
|
(2)
|
The
relevant results of Tenda are available only from October 22, 2008, the
date after the merger of FIT into Tenda. Accordingly, there was no
comparative information for Tenda in
2007.
|
Gafisa
S.A.
Net
operating revenue
Net
operating revenue for the Gafisa segment was R$1,214.6 million in 2008 compared
to R$1,004.4 million in 2007, which represents an increase of 20.9%. This
increase was primarily due to the continued strong demand for Gafisa properties
and recognition of results from sales contracted in prior periods, since there
was no variation in the amount of developments launched during the
period.
Operating
costs
Operating
costs for the Gafisa segment were R$847.6 million in 2008 compared to R$726.3
million in 2007, which represented an increase of 16.7%. This increase was
mainly due to the greater volume of construction in progress during 2008 as
compared to 2007.
Gross
profit
Gross
profit for the Gafisa segment was R$366.9 million or 69.8% of our total gross
profit in 2008, compared to R$278.2 million or 82.7% of our total gross profit
for 2007. The increase in gross profit was primarily due to higher gross revenue
from the greater number of developments. In 2008, the gross margin generated
from the sale of our developments increased to 30.2% as compared to 27.7% in
2007. This increase was due to sales at higher margins as we recognized revenue
from developments launched in prior years.
Alphaville
Net
operating revenue
Net
operating revenue for the Alphaville segment was R$249.6 million in 2008
compared to R$192.7 million in 2007, which represents an increase of 29.5%. This
increase was primarily due to (1) higher volume of contracted sales during 2008,
mainly related to the increase of launches from 6 in 2007 to 11 in 2008 and; (2)
recognition of results from sales in prior periods and geographic
expansion.
Operating
costs
Operating
costs for the Alphaville segment was R$167.0 million in 2008 compared to R$136.9
million in 2007, which represents an increase of 22.0%. This increase was mainly
due to the greater volume of construction in progress in 2008 as compared to
2007.
Gross
profit
Gross
profit for the Alphaville segment was R$82.5 million or 15.7% of our total gross
profit in 2008, compared to R$55.8 million or 16.6% of our total gross profit
for 2007. The increase in gross profit was primarily due to higher gross revenue
from the greater number of developments in 2008.
FIT
Net
operating revenue
Net
operating revenue for the FIT segment was R$78.5 million in the period from
January 1, 2008 to October 21, 2008 compared to R$7.2 million in 2007, an
increase of R$71.3 million. This increase was primarily due to the start-up of
FIT operations in 2007.
Operating
costs
Operating
costs for the FIT segment was R$60.1 million in the period from January 1, 2008
to October 21, 2008 compared to R$4.9 million in 2007. This increase was mainly
due to the start-up of FIT operations in 2007.
Gross
profit
Gross
profit for the FIT segment was R$18.4 million or 3.5% of our total gross profit
in the 2008 period, compared to R$2.3 million or 0.7% of our total gross profit
for 2007. The increase in gross profit was primarily due to the start-up of FIT
operations in 2007 and gross revenue from the developments launched at the end
of 2007 and in 2008.
Bairro
Novo
Net
operating revenue
Net
operating revenue for the Bairro Novo segment was R$33.9 million in 2008. There
was no recognized revenue for 2007, since Bairro Novo Cotia was launched in
November 2007.
Operating
costs
Operating
costs for the Bairro Novo segment was R$27.7 million in 2008. There was no
operating cost in 2007.
Gross
profit
Gross
profit for the Bairro Novo segment was R$6.1 million or 1.2% of our total gross
profit in 2008.
We do not
provide a comparative analysis for Tenda because our business combination
occurred on October 21, 2008. In addition, the usefulness of the
comparative analysis for the Bairro Novo segment is limited since Bairro Novo
Cotia was launched in November 2007.
B. Liquidity
and Capital Resources
Our
transactions are financed mainly through the contracting of real estate
financing and securitization of receivables. When necessary and in accordance
with market demands, we carry out long-term financing for the sale of our
developments. In order to turn over our capital and accelerate its return, we
try to transfer to banks and sell to the market the receivables portfolio of our
completed units. We did not use this source of funding in 2008. In
March 2009, we completed a sale of receivables from completed units for net
proceeds of R$70.0 million.
We
consistently review 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 capital market
financings, capital increase or through a combination thereof.
The
current global credit markets have impacted our ability to secure financing at
favorable interest rates. Construction financing lines of credit are
available and we have fulfilled substantially all of our construction financing
needs for 2009 at rates that have increased an average of up to 100 basis points
per year since 2008. In order to mitigate the effects of the current global
credit crisis, the Brazilian government has announced additional lines of credit
to assist the construction industry and its customers, including R$3 billion
from the FGTS (a Government Severance Indemnity Fund for Employees). In
addition, the Brazilian government will finance up to 20% of construction costs,
to be financed by the Brazilian Saving and Loan System (Sistema Brasileiro de Poupança e
Empréstimo – SBPE).
The
credit market turmoil has not yet had a material impact on our customers’
ability to obtain bank mortgage loans during 2008 and the first quarter of 2009,
although interest rates have gone up about 100 basis points, from 10.5% to
11.5%. Delinquency rates among our customers have not increased materially
in 2008 compared to 2007.
The
following table shows the balance of our receivables from clients’ portfolio for
the development and sale of properties for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate development receivables:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
R$ |
1,254,594 |
|
|
R$ |
473,734 |
|
|
R$ |
533,593 |
|
|
Long-term
|
|
|
863,950 |
|
|
|
497,910 |
|
|
|
41,492 |
|
|
Total
|
|
|
2,118,544 |
|
|
|
971,644 |
|
|
|
575,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
to be recognized on our balance sheet according to percentage of
completion method:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
R$ |
812,406 |
|
|
R$ |
486,794 |
|
|
R$ |
30,161 |
|
|
Long-term
|
|
|
2,754,513 |
|
|
|
881,352 |
|
|
|
729,810 |
|
|
Total
|
|
|
3,566,919 |
|
|
|
1,368,146 |
|
|
|
759,971 |
|
|
Total
clients’ portfolio
|
|
R$ |
5,685,463 |
|
|
R$ |
2,339,790 |
|
|
R$ |
1,335,056 |
|
The total
clients’ portfolio balances have the following maturity profile:
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
|
|
|
2009
|
|
R$ |
2,067,000 |
|
|
2010
|
|
|
1,983,571 |
|
|
2011
|
|
|
992,919 |
|
|
Thereafter
|
|
|
641,973 |
|
|
Total
|
|
R$ |
5,685,463 |
|
Loans
made to our clients are generally adjusted on a monthly basis: (1) during
construction, by the INCC in São Paulo, Rio de Janeiro and other Brazilian
cities; and (2) stated date in the contract, 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 April 30, 2009, our
clients’ default level was 3.7% of our accounts receivable. We did not record a
provision for the years ended December 31, 2008, 2007 and 2006 because we
considered the allowance for doubtful accounts not to be necessary, except for
Tenda, 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.
The allowance for doubtful accounts for Tenda totaled R$18.8 million on December
31, 2008 and is considered sufficient by our management to cover future losses
on the realization of accounts receivable of this subsidiary.
Cash
Flows
Operating
activities
Net cash
used in operating activities totaled to R$812.5 million in 2008 as compared to
R$451.9 million in 2007 mainly due to the higher level of ongoing construction
projects, the acquisition of land to support future launches and the increase of
accounts receivable.
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$451.9 million in 2007 as compared to R$271.2 million in
2006.
Investment
activities
Net cash
used in investment activities, including the acquisition of property, equipment
and new investments, was R$78.3 million, R$149.3 million and R$25.6 million in
2008, 2007 and 2006, respectively.
Our
expenditure in 2008 was mainly related to investments in property and equipment
in the amount of R$63.1 million, in subsidiaries in the amount of R$15.0 million
and restricted cash for loan guarantees in the amount of R$67.1 million. Cash
acquired along with Tenda’s business combination totaled R$66.9
million.
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 Alphaville; 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.
Financing
activities
Net cash
provided by financing activities in 2008 totaled R$911.8 million, an increase of
R$69.2 million, compared to the net cash provided by financing activities in
2007 of R$842.6 million. The cash provided in 2008 was mainly attributable to:
(1) debt issuances in the amount of R$775.9 million, of which R$250 million was
raised in June related to the first issuance of the third debenture program, and
R$285.0 million was raised in September for working capital purposes; (2)
contributions from venture partners in the amount of R$300 million, and (3) a
capital increase of R$7.7 million. In addition, we paid R$145.7 million in loans
and financing, mainly SFH and working capital loans and dividends of R$27.0
million.
In 2007,
net cash provided by financing activities totaled R$842.6 million, a significant
increase of 96.4% compared to R$429.1 million in 2006. The increase of our net
cash provided by financing activities in 2007 is mainly due to the
following:
(1) a capital increase, net of stock issuance expenses, of R$476.2 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$51.7 million in loans and financings, mainly SFH and working capital
loans and dividends of R$11.0 million.
In
January 2008, we formed an unincorporated venture represented by 13,084,000
Class A quotas fully paid by us and 300,000,000 Class B quotas from our venture
partner, of which R$300.0 million was subscribed by our venture partner. The
venture, which will use these funds to acquire equity investments in real estate
developments, has a term that ends on January 31, 2017 at which time we are
required to fully redeem our venture partner’s interest. The venture partner
receives an annual dividend substantially equivalent to the variation in the
Interbank Certificate of Deposit (CDI) rate. The venture’s charter provides that
we must comply with certain covenants in our capacity as lead partner, which
include the maintenance of minimum net debt and receivables. We and the venture
are currently in compliance with these covenants. The redemption of Class B
quotas will start on January 31, 2012.
Pledged
mortgage receivables and cash and cash equivalents
As of
December 31, 2008, substantially all of our mortgage receivables totaling R$2.3
billion are pledged. In addition, R$111 million of our cash and cash
equivalents are restricted as they have been pledged.
Capital
Expenditures
In 2006,
we invested R$21.6 million in property and equipment, primarily information
technology equipment, expenditures incurred for the construction of sales
stands, facilities, model apartments and related furnishings, and new office
facilities in Rio de Janeiro and São Paulo to accommodate our recently created
internal sales force.
In 2007,
we invested R$61.3 million in property and equipment, primarily information
technology equipment, software, expenses for the construction of sales stands,
facilities, model apartments and related furnishings and new office facilities
in Rio de Janeiro and in São Paulo. Our main investments during the period were
construction of sales stands of R$37.0 million and the implementation of SAP
that totaled 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.
In 2008,
we invested R$63.1 million in property and equipment, primarily information
technology equipment, software, expenses for the construction of sales stands,
facilities, model apartments and related furnishings and new office facilities
in Rio de Janeiro and in São Paulo. Our main investments during the period were
the construction of sales stands, which totaled R$35.5 million, investments in
information technology equipment and software, which totaled R$3.7 million, in
office facilities, which totaled R$4.2 million and the SAP implementation, which
totaled R$2.0 million.
Our
capital expenditures are all made in Brazil and are usually funded by internal
sources. We currently do not have any significant capital
expenditures in progress.
Indebtedness
When
appropriate, we have incurred indebtedness within SFH, which offers lower
interest rates than the private market. When our customers obtain a mortgage, we
use the proceeds to amortize our SFH indebtedness. 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, 2008 we had outstanding debt in the total amount of R$1,552.1
million, an increase of 123.2% as compared to December 31, 2007. Our
indebtedness principally consists of: (1) the first issuance of the third
debenture program of R$250.0 million; (2) working capital loans in the total
amount of R$285.0 million; (3) other loans (mainly SFH) obtained throughout 2008
in the total amount of R$240.9 million; and (4) accrued interest in the amount
of R$116.8 million, which was partially offset by a repayment of debts in the
total amount of R$145.7 million, primarily related to SFH and working capital
loans.
In order
to mitigate interest rate and exchange rate volatility 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 the notional
amount of R$200.0 million as of December 31, 2008.
As of
December 31, 2007 we had outstanding loans and financing in the total amount of
R$695.4 million, an increase of 135.4% 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$227.0 million; and (3) accrued interest
in the amount of R$22.9 million, which was partially offset by a repayment of
debts in the total amount of R$51.7 million, primarily related to SFH and
working capital loans. See note 9 to our financial statements included elsewhere
in this annual report.
The table
below sets forth information on our loans, financing and debentures as of
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of reais)
|
|
|
|
Debentures
(1)
|
|
|
503,945 |
|
|
|
61,945 |
|
|
|
96,000 |
|
|
|
96,000 |
|
|
|
250,000 |
|
|
Working
capital
|
|
|
662,535 |
|
|
|
283,044 |
|
|
|
153,315 |
|
|
|
152,073 |
|
|
|
74,103 |
|
|
Housing
Finance System (SFH)
|
|
|
372,255 |
|
|
|
156,819 |
|
|
|
187,650 |
|
|
|
27,786 |
|
|
|
— |
|
|
Other
|
|
|
13,386 |
|
|
|
7,640 |
|
|
|
4,056 |
|
|
|
1,690 |
|
|
|
— |
|
|
Total
|
|
|
1,552,121 |
|
|
|
509,448 |
|
|
|
441,021 |
|
|
|
277,549 |
|
|
|
324,103 |
|
(1)
Does not
include the Tenda R$600 million debentures issued in May
2009.
In
addition to the loans listed above, we received contributions from venture
partners of R$300.0 million in 2008 which will be fully redeemed by us in
2014.
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
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 consisted of 11,250 nominal, non-convertible debentures with a face
value of R$10,000 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, 2008, 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.
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 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 not in compliance with these covenants. If we
are not in compliance at the measurement date of June 30, 2009, we will be in
default under the indenture and the amount due immediately would be $240 million, which is further
described below.
In
June 2008, the CVM approved 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 consisted of 25,000 nominal, non-convertible debentures
with a face value of R$10,000, which were 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.
In April
2009, Tenda’s first debenture program was approved, under which we received
R$600 million in non-convertible debentures. The debentures provide for payment
of annual interest at a spread of 8% + TR, calculated from the subscription
date, with a maturity in five years.
Certain
covenants contained in the agreements governing our debenture programs restrict
our ability to take certain actions, including incurring additional debt and may
require us to repay or refinance our indebtedness if we are unable to meet
certain ratios. Our second and third debenture programs have cross default
provisions whereby an event of default or prepayment of any other debt above
R$5.0 million and R$10.0 million, respectively, could require us to prepay the
indebtedness under the second or third debenture program. The ratios and minimum
or maximum amounts generally required by those covenants and our performance
against those minimum or maximum levels are summarized below:
|
|
|
|
|
|
|
|
|
Second
program - first issuance
|
|
|
|
|
Total
debt minus SFH debt minus cash does not exceed 75% of shareholders’
equity
|
41%
|
|
35%
|
|
Total
receivables plus post-completion inventory is equal to or greater than 2.0
times total debt
|
3.6
|
|
3.3
|
|
Total
debt minus available funds is less than R$1.0 billion
|
R$1,061.9
million
|
|
R$946.6
million
|
|
|
|
|
|
|
Third
program - first issuance
|
|
|
|
|
Total
debt minus SFH debt minus cash does not exceed 75% of shareholders’
equity
|
41%
|
|
35%
|
|
Total
receivables plus post-completion inventory is equal to or greater than 2.2
times total debt
|
5.4
|
|
5.5
|
We expect
to comply with the covenants in the agreements governing our outstanding
indebtedness which may limit our long-term growth prospects by hindering our
ability to incur future indebtedness or grow through acquisitions. See “Item
3.D. Key Information—Risk Factors—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 the date of this annual report,
our net debt level was in excess of the R$1.0 billion set forth in the covenants
of our debentures issued in 2006 (our “Obligation to venture partners” balance is not considered to be
part of debt for purposes of this covenant). We are currently not in breach of the covenant as it is
only measured at June 30 and December 31 of each year. We are currently
renegotiating an amendment to the covenant with the debenture holders, which may
result in a higher interest rate. However, if at June 30, 2009 our
net debt level remains in excess of that stipulated in the covenant and we are
not able to amend the covenant or receive a waiver from debenture holders, the
2006 debentures could be accelerated and the amount due immediately would be
R$240 million. If we fail to pay the 2006 debentures upon
acceleration, other indebtedness in the amount of R$670 million may be
accelerated and due immediately by us, which may have a material adverse effect
on our financial position and results of operations.
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, 2008, the interest rates on these loans generally varied between
6.2% and 11.4% per annum, plus TR, and the loans generally mature through
December 2010. This financing is secured by mortgages on property and by
security interests on the receivables from clients. On December 31, 2008 we had
77 loan agreements in effect, with a balance of R$372.3 million. At
the same date we also had R$1,128.2 million in aggregate principal amount of
financing agreements with SFH, the funds of which will be released through the
date of completion as construction of the corresponding developments
progress.
Securitization
Fund – FIDC
On March
31, 2009, we entered into a securitized receivables transaction, whereby we
assigned a portfolio of select residential and commercial real estate
receivables to “Gafisa FIDC” which issued senior and subordinated quotas. This
first issuance of senior quotas was made through an offering restricted to
qualified investors. Subordinated quotas, equivalent to 21% of the amount
issued, were subscribed exclusively by Gafisa S.A. Gafisa FIDC acquired the
present value of the portfolio based on an agreed discount rate. We
provide Gafisa FIDC with administrative and accounting services including the
reconciliation and analysis of receivables and collections and can be replaced
by another collection agent in the event of non-fulfillment with contractual
parameters. The senior and subordinated quotas are remunerated based on the
IGP-M index plus interest of 12% per year. Because the subordinated quotas have
a disproportional percentage of the expected losses, Gafisa FIDC was considered
a variable interest entity and was fully consolidated in our financial
statements as at March 31, 2009.
The
receivables portfolio assigned totaled R$119.6 million of which we received the
equivalent of the present value of R$88.7 million in cash. We
consolidated receivables of R$88.7 million assigned to Gafisa FIDC in our
financial statements at March 31, 2009 and recorded the mandatorily redeemable
equity interest in the securitization fund of R$69.7 million as minority
interests. The balance of our subordinated quotas was eliminated on
consolidation.
Working
Capital
We
believe that our current working capital is sufficient for our present
requirements and that our sources of funds from financing activities are
sufficient to meet the financing of our activities and cover our need for funds
for at least the next twelve months.
U.S.
GAAP Reconciliation
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$109.9 million, R$91.6 million and R$44.0 million, in
2008, 2007 and 2006, respectively. Under U.S. GAAP, we would have reported a net
income of R$299.7 million, R$63.5 million and R$24.8 million, in 2008, 2007 and
2006, respectively.
Our
shareholders’ equity, in accordance with Brazilian GAAP, was R$1,612.4 million
as of December 31, 2008, R$1,498.7 million as of December 31, 2007 and R$807.4
million as of December 31, 2006. Under U.S. GAAP, we would have reported
shareholders’ equity of R$1,723.1 million, R$1,441.9 million and R$795.3 million
as of December 31, 2008, 2007 and 2006, respectively.
The
following items generated the most significant differences between Brazilian
GAAP and U.S. GAAP in determining net income and shareholders’
equity:
|
·
|
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.”
New
Accounting Pronouncements
Law No.
11,638/07 enacted on December 28, 2007 introduced changes to the Brazilian
corporate law to be applied to financial statements in 2008. To ensure
consistent presentation of our financial statements in prior periods, we have
retroactively applied changes to Brazilian GAAP introduced by the newly formed
CPC and the provisions of Law No. 11,638/07 from January 1, 2006 and have
elected for tax purposes to adopt Provisional Measure No. 449/08, or “MP
No. 449/08,” which was converted into Law No. 11,941/09. As a
result, there is no tax impact during 2006 and 2007 following retroactive
adoption of these accounting policy changes. See note 2(a) to our
financial statements included elsewhere in this annual report for this amendment
and other reclassifications to our Brazilian GAAP financial
statements.
We
restated our Brazilian GAAP financial statements as of and for the years ended
December 31, 2007 and 2006 when we adopted, beginning January 1, 2006, the
changes introduced by Law 11,638/07 and the new accounting standards issued by
the CPC in 2008. Brazilian GAAP encourages companies to make such
restatements from the date the accounting changes were introduced in order to
provide comparative information within the financial statements. See
note 2(a) to our financial statements included elsewhere in this annual report
for this amendment and other reclassifications to our Brazilian GAAP financial
statements. However, selected financial information presented as of
and for the years ended December 31, 2005 and 2004 has not been represented on
the basis of the new accounting policies introduced in 2008, as the cost and
time required to prepare such information would be prohibitive. As a
result, such information is not comparative to the financial information
reported herein as of and for the years ended December 31, 2008, 2007 and
2006.
Assets
and liabilities
We adjust
on a present value basis the assets and liabilities arising from long-term
transactions. As set forth in CPC Interpretation No. 01, “Real Estate
Development Entities,” for inflation-indexed receivables arising from
installment sales of unfinished units, the receivables generated prior to
delivery of the units that does not accrue interest, were discounted to present
value. The present value adjustment is accreted to our net
operating revenue as the company finances its clients through
delivery of the
units. As interest from funds used to finance the acquisition of land
for development and construction is capitalized, the accretion of the present
value adjustment arising from the obligation
is recorded in real estate development operating costs or against inventories of properties
for sale, as the case may be, until the construction phase of the venture is
completed.
Warranty
provision
We record
a provision for warranties, unless a third party provides warranties for the
services rendered during construction. The warranty term is five years from the
delivery of the unit.
Barter
transactions
Under CPC
Interpretation No. 01, for barter transactions of land in exchange for units,
the value of land acquired by us is calculated based on the fair value of real
estate units to be delivered, and recorded in inventories of properties for
sale
against
liabilities for advances from clients, at the time the barter agreement is
signed. The percentage-of-completion criteria adopted for appropriation of
income is also applied to these transactions.
Expenditures
on sales stands, facilities, model apartments and related
furnishings
Expenditures
incurred for the construction of sales stands, facilities, model apartments and
related furnishings are capitalized as property and equipment. Depreciation
commences upon launch of the development and is recorded over the average term
of one year and subject to periodical analysis of asset impairment.
Stock
options
We have
executive stock compensation plans. Options, calculated at the grant
date, must be recognized as an expense against shareholders’ equity, over the
period the services are rendered through the vesting date.
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, 2008, 2007 and 2006, we had 15, 12 and 9 employees engaged in
research and development activities, respectively. Our research and development
expenditures in 2008, 2007 and 2006 were immaterial.
D. Trend
Information
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, 2008. The table does not include deferred income tax
liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of R$)
|
|
|
Loans
and financing
|
|
|
1,048,176 |
|
|
|
447,503 |
|
|
|
526,570 |
|
|
|
74,103 |
|
|
|
— |
|
|
Debentures
|
|
|
503,945 |
|
|
|
61,945 |
|
|
|
192,000 |
|
|
|
250,000 |
|
|
|
— |
|
|
Interest
(1)
|
|
|
288,086 |
|
|
|
115,111 |
|
|
|
140,963 |
|
|
|
32,012 |
|
|
|
— |
|
|
Real
estate development obligations (2)
|
|
|
2,465,963 |
|
|
|
1,499,317 |
|
|
|
966,646 |
|
|
|
— |
|
|
|
— |
|
|
Obligations
for land purchase
|
|
|
392,762 |
|
|
|
280,209 |
|
|
|
59,953 |
|
|
|
52,600 |
|
|
|
— |
|
|
Obligation
to venture partners (3)
|
|
|
300,000 |
|
|
|
— |
|
|
|
— |
|
|
|
200,000 |
|
|
|
100,000 |
|
|
Credit
assignments
|
|
|
67,552 |
|
|
|
46,844 |
|
|
|
20,708 |
|
|
|
— |
|
|
|
— |
|
|
Obligations
from operating leases
|
|
|
31,475 |
|
|
|
5,651 |
|
|
|
8,763 |
|
|
|
7,747 |
|
|
|
9,314 |
|
|
Acquisition
of investments
|
|
|
30,875 |
|
|
|
30,875 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other
accounts payables
|
|
|
89,265 |
|
|
|
20,214 |
|
|
|
69,051 |
|
|
|
— |
|
|
|
— |
|
|
Total
|
|
|
5,218,099 |
|
|
|
2,507,669 |
|
|
|
1,984,654 |
|
|
|
616,462 |
|
|
|
109,314 |
|
|
(1)
|
Estimated
interest payments are determined using the interest rate at December 31,
2008. 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. 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. As of December 31, 2008, the amount of
“real estate development obligations” related to units launched but not
sold was R$1,167.5 million.
|
|
(3)
|
Obligation
to venture partners accrues a minimum annual dividend equivalent to the
variation in CDI, which is not included in the table
above.
|
We have a
commitment to purchase the remaining 40% of Alphaville’s capital, not yet
measurable and consequently not recorded, which will be based on a fair value
appraisal of Alphaville prepared at the future acquisition dates. The
acquisition agreement provides that we will purchase the remaining 40% of
Alphaville by January 2012 (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.
We also
made provisions for contingencies in relation to labor, tax and civil lawsuits
in the amounts of R$17.6 million and R$36.0 million in current and non-current
liabilities, respectively, as of December 31, 2008.
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(3)
|
|
52
|
|
Chairman
|
|
|
|
Annual
Shareholders’ General Meeting in 2010
|
|
Caio
Racy Mattar(2)(3)
|
|
51
|
|
Director
|
|
|
|
Annual
Shareholders’ General Meeting in 2010
|
|
Richard
L. Huber(2)(3)
|
|
72
|
|
Director
|
|
|
|
Annual
Shareholders’ General Meeting in 2010
|
|
Thomas
J. McDonald(3)
|
|
44
|
|
Director
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|
|
|
Annual
Shareholders’ General Meeting in 2010
|
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Gerald
Dinu Reiss (2)(3)
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64
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Director
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Annual
Shareholders’ General Meeting in 2010
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Jose
Ecio Pereira da Costa Junior (2)(3)
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57
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Director
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Annual
Shareholders’ General Meeting in
2010
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(1)
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Under
Brazilian corporate law, an annual shareholders’ general meeting must take
place within the first four months of the calendar
year.
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(2)
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Independent
member pursuant to NYSE rules.
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(3)
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Independent
member pursuant to Brazilian Law. According to Brazilian Law, a
director is considered independent when: (1) he/she has no relationship
with the company, except for holding shares; (2) 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; (3) 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; (4) he/she is
not a supplier or buyer, direct or indirect, of the company where the
arrangement exceeds a certain amount; (5) 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; (6) he/she is not a spouse or
relative of any member of the company’s management; and (7) he/she does
not receive any compensation from the company, except for the compensation
related to its position as a board
member.
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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 (EGI), the
privately held investment company founded and led by Sam Zell. Mr.
Garrabrant joined EGI in 1996 and founded Equity International with Mr. Zell in
1999. Mr. Garrabrant is a director of Equity International, and is the former
vice chairman and director of Homex and a former director of NH Hoteles
(MSE:NHH). Previously, Mr. Garrabrant was involved in the creation of Capital
Trust (NYSE:CT) where he served as vice chairman and director, and in the
formation of Equity Office Properties Trust. Prior to joining EGI, he co-founded
Genesis Realty Capital Management and was a managing director in the real estate
investment banking division of Chemical Bank and in a similar role with The
Bankers Trust Company. Mr. Garrabrant is a member of the University of Notre
Dame's Mendoza College of Business Advisory Council and the Real Estate Advisory
Board at
Cambridge University. Mr. Garrabrant
holds a bachelor’s degree in finance from the University of Notre Dame and
completed the Dartmouth Institute at
Dartmouth College. He is currently the chairman of our board of
directors, and his current term commenced on April 4, 2008. He is also a
member of the Investment Committee and Compensation Committee. His business
address is Two North Riverside Plaza, Suite 1700, Chicago, Illinois, 60606,
United States.
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. He is also a member of the Compensation Committee and Nomination and
Corporate Governance Committee. 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 South America. He is currently the
chairman of Antarctic Shipping, a Chilean company that operates maritime cruises
in the Antarctic, and a director of, and an investor in, Viña San Rafael in
Chile, Covanta Energy Corporation, American Commercial Barge Line, and other
companies in the United States. 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. He has worked for more than 40 years at Aetna
Inc. in its financial area and as its chief executive officer and chairman, and
left Aetna Inc. in 2000. 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. He is also member of the Audit Committee and the Nomination and
Corporate Governance Committee. His business address is 139 W. 78th Street,
10024, New York, New York, United States.
Thomas J.
McDonald. Mr.
McDonald is chief strategic officer of Equity International. Mr. McDonald has
been associated with the Company since its inception in 1999. He is a
director of several of Equity International’s portfolio companies, including Gafisa (NYSE:GFA,
BZ:GFSA3), Construtora Tenda (BZ:TEND3), BR Malls (BZ:BRML3), Parque Arauco
(CI:PARAUCO), and AGV Logística. Prior to Equity International, Mr.
McDonald was with Anixter International, a global provider of network
infrastructure solutions and services. Prior to joining Anixter in 1992, Mr.
McDonald was based in Mexico City with Quadrum S.A. de C.V., a Latin American
finance company. Mr. McDonald holds a
bachelor’s degree in international relations and Spanish from the University of
Notre Dame and a master’s degree in business administration from the University
of Chicago's Graduate School of Business. He is currently a member of
our board of directors, and his current term commenced on April 4, 2008. He
is also member of the Investment Committee, the Compensation Committee and the
Nomination and Corporate Governance Committee. His business address is Two North
Riverside Plaza, Suite 1700, Chicago, Illinois, 60606, 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 was 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 from 1974 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 14,
2008. He is also member of the Audit Committee. 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 – PR Instituto Brasileiro dos Executivos de Finanças do Paraná.
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, and his current term commenced on April 30, 2009. 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:
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|
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|
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Wilson
Amaral de Oliveira
|
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56
|
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Chief
Executive Officer
|
|
|
|
|
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Alceu
Duilio Calciolari
|
|
46
|
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Chief
Financial Officer and Investor Relations Officer
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Antônio
Carlos Ferreira Rosa
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37
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Officer
|
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Mário
Rocha Neto
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51
|
|
Officer
|
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|
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Odair
Garcia Senra
|
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62
|
|
Officer
|
|
|
|
|
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, and he is the president of the
board of directors of Construtora Tenda S.A. 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 Fundição 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 Duilio
Calciolari. Mr. Calciolari is currently our chief financial
officer and investor relations officer, and his current term commenced in
December 2006 and he is the vice president of the board of directors of
Construtora Tenda S.A. 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 executive officer responsible
for new developments, and his current term commenced in December
2006. He holds a bachelor’s degree in civil engineering from
Universidade de São Paulo. He joined Gafisa in 1995 as an intern,
holding several positions, including construction manager and development
manager.
Mário Rocha
Neto. Mr. Rocha Neto is currently our operations 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 institutional relations, 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 officer of Secovi—Sindicato de Compra e Venda de Imóveis in
São Paulo.
Our
Relationship with our Executive Officers and Directors
As of
December 31, 2008, 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. As of December 31, 2008, our board of officers in the
aggregate held 0.99% of our share capital and our board of directors in the
aggregate held less than a 1% direct or indirect interest in our share capital.
Also, as of December 31, 2008, 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 2006,
the aggregate compensation of the members of our board of directors and our
consulting committees totaled R$800 thousand. For 2007, the aggregate
compensation of the members of our board of directors and our consulting
committees totaled R$867 thousand. For 2008, the aggregate compensation of the
members of our board of directors and our consulting committees totaled R$916
thousand.
For each
of 2006, 2007 and 2008, the aggregate compensation we paid to our executive
officers totaled R$4.6 million, R$4.6 million and R$4.1 million, respectively.
50% of our employee compensation is determined based on the attainment of
certain corporate goals.
For 2009,
the shareholders have established R$7.8 million as the aggregate compensation to
be paid to members of the board of directors, the board of officers and the
committees.
C. Board
Practices
General
Information
We are
managed by a board of directors consisting of at least five and a maximum of
seven directors and a board of officers consisting of at least two and a maximum
of seven 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, which is currently not installed as a permanent body, an investment
committee, an audit committee, a compensation committee, a nominating and
corporate governance committee, a finance committee, and ethics 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 at least
five and a maximum seven 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, in a board of directors that has six members, only one
member needs to be an independent director, our current 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 voting 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. This minimum percentage may vary from 5% to 10% depending on
the amount of our capital stock, as prescribed in the aforementioned CVM
instruction. 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. 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; (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. 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 bylaws and our board of directors determine 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 three 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
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 is currently comprised of 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 and our Audit Committee fulfills
the other requirements of Rule 10A-3 of the SEC and NYSE Rule 303A. 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 may act either as a permanent or non-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. According to CVM Resolution No.
324/00 and taking into consideration our corporate capital, our fiscal council,
a non-permanent body, must be established at a shareholders’ general meeting
upon the request of shareholders representing at least 2% of the shares with
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,
of companies controlled by us, or of companies forming a group of companies with
us (pursuant to Chapter XXI of Law No. 6,404/76), as well as spouses or
relatives 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. After the fiscal council is formed, its members would
remain in office until the annual general shareholders’ meeting of the year
following their election. 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
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, our Chief Executive Officer,
Alceu Duilio Calciolari, our Chief Financial Officer and Investor Relations
Officer and Fernando Cesar Calamita, our Planning and Controlling Officer. 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. According to the Novo Mercado listing rules
and our by-laws, we are required to have at least 20% of our board of directors
represented by independent directors. 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 or individual compensation of our board members
and
executive
officers, including benefits and allowances, at a general shareholders’ meeting.
If the shareholders only determine the total compensation, it is incumbent upon
the board of directors to establish the individual amounts. 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.
Although
we are not required under Brazilian law to have an audit committee, we formed
such a committee, which complies with NYSE Rule 303A.06 and the requirements of
Rule 10A-3 of the SEC, 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
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;
|
|
·
|
Provide
recommendations on the audit committee’s bylaws;
and
|
|
·
|
Review
our Code of
Business Conduct and Ethics and the procedures for monitoring
compliance with
it.
|
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, 2008, we had 3,916 employees, 2,778 in the State of São Paulo and
1,138 in the State of Rio de Janeiro. The table below shows the
number of employees for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
3,665 |
|
|
|
115 |
|
|
|
72 |
|
|
|
17 |
|
|
|
47 |
|
|
|
3,916 |
|
|
2007
|
|
|
642 |
|
|
|
78 |
|
|
|
73 |
|
|
|
14 |
|
|
|
66 |
|
|
|
873 |
|
|
2006
|
|
|
337 |
|
|
|
76 |
|
|
|
60 |
|
|
|
14 |
|
|
|
43 |
|
|
|
530 |
|
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 4,838 outsourced professionals are providing services to
us. There are 3,052 in the State of São Paulo and 1,786 in the State
of Rio de Janeiro.
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 2009, establishing a salary adjustment of 6.7% as
of May 2009. This collective bargaining agreement became effective on
May 2009 and will expire on April 30, 2010. 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 2009, establishing a salary adjustment of 7.5% as of March
2009. This collective bargaining agreement became effective in March
2009 and will expire in February 2010. We believe our relations with our
employees and unions are good. Over 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 1.0% of our
total share capital or of the share capital of any of our subsidiaries or
jointly-controlled entities. Also, as of December 31, 2008, 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
|
|
20,001
|
|
|
Gary
R. Garrabrant
|
|
Director
|
|
50,395
|
|
|
Caio
Racy Mattar
|
|
Director
|
|
1
|
|
|
Richard
L. Huber
|
|
Director
|
|
16,217
|
|
|
Gerald
Dinu Reiss
|
|
Director
|
|
1
|
|
|
Jose
Ecio Pereira da Costa Junior
|
|
Director
|
|
1
|
|
|
Wilson
Amaral De Oliveira
|
|
Chief
Executive Officer
|
|
235,000
|
|
|
Alceu
Duilio Calciolari
|
|
Chief
Financial Officer and Investor Relations Officer
|
|
347,920
|
|
|
Odair
Garcia Senra
|
|
Officer
|
|
363,733
|
|
|
Antonio
Carlos Ferreira Rosa
|
|
Officer
|
|
88,738
|
|
|
Mario
Rocha Neto
|
|
Officer
|
|
202,399
|
|
|
Total
|
|
|
|
1,324,406
|
|
Stock
Option Plans
Our stock
option plans seek to: (1) encourage our expansion and success by allowing our
directors, executive officers and senior employees to acquire shares of our
capital stock in order to encourage their integration with the company; (2)
allow 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.
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 plans and the specific
conditions set forth in their agreements.
Stock
Option Plan – 2000 to 2002
In 2002,
our shareholders ratified the terms and conditions of our stock option
plan. A standard stock option plan to grant subscription rights
related to our preferred shares was approved by our board of directors at a
meeting held on April 3, 2000. 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 this 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 this stock option plan agreement. Of these shares, 1,958,700 shares have been
acquired or expired pursuant to such agreements.
Stock
Option Plan – 2006
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 the
existing stock option plan. In addition, on February 3, 2006, our shareholders
approved a new stock option plan. Under the 2006 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 2006 stock option plan. Such new programs would grant our managers
and senior employees the right to subscribe and/or 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 6,065,040 shares of our common
shares have been issued to employees, directors and executive officers pursuant
to this stock option plan agreement. Of these shares, 433,095 shares have been
acquired or expired pursuant to such agreements.
Stock
Option Plan – 2008
We
approved a new stock option plan on June 18, 2008 during a special shareholders’
general meeting. Under the new stock option plan, our board of directors may
create additional programs on a regular basis for options to purchase up to 5%
of the total outstanding shares of our company, as set forth in the 2008 stock
option plan.
Under
this new stock option plan, the board of directors may grant different types of
options to certain beneficiaries, or “B options,” for the exercise price of
R$0.01. The exercise of B options, if granted, is subject to the proportional
exercise of the regular options granted under this 2008 plan, according to the
terms and conditions set forth in each program, and to lapse two years from the
grant date.
As of the
date of this annual report, options to purchase 151,189 shares of our common
shares have been issued to employees, directors and executive officers pursuant
to this stock option plan agreement. The options granted included 108,489 B
options. Of the total options granted, 42,700 have been acquired or
expired pursuant to such agreements.
|
|
|
Number
of Stock
Options
Issued
|
|
|
Number
of Stock
Options
Outstanding
(Not
Expired or exercised)
|
|
|
Exercise
Price per
Stock
Option
|
|
|
|
April
2000
|
|
|
1,050,000 |
|
|
|
— |
|
|
|
R$2.09 |
|
April
2009
|
|
April
2001
|
|
|
795,000 |
|
|
|
132,300 |
|
|
|
R$2.43 |
|
April
2010
|
|
April
2002
|
|
|
300,000 |
|
|
|
54,000 |
|
|
|
R$4.75 |
|
April
2011
|
|
February
2006
|
|
|
1,020,040 |
|
|
|
861,092 |
|
|
|
R$18.50 |
|
February
2014
|
|
February
2006
|
|
|
1,500,000 |
|
|
|
1,240,800 |
|
|
|
R$5.01 |
|
February
2014
|
|
February
2007
|
|
|
1,525,000 |
|
|
|
1,510,053 |
|
|
|
R$30.58 |
|
February
2015
|
|
May
2008
|
|
|
2,020,000 |
|
|
|
2,020,000 |
|
|
|
R$31.81 |
|
May
2016
|
|
June
2008
|
|
|
151,189 |
|
|
|
108,489 |
|
|
|
R$31.81 |
|
May
2011
|
(Exercise prices are adjusted according
to the dividends paid and the IGP M inflation index plus an annual interest rate
of 3% to 6%.)
A. Major
Shareholders
The
following table sets forth information relating to the ownership of our common
shares as of the date of this report, 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) (2)
|
|
|
18,229,607 |
|
|
|
13.7
|
|
|
|
Marsico
Capital
|
|
|
13,636,367 |
|
|
|
10.2
|
|
|
|
Morgan
Stanley (4)
|
|
|
12,076,326 |
|
|
|
9.1
|
|
|
|
FMR
LLC (Fidelity) (3)
|
|
|
7,806,682 |
|
|
|
5.9
|
|
|
|
EI
Fund IV Pronto, LLC (1) (2)
|
|
|
6,600,000 |
|
|
|
4.9
|
|
|
|
Directors
and officers (5)
|
|
|
1,324,406 |
|
|
|
1.0
|
|
|
|
Other
shareholders
|
|
|
70,569,958 |
|
|
|
52.9
|
|
|
|
Treasury
shares
|
|
|
3,124,972 |
|
|
|
2.3
|
|
|
|
Total
|
|
|
133,368,318 |
|
|
|
100.0
|
|
|
|
(1)
|
Affiliate
of Equity International.
|
|
(2)
|
Based
on information filed jointly by EIP Brazil Holdings, LLC (“EIP Brazil”),
EI Fund II, LP (“EI Fund II”), EI Fund II GP, LLC (“EI Fund II GP”), EI
Fund IV Pronto, LLC (“EI Pronto”), EI Fund IV, LP (“EI Fund IV”), EI Fund
IV GP, LLC (“EI Fund IV GP”) and Equity International, LLC (“EI”) with the
SEC on October 21, 2008. 18,229,607 common shares are owned directly by
EIP Brazil. EIP Brazil is wholly owned by EGB Holdings, LLC, which is
owned 99.9% by EI Fund II. EI Fund II GP is the general partner of EI Fund
II. EI Fund II and EI Fund II GP may be deemed to have beneficial
ownership of the shares owned directly by EIP Brazil. 3,300,000 ADSs
representing 6,600,000 common shares are owned directly by EI Pronto. EI
Pronto is wholly owned by EI Fund IV and EI Fund IV GP is the general
partner of EI Fund IV. EI Fund IV and EI Fund IV GP may be deemed to have
beneficial ownership of the shares owned directly by EI Pronto. Each of EI
Fund II GP and EI Fund IV GP is indirectly wholly owned by EI and EI may
be deemed to have beneficial ownership of the shares owned directly by EIP
Brazil and EI Pronto.
|
|
(3)
|
Based
on information filed by FMR LLC with the SEC on February 17, 2009.
Fidelity Management & Research Company, a wholly-owned subsidiary of
FMR LLC and an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is the beneficial owner of 7,804,590
common shares as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940.
|
|
(4)
|
Based
on information filed jointly by Morgan Stanley and Morgan Stanley
Investment Management Inc. with the SEC on February 17, 2009. The
securities being reported on by Morgan Stanley as a parent holding company
are owned, or may be deemed to be beneficially owned, by Morgan Stanley
Investment Management Inc., an investment adviser in accordance with Rule
13d-1(b)(1)(ii)(E) of the Securities Exchange Act, as amended. Morgan
Stanley Investment Management Inc. is a wholly-owned subsidiary of Morgan
Stanley.
|
|
(5)
|
Does
not include shares that may be purchased pursuant to outstanding stock
option plans except for shares subject to options that are currently
exercisable or exercisable within 60 days of the date of this annual
report.
|
Approximately
49% of our total common shares outstanding are held by investors in Brazil. We
are not aware of any shareholders’ agreement currently in force with our main
shareholder.
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, 2006, 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.
We
participate in the development of real estate ventures with other partners,
directly or through related parties, based on the constitutive documents of
condominiums and/or consortia. The management structure of these enterprises and
the cash management are centralized in the lead partner of the enterprise, which
manages the construction schedule and budgets. Thus, the lead partner ensures
that the investments of the necessary funds are made and allocated as planned.
The sources and uses of resources of the venture are reflected in the balance
sheet of the ventures, reflecting the respective
participation
percentages of the partners, which are not subject to inflation adjustments or
financial charges and do not have a predetermined maturity date. The average
term for the development and completion of the projects in which the resources
are invested is between 24 and 30 months. As of December 31, 2008, 2007 and
2006, we had current accounts receivable related to real estate ventures of
R$60.5 million, R$17.9 million and R$47.3 million, respectively.
As of and
for the years ended December 31, 2006, 2007 and 2008, 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, 2008, we were a party to 581 civil actions, totaling R$192.7
million. Of these actions, we were the plaintiff in 261 actions and the
defendant in 1,664 actions, with aggregate amounts of R$32.2 million and R$237.9
million, respectively. For three of the claims where we are the defendant, the
plaintiffs are seeking an aggregate amount of R$48.0 million. As of
December 31, 2008, we have filed defenses 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 claim involves an amount of R$28.0
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.
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, 2008, the provision for our civil claims amounted to R$27.8
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 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.
Tax
Claims
On
December 31, 2008, we were party to several tax proceedings involving tax
liabilities in the aggregate amount of R$108.5 million. As of December 31,
2008, the provision for tax liabilities amounted to R$19.6
million. In addition, we have deposited R$4.5 million with the court
in connection with some of these proceedings. These amounts take into
consideration the tax liabilities of our subsidiaries, in proportion to our
interest in their share capital. The main tax proceedings to which we are a
party are described below.
We have
challenged the constitutionality of the monthly payments to and 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 partially favorable first level decision in the case and
have not paid R$8.0 million to the tax authorities. Although we believe that an
unfavorable final outcome is unlikely, 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 No.
9,718/98. We obtained a partially favorable first level decision in the case and
have not paid R$3.5 million, which amount is fully accrued. We believe that an
unfavorable final outcome is unlikely with respect to the amendment of the
contribution calculation basis and probable 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.
As a
result of our business combination with Tenda, we became party to a proceeding
challenging the inclusion of revenues from the sale of real estate in the tax
basis for payment of the COFINS, as determined by Law No. 9,718/98. A final
decision was rendered unfavorably against Tenda and the payment due in
connection with this proceeding will be withdrawn by the federal
government.
We are
party to two tax claims arising from tax assessments filed by the Brazilian
Federal Revenue Service—SRF, because we deducted expenses that were considered
non-deductible by the authorities from the IRPJ (Corporate Income Tax) and CSLL
(Social Contribution on Net Income) calculation basis in fiscal years 1998 and
1999. The lower administrative court has rendered an unfavorable
decision for the fiscal year 1999 claim. We filed an administrative
appeal, but have not been notified of a final administrative decision. With
respect to the fiscal year 1998 claim, the administrative court issued a
partially favorable decision. We filed an appeal secured by a bank guarantee. We
are awaiting the 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
investigation 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
file an appeal as we did for fiscal year 1998. The aggregate amount
involved in these two claims is R$16.5 million, including interest, penalties
and legal fees, which do not include attorney’s fees.
Several
municipalities charge a municipal tax on construction on an arbitrated basis,
which varies depending on the characteristic of the construction. We have
challenged the calculation of the arbitrated basis on several of our
developments under construction and have filed lawsuits against the municipality
of São Paulo. In these proceedings, we deposited R$5.3 million with the courts
and we are awaiting a first level decision. In addition, the municipalities of
Rio de
Janeiro
and Santo Andre have issued tax assessments against us. We have filed
administrative defenses and are awaiting first level administrative decisions.
The total amount involved in these proceedings is R$9.0 million.
We are
party to several proceedings regarding the “non-cumulative systematic”
calculation and payment of the PIS and COFINS, as determined by Law No.
10,637/02. The total amount involved in these proceedings is approximately
R$14.0 million. Our legal counsel in connection with these proceedings believes
that an unfavorable final outcome is unlikely.
In
addition, we have requested payment in installments for amounts not collected of
the PIS and COFINS for the period from March 2004 to April 2005. The last
installment payment is scheduled for January 2011. As of December 31, 2008, such
installment plan had been deferred and an amount of R$7.2 million is fully
accrued as accounts payable. An additional installment plan was granted to Tenda
for amounts not collected of the IRPJ, CSLL, PIS and COFINS for the period from
2004 to 2006. The last installment payment is scheduled for April 2012. As of
December 31, 2008, the amount due is R$9.0 million.
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 amount involved in
these claims is R$37.6 million and the amount that was deposited with the court
was R$1.3 million. These amounts are in proportion to our stake in
Alphaville. 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, 2008, we
recorded a provision of R$16.7 million for this claim.
Labor
Claims
As of
December 31, 2008, we were a defendant in approximately 1,871 labor claims
resulting from our ordinary course of business, of which approximately 97% were
filed by outsourced workers and approximately 3% were filed by our former
employees. The alleged legal bases for these claims mainly relate to
termination benefits, overtime hours, employee relationship and dismissal
rights. On December 31, 2008, the total value involved in the labor claims filed
against us was approximately R$45 million. As of December 31, 2008,
the provision for labor claims amounted to R$10.0 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. Our board of directors has
recommended that we pay the mandatory 25% dividends on shareholders’ equity for
the fiscal year 2008.
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 debentures, employees’
and management’s participation in earnings and founders’ shares, represents its
“net income” for such fiscal year. In accordance with Brazilian
corporate law, an amount equal to the company’s “net income” may be affected by
the following:
|
·
|
reduced
by amounts allocated to the legal
reserve;
|
|
·
|
reduced
by amounts allocated to any statutory
reserve;
|
|
·
|
reduced
by amounts allocated to the contingency reserve, if
any;
|
|
·
|
reduced
by amounts allocated to the tax incentives
reserve;
|
|
·
|
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 types of reserve accounts: (1) revenue
reserves and (2) capital reserve.
Revenue
Reserves
Our
revenue reserves consist of the following:
|
·
|
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, 2008, our legal reserve amounted to R$21.1
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.
|
According
to our by-laws, up to 71.25% of our net income may be allocated to an investment
reserve to finance the expansion of our activities and the activities of our
subsidiaries and jointly-controlled entities by, among other things, subscribing
for capital increases, creating new projects or participating in
consortia. This investment reserve may not exceed 80% of our
corporate capital.
|
·
|
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, 2008, there was no amount allocated to
a contingency reserve.
|
|
·
|
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 net profits, net gains or net returns resulting
from transactions or the accounting of assets and liabilities based on
their market value, 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,
2008, our investment reserve amounted to R$38.5
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, 2008, there was no amount allocated to our retained
earnings reserve.
|
Capital
Reserves
The
capital reserve is formed by (a) amounts received by shareholders in excess of
the par value of shares issued (premium on capital stock), as well as the part
of the issue price of the shares with no par value that exceeds the amount
intended to form the capital stock; and (b) proceeds from the sale of founders’
shares and subscription warrants. Under Brazilian corporate law, capital reserve
may only be applied to: (1) absorb losses that exceed accumulated earnings and
revenue reserves; (2) redeem, reimburse or buy our own shares; and (3) increase
our share capital.
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, rather
than a fixed monetary amount per share. Under our bylaws, at least
25% of our 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 profit retention and statutory
reserves.
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
companies, 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 and our by-laws 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 based on our financial results from the previous fiscal
year.
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 or
quarter 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 Common Shares and
the 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 a deductible 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. 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 to 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). Countries that have no income tax, have income tax rates lower
than 20% or whose legislation does not allow access to shareholder information
of corporate structures are considered tax haven jurisdictions.
If a
payment of interest on shareholder’s equity is recorded at net value as part of
a mandatory dividend, we will pay the income tax on behalf of our shareholders
at the time the payment is distributed. Otherwise, the income tax
will be paid by the shareholders, subject to our obligation to retain and
collect taxes on the payment.
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
In 2007,
we distributed dividends in the total amount of R$11.0 million, or R$0.11 per
share, for fiscal year 2006. Dividends for fiscal year 2007, in the amount of
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. In 2009, we will
distribute dividends in the total amount of R$26.1 million, or R$0.20 per share,
for fiscal year 2008, on dates to be set by our board of directors.
B. Significant
Changes
None.
A. Offer
and Listing Details
Our
common shares started trading on the BOVESPA on February 17, 2006 and the ADSs
started trading on the NYSE on March 16, 2007. The table below sets forth, for
the indicated periods, the high and low closing prices of the ADSs on the NYSE,
in U.S. dollars, and the common shares on the BOVESPA, in reais:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(in
US$ per ADS)
|
|
|
|
|
|
(in
reais per common
shares)
|
|
|
|
|
|
Year
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35.20 |
|
|
|
17.70 |
|
|
|
430,555 |
|
|
|
|
|
40.50 |
|
|
|
23.10 |
|
|
|
418,005 |
|
|
|
35.61 |
|
|
|
22.50 |
|
|
|
897,085 |
|
|
|
|
|
46.50 |
|
|
|
5.41 |
|
|
|
930,018 |
|
|
|
38.26 |
|
|
|
6.86 |
|
|
|
1,238,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter 2007 (3)
|
|
|
27.77 |
|
|
|
24.89 |
|
|
|
1,164,963 |
|
|
|
35.30 |
|
|
|
25.70 |
|
|
|
466,779 |
|
|
Second
quarter 2007
|
|
|
35.32 |
|
|
|
24.65 |
|
|
|
310,953 |
|
|
|
34.02 |
|
|
|
25.25 |
|
|
|
889,111 |
|
|
Third
quarter 2007
|
|
|
35.09 |
|
|
|
23.10 |
|
|
|
405,016 |
|
|
|
33.41 |
|
|
|
22.50 |
|
|
|
1,141,404 |
|
|
Fourth
quarter 2007
|
|
|
40.50 |
|
|
|
30.00 |
|
|
|
407,786 |
|
|
|
35.61 |
|
|
|
27.01 |
|
|
|
1,089,472 |
|
|
First
quarter 2008
|
|
|
41.50 |
|
|
|
29.96 |
|
|
|
771,929 |
|
|
|
34.60 |
|
|
|
25.50 |
|
|
|
1,128,515 |
|
|
Second
quarter 2008
|
|
|
46.50 |
|
|
|
33.36 |
|
|
|
969,276 |
|
|
|
38.26 |
|
|
|
27.50 |
|
|
|
995,435 |
|
|
Third
quarter 2008
|
|
|
35.59 |
|
|
|
20.97 |
|
|
|
890,823 |
|
|
|
28.20 |
|
|
|
19.90 |
|
|
|
1,206,926 |
|
|
Fourth
quarter 2008
|
|
|
24.60 |
|
|
|
5.41 |
|
|
|
1,080,111 |
|
|
|
23.79 |
|
|
|
6.86 |
|
|
|
1,621,471 |
|
|
First
quarter 2009
|
|
|
12.11 |
|
|
|
7.33 |
|
|
|
674,687 |
|
|
|
13.23 |
|
|
|
8.69 |
|
|
|
1,885,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(in
US$ per ADS)
|
|
|
|
|
|
(in
reais per common
shares)
|
|
|
|
|
|
Month
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
2008
|
|
|
9.26 |
|
|
|
6.36 |
|
|
|
591,131 |
|
|
|
10.50 |
|
|
|
7.70 |
|
|
|
1,433,820 |
|
|
January
2009
|
|
|
12.11 |
|
|
|
8.58 |
|
|
|
683,844 |
|
|
|
13.10 |
|
|
|
10.10 |
|
|
|
1,215,924 |
|
|
February
2009
|
|
|
11.72 |
|
|
|
8.26 |
|
|
|
671,193 |
|
|
|
13.23 |
|
|
|
9.91 |
|
|
|
1,724,356 |
|
|
March
2009
|
|
|
10.47 |
|
|
|
7.33 |
|
|
|
669,380 |
|
|
|
11.86 |
|
|
|
8.69 |
|
|
|
2,724,900 |
|
|
April
2009
|
|
|
17.92 |
|
|
|
10.91 |
|
|
|
779,236 |
|
|
|
19.60 |
|
|
|
12.41 |
|
|
|
2,267,110 |
|
|
May
2009
|
|
|
19.73 |
|
|
|
16.44 |
|
|
|
771,136 |
|
|
|
20.90 |
|
|
|
17.20 |
|
|
|
2,687,006 |
|
|
(1)
|
Average
number of shares traded per day.
|
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
approximately 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
US$1.4 trillion as of December 31, 2007 and an average daily trading volume of
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—Disclosure
Requirements.”
Under
Brazilian corporate law, a corporation is either public, as we are, or closely
held. 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:
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appoint
a representative in Brazil with powers to take actions relating to the
investment;
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appoint
an authorized custodian in Brazil for the investments, which must be a
financial institution duly authorized by the Central Bank and
CVM;
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appoint
a tax representative in Brazil;
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through
its representative, register itself as a foreign investor with the CVM and
the investment with the Central Bank;
and
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through
its representative, register itself with the Brazilian Internal Revenue
(Receita Federal)
pursuant to the Regulatory Instructions No. 461 and
568.
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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:
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register
as a foreign direct investor with the Central
Bank;
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obtain
a taxpayer identification number from the Brazilian tax
authorities;
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appoint
a tax representative in Brazil; and
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appoint
a representative in Brazil for service of process in respect of suits
based on Brazilian corporate law.
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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 obtain the authorization with the Central Bank and
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 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 after obtaining Central Bank’s
authorization. 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.
Registration
We are
currently a publicly-held company 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 develop
any type of real estate project, whether our own or that of a third party, in
the latter case as a contractor or agent; (2) purchase and sell any type of real
estate; (3) perform civil construction and provide civil engineering services;
and (4) develop and implement marketing strategies for any type of real estate
project, whether our own or that of a third party.
Issued
Share Capital
As of the
date of this annual report, our share capital was R$1,231.9 million, all of
which was fully subscribed and paid-in. Our share capital is
comprised of 133,368,318 registered, book-entry common shares, without par
value. 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, among others, (1) only issue common shares,
(2) maintain a minimum free float equal to at least 25% of the company’s
capital, (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.
According
to CMN Resolution No. 3,456 of June 1, 2007, which governs the investment
of funds by private pension funds, shares of companies that adopt differentiated
corporate governance practices may represent a higher interest in the investment
portfolio of such private pension funds, and are therefore 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 free float equal to 25% of the capital
stock, shall be maintained 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. 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 sells 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
Fiscal 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 a board of officers (Diretoria). See “Item 6.C.
Directors, Senior Management and Employees—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:
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perform
any act of generosity to the detriment of the
company;
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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
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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.
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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:
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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;
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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;
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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, also through private trading, carried out by
us. This restriction is extended to periods prior to the
announcement of such information or annual or interim financial
statements;
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trading
of our securities or transactions related to our securities carried out by
the aforementioned persons pursuant to an Individual Investment Program,
consisting of long-term investments, as defined in the Trading Policy, is
not subject to the aforementioned restrictions;
and
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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.
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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 has 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, Brazilian corporate law and the Novo Mercado rules, 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 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 by a single or series of
transaction.
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, or (2) individuals who provide services to us
or to 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:
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a
reduction in the percentage of our mandatory
dividends;
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a
change in our corporate purpose;
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an
acquisition, by our company, of a controlling stake in another company if
the acquisition price is outside of the limits established by Brazilian
corporate law;
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a
merger of our company into another company, if we are not the surviving
entity, or our consolidation with another company;
or
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an
approval of our participation in a group of companies (as defined in
Brazilian corporate law).
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Brazilian
corporate law further provides that any resolution regarding a spin-off will
also entitle shareholders to withdraw if the spin-off:
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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;
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reduces
our mandatory dividends; or
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causes
us to join a group of companies (as defined in Brazilian corporate
law).
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In cases
where (1) our company merges with another company where 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, i.e. part of the BOVESPA index or other stock
exchange index in Brazil or abroad, (as defined by the CVM), and (b) widely
held, such that less than 50% of our shares are held by a controlling
shareholder or by companies a controlling shareholder controls. Gafisa is
currently part of the IBOVESPA (the BOVESPA index) and has no controlling
shareholder. Therefore, its shares are, at present, considered liquid and widely
held for the purposes of this paragraph.
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 the
30-day period 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 subscription 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, debentures or subscription warrants is effected through a sale on
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, including amendment of our corporate
purpose;
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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 option plan;
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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 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, consolidation with another company or
spin-off;
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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, except in some specific
circumstances under 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 vote in any shareholders meeting;
and
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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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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 O Estado de São
Paulo. 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, 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; and
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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.
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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
determines that the price of our shares shall be quoted separately or that the
trading of our shares on the Novo Mercado shall be
suspended by reason of non-compliance with the listing rules of Novo Mercado. At
such a meeting all members of our board of directors must be replaced. In the
event the shareholders’ general meeting is not called by the chairman of the
board of directors within the time period established in our bylaws, the meeting
may be called by any shareholder of the company.
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 involving our company, our shareholders, members of
our management or our fiscal council relating to or arising from the Listing
Agreement in the Novo
Mercado, Listing Rules, 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 shareholders only if we conduct
a public tender offer to acquire all of our outstanding shares in accordance
with the rules and regulations of Brazilian corporate law, the CVM and the Novo Mercado regulations
which requires:
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a
fair bid price at least equal to the value estimated by the company;
and
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shareholders
holding more than two thirds of the outstanding shares have specifically
approved the process or accepted the
offer.
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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, and 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.
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, 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
us.
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.
Delisting
from the Novo
Mercado
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. 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, if any, or by us.
If our
delisting from the Novo
Mercado occurs due to the cancellation of our registration as a publicly
held company, all the other requirements established by such delisting shall be
followed. 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.
In
addition, our by-laws provide that if the shareholders decide to delist from the
Novo Mercado and no
controlling shareholders exist at the time, the tender offer for the acquisition
of our outstanding common shares shall be effected by the shareholders who voted
in favor of the delisting from the Novo Mercado.
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 and pursuant to the conditions 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
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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, as provided in our financial
statements;
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create,
as a result of any action or inaction, directly or indirectly, any
artificial demand, supply or condition relating to 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 outstanding 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 other
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.
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% by January 2012 (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.
In
October 2008, Gafisa and Tenda concluded a business combination in which
Gafisa’s wholly-owned subsidiary FIT was merged into Tenda. The purpose of the
merger was to consolidate the activities of FIT and Tenda in the low income
sector in Brazil and to develop real estate units with an average value of less
than R$200,000. As a result of the business combination, Gafisa now owns 60.0%
of the total and voting capital stock of Tenda and FIT was merged into
Tenda.
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, our common shares or 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 of 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 to the extent that
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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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.
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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.
The legal
definition of a “tax haven jurisdiction” was recently broadened by Law No.
11,727, and may vary depending on the type of transaction which is carried out.
For purposes of payment of interest on shareholders’ equity, a payee’s country
or location should be deemed a tax-haven jurisdiction when it (a) does not tax
income, (b) taxes income at a rate lower than 20%, or (c) imposes restrictions
on the disclosure of shareholding composition, ownership of investments, or the
ultimate beneficiary of earnings that are attributed to
non-residents.
The
Brazilian tax authorities regularly issue a list of jurisdictions which are
considered tax-haven jurisdictions (“black-list”)1. This “black-list,” however, has not been
updated after the recent modifications introduced by Law No. 11,727/08. There is
no assurance that, when and if the Brazilian tax authorities issue a new
“black-list,” it will not comprise, for the purpose of interest on shareholders’
equity, countries or locations other than those which meet the criteria
described in items (a), (b) and (c) above.
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.
1 The countries currently included in this
list, according to Normative Instruction of the Brazilian Federal Revenue
Service No. 188/02, are: American Samoa, Andorra, Anguilla, Antigua and Barbuda,
Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands,
Campione D’Italia, Cayman Islands, Channel Islands (Jersey, Guernsey, Alderney
and Sark), Cook Islands, Costa Rica, Cyprus, Djibouti, Dominica, Gibraltar,
Grenada, Hong Kong, Isle of Man, Lebanon, Lebuan, Liberia, Liechtenstein,
Luxembourg (only to holding companies governed by Law dated 7/31/1929), Macau,
Madeira Islands, Maldives, Malta, Marshall Islands, Mauritius, Monaco,
Montserrat, Nauru, Netherland Antilles, Niue, Oman, Panama, Saint Kitts and
Nevis, Saint Lucia, Saint Vincent and The Grenadines, San Marino, Seychelles,
Singapore, Tonga, Turks and Caicos Islands, United Arab Emirates, U.S. Virgin
Islands, Vanuatu and Western Samoa.
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, on the basis that ADSs are not “assets located
in Brazil” for the purposes of Article 26 of Law No. 10,833. We cannot be sure
that the Brazilian tax authorities will agree with this interpretation. 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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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 for purposes of income tax on gains;
or
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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 for purposes of income tax on
gains.
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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 for purposes of income tax on gains, 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.
The
statutory definition of a tax-haven jurisdiction for the purposes of income tax
on gains differs depending on whether or not the investment in common shares or
ADSs is registered under Law No. 4,131 or under Resolution No.
2,689.
In the
case of gains arising from an investment under Law No. 4,131, a country or
location is defined as a tax-haven jurisdiction whenever such country or
location (a) does not tax income, (b) taxes income at a rate lower than 20%, or
(c) imposes restrictions on the disclosure of shareholding composition,
ownership of investments, or the ultimate beneficiary of earnings that are
attributed to non-residents.
In the
case of gains arising from an investment registered under Resolution No. 2,689,
criterion (c) above does not apply. In these cases, a
country or location is defined as a tax-haven jurisdiction solely when such
country or location: (a) does not tax income, or (b) taxes income at a rate
lower than 20%.
The
Brazilian tax authorities regularly issue a list of countries and locations
considered to be “tax haven jurisdictions.” The same comments relating to
the issuance of this “black list” made under “Item 8.A. Consolidated Statements
and Other Financial Information—Interest on Shareholders’ Equity” above apply
both to investments registered under Law No. 4,131 and under Resolution No.
2,689.
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 from zero to 0.38%, although the zero
percent rate still applies in some cases, such as:
|
|
(1)
|
inflow
and outflow related to transactions carried out on the Brazilian stock
exchange by 2,689 Holders; and
|
|
|
(2)
|
payment
of dividends and interest on shareholders’ equity related to the
investment mentioned under item (1)
above.
|
Notwithstanding
these rates in force as of the date hereof, the Minister of Finance is legally
entitled to increase the rate of the IOF/Exchange to a maximum of 25% of the
amount of the currency exchange transaction, but only on a prospective
basis.
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.
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
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:
|
·
|
certain
financial institutions;
|
|
·
|
dealers
or traders in securities who use a mark-to-market method of tax
accounting;
|
|
·
|
persons
holding common shares or ADSs as part of a hedging transaction, straddle,
wash sale, conversion transaction or integrated transaction or persons
entering into a constructive sale with respect to the common shares or
ADSs;
|
|
·
|
persons
whose functional currency for U.S. federal income tax purposes is not the
U.S. dollar;
|
|
·
|
entities
classified as partnerships for U.S. federal income tax
purposes;
|
|
·
|
persons
liable for the alternative minimum
tax;
|
|
·
|
tax-exempt
entities, including an “individual retirement account” or “Roth
IRA”;
|
|
·
|
persons
that own or are deemed to own ten percent or more of our voting
stock;
|
|
·
|
persons
who acquired our ADSs or common shares pursuant to the exercise of any
employee stock option or otherwise as compensation;
or
|
|
·
|
persons
holding shares in connection with a trade or business conducted outside of
the United States.
|
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, any of which is
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:
|
·
|
a
citizen or individual resident of the United
States;
|
|
·
|
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 shares
are released before shares are delivered to the depositary (“pre-release”) or
intermediaries in the chain of ownership between U.S. holders and the issuer of
the security underlying the American depositary shares may be taking actions
that are inconsistent with the claiming of foreign tax credits for U.S. holders
of American depositary shares. 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 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 other than certain pro rata distributions of
ordinary 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 favorable rates, up to 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.
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 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 converted into U.S. dollars after
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
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.
U.S. Holders should consult their tax advisers as to whether the Brazilian tax
on gains would be creditable against the holder’s U.S. federal income tax on
foreign-source income from other sources.
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 2008 taxable year. However, because
PFIC status depends on 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 a 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 that taxable year, and an
interest charge would be imposed on the amount allocated to that taxable
year. Further, to the extent that any distribution received by a U.S.
Holder on its common shares or ADSs exceeds approximately 125% of the average of
the annual distributions on common shares or ADSs received during the preceding
three years or the U.S. Holder’s holding period, whichever is shorter, that
distribution would be subject to taxation in the same manner as gain, described
immediately above. 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 any of these elections would be available and, if so, what
the consequences of the alternative treatments would be in their 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 may be subject 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 100 F Street,
N.E., 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, 100 F Street, N.E., 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 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
instruments (fixed and variable) as of December 31, 2008.
| |
|
|
|
| |
|
Expected
Maturity Date
|
|
| |
|
Total
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
and later
|
|
|
Principal
Index(1)
|
|
|
Fair
Value
|
|
| |
|
(In
accordance with Brazilian GAAP) (in thousands of R$)
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
financing and debentures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentures
|
|
|
503,945 |
|
|
|
61,945 |
|
|
|
96,000 |
|
|
|
96,000 |
|
|
|
250,000 |
|
|
CDI
|
|
|
|
503,945 |
|
|
Average
interest rate
|
|
|
11.6 |
% |
|
|
11.8 |
% |
|
|
11.0 |
% |
|
|
11.6 |
% |
|
|
11.8 |
% |
|
|
|
|
|
|
|
|
Loans
and financing (working capital)
|
|
|
662,535 |
|
|
|
283,044 |
|
|
|
153,315 |
|
|
|
152,073 |
|
|
|
74,103 |
|
|
CDI
|
|
|
|
662,535 |
|
|
Average
interest rate
|
|
|
11.6 |
% |
|
|
11.6 |
% |
|
|
11.2 |
% |
|
|
11.8 |
% |
|
|
12.4 |
% |
|
|
|
|
|
|
|
|
Loans
and financing – other
|
|
|
13,386 |
|
|
|
7,640 |
|
|
|
4,056 |
|
|
|
1,690 |
|
|
|
— |
|
|
TR
|
|
|
|
13,386 |
|
|
Average
interest rate
|
|
|
11.0 |
% |
|
|
11.1 |
% |
|
|
10.6 |
% |
|
|
10.9 |
% |
|
|
— |
|
|
|
|
|
|
|
|
|
Loans
and financing - SFH
|
|
|
372,255 |
|
|
|
156,819 |
|
|
|
187,650 |
|
|
|
27,786 |
|
|
|
— |
|
|
TR
|
|
|
|
372,255 |
|
|
Average
interest rate
|
|
|
11.4 |
% |
|
|
11.6 |
% |
|
|
11.1 |
% |
|
|
12.0 |
% |
|
|
— |
|
|
|
|
|
|
|
|
|
Total
loans, financing and debentures
|
|
|
1,552,121 |
|
|
|
509,448 |
|
|
|
441,021 |
|
|
|
277,549 |
|
|
|
324,103 |
|
|
|
|
|
|
1,552,121 |
|
|
Obligation
to venture partner
|
|
|
300,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
300,000 |
|
|
CDI
|
|
|
|
300,000 |
|
|
Real
estate development obligations(2)
|
|
|
2,465,963 |
|
|
|
1,499,317 |
|
|
|
905,660 |
|
|
|
60,986 |
|
|
|
— |
|
|
INCC
|
|
|
|
2,465,963 |
|
|
Obligations
for purchase of land
|
|
|
392,762 |
|
|
|
280,209 |
|
|
|
26,626 |
|
|
|
33,327 |
|
|
|
52,600 |
|
|
INCC
|
|
|
|
392,762 |
|
|
Total
|
|
|
4,710,846 |
|
|
|
2,288,974 |
|
|
|
1,373,307 |
|
|
|
371,862 |
|
|
|
676,703 |
|
|
|
|
|
|
4,710,846 |
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
bank and marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and banks
|
|
|
73,538 |
|
|
|
73,538 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
73,538 |
|
|
Cash
equivalents (current and non-current)
|
|
|
455,036 |
|
|
|
455,036 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
455,036 |
|
|
Restricted
cash
|
|
|
76,928 |
|
|
|
76,928 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
76,928 |
|
|
Receivables
from clients
|
|
|
2,118,544 |
|
|
|
1,254,594 |
|
|
|
473,601 |
|
|
|
237,071 |
|
|
|
153,278 |
|
|
INCC
and IGPM
|
|
|
|
2,118,544 |
|
|
Receivables
from clients (2)
|
|
|
3,566,919 |
|
|
|
812,406 |
|
|
|
1,509,970 |
|
|
|
755,848 |
|
|
|
488,695 |
|
|
INCC
and IGPM
|
|
|
|
3,566,919 |
|
|
Total
client receivables
|
|
|
5,685,463 |
|
|
|
2,067,000 |
|
|
|
1,983,571 |
|
|
|
992,919 |
|
|
|
641,973 |
|
|
|
|
|
|
|
5,685,463 |
|
|
Total
|
|
|
6,290,965 |
|
|
|
2,672,502 |
|
|
|
1,983,571 |
|
|
|
992,919 |
|
|
|
641,973 |
|
|
|
|
|
|
|
6,290,965 |
|
|
(1)
|
See
notes 9 and 10 to our consolidated financial statements for information
about the interest rates on our loans, financing and debentures. At
December 31, 2008, the annualized index was 12.2% for CDI, 1.62% for TR,
11.9% for INCC and 9.8% for IGPM.
|
|
(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.
Foreign
Exchange Rate
As of
December 31, 2008, we had debt in foreign currency in the total notional amount
of R$200.0 million. In order to mitigate 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, 2008, under management’s supervision and with its participation,
including our chief executive officer and chief financial officer, we performed
an evaluation of our disclosure controls 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, 2008.
(b)
Management’s Annual Report on Internal Control over Financial
Reporting
Our
management’s annual report on internal control over financial reporting is
included in this annual report on page F-2.
(c)
Attestation Report of the Registered Public Accounting Firm
The
opinion by our independent registered public accounting firm on the
effectiveness of our internal control over financial reporting is included in
the report of PricewaterhouseCoopers Auditores Independentes that is included in
this annual report on page F-4.
(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 affected, or is
reasonably likely to materially affect, 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 nine times in 2008. 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 55-11-3025-9348 and e-mail ri@gafisa.com.br.
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, 15 issues were reported to our
“whistleblower channel,” all of them related to personal conduct and, therefore,
without any financial impact on 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 2008
and 2007 and the respective remuneration for these services.
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of reais)
|
|
|
Audit
fees (1)
|
|
|
2,334 |
|
|
|
1,346 |
|
|
Audit
related fees (2)
|
|
|
1,008 |
|
|
|
498 |
|
|
Tax
fees (3)
|
|
|
99 |
|
|
|
— |
|
|
Total
|
|
|
3,441 |
|
|
|
1,844 |
|
|
(1)
|
“Audit
fees” are the aggregate fees billed by PricewaterhouseCoopers Auditores
Independentes for the audit of our consolidated and annual financial
statements including audit of internal control over financial reporting,
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 billed by PricewaterhouseCoopers Auditores Independentes
for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and in 2008
and 2007 were principally related to an assessment and recommendation for
improvements in internal control over financial reporting and due
diligence related to mergers and
acquisitions.
|
|
(3)
|
“Tax
fees” are fees billed by PricewaterhouseCoopers Auditores Independentes
for tax compliance services.
|
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.
See “Item
6.C. Directors, Senior Management and Employees—Board Practices.”
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.
|
|
4.2
|
Acquisition
Agreement dated October 3, 2008 between Fit Residencial Empreendimentos
Imobiliários Ltda. and Construtora Tenda S.A.*
|
|
11.1.
|
Code
of Business Conduct and Ethics (English), which is incorporated by
reference to our annual report filed on Form 20-F with the Securities and
Exchange Commission on June 18,
2008.
|
|
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:
|
|
|
| |
|
Name:
|
Wilson
Amaral de Oliveira
|
|
| |
|
Title:
|
Chief
Executive Officer
|
|
| |
By:
|
|
|
| |
|
Name:
|
Alceu
Duilio Calciolari
|
|
| |
|
Title:
|
Chief
Financial and Investor Relations Officer
|
|
TABLE
OF CONTENTS
|
|
Page
|
|
Audited
Consolidated Financial Statements:
|
|
|
|
|
|
F-2
|
|
|
F-4
|
|
|
F-7
|
|
|
F-9
|
|
|
F-10
|
|
|
F-11
|
|
|
F-12
|
|
|
F-13
|
|
|
|
|
|
A-1
|
over Financial Reporting
The management of Gafisa S.A. ("Gafisa" or the "Company"), including
the CEO and CFO, is responsible for establishing and maintaining adequate
internal controls over financial reporting.
The Company's internal control over
financial reporting is a process designed by, or under the supervision of, our
CEO and CFO, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The
Company's internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, and that the degree of compliance with the policies or
procedures may deteriorate.
As disclosed in the Note 1 of its
consolidated financial statements, during 2008, Gafisa acquired control of
Construtora Tenda S.A. As provided under the Sarbanes-Oxley Act of 2002 and the
applicable rules and regulations of the Securities and Exchange Commission,
management has elected to exclude Construtora Tenda S.A. from this evaluation,
but not its former subsidiary Fit Residencial Empreendimentos
Imobiliários Ltda. which was merged by Construtora Tenda S.A. on October 21,
2008. The total assets and gross
operating revenue of Construtora Tenda S.A., excluding Fit Residencial
Empreendimentos Imobiliários Ltda., represent 18.5% and 8.2%, respectively,
of the amounts reported in the Company's consolidated financial statement as of
and for the year ended December 31, 2008.
Gafisa's management has assessed the
effectiveness of the Company's internal controls over financial reporting as of
December 31, 2008 based on the criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") and, based on such criteria, Gafisa's management
has concluded that, as of December 31, 2008, the Company's internal control over
financial reporting was effective.
The effectiveness of the Company's
internal control over financial reporting as of December 31, 2008 has been audited by
PricewaterhouseCoopers Auditores Independentes, an independent registered public
accounting firm, as stated in their report which appears
herein.
São Paulo, June 5, 2009
By:
|
|
|
|
Chief Executive
Officer
|
|
| |
|
| |
|
|
|
|
|
Chief Financial
Officer
|
|
Public
Accounting Firm
To
the Board of Directors and Shareholders
Gafisa
S.A.
|
1
|
In our
opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of changes in shareholders' equity, of
cash flows and of value added present fairly, in all material respects,
the financial position of Gafisa S.A. (the "Company") at December 31,
2008, 2007 and 2006, and the results of their operations, their value
added and their cash flows for each of the three years in the period ended
December 31, 2008 in conformity with accounting practices adopted in
Brazil. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company's management is responsible
for these financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
"Management's Report on Internal Control over Financial Reporting". Our
responsibility is to express opinions on these financial statements and on
the Company's internal control over financial reporting based on our
audits (which was an integrated audit in 2008). We did not audit the
consolidated financial statements of Construtora Tenda S.A., a subsidiary,
which statements reflect total assets of R$ 1,544,030 thousand as of
December 31, 2008, and gross operating revenue of R$ 169,026 thousand
for the period from October 22 through December 31, 2008. The consolidated
financial statements of Construtora Tenda S.A. were audited by other
auditors whose report thereon has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Construtora Tenda S.A.,
is based solely on the report of the other
auditors.
|
|
2
|
We conducted
our audits in accordance with approved Brazilian auditing standards 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 and whether effective internal control over
financial reporting was maintained in all material respects. Our audits
of
|
the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits and the
report of other auditors provide a reasonable basis for our
opinions.
|
3
|
As mentioned
in Note 2 to the consolidated financial statements, in connection with the
changes in the accounting practices adopted in Brazil in 2008, the
financial statements for 2007 and 2006, presented for comparison purposes,
were adjusted and have been restated pursuant to Accounting Standards and
Procedures (NPC) 12 - Accounting Practices, Changes in Accounting
Estimates and Correction of Errors.
|
|
4
|
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 Note 22 to the consolidated financial
statements.
|
|
5
|
A company's
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company's assets that could have a material effect
on the financial statements.
|
|
6
|
Because of
its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may
deteriorate.
|
|
7
|
As described
in the accompanying "Management's Report on Internal Control over
Financial Reporting", management has excluded Construtora Tenda S.A., but
not the former subsidiary Fit Residencial Empreendimentos Imobiliários
Ltda. which was merged by Construtora Tenda S.A. on October 21, 2008, from
its assessment of internal control over financial reporting as of December
31, 2008, because it was acquired by the Company in a purchase business
combination during 2008. We have also excluded Construtora Tenda S.A. from
our audit of internal control over financial reporting. Construtora Tenda
S.A. is a subsidiary whose excluded total assets and gross operating
revenue represent 18.5% and 8.2%, respectively, of the related
consolidated financial statement amounts as of and for the year ended
December 31, 2008.
|
/s/
PricewaterhouseCoopers
Auditores
Independentes
|
Gafisa
S.A.
|
| In
thousands of Brazilian reais |
|
|
Assets
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and marketable securities
|
|
4
|
|
|
|
605,502 |
|
|
|
517,420 |
|
|
|
266,159 |
|
|
Receivables
from clients
|
|
5
|
|
|
|
1,254,594 |
|
|
|
473,734 |
|
|
|
533,593 |
|
|
Properties
for sale
|
|
6
|
|
|
|
1,695,130 |
|
|
|
872,876 |
|
|
|
422,984 |
|
|
Other
accounts receivable
|
|
7
|
|
|
|
182,775 |
|
|
|
101,920 |
|
|
|
108,527 |
|
|
Deferred
selling expenses
|
|
|
|
|
|
13,304 |
|
|
|
3,861 |
|
|
|
3,074 |
|
|
Prepaid
expenses
|
|
|
|
|
|
25,396 |
|
|
|
6,224 |
|
|
|
5,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,776,701 |
|
|
|
1,976,035 |
|
|
|
1,339,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
from clients
|
|
5
|
|
|
|
863,950 |
|
|
|
497,910 |
|
|
|
41,492 |
|
|
Properties
for sale
|
|
6
|
|
|
|
333,846 |
|
|
|
149,403 |
|
|
|
63,413 |
|
|
Deferred
taxes
|
|
15
|
|
|
|
190,252 |
|
|
|
78,740 |
|
|
|
59,918 |
|
|
Other
|
|
|
|
|
|
110,606 |
|
|
|
42,797 |
|
|
|
29,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,498,654 |
|
|
|
768,850 |
|
|
|
194,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
8
|
|
|
|
- |
|
|
|
12,192 |
|
|
|
- |
|
|
Goodwill,
net
|
|
8
|
|
|
|
195,088 |
|
|
|
207,400 |
|
|
|
2,544 |
|
|
Property and
equipment, net
|
|
|
|
|
|
50,348 |
|
|
|
32,411 |
|
|
|
18,844 |
|
|
Intangible
assets
|
|
|
|
|
|
18,067 |
|
|
|
7,897 |
|
|
|
3,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263,503 |
|
|
|
259,900 |
|
|
|
24,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762,157 |
|
|
|
1,028,750 |
|
|
|
218,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
5,538,858 |
|
|
|
3,004,785 |
|
|
|
1,558,590 |
|
|
Gafisa
S.A.
Consolidated
Balance Sheets at December 31
|
| In
thousands of Brazilian reais |
(continued)
|
|
Liabilities
and shareholders' equity
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and
financing, net of swaps
|
|
9
|
|
|
|
447,503 |
|
|
|
68,357 |
|
|
|
17,305 |
|
|
Debentures
|
|
10
|
|
|
|
61,945 |
|
|
|
6,590 |
|
|
|
11,039 |
|
|
Obligations
for purchase of land and advances from clients
|
|
13
|
|
|
|
421,584 |
|
|
|
290,193 |
|
|
|
266,856 |
|
|
Materials and
service suppliers
|
|
|
|
|
|
112,900 |
|
|
|
86,709 |
|
|
|
28,381 |
|
|
Taxes and
contributions
|
|
|
|
|
|
113,167 |
|
|
|
71,250 |
|
|
|
41,575 |
|
|
Salaries,
payroll charges and profit sharing
|
|
|
|
|
|
29,693 |
|
|
|
38,513 |
|
|
|
18,089 |
|
|
Mandatory
dividends
|
|
14(b)
|
|
|
|
26,104 |
|
|
|
26,981 |
|
|
|
10,938 |
|
|
Provision for
contingencies
|
|
12
|
|
|
|
17,567 |
|
|
|
3,668 |
|
|
|
4,105 |
|
|
Other
accounts payable
|
|
11
|
|
|
|
97,933 |
|
|
|
68,368 |
|
|
|
14,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,328,396 |
|
|
|
660,629 |
|
|
|
412,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and
financing, net of swaps
|
|
9
|
|
|
|
600,673 |
|
|
|
380,433 |
|
|
|
27,101 |
|
|
Debentures
|
|
10
|
|
|
|
442,000 |
|
|
|
240,000 |
|
|
|
240,000 |
|
|
Obligations
for purchase of land and advances from clients
|
|
13
|
|
|
|
231,199 |
|
|
|
103,184 |
|
|
|
16,325 |
|
|
Deferred
taxes
|
|
15
|
|
|
|
239,131 |
|
|
|
46,070 |
|
|
|
32,259 |
|
|
Provision for
contingencies
|
|
12
|
|
|
|
35,963 |
|
|
|
17,594 |
|
|
|
- |
|
|
Deferred gain
on sale of investment
|
|
8
|
|
|
|
169,394 |
|
|
|
- |
|
|
|
- |
|
|
|
|
8
|
|
|
|
18,522 |
|
|
|
32,223 |
|
|
|
- |
|
|
Other
accounts payable
|
|
11
|
|
|
|
389,759 |
|
|
|
12,943 |
|
|
|
22,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,126,641 |
|
|
|
832,447 |
|
|
|
338,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
|
|
|
471,402 |
|
|
|
12,981 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
1,229,517 |
|
|
|
1,221,846 |
|
|
|
591,742 |
|
|
Treasury
shares
|
|
|
|
|
|
(18,050
|
) |
|
|
(18,050
|
) |
|
|
(47,026
|
) |
|
Stock options
reserve
|
|
|
|
|
|
47,829 |
|
|
|
25,626 |
|
|
|
14,087 |
|
|
Capital
reserves
|
|
|
|
|
|
134,296 |
|
|
|
134,296 |
|
|
|
149,253 |
|
|
Revenue
reserves
|
|
|
|
|
|
218,827 |
|
|
|
135,010 |
|
|
|
99,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,612,419 |
|
|
|
1,498,728 |
|
|
|
807,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
|
|
|
|
5,538,858 |
|
|
|
3,004,785 |
|
|
|
1,558,590 |
|
The accompanying
notes are an integral part of these financial statements.
|
Gafisa S.A
Years
Ended December 31
In
thousands of Brazilian reais, except number of
shares and per share amount
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate development and
sales
|
|
3(a)
|
|
|
|
1,768,200 |
|
|
|
1,216,773 |
|
|
|
660,311 |
|
Construction services rendered, net of
costs
|
|
3(a)
|
|
|
|
37,268 |
|
|
|
35,121 |
|
|
|
21,480 |
|
Taxes on services and
revenues
|
|
|
|
|
|
(65,064
|
) |
|
|
(47,607
|
) |
|
|
(33,633
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating revenue
|
|
|
|
|
|
1,740,404 |
|
|
|
1,204,287 |
|
|
|
648,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate development
costs
|
|
|
|
|
|
(1,214,401
|
) |
|
|
(867,996
|
) |
|
|
(464,766
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
526,003 |
|
|
|
336,291 |
|
|
|
183,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(expenses) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154,401
|
) |
|
|
(69,800
|
) |
|
|
(51,671
|
) |
General and administrative
expenses
|
|
|
|
|
|
(180,839
|
) |
|
|
(130,873
|
) |
|
|
(64,310
|
) |
Depreciation and
amortization
|
|
|
|
|
|
(52,635
|
) |
|
|
(38,696
|
) |
|
|
(7,369
|
) |
Amortization of gain on partial sale of
FIT Residential
|
|
|
|
|
|
41,008 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
(10,931
|
) |
|
|
2,508 |
|
|
|
4,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit before financial income (expenses)
|
|
|
|
|
|
168,205 |
|
|
|
99,430 |
|
|
|
64,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,008
|
) |
|
|
(35,291
|
) |
|
|
(64,932
|
) |
|
|
|
|
|
|
|
102,854 |
|
|
|
63,919 |
|
|
|
52,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before taxes on income and minority interest
|
|
|
|
|
|
210,051 |
|
|
|
128,058 |
|
|
|
52,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax and social
contribution expense
|
|
|
|
|
|
(24,437
|
) |
|
|
(12,217
|
) |
|
|
(4,632
|
) |
|
|
|
|
|
|
|
(18,960
|
) |
|
|
(18,155
|
) |
|
|
(3,893
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
(43,397
|
) |
|
|
(30,372
|
) |
|
|
(8,525
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before minority interest
|
|
|
|
|
|
166,654 |
|
|
|
97,686 |
|
|
|
44,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
|
|
|
(56,733
|
) |
|
|
(6,046
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the year
|
|
|
|
|
|
109,921 |
|
|
|
91,640 |
|
|
|
44,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding at the end of the year (in thousands)
|
|
14(a)
|
|
|
|
129,963 |
|
|
|
129,452 |
|
|
|
103,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per thousand shares outstanding at the end
|
|
|
|
|
|
0.8458 |
|
|
|
0.7079 |
|
|
|
0.4258 |
|
The accompanying
notes are an integral part of these financial statements.
|
Gafisa S.A
In
thousands of Brazilian reais
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
Treasury
shares
|
|
|
Stock
options
reserve
|
|
|
Capital
reserves
|
|
|
Legal
reserve
|
|
|
Statutory
reserve
|
|
|
For
investments
|
|
|
Retained
earnings
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,363 |
|
|
|
(47,026 |
) |
|
|
- |
|
|
|
27,832 |
|
|
|
7,602 |
|
|
|
- |
|
|
|
86,629 |
|
|
|
(27,926
|
) |
|
|
274,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352,756 |
|
|
|
- |
|
|
|
- |
|
|
|
141,637 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
494,393 |
|
Stock issuance expenses, net of
taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(18,023
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(18,023
|
) |
|
|
|
|
3,414 |
|
|
|
|
|
|
|
|
|
|
|
2,765 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,179 |
|
Exercise of stock
options
|
|
|
8,209 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,209 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
9,129 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9,129 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44,010 |
|
|
|
44,010 |
|
Appropriation of net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,303 |
|
|
|
- |
|
|
|
- |
|
|
|
(2,303
|
) |
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(10,938
|
) |
|
|
(10,938
|
) |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,843 |
|
|
|
(2,843
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
591,742 |
|
|
|
(47,026
|
) |
|
|
9,129 |
|
|
|
154,211 |
|
|
|
9,905 |
|
|
|
- |
|
|
|
89,472 |
|
|
|
- |
|
|
|
807,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
487,813 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
487,813 |
|
Stock issuance expenses, net of
taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19,915
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19,915
|
) |
Capital increase - Alphaville Urbanismo
S.A.
|
|
|
134,029 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
134,029 |
|
Exercise of stock
options
|
|
|
8,262 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,262 |
|
Additional 2006
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(50 |
) |
|
|
(50 |
) |
Cancellation of treasury
shares
|
|
|
- |
|
|
|
28,976 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(28,976
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
16,497 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
16,497 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
91,640 |
|
|
|
91,640 |
|
Appropriation of net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,680 |
|
|
|
- |
|
|
|
- |
|
|
|
(5,680
|
) |
|
|
- |
|
Minimum mandatory
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(26,981
|
) |
|
|
(26,981
|
) |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
80,892 |
|
|
|
- |
|
|
|
(80,892
|
) |
|
|
- |
|
Transfer from investments
reserve
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(21,963
|
) |
|
|
21,963 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,221,846 |
|
|
|
(18,050
|
) |
|
|
25,626 |
|
|
|
134,296 |
|
|
|
15,585 |
|
|
|
80,892 |
|
|
|
38,533 |
|
|
|
- |
|
|
|
1,498,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock
options
|
|
|
7,671 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,671 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
22,203 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,203 |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
109,921 |
|
|
|
109,921 |
|
Appropriation of net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,496 |
|
|
|
- |
|
|
|
- |
|
|
|
(5,496
|
) |
|
|
- |
|
Minimum mandatory
dividends
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(26,104
|
) |
|
|
(26,104
|
) |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
78,321 |
|
|
|
- |
|
|
|
(78,321
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,229,517 |
|
|
|
(18,050
|
) |
|
|
47,829 |
|
|
|
134,296 |
|
|
|
21,081 |
|
|
|
159,213 |
|
|
|
38,533 |
|
|
|
- |
|
|
|
1,612,419 |
|
The
accompanying notes are an integral part of these financial statements.
|
Gafisa S.A
Years
Ended December 31
In
thousands of Brazilian reais
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
revenues
|
|
|
|
|
|
|
|
|
|
Real estate development sales and
services
|
|
|
1,814,109 |
|
|
|
1,251,894 |
|
|
|
681,791 |
|
Allowance for doubtful
accounts
|
|
|
(8,641
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,805,468 |
|
|
|
1,251,894 |
|
|
|
681,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
from third parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,160,906
|
) |
|
|
(850,202
|
) |
|
|
(456,643
|
) |
Materials, energy, service suppliers
and other
|
|
|
(233,147
|
) |
|
|
(111,671
|
) |
|
|
(59,966
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,394,053
|
) |
|
|
(961,873
|
) |
|
|
(516,609
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
value added
|
|
|
411,415 |
|
|
|
290,021 |
|
|
|
165,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
(52,635
|
) |
|
|
(38,696
|
) |
|
|
(7,369
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
value added produced
|
|
|
358,780 |
|
|
|
251,325 |
|
|
|
157,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
added received through transfer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,854 |
|
|
|
63,919 |
|
|
|
52,989 |
|
Amortization of negative goodwill from
gain on
partial sale of FIT
Residencial
|
|
|
41,008 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,862 |
|
|
|
63,919 |
|
|
|
52,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
value added to be distributed
|
|
|
502,642 |
|
|
|
315,244 |
|
|
|
210,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
added distributed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,771 |
|
|
|
93,275 |
|
|
|
44,929 |
|
|
|
|
|
131,448 |
|
|
|
77,244 |
|
|
|
48,807 |
|
|
|
|
|
114,502 |
|
|
|
53,085 |
|
|
|
73,056 |
|
|
|
|
|
83,817 |
|
|
|
64,609 |
|
|
|
33,072 |
|
|
|
|
|
26,104 |
|
|
|
27,031 |
|
|
|
10,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
502,642 |
|
|
|
315,244 |
|
|
|
210,802 |
|
The accompanying
notes are an integral part of these financial statements.
|
Gafisa S.A
Years
Ended December 31
In
thousands of Brazilian reais
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,921 |
|
|
|
91,640 |
|
|
|
44,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses (income) not affecting
cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
52,635 |
|
|
|
38,696 |
|
|
|
7,369 |
|
|
|
|
|
26,138 |
|
|
|
17,820 |
|
|
|
9,129 |
|
Deferred gain on sale of
investment
|
|
|
(41,008
|
) |
|
|
- |
|
|
|
- |
|
Unrealized interest and
charges, net
|
|
|
116,771 |
|
|
|
22,934 |
|
|
|
39,437 |
|
|
|
|
|
18,960 |
|
|
|
18,155 |
|
|
|
3,893 |
|
|
|
|
|
56,733 |
|
|
|
6,046 |
|
|
|
- |
|
Decrease (increase) in
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(580,843
|
) |
|
|
(436,691
|
) |
|
|
(205,525
|
) |
|
|
|
|
(703,069
|
) |
|
|
(579,496
|
) |
|
|
(182,067
|
) |
Other accounts
receivable
|
|
|
(65,344
|
) |
|
|
(6,011
|
) |
|
|
(45,229
|
) |
Deferred selling
expenses
|
|
|
(5,211
|
) |
|
|
13,171 |
|
|
|
(569
|
) |
|
|
|
|
(19,172
|
) |
|
|
(723
|
) |
|
|
(2,665
|
) |
Increase (decrease) in
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations for real state
developments
|
|
|
- |
|
|
|
(6,733
|
) |
|
|
(57,963
|
) |
Obligations for purchase of
land
|
|
|
217,453 |
|
|
|
97,757 |
|
|
|
69,633 |
|
|
|
|
|
38,977 |
|
|
|
28,718 |
|
|
|
(5,674
|
) |
Provision for
contingencies
|
|
|
13,933 |
|
|
|
- |
|
|
|
(317
|
) |
Materials and service
suppliers
|
|
|
(14,363
|
) |
|
|
60,982 |
|
|
|
502 |
|
|
|
|
|
(28,160
|
) |
|
|
61,527 |
|
|
|
103,474 |
|
Salaries, payroll charges and
profit sharing
|
|
|
(19,475
|
) |
|
|
20,428 |
|
|
|
7,607 |
|
|
|
|
|
12,612 |
|
|
|
99,851 |
|
|
|
(56,233
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in operating activities
|
|
|
(812,512
|
) |
|
|
(451,929
|
) |
|
|
(271,188
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,904 |
|
|
|
- |
|
|
|
- |
|
Purchase of property and
equipment
|
|
|
(63,127
|
) |
|
|
(61,279
|
) |
|
|
(21,612
|
) |
Restricted cash in guarantee to
loans
|
|
|
(67,077
|
) |
|
|
(9,851
|
) |
|
|
- |
|
Acquisition of
investments
|
|
|
(15,000
|
) |
|
|
(78,160
|
) |
|
|
(3,997
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in investing activities
|
|
|
(78,300
|
) |
|
|
(149,290
|
) |
|
|
(25,609
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,671 |
|
|
|
496,075 |
|
|
|
508,781 |
|
|
|
|
|
- |
|
|
|
(19,915
|
) |
|
|
(18,023
|
) |
Loans and financing
obtained
|
|
|
775,906 |
|
|
|
426,969 |
|
|
|
303,188 |
|
Repayment of loans and
financing
|
|
|
(145,697
|
) |
|
|
(51,737
|
) |
|
|
(364,115
|
) |
Contributions from venture
partners
|
|
|
300,000 |
|
|
|
- |
|
|
|
- |
|
Assignment of credits
receivable, net
|
|
|
916 |
|
|
|
2,225 |
|
|
|
(766
|
) |
|
|
|
|
(26,979
|
) |
|
|
(10,988
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities
|
|
|
911,817 |
|
|
|
842,629 |
|
|
|
429,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
21,005 |
|
|
|
241,410 |
|
|
|
132,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the
year
|
|
|
507,569 |
|
|
|
266,159 |
|
|
|
133,891 |
|
|
|
|
|
528,574 |
|
|
|
507,569 |
|
|
|
266,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
21,005 |
|
|
|
241,410 |
|
|
|
132,268 |
|
The accompanying
notes are an integral part of these financial statements.
| |
Gafisa S.A
In
thousands of Brazilian 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 (Special Purpose Entities - SPEs) and participates
in consortia and condominiums with third parties as a means of meeting its
objectives. The controlled entities share the structure and corporate,
managerial and operating costs with the Company.
In
February 2006, the Company concluded its Brazilian initial public offering on
the Novo Mercado of the Bolsa de Valores de São Paulo - BOVESPA, raising
proceeds of R$ 494,393 through issuance of 26,724,000 Common
shares.
In
January 2007, the Company acquired 60% of the voting capital of Alphaville
Urbanismo S.A. ("Alphaville"), a company which develops and sells residential
condominiums throughout Brazil. The purchase commitment for the remaining 40% of
Alphaville's voting capital will be determined by means of an economic and
financial evaluation of Alphaville to be carried out, according to the
agreement, by 2012 (Note 8).
In
March 2007, the Company completed a public offering 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 equivalent to 9,380,996 ADRs. The expenses
related to this public offering of the Company's stock, net of respective tax
effects, totaled R$ 19,915 and were charged to Capital
reserve.
In
October 2007, Gafisa completed the acquisition of 70% of the voting capital of
Cipesa Engenharia S.A. ("Cipesa"), a real estate developer in the state of
Alagoas (Note 8). In 2007, the Company launched its operations in the lower
income real estate market through its subsidiary FIT Residencial Empreendimentos
Imobiliários Ltda. ("FIT Residential"). On September 1, 2008, the Company and
Construtora Tenda S.A. ("Tenda") consummated a merger of Tenda and FIT
Residencial, by means of a Merger Protocol and Justification. On October 3,
2008, this Merger Protocol and Justification was approved by Gafisa's Board of
Directors, as well as the first Amendment to the Protocol. Upon exchange of FIT
Residential quotas for Tenda shares, the Company received 240,391,470 common
shares, representing
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
60% of total and
voting capital of Tenda after the merger of FIT Residencial, in exchange for
76,757,357 quotas of FIT Residencial. The Tenda shares received by the Company
in exchange for FIT Residencial quotas will have the same rights, attributed on
the date of the merger of the shares held by the Company, and will receive all
benefits, including dividends and distributions of capital that may be declared
by Tenda as from the merger approval date. On October 21, 2008, the merger of
FIT Residencial into Tenda was approved at an Extraordinary Shareholders'
Meeting by the Company's shareholders (Note 8).
Bairro Novo
Empreendimentos Imobiliários S.A. ("Bairro Novo") was incorporated in March 2007
by Gafisa S.A. and Odebrecht Empreendimentos Imobiliários Ltda. ("Odebrecht
Empreendimentos"), with control shared by both companies through a joint
venture. On February 27, 2009, the joint venture was dissolved (Note
20).
|
2
|
Presentation
of Financial Statements
|
These financial
statements were approved by the Board of Directors for issuance on March 9,
2009.
|
(a)
|
Basis
of presentation
|
The financial
statements were prepared in accordance with accounting practices adopted in
Brazil as determined by the Brazilian Corporate law ("Corporate Law"), the
Accounting Standards Committee ("CPC"), the Federal Accounting Council ("CFC"),
the IBRACON - Institute of Independent Auditor of Brazil ("IBRACON") and
additional regulations and resolutions of 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 2009. 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 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 statements of
cash flows were reclassified from that originally presented as part of the
consolidated financial statements for the years ended December 31, 2008 and
2007.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
Law No. 11.638/07
enacted on December 28, 2007 introduced changes to the Corporate Law to be
applied as from financial statements presented for the year ended December 31,
2008. To assure consistency of presentation, the Company and its subsidiaries
have retroactively applied changes to Brazilian GAAP introduced by the newly
formed CPC and the provisions of Law No. 11.638/07 from January 1, 2006 and have
elected for tax purposes to adopt Provisional Measure No. 449/08 ("MP
No. 449/08"). By opting to apply the provisions of MP No. 449/08, the
effects of the accounting changes to Brazilian GAAP introduced by Law No.
11.638/07 and the new CPC standards do not generate tax effects for two
years.
The effects of
changes to Brazilian GAAP on shareholders' equity and results of operations as
at and for the years ended December 31 are as follows:
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity as originally reported
|
|
|
1,530,763 |
|
|
|
814,087 |
|
Adjustment to present value of assets
and liabilities
|
|
|
(40,971
|
) |
|
|
(15,955
|
) |
Barter transactions - land in exchange
for units
|
|
|
4,617 |
|
|
|
4,440 |
|
|
|
|
|
(2,400
|
) |
|
|
(7,700
|
) |
Depreciation of sales stands,
facilities, model apartments
|
|
|
(11,408
|
) |
|
|
(1,853
|
) |
|
|
|
|
4,055 |
|
|
|
- |
|
Other, including deferred
taxes
|
|
|
14,072 |
|
|
|
14,414 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity as presented herein
|
|
|
1,498,728 |
|
|
|
807,433 |
|
|
Net income
for the year as originally reported
|
|
|
113,603 |
|
|
|
46,056 |
|
Adjustment to present value of assets
and liabilities
|
|
|
(22,113
|
) |
|
|
(13,460
|
) |
Barter transactions - land in exchange
for Units
|
|
|
4,617 |
|
|
|
177 |
|
|
|
|
|
(17,291
|
) |
|
|
(9,129
|
) |
|
|
|
|
(1,200
|
) |
|
|
(1,200
|
) |
Depreciation of sales stands,
facilities, model apartments and related furnishings
|
|
|
(9,555
|
) |
|
|
(1,853
|
) |
|
|
|
|
19,915 |
|
|
|
18,023 |
|
|
|
|
|
(8,801
|
) |
|
|
- |
|
Other, including deferred
taxes
|
|
|
12,465 |
|
|
|
5,396 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
for the year as presented herein
|
|
|
91,640 |
|
|
|
44,010 |
|
These changes to
Brazilian GAAP are summarized as follows:
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The Company
classifies highly-liquid short-term investments which are readily convertible
into a known amount of cash and subject to an insignificant risk of change in
value as Cash equivalents, pursuant to CPC No. 03, "Statement of Cash
Flows".
|
(ii)
|
Minority
interest and deferred taxes
|
The Company
adjusted for minority interest in subsidiaries and recorded deferred taxes on
the changes to Brazilian GAAP.
|
(iii)
|
Financial
instruments and fair value
|
Pursuant to CPC No.
14, "Financial Instruments: Recognition, Measurement and Evidence", financial
instruments are classified among four categories: (i) financial assets or
liabilities measured at fair value through income, (ii) held to maturity, (iii)
loans and receivables, and (iv) available for sale. The classification
depends upon the purpose for which the financial assets and liabilities were
acquired. Management classifies its financial assets and liabilities when
initially recognized.
At
December 31, 2008, 2007 and 2006, the Company elected to apply the ‘fair value
option' to certain financial assets (cross-currency interest rate swaps) and
liabilities (foreign currency liabilities) recording these at fair value through
income, thereby mitigating volatility from inconsistent measurement
bases.
For financial
assets without an active market or market listing, the Company measures the fair
value by applying valuation techniques. These techniques include the use of
recent transactions with third parties benchmarking against other instruments
that are substantially similar, analysis of discounted cash flows and option
pricing models always maximizing sources of information provided by the market
and minimizing management sourced data. The Company evaluates if there is
objective evidence of asset impairment at the balance sheet date indicating that
a financial asset or a group of financial assets is recorded at an amount which
exceeds its recoverable amount.
|
(iv)
|
Debenture
and share issuance expenses
|
As
per CPC No. 08, "Transaction Costs and Premiums on Issuance of Securities",
share issuance expenses are accounted for as a direct reduction of capital
raised. Transaction costs and premiums on issuance of debt securities are
amortized over the terms of the security and the balance is presented net of
issuance expenses.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
As
approved by its Board of Directors, the Company offers to its selected
executives share-based compensation plans ("Stock Options").
CPC No. 10,
"Share-based Compensation" requires that the options, calculated at the grant
date, be recognized as an expense against shareholders' equity, over the period
the services are rendered through the vesting date.
As
required by CPC No. 13, "Initial Adoption of Law 11.638/07" and
MP No. 449/08, deferred pre-operating expenses were written off to
retained earnings at the transition date and amortization expenses were
reversed.
|
(vii)
|
Adjustment
to present value of assets and
liabilities
|
In
conformity with CPC No. 12, "Adjustment to Present Value", the assets and
liabilities arising from long-term transactions were adjusted to present
value.
As
specified by CPC Interpretation ("CPC (O)") No. 01, "Real Estate Development
Entities", for inflation-indexed receivables arising from installment sales of
unfinished units, the receivables formed prior to delivery of the units which does not accrue interest, were discounted to present value. The present value adjustment is accreted to Net operating revenue as the Company finances its clients through
delivery of the units. The present value adjustment accreted to Real estate development revenue
for the years ended December 31, 2008, 2007 and 2006 was income of
R$ (3,147) and an expense of R$ 39,553 and R$ 15,689,
respectively.
As interest from funds used to finance the acquisition of land for development and
construction is capitalized
, the accretion of the present
value adjustment arising from the obligation is recorded in Real estate development operating costs or against inventories of Properties for sale, as the case may be, until the
construction phase of the venture is completed. The present value adjustment accreted to Real estate
development operating costs
for the years ended December 31, 2008, 2007 and 2006 resulted
in income of R$ (1,838) and an expense of R$ 517 and income of R$
2,229, respectively.
|
(viii)
|
Warranty
provision
|
Consistent with CPC
(O) No. 01, the Company records a provision for warranties, unless a third party
provides warranties for the services rendered during construction. The warranty
term is five years from the delivery of the unit.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
As
per CPC (O) No. 01, for barter transactions of land in exchange for units, the
value of land acquired by the Company is calculated based on the fair value of
real estate units to be delivered, and recorded in inventories of Properties for
sale against liabilities for Advances from clients, at the time the
barter agreement is signed. The percentage-of-completion criteria adopted for
appropriation of income is also applied to these transactions.
|
(x)
|
Expenditures
on sales stands, facilities,
model
apartments and related
furnishings
|
As
per CPC (O) No. 01, expenditures incurred for the construction of sales stands,
facilities, model apartments and related furnishings are capitalized as Property
and equipment. Depreciation commences upon launch of the development and is
recorded over the average term of one year and subject to periodical analysis of
asset impairment.
|
(xi)
|
Share
issuance expenses
|
As
per CPC No. 08, the costs related to the share issuances, originally accounted
for as expenses were reclassified, net of tax effects, to the Capital
reserve.
|
(xii)
|
Tax
effects and the Transitory Tax Regime
("RTT")
|
The income tax and
social contribution effects arising from the initial adoption of Law 11.638/07,
upon election to adopt the provisions of MP No. 449/08, were recorded
based on the pre-existing tax regulations. Gafisa S.A. and its subsidiaries'
elections to follow the provisions of the RTT, as provided for by
MP No. 449/08, will be declared in the corporate income tax returns
(DIPJ) to be filed in 2009.
At
December 31 of each year, the remaining balance of retained earnings is
appropriated to the applicable reserve accounts, according to the Company's
Bylaws, in conformity with the Corporate Law and CVM Instructions.
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
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
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.
|
(c)
|
Consolidation
of financial statements
|
The consolidated
financial statements include the accounts of Gafisa S.A. and those of all of 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, 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 and unrealized results among consolidated companies.
Transactions and
balances with related parties, primarily shareholders and investees, are
disclosed (Note 17).
The statement of
changes in shareholders' equity reflects the changes in Gafisa S.A.'s parent
company's books.
|
3
|
Significant
Accounting Practices
|
The more
significant accounting practices adopted in the preparation of the financial
statements are as follows:
|
(a)
|
Recognition
of results
|
|
(i)
|
Real
estate development and sales
|
Revenues, as well
as 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 revenue is recognized when the sale is made, regardless of the
receipt of the contractual amount, provided that the following conditions are
met: (a) the result is determinable, that is, the collectibility of the sale
price is reasonably assured or the amount
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
that will not be
collected can be estimated, and (b) the earnings process is virtually complete,
that is, the Company is not obliged to perform significant activities after the
sale to earn the profit. The collectibility of the sales amount is evaluated
based on the client's commitment to pay, which in turn is supported by initial
and continuing investment.
In
the sales of unfinished units, the following procedures and rules were
observed:
|
|
.
|
The incurred
cost (including the costs related to land) corresponding to the units sold
is fully appropriated to the
result.
|
|
|
.
|
The
percentage of incurred cost (including costs related to land) is measured
in relation to total estimated cost, and this percentage is applied on the
revenues from units sold, determined in accordance with the terms
established in the sales contracts, thus determining the amount of
revenues and selling expenses to be
recognized.
|
|
|
.
|
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".
|
|
|
.
|
Interest and
inflation-indexation charges on accounts receivable as from the time the
client takes possession of the property, as well as the adjustment to
present value of accounts receivable, 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 for the acquisition of land and real estate
credit operations 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.
|
Deferred taxes are
booked on the difference between the revenues recorded from real estate
development for accounting purposes and revenue recorded on a cash basis for tax
purposes.
The other income
and expenses, including advertising and publicity, are appropriated to the
results as they are incurred using the accrual basis of accounting.
|
(ii)
|
Construction
services
|
Revenues from real
estate services consist primarily of amounts received in connection with
construction management activities for third parties, technical management and
management of real estate. The revenues are recognized as services are rendered,
net of the corresponding costs incurred. Cost incurred totaled R$ 63,896
for the year ended December 31, 2008 (2007 - R$ 26,546, 2006 - R$
46,053).
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(b)
|
Cash
and cash equivalents
|
Consist primarily
of bank certificates of deposit and investment funds, denominated in reais, having a ready market
and original maturity of 90 days or less or in regard to which there are no
penalties or other restrictions for early redemption, recognized at market
value.
Investment funds in
which the Company is the sole owners are fully consolidated.
|
(c)
|
Receivables
from clients
|
These are stated at
cost plus accrued interest and indexation adjustments. The allowance for
doubtful accounts, when necessary, is provided in an amount considered
sufficient by management to meet expected losses.
The installments
due are indexed based on the National Civil Construction Index (INCC) during the
construction phase, and based on the General Market Prices Index (IGP-M) after
delivery of the units. The balance of the accounts receivable (after delivery)
generally accrues annual interest of 12%. The financial revenues are recorded in
results under "Real estate development" (December 31, 2008, 2007 and 2006,
R$ 45,722, R$ 20,061 and R$ 39,832, respectively).
|
(d)
|
Certificates
of real estate receivables (CRIs)
|
The Company assigns
receivables for the securitization and issuance of mortgage-backed securities
("CRI"). When this assignment does not involve right of recourse, they are
recorded as a reduction of accounts receivable. When the transaction involves
recourse against the Company, the accounts receivable sold are maintained on the
balance sheet. The financial guarantees, when a participation is acquired
(subordinated CRI) and maintained to secure the receivables that were assigned,
are recorded in the balance sheet in Long-term receivables at fair
value.
Land is stated at
cost of acquisition. Land is recorded only after the deed of property is fully
consummated. The Company also acquires land through barter transactions where,
in exchange for the land acquired, it undertakes to deliver (a) real estate
units under development or (b) part of the sales revenues originating from the
sale of the real estate units. Land acquired through barter transaction is
stated at fair value.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
Properties are
stated at construction cost, which does not exceed net realizable value. In the
case of real estate developments in progress, the portion in inventories
corresponds to the cost incurred for units that have not yet been sold. The cost
comprises construction (materials, own or outsourced labor and other related
items) and land, including financial charges appropriated to the development as
incurred during the construction phase.
When the cost of
construction of properties for sale exceeds the expected cash flow from sales,
once completed or still under construction, an impairment charge is recognized
in the period when the book value is considered no longer to be recoverable.
This analysis is consistently applied to residential ventures targeted at the
low, medium and high income markets, regardless of their geographic region or
construction phase.
Properties for sale
are reviewed to evaluate the recovery of the book value of each real estate
development when events or changes in macroeconomic scenarios indicate that the
book value may not be recoverable. If the book value of a real estate
development is not recoverable, compared to its realizable value through
expected cash flows, a provision is recorded.
In
the year ended December 31, 2008, the Company cancelled certain real estate
developments and reversed gross margin of R$ 15,700 of recorded gross
profit. No reversals were made in 2007 and 2006.
The Company
capitalizes interest on developments during the construction phase, arising from
the National Housing System and other credit lines that are used for financing
the construction of developments (limited to the corresponding financial expense
amount). Interest capitalized in 2008 totaled R$ 33,669 (2007 -
R$ 36,686; 2006 - R$ 5,236).
|
(f)
|
Deferred
selling expenses
|
These include
brokerage expenditures, recorded in results following the same
percentage-of-completion criteria adopted for the recognition of revenues. The
charges related to sales commission of the buyer are not recognized as revenue
or expense of the Company.
On
December 31, 2008, 2007 and 2006, the Company presented a provision to cover
expenditures for repairing construction defects covered during the warranty
period, amounting to R$ 11,900, R$ 8,671 and R$ 7,295, respectively.
The warranty period is five years from the delivery of the unit.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
These refer to
sundry expenses which are taken to income in the period to which they
relate.
|
(i)
|
Property
and equipment
|
Property and
equipment is stated at cost. Depreciation is calculated a straight-line based on
the estimated useful life of the assets, as follows: (i) vehicles - 5 years;
(ii) office equipment and other installations - 10 years; (iii) sales stands,
facilities, model apartments and related furnishings - 1 year.
Intangible assets
relate to the acquisition and development of computer systems and software
licenses, stated at acquisition cost, and are amortized over a period of up to
five years.
|
(k)
|
Investments
in subsidiaries and
jointly-controlled
investees
|
If
the Company holds more than half of the voting capital of another company, the
latter is considered a subsidiary and is consolidated. In situations where
shareholder agreements grant the other party veto rights affecting the Company's
business decisions with regards to its subsidiary, such affiliates may be
considered to be jointly-controlled companies and are recorded on the equity
method.
Unrealized gains or
transactions between Gafisa S.A. and its affiliates and subsidiary companies are
eliminated in proportion to the Gafisa S.A.'s interest; unrealized losses are
also eliminated, unless the transaction provides evidence of impairment of the
asset transferred.
When the Company's
interest in the losses of subsidiaries is higher than the amount invested, the
Company recognizes the residual portion of the net capital deficiency since it
assumes obligations to make payments on behalf of these companies or for
advances for future capital increase.
The accounting
practices of acquired subsidiaries are aligned with those of the
Company.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(ii)
|
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, based on 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 purchase consideration.
Goodwill is
amortized in accordance with the underlying economic basis which considers
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. 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)
|
Obligations
for purchase of land and
advances
from clients
|
These are
contractual obligations established for purchases of land in inventory (Property
for sale) which are stated at amortized cost plus interest and charges, when
applicable.
The obligations
related to barter transactions of land in exchange for real estate units are
stated at fair value, against Advances from clients (Note 13).
Selling expenses
include advertising, promotion, brokerage fees and similar
expenses.
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.
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
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
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,
of 25% and 9%, respectively, are applied. All tax losses expected to be
recovered through offset are recorded as deferred tax assets.
The deferred tax
assets are recognized to the extent that future taxable income is expected to be
available to be used to offset temporary differences based on the budgeted
future results prepared based on internal assumptions. New circumstances and
economic scenarios may, change the estimates.
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.
In
the event realization of deferred tax assets is not considered to be probable,
no amount is recorded (Note 15). Reclassifications from results to shareholders'
equity, when applicable, are made net of taxes.
|
(o)
|
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.
The liability for
future compensation of employee vacations earned is fully accrued.
Gafisa S.A. and its
subsidiaries do not offer private pension plans or retirement plan to
employees.
The fair value of
services received from the plan participants, in exchange for options, is
determined in relation to the fair value of shares, on the grant date of each
plan and recognized as an expense through the vesting date.
|
(q)
|
Profit
sharing program for
employees
and officers
|
The Company
provides for the distribution of profit sharing benefits and bonuses to
employees (included in General and administrative expenses).
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
Additionally, the
Company's bylaws provide for 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).
The bonus systems
operate on a three-tier performance-based structure in which the corporate
efficiency targets as approved by the Board of Directors must first be achieved,
followed by targets for the business units and lastly individual performance
targets. Amounts paid with respect to the program may differ from the liability
accrued.
|
(r)
|
Present
value adjustment
|
Certain asset and
liability items were adjusted to present value based on discount rates that
reflect management's best estimate of the value of money over time and the
specific risks of the asset and the liability.
|
(s)
|
Cross-currency
interest rate swap
and
derivative transactions
|
The Company has
derivative instruments for the purposes of mitigating the risk of its exposure
to the volatility of currencies, indices and interest rates, recognized at fair
value directly in income. In accordance with its treasury policies, the Company
does not acquire or issue derivative financial instruments for speculative
purposes.
|
(t)
|
Financial
liabilities recorded at fair value
|
The Company
recorded certain loans denominated in foreign currency as financial liabilities
at fair value through income. These transactions are directly linked to the
cross-currency interest rate swaps and are recognized at fair value. Changes in
the fair value of financial liabilities are directly recognized in
results.
|
(u)
|
Impairment
of financial assets
|
At
each balance sheet date, or when events or changes in circumstances indicate
that the carrying value of an asset or group of assets may not be recoverable,
the Company evaluates whether there are any indications of impairment of a
financial asset or group of financial assets in relation to the market value,
and its ability to generate positive cash flows to support its realization. A
financial asset or group of financial assets is considered impaired when there
is objective evidence of a decrease in recoverable value as a result of one or
more events that occurred after the initial recognition of the asset, which
impact estimated future cash flows.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
Earnings per share
are calculated based on the number of shares outstanding at the end of each
year, net of treasury shares.
|
4
|
Cash,
Cash Equivalents and Financial
Investments
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,538 |
|
|
|
79,590 |
|
|
|
45,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Certificates of Deposits -
CDBs
|
|
|
185,334 |
|
|
|
8,487 |
|
|
|
218,869 |
|
|
|
|
|
149,772 |
|
|
|
299,067 |
|
|
|
2,059 |
|
Securities purchased under agreement
to resell
|
|
|
114,286 |
|
|
|
111,392 |
|
|
|
- |
|
|
|
|
|
5,644 |
|
|
|
9,033 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash
and cash equivalents
|
|
|
528,574 |
|
|
|
507,569 |
|
|
|
266,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash in guarantee to loans (Note 9)
|
|
|
76,928 |
|
|
|
9,851 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash,
cash equivalents and financial investments
|
|
|
605,502 |
|
|
|
517,420 |
|
|
|
266,159 |
|
Pursuant to CVM
Instruction No. 408/04, investments funds in which the Company has an
exclusive interest are consolidated.
Deposits pledged in
guarantee to loans are remunerated based on the CDI rate.
|
5
|
Receivables
from Clients
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,254,594 |
|
|
|
473,734 |
|
|
|
533,593 |
|
|
Non-current
|
|
|
863,950 |
|
|
|
497,910 |
|
|
|
41,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,118,544 |
|
|
|
971,644 |
|
|
|
575,085 |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The balance of
accounts receivable from the units sold and not yet delivered is limited to the
portion of revenues accounted for net of the amounts already received. A portion
of the full mortgage receivables are assigned in guarantee to loans (Note
9).
The balances of
advances from clients (development and services), which exceed the revenues
recorded in the period, amount to R$ 90,363 on December 31, 2008 (2007 -
R$ 47,662, 2006 - R$ 76,146), and are classified in Obligations for
purchase of land and advances from clients.
Other than for
Tenda, an allowance for doubtful accounts is not considered necessary, since the
accounts receivable history of losses is insignificant. The Company's evaluation
of the risk of loss takes into account that these receivables refer mostly to
developments under construction, for which the transfer of the property deed
only takes place after the settlement and/or negotiation of the client
receivables.
The allowance for
doubtful accounts for Tenda, totaled R$ 18,815 on December 31, 2008, and is
considered sufficient by the Company's management to cover future losses on the
realization of accounts receivable of this subsidiary.
At
December 31, 2008, the balance of accounts receivable was reduced by an
adjustment to present value of R$ 62,266 (2007 - R$ 39,553, 2006 - R$
18,184).
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
750,555 |
|
|
|
656,146 |
|
|
|
233,033 |
|
|
Property
under construction
|
|
|
1,181,930 |
|
|
|
324,307 |
|
|
|
221,995 |
|
|
Completed
units
|
|
|
96,491 |
|
|
|
41,826 |
|
|
|
31,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,028,976 |
|
|
|
1,022,279 |
|
|
|
486,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
|
1,695,130 |
|
|
|
872,876 |
|
|
|
422,984 |
|
|
Non-current
portion
|
|
|
333,846 |
|
|
|
149,403 |
|
|
|
63,413 |
|
The Company has
undertaken commitments to built units bartered for land, accounted for based on
the fair value of the bartered units. At December 31, 2008, the balance of land
acquired through barter transactions totaled R$ 169,658 (2007 - R$105,424,
2006 - R$ 75,120).
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
7
|
Other
Accounts Receivable
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
accounts related to real estate ventures (*)
|
|
|
60,513 |
|
|
|
17,928 |
|
|
|
47,272 |
|
|
Advances to
suppliers
|
|
|
53,084 |
|
|
|
22,197 |
|
|
|
10,765 |
|
|
Recoverable
taxes
|
|
|
18,905 |
|
|
|
8,347 |
|
|
|
11,005 |
|
|
Deferred PIS
and COFINS
|
|
|
10,187 |
|
|
|
8,274 |
|
|
|
7,940 |
|
|
Credit
assignment receivables
|
|
|
7,990 |
|
|
|
8,748 |
|
|
|
10,773 |
|
|
Client
refinancing to be released
|
|
|
4,392 |
|
|
|
8,510 |
|
|
|
10,413 |
|
|
Advances for
future capital increase
|
|
|
1,645 |
|
|
|
10,350 |
|
|
|
- |
|
|
Other
|
|
|
26,059 |
|
|
|
17,566 |
|
|
|
10,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,775 |
|
|
|
101,920 |
|
|
|
108,527 |
|
|
|
(*)
|
The Company
participates in the development of real estate ventures with other
partners, directly or through related parties, through condominiums and/or
consortia. The management structure of these enterprises and the cash
management are centralized in the lead partner of the enterprise, which
manages the construction schedule and budgets. Thus, the lead partner
ensures that the investments of the necessary funds are made and allocated
as planned. The sources and use of resources of the venture are reflected
in these balances, observing the respective participation percentage,
which are not subject to indexation or financial charges and do not have a
predetermined maturity date. The average term for the development and
completion of the projects in which the resources are invested is between
24 and 30 months. Other payables to partners of real estate ventures are
presented separately.
|
In
January 2007, upon the acquisition of 60% of Alphaville, arising from the merger
of Catalufa Participações Ltda., a capital increase of R$ 134,029 was
approved upon the issuance for public subscription of 6,358,116 common shares.
This transaction generated goodwill of R$ 163,589 recorded based on
expected future profitability, which is being amortized to match the estimated
profit before taxes of Alphaville over a ten year period. During the year ended
December 31, 2008, the Company amortized R$ 10,733 of goodwill arising from
the acquisition of Alphaville. The Company has a commitment to purchase the
remaining 40% of Alphaville's capital stock based on the fair value of
Alphaville, evaluated at the future acquisition dates, the purchase
consideration for which cannot yet be calculated and, consequently, is not
recognized. The acquisition agreement provides that the Company undertakes to
purchase the remaining 40% of Alphaville (20% in January 2010 and 20% in January
2012) for settlement in cash or shares, at the Company's sole
discretion.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
On
October 26, 2007, the Company acquired 70% of Cipesa whereupon Gafisa S.A. and
Cipesa incorporated a new company, Cipesa Empreendimentos Imobiliários Ltda.
("Nova Cipesa"), in which the Company holds a 70% interest and Cipesa has 30%.
Gafisa S.A. made a contribution in Nova Cipesa of R$ 50,000 in cash and
acquired the shares which Cipesa held in Nova Cipesa amounting for
R$ 15,000, paid on October 26, 2008. Cipesa is entitled to receive from the
Company a variable portion corresponding to 2% of the Total Sales Value (VGV),
as defined, of the projects launched by Nova Cipesa through 2014, not to exceed
R$ 25,000. Accordingly, the Company´s purchase consideration totaled
R$ 90,000 and goodwill amounting to R$ 40,686 was recorded, based on
expected future profitability, which will be amortized in variable installments
to match the estimated pretax income of Nova Cipesa, calculated over a ten year
period.
In
November 2007, the Company acquired for R$ 40,000 the remaining interest in
certain ventures with Redevco do Brasil Ltda. ("Redevco"). As a result of this
transaction, the Company recognized negative goodwill of R$ 31,235, based
on expected future results to match the estimated pretax income of these SPEs
over a ten year period. In the year ended December 31, 2008, the Company
amortized negative goodwill amounting to R$ 12,713 arising from the
acquisition of the SPEs.
On
October 21, 2008, as part of the acquisition of its interest in Tenda, the
Company contributed the net assets of FIT Residencial amounting to
R$ 411,241, acquiring 60% of the shareholders' equity of Tenda (book value
of the 60% interest representing an investment in net assets of
R$ 621,643), which at that date presented shareholders' equity book value
of R$ 1,036,072 The sale of the 40% quotas of FIT Residencial to Tenda
shareholders in exchange for the Tenda shares generated negative goodwill of
R$ 210,402, which is based on expected future results, reflecting the gain
on the sale of the interest in FIT Residencial (Gain on the exchange of shares).
This negative goodwill is being amortized over the average construction period
(through delivery of the units) of the real estate ventures of FIT Residencial
at October 21, 2008. From October 22 to December 31, 2008, the Company amortized
R$ 41,008 of the negative goodwill (Deferred gain on sale of
investment).
|
|
|
Interest
- %
|
|
|
Shareholders'
equity
|
|
|
Net
income (loss ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investees
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenda
|
|
|
60.00 |
|
|
|
- |
|
|
|
- |
|
|
|
1,062,213 |
|
|
|
- |
|
|
|
- |
|
|
|
26,142 |
|
|
|
- |
|
|
|
- |
|
|
FIT
Residencial
|
|
|
60.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
- |
|
|
|
(14,974
|
) |
|
|
(2 |
) |
|
|
(22,263
|
) |
|
|
(14,941
|
) |
|
|
- |
|
|
Bairro
Novo
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
8,164 |
|
|
|
10,298 |
|
|
|
- |
|
|
|
(18,312
|
) |
|
|
(1,902
|
) |
|
|
- |
|
|
Alphaville
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
- |
|
|
|
69,211 |
|
|
|
42,718 |
|
|
|
- |
|
|
|
35,135 |
|
|
|
20,905 |
|
|
|
- |
|
|
Cipesa
Holding
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
62,157 |
|
|
|
47,954 |
|
|
|
- |
|
|
|
(6,349
|
) |
|
|
(1,359
|
) |
|
|
- |
|
|
Península SPE1
S.A.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
(1,139
|
) |
|
|
(1,390
|
) |
|
|
(963
|
) |
|
|
205 |
|
|
|
(427
|
) |
|
|
(261
|
) |
|
Península SPE2
S.A.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
98 |
|
|
|
(955
|
) |
|
|
(3,222
|
) |
|
|
1,026 |
|
|
|
2,267 |
|
|
|
(119
|
) |
|
Res. das
Palmeiras SPE Ltda.
|
|
|
100.00 |
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
2,545 |
|
|
|
2,039 |
|
|
|
1,443 |
|
|
|
264 |
|
|
|
596 |
|
|
|
349 |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
Interest
- %
|
|
|
Shareholders'
equity
|
|
|
Net
income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investees
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa SPE 40
Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
5,841 |
|
|
|
1,713 |
|
|
|
(512
|
) |
|
|
1,269 |
|
|
|
2,225 |
|
|
|
(348
|
) |
|
Gafisa SPE 42
Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
99.80 |
|
|
|
6,997 |
|
|
|
76 |
|
|
|
(293 |
) |
|
|
6,799 |
|
|
|
369 |
|
|
|
(293
|
) |
|
Gafisa SPE 43
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
(3 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
Gafisa SPE 44
Ltda.
|
|
|
40.00 |
|
|
|
40.00 |
|
|
|
99.80 |
|
|
|
(377
|
) |
|
|
(534
|
) |
|
|
(1 |
) |
|
|
(192
|
) |
|
|
(533
|
) |
|
|
(1 |
) |
|
Gafisa SPE 45
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
1,058 |
|
|
|
(475
|
) |
|
|
406 |
|
|
|
(8,904
|
) |
|
|
(882
|
) |
|
|
20 |
|
|
Gafisa SPE 46
Ltda.
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
5,498 |
|
|
|
212 |
|
|
|
(966
|
) |
|
|
3,384 |
|
|
|
1,178 |
|
|
|
(966
|
) |
|
Gafisa SPE 47
Ltda.
|
|
|
80.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
6,639 |
|
|
|
(18 |
) |
|
|
(1 |
) |
|
|
(159
|
) |
|
|
(18 |
) |
|
|
(1 |
) |
|
Gafisa SPE 48
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
21,656 |
|
|
|
(718
|
) |
|
|
(1 |
) |
|
|
818 |
|
|
|
(718
|
) |
|
|
(1 |
) |
|
Gafisa SPE 49
Ltda.
|
|
|
99.80 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
(58 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
(57 |
) |
|
|
(2 |
) |
|
|
- |
|
|
Gafisa SPE 53
Ltda.
|
|
|
60.00 |
|
|
|
60.00 |
|
|
|
- |
|
|
|
2,769 |
|
|
|
205 |
|
|
|
- |
|
|
|
1,895 |
|
|
|
204 |
|
|
|
- |
|
|
Gafisa SPE 55
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
20,540 |
|
|
|
(4 |
) |
|
|
- |
|
|
|
(3,973
|
) |
|
|
(5 |
) |
|
|
- |
|
|
Gafisa SPE 64
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 65
Ltda.
|
|
|
70.00 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
(281
|
) |
|
|
1 |
|
|
|
- |
|
|
|
(732
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 67
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 68
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 72
Ltda.
|
|
|
60.00 |
|
|
|
- |
|
|
|
- |
|
|
|
(22 |
) |
|
|
- |
|
|
|
- |
|
|
|
(22 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 73
Ltda.
|
|
|
70.00 |
|
|
|
- |
|
|
|
- |
|
|
|
(155
|
) |
|
|
- |
|
|
|
- |
|
|
|
(155
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 74
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(330
|
) |
|
|
- |
|
|
|
- |
|
|
|
(331
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 59
Ltda.
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
- |
|
|
Gafisa SPE 76
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 78
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 79
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 75
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(27 |
) |
|
|
- |
|
|
|
- |
|
|
|
(28 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 80
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-85
Empr. Imob.
|
|
|
60.00 |
|
|
|
- |
|
|
|
- |
|
|
|
(756
|
) |
|
|
- |
|
|
|
- |
|
|
|
(1,200
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-86
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(82 |
) |
|
|
- |
|
|
|
- |
|
|
|
(83 |
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-81
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-82
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-83
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-87
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-88
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-89
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-90
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE-84
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Dv Bv SPE
S.A.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
(439
|
) |
|
|
(464
|
) |
|
|
(234
|
) |
|
|
126 |
|
|
|
(231
|
) |
|
|
115 |
|
|
DV SPE
S.A.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
932 |
|
|
|
1,658 |
|
|
|
964 |
|
|
|
(527
|
) |
|
|
695 |
|
|
|
(728
|
) |
|
Gafisa SPE 22
Ltda.
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
49.00 |
|
|
|
5,446 |
|
|
|
4,314 |
|
|
|
(1,080
|
) |
|
|
1,006 |
|
|
|
250 |
|
|
|
(37 |
) |
|
Gafisa SPE 29
Ltda.
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
70.00 |
|
|
|
257 |
|
|
|
2,311 |
|
|
|
5,443 |
|
|
|
271 |
|
|
|
(2,532
|
) |
|
|
5,732 |
|
|
Gafisa SPE 32
Ltda.
|
|
|
80.00 |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
(760
|
) |
|
|
1 |
|
|
|
1 |
|
|
|
(760
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 69
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(401
|
) |
|
|
- |
|
|
|
- |
|
|
|
(402
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 70
Ltda.
|
|
|
55.00 |
|
|
|
- |
|
|
|
- |
|
|
|
6,696 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 71
Ltda.
|
|
|
70.00 |
|
|
|
- |
|
|
|
- |
|
|
|
(794
|
) |
|
|
- |
|
|
|
- |
|
|
|
(795
|
) |
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 50
Ltda.
|
|
|
80.00 |
|
|
|
80.00 |
|
|
|
- |
|
|
|
7,240 |
|
|
|
(121
|
) |
|
|
- |
|
|
|
1,532 |
|
|
|
(121
|
) |
|
|
- |
|
|
Gafisa SPE 51
Ltda.
|
|
|
90.00 |
|
|
|
90.00 |
|
|
|
- |
|
|
|
15,669 |
|
|
|
8,387 |
|
|
|
- |
|
|
|
6,620 |
|
|
|
1,602 |
|
|
|
- |
|
|
Gafisa SPE 61
Ltda.
|
|
|
99.80 |
|
|
|
- |
|
|
|
- |
|
|
|
(14 |
) |
|
|
- |
|
|
|
- |
|
|
|
(14 |
) |
|
|
- |
|
|
|
- |
|
|
Tiner Empr. e
Part. Ltda.
|
|
|
45.00 |
|
|
|
45.00 |
|
|
|
45.00 |
|
|
|
26,736 |
|
|
|
10,980 |
|
|
|
5,649 |
|
|
|
15,762 |
|
|
|
5,331 |
|
|
|
4,687 |
|
|
O Bosque Empr.
Imob. Ltda.
|
|
|
30.00 |
|
|
|
30.00 |
|
|
|
30.00 |
|
|
|
15,854 |
|
|
|
9,176 |
|
|
|
2,667 |
|
|
|
(62 |
) |
|
|
79 |
|
|
|
(166
|
) |
|
Alta Vistta -
Alto da Barra de S. Miguel Emp. Imob
Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
3,428 |
|
|
|
(644
|
) |
|
|
(233
|
) |
|
|
4,073 |
|
|
|
(618
|
) |
|
|
- |
|
|
Dep. José
Lages Emp. Imob. Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
34 |
|
|
|
(399
|
) |
|
|
12 |
|
|
|
433 |
|
|
|
(410
|
) |
|
|
- |
|
|
Sitio Jatiuca
Emp. Imob. SPE Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
1,259 |
|
|
|
(2,829
|
) |
|
|
(79 |
) |
|
|
4,088 |
|
|
|
(3,361
|
) |
|
|
- |
|
|
Spazio Natura
Emp. Imob. Ltda
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
1,400 |
|
|
|
1,429 |
|
|
|
(26 |
) |
|
|
(28 |
) |
|
|
(28 |
) |
|
|
- |
|
|
Grand Park -
Parque Águas Emp. Imob.
Ltda
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
(1,661
|
) |
|
|
(281
|
) |
|
|
- |
|
|
|
(1,529
|
) |
|
|
(280
|
) |
|
|
- |
|
|
Grand Park -
Parque Árvores Emp. Imob.
Ltda.
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
(1,906
|
) |
|
|
(625
|
) |
|
|
- |
|
|
|
(1,698
|
) |
|
|
(625
|
) |
|
|
- |
|
|
Dubai
Residencial
|
|
|
50.00 |
|
|
|
- |
|
|
|
- |
|
|
|
5,374 |
|
|
|
- |
|
|
|
- |
|
|
|
(627
|
) |
|
|
- |
|
|
|
- |
|
|
Cara de
Cão
|
|
|
65.00 |
|
|
|
- |
|
|
|
- |
|
|
|
40,959 |
|
|
|
- |
|
|
|
- |
|
|
|
19,907 |
|
|
|
- |
|
|
|
- |
|
|
Costa
Maggiore
|
|
|
50.00 |
|
|
|
- |
|
|
|
- |
|
|
|
3,892 |
|
|
|
- |
|
|
|
- |
|
|
|
4,290 |
|
|
|
- |
|
|
|
- |
|
|
Gafisa SPE 36
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
4,145 |
|
|
|
(54 |
) |
|
|
- |
|
|
|
4,199 |
|
|
|
848 |
|
|
Gafisa SPE 38
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
5,088 |
|
|
|
439 |
|
|
|
- |
|
|
|
4,649 |
|
|
|
1,165 |
|
|
Gafisa SPE 41
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
20,793 |
|
|
|
6,855 |
|
|
|
- |
|
|
|
13,938 |
|
|
|
6,696 |
|
|
Villaggio
Trust
|
|
|
- |
|
|
|
50.00 |
|
|
|
50.00 |
|
|
|
- |
|
|
|
5,587 |
|
|
|
3,923 |
|
|
|
- |
|
|
|
1,664 |
|
|
|
119 |
|
|
Gafisa SPE 25
Ltda.
|
|
|
- |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
14,904 |
|
|
|
13,551 |
|
|
|
- |
|
|
|
419 |
|
|
|
1,392 |
|
|
Gafisa SPE 26
Ltda.
|
|
|
- |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
121,767 |
|
|
|
28,635 |
|
|
|
- |
|
|
|
(19 |
) |
|
|
(7,417
|
) |
|
Gafisa SPE 27
Ltda.
|
|
|
- |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
15,160 |
|
|
|
14,007 |
|
|
|
- |
|
|
|
1,215 |
|
|
|
(77 |
) |
|
Gafisa SPE 28
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
(1,299
|
) |
|
|
(800
|
) |
|
|
- |
|
|
|
(499
|
) |
|
|
3 |
|
|
Gafisa SPE 30
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
15,923 |
|
|
|
7.897 |
|
|
|
- |
|
|
|
8,026 |
|
|
|
7,482 |
|
|
Gafisa SPE 31
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
22,507 |
|
|
|
21,746 |
|
|
|
- |
|
|
|
761 |
|
|
|
11,391 |
|
|
Gafisa SPE 35
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
2,671 |
|
|
|
(48 |
) |
|
|
- |
|
|
|
2,719 |
|
|
|
849 |
|
|
Gafisa SPE 37
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
8,512 |
|
|
|
(5,868
|
) |
|
|
- |
|
|
|
2,661 |
|
|
|
3,461 |
|
|
Gafisa SPE 39
Ltda.
|
|
|
- |
|
|
|
99.80 |
|
|
|
99.80 |
|
|
|
- |
|
|
|
5,693 |
|
|
|
1,261 |
|
|
|
- |
|
|
|
4,432 |
|
|
|
1,819 |
|
|
Gafisa SPE 33
Ltda.
|
|
|
- |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
11,256 |
|
|
|
9,559 |
|
|
|
- |
|
|
|
1,696 |
|
|
|
(2,091
|
) |
|
Diodon
Participações Ltda.
|
|
|
- |
|
|
|
100.00 |
|
|
|
100.00 |
|
|
|
- |
|
|
|
36,556 |
|
|
|
31,920 |
|
|
|
- |
|
|
|
4,637 |
|
|
|
(869
|
) |
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(b)
|
Goodwill
(negative goodwill) on acquisition of
subsidiaries
and deferred gain on partial sale
of
investments
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
amortization
|
|
|
Net
|
|
|
Net
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,589 |
|
|
|
(10,733
|
) |
|
|
152,856 |
|
|
|
163,441 |
|
|
|
- |
|
|
|
|
|
40,686 |
|
|
|
- |
|
|
|
40,686 |
|
|
|
40,686 |
|
|
|
- |
|
|
|
|
|
5,740 |
|
|
|
(4,194
|
) |
|
|
1,546 |
|
|
|
3,273 |
|
|
|
2,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210,015 |
|
|
|
(14,927
|
) |
|
|
195,088 |
|
|
|
207,400 |
|
|
|
2,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Negative
goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,235
|
) |
|
|
12,713 |
|
|
|
(18,522
|
) |
|
|
(32,223
|
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
gain on partial sale of FIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210,402
|
) |
|
|
41,008 |
|
|
|
(169,394
|
) |
|
|
- |
|
|
|
- |
|
|
9
|
Loans
and Financing, net of
|
Cross-Currency
Interest Rate Swaps
|
Type
of operation
|
|
Annual
interest rates
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4% |
|
|
|
166,818 |
|
|
|
99,364 |
|
|
|
- |
|
|
|
|
Yen +
1.4%/105% CDI
|
|
|
|
(53,790
|
) |
|
|
(733
|
) |
|
|
- |
|
|
|
|
7% |
|
|
|
146,739 |
|
|
|
104,492 |
|
|
|
- |
|
|
|
|
US$ +
7%/104%CDI
|
|
|
|
(32,962
|
) |
|
|
(5,124
|
) |
|
|
- |
|
|
|
|
0.66% to
3.29% + CDI
|
|
|
|
435,730 |
|
|
|
136,078 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
662,535 |
|
|
|
334,077 |
|
|
|
- |
|
|
National
Housing System - SFH
|
|
TR + 6.2% to
11.4%
|
|
|
|
372,255 |
|
|
|
98,700 |
|
|
|
26,379 |
|
|
Downstream
merger obligations
|
|
TR + 10% to
12.0%
|
|
|
|
8,810 |
|
|
|
13,311 |
|
|
|
18,027 |
|
|
Other
|
|
TR +
6.2%
|
|
|
|
4,576 |
|
|
|
2,702 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,048,176 |
|
|
|
448,790 |
|
|
|
44,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
|
|
|
|
|
447,503 |
|
|
|
68,357 |
|
|
|
17,305 |
|
|
Non-current
portion
|
|
|
|
|
|
|
600,673 |
|
|
|
380,433 |
|
|
|
27,101 |
|
|
|
(i)
|
Loans and
financing classified at fair value through income (Note
16(a)(ii)).
|
|
|
(ii)
|
Derivatives
classified as financial assets at fair value through income (Note
16(a)(ii)).
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
Rates:
|
CDI -
Interbank Certificate of Deposit, at December 31, 2008 was 12.2% p.a.
(2007 - 11.8% p.a., 2006 - 15% p.a.). TR - Referential Rate, at December
31, 2008 was 1.62% p.a. (2007 - 1.44% p.a., 2006 - 1.99%
p.a.)
|
Funding for working
capital and for developments correspond to credit lines from financial
institutions. The Company has contracted cross-currency interest rate swaps to
cover the full amount of the working capital loans (Note 16). At December 31,
2008, 2007 and 2006, the Company elected to apply the fair value option and
record both the loan and respective derivative instruments at fair value through
income.
Downstream merger
obligations correspond to debt assumed from former shareholders with maturities
up to 2013.
The Company has
financing agreements with the SFH, the resources from which are released to the
Company as construction progresses.
Loans and financing
are guaranteed by sureties of the investors, mortgage of the units, assignment
of rights, receivables from clients and the proceeds from the sale of our
properties. Mortgage receivables given in guarantee total R$ 2,484,149. The
balance of deposits accounts pledged in guarantee totals R$ 76,928 on
December 31, 2008 (Note 4).
Long-term
installments as of December 31, 2008 mature as follows: R$ 345,021 in 2010,
R$ 181,549 in 2011, R$ 40,548 in 2012 and R$ 33,555
in 2013.
In
September 2006, the Company issued its Second Debenture Placement Program, which
allows it to place up to R$ 500,000 in non-convertible simple subordinated
debentures secured by a general guarantee. In June 2008, the Company issued its
Third Debenture Placement Program, which allows it to place R$ 1,000,000 in
simple debentures with a general guarantee maturing in two years.
Under the Second
and Third Programs, the Company placed series of 24,000 and 25,000 series
debentures, respectively, corresponding to R$ 240,000 and R$ 250,000,
with the following features:
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
Program/issuances
|
|
Amount
|
|
Annual
remuneration
|
|
Maturity
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
program/first issuance
|
|
|
240,000 |
|
CDI +
1.30%
|
|
September
2011
|
|
|
248,679 |
|
|
|
246,590 |
|
|
|
251,039 |
|
|
Third
program/first issuance
|
|
|
250,000 |
|
107.20%
CDI
|
|
June
2018
|
|
|
255,266 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
503,945 |
|
|
|
246,590 |
|
|
|
251,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
|
|
|
|
|
|
|
|
61,945 |
|
|
|
6,590 |
|
|
|
11,039 |
|
|
Non-current
portion
|
|
|
|
|
|
|
|
|
|
442,000 |
|
|
|
240,000 |
|
|
|
240,000 |
|
The Company has
restrictive debenture covenants which limit its ability to perform certain
actions, such as the issuance of debt, and that could require the early
redemption or refinancing of loans if the Company were it to breach these
covenants. The first issuance of the Second Program and the first issuance of
the Third Program have cross-restrictive covenants in which an event of default
or early maturity of any debt above R$ 5,000 and R$ 10,000,
respectively, requires the Company to early amortize the first issuance of the
Second Program. The actual ratios and minimum and maximum amounts stipulated by
these restrictive covenants and measured under Brazilian GAAP at December 31,
2008 and 2007 are as follows:
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Second
program - first issuance
|
|
|
|
|
|
|
|
Total debt, less SFH debt, less cash,
cash equivalents
and financial investments cannot exceed
75% of
|
|
35%
|
|
5%
|
|
4%
|
|
Total receivables from clients from
development and
services, plus inventory of finished
units, required to be
over 2.0 times total
debt
|
|
3.3
times
|
|
3.5
times
|
|
4.6
times
|
|
|
|
|
|
|
|
|
|
|
Total debt, less cash, cash equivalents
and financial
investments, required to be under
R$ 1,000,000
|
|
R$ 946,600
|
|
R$ 175,000
|
|
R$
29,284
|
|
|
|
|
|
|
|
|
|
|
|
Third
program - first issuance
|
|
|
|
|
|
|
|
Total debt, less SFH debt, less cash,
cash equivalents
and financial investments, cannot
exceed 75% of
|
|
35%
|
|
N/A
|
|
N/A
|
|
Total accounts receivable plus inventory
of finished units
required to be over 2.2 times total
debt
|
|
5.5
times
|
|
N/A
|
|
N/A
|
|
The long-term
balance as of December 31, 2008 matures as follows: R$ 96,000 in 2010,
R$ 96,000 in 2011, R$ 125,000 in 2012 and R$ 125,000 in
2013.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
11
|
Other
Accounts Payable
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation to
venture partners (i)
|
|
|
300,000 |
|
|
|
- |
|
|
|
- |
|
|
Credit
assignments
|
|
|
67,552 |
|
|
|
5,436 |
|
|
|
6,474 |
|
|
Acquisition
of investments
|
|
|
30,875 |
|
|
|
48,521 |
|
|
|
- |
|
|
Loans from
real estate development partners (ii)
|
|
|
- |
|
|
|
8,255 |
|
|
|
2,166 |
|
|
Other
accounts payable
|
|
|
89,265 |
|
|
|
19,099 |
|
|
|
28,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
487,692 |
|
|
|
81,311 |
|
|
|
37,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
portion
|
|
|
97,933 |
|
|
|
68,368 |
|
|
|
14,628 |
|
|
Non-current
portion
|
|
|
389,759 |
|
|
|
12,943 |
|
|
|
22,556 |
|
|
|
(i)
|
In January
2008, the Company formed an unincorporated venture ("SCP"), the main
objective of which is to hold interests in other real estate development
companies. The SCP received contributions of R$ 304,040 through
December 31, 2008 (represented by 13,084,000 Class A quotas fully paid-in
by the Company and 300,000,000 Class B quotas from the other venture
partner). The SCP has a defined term which ends on January 31, 2017 at
which time the Company is required to redeem the venture partners'
interest. The SCP will preferably use these funds to acquire equity
investments and increase the capital of its investees. The redemption of
Class B quotas of R$ 300,000 will start on January 31, 2012 and will be
fully paid by January 31, 2014. The venture partner receives an annual
dividend substantially equivalent to the variation in the Interbank
Certificate of Deposit (CDI) rate. The SCP's charter provides for the
compliance with certain covenants by the Company, in its capacity as lead
partner, which include the maintenance of minimum indices of net debt and
receivables. At December 31, 2008, the SCP and the Company were in
compliance with these clauses.
|
|
|
(ii)
|
Loans from
real estate development partners related to amounts due under current
account agreements, which accrued financial charges of IGP-M plus 12%
p.a.
|
|
12
|
Commitments
and Provision for
Contingencies
|
The Company is a
party 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
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
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 probable losses.
The changes in the
provision for contingencies are summarized below:
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
the beginning of the year
|
|
|
21,262 |
|
|
|
4,105 |
|
|
|
4,422 |
|
|
|
|
|
11,440 |
|
|
|
2,258 |
|
|
|
725 |
|
Additions - consolidation of
Alphaville
|
|
|
- |
|
|
|
16,695 |
|
|
|
- |
|
Additions - consolidation of
Tenda
|
|
|
26,840 |
|
|
|
- |
|
|
|
- |
|
Reversals and
settlements
|
|
|
(2,178
|
) |
|
|
(1,796
|
) |
|
|
(1,042
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Court-mandated escrow
deposits
|
|
|
(3,834
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
the end of the year
|
|
|
53,530 |
|
|
|
21,262 |
|
|
|
4,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Tax,
labor and civil lawsuits
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Civil
lawsuits
|
|
|
27,779 |
|
|
|
2,323 |
|
|
|
- |
|
|
Tax
lawsuits
|
|
|
19,609 |
|
|
|
16,768 |
|
|
|
3,169 |
|
|
Labor
claims
|
|
|
9,976 |
|
|
|
2,171 |
|
|
|
936 |
|
|
Court-mandated
escrow deposits
|
|
|
(3,834
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,530 |
|
|
|
21,262 |
|
|
|
4,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
17,567 |
|
|
|
3,668 |
|
|
|
4,105 |
|
|
Non-current
|
|
|
35,963 |
|
|
|
17,594 |
|
|
|
- |
|
Alphaville is a
party in judicial lawsuits and administrative proceedings related to Excise Tax
(IPI) and Value-added Tax on Sales and Services (ICMS). The likelihood of loss
in the ICMS case is estimated by legal counsel as (i) probable in regard to the
principal and interest, and (ii) remote in regard to the fine for noncompliance
with ancillary obligations. The amount of the contingency estimated by legal
counsel as a probable loss amounts to R$ 16,705 and is recorded in the
Provision for contingencies.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
At
December 31, 2008, the Company is monitoring other lawsuits and risks, the
likelihood of loss for which, based on the position of legal counsel, is
possible but not probable, totaling R$ 67,736, and for which management
believes a provision for loss is not necessary.
In
September 2008, R$ 10,583 in the Gafisa S.A. bank accounts were deemed to
be restricted as to withdrawal. This restriction arose from a foreclosure action
in which it is alleged that Gafisa S.A. became the successor of Cimob Companhia
Imobiliária S.A. ("Cimob") upon merger of Cimob, at which time Cimob assets were
reduced. The Company is appealing against such decision on the grounds that the
claim lacks merit, in order to release its funds and not be held liable for
Cimob's debt. No provision was recognized in the financial statements as of
December 31, 2008 based on the position of the Company's legal
counsel.
An
amount of R$ 27,979 of the proceeds of the Company's initial public
offering was withheld 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 based on the position of
the Company's legal counsel.
|
(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. At December 31, 2008, estimated
costs to be incurred on developments under construction total approximately
R$2,465,000.
|
13
|
Obligations
for Purchase of Land and
Advances
from Clients
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
for purchase of land
|
|
|
392,762 |
|
|
|
151,594 |
|
|
|
131,915 |
|
|
Advances from
clients
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,658 |
|
|
|
169,658 |
|
|
|
75,120 |
|
|
|
|
|
90,363 |
|
|
|
72,125 |
|
|
|
76,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
652,783 |
|
|
|
393,377 |
|
|
|
283,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
421,584 |
|
|
|
290,193 |
|
|
|
266,856 |
|
|
Non-current
|
|
|
231,199 |
|
|
|
103,184 |
|
|
|
16,325 |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
At
December 31, 2008, the Company's capital totaled R$ 1,229,517 (2007 -
R$ 1,221,846, 2006 - R$ 591,742), represented by 133,087,518 nominative
Common shares without par value (2007 - 132,577,093 nominative Common shares
without par value, 2006 - 111,511,596 nominative Common shares without par
value), 3,124,972 of which were held in treasury (2007 - 3,124,972 treasury
shares, 2006 - 8,141,646 treasury shares).
On
April 4, 2008, the distribution of dividends for 2007 was approved in the total
amount of R$ 26,981, paid to shareholders on April 29, 2008. In 2008, the
capital increase of R$ 7,671, related to the stock option plan and the
exercise of 510,425 Common shares, was approved.
In
January 2007, upon the acquisition of 60% of Alphaville, arising from the merger
of Catalufa, a capital increase of R$ 134,029 was approved through the
issuance for public subscription of 6,358,116 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 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 2007, a capital increase of R$ 8,262, related
to the stock option plan and the exercise of 961,563 Common shares, was
approved. Under the Bylaws, amended on January 8, 2007, the Board of Directors
may increase share capital up to the limit of the authorized capital of
200,000,000 Common shares.
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 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
In
thousands of Brazilian 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).
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.
The changes in the
number of shares are as follows:
|
|
|
Thousands
of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares
|
|
|
Class
A
|
|
|
Class
F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,404 |
|
|
|
14,973 |
|
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of all preferred to common
shares
|
|
|
16,223 |
|
|
|
(14,973
|
) |
|
|
(1,250
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
50,075 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,113 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of
stock options
|
|
|
1,533 |
|
|
|
- |
|
|
|
- |
|
|
Initial
public offering
|
|
|
26,724 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,370 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issuance (Alphaville
Acquisition)
|
|
|
6,359 |
|
|
|
- |
|
|
|
- |
|
Exercise of stock
options
|
|
|
961 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
18,762 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,452 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock
options
|
|
|
511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,963 |
|
|
|
- |
|
|
|
- |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(b)
|
Appropriation
of net income for the year
|
Pursuant to the
Company's Bylaws, the net income for the year is distributed as follows: (i) 5%
to the legal reserve, until such reserve represents 20% of paid-up capital, and
(ii) 25% of the remaining balance for the payment of mandatory dividends to all
shareholders.
Pursuant to Article
36 of the Company's Bylaws, amended on March 21, 2007, the recognition of a
statutory investment reserve became mandatory, the amount of which may not
exceed 71.25% of net income. The purpose of the reserve is to retain funds for
financing for the expansion of the activities of the Company, including the
subscription of capital increases or creation of new ventures, participation in
consortia or other forms of association for the achievement of the Company's
corporate objectives.
Management's
proposal for distribution of net income for the years ended December 31 (subject
to approval at the Annual Shareholders' Meeting) are as follows:
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
for the year, adjusted by Law No. 11.638/07
|
|
|
|
|
|
91,640 |
|
|
|
44,010 |
|
|
Effects of
changes from Law No. 11.638/07
|
|
|
|
|
|
21,963 |
|
|
|
2,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
for the year
|
|
|
109,921 |
|
|
|
113,603 |
|
|
|
46,056 |
|
|
Legal
reserve
|
|
|
(5,496
|
) |
|
|
(5,680
|
) |
|
|
(2,303
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,425 |
|
|
|
107,923 |
|
|
|
43,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
mandatory dividends - 25%
|
|
|
(26,104
|
) |
|
|
(26,981
|
) |
|
|
(10,938
|
) |
The Company
provides six stock option plans. 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, (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.
To
be eligible for the plans (plans from 2000 to 2002), 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 of the grant is
inflation adjusted (IGP-M index), plus annual interest from 3% to 6%. The stock
option may be exercised in one to five years subsequent to the initial date of
the work period established in each of the plans. The shares are usually
available to employees over a period of ten years after their
contribution.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian 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. There were no
advanced payments for the years ended December 31, 2008 and 2007 (2006 - R$
996).
The Company and its
subsidiaries may decide to issue new shares or transfer the 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 and retirement. In such cases, the amounts advanced are
returned to the employees, in certain circumstances, at amounts that correspond
to the greater of the market value of the shares (as established in the rules of
the plans) or the amount inflation-indexed (IGP-M) plus annual interest from 3%
to 6%.
In
2008, the Company issued a new stock option plan. In order to become eligible
for the grant, employees are required to contribute from 25% to 80% of their
annual net bonus to exercise the options within 30 days from the program
date.
The market value of
each option granted is estimated at the grant date using the Black-Scholes
option pricing model. The assumptions used were as follows: expected volatility
of 50% in 2008 (2007 - 48%, 2006 - 50%); expected dividend yield on shares of
0.63% in 2008 (2007 - 0.33%, 2006 - 0%); risk-free interest rate of 11.56% in
2008 (2007 - 12.87 %, 2006 - 8.00%); and expected average option term of 2.6
years in 2008 and 2007 (2006 - 3.2 years).
The changes in the
number of stock options and corresponding weighted average exercise prices are
as follows:
|
|
|
|
|
|
2008
|
|
|
|
|
|
2007
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
options
|
|
|
Weighted
average
exercise
price - R$
|
|
|
Number of
options
|
|
|
Weighted
average
exercise
price – R$
|
|
|
Number of
options
|
|
|
Weighted
average
exercise
price – R$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at the
beginning of year
|
|
|
5,174,341 |
|
|
|
22.93 |
|
|
|
3,977,630 |
|
|
|
16.04 |
|
|
|
1,848,150 |
|
|
|
6.29 |
|
|
|
|
|
2,145,793 |
|
|
|
31.81 |
|
|
|
2,320,599 |
|
|
|
30.36 |
|
|
|
3,201,432 |
|
|
|
17.14 |
|
|
|
|
|
(441,123
|
) |
|
|
16.72 |
|
|
|
(858,582
|
) |
|
|
12.50 |
|
|
|
(1,021,950
|
) |
|
|
6.27 |
|
|
|
|
|
(3,675
|
) |
|
|
20.55 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(945,061
|
) |
|
|
20.55 |
|
|
|
(265,306
|
) |
|
|
18.61 |
|
|
|
(50,002
|
) |
|
|
18.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at the end of
the year
|
|
|
5,930,275 |
|
|
|
26.14 |
|
|
|
5,174,341 |
|
|
|
25.82 |
|
|
|
3,977,630 |
|
|
|
16.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at the end of
the year
|
|
|
4,376,165 |
|
|
|
28.00 |
|
|
|
2,597,183 |
|
|
|
22.93 |
|
|
|
1,066,151 |
|
|
|
6.56 |
|
|
|
(i)
|
In the years
ended December 31, 2007 and 2008, no option was cancelled due to the
expiration of terms of stock option
plans.
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
Brazilian
reais
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price per share at the end of the
|
|
|
7.86-39.95 |
|
|
|
6.75-34.33 |
|
|
|
5,91-19,92 |
|
|
Weighted
average of exercise price at the
|
|
|
21.70 |
|
|
|
18.54 |
|
|
|
9.63 |
|
|
Weighted
average of market price per
|
|
|
27.27 |
|
|
|
27.92 |
|
|
|
11.67 |
|
|
Market price
per share at the end of the
|
|
|
10.49 |
|
|
|
33.19 |
|
|
|
31.94 |
|
The options granted
will confer their holders the right to subscribe the Company's shares, after
completing one to five years of employment with the Company, and will expire
after ten years from the grant date.
The Company
recognized stock option expenses of R$ 26,138 in 2008 (2007 -
R$ 17,820, 2006 - R$ 9,129) of which R$22,203, R$16,497 and R$9,129 were
recorded by Gafisa S.A.
Tenda has a stock option plan, approved
at the Extraordinary Shareholders' Meeting of June 3, 2008, and established at the
Board of Directors' meeting on June 5, 2008, whereby the Board of
Directors of Tenda can implement issuance programs of up
to the maximum aggregate limit of 5% of total capital shares, including the dilution effect
from the exercise of all granted options. The volume involved in the granting of stock
options is limited to 3,000,000 shares. In 2008, 2,640,000 options were
granted, and 570,000 were cancelled. Options outstanding at the end of the year
totaled 2,570,000.
The stock option program provides that
the options granted may be exercised in three annual lots, each lot being
equivalent to 33.33% of total granted options, and the first exercise
being in May 2009. Options may be exercised in two periods during each year,
from the 1st to the 15th of May and November. The base exercise price of granted options was
R$ 7.20 per share. When exercising the option in the three annual lots, the
base price will be adjusted according to the
market value of shares, based on the average price in trading sessions over the
last 30 consecutive days before the commencement of each annual exercise period.
The exercise price is adjusted according to a fixed table of values, based on
the share value in the market, at the time of the two exercise periods for each
annual lot.
The market price of Tenda shares at the grant date was
R$ 11.60 and on December 31, 2008 was R$ 1.16.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The market value of each option granted
in 2008 was estimated at the grant date using the Black-Scholes option
pricing model, taking into
consideration the following assumptions: expected volatility of 58%, expected
dividend yield on shares of 0%, risk-free interest rate of 14.3% and expected
average option term of 1.7 year. In 2008, Tenda recorded stock option expenses
of R$ 1,973 for the period from October 22, 2008 through December 31, 2008.
Alphaville has
three stock option plans, the first launched in 2007 which was approved at the
June 26, 2007 Annual Shareholders' Meeting and of the Board of
Directors.
The changes in the
number of stock options and their corresponding weighted average exercise prices
for the year are as follows:
|
|
|
|
|
|
2008
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price -
Reais
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price -
Reais
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at the beginning of
|
|
|
1,474 |
|
|
|
6,522.92 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
720 |
|
|
|
7,474.93 |
|
|
|
1,474 |
|
|
|
6,522.92 |
|
|
|
|
|
(56
|
) |
|
|
6,522.92 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding at the end of the year
|
|
|
2,138 |
|
|
|
6,843.52 |
|
|
|
1,474 |
|
|
|
6,522.92 |
|
The market value of each option granted
in 2008 was estimated at the grant date using the Black-Scholes option
pricing model, taking into
consideration the following assumptions: expected volatility, calculated based
on the historic volatility of companies in the sector, of 38% in 2008 and 34% in
2007, expected dividend yield on shares of 0% in 2008 and 2007, risk-free
interest rate of 11.36% in 2008 and 11.88% in 2007, and expected average option
term of 2.3 years in 2008 and 2007.
Alphaville recorded stock option plan
expenses of R$ 1,962 in 2008 and R$ 1,323 in 2007.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Net operating loss
carryforwards
|
|
|
76,640 |
|
|
|
12,499 |
|
|
|
15,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax versus prior book
basis
|
|
|
52,321 |
|
|
|
46,267 |
|
|
|
24,800 |
|
|
|
|
|
39,680 |
|
|
|
10,633 |
|
|
|
6,784 |
|
Tax credits from downstream
mergers
|
|
|
21,611 |
|
|
|
9,341 |
|
|
|
12,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,252 |
|
|
|
78,740 |
|
|
|
59,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences between income taxed oncash
and recorded on accrual basis
|
|
|
202,743 |
|
|
|
46,070 |
|
|
|
32,259 |
|
|
|
|
|
18,266 |
|
|
|
- |
|
|
|
|
|
Temporary differences - CPC accounting
standards
|
|
|
18,122 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,131 |
|
|
|
46,070 |
|
|
|
32,259 |
|
The Company
calculates its taxes based on the recognition of results proportionally to the
receipt of the contracted sales, in accordance with the tax rules determined by
the Federal Revenue Service (SRF) Instruction 84/79, which differs from the
calculation of the accounting revenues based on the costs incurred versus total
estimated cost. The tax basis will crystallize over an average period of four
years as cash inflows arise.
At
December 31, 2008, the Company had tax losses, social contribution tax loss
carryforwards and tax credits totaling R$ 161,291 (2007 - R$ 130,991),
with corresponding tax benefits of R$ 54,838 (2007 -
R$ 51,317).
Other than for
Tenda, the Company has not recorded 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.
The projections of
future taxable income consider estimates that are related, among other things,
to the Company's performance and the behavior of the market in which it
operates, as well as certain economic factors. Actual results could differ from
these estimates.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
Based on estimated
future taxable income, the expected recovery profile of the income tax and
social contribution net operating loss carryforwards is as follows:
|
2009
|
|
|
5,289 |
|
|
2010
|
|
|
33,192 |
|
|
2011
|
|
|
35,714 |
|
|
2012
|
|
|
2,129 |
|
|
Other
|
|
|
316 |
|
|
|
|
|
|
|
|
Total
|
|
|
76,640 |
|
The reconciliation
of the statutory to effective tax rate is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
taxes on income and minority
|
|
|
210,051 |
|
|
|
128,058 |
|
|
|
52,535 |
|
|
Income tax
calculated at the standard
|
|
|
(71,417
|
) |
|
|
(43,540
|
) |
|
|
(17,862
|
) |
|
|
|
|
22,122 |
|
|
|
13,598 |
|
|
|
12,058 |
|
|
Pre
acquisition deferred income tax asset
|
|
|
12,419 |
|
|
|
- |
|
|
|
- |
|
|
Prior period
income tax and social
|
|
|
3,946 |
|
|
|
6,124 |
|
|
|
- |
|
|
Stock option
plan
|
|
|
(10,088
|
) |
|
|
(6,059
|
) |
|
|
(3,104
|
) |
|
Other
non-deductible items, net
|
|
|
(379
|
) |
|
|
(495
|
) |
|
|
383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
and social contribution expense
|
|
|
(43,397
|
) |
|
|
(30,372
|
) |
|
|
(8,525
|
) |
The Company
participates in operations involving financial instruments, all of which are
recorded on the balance sheet, for the purposes of meeting its operating needs
and reducing its exposure to credit, currency and interest rate risks. These
risks are managed by control policies, specific strategies and determination of
limits, as follows:
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The Company and its
subsidiaries restrict their exposure to credit risks associated with banks and
cash and cash equivalents, investing in highly-rated financial institutions in
short-term securities.
With regards to
accounts receivable, the Company restricts its exposure to credit risks through
sales to a broad base of clients and ongoing credit analysis. Additionally,
there is no history of losses due to the existence of liens for the recovery of
its products in the cases of default during the construction
period.
Other than for
Tenda, Company management did not deem necessary the recognition of a provision
to cover losses for the recovery of receivables related to delivered real estate
units. There was no significant concentration of credit risks related to clients
for the periods presented.
The Company
participates in operations involving derivative financial instruments for the
purposes of mitigating the effects of fluctuations in foreign exchange rates. In
the years ended December 31, 2008, 2007, R$ 80,895 and R$ 5,857,
respectively, related to the net positive result from the swap operations of
currency and interest rates was recognized in Financial income (expenses),
matching the results of these operations with the fluctuation in foreign
currencies in the Company's financial statements.
|
|
|
Reais
|
|
Percentage
|
|
Net
unrealized gains (losses)
from
derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominal
|
|
Original
|
|
|
|
|
|
|
|
|
(US
Dollar and Yen for CDI)
|
|
value
|
|
index
|
|
Swap
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco ABN
Amro Real S.A.
|
|
100,000
|
|
Yen +
1.4
|
|
105% of
CDI
|
|
53,790
|
|
733
|
|
|
Banco
Votorantim S.A.
|
|
100,000
|
|
US Dollar +
7
|
|
104% of
CDI
|
|
32,962
|
|
5,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
86,752
|
|
5,857
|
|
The Company does
not make sales denominated in foreign currency.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The interest rates
on loans and financing are disclosed in Note 9. The interest rates contracted on
financial investments are disclosed in Note 4. Accounts receivable from real
estate units delivered (Note 5) are subject to annual interest of
12%.
Additionally, as
disclosed in Notes 7 and 11, a significant portion of the balances from related
parties and with partners in the ventures are not subject to financial
charges.
|
(b)
|
Valuation
of financial instruments
|
The main financial
instruments receivable and payable are described below, as well as the criteria
for their valuation.
|
(i)
|
Cash
and cash equivalents
|
The market value of
these assets does not differ significantly from the amounts presented in the
financial statements (Note 4). The contracted rates reflect usual market
conditions.
|
(ii)
|
Loans
and financing and debentures
|
Loans and financing
are recorded based on the contractual interest rates of each operation, except
for loans denominated in foreign currency, which are stated at fair value.
Interest rate estimates for contracting operations with similar terms and
amounts are used for the determination of market value. The terms and conditions
of loans and financing and debentures obtained are presented in Notes 9 and 10.
The fair value of the other loans and financing, recorded based on the
contractual interest of each operation, does not significantly differ from the
amounts presented in the financial statements.
A
sensitivity analysis of the risks of material losses that could accrue from
financial instrument transactions, based on management's best estimate of the
most likely scenario (Scenario I), is presented below. Additionally, a further
two scenarios are presented, as required by the CVM, pursuant to Instruction No.
475/08, by stressing the variables by 25% and 50%, respectively, (Scenarios II
and III).
Banco Votorantim
S.A (counterparty) swap risk factors - increase of CDI (liability position) and
devaluation/appreciation of the Real x US Dollar (asset position).
ABN Amro swap risk
factor - increase of CDI (liability position) and devaluation/appreciation of
the Real x Yen (asset position).
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
Exchange
rate
- R$/US$
|
|
|
CDI
- %
|
|
|
|
|
|
|
|
|
|
|
Scenario I -
Likely
|
|
|
2.42 |
|
|
|
11.67 |
|
|
Scenario II -
Possible - Stress at 25%
|
|
|
1.82 |
|
|
|
14.57 |
|
|
Scenario III
- Remote - Stress at 50%
|
|
|
1.21 |
|
|
|
17.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
R$/Yen
|
|
|
CDI
- %
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario I -
Expected
|
|
|
0.02767 |
|
|
|
12.30 |
|
|
Scenario II -
Possible - Stress at 25%
|
|
|
0.02076 |
|
|
|
15.34 |
|
|
Scenario III
- Remote - Stress at 50%
|
|
|
0.01384 |
|
|
|
18.39 |
|
At
December 31, 2008, the Company calculated the scenario estimates of the
R$/US$ and R$/Yen exchange rates for the maturity dates of the swaps. The
hypothetical appreciations of the Real against other currencies would produce
the following impact:
Impact
on exchange rate scenarios
|
|
|
|
|
Scenario
(*)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Risk
|
|
|
I |
|
|
II
|
|
|
III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap (asset
position - US$)
|
|
Devaluation
of US Dollar
|
|
|
147,539 |
|
|
|
110,654 |
|
|
|
73,769 |
|
|
Debt
denominated in US$
|
|
Appreciation
of US Dollar
|
|
|
(146,739
|
) |
|
|
(110,054
|
) |
|
|
(73,370
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of
US$ devaluation
|
|
|
|
|
800 |
|
|
|
600 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap (asset
position - Yen)
|
|
Devaluation
of Yen
|
|
|
168,516 |
|
|
|
126,387 |
|
|
|
84,258 |
|
|
Debt
denominated in Yen
|
|
Appreciation
of Yen
|
|
|
(166,818
|
) |
|
|
(125,113
|
) |
|
|
(83,409
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of
Yen devaluation
|
|
|
|
|
1,698 |
|
|
|
1,274 |
|
|
|
849 |
|
(*) Scenarios I, II
and III - Likely, Possible and Remote, respectively.
Impact
on interest rate scenarios
|
|
|
|
|
Scenario
(*)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Risk
|
|
|
I |
|
|
II
|
|
|
III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votorantim
swap - liability position balance in CDI on
maturity date (June 9, 2009)
|
|
Increase of
CDI
|
|
|
120,656 |
|
|
|
122,103 |
|
|
|
123,528 |
|
ABN Amro Bank
swap - liability position balance in CDI on
maturity date (October 29, 2009)
|
|
Increase of
CDI
|
|
|
126,187 |
|
|
|
129,009 |
|
|
|
131,820 |
|
|
|
(*) Scenarios
I, II and III - Likely, Possible and Remote,
respectively.
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
The source of the
data used to determine the exchange rate adopted in the base scenarios was the
Brazilian Mercantile & Futures Exchange ("BMF"), as management believes that
this is the most reliable and independent source, and which represents the
market consensus on these quotations.
The US Dollar and
Yen data were sourced from the BMF on December 31, 2008 for the maturity
dates.
|
|
|
Quotation
- %
|
|
|
|
|
|
|
|
R$/U$$ for
maturity in June 2009
|
|
|
11.67 |
|
|
R$/JPY for
maturity in October 2009
|
|
|
12.30 |
|
|
|
|
CDI
- %
|
|
|
|
|
|
|
|
Maturity in
June 2009
|
|
|
11.67 |
|
|
Maturity in
October 2009
|
|
|
12.30 |
|
|
(a)
|
Transactions
with related parties
|
|
Current
account
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums and
consortia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(466
|
) |
|
|
265 |
|
|
|
- |
|
Consórcio Ezetec &
Gafisa
|
|
|
9,341 |
|
|
|
- |
|
|
|
611 |
|
|
|
|
|
(9,300
|
) |
|
|
2,293 |
|
|
|
- |
|
Cond. Constr. Empres. Pinheiros
|
|
|
2,132 |
|
|
|
(86
|
) |
|
|
(975
|
) |
Condomínio Parque da Tijuca
|
|
|
235 |
|
|
|
339 |
|
|
|
339 |
|
Condomínio em Const. Barra Fir
|
|
|
(46
|
) |
|
|
(100
|
) |
|
|
(97
|
) |
|
|
|
|
791 |
|
|
|
- |
|
|
|
- |
|
Condomínio do Ed. Barra Premiu
|
|
|
105 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(273
|
) |
|
|
(454
|
) |
|
|
(77
|
) |
Evolução Chácara das Flores
|
|
|
7 |
|
|
|
7 |
|
|
|
- |
|
Condomínio Passo da Pátria
II
|
|
|
569 |
|
|
|
569 |
|
|
|
734 |
|
Cond. Constr. Palazzo
Farnese
|
|
|
(17
|
) |
|
|
(17
|
) |
|
|
(17
|
) |
|
|
|
|
(214
|
) |
|
|
546 |
|
|
|
- |
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Consórcio Quintas Nova Cidade
|
|
|
36 |
|
|
|
36 |
|
|
|
36 |
|
|
|
|
|
3,838 |
|
|
|
5,476 |
|
|
|
4,665 |
|
Consórcio Sispar &
Gafisa
|
|
|
1,995 |
|
|
|
1,198 |
|
|
|
- |
|
Cd. Advanced Ofs
Gafisa-Metro
|
|
|
(417
|
) |
|
|
(130
|
) |
|
|
(976
|
) |
|
|
|
|
(2,629
|
) |
|
|
(257
|
) |
|
|
2,030 |
|
|
|
|
|
1,478 |
|
|
|
(488
|
) |
|
|
(305
|
) |
|
|
|
|
5 |
|
|
|
149 |
|
|
|
2,186 |
|
Cond. Urbaniz. Lot. Quintas Rio
|
|
|
(486
|
) |
|
|
(73
|
) |
|
|
215 |
|
Cond. Constr. Homem de Melo
|
|
|
83 |
|
|
|
11 |
|
|
|
(176
|
) |
Consórcio OAS Gafisa -
Garden
|
|
|
(1,759
|
) |
|
|
1,504 |
|
|
|
142 |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
Current
account
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Cond. de Constr. La Traviata
|
|
|
- |
|
|
|
298 |
|
|
|
(733
|
) |
Cond. em Constr.
Lacedemonia
|
|
|
57 |
|
|
|
57 |
|
|
|
33 |
|
|
|
|
|
(665
|
) |
|
|
(610
|
) |
|
|
(345
|
) |
|
|
|
|
711 |
|
|
|
683 |
|
|
|
573 |
|
Columbia Outeiro dos Nobres
|
|
|
(153
|
) |
|
|
(155
|
) |
|
|
19 |
|
Evolução - Reserva do Bosque
|
|
|
5 |
|
|
|
- |
|
|
|
(5
|
) |
Evolução - Reserva do Parque
|
|
|
122 |
|
|
|
118 |
|
|
|
90 |
|
Consórcio Gafisa &
Bricks
|
|
|
(26
|
) |
|
|
30 |
|
|
|
- |
|
Cond. Constr. Fernando
Torres
|
|
|
135 |
|
|
|
135 |
|
|
|
152 |
|
Cond. de Const. Sunrise
Reside
|
|
|
18 |
|
|
|
18 |
|
|
|
(257
|
) |
|
|
|
|
159 |
|
|
|
160 |
|
|
|
155 |
|
Consórcio Quatro Estações
|
|
|
(1,340
|
) |
|
|
(1,400
|
) |
|
|
(1,549
|
) |
Cond. em Const. Sampaio
Viana
|
|
|
951 |
|
|
|
951 |
|
|
|
714 |
|
Cond. Constr. Monte Alegre
|
|
|
1,456 |
|
|
|
1,433 |
|
|
|
829 |
|
Cond. Constr. Afonso de
Freitas
|
|
|
1,674 |
|
|
|
1,672 |
|
|
|
1,654 |
|
|
|
|
|
1,472 |
|
|
|
1,413 |
|
|
|
1,028 |
|
|
|
|
|
618 |
|
|
|
44 |
|
|
|
25 |
|
Condomínio do Ed. Pontal Beach
|
|
|
43 |
|
|
|
98 |
|
|
|
74 |
|
Consórcio OAS Gafisa -
Garden
|
|
|
430 |
|
|
|
585 |
|
|
|
101 |
|
Cond. Constr. Infra
Panamby
|
|
|
(483
|
) |
|
|
(1,408
|
) |
|
|
4,008 |
|
|
|
|
|
(851
|
) |
|
|
(762
|
) |
|
|
6,096 |
|
|
|
|
|
4,319 |
|
|
|
4,723 |
|
|
|
5,219 |
|
|
|
|
|
2,715 |
|
|
|
2,869 |
|
|
|
3,524 |
|
Cond. em Constr.
Splendor
|
|
|
(1,848
|
) |
|
|
(1,933
|
) |
|
|
(1,925
|
) |
|
|
|
|
793 |
|
|
|
(1,055
|
) |
|
|
(981
|
) |
|
|
|
|
(1,719
|
) |
|
|
336 |
|
|
|
1,869 |
|
|
|
|
|
887 |
|
|
|
1,366 |
|
|
|
1,314 |
|
|
|
|
|
(1,436
|
) |
|
|
(666
|
) |
|
|
1,199 |
|
Cond. em Constr. Doppio
Spazio
|
|
|
(2,407
|
) |
|
|
(1,739
|
) |
|
|
(1,580
|
) |
|
|
|
|
2,493 |
|
|
|
2,063 |
|
|
|
- |
|
|
|
|
|
270 |
|
|
|
115 |
|
|
|
- |
|
Consórcio Gafisa & Rizzo
(SUSP)
|
|
|
1,239 |
|
|
|
- |
|
|
|
- |
|
Consórcio Gafisa OAS -
Abaeté
|
|
|
3,638 |
|
|
|
- |
|
|
|
- |
|
Cond do Clube Quintas do
Rio
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Cons. Oas-Gafisa Horto Panamby
|
|
|
9,349 |
|
|
|
412 |
|
|
|
- |
|
Consórcio OAS e Gafisa - Horto
Panamby
|
|
|
(27
|
) |
|
|
- |
|
|
|
- |
|
Consórcio Ponta Negra - Ed
Marseille
|
|
|
(1,033
|
) |
|
|
- |
|
|
|
- |
|
Consórcio Ponta Negra - Ed
Nice
|
|
|
(4,687
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
600 |
|
|
|
- |
|
|
|
- |
|
Cons. Eztec Gafisa Pedro
Luis
|
|
|
(3,589
|
) |
|
|
- |
|
|
|
- |
|
Consórcio Planc Boa Esperança
|
|
|
603 |
|
|
|
- |
|
|
|
- |
|
Consórcio Gafisa OAS-
Tribeca
|
|
|
(144
|
) |
|
|
- |
|
|
|
- |
|
Consórcio Gafisa OAS- Soho
|
|
|
(167
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
(40
|
) |
|
|
- |
|
|
|
- |
|
Consórcio Ventos do Leste
|
|
|
(1
|
) |
|
|
(1
|
) |
|
|
(1
|
) |
|
|
|
|
(6,137
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
(2,585
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(330
|
) |
|
|
- |
|
|
|
- |
|
Bairro Novo Cia. Aeroporto
|
|
|
(55
|
) |
|
|
- |
|
|
|
- |
|
Consórcio B. Novo Ap
Goiania
|
|
|
(210
|
) |
|
|
- |
|
|
|
- |
|
Consórcio B. Novo
Campinas
|
|
|
(261
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
3,384 |
|
|
|
3,329 |
|
|
|
|
|
- |
|
|
|
(878
|
) |
|
|
(19
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,577 |
|
|
|
23,147 |
|
|
|
32,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other SPEs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,051 |
|
|
|
76 |
|
|
|
1,351 |
|
Gafisa Vendas I. Imob.
Ltda.
|
|
|
2,384 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(25,000
|
) |
|
|
(25,000
|
) |
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(431
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,565
|
) |
|
|
(24,924
|
) |
|
|
920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPEs
|
|
|
|
|
|
|
|
|
|
|
|
|
FIT Resid. Empreend. Imob.
Ltda.
|
|
|
12,058 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
1,968 |
|
|
|
- |
|
|
|
- |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
Current
account
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Cipesa Empreendimentos Imob.
|
|
|
(398
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
80 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 46 Empreend.
Imob.
|
|
|
8,172 |
|
|
|
(11
|
) |
|
|
188 |
|
Gafisa SPE 40 Empr. Imob.
Ltda.
|
|
|
1,288 |
|
|
|
806 |
|
|
|
365 |
|
Blue II Plan. Prom e Venda Lt.
|
|
|
911 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
(1,138
|
) |
|
|
(902
|
) |
|
|
(1,322
|
) |
Gafisa SPE-49 Empr. Imob.
Ltda.
|
|
|
(2
|
) |
|
|
(2
|
) |
|
|
- |
|
|
|
|
|
(129
|
) |
|
|
(127
|
) |
|
|
(15
|
) |
Gafisa SPE 38 Empr. Imob.
Ltda.
|
|
|
109 |
|
|
|
198 |
|
|
|
217 |
|
Lt Incorporadora SPE Ltda.
|
|
|
(527
|
) |
|
|
(93
|
) |
|
|
(715
|
) |
Res. das Palmeiras Inc. SPE
Lt.
|
|
|
1,246 |
|
|
|
657 |
|
|
|
(102
|
) |
Gafisa SPE 41 Empr. Imob.
Ltda.
|
|
|
1,534 |
|
|
|
293 |
|
|
|
(144
|
) |
Dolce Vitabella Vita SPE
S.A.
|
|
|
32 |
|
|
|
30 |
|
|
|
(25
|
) |
Saira Verde Empreend. Imob.
Lt.
|
|
|
214 |
|
|
|
25 |
|
|
|
(239
|
) |
|
|
|
|
630 |
|
|
|
600 |
|
|
|
727 |
|
Gafisa SPE 39 Empr. Imob.
Ltda.
|
|
|
(304
|
) |
|
|
(189
|
) |
|
|
(255
|
) |
|
|
|
|
(571
|
) |
|
|
(574
|
) |
|
|
(580
|
) |
Gafisa SPE 48 Empreend.
Imob.
|
|
|
159 |
|
|
|
123 |
|
|
|
- |
|
Gafisa SPE-53 Empr. Imob.
Ltda.
|
|
|
(94
|
) |
|
|
1 |
|
|
|
- |
|
Jardim II Planej. Prom. Vda.
Ltda.
|
|
|
(2,990
|
) |
|
|
(2,986
|
) |
|
|
(2,524
|
) |
Gafisa SPE 37 Empreend.
Imob.
|
|
|
(398
|
) |
|
|
(137
|
) |
|
|
27 |
|
Gafisa SPE-51 Empr. Imob.
Ltda.
|
|
|
810 |
|
|
|
398 |
|
|
|
- |
|
Gafisa SPE 36 Empr. Imob.
Ltda.
|
|
|
(1,205
|
) |
|
|
(353
|
) |
|
|
3,653 |
|
Gafisa SPE 47 Empreend.
Imob.
|
|
|
146 |
|
|
|
17 |
|
|
|
- |
|
|
|
|
|
415 |
|
|
|
415 |
|
|
|
104 |
|
|
|
|
|
1,135 |
|
|
|
1,401 |
|
|
|
(4,484
|
) |
|
|
|
|
(1,217
|
) |
|
|
(1,628
|
) |
|
|
(395
|
) |
Gafisa SPE-50 Empr. Imob.
Ltda.
|
|
|
(221
|
) |
|
|
169 |
|
|
|
- |
|
Tiner Campo Belo I Empr. Imob.
|
|
|
6,971 |
|
|
|
- |
|
|
|
3,651 |
|
|
|
|
|
2,321 |
|
|
|
775 |
|
|
|
3,878 |
|
Jardim I Planej. Prom. Vda.
Ltda.
|
|
|
6,662 |
|
|
|
6,556 |
|
|
|
4,487 |
|
Verdes Praças Inc. Imob. Spe. Lt.
|
|
|
(38
|
) |
|
|
(50
|
) |
|
|
(19
|
) |
Gafisa SPE 42 Empr. Imob.
Ltda.
|
|
|
64 |
|
|
|
2 |
|
|
|
798 |
|
|
|
|
|
(1,267
|
) |
|
|
(1,300
|
) |
|
|
(1,863
|
) |
|
|
|
|
865 |
|
|
|
881 |
|
|
|
534 |
|
|
|
|
|
74 |
|
|
|
9 |
|
|
|
217 |
|
Gafisa SPE-55 Empr. Imob.
Ltda.
|
|
|
(2
|
) |
|
|
1 |
|
|
|
- |
|
|
|
|
|
(2,304
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
2,834 |
|
|
|
- |
|
|
|
- |
|
Unigafisa Partipações SCP
|
|
|
1,040 |
|
|
|
- |
|
|
|
- |
|
Villagio Panamby Trust
SA
|
|
|
749 |
|
|
|
3,262 |
|
|
|
1,584 |
|
Diodon Participações
Ltda.
|
|
|
13,669 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 44 Empreend.
Imobili.
|
|
|
175 |
|
|
|
53 |
|
|
|
- |
|
JTR Jatiuca Trade
Residence
|
|
|
1,218 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 65 Empreend. Imob.
Ltd.
|
|
|
321 |
|
|
|
128 |
|
|
|
- |
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 52 Empreend. Imob.
Ltd.
|
|
|
42 |
|
|
|
2 |
|
|
|
- |
|
|
|
|
|
2,220 |
|
|
|
909 |
|
|
|
(185
|
) |
Terreno Ribeirão/Curupira
1
|
|
|
1,360 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(95
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
124 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 69
Empreendimentos
|
|
|
(72
|
) |
|
|
- |
|
|
|
- |
|
Gafisa SPE-74 Emp. Imob.
Ltda.
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 59 Empreend. Imob.
Ltda.
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 68
Empreendimentos
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE-76 Emp. Imob.
Ltda.
|
|
|
24 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE-77 Emp. Imob.
Ltda.
|
|
|
3,289 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE-78 Emp. Imob.
Ltda.
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE-79 Emp. Imob.
Ltda.
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 70
Empreendimentos
|
|
|
(746
|
) |
|
|
- |
|
|
|
- |
|
Gafisa SPE 61 Empreendimento I
|
|
|
(12
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
(878
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Gafisa SPE 85 Emp. Imob.
Ltda.
|
|
|
(96
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
381 |
|
|
|
- |
|
|
|
- |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
Current
account
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa SPE-77 Empr.
Ltda.
|
|
|
1,463 |
|
|
|
- |
|
|
|
- |
|
Mario Covas SPE Empreendimento
|
|
|
(208
|
) |
|
|
19 |
|
|
|
- |
|
Imbui I SPE Empreendimento Imo.
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
Acedio SPE Empreend. Imob.
Ltda.
|
|
|
2 |
|
|
|
1 |
|
|
|
- |
|
Maria Inês SPE Empreend.
Imob.
|
|
|
(2
|
) |
|
|
1 |
|
|
|
- |
|
Gafisa SPE 64 Empreendimento I
|
|
|
(50
|
) |
|
|
1 |
|
|
|
- |
|
FIT Jd. Botânico SPE Empr.
Imob.
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
Cipesa Empreendimentos Imobili.
|
|
|
- |
|
|
|
(17
|
) |
|
|
- |
|
Bairro Novo Empreend. Imobil.
SA
|
|
|
- |
|
|
|
3,630 |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
(65
|
) |
|
|
- |
|
Gafisa Vendas I. Imob.
Ltda.
|
|
|
- |
|
|
|
(129
|
) |
|
|
937 |
|
Blue II Plan. Prom. e Venda Lt.
|
|
|
- |
|
|
|
(743
|
) |
|
|
(747
|
) |
|
|
|
|
- |
|
|
|
10,254 |
|
|
|
(1,000
|
) |
FIT Roland Garros Empr. Imb.
Ltd.
|
|
|
- |
|
|
|
291 |
|
|
|
- |
|
FIT Resid. Empreend. Imob.
Ltda.
|
|
|
- |
|
|
|
(2,570
|
) |
|
|
(1
|
) |
FIT 01 SPE Empreend. Imob.
Ltda.
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
FIT 02 SPE Empreend. Imob.
Ltda.
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
FIT 03 SPE Empreend. Imob.
Ltda.
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
(4,739
|
) |
|
|
(2,314
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,821 |
|
|
|
15,299 |
|
|
|
4,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
Camargo Corrêa Des. Imob.
S.A.
|
|
|
916 |
|
|
|
(16
|
) |
|
|
34 |
|
Genesis Desenvol. Imob.
S.A.
|
|
|
(216
|
) |
|
|
(277
|
) |
|
|
(109
|
) |
Empr. Incorp. Boulevard SPE
Lt.
|
|
|
56 |
|
|
|
56 |
|
|
|
59 |
|
Cond. Const. Barra First
Class
|
|
|
31 |
|
|
|
31 |
|
|
|
- |
|
|
|
|
|
532 |
|
|
|
532 |
|
|
|
532 |
|
Edge Incorp. e Part.
Ltda.
|
|
|
146 |
|
|
|
146 |
|
|
|
158 |
|
Multiplan Plan. Particip. e
Ad.
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Administ. Shopping Nova América
|
|
|
90 |
|
|
|
(11
|
) |
|
|
(11
|
) |
Ypuã Empreendimentos Imob.
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
Cond. Constr. Jd. Des.
Tuiliere
|
|
|
(124
|
) |
|
|
(124
|
) |
|
|
128 |
|
Rossi AEM Incorporação Ltda.
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Patrimônio Constr. e Empr.
Ltda.
|
|
|
307 |
|
|
|
307 |
|
|
|
307 |
|
Camargo Corrêa Des. Imob.
S.A.
|
|
|
39 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
(107
|
) |
|
|
(115
|
) |
|
|
2,140 |
|
Boulevard Jardins Empr.
Incorp.
|
|
|
(89
|
) |
|
|
(623
|
) |
|
|
(309
|
) |
Rezende Imóveis e Construções
|
|
|
809 |
|
|
|
802 |
|
|
|
591 |
|
São José Constr. e Com. Ltda.
|
|
|
543 |
|
|
|
543 |
|
|
|
543 |
|
Condomínio Civil Eldorado
|
|
|
276 |
|
|
|
276 |
|
|
|
585 |
|
Tati Construtora Incorp.
Ltda.
|
|
|
286 |
|
|
|
286 |
|
|
|
286 |
|
Columbia Engenharia Ltda.
|
|
|
431 |
|
|
|
431 |
|
|
|
431 |
|
Civilcorp Incorporações Ltda.
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
Waldomiro Zarzur Eng. Const. Lt.
|
|
|
1,801 |
|
|
|
1,801 |
|
|
|
1,800 |
|
|
|
|
|
431 |
|
|
|
431 |
|
|
|
431 |
|
|
|
|
|
(781
|
) |
|
|
(781
|
) |
|
|
651 |
|
Jorges Imóveis e Administrações
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
Camargo Corrêa Des. Imob.
S.A.
|
|
|
(673
|
) |
|
|
- |
|
|
|
- |
|
Camargo Corrêa Des. Imob.
S.A.
|
|
|
(323
|
) |
|
|
- |
|
|
|
- |
|
Patrimônio Const. Empreend.
Ltda.
|
|
|
155 |
|
|
|
155 |
|
|
|
155 |
|
Alta Vistta Maceió (controle)
|
|
|
2,318 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
807 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
276 |
|
|
|
- |
|
|
|
- |
|
JTR - Jatiuca Trade
Residence
|
|
|
880 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
353 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
185 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
180 |
|
|
|
- |
|
|
|
- |
|
Concord. Incorp. Imob. S/C
Ltda.
|
|
|
- |
|
|
|
11 |
|
|
|
11 |
|
|
|
|
|
- |
|
|
|
446 |
|
|
|
446 |
|
|
|
|
|
32 |
|
|
|
(4
|
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,680 |
|
|
|
4,406 |
|
|
|
8,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset
balance
|
|
|
60,513 |
|
|
|
17,928 |
|
|
|
47,272 |
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(b)
|
Management
compensation
|
Remuneration of the
Company's management group is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board of
Directors
|
|
|
916 |
|
|
|
867 |
|
|
|
800 |
|
|
Board of
Executive Officers
|
|
|
3,231 |
|
|
|
4,649 |
|
|
|
4,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,147 |
|
|
|
5,516 |
|
|
|
5,367 |
|
The Company has
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.
Beginning in 2007,
following the acquisition, formation and merger of the entities Alphaville, FIT
Residencial, Bairro Novo and Tenda, the Company's chief executive officer
assesses segment information on the basis of different business corporate
segments and economic data rather than geographic regions of its operations.
Gafisa S.A. was the only segment in 2006.
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 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
gathered internally and used by management to develop economic present value
estimates, provided to the chief executive officer for making operating
decisions, including the allocation of resources among segments. The information
is derived from the statutory accounting records which are maintained in
accordance with the accounting practices
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
adopted in Brazil.
The reporting segments do not separate operating expenses, total assets and
depreciation. No revenues from an individual client represented more than 10% of
net sales and/or services.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A. (i)
|
|
|
Tenda
(ii)
|
|
|
Alphaville
|
|
|
FIT
Residencial
(iii)
|
|
|
Bairro
Novo
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
1,214,562 |
|
|
|
163,897 |
|
|
|
249,586 |
|
|
|
78,467 |
|
|
|
33,892 |
|
|
|
1,740,404 |
|
|
Operating
costs
|
|
|
(847,617
|
) |
|
|
(111,920
|
) |
|
|
(167,043
|
) |
|
|
(60,082
|
) |
|
|
(27,739
|
) |
|
|
(1,214,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
366,945 |
|
|
|
51,977 |
|
|
|
82,543 |
|
|
|
18,385 |
|
|
|
6,153 |
|
|
|
526,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin -
%
|
|
|
30.2 |
|
|
|
31.7 |
|
|
|
33.1 |
|
|
|
23.4 |
|
|
|
18.2 |
|
|
|
30.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) for the year
|
|
|
103,650 |
|
|
|
15,685 |
|
|
|
21,081 |
|
|
|
(22,263
|
) |
|
|
(8,232
|
) |
|
|
109,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
from clients(current and long-term)
|
|
|
1,377,689 |
|
|
|
565,576 |
|
|
|
174,096 |
|
|
|
- |
|
|
|
1,183 |
|
|
|
2,118,544 |
|
|
Properties for
sale
|
|
|
1,340,554 |
|
|
|
549,989 |
|
|
|
135,173 |
|
|
|
- |
|
|
|
3,260 |
|
|
|
2,028,976 |
|
|
Other
assets
|
|
|
915,648 |
|
|
|
428,465 |
|
|
|
39,585 |
|
|
|
- |
|
|
|
7,640 |
|
|
|
1,391,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
3,633,891 |
|
|
|
1,544,030 |
|
|
|
348,854 |
|
|
|
- |
|
|
|
12,083 |
|
|
|
5,538,858 |
|
|
|
(i)
|
Includes all
subsidiaries, except Tenda, Alphaville, FIT Residencial and Bairro
Novo.
|
|
|
(ii)
|
Includes the
result for the period of 10 months and 21 days of FIT
Residencial.
|
|
|
(iii)
|
Includes the
result for the period of 2 months and 10 days of Tenda. Thereafter FIT
Residencial was merged into Tenda.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gafisa
S.A. (*)
|
|
|
Alphaville
|
|
|
FIT
Residencial
|
|
|
Bairro
Novo
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
1,004,418 |
|
|
|
192,700 |
|
|
|
7,169 |
|
|
|
- |
|
|
|
1,204,287 |
|
|
Operating
costs
|
|
|
(726,265
|
) |
|
|
(136,854
|
) |
|
|
(4,877
|
) |
|
|
- |
|
|
|
(867,996
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
278,153 |
|
|
|
55,846 |
|
|
|
2,292 |
|
|
|
- |
|
|
|
336,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin -
%
|
|
|
27.7 |
|
|
|
29.0 |
|
|
|
32.0 |
|
|
|
- |
|
|
|
27.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) for the year
|
|
|
91,941 |
|
|
|
14,994 |
|
|
|
(11,282
|
) |
|
|
(4,013
|
) |
|
|
91,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
from clients
|
|
|
873,228 |
|
|
|
96,718 |
|
|
|
1,698 |
|
|
|
- |
|
|
|
971,644 |
|
|
Properties for
sale
|
|
|
878,137 |
|
|
|
96,195 |
|
|
|
45,548 |
|
|
|
2,399 |
|
|
|
1,022,279 |
|
|
Other
assets
|
|
|
922,201 |
|
|
|
56,727 |
|
|
|
26,349 |
|
|
|
5,585 |
|
|
|
1,010,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,673,566 |
|
|
|
249,640 |
|
|
|
73,595 |
|
|
|
7,984 |
|
|
|
3,004,785 |
|
|
|
(*)
|
Includes all
subsidiaries, except Alphaville, FIT Residencial and Bairro
Novo.
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(a)
|
Dissolution
Joint Venture
|
On
February 27, 2009, Gafisa S.A. and Odebrecht Empreendimentos announced an
agreement for the dissolution of the partnership entered into with Odebrecht
Empreendimentos in Bairro Novo, terminating the Shareholders' Agreement between
the partners. Accordingly, Gafisa S.A. is no longer a partner in Bairro Novo.
The real estate ventures that were being conducted together by the parties are
henceforth to be carried out separately. Gafisa S.A. will develop the Bairro
Novo Cotia real estate venture, whereas Odebrecht Empreendimentos develop the
other ventures of the dissolved partnership, in addition to the operations of
Bairro Novo.
|
(b)
|
Debentures
debt covenants
|
At March 31, 2009, the Company's debt levels were in
excess of those stipulated in the debentures debt covenants. The Company is not
in technical breach of the covenants as these are only measured at June 30 and
December 31 of each year. The Company is renegotiating the covenants of the
debentures with the holders and the outcome will not affect the classification
of the debt on the balance sheet at December 31, 2008. The renegotiation of an amendment to the
restrictive debenture covenants with the debenture holders may result in a
higher interest rate. However, the success on the renegotiation is subject to
the agreement with the debentureholders to be reached. These debentures relate
to the Second program-first issuance issued in 2006 (Note 10) which presented a
balance of R$240,000 at December 31, 2008.
If at June 30, 2009 the net debt level
remains in excess of that stipulated in the covenant and the Company is not able
to amend the covenant or receive a waiver from
debentureholders, the
Second program-first issuance debentures could be accelerated and the full
amount of R$240,000 would be due immediately. If the Company fails to
pay the 2006 debentures upon acceleration, other indebtedness in the amount of
R$670,000 may be accelerated and due immediately, which may have a material
adverse effect on our financial position and results of
operations.
|
(c)
|
Receivables
securitization fund ("FIDC")
|
On
March 31, 2009, the Company carried out a securitization of receivables, which
consists of an assignment of a portfolio of select residential and commercial
real estate receivables. This portfolio was assigned and transferred to "Gafisa
FIDC" which issued Senior an Subordinated quotas, Subordinated quotas were
subscribed exclusively by Gafisa S.A. Gafisa FIDC acquired the portfolio of
receivables at a discount rate equivalent to the interest rate of finance
contracts. The Company assigned a receivables portfolio of R$ 119,622 to Gafisa
FIDC in
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
exchange for cash,
which was equivalent, at the transfer date, discounted to present value, of R$
88,664.
In
April 2009, Tenda's first debenture program was approved and issued in May 2009,
under which the company received R$ 600,000 in non-convertible debentures. The
debentures provide for payment of annual interest at a spread of 8% + TR,
calculated from the subscription date, and mature in five years.
|
21
|
Supplemental
Information - Pro Forma Consolidated Financial
Information
|
Unaudited condensed
pro forma consolidated selected financial information for 2008 and 2007, which
assume the acquisition of Tenda (Note 8) had occurred as of the beginning of
each fiscal year is as follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(Unaudited
) |
|
|
(Unaudited
) |
|
|
|
|
|
|
|
|
|
|
Net operating
revenue
|
|
|
2,061,384 |
|
|
|
1,443,338 |
|
|
Net
income
|
|
|
45,570 |
|
|
|
84,166 |
|
|
Shares
outstanding at the end of the year (in thousands)
|
|
|
129,963 |
|
|
|
129,452 |
|
|
Earnings per
thousand shares outstanding at the end of
|
|
|
0.35 |
|
|
|
0.65 |
|
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 periods presented or the results which may
occur in the future.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
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. The Company has retroactively applied
the changes in Brazilian GAAP introduced by the newly formed CPC and the provisions of Law 11638/2007 as
from January 1,
2006 (Note 2(a)).
Certain items presented in
the reconciliation to the Company's US GAAP financial information as at and for
the years ended December
31, 2007 and 2006
previously issued have been adjusted to reflect the adoption of Law
11638/2007.
As a result of the changes to Brazilian
GAAP introduced in 2008 which were applied retroactively to January 1, 2006 a number of differences between
Brazilian GAAP and USGAAP, as originally reported, were eliminated. The changes
to Brazilian GAAP did not affect the balances originally reported under
USGAAP.
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 Gafisa S.A.
and those of all its subsidiaries listed in Note 8. The proportional
consolidation method is used for investments in jointly-controlled investees,
which are all governed by shareholders' agreement; accordingly, the assets,
liabilities, revenues and costs are consolidated 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 were only met by the Bairro Novo consortium
at December 31, 2007. 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
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
income or
shareholders' equity, the line items in the consolidated balance sheet and
statement of income are affected.
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
US GAAP shareholders' equity reconciliation as at December 31, 2008, 2007 and
2006, R$ (127,308), R$ (63,822) and R$ (7,973) were adjusted. For purposes
of the US GAAP net income reconciliation, R$ 37,665, R$ (55,849) and
R$ (7,973) were adjusted for the years ended December 31, 2008, 2007 and
2006 (being: Net operating revenue for 2008 R$ 85,337 (2007 - R$ 152,064;
2006 - R$ 32,970); Operating costs for 2008 R$ 47,672 (2007 - R$
96,215; 2006 - R$ 24,997).
The revenue
recognition adjustments in the shareholders' equity were compiled as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the
beginning of the year
|
|
|
(63,822
|
) |
|
|
(7,973
|
) |
|
|
- |
|
|
|
|
|
6,945 |
|
|
|
- |
|
|
|
- |
|
|
Consolidation
of Tenda
|
|
|
(108,096
|
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net
income
|
|
|
37,665 |
|
|
|
(55,849
|
) |
|
|
(7,973
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the end of
the year
|
|
|
(127,308
|
) |
|
|
(63,822
|
) |
|
|
(7,973
|
) |
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
(iii)
|
Capitalized
interest
|
Under Brazilian
GAAP, the Company capitalizes interest on the developments during the
construction phase, on loans from the National Housing Finance 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 and discrete
projects.
For purposes of the
US GAAP shareholders' equity reconciliation, R$ 5,771, R$ 15,128 and
R$ 47,672 were adjusted as at December 31, 2008, 2007 and 2006. For the purposes
of the US GAAP net income reconciliation, R$ (9,357), R$(32,544) and
R$ 13,457 were adjusted for the years ended December 31, 2008, 2007 and
2006.
Under Brazilian
GAAP, the rights to acquire shares granted to employees and executive officers
under the stock options plan were recorded as an expense as from January 1,
2006, the transition date for the adoption of Law 11638/2007. Previously, under
Brazilian GAAP, the stock option plans did not result in any expense being
recorded. The purchase of the stock by the employees is recorded as an increase
in capital stock for the amount of the purchase price. Under Law 11638/2007 and
the accounting guidance provided by CPC No. 10, the stock option plans are
treated as equity awards and measured at fair value at the grant date, no
further adjustments are made at the balance sheet dates to reflect changes in
fair values.
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 liability awards under the terms of SFAS
123R. The liability-classified awards are remeasured at fair value through the
statement of income 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 (Note 22(c)(ii)).
For purposes of the
US GAAP net income and shareholders' equity reconciliations, a stock option
compensation income (expenses) of R$ 53,819, R$ 22,684 and R$ (25,091) for
the years ended December 31, 2008, 2007 and 2006, comprised by (i) a reversal of
stock option expenses recognized under Brazilian GAAP of R$26,138, R$17,820 and
R$9,129 for the year ended December 31, 2008, 2007 and 2006, respectively; and
(ii) a reversal (expense) of stock
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
option compensation
expense under USGAAP of R$27,681; R$4,864 and R$(34,220) for the year ended
December 31, 2008, 2007 and 2006, respectively. A reduction of equity of
R$ 2,221, R$ 29,356 and R$ 34,220 were recorded at December 31, 2008, 2007
and 2006.
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.
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 Company has
issued employee stock options (Note 14(c)), the dilutive effects of which are
reflected in diluted earnings per share by application of the "treasury stock
method". Under the treasury stock method, earnings per share are calculated as
if options were exercised at the beginning of the period, or at time of
issuance, if later, and as if the funds received were used to purchase the
Company's own stock. When the stock options' exercise price was greater than the
average market price of shares, diluted earnings per share are not affected by
the stock options.
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.
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Total
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,104 |
|
|
|
26,104 |
|
|
|
26,981 |
|
|
|
26,981 |
|
US GAAP undistributed
earnings
|
|
|
273,554 |
|
|
|
273,554 |
|
|
|
36,481 |
|
|
|
36,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available
|
|
|
299,658 |
|
|
|
299,658 |
|
|
|
63,462 |
|
|
|
63,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
denominator (in thousands of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares
|
|
|
129,671 |
|
|
|
|
|
|
|
126,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per thousand
shares - US GAAP - R$
|
|
|
2,310.92 |
|
|
|
|
|
|
|
503.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,104 |
|
|
|
26,104 |
|
|
|
26,981 |
|
|
|
26,981 |
|
US GAAP undistributed
earnings
|
|
|
273,554 |
|
|
|
273,554 |
|
|
|
36,481 |
|
|
|
36,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated US GAAP undistributed
earnings available
|
|
|
299,658 |
|
|
|
299,658 |
|
|
|
63,462 |
|
|
|
63,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
denominator (in thousands of shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares
|
|
|
129,671 |
|
|
|
|
|
|
|
126,032 |
|
|
|
|
|
|
|
|
|
478 |
|
|
|
|
|
|
|
577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average number
of shares
|
|
|
130,149 |
|
|
|
|
|
|
|
126,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per thousand
shares - US GAAP - R$
|
|
|
2,302.43 |
|
|
|
|
|
|
|
501.25 |
|
|
|
|
|
| |
Gafisa S.A
Notes
to the Consolidated Financial Statements
In
thousands of Brazilian reais, unless otherwise
stated
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
(vi)
|
Business
combination
|
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, except when it is based on future results. For US GAAP purpose,
when a business combination process generates 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
In
thousands of Brazilian 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.
For Brazilian GAAP purposes, the net
balance of goodwill at December 31, 2008 was R$ 215,296 (2007 – R$
207,400), which is being amortized to income over a period of up to
10 years; negative goodwill at December 31, 2008 was R$ 18,522 (2007 -
R$ 32,223) which was classified as "Negative Goodwill on acquisition of
subsidiaries"; and the negative goodwill on the Tenda acquisition of
R$ 169,394 was classified at "Deferred gain on sale of investment".
Additionally, R$ 25,296 was recorded as Acquisition of
investments related mainly to payables for the
acquisition of Redevco and Cipesa in the amounts of R$ 17,000 and
R$ 8,000, respectively.
Under Brazilian
GAAP, the acquisition was consummated on October 21, 2008, as part of the
acquisition of interest in Tenda, the Company contributed the net assets of FIT
Residencial amounting to R$ 411,241, acquiring 60% of the shareholders'
equity of Tenda (book value of the 60% interest representing an investment in
net assets of R$ 621,643), which had a total shareholders' equity book
value of R$ 1,036,072.
Under Brazilian
GAAP, the sale of the 40% owneship interest in FIT Residencial to Tenda
shareholders in exchange for the Tenda shares generated negative goodwill of
R$ 210,402, reflecting the gain on the sale of the interest in FIT
Residencial. Through December 31, 2008, this negative goodwill was amortized
over the average construction period (through delivery of the units) of the real
estate ventures of FIT Residencial at October 21, 2008. From October 22 to
December 31, 2008 under Brazilian GAAP, the Company amortized R$ 41,008 of
the negative goodwill, represented by the gain on the partial sale of FIT
Residencial.
Under USGAAP, the
Company recorded the transfer of Fit Residecial as a partial sale to the
minority shareholders of Tenda and a gain of R$ 205,527 was recorded in the net
income for the year ended December 31, 2008. For the reconciling the net income,
the Company also
