QUEIROZ GALVÃO S.A.

Q U E I R O Z GALVÃO S.A .
report
To the Stockholders,
In accordance with the by-laws, we are submitting for your consideration the
annual report of the management, and the related financial statements for the year
ended December 31, 2008, of Queiroz Galvão S. A.
The Management is grateful to all those who contributed toward the results
achieved, especially our team of collaborators for their hard work and dedication,
to suppliers and service providers for their good quality and punctuality and to
clients for their faith in our work.
Rio de Janeiro, April 14, 2009.
BOARD OF DIRECTORS
Antonio de Queiroz Galvão
President
João Antonio de Queiroz Galvão
Vice-President
Antonio Augusto de Queiroz Galvão
Counselor
EXECUTIVE BOARD
Ricardo de Queiroz Galvão
Fernando de Queiroz Galvão
Antonio Augusto de Queiroz Galvão
Mauricio José de Queiroz Galvão
ACCOUNTANT
Flávio de Castro e Souza
CRC-RJ 60.913
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
managerial
2
CONSOLIDATED BALANCE SHEETS
At December 31, 2008 and 2007 (in thousands of US dollars)
CONSOLIDATED
2008
2007
HOLDING COMPANY
2008
2007
Current assets:
Cash
Marketable securities
Trade accounts receivable
Inventories
Taxes recoverable
Prepaid expenses
Other receivables
Total current assets
83,090
526,196
399,074
157,795
54,941
12,298
40,336
261,548
445,419
537,767
143,932
83,670
11,014
59,845
90
5,533
-
85
1,198
-
1,273,730
1,543,194
5,623
1,283
Non current assets:
Long-term assets:
Marketable securities
Deferred income tax and social contribution
Judicial deposits
Other receivables
Investments in subsidiaries (note 5)
Other investments (note 5)
Fixed assets (note 6)
Intangible assets
Deferred assets
16,100
2,332
6,480
124,176
15,377
1,076,101
17,134
15,470
25,445
6,461
15,720
27,371
2,542
1,082,302
18,375
35,303
1,239,800
-
1,375,492
-
1,273,170
1,213,520
1,239,800
1,375,492
2,546,900
2,756,714
1,245,423
1,376,775
Total non current assets
See notes to financial statements.
3
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
ASSETS
CONSOLIDATED BALANCE SHEETS
At December 31, 2008 and 2007 (in thousands of US dollars)
CONSOLIDATED
2008
Current liabilities:
Trade accounts payable
Loans
Income tax and social contribution
and payroll and social security
Concession creditors
Dividends payable
Interest on shareholders' equity
Others accounts payable
Total current liabilities
Non current liabilities:
Loans
Concession creditors
Taxes and social contributions payable
Related parties
Deferred income tax and social contribution
Others accounts payable
Discount of price
Deferred income
Total non current liabilities
Minority interest
Shareholders´ equity (note 7):
Capital stock
Capital reserve
Revaluation reserve
Earning reserve
See notes to financial statements.
HOLDING COMPANY
2007
2008
2007
180,937
258,608
255,139
305,355
-
-
87,571
780
86,401
31,470
89,665
1,999
7,951
44,060
8,943
73,122
-
1,932
7,951
-
645,767
704,170
82,065
9,883
487,501
1,076
17,170
76,568
21,977
74,943
18,825
40,795
517,173
1,456
36,293
22,929
74,915
48,458
4,522
-
22,636
-
738,856
701,225
4,522
22,636
3,440
7,064
-
-
528,455
566
6,470
623,346
697,228
746
26,049
620,233
528,455
566
6,470
623,346
697,228
746
26,049
620,233
1,158,837
1,344,256
1,158,837
1,344,256
2,546,900
2,756,714
1,245,423
1,376,775
4
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
LIABILITIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2008 and 2007 (in thousands of US dollars)
HOLDING COMPANY
2007
2,364,720
2,374,048
-
-
(1,851,279)
9,212
(1,870,070)
252,209
-
255,016
-
513,440
513,190
252,209
255,016
(201,520)
(25,347)
(13,093)
(180,743)
(16,468)
(10,730)
(82)
(4,004)
(20)
(3,322)
(26,065)
(27,911)
27,911
77,938
(36,885)
36,885
-
(27,911)
27,911
-
(266,026)
(130,004)
(4,086)
(3,342)
168,692
(113,276)
85,732
(104,728)
-
(1)
55,416
(18,996)
-
(1)
Profit before social contribution and income tax
302,831
364,191
248,123
251,673
Social contribution
Income tax
Reversal of deferred social
contribution and income tax
(19,194)
(39,433)
(27,703)
(63,103)
-
-
4,119
(2,514)
-
-
Income before minority interest
248,322
270,871
248,123
251,673
(199)
(19,198)
-
-
248,123
251,673
248,123
251,673
0,23
0,24
1,056,483,784
1,056,483,784
Service income
Equity in earnings of
subsidiaries and affiliates (Note 5)
Cost of services
Gross profit
Operating income (expenses):
Administrative
Depreciation
Tax expenses
Financial expenses- interest
on shareholders' equity
Reversion-interest on shareholders' equity
Other
Financial income
Financial expenses
Minority interest
Net income for the year
Earning per share
Number of shares of capital stock
See notes to financial statements.
2008
2007
5
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
CONSOLIDATED
2008
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2008 and 2007 (in thousands of US dollars)
CAPITAL
RESERVE
REVALUATION
RESERVE
EARNING RESERVE
Legal
reserve
Realizable
profits
RETAINED
EARNINGS
TOTAL
Balances at December 31, 2006
514,500
42
13,956
30,948
106,423
297,231
963,100
Gain on translation
Capital increase
Dividends payable
Constitution of reserve
Shares redemption
Net income for the year
Appropriation of net income:
Legal reserve
Retained earnings
adjustment in related parties
106,513
76,215
-
8
696
-
2,890
9,204
-
6,406
-
22,032
(77,281)
-
61,535
(25,405)
437
251,673
199,384
76,215
(25,405)
10,337
(77,281)
251,673
-
-
-
11,188
-
(11,188)
-
-
-
-
-
-
(25,856)
(27,911)
(25,856)
(27,911)
Balances at December 31, 2007
697,228
746
26,050
48,542
51,174
520,516
1,344,256
Gain on translation
(168,773)
Dividends payable
Realization of the revaluation reserve
Net income for the year
Appropriation of net income:
Legal reserve
Constituition of Realizable
Profits reserve
Financial expenses-interest
on shareholders' equity
-
(180)
-
(6,306)
(13,274)
-
(11,750)
-
(12,387)
-
(125,997)
(64,185)
6,195
248,123
(325,393)
(64,185)
(7,079)
248,123
-
-
12,406
-
(12,406)
-
-
-
-
-
(535,361)
(535,361)
-
-
-
535,361
(36,885)
498,476
566
6,470
49,198
574,148
-
1,158,837
Balances at December 31, 2008
See notes to financial statements.
528,455
6
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
CAPITAL
STOCK
STATEMENT OF CASH FLOW
Years ended December 31, 2008 (in thousands of US dollars)
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in Recoverable taxes
Decrease (increase) in other accounts receivable
Increase (decrease) in related parties
Increase (decrease) in suppliers
Increase (decrease) in salaries, charges and tax obligations to pay
Increase (decrease) in other trade accounts payable
Cash flows from operating activities
( - ) interests paid
Net cash used in operating activities
HOLDING COMPANY
2008
2008
248,123
248,123
111,939
(1,914)
12,777
(55,416)
(252,209)
-
315,509
(4,086)
8,520
(48,703)
8,476
(91,172)
76,568
(12,443)
100,272
12,742
(4,625)
(12,635)
74,574
-
369,769
53,229
(113,276)
-
256,493
53,229
(372,419)
(101,070)
167,760
54,947
(101,070)
(7,079)
-
(305,729)
(53,202)
122,685
-
122,685
-
73,449
26
Cash and cash equivalents, beginning of the year
706,967
85
Cash and cash equivalents, end of the year
609,286
90
Gain on translation
171,130
21
73,449
26
Cash flows used in investing activities
( - ) Additions in Fixed assets
( - ) Additions in Invest.in affiliates and subsidiaries
Interest on shareholders' equity
Realization of the revaluation reserve
Interests received
Net cash used in investing activities
Cash flows from financing activities
Financing
Net cash used in financing activities
Increase in cash and cash equivalents
Increase in cash and cash equivalents
See notes to financial statements.
7
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
Cash flows from operating activities:
Loss for the year
Adjustments for:
Depreciation
Equity in earnings of subsidiaries and affiliates
Minority interest
Net value of fixed assets written off
Interest expenses (income) - net
CONSOLIDATED
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
(A translation of the original report in Portuguese containing financial statements
prepared in accordance with accounting practices generally accepted in Brazil)
1 | OPERATIONS
A shareholders’ extraordinary general meeting held as of August 31, 1998, approved the conversion of the
following existing group companies into whole owned subsidiaries of the holding company:
Construtora Queiroz Galvão S.A.
Operations: Performs general civil engenering work, taking responsibility for the full or piecework
construction, for the administration work only, or for execution work. Also participates in the capital of other
companies with correlates activities.
Queiroz Galvão Participações – Indústria e Agropecuária S.A.
Operations: Participation in the capital of companies mainly in the industry and farming fields.
Queiroz Galvão Participações – Concessões S.A.
Operations: To increment the participation of the Queiroz Galvão group in the capital of companies mainly in
the field of public concessions, sanitation, energy and highway.
Queiroz Galvão Óleo e Gás S.A.
Operations: Performance of services of extraction and production of oil and gas, as well as purchase,
import, export, leasing and sale of equipments to the oil industry.
Vital Engenharia Ambiental S.A.
Operations: Increase the Queiroz Galvão group activities in the areas of services rendering, commerce and
transport, through participation in the capital of companies in these line of business. Changed the activities
to Develop and rendering services related to Environmental.
To stimulate the participation of Queiroz Galvão group in the services areas or concessions of public services
of urban cleaning, construction of sanitary terrains, and other similar services.
8
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
Queiroz Galvão S.A. is a closely-held holding company, incorporated at February 01, 1998 as part of an
ample restructuration process of the Queiroz Galvão group, including new strategic plans and the realignment
of operations by business areas. In this context the company has as its main activity investment in the capital
of other companies and consulting and management as well.
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
2 | PRESENTATION OF FINANCIAL STATEMENTS
2.1
| Adjustment of Law nº 11.638/07
On December 28, 2007 was promulgated the Law nº 11.638, with term from 1 January 2008, which
changes, repeals and adds new provisions to Law nº 6.404/76 (Brazilian Corporate Law). This law had,
mainly, the objective of update the Brazilian corporate law to facilitate the process of convergence of
accounting practices adopted in Brazil with those contained in international accounting standards (IFRS) and
allow new accounting standards and procedures are dispatched by the regulators in line with international
standards of accounting.
To attend the Law nº 11.638/07, the company developed the Statement of Cash Flows for the year ended
December 31, 2008.
3 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.Income and expenses
• Service income, the related costs and other income and expenses are recorded for in accordance
to the accrual basis method of accounting.
• The income tax expense is calculated at the rate of 15% over the taxable income plus a 10% surcharge,
which includes fiscal incentives. Social contribution expense was calculated at the rate of 9% applied on
adjusted profit before income tax as per the legislation in force.
• Deferred income tax and social contribution relate to temporally differences in income and
expenses accounted which are taxable, for income tax purposes, in the future (mostly in the cash
basis of accounting).
b.Marketable securities
Marketable securities are represented by investments in fixed income securities, banking certificate of
deposits, which and debentures are stated at cost, plus accrued income to balance sheet date and do not
exceed the market values.
c.Inventories
Inventories are stated at the lower of the average cost or market.
9
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
The financial statements have been prepared in accordance with accounting practices adopted in Brazil,
which include the criteria established by Law nº 6.404/76 with changes introduced by Law 11.638/07
additional rules of the Brazilian Securities and Exchange Commission – CVM, and the Brazilian Independent
Accountants Institute (IBRACON).
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
d.Permanent assets
Permanent assets are stated at cost (monetarily corrected cost up to December 31, 1995), including
• Investments in subsidiaries and affiliates are accounted for by the equity method based on the investor
financial statements. Other investments are stated at cost.
• Depreciation of fixed assets is calculated using the straight-line method over the useful lives of the assets.
• Deferred assets are represented by actual disbursements, net of accrued income. The amortization is
calculated using the straight-line method at annual rates of 10% and 20%.
e.Deferred income
Income and cost of short-term constructions are recognized as “Deferred Income” being credited and
charged to income at the conclusion of the construction.
The result of the sales of the units, concluded on under construction, is accounted for as “Deferred
Income” at the time of the formalization of any document representing the sales commitment. The
appropriation as income is made at the moment of the receipt of the installments.
f.Translation into United States dollars
The United States dollar amounts result from translation of the financial statements at the year-end rate
of exchange as follows:
2008
2007
R$ 2,337 to US$1.00
R$ 1,7713 to US$1.00
The translation should not be construed as representation that the real (R$) amounts actually represent
or have been, or could be converted into United States dollars.
4 | SUMMARY OF THE MAIN PROCEDURES USED IN THE CONSOLIDATED OF THE FINANCIAL STATEMENTS
The following procedures were adopted in the consolidation of the financial statements:
a.Elimination of assets and liability balances among consolidated companies;
b.Elimination of the income and expense balances as well as non realized profits among the consolidated
companies;
c.Reclassification of minority shareholders’ interest in the consolidated financial statements.
d.The consolidated financial statements include the companies mentioned in note 5.
10
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
the following:
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
5 | PARTICIPATION IN WHOLE OWNED SUBSIDIARIES
2008
Construtora Queiroz Galvão S.A.
Queiroz Galvão Óleo e Gás S.A.
Queiroz Galvão Part.-Ind. e Agropecuária S.A.
Vital Engenharia Ambiental S.A.
Queiroz Galvão Participações-Concessões S.A.
Quantity of
On shares
% of
Interest
Capital
Stock – US$
Shareholders’
Equity – US$
840,353
3,757,819
79,979
7,576
38,279
100
100
100
100
100
299,529
128,083
51,321
4,510
89,859
681,898
250,407
115,113
55,548
136,835
Investments –
US$
Equity in
earning - US$
681,898
250,407
115,113
55,548
136,835
151,362
49,837
12,935
15,203
22,872
1,239,800
252,209
Investments –
US$
Equity in
earning – US$
762,073
261,878
134,811
56,730
160,000
-
135,601
41,252
24,636
9,211
22,751
21,599
(34)
1,375,493
255,016
2007
INVESTORS
Construtora Queiroz Galvão S.A.
Queiroz Galvão Óleo e Gás S.A.
Queiroz Galvão Part.-Ind. e Agropecuária S.A.
BGN Participações S.A.
Vital Engenharia Ambiental S.A.
Queiroz Galvão Participações-Concessões S.A.
Other Investments
Quantity of
On shares
% of
Interest
Capital
Stock – US$
Shareholders’
Equity – US$
840,353
3,757,819
79,979
7,576
38,279
-
100
100
100
100
100
-
299,780
168,989
67,712
5,950
118,557
-
762,073
261,878
134,811
56,730
160,000
-
11
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
INVESTORS
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
6 | FIXED ASSETS
6.1 | Fixed asset
12
Field Equipments
Civil Construction
Probes and drilling oil equipment
Machines and Equipments
Vehicles
Road improvement
Permanent plantation and forests
Work utensils and other
Installations
Buildings
Airplanes
Construction in progress
Development
Exploration
Lands
Other fixed assets
Less:
Accumulated depreciation
20%
4% and 8%
14% and 20%
10% and 20%
20% and 40%
10%
6.6% and 10%
10%
10%
4%, 4.26% and 4.33%
20%
Many
CONSOLIDATED
2008
2007
254,920
316,058
15,463
146,212
153,076
26,941
56,695
21,619
14,528
9,056
3,911
9,141
304,421
59,817
52,156
47,474
247,398
218,917
24,370
185,964
131,932
36,235
65,224
12,515
14,787
6,476
5,123
481,183
48,300
50,945
1,491,489
1,529,369
415,388
447,067
1,076,101
1,082,302
3,284
13,712
138
18,147
228
17,134
18,375
6.2 | Intangible
Software
Trademarks and Technology
Telephone Lines
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
YEARS TAXES
DEPRECIATION
Notes to Consolidated Financial Statements
At December 31, 2008 and 2007 (in thousands of US dollars)
7 | SHAREHOLDERS’ EQUITY
The net income for the year deducted by the interest on shareholders’ equity is destined as follows:
• 5% is accounted for as legal reserve, up to the limit of 20% of the capital;
• 3% is paid to the shareholders as a compulsory minimum dividend. However the general shareholder general
meeting has the power to approve the distribution of a different amount or to retain the whole profit.
8 | RELATED PARTIES
The transactions were made at usual market rates, terms and values.
9 | FINANCIAL INSTRUMENTS
The financial instruments are recorded for in the balance sheet accounts as of December 31, 2008 and 2007
at compatible market value. The management of these instruments is made in an strategic way with the
objective of liquidity, profitability and security.
The investment control consists of a permanent follow-up of the contracted rates compared to the daily
market rates. The company does not operate with derivatives on any other risk assets.
10|CONTINGENCIES
The Company’s management, based on the opinion of its legal advisors believes that the appropriate referrals
and arrangements for any fiscal, tax, pension and labor liability purposes; have been taken in each situation and
are sufficient to preserve the company’s equity no indications, in December 31, 2008, of the need to recognize
any provision for contingencies in the financial statements. The accounting records and operations are subject
to examination of tax authorities in different mature dates according to the specific tax laws applicable.
13
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
The paid-in capital is represented by 1,056,483,784 ordinary nominative shares, with no par value. At
December 31, 2008 the Company’s book value per thousand of shares was equivalent to US$1,096.88
(US$1,272.39 in 2007).
Independent Auditors’ Report
1. We have audited the accompanying holding and consolidated balance sheets of Queiroz Galvão S.A. as of
December 31, 2008, and the related statements of income, changes in shareholders’ equity and cash flows
for the year then ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements.
2. We conducted our audit in accordance with auditing standards generally accepted in Brazil. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects,
the financial position of holding and consolidated Queiroz Galvão S.A. at December 31, 2008, the results of its
operations, the changes in its shareholders’ equity and cashflows for the year then ended, in accordance with
accounting practices adopted in Brazil.
4. Previously, we have audited the holding and consolidated financial statements for the year end of December
31, 2007, regarding the balance sheets, statements of income, changes in shareholders’ equity and changes in
financial position for the year then ended on which we issued a non qualified opinion dated April 16, 2008.
As mentioned in note 2.1, Brazilian accounting practices have been changed since January 1st, 2008. Holding
and controlled financial statements referring to the year end of December 31, 2007, presented with the financial
statements of 2008 were made according to accounting practices generally accepted in Brazil until December 31,
2007 and, as allowed by the CPC Technical Statement 13 – Initial Adoption of Law 11.638/07 and Provisory
Measure 449/08, are not being presented with adjustments for comparison purposes between both year ends.
Rio de Janeiro, April 16, 2009.
CRC-RJ-2026-O
Mário Vieira Lopes
Contador-CRC-RJ 60.611/O
14
Q U E I R O Z G A LV Ã O S . A . 2 0 0 8 A N N U A L R E P O RT
The Board of
Directors and Shareholders
Queiroz Galvão S.A.
Rio de Janeiro – RJ