Abril EducaÃ§Ã£o S.A. - Abril EducaÃ§Ã£o Investidores

Transcription

(A free translation of the original in Portuguese)
Abril Educação S.A.
Parent company and consolidated
financial statements
at December 31, 2014
and independent auditor's report
ABRIL EDUCAÇÃO S.A.
Financial statements
at December 31, 2014
and independent auditor's report
CONTENTS
Page
Independent auditor's report
1-2
Management Report
3 - 11
Balance sheet
12 - 13
Statements of income and comprehensive income
14
Statement of changes in equity
15
Statement of cash flow
16
Statement of value added
17
Notes to the financial statements
18 - 82
Other information considered relevant by the Company
83
Board of Directors and Fiscal Council
84
Board of Executive Officers
85
Fiscal Council's Opinion
86
Independent auditor's report
on the parent company and consolidated
financial statements
To the Board of Directors and Stockholders
We have audited the accompanying financial statements of Abril Educação S.A. ("Company" or "Parent
Company"), which comprise the balance sheet as at December 31, 2014 and the statements of income,
comprehensive income, changes in equity and cash flow for the year then ended. We have also audited
the accompanying consolidated financial statements of Abril Educação S.A. and its subsidiaries
("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2014 and the
consolidated statements of income, comprehensive income, changes in equity and cash flow for the year
then ended, and a summary of significant accounting policies and other explanatory information.
Management's responsibility
for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting practices adopted in Brazil and the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal
control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Brazilian and International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
1
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Abril Educação S.A. as at December 31, 2014, and its financial performance and
cash flow, and of Abril Educação S.A. and its subsidiaries as at December 31, 2014, and their financial
performance and cash flow for the year then ended, in accordance with the accounting practices adopted
in Brazil and the International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB).
Other matters
Supplementary information - Statement of
value added
We have also audited the parent company and consolidated statements of value added for the year ended
December 31, 2014, which are the responsibility of the Company's management. The presentation of this
statement is required by the Brazilian corporate legislation for listed companies, but it is considered
supplementary information for IFRS. These statements were subject to the same audit procedures
described above and, in our opinion, are fairly presented, in all material respects, in relation to the
financial statements taken as a whole.
São Paulo, March 23, 2015
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Estela Maris Vieira de Souza
Contadora CRC 1RS046957/O-3 "S" SP
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Abril Educação
Management Report 2014
Dear Shareholders,
We hereby submit for your appreciation the Management Report and Financial Statements of Abril
Educação S.A. for the fiscal year ended December 31, 2014, along with the Report of the Independent
Auditors on the Financial Statements. The consolidated financial statements of the Company were
prepared in accordance with the accounting practices adopted in Brazil issued by the Accounting
Pronouncements Committee (CPC) and in accordance with the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB).
The information described in this report involves distinct consolidations. Four school acquisitions were
concluded over the course of 2013: Grupo Ometz (Wise Up, Wise Up Teens and You Move), in April;
Colégio Motivo, in July; Centro Educacional Sigma (Colégio Sigma), in October; and a 22.7% interest in
MStech, in December. Lastly, in December 2014, we acquired the remaining 49% interest in Red
Balloon.
The assets arising from these transactions began to be recognized in the consolidated financial statements
of the Company as from their respective acquisition dates, which influenced the evolution in the
performance of Abril Educação between fiscal year 2013 and fiscal year 2014.
An important event in the Company’s trajectory in 2014 was the sale, in June, of a portion of the shares
held by the Abrilpar Group to Thunnus Participações, a company owned by the investment funds
managed by Tarpon. As a result of this transaction, the Abrilpar Group reduced its interest to 37.72% of
the voting capital and 20.73% of the total capital of Abril Educação, with Tarpon Company now holding
24.21% of the voting capital and 19.91% of the total capital. In the same period, the Company announced
its intention to migrate to the Novo Mercado, the listing segment of the BM&FBovespa with the highest
corporate governance and transparency requirements. In August, the transaction between the Abrilpar
Group and Tarpon Company was concluded, and the Company’s Board of Directors approved the
convening of a shareholders’ meeting to approve the migration to Novo Mercado.
The focus of this Management Report was the performance and main events of Abril Educação S.A. in
2014.
For more information on the operating and financial performance, as well as on our industry, please
consult
our
Reference
Form
available
on
the
websites
of
Abril
Educação
(www.abrileducacao.com.br/investidor), of the Securities and Exchange Commission of Brazil - CVM
(www.cvm.gov.br) and of the Brazilian stock exchange - BM&FBovespa (www.bmfbovespa.com.br).
Message from the Management
Marked by a series of advances in its organizational structure, 2014 was one of the most important years
in the history of Abril Educação. The year was used to consolidate and integrate the newly acquired assets
and to migrate to the Novo Mercado listing segment of the BM&FBovespa. Another important
development, though more recent, in 2015, was the transfer of the Company's control to Tarpon.
Tarpon, which in June 2014 had acquired a 19.91% interest in Abril Educação, became its controlling
shareholder after acquiring the remaining interest held by Abrilpar for R$12.33 per share, bringing its
total interest to 40.64%. The operation was announced on February 9, 2015 and approved by Brazil’s
antitrust agency CADE on March 12, 2015.
3
The transfer of control produced two effects: the need to offer the same proposal in terms of price per
share to the non-controlling shareholders through a Public Tender Offer; and the reformulation of the
organizational structure. Eduardo Mufarej, the CEO of Tarpon, became the CEO of Abril Educação,
while Mario Ghio Júnior became the CEO of all the Basic Education businesses (Schools, Learning
Systems, Publishers and Red Balloon) and Marcelo Bruzzi remained the CEO of all the Language
Courses for Adults businesses (Ometz Group). The new CEO will also be supported by the Financial &
Investor Relations, Strategy & Innovation and Culture & Organization departments.
Without straying from its strategic focus to maintain market leadership in quality basic education, Abril
Educação will remain alert to business opportunities in the sector that offer excellent growth potential and
will also actively seek new opportunities in complementary education for adults. The Company will also
invest in: expanding the network of schools it serves to further expand its student base in Learning
Systems; expanding its offering of products via cross-selling at Publishers; education technology; and the
in-school model under the Red Balloon brand.
In 2014, we maintained the good performance of our main business lines, especially those with more
consistent revenues over the course of the year. We have taken special care to ensure that the integration
of the new operations preserve the previous growth dynamic to ensure the exchange of best practices
among the various units. In 2014, we posted net revenue of R$1,265.0 million, up 22% on R$1,036.5
million in 2013, and EBITDA* growth of 6% to R$285.0 million, with EBITDA margin contracting 3
p.p. from 26% in 2013. This EBITDA margin compression is explained by the recognition of
nonrecurring expenses with the provisioning for restructuring in the amount of R$27.9 million accrued in
the second quarter of 2014, and by the expenses of R$18.7 million associated with the new stock-based
compensation plan approved by the Extraordinary Shareholders' Meeting held in March. The main actions
and results contributing to the Company's performance in 2014 are detailed below.
In the Publishing business, the highlight of the year was the recovery in market share in the 2015 National
Textbook Program (PNLD) to 25%, which is the same share as in 2011 (a reference year for the program)
and much higher than the 2014 PNLD (16%). In the private segment, the Publishers posted contraction in
book sales volume, which was offset by growth in premium collections (e.g., Teláris and Múltiplo
projects) that increased the average ticket and by increased cross-selling in the School and Learning
Systems segments.
In Learning Systems, 2014 was a year of strong growth. The number of students increased 14% in the
traditional brands and 54% overall, including the brands ETB and OLEM (O Líder em Mim). There was
also strong growth in the OLEM system, which was installed in the public school system of an important
city in the São Paulo Metropolitan Area, and in ETB, which as of 2014 has been present in the Institutions
of Higher Learning participating in the PRONATEC technical education program. Another important
contract closed in 2014 was to supply the SER Learning System to schools in the national network of
Industrial Social Services (SESI), with the potential for expanding sales to the organization's 26 regional
offices, pointing to the possibility of strong growth over the coming years.
It is also important to note that in early 2015, the Company began to adopt new educational technologies.
The main product is the Adaptive Platform of the Anglo System, which was developed in partnership
with MSTech and has already successfully passed the test phase. This innovation is yet another important
step towards further strengthening the products and services of Abril Educação.
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In the Schools segment, 2014 was a year marked by stabilization and the consolidation of our brands,
since the Company has maintained the 19 units it has held since 2013. The period also demonstrated the
feasibility of investments in this sector, especially those based on the model of Colégio pH in Rio de
Janeiro, which has registered strong growth over the last three years, with the launch of the pH Learning
System at owned units, the expansion of the pH System offering to schools in surrounding areas, and the
expansion of the offering of new complementary products, such as OLEM and the Red Balloon in-school
model. Three new units – two under the pH brand and one under the Motivo brand – were inaugurated in
Caruaru, Pernambuco in 2014 and posted excellent results in new enrollments for 2015 that surpassed the
Company's expectations.
In the first quarter of 2015, in keeping with its policy to expand, selectively, the network of owned
schools via mergers of strategic units, Abril Educação acquired two new units: Sigma Centro Educacional
de Águas Claras in Brasília, Federal District; and Colégio Maxi in Cuiabá, Mato Grosso. With a total of
approximately 3,000 students, these schools are references in quality education and have been registering
excellent results on the national ENEM exams. The Sigma school will use the materials of the Publishers
Ática and Scipione, while Colégio Maxi will adopt the Maxi Learning System. The two institutions
represent important acquisitions to increase the penetration of the Company's Learning Systems in the
Midwest region.
In the Language Schools segment, in 2014, Abril Educação concluded the stabilization of its business
Wise Up, starting a journey towards achieving leadership in the Business English segment. The main
challenge facing this strategy is the satisfaction, and consequently the retention, of both customer and
franchise. To meet this target, the Company will focus on investments by franchise owners, on the Go
Premium strategy for the student experience and on inaugurating a model school.
In the Red Balloon brand, in 2014, we launched the pilot project for the in-school model, which offers
English courses to children in basic education schools and is a trend garnering more and more approval
from parents and students as well as school operators. The more than 2,000 schools supported by the
Learning Systems of Abril Educação represent strong enrollment potential for the in-school courses,
which represents an immense universe to be explored. In 2015, the Company plans to strengthen its
investments in this model.
Also in 2014, Abril Educação acquired the remaining 49% interest in Red Balloon. The Company had
acquired the initial 51% in 2012 and signed an option to purchase the remaining interest, held by the Lam
family, by 2017. Given the demonstrated feasibility of the language school for children business, with the
possibility of synergies with the in-school system at partner schools, the acquisition's conclusion was
brought forward to 2014.
With the consolidation of the businesses acquired in recent years, the progress made on their integration
and the strategic planning formulated by its new management over the course of the year, Abril Educação
ended 2014 in an even stronger position to build a promising future for the more than 900,000 student
served by its Schools and Learning Systems.
Building this future in education is a collective task, given the importance of always working alongside
employees and partners who are committed to the ideal of taking the highest-quality education to all
regions of Brazil. Thus, people who dream, are bold, tirelessly seek out innovation and, most importantly,
are passionate about education.
(*) In accordance with CVM Instruction 527/12, EBITDA is defined as Earnings Before Interest, Tax (Income and Social Contribution Taxes), Depreciation and Amortization. Adjusted EBITDA is calculated
based on operating income including the amounts related to depreciation and amortization and including amortization of publishing investments, the provision for restructuring and the provision for the new stockbased compensation plan amounted to R$389.1 million in 2014 and R$311.9 million in 2013. Pursuant to CVM Instruction 527/12, the Company may opt to report EBITDA excluding the net amounts related to
5
discontinued operations, as per Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, and adjusted for other items that contribute to information on potential gross
cash generation.
Analysis of Economic and Financial Performance – 2014
Revenue
In 2014, net revenue amounted to R$1,265.0 million, growing 22% from 2013. Excluding the revenues
from the latest acquisitions of Grupo Ometz (Wise Up, Wise Up Teens and You Move) and of the schools
Motivo and Sigma, net revenue grew 10%. The acquisition of Grupo Ometz and of the schools Motivo
and Sigma contributed additional revenue of R$131.7 million in 2014.
The combined organic contribution from our existing businesses amounted to R$1,133.4 million. The
main growth drivers were the continued growth in the Learning Systems and Schools segments and the
revenue growth in the Publishers segment, due to the higher market share achieved in the 2015 National
Textbook Program (PNLD). In 2014, we continued to make progress in diversifying our revenue sources,
which helped to attenuate the seasonality of the business and ensure more consistent revenue distribution
over the
quarters.
Note: Corporate data. Eliminations include the divestments of SER to GEO, of Anglo to pH and of SER to ETB.
In the Learning Systems business, which comprises Traditional Learning
Systems (Anglo, pH, SER, GEO, Maxi and Farias Brito), ETB Learning
Systems and O Líder em Mim (OLEM), we ended December 2014 with 931,300
students, for growth of 54% on 2013. This increase is explained by the organic
growth of 77,000 students (14%) in the Traditional Learning Systems compared
to 2013; the growth of 206,700 students in the ETB Technical Learning System
due to the recognition of students under the PRONATEC technical education
program; and the growth of 41,800 students in the OLEM program due to the
signing of agreements in the public school system to serve 18,000 new students.
As a result, in 2014, revenue from Learning Systems grew 27% compared to
2013, to R$303.0 million.
In 2014, net revenue from Publishers grew 1%, from R$462.8 million in 2013 to
R$467.2 million. In the public segment, the highlight was the leadership in
purchases by the 2015 National Textbook Program (PNLD) for the publishers
Ática and Scipione, which achieved 25% market share in 2014, according to
estimates by Abrelivros. In the 2015 PNLD, the Publishers received total orders
for 32.0 million books, 21.7 million of which for initial purchases under the
program and 10.3 million for replacing books from previous programs. Revenues
under the program came to R$245 million for physical books. Digital books were
not included in the 2014 orders and are being negotiated with the National
6
Education Development Fund (FNDE).
In 2014, Publishers registered a decrease of 30% in book sales volume in the private segment, selling a
total of 5.0 million books. The decrease is explained by a non-recurring sale of 1.7 million books to the
São Paulo branch of the Foundation for Educational Development (FDE) in 2014. Excluding this effect,
volumes declined by 0.4 million books in 2014, which was more than offset by a 10% increase in average
ticket due to the higher share of premium collections.
In 2014, revenue from Preparatory Schools and Courses amounted to
R$307.5 million, increasing 45% from 2013, with this amount including the
full recognition of revenue from the schools Motivo and Sigma that were
acquired in the second half of 2013. On a comparable basis, net revenue
grew 10%, driven by the 15% increase in revenue per student, which more
than offset the smaller student base.
The Schools and Preparatory Courses business (Anglo, pH, Motivo and
Sigma) ended December 2014 with 25,200 students enrolled at 19 units,
representing a decrease of 2% from 2013, due to a reduction in new
enrollments in preparatory courses compared to 2013.
In 2014, net revenue in the Language School business was R$164.4 million, R$32.2 million of which
was contributed by Red Balloon and R$132.2 million by Grupo Ometz. The Language School business
(Red Balloon and Grupo Ometz, formed by Wise Up, Wise Up Teens and You Move) ended December
with 83,300 students enrolled at 393 units.
In early 2014, we presented a few strategic changes to the
Grupo Ometz franchisees to increase the profitability of their
businesses. The main changes were the higher commissions
paid on the sale of teaching materials; the maintenance of
teaching material prices for Wise Up with no inflation
passthrough; the 10% decrease in teaching material costs for
You Move; and the incentives given to the current network of
franchisees for recommending potential new franchisees.
These changes made on the Company’s initiative were
required to reestablish the economic balance between franchiser and franchisee and ended in January
2015, with the new strategic proposal now focused on the Go Premium experience and on the satisfaction
- and consequently retention – of both customer and franchisee.
Cost of Goods Sold (COGS)
Cost of Goods Sold in 2014 increased by 27% to R$413.1 million. In 2014, we fully recognized the costs
related to the acquisitions made in 2013 (Grupo Ometz, Schools Motivo and Sigma). Excluding these
events, COGS in 2014 increased 15%, leading to gross margin contraction of 2 percentage points, driven
mainly by the higher COGS at Publishers. This increase is explained by: (i) the investment in digital
content for the PNLD 2015, without a corresponding net revenue in 2014; (ii) the investment in
publishing for the government program Education for Youth and Adults (EJA); and (iii) the higher
amortization in the Publishers segment due to the change in criteria for the production of books for the
private market, which optimized production and reduced inventory levels.
7
Selling, General and Administrative Expenses
In 4Q14, we recognized an expense of R$18.7 million related to the stock-based compensation plan
approved in the Extraordinary Shareholders’ Meeting held on March 19, which reinforces our policy of
meritocracy and talent retention. The decision led to the cancelation of the former Stock Option Plan and
the Extraordinary Executive Incentive Plan of the Company. The stock options to be offered under the
new plan will represent a maximum of 5% of our capital stock.
In the year, total expenses amounted to R$645.3 million, increasing 28% from 2013. This amount
includes: (i) the recognition of the restructuring provision, as previously announced in 2Q14, (R$27.9
million); (ii) the expenses related to the new stock-based compensation plan (R$18.7 million); (iii) the
incremental expenses associated with the acquired businesses (R$57.4 million); (iv) the expenses related
to moving the Company’s headquarters (R$7.8 million); and (v) the nonrecurring expenses with
consulting services, which did not occur in 2013 (R$6.2 million). Excluding the aforementioned effects,
expenses in 2014 increased 5%.
Adjusted EBITDA* and Net Income
In 2014, adjusted EBITDA* amounted to R$389.1 million, growing 25% on 2013. This increase is
explained by the significant contribution from the Learning Systems and Preparatory Schools and
Courses, given the full recognition of the schools Motivo and Sigma. Excluding the assets acquired in
2014, adjusted EBITDA grew by 15%.
(*) In accordance with CVM Instruction 527/12, EBITDA is defined as Earnings Before Interest, Tax (Income and Social Contribution Taxes), Depreciation and Amortization. On this basis, in accordance with
this Instruction, EBITDA amounted to R$268.4 million in 2013 and R$285.0 million in 2014. Adjusted EBITDA is calculated based on operating income including the amounts related to depreciation and
amortization, the amortization of publishing investments, the provision for the Company’s restructuring, as well as the new stock-based compensation plan. Pursuant to CVM Instruction 527/12, the Company may
opt to report EBITDA excluding the net amounts related to discontinued operations, as per Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, and adjusted for
other items that contribute to information on potential gross cash generation.
Net Income before non-controlling interest was R$58.7 million, decreasing 26% from 2013. The
reduction is explained by the increase in the financial expense in 2014, due to the growth in the
Company’s debt position resulting from its investment strategy, and by the higher interest rates compared
to 2013. Net income adjusted by the amortization of goodwill and the tax benefit from the use of goodwill
amounted to R$195.0 million in 2014.
Dividends
The Board of Directors approved the distribution of R$11.6 million as dividends, which is equivalent to
25% of net income for the period, after the constitution of a 5% legal reserve, based on the 2014 financial
statements. The proposal for the allocation of net income for 2014 will be submitted for approval at the
Shareholders’ Meeting to be held in April 2015.
Investments
Operating investments amounted to R$114.5 million in 2014, distributed as follows: (i) R$70.5 million to
acquisitions of property and equipment and intangible assets; and (ii) R$44.0 million to the production
and updating of content for the new collections of the Learning Systems and Publishers. Total
investments in the period were 26% higher than the R$90.6 million invested in 2013, mainly due to the
new assets acquired in 2014 and the one-time investments related to moving the Company’s head office
in the amount of R$14.6 million. Excluding this non-recurring effect, investments in 2014 amounted to
R$100 million.
8
Acquisition of 100% of Sigma Centro Educacional de Águas Claras in Brasília, Federal District; and
Colégio Maxi in Cuiabá, Mato Grosso.
The Company concluded the acquisitions of 100% of Sigma Centro Educacional de Águas Claras in
Brasilia, and of Colégio Maxi in Cuiabá, in the first quarter of 2015. Both schools are a reference in
academic quality and achieved strong results in the national ENEM exam. These acquisitions are in line
with the Company’s strategic plan to focus on school growth to replicate their quality in the services and
products offered to our partners.
Acquisition of the remaining 49% interest in Red Balloon
In December 2014, Abril Educação acquired the remaining 49% interest in Red Balloon. The Company
had acquired the initial 51% in 2012 and signed an option to purchase the remaining interest, held by the
Lam Family, by 2017. Given the demonstrated feasibility of the language courses for children business,
with the possibility of synergies with the in-school system at partner schools, the acquisition's conclusion
was brought forward.
The total amount paid for the company to the acquisition of Sigma Centro Educacional de Águas Claras
in Brasilia, and of Colégio Maxi in Cuiabá and the remaining 49% interest in Red Balloon was R$106
million.
Operating Cash Generation
Operating cash generation in 2014 increased by 42%, or R$96.8 million, to R$328.5 million, from
R$231.7 million in 2013. The positive result was mainly due to: (i) organic growth in our Learning
Systems and Schools businesses; (ii) improvements in working capital management; and (iii) the full
recognition of the acquired businesses (Wise Up, Sigma and Motivo).
Cash generation, net of interest and tax payments advanced 9% on the prior year to R$172.1 million. The
main offsetting impact on operating cash generation in relation to the prior year was interest expenses,
due to the payment on an annual basis of the interest on debt contracted in 2013.
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Capital Structure
In December 2014, the consolidated net debt of Abril Educação amounted to R$903.5 million, composed
of gross debt of R$1,272.5 million and cash and cash equivalents of R$369.0 million. Total gross debt
was formed by R$859.6 million in financial debt and R$413.0 million in debt with the sellers of the
acquired companies. Of this amount, 93% corresponded to long-term debt.
With the aim of restructuring and lengthening the Company's debt maturity profile, in October, bonds
were issued by the subsidiaries Ática, Scipione and Abril Educação Learning Systems. The additional
balance of R$120 million in proceeds from the transaction will be used for working capital purposes.
Corporate Governance
In August 2014, with the conclusion of the sale of a portion of the shares held by Abrilpar to Tarpon
Company, the Company’s Board of Directors approved the migration to the Novo Mercado. As a result,
on October 21, 104, Abril Educação concluded the process to migrate its stock to the special trading
segment of the Brazilian stock exchange BM&FBovespa called “Novo Mercado,” and as of October 23
its stock, now formed exclusively by common shares, began trading on the segment under the stock
symbol ABRE3.
The Board of Directors of Abril Educação is composed of nine members, of whom two represent the noncontrolling shareholders and two are independent. The track record and market knowledge of our main
shareholders, with whom we interact frequently, provide important support to the management.
Furthermore, the Board of Directors is supported by an Audit Board, which has been installed since April
2012, and formed by five members, two of whom represent the interests of the non-controlling
shareholders.
At the end of 2014, the Company approved its new Information Disclosure and Securities Trading Policy
to establish the practices for disclosing and using information that must be observed by the controlling
shareholder, the managers, the audit board members and any other persons who become aware of
privileged information. The new policy also establishes the rules and procedures to be adopted by the
Company and by related persons for trading securities issued by the Company in order to ensure ethical
conduct by all those with access to privileged and material information.
Submission to the Market Arbitration Chamber
The Company submitted to arbitration in the Market Arbitration Chamber, pursuant to the submission to
arbitration clause in its Bylaws. This chamber, which was created by the stock exchange, adjudicates
disputes and controversies that may arise between the controlling shareholders of companies listed on the
Novo Mercado listing segment, shareholders in general, managers, audit board members and the stock
exchange itself.
Relations with the Independent Auditors
In compliance with CVM Instruction 381/03, we hereby inform that the Company and its subsidiaries
have formally adopted the procedure of consulting the independent auditors PricewaterhouseCoopers
(PWC) to ensure that the provision of other services does not affect their autonomy and the objectiveness
needed to carry out independent audit.
In the fiscal year ended December 31, 2014, PWC provided additional services totaling R$175 thousand,
for fiscal consulting purposes, which is equivalent to around 14% of the fees for auditing the consolidated
financial statements of the Company for that year.
10
PricewaterhouseCoopers Auditores Independentes considers that the services were provided in strict
compliance with the accounting rules related to the autonomy of independent auditors during audit work
and therefore did not represent any situation that could affect their autonomy and objectiveness while
carrying out the independent audit services.
Declaration of the Board of Executive Officers
Pursuant to CVM Instruction 480/09, the Board of Executive Officers hereby declares to have discussed,
reviewed and to be in full agreement with the financial statements for the fiscal year ended December 31,
2014 and the opinions expressed in the Independent Auditors’ Report.
Acknowledgments
We would like to thank and recognize all of our employees, clients, shareholders, partners and
government representatives for their support and trust in our mission of building a Company that is
capable of having a positive influence on the quality of basic education and pre-college education in
Brazil and on the constant pursuit of value creation.
The Management
São Paulo, March 23, 2015
11
BALANCE SHEET
(All amounts in thousands of Reais)
ASSETS
Parent
Consolidated
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
841
2,565
15,313
9,284
671
100,271
2,504
12,984
15,432
825
369,069
336,135
189,125
62,173
24,055
360,745
318,343
176,004
33,689
25,714
28,674
132,016
980,557
914,495
-
-
6,889
4,467
10,150
4,739
6
-
5
373
109,979
9,088
12,480
58,440
6,362
3,153
Investments (Note 12)
Intangible assets (Note 13)
Property and equipment (Note 14)
1,585,042
30
1,585,078
1,496,970
303
1,497,651
7,728
2,122,524
106,715
2,379,870
4,434
2,150,177
81,156
2,318,611
Total assets
1,613,752
1,629,667
3,360,427
3,233,106
CURRENT ASSETS
Cash and cash equivalents (Note 7)
Trade receivables (Note 8)
Inventories (Note 9)
Dividends and interest on capital (Note 32)
Other assets (Note 11)
NON-CURRENT ASSETS
Trade receivables (Note 8)
Taxes recoverable (Note 10)
Deferred income tax and social
contribution (Note 19)
Judicial deposits (Note 18)
Other assets (Note 11)
12
BALANCE SHEET
LIABILITIES AND EQUITY
Parent
Consolidated
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
17,729
1,531
11,608
30,781
10
17,268
296,593
39,482
6,558
3,604
12,545
232,280
92,194
7,304
15,859
19,032
-
-
43,880
132,375
30,868
48,059
402,662
499,044
10,944
286
12,668
5,518
-
-
369,093
820,085
751
44,649
355,864
671,831
40,236
4,631
4,631
134,260
73,281
15,575
4,917
1,381,506
1,146,730
46,443
52,976
1,784,168
1,645,774
852,868
533,564
257,456
(13,228)
(4,671)
(58,680)
852,868
517,192
220,189
(13,228)
(330)
-
852,868
533,564
257,456
(13,228)
(4,671)
(58,680)
852,868
517,192
220,189
(13,228)
(330)
-
Non-controlling interests
Total equity
1,567,309
1,567,309
1,576,691
1,576,691
1,567,309
8,950
1,576,259
1,576,691
10,641
1,587,332
Total liabilities and equity
1,613,752
1,629,667
3,360,427
3,233,106
CURRENT LIABILITIES
Trade and other payables (Note 15)
Borrowings (Note 16)
Taxes and contributions payable (Note 17)
Income tax and social contribution payable
Dividends payable
Payables for the acquisition of equity
interests (Note 31)
NON-CURRENT LIABILITIES
Payables for the acquisition of equity
interests (Note 31)
Taxes and contributions payable (Note 17)
Provision for contingencies (Note 18)
Deferred income tax and social
contribution (Note 19)
Total liabilities
EQUITY
Attributable to owners of the parent
Share capital (Note 22)
Capital reserves (Note 23)
Revenue reserves (Note 23)
Carrying value adjustments
Treasury shares (Note 22.b)
Goodwill on equity transaction (Note 12.7)
The accompanying notes are an integral part of these financial statements.
13
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31
(All amounts in thousands of Reais, except for earnings per share)
STATEMENT OF INCOME
Parent
Consolidated
2014
2013
2014
2013
424
(155)
269
(5)
(4,028)
(139)
(3,903)
4,809
(4,395)
123
(3,366)
54,198
50,832
(1,957)
48,875
581
(249)
332
(42)
(38,858)
99
(38,469)
10,698
(4,056)
4
(31,823)
104,578
72,755
(50)
72,705
1,265,048
(413,145)
851,903
(354,630)
(292,638)
1,959
206,594
50,814
(160,192)
1,315
98,531
1,303
99,834
(41,156)
58,678
1,036,492
(325,559)
710,933
(277,058)
(228,032)
1,115
206,958
36,346
(98,582)
539
145,261
145,261
(66,376)
78,885
48,875
72,705
9,803
58,678
6,180
78,885
Basic earnings per share - R$ (Note 23.5)
0.18738
0.29848
Diluted earnings per share - R$ (Note 23.5)
0.18486
0.29773
Net revenue (Note 25)
Cost of sales and services (Note 26)
Gross profit
Selling expenses (Note 26)
General and administrative expenses (Note 26)
Other income (expenses), net (Note 27)
Operating profit (loss)
Finance income (Note 28)
Finance costs (Note 28)
Foreign exchange variation, net (Note 28)
Profit (loss) before equity in the result of subsidiaries
Equity in the results of subsidiaries (Note 12)
Profit before taxation
Income tax and social contribution (Note 29)
Profit for the year
Attributable to
Owners of the parent
STATEMENT OF COMPREHENSIVE INCOME
Parent
2014
Profit for the year
Other comprehens ive income
Fair value adjus tment on iss ue of s hares
48,875
Total comprehensive income for the year
2013
72,705
Cons olidated
2014
58,678
2013
78,885
-
(13,228)
-
(13,228)
48,875
59,477
58,678
65,657
48,875
59,477
9,803
58,678
6,180
65,657
Attributable to
Owners of the parent
The amount recognized as "Fair value adjustment on issue of shares" in the statement of
comprehensive income does not have any impact of deferred income tax and social contribution
because there will be no effect on the income statement when the investment which gave rise to this
accounting adjustment is sold.
14
STATEMENT OF CHANGES IN EQUITY
Capital reserves
Carrying
Share
Capital
options
Legal
capital
reserve
granted
reserve
retention
463,952
395,933
15,831
12,935
151,817
Capital increase according to the minutes of the Board of Directors' Meeting (BODM)on 4/25/2013 (Note15,924
22.b)
107,646
BALANCES AT DECEMBER 31, 2012
Equity
Revenue reserves
Stock
Profit
Goodwill
attributable to
value
Treasury
on equity
Retained
owners of
Non-controlling
adjustments
shares
transactions
earnings
the parent
interests
Total
1,040,468
5,245
1,045,713
-
-
-
-
-
-
-
-
-
-
-
123,570
372,573
-
123,570
372,573
2,692
-
-
-
-
-
-
-
3,104
-
3,104
-
-
-
-
-
-
-
-
7
-
7
-
(9,414)
-
-
-
-
(13,228)
-
-
-
(9,414)
(13,228)
-
(9,414)
(13,228)
Purchase of shares (Note 22.d)
Stock option plan (Note 21)
-
-
-
-
-
-
(330)
-
-
(330)
-
-
-
4,504
-
-
-
-
-
-
4,504
-
4,504
Profit for the year
-
-
-
-
-
-
-
-
72,705
72,705
6,180
78,885
Other changes in non-controlling interests
-
-
-
-
-
-
-
-
-
-
(784)
(784)
Allocation of profit for the year:
- Legal reserve (Note 23.4)
- Proposed mandatory minimum dividends (Note 23.4)
-
-
-
3,635
-
-
-
-
-
(3,635)
(17,268)
(17,268)
-
(17,268)
Capital increase according to the minutes of the BODM on 4/30/2013 (Note 22.b)
372,573
412
Share issuance costs (Note 22.c)
Fair value adjustment on issue of shares
- Profit retention (Note 23.4)
-
7
-
-
-
-
51,802
-
-
-
(51,802)
852,868
496,857
20,335
16,570
203,619
(13,228)
(330)
-
-
Purchase of shares (Note 22.d)
-
-
16,372
-
-
-
-
(4,341)
-
-
16,372
(4,341)
-
16,372
(4,341)
-
-
-
-
-
-
-
(58,680)
-
(58,680)
-
(58,680)
Profit for the year
Other changes in non-controlling interests
-
-
-
-
-
-
-
-
48,875
-
48,875
-
9,803
(11,494)
58,678
(11,494)
-
-
-
2,444
-
34,823
-
-
-
(2,444)
(11,608)
(34,823)
(11,608)
-
-
(11,608)
-
852,868
496,857
36,707
19,014
238,442
(13,228)
(4,671)
(58,680)
-
1,567,309
8,950
1,576,259
-
(330)
1,576,691
10,641
1,587,332
Allocation of profit for the year:
- Legal reserve (Note 23.4)
- Proposed mandatory minimum dividends (Note 23.4)
- Profit retention (Note 23.4)
15
STATEMENT OF CASH FLOW
Parent
CASH FLOWS FROM OPERATING ACTIVITIES
Cash from operations (Note 30)
Interest paid
Income tax and social contribution paid
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of and additions to:
Property, plant and equipment
Intangible assets
Financial investments
Acquisition of subsidiary, net of cash acquired (Note 12.4)
Acquisition of subsidiary - Non-controlling interest
Decrease in cash due to disposal of subsidiary
Payment for acquisition of subsidiary
Payment of acquisition price adjustment
Capital increase in subsidiaries
Capital decrease in subsidiaries
Dividends received
Interest on capital received
Proceeds from sale of subsidiary (Note 12)
Loans received from related parties
Loans granted to related parties
Interest received
NET CASH USED IN INVESTING
ACTIVITIES
Consolidated
2014
2013
2014
2013
(5,037)
-
(21,709)
-
328,514
(126,326)
(30,102)
232,088
(54,026)
(20,276)
(5,037)
(21,709)
172,086
157,786
(53)
(137,133)
58,646
5,756
-
(150)
(301,681)
17,000
131,992
4
(41,348)
(29,107)
(42,464)
(1,575)
(103,262)
943
36
(15,225)
(22,732)
9,388
(498,298)
(25,000)
(438)
(90,269)
(656)
-
(72,784)
(152,835)
(216,777)
(642,677)
(615)
1,164
4
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Payment of PAES and taxes in installments
Capital increase (decrease)
Increase (decrease) in non-controlling interests
Treasury shares (Note 22.b)
Dividends paid
Dividends paid to non-controlling interests
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES
(4,341)
(17,268)
117,267
(330)
(23,783)
-
966,521
(879,101)
(3,956)
(1,470)
562
(4,341)
(17,268)
(7,932)
482,919
(32,432)
(4,388)
117,267
1,341
(330)
(23,783)
(850)
(21,609)
93,154
53,015
539,744
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(99,430)
(81,390)
8,324
54,853
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
100,271
841
181,661
100,271
360,745
369,069
305,892
360,745
NET CHANGES IN CASH AND CASH EQUIVALENTS
(99,430)
(81,390)
8,324
54,853
16
STATEMENT OF VALUE ADDED
Parent
Consolidated
2014
2013
2014
2013
541
441
100
-
1,030
820
210
-
1,296,722
1,304,792
4,528
(12,598)
1,064,747
1,068,456
4,541
(8,250)
7,615
7,615
15,787
249
15,538
533,728
317
253,639
279,772
412,054
175
212,610
199,269
(7,074)
(14,757)
153
153
205
205
NET VALUE ADDED
GENERATED BY THE ENTITY
(7,227)
(14,962)
VALUE ADDED RECEIVED
THROUGH TRANSFER
Equity in the results of subsidiaries (Note 12)
Finance income (Note 28)
Foreign exchange gains (Note 28)
59,130
54,198
4,809
123
115,280
104,578
10,698
4
54,972
1,303
50,814
2,855
37,987
36,346
1,641
TOTAL VALUE ADDED
TO DISTRIBUTE
51,903
100,318
739,539
629,255
DISTRIBUTION OF VALUE ADDED
Pers onnel and payroll charges
Salaries
Benefits
Government Severance Indemnity Fund for Employees (FGTS)
(4,227)
(4,455)
148
80
20,766
20,305
308
153
281,039
238,525
26,151
16,363
224,789
190,693
20,735
13,361
Taxes and contributions
Federal
State
Municipal
2,860
2,860
-
2,747
2,747
-
146,673
127,254
1,301
18,118
149,171
133,500
890
14,781
Third parties
Interes t (Note 28)
Foreign exchange loss (Note 28)
Rentals
Copyrights
Other
4,395
4,395
-
4,100
4,056
3
41
-
253,149
160,192
1,540
35,945
55,472
-
176,410
98,582
1,102
25,051
51,675
-
48,875
11,608
37,267
-
72,705
17,268
55,437
-
58,678
11,608
37,267
9,803
78,885
17,268
55,437
6,180
51,903
100,318
739,539
629,255
REVENUE
Sale of products and services (Note 25)
Other revenue (Note 27)
Provision for impairment of trade receivables (Note 8)
INPUTS ACQUIRED FROM THIRD PARTIES
Raw materials consumed
Cost of s ales and services
Materials , energy, outsourced services and other
GROSS VALUE ADDED
RETENTIONS
Depreciation and amortization (Notes 13 and 14)
Owners
Dividends
Retained earnings
TOTAL VALUE ADDED DISTRIBUTED
762,994
78,427
78,427
684,567
The accompanying notes are an integral part of thes e financial statements.
17
652,693
61,425
61,425
591,268
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2014
(All amounts in thousands of Reais unless otherwise stated)
1.
GENERAL INFORMATION
Abril Educação S.A. (the "Company") is a corporation headquartered in the city of São Paulo, State of São
Paulo. The Company and its subsidiaries (the "Group") operate in the segment of primary and preuniversity education, with the following business lines: Editora Ática and Editora Scipione - book
publishing houses, SER teaching system and "O Líder em Mim" (OLEM) program; Sistema de Ensino
Abril Educação - Anglo teaching system, Ph teaching system, Motivo system and pre-university entrance
courses; Ph Group - basic teaching schools and pre-university entrance courses; ETB Group - technical
and professional teaching schools; Maxiprint Gráfica e Editora - Maxi teaching system; Edumobi digital content distribution technology; SGE - GEO teaching system; Jafar (Alfacon) - preparatory
courses for civil service exams; Red Balloon - English language teaching schools for children and
teenagers; Ei Você - e-learning, professional training and free courses, Ometz - English language teaching
service for teenagers and adults through the Wise Up and You Move brands, Motivo Group - basic
teaching schools and pre-university entrance courses, and Sigma - basic teaching schools.
The Company's activities include the editing, printing, publication, advertising and sale, in the wholesale
and retail markets, of books, textbooks and publications for basic education and pre-college admission
courses, and it also provides specialized training services for teachers and school managers, meetings,
lectures and workshop activities related to education, as well as the pedagogical activities of its basic and
professional teaching courses through its own schools or teaching systems.
The issue of these financial statements was definitively authorized by the Company's Board of Directors on
March 23, 2015.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting practices adopted in Brazil,
including the pronouncements issued by the Brazilian Accounting Pronouncements Committee (CPC), as
well as according to the International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB).
The main accounting policies applied to the preparation of these financial statements are set out below.
These policies have been consistently applied to the years presented, unless otherwise stated.
2.1 Basis of presentation
The financial statements have been prepared based on the historical costs convention, as modified by
financial assets measured at fair value through profit or loss.
The preparation of financial statements requires the use of certain critical accounting estimates. It
also requires management to exercise its judgment in the process of applying the Group's accounting
policies. Those areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in Note 3.
18
(a)
Parent company financial statements
The parent company financial statements have been prepared in accordance with the
accounting practices adopted in Brazil issued by the Brazilian Accounting Pronouncements
Committee (CPC). The accounting practices adopted in Brazil applicable to the parent
company financial statements from 2014 do not differ from the IFRS applicable to separate
financial statements, since the measurement of investments in subsidiaries based on the equity
accounting method in the parent company financial statements is now permitted under IFRS,
meaning that the parent company financial statements are also in conformity with the
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB). The parent company financial statements are disclosed together with
the consolidated financial statements.
(b)
Consolidated financial statements
The consolidated financial statements have been prepared and are being presented in
accordance with accounting practices adopted in Brazil, including the pronouncements issued
by the Brazilian Accounting Pronouncements Committee (CPC), as well as according to the
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB).
The presentation of the parent company and consolidated statements of value added is
required by the Brazilian corporate legislation and the accounting practices adopted in Brazil
for listed companies, while it is not required by IFRS. Therefore, under the IFRS, the
presentation of such statements is considered supplementary information, and not part of the
set of financial statements.
(c)
Changes in accounting policies and disclosures
The following pronouncement has been adopted by the Group for the first time in the
financial year beginning on January 1, 2014 and has no material impacts on the Group:
(i) OCPC 07 - "Disclosures in general purpose financial reports" deals with quantitative and
qualitative aspects of disclosures in the notes to the financial statements, reinforcing the
already existing requirements in accounting standards, and emphasizing that only information
that is relevant to users of the financial statements should be disclosed.
Other amendments to and interpretations of standards issued that became effective for the
year are not applicable to the Group.
2.2
Consolidation
The following accounting policies are applied to the preparation of the consolidated financial
statements.
19
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. The Group
recognizes any non-controlling interest in the acquiree based on the non-controlling interest's
proportionate share of the fair value of the acquiree's net assets. Non-controlling interests are
determined on each acquisition.
Transactions, balances and unrealized gains on transactions between Group companies are
eliminated. Unrealized losses are also eliminated, unless the transaction provides evidence of
impairment of the asset transferred. The accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as transactions with the equity
owners of the Group. For purchases from non-controlling interests, the difference between
any consideration paid and the proportion acquired of the carrying value of net assets of the
subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are
also recorded directly in equity, in "Carrying value adjustments".
2.3
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker, responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Board of
Directors, which also makes the Group's strategic decisions.
2.4
Foreign currency translation
(a)
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using
the currency of the primary economic environment in which the entity operates (the
"functional currency").
The parent company and consolidated financial statements are presented in Brazilian Reais
(R$), which is the Company's functional currency, and also the Group's presentation currency.
20
(b)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or the dates of valuation when items are
remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognized in the statement of income, within finance income and
costs, as "foreign exchange variations, net".
Changes in the fair value of monetary securities denominated in foreign currency classified as
available for sale are analyzed based on translation differences resulting from changes in the
amortized cost of the security and other changes in the carrying amount of the security.
Translation differences related to changes in amortized cost are recognized in profit or loss,
and other changes in carrying amount are recognized in equity.
2.5
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits with banks and other short term highly
liquid investments with original maturities of three months or less, and with immaterial risk of
changes in value.
2.6
Financial assets
2.6.1 Classification
The Group classifies its financial assets, upon initial recognition, in the loans and receivables
category. The classification depends on the purpose for which the financial assets were acquired. The
Company only has financial investments in bank deposits which fall into the category of cash and
cash equivalents, and therefore has no financial instruments measured at fair value through profit or
loss.
2.6.2 Recognition and measurement
Investments are initially recognized at fair value plus transaction costs. Financial assets are
derecognized when the rights to receive cash flow have expired or have been transferred and the
Group has transferred substantially all of the risks and rewards of ownership. Loans and receivables
are carried at amortized cost using the effective interest rate method.
2.6.3 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is presented in the balance sheet when
there is a legally enforceable right to offset the recognized amounts and there is an intention to settle
on a net basis or to realize the asset and settle the liability simultaneously. The right to offset must be
not conditional on future events and be legally enforceable in the normal course of business and in
the event of default, insolvency or bankruptcy of the entity or the counterparty.
21
2.6.4 Impairment of financial assets
(a)Assets carried at amortized cost
The Group assesses at each balance sheet date whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset (a "loss event") and
that loss event (or events) has an impact on the estimated future cash flow of the financial asset or
group of financial assets that can be reliably estimated.
The amount of any impairment loss is measured as the difference between the asset's carrying amount
and the present value of estimated future cash flow (excluding future credit losses that have not been
incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the
asset is reduced, and the amount of the loss is recognized in the statement of income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized (such as an
improvement in the debtor's credit rating), the reversal of the previously recorded loss is recognized
in the statement of income.
2.7
Trade receivables
Trade receivables primarily relate to wholesale (public and private market) and retail sales of books
(publishing houses) and textbooks (teaching systems) focused on education, language teaching,
franchise royalties, and the tuition of preparatory courses for college and civil service exams. If
collection is expected in one year or less, they are classified as current assets. If not, they are
presented as non-current assets.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest rate method, less provision for impairment of trade receivables. A
provision for impairment is typically recorded when a receivable is more than 90 days overdue. The
Company also considers the analysis of historical losses and monitors the individual position of its
customers.
2.8
Inventory
Inventory is stated at the average cost of acquisition or production, considering the lower of cost and
net realizable value, less a provision for obsolescence.
The Company recognizes a provision for losses on slow-moving finished products and raw materials.
This provision is based on a percentage of the time that such items remain in inventory up to a
maximum of three years. Management assesses periodically whether obsolete or slow-moving
inventory should be destroyed.
22
2.9
Judicial deposits
Deposits are monetarily restated and presented as a deduction from the value of a related recorded
liability, when a given tax ceases to be levied or when the redemption of the deposit is not possible.
Otherwise, deposits are presented as non-current assets.
2.10 Intangible assets
(i) Goodwill
Goodwill derives from the acquisition of subsidiaries and represents the excess of (i) the
consideration transferred, (ii) the amount of any non-controlling interest in the acquiree, and (iii) the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the
identifiable net assets acquired. If the total of the consideration transferred, the non-controlling
interest recognized and the previously held interest measured at fair value is less than the fair value of
the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is
recognized directly in the income statement.
(ii) Trademarks
Separately acquired trademarks are initially stated at historical cost. Trademarks acquired in a
business combination are recognized at their fair value at the acquisition date, and are recognized in
the consolidated financial statements in a specific account within intangibles. Trademarks assessed as
having an indefinite useful life are subsequently carried at cost less accumulated impairment losses.
Trademarks are tested annually for impairment.
(iii) Contractual customer relationships
Contractual customer relationships acquired in a business combination are recognized at their fair
value at the acquisition date. The contractual customer relationships have a finite useful life and are
carried at cost less accumulated amortization. Amortization is calculated using the straight line
method over the expected life of the customer relationship.
(iv) Computer software
Computer software licenses purchased are capitalized on the basis of the costs incurred to acquire and
bring to use the specific software. These costs are amortized over the estimated useful life of the
software (three years).
Costs associated with maintaining computer software programs are recognized as an expense as
incurred. Development costs that are directly attributable to the design and testing of identifiable and
unique software products controlled by the Group are recognized as intangible assets.
Directly attributable costs that are capitalized as part of the software product include the software
development employee costs and an appropriate portion of any applicable overheads.
Other development expenditure that do not meet these criteria are recognized in expenses as incurred.
Development costs previously recorded as expenses are not recognized as assets in a subsequent
period.
23
Computer software development costs recognized as assets are amortized over their estimated useful
lives, which does not exceed seven years.
2.11 Property and equipment
Land and buildings are fixed assets maintained by the Company to carry out its activities and mainly
comprise its own teaching and headquarters facilities. Industrial machinery and equipment are
maintained by the Company to produce books and teaching system textbooks. Information
technology equipment includes computers and servers used to manage information and databases for
the operating units and the holding company.
Historical cost includes expenditure that is directly attributable to the acquisition of the items, net of
any related depreciation, except for land, which is not depreciated. Historical cost also includes
finance costs related to the acquisition of qualifying assets.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with these costs will
flow to the Group and they can be measured reliably. The carrying amounts of the replaced items or
parts are derecognized. All other repairs and maintenance are charged to the statement of income
during the financial period in which they are incurred.
Depreciation is calculated using the straight line method over the estimated useful lives of the assets,
as follows:
Category
Buildings
Industrial machinery and equipment
Facilities, other and improvements
Furniture and fittings, vehicles and computer equipment
Ye ars
25
3 - 10
5 - 10
3 - 10
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period. An asset's carrying amount is written down immediately to the recoverable
amount when the carrying amount is greater than its estimated recoverable amount.
During the year ended December 31, 2014, no significant differences in the useful economic lives of
the items comprising the Company's fixed assets were identified, and therefore, the same
depreciation rates used during the year ended December 31, 2013 were used in 2014.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognized within "Other income (expenses), net" in the statement of income.
2.12 Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill and trademarks, are not subject to
amortization and are tested annually for impairment. Goodwill is reviewed for impairment annually,
or more frequently if events or changes in circumstances indicate that the carrying amount may be
impaired. Trademarks are tested based on anticipated savings from the non-payment of royalties
relating to them.
24
Assets that are subject to depreciation or amortization are reviewed for impairment annually and
tested whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized when the asset's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or
its value in use.
For the purposes of assessing impairment, assets are grouped at the lowest level for which there is
separately identifiable cash flow (Cash-generating unit (CGU) level). For the purposes of impairment
testing, goodwill is allocated to CGUs or groups of CGUs that are expected to benefit from the
business combination in which the goodwill arose. The CGUs or groups of CGUs are identified by
operating segment.
Non-financial assets other than goodwill that were adjusted due to impairment are subsequently
reviewed for possible reversal of the impairment at the balance sheet date. An impairment loss in
respect of goodwill recognized in the income statement is not reversed.
2.13 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business. Accounts payable are classified as current liabilities if payment is due in one year
or less. If not, they are presented as non-current liabilities.
Trade payables are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest rate method.
2.14 Borrowing
Borrowing is recognized initially at fair value, net of transaction costs incurred, and subsequently
carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the total
amount payable is recognized in the statement of income over the period of the borrowing using the
effective interest rate method.
Borrowing items are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
Both general and specific borrowing costs directly related to the acquisition, construction or
production of a qualifying asset that requires a substantial period of time to prepare for its intended
use or sale are capitalized as part of the cost of that asset when it is probable that future economic
benefits associated with the item will flow to the Company and costs can be measured reliably. Other
borrowing costs are recognized as finance costs in the period in which they are incurred.
2.15 Provisions
Provisions for restructuring costs and legal claims (labor, civil and tax) are recognized when: (i) the
Group has a present legal or constructive obligation as a result of past events, (ii) it is probable that
an outflow of resources will be required to settle the obligation, and (iii) the amount of this outflow
can be reliably estimated. Restructuring provisions comprise costs for the termination of contracts
with educational book distributors, reorganization of the franchise network and changes in personnel
and executives. Provisions do not include future operating losses.
25
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognized
even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of the expenditure expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognized as an interest expense.
2.16 Copyrights
Copyrights payable and prepayments are charged to income for the year based on revenue from the
sale of books, on an accruals basis, and correspond to the remuneration paid to the author of the
work. In the balance sheet, the balances of copyrights are presented as "work in progress" within
inventory.
2.17 Current and deferred income tax and social contribution
The income tax and social contribution expenses for the period comprise current and deferred taxes.
Taxes on profit are recognized in the statement of income.
The current and deferred income tax and social contribution are calculated on the basis of the tax
laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates
the positions taken by the Group in income tax returns with respect to situations in which the
applicable tax regulations are subject to interpretation. It establishes provisions, where appropriate,
on the basis of the amounts expected to be paid to the tax authorities.
The current income tax and social contribution are presented net, separated by taxpaying entity, in
liabilities when there are amounts payable, or in assets when the amounts prepaid exceed the total
amount due on the reporting date.
Deferred income tax and social contribution are recognized, using the liability method, on temporary
differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. However, deferred taxes are not accounted for if they arise from the initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither the accounting nor the taxable profit or loss.
Deferred tax assets are recognized only to the extent it is probable that future taxable profits will be
available against which the temporary differences and/or tax losses can be utilized.
Deferred tax assets and liabilities are presented net in the balance sheet when there is a legally
enforceable right and the intention to offset them against the calculation of current taxes, generally
when they are related to the same legal entity and the same tax authority. Accordingly, deferred tax
assets and liabilities in different entities are generally presented separately, and not on a net basis.
26
2.18 Employee benefits
(i) Pension obligations
The Company's pension plan is classified as a defined contribution plan under which contributions
are paid to pension funds managed by Abrilprev - Sociedade de Previdência Privada ("AbrilPrev") on
a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the
contributions have been paid. Regular contributions comprise net periodic costs for the period when
they are due, and are thus included in personnel costs.
(ii) Profit sharing
The Group recognizes a liability and an expense for profit-sharing based on a methodology that takes
into consideration the profit attributed to the Company's stockholders, after certain adjustments. The
Group recognizes a provision where it is contractually obliged to do so, or where there is a past
practice that has created a constructive obligation.
The Group gives its employees a share in the profits of the Group, through a profit sharing plan
called Superação, which is tied to reaching pre-established targets.
The profit sharing is recognized on a monthly basis and reviewed at the year end, at which time the
amount can be reliably measured by the Group.
(iii) Share-based payments
The Group has an equity-settled, share-based compensation plan, under which it receives services
from employees as consideration for equity instruments (options) of the Group. The fair value of the
employee services received in exchange for the grant of the options is recognized as an expense. The
total amount to be recognized is determined with reference to the fair value of the options granted,
excluding the impact of any service and non-market performance vesting conditions (for example,
profitability, sales growth targets and remaining an employee of the entity over a specified time
period). Non-market vesting conditions are included in assumptions regarding the number of options
that are expected to vest. The total expense is recognized over the vesting period, which is the period
over which all of the specified vesting conditions are to be satisfied. At the balance sheet date, the
Group revises its estimates of the number of options that are expected to vest based on the nonmarket vesting conditions and the length of service conditions. It recognizes the impact of the
revision to original estimates, if any, in the statement of income, with a corresponding adjustment to
equity.
The proceeds received, net of any directly attributable transaction costs, are credited to share capital
(nominal value) and share premium, if applicable, when the options are exercised.
Any social security contributions payable in connection with the granting of the share options are
considered an integral part of the grant itself, and the charge will be treated as a cash-settled
transaction.
27
2.19 Share capital
Common shares are classified in equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
2.20 Distribution of dividends and interest on capital
The distribution of dividends and interest on capital to the Company's stockholders is recognized as a
liability in the Group's financial statements at the year end based on the Company's bylaws. Any
amount that exceeds the minimum required is only provided for on the date when it is approved by
the stockholders at a General Meeting.
The tax benefit of interest on capital is recognized in the statement of income.
2.21 Revenue recognition
Revenue represents the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Group's activities. Revenue is shown net of taxes, returns,
rebates and discounts and after eliminating sales within the Group.
The Group recognizes revenue when the amount of revenue can be reliably measured, when it is
probable that future economic benefits will flow to the entity, and when specific criteria have been
met for each of the Group's activities, as described below. The Group bases its estimates on historical
results, taking into consideration the type of customer, the type of transaction and the specifics of
each arrangement.
a) Revenue from the sale of products
Revenue from the sale of products (books, textbooks and other publications) is credited to income
upon delivery of the product.
b) Revenue from the provision of services
Revenue from the provision of services, basically tuition fees for schools and language and
preparatory courses, is recognized over the term of such courses.
c) Interest income
Interest income is recognized on an accruals basis, using the effective interest rate method.
Subsequently, as time elapses, interest is incorporated into accounts receivable against interest
income. This interest income is calculated at the same effective interest rate used to determine the
recoverable amount, that is, the original rate of the instrument.
d) Royalty income
28
Royalty income is recognized on an accruals basis in accordance with the substance of the relevant
agreements. The Group's royalty income relates mainly to franchising agreements between the
subsidiaries Ometz and Red Balloon and their network of franchisees.
2.22 New standards that are not yet effective
The following new standards were issued by IASB but are not effective for 2014. The early adoption
of standards, even though encouraged by IASB, has not been implemented in Brazil by the Brazilian
Accounting Pronouncements Committee (CPC):
. IFRS 15, "Revenue from Contracts with Customers". This new standard contains the principles
that an entity should apply to determine the measurement of revenue and timing of when it is
recognized. The standard is applicable from January 1, 2017 and replaces IAS 11 "Construction
Contracts", IAS 18 "Revenue", and related interpretations. Management is assessing the impact of
IFRS 15.
. IFRS 9, "Financial Instruments" addresses the classification, measurement and recognition of
financial assets and financial liabilities. The complete version of IFRS 9 was published in July
2014, and is effective for accounting periods beginning on or after January 1, 2018. It replaces the
guidance in IAS 39 relating to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortized cost, fair value through other comprehensive income and
fair value through profit or loss. There is now a new expected credit losses model that replaces the
incurred loss impairment model. IFRS 9 relaxes the requirements regarding hedge effectiveness,
requiring the existence of an economic relationship between the hedged item and the hedging
instrument and that the hedge ratio used for hedge accounting purposes should be the same as that
used by management for risk management purposes. Management is still assessing the full impact
of IFRS 9.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Group.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Accounting estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
3.1
Critical accounting estimates and assumptions
Based on assumptions, the Group makes estimates concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that
carry a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are addressed below:
29
(a) Impairment of goodwill and trademarks
The Group tests annually whether goodwill and acquired trademarks have suffered any impairment. The
recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use
calculations. These calculations require the use of estimates. For the purposes of impairment testing, which
is conducted on an annual basis, the Company uses business projections for each of its CGUs, along with
market information about the risks related to these CGUs. Accordingly, the main critical judgments
include:
• Projected growth rate for each business
• Projected interest rate
• Discount rate used to calculate the present value of the projected flows
• Establishment of a perpetual rate for each business analyzed, and
• Expected savings arising from the non-payment of trademark-related royalties.
•
(b) Deferred income tax and social contribution
The Group recognizes deferred tax assets and liabilities based on the differences between the carrying
amounts of assets and liabilities and their tax bases, using the current tax rates and taking into account the
historical profits generated and the estimated future taxable profits, based on technical feasibility studies
supporting the recording and maintenance of these assets.
(c) Contingencies
The Group is a party to several judicial and administrative proceedings. Provisions are recorded for all
contingencies related to judicial proceedings assessed as probable losses. The likelihood of unfavorable
outcomes is determined based on evidence available, including the opinion of external lawyers.
Management believes that these contingencies are properly presented in the financial statements.
4. FINANCIAL RISK MANAGEMENT
4.1
General considerations and policies
The Company's and its subsidiaries' risk management policy provides guidelines on transactions and
requires the diversification of transactions and counterparties. According to this policy, the nature and
general position of the financial risks is regularly monitored and managed in order to assess the results and
the financial impact on cash flow. The credit limits of the counterparties are also periodically reviewed.
4.2
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and
interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on
the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's
financial performance. In practice, the Corporate Treasury may contract financial instruments for the
purpose of hedging the Group against interest and foreign exchange rate risks.
30
Risk management is carried out by a central treasury department (Group Treasury) based on policies
approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in
close co-operation with the Group's operating units.
(a) Market risk
The Company is subject to market risks arising from its business activities, mainly involving the possibility
of fluctuations in foreign exchange and interest rates.
i) Foreign exchange risk
The Company has contracts with paper suppliers denominated in foreign currency. The risk related to these
transactions arises from possible fluctuations in foreign exchange rates, which may increase the balances of
these liabilities.
At December 31, 2014, the balance of trade payables indexed to the US Dollar was R$ 11,064 (R$ 11,102
at December 31, 2013).
Because of the new orders already placed for the purchase of paper indexed to the US Dollar, the Company
decided to allocate on May 28, 2014 the amount of R$ 11,758 (USD 5,248 thousand) to US Dollar-backed
investments to mitigate market fluctuation risks, amounting to R$ 11,094 (USD 4,176 thousand) at
December 31, 2014 and recorded in "Export Notes" within cash and cash equivalents.
ii) Interest rate risk
The Group's interest rate risk arises from borrowing and debentures in local currency that are subject to
interest rates linked to indices (mainly the Interbank Deposit rate - CDI). The risks related to these
liabilities arise from possible fluctuations in such rates.
At December 31, 2014 and 2013, the Group had not entered into any derivatives contracts to hedge against
the risk of variations in interest rates. However, the Group's financial investments, which are also indexed
to the CDI, partially mitigate the exposure to this index. The market rates are constantly monitored in order
to assess the need to contract derivatives to hedge against such risks.
The market value of the above-mentioned transactions does not differ significantly from the amounts
recorded in the financial statements at the balance sheet date.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, including
marketable securities with high liquidity, and outstanding receivables. For banks and other financial
institutions, only independently rated parties with a minimum rating of "A" on the Standard & Poor's rating
scale are accepted.
The rates contracted for marketable securities reflect normal market conditions, which establish an average
rate of 100.5% of the CDI rate.
31
The sales policy of the Company and its subsidiaries is directly associated with the credit risk level that
they are willing to accept in the normal course of their business. The diversification of their receivables
portfolio, the selective acceptance of customers, as well as the monitoring of sales terms per business
segment and individual position limits are among the procedures adopted to minimize possible default
problems on accounts receivable. The Group's management maintains provisions for the impairment of
trade receivables at an amount considered sufficient to cover possible losses on receivables.
No credit limits were exceeded during the year, and the Group's management does not expect any losses
from non-performance by these counterparties exceeding the provision already recorded.
(c) Liquidity risk
Prudent liquidity risk management implies the maintenance of sufficient cash and marketable securities, as
well as the availability of committed borrowing facilities and the capacity to liquidate market positions.
Management monitors the Group's consolidated liquidity level, taking into consideration the projected cash
flow, undrawn borrowing facilities and the cash and cash equivalents balance.
The table below shows the Group's non-derivative financial liabilities, which are measured at amortized
cost. The amounts disclosed in the table are the contractual undiscounted cash flow, plus the reconciliation
for those recorded in the consolidated balance sheet. For future cash flow projections, the Company used
the current CDI rate of 11.51% p.a.
Le ss than
1 ye ar
Be twe e n 2
and 5 ye ars
16,457
27,957
7,575
1,322,878
9,545
1,339,335
45,077
(516,108)
(8,737)
823,227
36,340
48,932
296,593
46,818
12,668
486,055
-
581,805
309,261
(168,832)
-
412,973
309,261
63,085
29,335
63,264
25,929
857,170
17,383
983,519
72,647
(280,141)
(12,000)
703,378
60,647
145,317
232,280
41,109
5,518
485,579
-
672,005
237,798
(183,766)
-
488,239
237,798
Total
Effe ct of
discount
Consolidate d
Carrying
amount
Be twe e n 1
and 2 ye ars
At De ce mbe r 31, 2014
Debentures (Note 16)
Payables for the acquisition of
equity interests (Note 31)
At De ce mbe r 31, 2013
Debentures (Note 16)
5.
CAPITAL MANAGEMENT
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going
concern in order to provide returns for stockholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
The gearing ratios can be summarized as follow:
32
December 31,
2014
Total borrowings and debentures (Note 16)
(+) Payables for the acquisition of
(-) Cash and cash equivalents (Note 7)
December 31,
2013
859,567
764,025
412,973
(369,069)
488,239
(360,420)
903,471
891,844
Total equity
1,576,259
1,587,332
Equity plus net debt
2,479,730
2,479,176
Gearing ratio - %
36
36
Net debt
Capital is managed considering the consolidated position, not only that of the parent entity.
6.
FINANCIAL INSTRUMENTS
a) Identification and valuation of financial instruments
The Group has various financial instruments classified as loans and receivables, mainly cash and cash
equivalents which include marketable securities, trade receivables, trade payables and borrowing, which
are measured at amortized cost using the effective interest rate method.
Considering the terms and characteristics of these instruments, the carrying amounts approximate their
fair values. In the years ended December 31, 2014 and 2013, the Group did not have any operations
involving derivative financial instruments.
In compliance with CVM Resolution 550/08, the Company has presented a table with a sensitivity
analysis of the risks associated with the Company's financial instruments that could have an impact on
the Company's profit and equity, with the most probable scenario over a three-month period as
evaluated by management, together with external consultants. Additionally, in line with CVM
Instruction 475/08 of December 17, 2008, two other scenarios were disclosed, with a deterioration of
25% and 50% in the selected risk variable (Scenarios I and II, respectively).
33
Consolidated gain (loss)
Carrying amount at
December 31, 2014
Probable
scenario (ii)
Scenario I
Scenario II
Bank Deposit Certificates (CDBs) (Note 7)
Total assets in CDI
237,002
237,002
37,560
37,560
46,950
46,950
Debentures placed (Note 16)
Bank borrowings (i) (Note 16)
(412,973)
(823,227)
(10,812)
(46,680)
(89,077)
(2,224)
(58,349)
(111,346)
(2,780)
(70,019)
(133,616)
(3,336)
Total debt in CDI
(1,247,012)
(137,981)
(172,475)
(206,971)
Net exposure in CDI
(1,010,010)
(100,421)
(125,525)
(150,631)
11.51%
11.51%
14.39%
17.27%
25%(iii)
50%(iv)
CDI rate - % p.a.
Rate variation compared to the projection
(i) Does not include the BNDES-FINAME loan, which is restated based on the Long-Term Interest Rate (TJLP), in the amount of R$ 25,528,
for which projections point to the maintenance of the rate at current levels.
(ii) Current rate variation for the estimated probable scenario.
(iii) Probable scenario variation for the scenario of a 25% deterioration.
(iv) Probable scenario variation for the scenario of a 50% deterioration.
34
56,340
56,340
7.
CASH AND CASH EQUIVALENTS
De cembe r 31,
2014
Cash
Banks
Bank Deposit Certificates (CDBs) (i)
Export Notes (ii)
Company
Dece mber 31,
2013
De cembe r 31,
2014
Consolidated
De cember 31,
2013
28
813
-
6
125
100,140
-
398
120,575
237,002
11,094
507
14,094
346,144
-
841
100,271
369,069
360,745
(i) Bank Deposit Certificates (CDBs) have an average interest rate of 100.5% of the Interbank Deposit
Certificate (CDI) rate. They are measured at amortized cost, have varying maturities, are
redeemable at any time and carry an immaterial risk of changes in value.
(ii) Export Notes refer to investments indexed to US Dollars, variations in which occur due to the
foreign exchange differences in relation to the Brazilian Real + 0.34% p.a.
8.
TRADE RECEIVABLES
a) Breakdown:
Consolidated
December 31,
2014
December 31,
2013
Sale of educational and similar books
Sale of textbooks
Language courses (i)
Franchises
Monthly tuition fees
Other
227,612
32,821
91,480
6,305
23,702
4,011
236,490
19,483
77,153
4,688
18,739
2,517
Total trade receivables
385,931
359,070
Provision for impairment
of trade receivables
(42,907)
(30,577)
Total trade receivables
Current
Non-current
343,024
328,493
336,135
6,889
318,343
10,150
(i) This refers mainly to receivables for the sale of English course books to students of the
subsidiary Ometz, for collection within 24 months, amounting to R$ 90,718 (December 31, 2013
- R$ 73,735), net of adjustments to present value of R$ 3,077 (December 31, 2013 - R$ 3,158).
The non-current amount of R$ 6,889 (December 31, 2013 - R$ 10,150) refers entirely to the
subsidiary Ometz.
The balance of trade receivables represents receivables from the domestic market, and its realizable value
does not differ significantly from the fair value of these assets.
35
Of the total trade receivables (sales of educational and similar books) at December 31, 2014, R$ 97,882
(2013 - R$ 120,155) relates to sales to the Government, mainly to the National Education Development
Fund (FNDE), an independent agency of the Ministry of Education (MEC), and the remaining amount
relates to sales to the private market.
b) The ageing analysis of trade receivables is as follows:
Breakdown
December 31,
2014
Not yet due:
Past due: (i)
Up to 30 days
From 31 to 60 days
From 61 to 90 days
From 91 to 180 days
From 181 to 360 days
Over 360 days
Consolidated
December 31,
2013
309,950
75,981
10,097
5,065
9,596
8,746
15,570
26,907
385,931
309,631
49,439
9,473
6,519
5,015
7,452
10,242
10,738
359,070
(i) Of the past-due balance at December 31, 2014, approximately R$ 35,480 (December 31, 2013 R$ 19,586) relates to the subsidiary Ometz.
Changes in the provision for impairment of trade receivables are as follow:
Balance s at January 1
Additions due to acquisition
Write-off due to sale of company (i)
Additions/reversals, net (ii)
Balance s at De ce mbe r 31
De ce mbe r 31,
2014
Consolidate d
De cembe r 31,
2013
30,577
(268)
12,598
42,907
11,241
12,066
(980)
8,250
30,577
(i) In 2014, this balance refers to the sale of Escola Satélite S.A. and, in 2013, to the sale of ETB Santos
Dumont and ETB Escolas Técnicas (Note 12.2).
(ii) At December 31, 2014, the most significant balances relate mainly to additions to and reversals of the
provision for the impairment of trade receivables in the subsidiaries Ometz and Sigma, in the amounts of
R$ 5,667 and R$ 1,743, respectively. The provision for the impairment of trade receivables was
established based on an analysis of the historical loss percentage on receivables, at an amount deemed
sufficient by management to cover probable losses on the collection of these receivables.
36
9.
INVENTORY
Consolidated
Finished products
Work in progress
Raw materials
Imports in transit
Provision for impairment
De ce mbe r 31,
2014
De ce mbe r 31,
2013
125,584
42,362
49,152
558
(28,531)
128,264
46,057
27,647
1,331
(27,295)
189,125
176,004
The changes in the provision for impairment of inventory were as follow:
Consolidated
December 31,
2014
Balances at January 1
Additions due to acquisitions
Additions/reversals, net
27,295
1,236
Balances at December 31
(i)
28,531
December 31,
2013
19,221
925
7,149 (i)
27,295
During the first half of 2013, the Company's management identified the need for an addition to the
provision for the impairment of inventory relating to the destruction of reformulated materials and
inventory adjustments.
10. TAXES RECOVERABLE
Pare nt
Consolidate d
December 31,
2014
De ce mbe r 31,
2013
December 31,
2014
De ce mbe r 31,
2013
303
10,585
3,948
477
15,313
275
10,848
1,401
460
12,984
19,779
17,053
20,147
4,823
2,539
2,299
66,640
8,699
13,575
10,394
2,642
1,401
1,717
38,428
15,313
-
12,984
-
62,173
4,467
33,689
4,739
Prepaid income tax and social contribution
Income tax on financial investments
Social Contribution on Revenues (COFINS)
Social Integration Program (PIS)
Income tax on interest on capital
Other
Current
Non-current
37
11. OTHER ASSETS
De ce mbe r 31,
2014
Advances to employees
Advances to suppliers
Copyright-related advances
Employee benefits
Commission on franchise sales
Prepayments
Advertising and publicity
Sale of equity interest (Note 12.2)
Accounts receivable (i)
Other
Current
Non-current
Cons olidate d
De ce mbe r 31,
2013
5,222
7,148
2,999
1,427
888
2,353
4,459
7,965
4,074
36,535
5,201
8,161
2,199
2,344
1,213
5,249
2,682
1,818
28,867
24,055
12,480
25,714
3,153
(i) At December 31, 2014, the amount of R$ 7,965 refers to contingencies which are the responsibility
of the sellers of the entities acquired by the Company, and which are assessed as probable losses.
As established in the private purchase and sale contracts entered into between the Company and the
former owners of the acquired entities, these owners, in certain circumstances, guarantee the
reimbursement of possible amounts that the Company may have to pay.
38
12. INVESTMENTS
Investments in subsidiaries
Parent
Ática
Scipione
Sistema de
Ensino Abril
Educação
156,240
106,246
295,438
Investments:
Total at December 31, 2012
Capital increase
Capital decrease through return to the stockholders
Carrying value adjustments
Partial split-off of equity interest
Payments of additional dividends
Payments of interim dividends
Proposed dividends
Caep
35,571
Motivo
Group
pH Group
Maxiprint
OMETZ
174,754
46,682
-
-
-
-
419,288
-
36,532
-
82,088
-
108,111
-
55,805
-
9,171
46,495
(19,928)
1,879
6,137
143,423
66,757
345,021
89,891
164,412
49,147
412,348
36,532
81,475
107,964
1,496,970
Capital increase (i)
35,713
-
-
31,820
-
-
47,500
12,600
9,500
-
137,133
-
24,090
-
-
-
-
-
-
-
-
16,099
(58,680)
(17,570)
(25,644)
Equity transactions with subsidiaries
Payments of prior years' dividends
Payments of dividends for the year
Proposed dividends
Interest on capital for the year
Equity in the results of subsidiaries:
Share of profits (losses) of subsidiaries
Amortization of intangible assets (allocation)
Fair value adjustment - FIFA contract
Deferred taxes on amortization of intangible assets (allocation) and fair value adjustment
2,533
(5,910)
(12,437)
-
(7,103)
(1,298)
-
(7,508)
-
5,467
-
(5,910)
-
57,238
(19,928)
-
(4,160)
(7,946)
2,702
21,765
(3,193)
1,086
3,692
(1,859)
632
814,931
15,000
-
13,566
(12,270)
-
-
Total
(46,482)
(2,178)
-
(17,000)
(13,000)
-
Sigma
(55,368)
(13,254)
Equity in the results of subsidiaries:
Share of profits (losses) of subsidiaries
Disposal of intangible assets (allocation)
Deferred taxes on amortization of intangible assets (allocation)
722,971
(13,228)
(646,019)
-
SGE
-
(58,680)
-
(5,133)
(25,644)
(5,287)
(894)
(1,214)
14,731
(334)
-
27,003
(3,193)
-
7,604
(1,859)
-
(6,860)
(12,646)
12,525
41
-
(36,927)
(23,259)
22,477
-
(928)
315
(223)
76
737,971
(17,000)
(13,228)
(101,850)
(13,000)
(15,432)
125,908
(46,723)
12,525
1,879
10,989
(589)
(68)
(1,011)
(1,298)
(16,166)
(768)
(3,661)
-
(551)
(1,700)
-
11,099
(3,682)
-
77,388
(57,616)
22,477
-
-
6,776
114
1,086
632
266
1,245
578
1,252
11,949
165,821
55,112
383,197
72,255
157,637
54,310
446,495
45,359
89,234
115,622
1,585,042
(i) Capital increase fully paid up by legal tender.
39
Shown below are the Company's interests in investees:
Name
Business
Equity interest
12/31/2014
31/12/2013
Editora Ática S.A.
Central de Produções GWUP S.A. (Ometz)
Educational book publishing
English school for teenagers and adults
Direct
Indirect
100.00%
28.70%
100.00%
-
Editora Scipione S.A.
Educational book publishing
Direct
Indirect
100.00%
13.39%
100.00%
-
Sistema de Ensino Abril Educação S.A.
Teaching system and preparatory courses
Direct
Indirect
100.00%
13.39%
100.00%
-
Sistema P.H. de Ensino Ltda. (pH Group)
Primary and high schools
Direct
100.00%
100.00%
Curso P.H. Ltda. (pH Group)
Preparatory courses
Direct
100.00%
100.00%
Maxiprint Gráfica e Editora Ltda.
Teaching system
Direct
100.00%
100.00%
SGE Comércio de Material Didático S.A.
Teaching system distribution
Direct
100.00%
Direct
44.52%
100.00%
Colégio Motivo Ltda. (Motivo Group)
Park Carapuceiro Serviços Ltda. (Motivo Group)
ACEL Administração de Cursos Educacionais Ltda. (Sigma)
Primary and high schools
Sale of books, stationery and uniforms and rendering of services
Interests in preschool, primary and high schools
Direct
Direct
Direct
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Central Abril Educação e Participações Ltda. (CAEP)
Nice Participações S.A.
ETB Editora Técnica do Brasil Ltda. (ETB Group)
Schools, preparatory courses, technical and professional courses
Non-operating holding
Technical and professional course system
Direct
Indirect
Indirect
100.00%
64.86%
99.99%
100.00%
64.86%
99.99%
Escola Satélite S.A.
Telepresence courses
Indirect
-
51.00%
Edumobi Tecnologia de Ensino Móvel Ltda.
Mobile teaching network
Indirect
100.00%
100.00%
Jafar Sistema de Ensino e Cursos Livres S.A. (Alfacon)
Preparatory courses for civil service exams
Indirect
51.00%
51.00%
RBBF Participações S.A. (Red Balloon Group )
Red Balloon Curso de Inglês Ltda.
Red Balloon Brasil Franchising Ltda.
English school for children and teenagers
Interests in other companies, as quotaholder or stockholder, in Brazil or
Interests in other companies, as quotaholder or stockholder, in Brazil or
Indirect
Indirect
Indirect
100.00%
100.00%
100.00%
51.00%
99.99%
100.00%
Ei Você Educação Interativa Ltda.
Professional training e-learning and free courses
Indirect
100.00%
100.00%
MSTECH Educação e Tecnologia S.A.
Educational information systems development
Associate
22.73%
22.73%
40
100.00%
Shown below is the Company's share of the total assets (including goodwill), liabilities and profit (loss)
of its subsidiaries:
Assets
At December 31, 2014
Profit or
Liabilities
loss
Assets
At December 31, 2013
Profit or
Liabilities
loss
Direct investments
Editora Ática S.A.
Amortization of goodwill - Sistema de Ensino Abril Educação S.A.
pH Group
Goodwill - pH Group
Goodwill - Maxiprint
Central Abril Educação e Participações Ltda. (CAEP)
Goodwill - CAEP
Central de Produções GWUP S.A. (Ometz) (Note 12.1) (Note 12.3)
Goodwill - Ometz
SGE Comércio de Material Didático Ltda.
Goodwill - SGE
Motivo Group (Note 35.a)
Goodwill - Motivo Group
ACEL Administração de Cursos Educacionais Ltda. (Sigma) (Note 35.b)
Goodwill - Sigma
Indirect investments
Editora Ática S.A.
Indirect investments - Caep
Nice Participações S.A. (ETB Group)
Escola Satélite S.A. (Note 12.2)
Goodwill - Satélite
Edumobi Tecnologia de Ensino Móvel Ltda.
SGE Comércio de Material Didático Ltda.
Goodwill - SGE
Jafar Sistema de Ensino e Cursos Livres S.A. (Alfacon)
Goodwill - Jafar
Red Balloon Group (Note 12.4)
Goodwill - Red Balloon Group
Ei Você Educação Interativa Ltda.
Goodwill - Ometz
Motivo Group
ACEL Administração de Cursos Educacionais Ltda. (Sigma)
766,571
316,968
501,925
611,060
265,168
520,647
123,164
759,305
31,061
42,956
70,740
2,737,283
41,956
360,246
9,118
19,661
40,420
1,947,398
(7,508)
5,467
57,238
(13,152)
27,003
(2,107)
7,604
(1,227)
14,731
(220)
(36,927)
(516)
(768)
(2,416)
(551)
(1,122)
11,099
(2,430)
54,198
88,926
74,119
35,667
5,003
425,846
186,980
266,084
107,058
27,639
113,038
292,733
123,535
336,134
87,584
3,364
12,503
615,503
759,305
360,246
105
-
-
-
759,305
360,246
199
-
-
-
759,305
360,246
199
-
-
-
2,277,915
1,080,738
503
-
-
-
17,205
4,772
-
4,857
561
-
6,401
(167)
(10)
984
-
12,445
14,662
628
49,712
3,037
9,449
87
17,991
7,755
(44)
8,234
(166)
(889)
22,098
5,170
3,342
3,558
7,632
21,184
1,345
42,231
823
839
267
2,302
10,417
75
14,723
(1,000)
(425)
(112)
(116)
2,083
(3,007)
5,280
(52)
8,475
(194)
(1,285)
15,683
(1,880)
1,683
688
25,821
423,486
30,258
42,443
58,384
1,681,216
19,557
28,030
38,152
1,557,095
55,805
9,171
46,495
(11,912)
21,765
(2,107)
3,692
(1,227)
(4,160)
(5,244)
(6,860)
(80)
(613)
(147)
104,578
12.1 Fair value of FIFA contract
As mentioned, on April 30, 2013, the Company, through its subsidiary CAEP, acquired the Ometz
Group. When measuring the fair values of assets acquired and liabilities assumed on the acquisition
date, the Company identified an advertising contract with the Fédération Internationale de Football
Association ("FIFA") for a total of R$ 54,000 with a two-year term from the date of execution. The
advertising contract comprised three components: (i) tickets to Confederation Cup matches, Brazilian
team exhibition matches, and World Cup matches, (ii) the right to display the Wise Up brand at events
mentioned in item (i) above, and (iii) assignment of the right to use the FIFA brand in advertising
campaigns run by the Company to disseminate the Wise Up brand.
41
The table below segregates the FIFA contract amounts by component and shows the fair value of each
component, as measured in a report issued by experts engaged by the Company's management:
Contract
468
10,210
43,322
54,000
Components
Match tickets
Right to display brand
FIFA rights assignment
Fair value
adjustment
(43,322)
(43,322)
Fair value
468
10,210
10,678
Amortization schedule
6/30/2013
6/30/2014 7/31/2014
(121)
(292)
(54)
(2,042)
(6,892)
(1,277)
(2,163)
(7,184) (1,331)
As a result of the adjustment to fair value of the FIFA contract, the Company's management came to
the conclusion that the portion corresponding to "FIFA rights assignment", amounting to R$ 43,322,
had a fair value of zero, due to the absence of future economic benefits from this component for Wise
Up's business. Accordingly, as this contract was recognized in the separate financial statements of the
subsidiary GWUP under prepaid expenses, as disbursements are made and amortized based on actual
advertisements, the Company made a corresponding adjustment in its consolidated financial statements
so as to reflect the fair value of zero.
12.2 On May 28, 2014, the Company, through its direct subsidiary Central Abril Educação e Participações
Ltda. (CAEP), concluded the disposal of a 51% interest in Escola Satélite S.A., for R$ 5,100, which will be
paid to the Company within five years, as contractually established. The balance receivable at December
31, 2014 is R$ 4,459.
Sale of equity
interest
Current
Non-current
1,405
3,695
5,100
Principal
Inte rest
(943)
(943)
(36)
(36)
Provision for
interest
103
235
338
Transfer
Balance
462
(462)
-
991
3,468
4,459
12.3 Corporate reorganization of GWUP (Ometz)
At October 3, 2014, the Extraordinary Stockholders' Meeting approved a capital increase in the subsidiary
Central de Produções GWUP S.A - (Ometz), amounting to R$ 300,000, fully paid up by legal tender. The
subsidiary's share capital was raised from R$ 465,370 to R$ 765,370 through a new issue of 300,000,000
registered common shares without par value, which were fully subscribed by Editora Ática S.A.
At October 27, 2014, the Extraordinary Stockholders' Meeting approved a capital increase in the subsidiary
Central de Produções GWUP S.A (Ometz), amounting to R$ 280,000, fully paid up by legal tender. The
subsidiary's share capital was raised from R$ 765,370 to R$ 1,045,370 through a new issue of 280,000,000
registered common shares without par value, which were fully subscribed by Editora Scipione S.A. and by
Sistema de Ensino Abril Educação S.A. in the same proportion.
42
The shares of GWUP (Ometz), which until October 27, 2014 were all owned by Abril Educação, are held at
December 31, 2014 as follow:
GWUP (Ometz)
Abril Educação
Editora Ática
Editora Scipione
Sistema de Ensino Abril Educação
44.52%
28.70%
13.39%
13.39%
100.00%
12.4 Acquisitions from minority stockholders - Red Balloon
At December 16, 2014, the Company, through the subsidiary Central Abril Educação e Participações S.A.
(CAEP), acquired 49% of the shares issued by RBBF Participações S.A. (Red Balloon Group) and became
owner of 100% of the shares for a consideration of R$ 61,034, of which R$ 42,464 was paid at the
acquisition date and R$ 18,570 will be paid in three installments as contractually established, within three
years from the date of acquisition.
In accordance with Brazilian accounting practices, in this type of transaction involving stockholders, the
amount of the investment to be recognized is the net book value of the acquired stake of R$ 2,354, and the
difference compared to the amount actually paid is recognized in equity as "goodwill on equity
transactions", in this case amounting to R$ 58,680.
43
13.
INTANGIBLE ASSETS
Consolidated
Goodwill based on
future profits
Balance at December 31, 2012
Additions
Additions due to acquisition of comp anies
Acquisition p rice adjustment
Write-off due to disp osal of comp anies
Write-offs
Transfers
Transfers of goodwill
Amortization
Amortization of goodwill
Additions
Acquisition p rice adjustment
Write-off due to disp osal of comp anies (Note 12.2)
Transfers
Transfers of goodwill
Fair value adjustment - Fifa contract
Amortization
Amortization of goodwill
Trademarks
and patents
Customer
portfolio
Noncompetition
agreement
Reacquired
right
Textbook
portfolio
Computer
systems
Licenses
Internallygenerated software
development costs
Other
452,526
237,369
255,131
5,200
5,967
18,580
10,771
732,913
656
8,278
-
1
223,003
(2)
(200)
100
(7,170)
-
3,810
186,526
(517)
(30,815)
24,849
(820)
(4,036)
(2,685)
2,203
15,767
229
(605)
(7,120)
4,077
106
1,792
(3,586)
(14)
453,101
414,135
25,193
3,282
29,054
13,146
1,484
81
(1,024)
(29,452)
-
600
(295)
35,749
(40,382)
3,596
(6,672)
2,727
51
(3,970)
(1,576)
(6,684)
5,379
(393)
11,204
(5,733)
(14)
224
(1,484)
-
422,706
409,807
22,117
19,602
23,589
22,151
2,874
1,194,373
(2,050)
(2,792)
(5,923)
14,354
1,197,962
44
(1,790)
1,492
Total
2,844
4,312
366
993,066
(1,360)
-
12,515
(16)
(1,792)
-
1,426
(6)
(100)
(296)
-
24,032
1,183,164
656
(24)
(200)
(5,847)
(44,670)
15,019
1,390
2,150,177
17,766
(10,634)
-
2,330
(846)
-
224
29,107
(2,345)
(4,209)
621
14,354
(9,639)
(55,542)
2,122,524
Customer
portfolio
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
Amortization rates
- % p.a.
- Anglo % p.a.
- PH % p.a.
- M axiprint % p.a.
- SGE % p.a.
- Red Balloon % p.a.
- Satélite % p.a.
- Jafar % p.a.
- Wise Up % p.a.
- M otivo % p.a.
- Sigma % p.a.
5.33%
8.57%
21.43%
31.57%
10.00%
10.00%
6.06%
6.56%
Noncompetition
agreement
Reacquired
right
Textbook
portfolio
Computer
systems
Licenses
50%
20%
20%
20%
33%
20%
50%
20%
20%
20%
30.03%
-
18%
20%
16.67%
-
15%
-
33.33%
-
A summary of goodwill by company is presented below:
2014
Editora Ática S.A. (Publishing houses)
Editora Scipione S.A. (Publishing houses)
Curso P.H. Ltda.
Sistema P.H. de Ensino Ltda.
Nice Participações S.A. (ETB)
Escola Satélite S.A.
SGE Comércio de Material Didático S.A.
Jafar Sistema de Ensino e Cursos Livres S.A.
RBBF Participações S.A.
Ometz Group
Motivo Group
Sigma Group
MSTech
10,310
3,312
231,178
48,488
96,951
23,223
4,232
23,677
1,860
832
566,154
73,701
95,528
18,516
1,197,962
2013
10,310
3,312
231,178
48,488
96,951
23,223
4,232
2,792
23,677
1,860
15,437
551,801
68,892
91,654
20,566
1,194,373
Goodwill impairment testing
The Group has reassessed the recovery of the carrying amount of goodwill using the concept of value in use,
through the methodology of discounted cash flow from cash-generating units which are representative of the
entirety of tangible and intangible assets used to develop and sell its services. The determination of value in
use involves the use of assumptions, judgments and estimates of cash flow for a five-year period, and in
perpetuity from the 5th to the 10th year, such as the growth rates of revenue, costs and expenses, investments,
and discount rates. Assumptions regarding the projections of future cash flow increases for the five year
period are based on the Group's business plan, as approved by management, and on comparable market data,
and represent management's best estimate of the economic conditions that are expected to exist during the
economic lives of the various cash-generating units. Future cash flow was discounted based on the weighted
average cost of capital.
45
The main assumptions used to calculate value in use at December 31, 2014 were as follow:
Gross margin
Average growth
rate (i)
Discount rate
(i)
Publishing houses
65.00%
Anglo
73.20%
5.50%
12.93%
5.50%
12.93%
P.H.
Maxiprint
67.40%
74.70%
SGE
60.80%
RBBF
74.00%
Wise Up
94.90%
Motivo
69.20%
Sigma
64.40%
5.50%
12.93%
5.50%
12.93%
5.50%
12.93%
5.50%
12.93%
5.50%
12.93%
5.50%
12.93%
5.50%
12.93%
Growth rate used to extrapolate cash flow after the estimated period.
At December 31, 2013, the assumptions used in the calculation were as follow:
Gross margin
Average growth rate
(i)
Discount rate
Publishing houses
67.10%
Anglo
73.20%
5.00%
13.10%
5.00%
13.10%
P.H.
Maxiprint
SGE
67.40%
75.90% 36.90%
5.00%
13.10%
5.00% 5.00%
13.10% 13.10%
RBBF
Wise Up
64.20%
96.90%
5.00%
13.10%
5.00%
13.10%
Motivo
72.10%
Sigma
64.20%
5.00%
13.10%
5.00%
13.10%
The fixed discount rate used corresponds to the average rate of the Company's debts, which reflects
segment-specific risks.
At December 31, 2014 and 2013, management identified no impairment losses for goodwill and other
intangible assets with indefinite useful lives, and no indication of impairment of assets with finite useful
lives. Additionally, management does not expect material deviations from the assumptions used for the
impairment testing.
46
14. PROPERTY AND EQUIPMENT
Annual
de pre ciation
rate s
Land
Buildings
Facilities
Furniture and fittings
Vehicles
Computer equipment
Other
Leasehold improvements
Construction in progress
(i)
3%
20%
27%
10%
33.33%
40%
20%
10%
-
Write -off due
to disposal of
company (i)
De pre ciation
De pre ciation
goodwill
Consolidate d
Ne t book
Transfe rs
value at
12/31/2014
3,898
37,833
2,195
8,890
4,877
2,415
5,046
305
10,030
5,667
560
1,002
3,307
8,610
6,133
42
7,393
14,301
(383)
(23)
(339)
(20)
(8)
(118)
-
(797)
(54)
(133)
(47)
-
(79)
(929)
(1,253)
(986)
(2,118)
(3,392)
(16)
(2,400)
-
(2,073)
-
11,405
182
290
791
17
2,661
(15,967)
3,898
35,681
13,231
7,641
7,411
8,568
8,425
340
17,519
4,001
81,156
41,348
(891)
(1,031)
(11,173)
(2,073)
(621)
106,715
Refers to the sale of Escola Satélite S.A. (Note 12.2)
Annual
depreciation
rates
Land
Buildings
Facilities
Furniture and fittings
Vehicles
Computer equipment
Other
Leasehold improvements
Construction in progress
(i)
(ii)
Ne t book
value at AdditionsWrite -offs
12/31/2013
3%
20%
27%
10%
33.33%
40%
20%
10%
-
Net book
value at AdditionsWrite-offs
12/31/2012
Additions due
to acquisition
of companies
(i)
Consolidated
Net book
Write-off
due to
disposal of
companies
Depreciation
Depreciation
goodwill
22
540
1,210
1,692
1,314
2,719
194
3,855
3,679
(887)
(7)
(244)
(37)
(731)
-
1,496
5,417
63
1,320
1,790
9
721
86
739
-
(60)
(13)
(14)
(87)
(24)
(2)
-
(26)
(290)
(1,157)
(707)
(3,158)
(1,922)
(13)
(1,584)
-
(2,051)
-
67,304
15,225
(1,906)
11,641
(200)
(8,857)
(2,051)
47
value at
12/31/2013
2,402
34,471
1,973
8,417
2,241
4,494
3,652
793
7,187
1,674
Refers to the acquisition of subsidiaries Ometz, Motivo Group and Sigma.
Refers to the sale of subsidiaries ETB Santos Dumont and ETB Escolas Técnicas.
Transfers
(31)
(118)
(165)
314
-
3,898
37,833
2,195
8,890
4,877
2,415
5,046
305
10,030
5,667
81,156
Management did not identify any indication of impairment at December 31, 2014, and accordingly it
was not necessary to calculate the impairment of these assets.
At December 31, 2014 and 2013, the Company did not have qualifying assets or credit operations
eligible for the capitalization of interest on its property and equipment.
15. TRADE AND OTHER PAYABLES
Parent
Domestic suppliers (i)
Foreign suppliers
Salaries and social charges
Advances from customers
Deferred income (ii)
Copyrights payable
Other payables (iii)
Current
Non-current
Consolidated
December 31,
2014
274
5,988
713
21,698
28,673
December 31,
2013
5,778
6,647
18,642
31,067
December 31,
2014
134,536
11,064
77,974
23,578
3,868
25,737
32,504
309,261
December 31,
2013
71,848
11,102
72,406
24,429
7,763
19,096
31,154
237,798
17,729
10,944
30,781
286
296,593
12,668
232,280
5,518
(i) The balance of domestic suppliers refers mainly to the purchase of raw materials (paper), with
average payment terms of 362 days for purchases in the domestic market and 180 days for the
foreign market (2013 - 180 days for domestic and foreign market). At December 31, 2014, the
balance of R$ 141,574 is already net of the present value adjustment of R$ 6,598.
(ii) This refers to income from franchises of the subsidiary Ometz amounting to R$ 3,868 (2013 R$ 7,763), which was charged for the continuous utilization of contractually-assigned rights or due to
other services rendered during the agreed-upon period, and is recognized as income when the
services are rendered or the rights are exercised. This income is deferred and recognized in the
statement of income on the accrual basis, on average over five years.
(iii)These mainly refer to the acquisition of the non-controlling interest in Ometz amounting to
R$ 21,500 (December 31, 2013 - R$ 18,642).
48
16. BORROWING
Consolidated
December 31,
2013
Borrowing
Payment of
principal
Payment of
interest
Foreign
exchange
variation
Provision
for interest
Debenture
transaction
cost
Transfer
Balance
before
elimination
Elimination (i)
December 31,
2014
Current
Debentures placed
BNDES - FINAME (i)
Bank borrowings
In foreign currency:
BNDES - FINAME (i)
65,070
140,000
(695,000)
(83,890)
89,077
-
16,145
10,979
1,985
158,000
(15,296)
(168,426)
(3,067)
(2,391)
2,667
2,224
-
(1,110)
-
500,885
15,032
-
15,032
10,444
10,426
12,878
10,812
-
12,878
10,812
-
-
(360)
(19)
14
69
1,056
760
-
760
92,194
299,985
(879,082)
(89,367)
93,982
69
(1,110)
522,811
39,482
-
39,482
638,308
975,000
-
7,544
-
(4,228)
(500,885)
1,115,739
23,096
10,427
312
-
(19)
-
-
-
-
(11,499)
(10,427)
11,890
-
671,831
975,312
(19)
-
7,544
-
(4,228)
(522,811)
1,127,629
(307,544)
820,085
764,025
1,275,297
(879,101)
101,526
69
(5,338)
1,167,111
(307,544)
859,567
Non-current
Debentures placed
In local currency:
BNDES - FINAME (i)
Bank borrowings
-
(89,367)
-
-
(307,544)
-
808,195
11,890
-
(i) Refers to the issue of private debentures of the subsidiary Editora Ática, which were subscribed by the subsidiary GWUP (Ometz) (Note 32.2).
16.1 The maturities of long term borrowing and debentures at December 31, 2014 are as follow:
Maturity
2016
2017
2018
2019
Balance before
elimination
Elimination
Balance after
elimination
% of total after
elimination
5,712
317,816
478,657
325,444
(153,757)
(153,787)
5,712
164,059
324,870
325,444
0.70%
20.01%
39.61%
39.68%
1,127,629
(307,544)
820,085
100.00%
49
16.2 Debentures
The Third Issue of Debentures of the subsidiary Sistemas de Ensino Abril Educação S.A., the Second Issue of Debentures of the subsidiary Editora
Scipione S.A., and the Third Issue of Debentures of the subsidiary Editora Ática S.A. were carried out on October 31, 2014. The debentures are a single
series, registered and book-entry, not convertible into shares, under the terms of CVM Instruction 476, totaling 815,000 at a unit value of R$ 1,000.00.
The proceeds from these issues were used to redeem all outstanding debentures of the respective subsidiaries and for working capital purposes. The
issues of Editora Scipione S.A. and Sistema de Ensino Abril Educação S.A. were also intended to raise the share capital of Central de Produções GWUP
S.A., which used the proceeds to redeem all of its first issue debentures outstanding.
16.3 Private debentures
The Second Issue of Debentures of the subsidiary Editora Ática S.A. was carried out on October 13, 2014. The debentures are in two series, registered,
private and not convertible into shares, totaling R$ 300,000 (three hundred million Reais), subscribed by the subsidiary Central de Produções GWUP
S.A. The proceeds from this issue were used for the ordinary management of the subsidiary's activities. The first series of debentures will mature on
April 30, 2017 and the second series on April 30, 2018, subject to CDI + average interest rate of 1.65% p.a.
The main conditions are presented in the table below:
Issuer
Issue
Date of
issue
Grace
Maturity
period
Editora Ática S.A.
1st
9/30/2013
9/30/2018 36 months
1st
9/30/2013
9/30/2018 36 months
Sistemas de Ensino Abril Educação S.A.
2nd
6/18/2012
6/18/2017 24 months
Central de Produções GWUP S.A.
1st
4/22/2013
4/22/2018 36 months
Interest
payment
Semiannual
interest
Semiannual
interest
Semiannual
interest
Semiannual
interest
50
Financial
charges
Type of issue
CDI + 1.50% p.a.
Public ICVM 476
140,000
CDI + 1.50% p.a. Public ICVM 476
60,000
215,000
280,000
695,000
Total issue (R$)
Redeemed early
Date of early
redemption
11/10/2014
11/10/2014
11/11/2014
11/11/2014
Effective
Issuer
Issue
Date of
issue
Maturity
Grace
period
Interest
payment
Financial
charges
Type of issue
Total issue (R$)
Debentures
Editora Ática S.A.
3rd
10/31/2014
7/31/2019 33 months
2nd
10/31/2014
7/31/2019 33 months
Sistemas de Ensino Abril Educação S.A.
3rd
10/31/2014
10/31/2019 36 months
2nd
10/13/2014
4/30/2017 30 months
4/30/2018 42 months
Semiannual
interest
Semiannual
interest
Semiannual
interest
CDI + 1.70% p.a.
Public ICVM 476
Public ICVM 476
CDI + 1.70% p.a.
140,000
200,000
Public ICVM 476
CDI + 1.70% p.a.
475,000
815,000
Private debenture
Editora Ática S.A.
Interest at
maturity
CDI + 1.65% p.a.
Private
Current
Non-current
51
150,000
150,000
300,000
1,115,000
140,000
975,000
1,115,000
To comply with the covenants established in the debenture issues, the guarantor Abril Educação S.A.
is required to maintain the following financial ratios during the effective period of the debentures.
(i)
Leverage ratio equal to or lower than 3.0 at December 31, 2014; 3.5 at December 31, 2015
and December 31, 2016; 3.0 at December 31, 2017; and 2.5 from December 31, 2018 and
subsequent years. The leverage ratio is the ratio between net debt and Adjusted Earnings
before Interest, Taxes, Depreciation and Amortization, including amortization of the
publishing investment and write-offs resulting from the impairment of assets (Adjusted
EBITDA). Adjusted EBITDA is calculated by incorporating the amounts of EBITDA for the
last 12 months of schools and teaching systems that have been acquired by Abril Educação
S.A. or by any of its direct or indirect subsidiaries; and
(ii)
Interest coverage ratio equal to or higher than 2.0 from December 31, 2014 and subsequent
years. Interest coverage ratio is the ratio between Adjusted EBITDA and interest expenses for
the previous 12 months.
At December 31, 2014, the Company was in compliance with all applicable financial covenants.
16.3 BNDES - FINAME
In May 2010, the subsidiaries Editora Ática S.A. and Editora Scipione S.A. obtained a credit line
through FINAME (financing from the National Bank for Economic and Social Development
(BNDES) for the purchase of machinery and equipment) from the financial agent Itaú BBA S.A.
amounting to R$ 10,000 and R$ 9,500, respectively, in order to finance the production of educational
books, subject to interest ranging from 3.80% to 4.80% p.a. and Long Term Interest Rate (TJLP).
The principal matures in June 2015. At December 31, 2014, the balances of these transactions were
R$ 1,389 at Editora Ática S.A. and R$ 1,341 at Editora Scipione S.A.
In June 2012, the subsidiaries Editora Ática S.A. and Editora Scipione S.A. obtained a credit line
through FINEM (BNDES financing for projects) from the financial agent Bradesco amounting to
R$ 23,877 and R$ 15,621, respectively, in order to fund expenditure for the Publishing and Printing
Plan, subject to interest ranging from 2.75% to 3.25% p.a. + TJLP + 1% p.a. The principal matures in
January 2018. At December 31, 2014, the balances of these transactions were R$ 14,667 at Editora
Ática S.A. and R$ 8,118 at Editora Scipione.
16.4 Bank borrowing
Bank borrowing refer to credit facilities for working capital purposes of the subsidiaries Editora
Ática S.A. and Editora Scipione S.A., subject to CDI + 1.8% p.a., to be repaid in six semiannual
installments from April 3, 2013 to October 2015.
This loan agreement contains restrictive covenants that may trigger the early maturity of the debt
balance. These covenants require compliance with certain financial ratios, to be calculated based on
the annual consolidated financial statements of the Company; prepayments through the sale of assets;
restrictions on the distribution of dividends and other transactions with related parties or investments
in other companies.
52
(i)
Maximum leverage ratio for the Company of 3.5 for 2013, 3.0 for 2014, and 2.5 for the fiscal
years from 2015 – the leverage ratio is the ratio between net debt (except indebtedness under
the REFIS IV Program) and Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA); and
(ii)
Minimum interest coverage ratio of 1.5 for 2013 and 2.0 from 2014 - interest coverage ratio is
the ratio between EBITDA and interest expenses (except for indebtedness under the REFIS
IV Program) for the previous 12 months, calculated based on the Guarantor's annual
consolidated financial statements.
At December 31, 2014, the Company was compliant with all applicable covenants, which are annual.
At December 31, 2014, the average rate for borrowing was CDI + 1.73% p.a. (spread) and for
BNDES-FINAME, the rate is TJLP + 3.65% p.a.
17. TAXES AND CONTRIBUTIONS PAYABLE
IRRF
COFINS
ISS
REFIS and PAES (i)
PIS
INSS
Other
Current
Non-current
(i)
December 31,
2014
December 31,
2013
Consolidated
Consolidated
496
2,884
1,703
874
650
415
287
7,309
6,558
751
531
1,447
1,457
2,954
339
399
177
7,304
7,304
-
REFIS and PAES
In November 2009, the Company and its subsidiaries enrolled in the Tax Recovery Program
established by Law 11,941/09 and Provisional Measure 470/09, to settle their tax liabilities through a
special installment payment plan for tax and social security obligations. The changes in the balances
of this program can be summarized as follow:
53
Consolidated
Balance payable at December 31, 2012
6,614
Payments from January to December 2013
Interest from January to December 2013
(3,940)
280
2,954
Additions
Payments from January to December 2014
Interest from January to December 2014
1,764
(3,956)
112
874
Current
Non-current
123
751
As a consequence of the enrollment in the REFIS IV Tax Recovery Program, the Company and its
subsidiaries must pay the installments on the due dates, as well as waiving their legal claims and any
pleas of rights on which the related lawsuits are based, subject to the immediate rescission of the
installment program and, consequently, the loss of the associated benefits. In accordance with Law
11,941/09, no guarantees were required to enter this program.
The installment period is 60 months and the payments are being made on time, in cash, since tax
losses are not being used to offset the liability. The amounts are subject to Brazil's core interest rate
(SELIC).
On August 25, 2014, the Company and its subsidiaries enrolled in the Tax Recovery Program
established by Law 12,996/14 and Provisional Measure 651/2014, to settle their tax liabilities through
a special installment payment plan for tax and social security obligations.
The general conditions for this installment program can be summarized as follow:
a) Enrollment in the World Cup Tax Recovery Program ("REFIS da Copa") in 2014, already
considering the installment-related benefits:
Company
Nature of tax
Principal
Sistema de Ensino
Abril Educação
Corporate Income Tax (IRPJ) – unrecognized tax
incentive
Sigma (*)
Fine – non-fulfillment of tax obligations
GWUP (*)
INSS - Employer's contribution on remuneration
of individual taxpayers
Fine
Interest
Total
477
49
843
1,369
-
535
232
767
295
-
187
482
772
584
1,262
2,618
(*) Processes which are the responsibility of sellers of the entities acquired by the Company, payments of which were
made in full at the date of enrollment in the installment program, that is, August 25, 2014.
54
As a consequence of the enrollment in the "REFIS da Copa" Tax Recovery Program, the Company
and its subsidiaries must pay the installments on the due dates, as well as waiving their legal claims
and any plea of rights on which the related lawsuits are based, subject to the immediate rescission of
the installment program and, consequently, the loss of the associated benefits. In accordance with
Law 11,941/09, no guarantees were required to enter this program.
The installment period for Sistema de Ensino Abril Educação S.A. is 30 months and the payments are
being made on time, in cash, with the possibility of making payments using tax losses. The amounts
from the enrollment on August 25, 2014 are subject to Brazil's core interest rate (SELIC). This
installment plan benefits from a reduction of 90% on arrears and assessment penalties, 35% on
individual fines, 40% on arrears interest and 100% on legal charges.
Management is awaiting the ratification of the consolidation of the debts of the Company and its
subsidiaries by the end of 2014.
18. PROVISION FOR CONTINGENCIES AND JUDICIAL DEPOSITS
The Company and its subsidiaries are parties to judicial and administrative proceedings involving labor,
civil and tax matters arising from the normal course of their business.
The provision for contingencies was recognized taking into account the evaluation of probable losses by
the Company's legal advisors, the nature of the proceedings and past experience.
The Company's management, based on the opinion of its legal advisors, believes that the provision for
contingencies presented below is sufficient to cover any losses on judicial proceedings:
a)
Breakdown:
De cember 31,
2014
Lawsuits
Tax
Labor
Civil
Consolidate d
De cember 31,
2013
17,244
24,641
2,764
13,925
22,318
3,993
44,649
40,236
At December 31, 2014, a significant portion of the provision for contingencies relates to Ometz, amounting
to R$ 25,554 (December 31, 2013 - R$ 26,846), of which R$ 11,914 (December 31, 2013 - R$ 13,842)
refers to tax contingencies, R$ 13,436 (December 31, 2013 - R$ 12,966) to labor contingencies, and
R$ 204 (December 31, 2013 - R$ 38) to civil contingencies, most of which have already materialized. The
Company has guarantees from the sellers in the purchase and sale contract, which cover all of these
amounts, to be recognized as incurred.
55
a)
Changes:
Tax
Contingencies
Judicial deposit reducing the provision
Balance at De cember 31, 2013
13,994
(69)
13,925
Monetary restatement and interest
Provision
Provision - former owners
Write-off of provision:
- due to payment
- due to reversal
Labor
Consolidated
Civil
Total
22,318
22,318
3,993
3,993
185
381
5,246
409
5,829
2,664
12
989
55
(2,493)
27
(6,606)
40,305
(69)
40,236
606
7,199
7,965
(79)
(2,206)
(52)
(11,305)
Balance at De cember 31,2014
17,244
24,641
2,764
44,649
Contingencies
Former owners' guarantee (Note 11)
12,067
5,246
(69)
22,006
2,664
-
2,678
55
-
36,751
7,965
(69)
17,244
24,641
2,764
44,649
Consolidated
Civil
Total
Tax
Labor
4,726
(69)
4,657
5,619
(1,947)
3,672
2,914
(1,252)
1,662
13,259
(3,268)
9,991
Monetary restatement and interest
Addition due to acquisition of company (i)
Write-off due to disposal of company (ii)
Provision
Write-off of provision:
- due to payment
- due to reversal
- due to transfer
487
14,021
(28)
153
121
14,120
(563)
4,961
203
1,714
(4,024)
(1,341)
(485)
(2,796)
1,341
608
28,344
(591)
6,828
(1,144)
(6,999)
-
Withdrawal (judicial deposit)
13,925
1,947
22,318
1,252
3,993
3,199
40,236
Contingencies
13,994
(69)
22,318
-
3,993
-
40,305
(69)
13,925
22,318
3,993
40,236
Contingencies
(659)
(179)
-
The provision for contingencies is calculated on the basis of the probable amount required to settle an
obligation at the reporting date, and is subsequently updated for monetary restatements, when
applicable, and as such is stated at its present value.
Based on the opinion of its legal advisors, management adjusted the estimated losses on lawsuits,
taking into account the issues and the current status of each case.
56
b) The nature of the lawsuits can be summarized as follows:
Labor lawsuits
The Abril Educação Group is a party to labor claims, which refer mainly to proportional vacation
pay, salary differences, night-shift premiums, overtime and social charges, among others. There
are no individual claims of a significant amount which require specific disclosure.
Civil and tax lawsuits
There are no individual claims of a significant amount requiring specific disclosure.
18.1 Judicial deposits recorded in non-current assets are as follow:
De ce mbe r 31,
2014
De cember 31,
2013
Tax
Labor
Civil
7,281
1,267
540
9,088
4,675
992
695
6,362
Judicial deposits
Judicial deposits reducing the provision
9,157
(69)
6,431
(69)
9,088
6,362
Judicial deposits
18.2 In management's opinion, all judicial and administrative proceedings have been properly provided for,
and for those where no provision has been recorded, including litigation for which an unfavorable
outcome is considered possible by the legal advisors, management believes that favorable outcomes
are more likely. The contingencies under discussion with the courts, classified as possible losses, for
which no provision has been recorded, are as follow:
Lawsuits (Possible Loss)
Dece mber 31,
2014
Tax
Labor
Civil
Dece mber 31,
2013
69,873
43,120
68,460
63,514
16,794
68,180
181,453
148,488
At December 31, 2014, a substantial portion of civil claims representing a possible risk of loss, amounting
to approximately R$ 60,686 (2013 - R$ 60,000), refers to five lawsuits associated with the termination of
contracts with distributors. At December 31, 2014, in addition to the monetary restatements of the
ongoing lawsuits, one of the lawsuits was judged groundless, which resulted in a reduction of R$ 9,300 in
possible contingencies.
57
In 2014, the amounts related to labor lawsuits increased by R$ 26,326, of which R$ 7,967 was related to
new contingencies classified as possible losses involving Central de Produções GWUP S.A. (Ometz) and
R$ 9,904 was related to new contingencies classified as possible losses and monetary restatements
involving Sistema de Ensino Abril Educação S.A. Most of these lawsuits are brought by former
administrative employees and teachers, principally claiming overtime pay, salary differences, FGTS, 13th
month’s salary, vacation pay and an additional one third of their monthly pay, equitable/adjusted salary
scale.
19. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION
Deferred income tax and social contribution assets and liabilities at December 31, 2014 are as follow:
Consolidated
Deferred tax assets
Tax loss carryforwards (i)
Provision for contingencies
Provision for impairment of trade receivables
Provision for profit sharing
Provision for obsolescence
Provision for return of products
Provision for restructuring costs
Stock option plan
INSS on stock options granted
Copyright-related losses
Temporary differences
Deferred tax liabilities
Goodwill on investments (i)
Tax-deductible goodwill
Fair value adjustment
2014
(Debited)/
credited to
profit or
loss
86,896
8,042
5,307
2,024
670
104
5,588
1,144
436
(232)
109,979
48,014
(972)
2,045
(70)
(160)
104
5,588
1,144
23
(4,177)
51,539
-
(4,631)
547,970
(675,643)
(1,956)
(134,260)
(78,713)
19,588
(7,642)
(1,517)
(68,284)
7,394
7,394
Allocation
of fair value
adjustment
Writeoff
(63)
(63)
Reclassification
(26)
(26)
2013
38,882
9,014
3,262
2,094
160
670
413
3,945
58,440
(4,631)
626,683
(695,168)
248
(413)
(73,281)
2014
2013
Deferred tax assets to be recovered after 12 months
109,979
109,979
58,440
58,440
Deferred tax liabilities to be settled after 12 months
(134,260)
(134,260)
(73,281)
(73,281)
(i) At December 31, 2014, the increase in tax losses refers mainly to the subsidiary Ometz, amounting to
R$ 45,463.
58
Consolidated
Deferred tax assets
Tax loss carryforwards
Provision for profit sharing
Provision for bonuses
Provision for obsolescence
Provision for return of products
Copyright-related losses
Deferred tax liabilities
Goodwill on investments (i)
Fair value adjustment
Tax-deductible goodwill
2013
(Debited)/credit
ed to profit or
loss
38,882
9,014
3,262
2,094
160
670
413
3,945
58,440
11,286
1,373
315
971
(966)
(155)
278
(213)
(926)
11,963
4,727
2,034
315
1,784
8,860
27,596
2,914
913
1,123
966
392
626
3,087
37,617
(4,631)
4,506
(72,743)
(413)
(73,281)
(33,838)
60
(33,778)
4,506
(160)
4,346
(4,631)
(38,905)
(313)
(43,849)
2013
(i)
Acquisition
2012
2012
Deferred tax assets to be recovered after 12 months
58,440
58,440
37,617
37,617
Deferred tax liabilities to be settled after 12 months
(73,281)
(73,281)
(43,849)
(43,849)
Refers to the balance of deferred income tax and social contribution liabilities associated with the
already utilized tax benefits of goodwill arising on the acquisitions of Editora Ática and Editora
Scipione, amounting to R$ 10,312 and R$ 3,312, respectively.
The realization of deferred income tax and social contribution assets on tax losses and temporary
differences is related to the period in which the companies estimate they will earn sufficient taxable profits
to utilize these balances, as well as to realize the related temporary differences based on which the deferred
tax assets or liabilities were recognized. In the specific case of tax-deductible goodwill, the deferred tax is
expected to be realized within about seven to ten years.
19.1 Law 12,973 of 2014
Provisional Measure (MP) 627 was converted into Law 12,973/14 on May 13, 2014, ratifying the
cancellation of the Transitional Tax System (RTT) from 2015. Early adoption is allowed.
The Group finalized an analysis of the effects of the adoption of this law both on its financial statements
and on its internal control structure. Considering that the results of this analysis did not indicate material
tax effects, the Group decided not to adopt the rules and provisions of the new law early, in fiscal year
2014.
59
20. PRIVATE PENSION AND RETIREMENT PLANS
Some of the Company's subsidiaries have been sponsors of the private pension fund Abrilprev Sociedade
de Previdência Privada ("Abrilprev") since December 2007. The main purpose of Abrilprev is to
supplement the official social security benefits. At December 31, 2014, the Company and its subsidiaries
made contributions to Abrilprev amounting to R$ 1,950 (2013 - R$ 1,717). The sponsors' contribution is
currently 2.0792 % (2013 - 1.9742%), and joining the plan is optional for all employees of the sponsors.
The Abrilprev pension plan is a defined contribution plan and, therefore, no provision for potential
actuarial liabilities is required. The Company and its subsidiaries have no further payment obligations once
the contributions have been paid.
21. STOCK OPTION PLAN
The Special Incentive Program for the Company's Officers and Executives, which was approved by the
Company's stockholders at the Extraordinary General Meeting held on May 24, 2011 ("Program 1"),
establishes the general conditions for granting of unit options ("Options") under the terms of Article 168,
paragraph 3 of the Brazilian Corporation Law.
Grant date
Number of shares granted (*)
Price of share at the grant date (*) - R$
Exercise price of share (*) - R$
Special Incentive Program for the Company's Officers and Executives ("Program 1")
5/24/2011
2,234,940
6.67
0.01
Vesting period
50% as from the grant date
25% 12 months after the initial public offering of shares
12/15/2011
675,000
6.67
0.01
4/3/2012
111,300
16.23
0.01
(*) The number and price of shares were updated because of the decision regarding the Company's migration to the BM&FBOVESPA “Novo Mercado” segment, taken at an Extraordinary General Meeting, according
to which the Units representing the Company's common and preferred shares were cancelled as from September 26, 2014 and all the Company's preferred shares were converted into common shares.
The Stock Option Plan approved by the Board of Directors on February 15, 2013 ("Program 2") establishes
the general conditions for the granting of stock options.
Grant date
Vesting period
Stock Option Plan ("Program 2")
2/15/2013
383,160
16.48
9.67
4/9/2013
186,843
16.48
9.67
25% 12 months after the grant date; 25% 24 months after the grant date; 25% 36
months after the grant date; and 25% 48 months after the grant date.
(*) The number and price of shares were updated because of the decision regarding the Company's migration to the BM &FBOVESPA “Novo
M ercado” segment, taken at an Extraordinary General M eeting, according to which the Units representing the Company's common and
preferred shares were cancelled as from September 26, 2014 and all the Company's preferred shares were converted into common shares.
The Extraordinary Incentive Plan for the Company's Executives, approved at the Extraordinary General
Meeting held on April 28, 2014 ("Program 3"), is a plan under which the Company may choose at its
discretion between granting the incentive award in cash or in shares of its issue to the beneficiaries of the
program against the shares acquired by them with their own funds, pursuant to the terms and conditions of
the Plan.
60
Extraordinary Incentive Plan for the Company's Executive ("Program 3")
4/28/2014
Grant date
993,594
9.59
0.01
33.4% 24 months after the grant date; 33.3% 36 months after the grant date; and
Vesting period
33.3% 48 months after the grant date.
(*) The number and price of shares were updated because of the decision regarding the Company's migration to the BM &FBOVESPA
“Novo M ercado” segment, taken at an Extraordinary General M eeting, according to which the Units representing the Company's
common and preferred shares were cancelled as from September 26, 2014 and all the Company's preferred shares were converted into
common shares.
In December 2014, the Remuneration Committee approved a Remuneration Plan ("Program 4") under
which the officers and employees of the Company and its direct or indirect subsidiaries are given the
opportunity to become stockholders of the Company, resulting in greater alignment of the interests of the
Company's management with those of stockholders, and allowing the Company and its subsidiaries to
attract and retain high-performing professionals.
In view of the nature of the plan, which is tied to the performance of the Company and to the performance
of the beneficiaries, this expense was recognized in the period between this fiscal year (the year in which
the corporate and individual targets were attained) and the effective date of transfer of each lot of shares to
the beneficiaries, according to CPC 10.
On March 19, 2015, the new Remuneration Plan was approved at an Extraordinary General Meeting.
Remuneration Plan ("Program 4")
12/31/2014
Grant date
Number of shares granted
Price of share at the grant date - R$
Exercise price of share - R$
Vesting period
2,612,577
11.37
3 years as from 2015
The total amount of shares that can be acquired under the Programs is subject to a global limit on the
Company’s shares, to be observed upon the implementation of the Programs, already considering any
incentive instruments for the officers and employees of the Company or its direct or indirect subsidiaries,
when such instruments are based on shares or units issued by the Company. The proposal of the Programs
is to set this limit at 3% of the share capital of the Company, considering, for purposes of the calculation of
this limit, any share-based incentives for executives that have been previously approved.
61
The changes in the stock option plans are as follow(*):
Program 1
Program 1
Program 2
Program 3
Program 4
Year
2011
2012
2013
2014
2014
Options granted
2,909,940
111,300
570,003
993,594
2,612,577
7,197,414
Options
cancelled
381,480
83,475
273,222
248,118
986,295
Options
exercised
2,363,460
27,825
2,391,285
Options
exercisable
165,000
296,781
745,476
2,612,577
3,819,834
(*)The numbers and prices of shares were updated to reflect the decision regarding the Company's migration to the BM&FBOVESPA "Novo
Mercado" segment, taken at an Extraordinary General Meeting, according to which the Units representing the Company's common and
preferred shares were cancelled from September 26, 2014 and all the Company's preferred shares were converted into common shares.
In the period ended December 31, 2014, the Company and its subsidiaries calculated and recognized
expenses amounting to R$ 16,372 (December 31, 2013 - R$ 4,504), presented as "General and
administrative expenses" within the statement of income, with an offsetting entry to "Stock options
granted" within equity.
22. SHARE CAPITAL
a) Share capital
At December 31, 2014 and 2013, the Company's fully subscribed and paid-up capital is R$ 852,868,
comprising 261,257,651 common shares (2013 - 261,257,651, of which 135,799,807 are common shares
and 125,457,844 are preferred shares), all registered, book entry and without par value. The Company's
capital may be increased up to the limit of 347,952,971 common shares, without amendment to the bylaws,
following a resolution of the Board of Directors, which will set the issue price, the number of common
shares to be issued and other conditions for the subscription and payment of shares within the authorized
capital.
On August 7, 2014, the acquisition of the 32,880,263 common shares and of 19,142,468 preferred shares
issued by the Company for Thunnus Participações S.A. was concluded, the latter being an entity controlled
by certain investment funds and portfolios under the discretionary management of Tarpon Gestora de
Recursos S.A. ("Sociedade Tarpon"), in accordance with the terms established by the Contract for the
Purchase and Sale of Shares entered into on June 4, 2014 by ABRILPAR Participações Ltda. and the Civita
Family ("ABRILPAR Block") as the sellers and by Sociedade Tarpon as the buyer. Accordingly, on that
date, ABRILPAR Block became the owner of 37.72% of the voting capital and 20.73% of the total capital
of the Company, while Sociedade Tarpon became owner of 24.21% of the voting capital and 19.91% of the
total capital of the Company.
At the Extraordinary General Meeting held on September 8, 2014, the Stockholders approved: (i) the
Company's migration to the BM&FBovespa listing segment called "Novo Mercado" (New Market); (ii) the
conversion of all the Company's preferred shares into common shares, at the ratio of 1 preferred share for 1
common share; (iii) the cancellation of the Units representing the Company's common and preferred
shares; (iv) the overall restructuring of the Company's bylaws in compliance with the BM&FBovespa
62
"Novo Mercado" segment regulations as well as the other changes suggested by management; and (v) the
authorization for the Company's Executive Board to take all necessary measures in order to implement the
resolutions passed at the Extraordinary General Meeting.
At that same date, the Special Meeting of the holders of preferred shares ("Special Meeting") approved the
resolutions passed at the Extraordinary General Meeting, specifically concerning the conversion of all the
Company's preferred shares into common shares. Irrespective of the approval of item (i) described above at
the Extraordinary General Meeting, the migration of the Company to the "Novo Mercado" listing segment
("Migration") became effective.
The Company announced to the market that considering the conversion of its preferred shares into
common shares, as approved at the Extraordinary General Meeting and at the Special Meeting of holders
of preferred shares (both held on September 8, 2014).
On October 21, 2014, the Company's Migration process ("Migration") for it to move to the special listing
segment called "Novo Mercado" was approved by the São Paulo Stock Exchange (BM&FBOVESPA).
From October 23, the Company shares are traded on the BM&FBOVESPA "Novo Mercado" under the
ticker symbol "ABRE3", thus effectively concluding the Company's Migration to the Novo Mercado listing
segment.
b) Treasury shares
On September 20, 2013, in accordance with Article 19, item XVI of its bylaws, the Company approved the
establishment of the first stock repurchase program. The repurchased shares are to be held in treasury and
subsequently sold, as provided for in Article 3, paragraph 1 of Law 6,404/76 and Article 1 of CVM
Instruction 10/80, as amended ("ICVM 10"), in order to enable the Company to acquire its own shares and
maintain them in treasury to meet the requirements of stock option plans or other incentive instruments that
it has approved or may approve in the future, whose beneficiaries are eligible to acquire or receive
Company shares, with no dilutive effect for the Company's stockholders.
Number of shares
Ref.
Common
R$
Preferred
(i)
330
10,000
20,000
Acquisition of shares
(ii)
4,231
132,500
265,000
Conversion of preferred shares into common shares
(iii)
-
285,000
(285,000)
Acquisition of shares - withdrawal rights
(iv)
110
18,200
-
4,671
445,700
-
(i) At November 21, 2013, the Company acquired 10,000 Units, represented by 10,000 common shares and 20,000 preferred shares
for R$ 330.
(ii) In the first quarter of 2014, the Company acquired 132,500 Units, represented by 132,500 common shares and 265,000 preferred
shares for R$ 4,231.
(iii) As approved at the Extraordinary General Meeting and at the Special Meeting of holders of preferred shares, after September 25,
2014 the Company's units (ABRE11) will no longer be traded and will have their ticker symbol cancelled. Thus, the Company's
common shares amount to 427,500.
63
(iv) At October 10, 2014, the Company acquired 18,200 preferred shares for R$ 110, in view of the withdrawal rights of the holders
of preferred shares, as approved at the Extraordinary General Meeting and at the Special Meeting of holders of preferred shares.
23. RESERVES
De ce mber 31,
2014
Dece mbe r 31,
2013
529,429
(32,572)
36,707
533,564
529,429
(32,572)
20,335
517,192
19,014
238,442
257,456
16,570
203,619
220,189
791,020
737,381
Capital reserves
Share issue costs
Stock options granted (Note 21)
Revenue reserves
Legal reserve
Profit retention reserve
23.1 Capital reserves
The capital reserve can only be used to offset losses that exceed retained earnings plus revenue
reserves.
23.2 Profit retention reserve
The profit retention reserve refers to the remaining balance of retained earnings, maintained to fund
projected business growth, as established in the Company's investment plan approved at the General
Stockholders' Meeting, in conformity with Article 196 of Law 6,404/76.
23.3 Legal reserve
The legal reserve is credited annually with 5% of the profit for the year, and cannot exceed 20% of the
capital. The purpose of the legal reserve is to protect capital, and it can only be used to offset losses
and increase capital.
23.4 Proposed dividends
The Company's bylaws establish that the stockholders are entitled to a minimum dividend of 25% of
the profit for the year, after the transfer to the legal reserve, to be calculated at the end of each fiscal
year.
64
Profit for the year
Transfer to legal reserve
Balance to distribute
Proposed mandatory minimum dividends (25%)
Profit retention reserve
2014
2013
48,875
(2,444)
46,431
72,705
(3,635)
69,070
(11,608)
(17,268)
34,823
51,802
23.5 Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to stockholders of the
Company by the weighted average number of common shares outstanding, excluding common
shares purchased and held as treasury shares, as follows:
Profit attributable to stockholders of the Company
Weighted average number of outstanding common shares (thousands)
Basic earnings per share - R$
December 31,
2014
December 31,
2013
48,875
260,829
0.18738
72,705
243,586
0.29848
De cember 31,
2014
Dece mbe r 31,
2013
(b) Diluted
Profit attributable to stockholders of the Company
48,875
72,705
Weighted average number of outstanding common shares
Stock options granted
Weighted average number of common shares for diluted earnings per share
260,829
3,567
264,396
243,586
609
244,195
Diluted earnings per share (R$)
0.18486
0.29773
Shares (thousands)
24. SEGMENT REPORTING
The Company's management defined the operating segments based on the reports used for strategic
decision-making.
The current structure of the Company's segments is not comparable to the information per segment as at
December 31, 2013, since some of the business acquisitions occurred during different quarters of 2013.
The information by business segment for the years ended December 31, 2014 and 2013 is as follows:
(a) Editora Ática and Editora Scipione: Engaged in the publication of teaching systems, educational
books and digital content integrated with their publishing products, with a personalized collection and
organized through portals. The school book market is divided into educational books, literary books and
65
factual books, which supplement the information offered in educational books for students of Brazilian
public and private schools.
(b) Sistema de Ensino Abril Educação: Primarily engaged in the provision of educational services,
through the sale of teaching systems to associated schools and conducting preparatory courses for preuniversity entrance exams as well as for civil service exams.
(c) pH Group: PH maintains teaching schools, especially providing Preschool, Primary School and
Secondary School courses and preparatory courses for university entrance exams. It also develops and
carries out any and all activities related to the teaching segment.
(d) ETB Group: The Technical Education qualifies students that conclude the basic level for the labor
market, providing professional courses in general, the maintenance of regular, college and technical
teaching institutions, personnel selection and training, integrated editing and printing of books, didactic
materials and other graphic products.
(e) Maxiprint: Maxiprint is engaged in the creation, development and sale of teaching systems for
preschool, secondary school and high school education, pre-university entrance courses and young
persons and adult education.
(f) Escola Satélite: Operates in the segment of the provision of services and the preparation, production
and coordination of courses through the use of satellite capacity contracted from third parties.
(g) Edumobi: Engaged in the development of digital content distribution technologies and platforms
(software).
(h) SGE: Operates in the segment of teaching systems distribution.
(i) Jafar Sistema de Ensino e Cursos Livre - ("Alfacon"): Engaged in the preparation, production and
coordination of preparatory courses for civil service exams at federal, state and municipal levels,
through distance-learning courses using video tutorials on the internet.
(j) Red Balloon: Network of English language teaching schools for children and adolescents, with a strong
presence in the city of São Paulo and franchises strategically located across Brazil.
(k) Ei Você: Engaged in the creation, editing, production and sale through physical means, Internet and
social networks, of books, electronic books, audio books and games, all of an educational, cultural or
entertainment nature, including the provision of personal and healthcare and meals.
(l) Ometz: Network of English language teaching schools for adolescents and adults, which promotes, in
Brazil and abroad, activities related to onsite and remote (including online) teaching, directly or through
franchises of its own teaching system, associated with the licensing of its own and/or third party
trademarks, and the production, editing, distribution and sale of didactic materials.
66
(m) Motivo Group: Operates within the preschool, primary school and pre-university entrance segments.
(n) Sigma: Operates within the preschool and primary school segment.
(o) Corporate: Comprises the parent company Abril Educação S.A. and the holding company CAEP Central Abril Educação e Participações Ltda.
67
Decembe r 31, 2014
4 Months
Publishers
Net revenue
Cost of sales and services
Gross profit
Expenses
Operating profit
Depreciation and amortization
Amortization of publishing investment
Adjusted Ebitda (i)
522,494
(205,079)
317,416
(301,081)
16,335
9,010
(i)
P.H. Group
247,224
(65,303)
181,922
(61,558)
120,364
2,372
142,393
(53,261)
89,132
(48,447)
40,685
3,063
48,455
6,912
73,799
129,647
Publishers
Net revenue
Cost of sales and services
Gross profit
Expenses
Operating profit (loss)
Adjusted Ebtida (i)
Siste ma de
Ensino Abril
Educação
509,790
(181,978)
327,812
(225,774)
102,038
7,608
37,569
147,215
Sistema de
Ensino Abril
Educação
209,646
(56,300)
153,346
(52,401)
100,945
1,607
5,455
108,007
43,748
P.H. Group
127,139
(47,908)
79,231
(44,744)
34,487
2,376
36,863
ETB
Group
23,354
(8,619)
14,735
(5,002)
9,733
8
Maxiprint
28,803
(10,062)
18,741
(10,042)
8,699
166
870
1,273
10,611
10,138
ETB
Group
7,852
(3,540)
4,312
(5,307)
(995)
34
40
(921)
Maxiprint
20,546
(5,953)
14,593
(7,662)
6,931
384
488
7,803
Escola
Satélite
Edumobi
2,133
(820)
1,313
(1,378)
(65)
56
3,726
21
3,747
(2,602)
1,146
253
(9)
Escola
Satélite
4,847
(2,731)
2,116
(2,599)
(483)
168
(315)
SGE
32,296
(19,498)
12,798
(11,033)
1,764
217
JAFAR
21,912
(3,520)
18,392
(10,007)
8,385
931
Red
Balloon
Group
32,224
(13,731)
18,493
(7,462)
11,032
164
-
-
-
-
1,399
1,981
9,316
11,195
Edumobi
1,500
1
1,501
(1,627)
(126)
12
(114)
SGE
25,314
(15,840)
9,474
(7,057)
2,417
174
2,591
JAFAR
14,267
(2,067)
12,200
(5,863)
6,337
346
6,683
Red
Balloon
Group
27,185
(11,795)
15,390
(5,466)
9,924
151
10,075
Ei Você
273
(746)
(473)
(420)
(893)
727
(166)
Ei Você
382
(347)
35
(1,332)
(1,297)
317
(980)
Ome tz
Group
132,180
(5,623)
126,556
(121,580)
4,976
2,529
Motivo
Group
380
(155)
225
(39,018)
(38,793)
57,765
Elimination
(33,708)
32,515
(1,193)
1,193
-
Consolidated
-
-
-
-
-
7,505
5,507
18,885
18,972
-
342,530
8 Months
6 Months
Ometz
Group
Motivo
Group
11,817
(4,204)
7,613
(5,424)
2,189
159
2,348
79,775
(49,772)
30,004
(11,740)
18,263
622
Corporate
1,265,048
(413,145)
851,903
(645,309)
206,594
78,426
57,510
80,979
(3,832)
77,147
(62,827)
14,320
889
15,209
29,588
(9,493)
20,095
(15,131)
4,964
544
Sigma
Group
3 Months
Sigma
Group
17,622
(11,734)
5,888
(4,013)
1,875
274
2,149
Corporate
581
(249)
332
(71,935)
(71,603)
46,926
(24,677)
Elimination
(22,975)
22,918
(57)
57
(0)
(0)
Consolidated
1,036,492
(325,559)
710,933
(503,975)
206,958
61,425
43,552
311,935
According to CVM Instruction 527/12, the definition of EBITDA is earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated based on the
operating profit, including the amounts referring to depreciation and amortization and also the amortization of publishing investments.
68
25. REVENUE
The reconciliation between gross and net revenue is as follows:
Consolidate d
December 31,
2014
December 31,
2013
1,304,792
(39,744)
1,068,456
(31,964)
1,265,048
1,036,492
Gross sales and services,
net of returns
Taxes on sales
Net re venue
26. EXPENSES BY NATURE
The details of operating expenses by nature are as follow:
Parent
Cost
Personnel
Raw materials and consumables
Outsourced services
Maintenance and repairs
Travels and representation
Promotions
Rental
Other expenses, net
Selling
December 31, 2014
General and
administrative
Total
Cost
Selling
December 31, 2013
General and
administrative
Total
(155)
-
(4)
(1)
(153)
8,009
(488)
(2,693)
(53)
(409)
(15)
(17)
(8,041)
(168)
(153)
8,009
(643)
(2,693)
(53)
(413)
(15)
(17)
(8,041)
(169)
(249)
-
(1)
(41)
(205)
(23,072)
(99)
(14,506)
(50)
(515)
(123)
(56)
(232)
(205)
(23,072)
(99)
(14,755)
(50)
(515)
(124)
(56)
(273)
(155)
(5)
(4,028)
(4,188)
(249)
(42)
(38,858)
(39,149)
Consolidated
Personnel
Raw materials and consumables
Direct sales
Outsourced services
Freight
Maintenance and repairs
Copyrights
Commissions
Media
Events and seminars
Promotions
Rental
Travels and representation
Lawsuits/Contingencies
Other expenses, net
December 31, 2014
Administrative
Total
Cost
Selling
(4,974)
(127,210)
(181,059)
(57,508)
(4,599)
(11,818)
(9,747)
(1,242)
(6)
(11)
(9)
(550)
(12,453)
(296)
(357)
(1,307)
(51,514)
(78,103)
(2,777)
(25,038)
(3,715)
(2,296)
(55,924)
(19,668)
(48,744)
(1,983)
(22,674)
(12,598)
(13,715)
(10,522)
(12)
(5,348)
(21,939)
(116,163)
(5,023)
(49,193)
(536)
(14,944)
(16)
(82)
(1,840)
(680)
(31,947)
(4,569)
(3)
(27,923)
(17,779)
(413,145)
(354,630)
(292,638)
69
December 31, 2013
Administrative
Total
Cost
Selling
(78,427)
(321,476)
(188,859)
(57,508)
(4,599)
(86,049)
(13,998)
(18,482)
(55,924)
(19,690)
(48,837)
(3,832)
(23,904)
(12,598)
(58,114)
(15,387)
(372)
(27,923)
(24,434)
(2,664)
(93,986)
(152,811)
(43,552)
(5,129)
(11,754)
(6,310)
(1,069)
(18)
(114)
(24)
(346)
(5,831)
(280)
(483)
(1,188)
(44,207)
(64,102)
(3,124)
(22,202)
(2,466)
(2,129)
(51,675)
(9,693)
(26,048)
(995)
(12,599)
(8,250)
(13,739)
(11,734)
1,253
(5,348)
(14,554)
(111,407)
(3,302)
(50,575)
(331)
(9,200)
(108)
(143)
(340)
(595)
(19,081)
(3,565)
(4,881)
(9,950)
(61,425)
(269,495)
(159,237)
(43,552)
(5,129)
(84,531)
(9,107)
(12,398)
(51,675)
(9,819)
(26,305)
(1,359)
(13,540)
(8,250)
(38,651)
(15,579)
(4,111)
(16,486)
(1,060,413)
(325,559)
(277,058)
(228,032)
(830,649)
The amount recorded in outsourced services relates mainly to: consulting, information technology, property
security and outsourced labor.
The amount recorded in personnel expenses includes salaries and social security charges.
At the Meeting of the Board of Executive Officers of Abril Educação held on June 23, 2014, the Board of
Executive Officers decided to implement a restructuring plan encompassing: (i) changes in personnel and
executives so as to realize the Company's long term strategy in a more efficient and professional manner, in
accordance with the best corporate governance practices; (ii) termination of contracts with educational
book distributors; and (iii) reorganization of the franchise network to optimize the operations of the units.
Management announced this organization restructuring plan on June 24, 2014.
At June 30, 2014, a provision for restructuring costs was recognized amounting to R$ 27,923, based on the
best estimate of costs to be incurred during restructuring. At December 31, 2014, a substantial portion of
the provision, that is, R$ 18,171 had already been incurred, of which R$ 16,598 in personnel expenses and
R$ 1,573 in other expenses, net. In addition, for the purposes of better presentation and comparison of the
financial information, this non-recurring expenditure was recorded under "Provision for restructuring
costs" within the statement of income.
27. OTHER INCOME (EXPENSES), NET
December 31,
2014
Other income
Gain on sale of property and equipment
Rentals
Discounts received
Capital gain in subsidiary
Other
Other expenses
Loss on sale of property and equipment
Tax and contractual fines
Donations
Capital loss in subsidiaries
Other
Other income (expenses), net
-
Parent
December 31,
2013
December 31,
2014
Consolidated
December 31,
2013
-
891
632
106
2,899
350
2,847
100
210
4,528
4,541
(142)
(1)
(96)
-
(111)
-
(634)
(1,350)
(559)
(31)
5
(198)
(1,166)
(878)
(785)
(399)
(239)
(111)
(2,569)
(3,426)
(139)
99
1,959
1,115
210
14
86
70
490
854
-
28. FINANCE INCOME AND COSTS
Pare nt
De ce mbe r
31, 2014
Income :
Interest income on marketable securities
Discounts received
Interest income (i)
Monetary variations
Present value adjustment
Other
De ce mbe r
31, 2013
3,622
2
1,185
4,809
Costs :
Interest on borrowings and debentures
Taxes
Charges on taxes payable in installments
Discounts granted
Interest on other liabilities (ii)
Commissions and bank fees
Provision for losses
Present value adjustment
Other
(1,500)
(2,858)
(7)
(30)
(4,395)
Fore ign e xchange variations :
Foreign exchange gains
Foreign exchange losses
Finance income (cos ts ), ne t
Cons olidate d
De ce mbe r
31, 2014
10,130
6
558
4
10,698
De ce mbe r
31, 2013
37,583
1,301
5,821
5,900
209
50,814
(363)
(101)
(287)
(5)
(3,300)
(4,056)
30,072
392
5,649
226
7
36,346
(130,562)
(2,564)
(1,160)
(2,384)
(14,484)
(3,021)
(30)
(5,452)
(535)
(160,192)
(55,538)
(1,020)
(1,206)
(778)
(29,064)
(7,177)
(3,300)
(499)
(98,582)
123
123
4
4
2,855
(1,540)
1,315
1,641
(1,102)
539
537
6,646
(108,063)
(61,697)
(i) Refers mainly to interest received from customers on the late payment of invoices.
(ii) Refers mainly to interest on payables for the acquisition of equity interests.
29. INCOME TAX AND SOCIAL CONTRIBUTION EXPENSES
The amounts charged and credited to the current and deferred income tax and social contribution accounts,
recorded on tax losses and temporary differences, in the statement of income for the years ended December
31, 2014 and 2013 are as follow:
Parent
Consolidate d
De cember
31, 2014
December
31, 2013
December
31, 2014
Dece mbe r
31, 2013
(1,957)
-
(50)
-
(24,405)
(16,751)
(44,561)
(21,815)
(1,957)
(50)
(41,156)
(66,376)
Current income tax and social contribution
Deferred income tax and social contribution
71
The reconciliation of the income tax and social contribution expenses is as follows:
Parent
December
31, 2014
Profit (loss) before income tax and
social contribution
Statutory tax rates
Income tax and social contribution charge
Equity in the results of subsidiaries
Capital losses (gains)
Other permanent differences
Temporary differences, without recognition of deferred income tax
Offsetting of tax losses in respect of prior years
Income tax and social contribution on tax losses - utilized for offsetting
Tax benefits
Other
Interest on capital
Adjustment to presumed profit
Total income tax and social contribution
Current income tax and social contribution
Deferred income tax and social contribution
72
December
31, 2013
Consolidated
December
31, 2014
December
31, 2013
50,832
72,755
99,834
145,261
34.00%
(17,283)
18,427
(1,169)
2,612
873
55
25
(5,497)
(1,957)
34.00%
(24,737)
35,557
(1,300)
(2,045)
(7,475)
(50)
(50)
34.00%
(33,944)
443
(10)
(5,934)
2,489
988
(5,812)
633
(427)
424
(41,150)
34.00%
(49,389)
(136)
(3,341)
(2,087)
37
(18,124)
1,036
790
(1,957)
-
(50)
-
(24,405)
(16,745)
(44,561)
(21,815)
4,838
(66,376)
30. CASH FROM OPERATIONS
Profit (loss) for the year
Adjustments for:
Result on disposal of property and equipment
Equity in the results of subsidiaries
Deferred income tax
(Gains) losses on investments
Disposal of investments, net
Stock options
Amortization of debenture transaction costs
Interest and foreign exchange variation, net
Changes in working capital
Trade receivables
Inventories
Taxes recoverable
Other assets
Judicial deposits
Trade and other payables
Taxes and contributions payable
Deferred income tax
Provision for contingencies (Note 18)
December 31,
2014
Parent
December
31, 2013
December
31, 2014
48,875
72,705
58,678
78,885
153
173
(54,198)
273
5,655
205
111
(104,578)
3,300
4,505
(4)
78,427
891
(1,303)
(3,552)
16,745
12,598
16,372
(22,477)
3,437
146,134
61,425
2,106
(708)
21,815
3,643
8,250
383
4,505
(12,525)
85,488
(61)
(2,329)
154
(1)
(5,252)
1,521
(5,037)
1,026
(1,604)
1,685
(5)
1,487
4
(546)
(21,709)
(27,285)
(13,121)
(28,299)
4,896
(2,732)
69,730
1,464
26
17,885
328,514
(64,842)
5,428
(1,050)
3,509
95
15,079
619
3,200
16,783
232,088
73
Consolidated
December
31, 2013
31. PAYABLES FOR THE ACQUISITION OF EQUITY INTERESTS
These refer to debts assumed in connection with the acquisition of companies, payable according to the
contractual terms and subject to interest at the CDI rate.
The balances comprise the following:
Consolidated
Additions
Acquisition
price
adjustment
Payment of
principal
Payment of
interest
85,937
17,111
294
10,642
11,478
5,523
1,390
132,375
6,000
6,000
(295)
(295)
(62,563)
(13,500)
(294)
(9,500)
(11,000)
(5,400)
(1,005)
(103,262)
(29,651)
(3,905)
(1,667)
(1,055)
(558)
(123)
(36,959)
34,222
288,072
11,478
22,092
355,864
12,570
12,570
488,239
18,570
December 31,
2013
Provision for
interest
Transfers
December 31,
2014
Current
Anglo
pH Group
Maxiprint
SGE
Motivo Group
Sigma
Red Balloon
Others
6,277
1,595
525
1,248
587
81
33
10,346
17,658
12,049
5,968
35,675
18,959
12,720
6,120
6,081
43,880
2,395
31,132
571
2,236
36,334
(17,658)
(12,049)
(5,968)
(35,675)
18,959
319,204
18,360
12,570
369,093
Non-current
pH
Ometz
Motivo Group
Sigma
Red Balloon
December 31,
2012
Additions
-
-
(295)
-
(103,262)
(36,959)
Payment of
principal
Payment
of interest
(62,563)
(13,500)
(4,706)
(9,500)
(90,269)
(21,102)
(2,392)
(881)
(687)
(25,062)
Provision for
interest
46,680
-
Transfers
412,973
Consolidated
December 31,
2013
Current
Anglo
PH
Maxiprint
SGE
Motivo
Sigma
Others
79,532
15,589
5,560
9,849
110,530
11,000
6,750
1,300
19,050
79,532
47,509
9,849
136,890
272,531
11,000
20,250
303,781
247,420
322,831
6,654
1,206
322
853
478
154
90
9,757
83,415
16,208
10,127
(1,381)
108,369
85,936
17,111
295
10,642
11,478
5,523
1,390
132,375
3,883
2,921
278
15,541
478
461
23,562
(83,415)
(16,208)
(10,127)
1,381
(108,369)
34,222
288,072
11,478
22,092
355,864
Non-current
Anglo
PH
SGE
Wise Up
Motivo
Sigma
(90,269)
(25,062)
74
33,319
-
488,239
At December 31, 2014, the non-current payables mature as follow:
Non-current
2016
2017
2018
2019
PH
18,959
18,959
Wise Up
159,602
159,602
-
Sigma
6,120
6,120
6,120
--
319,204
Red Balloon
12,570
-
18,360
Total
37,649
165,722
165,722
-
12,570
369,093
32. RELATED PARTY TRANSACTIONS
32.1 Transactions and balances:
The transactions and balances with related parties are summarized below:
Current
Related parties and
other related parties
Abril Comunicações S.A (i)
Acel Administração de Cursos Educacionais Ltda.
Caep Central Abril Educação e Participações S.A
Curso PH Ltda.
Editora Ática S.A
Park Carapuceiro Ltda.
SGE Comércio de Material Didático S.A
Sistema PH de Ensino Ltda
Others
Accounts
receivable
Dividends and
interest on
capital
Trade
and other
payables
Parent
December 31, 2014
Non-current
Profit (loss)
Finance
income
(costs),
Borrowings
net
87
860
4,494
4
-
-
2,579
1
217
281
1,298
1,032
58
501
543
-
194
-
-
2,667
9,284
198
-
75
(321)
(321)
Parent
December 31, 2013
Current
Related parties and
other related parties
Abril Comunicações S.A (i)
Ativic S.A
Editora Ática S.A
Editora Scipione S.A
Nice Participações S.A
Sistema pH de Ensino Ltda
Others
(i)
Accounts
receivable
Dividends
receivable
Trade
and other
payables
Profit (loss)
Finance
income
(costs),
net
2,502
2
2,504
13,254
2,178
15,432
21
29
1
51
(364)
4
(360)
Formerly Editora Abril S.A.
Loans made to and obtained from related parties are supported by loan agreements and carry interest at the CDI rate.
Current
Other related parties
Abril Comunicações S.A. (i)
Associação Abril Benefícios
Elemídia Consultoria e Serviços e Marketing S.A.
Fundação Victor Civita
Iba Comercial e Distribuição S.A
Tex Courrier S.A
Treelog S.A - Logística e Distribuição
Others
Accounts
receivable
Trade
and other
payables
Consolidated
December 31, 2014
Profit (loss)
Sales
Finance
(costs/
income
expenses),
(costs),
net
net
5,770
-
19,553
-
(73,578)
(440)
(685)
-
1
5,771
22
45
19,620
(17)
(140)
11
(42)
(1,685)
(1)
(75,892)
(685)
76
Accounts
receivable
Trade
and other
payables
Consolidated
December 31, 2013
Profit (loss)
Sales
(costs/
expenses),
net
221
2
3
2
15,803
29
40
-
(68,860)
(110)
(73)
(119)
(613)
(796)
1
228
15,872
(70,570)
Current
Other related parties
Abril Comunicações S.A. (i)
Associação Abril Benefícios
Ativic S.A.
Derivo Consultoria e Serv.de Comunic.S.A
Dinap S.A
Editora Caras S.A.
Fundação Victor Civita
Treelog S.A - Logística e Distribuição
Others
(i)
Refers mainly to graphic production services related to the preparation of books and apportionment of shared services.
32.2 Key management compensation:
Key management includes the chief executive officer and directors of the Company. The compensation paid
or payable to key management for their services is shown below:
Salaries and social charges
Profit sharing
Share-based payment
Decembe r
31, 2014
Dece mbe r
31, 2013
10,002
4,523
13,566
28,091
8,380
4,335
4,505
17,220
33. INSURANCE
The policy of the parent company Abrilpar Participações S.A. is to maintain insurance coverage for the
Group companies through a collective policy, at an amount considered sufficient by management to cover
the risks relating to, among other risks, fire, flood, machinery breakdown, own and third party goods and
merchandise, work accidents and environmental damage.
All of the Company's offices, schools and warehouses have current insurance policies covering fire,
lightning, explosions, windstorms, machinery breakdown, electrical damage, water leaks, and theft. The
maximum indemnity is R$ 634,665, with sub-limits for location and coverage. The limits and risks insured
are disclosed in the annual financial statements at December 31, 2013.
77
The following insurance policies have also been purchased and are in effect:
• General civil liability
R$ 10,000
(damages to third parties)
• D&O (directors & officers)
R$ 60,000
(lawsuits against executives and members of the Board of Directors)
• Fleet:
Hull coverage
FIPE table
Pain and suffering and bodily injury
R$ 100/vehicle
Property damages
R$ 50/vehicle
• Domestic transport, which supports all movements of paper and finished products throughout the
Brazilian territory.
• Import transport, which supports the whole paper import process.
All insurance policies were purchased from insurance companies in the Brazilian market.
34. BUSINESS COMBINATIONS
a) Motivo Group
On July 5, 2013, the Company, through its subsidiary CAEP - Central Abril Educação e Participações S.A.,
acquired all shares of Colégio Motivo Ltda., Park Carapuceiro Serviços Ltda. and Centro Recifense de
Educação Ltda. for R$ 103,418, of which R$ 81,418 was settled on the acquisition date and the remaining
balance of R$ 22,000 was divided into two equal installments of R$ 11,000, the first paid in July 2014 and
the second to be paid in July 2015.
Through this acquisition, the Company started to serve directly over 2.8 thousand students through Colégio
Motivo, from preschool to pre-university education. This acquisition will enable the Company to reinforce
its significant position in the Northeast region.
In compliance with the provisions of CPC 15 - "Business Combinations", the Company measured the
acquisition-date fair values of the assets acquired and liabilities assumed. Management, together with its
external experts, concluded in July 2014 the measurement of the fair value of the assets acquired and
liabilities assumed. The final allocation of the acquisition price did not affect the downstream merger
carried out by the entity at December 31, 2013.
78
The final allocation of the acquisition price is as follows:
Position at June 30, 2013:
Trade receivables
Inventories
Taxes recoverable
Advances and prepaid expenses
Judicial deposits
Property and equipment
Intangible assets - customer portfolio
Intangible assets - non-competition agreement
Intangible assets - trademarks
Total ne t asse ts
Goodwill
Total cost of acquisition
Carrying
Fair value
Fair
amounts
adjustme nt
values
712
1,303
52
217
669
14
1,453
(3,115)
(236)
(189)
15,642
4,732
8,463
712
1,303
52
217
669
14
1,453
15,642
4,732
8,463
(3,115)
(236)
(189)
880
28,837
29,717
102,538
73,701
103,418
103,418
Amount paid
Cash acquired
Disburse ment, net of cash acquire d
81,418
(712)
80,706
Amount payable in installments
22,000
The information available and used for the assessment on the acquisition date was that of June 30, 2013.
Management believes that the goodwill for tax purposes of R$ 102,538 will be deductible for the
calculation of income tax and social contribution.
79
b) Sigma Group
On October 1, 2013, the Company, through its subsidiary CAEP - Central Abril Educação e Participações
S.A., acquired all shares of ACEL - Administração de Cursos Educacionais Ltda.; CEI - Centro de
Educação Integral Ltda.; and CEBEI - Centro de Ensino Brasiliense de Educação Integral Ltda. Together,
these companies form Centro Educacional Sigma. The acquisition totaled R$ 135,037, of which
R$ 108,037 was settled and the remaining R$ 27,000 will be paid in five equal installments of R$ 5,400, as
contractually established, over five years from the acquisition date.
Through this acquisition, the Company started to serve directly over 5.1 thousand students through Centro
Educacional Sigma, from preschool to high school education. This acquisition will enable the Company to
attain a significant position in the Mid-West region.
In compliance with the provisions of CPC 15 - "Business Combinations", the Company measured the
acquisition-date fair values of the assets acquired and liabilities assumed. Management, together with its
external experts, concluded in September 2014 the measurement of the fair value of the assets acquired and
liabilities assumed. The final allocation of the acquisition price did not affect the downstream merger
carried out by the entity at December 31, 2013.
The final allocation of the acquisition price is as follows:
Position at Septe mbe r 30, 2013:
Carrying
amounts
Fair value
adjustme nt
Fair value s
5,226
922
42
19
36
1,690
(4,628)
(18)
(530)
(872)
14,594
5,380
5,637
12,011
-
5,226
922
42
19
36
1,690
14,594
5,380
5,637
12,011
(4,628)
(18)
(530)
(872)
1,887
37,622
39,509
Trade receivables
Taxes recoverable
Advances and prepaid expenses
Judicial deposits
Property and equipment
Intangible assets - customer portfolio
Intangible assets - non-competition agreement
Intangible assets - licensed school portfolio
Intangible assets - trademarks
Borrowings
Total ne t assets
Goodwill
Total cost of acquisition
133,150
95,528
135,037
135,037
Amount paid
Cash acquired
Disbursement, net of cash acquire d
108,037
(5,226)
102,811
Amount payable in installments
27,000
80
Management believes that the goodwill for tax purposes of R$ 133,150 will be deductible for the
calculation of income tax and social contribution. The information available and used for the assessment on
the acquisition date was that of September 30, 2013.
35. EVENTS AFTER THE REPORTING PERIOD
35.1. Acquisition of Centro Educacional Sigma Águas Claras
At January 30, 2015, the Company, through its subsidiary Administração de Cursos Educacionais
Ltda. (ACEL), entered into an Agreement for Purchase and Sale of Quotas and Other Covenants to
acquire 100% of the share capital ("Acquisition") of Instituto de Ensino e Cultura Águas Claras Ltda.
The total acquisition cost was R$ 21,000.
This transaction is not conditioned upon approval at the General Meeting of the Company and does
not entail withdrawal rights of stockholders as it does not fall inunderto Article 256 of the Brazilian
Corporation Law.
35.2. Acquisition by Thunnus of shares owned by Abrilpar.
At February 8, 2015, Thunnus and the Abrilpar Block signed an Addendum to the Share Purchase
and Sale Agreement wherein Thunnus agreed to acquire all of the remaining Company shares owned
by the Abrilpar Block, totaling 54,152,107 common shares representing 20.73% of the Company's
voting and total capital.
The sum of the shares acquired and to be acquired by Thunnus according to the terms of the
Agreement and the Addendum thereto will represent the transfer of all of the Company shares owned
by the Abrilpar Block, which holds directly or indirectly a controlling interest in Abril Educação, so
that Thunnus will acquire from the Abrilpar Block a total of 106,174,838 common shares (already
considering the conversion of preferred shares into common shares, approved after the Agreement
was signed) representing 40.64% of the Company's voting and total stock ("Abrilpar's Shares").
With the conclusion of the acquisition of Abrilpar's Shares, Thunnus will become the new controlling
stockholder or Abril Educação and owner of all shares of the control stock.
The price agreed upon in the Agreement and the Addendum thereto to be paid for all Abrilpar's
Shares acquired from the Abrilpar Block is R$ 1,309,489,668.67, equivalent to R$ 12.33 per share.
At March 12, 2015, the approval of this acquisition by the Brazilian Antitrust Agency (CADE) was
published in the Official Gazette.
81
35.3. Acquisition of Sociedade Educacional Paraná Ltda.
At March 9, 2015, the Company, through its subsidiary ACEL, entered into an Agreement for the
Purchase and Sale of Quotas and Other Covenants to acquire 100% of the share capital (the
"Acquisition") of Sociedade Educacional Paraná Ltda. The total acquisition cost was R$ 24,200.
This transaction is not conditioned upon approval at the General Meeting of the Company and does
not entail withdrawal rights of stockholders as it does not fall under Article 256 of the Brazilian
Corporation Law.
35.4. Extraordinary General Meeting
At March 19, 2015, management proposed at the Extraordinary General Meeting the adoption of a
Remuneration Plan for the Company.
The primary objective of the Remuneration Plan is to give the officers and employees of the
Company and its direct or indirect subsidiaries the opportunity to become stockholders of the
Company, and thus achieve greater alignment between the interests of the Company and those of its
stockholders and allow the Company and its subsidiaries to attract and retain high-performing
professionals, as mentioned in Note 21.
It is important to note that the implementation of this Plan, if it is approved at the Extraordinary
General Meeting, will depend on obtaining the previous authorization of the Brazilian Securities
Commission (CVM), pursuant to Article 23 of CVM Instruction 10 of February 14, 1980, as
amended, on account of the use of the Company’s shares in this Plan. In addition, following the
approval and implementation of the Plan, the Board of Directors of the Company will resolve on the
cancellation of the Stock Option Plan and the Extraordinary Incentive Plan for the Company's
Executives.
82
OTHER INFORMATION CONSIDERED RELEVANT BY THE COMPANY
The ownership interest of the Company's stockholders, officers, members of the Board of Directors and of
the Fiscal Council at December 31, 2014 and 2013 is as follows:
Stockholders
Major stockholders
AbrilPar Participações S.A.
Tarpon
GIC
Constellation
Polar Fundo de Investimento em Participações
Fundo de Inv. em Participações Potentia Bioenergy
BR Educacional Fundo de Investimento em Participações
FIP Brasil de Governança Corporativa
Manage ment
Board of Directors
Fiscal Council
Executive Board
Treasury share s
Other
(i)
December 31, 2014
Quantity (i)
%
December 31, 2013
Quantity (i)
%
54,146,107
52,052,731
48,394,524
17,219,166
-
20.73
19.92
18.52
6.59
-
77,455,136
14,649,000
12,535,293
12,535,293
10,954,599
12,369,339
29.65
5.61
4.80
4.80
4.19
4.73
131,898
423
77,250
445,700
88,789,852
261,257,651
-
0.05
0.00
0.03
0.17
33.99
100.00
38,786,616
420
1,286,988
80,684,967
261,257,651
14.85
0.00
0.49
30.88
100.00
At December 31, 2013, this represents common shares and Units; each Unit is composed of 1 common share
and 2 preferred shares. At December 31, 2014, this represents common shares only.
The ownership interests of the stockholders owning more than 5% of the voting capital at December 31,
2014 and 2013 are as follow:
Stockholders
Major stockholders
AbrilPar Participações S.A.
Tarpon
GIC
Constellation
Board of Directors
Other
Dece mber 31, 2014
Quantity (i)
%
Dece mber 31, 2013
Quantity (i)
%
54,146,107
52,052,731
48,394,524
17,219,166
171,812,528
20.73
19.92
18.52
6.59
65.76
77,455,136
14,649,000
38,786,616
130,890,752
29.65
5.61
14.85
50.10
89,445,123
261,257,651
34.24
100.00
130,366,899
261,257,651
-
49.90
100.00
-
(i)
At December 31, 2013, this represents common shares and Units; each Unit is composed of 1 common share
and 2 preferred shares. At December 31, 2014, this represents common shares only.
83
BOARD OF DIRECTORS
GIANCARLO FRANCESCO CIVITA
Chairman
EDUARDO SILVEIRA MUFAREJ
Vice-Chairman
Members:
FERNANDO SHAYER
GUSTAVO JOSEF WIGMAN
MARCOS ANTONIO MAGALHÃES
ARNALDO FIGUEIREDO TIBYRIÇÁ
FLORIAN BARTUNEK
WOFGANG STEPAN SCHWERDTLE
MARCELO VAZ BONINI
___________________________________________
FISCAL COUNCIL
Members:
EDUARDO KHAIR CHALITA
MARCOS BASTOS ROCHA
LEONARDO DE PAIVA ROCHA
ALEXANDRE CUNHA BAGNOLI
XAVIER ABDON DE SOUSA
___________________________________________
84
BOARD OF EXECUTIVE OFFICERS
MARIO GHIO JUNIOR
Chief Executive Officer
Officers:
GUILHERME ALVES MÉLEGA
IVAN SARTORI FILHO
JOÃO LACERDA ALMEIDA E SILVA
ELZIMAR GOUVÊA ALBUQUERQUE
_________________________________
ÉRICO DE MELLO PRADO
Accountant CRC - 1SP 256.729/O-1
85
Fiscal Council's Opinion issued on March 20, 2015
The Fiscal Council of Abril Educação S.A., through its undersigned members, in the exercise of their duties in
accordance with Article 163 of Law 6,404/76 as amended and in compliance with legal provisions, after examining
the financial statements for the year ended December 31, 2014 and the proposal for distribution of dividends, based
on the examinations made, information and clarification received during the year, express a favorable opinion
regarding such documents and their approval at the General Stockholders' Meeting to be held on April 30, 2015. The
members of the Fiscal Council are also aware of the proposal for capital budget to be submitted to vote at the
General Stockholders' Meeting.
São Paulo, March 20, 2015.
Eduardo Khair Chalita
Marcos Bastos Rocha
Leonardo de Paiva Rocha
Alexandre Bagnoli
Xavier Abdon de Sousa
86

Abril EducaÃ§Ã£o S.A. - Abril EducaÃ§Ã£o Investidores

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