goldf2q14_6k.htm - Generated by SEC Publisher for SEC Filing
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the month of August, 2014
(Commission File No. 001-32221) ,
 

 
GOL LINHAS AÉREAS INTELIGENTES S.A.
(Exact name of registrant as specified in its charter)
 
GOL INTELLIGENT AIRLINES INC.
(Translation of Registrant's name into English)
 


 
Praça Comandante Linneu Gomes, Portaria 3, Prédio 24
Jd. Aeroporto 
04630-000 São Paulo, São Paulo
Federative Republic of Brazil
(Address of Regristrant's principal executive offices)

 


Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.

Form 20-F ___X___ Form 40-F ______

Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):

 

 

(Convenience Translation into English from the Original previously issued in Portuguese)

 

 

 

 

 

 

 

 

 

 

 

 

Individual and Consolidated Interim Financial Information

 

GOL Linhas Aéreas Inteligentes S.A.

 

For the quarter ended June 30, 2014

with Report on Review of Interim Financial Information

 

 


 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Individual and Consolidated Interim Financial Information

 

June 30, 2014

 

 

 

Contents

 

 

 

Perfomance report 01
Audit committee statement 08
Directors' statement on the interim financial information 09
Directors' statement on the auditor’s report on review of interim financial information 10
Independent auditor’s report on review of interim financial information 11
 
Capital 13
 
Individual interim financial information for the period ended June 30, 2014  
 
Balance sheets 14
Statements of operations 16
Statements of comprehensive income 17
Statements of cash flows 18
Statements of changes in equity 19
Statements of value added 21
 
Consolidated Interim Financial Information for the period ended June 30, 2014  
 
Balance sheets 22
Statements of operations 24
Statements of comprehensive income 25
Statements of cash flows 26
Statements of changes in equity 28
Statements of value added 30
 
Notes to the interim financial information 31

 

 


 

 

Performance Report

 

 

GOL recorded its first positive second-quarter operating income since 2010, reaching R$38 million, accompanied by a positive operating margin (EBIT) of 1.6%, R$73 million or 3.4 percentage points higher than in 2Q13, resulting on the sixth consecutive quarterly improvement in the operating result.

 

Net revenue reached a highest ever level of R$2.4 billion on 2Q14, R$466 million more than in 2Q13. Over the last twelve months, net revenue reached R$9.8 billion, which also came to a new record. Domestic load factor reached 76.0% in the quarter and 76.4% year to date, also the highest ever figures for the periods. The new load factor level, together with the increase in yield by 17% in 2Q14, pushed up PRASK and RASK by 30% over 2Q13.

 

These results reflect the Company’s efforts to ensure service excellence for all its clients, based on security, simplicity and sympathy.

 

In line with its strategy of increasing dollar revenue, GOL announced a codeshare agreement with Etihad Airways and Aeromexico, and new routes between Campinas (São Paulo) and Miami (USA), and Guarulhos (São Paulo) and Santiago (Chile), ensuring new destinations and improved connectivity. As a result, GOL recorded a 19% year over year increase in the number of passengers carried in the international market, the highest in the industry, raising its share of this segment by 4.2 percentage points to 30%. As a result, international passenger revenue has been increasing constantly, having passed the R$1.0 billion level in the last 12 months.

 

Given the 8% devaluation of the Real against the average Dollar in 2Q13, the 13% increase in the per-liter jet fuel price, and higher inflationary pressure, the Company’s costs reached R$2.3 billion, 20% higher than in 2Q13, which represents an increase of 4 percentage points lower than the revenue growth.

 

GOL ended 2Q14 with a cash position of R$2.8 billion, or 29% of net revenue in the last 12 months. Financial leverage (adjusted net debt over LTM revenue) totaled at 4.6x, versus 11.3x at the end of 2Q13. This improvement was chiefly due to higher LTM EBITDAR, which reached R$1.8 billion, R$1.1 billion up over 2Q13 LTM EBITDAR.

 

In order to strengthen its balance sheet, the Company renegotiated its 4th debenture issuance and held a tender offer of US$187.1 million for the acquisition of its senior notes, maintaining a constant focus on reducing the cost and amortization of debt.

 

The efforts of the Team of Eagles were further underlined by the results during the 2014 World Cup. It represented months of preparation and planning to provide more than 28 thousand commercial flights, an average of 908 per day, with 486 extra flights. In order to serve passengers with different nationalities, we identified crew members fluent in several languages and allocated them in accordance with the needs of each flight. Of the total 4,500 airport employees, were temporarily relocated 3,000 to provide the best possible support for the operation. GOL was leader in passengers carried in the domestic market – 3.4 million – reaching a period load factor of 81.2% and leading the punctuality rankings, with 96% of flights on time.

 

The operational success during the World Cup was also recognized by the clients, through the SMS customer satisfaction survey, we received a rating of 8.16 on a scale of 0 to 10, reinforcing the commitment to overcome this rating by the end of the year.

 

 

 

 

 

1


 
 

 

GOL would like to thank its customers for their loyalty, our Team of Eagles for their commitment and investors for their confidence, all of which increasingly reinforces GOL’s vision of being the best company to fly with, work for and invest in.

 

Paulo Sérgio Kakinoff 

CEO of GOL Linhas Aéreas Inteligentes S.A.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 


 
 

 

Highlights of the Subsidiary Smiles’ Results in 2Q14

*        25.2%  upturn in the number of accumulated miles, excluding GOL, over 2Q13;

*        Increased redemptions with international partner airlines, totaling 1.2 billion miles, 16.7% of total redemptions;

*        Gross margin of 46.9%, in line with 1Q14;

*        Net income of R$64.1 million in 2Q14, with a  net margin of 42.1%;

*        Issue of R$600.0 million in debentures at 115% of the CDI rate;

*        Conclusion of the capital reduction (R$8.17 per share).

The second quarter of 2014 was marked by the increased accumulation of ex-GOL miles, which reached 8.1 billion, 25.2% more than in 2Q13. Redemptions with international partner airlines and products also moved up, considering the implementation of a redemption partnership with Aerolíneas Argentinas and the new e-commerce miles redemption platform.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 


 
 

 

Operating and Financial Indicators

 

Aviation Market

2Q14

2Q13

% Var.

6M14

6M13

% Var.

Aviation Market - Industry

           

RPK Industry - Total

28,791

27,569

4.4%

59,032

55,957

5.5%

RPK Industry - Domestic

21,819

20,937

4.2%

45,039

42,266

6.6%

RPK Industry - International

6,972

6,632

5.1%

13,993

13,691

2.2%

ASK Industry - Total

36,154

36,841

-1.9%

74,170

75,154

-1.3%

ASK Industry - Domestic

27,695

28,137

-1.6%

56,881

56,795

0.2%

ASK Industry - International

8,459

8,704

-2.8%

17,288

18,359

-5.8%

Industry Load Factor - Total

79.6%

74.8%

4.8 p.p

79.6%

74.5%

5.1 p.p

Industry Load Factor - Domestic

78.8%

74.4%

4.4 p.p

79.2%

74.4%

4.8 p.p

Industry Load Factor - International

82.4%

76.2%

6.2 p.p

80.9%

74.6%

6.3 p.p

Aviation Market – GOL

 

 

 

 

 

 

RPK GOL – Total

8,734

8,249

5.9%

18,273

16,540

10.5%

RPK GOL - Domestic

7,759

7,499

3.5%

16,260

14,914

9.0%

RPK GOL - International

975

749

30.2%

2,013

1,626

23.8%

ASK GOL – Total

11,618

12,179

-4.6%

24,147

24,508

-1.5%

ASK GOL – Domestic

10,213

10,870

-6.0%

21,288

21,767

-2.2%

ASK GOL - International

1,405

1,309

7.4%

2,859

2,741

4.3%

GOL Load Factor - Total

75.2%

67.7%

7.5 p.p

75.7%

67.5%

8.2 p.p

GOL Load Factor - Domestic

76.0%

69.0%

7.0 p.p

76.4%

68.5%

7.9 p.p

GOL Load Factor - International

69.4%

57.2%

12.2 p.p

70.4%

59.3%

11.1 p.p

Operational Data

2Q14

2Q13

% Var.

6M14

6M13

% Var.

Revenue Passengers - Pax on board ('000)

9,234

8,699

6.1%

19,062

17,270

10.4%

Aircraft Utilization (Block Hours/Day)

11.0

11.7

-5.9%

11.3

11.7

-3.4%

Departures

75,266

78,395

-4.0%

154,399

156,627

-1.4%

Average Stage Length (km)

903

891

1.3%

906

898

0.9%

Fuel consumption (mm liters)

363

370

-1.9%

749

745

0.6%

Full-time equivalent employees at period end

16,302

16,465

-1.0%

16,302

16,465

-1.0%

Average Operating Fleet

124

119

3.9%

125

121

3.4%

Financial Data

2Q14

2Q13

% Var.

6M14

6M13

% Var.

Net YIELD (R$ cents)

24.40

20.88

16.9%

24.16

21.94

10.1%

Net PRASK (R$ cents)

18.35

14.14

29.8%

18.29

14.81

23.5%

Net RASK (R$ cents)

20.50

15.72

30.4%

20.19

16.31

23.8%

CASK (R$ cents)

20.16

16.01

25.9%

19.43

16.04

21.1%

CASK ex-fuel (R$ cents)

12.35

9.30

32.8%

11.48

9.00

27.6%

Average Exchange Rate1

2.2296

2.0673

7.9%

2.2974

2.0333

13.0%

End of period Exchange Rate1

2.2025

2.2156

-0.6%

2.2025

2.2156

-0.6%

WTI (avg. per barrel, US$)2

103.06

94.14

9.5%

100.89

94.30

7.0%

Price per liter Fuel (R$)

2.50

2.21

13.1%

2.56

2.32

10.6%

Gulf Coast Jet Fuel Cost (average per liter, US$)³

0.76

0.74

2.7%

0.77

0.77

0.0%

1.Source: Brazilian Central Bank; 2. Source: Bloomberg; 3. Fuel expenses/liters consumed.

 

 

 

4

 


 
 

 

Aviation Market – Industry

 

In 2Q14, domestic aviation industry demand increased by 7% year to date and 4% in a quarter comparison over last year, fueled by the respective 4.8 and 4.4 percentage point increases to 79.2% and 78.8%. Supply remained flat in 6M14 and fell by 1.6% in the quarter.

 

The number of paying passengers transported in the domestic market increased by 7.8% in 6M14 to 46.2 million, a new period record. The total of paying passengers

transported in the international market stood at 3 million, 2% up over 6M13 and also a record over the period.

 

 

Domestic Market - GOL

 

Domestic supply declined by 2.2% year to date and 6.0% in the quarter, in line with the Company’s projections for 2014 of a reduction between -3% and -1%.

 

Domestic demand increased by 9.0% in 6M14, representing around 50% of the industry growth in the same period. In 2Q14, domestic demand grew by 3.5%.

 

Domestic load factor reached 76.4% and 76.0% in 6M14 and 2Q14, respectively, the highest level in GOL’s history.

 

GOL carried more paid passengers than any other airline in the domestic market, totaling a record of 19 million in the first half, 10% up on 6M13 and corresponding to 37% of the total industry.

 

 

International Market - GOL

 

International supply increased by 4.3% in the first half and 7.4% in the second quarter, in line with the annual growth guidance of up to 8%. The Company maintains its focus on increasing its international market presence by launching new routes in 2Q14 between São Paulo (Brazil) and Santiago (Chile), and Campinas (Brazil) and Miami (USA).

 

International demand grew by 24% in 6M14 and 30% in 2Q14, generating respective increases of 11.1 and 12.1 percentage points in the international load factor.

 

The number of paid passengers transported came to 908,000 year-to-date, 146,000, or 19%, more than in 6M13, outpacing the industry as a whole, which recorded growth of 64,000 paid passengers in the same period. GOL’s market share grew by 4.2 percentage points to 30% in the first half.

 

 

PRASK and Yield

 

Thanks to the Company’s strategy of maximizing profitability by raising its load factor to new levels, increasing the attractiveness of its services and having the flexibility to adapt its route network in a dynamic manner, PRASK grew by 30% in 2Q14 over 2Q13, and yield expanded by 17%.

 

 

5

 


 
 

 

Debt Amortization Schedule

 

GOL’s loans and financing amortization profile, excluding interest and financial leasing, underlines the Company’s continuing commitment to reducing its short-term financial obligations.

 

 

Debt Amortization Schedule (2Q14)

 

Debt Amortization Schedule (Pro-Forma) ¹

 

¹Considers the following subsequent events: the Smiles S.A. debenture issue and the US$187.1 million tender offer.

 

 

Operational Fleet and Fleet Plan

 

Fleet Plan (End of Period)

2014

2015

2016

>2016

Total

Fleet

137

140

140

 

 

Aircraft Commitments (R$ million)*

-

1,098

1,149

30,459

32,705

Pre-Delivery Payments (R$ million)

88

240

128

4,021

4,476

Total (R$ million)

88

1,338

1,276

34,479

37,181

* Considers aircraft list price

 

Fleet (End of Period)

2Q14

2Q13

Var.

1Q14

Var.

Boeing 737-NG Family

146

135

11

147

-1

737-800 NG**

110

98

12

111

-1

737-700 NG

36

37

-1

36

0

737-300 Classic*

3

9

-6

7

-4

767-300/200*

1

1

-

1

-

Total*

   

 

 

 

Financial Leasing

46

46

-

46

-

Operational Leasing

101

90

11

102

-1

* Non-operational aircraft

                **Includes 5 aircraft being returned and 8 sub-leased aircraft

 

 

6

 
 

 

 

The Company ended the quarter with an operational fleet of 133 B737-700 NG and B737-800 NG aircraft, due to the sub-leasing of 8 aircraft to European airlines. The other 5 aircraft were in the process of being returned to their lessors, giving a total fleet of 146, as shown in the above table. The average age of the fleet is 7.1 years.

 

Of the 46 aircraft under finance leases, 40 have a purchase option when their leasing contracts expire. In 2Q14, the Company took delivery of 3 aircraft under operating lease contracts, and returned another 4 under operating lease, as well as 4 aircraft from Webjet’s fleet. On June 30, 2014, the Company had 130 firm aircraft acquisition orders with Boeing.

 

The portion financed through long-term loans with the U.S. Ex-Im Bank corresponds to 85% of the total aircraft cost. Other agents finance acquisitions with similar or higher rates, sometimes reaching 100%. The Company pays for its aircraft acquisitions with its own resources, loans, cash flow from operations, short and long-term credit lines and financing by the supplier.

 

Capex

GOL invested R$194 million in 2Q14. For more details on changes in property, plant and equipment, see Note 16 to the financial statements.

 

 

 

 

Financial Guidance – 2014

 

2014 Financial Projections

From

To

Actual

6M14

Brazilian GDP Growth

1.5%

2.0%

-

Annual Change in RASK

Equal to or above 10%

24%

Annual Change in Domestic Supply (ASK)

-3%

-1%

-2.2%

Annual Change in International Supply (ASK)

Until +8%

4.3%

Annual Change in CASK ex-fuel

Equal to or less than 10%

27.5%

Average Exchange Rate (R$/US$)

2.50

2.40

2.30

Jet Fuel Price (QAV)*

2.85

2.70

2.56

Operating Margin (EBIT)

3%

6%

3.7%

 

Due to the impact of the adverse macroeconomic scenario, GOL may revise its guidance to incorporate any developments in its operating and financial performance, as well as any changes in interest, FX, GDP and WTI and Brent oil price trends. GOL is maintaining its previously published financial guidance for 2014.

 

 

 

 

 

7


 

 

Audit committee statement

 

The Audit Committee of GOL LINHAS AÉREAS INTELIGENTES S.A., in accordance with its bylaws and legal provisions, examined the Interim Financial Information for the period ended June 30, 2014. Based on the examinations performed, considering also the report of the independent auditors - Deloitte Touche Tohmatsu, dated August 13, 2014, and the information and explanations received during the period, opines that these documents are able to be appreciated by the Board Shareholder’s Meeting.

 

 

São Paulo, August 13, 2014.

 

 

Richard F. Lark

Member of the Audit Committee

 

 

Antônio Kandir

Member of the Audit Committee  

 

 

Luiz Kaufmann

Member of the Audit Committee  

 

8


 

 

Directors' statement on the interim financial information

 

 

FOR THE PURPOSES OF ARTICLE 25, §1, Subsection VI, of INSTRUÇÃO CVM 480/09.

 

In accordance with Instrução CVM 480/09, the Directors declare that discussed, reviewed and agreed with the Interim Financial Information for the period ended June 30, 2014.

 

 

São Paulo, August 13, 2014.

 

 

Paulo Sérgio Kakinoff

Chief Executive Officer

 

 

Edmar Prado Lopes Neto

Vice President and Investor Relations Officer

 

9


 

 

Directors' statement on the report of the independent auditors

 

 

FOR THE PURPOSES OF ARTICLE 25, §1, Subsection VI, of INSTRUÇÃO CVM 480/09.

 

 

In accordance with Instrução CVM 480/09, the Directors declare that discussed, reviewed and agreed with the Report on Review of Interim Financial Information for the three-month period ended June 30, 2014.

 

 

São Paulo, August 13, 2014.

 

 

 

Paulo Sérgio Kakinoff

Chief Executive Officer

 

 

 

Edmar Prado Lopes Neto

Vice President and Investor Relations Officer

 

10


 

(A free translation from the original in Portuguese into English)

 

Report on the review of interim financial information

 

To

The Shareholders, Board of Directors and Officers

Gol Linhas Aéreas Inteligentes S.A.

São Paulo - SP

 

Introduction

 

We have reviewed the accompanying individual and consolidated interim financial information of Gol Linhas Aéreas Inteligentes S.A. (“Company”), identified as Company and Consolidated, respectively, contained in the Quarterly Information (ITR) for the quarter ended June 30, 2014, which comprises the balance sheet as at June 30, 2014 and the related statement of operations and statement of comprehensive income (loss) for the quarter and six-month period then ended, and the statement of changes in equity and statement of cash flows for the quarter and six-month period then ended, and a summary of significant accounting practices and other explanatory notes.

 

Company management is responsible for the preparation of interim individual financial information in accordance with the Technical Pronouncement of the Accounting

Pronouncements Committee (CPC) 21 (R1) – Interim Financial Reporting and the consolidated interim financial information in accordance with CPC 21 (R1) and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of these information in compliance with the rules issued by the Brazilian Securities Commission (“CVM”), applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

 

Scope of review

 

We conducted our review according to the Brazilian and international review standards

of interim financial information (NBC TR 2410 – Review of Interim Financial

Information Performed by the Independent Auditor of the Entity, and ISRE 2410 -

Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of inquiries, mainly of the people responsible for the financial and accounting matters, and the application of analytical and other review procedures. The scope of a review is significantly narrower than that of an audit conducted in accordance with audit standards and, accordingly, it did not permit us to obtain assurance that we took notice of all significant matters that could have been raised in an audit. Therefore, we did not

express an audit opinion.

 

Conclusion on the interim financial information

 

Based on our review, we are not aware of any fact that makes us believe that the individual and consolidated interim financial information included in the Quarterly Information referred above was not

11


 

prepared, in all material respects, in accordance with CPC 21 (R1) applicable to the preparation of Quarterly Information (ITR), and presented in compliance with the rules issued by the CVM.

 

 

 

 

(A free translation from the original in Portuguese into English)

 

Other matters

 

Statements of value added

 

We have also reviewed the individual and consolidated statement of value added (SVA) for the six-month period ended June 30, 2014, prepared under the responsibility of the Company’s management, the presentation of which in the interim financial information is required by the rules of the CVM applicable to Quarterly Information (ITR), and as supplementary information under IFRS, whereby no statement of value added presentation is required. These statements have been subject to the same review procedures previously described and, based on our review, we are not aware of any fact that makes us believe that they were not prepared, in all material respects, according to the individual and consolidated interim financial information taken as a whole.

 

Audit and review of the amounts corresponding to prior year and period

 

The amounts correspondent to balance sheets for the year ended December 31, 2013 and the statements of operations, of comprehensive income, of changes in shareholders’ equity, of cash flows and of value added for the three and six-months period ended June 30, 2013 presented for comparison purposes, were previously audited and reviewed, respectively, by other independent accountants, who issued an unmodified opinion dated March 25, 2014 and review report of quarterly information dated August 12, 2013.

 

 

São Paulo, August 12, 2014.

 

 

 

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

 

 

 

 

Luiz Carlos Passetti                                                   Vanessa R. Martins                          

Accountant CRC-1SP144343/O-3                           Accountant CRC-1SP244569/O        

 

 

 

12


 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Company Profile / Subscribed Capital

 

 

Number of shares

Current Year

06/30/2014

Paid-in capital

143,858,204

Preferred

135,009,316

Total

278,867,520

Treasury

2,146,725

Total

2,146,725

 

 

13


 

 

 

Individual Financial Statements / Statement of Financial Position - Assets

 

(In thousands of Brazilian Reais)

 

 

 

Line code

 

Line item

Current Year 06/30/2014

Prior Year 12/31/2013

1

Total assets

2,633,109

2,513,648

1.01

Current assets

915,336

363,767

1.01.01

Cash and cash equivalents

905,047

343,793

1.01.02

Short-term investments

54

2,524

1.01.06

Recoverable taxes

10,207

9,991

1.01.07

Prepaid expenses

21

438

1.01.08

Other current assets

7

7,021

1.01.08.01

Noncurrent assets for sale

7

7

1.01.08.01.01

Restricted cash

7

7

1.01.08.03

Others

-

7,014

1.02

Noncurrent assets

1,717,773

2,149,881

1.02.01

Long-term assets

165,956

174,900

1.02.01.06

Taxes

71,272

84,567

1.02.01.06.01

Deferred taxes

19,016

29,569

1.02.01.06.02

Recoverable taxes

52,256

54,998

1.02.01.08

Related-party transactions

50,328

49,961

1.02.01.08.04

Other related-party transactions

50,328

49,961

1.02.01.09

Other noncurrent assets

44,356

40,372

1.02.01.09.03

Deposits

23,221

20,170

1.02.01.09.04

Restricted cash

21,135

20,202

1.02.02

Investments

807,913

1,084,149

1.02.03

Property, plant and equipment

743,904

890,832

 

14


 

 

 

Individual Financial Statements / Statement of Financial Position - Liabilities

 

(In thousands of Brazilian Reais)

 

 

 

Line code

 

Line item

Current Year

06/30/2014

Prior Year

12/31/2013

2

Total liabilities

2,633,109

2,513,648

2.01

Current liabilities

65,679

84,710

2.01.01

Salaries, wages and benefits

390

1,092

2.01.01.02

Salaries, wages and benefits

390

1,092

2.01.02

Suppliers

385

3,769

2.01.03

Taxes payable

1,491

1,246

2.01.04

Short-term debt

62,640

47,488

2.01.05

Other liabilities

773

31,115

2.01.05.02

Other

773

31,115

2.01.05.02.04

Other liabilities

773

800

2.01.05.02.05

Derivative transactions

-

30,315

2.02

Noncurrent liabilities

2,082,320

1,778,012

2.02.01

Long-term debt

1,948,033

1,651,494

2.02.02

Other liabilities

134,287

126,518

2.02.02.01

Liabilities with related-party transactions

121,580

113,741

2.02.02.02

Other

12,707

12,777

2.02.02.02.03

Taxes payable

12,707

12,777

2.03

Shareholder’s equity

485,110

650,926

2.03.01

Capital

2,586,059

2,469,623

2.03.01.01

Issued capital

2,501,653

2,501,574

2.03.01.02

Cost on issued shares

(31,951)

(31,951)

2.03.01.03

Shares to be issue

116,357

-

2.03.02

Capital reserves

159,714

156,688

2.03.02.01

Premium on issue of shares

32,387

32,387

2.03.02.02

Special reserve

70,979

70,979

2.03.02.05

Treasury shares

(32,116)

(32,116)

2.03.02.07

Share-based payments

88,464

85,438

2.03.05

Accumulated losses

(2,873,726)

(2,568,353)

2.03.06

Equity valuation adjustments

613,063

592,968

2.03.06.01

Other comprehensive income

(74,839)

(18,162)

2.03.06.02

Change in equity through public offer

687,902

611,130

 

15


 

 

 

Individual Financial Statements / Statements of Operations

 

(In thousands of Brazilian Reais)

 

 

 

 

Current Quarter

Current

Year

Same Quarter Prior Year

Prior Year YTD

 

 

Line code

 

 

Line item

04/01/2014 to 06/30/2014

01/01/2014 to 06/30/2014

04/01/2013

to

06/30/2013

01/01/2013 to 06/30/2013

3.04

Operating expenses/revenues

(178,031)

(328,441)

(280,035)

(356,012)

3.04.02

General and administrative expenses

(2,690)

(7,503)

(5,141)

(9,996)

3.04.04

Other operating income

26,700

75,073

28,916

66,708

3.04.06

Equity in subsidiaries

(202,041)

(396,011)

(303,810)

(412,724)

3.05

Result before income taxes and financial result

(178,031)

(328,441)

(280,035)

(356,012)

3.06

Financial result

3,865

23,086

(166,746)

(165,959)

3.06.01

Financial income

49,187

132,960

(119,670)

(82,406)

3.06.01.01

Financial income

6,491

8,626

5,013

11,248

3.06.01.02

Exchange variation, net

42,696

124,334

(124,683)

(93,654)

3.06.02

Financial expenses

(45,322)

(109,874)

(47,076)

(83,553)

3.07

Result before income taxes

(174,166)

(305,355)

(446,781)

(521,971)

3.08

Income taxes

(12)

(18)

(2,740)

(2,840)

3.08.01

Current

-

-

(1,885)

(1,985)

3.08.02

Deferred

(12)

(18)

(855)

(855)

3.09

Result from continuing operations, net

(174,178)

(305,373)

(449,521)

(524,811)

3.11

Net loss for the period

(174,178)

(305,373)

(449,521)

(524,811)

 

16


 

 

 

Individual Statements of Comprehensive Income

 

(In thousands of Brazilian Reais)

 

 

   

Current Quarter

Current

Year

Same Quarter Prior Year

Prior Year

YTD

 

 

Line code

 

 

Line item

04/01/2014 to 06/30/2014

01/01/2014 to 06/30/2014

04/01/2013

to

06/30/2013

01/01/2013 to 06/30/2013

4.01

Net loss for the period

(174,178)

(305,373)

(449,521)

(524,811)

4.02

Other comprehensive income

(26,966)

(56,677)

22,308

29,296

4.02.01

Cash flow hedges

(40,857)

(85,874)

33,800

44,388

4.02.02

Tax effect

13,891

29,197

(11,492)

(15,092)

4.03

Comprehensive loss for the period

(201,144)

(362,050)

(427,213)

(495,515)

 

 

17


 

 

 

Individual Financial Statements / Statements of Cash Flows - Indirect Method

 

(In thousands of Brazilian Reais)

 

 

 

 

Current

Quarter

Same Quarter

Prior Year

 

Line code

 

Line item

04/01/2014 to 06/30/2014

04/01/2013 to 06/30/2013

6.01

Net cash used in operating activities

23,018

231,350

6.01.01

Cash flows from operating activities

311,866

559,844

6.01.01.02

Deferred taxes

18

855

6.01.01.03

Equity in subsidiaries

396,011

412,724

6.01.01.04

Share-based payments

3,026

2,702

6.01.01.05

Exchange and monetary variations, net

(126,056)

137,027

6.01.01.06

Interest on loans

88,553

25,872

6.01.01.07

Interest paid

(65,538)

(25,797)

6.01.01.08

Income tax paid

-

(1,216)

6.01.01.09

Unrealized results of hedge, net

15,852

7,677

6.01.02

Changes assets and liabilities

16,525

196,317

6.01.02.02

Financial applications used for trading

2,470

173,359

6.01.02.03

Deposits

(3,051)

(815)

6.01.02.04

Prepaid expenses and recoverable taxes

13,477

4,573

6.01.02.05

Other assets

7,014

17,097

6.01.02.06

Suppliers

(3,384)

3,950

6.01.02.07

Tax obligations

175

(2,693)

6.01.02.08

Salaries, wages and benefits

(702)

163

6.01.02.10

Other obligations

526

683

6.01.03

Other

(305,373)

(524,811)

6.01.03.01

Net loss for the period

(305,373)

(524,811)

6.02

Net cash used in investing activities

(4,899)

(307,006)

6.02.01

Advance for future capital increase

(290,215)

(224,689)

6.02.02

Credit with related parties

(367)

-

6.02.03

Restricted cash

(933)

(19,181)

6.02.04

Property, plant and equipment acquisition

-

(63,136)

6.02.05

Capital increase on subsidiary

(2,367)

-

6.02.06

Gains on investment sale, net

61,362

-

6.02.07

Advance for property, plant and equipment acquisition

146,928

-

6.02.08

Dividends received by subsidiary

80,693

-

6.03

Net cash generated by financing activities

543,135

(81,358)

6.03.02

Loan and lease payment

(44,612)

-

6.03.03

Credit with related parties

467,212

(86,478)

6.03.04

Disposal of treasury shares

-

3,235

6.03.05

Capital increase

79

1,885

6.03.07

Shares to be issued

116,357

-

6.03.08

Gains due to change on investment

4,099

-

6.05

Net increase (decrease) in cash and cash equivalents

561,254

(157,014)

6.05.01

Cash and cash equivalents at beginning of the period

343,793

247,145

6.05.02

Cash and cash equivalents at end of the period

905,047

90,131

18


 

 

 

Individual Financial Statements / Statements of Changes in Equity - From 01/01/2014 to 06/30/2014

 

(In thousands of Brazilian Reais)

 

 

 

 

 

Line code

 

 

 

Line item

 

 

Capital

stock

Capital reserves, options granted and treasury shares

 

 

Accumulated losses

 

Other comprehensive income

 

Total consolidated equity

5.01

Opening balance

2,469,623

767,818

(2,568,353)

(18,162)

650,926

5.03

Adjusted balance

2,469,623

767,818

(2,568,353)

(18,162)

650,926

5.04

Shareholders’ capital transactions

116,436

76,772

-

-

193,208

5.04.01

Capital increase

79

-

-

-

79

5.04.11

Shares to be issued

116,357

-

-

-

116,357

5.04.12

Gains on change on investment

-

2,802

-

-

2,802

5.04.13

Gains on investment sold – G.A. Smiles

-

73,970

-

-

73,970

5.05

Total comprehensive result

-

3,026

(305,373)

(56,677)

(359,024)

5.05.01

Net loss for the period

-

-

(305,373)

-

(305,373)

5.05.02

Other comprehensive income

-

3,026

-

(56,677)

(53,651)

5.05.02.07

Other comprehensive result, net

-

-

-

(56,677)

(56,677)

5.05.02.08

Share-based payments

-

3,026

-

-

3,026

5.07

Closing balance

2,586,059

847,616

(2,873,726)

(74,839)

485,110

 

 

19


 

 

 

Individual Financial Statements / Statement of Changes in Equity - From 01/01/2013 to 06/30/2013

 

(In thousands of Brazilian Reais)

 

 

 

 

Line code

 

 

Line item

 

Capital

stock

Capital reserves, options granted and treasury shares

 

Accumulated losses

Other comprehensive income

Total consolidated equity

5.01

Opening balance

2,467,738

105,478

(1,771,806)

(68,582)

732,828

5.03

Adjusted balance

2,467,738

105,478

(1,771,806)

(68,582)

732,828

5.04

Shareholders’ capital transactions

-

617,628

-

-

617,628

5.04.08

Treasury shares sold

-

3,235

-

-

3,235

5.04.09

Share-based payments

-

3,351

-

-

3,351

5.04.10

Change on equity through public offer

-

611,042

-

-

611,042

5.05

Total comprehensive income

1,885

-

(524,811)

29,296

(493,630)

5.05.01

Net loss for the period

-

-

(524,811)

-

(524,811)

5.05.02

Other comprehensive income

1,885

-

-

29,296

31,181

5.05.02.06

Capital increase by exercise of

stock options

1,885

-

-

-

1,885

5.05.02.07

Other comprehensive income, net

-

-

-

29,296

29,296

5.07

Closing balance

2,469,623

723,106

(2,296,617)

(39,286)

856,826

 

 

20


 

 

 

Individual Financial Statements / Statements of Value Added

 

(In thousands of Brazilian Reais)

 

 

 

 

Current YTD

Prior Year YTD

 

Line code

 

Line item

01/01/2014 to 06/30/2014

01/01/2013 to 06/30/2013

7.01

Revenues

74,385

66,708

7.01.02

Other revenue

74,385

66,708

7.01.02.02

Other operational revenue

74,385

66,708

7.02

Acquired from third parties

(4,049)

(6,315)

7.02.02

Materials, energy, third-party services and other

(4,049)

(6,315)

7.03

Gross value added

70,336

60,393

7.05

Added value produced

70,336

60,393

7.06

Value added received in transfer

(387,385)

(401,476)

7.06.01

Equity in subsidiaries

(396,011)

(412,724)

7.06.02

Finance income

8,626

11,248

7.07

Total wealth for distribution

(317,049)

(341,083)

7.08

Wealth for distribution

(317,049)

(341,083)

7.08.01

Employees

2,926

3,643

7.08.02

Taxes

(142)

2,878

7.08.03

Third party capital remuneration

(14,460)

177,207

7.08.03.03

Other

(14,460)

177,207

7.08.03.03.01

Financiers

(14,460)

177,207

7.08.04

Return on own capital

(305,373)

(524,811)

7.08.04.03

Loss for the period

(305,373)

(524,811)

 

21


 

 

 

Consolidated Financial Statements / Statement of Financial Position - Assets

 

(In thousands of Brazilian Reais)

 

 

 

Line code

 

Line item

Current Year 06/30/2014

Prior Year 12/31/2013

1

Total assets

10,256,690

10,638,448

1.01

Current assets

3,357,238

3,565,709

1.01.01

Cash and cash equivalents

2,450,393

1,635,647

1.01.02

Short-term investments

143,362

1,244,034

1.01.02.01

Short-term investments at fair value

143,362

1,244,034

1.01.02.01.03

Restricted cash

7

88,417

1.01.02.01.04

Short-term investments

143,355

1,155,617

1.01.03

Trade receivables

466,826

324,821

1.01.04

Inventories

147,729

117,144

1.01.06

Recoverable taxes

30,936

52,124

1.01.07

Prepaid expenses

79,171

80,655

1.01.08

Other current assets

38,821

111,284

1.01.08.03

Others

38,821

111,284

1.01.08.03.03

Other credits

38,821

62,350

1.01.08.03.04

Rights on derivatives transactions

-

48,934

1.02

Noncurrent assets

6,899,452

7,072,739

1.02.01

Long-term assets

1,647,733

1,606,390

1.02.01.06

Taxes

533,095

561,694

1.02.01.06.01

Deferred Taxes

465,251

488,157

1.02.01.06.02

Recoverable taxes

67,844

73,537

1.02.01.07

Prepaid expenses

22,386

26,526

1.02.01.09

Other noncurrent assets

1,092,252

1,018,170

1.02.01.09.03

Restricted cash

226,539

166,039

1.02.01.09.04

Deposits

844,295

847,708

1.02.01.09.05

Other credits

21,418

4,423

1.02.02

Investments

8,775

-

1.02.03

Property, plant and equipment

3,517,216

3,772,159

1.02.03.01

Property, plant and equipment in operation

1,361,784

1,596,462

1.02.03.01.01

Other flight equipment

915,732

987,310

1.02.03.01.02

Advances for property, plant and equipment acquisition

314,331

467,763

1.02.03.01.04

Others

131,721

141,389

1.02.03.02

Property, plant and equipment under leasing

2,155,432

2,175,697

1.02.03.02.01

Property, plant and equipment under financial leasing

2,155,432

2,175,697

1.02.04

Intangible

1,725,728

1,694,190

1.02.04.01

Intangible

1,165,563

1,151,888

1.02.04.02

Goodwill

560,165

542,302

 

22


 

 

 

Consolidated Financial Statements / Statement of Financial Position - Liabilities

 

(In thousands of Brazilian Reais)

 

 

 

Line code

 

Line item

Current Year

06/30/2014

Prior Year 12/31/2013

2

Total liabilities

10,256,690

10,638,448

2.01

Current liabilities

3,368,462

3,446,791

2.01.01

Salaries, wages and benefits

256,201

233,584

2.01.01.02

Salaries, wages and benefits

256,201

233,584

2.01.02

Suppliers

498,760

502,919

2.01.03

Taxes payable

75,637

94,430

2.01.04

Short-term debt

531,651

440,834

2.01.05

Other liabilities

1,849,929

1,975,553

2.01.05.02

Others

1,849,929

1,975,553

2.01.05.02.04

Tax and landing fees

300,127

271,334

2.01.05.02.05

Advance ticket sales

1,129,699

1,219,802

2.01.05.02.06

Customer loyalty programs

208,650

195,935

2.01.05.02.07

Advances from customers

43,700

167,759

2.01.05.02.08

Other liabilities

125,613

90,408

2.01.05.02.09

Liabilities from derivative transactions

42,140

30,315

2.01.06

Provisions

156,284

199,471

2.02

Noncurrent liabilities

5,795,506

5,973,157

2.02.01

Long-term debt

4,875,317

5,148,551

2.02.02

Other liabilities

671,645

541,703

2.02.02.02

Others

671,645

541,703

2.02.02.02.03

Customer loyalty programs

496,013

456,290

2.02.02.02.04

Advances from customers

383

3,645

2.02.02.02.05

Tax obligations

62,869

61,038

2.02.02.02.06

Other liabilities

112,380

20,730

2.02.04

Provisions

248,544

282,903

2.03

Consolidated equity

1,092,722

1,218,500

2.03.01

Capital

2,472,731

2,356,295

2.03.01.01

Issued capital

2,501,653

2,501,574

2.03.01.02

Cost on issued shares

(145,279)

(145,279)

2.03.01.03

Shares to be issue

116,357

-

2.03.02

Capital reserves

159,714

156,688

2.03.02.01

Premium on issue of shares

32,387

32,387

2.03.02.02

Special reserve

70,979

70,979

2.03.02.05

Treasury shares

(32,116)

(32,116)

2.03.02.07

Share-based payments

88,464

85,438

2.03.05

Accumulated losses

(2,760,398)

(2,455,025)

2.03.06

Equity valuation adjustments

613,063

592,968

2.03.06.01

Equity valuation adjustments

(74,839)

(18,162)

2.03.06.02

Gains on capital

687,902

611,130

2.03.09

Participation of non-controlling Company’s shareholders

607,612

567,574

23


 

 

 

Consolidated Financial Statements /Statements of Operations

 

(In thousands of Brazilian Reais)

 

 

Current Quarter

Current

Year

Same Quarter Prior Year

Prior Year

YTD

 

Line code

 

Line item

04/01/2014 to 06/30/2014

01/01/2014 to 06/30/2014

04/01/2013 to 06/30/2013

01/01/2013 to 06/30/2013

3.01

Sales and services revenue

2,381,289

4,874,688

1,914,825

3,997,501

3.01.01

Passenger

2,131,409

4,415,697

1,722,561

3,628,668

3.01.02

Cargo and other

249,880

458,991

192,264

368,833

3.02

Cost of sales and/or services

(1,969,514)

(4,017,722)

(1,719,847)

(3,476,469)

3.03

Gross profit

411,775

856,966

194,978

521,032

3.04

Operating expenses

(373,927)

(674,668)

(230,056)

(454,935)

3.04.01

Sales expenses

(225,549)

(425,400)

(144,523)

(306,784)

3.04.01.01

Marketing expenses

(225,549)

(425,400)

(144,523)

(306,784)

3.04.02

General and administrative expenses

(174,117)

(322,934)

(108,140)

(214,853)

3.04.04

Other operating income

26,700

75,073

22,607

66,702

3.04.06

Equity in subsidiaries

(961)

(1,407)

-

-

3.05

Income before taxes and financial result

37,848

182,298

(35,078)

66,097

3.06

Financial result

(105,695)

(299,477)

(424,979)

(531,907)

3.06.01

Financial income

118,703

278,942

(210,890)

(94,323)

3.06.01.01

Financial income

68,312

171,064

122,795

180,208

3.06.02.02

Exchange variation, net

50,391

107,878

(333,685)

(274,531)

3.06.02

Financial expenses

(224,398)

(578,419)

(214,089)

(437,584)

3.07

Loss before income taxes

(67,847)

(117,179)

(460,057)

(465,810)

3.08

Tax expenses

(77,133)

(123,947)

27,103

(42,434)

3.08.01

Current

(34,799)

(74,055)

(10,968)

(28,372)

3.08.02

Deferred

(42,334)

(49,892)

38,071

(14,062)

3.09

Net loss from continuing operations

(144,980)

(241,126)

(432,954)

(508,244)

3.11

Net loss for the period

(144,980)

(241,126)

(432,954)

(508,244)

3.11.01

Attributable to Company’ hareholders

(174,178)

(305,373)

(449,521)

(524,811)

3.11.02

Attributable to non-controlling Company’ shareholders

29,198

64,247

16,567

16,567

 

 

24


 

 

 

Consolidated Statements of Comprehensive Income

 

(In thousands of Brazilian Reais)

 

 

   

 

Current

Quarter

 

Current

Year

Same Quarter Prior Year

 

Prior Year

YTD

 

Line code

 

 

Line item

04/01/2014

to

06/30/2014

01/01/2014 to 06/30/2014

04/01/2013 to 06/30/2013

01/01/2013 to 06/30/2013

4.01

Net loss for the period

(144,980)

(241,126)

(432,954)

(508,244)

4.02

Other comprehensive income (loss)

(26,966)

(56,677)

22,308

29,296

4.02.01

Cash flow hedges

(40,857)

(85,874)

33,800

44,388

4.02.02

Tax effect

13,891

29,197

(11,492)

(15,092)

4.03

Comprehensive income for the period

(171,946)

(297,803)

(410,646)

(478,948)

4.03.01

Attributable to Company’ shareholders

(201,144)

(362,050)

(427,213)

(495,515)

 

4.03.02

Attributable to non-controlling Company’ shareholders

 

29,198

 

64,247

 

16,567

 

16,567

 

25


 

 

 

Consolidated Financial Statements / Statements of Cash Flows - Indirect Method

 

(In thousands of Brazilian Reais)

 

 

 

Current

Quarter

Same Quarter

Prior Year

 

Line code

 

Line item

04/01/2014 to 06/30/2014

04/01/2013 to 06/30/2013

6.01

Net cash provided by operating activities

683,166

(584,835)

6.01.01

Cash flows from operating activities

463,232

833,752

6.01.01.01

Depreciation and amortization

259,561

227,155

6.01.01.02

Allowance for doubtful accounts

7,757

16,393

6.01.01.03

Provisions for judicial deposits

2,541

8,073

6.01.01.04

Reversion for inventory obsolescence

(1)

(8,289)

6.01.01.05

Deferred taxes

49,892

14,062

6.01.01.06

Share-based payments

4,186

3,692

6.01.01.07

Exchange and monetary variations, net

(111,061)

328,784

6.01.01.08

Interest on loans and financial lease

148,074

105,006

6.01.01.09

Unrealized hedge results

15,852

24,765

6.01.01.11

Mileage program

52,438

93,985

6.01.01.12

Write-off property, plant and equipment and intangible assets

40

20,126

6.01.01.14

Result share plan provision

32,546

-

6.01.01.15

Equity in subsidiary

1,407

-

6.01.02

Changes in assets and liabilities

461,060

(893,776)

6.01.02.01

Accounts receivable

(149,762)

(44,105)

6.01.02.02

Financial aplications used for trading

1,012,262

(818,486)

6.01.02.03

Inventories

(30,585)

(1,888)

6.01.02.04

Deposits

(34,275)

(54,439)

6.01.02.05

Prepaid expenses, insurance and tax recoverable

36,452

(18,634)

6.01.02.06

Other assets

6,534

29,452

6.01.02.07

Suppliers

(42,625)

(96,863)

6.01.02.08

Advanced ticket sales

(90,103)

122,289

6.01.02.09

Obligations from derivative operations

5,200

(21,337)

6.01.02.10

Advances from customers

(127,321)

285,725

6.01.02.11

Salaries, wages and benefits

(9,929)

2,194

6.01.02.12

Taxes and landing fees

28,793

(1,299)

6.01.02.13

Taxes payable

62,246

16,800

6.01.02.14

Provisions

(87,995)

(137,905)

6.01.02.15

Other liabilities

125,716

(5,543)

6.01.02.16

Interest paid

(167,065)

(129,127)

6.01.02.17

Income tax paid

(76,483)

(20,610)

6.01.03

Others

(241,126)

(524,811)

6.01.03.01

Net loss for the period

(241,126)

(524,811)

6.02

Net cash used in investing activities

84,551

(98,751)

6.02.03

Restricted cash

27,910

23,025

6.02.04

Property, plant and equipment

(125,724)

(112,494)

6.02.05

Intangible

(24,319)

(9,282)

6.02.06

Investment acquisition

(12,500)

-

6.02.07

Gains on investment sale, net

65,752

-

6.02.08

Advance for property, plant and equipment acquisition

153,432

-

6.03

Net cash generated by financing activities

156,609

1,085,973

6.03.01

Loan funding

295,719

397,600

6.03.02

Loan payment

(73,304)

(318,175)

6.03.03

Disposal of treasury shares

-

3,235

6.03.04

Capital increase

1,235

1,885

6.03.06

Financial leases payment

(122,355)

(94.525)

6.03.07

Capital increase in subsidiary

-

1,095,953

6.03.08

Dividends paid

(67,409)

-

6.03.09

Shares to be issued

117,249

-

6.03.10

Gains due to change on investment

5,474

-

6.04

Exchange variation on cash and cash equivalents

(109,580)

(15,848)

6.05

Net increase in cash and cash equivalents

814,746

386,539

6.05.01

Cash and cash equivalents at beginning of the period

1,635,647

775,551

6.05.02

Cash and cash equivalents at end of the period

2,450,393

1,162,090

26


 

 

 

Consolidated Financial Statements / Statements of Changes in Equity - From 01/01/2014 to 06/30/2014

 

(In thousands of Brazilian Reais)

 

 

 

 

 

Line code

 

 

 

Line item

 

 

Capital Stock

Capital reserves, Options Granted and

Treasury Shares

 

 

Accumulated Losses

 

Other Comprehensive Income

 

 

Consolidated Equity

 

Non-controlling

Interests

 

Total Consolidated

Equity

5.01

Opening balance

2,356,295

767,818

(2,455,025)

(18,162)

650,926

567,574

1,218,500

5.03

Adjusted opening balance

2,356,295

767,818

(2,455,025)

(18,162)

650,926

567,574

1,218,500

5.04

Shareholders’ capital transactions

116,436

79,798

-

-

196,234

(24,209)

172,025

5.04.08

Capital increase

79

-

-

-

79

1,158

1,237

5.04.11

Shares to be issue

116,357

-

-

-

116,357

892

117,249

5.04.12

Share-based payments

-

3,026

-

-

3,026

529

3,555

5.04.13

Dividends paid

-

-

-

-

-

(67,409)

(67,409)

5.04.14

Gains on investment sold

-

2,802

-

-

2,802

2,672

5,474

5.04.15

Gains on investment sold – G.A Smiles

-

73,970

-

-

73,970

37,949

111,919

5.05

Total comprehensive result

-

-

(305,373)

(56,677)

(362,050)

64,247

(297,803)

5.05.01

Net loss for the period

-

-

(305,373)

-

(305,373)

64,247

(241,126)

5.05.02

Other comprehensive result

-

-

-

(56,677)

(56,677)

-

(56,677)

5.05.02.08

Other comprehensive result, net

-

-

-

(56,677)

(56,677)

-

(56,677)

5.07

Closing balance

2,472,731

847,616

(2,760,398)

(74,839)

485,110

607,612

1,092,722

 

27


 

 

 

Consolidated Financial Statements / Statement of Changes in Equity - From 01/01/2013 to 12/31/2013

 

(In thousands of Brazilian Reais)

 

 

 

 

 

Line code

 

 

 

Line item

 

 

Capital

stock

Capital reserves, Options Granted and

Treasury Shares

 

 

Accumulated Losses

 

Other Comprehen-sive Income

 

 

Consolidated Equity

 

Non-controlling

Interests

 

Total Consolidated

Equity

5.01

Opening balance

2,354,410

105,478

(1,658,478)

(68,582)

732,828

-

732,828

5.03

Adjusted balance

2,354,410

105,478

(1,658,478)

(68,582)

732,828

-

732,828

5.04

Shareholders capital transactions

1,885

617,628

-

-

619,513

485,252

1,104,765

 

5.04.08

Capital increase by the exercise

of stock options

 

1,885

 

3,351

 

-

 

-

 

5,236

 

341

 

5,577

5.04.09

Treasury shares sold

-

3,235

-

-

3,235

-

3,235

5.04.10

Change on equity through

public offer

 

-

 

611,042

 

-

 

-

 

611,042

 

484,911

 

1,095,953

5.05

Total comprehensive income

-

-

(524,811)

29,296

(495,515)

16,567

(478,948)

5.05.02

Other comprehensive income

-

-

(524,811)

29,296

(495,515)

16,567

(478,948)

5.05.02.07

Net loss for the period

-

-

(524,811)

-

(524,811)

16,567

(508,244)

5.05.02.08

Other comprehensive income, net

-

-

-

29,296

29,296

-

29,296

5.07

Closing balance

2,356,295

723,106

(2,183,289)

(39,286)

856,826

501,819

1,358,645

 

 

28


 

 

 

Consolidated Financial Statements / Statements of Value Added

 

(In thousands of Brazilian Reais)

 

 

   

Current YTD

Prior Year YTD

 

Line code

 

Line item

01/01/2014 to 06/30/2014

01/01/2013 to 06/30/2013

7.01

Revenues

5,232,910

4,294,921

7.01.02

Other revenue

5,229,487

4,301,260

7.01.02.01

Passengers, cargo and other

5,154,414

4,234,558

7.01.02.02

Other operating income

75,073

66,702

7.01.04

Allowance (reversal) for doubtful accounts

3,423

(6,339)

7.02

Acquired from third parties

(3,438,764)

(2,842,579)

7.02.02

Material, power, third-party services and other

(1,161,845)

(890,733)

7.02.04

Other

(2,276,919)

(1,951,846)

7.02.04.01

Suppliers of fuel and lubrificants

(1,941,598)

(1,748,525)

7.02.04.02

Aircraft insurance

(9,661)

(10,240)

7.02.04.03

Sales and advertising

(325,660)

(193,081)

7.03

Gross value added

1,794,146

1,452,342

7.04

Retentions

(259,561)

(227,152)

7.04.01

Depreciation, amortization and exhaustion 

(259,561)

(227,152)

7.05

Added value produced

1,534,585

1,225,190

7.06

Value added received in transfer

169,657

180,208

7.06.01

Equity in subsidiaries

(1,407)

-

7.06.02

Finance income

171,064

180,208

7.07

Total wealth for distribution

1,704,242

1,405,398

7.08

Wealth for distribution

1,704,242

1,405,398

7.08.01

Employees

631,437

599,038

7.08.02

Taxes

417,395

294,065

7.08.03

Third-party capital remuneration

896,536

1,020,539

7.08.03.03

Other

896,536

1,020,539

7.08.03.03.01

Financiers

896,536

712,115

7.08.03.03.02

Lessors

-

308,424

7.08.04

Return on own capital

64,247

16,567

7.08.04.04

Non-controlling interests

64,247

16,567

7.08.05

Other

(305,373)

(524,811)

7.08.05.01

Loss for the period

(305,373)

(524,811)

29


 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

1.     General information

 

Gol Linhas Aéreas Inteligentes S.A. (“Company” or “GLAI”) is a publicly-listed company incorporated in accordance with the Brazilian Corporate Laws, organized on March 12, 2004. The Company is engaged in controlling its wholly-owned subsidiary (i) VRG Linhas Aéreas S.A. (“VRG”), and through its subsidiaries or affiliates, essentially exploring: (a) regular and non-regular air transportation services of passengers, cargo and mailbags, domestically or internationally, according to the concessions granted by the competent authorities; (b) complementary activities of air transport service provided in its bylaws; and (ii) Smiles S.A., which mainly operates: (a) the development and management of its own or third party’s customer loyalty program, and (b) sale of redemption rights of awards related to the loyalty program.

 

Additionally, GLAI is the direct parent Company of the subsidiaries GAC Inc. (“GAC”), Gol Finance (“Finance”). Gol LuxCo S.A. (“Gol LuxCo”), Gol Dominicana Lineas Aereas SAS (“Gol Dominicana”) and indirect parent Company of the subsidiary Webjet Linhas Aéreas S.A. ("Webjet").

 

On February 27, 2014, the Company sold to General Atlantic S.A. (G.A.) the total of 3,433,476 shares of Smiles S.A. through the exercise of stock options in accordance with the investment agreement between the companies dated April 5, 2013 in the amount of R$80,000. As a result of the exercise of the options, the Company decreased its participation in Smiles’ capital, being from 57.3% to 54.5% and remaining as the controlling shareholder. The gain generated by this partial decrease in the investment was recorded in “Gains on change on investment” in equity. This gain is also consists of the reversal of R$46,216 previously classified in equity as derivatives of equity instruments.

 

The Company’s shares are traded on the New York Stock Exchange (“NYSE”) and on the São Paulo Stock Exchange (“BOVESPA”). The Company entered into an agreement for adoption of Level 2 Differentiated Corporate Governance Practices with the São Paulo Stock Exchange (“BOVESPA”), and is included in the Special Corporate Governance Stock Index (“IGC”) and the Special Tag Along Stock Index (“ITAG”), which were created to identify companies committed to adopt differentiated corporate governance practices.

 

 

2.     Approval and summary of significant accounting policies applied in preparing the interim financial information

 

The interim Financial Information was authorized for issuance at the Board of Directors’ meeting held on August 12, 2014. The Company’s registered Office is at Pça. Comandante Linneu Gomes, s/n, portaria 3, prédio 24, Jardim Aeroporto, São Paulo, Brazil.

 

 

 

30


 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

2.   Approval and summary of significant accounting policies applied in preparing the interim financial information (Continued) 

 

 

2.1.    Basis of preparation

 

The Consolidated Interim Financial Information was prepared for the six-month period ended on June 30, 2014 in accordance with International Accounting Standards (IAS) n.34 and technical pronouncement CPC 21 (R1) which comprises the interim financial reporting.

 

IAS 34 requires the use of certain accounting estimates by Company’s Management. The consolidated interim financial information was prepared based on historical cost, except for certain financial assets and liabilities, which are measured at fair value.

 

The Individual Interim Financial Information was prepared in accordance with the technical pronouncement CPC 21 (R1) which comprises the interim financial reporting.

 

The Individual Interim Financial information measures investments in subsidiaries by the equity method, according to Brazilian legislation. Thus, the individual interim financial information is not in accordance with IFRS, which requires the valuation of these investments on the individual financial statements of the Parent Company at fair value or cost.

 

This Individual and Consolidated Interim Financial Information do not include all the information and disclosure items required in the consolidated annual financial statements and, therefore, it must be read along with the consolidated financial statements referring to the year ended December 31, 2013 filed on March 25, 2014, which were prepared in accordance with Brazilian accounting practices and IFRS. There were no changes in accounting policies adopted druring the period from December 31, 2013 to June 30, 2014.

 

The shareholder’s equity individual and consolidated quarterly financial information do not present differences on its composition, except in respect of the non-controlling interest in Smiles S.A., highlighted in the consolidated equity.

 

The non-financial information included on this Individual and Consolidated Interim Financial Information, such as sales volume, agreement information, forecasts, insurance, among others, have not been audited.   

 

 

 

 

 

 

31


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

3.     Seasonality 

 

The Company expects that revenues and profits from its flights reach the highest levels during the summer and winter vacation periods, in January and July, respectively, and during the last two weeks of December, during the season holidays. Given the high portion of fixed costs, this seasonality tends to result in fluctuations in our operational quarter-on-quarter income.

 

 

4.     Cash and cash equivalents

 

 

Individual

Consolidated

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Cash and bank deposits (a)

348,521

 

320,276

1,055,348

 

667,985

Cash equivalents

556,526

 

23,517

1,395,045

 

967,662

 

905,047

 

343,793

2,450,393

 

1,635,647

 

 

(a)     On January 23, 2014, the Venezuela government announced that the airline companies could request the repatriation of their resources generated by sales in Venezuela through CADIVI ("Comisión de Administración de Divisas") by the official rate of BS 6.30/US$1.00. This rate experienced a level increase and the rate as of June 30, 2014 was BS 10.60/US$1.00. The exchange variation control in Venezuela is determined on a weekly basis by its Federal Reserve (SICAD). Given this increase, the Company recorded a currency depreciation justified by the intention to repatriate its values related to the operations performed in the country from January 2014. The total amount of the cash in Venezuela as of June 30, 2014 is R$464,043, which the portion accrued as an impairment from the Venezuelan Bolívar related to U.S. Dollar was R$134,333 with counterpart on "Foreign exchange variation, net" (see Note 28).

 

The register is subject to future changes due to the doubtful economic scenario on Vezenuela, with the possibility of new limitations in the cash flows by CADIVI or sanctions by the government that may difficult the cash repatriation. Accordingly, considering the intention of the Company to perform the repatriation of the amount involved, the recoverable balance of Venezuela’s cash as of June 30, 2014 is R$329,710 recorded as “Cash and bank deposits”, which R$160,189 is related to the operations performed in 2014 and R$169,521 is related to the operation performed in 2013.

 

The cash equivalents breakdown was as follows:

 

 

Individual

Consolidated

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Private bonds

556,093

 

19,471

1,152,092

 

537,196

Government bonds

-

 

271

6,195

 

65,673

Investment funds

433

 

3,775

236,758

 

364,793

 

556,526

 

23,517

1,395,045

 

967,662

 

 

As of June 30, 2014, the cash equivalents were represented by private bonds (Bank Deposit Certificates - “CDBs”), and buy-back transactions. The government bonds were represented by LFT and LTN paid at post fixed rates ranging between 95.0% and 102.0% of the Interbank Deposit Certificate Rate (“CDI”).

 

The investment funds classified as cash equivalentes have immediate liquidity and, according to the Company analysis, can be converted to a known amount of cash with insignificant risk of change in its value.

 

32


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.


Notes to the consolidated interim financial information (Continued)
June 30, 2014
(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

5.     Short-term investments

 

 

Individual

Consolidated

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Private bonds

-

 

-

7

 

554,032

Government bonds

-

 

929

20,112

 

88,596

Investment funds

54

 

1,595

123,236

 

512,989

 

54

 

2,524

143,355

 

1,155,617

 

As of June 30, 2014, the private bonds comprise of CDBs with maturity up to 90 days, paid at a weighted average rate of 98.0% of the CDI rate.

 

Government bonds are represented primarily by government bonds LTN, NTN and LFT paid at a weighted average of 100.5% of CDI rate.

 

Investment funds are represented primarily by government bonds LTN, NTN, LFT and private credits with first-rate financial institutions (debentures and CDBs), paid at a weighted average 95.0% of CDI rate.

 

 

6.     Restricted cash

 

 

Individual

Consolidated

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Margin deposits for hedge transactions (a)

-

 

-

49,050

 

29,845

Deposits in guarantee of letter of credit - Safra (b)

-

 

-

40,180

 

75,681

Escrow deposits - Bic Banco (c)

20,690

 

19,917

71,150

 

57,923

Escrow deposits - Leasing (d)

-

 

-

57,314

 

-

Guarantee deposits of forward transactions (e)

-

 

-

-

 

88,410

Other deposits

452

 

292

8,852

 

2,597

21,142

 

20,209

226,546

 

254,456

 

 

 

 

 

 

Current (f)

7

 

7

7

 

88,417

Noncurrent

21,135

 

20,202

226,539

 

166,039

 

(a)     Denominated in U.S. Dollar, remunerated by libor rate (average remuneration of 0.5% p.a.).

(b)     The guarantee amount is related to Webjet’s loan (See Note 18).

(c)     The amount of R$20,690 on the individual Company and which comprises the consolidated balance is related to a contractual guarantee for STJ’s PIS and COFINS proceeding, paid to GLAI as detailed in Note 24d) and existing notes guarantees.

(d)     Is related to a credit letter of financial leasings of aircraft.

(e)    Escrow deposits of forward transactions applied in LTN and LFT (average remuneration of 9.7% p.a.).

(f)     As of December 31, 2013, the Company held escrow deposits of forward transactions on the current assets which were fully paid during the six-month period ended June 30, 2014.

33


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

7.     Trade receivable

 

Consolidated

06/30/2014

 

12/31/2013

Local currency:

 

 

 

Credit card administrators

162,132

 

74,359

Travel agencies

187,146

 

175,723

Installment sales

43,857

 

45,475

Cargo agencies

31,930

 

32,339

Airline partners companies

60,832

 

20,544

Other (a)

37,570

21,153

523,467

 

369,593

Foreign currency:

 

 

 

Credit card administrators

13,007

 

27,156

Travel agencies

12,035

 

11,881

Cargo agencies

-

 

1,321

25,042

 

40,358

548,509

 

409,951

 

 

 

Allowance for doubtful accounts

(81,678)

 

(85,101)

466,831

 

324,850

 

 

 

Current

466,826

 

324,821

Noncurrent (b)

5

 

29

 

 

(a)     From the total amount of R$37,570, R$16,519 is related to Air France-KLM investment to be received on July, 2015. For further information, see Note 12e.

 

(b)     The portion of noncurrent trade receivables is recorded in “Other receivables” in noncurrent assets and corresponds to installment sales from the Voe Fácil Program, with maturity over 360 days.

 

The aging list of accounts receivable is as follows:

 

 

Consolidated

 

06/30/2014

 

12/31/2013

Falling due

407,332

 

280,271

Overdue until 30 days

14,737

 

17,778

Overdue 31 to 60 days

10,440

 

6,864

Overdue 61 to 90 days

7,278

 

6,196

Overdue 91 to 180 days

8,727

 

5,830

Overdue 181 to 360 days

16,802

 

12,464

Overdue above 360 days

83,193

 

80,548

 

548,509

 

409,951

 

34


 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

7.   Trade receivable (Continued) 

 

The average collection period of installment sales is 7 months and a 5.99% monthly interest is charged on the receivable balance, recognized in financial result. The average collection period of the other receivables is 126 days (122 days as of December 31, 2013).

 

The changes in the allowance for doubtful accounts are as follows:

 

 

Consolidated

 

06/30/2014

 

12/31/2013

Balance at beginning of the period

(85,101) 

 

(80,712)

Additions

(7,757)

 

(32,849)

Unrecoverable amounts

6,470

 

8,119

Recoveries

4,710

 

20,341

Balance at the end of the period

(81,678)

 

(85,101)

 

 

8.     Inventories 

 

 

Consolidated

 

06/30/2014

 

12/31/2013

Consumables

24,520

 

19,601

Parts and maintenance materials

117,261

 

105,649

Advances to suppliers

12,562

 

286

Others

5,612

 

3,835

Provision for obsolescence

(12,226)

 

(12,227)

 

147,729

 

117,144

 

The changes in the allowance for inventory obsolescence are as follows:

 

Consolidated

06/30/2014

 

12/31/2013

Balance at the beginning of the period

(12,227)

 

(17,591)

Additions

(68)

 

(3,702)

Write-off and reversal

69

 

9,066

Balance at the end of the period

(12,226)

 

(12,227)

 

35


 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

9.     Deferred and recoverable taxes

 

a)      Recoverable taxes

 

Individual

Consolidated

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

ICMS (1)

-

 

-

37,416

 

32,205

Prepaid IRPJ and CSSL (2)

28,187

 

37,124

35,472

 

46,389

IRRF (3)

411

 

1,845

6,230

 

26,505

PIS and COFINS (4)

-

 

-

2,530

 

2,177

Withholding tax of public

institutions

-

 

-

7,568

 

8,693

Value added tax - IVA (5)

-

 

-

5,994

 

6,544

Income tax on imports

625

 

591

2,843

 

2,741

Others

-

 

-

727

 

407

Total recoverable taxes - current

29,223

 

39,560

98,780

 

125,661

 

 

 

 

 

 

Current assets

10,207

 

9,991

30,936

 

52,124

Noncurrent assets

19,016

 

29,569

67,844

 

73,537

 

(1)  ICMS: State tax on sales of goods and services.

(2)  IRPJ: Brazilian federal income tax on taxable income.

      CSLL: social contribution on taxable income, created to sponsor social programs and funds.

(3)  IRRF: withholding income tax levied on financial income from bank investments.

(4)  PIS/COFINS: Contributions to Social Integration Program (PIS) and Contribution for the Financing of Social Security (COFINS).

(5)  IVA: Value added tax on sales of goods and services abroad.

 

36


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

9.   Deferred and recoverable taxes (Continued) 

 

b)      Deferred taxes - long term

 

GLAI

VRG

Smiles

Consolidated

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

 

 

 

 

 

 

 

 

 

 

 

 

Tax losses

39,475

 

39,475

394,045

 

394,045

-

 

-

433,520

 

433,520

Negative basis of social contribution

14,211

 

14,211

141,857

 

141,857

-

 

-

156,068

 

156,068

 

 

 

 

 

 

 

 

 

 

 

 

Temporary differences:

 

 

 

 

 

 

 

 

 

 

 

 

Mileage program

-

 

-

68,973

 

94,540

-

 

-

68,973

 

94,540

Allowance for doubtful accounts and

other credits

-

 

-

93,466

 

73,200

157

 

100

93,623

 

73,300

Provision for losses on VRG’s acquisition

-

 

-

143,350

 

143,350

-

 

-

143,350

 

143,350

Provision for legal and tax liabilities

1,200

 

1,219

40,885

 

48,434

119

 

36

42,204

 

49,689

Aircraft return

-

 

-

77,458

 

85,350

-

 

-

77,458

 

85,350

Derivative transactions not settled

-

 

-

51,318

 

15,727

-

 

-

51,318

 

15,727

 

Tax benefit due to goodwill incorporation (**)

-

 

-

-

 

-

65,647

 

72,942

65,647

 

72,942

Flight rights

-

 

-

(353,226)

 

(353,226)

-

 

-

(353,226)

 

(353,226)

Maintenance deposits

-

 

-

(129,091)

 

(140,246)

-

 

-

(129,091)

 

(140,246)

Depreciation of engines and parts for

aircraft maintenance

-

 

 

-

(161,827)

 

 

(158,775)

-

 

 

-

(161,827)

 

 

(158,775)

Reversal of goodwill amortization on VRG’s acquisition

-

 

-

(127,659)

 

(127,659)

-

 

-

(127,659)

 

(127,659)

Aircraft leasing

-

 

-

(21,189)

 

34,764

-

 

-

(21,189)

 

34,764

Others (*)

(2,630)

 

93

111,036

 

94,911

9,614

 

4,230

126,082

 

108,813

Total deferred tax and social

contribution - noncurrent

52,256

 

54,998

329,396

 

346,272

75,537

 

77,308

465,251

 

488,157

 

(*)     The portion of taxes on Smiles unrealized profit in the amount of R$8,062 is registered directly in the consolidated column (R$9,579 as of June 30, 2013).

 

(**)    Related to the tax benefit from the reverse incorporation of the G.A. Smiles Participações S.A. by the Company’s subsidiary Smiles S.A. Under the terms of the current legislation, the goodwill generated by the operation will be a deductible expense on the Income Tax and Social Contribution calculation.

 

37


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

9.   Deferred and recoverable taxes (Continued) 

 

b)    Deferred taxes - long term (Continued)

 

       The Company and its direct subsidiary VRG and indirect subsidiary Webjet have tax losses and negative basis of social contribution in the calculation of taxable income, to compensate with 30% of annual taxable profits, without time limit for expiration, in the following amounts:

 

 

Individual (GLAI)

Direct subsidiary (VRG)

Indirect subsidiary (Webjet)

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Tax losses

235,907

 

235,907

3,097,480

 

2,602,369

735,558

 

712,849

Negative basis of social

contribution

235,907

 

235,907

3,097,480

 

2,602,369

735,558

 

712,849

 

As of June 30, 2014, the tax credits arising from tax loss carryforwards and negative social contribution basis were valued based on the reasonably expected generation of future taxable income of the parent Company and its subsidiaries, subject to legal limitations.

 

Estimated recovery of deferred tax assets was based on taxable income projections, considering the assumptions above and several financial assumptions, business and internal and external factors considered at the end of the period. Consequently, the estimates may be subject to not materialize in the future, due to the uncertainties inherent in these estimates.

 

The Company and its subsidiaries hold the total amount of R$1,383,441, of which R$80,208 is related to its parent Company GLAI and R$1,303,233 is related to its subsidiaries VRG and Webjet.

 

The forecasts of the parent Company GLAI and the indirect subsidiary Webjet did not present sufficient taxable profits to be realized over the next 10 years and, as a result, a provision was recorded for unrealizable loss tax credits of R$26,522 for GLAI and R$250,090 for Webjet. For the subsidiary VRG such forecasts indicate sufficient taxable profits for such to be realized in the next 10 years. However, due to tax losses presented during the recent years, the Administration conducted a sensitivity analysis on the forecast results, and considering significant changes in the macroeconomic scenario, registered the deferred tax assets on tax losses based on the lowest value obtained in this analysis. As a result, the Company and its subsidiaries did not recognized of R$517,241 in its subsidiary VRG.

 

The Company’s management considers that the deferred assets recognized as of June 30, 2014 arising from temporary differences will be realized when the provisions are settled and the related future events are resolved.

 

38


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

9.   Deferred and recoverable taxes (Continued) 

 

b)    Deferred taxes - long term (Continued)

 

 

Individual

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Loss before income tax and social contribution

(174,166)

 

(446,781)

 

(305,355)

 

(521,971)

Combined tax rate

34%

 

34%

 

34%

 

34%

Income tax credits at the combined tax rate

59,217

 

151,905

 

103,821

 

177,470

Adjustments to calculate the effective tax rate:

 

 

 

 

 

 

 

Equity in subsidiaries

(68,694)

 

(103,295)

 

(134,644)

 

(140,326)

Income from subsidiaries

(4,659)

 

(3,259)

 

(4,226)

 

(2,267)

Income tax on permanent differences and others

-

 

(3,032)

 

-

 

(3,576)

Nontaxable revenues (nondeductible expenses), net

(205)

 

(51)

 

(6,334)

 

(103)

Exchange differences on foreign investments

15,299

 

(45,008)

 

44,090

 

(34,038)

Benefit on tax losses and temporary differences

not constituted

(970)

 

-

 

(2,725)

 

-

Expense from income tax and social contribution

(12)

 

(2,740)

 

(18)

 

(2,840)

 

 

 

 

 

 

 

Current income tax and social contribution

-

 

(1,885)

 

-

 

(1,985)

Deferred income tax and social contribution

(12)

 

(855)

 

(18)

 

(855)

(12)

 

(2,740)

 

(18)

 

(2,840)

Effective rate

-

 

-

 

-

 

-

 

Consolidated

Three-month

period ended on

 

Six-month

period ended on

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Loss before income tax and social contribution

(67,847)

 

(460,057)

 

(117,179)

 

(465,810)

Combined tax rate

34%

 

34%

 

34%

 

34%

Income tax credits at the combined tax rate

23,069

 

156,419

 

39,841

 

158,375

Adjustments to calculate the effective tax rate:

 

 

 

 

 

 

 

Equity in subsidiaries

(327)

 

-

 

(478)

 

-

Income from subsidiaries

(4,998)

 

(3,089)

 

(4,815)

 

(2,268)

Income tax on permanent differences and others

171

 

(3,623)

 

(100)

 

(4,343)

Nontaxable revenues (nondeductible expenses), net

(30,927)

 

(20,060)

 

(58,004)

 

(27,501)

Exchange differences on foreign investments

20,104

 

(44,945)

 

61,208

 

(25,244)

Benefit on tax losses and temporary differences

not constituted

(84,224)

 

(57,599)

 

(161,599)

 

(141,453)

Expense from income tax and social contribution

(77,133)

 

27,103

 

(123,947)

 

(42,434)

 

 

 

 

 

 

 

Current income tax and social contribution

(34,799)

 

(10,968)

 

(74,055)

 

(28,372)

Deferred income tax and social contribution

(42,334)

 

38,071

 

(49,892)

 

(14,062)

(77,133)

 

27,103

 

(123,947)

 

(42,434)

Effective rate

-

 

-

 

-

 

-

 

 

39


 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

10.  Prepaid expenses

 

 

Individual

Consolidated

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Deferred losses from sale-leaseback

transactions (a)

-

 

-

30,763

 

35,449

Prepaid hedge

-

 

-

-

 

1,532

Prepaid lease

-

 

-

29,692

 

27,238

Prepaid insurance

21

 

438

7,726

 

16,970

Prepaid commissions

-

 

-

14,203

 

18,509

Others (b)

-

 

-

19,173

 

7,483

21

 

438

101,557

 

107,181

 

 

 

 

 

 

Current

21

 

438

79,171

 

80,655

Noncurrent

-

 

-

22,386

 

26,526

 

(a)  During the years 2007, 2008, and 2009, the Company recorded losses from sale-leaseback transactions performed by its subsidiary GAC Inc. related to 9 aircraft in the amount of R$89,337. These losses were deferred and are being amortized proportionally to the payments of the respective lease contracts during the contractual term of 120 months. Further information related to the sale-leaseback transactions is described in Note 30b.

 

(b)  Includes the amount of R$13,191 related to the agreement with Confederação Brasileira de Futebol (“CBF”) signed in 2013, for the sponsorship and transportation of the Brazilian soccer team and other participating teams in the Brazilian cup and championship, with maturity in the year 2017.

 

 

11.  Deposits 

 

 

 

Individual

 

Consolidated

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Escrow deposits (a)

23,221

 

20,170

 

232,091

 

217,540

Maintenance deposits (b)

-

 

-

 

379,711

 

412,488

Depósitos em garantia de contratos de arrendamento (c)

-

 

-

 

232,493

 

217,680

 

23,221

 

20,170

 

844,295

 

847,708

 

a)    Escrow deposits

 

Parent Company

 

       Represent guarantees in legal proceedings related to labor claims, deposited in escrow until the conclusion of the related claims.

 

 

 

 

 

11.     Deposits (Continued) 

 

 

40


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

a)    Escrow deposits (Continued) 

 

Consolidated

 

Deposits and blocked escrows represent guarantees of lawsuits related to tax, civil and labor claims deposited in escrow until the resolution of the related claims. Part of the blocked amount in escrow is related to civil and labor claims arising on the succession orders on claims against Varig S.A. and proceedings filed by employees that are not related to the Company or any related party (third-party claims). As the Company is not correctly classified as the defendant of these lawsuits, whenever such blockages occur, the exclusion of such is requested in order to release the resources. As of June 30, 2014 the blocked amounts regarding the Varig’ succession and the third-party lawsuits are R$82,520 and R$62,792 respectively (R$75,498 and R$65,450 as of December 31, 2013, respectively).

 

 

b)    Maintenance deposits

 

       The Company and its subsidiaries VRG and Webjet made deposits in U.S. Dollars for maintenance of aircraft and engines that will be used in future events as set forth in some leasing contracts.

 

       The maintenance deposits do not exempt the Company and its subsidiaries, as lessee, neither from the contractual obligations relating to the maintenance of the aircraft nor from the risk associated with maintenance activities. The Company and its subsidiaries hold the right to select any of the maintenance service providers or to perform such services internally.

 

c)    Deposits in guarantee for lease agreements

 

As required by the lease agreements, the Company and its subsidiaries hold guarantee deposits in U.S. Dollars on behalf of the leasing companies, whose full refund occurs upon the contract expiration date.

 

41


 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

12.  Transactions with related parties

 

a)    Loan agreements - Noncurrent assets and liabilities

 

       Parent Company

 

       The Company maintains loan agreements, assets and liabilities, with its subsidiary VRG without interest, maturity or guarantees prescribed, as set forth below:

 

 

Asset

Liability

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

GLAI with VRG

50,328

 

49,961

-

 

-

GAC with VRG (a)

-

 

-

121,580

 

113,741

 

50,328

 

49,961

121,580

 

113,741

 

(a)  The values that the Company maintains with GAC and Finance, subsidiaries abroad, are subject to exchange rate variations on U.S. Dollars.

 

Additionally, the Parent Company holds loans between: Finance (asset) with Gol LuxCo (liability) and Gol LuxCo (asset) with GAC (liability) in the amount of R$496,610. These transactions are eliminated by the Company, since the entities are offshore and are considered an extension of the Company’s operations.

 

During the six-month period ended June 30, 2014, VRG transferred to LuxCo assumed the debt of the Senior Bond maturing in 2023, previously owned by VRG, as described in Note 18. As counterpart, besides the receiving of the financial resources in the amount of R$379,381, LuxCo signed with VRG a liability agreement in the amount of R$14,612, which corresponds to the remaining amount of the obligation.

 

b)    Transportation services and consulting

 

All the agreements related to transportation and consulting services are held by the Company’ subsidiary VRG. The related parties for these services are:

 

i.     Breda Transportes e Serviços S.A. for passenger and luggage transportation services between airports, and transportation of employees, expiring on May 31, 2015, renewable every 12 months for additional equal terms through an amendment instrument signed by the parties, annually adjusted based on the IGP-M fluctuation (General Market Price Index from Getulio Vargas Foundation).

 

ii.     União Transporte de Encomendas e Comércio de Veículos Ltda., expiring on December 29, 2015 for the operation of the Gollog franchise in Passos/MG.

 

iii.    Vaud Participações S.A. to provide executive administration and management services, expiring on October 01, 2014.

42


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

12. Transactions with related parties (Continued) 

 

b)    Transportation services and consulting (Continued)

 

During the six-month period ended on June 30, 2014, the subsidiary VRG recognized the total expenses related to these services of R$3,255 (R$3,114 as of June 30, 2013).

 

c)    Contracts account opening UATP (“Universal Air Transportation Plan”) to grant credit limit

 

In September 2011, the subsidiary VRG entered into agreements with related parties Pássaro Azul Taxi Aéreo Ltda. and Viação Piracicabana Ltda., both with no expiration date, with the purpose of the issuance of credits in the amounts of R$20 and R$40, respectively, to be used in the UATP (Universal Air Transportation Plan) system. The UATP account (virtual card) is accepted as a payment method on the purchase of airline tickets and related services, seeking to simplify the billing and facilitate the payment between participating companies.

 

d)    Financing contract for engine maintenance

 

The subsidiary VRG has a line of funding for maintenance of engines services, which disbursement occurs through the issuance of Guaranteed Notes.  As od June 30, 2014, VRG holds three series of Guaranteed Notes for maintenance of engines, issued on September 27, 2012, March 11, 2013 and February 14, 2014, maturing in 2 years. During the six-month period ended June 30, 2014 the spending on engine maintenance conducted by Delta Air Lines was R$17,403 (R$41,170 as of June 30, 2013).

 

e)    Financing contract for engine maintenance

 

 

On February 19th 2014, the Company signed an exclusive strategic partnership for long-term business cooperation with Airfrance-KLM with the purpose of the sales activities improvements and codeshare expansion and mileage programs benefts between the companies for the customers in the Brazilian and European market. The agreement provides the incentive investment in the Company in the amount of R$112,152, which payment is divided in three installments: the first installments in the amount of R$74,506 was received during the six-month period ended June 30, 2014, the second and the third installments, both in the amount of R$16,519, will be received in June 2015 and 2016, respectively. The agreement will mature within 5 years and the installments will be amortized monthly. On June 30th, 2014, the company has deffered revenue in the amount of R$22,340 and R$82,245 recorded as “Other Liabilities” in the current and non-current liability, respectively.  

 

 

 

43


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

12.     Transactions with related parties (Continued) 

 

f)     Trade payables - current liabilities

 

As of June 30, 2014, balances payable to related companies amounting to R$3,202 (R$1,008 as of December 31, 2013) are included in the balance of accounts payables and substantially refers to the payment to Breda Transportes e Serviços S.A. for passenger transportation services.

 

g)    Key management personnel payments

 

 

Consolidated

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Salaries and benefits

9,981

 

1,883

 

15,741

 

4,724

Related taxes

849

 

341

 

2,173

 

788

Share-based payments

904

 

542

 

1,979

 

1,516

 

11,734

 

2,766

 

19,893

 

7,028

 

As of June 30, 2014, the Company did not offer postemployment benefits, and there are no severance benefits or other long-term benefits for the Management or other employees.

 

 

13.  Share-based payments

 

The Company holds two share-based payment plans offered to its management personnel: the Stock Option Plan and the Restricted Shares Plan. Both these plans are offered in order to stimulate and promote the alignment of the gols of the Company, management and employees, mitigate the risks in value created for the Company resulting from the loss of their executives and strengthen the commitment and productivity of these executives to long-term results.

 

GLAI

 

a)    The Stock Option Plan

         The movement of existing stock options during the period ended June 30, 2014 is as follows:

 

 

Total of stock

options

Weighted average exercise price

Options outstanding as of December 31, 2013

3,463,462

20.66

Options exercised

(6,194)

12.81

Options cancelled and adjustments in estimated lost rights

(113,457)

27.83

Options outstanding as of June 30, 2014

3,343,811

20.72

 

 

Number of options exercisable as of December 31, 2013

2,609,906

24.39

Number of options exercisable as of June 30, 2014

2,841,695

21.76

44


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

13.     Share-based payments (Continued) 

 

GLAI (Continued)

 

a)    The Stock Option Plan (Continued) 

 

The range of exercise prices and the average maturity of outstanding options, as well as the average exercise price for exercisable options as of June 30, 2014 are summarized below:

 

Outstanding options

Exercisable options

Range of exercise prices

 

Outstanding options

 

Average remaining maturity

(in years)

 

Average exercise price

Options exercisable

 

Average exercise price

33.06

 

4,965

 

2

 

33.06

4,965

 

33.06

47.30

 

13,220

 

3

 

47.30

13,220

 

47.30

65.85

 

14,962

 

4

 

65.85

14,962

 

65.85

45.46

 

41,749

 

5

 

45.46

41,749

 

45.46

10.52

 

20,414

 

6

 

10.52

20,414

 

10.52

20.65

 

1,097,811

 

7

 

20.65

1,097,811

 

20.65

27.83

 

1,011,614

 

8

 

27.83

1,011,614

 

27.83

12.81

 

545,299

 

9

 

12.81

438,512

 

12.81

12.76

 

593,777

 

9

 

12.76

198,448

 

12.76

10.52-65.85

 

3,343,811

 

7,92

 

20.72

2,841,695

 

21.76

 

b)    Restricted shares

 

The Restricted Shares Plan was approved on the Extraordinary General Meeting held on October 19, 2012, and the first grants were approved at the Board of Directors’ meeting on November 13, 2012. The transfer of the restricted shares will occur after 3 years from the grant date, with an acquisition condition that the beneficiary maintains its employment relationship up to the end of this period.

 

The fair value of the restricted shares granted was estimated on the grant date using the Black-Scholes pricing model, and the assumptions are listed below:

 

Restricted shares

 

Year of

the share

 

Date of the Board Meeting

 

Total shares granted

 

Fair value of the share at grant date (in Reais)

 

Estimate volatility of share price

 

Risk-free rate of return

2012

 

11/13/2012

 

589,304

 

9.70

 

52.25%

 

9.0%

2013

 

05/13/2013

 

712,632

 

12.76

 

46.91%

 

7.5%

 

Until June 30, 2014 there were no restricted shares transferred to the plan’s participants.

 

45


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

13.     Share-based payments (Continued) 

 

Smiles

 

On February 22, 2013, the Smiles’ Board of Directors, during the Extraordinary General Meeting, approved the grant of a stock options plan, which consists of an additional payment to the Company’s management and executives. On August 08, 2013, the Company’s Board of Directors approved the grant of 1,058,043 shares related to the stock option plan, of which 260,020 shares were granted to employees of its affiliate VRG.

 

On February 4, 2014, the Smiles S.A.’ Board of Directors approved the issue of 1,150,000 (one million, one hundred and fifty thousand) new stock options at a price of R$31.28 per share, under the terms of the Stock Options Plan previously established for its management and participants which feature under the terms of the plan. Until June 30, 2014, there was no grant approval of these shares to its beneficiaries.

 

The fair value of stock options was estimated on the grant date using the Black-Scholes option pricing model. The expected volatility of Smiles shares is based on the historical volatility of 252 working days of the Bovespa index. The other assumptions utilized in the Black-Scholes option pricing model are as follows:

 

Stock Options Plan

 

 

Year of the share

 

 

 

Date of the Board Meeting

 

 

 

Total shares granted

 

Exercise price

of the option

(In Reais)

 

The fair value of the option at grant date

(In Reais)

 

 

Estimate volatility of share price

 

 

 

 

Expected dividend

 

 

Risk-free rate of return

 

 

Length of the option

(in years)

2013

 

08/08/2013

 

1,058,043

 

21.70

 

4.13 (a)

 

36.35%

 

6.96%

 

7.40%

 

10

2014

 

02/04/2014

 

1,150,000

 

31.28

 

4.90 (b)

 

33.25%

 

10.67%

 

9.90%

 

10

 

(a)  The fair value calculated for the 2013 plan was R$4.84, R$4.20, R$3.73 and R$3.73 for the respective periods of vesting of 2013, 2014, 2015 and 2016.

 

(b)  The fair value calculated for the 2013 plan was R$4.35, R$4.63, R$4.90, R$5.15 and R$5.17 for the respective periods of vesting from 2014 to 2018.

 

For the six-month period ended June 30, 2014, the Company recorded in shareholders ' equity a result from share-based payments in the amount of R$3,026 related to Company’s shareholders and R$1,087  related to its non-controlling shareholders (R$3,351 related to Company’s shareholders and R$341 related to its non-controlling shareholders for the six-month period ended June 30, 2013) for the plans presented above, being the corresponding entry in the income statement result classified as personnel costs.

 

46


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

14.  Investments 

 

Due to the changes in Law 6,404/76 introduced by Law 11,638/07, investments in foreign subsidiaries, GAC, Finance and Gol LuxCo were considered as an extension of the controller GLAI and consolidated on a line by line basis, only the subsidiaries Smiles, VRG and Gol Dominicana were considered as an investment.

 

On February 21, 2014, the subsidiary Smiles S.A., after the CADE’s approval, closure the acquisition process of 25% of its affiliate Netpoint Fidelidade S.A. (for further information, see Note 1). Therefore, a consolidated investment balance was generated by this transaction. The change in investments during the six-month period ended June 30, 2014 is as follows:

 

 

Individual

Consolidated

 

Gol

Dominicana

 

 

VRG

 

 

Smiles

 

Total

 

 

Netpoints

Relevant information of the Company’s subsidiaries as of June 30, 2014:

         

 

 

 

Total number of shares

-

 

3,225,248,156

 

122,173,912

-

 

60,492,404

Capital

4,008

 

2,807,381

 

1,136,663

-

 

63,451

Interest

100.0%

 

100.0%

 

54.5%

-

 

21.3%

         

 

 

 

Total shareholder’s equity

882

 

72,035

 

1,332,072

-

 

41,295

Unrealized gains (a)

-

 

-

 

2,948

-

 

-

Adjusted shareholder’s equity (b)

882

 

72,035

 

708,813

-

 

8,775

Net (loss) income for the period

(1,734)

 

(475,401)

 

142,423

-

 

(32,978)

Net (loss) income for the period attributable

to Company’s shareholders

(1,734)

 

(475,401)

 

81,124

-

 

(1,407)

           

 

 

Changes on investments:

           

 

 

Balance as of December 31, 2013

263

 

341,000

 

742,886

1,084,149

 

-

Equity in subsidiaries

(1,734)

 

(475,401)

 

81,124

(396,011)

 

(1,407)

Exchange variation from foreign subsidiaries

(29) 

 

-

 

-

(29)

 

-

Unrealized hedge losses

-

 

(56,677)

 

-

(56,677)

 

-

Investment losses (c)

-

 

-

 

(37,949)

(37,949)

 

-

Gains due to change on investment

-

 

-

 

3,045

3,045

 

-

Capital increase

2,367

 

-

 

-

2,367

 

-

Share-based payments

-

 

-

 

400

400

 

-

Dividends received

-

 

-

 

(80,693)

(80,693)

 

-

Fair value of the acquired investment

-

 

-

 

-

-

 

10,182

Advance for future capital increase

15

 

290,200

 

-

290,215

 

-

Amortization losses, net of sale leaseback (d)

-

 

(904)

 

-

(904)

 

-

Balance as of June 30, 2014

882

 

98,218

 

708,813

807,913

 

8,775

                 

 

 

(a)      Refers to transactions related to revenue for redeeming miles for flight tickets for Smiles Program participants that, for consolidated financial statements purposes, only take place when the participants of the program are effectively transported by VRG.

(b)      The adjusted equity corresponds to the percentage of the equity less unrealized gains.

(c)      Is related to the investment cost due to G.A., as described in Note 1.

(d)      The subsidiary GAC has a net balance of deferred losses and gains on sale leaseback, whose deferral is subject to the payment of contractual installments made by its subsidiary VRG. Accordingly, as of June 30, 2014, the net balance to be deferred is essentially part of the net investment of the Parent Company in VRG. The net balance to be deferred as of June 30, 2014 was R$26,184 (R$27,088 as of December 31, 2013). For further details, see Note 30b.

 

47


 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

14. Investments (Continued) 

 

Impacts on participation change on capital - Smiles S.A.

 

On February 27, 2014, General Atlantic exercised the total stock options in respect of Smiles S.A. previously issued for G.A.’s benefit. As a result of the exercise of the stock options, the Company decreased its participation on Smiles’ capital, being from 57.3% to 54.5%, as described in Note 1. The amounts related to this transaction are presented below:

 

Shares sold

3,433,476

Investment per share

11.052

 

Sell price

80,000

Investment costs offset

(37,949)

Exercise of stock options - G.A.

46,216

Income tax on capital gains (*)

(14,297)

Total gains from the change on investment

73,970

 

(*) Related to 25% of withholding taxes and 9% of social contribution.

 

 

15.  Losses per share

 

Although there are differences between common and preferred shares in terms of voting rights and priority in case of liquidation, the Company’s preferred shares are not entitled to receive any fixed dividends. Rather, preferred shareholders are entitled to receive dividends per share in the same amount of the dividends per share paid to common shareholders. Therefore, the Company understands that, substantially, there is no difference between preferred shares and common shares, and, accordingly, basic and diluted earnings or losses per share are calculated equally for both shares.

 

Consequently, basic earnings or loss per share are computed by dividing income or losses by the weighted average number of all classes of shares outstanding during the period. Diluted earnings or loss per share are computed including stock options granted to key management and employees using the treasury stock method when the effect is dilutive. The antidilutive effect of all potential shares is disregarded in calculating diluted earnings or loss per share.

 

48


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

15. Losses per share (Continued) 

 

Individual and Consolidated

Three-month

period ended on

 

Six-month

period ended on

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Numerator

 

 

 

 

 

 

 

Net loss for the year attributable to Company’

shareholders

 

(174,178)

 

(449,521)

 

 

(305,373)

 

(524,811)

Diluted securities effect - Smiles (a)

(333)

 

-

 

(333)

 

-

(174,511)

 

(449,521)

 

(305,706)

 

(524,811)

Denominator

 

 

 

 

 

 

 

Weighted average number of outstanding shares

(In thousands)

 

278,986

 

276,437

 

 

277,844

 

276,437

 

 

 

 

 

 

 

Adjusted weighted average number of outstanding

shares and diluted presumed conversions (In

thousands)

 

 

278,986

 

 

 

276,437

 

 

 

277,844

 

 

 

276,437

 

 

 

 

 

 

 

Basic loss per share

(0.624)

 

(1.626)

 

(1.099)

 

(1.626)

Diluted loss per share

(0.626)

 

(1.626)

 

(1.100)

 

(1.626)

 

(a)  Smiles holds a Stock Options Plan for its employees. These equity instruments have a dilutive effect on earnings per share of this subsidiary, impacting, therefore, the loss considered on the basis calculation of Company’s diluted result per share, in accordance with CPC 41.

 

Diluted earnings (losses) per share are calculated by the weighted average number of outstanding shares, in order to assume the conversion of all potential dilutive shares.

 

Diluted earnings or loss per share are calculated based on considering the instruments that may have a potential dilutive effect in the future, such as share-based payment transactions, described in Note 13. However, due to the losses reported for the period ended on June 30, 2014, these instruments issued have anti-dilutive effect and, therefore, are not considered in the total number of outstanding shares.

 

 

16.  Property, plant and equipment

 

Parent Company

 

The balance corresponds to advances for acquisition of aircraft, related to prepayments made based on the contracts with Boeing Company to acquire 21 aircraft 737-800 Next Generation (30 aircraft as of December 31, 2013) and 109 aircraft 737-MAX (109 aircraft as of December 31, 2013) in the amount of R$316,604 (R$463,532 as of December 31, 2013) and the right to the residual value of aircraft in the amount of R$427,300 (R$427,300 as of December 31, 2013), both held by the subsidiary GAC.

 

49


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

16. Property, plant and equipment (Continued) 

 

Consolidated

 

 

06/30/2014

12/31/2013

 

Weighted anual depreciation rate

 

Cost

 

Accumulated

depreciation

 

Net

amount

Net

amount

 

Flight equipment

 

 

 

 

 

 

 

 

Aircraft under finance leases

4%

 

3,114,391

 

(958,959)

 

2,155,432

2,175,697

Sets of replacement parts and

spares engines

4%

 

 

1,070,905

 

 

(338,894)

 

 

732,011

710,337

Aircraft reconfigurations/overhauling

30%

 

893,798

 

(687,829)

 

205,969

287,038

Aircraft and safety equipment

20%

 

2,044

 

(1,150)

 

894

956

Tools

10%

 

28,217

 

(13,748)

 

14,469

15,327

 

 

5,109,355

 

(2,000,580)

 

3,108,775

3,189,355

 

 

 

 

 

 

 

 

Impairment losses (*)

-

 

(37,611)

 

-

 

(37,611)

(26,348)

 

 

5,071,744

 

(2,000,580)

 

3,071,164

3,163,007

 

 

 

 

 

 

 

 

Property, plant and equipment in use

 

 

 

 

 

 

 

 

Vehicles

20%

 

9,436

 

(7,906)

 

1,530

1,946

Machinery and equipment

10%

 

48,362

 

(22,145)

 

26,217

28,237

Furniture and fixtures

10%

 

19,826

 

(12,765)

 

7,061

7,738

Computers and peripherals

20%

 

32,697

 

(23,516)

 

9,181

9,661

Communication equipment

10%

 

2,412

 

(1,326)

 

1,086

1,110

Facilities

10%

 

4,235

 

(3,364)

 

871

1,026

Maintenance center - Confins

10%

 

105,971

 

(41,615)

 

64,356

69,759

Leasehold improvements

20%

 

51,786

 

(39,706)

 

12,080

13,242

Construction in progress

-

 

9,339

 

-

 

9,339

8,670

 

 

284,064

 

(152,343)

 

131,721

141,389

 

 

5,355,808

 

(2,152,923)

 

3,202,885

3,304,396

 

 

 

 

 

 

 

 

Advances for aircraft acquisition

-

 

314,331

 

-

 

314,331

467,763

 

 

5,670,139

 

(2,152,923)

 

3,517,216

3,772,159

 

(*)  Refers to provisions recorded by the Company in order to present its assets according to the potential of monetary benefit generation.

 

50


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

16. Property, plant and equipment (Continued) 

 

Consolidated (Continued)

 

Changes in property, plant and equipment balances are as follows:

 

 

Property, plant and equipment under finance lease

Other flight equipment (a)

Advances for acquisition of property, plant and equipment

Others

Total

As of December 31, 2012

2,224,036

1,008,972

481,289

171,502

3,885,799

Additions

106,101

318,707

411,584

6,570

842,962

Disposals

-

(8,223)

(425,110)

(3,056)

(436,389)

Depreciation

(154,440)

(332,146)

-

(33,627)

(520,213)

As of December 31, 2013

2,175,697

987,310

467,763

141,389

3,772,159

Additions

59,289

74,296

228,595

4,134

366,314

Disposals

-

-

(382,027)

(36)

(382,063)

Depreciation

(79,554)

(145,874)

-

(13,766)

(239,194)

As of June 30, 2014

2,155,432

915,732

314,331

131,721

3,517,216

 

(a)  Additions primarily represent: (i) total estimated costs to be incurred relating to the reconfiguration of the aircraft when returned and, (ii) capitalized costs related to major engine overhaul.

 

 

17.  Intangible assets

 

 

Goodwill

Trademark

Airport operating licenses

Software

Total

Balance as of December 31, 2012

542,302

6,348

1,038,900

112,381

1,699,931

Additions

-

-

-

51,035

51,035

Disposals

-

(6,348)

-

(9,675)

(16,023)

Amortizations

-

-

-

(40,753)

(40,753)

Balance as of December 31, 2013

542,302

-

1,038,900

112,988

1,694,190

Additions (a)

17,863

-

-

34,046

51,909

Disposals

-

-

-

(4)

(4)

Amortizations

-

-

-

(20,367)

(20,367)

Balance as of June 30, 2014

560,165

-

1,038,900

126,663

1,725,728

 

(a) Refers to the goodwill generated by the difference between the equity and portion paid of Netpoints attributable to Smiles.

 

51


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

18.  Short and long-term debt

 

 

Maturity of

the Contract

Effective Rate (p.a.)

Individual

Consolidated

   

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Short-term debt

               

Local currency

   

 

   

 

   

BNDES - Direct

Jul, 2017

6,15%

-

 

-

3,105

 

3,088

BDMG

-

-

-

 

-

-

 

5,203

Safra (a)

Dec, 2015

11,28%

-

 

-

66,140

 

32,299

Interest

-

-

-

 

-

27,570

 

19,689

 

 

 

-

 

-

96,815

 

60,279

Foreign currency (in US$):

 

 

 

   

 

   

J.P. Morgan

Feb, 2016

0,93%

-

 

-

55,067

 

51,524

FINIMP

Mar, 2015

4,09%

-

 

-

52,600

 

5,838

Engine Facility (Cacib)

Jun, 2021

2,52%

-

 

-

11,781

 

-

Interest

-

-

62,640

 

47,488

58,928

 

63,360

 

 

 

62,640

 

47,488

178,376

 

120,722

 

 

 

62,640

 

47,488

275,191

 

181,001

 

 

 

 

   

 

   

Financial lease

Jul, 2025

5,11%

 

 

-

256,460

 

259,833

Total short-term debt

 

 

62,640

 

47,488

531,651

 

440,834

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

 

   

 

   

Local currency

 

 

 

   

 

   

Debentures IV

Sep, 2018

12,77%

-

 

-

589,057

 

597,741

Debentures V

Jun, 2017

12,56%

-

 

-

488,750

 

495,726

Safra (a)

Dec, 2015

11,28%

-

 

-

32,221

 

65,555

BDMG

Mar, 2018

10,88%

-

 

-

-

 

15,704

BNDES - Direct

Jul, 2017

6,15%

-

 

-

6,452

 

8,001

 

 

-

 

-

1,116,480

 

1,182,727

Foreign currency (in US$):

 

 

 

   

 

   

J.P. Morgan

Feb, 2016

0,93%

-

 

-

32,273

 

1,540

Engine Facility (Cacib)

Jun, 2021

2,52%

-

 

-

137,023

 

-

Senior Bond I

Apr, 2017

7,63%

462,525

 

491,946

462,525

 

491,946

Senior Bond II

Jul, 2020

9,65%

649,120

 

691,028

649,120

 

691,028

Senior Bond III (b)

Feb, 2023

11,30%

395,888

 

-

384,760

 

426,489

Perpetual Bond

-

8,75%

440,500

 

468,520

394,248

 

419,326

 

 

1,948,033

 

1,651,494

2,059,949

 

2,030,329

 

 

1,948,033

 

1,651,494

3,176,429

 

3,213,056

 

 

 

   

 

   

Financial lease

Jul, 2025

5,11%

-

 

-

1,698,888

 

1,935,495

Total long-term debt

 

 

1,948,033

 

1,651,494

4,875,317

 

5,148,551

 

 

2,010,673

 

1,698,982

5,406,968

 

5,589,385

 

(a)  The total amount of the Safra loan as of June 30, 2014 was R$98,361, and held a deposit in guarantee in the amount of R$40,180 as shown in Note 6.

 

(b)  The Senior Bond issued on February 07, 2013 with maturity in 2023 was transferred from VRG to LuxCo along with the financial applications acquired on the date of issuance.

 

52


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

18. Short and long-term debt (Continued) 

 

The maturities of long-term debt as of June 30, 2014 are as follows:

 

Individual

 

 

 

2017

After

2018

Without

maturity date

 

Total

Foreign Currency (in US$):

 

 

 

 

Senior Bond I

462,525

-

-

462,525

Senior Bond II

-

649,120

-

649,120

Senior Bond III

-

395,888

-

395,888

Perpetual Bond

-

-

440,500

440,500

Total

462,525

1,045,008

440,500

1,948,033

 

Consolidated

 

 

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

After

2018

Without maturity date

 

 

Total

Local currency:

 

 

 

 

 

 

 

BNDES - Direct

1,548

3,097

1,807

-

-

-

6,452

Safra

32,221

-

-

-

-

-

32,221

Debentures

144,452

294,452

294,451

344,452

-

-

1,077,807

178,221

297,549

296,258

344,452

-

-

1,116,480

Foreign currency (in US$):

 

 

 

 

 

 

 

J.P. Morgan

22,423

9,850

-

-

-

-

32,273

Engine Facility (Cacib)

5,890

11,781

11,781

11,781

95,790

-

137,023

Senior Bond I

-

-

462,525

-

-

-

462,525

Senior Bond II

-

-

-

-

649,120

-

649,120

Senior Bond III

-

-

-

-

384,760

-

384,760

Perpetual Bond

-

-

-

-

-

394,248

394,248

28,313

21,631

474,306

11,781

1,129,670

394,248

2,059,949

 

 

 

 

 

 

 

Total

206,534

319,180

770,564

356,233

1,129,670

394,248

3,176,429

 

The fair values of Senior and Perpetual Bonds as of June 30, 2014 are as follows:

 

 

Individual

Consolidated

 

Book

 

Market (b)

Book

 

Market (b)

Senior Bonds (a)

1,507,533

 

1,598,934

1,496,405

 

1,598,934

Perpetual Bond

440,500

 

377,870

394,248

 

338,193

 

(a)     Senior and Perpetual Bonds’ market prices are equal since the market price does not consider the issuance costs.

 

(b)     Senior and Perpetual Bonds’ market prices are obtained through market quotations (level 1).

 

53


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

18. Short and long-term debt (Continued) 

 

a)    Covenants 

 

       Long-term financing (excluding perpetual bonds and financing of aircraft) in the total amount of R$2,782,181, as of June 30, 2014, hold clauses and contratual restrictions, including but not limited to those that require the Company to maintain the liquidity requirements defined  and the cover of expenses with interest. The Company has restrictive covenants in its financing agreements with the following financial institutions: Bradesco and Banco do Brasil (Debentures IV e V), with quarterly measurements. The costs for the deeds addition were R$17,310.

 

       On the Meeting of the Holders of Debentures IV and V held on June 20, 2014, was resolved: (i) the extension of the term and changes on the amortization amounts of Debenture IV; (ii) change the remuneration of the Debentures IV and V to 128% of the CDI (from 118% and 120% of the CDI, respectively); and (iii) change the restrictive contractual clauses relative to financial indicators and limits for the Debentures IV and V Issues.

 

       As of June 30, 2014, the funding by the debentures IV and V have the following restrictive clauses: (i) net debt/EBITDAR below 5.69, and (ii) coverage of debt (CID) of at least 1.53. Based on the measurements, the following indexes were obtained: (i) net debt/EBITDA of 2.65; and (ii) coverage of debt (CID) of 2.11. Accordingly, as of June 30, 2014, the Company was in compliance with the limits stablished on the agreement. The next measurement will be on December 31, 2014, based on the same date.

 

b)    New loans raised on the three-month period ended June 30, 2014  

 

       Import Financing (Finimp)

 

       On April 03, 2014, the Company, through its subsidiary VRG, obtained a loan part of a credit line for import financing (Finimp) in the amount of R$18,616 (US$8,156 as the loan date) with Banco Safra, with maturity of 360 days on March 30, 2015 and interest rate of 3.01% p.a., being (Finimp) for purchase of spare parts and aircraft equipment. In guarantee for this loan is one promissory note in the total amount of the loan.

 

54


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

18.     Short and long-term debt (Continued) 

 

Engine financing (Engine Facility)

 

       On June 30, 2014, the Company, through its subsidiary VRG, contracted a financing in the amount of US$68 million with Credit Agricole Corporate and Investment Bank (“Cacib”), with guarantee of twelve proprietary spare CFM56-7B engines, and with the possibility of the financing increase of an additional US$100 million (equivalent to R$220 million at reporting date) for future proprietary engine deliveries. The financing is over 7 years, with quarterly amortization of the principal and interest as of September 2014 at a cost of 3 months Libor index plus 2.25% p.a. The operation aims the maintainance of the high liquidity in order to reduce the cost of the Company’s debts.

 

 

c)    Financial leases

 

       The future payments of financial leasing contracts indexed to U.S. Dollar are detailed below:

 

Consolidated

06/30/2014

 

12/31/2013

2014

169,198

 

356,642

2015

340,462

 

362,099

2016

330,996

 

352,050

2017

306,328

 

325,813

2018

301,088

 

320,240

Beyond 2018

820,532

 

862,149

Total minimum lease payments

2,268,604

 

2,578,993

Less total interest

(313,256)

 

(383,665)

Present value of minimum lease payments

1,955,348

 

2,195,328

Less current portion

(256,460)

 

(259,833)

Noncurrent portion

1,698,888

 

1,935,495

 

The discount rate used to calculate the present value of the minimum lease payments was 5.11% as of June 30, 2014 (5.20% as of December 31, 2013). There are no significant differences between the present value of minimum lease payments and the fair value of these financial liabilities.

 

The Company extended the maturity date of the financing for some of its aircraft leased for 15 years using the SOAR framework (mechanism for extending financing amortization and repayment), which enables the performance of calculated withdrawals to be settled at the end of the lease agreement. As of June 30, 2014, the withdrawals made for the repayment at maturity date of the lease agreements amount to R$126,415 (R$123,879 as of December 31, 2013) and are recorded in long-term debt.

 

 

19.  Salaries, wages and benefits

 

Individual

Consolidated

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Salaries

-

 

-

171.653

 

135,027

INSS and FGTS recoverable

378

 

1,088

46,406

 

45,630

Profit sharing plan

-

 

-

33.608

 

51,650

Others

12

 

4

4.534

 

1,277

390

 

1,092

256,201

 

233,584

55


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

20.  Taxes payable

 

 

Individual

Consolidated

 

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

 

 

 

 

 

 

 

PIS and COFINS

-

 

-

27,694

 

37,926

REFIS

13,874

 

13,872

32,412

 

32,490

IRRF on Payroll

13

 

1

16,016

 

23,175

ICMS

-

 

-

33,856

 

32,440

Tax on import

-

 

-

3,467

 

3,467

CIDE

186

 

84

2,767

 

2,686

IOF

61

 

62

61

 

62

IRPJ and CSLL to pay

-

 

-

12,783

 

15,838

Others

64

 

4

9,450

 

7,384

14,198

 

14,023

138,506

 

151,468

 

 

 

 

 

 

Current

1,491

 

1,246

75,637

 

94,430

Noncurrent

12,707

 

12,777

62,869

 

61,038

 

Adoption of the Law nº 12,973/2014 (Provisional Measure 627/2013)

 

On November, 2013 the provisional measure n. 627 was issued establishing that non-taxation over the profit and dividends calculated based on results from January 01, 2008 to December 31, 2013 by the Companies taxable based on actual profits, presumed or arbitrate, paid until the date of the provisional measure publication, in higher values that the ones calculated by the current accounting policies on December 31, 2007 since the Company has already paid the profit or dividends the anticipated adoption by 2014.

 

On May, 2014, the provisional measure was converted to Law n. 12,973, resulting in significant changes to the previously established, along with dividends, return on own capital and investments measurement through equity. A change from provisional measure n. 627 to Law n. 12,973, was the unconditional non-taxation for the profits and dividends calculated based on the results from January 01, 2008 to December 31, 2013.

 

In order to ensure tax neutrality established in Law n. 11,941, from 2009, since dividend payments occurred until the date of the law’s publication, the Company and its subsidiary Smiles S.A.’s managements chose the early adoption of the Law through DCTF related to May, 2014. Thus, it will be guaranteed the usage of the equity measured in accordance with the Law no. 6404 from 1976, for purposes of calculating the limits as per laws related to the tax effects of interest on capital.

 

The Company analyzed the potential effects on the Law n. 12,973 adoption and concluded that there are no significant effects on its interim financial information as of June 30, 2014 and December 31, 2013 on GLAI and Smiles. On VRG and Webjet, the Company will analyse the impacts of the adoption of the Law and the related effects will be registered starting as from January 01, 2015.

 

56


 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

21.  Advance ticket sales

 

As of June 30, 2014, the balance of transport to perform classified in current liabilities was R$1,129,699 (R$1,219,802 as of December 31, 2013) and is represented by 5,324,146  coupons tickets sold and not yet used (5,951,486 as of December 31, 2013) with an average use of 119 days (111 days as of December 31, 2013).

 

 

22.  Mileage program

 

As of June 30, 2014, the balance of Smiles deferred revenue is R$208,650 (R$195,935 as of December 31, 2013) and R$469,013 (R$456,290 as of December 31, 2013) classified in the current and noncurrent liabilities, respectively and the number of outstanding miles as of June 30, 2014 amounted to 40,853,705,083.

 

 

23.  Advances from customers

 

The Company performs advance miles sales and recorded such under "Advances from Customers". As of June 30, 2014, the outstanding balance related to these anticipated sales is as follows:

 

 

Consolidated

06/30/2014

12/31/2013

Financial institutions (a)

42,860

169,649

Others

1,223

1,755

44,083

171,404

 

 

Current

43,700

167,759

Noncurrent

383

3,645

 

(a)    A portion of the amount in the current liabilities of R$41,563 (R$166,004 and R$3,645 as of December 31, 2013) is related to the miles sales agreement in the approximately total amount of R$400,000 signed on April 08, 2014 along with the financial institutions Bradesco S.A., Banco do Brasil S.A. and Santander S.A.

 

57


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

24.  Provisions 

 

 

 

Insurance

Provision

 

Provision for anticipated return of Webjet’s aircraft (a)

Provision for aircraft and engine return of VRG and Webjet (b)

 

 

Lawsuits (c)

 

 

 

Total

Balance on December 31, 2013

17,519

12,381

334,909

117,565

482,374

Additional provisions recognized

789

-

11,995

2,541

15,325

Utilized provisions

(11,264)

(8,844)

(52,773)

(25,147)

(98,028)

Foreign exchange

(274)

(462)

6,795

(902)

5,157

Balance on June 30, 2014

6,770

3,075

300,926

94,057

404,828

         

As of December 31, 2013

         

Current

17,519

12,381

169,571

-

199,471

Noncurrent

-

-

165,338

117,565

282,903

17,519

12,381

334,909

117,565

482,374

         

As of June 30, 2014

 

 

 

 

 

Current

6,770

3,075

146,439

-

156,284

Noncurrent

-

-

154,487

94,057

248,544

6,770

3,075

300,926

94,057

404,828

 

a)    Provision for anticipated return of aircraft

 

       In 2011, according to the strategic planning of Webjet, a provision for the anticipated return of aircraft was recorded. This provision was calculated based on the expected return of 18 aircraft Boeing 737-300 with operating leases contracts, as part of the Company's fleet renewal. During the six-month period ended June 30, 2014 the Company completed 5 aircraft return with the following prefixs: PR-WJV, PR-WJB, PR-WJD, PR-WJF e PR-WJH.

 

b)    Return of aircraft and engines

 

       The returns provisions consider the costs that meet the contractual conditions for the return of engines maintained under operating leases, as well as the costs to reconfigure the aircraft without purchase option, as prescribed in the returns conditions of the lease contracts, and which is capitalized in fixed assets (aircraft reconfigurations/overhauling), as described in Note 16.

 

c)    Lawsuits 

 

       As of June 30, 2014 the Company and its subsidiaries are parties to 27,057 (7,429 labor and 19,628 civil) lawsuits and administrative proceedings. The lawsuits and administrative proceedings are classified into Operation (those arising from the Company’s normal course of operations), and Succession (those arising from the succession of former Varig S.A. obligations). Under this classification, the number of proceedings is as follows:

 

58


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

24. Provisions (Continued) 

 

c)    Lawsuits  (Continued)

 

 

Operation

Succession

Total

Civil lawsuits

16,464

447

16,911

Civil proceedings

2,707

10

2,717

Labor lawsuits

3,910

3,297

7,207

Labor proceedings

220

2

222

 

23,301

3,756

27,057

 

The civil lawsuits are primarily related to compensation claims generally related to flight delays and cancellations, baggage loss and damage. The labor claims primarily consist of discussions related to overtime, hazard pay, and wage differences.

 

The provisions related to civil and labor suits, whose likelihood of loss is assessed as probable are as follows:

 

 

06/30/2014

12/31/2013

Civil

50,053

66,294

Labor

44,004

51,271

 

94,057

117,565

 

Provisions are reviewed based on the progress of the proceedings and history of losses based on the best current estimate for labor and civil lawsuits.

 

There are other civil and labor lawsuits assessed by management and its legal counsel as possible risks, in the estimated amount as of June 30, 2014 of R$20,839 for civil claims and R$2,990 for labor claims (R$13,226 and R$3,929 as of December 31, 2013 respectively), for which no provisions are recognized.

 

The tax lawsuits below were evaluated by the Companys’ management and its legal consultants as being relevant and with probable risk as of June 30, 2014:

 

·  GLAI is discussing the non-incidence of taxation of PIS and COFINS on revenues generated by the interest on capital in the amount of R$37,750, related to the years from 2006 to 2008, paid by its subsidiary GTA Transportes Aéreos S.A., succeeded by VRG on September 25, 2008. According to the opinion of the Company’s legal counsel and based on the jurisprudence occurred in recent events, the Company classified this case as possible loss, without a provision registered for the related amount. Additionally, the Company maintains a letter of credit with Bic Banco with a partial guarantee on the lawsuit value of R$20,690 as disclosed in Note 6.

 

59


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

24. Provisions (Continued) 

 

c)    Lawsuits  (Continued)

 

·  Tax on Services (ISS), the amount of R$15,532 arising from assessment notices issued by the Prefeitura do Município de São Paulo against the Company, in the period from January, 2007 to December, 2010 regarding a possible ISS taxation on partners agreements. The classification of the possible risk stems from the matters under discussion and are interpretative, and involves discussions of factual and evidential materials, and has no final positioning of the Superior Courts.

·  Customs Penalty in the amount of R$33,044 relating to assessment notices issued against the Company for alleged breach of customs rules regarding procedures for temporary import of aircraft. The classification of possible risk is a result of the absence of a final positioning of the Superior Courts.

·  BSSF goodwill (BSSF Air Holdings), in the amount of R$42,514 related to Infraction notices due to the deductibility of the goodwill allocated to future profitability. The classification of possible risk is a result of the absence of a final positioning of the Superior Courts.

·  VRG’s goodwill in the amount of R$16,670 resulted from summons of violation related to the deductibility of the goodwill classified as future payment. The classification of probable risk arises from the absence of a final opinion from the Superior Courts.

 

There are other lawsuits considered by the Company’s management and its legal counsel as possible risk, in the estimated amount of R$20,178 which added to the lawsuits mentioned above, amount to R$165,688 as of June 30, 2014.

 

The Company and its subsidiaries are challenging in the court the ICMS levied on aircraft and engines imported under aircraft lease transactions without purchase options in transactions carried out with lessors’ registered in foreign countries. The Company and its subsidiaries’ management understand that these transactions represent simple leases in view of the contractual obligation to return the assets that are the subject matter of the contract.

 

Management believes that there is no evidence of goods circulation and so, there are no legal events to generate the ICMS taxation. Based on the legal counsel opinion and supported by similar lawsuits with favorable decisions to taxpayers by the Superior Court of Justice (STJ) and Supreme Federal Court (STF) in the second quarter of 2007, the Company understands that the likelihood of loss is remote, and thus did not recognize provisions for these amounts. As of June 30, 2014 the estimated aggregated amount of the ongoing lawsuits related to the non-levy of ICMS tax on said imports is R$239,232 (R$229,450 as of December 31, 2013) adjusted for inflation, not including late payment charges.

 

60


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

25.  Shareholders’ equity

 

a)    Issued capital

 

       As of June 30, 2014, the Company’s capital is represented by 278,867,520 shares, of which 143,858,204 are common shares and 135,009,316 are preferred shares. The Fundo de Investimento em Participações Volluto is the Company’s controlling fund, which is equally controlled by Constantino de Oliveira Júnior, Henrique Constantino, Joaquim Constantino Neto, and Ricardo Constantino.

 

       Shares are held as follows:

 

 

06/30/2014

12/31/2013

 

Common

 

Preferred

 

Total

Common

 

Preferred

 

Total

Fundo Volluto

100.00%

 

21.84%

 

62.16%

100.00%

 

22.30%

 

62.38%

Wellington Management

Company

-

 

10.49%

 

5.08%

-

 

10.49%

 

5.08%

Delta Airlines, Inc.

-

 

6.15%

 

2.98%

-

 

6.15%

 

2.98%

Fidelity Investments

-

 

5.21%

 

2.52%

-

 

5.21%

 

2.52%

Treasury shares

-

 

1.59%

 

0.77%

-

 

1.59%

 

0.77%

Other

-

 

1.50%

 

0.73%

-

 

1.51%

 

0.73%

Free float

-

 

53.22%

 

25.76%

-

 

52.75%

 

25.54%

100.00%

 

100.00%

 

100.00%

100.00%

 

100.00%

 

100.00%

 

The authorized share capital, as of June 30, 2014, was R$4.0 billion. Within the authorized limit, the Company can, once approved by the Board of Directors, increase its capital regardless of any amendment to its bylaws, by issuing shares, without necessarily maintaining the proportion between the different types of shares. Under the law terms, in case of capital increase, the Board of Directors will define the issuance conditions, including pricing and payment terms.

 

On the Board of Director’s General Meeting held on May 28, 2014, it was aproved the capital increase limited to R$185,757, being the amount of R$116,357 proceeding from Air France - KLM S.A. investment ("Air France KLM"), to be subscribed of 4,246,620 preferred shares of the Company, registered as of June 30, 2014 as “Shares to be issued”, as Note 34e.

 

The Company shares as of June 30, 2014 are quoted on the São Paulo Stock Exchange - BM&FBOVESPA in the amount of R$12.02 per share and US$5.48 per share on the New York Stock Exchange - NYSE (R$10.48 and US$4.57 on December 31, 2013). The book value per share as of June 30, 2014 is R$1.74 (R$2.33 as of December 31, 2013).

 

61


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

25. Shareholders’ equity (Continued) 

 

b)    Retained earnings

 

Legal reserve

 

It is recognized by allocating 5% of the profit for the year after the absorption of accumulated losses in accordance with Article 193 of Law 11,638/07, limited to 20% of the capital, according to the Brazilian Corporate Law and the Company’s bylaws.

 

c)    Dividends 

 

The Company’s bylaws provide for a mandatory minimum dividend to be paid to common and preferred shareholders, in the aggregate of at least 25% of annual adjusted profit after resevers in accordance with the Corporate Law (6,404/76). The Brazilian Corporate Law, permits the payment of cash dividends only from retained earnings, and certain reserves recognized in the Company’s statutory accounting records.

 

d)    Treasury shares

 

As of June 30, 2014, the Company holds 2,146,725 treasury shares, totaling R$32,116, with a market value of R$25,803 (R$32,116 in shares with market value of R$22,499 as of December 31, 2013).

 

e)    Share-based payments

 

As of June 30, 2014, the balance of share-based payments reserve was R$88,464 (R$85,438 as of December 31, 2013). The Company recorded a share-based payment expense amounting to R$3,026 related to the Company’s controlling shareholders and R$529 related to its non-controlling shareholders in the period ended June 30, 2014, with a corresponding expense classified as personnel costs under the statement of profit or loss (R$6,183 related to the Company’s controlling shareholders and R$905 related to its non-controlling shareholders as of December 31, 2013).

 

f)     Other comphensive income

 

The fair value measurement of financial instruments designated as cash flow hedges is recognized as “Other Comphensive Income”, net of tax effects. The balance as of June 30, 2014 corresponds to a net loss of R$74,839 (net loss of R$18,162 as of December 31, 2013) as per Note 31.

 

62


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

26.  Sales revenue

 

The net sales revenue has the following composition:

 

 

Consolidated

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Passenger transportation

2,243,799

 

1,782,365

 

4,604,380

 

3,752,998

Cargo

83,631

 

83,386

 

160,951

 

155,146

Other revenue

202,542

 

161,971

 

389,083

 

326,414

Gross revenue

2,529,972

 

2,027,722

 

5,154,414

 

4,234,558

 

 

 

 

 

 

 

 

Related taxes

(148,683)

 

(112,897)

 

(279,726)

 

(237,057)

Net revenue

2,381,289

 

1,914,825

 

4,874,688

 

3,997,501

 

The revenues are net of federal, state and municipal taxes, which are paid and transferred to the appropriate government entities.

 

Revenue by geographical segment is as follows:

 

 

Consolidated

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

%

 

06/30/2013

%

 

06/30/2014

%

 

06/30/2013

%

Domestic

2,065,921

86.8

 

1,768,321

92.3

 

4,285,132

87.9

 

3,645,826

91.2

International

315,368

13.2

 

146,504

7.7

 

589,556

12.1

 

351,675

8.8

Net revenue

2,381,289

100.0

 

1,914,825

100.0

 

4,874,688

100.0

 

3,997,501

100.0

 

 

27.  Costs of services, administrative and selling expenses

 

 

Individual

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

 

Total

%

 

Total

%

 

Total

%

 

Total

%

Personnel (a)

(721)

(3.0)

 

(1,653)

(7.0)

 

(2,945)

(4.4)

 

(3,780)

(6.7)

Services rendered

(1,281)

(5.3)

 

(967)

(4.1)

 

(3,870)

(5.7)

 

(1,224)

(2.2)

Sale-leaseback transactions (b)

26,272

109.4

 

24.,229

101.9

 

75,073

111.1

 

62,021

109.4

Other operating expenses

(revenue), net

(260)

(1.1)

 

2,166

9.2

 

(688)

(1.0)

 

(305)

(0.5)

 

24,010

100.0

 

23,775

100.0

 

67,570

100.0

 

56,712

100.0

 

63


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

27. Costs of services, administrative and selling expenses (Continued) 

 

 

Consolidated

 

Three-month period ended on

 

06/30/2014

 

Cost of services

 

Selling expenses

 

Administrative expenses

Other operating income

 

 

Total

 

 

%

Personnel (a)

(268,190)

(15,887)

(43,052)

-

(327,129)

14.0

Fuel and lubricants

(908,042)

-

-

-

(908,042)

38.8

Aircraft rental

(213,033)

-

-

-

(213,033)

9.1

Aircraft insurance

(4,776)

-

-

-

(4,776)

0.2

Maintenance materials and repairs

(152,402)

-

(2)

-

(152,404)

6.5

Traffic services

(83,528)

(40,816)

(77,682)

-

(202,026)

8.6

Sales and marketing

-

(160,662)

(342)

-

(161,004)

6.9

Tax and landing fees

(142,344)

-

-

-

(142,344)

6.1

Depreciation and amortization

(108,915)

-

(15,394)

-

(124,309)

5.3

Sale-leaseback transactions (b)

-

-

-

26,272

26,272

(1.2)

Other, net

(88,284)

(8,184)

(37,645)

428

(133,685)

5.7

(1,969,514)

(225,549)

(174,117)

26,700

(2,342,480)

100.0

 

Consolidated

Three-month period ended on

06/30/2013

 

Cost of services

 

Selling expenses

 

Administrative expenses

Other operating income

 

 

Total

 

 

%

Personnel (a)

(251,836)

(25,149)

(58,184)

-

(335,169)

17.2

Fuel and lubricants

(817,530)

-

-

-

(817,530)

41.9

Aircraft rental

(153,983)

-

-

-

(153,983)

7.9

Aircraft insurance

(5,116)

-

-

-

(5,116)

0.3

Maintenance materials and repairs

(81,559)

-

-

-

(81,559)

4.2

Traffic services

(86,296)

(11,026)

(44,337)

-

(141,659)

7.3

Sales and marketing

-

(109,297)

-

-

(109,297)

5.6

Tax and landing fees

(134,797)

-

-

-

(134,797)

6.9

Depreciation and amortization

(116,140)

-

(87)

-

(116,227)

6.0

Sale-leaseback transactions (b)

-

-

-

26,573

26,573

(1.4)

Other, net

(72,590)

949

(5,532)

(3,966)

(81,139)

4.1

(1,719,847)

(144,523)

(108,140)

22,607

(1,949,903)

100.0

             

 

64


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

27. Costs of services, administrative and selling expenses (Continued) 

 

Consolidated

Six-month period ended on

06/30/2014

 

Cost of services

 

Selling expenses

 

Administrative expenses

Other operating income

 

 

Total

 

 

%

Personnel (a)

(559,686)

(23,379)

(91,363)

-

(674,428)

14.4

Fuel and lubricants

(1,919,364)

-

-

-

(1,919,364)

40.9

Aircraft rent

(425,995)

-

-

-

(425,995)

9.1

Aircraft insurance

(9,661)

-

-

-

(9,661)

0.1

Maintenance materials and repairs

(227,933)

-

(2)

-

(227,935)

4.9

Traffic services

(175,915)

(64,563)

(127,391)

-

(367,869)

7.8

Sales and marketing

-

(321,895)

(342)

-

(322,237)

6.9

Tax and landing fees

(293,812)

-

-

-

(293,812)

6.3

Depreciation and amortization

(229,227)

-

(30,334)

-

(259,561)

5.5

Sale-leaseback transactions (b)

-

-

-

75,073

75,073

(1.6)

Other, net

(176,129)

(15,563)

(73,502)

-

(265,194)

5.7

(4,017,722)

(425,400)

(322,934)

75,073

(4,690,983)

100.0

 

Consolidated

Six-month period ended on

06/30/2013

 

Cost of services

 

Selling expenses

 

Administrative expenses

Other operating income

 

 

Total

 

 

%

Personnel (a)

(486,956)

(41,214)

(93,898)

-

(622,068)

15.8

Fuel and lubricants

(1,724,905)

-

-

-

(1,724,905)

43.9

Aircraft rent

(308,424)

-

-

-

(308,424)

7.8

Aircraft insurance

(10,240)

-

-

-

(10,240)

0.3

Maintenance materials and repairs

(174,641)

-

-

-

(174,641)

4.4

Traffic services

(131,866)

(59,684)

(85,668)

-

(277,218)

7.1

Sales and marketing

-

(199,420)

-

-

(199,420)

5.1

Tax and landing fees

(268,641)

-

-

-

(268,641)

6.8

Depreciation and amortization

(210,277)

-

(16,875)

-

(227,152)

5.8

Sale-leaseback transactions (b)

-

-

-

62,021

62,021

(1.6)

Other, net

(160,519)

(6,466)

(18,412)

4,681

(180,716)

4.6

(3,476,469)

(306,784)

(214,853)

66,702

(3,931,404)

100.0

 

(a)    The Company recognizes the cost of the Audit Committee and Board of Directors on “personnel”

 

(b)    The amount of R$75,073 (R$62,021 as of June 30, 2013) comprises the gains fully recognized and deferred losses from sale-leaseback transactions. During the period ended June 30, 2014, the Company held sale-leaseback transactions related to 9 aircraft (8 aircraft as of June 30, 2013).

 

65


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

28.  Financial result

 

Individual

Three-month

period ended on

 

Six-month

period ended on

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Financial income

 

 

 

 

 

 

 

Income from short-term investments and investment funds

2,006

 

668

 

3,468

 

2,676

Monetary variation

552

 

520

 

1,225

 

977

Other

3,933

 

3,825

 

3,933

 

7,595

6,491

 

5,013

 

8,626

 

11,248

Financial expenses

 

 

 

 

 

 

 

Losses (gains) from derivatives

49

 

(7,677)

 

(15,852)

 

(7,677)

Interest on short and long-term debt

(44,737)

 

(38,721)

 

(92,437)

 

(74,350)

Bank interest and expenses

(155)

 

(120)

 

(689)

 

(585)

Other

(479)

 

(558)

 

(896)

 

(941)

(45,322)

 

(47,076)

 

(109,874)

 

(83,553)

 

 

 

 

 

 

 

Foreign exchange variation, net (*) 

42,696

 

(124,683)

 

124,334

 

(93,654)

 

 

-

 

 

 

-

Total

3,865

 

(166,746)

 

23,086

 

(165,959)

 

 

 

Consolidated

 

Three-month

period ended on

 

Six-month

period ended on

 

06/30/2014

 

06/30/2013

 

06/30/2014

 

06/30/2013

Financial income

 

 

 

 

 

 

 

Income from derivatives

34,996

 

105,213

 

89,755

 

149,900

Income from short-term investments and investment funds

25,359

 

13,801

 

67,530

 

20,881

Monetary variation

1,919

 

3,509

 

4,485

 

6,020

Other

6,038

 

272

 

9,294

 

3,407

68,312

 

122,795

 

171,064

 

180,208

Financial expenses

 

 

 

 

 

 

 

Losses from derivatives

(71,781)

 

(65,821)

 

(260,926)

 

(136,576)

Interest on short and long-term debt

(132,899)

 

(129,963)

 

(276,004)

 

(250,793)

Bank interest and expenses

(5,739)

 

(3,767)

 

(11,362)

 

(30,305)

Monetary variation

(1,134)

 

(909)

 

(2,110)

 

(1,760)

Other

(12,845)

 

(13,629)

 

(28,017)

 

(18,150)

(224,398)

 

(214,089)

 

(578,419)

 

(437,584)

 

 

 

 

 

 

 

Foreign exchange variation, net (*) 

50,391

 

(333,685)

 

107,878

 

(274,531)

 

 

 

 

 

 

 

Total

(105,695)

 

(424,979)

 

(299,477)

 

(531,907)

 

(*)      From the net amount of R$107,878 (consolidated) for the six-month period ended on June 30, 2014, portion of R$134,333 is related to the cash loss of the Bolívar Venezuelano, as described in Note 4a.

 

66


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

29.  Operating segment

 

Operating segments are defined as business activities from which it may earn revenues and incur expenses, which operating results are regularly reviewed by the relevant decision makers to evaluate performance and allocate resources to the segments.

 

As of January 01, 2013, as a result of the Smiles Program as an independent entity, the Company presents two operating segments: the flight transportation segment and the customer’s loyalty program segment.

 

The flight transportation segment offers regular transportation of passenger and cargo, and the customer’s loyalty program segment consists on the granting of credit reward miles to participants who can use them to redeem rewards, mainly airline tickets.

 

The accounting policies of the operating segments are the same as those applied to the consolidated financial statements. Additionally, the Company has distinct natures between the two reportable segments, which prevents any form of cost allocation, so there is no common costs and revenues between operating segments.

 

The information below presents the summarized financial position related to reportable segments for the six-month period ended June 30, 2014.

 

a)    Assets and liabilities of the operational segment

 

 

06/30/2014

 

 

 

Flight

transpor-tation

 

 

 

 

Smiles loyalty

program

 

 

 

 

 

Combined information

 

Eliminations and adjustments to align accounting

policies

 

 

 

 

 

Total consolidated

Assets

 

 

 

           

Current

2,846,790

 

978,528

 

3,825,318

 

(468,080)

 

3,357,238

Noncurrent

7,483,663

 

1,002,530

 

8,486,193

 

(1,586,741)

 

6,899,452

Total assets

10,330,453

 

1,981,058

 

12,311,511

 

(2,054,821)

 

10,256,690

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current

4,403,916

 

276,322

 

4,680,238

 

(1,311,776)

 

3,368,462

Noncurrent

5,441,427

 

372,665

 

5,814,092

 

(18,586)

 

5,795,506

Shareholder’s equity

485,110

 

1,332,071

 

1,817,181

 

(724,459)

 

1,092,722

Total liabilities and

shareholder’s equity

10,330,453

 

1,981,058

 

12,311,511

 

(2,054,821)

 

10,256,690

 

67


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

29. Operating segment (Continued) 

 

a)    Assets and liabilities of the operational segment: (Continued)

 

 

12/31/2013

 

 

Flight

transpor-tation

 

 

Smiles loyalty

program

 

 

 

Combined information

 

Eliminations and adjustments to align accounting

policies

 

 

 

Total consolidated

Assets

 

 

             

Current

2,827,332

 

834,116

 

3,992,847

 

(427,138)

 

3,565,709

Noncurrent

7,483,071

 

1,110,034

 

8,837,137

 

(1,764,398)

 

7,072,739

Total assets

10,310,403

 

1,944,150

 

12,829,984

 

(2,191,536)

 

10,638,448

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Current

4,422,851

 

344,120

 

3,845,423

 

(398,632)

 

3,446,791

Noncurrent

5,456,160

 

270,974

 

7,004,578

 

(1,031,421)

 

5,973,157

Shareholder’s equity

431,392

 

1,329,056

 

1,979,983

 

(761,483)

 

1,218,500

Total liabilities and

shareholder’s equity

10,310,403

 

1,944,150

 

12,829,984

 

(2,191,536)

 

10,638,448

 

b)    Income and expenses of the operational segment

 

 

06/30/2014

 

 

Fligh

Transpor-tation

 

 

Smiles loyalty

Program

 

 

 

Combined

information

 

Eliminations and adjustments to align accounting

policies

 

 

 

Total consolidated

Net revenue

       

 

 

 

 

 

Passenger

4,332,418

 

-

 

4,332,418

 

83,279

 

4,415,697

Cargo and other

422,588

 

-

 

422,588

 

(9,281)

 

413,307

Miles redeemed revenue

-

 

340,374

 

340,374

 

(294,690)

 

45,684

 

 

 

 

 

 

 

 

 

 

Costs

(4,062,355)

 

(180,643)

 

(4,242,998)

 

225,276

 

(4,017,722)

Net income

692,651

 

159,731

 

852,382

 

4,584

 

856,966

 

 

 

 

 

 

 

 

 

Equity in subsidiaries

81,124

 

(1,407)

 

79,717

 

(81,124)

 

(1,407)

 

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

 

 

 

 

 

 

 

Sales and marketing

(395,757)

 

(26,976)

 

(422,733)

 

(2,667)

 

(425,400)

Administrative expenses

(310,772)

 

(14,688)

 

(325,460)

 

2,526

 

(322,934)

Other operating revenue, net

75,073

 

-

 

75,073

 

-

 

75,073

 

 

 

 

 

 

 

 

 

Finance result

 

 

 

 

 

 

 

 

 

Financial income

148,363

 

100,049

 

248,412

 

(77,348)

 

171,064

Financial expense

(655,317)

 

(450)

 

(655,767)

 

77,348

 

(578,419)

Exchange rate changes, net

107,251

 

627

 

107,878

 

-

 

107,878

 

 

 

 

 

 

 

 

 

 

Loss (income) before income tax

and social contribution

(257,384)

 

216,886

 

(40,498)

 

(76,681)

 

(117,179)

 

 

 

 

 

 

 

 

 

Current and deferred income tax

and social contribution

(47,964)

 

(74,463)

 

(122,427)

 

(1,520)

 

(123,947)

Total loss (income), net

(305,348)

 

142,423

 

(162,925)

 

(78,201)

 

(241,126)

 

 

 

 

 

 

 

 

 

Attributable to Company’ shareholders

-

 

-

 

-

 

-

 

(305,373)

Attributable to non-controlling

Company’ shareholders

-

 

-

 

-

 

-

 

64,247

68


 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

29.     Operating segment (Continued) 

 

b)    Income and expenses of the operational segment: (Continued)

 

06/30/2013

Fligh

Transpor-tation

 

Smiles loyalty

Program

 

Combined

information

 

Eliminations and adjustments to align accounting

policies

 

Total consolidated

Net revenue

   

 

 

 

 

 

 

 

Passenger

3,550,182

 

-

 

3,550,182

 

78,486

 

3,628,668

Cargo and other

415,577

 

-

 

415,577

 

(83,493)

 

332,084

Miles redeemed revenue

-

 

229,877

 

229,877

 

(193,128)

 

36,749

 

 

 

 

 

 

 

 

 

Costs

(3,467,736)

 

(110,359)

 

(3,578,095)

 

101,626

 

(3,476,469)

Net income

498,023

 

119,518

 

617,541

 

(96,509)

 

521,032

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

 

 

 

 

 

 

 

Sales and marketing

(342,067)

 

(21,490)

 

(363,557)

 

56,773

 

(306,784)

Administrative expenses

(223,809)

 

(12,902)

 

(236,711)

 

21,858

 

(214,853)

Other operating revenue, net

66,707

 

-

 

66,707

 

(5)

 

66,702

 

 

 

 

 

 

 

 

 

Finance result

 

 

 

 

 

 

 

 

 

Financial income

177,599

 

33,972

 

211,571

 

(31,363)

 

180,208

Financial expense

(468,731)

 

(216)

 

(468,947)

 

31,363

 

(437,584)

Exchange rate changes, net

(274,531)

 

-

 

(274,531)

 

-

 

(274,531)

 

 

 

 

 

 

 

 

 

Loss (income) before income tax and social contribution

(566,809)

 

118,882

 

(447,927)

 

(17,883)

 

(465,810)

 

 

 

 

 

 

 

 

 

Current and deferred income tax and social contribution

(7,835)

 

(40,743)

 

(48,578)

 

6,144

 

(42,434)

 

 

 

 

 

 

 

 

 

Total loss (income), net

(574,644)

 

78,139

 

(496,505)

 

(11,739)

 

(508,244)

 

 

 

 

 

 

 

 

 

Attributable to non-controlling Company’ shareholders

-

 

-

 

-

 

-

 

(524,811)

Attributable to Company’ shareholders

-

 

-

 

-

 

-

 

16,567

 

In the individual interim financial information - ITR of the subsidiary Smiles S.A., which represents the segment Smiles Loyalty Program and in the information provided to the relevant decision makers, the revenue recognition occurs upon redemption of the miles by the participants. Under this perspective, this measurement is appropriate given that this is when the revenue recognition cycle is complete. At this point, Smiles has transferred to its suppliers the obligation to provide services or deliver products to its customers.

 

69


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

29. Operating segment (Continued) 

 

However, from a consolidated perspective, the revenue recognition cycle related to miles exchanged for flight tickets is only complete when the passengers are effectively transported. Therefore, for purposes of reconciliation with the consolidated assets, liabilities and results, as well as for purposes of equity method of accounting and for consolidation purposes, the Company performed, besides eliminations entries, consolidating adjustments to adjust the accounting practices related to Smiles´ revenues. In this case, under the perspective of the consolidated financial statements, the miles that were used to redeem airline tickets are only recognized as revenue when passengers are transported, in accordance with accounting practices and policies adopted by the Company.

 

 

30.  Commitments 

 

As of June 30, 2014 the Company holds 130 firm orders for aircraft acquisitions with Boeing. These aircraft acquisition commitments include estimates for contractual price increases during the construction phase. The approximate amount of firm orders, not including the contractual discounts, is R$32,704,865 (corresponding to US$14,848,974 at the reporting date) and are segregated according to the following years:

 

06/30/2014

12/31/2013

2014

-

1,764,882

2015

1,097,700

1,167,524

2016

1,148,522

1,221,579

2017

1,768,451

1,880,941

2018

1,207,917

1,284,752

Beyond 2018

27,482,275

29,230,410

32,704,865

36,550,088

 

As of June 30, 2014, from the total orders mentioned above, the Company holds commitments in the amount of R$4,476,474 (corresponding to US$2,032,451 at the reporting date) related to advances for aircraft acquisition, to be disbursed in accordance with the following schedule:

 

06/30/2014

12/31/2013

2014

87,657

163,368

2015

240,420

255,714

2016

127,875

136,009

2017

222,139

236,269

2018

539,907

574,250

Beyond 2018

3,258,476

3,465,745

4,476,474

4,831,355

 

70


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

30. Commitments (Continued) 

 

The installment financed by long-term debt with aircraft guarantee through the U.S. Ex-Im Bank corresponds approximately to 85% of the aircraft total cost. Other establishments finance the acquisitions with equal or higher percentages, reaching up to 100%.

 

The Company performs payments related to aircraft acquisition through its own funds, short and long-term debt, cash provided by operating activities, short and medium-term line of credit and supplier financing.

 

The Company leases its entire aircraft fleet through a combination of operational and financial leases. As of June 30, 2014, the total fleet leased was comprised of 147 aircraft, excluding 3 aircraft from Webjet’s fleet, of which 101 were under operating leases and 46 were recorded as financial leases. The Company holds 40 aircraft under financial leasing with purchase option. During the six-month period ended June 30, 2014, the Company received 9 aircraft under operating lease contracts and effected the return of 4 aircraft operating lease.

 

 

a)    Operating leases

 

       The future payments of non-cancelable operating lease contracts are denominated in U.S. Dollars, and are as follows:

 

06/30/2014

12/31/2013

2014

351,002

693,125

2015

605,787

581,153

2016

535,173

508,828

2017

481,083

456,990

2018

420,816

397,103

Beyond 2018

1,657,464

1,456,846

Total minimum lease payments

4,051,325

4,094,045

 

b)    Sale-leaseback transactions

 

During the period ended June 30, 2014, the Company recorded the amount of R$2,356 and R$2,228, as “Other payables” in current and noncurrent liabilities, respectively (R$5,247 and R$3,118 as of December 31, 2013), related to the gains from sale-leaseback transactions performed by its subsidiary GAC Inc. in 2006 of 8 aircraft 737-800 Next Generation. These gains were deferred and are being amortized proportionally to the payments of the operational lease agreements, of which 1 aircraft have the agreement maturity of 91 months, 5 aircraft have contract term of 96 months and 2 aircraft have contract term of 120 months.

 

71


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

30. Commitments (Continued) 

 

b)    Sale-leaseback transactions (Continued)

 

On the same date, the Company held the amount of R$8,377 and R$22,386 as “Prepaid expenses” in current and noncurrent assets, respectively (R$8,923 and R$26,526 as of December 31, 2013), related to the losses on sale-leaseback transactions performed by its subsidiary GAC Inc. of 9 aircraft. During the years 2007, 2008 and 2009 these losses were deferred, and are being amortized proportionally to the payments of the operational lease agreements over the contract term of 120 months.

 

Additionally, during the period ended on June 30, 2014, the Company recorded a gain of R$75,073 resulting from 9 aircraft received during the period (8 aircraft received during the six-month period ended on June 30, 2013) that were used as sale-leaseback transactions and resulted in operating leases. Given that the gains and losses from sale-leaseback transactions will not be offset against future lease payments and were negotiated at fair value, such gain was recognized directly in profit or loss.

 

 

31.  Financial instruments

 

The Company and its subsidiaries have financial asset and financial liability transactions, which consist in part of derivative financial instruments.

 

The financial derivative instruments are used to hedge against the inherent risks related to the Company operations. The Company and its subsidiaries consider as most relevant risks: fuel price, exchange rate and interest rate. These risks can be mitigated by using exchange swap derivatives, futures and options contracts based on oil, U.S. Dollar and interest markets. The contracts may be held by means of exclusive investment funds, as described in the Risk Management Policy of the Company.

 

Management follows a documented guideline when managing its financial instruments, set out in its Risk Management Policy, which is periodically revised by the Risk Committee (CPR), and approved by the Board of Directors. The Committee sets the guidelines and limits, monitors controls, including the mathematical models adopted for a continuous monitoring of exposures and possible financial effects and also prevents the execution of speculative financial instruments transactions.

 

The gains or losses on these transactions and the application of risk management controls are part of the Committee’s monitoring and have been satisfactory when considering the objectives proposed.

 

72


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

The fair values of financial assets and liabilities of the Company and its subsidiaries are established through information available in the market and according to valuation methodologies.

 

Most of the derivative financial instruments are engaged with the purpose of hedging against fuel and exchange rates risks based on scenarios with low probability of occurrence, and thus have lower costs compared to other instruments with higher probability of occurrence. Consequently, despite the high correlation between the hedged item and the derivative financial instruments contracted, can presents ineffective positions for hedge accounting purposes upon settlement, which are presented in the tables below.

 

The description of the consolidated account balances and the categories of financial instruments included in the balance sheet as of June 30, 2014 and December 31, 2013 is as follows:

 

Measured at fair value

through profit or loss

Measured at

amortized cost (a)

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Assets:

 

 

 

 

 

 

Cash and cash equivalents

2,450,393

 

1,635,647

-

 

-

Short-term investments (c)

143,355

 

1,155,617

-

 

-

Restricted cash

226,546

 

254,456

 

 

-

Derivatives operations assets (b)

-

 

48,934

 

 

-

Accounts receivable

-

 

-

466,826

 

324,821

Deposits (d)

-

 

-

612,204

 

630,168

Other credits

-

 

-

60,239

 

66,773

Prepayment of hedge premium

-

 

-

-

 

1,532

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Loans and financing

-

 

 

5,406,940

 

5,589,385

Suppliers

-

 

 

498,760

 

502,919

Derivatives obligations (b)

42,140

 

30,315

-

 

-

 

(a)     The fair values are approximately the book values, according to the short term maturity period of these assets and liabilities, except the amounts related to Perpetual Bonds  and Senior Notes, as disclosed on Note 18;

(b)     The Company registered as of June 30, 2014 the amount net of R$74,839, net of tax effects (R$18,162 as of December 31, 2013) in equity as an equity valuation resulting from these assets and liabilities, as explained in Note 25f;

(c)     The Company manages its investments as held for trading to pay its operational expenses;

(d)     Excludes the escrow deposits, as mentioned in Note 11.

 

On June 30, 2014 the Company had no financial assets available for sale.

 

Risks

 

The operating activities expose the Company and its subsidiaries to the following financial risks: market (especially currency risk, interest rate risk, and fuel price risk), credit and liquidity risks. These risks are originated by, essentially, leasing agreements of aircraft purchase.

 

73


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

31. Financial instruments (Continued) 

 

Risks (Continued)

 

The Company’s risk management policy aims at mitigating potential adverse effects from transactions that could affect its financial performance.

 

The Company’s and its subsidiaries’ decisions on the exposure portion to be hedged against financial risk, both for fuel consumption and currency and interest rate exposures, consider the risks and hedge costs.

 

The Company and its subsidiaries do not usually contract hedging instruments for its total exposure, and thus they are subject to the portion of risks resulting from market fluctuations. The portion of exposure to be hedged is determined and reviewed at least yearly in compliance with the strategies determined in the Risk Policies Committees. The relevant information on the main risks affecting the Company’s and its subsidiaries’ operation is as follows:

 

a)    Fuel price risk

 

       As of June 30, 2014, fuel expenses accounted for 41% of the costs and operating expenses of the Company and its subsidiaries. The aircraft fuel price fluctuates both in the short and in the long term, in line with crude oil and oil byproduct price fluctuations.

 

       To mitigate the risk of fuel price, the Company and its subsidiaries contract derivative financial instruments referenced mainly to crude oil and, eventually, to their derivatives, also contracted, directly with the local supplier, are future fuel deliveries to aircraft at predetermined prices.

 

As of June 30, 2014, there are no open transactions of derivatives instruments of fuel price variation hedge.

 

b)    Exchange rate risk

 

       The exchange rate risk derives from the possibility of unfavorable fluctuation of foreign currencies to which the Company’s liabilities or cash flows are exposed. The exposure of the Company’s and its subsidiaries’ assets and liabilities to the foreign currency risk mainly derives from foreign currency-denominated leases and financing.

 

       The Company’s and its subsidiaries’ revenues are mainly denominated in Brazilian Reais, except for a small portion in U.S. Dollar, Argentinean pesos, Bolivian bolivianos, Chilean peso, Colombian peso, Paraguay Guarani, Uruguayan peso, Venezuela bolivar etc.

 

74


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31.     Financial instruments (Continued) 

 

Risks (Continued)

 

b)    Exchange rate risk (Continued) 

      
The Company’s and its subsidiaries’ revenues are mainly denominated in Brazilian Reais, except for a small portion in U.S. Dollar, Argentinean pesos, Bolivian bolivianos, Chilean peso, Colombian peso, Paraguay Guarani, Uruguayan peso, Venezuela bolivar etc.

To mitigate the risk of exchange rate, the Company and its subsidiaries hold derivative financial instruments that are referenced to the U.S. Dollar.

 

The currency exposure of the Company on June 30, 2014 and December 31, 2013 is shown below:

 

Individual

Consolidated

06/30/2014

 

12/31/2013

06/30/2014

 

12/31/2013

Assets:

           

Cash and short-term investments

862,332

 

319,565

1,536,202

 

1,061,746

Trade receivables

-

 

-

24,703

 

39,924

Deposits

-

 

-

612,203

 

630,168

Hedge premium

-

 

-

-

 

1,532

Prepaid expenses with leases

-

 

-

29,692

 

27,238

Result from hedge operations

-

 

-

-

 

48,934

Others

-

 

-

18,244

 

5,968

Total assets

862,332

 

319,565

2,221,044

 

1,815,510

 

 

 

 

 

 

Liabilities:

 

   

 

   

Foreign suppliers

-

 

-

63,151

 

30,629

Short and long-term debt

2,010,673

 

1,698,982

2,238,325

 

2,151,051

Finance leases payable

-

 

-

1,955,348

 

2,195,328

Other leases payable

-

 

-

60,001

 

45,140

Provision for aircraft return

-

 

-

304,001

 

347,290

Contingency provision

-

 

-

880

 

27,267

Related parties

121,580

 

113,741

-

 

-

Total liabilities

2,132,253

 

1,812,723

4,621,706

 

4,796,705

Exchange exposure in R$

1,269,921

 

1,493,158

2,400,662

 

2,981,195

 

   

 

   

Obligations not registered in the balance sheet

 

   

 

   

Future obligations resulting from operating leases

-

 

-

4,051,325

 

4,094,045

Future obligations resulting from firm aircraft orders

32,704,865

 

36,550,088

32,704,865

 

36,550,088

Total

32,704,865

 

36,550,088

36,756,190

 

40,644,133

 

   

 

   

Total exchange exposure R$

33,974,786

 

38,043,246

39,156,852

 

43,625,328

Total exchange exposure US$

15,425,556

 

16,239,753

17,778,366

 

18,622,611

Exchange rate (R$/US$)

2.2025

 

2.3426

2.2025

 

2.3426

 

75


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Risks (Continued)

 

c)    Interest rate risk

 

The Company and its subsidiaries are exposed to fluctuations in domestic and foreign interest rates, substantially the CDI and Libor, respectively. The highest exposure is related to lease transactions, of which the installments to be paid are indexed to the Libor after date that the aircraft are delivered. Another relevant exposure is the local investments and debts indexed to the CDI rate.

 

To mitigate the interest rate risk the Company and its subsidiaries hold swap instruments.

 

d)    Credit risk

 

The credit risk is inherent in the Company’s and its subsidiaries’ operating and financing activities, mainly represented by trade receivables, cash and cash equivalents, including bank deposits.

 

The trade receivable credit risk consists of amounts falling due from the largest credit card companies, with credit risk better than or equal to those of the Company and its subsidiaries, and receivables from travel agencies, installment sales, and government sales, with a small portion exposed to risks from individuals or other entities.

 

As defined in the Risk Management Policy, the Company and its subsidiaries are required to evaluate the counterparty risks in financial instruments and diversify the exposure. Financial instruments are contracted with counterparties rated at least as investment grade by S&P and Moody’s. The financial instruments are mostly contracted on commodities and futures exchanges (BM&FBOVESPA and NYMEX), which substantially mitigate the credit risk, derivative transactions contracted on the OTC market (OTC) have counterparts with a minimum rating of "investment grade". The Company’s and its subsidiaries’ Risk Management Policy establishes a maximum limit of 20% per counterparty for short-term investments.

 

e)    Liquidity risk

 

Liquidity risk takes on two distinct forms: market and cash flow liquidity risk. The first is related to current market prices and varies in accordance with the types of assets and the markets where they are traded. Cash flow liquidity risk, however, is related to difficulties in meeting the contracted operating obligations at the agreed dates.

 

76


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Risks (Continued)

 

e)    Liquidity risk (Continued) 

 

As a way of managing the liquidity risk, the Company and its subsidiaries invest its funds in liquid assets (governmental bonds, CDBs, and investment funds with daily liquidity), and the Cash Management Policy establishes that the Company’s and its subsidiaries’ weighted average debt maturity should be higher than the weighted average maturity of the investment portfolio. As of June 30, 2014, the weighted average maturity of the Company’s and its subsidiaries’ financial assets was 18 days and of financial debt, excluding perpetual bonds, was 4.3 years.

 

f)     Capital management

 

The table below shows the financial leverage rate as of June 30, 2014 and December 31, 2013:

 

Consolidated

06/30/2014

 

12/31/2013

Shareholder’s equity (b)

485,110

 

650,926

Cash and cash equivalents

(2,450,393)

 

(1,635,647)

Restricted cash

(226,546)

 

(254,456)

Short-term investments

(143,355)

 

(1,155,617)

Short- and long-term debts

5,406,968

 

5,589,385

Net debt (a)

2,586,674

 

2,543,665

Leverage ratio (a)/(b)

533%

 

391%

 

The Company and its subsidiaries remain committed to maintaining high liquidity and an amortization profile without pressure on the short-term refinancing.

 

77


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Derivative financial instruments

 

The derivative financial instruments were recognized in the following balance sheet line items:

 

Movement of assets and liabilities

 

 

Fuel

 

Foreign
currency

 

Interest
rate

Derivatives
of equity
instruments

 

 

Total

 

 

 

 

 

Asset (liability) as of December 31, 2013

22,873

-

34,874

(30,315)

27,432

Fair value variations:

 

 

 

 

 

Gains (losses), net recognized in results

8,730

(90,214)

-

(15,901)

(97,385)

Gains (losses) recognized in other comprehensive income

(1,133)

-

(165,100)

-

(166,233)

Payments (cash receipts) during the period

(30,470)

89,855

84,194

-

143,579

Exercise of stock options by General Atlantic

-

-

-

46,216

46,216

Asset (liability) as of June 30, 2014 (*)

-

(359)

(46,032)

-

(46,391)

 

Movement of other comprehensive

results

 

 

Fuel

 

Foreign

currency

 

Interest
rate

Derivatives
of equity
instruments

 

 

Total

 

 

 

 

 

Balance as of December 31, 2013

2,739

-

(20,901)

-

(18,162)

Fair value adjustments during the period

(1,133)

-

(165,100)

-

(166,233)

Reversal, net to profit or loss (b)

(219)

-

80,578

-

80,359

Tax effect

460

-

28,737

-

29,197

Balance as of June 30, 2014

1,847

-

(76,686)

-

(74,839)

 

 

 

 

 

Effects on result (a+b)

8,949

(90,214)

(80,578)

(15,901)

(177,744)

 

 

 

 

 

Operational income

-

-

(6,573)

-

(6,573)

Financial income (expense)

8,949

(90,214)

(74,005)

(15,901)

(171,171)

 

(*)  Classified as "Rights with derivative operations" if the amount results in an asset or "Obligation with derivative operations" if the amount results in a liability. Includes R$4,251 of assets related to hedges held in an exclusive fund.

 

The Company and its subsidiaries adopt hedge accounting. The derivatives contracted to hedge interest rate risk and fuel price risk are classified as "cash flow hedge", according to the parameters described in the Brazilian accounting standard CPC 38.

 

78


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Classification of derivatives financial instruments

 

i.      Cash flow hedges

 

       The Company and its subsidiaries use cash flow hedges to hedge against future revenue or expense fluctuations resulting from changes in the exchange rates, interest rates or fuel price, and accounts for actual fluctuations of the fair value of derivative financial instruments in shareholders’ equity until the hedged revenue or expense is recognized.

 

       The Company and its subsidiaries estimates the effectiveness based on statistical correlation methods and the ratio between gains and losses on the financial instruments used as hedge, and the cost and expense fluctuation of the hedged items. The instruments are considered as effective when the fluctuation in the value of derivatives offsets between 80 % to 125% the impact of the price fluctuation on the cost or expense of the hedged item.

 

       The balance of the actual fluctuations in the fair values of the derivatives designated as cash flow hedges is transferred from shareholders’ equity to profit or loss for the period in which the hedged costs or expenses impacts profit or loss. Gains or losses on effective cash flow hedges are recorded in balancing accounts of the hedged expenses, by reducing or increasing the operating cost, and the ineffective gains or losses are recognized as financial income or financial expenses for the period.

 

ii.     Derivative financial instruments not designated as hedge

 

       The Company and its subsidiaries hold derivative financial instruments that are not formally designated for hedge accounting. This occurs when transactions are in the short term and the control and disclosure complexity.

 

iii.    Derivative equity instruments

 

       In April 2013, the Company entered into an investment agreement with General Atlantic Service Company LLC. ("G.A.") that established the grant by the Company of an option to purchase its Smiles shares enabling the secondary acquisition by G.A. (or other person designated by it), of Smiles S.A. shares held by the Company. These stock options were exercised on February 27, 2014 and, during the period ended June 30, 2014, the Company registered a loss in derivative instruments on the financial result in the amount of R$15,901 related to the derivative market pricing. As of June 30, 2014, the Company performed a reversal of this derivative obligation to the equity in the amount of R$46,216 as described on Note 1.

 

31. Financial instruments (Continued) 

79


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

Hedge activities

 

a)      Fuel hedge

 

Due to the low liquidity of jet fuel derivatives traded in commodities exchanges, the Company and its subsidiaries contracts crude oil derivatives (WTI, Brent) and its byproducts (Heating Oil) to hedge against fluctuations in jet fuel prices. Historically, oil prices are highly correlated with aircraft fuel prices.

 

As of June 30, 2014, the Company and its subsidiaries does not have contracts designated as “cash flow hedge accounting” of fuel.

 

The gains and losses from the derivative contracts for the period ended June 30, 2014 and December 31, 2013 are summarized below:

 

Closing balance on:

06/30/2014

 

12/31/2013

 

Fair value at end of the period (R$)

-

 

22,294

 

Gains with hedge effectiveness recognized in

shareholders’ equity, net of taxes (R$)

 

1,847

 

 

2,740

 

 

 

Three-month period ended on

Six-month period ended on

Period ended on:

06/30/2014

 

06/30/2013

06/30/2014

 

06/30/2013

Hedge result recognized in operating costs (R$)

-

 

(3,815)

-

 

(3,777)

Hedge result recognized in financial expenses (R$)

9,145

 

(17,134)

8,040

 

(12,475)

Total earnings (losses)

9,145

 

(20,949)

8,040

 

(16,252)

 

As of June 30, 2014, the Company and its subsidiaries does not hold contracts not designated as cash flow hedge accounting.

 

Three-month period ended on

Six-month period ended on

Closing balance on:

06/30/2014

 

06/30/2013

06/30/2014

 

06/30/2013

Gains recognized in financial income

(R$)

1,458

 

-

908

 

-

 

80


 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Hedge activities (Continued)

 

b)      Foreign exchange hedge

 

As of June 30, 2014, the Company and its subsidiaries have future derivative contracts for the U.S. Dollar for foreign exchange cash flow protection, not designated as hedge accounting. The losses and gains of the derivatives, for the period ended on June 30, 2014 and the year ended December 31, 2013, are presented below:

 

 

06/30/2014

 

12/31/2013

 

Fair value at the end of period (R$)

(359)

 

-

 

Volume hedged for future periods (US$)

262,250

 

319,000

 

 

 

   

 

Three-month period ended on

Six-month period ended on

Period ended on:

06/30/2014

 

06/30/2014

06/30/2014

 

06/30/2014

Losses (gains) recognized in financial result (R$)

(29,251)

 

49,062

(90,214)

 

21,373

 

 

3Q14

4Q14

1Q15

Total 12M

Percentage of cash flow exposure

100%

38%

-

16%

Notional amount (US$)

102,500

159,750

-

262,250

Future rate agreed (R$)

2.4849

2.3923

-

2.4285

Total in Brazilian Reais

254,702

382,170

-

636,874

 

c)      Interest rate hedges

 

As of June 30, 2014, the Company and its subsidiaries have swap derivatives designated as cash flow hedge for Libor interest rate. The summary of interest rate derivatives designated as Libor cash flow hedges is shown below:

 

Closing balance at:

06/30/2014

 

12/31/2013

 

 

 

Fair value at the end of the period (R$)

(46,032)

 

34,873

 

 

 

Nominal value at the end of the period (US$)

688,500

 

1,319,250

 

 

 

Hedge losses recognized in shareholders’ equity,

net of taxes (R$)

(76,686)

 

(20,901)

 

 

 

 

   

 

 

 

Three-month period ended on

Six-month period ended on

Period ended on:

06/30/2014

 

06/30/2013

06/30/2014

 

06/30/2013

Losses recognized in financial expenses (R$)

(18,186)

 

(2,029)

(74,005)

 

(6,677)

Losses recognized in financial income (R$)

(3,286)

 

-

(6,573)

 

-

Total losses

(21,472)

 

(2,029)

(80,578)

 

(6,677)

 

As of June 30, 2014 the Company and its subsidiaries did not hold positions in Libor interest derivative agreements not designated for hedge accounting.

 

81


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Sensitivity analysis of derivative financial instruments

 

The sensitivity analysis of financial instruments was prepared according to CVM Instruction 475/08, in order to estimate the impact on the fair value of financial instruments operated by the Company, considering three scenarios considered in the risk variable: most likely scenario, the assessment of the Company; deterioration of 25% (possible adverse scenario) in the risk variable, deterioration 50% (remote adverse scenario).

 

The estimates presented, since they are based on simple statistics, do not necessarily reflect the amounts to be reported in the next financial statements. The use of different methodologies and /or assumptions may have a material effect on the estimates presented.

 

The tables below show the sensitivity analysis for market risks and financial instruments considered relevant by management, open position as of June 30, 2014 and based on the scenarios described above.

 

The probable scenario of the Company is the maintaining of the market rates.

 

In the tables, positive values are displayed as asset exposures (assets greater than liabilities) and negative values are exposed liabilities (liabilities greater than assets).

 

Parent Company

 

I)     Foreign exchange risk

 

       As of June 30, 2014, the Company has a currency exposure of R$1,269,921 (see Note 31b). On this date, the exchange rate adopted was R$2.2025/US$, corresponding to the closing rate of the month published by Banco Central do Brasil as a likely scenario, and the impacts analyzed from the variation of 25% and 50% over the current rate are shown below:

 

 

 

 

Instrument

 

 

 

Risk

 

 

Exposed

Values

 

 

Probable

Scenario

Possible Adverse

Scenario

Remote Adverse

Scenario

+ 25%

+ 50%

Liabilities, net

Dollar Appreciation

(1,269,921)*

-

(317,480)*

(634,961)*

 

 

 

 

   

 

 

Dollar

2.2025

2.7531

3.3038

 

* Negative amounts correspond to net losses in case of exchange variation.

 

82


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

31. Financial instruments (Continued) 

 

Consolidated

 

I)     Fuel risk fator

 

       As of June 30, 2014, the Company does not hold derivative contracts for oil.

 

II)    Foreign exchange risk factor

 

       As of June 30, 2014, the Company holds Dollar derivative contracts with a notional value of US$262,250 with maturity until January, 2015, and a net exchange exposure liability of R$2,400,662 (see Note 31b). At the current date, the Company adopted the closing exchange rate of R$2.2025/US$ as a likely scenario, and the impact of the change of 25% and 50% over the current rate, is shown below:

 

 

Instruments

Exposed

amount

-50%

-25%

+ 25%

+50%

R$1.1013/USD

R$1.6519/USD

R$2.7531/USD

R$3.3038/USD

Liabilities, net

(2,400,662)

1,200,331

600,165

(600,165)

(1,200,331)

Derivative

(30,843)

(248,664)

(124,358)

127,815

266,291

 

(2,431,505)*

951,667

475,807

(472,350)*

(934,040)*

 

* Negative values correspond to net losses expected in the case of U.S. Dollar appreciation.

 

III)   Interest risk factor

 

As of June 30, 2014, the Company holds financial investments and financial liabilities indexed to several rates, and Libor interest.

 

In the sensitivity analysis of non-derivative financial instruments it was considered the impacts on yearly interest of the exposed values as of June 30, 2014 (see Note 19), arising from fluctuations in interest rates according to the scenarios presented below:

 

 

 

 

Instruments

 

 

 

Risk

 

 

Exposed

amount

Probable

Scenario Scenario

Possible Adverse Scenario

Adverse Scenario Remote

 

25%

 

50%

Financial investments -

Short and Long-term debt (a)

Increase in the CDI rate

 

(101,546)

 

-

 

(12,075)

 

(24,150)

Derivative

Decrease in the Libor rate

 

(46,034)

 

-

 

(87,607)

 

(175,327)

 

(a)  Refers to the sum of the values invested and raised in the market and indexed to CDI, the negative amounts means more debt than application.

 

83


 

 

 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

31. Financial instruments (Continued) 

 

Measurement of the fair value of financial instruments

 

In order to comply with the disclosure requirements for financial instruments measured at fair value, the Company and its subsidiaries must classify its instruments in Levels 1 to 3, based on observable fair value levels:

 

a)      Level 1: Fair value measurements are calculated based on quoted prices (without adjustment) in active market or identical liabilities

 

b)      Level 2: Fair value measurements are calculated based on other variables besides quoted prices included in Level 1, that are observable for the asset or liability directly (such as prices) or indirectly (derived from prices); and

 

c)      Level 3: Fair value measurements are calculated based on valuation methods that include the asset or liability but that are not based on observable market variables (unobservable inputs).

 

The following table shows a summary of the Company’s and its subsidiaries’ financial instruments measured at fair value, including their related classifications of the valuation method, as of June 30, 2014 and December 31, 2013:

 

 

06/30/2014

12/31/2013

 

 

Financial instrument

 

Book value

06/30/2014

 

Other significant observable factors (level 2)

 

Book value

12/31/2013

 

Other significant observable factors (level 2)

 

 

 

 

 

 

Cash equivalents

2,450,393

 

2,450,393

1,635,647

 

1,635,647

Short-term investments

143,355

 

143,355

1,155,617

 

1,180,828

Restricted cash

226,546

 

226,546

254,456

 

254,456

Liabilities from derivative transactions

42,140

 

42,140

30,315

 

30,315

Rights on derivative transactions

-

 

-

48,934

 

48,934

 

 

32.  Non-cash transactions

 

Parent Company:

 

On February 27, 2014, the Company sold a portion of its investment on Smiles S.A. to General Atlantic. As a result, the amount of R$46,216 related to the equity derivative previously registered on “Liabilities from derivative transactions” was reversed to equity as part of gain of the transaction. This operation did not affect the Company’s cash during the period.

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GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

32.     Non-cash transactions (Continued) 

 

Consolidated:

 

As of June 30, 2014, the Company increased its property, plant and equipment in the amount of R$11,995, related to an increase of the provision for aircraft return.

 

As of June 30, 2014, the Company recorded the amount of R$12,500 related to the affiliate Company obligation due to the acquisition of Netpoints S.A. with counterpart in "Investments”. This transaction did not affect its cash position during the period ended June 30, 2014.

 

As of June 30, 2014, the Company acquired software licenses (“Siebel”) in the amount of R$12,774. This transaction did not affect its cash position during the period ended June 30, 2014.

 

 

33.  Insurance 

 

As of June 30, 2014, the insurance coverage by nature, considering the aircraft fleet, and related to the maximum reimbursable amounts indicated in U.S. Dollars, is as follows:

 

Aeronautical Type

In Reais

In U.S. Dollars

Guarantee - hull/war

11,865,664

5,388,829

Civil liability per event/aircraft (*)

1,651,425

750,000

Inventories (*)

308,266

140,000

 

(*) Values per incident and annual aggregate.

 

Pursuant to Law 10,744, of October 9, 2003, the Brazilian government assumed the commitment to complement any civil liability expenses related to third parties caused by war or terrorist events, in Brazil or abroad, which VRG may be required to pay, for amounts exceeding the limit of the insurance policies effective beginning September 10, 2001, limited to the amount in Brazilian Reais equivalent to one billion U.S. Dollars.

 

The scope the review from the Company’s independent auditors does not include the review of the effectiveness of the insurance coverage, which was determined by the Company and is considerated sufficient to cover possible losses.

 

85


 

 

 

GOL Linhas Aéreas Inteligentes S.A.

 

Notes to the consolidated interim financial information (Continued)

June 30, 2014

(In thousands of Brazilian Reais - R$, except when indicated otherwise)

 

 

 

34.  Subsequent events

 

a)       On July 03, 2014, it was approved the capital subscription on Smiles of R$1,956 related to the issuance of 97,375 from the exercise of stock options.

 

b)       On July 15, 2014 it was approved the first debentures issuance of 60,000 debentures non-convertible with main value of R$600,000, under the terms of Instruction CVM 476 from 2009. The debentures will be paid at 115% of CDI rate, with monthly amortization in 12 consecutive installments, maturing as of August 04, 2014 with possibility of anticipated maturity and redemption. The funds obtained from the issuance will be exclusively utilized by the Company to the payment of its shareholders, of the amount of the decrease on capital.

 

c)       On July 16, 2014, it was concluded the process of decrease of Smiles’ capital dring the Extraordinary Shareholder’s Meeting in the amount of R$1,000,000,without reducing the number of shares, with the consequent amendment of the 5th Article of the Bylaws. The restitution to its shareholders will occur upon: (i) delivery of its own resources arising from the Company's cash; and (ii) debt contract with financial institutions, in the amount of R$600,000.

 

d)      On July 29, 2014, the Company closed the offer for the acquisition by Gol Luxco any and all of its outstanding Senior Notes due 2023 and interest rates of 10.750% (“Senior Notes 2023”), and the offer for the acquisition by Gol Finance any and all Senior Notes due 2017 and interest rates of 7.50% (“Senior Notes 2017”). The company was informed that, until the closing date, the amount of US$98,909 from the Senior Notes 2023, or around 54.95% of the Senior Notes 2023, and the amount of US$88,162 from the Senior Notes 2017, or around 41.98% from the Senior Notes 2017, were duly offered for the acquisition according to the offer for the acquisition.

 

e)       On August 12, 2014, it was approved during the Management General Meeting, the Company’s capital increase by issuance of 4,248,286 preferred shares, of which 4,246,620 preferred shares proceeding from AirFrance-KLM’s investment on the Company in the amount of R$116,357.

 

f)      On August 12, 2014, it was approved the issue of 653,130 stock options and 804,073 restricted shares to grant to the beneficiaries of the Stock Options Plan and the Restricted Shares Plan of the Company, both issues related to the year 2014.

 

 

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SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: August 13, 2014
 
GOL LINHAS AÉREAS INTELIGENTES S.A.
By:

/S/ Edmar Prado Lopes Neto


 
Name: Edmar Prado Lopes Neto
Title:   Investor Relations Officer
 

 

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will a ctually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.