golitr3q12_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 November, 2012
(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):

 

ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1
                                                                                  

 

 

(Convenience Translation into English from the
Original Previously Issued in Portuguese)


Gol Linhas Aéreas
Inteligentes S.A.

Individual and Consolidated Interim

Financial Information for the

Quarter Ended September 30, 2012 and

Report on Review of

Interim Financial Information

 

 

Deloitte Touche Tohmatsu Auditores Independentes

 

 

 

 

 

 

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

 
 
Index    
Company data     
Capital    01 
Individual Financial Statements     
Balance Sheet - Assets    02 
Balance Sheet - Liabilities    03 
Income Statement    04 
Statements of Comprehensive Income    05 
Statements of Cash Flows    06 
Statement of Changes in Equity     
Statement of Changes in Equity – 01/01/2012 to 09/30/2012    07 
Statement of Changes in Equity – 01/01/2011 to 09/30/2011    08 
Statement of Value Added    09 
Consolidated Financial Statements     
Balance Sheet - Assets    10 
Balance sheet - Liability    11 
Income Statement    12 
Statement of Comprehensive Income    13 
Statements of Cash Flows    14 
Statement of Changes in Equity     
Statement of Changes in Equity – 01/01/2012 to 09/30/2012    16 
Statement of Changes in Equity – 01/01/2011 to 09/30/2011    17 
Statement of Value Added    18 
Comments on performance    19 
Notes    25 
Opinions and Statements     
Report on Review of Interim Financial Information    70 

 

 

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Company Profile / Subscribed Capital

 

Number of Shares

Current Quarter

 

 

 

 

(Thousands)

09/30/2012 

 

 

 

 

Paid-in Capital

143,858,204

 

 

 

 

Preferred

134,858,582

 

 

 

 

Total

278,716,786

 

 

 

 

Treasury

3,724,225

 

 

 

 

Total

3,724,225

 

 

 

 

 

 

 

 

 

  Page 1 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Balance Sheets – Assets

(In Thousands of Brazilian Reais)

Line code

Line item

Current Quarter 09/30/2012

Prior Year 12/31/2011

1

Total Assets

3,094,291

3,873,498

1.01

Current Assets

341,973

342,387

1.01.01

Cash and Cash Equivalents

114,869

232,385

1.01.02

Short-term Investments

181,220

69,885

1.01.06

Recoverable Taxes

44,238

39,981

1.01.07

Prepaid Expenses

463

136

1.01.08

Other Current Assets

1,183

-

1.01.08.01

Non-Current Assets for Sale

1,183

-

1.01.08.01.01

Restricted Cash

1,183

-

1.02

Noncurrent Assets

2,752,318

3,531,111

1.02.01

Long-term Assets

587,199

651,019

1.02.01.06

Deferred Taxes

43,389

45,137

1.02.01.08

Related-party Transactions

526,782

593,817

1.02.01.08.04

Others Related-party Transactions

526,782

593,817

1.02.01.09

Other Noncurrent Assets

17,028

12,065

1.02.01.09.03

Deposits

16,998

12,065

1.02.01.09.04

Restricted Cash

30

-

1.02.02

Investments

1,238,984

2,103,325

1.02.03

Property, Plant and Equipment

926,113

776,678

1.02.04

Intangible Assets

22

89

 

 

 

  Page 2 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Balance Sheets - Liabilities

(In Thousands of Brazilian Reais)

Line code

Line item

Current Quarter 09/30/2012

Prior Year 12/31/2011

2

Total Liabilities and Equity

3,094,291

3,873,498

2.01

Current Liabilities

45,260

89,670

2.01.01

Salaries, Wages and Benefits

299

25

2.01.01.02

Salaries, Wages and Benefits

299

25

2.01.02

Accounts Payable

739

6,353

2.01.03

Taxes Payable

6,049

3,233

2.01.04

Short-term Debt

37,356

79,475

2.01.05

Other Liabilities

817

584

2.01.05.02

Other

817

584

2.01.05.02.04

Other Liabilities

233

-

2.01.05.02.05

Dividends Payable

584

584

2.02

Noncurrent Liabilities

1,873,548

1,577,917

2.02.01

Long-term Debt

1,460,064

1,347,300

2.02.02

Other Liabilities

413,484

230,617

2.02.02.01

Liabilities with Related-party Transactions

406,232

222,725  

2.02.02.02

Other

7,252

7,892

2.02.02.02.03

Taxes Payable

7,252

7,892

2.03

Shareholder’s Equity

1,175,483

2,205,911

2.03.01

Capital

2,467,738

2,284,549

2.03.01.01

Issued Capital

2,499,689

2,316,500

2.03.01.02

Cost on Issued Shares

(31,951)

(31,951)

2.03.02

Capital Reserves

88,461

260,098

2.03.02.01

Premium on Issue of Shares

31,076

31,076  

2.03.02.02

Special Reserve Goodwill

29,187

29,187

2.03.02.05

Treasury Shares

(51,377)

(51,377)

2.03.02.06

Advance for Future Capital Increase

-

182,610  

2.03.02.07

Share-based Payments

79,575

68,602

2.03.05

Accumulated Losses

(1,325,301)

(259,468)

2.03.06

Valuation Adjustments Equity

(55,415)

(79,268)

 

 

  Page 3 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements /Income Statement

(In Thousands of Brazilian Reais)

 

 

Current Quarter

Current YTD

Same Quarter Prior Year

Prior Year YTD

Line code

Line item

07/01/2012 to 09/30/2012

01/01/2012 to 09/30/2012

07/01/2011 to 09/30/2011

01/01/2011 to 09/30/2011

3.04

Operating Expenses/Income

(285,637)

(890,644)

(332,729)

(624,693)

3.04.02

General and administrative expenses

(4,595)

(15,205)

(7,512)

(29,571)

3.04.04

Other operating income

4,655

11,398

-

7,356

3.04.06

Equity in subsidiaries

(285,697)

(886,837)

(325,217)

(602,478)

3.05

Profit Before Income Taxes and Financial Income/Expenses

(285,637)

(890,644)

(332,729)

(624,693)

3.06

Finance Income/Expenses

(23,417)

(169,148)

(180,329)

(177,672)

3.06.01

Financial income

5,355

36,524

6,918

22,086

3.06.02

Financial expenses

(28,772)

(205,672)

(187,247)

(199,758)

3.06.02.02

Exchange Variation (net)

(16)

(99,461)

(156,120)

(110,796)

3.06.02.05

Financial expenses

(28,756)

(106,211)

(31,127)

(88,962)

3.07

Profit Before Income Taxes

(309,054)

(1,059,792)

(513,058)

(802,365)

3.08

Income Tax (Expenses) and Social Contribution

(298)

(6,041)

(3,442)

(3,442)

3.08.01

Current

(277)

(4,293)

(2,404)

(2,404)

3.08.02

Deferred

(21)

(1,748)

(1,038)

(1,038)

3.09

Profit/ from Continuing Operations

(309,352)

(1,065,833)

(516,500)

(805,807)

3.11

Profit/ Loss for the Period

(309,352)

(1,065,833)

(516,500)

(805,807)

 

 

 

 

  Page 4 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Statements of Comprehensive Income

(In Thousands of Brazilian Reais)

 

 

Current Quarter

Current YTD

Same Quarter Prior Year

Prior Year YTD

Line code

Line item

07/01/2012 to 09/30/2012

01/01/2012 to 09/30/2012

07/01/2011 to 09/30/2011

01/01/2011 to 09/30/2011

4.01

Net Profit (Loss) for the Period

(309,352)

(1,065,833)

(516,500)

(805,807)

4.02

Other Comprehensive Income

(5,366)

23,853

(73,032)

(86,547)

4.02.01

Available for sale financial assets

-

-

-

(487)

4.02.02

Cash Flow Hedges

(8,129)

36,141

(110,654)

(130,394)

4.02.03

Tax effect

2,763

(12,288)

37,622

44,334

4.03

Comprehensive loss for the period

(314,718)

(1,041,980)

(589,532)

(892,354)

 

 

 

 

 

 

 

 

 

 

  Page 5 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Statements of Cash Flows – Indirect Method

In Thousands of Brazilian Reais)

   

Current YTD

Prior Year YTD

Line code

Line item

01/01/2012 to 09/30/2012

01/01/2011 to 09/30/2011

6.01

Net Cash Used in Operating Activities

(223,688)

(61,453)

6.01.01

Cash Flows from Operating Activities

934,653

741,197

6.01.01.01

Depreciation and Amortization

67

67

6.01.01.02

Deferred Taxes

1,748

1,038

6.01.01.03

Equity in subsidiaries

886,837

602,478

6.01.01.04

Shared-based Payments

10,973

19,999

6.01.01.05

Exchange and Monetary Variations, Net

77,790

135,533

6.01.01.06

Interest on Loans, Net

79,607

81,389

6.01.01.08

Interest Paid

(92,447)

(95,380)

6.01.01.09

Income Tax Paid

(4,293)

(3,440)

6.01.01.10

Unrealized Hedge income, Net of taxes

-

(487)

6.01.01.12

Provision

(25,629)

-

6.01.02

Changes in Assets and Liabilities

(92,508)

3,157

6.01.02.01

Deposits

(4,933)

(6,046)

6.01.02.02

Recoverable Taxes

(290)

1,870

6.01.02.04

Tax Obligation

2,176

3,958

6.01.02.07

Others Liabilities

1,859

1,967

6.01.02.08

Accounts Payable

(5,614)

( 1,187)

6.01.02.11

Others Assets

-

2,595

6.01.02.12

Investments used for trading

(85,706)

-

6.01.03

Other

(1,065,833)

(805,807)

6.01.03.01

Net Income (loss) for the Period

(1,065,833)

(805,807)

6.02

Net Cash Used in Investing Activities

(150,648)

(102,277)

6.02.01

Short-term Investments

-

(5,158)

6.02.02

Restricted Cash

(1,213)

(10,000)

6.02.04

Property, Plant and Equipment

(149,435)

(87,119)

6.03

Net Cash Generated by Financing Activities

256,820

59,915

6.03.03

Credit with related parties

299,318

110,551

6.03.04

Capital increase

579

807

6.03.05

Dividends

-

(51,443)

6.03.06

Payment of loans and leases

(43,077)

-

6.05

Net Decrease in Cash and Cash Equivalents

(117,516)

(103,815)

6.05.01

Cash and Cash Equivalents at Beginning of the Period

232,385

229,436

6.05.02

Cash and Cash Equivalents at End of the Period

114,869

125,621

 

 

  Page 6 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Statements of Changes in Equity – From 01/01/2012 to 09/30/2012

(In Thousands of Brazilian Reais)

               

Line code

Line item

Capital Stock

Capital reserves, options granted and treasury shares

Income reserves

Accumulated losses

Other comprehensive income

Total consolidated equity

5.01

Opening Balance

2,284,549

260,098

-

(259,468)

(79,268)

2,205,911

5.03

Adjusted Balance

2,284,549

260,098

-

(259,468)

(79,268)

2,205,911

5.04

Shareholders Capital Transactions

183,189

(171,637)

-

-

-

11,552

5.04.08

Share- based payments

-

10,973

-

-

-

10,973

5.04.10

Subscription of Capital on August 13, 2012

183,189

(183,189)

-

-

-

-

5.04.11

Increase in advances for future capital

-

579

-

-

-

579

5.05

Total Comprehensive Income (loss)

-

-

-

(1,065,833)

23,853

(1,041,980)

5.05.01

Accumulated Losses

-

-

-

(1,065,833)

23,853

(1,041,980)

5.07

Closing Balance

2,467,738

88,461

-

(1,325,301)

(55,415)

1,175,483

 

 

  Page 7 of   71

 


 
1
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Statement of Changes in  Equity – From 01/01/2011 to 09/30/2011

(In Thousands of Brazilian Reais)

Line code

Line item

Capital Stock

Capital reserves, options granted and treasury shares

Income reserves

Accumulated losses

Other comprehensive income

Total consolidated equity

5.01

Opening Balance

2,296,461

92,103

529,532

-

11,073

2,929,169

5.02

Prior year adjustments

-

-

-

(37,462)

-

(37,462)

5.03

Adjusted Balance

2,296,461

92,103

529,532

(37,462)

11,073

2,891,707

5.04

Shareholders Capital Transactions

807

(2,789)

-

-

-

(1,982)

5.04.01

Capital increase

807

-

-

-

-

807

5.04.08

Share-base payments

-

19,999

-

-

-

19,999

5.04.09

Share Buyback

-

(22,788)

-

-

-

(22,788)

5.05

Other Comprehensive Income

-

-

-

(805,807)

(86,547)

(892,354)

5.05.01

Loss for the period

-

-

-

(805,807)

-

(805,807)

5.05.02

Other Comprehensive Income

-

-

-

-

(86,547)

(86,547)

5.07

Closing Balance

2,297,268

89,314

529,532

(843,269)

(75,474)

1,997,371

 

  Page 8 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Individual Interim Financial Statements / Statements of Value Added

(In Thousands of Brazilian Reais)

 

 

Current YTD

Prior Year YTD

Line Code

Line Item

01/01/2012 to 09/30/2012

01/01/2011 to 09/30/2011

7.01

Revenues

11,398

7,356

7.01.02

Other Income

11,398

7,356

7.02

Acquired from Third Parties

(1,585)

(6,862)

7.02.02

Materials, Energy, Third Parties Services and Other

(1,585)

(6,862)

7.03

Gross Value Added

9,813

494

7.04

Retentions

(67)

(67)

7.04.01

Depreciation, Amortization and Exhaustion

(67)

(67)

7.05

Added Value Produced

9,746

427

7.06

Value Added Received in Transfer

(850,313)

(580,392)

7.06.01

Equity equivalence result

(886,837)

(602,478)

7.06.02

Finance income

36,524

22,086

7.07

Total Added Value for Distribution (Distributed)

(840,567)

(579,965)

7.08

Added Value for Distribution (Distributed)

(840,567)

(579,965)

7.08.01

Employees

12,160

21,086

7.08.02

Taxes and Contributions

7,434

4,998

7.08.03

Third Party Capital Remuneration

205,672

199,758

7.08.03.03

Other

205,672

199,758

7.08.03.03.02

Financiers

205,672

199,758

7.08.04

Shareholders’s return

(1,065,833)

(805,807)

7.08.04.03

Retained Earnings / Loss for the Period

(1,065,833)

(805,807)

 

  Page 9 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated Interim Financial Statements / Balance Sheets – Assets

(In Thousands of Brazilian Reais)

Line code

Line item

Current Quarter
09/30/2012

Prior Year

12/31/2011

1

Total Assets

9,404,671

9,891,435

1.01

Current Assets

2,595,953

3,138,303

1.01.01

Cash and Cash Equivalents

1,050,557

1,230,287

1.01.02

Short-term Investments

662,227

1,009,068

1.01.03

Trade Receivables

380,978

354,134

1.01.04

Inventories

152,598

151,023

1.01.06

Recoverable Taxes

151,043

212,998

1.01.07

Prepaid Expenses

60,311

93,797

1.01.08

Other Current Assets

138,239

86,996

1.01.08.03

Others

138,239

86,996

1.01.08.03.01

Restricted Cash

63,137

8,554

1.01.08.03.02

Deposits

23,928

35,082

1.01.08.03.03

Other Credits

27,318

39,147

1.01.08.03.04

Rights of derivative transactions

23,856

4,213

1.02

Noncurrent Assets

6,808,718

6,753,132

1.02.01

Long-term Assets

1,093,455

1,078,705

1.02.01.06

Deferred Taxes

349,649

323,284

1.02.01.07

Prepaid Expenses

37,853

44,964

1.02.01.09

Other Noncurrent Assets

705,953

710,457

1.02.01.09.01

Other Noncurrent Assets

2,818

14,399

1.02.01.09.03

Restricted Cash

103,305

100,541

1.02.01.09.04

Deposits

599,830

595,517

1.02.03

Property, Plant and Equipment

3,950,176

3,890,470

1.02.03.01

Property, Plant and Equipment

1,684,312

1,513,236

1.02.03.01.01

Other Flight Equipment

984,382

955,306

1.02.03.01.02

Advance of Property, Plant and Equipment Acquisition

513,556

365,067

1.02.03.01.04

Others

186,374

192,863

1.02.03.02

Leased Property, Plant and Equipment

2,265,864

2,377,234

1.02.03.02.01

Leased Property, Plant and Equipment

2,265,864

2,377,234

1.02.04

Intangible Assets

1,765,087

1,783,957

1.02.04.01

Intangible Assets.

1,222,785

1,241,655

1.02.04.02

Goodwill

542,302

542,302

       

 

 

  Page 10 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated Interim Financial Statements / Balance Sheets - Liabilities

(In Thousands of Brazilian Reais)

(Reais Mil)

 

 

Line code

Line item

Current Quarter
09/30/2012

Prior Year

12/31/2011

2

Total Liabilities and Equity

9,404,671

9,891,435  

2.01

Current Liabilities

2,896,062

3,595,665

2.01.01

Salaries, Wages and Benefits

261,944

250,030

2.01.02

Accounts Payable

501,427

414,563

2.01.03

Taxes Payable

64,871

76,736

2.01.04

Short-term Debt

614,967

1,552,440

2.01.05

Other Liabilities

1,390,557

1,226,328

2.01.05.02

Others

1,390,557

1,226,328

2.01.05.02.01

Dividends Payable

584

584

2.01.05.02.04

Tax and landing fees

271,656

190,029

2.01.05.02.05

Advance Ticket Sales

856,457

744,743

2.01.05.02.06

Millage Program

110,958

71,935

2.01.05.02.07

Advances from Customers

5,479

30,252

2.01.05.02.08

Other Liabilities

76,520

73,353

2.01.05.02.09

Liabilities from derivative transactions

68,903

115,432

2.01.06

Provisions

62,296

75,568

2.02

Noncurrent Liabilities

5,333,126

4,089,859

2.02.01

Short-term Debt

4,644,482

3,439,008

2.02.02

Other Liabilities

435,806

419,669

2.02.02.02

Others

435,806

419,669

2.02.02.02.03

Smiles Deferred Revenue

331,658

214,779

2.02.02.02.05

Taxes Payable

40,287

112,935

2.02.02.02.06

Other Liabilities

63,861

91,955

2.02.04

Provisions

252,838

231,182

2.03

Consolidated Equity

1,175,483

2,205,911

2.03.01

Capital

2,354,410

2,171,221

2.03.01.01

Issued Capital

2,499,689

2,316,500

2.03.01.02

Cost on Issued Shares

(145,279)

(145,279)

2.03.02

Capital Reserves

88,461

260,098

2.03.02.01

Premium on Issue of Shares

31,076

31,076

2.03.02.02

Special Reserve Goodwill

29,187

29,187

2.03.02.05

Treasury Shares

(51,377)

(51,377)

2.03.02.06

Advance for Future Capital Increase

-

182,610

2.03.02.07

Share-based Payments

79,575

68,602

2.03.05

Accumulated Losses

(1,211,973)

(146,140)

2.03.06

Other Comprehensive Income

(55,415)

(79,268)

       

 

  Page 11 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated Interim Financial Statements /Income Statement

(In Thousands of Brazilian Reais)

 

 

Current Quarter

Current YTD

Same Quarter Prior Year

Prior Year YTD

Line code

Line item

07/01/2012 to 09/30/2012

01/01/2012 to 09/30/2012

07/01/2012 to 09/30/2011

01/01/2011 to 09/30/2011

3.01

Sales and services revenue

1,987,338

5,984,064

1,843,698

5,305,760

3.01.01

Passenger

1,760,050

5,286,304

1,632,572

4,715,005

3.01.02

Cargo and Other

227,288

697,760

211,126

590,755

3.02

Cost of Sales and Services

(1,923,583)

(5,765,699)

(1,614,525)

(4,662,384)

3.03

Gross profit

63,755

218,365

229,173

643,376

3.04

Operating Expenses/Income

(264,411)

(766,405)

(304,232)

(853,980)

3.04.01

Selling expenses

(155,844)

(455,182)

(166,971)

(469,361)

3.04.01.01

Marketing expenses

(155,844)

(455,182)

(166,971)

(469,361)

3.04.02

General and Administrative expenses

(113,222)

(322,621)

(137,261)

(391,975)

3.04.04

Other Operating Income

4,655

11,398

-

7,356

3.05

Income Before Income Taxes and Financial Income/Expenses

(200,656)

(548,040)

(75,059)

(210,604)

3.06

Financial Income/Expenses

(77,716)

(551,255)

(572,821)

(685,652)

3.06.01

Financial income

89,084

301,067

132,538

327,371

3.06.02

Financial expenses

(166,800)

(852,322)

(705,359)

(1,013,023)

3.06.02.04

Exchange variation, net

(6,301)

(266,442)

(476,403)

(379,607)

3.06.02.05

Financial expenses

(160,499)

(585,880)

(228,956)

(633,416)

3.07

Income Before Income Taxes

(278,372)

(1,099,295)

(647,880)

(896,256)

3.08

Income Tax (Expenses)

(30,980)

33,462

131,380

90,449

3.08.01

Current

(597)

(5,192)

(2,581)

(22,186)

3.08.02

Deferred

(30,383)

38,654

133,961

112,635

3.09

Loss from Continuing Operations

(309,352)

(1,065,833)

(516,500)

(805,807)

3.11

Loss for the Period

(309,352)

(1,065,833)

(516,500)

(805,807)

3.11.01

Attributable to Shareholders of the Parent Company

(309,352)

(1,065,833)

(516,500)

(805,807)

 

  Page 12 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated Interim Statements of Comprehensive Income

(In Thousands of Brazilian Reais)

 

 

Current Quarter

Current YTD

Same

Quarter Prior

Year

Prior Year

YTD

Line code

Line item

07/01/2012 to
09/30/2012

01/01/2012 to
09/30/2012

07/01/2011 to
09/30/2011

01/01/2011 to
09/30/2011

4.01

Net Consolidated Profit (Loss) for the Period

(309,352)

(1,065,833)

(516,500)

(805,807)

4.02

Other Comprehensive Income

(5,366)

23,853

(73,032)

(86,547)

4.02.01

Available for sale financial assets

-

-

-

(487)

4.02.02

Cash Flow Hedges

(8,129)

36,141

(110,654)

(130,394)

4.02.03

Tax effect

2,763

(12,288)

37,622

44,334

4.03

Consolidated Comprehensive Income for the period

(314,718)

(1,041,980)

(589,532)

(892,354)

4.03.01

Attributable to Shareholders of the Parent Company

(314,718)

(1,041,980)

(589,532)

(892,354)

           


 

  Page 13 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated  Interim Financial Statements / Statements of Cash Flows – Indirect Method

(In Thousands of Brazilian Reais)

   

Current YTD

Prior Year YTD

Line code

Line item

01/01/2012 to 09/30/2012

01/01/2011 to 09/30/2011

6.01

Net Cash Provided by (used in) Operating Activities

315,903

216,768

6.01.01

Cash Flows from Operating Activities

1,023,004

1,061,331

6.01.01.01

Depreciation and Amortization

372,159

271,487

6.01.01.02

Allowance for Doubtful Accounts

4,029

6,939

6.01.01.03

Provisions for contingencies

10,792

4,224

6.01.01.04

Provisions for Onerous Contracts

-

15,274

6.01.01.05

Reversion of provision for Inventory Obsolescence

(364)

130

6.01.01.06

Deferred Taxes

(38,654)

(112,635)

6.01.01.07

Shared-based Payments

10,973

19,999

6.01.01.08

Exchange and Monetary Variations, Net

290,526

379,607

6.01.01.09

Interest on loans and other, net

181,111

285,336

6.01.01.10

Unrealized Hedge income, Net of taxes

13,658

80,427

6.01.01.11

Provision for Return of Aircraft

-

30,022

6.01.01.14

Mileage Program

155,902

32,173

6.01.01.15

Write-of property, plant equipment and intangible assets

55,606

5,919

6.01.01.16

Provision for profit sharing plan

-

42,429

6.01.01.17

Provisions

(25,629)

-

6.01.01.18

Impairment losses

(7,105)

-

6.01.02

Changes in Assets and Liabilities

358,732

(38,756)

6.01.02.01

Accounts receivable

(30,873)

(30,519)

6.01.02.02

Inventories

(1,211)

23,500

6.01.02.03

Deposits

40,776

13,762

6.01.02.04

Prepaid Expenses and Recovery Taxes

102,552

15,272

6.01.02.05

Other Assets

3,770

72,636

6.01.02.06

Accounts Payable

86,865

5,209

6.01.02.07

Advance Ticket Sales

111,714

130,214

6.01.02.08

Advances from customers

(24,773)

(38,424)

6.01.02.09

Salaries, Wages and Benefits

11,914

26,306

6.01.02.10

Sales Tax and Landing Fees

81,628

43,457

6.01.02.11

Taxes Payable

(79,320)

43,504

6.01.02.12

Provision

2,554

(82,402)

6.01.02.14

Interest Paid

(248,079)

(167,766)

6.01.02.15

Income Tax Paid

(5,192)

(22,913)

6.01.02.16

Provision for Profit Sharing

-

(56,727)

6.01.02.17

Insurance

(15,975)

-

6.01.02.18

Other Liabilities

(26,041)

12,452

6.01.02.19

Derivatives Obligations

(24,046)

(26,317)

6.01.02.20

Investments used for trading

372,469

-

6.01.03

Others

(1,065,833)

(805,807)

6.01.03.01

Profit (Loss) for the Period

(1,065,833)

(805,807)

6.02

Net Cash Used in Investing Activities

(518.843)

(1,012,235)

6.02.01

Short term Investments

-

(695,413)

6.02.02

Restricted Cash

(57,347)

(132,237)

6.02.04

Increase in Intangible

(16,540)

(23,211)

 

  Page 14 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated  Interim Financial Statements / Statements of Cash Flows – Indirect Method

(In Thousands of Brazilian Reais)

6.02.05

Payment of Property

(444,956)

(161,374)

6.03

Net Cash Generated by Financing Activities

24,561

143,793

6.03.02

Debt Increase

304,663

559,349

6.03.03

Payments of Debts

(280,681)

(209,602)

6.03.04

Capital increase

579

807

6.03.05

Dividends

-

(51,443)

6.03.06

Financial Lease Payments Increase

-

(155,318)

6.04

Exchange Variation on Cash and Cash Equivalents

(1,351)

(1,511)

6.05

Net Decrease in Cash and Cash Equivalents

(179,730)

(653,185)

6.05.01

Opening balance of cash and cash equivalents

1,230,287

1,955,858

6.05.02

Closing balance of cash and cash equivalents

1,050,557

1,302,673

 

  Page 15 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

Consolidated  Interim Financial Statements / Statements of Changes in Equity – From 01/01/2012 to 09/30/2012

(In Thousands of Brazilian Reais)

Line code

Line item

Capital stock

Capital reserves, options granted and treasury shares

Income reserves

Accumulated losses

Other comprehensive income

Equity

Total non-controllers participation

Consolidated equity

5.01

Opening Balance

2,171,221

260,098

-

(146,140)

(79,268)

2,205,911

-

2,205,911

5.03

Adjusted Balance

2,171,221

260,098

-

(146,140)

(79,268)

2,205,911

-

2,205,911

5.04

Shareholders Capital Transactions

183,189

(182,610)

-

-

-

579

 

579

5.04.10

Subscription of Capital on August 13, 2012

183,189

(183,189)

-

-

-

-

-

-

5.04.11

Increase in advances for future capital

-

579

-

-

-

579

-

579

5.05

Total Comprehensive Income

-

10,973

-

(1,065,833)

23,853

(1,031.007)

-

(1,031,007)

5.05.01

Net Income for the Period

-

-

-

(1,065,833)

-

(1,065,833)

-

(1,065,833)

5.05.02

Other Comprehensive Income, net

-

10,973

-

-

23,853

34,826

-

34,826

5.05.02.06

Share – based payments

-

10,973

-

-

-

10,973

-

10,973

5.05.02.07

Other net Comprehensive income

-

-

-

-

23,853

23,853

-

23,853

5.07

Closing Balance

2,354,410

88,461

-

(1,211,973)

(55,415)

1,175,483

-

1,175,483

 

 

 

 

 

 

  Page 16 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

 

Consolidated  Interim Financial Statements / Statement of Changes in  Equity – From 01/01/2011 to 09/30/2011

(In Thousands of Brazilian Reais)

Line code

Line item

Capital stock

Capital reserves, options granted and treasury shares

Income reserves

Accumulated losses

Other comprehensive income

Equity

Total non-controllers participation

Consolidated equity

5.01

Opening Balance

2,183,133

92,103

642,860

-

11,073

2,929,169

-

2,929,169

5.02

Prior year adjustments

-

-

-

(37,462)

-

(37,462)

-

(37,462)

5.03

Adjusted Balance

2,183,133

92,103

642,860

(37,462)

11,073

2,891,707

-

2,891,707

5.04

Shareholders Capital Transactions

807

(2,789)

-

-

-

(1,982)

-

(1,982)

5.04.01

Increase in advances for future capital

807

-

-

-

-

807

-

807

5.04.08

Share – based payments

-

19,999

-

-

-

19,999

-

19,999

5.04.09

Shares Buyback

-

(22,788)

-

-

-

(22,788)

-

(22,788)

5.05

Total Comprehensive Income

-

-

-

(805,807)

(86,547)

(892,354)

-

(892,354)

5.05.01

Net Profit for the Period

-

-

-

(805,807)

-

(805,807)

-

(805,807)

5.05.02

Other Comprehensive Income, net

-

-

-

-

(86,547)

(86,547)

-

(86,547)

5.07

Closing Balance

2,183,940

89,314

642,860

(843,269)

(75,474)

1,997,371

-

1,997,371

 

 

 

 

  Page 17 of   71

 


 
ITR - Quarter Information – 09/30/2012 – GOL LINHAS AÉREAS INTELIGENTES SA Version: 1

 

 

Consolidated Interim Financial Statements / Statements of Value Added

(In Thousands of Brazilian Reais)

Line code

Line item

Current YTD 01/01/2012 to 09/30/2012

Prior Year YTD 01/01/2011 to 09/30/2011

7.01

Revenues

6,292,933

5,555,014

7.01.02

Other Income

6,296,962

5,561,953

7.01.02.01

Transportation of Passengers, Cargo and Other

6,285,564

5,554,597

7.01.02.02

Other Operating Income

11,398

7,356

7.01.04

Allowance for doubtful accounts

(4,029)

(6,939)

7.02

Acquired from Third Parties

(4,378,700)

(3,599,332)

7.02.02

Materials, Energy, Third Parties Services and Other

(1,196,289)

(1,112,163)

7.02.04

Other

(3,182,411)

(2,487,169)

7.02.04.01

Fuel and lubrificants Suppliers

(2,859,184)

(2,175,393)

7.02.04.02

Aircraft Insurance

(21,507)

(25,555)

7.02.04.03

Sales and Marketing

(301,720)

(286,221)

7.03

Gross Value Added

1,914,233

1,955,682

7.04

Retentions

(372,159)

(271,487)

7.04.01

Depreciation, Amortization and Exhaustion

(372,159)

(271,487)

7.05

Net Added Value Produced

1,542,074

1,684,195

7.06

Value Added Received in Transfer

301,067

327,371

7.06.02

Finance income

301,067

327,371

7.07

Total Added Value for Distribution (Distributed)

1,843,141

2,011,566

7.08

Added value for Distribution (Distributed)

1,843,141

2,011,566

7.08.01

Employees

981,660

909,731

7.08.02

Taxes and Contributions

597,391

545,222

7.08.03

Third Party Capital Remuneration

1,329,923

1,362,420

7.08.03.03

Other

1,329,923

1,362,420

7.08.03.03.01

Financiers

852,322

1,013,023

7.08.03.03.02

Tenants

477,601

349,397

7.08.04

Shareholder’s return

(1,065,833)

(805,807)

7.08.04.03

 

Retained Earnings / Loss for the Period

 

(1,065,833)

 

(805,807)

 

   

  Page 18 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

São Paulo, November 13, 2012 – GOL Linhas Aéreas Inteligentes S.A.,“GLAI”, (BM&FBovespa: GOLL4 and NYSE: GOL), (S&P: B, Fitch: B+, Moody´s: B3), the largest low-cost and low-fare airline in Latin America, announces today its results for the third quarter of 2012 (3Q12). All the information herein is presented in accordance with International Financial Reporting Standards (IFRS) and in Brazilian Reais (R$), and all comparisons are with the third quarter of 2011 and second quarter of 2012 (3Q11 and 2Q12). The results for the quarter include 100% of Webjet’s, since october 3, 2011.

 

MESSAGE FROM MANAGEMENT

 

        During the quarter, GOL posted a consolidated operating loss (EBIT) of R$200 million and a net loss of R$309 million due to a combination of factors, including an increase of 20% in fuel over the previous year, a new exchange rate level, increase in airport fees and slow pace of Brazilian economic growth. This scenario reflects a challenging moment for the domestic aviation industry.

 

In response to this scenario, GOL has strengthened its strategy of adjusting domestic capacity in order to maximize load factor. Searching for more efficiency, GOL's route network has been centralized on profitable routes, while the workforce is still being reviewed by the Company. The impact of these measures will be gradual. In 3Q12, the strategy to adjust capacity continued to present results and load factor increased by 2.4 percentage points year over year.  Also, was an increase of 3.4% in passenger revenue per available seat kilometer (PRASK). These figures underline GOL's efforts to adjust its operation to the current macroeconomic scenario.

 

Even with this challenging scenario, GOL maintained a Cash Position of R$1.9 billion (22.9% of LTM Net Revenues) and without pressure for refinancing on the short term.

 

Another important move was CADE’s approval for Webjet’s acquisition by VRG in October, as already expected by the Company. This decision will allow GOL to keep searching for addional operational efficiencies between the Companies throughout this challenging scenario for the airline industry. After the approval, sales of both companies have been incorporated in GOL's website. Both companies continue to seek for other measures of operational integration.

 

The period was also marked by some important initiatives to strengthen the national aviation industry in the short and long term. In the short term, the government approved an incentive measure for the sector by reducing the airlines’ taxes on their payroll, GOL’s second highest expense after fuel. The country’s leading airlines created the Brazilian Airline Association (ABEAR) to discuss questions of common interest with the government and the regulatory agencies, an initiative that has been adopted by many important sectors of the Brazilian economy.

 

GOL maintained its focus on the creation and development of an independent Smiles business unit, aiming to improve its management and explore an increasingly attractive market with enormous growth potential in the coming years. Several initiatives were implemented to strengthen the program, including flights to the United States exclusively for Smiles clients and the creation of Smiles Shopping, both of which were designed to add even more value to this business model. As a result of this positive experience,  GOL announced the beginning of regular flights fto Orlando, Miami and Santo Domingo.

 

The period also saw some important strategic decisions by the Company. In October, GOL announced an additional purchase order for 60 737 MAX aircraft from Boeing. The new aircraft, which will be delivered as of 2018, will allow GOL to continue offering the most up-to-date equipment to its passengers in South America, while further increasing the cost efficiency of its flights, since the 737 MAXs are even more fuel-efficient than the B737 NGs. GOL will be the first Company in South America, and one of the first in the world, to use the new aircraft.

 

Throughout the quarter, GOL strengthened its focus on the provision of air services. GOL and Webjet’s combined route network achieved a punctuality ratio of around 94% and remote check-in via the web, smartphone and kiosk accounted for around 55% of period boardings (also on the combined network), versus 35% in 3Q11. The on-board sales service (buy on board), which offers passengers more options without the need to increase fares, is already present on 50% of daily flights, around four times more than in the same period last year. The Boeing 737 NG fleet closed the quarter with an average age of 7.4 years, one of the youngest in the global aviation industry. The spirit of service is an integral part of GOL’s DNA. The Company would like to take this opportunity to thank its employees for their unwavering dedication and motivation, attitudes that are making GOL increasingly the best company to fly with, work for and invest in.

 

Paulo Sérgio Kakinoff | CEO of GOL Linhas Aéreas Inteligentes S.A.  

 

  Page 19 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

AVIATION MARKET - INDUSTRY

Domestic aviation industry supply remained virtually flat over 3Q11, edging up by just 0.2%, while demand increased by 7.4%, due to the reduction of flights in GOL’s operational markets, a decision shared by all the key airlines, which was a response to the industry’s new cost level and the sluggish growth of Brazilian GDP. In September, domestic supply fell by 2.1% year over year, after eight consecutive years of growth. The last time supply dropped in September was in 2003.

 

The domestic load factor stood at 76.0%, versus 70.9% in 3Q11 (up by 5.1 p.p.). In the first nine months, domestic supply and demand moved up by 5.5% and 7.3%, respectively, over 9M11, confirming the industry’s trend towards more conservative supply additions and the creation of a more mature sector focused on recovering operating margins.

 

TOTAL SYSTEM - INDUSTRY (billion)

3Q12

3Q11

% Var.

9M12

9M11

% Var.

Supply (ASK)

38.3

38.4

-0.4%

114.7

110.5

3.8%

Demand (RPK)

29.6

28.2

5.0%

84.8

80.4

5.5%

Load Factor

77.3%

73.3%

+4.0 pp

73.9%

72.7%

+1.2 pp

DOMESTIC MARKET

3Q12

3Q11

% Var.

9M12

9M11

% Var.

Supply (ASK)

30.0

29.9

0.2%

90.2

85.4

5.5%

Demand (RPK)

22.8

21.2

7.4%

64.9

60.5

7.3%

Load Factor

76.0%

70.9%

+5.1 pp

72.0%

70.8%

+1.2 pp

INTERNATIONAL MARKET

3Q12

3Q11

% Var.

9M12

9M11

% Var.

Supply (ASK)

8.3

8.5

-2.6%

24.6

25.1

-2.1%

Demand (RPK)

6.8

7.0

-2.5%

19.9

19.9

0.0%

Load Factor

82.0%

81.9%

+0.1 pp

80.9%

79.2%

+1.6 pp

Data from the Brazilian Civil Aviation Agency (Anac); the 3Q11 operating figures were recalculated in accordance with the current DCA Manual.

AVIATION MARKET – PRO-FORMA CONSOLIDATED DATA (GOL + Webjet)

The information below refers to GOL and Webjet’s pro-forma route network, i.e. including Webjet’s traffic data in 3Q11. Pro-forma figures are used to ensure better comparisons of the Company’s route network trends.

TOTAL SYSTEM

GOL+ WEBJET PRO-FORMA (billion)

3Q12

3Q11

% Var.

9M12

9M11

% Var.

Supply (ASK)

13.0

14.0

-7.3%

39.5

40.3

-2.1%

Demand (RPK)

9.6

10.0

-4.6%

27.8

28.4

-2.0%

Load Factor

73.8%

71.7%

+2.0 p.p

70.4%

70.3%

+0.1 p.p

DOMESTIC MARKET

3Q12

3Q11

%Var.

9M12

9M11

%Var.

Supply (ASK)

11.9

13.0

-8.4%

36.3

36.9

-1.6%

Demand (RPK)

8.8

9.4

-5.7%

25.7

26.2

-1.9%

Load Factor

74.3%

72.1%

+2.2 p.p

70.7%

70.9%

-0.2 p.p

INTERNATIONAL MARKET

3Q12

3Q11

%Var.

9M12

9M11

%Var.

Supply (ASK)

1.1

1.0

7.0%

3.2

3.4

-7.4%

Demand (RPK)

0.8

0.7

8.8%

2.1

2.2

-3.5%

Load Factor

68.4%

67.3%

+1.1 p.p

65.8%

63.1%

+2.7 p.p

    

     Data from the Brazilian Civil Aviation Agency (Anac); the 3Q11 operating figures were recalculated in accordance with the current DCA Manual.

 

 

  Page 20 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

DOMESTIC MARKET

 

Supply on GOL’s pro-forma domestic route network fell by 8.4% over 3Q11, chiefly due to the flight rationalization strategy adopted by the Company as of March 2012 as a result of the challenging macroeconomic scenario for the civil aviation sector in Brazil. In line with this strategy, supply (-8.4%) fell more than demand (-5.7%), leading to a 2.2 p.p. increase in the domestic load factor. In 2012, the Company expects its domestic supply to decline by between 2.0% and 4.5% over 2011. In the first nine months of 2012, GOL reduced its domestic supply by 1.6% year over year.

 

GOL’s domestic demand fell by 5.7%, chiefly due to the exceptionally modest recovery of Brazil’s economy in 3Q12, combined with the 8.4% period decline in ASK

 

INTERNATIONAL MARKET

International supply moved up by 7.0% over 3Q11, chiefly due to the restructuring of the international route network, which added new flights from Guarulhos to Montevideo (Uruguay), Asunción (Paraguay) and Santa Cruz de La Sierra (Bolivia). There was also an increase in the number of flights that are not part of the regular route network, including those to Miami and Orlando (USA), offered exclusively to Smiles members.

 

International demand moved up by 8.8%, also mainly due to the same reasons that impacted international supply.

 

DEMAND (RPK) and LOAD FACTOR

As a result of the above, the total load factor climbed by 2.0 p.p. to 73.8% (from 71.1% in 3Q11), the Company’s best figure since 2007.  

 

  Page 21 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

CONSOLIDATED OPERATING INDICATORS (GOL and Webjet)

The indicators below do not include Webjet in 3Q11 and 9M11.

 

Consolidated Operating Indicators

3Q12

3Q11

% Var.

9M12

9M11

% Var.

RPK (in Bn)

9.6

8.9

7.7%

27.8

25.1

10.8%

GOL

8.4

8.9

-5.6%

24.1

25.1

-3.9%

Webjet

1.2

-

na

3.7

-

na

ASK (in Bn)

13.0

12.5

4.2%

39.5

36.0

9.7%

GOL

11.4

12.5

-8.7%

34.6

36.0

-4.0%

Webjet

1.6

-

na

4.9

-

na

Load Factor

73.8%

71.4%

+2.4 p.p

70.4%

69.7%

+0.7 p.p

GOL

73.8%

71.4%

+2.4 p.p

69.7%

69.7%

+0.1 p.p

Webjet

73.2%

-

na

74.8%

-

na

Revenue Passengers (’000)

10,416

9,396

10.9%

29,852

26,215

13.9%

GOL

9,110

9,396

-3.0%

25,857

26,215

-1.4%

Webjet

1,306

-

na

3,995

-

na

Productivity (Block Hour/Day)

12.1

13.8

-12.5%

12.2

13.4

-9.0%

GOL

12.3

13.8

-10.6%

12.5

13.4

-7.0%

Webjet

10.6

-

na

10.8

-

na

Departures

88,109

79,512

10.8%

267,021

229,734

16.2%

GOL

75,674

79,512

-4.8%

228,484

229,734

-0.5%

Webjet

12,435

-

na

38,537

-

na

Stage Length (km)

868

905

-4.2%

874

909

-3.9%

GOL

877

905

-3.1%

884

909

-2.8%

Webjet

810

-

na

818

-

na

Average Operating Aircraft

131

111

18.4%

133

110

20.7%

GOL

111

111

0.0%

112

110

1.5%

Webjet

20

-

na

21

-

na

Fuel Consumption (mm)

417

395

5.8%

1,266

1,135

11.5%

GOL

361

395

-8.4%

1,089

1,135

-4.1%

Webjet

56

-

na

177

-

na

Employee

18,356

18,606

-1.3%

18,356

18,606

-1.3%

GOL

16,704

18,606

-10.2%

16,704

18,606

-10.2%

Webjet

1,652

-

na

1,652

-

na

   3Q11 and 9M11traffic figures were recalculated in accordance with the current DCA Manual.

 

 

FLEET

 

The Company closed the third quarter with a total operational fleet (excluding 3 Boeing 767s) of 127 B737-700 and 800 NG aircraft with an average age of 7.4 years, plus 20 B737-300s, with an average age of 21.0 years. In 3Q12, the Company took delivery of four aircraft under an operational leasing contract and returned four aircraft under operational leasing, including three of Webjet's 737-300s. By the end of the quarter, three B767s were grounded.

 

 

  Page 22 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

The Company leases its fleet through a combination of financial and operational leases. Out of the total of 150 aircraft, 99 were under operational leases, 45 were under financial leases, and six are owned by the Company. GOL has purchase options on 39 of the 45 aircraft when their leasing contracts terminate. In 2012, the Company expects a decline of between 2.0% and 4.5% in the two companies’ combined seat supply over 2011.

 

 

Fleet - End of Period

3Q12

3Q11

Var.

2Q12

Var.

Consolidated Fleet

150

124

26

150

-

737-300

20

-

20

23

(3)

737-700

42

43

(1)

43

(1)

737-800 (2) 

85

78

7

81

4

767-300 (1) 

3

3

-

3

-

           

 

  

(1)   Of three Boeing 767 aircraft in the fleet, two are in the final stage to be transfered to Delta Air Lines and the other is outside the Company's operation. Expenses related to the two Boeing 767-300 aircraft are 100% reimbursed by Delta.

 

(2)   At the end of 3Q12, GOL had three 737-800s subleased  

 

 
   

On September 30, 2012, the Company had 88 firm orders, 10 purchase rights and an additional 40 purchase options with Boeing. The approximate amount of the firm orders, excluding contractual discounts, is R$16.6bn, to be paid in accordance with the following schedule.

 

On October 01, 2012, the Company announced together with Boeing a purchase order of 60 Boeing 737 NG MAX. Considering the new order, the Company will have 158 firm orders for aircraft acquisition of 737 family.

 

Aircraft Payments Forecast (R$MM)

2012

2013

2014

2015

2016

>2016

Total

Pre Delivery Deposits

136.5

606.5

527.6

444.8

91.4

3.6

1,810.4

Aircraft Acquisition Commitments

493.4

3,181.3

4,700.2

4,214.9

3,301.3

706.0

16,597.1

Total

629.9

3,787.8

5,227.8

4,659.7

3,392.7

709.6

18,407.5

* List price of the aircraft

 

In addition to the above-mentioned obligations, the Company will pay R$1.8bn as advances on aircraft acquisitions in the above periods.

 

FUTURE FLEET PLAN

 

The following table shows the Company’s current situation and expectations regarding negotiations with the lessors of Webjet’s Boeing 737-300s and is therefore subject to possible alterations as these negotiations proceed.

 

Consolidated Fleet Plan – End of the Period

2011

2012

2013

2014

Boeing 737-700 NG

43

39

32

32

Boeing 737-800 NG

80

89

103

108

Boeing 737-300

24

9

-

-

Boeing 767 (1) 

3

1

1

-

Total Fleet

150

138

136

140

(1)     Part of the total fleet, but not part of the operational fleet.

 

 

 

 

  Page 23 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

With the replacement of Boeing 737-300s by Boeing 737-800s, the Company will increase its average seating per aircraft, enhancing the flexibility of its operating capacity and improving aircraft efficiency in terms of fuel consumption.

CAPEX

GOL invested around R$126.3mn in 3Q12, 63% of which in the purchase of aircraft parts and in aircraft reconfigurations and improvements, 36% in the acquisition of aircraft for delivery between 2012 and 2014 (pre-delivery deposits), and around 1% in bases, IT and the expansion of the maintenance center in Confins, Minas Gerais (construction of the Wheel and Brake Workshop).  

 

2012 GUIDANCE

Due to the impact of the adverse macroeconomic scenario, GOL may revise its guidance on a quarterly basis 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. The estimates below refer to GOL's and Webjet's consolidated figures. 

                                                                                                                                                                                                                         

2012 Guidance

Previous Scenario

Revised Scenario

Actual 2012

Min.

Max.

Min.

Max.

JAN-SEP

Brazilian GDP Growth

3.0%

4.0%

1.5%

2.5%

N.D

Domestic Demand Growth (%RPK)

7.0%

10.0%

6.0%

9.0%

7.3%

Domestic Load Factor

71%

75%

71%

75%

71%

Passengers Transported (in million)

42

45

41

42

30

GOL Domestic Capacity (ASK billion)

50.2

51.2

48

49

36

RPK, System (in billion)

39

41.5

37

39

28

Departures (000)

363

370.3

354

364

267

CASK ex-fuel (R$ cents)

9.0

9.6

9.0

9.6

9.4

Fuel Liters Consumed (billion)

1.7

1.73

1.6

1.75

1.27

Average Exchange Rate (R$/US$)

1.75

1.8

1.95

2.00

1.92

Operating Margin (EBIT)

4.00%

7.00%

Negative

-9.2%

 

The Company’s quarterly figures reflect substantial and variable seasonality, jeopardizing comparisons with estimates for the entire fiscal year. The Company compares estimated with actual results after disclosing its financial statements for the full year. The results of these annual comparisons are available in Section 11 of the Company’s Reference Form.

.

 

  Page 24 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of 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 Brazilian Corporate Laws, organized on March 12, 2004. The Company is engaged in, controling of its wholly-owned subsidiary VRG Linhas Aéreas S.A. (“VRG”), and through its subsidiaries or affiliates, essentially exploring: (i) regular and non-regular air transportation services of passengers, cargo and mailbags, domestically or internationally, according to the concessions granted by the competent authorities; (ii) complementary activities of air transport service provided in its bylaws.

 

Additionally, GLAI is the direct parent company of the subsidiaries GAC Inc (“GAC”), Gol Finance (“Finance”), and indirect parent company of the subsidiaries SKY Finance II (“SKY II”) and Webjet Linhas Aéreas S.A. ("Webjet").

 

GAC was established on March 23, 2006, according to the laws of the Cayman Islands, and its activities are related to the aircraft acquisition for its single shareholder GLAI, which provides financial support for its operating activities and settlement of obligations. Finance was incorporated on March 16, 2006, in accordance with the laws of the Cayman Islands, and its activity is related to fundraising to finance the acquisition of aircraft.

 

On April 9, 2007, the Company acquired VRG, a low-cost and low-fare airline company, which operates domestic and international flights using GOL and VARIG brands, and provides regular and non-regular air transportation services from/to the main destinations in Brazil, South America and the Caribbean.

 

On February 28, 2011, the subsidiary VRG constituted a Participation Account Company (“SCP BOB”) engaged in developing and operating on-board sales of food and beverages in domestic flights. VRG has  50% participation in the share capital of the company, which started to operate in September, 2011.

 

On August 1, 2011, the subsidiary VRG acquired the entire share capital of Webjet, an airline based in the city of Rio de Janeiro, which provides domestic regular air transportation and nonregular international passenger cargo and mail transportation. The transaction was approved by the ANAC in October 3, 2011.

 

On April 28, 2012, the subsidiary VRG constituted a participation account company ("SCP Trip") in order to develop, produce and explore the "Gol Magazine", distributed free on flights of the Company. The participation of VRG is equivalent to 60% of the SCP.

 

The Company’s shares are traded on the New York Stock Exchange (NYSE) and on the São Paulo Stock Exchange- BOVESPA. The Company has adopted 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.

 

 

  Page 25 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

2.        Approval and summary of significant accounting policies applied in preparing the Interim Financial Information- ITR.

 

The approval and authorization of these Interim Financial Information occurred at the Board of Directors’ meeting held on November 13, 2012. The Company’s registered office is located at Comandante Linneu Gomes Square, entrance 3, building 24, Jardim Aeroporto, Sao Paulo, Brazil.

2.1  Basis of preparation

The consolidated Interim Financial Information- ITR was prepared for the three and/or nine months period ended on September 30, 2012 in accordance with International Accounting Standards (IAS) no. 34, related to consolidated interim financial statements, as issued by the International Accounting Standards Board (IASB) and technical pronouncement CPC 21 – Demonstração Intermediária (Interim Financial Reporting).

 

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

 

The Individual Interim Financial Information - ITR of the parent company was prepared in accordance with the accounting pratices adapted in Brazil, CPC 21 which deals with the Interim Finance Information.

 

The individual interim financial information prepared for statutory purposes, presents the valuation of investments in subsidiaries by the equity method, according to Brazilian legislation. Thus, these individual financial statements are not in accordance with IFRSs, which require the evaluation of these investments in separate financial statements of the parent at fair value or cost.

 

These Interim Financial Information- ITR individual and consolidated do not include all the information and disclosure items required in the individual and consolidated annual financial statements, therefore, they must be read together with the individual and consolidated financial statements for the year ended December 31, 2011, filed on March 26, 2012, which were prepared according to the accounting practices, as described above. There were no changes in accounting practices adopted on December 31, 2011 when compared to those of September 30, 2012. The balances of deferred income tax and social contribution assets and liabilities have been reclassified in September 30, 2012 and December 31, 2011 in order to present the net values by each taxpayer entity under CPC 32 - Income Taxes (IAS 12).

 

The Company has chosen to present these individual and consolidated interim financial information in one single set, side by side, because there is no difference between the individual and consolidated shareholders’ equity and net income (loss).

 

3.    Seasonality

  Page 26 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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

 

4.        Cash and cash equivalents

 

   

Individual

(BRGAAP)

Consolidated

(IFRS and BRGAAP)

   

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

                 

Cash and bank deposits

 

55,610

 

13,406

 

352,892

 

157,452

Cash equivalents

 

59,259

 

218,979

 

697,665

 

1,072,835

   

114,869

 

232,385

 

1,050,557

 

1,230,287

 

As of September 30, 2012, cash equivalents were represented by private bonds (CDBs - Bank Deposit Certificates), Government bonds and fixed-income funds, paid at post fixed rates ranging between 96.8% and 102.8% of the Interbank Deposit Certificate Rate (CDI).

The composition of cash equivalents balance is as follows:

 

   

Individual

(BRGAAP)

Consolidated

(IFRS and BRGAAP)

   

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

                 

Private bonds

 

41,858

 

218,979

 

49,160

 

284,911

Government bonds

 

-

 

-

 

399,535

 

787,605

Investment funds

 

17,401

 

-

 

248,970

 

319

   

59,259

 

218,979

 

697,665

 

1,072,835

 

These investments have high liquidity, are readily convertible into known amounts of cash and are subject to an insignificant risk of value changes.

5.   Short-term investments

 

   

Individual

(BRGAAP)

 

Consolidated

(IFRS and BRGAAP)

   

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Private bonds

 

-

 

-

 

60,162

 

12,071

Government bonds

 

-

 

-

 

233,039

 

124,400

Investment funds

 

181,220

 

69,885

 

369,026

 

872,597

   

181,220

 

69,885

 

662,227

 

1,009,068

 

  Page 27 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Private bonds comprise of CDBs (“Bank Deposit Certificates”), with maturity until September 2013 and highly liquid, paid at a weighted average rate of 101.5% of the CDI rate.

Public bonds comprise of LTN (National Treasury Bills), NTN (National Treasury Bills), with immediate maturity, and paid at a variable average for the last twelve months of 11.27% p.a..

Investment funds are represented primarily by government bonds LTN and CDBs.-


6. Restricted Cash

 

 Consolidated (IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

Escrow - operation buyback

1,183

 

-

Margin deposits for hedge transactions (a)

47,972

 

82,996

Guarantee margin deposits associated with loans from BNDES (b)

-

 

8,591

Deposits in guarantee with letter of credit

8,917

 

8,471

Escrow - Webjet loan (c)

61,954

 

-

Escrow - purchase of Webjet

-

 

8,554

Deposits in guarantee to forward operations of future   

44,256

 

-

Other deposits  

2,160

 

483

 

166,442

 

109,095

 

Current

63,137

 

8,554

Noncurrent

103,305

 

1,133

 

(a)      Deposits in US dollar, subject to the libor rate (average yield of 0.90% p.a.).  
(b)     Guarantee margin, invested in DI investment funds and yielding at a weighted average rate of 102% of CDI.
(c)      Escrow deposit equivalent to 30% of the loan transaction Webjet.

 

7.   Trade and other receivables

 

 

Consolidated

(IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

Local currency:

 

 

 

Credit card administrators

98,264

 

100,214

Travel agencies

218,811

 

185,544

Installment sales

38,418

 

47,189

Cargo agencies

34,319

 

37,460

Airline partners companies

17,812

 

17,031

Other

40,277

35,077

 

447,901

 

422,515

Foreign currency:

 

 

 

Credit card administrators

10,732

 

9,228

Travel agencies

7,528

 

6,833

Cargo agencies

345

 

301

 

18,605

 

16,362

 

466,506

 

438,877

 

 

 

 

Allowance for doubtful accounts

(84,988)

 

(83,610)

 

381,518

 

355,267

 

Current

380,978

 

354,134

Noncurrent (*)

540

 

1,133

(*) The portion of noncurrent trade receivables is recorded in other receivables, in noncurrent assets, and corresponds to installment sales made under the Voe Fácilprogram, with maturity over 360 days.

 

  Page 28 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

The aging list of accounts receivable is as follows:

 

Consolidated
(IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

Falling due

342,752

 

317,016

Overdue until 30 days

16,134

 

20,618

Overdue 31 to 60 days

7,560

 

7,507

Overdue 61 to 90 days

4,262

 

4,954

Overdue 91 to 180 days

6,190

 

11,754

Overdue 181 to 360 days

17,644

 

15,307

Overdue above 360 days

71,964

 

61,721

 

466,506

 

438,877

 

The average collection period of installment sales is eight months and 5.99% monthly interest is charged on the receivable balance, which is recognized as financial income. The average collection period of other receivables is 102 days (108 days as of December 31, 2011.)

Changes in the allowance for doubtful accounts, for the quarters ended September 30, 2012 and 2011, are as follows:

 

Consolidated (IFRS and BRGAAP)

 

09/30/2012

 

09/30/2011

Balance at beginning of period

(83,610)

 

(60,127)

Additions

(19,786)

 

(19,740)

Unrecoverable amounts

2,651

 

2,898

Recoveries

15,757

 

9,903

Balance at the end of period

(84,988)

 

(67,066)

 

8.             Inventories 

 

Consolidated (IFRS and BRGAAP)

09/30/2012

 

12/31/2011

 

 

 

Consumables

19,642

 

20,148

Parts and maintenance materials

123,101

 

127,080

Advances to suppliers

23,625

 

12,725

Others

6,361

 

12,331

Provision for adjustment to market value (a)

(2,295)

 

(3,061)

Provision for obsolescence

(17,836)

 

(18,200)

 

152,598

 

151,023

 

  Page 29 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

(a)      The amount refers to the amortization reduction on inventories purchased from Webjet. In the period ended September 30, 2012, there was the realization of the value allocated to the amount of R$776.

Changes in the allowance for inventory obsolescence are as follows:

 

Consolidated (IFRS and BRGAAP)

 

09/30/2012

 

09/30/2011

Balance at the beginning of the period

(18,200)

 

(17,004)

Additions

(116)

 

(51,180)

Write-offs

480

 

51,050

Balance at the end of the period

(17,836)

 

(17,134)

 

9.    Deferred and recoverable taxes

 

 

Individual (BRGAAP)

 

Consolidated (IFRS and BRGAAP)

 

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Recoverable taxes:

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 ICMS (1)

 

-

 

-

 

20,723

 

13,222

 Prepaid IRPJ and CSSL (2)

 

43,445

 

37,784

 

76,094

 

77,679

 IRRF (3)

 

546

 

1,922

 

25,367

 

16,584

 PIS and COFINS (4)

 

-

 

-

 

699

 

54,085

 Withholding tax of public institutions

 

-

 

-

 

4,712

 

26,791

 Value added tax – IVA (5)

 

-

 

-

 

5,603

 

4,242

 Income tax on imports

 

247

 

275

 

16,888

 

17,740

Others

 

-

 

-

 

957

 

2,655

Total recoverable taxes - current

 

44,238

 

39,981

 

151,043

 

212,998

 
(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 certain domestic transactions, such as payment of fees to some service providers, payment of salaries, and 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.

 

  Page 30 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

GLAI

 

VRG

 

Consolidated

 

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax losses

 

31,762

 

33,121

 

394,046

 

394,046

 

425,808

 

427,167

Negative basis of social contribution

 

11,434

 

11,923

 

141,857

 

141,857

 

153,291

 

153,780

 

 

 

 

 

 

 

 

 

 

 

 

 

Temporary diferences:

 

 

 

 

 

 

 

 

 

 

 

 

Mileage program:

 

-

 

-

 

150,489

 

97,483

 

150,489

 

97,483

Allowance for doubtful accounts and other credits

 

-

 

-

 

62,466

 

62,317

 

62,466

 

62,317

Provision for loss on acquisition of VRG

 

-

 

 

 

143,350

 

143,350

 

143,350

 

143,350

Provision for legal and tax liabilities

 

-

 

-

 

33,047

 

57,151

 

33,047

 

57,151

Return of aircraft

 

-

 

-

 

35,834

 

22,089

 

35,834

 

22,089

Derivative transactions not settled

 

-

 

-

 

35,972

 

36,852

 

35,972

 

36,852

Effects from Webjet’s acquisition

 

-

 

-

 

5,315

 

7,086

 

5,315

 

7,086

Brands

 

-

 

-

 

(21,457)

 

(21,457)

 

(21,457)

 

(21,457)

Flight rights

 

-

 

-

 

(353,226)

 

(353,226)

 

(353,226)

 

(353,226)

Maintenance deposits

 

-

 

-

 

(106,318)

 

(101,630)

 

(106,318)

 

(101,630)

Depreciation of engines and parts for aircraft maintenance

 

-

 

-

 

(156,002)

 

(140,677)

 

(156,002)

 

(140,677)

Reversal of goodwill amortization

 

-

 

-

 

(95,745)

 

(76,596)

 

(95,745)

 

(76,596)

Derivative transactions not settled

 

-

 

-

 

(14,436)

 

(26,902)

 

(14,436)

 

(26,902)

Aircraft leasing

 

193

 

93

 

51,068

 

36,404

 

51,261

 

36,497

Total deferred tax and social contribution

 

43,389

 

45,137

 

306,260

 

278,147

 

349,649

 

323,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company and its direct subsidiary VRG and indirect subsidiary Webjet have tax losses and negative basis of social contribution on calculation of taxable income, to be offset against 30% of annual taxable income, which can be carried forward indefinitely, in the following amounts:

Individual (GLAI)

 

Direct (VRG) and indirect subsidiary (Webjet)

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Tax losses

252,834

 

258,268

 

2,637,339

 

1,887,267

Negative basis of social contribution

252,834

 

258,268

 

2,637,339

 

1,887,267

 

The tax credits arising from tax loss carryforwards and negative basis of social contribution were recorded based on the expected generation of future taxable income of the Company and its subsidiaries, as prescribed by tax laws.

Projected future taxable income for the utilization of tax loss carryforwards and negative basis of social contribution, technically prepared and supported based on business plans and approved by the Board of Directors, indicates the existence of sufficient taxable income for the realization of the recognized deferred tax assets.

  Page 31 of   71

 


NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

The Company and its subsidiaries have a total tax credits in the amount of R$982,659, which R$85,964 are from GLAI and R$896,695 are from its subsidiaries VRG and Webjet, and recognized an allowance for loss of R$403,560 (R$42,768 from GLAI and R$360,792 from its subsidiaries VRG and Webjet), for credits that have no perspective of realization in the near future. Such tax credits are supported by projections of future profitability and reviewed annually.

Management considers that the deferred tax assets arising from temporary differences will be realized proportionally to the realization of provisions and final outcome of future events.

 

 

Individual

 

 

Three months periods ended on

 

Nine months periods ended on

 

30/06/11

09/30/2012

 

09/30/2011

 

09/30/2012

 

09/30/2011

Loss before income tax and social contribution

 

(309,054)

 

(513,058)

 

(1,059,792)

 

(802,365)

Combined tax rate

 

34%

 

34%

 

34%

 

34%

Income tax at combined tax rate

 

105,078

 

174,440

 

360,329

 

272,804

Adjustments to calculate the effective tax rate:

 

 

 

 

 

 

 

 

Equity in subsidiaries

 

(97,138)

 

(110,575)

 

(301,525)

 

(204,844)

Nondeductible income from subsidiaries

 

(8,211)

 

(9,402)

 

(25,131)

 

(24,718)

Income tax on permanent differences

 

(2,904)

 

(1,721)

 

(3,727)

 

(6,794)

Income tax and social contribution not recognized ​​on tax loss carryforwards or compensation 30%

 

 

-

 

722

 

-

 

-

Nondeductible expenses (nontaxable income)

 

(51)

 

(31)

 

(163)

 

320

Exchange differences on foreign investments

 

2,928

 

(56,875)

 

(35,824)

 

(40,210)

Income (expense) of tax and social contribution

 

(298)

 

(3,442)

 

(6,041)

 

(3,442)

 

 

 

 

 

 

 

 

 

Current income tax and social contribution

 

(277)

 

(2,404)

 

(4,293)

 

(2,404)

Deferred income tax and social contribution

 

(21)

 

(1,038)

 

(1,748)

 

(1,038)

 

 

(298)

 

(3,442)

 

(6,041)

 

(3,442)

 

 

 

Consolidated

 

 

Three months periods ended on

 

Nine months periods ended on

 

30/06/11

09/30/2012

 

09/30/2011

 

09/30/2012

 

09/30/2011

Loss before income tax and social contribution

 

(278,372)

 

(647,880)

 

(1,099,295)

 

(896,256)

Combined tax rate

 

34%

 

34%

 

34%

 

34%

Income tax at combined tax rate

 

94,646

 

220,279

 

373,760

 

304,727

Adjustments to calculate the effective tax rate:

 

 

 

 

 

 

 

 

Nondeductible income from subsidiaries

 

(19,025)

 

(9,402)

 

(43,495)

 

(24,718)

Nondeductible expenses

 

(8,062)

 

(7,967)

 

(14,498)

 

(17,106)

Income tax on permanent differences

 

(320)

 

(2,534)

 

(2,897)

 

(27,025)

Use of tax credits in the repayment of Law 11.941

 

-

 

-

 

-

 

(8,013)

Income tax and social contribution is not recognized ​​on tax loss carryforwards

 

 

(92,123)

 

(12,125)

 

(235,196)

 

(97,210)

Exchange differences on foreign investments

 

(6,096)

 

(56,871)

 

(44,212)

 

(40,206)

Income (expense) of tax and social contribution

 

(30,980)

 

131,380

 

33,462

 

90,449

 

 

 

 

 

 

 

 

 

Current income tax and social contribution

 

(597)

 

(2,581)

 

(5,192)

 

(22,186)

Deferred income tax and social contribution

 

(30,383)

 

133,961

 

38,654

 

112,635

 

 

(30,980)

 

131,380

 

33,462

 

90,449

 

  Page 32 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

10. Prepaid Expenses

 

Individual

(BRGAAP)

 

Consolidated (IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Deferred losses from sale-leaseback transactions

-

 

-  

 

47,172

 

54,201

Prepayments of hedge premium

-

 

-

 

91

 

11,572

Lease prepayments

-

 

-

 

27,255

 

30,382

Insurance prepayments

463

 

136

 

2,215

 

22,775

Prepaid commissions

-

 

-

 

14,603

 

13,020

Others

-

 

-

 

6,828

 

6,811

 

463

 

136

 

98,164

 

138,761

 

 

 

 

 

 

 

 

Current

463

 

136

 

60,311

 

93,797

Noncurrent

-

 

-

 

37,853

 

44,964

 

(a) During the reporting periods of 2007, 2008, and 2009, the Company recorded losses on sale-leaseback transactions performed by its subsidiary GAC Inc. relating to nine 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 are described in explanatory Note 27 b.

 

11.   Deposits

Parent company

Escrow deposits

Escrow deposits represent guarantees in legal proceedings related to labor claims, deposited in escrow until the conclusion of the related claims, updated at the SELIC  rate. The balances of escrow deposits as of September 30, 2012 recorded in noncurrent assets totaled R$16,998 (R$12,065 as of December 31, 2011).

Consolidated

Maintenance deposits

The Company and its subsidiaries VRG and Webjet made deposits in US dollars for maintenance of aircraft and engines that will be used  in future events as set forth in some finance lease contracts.

  Page 33 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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.

Based on the regular analysis of deposit recovery, management believes that the amounts reported in the consolidated balance sheet are recoverable and there are no indications of impairment of maintenance deposits, whose balances as of September 30, 2012 classified in current and noncurrent assets amount to R$23,928 and R$343,316, respectively (R$35,082 and R$323,062 in current and noncurrent assets as of December 31, 2011, respectively).

Deposits in guarantee for lease agreements

As required by the lease agreements, the Company and its subsidiaries hold guarantee deposits in US dollars on behalf of the leasing companies, whose full refund occurs upon the contract expiration date. As of September 30, 2012, the balance of guarantee deposits for lease agreements, classified in noncurrent assets, is R$97,282 (R$96,983 as of December 31, 2011).

Escrow deposits

Escrow deposits represent guarantees in legal proceedings related to tax, civil and labor claims, deposited in escrow until the resolution of the related claims, paid at SELIC  rate. The balances of escrow deposits as of September 30, 2012, recorded in noncurrent assets totaled R$159,232 (R$175,472 as of December 31, 2011).

12.      Transactions with related parties

 

Loan agreements– noncurrent assets and liabilities– Individual

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

 

Asset

 

Liability

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

GLAI with VRG

50,698

 

48,514

 

-

 

-

GAC with VRG (a)

-

 

71,280

 

406,232

 

222,725

Finance with VRG (a)

476,084

 

474,023

 

-

 

-

 

526,782

 

593,817

 

406,232

 

222,725

 

a)         The values that ​​the Company maintains with GAC and Finance, subsidiaries abroad, are subject to exchange rate variations.

 

Graphic, consulting and transportation services

  Page 34 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

The subsidiary VRG holds a contract with the related party Breda  Transportes e Serviços  S.A. for passenger and luggage transportation services between airports, and transportation of employees, expiring on May 31, 2013, 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) .

The subsidiary VRG also holds contracts with the related parties Expresso União Ltda. and Serviços Gráficos Ltda., for employee transportation and graphic services, expiring on September 16, 2012 and July 18, 2012, respectively. After the end of the term, these contracts were not renewed.

The subsidiary VRG also holds contracts for the operation of the Gollog franchise through the related party União Transporte de Encomendas e Comércio de Veículos Ltda., expiring on December 29, 2015.

The subsidiary VRG also holds contracts with the related party Vaud Participações S.A. to provide executive administration and management services, expiring on October 01, 2014.

During the period ended September 30, 2012, VRG recognized total expenses related to these services of R$8,307 (R$8,401 as of September 30, 2011). All the entities referred above belong to the same economic group.

Property lease

VRG is the lessee of the property located at Rua Tamoios, 246, São Paulo, SP, owned by Patrimony Administradora de Bens, controlled by Comporte Participações S.A., a company owned by the same shareholder of the Company, whose contract was terminated in August 2012. During the period ended September 30, 2012 VRG recognized total expenses related to this lease of R$329 (R$438 as of September 30, 2011).

Contracts Account Opening UATP (Universal Air Transportation Plan) to Grant Credit Limit

On September 2011, subsidiary VRG entered into agreements with related parties Pássaro Azul Taxi Aéreo Ltda. e Viação Piracicabana Ltda. The purpose of the agreement is the issuance of UATP (Universal Air Transportation Plan) accounts. VRG issued credits to related parties in the amounts of R$20 and R$40, respectively, to be used in the UATP system. Such system can be used to pay domestic and international air services to all members. VRG uses the UATP system, which is operated and maintained by the international air sector, and seeks to simplify billing and facilitate the payment of air travels and other related services.

Financing contract for engine maintenance

VRG has a line of funding for maintenance of engines whose disbursement occurs through the issuance of  Guaranteed Notes. The series, issued on 29 June 2012 and 27 September 2012 respectively, will mature on June 29, 2014 and 27 September 2014  aims to support the maintenance of engines, (see details in note 17). In the nine months ended on September 30, 2012 spending on engine maintenance conducted by Delta Air Lines was R$62,944.

  Page 35 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Trade payables – current liabilities

As of September 30, 2012, balances payable to related companies amounting to R$1,014 (R$1,198 as of December 31, 2011) 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.

Key management personnel payments

 

Three months period

 

Nine months period ended

 

09/30/2012

 

09/30/2011

 

09/30/2012

 

09/30/2011

Salaries and benefits

3,391

 

4,018

 

10,043

 

11,274

Related taxes

1,313

 

1,398

 

3,881

 

4,085

Share-based payments

1,376

 

2,400

 

3,969

 

11,576

Total

6,080

 

7,816

 

17,893

 

26,935

 

As of September 30, 2012, the Company did not offer postemployment benefits, and there are no severance benefits or other long-term benefits for the Management or other employees.

Share-based payments

The Company’s Board of Directors within the scope of its functions and in conformity with the Company’s Stock Option Plan, approved the grant of preferred stock options to the Company’s management and key senior executive officers. For grants through 2009, the options vest at a rate of 20% per year, and can be exercised within up to 10 years after the grant date.

Due to changes in the Company's Stock Option Plan, approved at the Annual Shareholders’ Meeting held on April 30, 2010, for plans granted beginning 2010, 20% of the options become vested as from the first year, an additional 30% as from the second, and the remaining 50% as from the third year. The options under these plans may also be exercised within 10 years after the grant date.

The fair value of stock options was estimated on the grant date using the Black-Scholes option pricing model.

The date of the Board of Directors’ meetings and the assumptions utilized in the Black-Scholes option pricing model are as follows:

 

Stock option plans

 

2005

 

2006

 

2007

 

2008

 

2009 (a)

 

2010 (b)

 

2011

Board of Directors’ meeting date

December 9, 2004

 

January 2, 2006

 

December 31, 2006

 

December 20, 2007

 

February 4, 2009

 

February 2, 2010

 

December 20, 2010

Total options granted

87,418

 

99,816

 

113,379

 

190,296

 

1,142,473

 

2,774,640

 

2,722,444

Option strike price

33.06

 

47.30

 

65.85

 

45.46

 

10.52

 

20.65

 

27.83

Average fair value of the option on the grant date

29.22

 

51.68

 

46.61

 

29.27

 

8.53

 

16.81

 

16.11(c)

Estimated volatility of the share price

32.52%

 

39.87%

 

46.54%

 

40.95%

 

76.91%

 

77.95%

 

44.55%

Expected dividend

0.84%

 

0.93%

 

0.98%

 

0.86%

 

-

 

2.73%

 

0.47%

Risk-free return rate

17.23%

 

18.00%

 

13.19%

 

11.18%

 

12.66%

 

8.65%

 

10.25%

Option term (years)

10

 

10

 

10

 

10

 

10

 

10

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Page 36 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

(a) In April 2010 additional options were granted, totaling 216,673 in addition to those approved by the 2009 plan.

(b) In April 2010 additional options were approved totaling 101,894, referring to the 2010 plan.

(c) The calculated fair the value for 2011 plan was 16.92, 16.11, and 15.17 for the related vesting periods (2011, 2012, and 2013).

(d) The calculated fair the value for 2012 stock option plans was 6.04, 5.35 and 4.56 respectively.

 

Changes in the stock options as of September 30, 2012 are as follows:

 

Stock options

 

Weighted average strike price

Outstanding options as of December 31, 2011

4,621,192

 

24.34

Options granted

-

 

-

Options expired and adjustment on forfeited rights estimate

(1,221,969)

 

26.54

Options outstanding as September 30,2012

3,399,223

 

24.09

 

 

 

 

Number of options to be vested as of December 31, 2011

1,784,759

 

23.89

Number of options to be vested as of September 30, 2012

1,885,116

 

23.05

 

The strike price range and the average maturity of outstanding options, as well as the strike price range for the exercisable options as of September 30, 2012, are summarized below:

Outstanding options

 

Options exercisable

Strike price range

Outstanding options

Remaining weighted average maturity in years

Average strike price

 

Options exercisable

Average strike price

33.06

4,965

3

33.06

 

4,965

33.06

47.3

13,220

4

47.30

 

13,220

47.3

65.85

14,962

5

65.85

 

14,962

65.85

45.46

41,749

6

45.46

 

37,574

45.46

10.52

237,087

7

10.52

 

165,961

10.52

20.65

1,419,751

8

20.65

 

1,064,814

20.65

27.83

1,667,489

9

27.83

 

583,620

27.83

10.52-65.85

3,399,223

8,26

24.63

 

1,885,116

23.05

 

For the period ended September 30, 2012, the Company recognized in shareholders’ equity an result with stock options in the amount of R$10,973 (R$19,999 for the period ended September 30, 2011), being the expense presented in the consolidated income statements as personnel expenses.

13.  Investments

Due to the changes in Law 6404/76 introduced by Law 11,638/07, investments in foreign subsidiaries, GAC and Finance were considered as an extension of the controller GLAI and consolidated on a line by line basis, only the subsidiary VRG was considered as an investment.

Changes in investments to September 30, 2012 are as follows:

  Page 37 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Balances as of December 31, 2010 - Investment

2,713,261

Equity in subsidiaries

(518,274)

Unrealized hedge losses (VRG)

(89,853)

Amortization losses, net of sale leaseback (a)

(1,809)

Balances as of December 31, 2011- Investment

2,103,325

Equity in subsidiaries

(886,837)

Unrealized hedge gains (VRG)

23,853

Deferred gains, net of sale leaseback transaction with (a)

(1,357)

Balances as of September 30, 2012- Investment

1,238,984

 

(a) The subsidiary GAC has 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 September 30, 2012, the net balance to be deferred of R$29,328 (R$30,685 for the year ended December 31, 2011) is basically a part of the parent's net investment in the VRG. See explanatory note N°. 27 b.

 

The subsidiary VRG’s shares are not traded on stock exchanges. The relevant information on VRG is summarized below:

 

Total number

of shares

Interest

%

Capital

Shareholders’ equity (b)

Net income (loss)

12/31/11

3,002,248,156

100%

2,294,191

2,072,640

(518,274)

09/30/12

3,002,248,156

100%

2,294,191

1,209,656

(886,837)

 

(b) The difference between the balance of investment and equity participation in VRG corresponds to the net effect of  R$29,328 from sale leaseback, mentioned above under (a).

 

14. Earnings or Loss 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 loss 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.

 

 

  Page 38 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

Individual and Consolidated (IFRS and BRGAAP)

Three months periods ended on

 

Nine months periods ended on

 

09/30/2012

 

09/30/2011

 

09/30/2012

 

09/30/2011

Numerator

             

Income (loss) for the period

(309,352)

 

(516,500)

 

(1,065,833)

 

(805,807)

 

 

     

 

   

Denominator

 

     

 

   

Weighted average number of outstanding shares (in thousands)

271,058

 

270,363

 

268,130

 

 

270,363

 

 

     

 

   

Adjusted weighted average number of outstanding shares and
diluted presumed conversions (in thousands)

271,058

 

270,363

 

268,130

 

270,363

 

 

     

 

   

Basic earnings (loss) per share

(1.14)

 

(1.91)

 

(3.98)

 

(2.98)

Diluted earnings (loss) per share

(1.14)

 

(1.91)

 

(3.98)

 

(2.98)

 

Diluted earnings or loss per share are calculated by considering the instruments that may have a potential dilutive effect in the future, such as share-based payment transactions, discussed in note 12. However, due to the losses reported for the periods ended on September 30, 2012 and 2011, these instruments have anti-dilutive effect and, therefore, are not considered in the total number of outstanding shares.

15. Property, Plant and Equipment

Individual

The balance correspond to advances for acquisition of aircraft, related to prepayments made based on the contracts with Boeing Company to acquire 98 aircraft 737-800 Next Generation (101 aircraft as of 31 December 2011) in the amount of R$508,950 (R$359,515 as of December 31, 2011) and the right on the residual value of aircraft in the amount of R$417,163 (R$417,163 as of December 31, 2011), both held by the subsidiary GAC.

 

 

  Page 39 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

Consolidated

 

09/30/2012

 

12/31/2011

 

Weighted anual depreciation rate

 

Cost

 

Accumulated
depreciation

 

Net
amount

 

Net
amount

Flight equipment

 

 

 

 

 

 

 

 

 

Aircraft under finance leases

4%

 

2,956,113

 

(690,249)

 

2,265,864

 

2,377,234

Sets of replacement parts and spares engines

4%

 

932,570

 

(220,458)

 

712,112

 

733,095

Aircraft reconfigurations / overhauling

30%

 

636,298

 

(339,196)

 

297,102

 

253,655

Aircraft and safety equipment

20%

 

2,162

 

(1,160)

 

1,002

 

822

Tools

10%

 

27,157

 

(9,443)

 

17,714

 

18,387

 

 

 

4,554,300

 

(1,260,506)

 

3,293,794

 

3,383,193

 

-

 

 

 

 

 

 

 

 

Impairment losses

-

 

(43,548)

 

-

 

(43,548)

 

(50,653)

 

 

 

4,510,752

 

(1,260,506)

 

3,250,246

 

3,332,540

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment in use

 

 

 

 

 

 

 

 

 

Vehicles

20%

 

10,637

 

(7,714)

 

2,923

 

2,969

Machinery and equipment

10%

 

49,878

 

(16,219)

 

33,659

 

31,573

Furniture and fixtures

10%

 

20,787

 

(10,870)

 

9,917

 

10,323

Computers and peripherals

20%

 

46,266

 

(31,757)

 

14,509

 

15,712

Communication equipment

10%

 

3,091

 

(1,668)

 

1,423

 

1,334

Facilities

10%

 

4,593

 

(2,986)

 

1,607

 

1,854

Maintenance center Confins

7%

 

105,971

 

(15,933)

 

90,038

 

92,047

Leasehold improvements

20%

 

51,374

 

(24,941)

 

26,433

 

15,115

Construction in progress

-

 

5,865

 

-

 

5,865

 

21,936

 

 

 

298,462

 

(112,088)

 

186,374

 

192,863

 

 

 

4,809,214

 

(1,372,594)

 

3,436,620

 

3,525,403

 

 

 

 

 

 

 

 

 

 

Advances for aircraft acquisition

-

 

513,556

 

-

 

513,556

 

365,067

 

 

 

 

 

 

 

 

 

 

 

 

 

5,322,770

 

(1,372,594)

 

3,950,176

 

3,890,470

                   

 

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

 

Property, plant and equipment under finance lease

 

Others flight equipment (a)

 

Advances for acquisition of property, plant and equipment

 

Others

 

Total

As of December 31, 2010

2,210,433

 

751,816

 

323,661

 

175,058

 

3,460,968

Additions from Webjet’s acquisition

-

 

65,328

 

-

 

6,264

 

71,592

Additions

371,262

 

300,915

 

273,984

 

38,576

 

984,737

Disposals

-

 

(3,383)

 

(232,578)

 

(5,132)

 

(241,093)

Depreciation

(204,461)

 

(136,120)

 

-

 

(21,903)

 

(362,484)

Impairment losses

-

 

(23,250)

 

-

 

-

 

(23,250)

As of December 31, 2011

2,377,234

 

955,306

 

365,067

 

192,863

 

3,890,470

Additions

31,705

 

251,373

 

215,598

 

13,389

 

512,065

Disposals

-

 

(55,140)

 

(67,109)

 

(88)

 

(122,337)

Depreciation

(143,075)

 

(174,262)

 

-

 

(19,790)

 

(337,127)

Impairment losses (b)

-

 

7,105

 

-

 

-

 

7,105

As of September 30, 2012

2,265,864

 

984,382

 

513,556

 

186,374

 

3,950,176

 

(a)     Additions primarily represent total estimated costs to be incurred relating to the reconfiguration of aircraft when returned and improvement costs relating to major overhauled of engine, hulls and spare parts, under operating lease.

(b)     Refers to adjustments of the depreciation of assets valued at recoverable amounts or fair value.

 

 

 

 

  Page 40 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

16. Intangible assets

Individual

As of September 30, 2012, the balance in the Parent Company in the amount of R$22 refers to software (R$89 as of December 31, 2011).

Consolidated

 

Goodwill  

 

Trademarks

 

Airport operating licenses

 

Software

 

Total

Balance as of December 31, 2010

542,302

 

63,109

 

560,842

 

100,924

 

1,267,177

Additions from Webjet’s acquisition

 

 

 

 

 

 

209

 

209

Additions

-

 

-

 

-

 

73,598

 

73,598

Disposals

-

 

-

 

-

 

(8,936)

 

(8,936)

Amortization

-

 

-

 

-

 

(26,149)

 

(26,149)

Provisional fair value from Webjet’s acquisition

-

 

-

 

478,058

 

-

 

478,058

Balance at December 31, 2011

542,302

 

63,109

 

1,038,900

 

139,646

 

1,783,957

Additions

-

 

-

 

-

 

16,540

 

16,540

Disposals

-

 

-

 

-

 

(378)

 

(378)

Amortization

-

 

-

 

-

 

(35,032)

 

(35,032)

Balance as of September 30, 2012

542,302

 

63,109

 

1,038,900

 

120,776

 

1,765,087

 

17. Short and Long-term Debt

 

Maturity of contract

 

Effective rate (p.a.)

 

Individual

 

Consolidated

     

09/30/2012

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Short-term debt:

 

                   

Local currency:

 

     

 

     

 

   

Debentures IV

Sep, 2015

 

11.09%

 

-

 

-

 

-

 

595,160

Debentures V

Jun, 2017

 

10.64%

 

-

 

-

 

-

 

493,284

BNDES loan Safra

Oct, 2014

 

11.46%

 

-

 

-

 

29,992

 

29,956

Santander

Oct, 2012

 

8.99%

 

1,161

 

40,676

 

1,161

 

40,676

Citibank

Dec, 2012

 

8.73%

 

-

 

-

 

14,931

 

19,401

BNDES (direct)

Jul, 2017

 

10.72%

 

-

 

-

 

3,138

 

8,372

BDMG

Mar, 2018

 

10.71%

 

-

 

-

 

5,643

 

3,600

Industrial CDB

Mar, 2012

 

-

 

-

 

-

 

-

 

1,250

Banco IBM

Sep, 2017

 

12,80%

 

-

 

-

 

4,752

 

-

Working Capital/ Banco Itaú

Mar, 2013

 

16.08%

 

-

 

-

 

150,042

 

-

Interest

 

 

 

 

-

 

-

 

52,806

 

23,421

 

 

 

 

 

1,161

 

40,676

 

262,465

 

1,215,120

Foreign currency

 

 

 

 

 

 

 

 

 

 

 

(in U.S. Dollars):

 

 

 

 

 

 

 

 

 

 

 

J.P.Morgan

Sep, 2014

 

1,09%

 

-

 

-

 

76,236

 

-

Working Capital

Mar, 2012

 

3.42%

 

-

 

-

 

-

 

95,894

IFC

Jan, 2013

 

5.79%

 

-

 

-

 

16,507

 

31,264

FINIMP

Jun,2013

 

3.59%

 

-

 

-

 

20,490

 

3,127

Aeroturbine

Dec,2012

 

-

 

-

 

-

 

705

 

4,579

Interest

 

 

 

 

36,195

 

38,799

 

35,252

 

40,701

 

 

 

 

 

36,195

 

38,799

 

149,190

 

175,565

 

 

 

 

 

37,356

 

79,475

 

411,655

 

1,390,685

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease

Sep, 2013

 

 

 

-

 

-

 

203,312

 

161,755

Total short-term debt

 

 

 

 

37,356

 

79,475

 

614,967

 

1,552,440

 

 

 

 

 

 

 

0

 

 

 

0

Long-term debt:

 

 

 

 

 

 

 

 

 

 

 

Local currency:

 

 

 

 

 

 

 

 

 

 

 

Debentures IV

Sep, 2015

 

11.09%

 

-

 

-

 

596,128

 

-

Debentures V

Jun,2017

 

10.64%

 

-

 

-

 

494,199

 

-

Safra

Dec,2015

 

11.54%

 

-

 

-

 

163,329

 

196,000

BNDES – Loan Safra

Oct, 2014

 

11.46%

 

-

 

-

 

21,163

 

42,837

BDMG

Mar, 2018

 

10.71%

 

-

 

-

 

21,325

 

25,851

BNDES – (direct)

Jul, 2017

 

10.72%

 

-

 

-

 

11,873

 

-

IBM bank

Sept, 2017

 

12.80%

 

-

 

-

 

20,485

 

-

 

 

 

 

 

-

 

-

 

1,328,502

 

264,688

Foreign Currency

 

 

 

 

 

 

 

 

 

 

 

(in U.S. Dollars):

 

 

 

 

 

 

 

 

 

 

 

J.P.Morgan

Sept, 2014

 

1.09%

 

-

 

-

 

44,820

 

-

Senior bond I

Apr, 2017

 

7.70%

 

456,882

 

421,669

 

426,426

 

393,532

Senior bond II

Jul, 2020

 

9.65%

 

597,062

 

550,471

 

597,062

 

550,471

Perpetual bond

-

 

8.75%

 

406,120

 

375,160

 

363,475

 

335,768

 

 

 

 

 

1,460,064

 

1,347,300

 

1,431,783

 

1,279,771

 

 

 

 

 

1,460,064

 

1,347,300

 

2,760,285

 

1,544,459

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease

Until Dec, 2021

 

 

 

-

 

-

 

1,884,197

 

1,894,549

Total long-term debt

 

 

 

 

1,460,064

 

1,347,300

 

4,644,482

 

3,439,008

 

 

 

 

 

1,497,420

 

1,426,775

 

5,259,449

 

4,991,448

 

  Page 41 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

The maturities of long-term debt for the next twelve months as of September 30, 2012, are as follows:

 

 

Individual

 

 

After

2016

 

Without
maturity date

 

Total

Foreign currency

 

 

 

 

 

 

(Dollars):

 

 

 

 

 

 

Senior bond I

 

456,882

 

-

 

456,882

Senior bond II

 

597,062

 

-

 

597,062

Perpetual bond

 

-

 

406,120

 

406,120

Total

 

1,053,944

 

406,120

 

1,460,064

 

 

  Page 42 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

Consolidated

 

2013

 

2014

 

2015

 

2016

 

After

2016

 

Without maturity date

Total

Local currency:

 

 

 

 

 

 

 

 

 

 

 

 

BNDES Loan

774

 

3,097

 

3,097

 

3,097

 

1,808

 

-

11,873

BNDES – Loan Safra

6,167

 

14,996

 

-

 

-

 

-

 

-

21,163

Safra

32,667

 

65,331

 

65,331

 

-

 

-

 

-

163,329

BDMG

2,195

 

4,566

 

4,566

 

4,566

 

5,432

 

-

21,325

IBM

-

 

5,459

 

5,532

 

5,605

 

3,889

 

-

20,485

Debêntures

-

 

-

 

596,128

 

247,099

 

247,100

 

-

1,090,327

 

41,803

 

93,449

 

674,654

 

260,367

 

258,229

 

-

1,328,502

Foreign currency

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars):

 

 

 

 

 

 

 

 

 

 

 

 

JP Morgan

7,707

 

37,113

 

-

 

-

 

-

 

-

44,820

Senior bond I

-

 

-

 

-

 

-

 

426,426

 

-

426,426

Senior bond II

-

 

-

 

-

 

-

 

597,062

 

-

597,062

Perpetual bond

-

 

-

 

-

 

-

 

-

 

363,475

363,475

 

7,707

 

37,113

 

-

 

-

 

1,023,488

 

363,475

1,431,783

Total

49,510

 

130,562

 

674,654

 

260,367

 

1,281,717

 

363,475

2,760,285

                         

 

The fair values of senior and perpetual bonds, as of September 30, 2012, are as follows:

 

 

Individual

 

Consolidated

 

 

Book

 

Market (a)

 

Book

 

Market (a)

Senior bonds (I and II)

 

1,053,944

 

996,654

 

1,023,486

 

996,195

Perpetual bonds

 

406,120

 

287,850

 

363,475

 

245,207

 

(a)    Senior and perpetual bonds market prices are obtained through market quotations.

 

Funding engine maintenance (JP Morgan)

 

On September 27, 2012, the Company through its subsidiary VRG, issued the second series of Guaranteed Notes in funding for engine maintenance in the amount of US$84,8 million (R$172.2 million at September 30, 2012)  with a financial guarantee from the Export-Import Bank of the United States (Ex-Im Bank). The second series of Guaranteed Notes was priced by capital market transactions with interest rate of 0.85% p.a. in the amount of R$46,007 (corresponding to US$22,667 on the disbursement date). The funding will be within two years due in September 27, 2014 and will have quarterly repayments of principal and interest and issuance costs in the amount of the transaction of R$1,385 (corresponding to U$682 on the balance sheet date).

 

 

 

  Page 43 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Banco IBM II

On September 10, 2012 the Company, through its subsidiary VRG, signed a loan in the amount of R$12,482 in domestic currency with the Banco IBM S.A., with no transaction costs. The funds designed to finance the acquisition of machinery and services of information technology. The loan has a term of 60 months maturing September 10, 2017, with semi-annual payments of principal and interest. The interest rate is calculated based on the CDI plus 2.85% pa, effective rate of 13.31% pa. On September 30, 2012 the outstanding balance in current liabilities and noncurrent liabilities was R$4,752 and R$20,485 respectively.

 

Working Capital

 

On September 28, 2012, Webjet raised a new line of working capital loan with Banco Industrial e Comercial S.A. in domestic currency in the amount of R$30,000, without transaction costs, with an effective rate of 15.15% per annum and maturing in January 2013. On September 30, 2012 the balance of the transaction recorded in current liabilities was R$30,024.

 

Finance leases

Future payments of US dollar-denominated finance lease installments are as follows:

 

Consolidated
(IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

2012

65,123

 

281,165

2013

316,970

 

292,835

2014

316,954

 

292,819

2015

307,634

 

284,205

2016

298,883

 

276,098

After 2016

1,228,565

 

1,118,240

Total minimum lease payments

2,534,129

 

2,545,362

Less total interest

(446,620)

 

(489,058)

Present value of minimum lease payments

2,087,509

 

2,056,304

Less current portion

(203,312)

 

(161,755)

Non- current portion

1,884,197

 

1,894,549

 

The discount rate used to calculate the present value of the minimum leasing payments is 6.10% as of September 30, 2012 (6.10% as of December 31, 2011). There are no significant differences between the present value of minimum leasing payments and the fair value of these financial liabilities.

The Company extended the maturity date of 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 September 30, 2012, the withdrawals made for the repayment at maturity date of the lease agreement amount to R$40,632 (R$59,552 as of December 31, 2011), are recorded in long-term debt.

 

  Page 44 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Covenants

VRG has restrictive covenants ("covenants") in its financing agreements with the following financial institutions: IFC, BNDES, Bradesco  (Debenture V) and Banco do Brasil (Debentures IV e V).

The restrictive covenants measures for these loans are: (i) net debt / EBITDAR, (ii) Current Assets / Current Liabilities, (iii) EBITDA / Debt Service, (iv) Short-term Debt / EBITDA, (v) Net debt/ EBITDA and (vi) Debt Coverage Ratio (ICD).

 

On September 30, 2012, the Company and its subsidiaries did not reach the minimum requirements established for the financing from IFC, BNDES and Debentures IV and V, associated with EBITDA and EBITDAR as a result of loss observed during this period.

VRG maintain with BNDES a letter of guarantee of R$18.6 million, whose amount exceeds the current debt, and is not therefore subject to liquidity problems in case it is required to settle such debts.

VRG has not reached the minimum parameters set by the IFC, but received a specific consent of the IFC (waiver) that relieves the Company to perform the prepayment of this loan during the year 2012. Consequently, VRG has set a new expiration date to January 15, 2013.

On March 15, 2012, the Company obtained authorization to non declaration of acceleration and / or application of any penalty on noncompliance with its restrictive covenants for Debentures IV and V. This was deliberated in the General Meeting of Debenture Holders of the fourth and fifth issues for the period ended June 30, 2012.

The measurement of these Indices and Financial Limits is informed in biannual recurrence and therefore the next measurement will be performed on December 31, 2012. Thus it does not constitute the need to reclassify its debt to short-term as of September 30, 2012, in order to meet the Brazilian and international accounting standards.

18.  Advance Ticket Sales

As of September 30, 2012, the balance of advance ticket sales in current liabilities of R$856,457 (R$744,743 as of December 31, 2011) is represented by 5,399,630  tickets sold and not yet used (4,245,181 as of 31 December 2011) with 95 days of average term of use (75 days as of December 31, 2011).

19.  Smiles Deferred Revenue

 

As of September 30, 2012, the balance of Smiles deferred revenue is R$110,958 and R$331,658 classified in the current and non-current liabilities, respectively (R$71,935 and R$214,779 as of December 31, 2011). The number of outstanding miles as of September 30, 2012 amounted to 32,605,922,407 (23,004,285,890 as of December 31, 2011).

 

  Page 45 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

20. Advances from Customers

 

As of September 30, 2012, the Company recognized the amount of R$5,479 (R$30,252 on December 31, 2011), as detailed below:

Operating Agreement- Co-Branded 

The subsidiary VRG, signed with Banco Bradesco S.A. and Banco do Brasil S.A., in September 2009, an Operating Agreement for the sale of miles and right to use the database of the Smiles mileage program, and right of use of the Smiles brand related to the credit card issues in Co-Branded format. The agreement is effective for five years.

The mileage sales was recognized as advances from customers and as of September 30, 2012 the balance of R$1,200 (R$9,620 as of December 31, 2011) represents the remaining miles which were not transferred to the customers’ mileage account. The right of data bank’s use of Smiles mileage program was recognized on other current and noncurrent liabilities and is recognized on cargo and other revenue on a straight line basis according to the agreement’s period. The right of use of the Smiles brand on credit card was recognized on cargo and other revenue as of July, 2009.

CVC Advance

The Company, through its indirect subsidiary Webjet, holds an advance made ​​on October 26, 2011 in the amount of R$25,000, related to an agreement signed with CVC, to buy tickets from Webjet. As of September 30, 2012, the Company has an outstanding amount of R$3,505 (R$20,632 on December 31, 2011).

Banco Patagônia S.A. Advances

The subsidiary VRG signed with Banco Patagônia S.A, on April 7, 2011, a contract of sale and granting of miles, in order to encourage the use of credit cards from Banco Patagônia by its customers for the accrual of points in its Incentive Program called Club Patagonia. The term of the contract is one year, renewable for the same period through an amendment to be signed between the parties. As of September 30, 2012 the Company holds the amount of R$774 as an advance related to this agreement.

21. Taxes Payable

 

 

 

Individual (BRGAAP)

 

Consolidated (IFRS and BRGAAP)

 

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

 

 

 

 

 

 

 

 

 

PIS and COFINS

 

-

 

-

 

26,572

 

107,987

REFIS

 

7,732

 

8,212

 

22,825

 

24,249

IRRF on payroll

 

-

 

5

 

13,372

 

26,372

ICMS

 

-

 

-

 

19,535

 

12,602

Import tax

 

-

 

-

 

3,325

 

3,410

CIDE

 

18

 

556

 

961

 

1,274

IOF

 

61

 

80

 

61

 

670

IRPJ and CSLL to collect

 

5,486

 

1,433

 

12,723

 

8,573

Others

 

4

 

839

 

5,784

 

4,534

 

 

13,301

 

11,125

 

105,158

 

189,671

 

 

 

 

 

 

 

 

 

Current

 

6,049

 

3,233

 

64,871

 

76,736

Noncurrent

 

7,252

 

7,892

 

40,287

 

112,935

 

  Page 46 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

PIS and COFINS

With the beginning of the non-cumulative regime of PIS (Law 10637/02) and COFINS calculation (Law 10833/03), the subsidiary VRG implemented those rules and challenged in the courts the rate used to calculate these taxes until December 31, 2011. To this end, the Company had judicial deposits in an amount sufficient to ensure the suspension of the tax credit in the amount of R$81,010 (R$77,539 at December 31, 2011). However, on January 9, 2012, the Company filed a waiver of that lawsuit, which was approved in March 2012. On September 20, 2012 the judicial deposits were converted into final payment to the Federal Government

22. Provisions

 

Insurance provision

 

Provision for anticipated return of aircraft Webjet

 

Provision for return of aircraft and engine VRG

 

Litigation

 

Total

Balance as of December 31, 2011

23,499

 

26,263 

 

181,044

 

75,944

 

306,750

Additional provisions recognized

-

 

-

 

72,761

 

14,026

 

86,787

Utilized provisions

(16,862)

 

(4,457)

 

(65,750)

 

(3,234)

 

(90,303)

Foreign exchange

893

 

-

 

11,007

 

-

 

11,900

Balance as of September 30, 2012

7,530

 

21,806

 

199,062

 

86,736

 

315,134

                 

 

Balance as of December 31, 2011

                 

Current

23,499

 

16,252

 

35,817

 

-

 

75,568

Noncurrent

-

 

10,011

 

145,227

 

75,944

 

231,182

 

23,499

 

26,263

 

181,044

 

75,944

 

306,750

                 

 

Balance as of September 30, 2012

 

 

 

 

 

 

 

 

 

Current

7,530

 

11,161

 

43,605

 

-

 

62,296

Noncurrent

-

 

10,645

 

155,457

 

86,736

 

252,838

 

7,530

 

21,806

 

199,062

 

86,736

 

315,134

 

Provision for anticipated return of Webjet’s aircraft

In 2011, according to the strategic planning of Webjet, a provision for anticipated return of aircraft was recorded. This provision was calculated based on the expected return of 14 aircraft Boeing 737- 300 with operating leases contracts, as part of the Company's fleet renewal. The anticipated returns from aircraft are scheduled to occur between 2012 and 2013 and the original termination of leases are in between 2012 to 2014. In the quarter ended September 30, 2012, the Company returned three aircraft with prefixes WJX, WJG and WJP.

  Page 47 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Return of aircraft and engines

The return provision considers 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 described in return conditions of lease contracts, which the counterpart is capitalized in the fixed assets (aircraft reconfigurations/overhauling),as described in note 15.

Lawsuits

As of September 30, 2012, the Company and its subsidiaries are parties to 26,739 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:

 

Operation

 

Succession

 

Total

Civil lawsuits

14,979

 

634

 

15,613

Civil proceedings

1,915

 

15

 

1,930

Civil miscellaneous

164

 

-

 

164

Labor lawsuits

5,359

 

3,544

 

8,903

Labor proceedings

127

 

2

 

129

Total

22,544

 

4,195

 

26,739

                                                            

The civil lawsuits are primarily related to compensation claims generally related to flight delays, flight cancellations, baggage loss and damages. 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:

 

09/30/2012

 

12/31/2011

Civil

37,538

 

34,101

Labor

49,198

 

41,843

 

86,736

 

75,944

 

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.

  Page 48 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

There are other lawsuits assessed by management and its legal counsel as possible risks, in the estimated amount as of September 30, 2012 of R$34,546 for civil claims and R$13,857 for labor claims (R$33,221 and R$16,019 as of December 31, 2011 respectively), for which no provisions are recognized.

The Company is party to 03 (three) labor actions in France due to debts of the former Varig SA The amount involved in discussions, not provisioned, is approximately R$ 5,481 (equivalent to €2.1 million). On September 30, 2012, the evaluation of our legal advisers in relation to the probability of loss was amended from possible to remote and therefore no provision for such that value is required.

GLAI has been challenging in courts the taxation  of PIS and COFINS over  revenue associated with  interest on capital in the amount of R$ 20,140, received in the period between 2006 and 2008 from its subsidiary GTA Transportes Aéreos S.A., succeeded by VRG on September 25, 2008. According to the opinion of our legal counsel and based on the jurisprudence  recently occured , the Company classified this process as possible loss, with no provision for the amount involved.

The Company and its subsidiaries are challenging in court the ICMS levied on aircraft and engines imported under aircraft lease transactions without purchase options in transactions carried out with lessors headquartered in foreign countries. The Company’s and its subsidiaries’ management understands 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 there are no the evidence of goods circulation and so, there are no legal events to generate 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. On September 30,2012 the estimated aggregated amount of the ongoing lawsuits related to the non-levy of ICMS tax on said imports is R$213,281 (R$205,102 as of December 31, 2011) adjusted for inflation, not including late payment charges.

23.    Shareholders’ Equity

 

a)    Issued capital

 

As of September 30, 2012 and December 31, 2011, the Company’s capital is represented by 278,716,786 shares, of which 143,858,204 are common and 134,858,582 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:

  Page 49 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

09/30/2012

 

12/31/2011

 

Common

 

Preferred

 

Total

 

Common

 

Preferred

 

Total

Fundo Volluto

100.00%

 

22.99%

 

62.74%

 

100.00%

 

22.21%

 

61.63%

Wellington Management Company

-

 

10.50%

 

5.08%

 

-

 

5.04%

 

2.49%

Delta Airlines. Inc

-

 

6.15%

 

2.98%

 

-

 

6.22%

 

3.07%

Fidelity Investments

-

 

5.22%

 

2.52%

 

-

 

5.27%

 

2.60%

Treasury shares

-

 

2.76%

 

1.34%

 

-

 

2.79%

 

1.38%

Other

-

 

1.48%

 

0.72%

 

-

 

1.50%

 

0.74%

Free float

-

 

50.90%

 

24.62%

 

-

 

56.97%

 

28.09%

 

100.00%

 

100.00%

 

100.00%

 

100.00%

 

100.00%

 

100.00%

 

The authorized share capital as of September 30, 2012 was R$4.0 billion (R$4.0 billion on December 31,2011). 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. The Board of Directors will define the issuance conditions, including price and payment term.

On August 13, 2012, the Board of Directors approved the capital subscription in the amount of R$183,189 million, represented by 6,825,470 common shares and 1,501,312 preferred shares, totaling 8,326,782 shares. Of this total, 8,300,455 shares were subscribed by the controlling shareholder and 26,327 shares subscribed by minority shareholders. At the end of all periods for the exercise of the Right of First Refusal, there were 5,118,453 still left unsubscribed shares which were canceled on the date of August 13, 2012, through the partial approval of the capital increase.

The price of Company shares as of September 30, 2012 are quoted, in the São Paulo Stock Exchange – BOVESPA, in the amount of R$11.57 and US$5.74 (R$12.44 and US$6.63 on December 31,2011) in New York Stock Exchange – NYSE. The book value per share as of September 30, 2012 is R$4.22 (R$8.24 as of December 31, 2011).

b)  Retained earnings

i. Legal reserve

It is recognized by allocating 5% of 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. On December 31, 2011, was used in its entirety to absorb losses.

ii. Reinvestment reserve

The reserve of retained earnings was constituted under Article 196 of Law 6.404/76, it is designated to invest in the capital budget, approved at the Board of Directors. As of December 31, 2011, such  reserve was used in its entirety to absorb losses.

  Page 50 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

c)  Dividends  

The Company’s bylaws provide for a mandatory minimum dividend to common and preferred shareholders, in the aggregate of at least 25% of annual adjusted profit. 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 September 30, 2012, the Company has 3,724,225 treasury shares, totaling R$51,377, with a fair value of R$43,089 (R$51,377 in shares with fair value of R$46,329 as of December 31, 2011).

e)  Share-based payments

As of September 30, 2012, the balance of share-based payments reserve was R$79,575. The Company recorded a share-based payment expense amounting to R$10,973  during the nine-months period ended September 30, 2012, with a corresponding item in the income statement as personnel costs (R$19,999 as of September 30, 2011).

f)   Other comprehensive income

The fair value measurement financial instruments designated as cash flow hedges is recognized in line item other comprehensive income, net of taxes, until maturity of the contracts. The balance as of September 30, 2012 corresponds to a loss of R$55,415 (loss of R$79,268 as of December 31, 2011).

24.      Costs of Services, Administrative and Selling Expenses

 

   

Individual (BRGAAP)

 

Individual (BRGAAP)

Three months period ended on

 

Nine months period ended on

   

09/30/2012

 

 

09/30/2011

 

 

09/30/2012

 

 

09/30/2011

 

   

Total

%

 

Total

%

 

Total

%

 

Total

%

Salaries (a)

 

(3,824)

(6,373.3)

 

(5,438)

72.4

 

(12,425)

326.4

 

(21,182)

95.4

Services Rendered

 

(220)

(366.7)

 

(1,952)

26.0

 

(1,220)

32.1

 

(6,702)

30.2

Depreciation and amortization

 

(22)

(36.7)

 

(22)

0.3

 

(67)

1.7

 

(67)

0.3

Other expenses

 

(529)

(881.7)

 

(100)

1.3

 

(1,493)

39.2

 

(1,620)

7.2

Gains with sale leaseback transactions

 

4,655

7,758.4

 

-

-

 

11,398

(299.4)

 

7,356

(33.1)

   

60

100.0

 

(7,512)

100.0

 

(3,807)

100.0

 

(22,215)

100.0

 
(a)      The Company recognizes the cost of the Audit Committee and Board of Directors, as well as a plan of share-based compensation in the controller.

 

 

 

 

  Page 51 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

Consolidated (IFRS and BRGAAP)

 

Three months period ended on

 

09/30/2012

 

09/30/2011

Cost of services

Selling expenses

Administrative expenses

Other operating (expenses) income

Total

%

 

Cost of services

Selling expenses

Administrative expenses

Other operating (expenses) income

Total

%

Salaries

(310,895)

(20,576)

(43,074)

-

(374,545)

17.1

 

(299,852)

(20,828)

(47,441)

-

(368,121)

19.2

Fuel and lubricants

(936,923)

-

-

-

(936,923)

42.8

 

(745,335)

-

-

-

(745,335)

38.8

Aircraft rent

(175,735)

-

-

-

(175,735)

8.0

 

(108,641)

-

-

-

(108,641)

5.7

Aircraft Insurance

(6,553)

-

-

-

(6,553)

0.3

 

(8,786)

-

-

-

(8,786)

0.5

Maintenance materials and repairs

(83,956)

-

-

-

(83,956)

3.8

 

(129,961)

-

-

-

(129,961)

6.8

Traffic servicing

(73,058)

(17,839)

(43,738)

-

(134,635)

6.2

 

(58,174)

(20,396)

(39,861)

-

(118,431)

6.2

Sales and marketing

-

(105,933)

-

-

(105,933)

4.9

 

-

(111,847)

-

-

(111,847)

5.8

Tax and landing fees

(145,933)

-

-

-

(145,933)

6.7

 

(99,910)

-

-

-

(99,910)

5.2

Depreciation and amortization

(102,795)

-

(18,322)

-

(121,117)

5.5

 

(75,665)

-

(14,998)

-

(90,663)

4.7

Other income (expenses), net

(87,735)

(11,496)

(8,088)

4,655

(102,664)

4.7

 

(88,201)

(13,900)

(34,961)

-

(137,062)

7.1

 

(1,923,583)

(155,844)

(113,222)

4,655

(2,187,994)

100.0

 

(1,614,525)

(166,971)

(137,261)

-

(1,918,757)

100.0

 

 

Consolidated (IFRS and BRGAAP)

 

Nine months period ended on

 

09/30/2012

 

09/30/2011

Cost of services

Selling expenses

Administrative expenses

Other operating (expenses) income

Total

%

 

Cost of services

Selling expenses

Administrative expenses

Other operating (expenses) income

Total

%

Salaries

(994,308)

(64,455)

(122,386)

-

(1,181,149)

18.1

 

(923,275)

(66,131)

(123,457)

-

(1,112,863)

20.2

Fuel and lubricants

(2,808,696)

-

-

-

(2,808,696)

43.0

 

(2,145,299)

-

-

-

(2,145,299)

38.9

Aircraft rent

(477,601)

-

-

-

(477,601)

7.3

 

(349,397)

-

-

-

(349,397)

6.3

Aircraft Insurance

(21,507)

-

-

-

(21,507)

0.3

 

(25,555)

-

-

-

(25,555)

0.5

Maintenance materials and repairs

(251,002)

-

-

-

(251,002)

3.8

 

(298,924)

-

-

-

(298,924)

5.4

Traffic servicing

(217,915)

(44,931)

(125,967)

-

(388,813)

6.0

 

(170,064)

(52,869)

(120,819)

-

(343,752)

6.2

Sales and marketing

-

(305,749)

-

-

(305,749)

4.7

 

-

(293,160)

-

-

(293,160)

5.3

Tax and landing fees

(423,027)

-

-

-

(423,027)

6.5

 

(281,804)

-

-

-

(281,804)

5.1

Depreciation and amortization

(317,214)

-

(54,945)

-

(372,159)

5.7

 

(227,766)

-

(43,721)

-

(271,487)

4.9

Other income (expenses), net

(254,429)

(440,047)

(19,323)

11,398

(302,401)

4.6

 

(240,300)

(57,201)

(103,978)

7,356

(394,123)

7.2

 

(5,765,699)

(455,182)

(322,621)

11,398

(6,532,104)

100.0

 

(4,662,384)

(469,361)

(391,975)

7,356

(5,516,364)

100.0

 

25. Sales Revenue

a)                  The net sales revenue for the period has the following composition:

 

 

Consolidated (IFRS and BRGAAP)

 

Three months period ended on

 

Nine months period ended on

 

09/30/2012

 

09/30/2011

 

09/30/2012

 

09/30/2011

Passenger transportation

1,821,010

 

1,689,529

 

5,470,728

 

4,879,182

Cargo transportation and other revenue

268,180

 

240,491

 

814,836

 

675,416

Gross revenue

2,089,190

 

1,930,020

 

6,285,564

 

5,554,598

Related taxes

(101,852)

 

(86,322)

 

(301,500)

 

(248,838)

Net revenue

1,987,338

 

1,843,698

 

5,984,064

 

5,305,760

 

  Page 52 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

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 (IFRS and BRGAAP)

 

Three months period ended on

 

Nine months period ended on

 

09/30/2012

%

 

09/30/2011

%

 

09/30/2012

%

 

09/30/2011

%

Domestic

1,834,611

92.3%

 

1,702,701

92.4

 

5,561,017

92.9%

 

4,880,680

91.9

International

152,727

7.7%

 

140,997

7.6

 

423,047

7.1%

 

425,080

8.1

Net revenue

1,987,338

100.0

 

1,843,698

100.0

 

5,984,064

100.0

 

5,305,760

100.0

 

 

26. Financial result

 

   

Individual (BRGAAP)

Three months period ended on

 

Nine months period ended on

Financial income

 

09/30/2012

09/30/2011

 

09/30/2012

09/30/2011

Income from short-term investments and Investment funds

 

4,797

3,359

 

17,524

10,810

Monetary variation

 

558

9

 

2,032

1,273

Other

 

-

3,550

 

16,968

10,003

   

5,355

6,918

 

36,524

22,086

Financial expenses

 

 

 

 

 

 

Interest on short and long term debt

 

(27,388)

(27,508)

 

(98,608)

(81,389)

Bank interest and expenses

 

(397)

(1,713)

 

(4,831)

(4,384)

Other

 

(971)

(1,906)

 

(2,772)

(3,189)

   

(28,756)

(31,127)

 

(106,211)

(88,962)

   

 

 

 

 

 

Foreign exchange changes, net

 

(16)

(156,120)

 

(99,461)

110,796

 

 

 

 

 

 

 

   

(23,417)

(180,329)

 

(169,148)

(177,672)

 

   

Consolidated (BRGAAP and IFRS)

Three months period ended on

 

Nine months period ended on

Financial income

 

09/30/2012

09/30/2011

 

09/30/2012

09/30/2011

Income from derivatives

 

59,762

87,311

 

188,750

193,041

Income from short-term investments and Investment funds

 

21,394

39,379

 

81,556

106,944

Monetary variation

 

2,240

1,986

 

9,898

7,209

Other

 

5,688

3,862

 

20,863

20,177

   

89,084

132,538

 

301,067

327,371

Financial expenses

 

 

 

 

 

 

Loss from derivatives

 

(16,004)

(102,844)

 

(143,282)

(302,043)

Interest on short and long term debt

 

(112,468)

(109,144)

 

(334,791)

(285,337)

Bank interest and expenses

 

(1,332)

(5,785)

 

(29,580)

(15,685)

Monetary variation

 

(1,773)

(2,032)

 

(8,270)

(11,338)

Other

 

(28,922)

(9,151)

 

(69,957)

(19,013)

   

(160,499)

(228,956)

 

(585,880)

(633,416)

   

 

 

 

 

 

Foreign exchange changes, net

 

(6,301)

(476,403)

 

(266,442)

(379,607)

 

 

 

 

 

 

 

 

 

(77,716)

(572,821)

 

(551,255)

(685,652)

             

 

 

 

 

 

 

 

 

  Page 53 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

27. Commitments

 

As of September 30, 2012 the Company had with Boeing 88 firm orders, 10 purchase rights and 40 purchase options granted on non-onerous basis, for aircraft acquisition. These aircraft purchase commitments include estimates for contractual price increase during the construction phase. The approximate amount of firm orders, not including contractual discount is R$16,597,033 (corresponding to US$8,173,463 at the reporting date) and are segregated according to the following periods:

 

09/30/2012

 

12/31/2011

2012

493,379

 

896,087

2013

3,181,309

 

2,938,786 

2014

4,700,191

 

4,341,879

2015

4,214,876

 

3,740,135

2016

3,301,299

 

3,207,569

After 2016

705,979

 

655,551

 

16,597,033

 

15,780,007

 

As of September 30, 2012, in addition to the firm orders mentioned above, the Company has commitments the amount of R$1,810,472 (corresponding to US$891,595 at the reporting date), related to advances for aircraft purchase  to be disbursed in accordance with the following schedule :

 

09/30/2012

 

12/31/2011

2012

136,469

 

443,909

2013

606,534

 

537,137

2014

527,600

 

501,975

2015

444,834

 

407,115

2016

91,445

 

94,634

After 2016

3,590

 

6,632

 

1,810,472

 

1,991,402

 

The installment financed by Long-term debt, collateralized by the aircraft through the U.S. Ex-Im Bank (“Exim”) corresponds approximately to 85% of total cost of the aircraft. Other agents finance the acquisitions with equal or higher percentages, reaching up to the limit of 100%.

  

Page 54 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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

The Company leases its entire aircraft fleet using a combination of finance and operating leases, except for 6 aircraft owned by its indirect subsidiary Webjet.

 

As of September 30, 2012, the total leased fleet was comprised of 144 aircraft  (130 from VRG and 14 from Webjet), which 99 were operating leases and 45 were recorded as finance leases. The Company has 39 financial aircraft with purchase option. During the nine months period ended September 30, 2012, the Company received two aircraft based on operating lease contracts. In the quarter ended September 30, 2012, the Company returned five aircraft.

 

a)        Operating leases

 

Future payments of non-cancelable operating lease contracts are denominated in U.S. dollars, and are as follows:

 

 

 

09/30/2012

 

12/31/2011

2012

175,721

 

594,976

2013

630,914

 

517,326

2014

452,350

 

341,486

2015

307,020

 

205,631

2016

254,625

 

157,231

After 2016

903,358

 

452,831

Total minimum leasing payments

2,723,988

 

2,269,481

 

b)    Sale-leaseback transactions

As of September 30, 2012, the Company recognized R$7,564 and R$10,258, as ‘Other payables’ in current and non-current liabilities, respectively (R$7,564 and R$15,931 as of December 31, 2011), related to gains on sale-leaseback transactions performed by its subsidiary GAC Inc. in 2006, related to eight 737-800 Next Generation aircraft. These gains were deferred and are being amortized proportionally to the monthly payments of the related lease agreements over the contractual term of 124 months.

On the same date, the Company recorded R$9,373 and R$37,799, as ‘Prepaid expenses’, in current and non-current assets, respectively (R$9,373 and R$44,828 as of December 31, 2011), related to losses on sale-leaseback transactions performed by its subsidiary GAC Inc. of nine aircraft. During the years of 2007, 2008 and 2009, these losses were deferred and are amortized proportionally to the  payments of the operational lease agreements over the contractual term of 120 months.

Additionally, in the period ended September 30, 2012, the Company recorded a gain of R$11,398, recognized directly in profit and loss, since gains and losses on sale-leaseback transactions would not be compensated over lease terms.

  Page 55 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

28.      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 relating to the operation. The Company and its subsidiaries consider as most relevant risks: fuel price, exchange rate and interest rate. These risks are mitigated by using exchange swap derivatives, futures and options contracts in the oil, U.S. dollar and interest markets.

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), after 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 are satisfactory to the objectives proposed.

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

Most of the derivative financial instruments are contracted 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, a significant portion of the transactions presents ineffective 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 September 30, 2012 and December 31, 2011 is as follows:

 

Measured at fair value
through profit and loss

 

Measured at amortized cost (a)

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

1,050,557

 

1,230,287

 

-

 

-

Short-term investments (c) 

662,227

 

1,009,068

 

-

 

-

Restricted cash

166,442

 

109,095

 

-

 

-

Derivatives operation assets (b) 

23,856

 

4,213

 

-

 

-

Accounts receivable

-

 

-

 

380,978

 

354,134

Deposits

-

 

-

 

464,526

 

455,127

Other credits

-

 

-

 

30,136

 

53,546

Prepayment of hedge premium

91

 

11,572

 

-

 

-

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Loans and financing

-

 

-

 

5,259,449

 

4,991,448

Suppliers

-

 

-

 

501,427

 

414,563

Derivatives Obligation (b) 

68,903

 

115,432

 

-

 

-

 

 

 

 

 

 

 

 

 

  Page 56 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

(a)      The fair value 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 17.

 

(b)     The Company recorded as of September 30, 2012 the amount of R$55,415 (R$79,268 on December 31, 2011) in shareholders’ equity as valuation adjustment to equity as a corresponding item of this assets and liability.

 

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

 

On September 30, 2012 and December 31, 2011 the Company had no 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.

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 quarterly 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’ operations is as follows:

a)  Fuel price risk

As of September 30, 2012, fuel expenses accounted for 43% 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.

In order to mitigate the fuel price risk, the Company and its subsidiaries contract derivatives linked mainly to crude oil and its byproducts. As of September 30, 2012, the Company used options, collar and swap agreements.

Fuel hedge transactions, classified as cash flow hedges are contracted by the counterparties rated as investment grade, or are performed on the NYMEX.

b)  Exchange rate risk

  Page 57 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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 Reais, except for a small portion in U.S. dollars, Argentinean pesos, Bolivian bolivianos, Chilean peso, Colombian peso, Paraguay Guarani, Uruguayan peso, Venezuela bolivar, etc.

In order to mitigate the currency risk, the Company contracts the following currency derivatives: U.S. dollar futures and options settled on the BM&F-BOVESPA. These transactions may be performed using exclusive investment funds, as described in the Company’s Risk Management Policy.

The Company’s foreign exchange exposure as of September 30, 2012 and December 31, 2011 is as follows:

 

 

Individual

 

Consolidated

(BRGAAP)

(IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

 

09/30/2012

 

12/31/2011

Assets

             

Cash and short-term investments

54,175

 

38,458

 

238,685

 

237,668

Deposits

-

 

-

 

464,526

 

455,127

Hedge premium

-

 

-

 

91

 

11,572

Prepaid Expenses with leases

-

 

-

 

27,255

 

30,382

Related parties transaction

526,782

 

593,817

 

-

 

-

Others

 

-

 

7,559

 

6,588

Total assets

580,957

 

632,275

 

738,116

 

741,337

Liabilities

 

     

 

   

Foreign suppliers

-

 

-

 

22,070

 

32,270

Short- and long-term debt

1,496,259

 

1,386,099

 

1,580,973

 

1,455,336

Finance leases payable

-

 

-

 

2,087,509

 

1,996,752

Other leases payable

-

 

-

 

40,387

 

59,552

Provision for aircraft return

-

 

-

 

199,062

 

181,044

Related Parties

406,232

 

222,725

 

-

 

-

Other U.S. dollar-denominated liabilities

-

 

-  

 

-

 

7,616

Total liabilities

1,902,491

 

1,608,824

 

3,930,001

 

3,732,570

Exchange exposure in R$

1,321,534

 

976,549

 

3,191,885

 

2,991,233

 

 

     

 

   

Obligations not recognized in balance sheet

 

     

 

   

Future obligations resulting from operating leases

1,810,472

 

1,991,402

 

1,810,472

 

1,991,402

Future obligations resulting from firm aircraft orders

16,597,033

 

15,780,007

 

16,597,033

 

15,780,007

Total

18,407,505

 

17,771,409

 

18,407,505

 

17,771,409

 

 

 

 

 

 

 

 

Total exchange exposure R$

19,729,039

 

18,747,958

 

21,599,390

 

20,762,642

Total exchange exposure US$

9,715,867

 

9,994,647

 

10,636,950

 

11,068,686

Exchange Rate (R$/US$)

2,0306

 

1,8758

 

2,0306

 

1,8758

 

  Page 58 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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 in lease transactions, indexed to the Libor and local debt.

In the period ended September 30, 2012, for interest rate hedges, the Company and its subsidiaries held swap transactions with counterparties rated as investment grade.

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 of 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 performed 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 mitigates the credit risk. 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 liquidity risk 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.            

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 September 30, 2012, the weighted average maturity of the Company’s and its subsidiaries’ financial assets was 19 days and of financial debt, excluding perpetual bonds, was 4.4 years.

f)  Capital management

  Page 59 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

The table below shows the financial leverage rate as of September 30, 2012 and December 31, 2011:

 

 

Consolidated

(IFRS and BRGAAP)

 

09/30/2012

 

12/31/2011

Shareholder’s equity

1,175,483

 

2,205,911

Cash and cash equivalents

(1,050,557)

 

(1,230,287)

Restricted cash

(166,442)

 

(109,095)

Short-term investments

(662,227)

 

(1,009,068)

Short- and long-term debts

5,259,449

 

4,991,448

Net debt (a)

3,380,223

 

2,642,998

Total capital (b)

4,555,705

 

4,848,909

Leverage ratio (a) / (b)

74%

 

55%

    

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

Derivative financial instruments

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

Description

Balance sheet account

09/30/2012

 

12/31/2011

Rights from derivatives operation (assets)

Rights of derivative transactions

23,856

 

4,213

Obligation from derivatives operation (liabilities)

Liabilities from derivative transactions

68,903

 

115,432

Prepayment of hedge premium

Prepaid expenses

91

 

11,572

 

The Company and its subsidiaries adopt hedge accounting. On September 30, 2012, the derivatives contracted to hedge interest rate risk and fuel price risk were classified as "cash flow hedge", according to the parameters described in the Brazilian accounting standard CPC 38, and 40, technical guidance OCPC03 and International Accounting Standard IAS 39.

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.

  Page 60 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

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 hedges

The Company and its subsidiaries contracts 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 make them unfeasible, or when the change in a derivative’s fair value must be recognized in profit or loss for the same period of the effects of the hedged risk.

Designation of hedged item

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 jet fuel prices. 

As of September 30, 2012, the Company and its subsidiaries have derivative contracts and WTI designated as cash flow hedge fuel, traded ​​in Nymex and OTC markets.

Oil derivative contracts, designated as fuel hedges of the Company and its subsidiaries, are summarized below:

Closing balance at

09/30/2012

 

12/31/2011

Fair value at end of the period (R$)

24,586

 

(9,217)

Volume hedged for future periods (thousand barrels)

1,944

 

3,631

Volume engaged for future periods (thousand barrels)

3,110

 

5,810

Gains (losses) with hedge effectiveness recognized in shareholders’ equity, net of taxes (R$)

16,300

 

(20,898)

 

 

 

Three Months

 

Nine Months

Period ended:

 

2012

 

2011

 

2012

 

2011

Gains (losses) on hedge effectiveness recognized as operating costs (R$)

 

1,843

 

-

 

(6,674)

 

-

Gains (losses) on hedge ineffectiveness recognized in financial income (expenses)

 

9,134

 

7,159

 

(5,826)

 

29,287

Gains (losses) on hedge ineffectiveness recognized in financial income (expenses) for future periods (R$)

 

37,906

 

(33,660)

 

2,897

 

(86,583)

Total gains (losses) on hedge ineffectiveness recognized in financial income (expenses) (R$)

 

47,040

 

(26,501)

 

(2,929)

 

(57,296)

Exposure percentage hedged during the period

 

30%

 

55%

 

46%

 

48%

 
 

 

4T12

 

1T13

 

2T13

 

3T13

Total 12M

 

4T13 - 1T15

Percentage of fuel exposure hedged

25%

 

4%

 

3%

 

4%

9%

 

5%

Notional amount in barrels (thousands)

1,065

 

202

 

139

 

180

1,586

 

1,524

Future rate agreed per barrel (US$) *

111.02

 

113.43

 

112.13

 

108.45

111.13

 

104.24

Total in reais **

240,091

 

46,527

 

31,649

 

39,639

357,906

 

322,597

                       

 

  Page 61 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

* Weighted average between call strikes,

** The exchange rate as of 09/30/12 was R$2.0306/ US$1.00.

 

 

b)        Foreign Exchange Hedge  

 

The Company and its subsidiaries uses derivative contracts as U.S. dollar hedges conducted with BM&FBOVESPA, using an exclusive investments fund as vehicle for contracting risk coverage.

In September 2011, Management, considering the future economic outlook, decided to suspend temporarily the currency hedge of the Company’s cash flows. In January 2012, the Administration resumed hedging.

As of September 30, 2012, R$47,779 financial assets of the exclusive investment fund were bank guarantee linked to margin deposits warranty on the BM&F, to cover the derivative transactions.

As of September 30, 2012, the Company and its subsidiaries held foreign exchange derivative contracts in U.S. dollar not designated as hedge accounting.Losses from hedge ineffectiveness recognized during the period ended September 30, 2012 and of 2011 are presented below:

Period ended:

09/30/2012

 

12/31/2011

Fair value at the end of period (R$)

(962)

 

-

Volume hedged for future periods (R$)

146,000

 

-

 

   

Three months

 

Nine months

Period ended:

 

2012

 

2011

 

2012

 

2011

Total hedge ineffective gains (losses) recognized in financial income (expenses) (R$)

 

(1,349)

 

1,022

 

56,787

 

293

Percentage exposure hedged during the period  

 

24%

 

4.2%

 

11%

 

5.4%

 

 

4T12

 

1T13

 

2T13

 

3T13

 

Total 12M

Percentage of cash flow exposure

24%

 

0%

 

0%

 

0%

 

6%

Notional amount (US$)

146,000

 

-

 

-

 

-

 

146,000

Future rate agreed (R$)

2.0415

 

-

 

-

 

-

 

2.0415

Total in reais

298,055

 

-

 

-

 

-

 

298,055

 

  Page 62 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

Since July/2011 the Company and its subsidiaries do not have foreign exchange derivative contracts designated as fair value hedge of U.S. dollar. The table below shows the amounts recognized in financial income related to these transactions:

   

Three months

 

Nine months

Period ended:

 

2012

 

2011

 

2012

 

2011

Hedge effectiveness gains (losses) recognized in financial expenses (R$)

 

-

 

-

 

-

 

(34,130)

Percentage of exposure hedged during the period

 

-

 

-

 

-

 

21%

 

In March 2012 the currency swaps (USD x CDI) to hedge a credit facility (working capital) indexed to dollar were settled. The Company and its subsidiaries did not enter into new contracts of this type.The table below shows the amounts recognized in financial income (expenses) related to these transactions:

   

Three months

 

Nine months

Period ended

 

2012

 

2011

 

2012

 

2011

Gains (losses) recognized in financial income (expenses)

 

-

 

23,930

 

(4,211)

 

5,051

 

 

c)        Interest rate hedges

 

As of September 30, 2012, the Company and its subsidiaries have swap derivatives designated as cash flow hedge for Libor interest rate. The following is a summary interest rate derivative contracts designated as Libor cash flow hedges:

Closing balance at:

09/30/2012

 

12/31/2011

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

(68,903)

 

(88,440)

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

311,040

 

505,181

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

631,598

 

947,618

Hedge losses recognized in shareholders’ equity, net of taxes (R$)

(71,715)

 

(58,370)

 

   

Three months

 

Nine months

Period ended:

 

2012

 

2011

 

2012

 

2011

Losses recognized in financial expenses (R$)

 

(1,934)

 

-

 

(4,054)

 

-

 

As of September 30, 2012 the Company and its subsidiaries did not hold positions in Libor interest derivative contracts not designated for hedge accounting. The table below shows the amounts recognized in financial income and expenses related to these transactions:

 

  Page 63 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

   

Three months

 

Nine months

Period ended

 

2012

 

2011

 

2012

 

2011

Losses recognized in financial expenses

 

-

 

(13,985)

 

(123)

 

(22,920)

 

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 September 30, 2012 and based on the scenarios described above.

The probable scenario of the  the Company is the maintaining of the market rates and therefore the impact on fair value is null.

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

Consolidated

I)     Fuel risk fator

 

As of September 30, 2012, the Company held derivative contracts for oil WTI, Brent and Heating Oil, totaling 3,110  thousand barrels, maturing from September, 2012 to December 2014.

 Derivative fuel

 

   

 

Risk

​​Exposed fuels

Adverse Scenario Remote

Possible Adverse Scenario

Probable Scenario

 

 

-50%

-25%

 

Curve drop in the price Brent

23,856

(267,917

(122,074

-

 

 

 

 

 

 

Brent

US$57.29/bbl

US$85.93/bbl

US$114.57/bbl

 

 

 

 

 

  Page 64 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

II)       Foreign exchange risk factor        

 

As of September 30, 2012, the Company held derivatives contracts in US dollar in the notional value of US$146,000 with maturity in October and November 2012 and an exposure to exchange losses based on R$3,191,885.

Instruments

Risk

Exposed amounts as of

Probable Scenario

Possible Adverse Scenario

Adverse Scenario Remote

+25%

+50%

Assets- liabilities  

Dollar devaluation

(3,191,885)

-

(797,971)

(1,595,943)

Derivative

Dollar devaluation

(962)

-

67,660

135,321

 

 

(3,192,847)

-

(730,311)

(1,460,622)

 

 

       

 

 

Dollar

2.0306

2.53825

3.0459

           

 

III)    Interest risk factor

 

On September 30, 2012, the Company holds assets and liabilities indexed to the CDI-Cetip overnight rate, financial liabilities indexed to the TJLP and Libor interest, loans indexed to the IPCA and derivatives position in LIBOR.

In the sensitivity analysis of non-derivative financial instruments it was considered the impacts on quarterly interest of the exposed values as of September 30, 2012, arising from fluctuations in interest rates according to the scenarios presented below:

Instruments

Risk

Exposed amounts

 

Probable Scenario

 

Possible Adverse Scenario

 

Adverse Scenario Remote

 

 

25%

 

50%

Short-term financial investments

Decrease in the CDI

356,686

 

-

 

(3,138)

 

(6,277)

Derivative

Decrease in the Libor

(82,652)

 

-

 

(23,975)

 

(47,950)

Debt and finance lease

Increase in the Libor

(362,013)

 

-

 

(723)

 

(1,446)

Short and long term debt

Increase TJLP

(81,096)

 

-

 

(434)

 

(868)

Short and long term debt

Increase IPCA

(26,968)

 

-

 

(21)

 

(41)

 

  Page 65 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

Individual

I)         Foreign exchange risk

 

On September 30, 2012, the Company has a currency exposure of R$1,321,534

             

 

Instruments

Risk

Exposed amounts

Probable Scenario

Possible Adverse Scenario

Adverse Scenario Remote

25%

50%

Assets - liabilities

Dollar appreciation

(1,321,534)

-

(330, 384)

(660,767)

 

 

Dollar

2.0306

2.53825

3.0459

 

 

IFRS

Besides the sensitivity analysis based on the abovementioned standards, the Company and its subsidiaries also analyze the impact of the financial instrument quotation fluctuation on the  Company’s and its subsidiaries’ profit or loss and shareholders’ equity considering:

·                Increase and decrease by 10 percentage points in fuel prices, by keeping all the other variables constant;

·                Increase and decrease by 10 percentage points in dollar exchange rate, by keeping all the other variables constant;

·                Increase and decrease by 10 percentage points in Libor interest rate, by keeping all the other variables constant;

The sensitivity analysis includes only relevant monetary items that are material for the risks above mentioned. A positive number indicates an increase in income and equity when the risk appreciates by 10%.

The table below shows the sensitivity analysis made by the Company’s management, at September 30, 2012 and 2011, based on the scenarios described above:

Fuel:

 

 

 

 

 

 

 

 

 

 

 

 

Position as of September 30, 2012

 

Position as of December 31, 2011

Increase/(decrease) in fuel prices (percentage)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

10

 

(276.6)

 

(155.5)

 

(294.6)

 

(186.0)

(10)

 

276.6

 

179.2

 

294.6

 

180.6

 

 

 

 

 

 

 

 

 

 

Foreign exchange - USD:

 

 

 

 

 

 

 

 

 

 

Position as of September 30, 2012

 

Position as of December 31, 2011

Appreciation/(devaluation) of USD/R$
(percentage)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

10

 

(353.3)

 

(233.2)

 

(385.7)

 

(254.5)

(10)

 

353.3

 

233.2

 

385.7

 

254.5

 

 

 

 

 

 

 

 

 

Interest rate - Libor:

 

 

 

 

 

 

 

 

 

Position as of September 30, 2012

 

Position as of December 31, 2011

Increase/(decrease) in Libor (percentage)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

 

Effect on income before tax (R$ million)

 

Effect on equity (R$ million)

10

 

(0.9)

 

(4.3)

 

(0.5)

 

8.7

(10)

 

0.9

 

4.3

 

0.5

 

(9.4)

 

  Page 66 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

 

    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 states 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 September 30, 2012:

Financial Instrument

 

Carrying amount

 

Other Significant Observable Factors (Level 2)

 

 

 

 

 

Cash equivalents

 

1,050,557

 

1,050,557

Short-term investments

 

662,227

 

662,227

Restricted cash

 

166,442

 

166,442

Liabilities from derivative transactions

 

68,903

 

68,903

Rights on derivative transactions

 

23,856

 

23,856

 

  Page 67 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

29.  Non-cash transactions

As of September 30, 2012, the Company and its subsidiaries increased their property, plant and equipment in the amount of R$1,310, these transactions did not affect its cash in the period.

 

30.    Insurance

 

As of September 30, 2012, 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 Brazilian reais

 

In US dollar

Guarantee – Hull/war

9,640,932

 

4,738,723

Civil liability per event/aircraft

1,525,875

 

750,000

Inventories (base and transit)

335,693

 

165,000

 

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.

 

31.    Subsequent event

 

On October 1, 2012 the Board of Directors of the Company placed an incremental purchase order of 60 737 MAX aircraft with Boeing, to be delivered on or after 2018. The company will use the new aircraft primarily for the renewal of its fleet in the future.

 

On 10 October 2012 the Administrative Council for Economic Defense (CADE) approved the acquisition of Webjet Linhas Aéreas SA ("Webjet") by VRG Linhas Aereas SA ("VRG"), a subsidiary of Gol Linhas Aéreas Inteligentes S.A. The approval was subject to the signing of a Term Performance Commitment ("TCD") between VRG, Webjet and CADE to achieve certain operational efficiencies, specifically in regards of maintaining, by VRG and Webjet, of a minimum regularity level (85%) in the use of operating schedules (HOTRAN) at Santos Dumont airport. The Company aims to optimize the organizational structure of the Companies unifying and integrating their operations, reducing costs and taking advantage of synergies.The effects of these actions are being evaluated by management.

 

 

  Page 68 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

On October 19, 2012 the Board of Directors of the Company announced to its shareholders and the market the approval at the Extraordinary General Meeting, the Long Term Incentive Plan - Option Shares ("Stock Option Purchase Plan") and Long Term Incentive Plan - Restricted Stock (" Restricted Stock Plan"). In connection with these plans, 1,368,216 grants have been approved at the Board of Directors’ meeting on November 13, 2012 , which correspond to 778,912 Stock Option Purchase Plan and 589,304 of Restricted Shares.

 

 

 

 

  Page 69 of   71

 


 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION   FOR THE   QUARTER ENDED SEPTEMBER 30, 2012

(The Individual and Consolidated Interim Financial Information as of September 30, 2012 were reviewed by Independent Auditors to the extent described in the Report on the Review of Interim Financial Information dated on November 13, 2012)

(In Thousands of Reais – R$, except when indicated otherwise) 

 

(Convenience Translation into English from the Original Previously Issued in Portuguese)

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Board of Directors and Shareholders of

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. and its subsidiaries (the “Company”), included in the Interim Financial Information Form (ITR), for the three-month period ended September 30, 2012, which comprises the statement of financial position as of September 30, 2012 and the related statement of income and statement of comprehensive income for the three-month and nine-month periods then ended and the statement of changes in equity and statement of cash flows for the nine-month period then ended, including the explanatory notes.

Management is responsible for the preparation of the individual interim financial information in accordance with 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 such information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of Interim Financial 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 in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 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 making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

  Page 70 of   71

 


 

 

Conclusion on the individual interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual interim financial information included in the Interim Financial Information (ITR) referred to above is not prepared, in all material respects, in accordance with CPC 21 (R1) applicable to the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the CVM.

Conclusion on the consolidated interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the Interim Financial Information (ITR) referred to above is not prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the CVM.

Other matters

Interim statements of value added

We also have reviewed the interim statements of value added (“DVA”), for the nine-month period ended September 30, 2012, prepared under the responsibility of Management, the presentation of which is required by the standards issued by CVM, applicable to the preparation of Interim Financial Information (ITR), and is considered as supplemental information for International Financial Reporting Standards - IFRS that do not require the presentation of DVA. These statements were subject to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, consistently with the individual and consolidated interim financial information taken as a whole.

Convenience translation

The accompanying interim individual and consolidated financial information has been translated into English for the convenience of readers outside Brazil.

São Paulo, November 13, 2012

DELOITTE TOUCHE TOHMATSU

André Ricardo Aguillar Paulon

Auditores Independentes

Engagement Partner

 

 

  Page 71 of   71

 

 

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: November 13, 2012
 
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.