Springs Global´s net revenue increases 10.0% in the 3Q15 when

Transcrição

Springs Global´s net revenue increases 10.0% in the 3Q15 when
compared to the 3Q14.
São Paulo, November 16, 2015 - Springs Global presents the results for the third quarter of 2015 (3Q15). The financial information
is presented in Reais (R$) and in a consolidated form under the IFRS.
Springs is the leading company in bedding, tabletop and bath products in the Americas, with traditional and leading brands in the
segments in which they compete, strategically positioned to target customers of different socioeconomic profiles. Springs has
vertically integrated operations and state-of-the-art facilities located in Brazil, United States and Argentina.
Bovespa: SGPS3
Share price on 11/16/15: R$2.81
Number of shares: 50 million
Market cap: R$140.5 million
APIMEC public meeting with investors, analysts,
and other professionals of the capital markets
will be held as shown below and broadcasted
live over the Internet on www.springs.com/ir (in
Portuguese only).
11/18/2015 - Time: Welcome Coffee at 3:30
p.m. (Brasília). Presentation starts at 4:00 p.m.
(Brasília) / 1:00 p.m. (New York) / 6:00 p.m.
(London)
Espaço Alves Guimarâes Garden – Rua Alves
Guimarâes 85 – Jardins – São Paulo, SP. Brazil
RSVP: To confirm your attendance, please send
an e-mail to [email protected] or call
to +55(11) 3107-1571.
Investor Relations:
Gustavo Kawassaki
Investor Relations Officer
Phone: +55 (11) 2145-4476
[email protected]
www.springs.com/ir
1. Highlights of the 3Q15:
•
Net revenue reached R$601 million in the 3Q15, an increase of 10.0% when
compared to the 3Q14.
•
10.8% increase in the consolidated gross profit when compared to the 3Q14,
reaching R$162 million.
•
Increase of 2.5 percentage points and 3.3 percentage points in gross margin of
the wholesale segment in South America and North America, respectively.
•
4.6 percentage point increase in EBITDA margin in North America.
•
EBITDA of the nine-month period ended September 30 increased by 24.3%
when compared to the same period of last year, reaching R$178 million.
•
15.4% growth in operating income in the 3Q15 versus 3Q14.
•
Operating cash flow measured by EBITDA increased by 6.6% when compared
to the 3Q14, reaching R$61 million in the 3Q15.
•
During the 3Q15, the Company converted 6 ARTEX owned stores and 2
mmartan owned stores into franchises.
Summary Information for Springs Global:
Summary of results (R$ million)
Gros s revenue
Net revenue
Gros s profi t
Margin %
EBITDA
3Q15
707.5
601.0
161.6
26.9%
61.4
3Q14
674.9
546.5
145.8
26.7%
57.6
var % 15-14
4.8%
10.0%
10.8%
0.2 p.p.
6.6%
9M15
1,991.8
1,657.9
439.7
26.5%
177.7
9M14
1,880.4
1,525.8
405.6
26.6%
143.0
var % 15-14
5.9%
8.7%
8.4%
(0.1 p.p.)
24.3%
Margin %
Net income (loss)
10.2%
13.4
10.5%
4.8
(0.3 p.p.)
179.2%
10.7%
22.5
9.4%
(29.6)
1.3 p.p.
-
var % 15-14
Net revenue (R$ million)
3Q15
3Q14
var % 15-14
9M15
9M14
South America
357.3
385.9
(7.4%)
1,043.7
1,081.4
(3.5%)
293.7
63.6
313.3
72.6
(6.3%)
(12.4%)
853.6
190.1
875.4
206.0
(2.5%)
(7.7%)
260.4
601.0
179.9
546.5
44.7%
10.0%
660.4
1,657.9
499.3
1,525.8
32.3%
8.7%
Whol es a l e*
Retai l
North America
Total net revenue
*Excluding the intercompany sales, net revenue of the wholesale segment in South America was R$277 in the 3Q15 and R$807 million in the
9M15.
Net Revenue (R$ million)
Product Lines
Beddi ng, ta bletop and ba th
3Q15
282.8
3Q14 var % 15-14
290.8
(2.8%)
Uti li ty beddi ng
Intermedi ate products
198.0
56.6
120.8
62.2
63.9%
(9.0%)
Volume (tons)
3Q15
8,523
10,824
7,029
3Q14 var % 15-14
10,976
(22.3%)
10,107
7,859
Reta il
63.6
72.7
(12.5%)
Total
601.0
546.5
10.0%
Product Lines
Beddi ng, ta bletop and ba th
9M15
805.3
9M14 var % 15-14
798.0
0.9%
Uti li ty beddi ng
Intermedi ate products
506.2
156.3
347.7
174.1
45.6%
(10.2%)
190.1
206.0
(7.7%)
-
-
1,657.9
1,525.8
8.7%
77,468
82,443
Reta il
Total
-
Average price (R$)/Kg
-
7.1%
(10.6%)
18.3
8.1
3Q14 var % 15-14
26.5
25.3%
12.0
7.9
-
-
(8.9%)
22.8
18.9
9M15
26,426
9M14 var % 15-14
31,021
(14.8%)
9M15
30.5
31,674
19,368
29,423
21,999
26,376
-
3Q15
33.2
28,942
Volume (tons)
52.5%
2.5%
20.6%
Average price (R$)/Kg
7.7%
(12.0%)
(6.0%)
16.0
8.1
9M14 var % 15-14
25.7
18.7%
11.8
7.9
35.6%
2.5%
-
-
-
21.4
18.5
15.7%
2
2. Our Business Model:
Springs is structured in 3 business segments: Wholesale South America, Wholesale North America and Retail. Net
revenue by business segment and its share in the total consolidated net revenue is shown below:
2.1. OUR OPERATIONS AND OUR BRANDS
Springs operates state-of-the-art industrial facilities of home textile products with nine plants in Brazil, five in the
United States, and one in Argentina. In Brazil, Springs operates vertically integrated plants, from spinning, through
weaving, preparation, dyeing, printing, finishing and sewing of home textile products. The Company’s
manufacturing activities are focused in three product lines: Bedding, Tabletop and Bath (“CAMEBA”), Utility
Bedding and Intermediate Products.
Bedding, Tabletop and Bath (CAMEBA): The Company designs, manufactures and markets a complete line of
coordinated products using its portfolio of brands and licenses in addition to private labels, which are distributed
through major retailers in their market and through owned and franchised monobrand stores. The products line
includes bed sheets and pillowcases, tablecloths, towels, rugs and bath accessories.
Utility Bedding: This product category includes pillows, mattress pads, and quilts. The manufacturing facilities of
these products are located in the United States and Brazil.
Intermediate Products: The Company manufactures and sells yarns and fabrics to clients represented mainly by
small and medium garment, knitwear and weaving companies. The fabrics are sold in their natural state or dyed
and printed.
Springs distributes its products through wholesale and retail as discussed below.
3
2.1.1. WHOLESALE SOUTH AMERICA
The Company's CAMEBA and Intermediate Products are sold to multibrand clients in South America under a
portfolio of traditional and leading brands, including: Artex and Santista (Brazil), Arco-Íris, Fantasia, and Palette
(Argentina). The main customers in this segment are department stores, mass retailers, as well as small and
medium sized shops specialized in CAMEBA products.
Our brands represent an important competitive advantage. All Springs´ brands are traditional and leaders in the
segments in which they compete. Our brands and products are strategically positioned to target customers of
different socioeconomic profiles, while reducing the risk of overlap and competition among them. The brands are:
Artex (Brazil): Quality products under the concept of affordable luxury, updated with the latest fashion trends.
There are four different Home Life Styles: Actual, Relax, Trend, and Elegance.
Santista (Brazil): Traditional brand of bedding, tabletop and bath products and bedding accessories with
significant penetration in the “budget consumer” and institutional markets.
Palette (Argentina): Brand for quality products under the concept of affordable luxury. Market leading brand with
over 30 years of presence in the Argentinean market.
Arco-Íris (Argentina): Brand offering traditional design and style, focusing on different tastes and trends, and with
major market penetration.
Fantasia (Argentina): Bedding and bath textile products for clients in the “budget consumer” segment.
2.1.2 RETAIL
In Brazil, the Company operates owned and/or franchised monobrand stores under the Artex, MMartan and Casa
Moysés brands that, combined, ensure a presence and coverage throughout its domestic market. Each of its store
brands operates specific and well defined store formats, including a portfolio of proprietary products and a set of
marketing and merchandising strategies aimed at serving targeted consumer groups.
Artex: Artex stores are focused on serving customers interested in good quality products which are offered in a
wide range of styles and colors, as well as competitive prices and efficient customer service. Artex´s products are
manufactured by the Company.
MMartan: Desired brand in the bedding, tabletop and bath category. It is synonymous with quality, sophisticated
and contemporary products, representing a major brand in the domestic bedding, tabletop and bath market.
MMartan’s products are manufactured by the Company using high quality fabrics and imported products.
Casa Moysés: Aimed at consumers who seek the highest standard of quality and with expectation of differentiated
service. It is a reference brand in the high-end luxury market, with presence and tradition since 1930. Casa
Moysés’ products are manufactured by the Company using high quality fabric imported from third parties and are
sold exclusively through MMartan and Casa Moysés stores.
2.1.3 NORTH AMERICA
The Company's CAMEBA and Utility Bedding are sold to multibrand clients in North America under a portfolio of
traditional and leading brands, including: Springmaid, Wabasso and Texmade (North America). The main Springs
customers in this segment are department stores, mass retailers, as well as small and medium sized shops
specialized in CAMEBA products.
Springmaid (USA and Canada): Brand positioned in the affordable luxury segment. Primarily marketed through
large retailers in North America.
4
Wabasso (Canada): Established in 1907 as a national brand of textile products in Canada. Wabasso is
synonymous with quality, taste, style and comfort.
Texmade (Canada): Traditional brand of bedding and bath products focusing on institutional clients in Canada.
3. Financial Performance
Springs reports its results, segregated between Wholesale South America (Brazil and Argentina), Retail (Brazil)
and North America (United States and Canada); its business units.
In the 3Q15, net revenue in South America presented a 7.4% decrease, from R$386 million in the 3Q14 to R$357
million in the 3Q15, representing 61% of the total revenue of the Company.
3.1. South America - Wholesale:
3.1.1 Net Revenue
Net revenue of the wholesale segment in South America reached R$294 million in the 3Q15, a 6.3% decrease
when compared to the 3Q14. This decrease is due, mainly, to the revenue decrease of intermediate products. The
Company projects a lower contribution of intermediate products to its total revenue, due to production growth of
finished products, which have higher added value.
Wholesale South America
(2%)
(6%)
313
294
3Q14
3Q15
875
854
9M14
9M15
3.1.2 Gross Profit
In the 3Q15, gross profit of the wholesale segment in South America was R$92 million, an increase of 1.7% when
compared to the 3Q14. Gross margin increased 2.5 percentage points, from 28.9% in the 3Q14 to 31.4% in the
3Q15. Sales of higher added value products contributed to the gross margin growth.
Gross Profit (R$ million) and Margin %
28.9%
31.4%
28.5%
29.6%
1%
2%
91
92
3Q14
3Q15
250
252
9M14
9M15
5
3.1.3 SG&A
There was an increase of 7.8% in SG&A in the 3Q15 when compared to the 3Q14, from R$50 million in the 3Q14
to R$54 million in the 3Q15.
SG&A Expenses (R$ million)
4%
8%
50
54
3Q14
3Q15
149
155
9M14
9M15
3.1.4 EBITDA
EBITDA of the wholesale segment in South America was R$49 million in the 3Q15, representing a decrease of
16.7% when compared to the 3Q14, which totaled R$59 million. EBITDA margin decreased 2.1 percentage points,
from 18.8% in the 3Q14 to 16.7% in the 3Q15. The decrease in EBITDA of approximately R$5 million in the quarter
is due, mainly, to nonrecurring expenses to adjust production to match the market.
EBITDA (R$ million) and Margin %
18.8% 16.7%
17.2% 19.2%
9%
(17%)
59
49
3Q14
3Q15
150
164
9M14
9M15
3.2 South America - Retail:
3.2.1 Net Revenue
Net revenue for the Company´s retail operation reached R$64 million in the 3Q15, a 12.4% decrease when
compared to the 3Q14. Sell-out revenue of all AMMO retail stores was R$110 million in the 3Q15.
6
Retail
(8%)
(12%)
Number of Stores
Owned MMa rtan
Fra nchi s e MMartan
Owned Artex
Fra nchi s ed Artex
Net revenue (R$ mi lli on)
Gros s revenue s ell -out (R$ mil lion)
206
73
64
3Q14
3Q15
3Q15
234
43
131
54
6
63.6
110.0
9M14
2Q15
233
45
128
60
63.2
107.5
190
9M15
3Q14 % var 15-14
237
(1.3%)
49
(12.2%)
123
6.5%
65
(16.9%)
72.6
(12.4%)
124.6
(11.7%)
9M15
234
43
131
54
6
190.1
328.2
9M14
237
49
123
65
206.0
347.7
% var 15-14
(1.3%)
(12.2%)
6.5%
(16.9%)
(7.7%)
(5.6%)
Realigning the number of stores in the retail operation, ending operations of unprofitable stores, and increasing the
number of franchised stores versus owned stores. Springs ended the 3Q15 with 234 owned and franchised stores.
At the end of the 3Q15, 20% of the Company stores were between 0 and 3 years and 34% between 3 and 5 years.
In the third quarter, the Company converted 6 ARTEX owned stores and 2 mmartan owned stores into franchises.
Number of Stores- 3Q15
Age of the Stores - 3Q15
231
193
242
239
234
6
54
67
65
54
115
128
124
127
131
31
46%
137
More than 5 years
From 3 to 5 years
103
90
From 2 to 3 years
58
34%
From 1 to 2 years
11%
6%
3%
45
47
47
49
51
47
43
2009
2010
2011
2012
2013
2014
3Q15
Less than 1 year
Owned MMartan
Franchise MMartan
Owned Artex
Franchise Artex
3.2.2 Gross Profit
Gross profit of the retail segment in South America reached R$29 million in the 3Q15. Gross margin remained
practically stable when compared to the 3Q14, reaching 45.9%, despite a higher contribution of sell-in revenue in
the total revenue. The focus of the retail operation continues on optimizing the use of existing assets and
expanding the number of franchised stores versus owned stores.
7
Retail
45.9%
45.9%
47.2%
47.2%
(8%)
(12%)
33
29
3Q14
3Q15
97
90
9M14
9M15
3.2.3 SG&A
In the retail segment, SG&A expenses decreased by 14.2% in the 3Q15 when compared to the 3Q14, from R$41
million in the 3Q14 to R$35 million in the 3Q15, due, mainly, to the conversion of owned stores into franchise.
Retail
(5%)
(14%)
41
35
3Q14
3Q15
118
112
9M14
9M15
3.2.4 EBITDA
EBITDA of the retail segment was a loss of R$5 million in the 3Q15 compared to a loss of R$6 million in the 3Q14.
Retail
3Q14
3Q15
(6)
(5)
9M14
9M15
(13)
(18)
(7.9%)
(7.4%)
(6.4%)
(9.7%)
3.3 North America:
3.3.1 Net Revenue
Net revenue in North America increased by 44.7% when compared to the 3Q14, reaching R$260 million in the
3Q15, due, mainly, to the conversion of foreign revenue into Reais.
8
North America
32%
660
45%
499
260
180
3Q14
3Q15
9M14
9M15
3.3.2 Gross Profit
Gross profit in North America was R$40 million in the 3Q15, representing an 84.0% increase when compared to the
3Q14, which totaled R$22 million. Gross margin in the 3Q15 was 15.5%, a 3.3 percentage points increase when
compared to the margin of the same period of the previous year.
North America
12.2% 15.5%
11.8% 14.8%
66%
98
84%
59
40
22
3Q14
3Q15
9M14
9M15
3.3.3 SG&A
SG&A in North America was R$20 million in the 3Q15, a 26% increase when compared to the 3Q14, due, mainly,
to the impact of the exchange rate depreciation on the conversion of the U.S. Dollar denominated expenses into
Reais.
North America
16%
56
26%
49
15
19
3Q14
3Q15
9M14
9M15
3.3.4 EBITDA
EBITDA in North America increased from R$4 million in the 3Q14 to R$18 million in the 3Q15. EBITDA margin
increased by 4.6 percentage points, from 2.3% in the 3Q14 to 6.9% in the 3Q15.
9
North America
2.3%
6.9%
5.2%
1.5%
374%
326%
18
7
3Q15
9M14
4
3Q14
35
9M15
3.4 Consolidated:
3.4.1 Net Revenue
Consolidated gross revenue reached R$707 million in the 3Q15. Consolidated net revenue increased by 10% when
compared to the 3Q14, reaching R$601 million in the 3Q15. In the first nine months of the year, net revenue
reached R$1,658 million.
Consolidated
9%
10%
1,526
547
601
3Q14
3Q15
9M14
1,658
9M15
3.4.2 Cost of Goods Sold (COGS)
Cost of goods sold (COGS) was R$439 million, representing an increase of 9.7% when compared to the 3Q14,
which totaled R$401 million. As a percentage of net revenue, COGS remained practically stable at 73%. The table
below presents, for the periods indicated, materials costs, conversion and others, as well as depreciation costs for
the production and distribution assets:
Cost of goods sold (R$ million)
3Q15
% NR
3Q14
% NR var % 15-14
Ma teri a l s
Convers i on costs a nd Others
Depreci ati on
Total
284.2
137.3
17.9
439.4
47.3%
22.8%
3.0%
73.1%
246.1
134.5
20.1
400.7
45.0%
24.6%
3.7%
73.3%
15.5%
2.1%
(10.9%)
9.7%
9M15
% NR
9M14
765.4
397.9
54.9
1,218.2
46.2%
24.0%
3.3%
73.5%
688.1
372.5
59.6
1,120.2
% NR var % 15-14
45.1%
24.4%
3.9%
73.4%
11.2%
6.8%
(7.9%)
8.7%
10
COGS was distributed as follows:
3Q14
3Q15
Depreciation;
5%
Depreciation;
4%
Conversion
Costs and
others; 31%
Conversion
Costs and
others; 34%
Materials;
65%
Materials;
61%
3.4.2.1 Materials:
Materials costs, which include mainly raw materials (cotton and polyester) and chemicals, increased by 15.5% in
the period, from R$246 million in the 3Q14 to R$284 million in the 3Q15. As a percentage of net revenue, material
costs were 47.3% in the 3Q15.
3.4.2.2 Conversion costs and Others:
Conversion costs and others, which include mainly labor, energy, and other utilities were R$137 million,
representing an increase of 2.1% when compared to the 3Q14, when totaled R$135 million. Conversion costs as a
percentage of net revenue decreased from 24.6% in the 3Q14 to 22.8% in the 3Q15.
3.4.2.3 Depreciation:
Depreciation costs of production and distribution assets totaled R$18 million in the 3Q15 and R$20 million in the
3Q14.
3.4.3 Gross Profit
Gross profit increased by 10.8%, from R$146 million in the 3Q14 to R$162 million in the 3Q15. Gross margin
increased by 0.2 percentage point when compared to the 3Q14, reaching 26.9% in the 3Q15.
The graph below presents, for the periods indicated, gross profit:
Consolidated
26.7%
26.9%
26.6%
26.5%
8%
11%
406
146
162
3Q14
3Q15
9M14
440
9M15
11
The table below presents, for the periods and segments indicated, gross profit:
South America
Wholesale*
Retail
3Q15
3Q14 var % 15-14
North America
Total
Wholesale
Consolidated
Gross Profit (R$ million)
3Q15
3Q14 var % 15-14
3Q15
3Q14 var % 15-14
3Q15
3Q14 var % 15-14
Net revenue
293.7
313.3
(6.3%)
63.6
72.6
(12.4%)
260.4
179.9
44.7%
601.0
546.5
10.0%
(-) COGS
Gros s Profi t
(201.6)
92.1
(222.7)
90.6
(9.5%)
1.7%
(34.4)
29.2
(39.3)
33.3
(12.5%)
(12.3%)
(220.1)
40.3
(158.0)
21.9
39.3%
84.0%
(439.4)
161.6
(400.7)
145.8
9.7%
10.8%
Margin %
31.4%
28.9%
2.5 p.p.
45.9%
45.9%
-
15.5%
12.2%
3.3 p.p.
26.9%
26.7%
0.2 p.p.
*Excluding the intercompany sales, net revenue of the wholesale segment in South America was R$277 in the 3Q15.
South America
Wholesale*
Gross Profit (R$ million)
Net revenue
(-) COGS
Gros s Profi t
Margin %
9M15
853.6
(601.2)
252.4
29.6%
North America
Wholesale
Retail
9M14 var % 15-14
875.4
(2.5%)
(625.8)
(3.9%)
249.6
1.1%
28.5%
1.1 p.p.
9M15
190.1
(100.3)
89.8
47.2%
9M14 var % 15-14
206.0
(7.7%)
(108.7)
(7.7%)
97.3
(7.7%)
47.2%
-
9M15
660.4
(562.9)
97.5
14.8%
Total
Consolidated
9M14 var % 15-14
9M15
9M14 var % 15-14
499.3
32.3%
1,657.9 1,525.8
8.7%
(440.6)
27.8% (1,218.2) (1,120.2)
8.7%
58.7
66.1%
439.7
405.6
8.4%
11.8%
3.0 p.p.
26.5%
26.6%
(0.1 p.p.)
*Excluding the intercompany sales, net revenue of the wholesale segment in South America was R$807 in the 9M15.
3.4.4 SG&A
SG&A (R$ million)
3Q15
3Q14
var % 15-14
9M15
SG&A South America
89.9
91.9
(2.2%)
269.7
270.3
Sel l i ng - whol es a l e
35.2
32.9
7.0%
104.4
100.5
3.9%
Sel l i ng - reta i l
29.8
35.4
(15.8%)
95.9
101.9
(5.9%)
General a nd a dmi ni s trati ve
24.9
23.6
5.5%
69.4
67.9
2.2%
SG&A North America
19.5
15.5
25.8%
56.4
48.5
16.3%
109.4
107.4
1.9%
326.1
318.8
2.3%
SG&A Total
9M14
var % 15-14
(0.2%)
SG&A expenses increased by 1.9% in the 3Q15 when compared to the 3Q14, reaching R$109 million in the 3Q15.
As a percentage of net revenue, SG&A expenses decreased from 19.7% in the 3Q14 to 18.2% in the 3Q15.
Consolidated
2%
2%
107
109
15
92
19
90
3Q14
3Q15
South America
319
326
49
56
270
270
9M14
9M15
North America
3.4.5 EBITDA
EBITDA totaled R$61 million in the 3Q15, representing an increase of 6.6% when compared to the 3Q14. EBITDA
margin in the 3Q15 reached 10.2%, practically stable when compared to the 3Q14.
12
EBITDA (R$ million)
3Q15
3Q14
var % 15-14
9M15
9M14
13.4
4.8
179.2%
22.5
(29.6)
-
0.5
(1.4)
(135.7%)
(2.2)
(2.5)
(12.0%)
(+) Fi na nci a l res ul ts
28.1
32.9
(14.6%)
97.9
110.2
(11.2%)
(+) Depreci ati on a nd amorti za ti on
EBITDA
19.4
61.4
21.3
57.6
(8.9%)
6.6%
59.5
177.7
64.9
143.0
(8.3%)
24.3%
10.2%
10.5%
(0.3 p.p.)
10.7%
9.4%
1.3 p.p.
Income (Los s ) for the year
(+) Income and s oci a l contri buti on ta xes
Margin %
var % 15-14
The graph below presents the EBITDA breakdown for the indicated periods:
Consolidated
10.5% 10.2%
10.7%
9.4%
24%
178
7%
143
58
61
3Q14
3Q15
9M14
9M15
3.5 Financial Results
Net financial expenses in the 3Q15 totaled R$28 million, compared to the R$33 million of the same period of the
previous year. The main factors that contributed to this result are discussed below.
Financial results (R$ million)
Fi na nci a l i ncome
3Q15
3Q14
var % 15-14
9M15
9M14
var % 15-14
7.0
6.4
9.4%
18.0
10.8
66.7%
Fi na nci a l expens es - i nteres ts
Fi na nci a l expens es - ba nk cha rges a nd others
(40.4)
(16.3)
(28.8)
(17.2)
40.3%
(5.2%)
(109.3)
(45.7)
(78.3)
(43.6)
39.6%
4.8%
Excha nge ra te vari a ti ons , net
Financial results
21.6
(28.1)
6.7
(32.9)
222.4%
(14.6%)
39.1
(97.9)
0.9
(110.2)
4,244.4%
(11.2%)
Financial income increased from R$6 million in the 3Q14 to R$7 million in the 3Q15 and interest expenses
increased from R$29 million in the 3Q14 to R$40 million in the 3Q15, due, mainly, to the SELIC rate (Brazilian
interest rate) increase in the 3Q15 when compared to the 3Q14. Bank charges and others decreased from R$17
million in the 3Q14 to R$16 million in the 3Q15.
The balance of net exchange rate variations reached an income of R$22 million in the 3Q15, reflecting the current
exposure to the U.S. Dollar.
3.6 Net Income
As a result of what was previously discussed, the Company reported net income of R$13 million in the 3Q15 and
R$22 million in the 9M15.
13
4. Capital Expenditures (CAPEX)
Our CAPEX reached R$13 million in the 3Q15 and R$19 million in the 3Q14. During the 3Q15, investments in
manufacturing facilities mainly reflected asset modernization. In retail, investments are associated with
restructurings and improvements of our owned stores.
Investment (R$ million)
Ma nufa cturing fa cil ities
3Q15
3Q14
var % 15-14
9M15
9M14
var % 15-14
10.4
17.1
(39.2%)
31.1
33.9
(8.3%)
Reta i l
2.4
1.6
50.0%
4.5
7.2
(37.5%)
Total
12.8
18.7
(31.6%)
35.6
41.1
(13.4%)
3Q15
625.0
2Q15
622.9
var % 3Q-2Q
0.3%
547.8
77.2
277.9
(130.3)
772.6
561.6
61.3
267.0
(110.2)
779.7
(2.5%)
25.9%
4.1%
18.2%
(0.9%)
5. Indebtedness and Working Capital
Indebtedness (R$ million)
Loa ns a nd fina ncing
- Domes tic currency
- Foreign currency
Debentures
Cas h and marketable s ecuriti es
Net debt
Debt Index (3Q15)
Fixed; 3%
Debt Amortization Schedule (R$ million)
Libor;
12%
CDI; 85%
378
72
2015
63
2016
2017
112
2018-23
In financial terms, the working capital needs were R$1,088 million in the 3Q15.
Working capital (R$ million)
3Q15
2Q15 var % 3Q-2Q
Accounts receiva ble
561.1
516.5
8.6%
Inventories
724.8
675.3
7.3%
40.8
37.0
10.3%
(238.8)
1,087.9
(202.3)
1,026.5
18.0%
6.0%
Adva nces to s uppl iers
Suppliers
Working capital
6. Investor Relations and Capital Market
Springs Global's shares, traded on the BM&FBovespa under the ticker SGPS3, over performed the Bovespa Index
(Ibovespa) and the Small Cap Index in the 3Q15, as shown in the graph below. Concerning its liquidity, the daily
average financial volume on the BM&FBovespa was R$102 thousand in the 3Q15, an increase of 3% when
compared to the 3Q14, which was R$99 thousand.
14
110
105
SGPS3 x Ibovespa x Small Cap Index
3Q15 (100 Base)
100
95
90
89
85
85
85
80
75
70
65
60
SGPS3
Ibovespa
Small Cap Index
7. Outlook
Springs confirms its focus on improving the profitability of its businesses, which will be obtained (1) by higher
capacity utilization of the plants in Brazil, resulting in higher fixed costs absorption, (2) by higher conversion of
intermediate products (yarns and fabrics) into finished products with higher added value, and (3) by the execution
of the monobrand retail growth plan, especially with the Artex brand, focusing on the franchise model, which
leverages growth with low capital demand.
In this context, we provide the guidance for 2015, in line with the Company´s budget.
Business Units
Amount (R$ million)
Wholes a le - South America
Reta il
Wholes a le - North America
1,150 - 1,260
260 - 300
740 - 790
Total Net Revenue
EBIT
EBITDA
2,150 - 2,350
110 - 140
200 - 230
CAPEX
40 - 50
Springs, therefore, continues to focus on growth with improved profitability and capital discipline, from a solid
platform in the wholesale segment in South America and the potential for expansion and consolidation of its
monobrand retail operations.
15
Appendix
I.
Balance Sheet
II.
Income Statement
III.
Cash Flow
16
Balance Sheet
Assets (R$ million)
Current asset
Cash and cash equivalents
Marketable securities
Financial instruments
Accounts receivable
Inventories
Advances to suppliers
Recoverable taxes
Receivable - sale of property
Other receivables
Noncurrent assets
Receivable - sale of property
Related parties
Recoverable taxes
Deferred income and social contribution taxes
Property, plant and equipment held for sale
Escrow deposits
Others
Permanent
Other investments
Property, plant and equipment
Intangible assets
Total assets
Liabilities and Equity (R$ million)
Current liabilities
Loans and financing
Debenture
Suppliers
Taxes
Payroll and related charges
Government concessions
Noneconomic leases
Other payables
Noncurrent liabilities
Loans and financing
Debenture
Noneconomic leases
Related parties
Employee benefit plans
Miscellaneous accruals
Other obligations
Equity
Capital
Capital reserves
Assets and liabilities valuation adjustment
Cumulative translation adjustment
Income reserves
Retained deficit
Noncontrolling interest
Total liabilities and equity
3Q15
1,513.1
128.3
2.0
1.7
561.1
724.8
40.8
29.8
5.0
19.6
221.7
42.1
23.5
4.6
67.8
58.6
20.5
4.6
944.1
2.7
811.3
130.1
2,678.9
2Q15
1,391.2
108.6
1.6
516.5
675.3
37.0
28.5
1.9
21.8
214.9
43.7
28.8
4.3
65.7
46.7
19.2
6.5
936.6
2.2
811.7
122.7
2,542.7
3Q15
2Q15
994.3
439.6
144.7
3.2
236.3
19.3
71.4
17.2
5.7
56.9
574.6
185.4
133.2
22.0
0.1
47.9
141.4
24.6
20.0
1,110.0
1,860.3
79.4
(40.2)
(210.7)
25.2
(614.9)
10.9
2,678.9
876.1
402.8
134.4
202.3
10.4
55.9
17.3
4.3
48.7
575.3
220.1
132.6
16.9
48.0
113.5
23.3
20.9
1,091.3
1,860.3
79.4
(40.3)
(213.7)
25.2
(628.3)
8.7
2,542.7
17
Income Statement
Consolidated Income Statement ($ milllion)
Gross revenues
Net revenues
Cost of goods sold
% of net sales
Materials
Conversion costs and others
Depreciation
Gross profit
% of net sales
SG&A
% of net sales
Selling expenses
% of net sales
General and administrative expenses
% of net sales
Others, net
% of net sales
Income from operations
% of net sales
Financial result
Loss from operations before taxes
Income and social contribution taxes
Net income for the period
3Q15
707.5
601.0
(439.4)
73.1%
(284.2)
(137.3)
(17.9)
161.6
26.9%
(109.4)
18.2%
(72.7)
12.1%
(36.7)
6.1%
(10.3)
(1.7%)
41.9
7.0%
(28.0)
13.9
(0.5)
13.4
3Q14 var % 15-14
674.9
4.8%
546.5
10.0%
(400.7)
9.7%
73.3%
(0.2 p.p.)
(246.1)
15.5%
(134.5)
2.1%
(20.1)
(10.9%)
145.8
10.8%
26.7%
0.2 p.p.
(107.4)
1.9%
19.7%
(1.5 p.p.)
(74.9)
(2.9%)
13.7%
(1.6 p.p.)
(32.5)
12.9%
5.9%
0.2 p.p.
(2.1)
390.5%
(0.4%)
(1.3 p.p.)
36.3
15.4%
6.6%
0.4 p.p.
(32.9)
(14.9%)
3.4
308.8%
1.4
(135.7%)
4.8
179.2%
18
Cash Flow
Consolidated Statements of Cash Flow (R$ million)
Net income (loss) for the period
Depreciation and amortization
(Gain) loss on disposal of property, plant and equipment
Reversal of impairment losses of property, plant and equipment
Exchange rate variations
Bank charges and interests
Cash flows from operating activities
9M15
22.5
59.5
(2.2)
(26.9)
(37.4)
83.9
99.4
9M14
(29.6)
64.9
(2.5)
21.5
(9.8)
2.3
47.1
93.9
(0.7)
(38.6)
(135.2)
5.9
69.3
65.8
(0.1)
16.6
(51.7)
0.3
(12.4)
(31.0)
Net cash provided in operating activities
65.9
15.6
Interest paid
Income and social contribution taxes paid
(107.2)
1.5
(45.2)
1.2
Net cash used in operating activities after interest and taxes (I)
(39.8)
(28.4)
Cash flows from investing activities
In acquisition of property, plant and equipment
In intangible assets
Disposal of property, plant and equipment
Loans between related parties
(35.6)
6.9
16.4
(40.9)
(0.2)
35.3
2.8
Net cash used in investing activities (II)
(12.3)
(3.0)
495.5
(453.4)
261.2
270.0
(430.7)
42.1
100.5
8.7
0.1
(1.3)
69.2
129.6
128.3
81.6
150.8
(1.3)
69.2
Changes in assets and liabilities
Accounts receivable
Inventories
Suppliers
Others
Cash flows from financing activities
Proceeds from new loans
Issuance of debenture
Repayment of loans
Net cash provided in financing activities (III)
Effect of exchange rate changes on cash and cash equivalents in foreign currencies (IV)
Increase (decrease) in cash and cash equivalents (I+II+III+IV)
Cash and cash equivalents:
At the beginning of the period
At the end of the period
Increase (decrease) in cash and cash equivalents
19
(Convenience Translation into English from the
Original Previously Issued in Portuguese)
Springs Global
Participações S.A.
Individual and Consolidated
Financial Statements on Review of Interim
Financial Information
Third Quarter - 2015
BDO RCS Auditores Independentes
Tel.: +55 11 3848 5880
Fax: + 55 11 3045 7363
www.bdobrazil.com.br
Rua Major Quedinho 90
Consolação – São Paulo, SP - Brasil
01050-030
(Convenience Translation into English from the Original Previously Issued in Portuguese)
REVIEW REPORT
INFORMATION
OF
INDEPENDENT
AUDITORS
ON
INTERIM
FINANCIAL
ToThe Board of Directors, Management and Shareholders of
Springs Global Participações S.A.
Montes Claros - MG
Introduction
We have reviewed the individual and consolidated interim financial statements of
Springs Global Participações S.A. (“Company”), included in the Quarterly
Information (ITR) related to the quarter ended September 30, 2015, which consist
of the balance sheet at September 30, 2015 and the related statements of income
and comprehensive income for the three and nine months then ended and the
changes in equity and cash flows for the nine month period then ended including a
summary of significant accounting policies and other explanatory notes.
The Management is responsible for the preparation of the individual interim
financial information in accordance with CPC 21 (R1) - Interim Financial Reporting
and IAS 34 - Interim Financial Reporting issued by the International Accounting
Standards Board (IASB), as well as the presentation of information in accordance
with the standards issued by the Brazilian Securities Commission (CVM) applicable
to the preparation of the Quarterly Information - ITR. Our responsibility is to
express a conclusion on this interim financial information based on our review.
Scope of the review
Our review was conducted according to the Brazilian and international standards
for reviewing interim financial statements (NBC TR 2410 and ISRE 2410 – Review of
Interim Financial Information performed by the Independent Auditor of the Entity).
An interim review consists principally of applying analytical and other review
procedures, and making enquiries of and having discussions with persons
responsible for financial and accounting matters.
It is substantially less in scope than an audit conducted in accordance with auditing
standards. An interim review does not provide assurance that we would become
aware of any or all significant matters that might be identified in an audit.
Therefore, we do not express such an opinion.
2
Conclusion on the individual and consolidated interim financial information
Based on our review, we are not aware of any facts that would lead us to believe
that the individual interim financial information included in the Quarterly
Information - ITR referred to above were not prepared, in all material respects, in
accordance with CPC 21 (R1) applicable to the preparation of Quarterly Information
- ITR and presented in accordance with the standards issued by the Brazilian
Securities Commission (CVM).
Other issues
Interim statements of value added
We have also reviewed the individual and consolidated interim statements of value
added (DVA), individual and consolidated, prepared under the responsibility of the
Company’s management, for the Company for the nine months ended September
30, 2015, for which presentation in the interim financial statements is required
according to the standards issued by CVM applicable to the preparation of
Quarterly Information (ITR), and considered as supplementary information by IFRS,
which do not require the presentation of DVA. These statements were submitted to
the same review procedures described before and, based on our review, we are not
aware of any fact that leads us to believe that they have not been fairly stated, in
all material respects, regarding the individual and consolidated interim financial
statements taken as a whole.
São Paulo, November 10, 2015.
BDO RCS Auditores Independentes
CRC 2SP 013846/O-1-S-MG
Paulo Sérgio Tufani
Accountant CRC 1SP 124504/O-9 S-MG
3
SPRINGS GLOBAL PARTICIPAÇÕES S.A.
BALANCE SHEETS AS OF SEPTEMBER 30, 2015 AND DECEMBER 31, 2014
(In thousands of Brazilian Reais)
A S S E T S
Note
CURRENT:
Accounts receivable
Inventories
Recoverable taxes
Receivable – sale of
property
Other receivables
3
4
22.d.3
5
6
17.d
16
Total current assets
NONCURRENT:
Long-term assets:
Receivable – sale of
property
Related parties
Recoverable taxes
Deferred income and social
contribution taxes
held for sale
Escrow deposits
Others
Investments in subsidiaries
Other investments
Intangible assets
Total noncurrent assets
Total assets
16
15
17.d
Company
09.30.2015
12.31.2014
Consolidated
09.30.2015
12.31.2014
114
1,189
136
8,076
128,303
2,035
1,681
561,127
724,768
40,797
29,777
129,570
1,360
522,489
589,566
46,667
47,355
985
-------------2,288
--------------
992
-------------9,204
--------------
5,014
19,633
-------------1,513,135
--------------
23,248
-------------1,360,255
--------------
42,101
23,455
4,580
7,535
4,595
23
-
-
17.c
3,325
1,905
67,761
62,512
8.b
18
4,221
-------------7,569
4,221
-------------6,126
58,592
20,464
4,732
-------------221,685
40,527
17,495
6,850
-------------139,514
7.a
1,157.345
27,303
-------------1,192,217
-------------1,194,505
========
1,119,462
27,303
-------------1,152,891
-------------1,162,095
========
2,672
811,316
130,094
-------------1,165,767
-------------2,678,902
========
1,968
847,260
119,574
-------------1,108,316
-------------2,468,571
========
8.a
9
The accompanying notes are an integral part of these interim financial statements.
BALANCE SHEETS AS OF SEPTEMBER 30, 2015 AND DECEMBER 31, 2014
LIABILITIES AND EQUITY
Note
LIABILITIES
CURRENT:
Loans and financing
Debenture
Suppliers
Taxes
Payroll and related charges
Noneconomic leases
Other payables
12
13
22.d.3
11
20
10
------------50
-------------
39
------------42
-------------
12
13
10
15
20
19
18
7.a
13,989
4,317
75,097
2,056
------------95,459
-------------
16,714
4,317
60,879
2,056
------------83,966
-------------
185,401
133,205
22,026
8
47,884
141,391
24,649
19,993
------------574,557
-------------
191,458
263,748
12,822
7,969
47,875
101,102
21,962
19,691
------------666,627
-------------
1.860,265
79,381
1,860,265
79,381
1.860,265
79,381
1,860,265
79,381
(40,205)
(210,698)
25,170
(614,917)
-------------
(40,369)
(209,176)
25,170
(637,184)
-------------
(40,205)
(210,698)
25,170
(614,917)
-------------
(40,369)
(209,176)
25,170
(637,184)
-------------
1,098,996
1,078,087
1,098,996
1,078,087
------------1,098,996
------------1,194,505
========
------------1,078,087
------------1,162,095
========
11,017
------------1,110,013
------------2,678,902
========
7,684
------------1,085,771
------------2,468,571
========
Total noncurrent liabilities
EQUITY:
Capital
Capital reserves
Assets and liabilities valuation
adjustment
Cumulative translation adjustments
Earnings reserves
Accumulated deficit
Total equity attributable to the owners
of the Company
NON-CONTROLLING INTERESTS
Total equity
Total liabilities and equity
-
-
Consolidated
09.30.2015 12.31.2014
439,587
144,692
3,152
236,346
19,307
71,446
17,240
5,568
56,994
------------994,332
-------------
Total current liabilities
NONCURRENT:
Loans and financing
Debenture
Noneconomic leases
Related parties
Employee benefit plans
Miscellaneous accruals
Subsidiaries obligations
Other obligations
Company
09.30.2015
12.31.2014
4
1
45
3
-
403,748
1,685
167,095
12,089
51,559
16,556
4,286
59,155
------------716,173
-------------
14
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
Note
OPERATING INCOME (EXPENSES):
Management fees
Equity in subsidiaries
7.a
INCOME (LOSS) FROM OPERATIONS
Financial expenses – interests
Financial expenses – bank charges and others
Financial income
Exchange rate variations, net
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES
Income and social contribution taxes:
Current
Deferred
17.b
17.b
NET INCOME (LOSS) FOR THE PERIOD
BASIC AND DILUTED INCOME (LOSS) PER SHARE – R$
26
07.01.2015
to
09.30.2015
Company
01.01.2015
07.01.2014
to
to
09.30.2015
09.30.2014
(733)
(106)
14,219
------------13,380
(2,345)
(316)
25,022
------------22,361
(758)
(108)
3,587
------------2,721
(2,422)
(324)
(25,764)
------------(28,510)
(516)
(80)
30
30
------------12,844
(1,568)
(260)
285
30
------------20,848
(454)
(151)
697
1,099
------------3,912
(930)
(381)
2,645
(3,021)
------------(30,197)
468
-----------13,312
=======
1,419
-----------22,267
=======
967
-----------4,879
=======
967
-----------(29,230)
=======
0.0661
======
0.1113
======
0.0244
======
(0.1462)
======
01.01.2014
to
09.30.2014
STATEMENTS OF OPERATIONS
FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
Consolidated
01.01.2015
07.01.2014
to
to
09.30.2015
09.30.2014
01.01.2014
to
09.30.2014
Note
07.01.2015
to
09.30.2015
NET REVENUES
25
601,025
1,657,893
546,513
1,525,816
COST OF GOODS SOLD
24
(439,417)
------------161,608
(1,218,226)
------------439,667
(400,702)
------------145,811
(1,120,194)
------------405,622
24
24
24
21
(72,652)
(34,821)
(1,933)
(10,283)
------------41,919
(220,833)
(99,956)
(5,359)
4,712
------------118,231
(74,874)
(29,949)
(2,612)
(2,066)
------------36,310
(221,909)
(90,562)
(6,363)
(8,721)
------------78,067
(40,406)
(16,292)
7,007
21,632
------------13,860
(109,316)
(45,731)
17,974
39,094
------------20,252
(28,765)
(17,211)
6,361
6,707
------------3,402
(78,261)
(43,620)
10,831
906
------------(32,077)
(924)
468
-----------13,404
=======
(874)
3,075
-----------22,453
=======
1,444
-----------4,846
=======
2,477
-----------(29,600)
=======
13,312
92
---------13,404
=======
22,267
186
---------22,453
=======
4,879
(33)
---------4,846
=======
(29,230)
(370)
---------(29,600)
=======
GROSS PROFIT
OPERATING INCOME (EXPENSES):
Selling expenses
Management fees
Others, net
INCOME FROM OPERATIONS
Financial expenses – interests
Financial expenses – bank charges and others
Financial income
Exchange rate variations, net
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES
Income and social contribution taxes:
Current
Deferred
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
17.b
17.b
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
07.01.2015
to
09.30.2015
Other comprehensive income (loss):
- Items that will impact the statements of operations:
Exchange rate variations on foreign investments
- Items that will not impact the statements of operations:
Actuarial gain on pension plans
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD
Other comprehensive income (loss):
- Items that will impact the statements of operations:
Exchange rate variations on foreign investments
- Items that will not impact the statements of operations:
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
Company
01.01.2015
07.01.2014
to
to
09.30.2015
09.30.2014
01.01.2014
to
09.30.2014
13,312
22,267
4,879
(29,230)
3,010
(1,522)
395
(19,196)
81
------------16,403
=======
164
------------20,909
=======
566
------------5,840
=======
1,575
------------(46,851)
=======
07.01.2015
to
09.30.2015
Consolidated
01.01.2015
07.01.2014
to
to
09.30.2015
09.30.2014
01.01.2014
to
09.30.2014
13,404
22,453
4,846
(29,600)
5,200
1,625
983
(19,056)
81
------------18,685
=======
164
------------24,242
=======
566
------------6,395
=======
1,575
------------(47,081)
=======
16,403
2,282
-----------18,685
=======
20,909
3,333
-----------24,242
=======
5,840
555
-----------6,395
=======
(46,851)
(230)
-----------(47,081)
=======
STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2014
Assets and
liabilities
Note
BALANCES AS OF DECEMBER 31, 2013
Total equity
Cumulative
Capital
valuation
translation
Capital
reserve
adjustment
adjustment
1,860,265
79,381
(21,929)
(190,005)
Earnings reserves
Legal
1,842
attributable to
Retained
Accumulated
the owners of
Non-controlling
income
deficit
the Company
interests
Total equity
23,328
(608,785)
1,144,097
7,866
1,151,963
-
-
(29,230)
(29,230)
(370)
(29,600)
-
-
-
(3,015)
140
(2,875)
-
-
-
-
1,575
-
1,575
(16,181)
-
-
-
(16,181)
-
(16,181)
------------
------------
------------
-------------
------------
-------------
-
-
(29,230)
(46,851)
(230)
(47,081)
Comprehensive income (loss):
Net loss for the period
-
-
-
Exchange rate variations on foreign
-
-
-
-
-
-
-
-
----------
----------
--------------
1,575
(19,196)
investments
(3,015)
2.1.b
1,575
Impact of subsidiariesExchange rate variations on foreign
investments
2.1.b
-------------
Total comprehensive income (loss)
BALANCES AS OF SEPTEMBER 30, 2014
-
-
-------------
----------
----------
--------------
------------
------------
------------
-------------
------------
-------------
1,860,265
79,381
(20,354)
(209,201)
1,842
23,328
(638,015)
1,097,246
7,636
1,104,882
========
======
======
========
=======
=======
=======
========
========
========
STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2015
Assets and
liabilities
Note
BALANCES AS OF DECEMBER 31, 2014
Total equity
Cumulative
Capital
valuation
translation
Capital
reserve
adjustments
adjustment
1,860,265
79,381
(40,369)
(209,176)
Earnings reserves
Legal
1,842
attributable to
Retained
Accumulated
the owners of
Non-controlling
income
deficit
the Company
interests
23,328
(637,184)
1,078,087
7,684
Total equity
1,085,771
Comprehensive income (loss):
Net income for the period
-
-
-
-
-
-
22,267
22,267
186
22,453
Exchange rate variations on foreign
-
-
-
(31,994)
-
-
-
(31,994)
3,147
(28,847)
-
-
-
-
-
-
164
-
164
-
-
-
-
-
-
30,472
-
30,472
----------
----------
--------------
------------
------------
------------
-------------
------------
-------------
164
(1,522)
-
-
22,267
20,909
3,333
24,242
investments
2.1.b
164
Impact of subsidiariesExchange rate variations on foreign
investments
------------Total comprehensive income (loss)
BALANCES AS OF SEPTEMBER 30, 2015
30,472
2.1.b
-
-
-------------
----------
----------
--------------
------------
------------
------------
-------------
------------
-------------
1,860,265
79,381
(40,205)
(210,698)
1,842
23,328
(614,917)
1,098,996
11,017
1,110,013
========
======
======
========
=======
=======
=======
========
========
========
STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
Company
01.01.2014
01.01.2015
to
to
09.30.2014
09.30.2015
Cash flows from operating activities
Net income (loss) for the period
Adjustments to reconcile net income (loss) for the period to
net cash provided by (used in) operating activities:
(Gain) loss on disposal of property, plant and equipment
(Reversal of) Impairment losses of property, plant and
equipment
Bank charges and interests
Changes in assets and liabilities
Accounts receivable
Inventories
Suppliers
Others
Net cash provided by (used in) operating activities
Interest paid
Income and social contribution taxes received (paid)
Net cash provided by (used in) operating activities after
interest and taxes
Cash flows from investing activities
In acquisition of property, plant and equipment
In intangible assets
Disposal of property, plant and equipment
Loans between related parties
Net cash provided by (used in) investing activities
Consolidated
01.01.2015
01.01.2014
to
to
09.30.2015
09.30.2014
22,267
(29,230)
22,453
(29,600)
(25,022)
(1,419)
-
25,764
(967)
-
59,498
(2,201)
(26,917)
64,865
(2,477)
21,541
(30)
1,568
-----------(2,636)
------------
3,021
(1,304)
-----------(2,716)
------------
(37,404)
83,947
-----------99,376
------------
(9,827)
2,324
47,049
-----------93,875
------------
1
6,900
-----------4,265
------------
229
-----------(2,487)
------------
(675)
(38,638)
(135,202)
5,870
69,251
65,848
-----------65,830
------------
(55)
16,627
(51,720)
312
(12,403)
(31,031)
-----------15,605
------------
------------
(411)
------------
(107,226)
1,535
------------
(45,168)
1,119
------------
4,265
------------
(2,898)
------------
(39,861)
------------
(28,444)
------------
(4,287)
-----------(4,287)
5,939
-----------5,939
(35,566)
6,964
16,388
-----------(12,214)
(40,907)
(204)
35,299
2,783
-----------(3,029)
------------
------------
------------
------------
STATEMENTS OF CASH FLOWS
Company
01.01.2014
01.01.2015
to
to
09.30.2014
09.30.2015
Cash flows from financing activities
Proceeds from new loans
Issuance of debenture
Repayment of loans
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents in foreign currency
Cash and cash equivalents:
At the beginning of the period
At the end of the period
Consolidated
01.01.2015
01.01.2014
to
to
09.30.2015
09.30.2014
-----------------------
19,130
(22,043)
-----------(2,913)
------------
495,453
(453,355)
-----------42,098
------------
261,187
270,000
(430,668)
-----------100,519
------------
-----------(22)
------------
-----------128
------------
8,710
-----------(1,267)
------------
172
-----------69,218
------------
136
114
-----------(22)
46
174
-----------128
129,570
128,303
-----------(1,267)
81,591
150,809
-----------69,218
=======
=======
=======
=======
STATEMENTS OF VALUE ADDED
Company
01.01.2014
01.01.2015
to
to
09.30.2014
09.30.2015
REVENUES
Sales of products, goods and services
Allowance for doubtful accounts
Gain (loss) on disposal of property, plant and equipment
MATERIALS ACQUIRED FROM THIRD PARTIES
Cost of goods and services sold
Materials, energy, third party services, and others
Impairment reversals of property, plant and equipment
GROSS VALUE ADDED
RETENTIONS
NET VALUE ADDED PRODUCED BY THE COMPANY
VALUE ADDED RECEIVED BY TRANSFER
Financial income
Exchange rate variation
Royalties
TOTAL VALUE ADDED FOR DISTRIBUTION (RETENTION)
DISTRIBUTION OF VALUE ADDED
Salary, wages and compensation
Taxes, duties and contributions
Payments to third parties
Equity – Net loss
VALUE ADDED DISTRIBUTED (RETAINED)
Consolidated
01.01.2015
01.01.2014
to
to
09.30.2015
09.30.2014
-----------
-----------
1,854,922
(523)
26,917
-------------1,881,316
1,751,397
(998)
(21,541)
-------------1,728,858
(2,555)
----------(2,555)
----------(2,555)
(2,667)
----------(2,667)
----------(2,667)
(879,764)
(271,304)
----------(1,151,068)
----------730,248
(806,270)
(266,464)
9,827
----------(1,062,907)
----------665,951
----------(2,555)
----------(2,667)
(59,498)
----------670,750
(64,865)
----------601,086
25,022
285
30
----------25,337
----------22,782
======
(25,764)
2,645
4,444
----------(18,675)
----------(21,342)
======
17,974
44,420
9,832
----------72,226
----------742,976
======
10,831
21,098
9,290
----------41,219
----------642,305
======
(1,053)
1,568
22,267
----------22,782
======
(507)
8,395
(29,230)
----------(21,342)
======
328,688
160,634
231,201
22,453
----------742,976
======
308,860
167,536
195,509
(29,600)
----------642,305
======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2015
(Amounts in thousands of Brazilian Reais)
1. OPERATIONS
Springs Global Participações S.A. (“Company”), domiciled in Montes Claros – MG, Brazil, was
incorporated on November 24, 2005 and, on January 24, 2006 received as capital contribution 100%
of the shares of Coteminas S.A. (“CSA”) and Springs Global US, Inc. (“SGUS”), privately-held
companies headquartered in Brazil and in the United States, respectively, whose shareholders were
Companhia de Tecidos Norte de Minas - Coteminas (“CTNM”) and the former shareholders of
Springs Industries, Inc. (“SI”), respectively. On April 30, 2009, the Company acquired a controlling
interest in Springs e Rossini Participações S.A. (“SRPSA”), the parent of MMartan Têxtil Ltda
(“MMartan”).
On July 27, 2007, the Company’s stock began trading on the “Bolsa de Valores, Mercadorias e
Futuros” – BM&FBOVESPA S.A., in the “Novo Mercado” segment, under the code “SGPS3”.
The Company functions as the holding company of CSA and SGUS, companies that focus their
manufacturing and distribution operations on bed and bath linens, previously carried out by CTNM
and SI. This joint venture created a textile industrial complex of bed linens and bath products, with
production units in Brazil, Argentina, the United States, and Mexico.
The Company also manufactures products with strong brand names, such as MMartan, Casas
Moysés, Artex, Santista, Paládio, Calfat, Garcia, Arco Íris, Magicolor, among others. The Company’s
products have a privileged market standing on the shelves of the largest and most demanding retail
channels of the world.
The Company’s products are sold in the United States and Canada by SGUS through its vast
distribution chain that is close to the largest retailers in those markets. In Brazil and Argentina, its
products are sold by CSA and its subsidiary Coteminas Argentina S.A.
In April 2009, the Company started its bed, tabletop and bath retail operations, under the brand
MMartan and later, in August 2011, with the brand Artex. The retail operation of these two brands is
run by subsidiary AMMO Varejo Ltda. (“AMMO”).
2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
The interim financial statements were approved by the Company’s Board of Directors on November
10, 2015.
The Company presents its individual (“Company”) and consolidated (“Consolidated”) interim
financial statements prepared simultaneously in accordance with technical pronouncement CPC 21
(R1) - Interim Financial Statements and in accordance with international standard IAS 34 – Interim
Financial Reporting, issued by the International Accounting Standards Board – IASB, as well as the
standards issues by CVM (Brazilian Securities and Exchange Commission), applicable to the
preparation of the Interim Financial Information.
The Company adopted all standards, review of standards and interpretations issued by the IASB
and the CPC which were effective on September 30, 2015.
1
2.1 – Translation of balances in foreign currency
a) Functional and presentation currency
The interim financial statements of each subsidiary included in the consolidation of the Company
and used as a basis for valuation of investments through the equity method are prepared using the
functional currency of each entity. The functional currency of an entity is the currency of the primary
economic environment in which it operates. By defining the functional currency of each of its
subsidiaries, Management considered which currency significantly influences the selling price of
their products and services, and the currency in which most of the production cost inputs are paid or
incurred.
The consolidated interim financial statements are presented in Reais (R$), which is the functional
and presentation currency of the Company.
b) Conversion of balances
The results and financial position of all subsidiaries included in the consolidation that have functional
currencies different from the presentation currency are translated to the presentation currency as
follows:
i) assets and liabilities are translated at the exchange rate prevailing on the date of the interim
financial statements;
ii) income and expenses are translated at the monthly rate of exchange, and
iii) all differences resulting from the translation are recognized in equity under the caption
"Cumulative translation adjustment" and are presented as other comprehensive income in the
statement of comprehensive income.
2.2 – Accounting policies
The significant accounting policies used in the preparation of the interim financial statements are as
follows:
(a) Results of operations--Results of operations are calculated in accordance with the accrual
basis of accounting. Revenue is not recognized if there is significant uncertainty regarding its
realization. Interest income and expense are recognized using the effective interest rate as
financial income and expenses in the statements of operations. The extraordinary gains and
losses and the transactions and provisions involving property, plant and equipment are recorded
in the statements of operations as "Others, net ".
(b) Non-derivatives financial instruments--Non-derivative financial instruments include cash and
cash equivalents, accounts receivable and other current and noncurrent receivables, loans and
financing, suppliers, other accounts payable and other equity and debt instruments. The nonderivative financial instruments are initially recognized at fair value plus costs directly attributable
to their acquisition or issuance. Subsequent to the initial recognition, non-derivative financial
instruments are measured at each balance sheet date, according to their classification, which is
defined in the initial recognition based on the purposes for which they were acquired or issued.
The financial instruments classified as assets fall into the category of "Loans and receivables"
and together with the financial liabilities, after the initial recognition at fair value, are valued
based on amortized cost using the effective interest rate method. Interest, monetary and
exchange rate variations, less impairment losses, if any, are recognized as revenue or expense
in the statements of operations as incurred.
2
The Company does not have any non-derivative financial assets classified in the following
categories: (i) held for trading, (ii) held to maturity, and (iii) available for sale, and also does not
have any non-derivative financial liabilities classified as "Fair value through profit or loss”.
(c) Derivative financial instruments--Derivative financial instruments are initially recognized at fair
value and, subsequently, the change in fair value is recorded in the statements of operations,
unless the derivative is designated as a cash flow hedge, which should follow the method of
accounting for cash flow hedges.
A derivative financial instrument is classified as a cash flow hedge when its purpose is to protect
against exposure to cash flow variability that is attributable both to a particular risk associated
with a recognized asset or liability, as well as to a transaction that is probable to occur, or to
exchange rate risk related to an unrecognized firm commitment.
When initiating a derivative transaction intended to hedge a risk, the Company formally
designates and documents the hedged item, as well as the objective of the risk policy and
strategy of the hedge transaction. The documentation includes identification of the hedging
instrument, the item or transaction being hedged, the nature of the risk to be protected and how
the entity will assess the effectiveness of the hedging instrument in offsetting the exposure to
changes in fair value of the hedged item or cash flows attributable to the hedged risk. The
purpose is that these hedging instruments are effective to offset changes in fair value or cash
flows and are assessed on an ongoing basis to determine if they have been actually effective
throughout the period for which they were designated.
The effective portion of gain or loss on change in fair value of the hedging instrument is
recognized directly in equity in the caption “Assets and liabilities valuation adjustments”, while
any ineffective portion is recognized immediately as income or expense in the statements of
operations.
The amounts classified in equity as asset and liability valuation adjustment are reflected in the
statements of operations in the period in which the hedged item affects the results, adjusting the
value of the hedged expense.
If the firm commitment is no longer expected to occur, amounts previously recognized in equity
are reflected in the statements of operations. If the hedged instrument expires or is sold,
terminated or exercised without replacement or rollover, or if its designation as a hedge is
revoked, the amounts previously recognized in equity are reflected in the statements of
operations.
(d) Cash and cash equivalents--Includes cash, deposits, cash in transit and short-term
investments with immediate liquidity and original maturities of 90 days or less (or without fixed
maturity), which are subject to an insignificant risk of change in its value. Cash and cash
equivalents are classified as non-derivative financial asset, measured at amortized cost, and its
earned income is recognized in the statements of operations for the period.
(e) Marketable securities--Represented by amounts of immediate liquidity with maturities of more
than 90 days and are subject to an insignificant risk of change in their value. Marketable
securities are classified as non-derivative financial assets measured at amortized cost and
interest earned is recognized in the statements of operations for the period.
(f) Accounts receivable and allowance for doubtful accounts--Accounts receivable from
customers are presented net of the allowance for doubtful accounts, which is determined
based on a credit risk analysis, in an amount considered sufficient by Management to
cover possible losses on receivables. Accounts receivable arising from retail sales are
adjusted at present value, based on the market interest rates or the transaction interest
3
rate. Current accounts receivable are adjusted whenever effects are significant. Accounts
receivable from customers are classified as non-derivative financial assets measured at
amortized cost.
(g) Inventories--Stated at average acquisition or production cost, which is lower than net
realizable value and are stated net of provision for losses on discontinued and / or obsolete
items. The net realizable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion of manufacturing and directly related
selling expenses.
(h) Property, plant and equipment held for sale--Includes out-of-use machinery and
equipment measured at fair value less selling expenses, when this amount is lower than
net book value.
(i) Investments--Investments in subsidiaries are accounted for using the equity method
based on the balance sheet of the subsidiaries as of the same date as the Company’s
balance sheet. The value of the equity of foreign subsidiaries is converted into Reais based
on the current rate of its functional currency and the foreign exchange rate variation is
recorded in "Cumulative translation adjustment" in equity and presented as other
comprehensive income.
(j) Business combinations--The cost of the acquired entity is allocated to the acquired
assets and liabilities, based on their estimated fair value at the acquisition date. Any
difference between the entity’s cost and the fair value of the acquired assets and liabilities
is recognized as goodwill.
(k) Research and development expenses--Are recognized as expenses when incurred.
(l) Lease--Operating leases are recognized as expense on a straight-line basis over the
lease term, except when another systematic basis is more representative of the future
economic benefits. Contingent leases, related to either capital or operating leases, are
recognized in the statements of operations when incurred. Subsidiary SGUS records an
accrual for unrecoverable lease costs based on the estimated present value of future lease
obligations (whose contracts are still valid after the closing of the leased facilities), net of
existing sublease income and estimated sublease income for closed facilities which were
not yet subleased.
(m) Property, plant and equipment--Stated at acquisition or construction cost. Depreciation
is calculated using the straight-line method based on the estimated useful lives of the
assets. Costs incurred that increase the value and extend the estimated useful lives of the
assets are capitalized; maintenance and repairs are recorded as expenses when incurred.
The estimated useful life of property, plant and equipment is as follows:
Useful life
Buildings
Installations
Equipment
Hydroelectric Plant - Porto Estrela
Furniture and fixtures
Vehicles
Computers and peripherals
40 years
15 years
15 years
35 years
10 years
5 years
5 years
The residual value and useful life of the assets are assessed by management on an annual
basis.
4
(n) Intangible assets--Represented by trademarks acquired, and goodwill on companies
acquired. Intangible assets with finite useful lives are amortized using the straight line
method, over their estimated useful lives. Intangible assets with indefinite useful lives are
tested for impairment annually, or as deemed necessary, in order to determine the
recoverability of their net book values.
(o) Valuation of recoverable assets--Assets included in property, plant and equipment,
intangible assets, and other noncurrent assets are tested for impairment annually, or when
circumstances indicate that the net book value may not be recoverable. When impairment
is required, it is recognized in the statements of operations. Previous period impairment
losses on fixed assets may be reversed whenever there is an assessment or reliable
evidence that the value of the asset has recovered. The reversal is recognized in the
statement of operations to the extent it does not exceed the previously recognized
impairment losses.
(p) Income and social contribution taxes--The provision for income and social contribution
taxes is calculated at the rate of approximately 34% on taxable income and is recognized
net of the portion related to the income tax exemption. The accrual balance is net of
prepayments made during the year, if applicable. For foreign subsidiaries, the tax rate
ranges from 35% to 38%, according to the tax legislation of each country.
(q) Deferred income and social contribution taxes--Deferred income and social contribution taxes
are recognized on net operating losses and temporary differences arising from provisions stated
in the accounting records, which, according to the tax rules, will only be considered deductible or
taxable when realized. A deferred tax asset is recognized only when there is an expectation of
future taxable income.
(r) Miscellaneous accruals--Recorded at an amount considered sufficient by Management to
cover probable losses. The escrow deposits related to the accruals are presented in noncurrent
assets.
(s) Employee benefit plans--Pension plans and postretirement benefit costs are recognized on
an accrual basis, based on actuarial calculations. Actuarial gains and losses are recognized in
the statements of operations when incurred.
(t) Basic and diluted earnings (loss) per share--Basic earnings (loss) per share is calculated by
dividing the income or loss for the year attributable to the Company’s shareholders by the
weighted average number of shares outstanding. Diluted earnings per share is calculated by
adjusting the weighted average number of shares outstanding to assume conversion of potential
shares to be issued. The Company did not identify any potential issuance of new shares and,
therefore, a potential dilution in earnings per share.
(u) Monetary and exchange rate variations--Assets and liabilities subject to monetary or
exchange rate variations are restated on the balance sheet dates, in accordance with the
Brazilian Central Bank (BACEN) published rates or other contractual indices. Exchange gains
and losses and monetary variations are recognized in the statements of operations for the year,
except for the exchange gains and losses on investments in foreign subsidiaries, which are
recognized in “Cumulative translation adjustment” in equity.
(v) Revenue recognition--Revenue is measured at fair value of the consideration received or
receivable, less any estimates of returns, cash discounts and/or unconditional trade discounts
given to the buyer and other similar deductions. Revenue from product sales is recognized when
all the following conditions are met: (i) the Company transferred to the buyer the significant risks
and rewards related to ownership of the products, (ii) the Company does not maintain continuing
involvement in the management of goods sold in a degree usually associated with ownership or
effective control over such products, (iii) the amount of revenue can be reliably measured, (iv) it
5
is probable that the economic benefits associated with the transaction will flow to the Company
and (v) costs incurred or to be incurred related to the transaction can be measured reliably.
(w) Statement of Value Added ("DVA")--The purpose of these statements is to highlight the
wealth created by the Company and its distribution over a given period. They are presented by
the Company as required by the Brazilian Corporate Law, as part of its individual interim financial
statements and as supplemental information for the consolidated interim financial statements,
since it is not a statement provided nor required by IFRS standards. The DVAs have been
prepared based on information obtained from accounting records that are the basis for the
preparation of the interim financial statements.
(x) Owners of the Company and non-controlling interests--In the interim financial statements,
"owners of the Company" represents all the shareholders of the Company and “non-controlling
interests" represents the minority interest of the Company’s subsidiaries.
2.3 – Accounting estimates
The preparation of interim financial statements makes use of estimates in order to record certain
assets, liabilities and other transactions. To make these estimates, Management used the best
information available at the time of preparation of the interim financial statements, as well as the
experience of past and/or current events, also considering estimates regarding future events.
Therefore, the interim financial statements include estimates related mainly to the useful lives of
property, plant and equipment, estimated recoverable value of noncurrent assets, provisions
necessary for tax, civil and labor liabilities, determination of provisions for income tax, determination
of fair value of financial instruments (assets and liabilities) and others, estimates related to the
selection of interest rate, expected return on assets and the choice of mortality table and expected
wage increases applied to the actuarial calculations. Actual results of transactions and information
could differ from the estimates.
2.4 – Consolidation criteria
The consolidated interim financial statements include the accounts of the Company and its whollyowned subsidiaries CSA, AMMO and SGUS.
The subsidiary CSA, parent company of Coteminas Argentina S.A. with 100% of its capital, was
included in consolidation based on its consolidated interim financial statements.
The subsidiary SGUS, parent company of (i) Warbird Corporation (Delaware, US); (ii) Springs Home
Textiles Reynosa, S.A. de C.V. (Mexico); (iii) Casa Springs S.A. de C. V. (Mexico); (iv) Charles D.
Owen Mfg. Co. (Delaware, US); (v) Springmaid International, Inc. (India); (vi) Springs International
Services Inc. (South Carolina, US); (vii) Sabre US, Inc. (Delaware, US), (viii) Espacio LLC
(Delaware, US) all wholly-owned and (ix) Springs Canada Holdings, LLC (Delaware, US); (x)
Springs Canada, Inc. (Ontario, Canada); (xi) Springs Brands, LLC (Delaware, US); (xii) Springs
Cayman Holding Ltd. (Cayman Islands); (xiii) Springs Shanghai Trading Co., Ltd. (China) all with
87.5% ownership; was included in consolidation based on its consolidated interim financial
statements.
The consolidation of the balance sheets and statement of operations accounts corresponds to the
sum of assets, liabilities, revenues and expenses, according to their nature, after eliminating
investments in subsidiaries, unrealized profits or losses and intercompany balances.
The effect of the exchange rate variations on foreign investments is disclosed in a separate caption
in the statement of changes in equity, “Cumulative translation adjustment”. The accounting practices
of the foreign subsidiaries were adjusted to conform to accounting practices of the parent company.
Non-controlling interests is presented separately in the statements of operations and equity.
6
The interim financial statements of the foreign subsidiaries have been translated into Brazilian Reais
based on the US Dollar exchange rate as of September 30, 2015 and December 31, 2014, for
balance sheet accounts and the average monthly exchange rate for statement of operations
accounts, as follows:
2015
2014
Variance
Exchange rate as of:
December 31
September 30
3.9729
2.6562
2.4510
62.09%
Average exchange rate:
September 30 (3 months)
September 30 (9 months)
3.6712
3.2263
2.3193
2.2954
58.29%
40.56%
2.5 – New IFRS, revised IFRS and IFRIC interpretations (IASB International Financial Reporting
Interpretations Committee)
a) Certain new IASB accounting pronouncements and IFRIC interpretations were published and/or
revised and have their mandatory adoption for the periods beginning after January 1, 2015. These
new pronouncements did not generate significant impact on the interim financial statements.
Standard
Main requirements
Annual Improvements to IFRSs: 2010 –
2012 Cycle (*)
Amendments to several standards.
Annual Improvements to IFRSs: 2011 –
2013 Cycle (*)
Amendments to IAS 19 — Employee
contributions to defined benefit plans
and revision to CPC technical
pronouncements no. 06 (CVM
resolution no. 728/14) (*)
Change the requirements for the recognition of the contributions made
by employees or third parties that are linked to the services.
b) Certain new IASB accounting pronouncements and IFRIC interpretations were published and/or
revised and have their mandatory adoption for the periods beginning after December 31, 2015.
However, the early adoption of these new and revised standards was not allowed:
Standard
Main requirements
Effective date
IFRS 9 - Financial
instruments (issued on July
24, 2014) (*)
IFRS 9 (2014) was issued in a finalized version
including the requirements previously issued
and additional amendments, which introduce
a new model of expected losses on
impairment and limited changes in
classification and measurement requirements
for financial assets. With those amendments,
the IASB completed the project for financial
instruments.
Effective for annual periods
beginning on or after January
1, 2018.
Agriculture: Bearer Plants amendments to IAS 16 and
41 (issued June 30, 2014)
(*)
Amendments to the guidance on bearer plants
which are now included within the scope of
IAS 16 rather than IAS 41 because the IASB
has determined that they “should be
accounted for in the same way as property,
plant and equipment”.
1, 2016.
7
Standard
Main requirements
Effective date
IFRS 15, Revenue From
Contracts With Customers
(issued May 28, 2014) (*)
The standard outlines a single comprehensive
model for entities to use in accounting for
revenue arising from contracts with customers
and supersedes most current revenue
recognition guidance. The standard specifies
how and when an entity will recognize
revenue through a single, principles based
five-step model to be applied to all contracts
with customers, and requires such entities to
provide users of interim financial statements
with more informative, relevant disclosures.
1, 2018.
Clarification of Acceptable
Methods of Depreciation
and Amortization —
Amendments to IAS 16 and
IAS 38 (issued May 12,
2014) (*)
The amendments clarify that a depreciation
and/or an amortization method that is based
on revenue that is generated by an activity
that includes the use of an asset is not
appropriate, except in some limited
circumstances for intangible assets.
1, 2016.
Accounting for Acquisitions
of Interests in Joint
Operations — Amendments
to IFRS 11 (issued May 6,
2014) (*)
The amendments determine that the acquirer
of an interest in a joint operation in which the
activity constitutes a business is required to
apply all of the principles on business
combinations accounting under IFRS 3.
1, 2016.
IFRS 14, Regulatory Deferral
Accounts (issued January
30, 2014) (*)
The standard permits an entity which is a firsttime adopter of IFRS to continue to account
for 'regulatory deferral account balances' in
accordance with its previous GAAP, both on
initial adoption of IFRS and in subsequent
financial statements.
1, 2016.
Annual Improvements to
IFRSs: 2012–2014 Cycle
(issued September 25, 2014)
(*)
beginning on or after January 1,
2016.
Sale or Contribution of Assets Amendments to IAS 28 and IFRS 10 to resolve
an inconsistency between the guidance in
Between an Investor and Its
Associate or Joint Venture — IFRS 10 and that in IAS 28 with respect to
amendments to IFRS 10 and “the sale or contribution of assets between an
investor and its associate or joint venture”.
IAS 28 (issued September
Under the amendments, an entity would
11, 2014) (*)
recognize a full gain or loss “when a
transaction involves a business” and would
recognize a partial gain or loss “when a
transaction involves assets that do not
constitute a business”.
Effective prospectively for sales
or contributions of assets
occurring in annual periods
2016.
8
Standard
Main requirements
Effective date
Investment Entities: Applying Amendments to IFRS 10, 12 and IAS 28 to
the Consolidation Exception - confirm that (1) the exemption from preparing
consolidated interim financial statements is
amendments to IFRS 10,
available for a subsidiary of an investment
IFRS 12 and IAS 28 (issued
entity, even if the investment entity measures
on December 18, 2014) (*)
all of its subsidiaries at fair value; (2) a
subsidiary that provides services related to the
parent's investment activities should not be
consolidated if the subsidiary itself is an
investment entity; (3) associates and joint
ventures accounted for using the equity
method in the interim financial statements of a
non-investment entity investor in an investment
entity may retain the fair value measurement
applied to its subsidiaries when they qualify as
investment entities; and (4) investment entities
measuring all of their subsidiaries at fair value
must provide the disclosures relating to
investment entities required by IFRS 12.
2016.
(*) The CPC has not yet issued the statements and changes corresponding to the new and revised
IFRS and the IFRIC discussed earlier. Due to the commitment of the CPC and the CVM to maintain
an updated set of standards issued based on the updates made by the IASB, it is expected that
these pronouncements and changes will be edited by the CPC and approved by the CVM before the
date of its mandatory application.
3. CASH AND CASH EQUIVALENTS
Company
09.30.2015 12.31.2014
Repurchase transactions (*)
Foreign exchange funds (US$)
Foreign deposits
Checking accounts deposits
-
114
----------114
======
-
136
----------136
======
Consolidated
09.30.2015 12.31.2014
40,110
1,834
79,952
67,158
954
46,914
6,407
-----------128,303
=======
14,544
-----------129,570
=======
(*) Income from financial investments ranges from 90% to 100% of the rates earned on Interbank
Deposit Certificate – CDI.
9
4. MARKETABLE SECURITIES
Consolidated
12.31.2014
09.30.2015
Restricted cash (*)
2,035
--------2,035
=====
1,360
--------1,360
=====
(*) On September 30, 2015, the subsidiary SGUS had restricted cash in financial institutions in the
amount of US$512 thousand (US$512 thousand as of December 31, 2014) related to a
compensating balance arrangement.
5. ACCOUNTS RECEIVABLE
Consolidated
12.31.2014
09.30.2015
Domestic customers
Foreign customers
Credit card companies
Related parties – domestic market
Related parties – foreign market
Allowance for doubtful accounts
368,179
187,836
7,060
22,665
1,146
----------586,886
(25,759)
----------561,127
======
405,139
103,193
18,221
12,745
7,272
----------546,570
(24,081)
----------522,489
======
The credit sales made by MMartan and Artex stores are made directly to the consumer that can pay
in up to 10 installments by instruments of credit granted by credit card companies. Present value
adjustments on these amounts are made considering the market rates, since cash sales prices do
not differ from installment sales prices. On September 30, 2015, the installment receivables under
this type of sale were R$9,692 (R$20,856 as of December 31, 2014), with an average collection
period of 90 days, totaling to an adjustment in the amount of R$2,632 (R$2,635 as of December 31,
2014), using 100% of the CDI as the interest rate.
Accounts receivable from customers consist of receivables with an average collection period of
approximately 81 days (78 days as of December 31, 2014). The past due amounts are not
significant and the allowance for doubtful accounts is considered by Management sufficient to cover
expected losses.
The Company's Management believes that the risk related to accounts receivable is minimized
because the composition of the company's customer portfolio is diluted. The Company has over
10,000 active clients as of September 30, 2015 and only one customer accounts for approximately
10% of sales.
The aging list of the consolidated accounts receivable was presented in the annual financial
statements for the year ended December 31, 2014. There was no significant change in the
composition of the aging list during the nine-month period ended September 30, 2015.
10
The changes in the consolidated allowance for doubtful accounts are as follows:
12.31.2014
09.30.2015
(24,081)
(523)
(1,155)
(18,375)
(6,133)
543
(116)
-------------
-------------
(25,759)
=======
(24,081)
=======
Balance at the beginning of the period
Additions
Write-offs
-
Balance at the end of the period
6. INVENTORIES
Consolidated
12.31.2014
09.30.2015
Raw materials and supplies
Work in process
Finished products
Repair parts
204,906
155,814
310,885
53,163
-----------724,768
=======
175,357
125,709
235,499
53,001
-----------589,566
=======
Inventories are presented net of the provision for losses, which, based on Management’s
assessment, is sufficient to cover losses related to obsolete and/or discontinued inventories.
The changes in the provision are as follows:
Raw materials and supplies
Finished products
Repair parts
12.31.2014
Additions
Reductions
Exchange
rate
variations
(1,313)
(1,101)
(1,099)
------------(3,513)
=======
(1,443)
-----------(1,443)
=======
229
------------229
=======
(752)
(10)
------------(762)
======
09.30.2015
(1,313)
(3,067)
(1,109)
------------(5,489)
======
11
7. INVESTMENTS IN SUBSIDIARIES
a) Direct investments:
Subsidiaries
SGUS (1)
CSA
AMMO (2)
Equity
(deficit)
Ownership
interest %
(75,097)
1,081,628
107,141
100.00
100.00
70.67
Net income
(loss) for the
period
17,611
31,899
(34,651)
Total investment
09.30.2015 12.31.2014
(Company)
09.30.2015 09.30.2014
1,081,628
75,717
------------1,157,345
=======
17,611
31,899
(24,488)
------------25,022
=======
1,019,258
100,204
------------1,119,462
=======
(3,853)
9,008
(30,919)
------------(25,764)
=======
(1) As of September 30, 2015, the investment in subsidiary SGUS is a deficit of R$75,097
(R$60,879 as of December 31, 2014) and it is presented in noncurrent liabilities under “Subsidiaries
obligations”.
(2) On August 31, 2014, subsidiary CSA made a capital investment in the amount of R$47,153 using
a portion of its outstanding credits with subsidiary AMMO on that date, in exchange to 29.33% of its
capital.
AMMO is a subsidiary of the Company, which owns, as of September 30, 2015 and December 31,
2014, directly and indirectly, 100% of its capital.
b) Indirect investments:
SGUS’ investments
Equity
(deficit)
Warbird Corporation (Delaware, US)
Springs Home Textiles Reynosa, S.A. de C.V.
(Mexico) (1)
Casa Springs S.A. de C.V. (Mexico) (1)
Charles D. Owen Mfg. Co. (Delaware, US)
Springmaid International, Inc. (India)
Springs International Services Inc.
(South Carolina, US)
Sabre US, Inc. (Delaware, US)
Espacio LLC (Delaware, US)
Springs Canada Holdings, LLC (Delaware, US)
Springs Canada, Inc. (Ontario, Canada) (2)
Springs Brands, LLC (Delaware, US) (2)
Springs Cayman Holding Ltd. (Cayman Islands) (2)
Springs Shanghai Trading Co., Ltd. (China) (3)
Ownership
interest %
Total investment
09.30.2015
12.31.2014
09.30.2015
09.30.2014
11
100.0
11
44
(55)
(29)
2,221
1,843
(1,025)
211
100.0
100.0
100.0
100.0
2,221
1,843
(1,025)
211
1,435
1,395
(693)
142
75
(20)
12
-
133
(124)
(1,813)
-
(1,128)
36,164
(910)
39,729
46,715
(1,295)
4,429
(1,432)
100.0
100.0
100.0
87.5
87.5
87.5
87.5
87.5
(1,128)
36,164
(910)
34,763
40,876
(1,133)
3,875
(1,253)
(754)
25,281
(608)
23,242
30,483
(2,474)
2,599
(59)
(1,619)
95
2,566
(12)
(1,085)
(854)
(4,269)
2,601
(822)
(1) Warbird Corporation’s (Delaware, US) wholly-owned subsidiaries.
(2) Springs Canada Holdings, LLC’s (Delaware, US) wholly-owned subsidiaries.
(3) Springs Cayman Holding Ltd.’s (Cayman Islands) wholly-owned subsidiary.
12
CSA’s investments
Net income
Equity
Ownership
(loss) for the
interest %
period
Total investment
09.30.2015
12.31.2014
09.30.2015
09.30.2014
Subsidiary Coteminas Argentina S.A.
123,813
100.00
15,997
123,813
======
77,344
======
15,997
----------
(1,108)
----------
107,141
29.33
(34,651)
31,424
======
41,588
======
(10,163)
---------5,834
(1,228)
---------(2,336)
======
======
Affiliated AMMO Varejo Ltda.
8. PROPERTY, PLANT AND EQUIPMENT AND PROPERTY, PLANT AND EQUIPMENT HELD
FOR SALE
a. Property, plant and equipment
Consolidated
09.30.2015
Rate
(*)%
Land and improvements
Buildings
Cost
Accumulated
depreciation
12.31.2014
Net
book value
Net
book value
10.5
63,167
(22,573)
40,594
46,833
2.3
431,737
(179,650)
252,087
257,453
Installations
5.2
232,298
(144,538)
87,760
94,489
Machinery and equipment
6.1
1,145,297
(827,674)
317,623
333,111
Hydroelectric Plant - Porto Estrela (**)
3.8
37,537
(13,363)
24,174
25,247
9.8
49,508
(32,553)
16,955
18,142
Vehicles
19.3
17,725
(15,341)
2,384
2,516
16.5
63,492
(59,553)
3,939
4,292
-
56,913
56,913
55,630
Construction in progress
Others
10.0
-
171,330
---------------
(162,443)
---------------
8,887
---------------
9,547
---------------
2,269,004
=========
(1,457,688)
=========
811,316
=========
847,260
=========
(*) Weighted average annual depreciation rate.
(**) See note 20.
Considering its operating profitability and cash generation, the Company and its subsidiaries have
not found evidence of deterioration or failure to recover the balances held as property, plant and
equipment.
13
The changes in consolidated property, plant and equipment are as follows:
Cost:
12.31.2014
69,228
Additions
Disposals
Transfers
from/to held
for sale
Transfers
Exchange
rate
variations
09.30.2015
2,775
(11,162)
-
-
2,326
63,167
431,737
Buildings
420,969
5
(11,442)
-
8,555
13,650
Installations
233,539
2,575
(8,403)
-
1,855
2,732
232,298
1,094,065
7,374
(7,291)
2,188
6,345
42,616
1,145,297
-
-
37,534
3
45,742
1,116
(1,713)
(1)
344
-
37,537
4,020
49,508
Vehicles
15,456
466
(464)
69
55
2,143
17,725
49,286
980
(765)
(1,222)
68
15,145
63,492
Construction in progress
55,630
20,267
(2,402)
(17,236)
654
56,913
119,022
---------------
5
---------------
(6)
---------------
(67)
---------------
14
---------------
52,362
---------------
171,330
---------------
2,140,471
=========
35,566
========
(43,648)
=========
967
=========
========
135,648
=========
2,269,004
=========
Transfers
Exchange
rate
variations
09.30.2015
Others
-
Accumulated depreciation:
12.31.2014
Buildings
Additions
Disposals
Transfers
from/to held
for sale
(22,395)
(5,840)
5,757
-
-
(95)
(22,573)
(163,516)
(7,569)
3,221
-
-
(11,786)
(179,650)
Installations
(139,050)
(7,160)
2,935
-
(760,954)
(31,534)
3,571
(2,157)
(12,287)
(1,076)
-
-
(27,600)
(2,181)
804
Vehicles
(12,940)
(757)
(44,994)
(1,544)
(109,475)
--------------(1,293,211)
=========
Others
(365)
-
(898)
(144,538)
(36,600)
(827,674)
-
-
(13,363)
1
-
(3,577)
(32,553)
464
(68)
-
(2,040)
(15,341)
732
1,224
-
(14,971)
(59,553)
(1,108)
-------------
6
-------------
67
---------------
365
---------------
(52,298)
---------------
(162,443)
---------------
(58,769)
========
17,490
=========
(933)
=========
=========
(122,265)
=========
(1,457,688)
=========
b. Property, plant and equipment held for sale
The Company’s subsidiaries identified assets that were removed from operations and considered
held for sale. These assets include machinery and equipment removed as a result of the
modernization of the Brazilian subsidiary’s manufacturing facilities and machinery and equipment
from the American subsidiary’s manufacturing facilities that were shutdown. Additionally, the
equipment available for sale from the readjustment of productive capacities was also included in this
category. These assets were measured at the lower of the net book value or market value, resulting
in the recognition of probable impairment.
As a result of this analysis, the recoverable value of R$58,592 (R$40,527 as of December 31, 2014)
was presented in noncurrent assets under “Property, plant and equipment held for sale”, and,
consequently, removed from the table above based on its net book value.
14
The changes in the property, plant and equipment held for sale are as follows:
Transfers
12.31.2014
Cost
Depreciation
Provision for losses
Additions
361,459
(283,066)
(37,866)
---------40,527
======
Disposals
260
(743)
(53)
---------(536)
======
(15,575)
12,487
2,617
---------(471)
======
from/to property
Exchange rate
variations
(967)
933
---------(34)
09.30.2015
164,672
(130,266)
(15,300)
---------19,106
======
=======
509,849
(400,655)
(50,602)
---------58,592
======
9. INTANGIBLE ASSETS
Consolidated
12.31.2014
09.30.2015
Goodwill from the acquisition of North
American companies
Goodwill from the acquisition of AMMO
(parent company)
Trademarks
Store locations (real estate intangible)
Total
45,013
30,616
27,303
16,307
41,471
----------130,094
======
27,303
16,307
45,348
----------119,574
======
The Company evaluates the recoverability of goodwill on investments annually and uses accepted
market practices, such as discounted cash flow for business units that have goodwill. Recoverability
of goodwill is evaluated based on analysis and identification of facts and circumstances that could
require the tests to be performed at an earlier date. If some fact or circumstance indicates that the
recoverability of goodwill is affected, then the test is anticipated.
The projection period for the December 2014 cash flows was three years. The assumptions used to
determine the fair value through the discounted cash flow method include: cost of capital, growth
rate and adjustments used for perpetual cash flows, methodology for determining working capital,
investment plans, and long-term economic-financial forecasts. Additionally, the perpetuity has been
calculated considering the stabilization of the operating margins, working capital and investments.
The annual discount rate used was 13.6% and the perpetuity growth rate considered was 3% per
year, for both SGUS goodwill, the acquisition of North American companies and the Company’s
goodwill in the acquisition of SRPSA. The discount rates used were determined taking into
consideration market information available on the test date. Changes in consolidated intangible
assets for the period were as follows:
12.31.2014
Goodwill from the acquisition of North
American companies
Goodwill from the acquisition of AMMO
Trademarks
Store locations (real estate intangible)
Total
30,616
27,303
16,307
45,348
----------119,574
======
Disposals
(3,877)
--------(3,877)
=====
Exchange
rate
variations
09.30.2015
14,397
--------14,397
=====
45,013
27,303
16,307
41,471
----------130,094
======
15
The intangible assets presented above have indefinite useful lives, and therefore are not amortized,
but their recoverable values are tested for impairment annually. Trademarks are recorded at their
acquisition cost. The amounts related to the store locations (real estate intangible) are recorded at
acquisition cost.
10. LEASES
Subsidiary SGUS leases properties and equipment under operating leases. Total leasing expense in
the nine-month period ended September 30, 2015 was R$29,190 (R$23,826 in the nine-month
period ended September 30, 2014). Subsidiary SGUS contractually agreed with third-parties to
sublease certain vacant facilities that no longer provide economic benefit. Total sublease income in
nine-month period ended September 30, 2015 was R$9,156 (R$5,006 in the nine-month period
ended September 30, 2014).
Lease payments scheduled for the future years are estimated as follows:
Year
2015 (*)
2016
2017
2018
2019
2015
10,206
38,581
35,871
35,617
31,291
(*) 3 months
Beginning in 2019, lease payments continue to decrease until the contracts terminate on several
dates through 2030, totaling R$303,990.
For the years between 2015 and 2019, subsidiary SGUS is scheduled to receive sublease lease
payments of R$63,527.
Subsidiary SGUS has short- and long-term accruals totaling R$27,594 (R$17,108 as of December
31, 2014), which consists of the present value of estimated future lease obligations that are
expected to be incurred after the closing of the leased facilities, net of existing sublease income and
estimated sublease income of closed facilities, which were not yet subleased. This potential
sublease income would result in a reduction of the obligations stated in the table above by
R$228,102.
11. SUPPLIERS
Consolidated
12.31.2014
09.30.2015
Domestic market
Foreign market
87,590
148,756
---------236,346
======
82,848
84,247
---------167,095
======
Accounts payable to suppliers consist of amounts with an average maturity term of approximately 40
days (27 days as of December 31, 2014). Domestic suppliers include credits to purchase raw
material (cotton) amounting to R$59,903 (R$54,011 as of December 31, 2014).
16
12. LOANS AND FINANCING
Consolidated
Annual interest
rate - %
Maturity
09.30.2015
12.31.2014
R$
R$
R$
R$
R$
R$
R$
R$
R$
R$
R$
R$
4.5 to 9.0
4.5 to 9.0
3.0 to 9.5
130.0 of CDI
118.5 and120.0 of CDI
116.6 of CDI
111.5 of CDI
113.6 of CDI
117.8 and 121.0 of CDI
120.0 and 123.5 of CDI
TJLP+3.3
109.0 and 110.7 of CDI
-
2016
2016
2023
2015
2015
2015
2016
2016
2016
2017
2015
2019
2023
6,912
6,912
4,993
14,439
37,141
25,044
48,279
101,246
57,653
245,146
67
----------547,832
13,136
13,136
5,210
13,023
30,401
27,320
279,686
104,684
37,648
17,407
83
----------541,734
US$ and CAD$
$ARG
Libor+2.25
15.3
2016
2016
74,876
2,280
----------77,156
----------624,988
(439,587)
----------185,401
=======
50,104
3,368
----------53,472
----------595,206
(403,748)
----------191,458
=======
Currency
Local currency:
Banco do Brasil S.A. (Revitaliza)
BNDES (Revitaliza)
BNDES (Finame)
Banco Bradesco S.A. (Overdraft account)
Banco do Brasil S.A. (Overdraft account)
Banco do Brasil S.A. (Giroflex)
Banco do Brasil S.A. (Credit Note)
Banco do Brasil S.A. (NCI)
Banco Itaú BBA S.A. (a)
Banco Santander S.A.
Banco Votorantim S.A.
Banco do Brasil S.A. (NCE)
Other
Foreign currency:
Deutsche Bank (Securitization)
Banco Patagonia
Total
Current liabilities
Noncurrent liabilities
(a) Original loan contract in US Dollars plus 2.466% per annum with a swap for approximately
117.8% and 121.0% of CDI with the same counterparty.
Loans are collateralized by: (i) registered security interest in real estate, machinery and equipment
located in Montes Claros, as well as a guarantee from CTNM for the “Revitaliza” loans; and (ii) by
sureties and bank guarantees for the remaining financing.
Maturities are as follows:
2016
2015
Local currency:
Banco do Brasil S.A. (Revitaliza)
BNDES (Revitaliza)
BNDES (Finame)
Banco Bradesco S.A. (Overdraft account)
Banco do Brasil S.A. (Overdraft account)
Banco do Brasil S.A. (Credit Note)
Banco do Brasil S.A. (NCI)
Banco Itaú BBA S.A.
Banco Santander S.A.
Banco do Brasil S.A. (NCE)
Other
Foreign currency:
Deutsche Bank (Securitization)
Banco Patagonia
Short term
Long Term
2017
2018 to 2023
Total
2,090
2,090
281
14,439
37,141
1,580
13,016
826
36
----------71,499
4,822
4,822
856
25,044
48,279
99,666
29,657
80,032
3
----------293,181
303
7,492
6
----------7,801
1,211
7,488
54,651
7
----------63,357
2,342
109,637
15
----------111,994
6,912
6,912
4,993
14,439
37,141
25,044
48,279
101,246
57,653
245,146
67
----------547,832
31
----------31
----------71,530
=======
74,876
----------74,876
----------368,057
=======
2,249
----------2,249
----------10,050
=======
--------------------63,357
=======
--------------------111,994
=======
74,876
2,280
----------77,156
----------624,988
=======
17
13. DEBENTURE
Through a privately-negotiated debenture agreement, on May 30, 2014, subsidiary CSA issued a
non-convertible debenture with the following characteristics, which, on July 7, 2014, was fully
subscribed by Banco Votorantim. Subsequently, Banco Votorantim sold the Debenture to Gaia
Securitizadora Agro SA ("Gaia"), which became entitled to receive the full amount of the subsidiary
CSA’s debt represented by the Debenture, plus the Debenture’s return and applicable default
charges, as well as other financial obligations under the Indenture, which are as follows:
Debenture Characteristics
-----------------------------------------------------------------------------------------------Quantity of issued Debentures
1
Debenture unit price (amount in Brazilian Reais)
R$270,000,000
Amortization
2 equal installments
Maturity of 1st installment
06/13/2016
Maturity of 2nd installment
06/13/2017
Return
110% of CDI
Interest amortization
Semiannual
Guarantees
(1)
Covenants
(2)
The Debenture was subject to public distribution with restricted placement efforts, pursuant to CVM
Instruction 476, subscribed by Banco Votorantim.
On June 11, 2014, it was signed with Gaia the Agribusiness Credit Rights Securitization Term
Sheet, for the 1st Series of the 3rd Issue of Agribusiness Receivables Certificates ("CRA"), binding
the Debenture to the issuance of the CRA.
On July 3 and 7, 2014, announcements of opening and closing of the distribution of the CRA were
published, respectively, and all 864 CRA were issued and subscribed with a unit price of R$312.5,
bringing the total amount of the offer to R$270,000, with the same return and guarantees as the
backing Debenture.
The funds were available to subsidiary CSA on date of the subscription of the CRA. The issuance
costs of the Debenture and the CRA, in the amount of approximately R$7,700, equivalent to 2.85%
of the total issuance amount, will be amortized as transaction cost, along with the Debenture
charges, prorated to the outstanding debt balance.
Balances on September 30, 2015 were as follows:
Original
amount
updated
Current
Noncurrent
Total
135,000
135,000
----------270,000
=======
Prepaid
interest
(2,550)
(1,795)
----------(4,345)
=======
Accrued
interest
12,242
----------12,242
=======
Balances on
09.30.2015
Balances on
12.31.2014
144,692
133,205
----------277,897
=======
1,685
263,748
----------265,433
=======
(1) Guarantees:
Secured guarantee: Real estate of subsidiary CSA which fair market valuation is greater than 120%
of the CRA issuance value. At any time, one or more real estate may be disposed at the discretion
of subsidiary CSA and without consent of the CRA holders, provided that: (i) such sale shall not
18
decrease the rate of 120% guarantee of the secured obligations to the CRA holders; and (ii) the
subsidiary CSA uses the net proceeds of the disposed assets for repayment of bank loans.
Fidejussory guarantee: Surety given by the Company.
(2) Covenants:
In addition to the usual covenants, the subsidiary CSA has agreed to comply with the following
financial ratios: (i) Net Debt to Adjusted EBITDA ratio, equal to or less than 4.25 (four and twentyfive hundredths) during the year 2014; (ii) Net Debt to Adjusted EBITDA ratio, equal to or less than
4.10 (four and ten hundredths) during the year 2015; (iii) Net Debt to Adjusted EBITDA ratio, equal
to or less than 4.00 (four) during the year 2016; (iv) Net Debt to Shareholders' Equity ratio, equal to
or less than 0.7 (seven tenths); and (v) Adjusted EBITDA to Interest ratio, less than 2 (two). The
ratios set forth in items (iv) and (v) are planned for the entire contract period. The terms used to
describe the ratios have their particular definition set forth in the contract and may differ from the
financial statement lines. On September 30, 2015, the subsidiary CSA complied with all the ratios
above.
14. EQUITY
a. Capital
The subscribed and paid in capital is represented by 200,000,000 common shares with voting rights.
There was no change in the number of shares subscribed and paid for the period between January
1, 2014 and September 30, 2015.
The Extraordinary General Meeting held on October 21, 2015 approved the reverse split of the
Company's shares in accordance with Article 12 of Law No. 6,404 / 76, totaling 200,000,000
registered common shares, without par value, representing the capital at a ratio of 4 shares for one,
without changing the amount of the capital, so that the capital as of that date is represented by
50,000,000 registered common shares, with no par value.
b. Dividends and realizable earnings reserve
Shareholders are entitled to dividends equivalent to 1/3 of the period net income, adjusted as per
Company’s bylaws and the Brazilian Corporate Law.
c.
Retained earnings reserve
The retained earnings reserve is determined in compliance with article 196 of law 6,404/76.
15. RELATED-PARTY TRANSACTIONS
Receivables
09.30.2015 12.31.2014
Company:
Coteminas S.A.
Companhia de Tecidos Norte de Minas - Coteminas
AMMO Varejo Ltda.
23
---------23
======
---------======
Payables
09.30.2015
12.31.2014
13,981
8
---------13,989
======
16,714
---------16,714
======
19
Receivables
09.30.2015 12.31.2014
Consolidated:
Companhia de Tecidos Norte de Minas - Coteminas
Coteminas International Ltd.
Companhia Tecidos Santanense
Encorpar – Empresa Nacional de
Comércio, Redito e Participações S.A.
Fazenda do Cantagalo Ltda.
Argentina Branch
23,284
19
7,451
11
81
11
60
---------23,455
======
73
---------7,535
======
Payables
09.30.2015
12.31.2014
8
7,969
-
---------8
======
---------7,969
======
-
Finance charges
09.30.2014
09.30.2015
Company:
Coteminas S.A.
Springs Global US, Inc.
Ammo Varejo Ltda.
Consolidated:
Companhia de Tecidos Norte de Minas Coteminas
Encorpar – Empresa Nacional de
Comércio, Redito e Participações S.A.
Companhia Tecidos Santanense
Coteminas International, Ltd.
(1,578)
30
---------(1,548)
(319)
2,035
---------1,716
3,195
1,413
8
1
(4)
---------3,200
======
2
(35)
(91)
---------1,289
======
The balances held with related parties have long-term maturities, and charges are calculated
according to the rates equivalent to those in effect in the financial market, namely, 115% to 120% of
the Certificate of Interbank Deposit – CDI variance and Libor plus 3% per year for foreign companies
(115% to 120% of the Certificate of Interbank Deposit – CDI variance and Libor plus 3% per year for
foreign companies in 2014).
The related party balances with direct subsidiary SGUS refer to a revolving loan agreement with a
limit of US$30 million, with projected six-month maturities that are renewable until January 2016.
The finance charges include the exchange rate variation plus interest calculated based on onemonth LIBOR plus 3% per year. On August 30, 2014, these loans were transferred to subsidiary
CSA.
As stated in the Company’s shareholders’ agreement, the subsidiary SGUS must pay annually
US$1,429 thousand for services provided; net of expenses, to the shareholder Heartland Industrial
Partners, L.P. and the subsidiary CSA must pay US$3,500 thousand to the controlling shareholder
CTNM. In the nine-month period ended September 30, 2015, the total amount of R$11,501
(R$8,479 in the nine-month period ended September 30, 2014) was accrued for services provided
and R$4,249 (R$8,445 in December 31, 2014) is accrued under the caption “Other payables,” in
current liabilities.
20
In the nine-month period ended September 30, 2015, CSA supplied intermediate products to a
related party, Companhia Tecidos Santanense, in the amount of R$22,459 (R$37,440 in the ninemonth period ended September 30, 2014). The transactions are conducted at market prices.
Rossini Administradora de Bens Ltda. and subsidiary AMMO entered into a real estate lease
agreement for AMMO’s manufacturing facility and its offices. In the nine-month period ended
September 30, 2015, R$2,467 was accrued under this lease (R$2,467 in the nine-month period
ended September 30, 2014). The valuation of the property and its lease were conducted by a
specialized company and represent market prices.
The amounts paid to key Management personnel are disclosed in the statements of operations,
under caption “Management fees” and include existing long-term and post-employment benefits.
16. RECEIVABLE – SALE OF PROPERTY
In May 2015, the subsidiary CSA sold real estate located in the city of Montes Claros - MG, to the
municipality, for R$48,000, to be received in 12 monthly installments of R$1,000 each, plus 24
monthly installments of R$1,500 each, adjusted for inflation using the “IGP-M” from the date the
agreement was signed and including a grace period of 12 months before the first payment. The
subsidiary CSA has a guarantee for the installments, through revenue and quotas of the Municipality
Participation Fund – “FPM”.
17. INCOME TAX AND OTHER TAXES
a. Tax incentives
All manufacturing units of the subsidiary CSA in Brazil, except for the Blumenau-SC and AcreúnaGO facilities, are located in the area of the Northeast Development Superintendence (SUDENE),
which provides federal and state tax incentives.
Federal and state tax incentives of the Company and its plants are scheduled to expire on different
dates, depending on the manufacturing facility’s location.
Federal tax incentives are valid until December 31, 2016 and state incentives are valid until
December 31, 2021.
Federal tax incentives are calculated based on income tax generated by the manufacturing and
commercial operations, recorded as a reduction of the income tax payable and income tax expense.
21
b. Income taxes reconciliation (income and social contribution taxes)
Company
09.30.2015
Income (loss) before taxes
Permanent differences:
Investment grant
Permanent differences from
foreign subsidiary
Other
Income tax basis
34% tax rate
Unrecognized tax credits
Foreign subsidiary tax credits
Others
Total income taxes
Income taxes – current
Income taxes – deferred
09.30.2014
Consolidated
09.30.2015
09.30.2014
20,848
(30,197)
20,252
(32,077)
(25,022)
-
25,764
-
(25,208)
(26,222)
--------(4,174)
--------(4,433)
(1,797)
494
--------(6,259)
(1,366)
710
--------(58,955)
1,419
--------1,419
=====
1,419
=====
1,507
(1,507)
967
--------967
=====
967
=====
2,128
(1,382)
1,655
(200)
--------2,201
=====
(874)
3,075
=====
20,045
(18,740)
1,172
--------2,477
=====
2,477
=====
As a holding Company, the Company’s operations consist of equity in subsidiaries and income from
investment activities. Foreign subsidiaries’ income is taxed as an addition to the taxable income and
they receive tax credits for taxes paid in their respective countries, which is up to 25% of its income
tax base. If there are tax losses, tax credits are not considered in Brazil, but they are offset with
future income generated by the foreign subsidiary. Therefore, as a holding Company, tax credit
recognition is allowed in specific situations.
CSA’s Management, in prior periods, based on a business plan and future projections, partially
recognized deferred tax assets arising from accumulated net operating losses. As of September 30,
2015, indirect subsidiary CSA had net operating losses of R$527,268 (R$507,750 as of December
31, 2014) and social contribution tax losses of R$532,867 (R$513,281 as of December 31, 2014),
whose tax assets were not recognized. The tax assets recognized by this subsidiary are net of its
tax benefits. CSA’s future projections consider a greater concentration on the domestic market since
these sales are more profitable, a greater profit margin due to the sales of higher value-added
products, among others. Based on these actions and the business plan assumptions, CSA’s
Management expects future taxable income that will allow the realization of the subsidiary’s deferred
tax assets.
22
c. Deferred income and social contribution taxes
Deferred income and social contribution taxes recorded in the consolidated interim financial
statements arise from subsidiaries’ temporarily nondeductible provisions, transferred tax credit, and
subsidiaries’ net operating losses. Deferred income and social contribution taxes are composed as
follows:
Balances on
12.31.2014
Assets:
Provisions deductible upon settlement:
Miscellaneous provisions
Net operating losses
Tax credits from foreign subsidiaries
Recognized in
statement of
operations
19,466
30,720
12,326
---------62,512
======
Noncurrent assets
3,313
(1,387)
1,149
---------3,075
======
Others
519
1,655
---------2,174
======
Balances on
09.30.2015
23,298
29,333
15,130
---------67,761
======
Based on business plan and future projections, Management estimates that the deferred taxes will
be realized in the following years, as follows:
Consolidated
09.30.2015
Year
2016
2017
2018
2019
2020 and thereafter
5,427
6,506
9,736
13,373
32,719
---------67,761
======
d. Recoverable taxes
Company
09.30.2015
12.31.2014
ICMS (state VAT)
Income and social contribution
taxes prepayments
Recoverable PIS and COFINS
IVA – Argentina
VAT – China and Mexico
Recoverable IPI
Reintegra
Other recoverable taxes
Current
Noncurrent
-
-
1,189
----------1,189
(1,189)
----------=======
8,076
----------8,076
(8,076)
----------=======
Consolidated
09.30.2015
12.31.2014
4,648
4,428
21,280
871
1,664
25
4,788
1,081
----------34,357
(29,777)
----------4,580
=======
26,773
7,434
6,597
1,329
22
4,070
1,297
----------51,950
(47,355)
----------4,595
=======
23
18. MISCELLANEOUS ACCRUALS
The Company and its subsidiaries are challenging in court the legality of certain taxes and labor
claims. The accrual was recognized based on the risk assessment made by Management and its
legal counsel for all lawsuits in which losses are considered probable.
The Company and its subsidiaries have tax and civil claims, whose loss was estimated as possible
in the amount of R$16,261 and R$363, respectively.
The claims for which losses are considered probable are summarized as follows:
Company
09.30.2015
12.31.2014
Tax litigation claims:
-Temporary contribution over
financial transactions (CPMF)
-INSS
-Reintegro
-Others
Labor
Civil and others
Total
Escrow deposits
Consolidated
09.30.2015
12.31.2014
4,317
----------4,317
=====
4,317
----------4,317
=====
4,317
1,998
762
63
13,506
4,003
----------24,649
=====
4,317
1,998
561
13
11,337
3,736
----------21,962
=====
4,221
=====
4,221
=====
20,464
=====
17,495
=====
CPMF – The Company is a plaintiff in a lawsuit to avoid the application of CPMF on the “symbolic”
exchange rate contracts incurred during the process of issuing stock to a foreign investor.
INSS – The subsidiary CSA is a plaintiff in a lawsuit against the Brazilian Treasury Department,
disputing the INSS tax assessment on amounts considered to be employee termination costs.
Labor – The subsidiary CSA is the defendant in lawsuits from former employees and third parties.
Civil – The subsidiary CSA is a plaintiff in a lawsuit against the Federal Government disputing the
legality of the collection of “RTE – Recomposição Tarifária Extraordinária” and “COFURH –
Compensação Financeira pela Utilização de Recursos Hídricos”.
Changes in the consolidated accrual are as follows:
Tax litigation claims:
-Temporary contribution over
financial transactions (CPMF)
-INSS
-Reintegro
-Others
Labor
Civil and others
Balances on
12.31.2014
Additions
Reductions
Balances on
09.30.2015
4,317
1,998
561
13
11,337
3,736
----------21,962
=====
201
50
2,874
425
--------3,550
=====
(705)
(158)
--------(863)
=====
4,317
1,998
762
63
13,506
4,003
----------24,649
=====
24
19. EMPLOYEE BENEFIT PLANS
Substantially, employees of the subsidiary SGUS are covered by defined-contribution plans. Some
executives of subsidiary SGUS are covered by a defined-benefit plan. Subsidiary SGUS may make
contributions to the defined-contribution plan at its discretion, and these contributions are considered
by means of a percentage of each participant’s eligible compensation. In addition, should eligible
participants contribute a percentage of their compensation to some defined-contribution plans,
subsidiary SGUS may, at its discretion, make a contribution in the proportion of the amounts
contributed by the participants.
Subsidiary SGUS sponsors a defined-benefit pension plan for some of its employees, whose
expected pension costs are accrued based on actuarial studies. Contributions of retired employees
and subsidiary SGUS are adjusted periodically. Subsidiary SGUS’ contributions to the definedbenefit plans are made pursuant to the “US Employee Retirement Income Security Act”, and
benefits are generally based on years of service and salary (compensation) levels.
The defined-benefit plan’s assets are invested in diversified equity securities and fixed-income funds
(including US government debt). Subsidiary SGUS also provides retirement benefits to eligible
executives under nonqualified supplemental executive retirement plans.
The table below includes summarized information on the pension and postretirement plans as of
September 30, 2015 and 2014.
09.30.2015
Components of net periodic benefit cost:
Service cost
Interest cost and others, net
Net periodic benefit cost
796
3,247
----------4,043
======
09.30.2014
655
3,599
----------4,254
======
Subsidiary SGUS’ investment strategy is to invest in a diversified portfolio that will maximize returns,
considering an acceptable risk level. Pension plan assets are invested in mutual funds which have a
target allocation of 45% to 54% in domestic equity securities and 55% to 46% in fixed income funds.
The expected returns on plan assets were developed in conjunction with external advisors and take
into account long-term expectations for future returns based on subsidiary SGUS’ current investment
strategy.
The balances of employee benefit plans and deferred compensation are as follows:
09.30.2015
Pension plan obligations
Pension plan obligations (multi-employer) (a)
Other employee benefit obligations
Total employee benefit plans
Current (b)
Noncurrent
12.31.2014
147,187
203
7,063
-----------154,453
102,386
179
7,270
-----------109,835
(13,062)
-----------141,391
=======
(8,733)
-----------101,102
=======
(a) Until December 30, 2010, subsidiary SGUS was one of the plan sponsors of the South Jersey Labor and
Management Pension Fund, a multiemployer defined benefit pension plan. On December 30, 2010, the Company
withdrew from the Plan and recorded a liability corresponding to the estimated cost of withdrawal.
(b) Presented on caption “Payroll and related charges”.
25
20. GOVERNMENT CONCESSIONS
The subsidiary CSA has equity interest in a consortium for an electric power generation concession
with the companies CEMIG Geração e Transmissão S.A. and Vale (formerly known as Companhia
Vale do Rio Doce), in equal percentages of 33.33%. No legally independent entity was established
for the management of this consortium. Accounting records, equivalent to its interest, are maintained
under the Company’s control.
In compensation for the concession granted, Company, together with the other consortium
members, will pay installments over the concession period to the Federal Government, as presented
below:
Beginning of concession period:
Concession period:
Total concession amount:
Monetary adjustment:
July 10, 1997
35 years
R$333,310
IGPM (general market price index)
Total annual installments of the concession:
Years 5 to 15
2002 to 2012
-------------------Historical amounts:
Minimum installment
Additional installment
Annual installment
Total installments
Monetarily adjusted installments
Years 16 to 25
2013 to 2022
--------------------
Years 26 to 35
2023 to 2032
--------------------
120
---------120
120
12,510
---------12,630
120
20,449
---------20,569
1,320
5,506
126,300
526,802
205,690
857,931
=====
======
======
For accounting purposes, CSA recognizes expenses incurred on an accrual basis, as a contra entry
to noncurrent liabilities, on a straight-line basis, based on its share in the total concession amount,
33.33%, at present value, considering a basic interest rate, monetarily adjusted based on the IGPM.
As of September 30, 2015, this amount represents R$65,124, of which, R$17,240 is classified as
“other payables” in current liabilities and R$48,006 is classified as noncurrent liabilities (R$64,431 as
of December 31, 2014, of which, R$16,556 is classified as “other payables” in current liabilities and
R$47,875 is classified as noncurrent liabilities).
As of September 30, 2015, the net book value of the property, plant and equipment related to the
current concession is R$24,174 (R$25,247 as of December 31, 2014) (see note 8), considering the
Company’s equity interest in the investments for the construction of the Porto Estrela Hydroelectric
Plant, located on the Santo Antônio River, 270 km from Belo Horizonte, with installed capacity of
112 MW. The plant began generation activities at the end of 2001.
21. OTHER INCOME AND EXPENSES, NET
Consolidated
09.30.2015 09.30.2014
Gain on the sale of assets, net of
provision for losses (*)
Non-operating lease expense
Others, net
21,746
(9,006)
(8,028)
---------4,712
======
(8,721)
---------(8,721)
======
26
(*) See Note 16 of the interim financial statements.
22. FINANCIAL INSTRUMENTS
a) General--The Company and its subsidiaries maintain derivatives and non-derivatives financial
instruments transactions, whose risks are managed through strategic financial positions and controls
to limit exposure to such risks. All transactions are fully recorded in the Company’s books and
described in the tables below.
The main risk factors to which the Company and its subsidiaries are exposed reflect strategicoperational and economic-financial matters. The strategic-operational risks (such as, demand trend,
competition, technological innovation, significant changes in the industry structure, among others)
are inherent to the Company’s operating activities and are addressed by its Management. The
economic-financial risks mainly reflect customers’ delinquency, macro-economic trends, such as,
currency exchange and interest rates, as well as the nature of the derivative instruments used by the
Company, its subsidiaries, and its counter-parties. These risks are managed through internal control
policies, specific strategies and establishment of approval authorities.
b) Fair value--The fair value of the financial instruments previously mentioned are as follows:
Company
12.31.2014
09.30.2015
Book
Fair
Book
Fair
value
value
value
value
ASSETS -CURRENT:
Accounts receivable
Receivable – sale of property
Other receivables
114
985
114
985
136
992
136
992
NONCURRENT:
Long-term assets:
Related parties
Receivable – sale of property
23
-
23
-
-
-
-
-
LIABILITIES -CURRENT:
Loans and financing (*)
Debenture (*)
Suppliers
Noneconomic lease
Other accounts payable
4
-
4
-
128,303
2,035
1,681
561,127
5,014
19,633
128,303
2,035
1,681
561,127
5,014
19,633
129,570
1,360
522,489
23,248
129,570
1,360
522,489
23,248
-
23,455
42,101
23,455
42,101
7,535
-
7,535
-
-
439,587
144,692
3,152
236,346
17,240
5,568
56,994
439,587
144,692
3,152
236,346
17,240
5,568
56,994
403,748
1,685
167,095
16,556
4,286
59,155
403,748
1,685
167,095
16,556
4,286
59,155
3
-
Consolidated
09.30.2015
12.31.2014
Book
Fair
Book
Fair
value
value
value
value
3
-
27
Company
NONCURRENT:
Loans and financing (*)
Debenture (*)
Noneconomic lease
Related parties
Other obligations
09.30.2015
Book
Fair
value
value
12.31.2014
Book
Fair
value
value
13,989
2,056
16,714
2,056
13,989
2,056
16,714
2,056
Consolidated
09.30.2015
12.31.2014
Book
Fair
Book
Fair
value
value
value
value
185,401
133,205
22,026
8
47,884
19,993
185,401
133,205
22,026
8
47,884
19,993
191,458
263,748
12,822
7,969
47,875
19,691
191,458
263,748
12,822
7,969
47,875
19,691
(*) The fair values of loans and financing and debentures are similar to their amortized cost recorded
in the interim financial statements because they are indexed to floating interest rates (TJLP, CDI and
LIBOR), which accompany market rates.
Considering that the maturities of other financial instruments are short-term, the Company estimates
that the fair value approximates its carrying book value.
The fair values of the financial instruments listed above are determined based on unobservable
inputs and are, therefore, classified as Level III information.
c) Classification of financial instruments--Except derivatives, all financial instruments listed above
are classified as “Loans and receivables”, in the case of assets, and as “Other financial liabilities”, in
the case of liabilities, initially measured at fair value and restated at amortized cost. The derivative
financial instruments are “Measured at fair value through profit or loss” and the portion related to the
cash flow hedge, for which its effectiveness can be measured, has its gains and losses recognized
directly in equity as assets and liabilities valuation adjustment and presented in the statements of
comprehensive income.
d) Risk management and derivative and non-derivative financial instruments:
d.1 - Objectives and risk management strategies--The Company believes that risk management is
important in driving its strategy of profitable growth. The Company is exposed to market risks, mainly
related to changes in exchange rates, commodity prices (cotton) and volatility of interest rates. The
goal of managing these risks is to eliminate possible unexpected variations in the results of the
group’s companies, arising from these variations.
The purpose of derivative transactions is always related to the elimination of market risks, identified
in our policies and guidelines and, also, to the management of the volatility of financial flows. The
measurement of efficiency and evaluation of results occurs during the term of the contracts. The
monitoring of the impact of these transactions is analyzed quarterly by the Cash and Debt
Management Committee, when the mark-to-market of these transactions is discussed and validated.
All derivative financial instruments are recorded at fair value in the Company’s interim financial
statements.
d.2 – Derivatives use policy--According to internal policies, the Company’s financial results should
be related to cash provided by its business and not by gains in the financial market. Therefore, it
considers the use of derivatives as a tool to protect eventual exposures related to risks arising from
such exposures, and not for speculative purposes. The derivative transactions goal is to reduce
Company’s market risks exposures.
d.3 – Exchange rate risk--This risk arises from the possibility that the Company and its subsidiaries
may incur losses due to exchange rate fluctuations that would reduce the nominal billed amounts or
increase funds raised in the market.
28
d.3.1) Exchange rate risk on foreign investments:
The Company has foreign investments that increase its foreign currency exchange exposure, as
follows:
Total of foreign investments
09.30.2015
12.31.2014
Investments
Subsidiaries’ obligations
123,813
(75,097)
----------48,716
======
77,344
(60,879)
----------16,465
======
In equivalent thousands of US Dollars
12,262
======
6,199
======
d.3.2) Exchange rate risks on the Company and on subsidiary CSA’s non-derivative financial
instruments:
The non-derivative financial instruments exposure of the Company and its Brazilian subsidiaries is
as follows:
Accounts receivable
Suppliers, net
Related parties (SGUS)
Total exposure in Brazilian Reais
Total exposure in equivalent thousands of US Dollars
09.30.2015
12.31.2014
1.834
47,271
(1,052)
110,530
----------158,583
======
39,916
======
954
40,457
(2,216)
80,654
----------119,849
======
45,120
======
The sensitivity analysis of non-derivative financial instruments, considering the US Dollar
denominated cash flows, as of September 30, 2015, is shown below:
Scenarios
Maturity
Risk
2015
2018
US Dollar depreciation
Exposure value
US$ thousands
12,095
27,821
---------39,916
======
Probable
878
40,091
---------40,969
======
II
(11,355)
2,436
---------(8,919)
======
III
(23,588)
(35,219)
----------(58,807)
======
Amounts in parenthesis (negative numbers) stated in the scenarios above refer to exchange rate
variance losses. The positive amounts relate to exchange rate variations gains.
The “Probable” scenario represents the result of the probable exchange rate variation, considering
the cash flow of the assets and liabilities presented above, applying US Dollar forward exchange
rates and comparing to the US Dollar exchange rate at the end of the current period. Scenarios II
and III reflect 25% and 50% deterioration of US Dollar forward exchange rates, respectively.
The US Dollar forward exchange rates were obtained from BM&FBOVESPA – “Bolsa de Valores,
Mercadorias e Futuros” (Brazilian Commodities and Futures Exchange).
29
d.3.3) Exchange rate risk on derivative instruments transactions of the Company and its
subsidiaries:
Consolidated information for derivative instruments with exchange rate risk is shown below:
Description
Notional Value –
US$ thousands
09.30.2015
12.30.2014
Fair Value – Asset (Liability)
09.30.2015
12.31.2014
Forward Contract (NDF) (1) -Position: Buy
Currency: US$
Dollar settlement: R$3.0448
Counterpart: Itaú BBA
Other information:
1 contract of US$1,300
thousands, maturing on
10.30.2015
1,300
-
585
-
1,300
-
561
-
Currency: US$
Other information:
1 contract of US$1,300
11.30.2015
Currency: US$
Other information:
1 contract of US $1,300
12.30.2015
Total current assets
1,300
----------3,900
=======
----------=======
15,000
-
15,000
----------30,000
=======
----------=======
535
----------1,681
=======
----------=======
Currency: US$/Pesos Argentinos
Dollar settlement: $10.03
Counterpart: Banco da Patagonia
Other information:
1 contract of US $15.000
12.30.2015
(979)
-
Currency: US$/Pesos Argentinos
Dollar settlement: $11.72
Counterpart: Banco da Patagonia
Other information:
1 contract of US $15.000
thousands, expiring on
06.30.2016
Total current liabilities
(2,173)
----------(3,152)
=======
----------=======
(1) Forward contracts (NDF - "Non Deliverable Forward") raw materials-- are presented and
measured at fair value through the statement of operations, and aim to protect the foreign exchange
risk on purchases of raw materials at each contract’s settlement date. Although the Company uses
30
these derivatives for hedging purposes, it did not adopt the hedge accounting practice for these
transactions.
The balance corresponds to the financial instruments’ fair values which were calculated based on
data obtained from BM&FBOVESPA - “Bolsa de Valores, Mercadorias e Futuros” for operations in
Brazil and the Central Bank of Argentina for operations in Argentina, such as the future Dollar
exchange rate at the settlement dates, interest rates and algorithms, and compared to data obtained
directly from the counterparty financial institutions, which evaluate those instruments.
The derivatives are traded in the over-the-counter market, registered at the competent agencies,
and are not subject to margin deposits. In the nine months ended September 30, 2014, a loss of
R$3,152 was recorded from derivatives related to foreign exchange risk included in “Exchange rate
variations, net”. Except for the swap contract mentioned in note 12.a, and the forward contracts
shown above, there were no other exchange rate derivatives in 2015 and 2014.
The sensitivity analysis of the above derivative financial instruments, considering the flows of
receipts and payments in US Dollars already contracted on September 30, 2015 is as follows:
Scenarios
Maturity
2015
2015
2016
Risk
Exposure value US$ thousands
3,900
15,000
15,000
---------33,900
======
Probable
II
III
1,681
(979)
(2,173)
---------(1,471)
======
(41)
(15,769)
(17,399)
---------(33,209)
======
(3,909)
(30,558)
(32,626)
---------(67,093)
======
Amounts in parenthesis (negative numbers) stated in the scenarios above refer to exchange rate
variance losses. The positive amounts relate to exchange rate variations gains.
The “Probable” scenario represents the result of the probable exchange rate variation, considering
the cash flow of the assets and liabilities presented above, applying US Dollar forward exchange
rates and comparing to the US Dollar exchange rate at the end of the current period. Scenarios II
and III reflect 25% and 50% deterioration of US Dollar forward exchange rates, respectively. The
US Dollar forward exchange rates were obtained from BM&FBOVESPA – “Bolsa de Valores,
Mercadorias e Futuros” (Brazilian Commodities and Futures Exchange).
d.4 – Commodities price risk (cotton)--This risk arises from the possibility of the Company and its
subsidiaries may incur losses due to fluctuations in the price of cotton, its main raw material. A
significant increase in price of cotton may cause an increase in the cost of its products in an amount
that the Company may be unable to pass such increases to its customers, reducing its margins. In
2015 and 2014, the Company had no results with this type of derivatives.
d.5 - Interest rates risk--Cash and cash equivalents and marketable securities yield, approximately,
the equivalent to CDI (Certificate of Interbank Deposit) rates. Interest-bearing liabilities (except as
described in d.5.1 and d.5.2 below), which reflect rates equivalent to LIBOR, TR and IRP, are
disclosed in notes 12 and 15. Considering the cash flows of these liabilities and the contracted
interest rates, Management determined that the exposure to market changes on the contracted
interest rates is not significant. Therefore, the sensitivity analysis is deemed unnecessary.
d.5.1) Variable interest rate risks on derivative financial instruments:
Interest rates swap contracts--Are presented and measured at fair value and their effectiveness is
measured based on the cash flow of the loans denominated in foreign currency. Gains or losses
were recorded under the “Financial expenses – interests” caption in the statements of operations.
31
Except for the swap contract mentioned in note 12.a, there were no interest rate derivatives in 2015
and 2014.
d.5.2) Variable interest rate risk on non-derivatives financial instruments:
The amounts related to the Company’s non-derivatives financial instruments subject to variable
interest rate exposure are as follows:
09.30.2015
Description
Loan Agreement -Interest: 108.5% of CDI
Counterpart: Banco do Brasil S.A.
Maturity: May/2015
Counterpart: Banco do Brasil S.A.-NCI
Maturity: April/2016
Principal
amount
R$
thousands
-
Accrued
interest
-
12.31.2014
Prepaid
interest
Payable
Payable
-
-
236,157
40,000
8,279
-
48,279
--------48,279
---------
43,529
--------279,686
---------
Loan and Swap Agreement-Interest: 121.0% of CDI
Counterpart: Banco Itaú BBA S.A.
Maturity: August/2016
66,667
1,066
-
67,733
104,684
Loan and Swap Agreement -Interest: 117.8% of CDI
Counterpart: Banco Itaú BBA S.A..
Maturity: February/2016
33,000
513
-
33,513
--------101,246
---------
--------104,684
---------
Counterpart: Banco Santander S.A.
Maturity: May/2017
30,000
1,712
(194)
31,518
30,055
5,000
370
(45)
5,325
7,593
Maturity: May/2016
20,000
1,154
(344)
20,810
--------57,653
---------
--------37,648
---------
Counterpart: Banco do Brasil S.A NCE
220,000
896
(993)
219,903
-
Counterpart: Banco do Brasil S.A NCE
Maturity: June/2016
25,000
259
(16)
25,243
---------245,146
----------
-----------------
-
-
-
27,320
(Refer to Note 12)
(Refer to Note 12)
(Refer to Note 12)
(Refer to Note 12)
Counterpart: Banco do Brasil S.A.
-
32
12.31.2014
09.30.2015
Principal
amount
R$
thousands
Description
Counterpart: Banco do Brasil S.A - NC
Maturity: March/2016
Debenture -Interest: 110.0% of CDI
Counterpart: Gaia Agro Sec. S.A.
Maturity: June/2017
Accrued
interest
25,000
44
270,000
-----------734,667
=======
12,242
----------26,535
=======
Prepaid
interest
Payable
-
Payable
25,044
(4,345)
-----------(5,937)
=======
-
277,897
-----------755,265
=======
265,433
-----------714,771
=======
The sensitivity analysis of the non-derivative financial instruments above, considering the scheduled
payments of principal and interest as of September 30, 2015, is as follows:
Maturity
2015
2016
2017
2018
2019
Risk
CDI increase
CDI increase
CDI increase
CDI increase
CDI increase
Principal
average
balance
762,504
618,946
276,853
74,281
55,669
Scenarios
Probable
II
III
28,420
72,455
29,270
10,711
2,923
======
36,830
102,313
42,197
15,160
4,025
======
44,236
123,925
51,001
18,289
4,855
======
Amounts shown in the scenarios above represent projected interest expense, in their respective
years and scenarios, considering the average loan balances on each year.
The “Probable” scenario represents the result of the probable CDI variations, considering the
principal and interest maturity dates. Scenarios II and III reflect 25% and 50% increase in the CDI
forward rates, respectively.
The CDI forward rates were obtained from BM&FBOVESPA – “Bolsa de Valores, Mercadorias e
Futuros”.
d.6 - Credit risk--The Company is subject to credit risk on its cash and cash equivalents,
marketable securities, and derivative instruments. This risk is mitigated by the policy of entering into
transactions only with major financial institutions.
The credit risk on accounts receivable is reduced due to the selectivity of customers and credit
policy. The Company has a credit management system based on the combination of information
originated by several departments of the Company, primarily sales, finance, accounting, legal and
external sources that enable the credit and collection departments to establish credit limits for its
customers that are approved by a credit committee.
d.7 – Liquidity risk management--The Company presented its consolidated financial assets and
liabilities, according to their cash flows, based on their approximate maturity date, and using nominal
contractual interest rates in its annual financial statements for the year ended December 31, 2014.
As of September 30, 2015, there was no significant change when compared to the published annual
33
d.8 - Capital management risk--The Company manages its capital structure to ensure the
continuity of its operational activities and, at the same time, to maximize the returns to its
shareholders. The Company’s strategy remained unchanged in the period covered by these interim
The Company’s net debt is as follows:
Consolidated
09.30.2015
12.31.2014
Loans and financing
Debenture
Financial instruments, net
Total net debt
Total equity
Total net debt and equity
624,988
277,897
(128,303)
(2,035)
1,471
------------774,018
------------1,110,013
------------1,884,031
========
595,206
265,433
(129,570)
(1,360)
------------729,709
------------1,085,771
------------1,815,480
========
23. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise for which separate financial
information is available and evaluated regularly by the decision maker, with the purpose of
determining the allocation of resources to an individual segment and evaluate its performance.
Decisions on strategic planning, finance, purchasing, investment and application of resources, as
well as evaluation of investment and key executives performance of the Company are made on a
consolidated basis, the Company and its subsidiaries have concluded that they have two operating
segments: “Wholesale" and "Retail". The Wholesale segment is subdivided into two sub-segments:
South America, which includes operations in Brazil and Argentina; and North America, which
includes operations in the United States of America and Canada.
The Company owns several factories that supply each other so that, together, they form an
integrated industry in spinning, weaving, finishing and manufacturing of home textile products. The
Company does not have separate operating segments in its sales categories and the reports used
for strategic and operational decision making are always consolidated. There are no specific
operational units for each category of goods sold. Therefore, these operations are denominated
“Wholesale” because its products are not sold to the final consumer.
The subsidiary AMMO has a set of separate information and investment decisions, pricing, store
expansion and others that are individually made, and are denominated “Retail” as its products are
sold directly to the final consumer.
34
The financial information, segregated by the segments previously explained, is presented below (in
millions of Reais):
Wholesale
Net revenues
Cost of goods sold
Gross profit
Selling, general and
administrative expenses
Other
Operating results
Financial results
Gross profit
Selling, general and
administrative expenses
Other
Operating results
Financial results
Others
unallocated
Total
853.6
(601.2)
---------252.4
190.1
(100.3)
---------89.8
1.043.7
(701.5)
---------342.2
660.4
(562.9)
---------97.5
(46.2)
46.2
----------
1.657.9
(1.218.2)
---------439.7
(155.1)
19.3
---------116.6
---------116.6
======
(112.0)
(4.9)
---------(27.1)
---------(27.1)
======
(267.1)
14.4
---------89.5
---------89.5
======
(56.4)
(9.7)
---------31.4
---------31.4
======
(2.6)
---------(2.6)
(98.0)
---------(100.6)
======
(326.1)
4.7
---------118.3
(98.0)
---------20.3
======
47.6
======
8.7
======
56.3
======
3.2
======
======
59.5
======
09.30.2014
North
America
Total
Wholesale
Others
unallocated
Wholesale
Net revenues
Cost of goods sold
South America
Retail
09.30.2015
North
America
Total
Wholesale
South America
Retail
Total
875.4
(625.8)
---------249.6
206.0
(108.7)
---------97.3
1.081.4
(734.5)
---------346.9
499.3
(440.6)
---------58.7
(54.9)
54.9
----------
1.525.8
(1.120.2)
---------405.6
(149.4)
(0.3)
---------99.9
---------99.9
======
(118.1)
(2.3)
---------(23.1)
---------(23.1)
======
(267.5)
(2.6)
---------76.8
---------76.8
======
(48.5)
(7.4)
---------2.8
---------2.8
======
(2.8)
1.3
---------(1.5)
(110.2)
---------(111.7)
======
(318.8)
(8.7)
---------78.1
(110.2)
---------(32.1)
======
50.5
======
9.9
======
60.4
======
4.5
======
======
64.9
======
The Company, through the analysis of sales performance, classifies its products under the
categories of sales (or product lines) such as: bedding, tabletop and bath, utility bedding,
intermediate products, and retail.
35
Revenue information by category or product lines is as follows:
Consolidated
09.30.2015 09.30.2014
Net revenues (in millions of Reais):
Bedding, tabletop and bath
Utility bedding
Intermediate products
Retail
Volume (in thousands of tons):
Bedding, tabletop and bath
Utility bedding
Intermediate products
805.3
506.2
156.3
190.1
------------1.657.9
========
798.0
347.7
174.1
206.0
------------1.525.8
========
26.4
31.7
19.4
------------77.5
=======
31.0
29.4
22.0
------------82.4
========
The Company has over 10,000 active clients as of September 30, 2015 and only one customer
accounts for approximately 10% of sales.
24. EXPENSES BY NATURE
The Company presents its consolidated statements of operations by function. The consolidated
statements of operations by nature are as follows:
By nature:
Consolidated
09.30.2015
09.30.2014
Cost of raw materials, goods and services acquired from third parties
Employee benefits
INSS
Finished goods and work-in-process inventory variations
Exchange rate variances in inventories from foreign subsidiaries
Other costs and expenses
Total by nature
(1,202,404)
(328,688)
(27,656)
(59,498)
107,456
49,959
(83,543)
-------------(1,544,374)
========
(1,009,490)
(308,861)
(22,207)
(64,865)
34,125
1,319
(69,049)
-------------(1,439,028)
========
By function:
Consolidated
09.30.2015
09.30.2014
Cost of goods sold
Selling expenses
Management fees
Total by function
(1,218,226)
(220,833)
(99,956)
(5,359)
------------(1,544,374)
========
(1,120,194)
(221,909)
(90,562)
(6,363)
------------(1,439,028)
========
36
25. NET REVENUES
See below the reconciliation between gross revenues and net revenues presented in the statements
of operations:
Consolidated
09.30.2015
09.30.2014
OPERATING REVENUES:
Gross revenues
Sales deductions
NET REVENUES
1,991,828
(333,935)
------------1,657,893
1,880,418
(354,602)
------------1,525,816
========
========
26. BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share was calculated as follows:
09.30.2015
Weighted-average outstanding common shares
09.30.2014
22,267
(29,230)
200,000,000
200,000,000
0.1113
======
(0.1462)
======
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE (R$):
The Company does not have shares with dilutive potential. Therefore, the basic earnings (loss) per
share equals the diluted earnings (loss) per share.
**************
37

Springs Global´s net revenue increases 10.0% in the 3Q15 when

Transcrição

Documentos relacionados

SPRINGS GLOBAL PARTICIPAÇÕES S.A. CNPJ/MF – 07.718.269

Institutional Presentation

COMPANHIA DE TECIDOS NORTE DE MINAS

NOTICE TO THE MARKET – Changes in the

release banco espírito santo, sa release concerning the cessation of

Notice of Completion of the Public Offer of

BANCO DO ESTADO DO RIO GRANDE DO SUL S.A.

1 - StockWatch

Notice to the Market Banco do Estado do Rio Grande do Sul S/A

CONTRATO DE PRESTAÇÃO DE SERVIÇOS

Banco Comercial Portugues SA