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___
Individual and consolidated
Financial Statements
GOL Linhas Aéreas Inteligentes S.A.
December 31, 2017
with independent auditors report
Gol Linhas Aéreas Inteligentes S.A.
Individual and consolidated financial statements
December 31, 2017
Contents
Management report |
01 |
Comments on business projection trends |
07 |
Annual Report of the Statutory Audit Committee (CAE) |
08 |
Statement of Executive officers on the financial statements |
10 |
Statement of Executive officers on the independent auditors report on the financial statements |
11 |
Independent auditors report on the individual and consolidated financial statements |
12 |
Statements of financial position |
18 |
Statements of income |
20 |
Statements of comprehensive income |
21 |
Statements of changes in equity |
22 |
Statements of cash flows |
24 |
Statements of value added |
26 |
Notes to the financial statements |
27 |
Management report
We remain committed to providing the best flight experience to our customers, with a focus on high-quality, on time service. We were the airline with the lowest proportion of complaints registered at ANAC in 2017: only 7 for every 100,000 passengers transported. Additionally, according to Infraero, in 4Q17 we maintained our on-time leadership in Brazil for the 19th consecutive quarter, with 92.5% of GOL’s flights (over 60,000) taking off on schedule.
“We expect to continue to drive our efficiency and technology advantage this year, as well as incorporating the new Boeing 737 MAX 8s in the second half of 2018. With a range of up to 6,500 km, the new 737 MAX 8 aircraft will allow GOL to offer non-stop flights from Brazil to any destination in Latin America, as well as to our recently announced destinations in Florida,” commented Paulo Kakinoff, CEO.
GOL began the sale of tickets to Miami and Orlando, its first destinations in the United States, in January of 2018. The new service will be flown by our new Boeing 737 MAX 8 aircraft, and will start on November 4th of this year, with departures from Brasília and Fortaleza; these cities were chosen for their privileged geographic locations and connectivity with other GOL markets. Customers will have at their disposal all the convenience and comfort already offered on the Company's flights, including in-flight internet and entertainment, leather seats with ample leg room, and free on-board drinks and meals.
“We remain focused on offering the best experience in air transportation, providing exclusive services to our customers on new, modern aircraft that connect our main markets with the most convenient schedules. Over 100 aircraft in our fleet have already been retrofitted with eco-leather seats, and more than 80 have on-board Wi-Fi. We also offer our customers selfie check-in, GOL+Conforto seats, and an expanded menu of on-board products, while remaining a low-fare leader. We recently launched live on-board television on our entertainment platform, which is the most complete and modern in Latin America and also offers on-demand internet and a free entertainment catalog,” concluded Kakinoff.
Financially, we continue to focus on reducing our cost of financing and improving our liquidity profile. In December 2017, through our subsidiary GOL Finance, we successfully completed a US$500 million issuance of Senior Notes maturing in 2025, with a 7.00% coupon. In 4Q17, our net debt (ex-perpetual bonds) to LTM EBITDA ratio improved to 3.0x, and our total liquidity increased to R$3.2 billion.
“During 2017, we were upgraded by all three major rating agencies. Fitch and S&P raised our credit rating twice, ending the year at B, stable outlook, and B-, positive outlook, respectively. In December, Moody's upgraded GOL’s corporate credit rating by four notches to B2, stable outlook. This is clear evidence that the market has now begun to acknowledge GOL’s improved credit profile, the result of the successful right-sizing and capital structure optimization plan that the Company has executed in recent years,” said Richard Lark, CFO.
We were lowest cost airline in the region for the 17th consecutive year, a result of our simplified operation with a single, standardized fleet (lower crew costs, intelligent spare parts management and best-in-class maintenance), and our lean and productive operations with reduced fixed costs. 4Q17 aircraft utilization was 12.4 block hours per day (an increase of 5.4% over 4Q16), and our load factor increased by 3.4 pp, reaching 81.0%, while our breakeven load factor decreased by 1.5 p.p. to 70.5%. "Our efficiency and cost advantage ensure our position as #1 airline in Brazil,” Richard concluded.
1
Operational and Financial Indicators
Traffic data – GOL |
4Q17 |
4Q16 |
% Var. |
2017 |
2016 |
% Var. |
RPK GOL – Total |
9,896 |
9,161 |
8.0% |
37,230 |
35,928 |
3.6% |
RPK GOL – Domestic |
8,879 |
8,230 |
7.9% |
33,246 |
32,031 |
3.8% |
RPK GOL – International |
1,017 |
931 |
9.2% |
3,984 |
3,897 |
2.2% |
ASK GOL – Total |
12,213 |
11,800 |
3.5% |
46,694 |
46,329 |
0.8% |
ASK GOL – Domestic |
10,863 |
10,568 |
2.8% |
41,459 |
41,104 |
0.9% |
ASK GOL – International |
1,350 |
1,232 |
9.6% |
5,235 |
5,226 |
0.2% |
GOL Load Factor – Total |
81.0% |
77.6% |
3.4 p.p |
79.7% |
77.5% |
2.2 p.p |
GOL Load Factor - Domestic |
81.7% |
77.9% |
3.9 p.p |
80.2% |
77.9% |
2.3 p.p |
GOL Load Factor - International |
75.3% |
75.6% |
-0.3 p.p |
76.1% |
74.6% |
1.5 p.p |
Operating data |
4Q17 |
4Q16 |
% Var. |
2017 |
2016 |
% Var. |
Average Fare (R$) |
303.23 |
288.96 |
4.9% |
283.73 |
265.21 |
7.0% |
Revenue Passengers - Pax on board ('000) |
8,606 |
8,106 |
6.2% |
32,380 |
32,623 |
-0.7% |
Aircraft Utilization (block hours/day)5 |
12.4 |
11.7 |
5.4% |
12.1 |
11.2 |
8.1% |
Departures |
64,910 |
63,860 |
1.6% |
250,654 |
261,514 |
-4.2% |
Total Seats (‘000) |
10,872 |
10,697 |
1.6% |
41,953 |
43,640 |
-3.9% |
Average Stage Length (km) |
1,103 |
1,084 |
1.8% |
1,094 |
1,043 |
4.8% |
Fuel Consumption (mm liters) |
364 |
350 |
4.1% |
1,379 |
1,391 |
-0.9% |
Full-time Employees (at period end) |
14,532 |
15,261 |
-4.8% |
14,532 |
15,261 |
-4.8% |
Average Operating Fleet6 |
111 |
112 |
-1.3% |
109 |
117 |
-6.9% |
On-time Departures |
92.5% |
94.0% |
-1.5 p.p |
94.6% |
94.8% |
-0.2 p.p |
Flight Completion |
98.8% |
98.3% |
0.4 p.p |
98.5% |
94.2% |
4.3 p.p |
Passenger Complaints (per 1000 pax) |
1.62 |
1.73 |
-6.3% |
1.45 |
1.99 |
-27.4% |
Lost Baggage (per 1000 pax) |
2.09 |
2.15 |
-3.2% |
2.06 |
2.23 |
-7.6% |
Financial data |
4Q17 |
4Q16 |
% Var. |
2017 |
2016 |
% Var. |
Net YIELD (R$ cents) |
26.36 |
25.57 |
3.1% |
24.67 |
24.14 |
2.2% |
Net PRASK (R$ cents) |
21.35 |
19.85 |
7.6% |
19.67 |
18.72 |
5.1% |
Net RASK (R$ cents) |
24.38 |
22.58 |
8.0% |
22.65 |
21.30 |
6.3% |
CASK (R$ cents)4 |
21.21 |
20.93 |
1.4% |
20.53 |
19.79 |
3.7% |
CASK ex-fuel (R$ cents)4 |
14.47 |
15.17 |
-4.6% |
14.35 |
13.97 |
2.7% |
Breakeven Load Factor |
70.5% |
72.0% |
-1.5 p.p |
72.3% |
72.1% |
0.2 p.p |
Average Exchange Rate 1 |
3.2466 |
3.2953 |
-1.5% |
3.1925 |
3.4878 |
-8.5% |
End of period Exchange Rate 1 |
3.3080 |
3.2591 |
1.5% |
3.3080 |
3.2591 |
1.5% |
WTI (avg. per barrel. US$) 2 |
55.30 |
49.29 |
12.2% |
50.85 |
43.44 |
17.1% |
Price per liter Fuel (R$) 3 |
2.26 |
1.94 |
16.4% |
2.09 |
1.94 |
8.1% |
Gulf Coast Jet Fuel (avg. per liter. US$)2 |
0.46 |
0.38 |
22.1% |
0.41 |
0.33 |
24.7% |
1. Source: Central Bank; 2. Source: Bloomberg; 3. Fuel expenses/liters consumed; 4. Including results on the return of aircraft under finance lease contracts, sale-leaseback transactions and tax regularization program expenses; 5. Change on methodology from flight hours to block hours per day between 1Q17 and 2Q17; 5. and 6. Average operating fleet excluding sub-leased aircraft and those under MRO.
*Certain variation calculations in this report may not match due to rounding.
Domestic market – GOL
In this quarter, GOL’s domestic supply increased by 2.8% over 4Q16. Demand increased by 7.9% in 4Q17, and load factor reached 81.7%, an increase of 3.9 p.p. when compared to 4Q16.
In 2017, domestic supply expanded 0.9% in comparison to 2016, while demand had an increase of 3.8% in the same period. Load factor improved by 2.3 p.p, reaching 80.2% in 2017.
2
GOL transported 8.1 million domestic passengers in the quarter, representing an increase of 6.8% when compared with the same period in 2016. The Company is the leader in terms of transported passengers in Brazil’s domestic aviation market.
International market - GOL
GOL’s international supply increased by 9.6% in the quarter compared to 4Q16. In 2017, The Company showed an increase of 0.2% when compared to 2016.
International demand increased 9.2% in 4Q17 when compared to 4Q16 and was up 2.2% in for 2017 when compared to 2016. International load factors in 4Q17 were 75.3%, decreasing 0.3 p.p. over 4Q16. In 2017, load factors reached 76.1%, a growth of 1.5 p.p. in relation to 2016. During the quarter, GOL transported 0.5 million passengers in the international market, an increase of 6.5% when compared to the fourth quarter of 2016.
Volume of Departures and Total seats - GOL
The total volume of GOL departures was 64,910, an increase of 1.6% in 4Q17 over 4Q16. Flights totaled 250,654 departures for 2017, down 4.2% when compared to 2016, due to the rationalization of our network carried out in May 2016.
The total number of seats available to the market was 10.9 million in the fourth quarter of 2017, an increase of 1.6% over the same period of 2016. In 2017, the total number of seats was 42.0 million seats, a decrease of 3.9% over 2016.
PRASK, Yield and RASK
Net PRASK increased by 7.6% in the quarter when compared to 4Q16, reaching 21.35 cents (R$), due to the growth of net passenger revenue of 11.4% in the quarter. In 2017, net PRASK reached 19.67 cents (R$), an increase of 5.1% compared to 2016.
Our Net RASK was 24.38 cents (R$) in 4Q17, an increase of 8.0% over 4Q16. In 2017, it was 22.65 cents (R$), an increase of 6.3% over the same period of 2016.
Net yield increased by 3.1% in 4Q17 compared to 4Q16, reaching 26.36 cents (R$), largely due to the 4.9% increase in our average fare. In 2017, net yield increased by 2.2% when compared to 2016, reaching 24.67 cents (R$).
Total Fleet
Final |
4Q17 |
4Q16 |
Var. |
3Q17 |
Var. |
Boeing 737-NGs |
119 |
130 |
-11 |
120 |
-1 |
737-800 NG |
92 |
102 |
-10 |
92 |
0 |
737-700 NG |
27 |
28 |
-1 |
28 |
-1 |
By rental type |
4Q17 |
4Q16 |
Var. |
3Q17 |
Var. |
Financial Leasing (737-NG) |
31 |
34 |
-3 |
31 |
0 |
Operating Leasing (373-NG) |
88 |
96 |
-8 |
89 |
-1 |
At the end of 2017, GOL was operating a fleet of 119 Boeing 737-NG aircraft. At the end of 2016, out of a total of 130 aircraft, GOL was operating 121 aircraft on its routes. Of the nine remaining aircraft, seven were in the process of being returned to lessors and two were sub-leased to other airlines.
3
GOL has 88 aircraft under operating leasing arrangements and 31 aircraft under financial leasing structures. 31 aircraft in the total fleet have a purchase option at the termination of their leasing contracts.
The average age of the fleet was 9.2 years at the end of 4Q17. In order to maintain this low average, the Company has 120 firm Boeing 737 MAX 8 acquisition orders for fleet renewal by 2028. The first Boeing 737 MAX aircraft is expected to be received by the Company in July 2018.
Fleet plan |
2017 |
2018E |
2019E |
>2019E |
Total |
Operating Fleet (End of the year) |
115 |
121 |
124 |
|
|
Aircraft Commitments (R$ million)* |
- |
- |
1,117.6 |
43,972.8 |
45,090.4 |
Pre-Delivery Payments (R$ million) |
- |
316.2 |
773.3 |
5,374.1 |
6,463.6 |
* Considers aircraft list price
The Company maintains standards of excellence in its maintenance procedures, both with regards to its equipment and in the provision of services to other operators and to its partner Delta. This is supported through certifications by regulatory agencies including ANAC- National Civil Aviation Agency, the American regulatory agency FAA - Federal Aviation Administration and recently EASA - European Aviation Safety Agency, the aeronautical regulator of the European community. These certifications ratify the high standard and excellence in aircraft and component maintenance services that reaffirm GOL’s commitment to ensuring that its processes, manuals and maintenance training programs are in line with aviation global best practices.
Relationship with Independent Auditors
When hiring services that are not related to external auditing from its independent auditors, Smiles bases its conduct on principles that preserve the auditor’s independence. Pursuant to internationally accepted standards, these principles consist of: (a) the auditors must not audit their own work, (b) the auditors must not execute managing functions for their clients and (c) the auditors must not represent their clients’ legal interests.
Based on the subparagraph III, article 2 of the CVM Instruction 381/2003, the Company adopts a formal procedure to hire services other than external auditing from our auditors. The procedure consists of consulting its Audit Committee to ensure that those services shall not affect the independence and the objectivity, required for the independent audit performance. Additionally, formal statements are required from the auditors regarding their independence while providing such services.
The Company informs that its independent auditor for the period, Ernst & Young Auditores Independentes (“EY”) did not provide additional services not related to auditing in the 2017 fiscal year.
4
Glossary of industry terms
| AIRCRAFT LEASING: an agreement through which a company (the lessor), acquires a resource chosen by its client (the lessee) for subsequent rental to the latter for a determined period.
| AIRCRAFT UTILIZATION: the average number of hours operated per day by the aircraft.
| AVAILABLE SEAT KILOMETERS (ASK): the aircraft seating capacity multiplied by the number of kilometers flown.
| AVAILaBLE FREIGHT TONNE KILOMETER (AFTK): cargo capacity in tonnes multiplied by number of kilometers flown.
| AVERAGE STAGE LENGTH: the average number of kilometers flown per flight.
| BLOCK HOURS: the time an aircraft is in flight plus taxiing time.
| BREAKEVEN LOAD FACTOR: the passenger load factor that will result in passenger revenues being equal to operating expenses.
| BRENT: oil produced in the North Sea, traded on the London Stock Exchange and used as a reference in the European and Asian derivatives markets.
| CHARTER: a flight operated by an airline outside its normal or regular operations.
| EBITDAR: earnings before interest, taxes, depreciation, amortization and rent. Airlines normally present EBITDAR, since aircraft leasing represents a significant operating expense for their business.
| FREIGHT LOAD FACTOR (FLF): percentage of cargo capacity that is actually utilized (calculated dividing FTK by AFTK)
| FREIGHT TONNE KILOMETERS (FTK): weight of revenue cargo in tonnes multiplied by number of kilometers flown by such tonnes.
| LESSOR: the party renting a property or other asset to another party, the lessee.
| LOAD FACTOR: the percentage of aircraft seating capacity that is actually utilized (calculated by dividing RPK by ASK).
| LONG-HAUL FLIGHTS: long-distance flights (in GOL’s case, flights of more than four hours’ duration).
| OPERATING COST PER AVAILABLE SEAT KILOMETER (CASK): operating expenses divided by the total number of available seat kilometers.
| OPERATING COST PER AVAILABLE SEAT KILOMETER EX-FUEL (CASK EX-FUEL): operating cost divided by the total number of available seat kilometers excluding fuel expenses.
| OPERATING REVENUE PER AVAILABLE SEAT KILOMETER (RASK): total operating revenue divided by the total number of available seat kilometers.
| PASSENGER REVENUE PER AVAILABLE SEAT KILOMETER (PRASK): total passenger revenue divided by the total number of available seat kilometers.
| REVENUE PASSENGERS: the total number of passengers on board who have paid more than 25% of the full flight fare.
| REVENUE PASSENGER KILOMETERS (RPK): the sum of the products of the number of paying passengers on a given flight and the length of the flight.
5
| SALE-LEASEBACK: a financial transaction whereby a resource is sold and then leased back, enabling use of the resource without owning it.
| SLOT: the right of an aircraft to take off or land at a given airport for a determined period of time.
| SUB-LEASE: an arrangement whereby a lessor in a rent agreement leases the item rented to a fourth party.
| TOTAL CASH: the sum of cash, financial investments and short and long-term restricted cash.
| WTI Barrel: West Texas Intermediate – the West Texas region, where US oil exploration is concentrated. Serves as a reference for the US petroleum byproduct markets.
| Yield pEr PASSENGER KILOMETER: the average value paid by a passenger to fly one kilometer.
Investor Relations
ri@voegol.com.br
www.voegol.com.br/ir
+55(11)2128-4700
About GOL Linhas Aéreas Inteligentes S.A. (“GOL”)
Brazil's largest airline group. GOL is Brazil's largest airline, carrying 33 million passengers annually on more than 700 daily flights to 64 destinations, 53 in Brazil and 11 in South America and the Caribbean, on a fleet of 119 Boeing 737 aircraft, with a further 120 Boeing 737 MAX on order. GOLLOG is a leading cargo transportation and logistics business serving more than 2,400 Brazilian municipalities and, through partners, 205 international destinations in 95 countries. SMILES is one of the largest coalition loyalty programs in Latin America, with over 13 million registered participants, allowing clients to accumulate miles and redeem tickets for more than 700 locations worldwide. GOL has a team of more than 15,000 highly skilled aviation professionals delivering Brazil's top on-time performance, and an industry leading 17 year safety record. GOL's shares are traded on the NYSE (GOL) and the B3 (GOLL4).
Disclaimer
This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of GOL. These are merely projections and, as such, are based exclusively on the expectations of GOL’s management. Such forward-looking statements depend, substantially, on external factors, in addition to the risks disclosed in GOL’s filed disclosure documents and are, therefore, subject to change without prior notice. The Company's non-financial information was not reviewed by the independent auditors.
Non-GAAP Measures
To be consistent with industry practice, we disclose so-called non-GAAP financial measures which are not recognized under IFRS or U.S. GAAP, including “Net Debt”, “Adjusted Net Debt”, ”total liquidity”, "EBITDA" and EBITDAR”. Our management believes that disclosure of non-GAAP measures provides useful information to investors, financial analysts and the public in their review of our operating performance and their comparison of our operating performance to the operating performance of other companies in the same industry and other industries. However, these non-GAAP items do not have standardized meanings and may not be directly comparable to similarly-titled items adopted by other companies. Potential investors should not rely on information not recognized under IFRS as a substitute for the GAAP measures of earnings or liquidity in making an investment decision.
6
Comments on business projection trends
The Company's financial perspectives are detailed below:
Financial Outlook |
Full year 2017 Guidance |
2017 Results |
2018E Guidance |
2019E1 Preliminary |
Total fleet (average) |
116 |
117 |
118 |
122 to 124 |
ASKs, System (% change) |
+ 0.5% |
+ 0.8% |
1% to 3% |
5% to 10% |
- Domestic |
+ 0.5% |
+ 0.9% |
0% to 3% |
1% to 3% |
- International |
+ 0.2% |
+ 0.2% |
7% to 10% |
30% to 40% |
Seats, System (% change) |
- 3% |
- 3.9% |
1% to 3% |
3% to 5% |
Departures, System (% change) |
-5% |
- 4.2% |
1% to 3% |
2% to 5% |
Average load factor (%) |
~ 79% |
79.7% |
79% to 80% |
79% to 81% |
Cargo and other revenues (R$ billion) |
~ 1.4 |
1.4 |
~ 1.6 |
~ 2 |
Total net revenues (R$ billion) |
~ 10.4 |
10.6 |
~ 11 |
~ 12 |
Non-fuel CASK (R$ cents) |
~ 14 |
14.5 |
~ 15 |
~ 15 |
Fuel liters consumed (mm) |
~ 1,370 |
1,379 |
~ 1,400 |
~ 1,440 |
Fuel price (R$ / liter) |
~ 2.1 |
2.1 |
~ 2.2 |
~ 2.6 |
Aircraft rent (R$mm) |
~ 950 |
940 |
~ 950 |
~ 1,000 |
EBITDA margin (%) |
~ 14% |
14.1% |
~ 16% |
~ 18% |
Operating (EBIT) margin (%) |
~ 9% |
9.4% |
~ 11% |
~ 13% |
Effective income tax rate (%) |
- |
N.M. |
~ 0% |
~ 0% |
Capital expenditures2 (R$mm) |
~ 600 |
560 |
~ 600 |
~ 600 |
Net Debt2 / EBITDA (x) |
~ 3.4x |
3.0x |
~ 3.0x |
~ 2.5x |
Fully-diluted shares outstanding (million) |
347.7 |
347.7 |
347.7 |
347.7 |
Earnings per share – fully diluted3(R$) |
0.80 to 0.90 |
0.42 |
1.20 to 1.40 |
1.70 to 2.30 |
Fully-diluted ADS outstanding (million) |
173.8 |
173.9 |
173.9 |
173.9 |
Earnings per ADS – fully diluted3 (US$) |
0.50 to 0.56 |
0.27 |
0.75 to 0.90 |
1.00 to 1.50 |
7
Annual Report of the Statutory Audit Committee (CAE)
General Information and Responsibilities
The Statutory Audit Committee (CAE) is a statutory body linked to the Board of Directors of Gol Linhas Aéreas Inteligentes S.A. (“Company”), which is composed of three independent members of the Board of Directors, who are elected by the Board members on annual basis, one of whom must be qualified as a Financial Expert. Pursuant to its internal regulations, the CAE is responsible for overseeing the quality and integrity of financial reports and statements; compliance with legal, regulatory and statutory standards; the suitability of risk management processes, internal control policies and procedures; internal audit activities. It is also responsible for overseeing the independent auditors’ work, including their independence and the quality and appropriateness of the services provided, as well as any differences of opinion with management. It determines the registration and exercise of the independent audit within the scope of the Brazilian Securities and Exchange Commission (CVM) and performs the function of an Audit Committee, in compliance with the Sarbanes Oxley Act, to which the Company is subject to, since it is registered at the Securities and Exchange Commission – SEC. The CAE is also responsible for overseeing related-party transactions and operating the complaints channel.
CAE’s Activities in 2017: In order to discuss the matters related to the year ended December 31, 2017, the CAE met eight times and, within its scope, carried out the following activities:
Its coordinator established the agendas and presided over the meetings;
It assessed the annual work plan and discussed the results of the activities performed by the independent auditors in 2017;
It supervised the activities and performance of the Company’s internal audit, analyzing the annual work plan, discussing the result of the activities and reviews. Any issues raised by the internal audit about improvements in the internal control environment are discussed with the respective managers/officers in order to implement continuous improvements. It supervised and analyzed the effectiveness, quality and integrity of internal control mechanisms in order to, among others, monitor compliance with the provisions related to the integrity of the financial statements, including quarterly financial information and other interim financial statements;
It supervised, together with management and the internal audit, the different agreements entered into between the Company or its subsidiaries, on the one hand, and the controlling shareholder, on the other hand, in order to verify compliance with the Company’s policies and controls regarding related-party transactions;
It met with the independent auditors, Ernst & Young, and addressed the following topics: the relationship and communication between the CAE and the external auditors, the scope of the auditors’ work, and the findings based on the implementation of the independent auditor’s work plan, among others; and
It prepared the CAE’s activities and operation report in 2017, in accordance with good corporate governance practices and the applicable regulation.
8
Internal Control Systems
Based on the agenda defined for 2017, the CAE addressed the main topics related to the Company’s internal controls, assessing risk mitigation initiatives and the senior management’s commitment to its continuous improvement. As a result of the meetings with the Company’s internal areas, the Statutory Audit Committee had the opportunity to make suggestions to the Board of Directors for improvements in the processes, overseeing the results already obtained in 2017. Considering that in 2016, the Company received requests from the Internal Revenue Service to provide clarifications on specific expenses incurred in 2012 and 2013, the CAE installed a Special Committee to initiate a procedure to monitor the Company’s controls, as well as overlook the external independent audit hired to conduct an investigation and clarify all the facts. The Special Committee’s activities were concluded in 2017 and revealed that, although additional irregular payments were made to politically exposed persons, none of the amounts paid was material (individually or in the aggregate) in terms of cash flow, and none of our current employees, representatives or members of our board or Management was knowledgeable of any illegal purpose behind any of the identified transactions or of any illicit benefit to the Company arising from the investigated transactions.
Based on the information obtained, the Statutory Audit Committee recommended improvements to the internal control system. As a result of the implementation of these changes, the CAE considers the internal control system of the Company and its subsidiaries to be suitable for the size and complexity of their businesses and structured in order to ensure the efficiency of their operations and the systems that generate the financial reports, as well as compliance with applicable internal and external regulations.
Corporate Risk Management
CAE members, in the exercise of their duties and legal responsibilities, received information from the Company’s Administration about the relevant corporate risks, including the continuity risks, making evaluations and recommendations to increase the effectiveness of the risk management processes directly at Board of Directors’ meetings, contributing to and ratifying the initiatives implemented in 2017.
Conclusion
The CAE considers that the facts that have been presented to it, based on the works carried out and described in this Report, to be appropriate, and recommended, in its report, the approval of the Company’s audited financial statements for the year ended December 31, 2017.
São Paulo, March 6, 2018.
André Jánszky
Member of the Statutory Audit Committee
Antônio Kandir
Member of the Statutory Audit Committee
James Meaney
Member of the Statutory Audit Committee
9
Declaration of the officers on the financial statements
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the financial statements for the year ended December 31, 2017.
São Paulo, March 6, 2018.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
10
In compliance with CVM Instruction No. 480/09, the Executive officers declare that they have discussed, reviewed and approved the conclusions expressed in the independent auditors report on the individual and consolidated financial statements for the year ended December 31, 2017.
São Paulo, March 6, 2018.
Paulo S. Kakinoff
President and Chief Executive Officer
Richard F. Lark Jr.
Executive Vice President and Chief Financial Officer
11
(A free translation from Portuguese into English of the independent auditor’s report originally issued in Portuguese)
Independent auditor’s report on the individual and consolidated financial statements
To the shareholders and Board members and Officers of
Gol Linhas Aéreas Inteligentes S.A.
São Paulo - SP
Opinion
We have audited the individual and consolidated financial statements of GOL Linhas Aéreas Inteligentes S.A. (the “Company”), identified as Parent and Consolidated, respectively, which comprise the balance sheets as at December 31, 2017, and the statements of operations, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and consolidated financial position of the Company as at December 31, 2017, and of its individual and consolidated financial performance and its individual and consolidated cash flows for the year then ended in accordance with the accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Basis for opinion
We conducted our audit in accordance with the Brazilian and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the individual and consolidated financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Accountants (Código de Ética Profissional do Contador) and the professional requirements issued by the Federal Accounting Council (Conselho Federal de Contabilidade), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, the description of how our audit addressed the matter, including any commentary on the findings or outcome of our procedures, is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the individual and consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
12
Revenue recognition from passenger transportation
Revenue recognition from passenger transportation is highly dependent on information technology (IT) systems and their internal controls for the revenue recognition from passenger transportation when the air transportation service is provided. This process also takes into consideration other complex aspects that may affect the proper revenue recognition, such as recording of tickets sold but not used, unused tickets recorded as credits to passengers, and subject to expiration, in addition to agreements with other airline companies, interline and codeshare agreements with other airline companies. Revenues recognized by the Company are disclosed in Note 23 and the recognition criteria are described in Note 2.2 (k).
This subject was considered significant to our audit due to the complexity of the technology environment and its respective controls related to revenue recognition, including ticket prices in different currencies, as well as, the acquisition of tickets through miles programs.
How our audit addressed this matter:
Our audit procedures included, among others, the involvement of systems specialists to support us in assessing the operational design and effectiveness of IT controls and internal controls that comprise the process of ticket sales, registration, execution of passenger transportation and revenue recognition; the execution of audit tests with the purpose of assessing the integrity of the data in the IT systems involved in the revenue recognition process, through selection of tickets samples for each revenue group and tests on tickets used and unused; other passenger revenues, and passenger no-show, rebooking and cancellation charges; tests of internal controls on the tickets sales process and revenue recognition; discussion with Management the assessment of the audit differences identified, review of the audit differences recorded by the Company, as well as, the assessment on the internal controls impacted by the audit differences identified.
Additionally, we assessed the adequacy of disclosures made by the Company on this matter, included in Notes 2.2 (k) and 23 to the financial statements.
Deficiencies in the design and operation of internal controls regarding the reconciliation and review of revenue recognition process changed our assessment of the nature, timing and extent of our detailed audit procedures designed to obtain sufficient and adequate audit evidence related to revenue recognition of passenger transportation. Taking this into consideration, based on the results of our audit procedures performed on the revenue recognition for passenger transportation, we consider acceptable the assumptions and criteria related to the revenue recognition process prepared by Management, and the related disclosures, in the context of the financial statement taken as a whole.
13
Breakage revenue
The Company’s revenues take into consideration the estimated number of tickets and miles that are not expected to be used or redeemed up to their expiration date, and are recognized as breakage revenue based on a statistical calculation of tickets and miles with high potential for expiration due to their expiration or no use. The analyses and assumptions for the revenue recognition of breakage is reviewed annually by the Company’s Management to take into consideration the historical trend of tickets and miles expired, as well, as those with high potential to expire.
This matter was considered significant to our audit, considering the subjectivity involved in this analysis and the high level of judgment adopted by Management to determine the assumptions used to determine the expected number of tickets and miles that will expire.
How our audit addressed this matter:
Our audit procedures included, among others, the assessment of the design and operational effectiveness of controls implemented by Management for the revenue recognition of breakage; assessment of the reasonableness of assumptions related to the tickets and miles expected to expire, based on the historical data of tickets and miles expired; tests on a sampling based of miles earned, redeemed and expired; and analysis of the reasonableness of the other assumptions and methodology adopted by Management to determine the breakage rate used to recognize revenue.
Additionally, we assessed the adequacy of disclosures made by the Company on this matter, included in Notes 2.2 (k) e 2.2 (q) to the financial statements.
Deficiencies in the design and operation of internal controls regarding the review of breakage revenue balances changed our assessment of the nature, timing and extent of our detailed audit procedures designed to obtain sufficient and adequate audit evidence related to breakage revenue. Taking this into consideration, based on the results of our audit procedures performed on the assumptions and calculations of breakage revenue prepared by Management, we consider acceptable the estimates prepared by the Company and the related disclosures, in the context of the financial statement taken as a whole.
Deferred income tax
The Company recognized deferred income tax assets on unused tax losses and temporary differences between tax and books basis. As of December 31, 2017, the amount of deferred tax assets recorded in noncurrent assets in the consolidated financial statements was R$ 276,514 thousand.
The deferred tax assets was recognized based on the Management’s projections of future taxable profits for the next 5 years. These projections were prepared and based on assumptions, among others, (i) forecast of future market conditions and economy; (ii) revenue growth; (iii) discount rate; and (iv) changes in costs and expenses. These assumptions consider significant judgement and uncertainties, and it would be materially different based on future outcomes, which may impact the realization of deferred tax assets.
14
This matter was considered significant to our audit, considering the subjectivity involved in this analysis and the high level of judgment adopted by Management to determine the assumptions used and the projections of future profits.
How our audit addressed this matter:
Our audit procedures included, among others, the involvement of valuation specialists to assist us on the review of the business plan used in the projections of future profit and assumptions utilized by Management on the projections of future taxable profits, review of the discount rate, assessment on the off-set of deferred tax assets and liabilities on temporary differences.
Additionally, we assessed the adequacy of the disclosures made by the Company on this matter.
Based on the results of the audit procedures performed on the recognition, measurement and realization of the deferred tax assets, which is consistent with Management’s assessment, we consider that the criteria and assumptions on the recoverable value of deferred tax assets prepared by Management, as well as the related disclosure in Note 8.2 are acceptable, in the context of the financial statement taken as a whole.
Other matters
Statements of value added
The individual and consolidated statements of value added for the year ended December 31, 2017, prepared under the responsibility of the Company’s Management and presented as supplementary information under IFRS, were submitted to the same audit procedures performed in accordance with the audit of the Company’s financial statements. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and whether their form and content are in accordance with the criteria provided for in Accounting Pronouncement CPC 9 - Statement of Value Added. In our opinion, these statements of value added were prepared fairly, in all material respects, in accordance with the criteria defined in Accounting Pronouncement CPC 9 and are consistent with the overall individual and consolidated financial statements as a whole.
Other information accompanying the individual and consolidated financial statements and the auditor’s report
The Company’s Management is responsible for other information that includes the Management Report. Our opinion on the individual and consolidated financial statements does not cover the Management Report and we do not express any form of audit conclusion on the Management Report.
In connection with the audit of the individual and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or based on our knowledge obtained in the audit, or otherwise, whether this report appears to be materially misstated. If based on our work performed, we conclude that there is material misstatement in the Management Report, we are required to report this fact. We have nothing to report on this matter.
15
Responsibilities of Management and those charged with governance for the individual and consolidated financial statements
Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company and its subsidiaries or to cease operations, or has no realistic alternative but to do so.
Those charged with governance of the Company and its subsidiaries are responsible for overseeing the financial reporting process.
Auditor’s responsibilities for the audit of the individual and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with the Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· |
Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. | |
· |
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Company and its subsidiaries. | |
· |
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. | |
· |
Conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Company and its subsidiaries to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern. |
16
· |
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. | |
· |
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
São Paulo, March 6, 2018, 2017
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Vanessa Martins Bernardi
Accountant CRC-1SP244569/O-3
17
Statements of financial positionFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
Parent Company |
Consolidated | ||||
Assets |
Note |
2017 |
2016 |
2017 |
2016 |
Current assets |
|||||
Cash and cash equivalents |
3 |
103,727 |
57,378 |
1,026,862 |
562,207 |
Short-term investments |
4 |
730,900 |
49 |
955,589 |
431,233 |
Trade receivables |
6 |
- |
- |
936,478 |
760,237 |
Inventories |
7 |
- |
- |
178,491 |
182,588 |
Recoverable taxes |
8.1 |
19,446 |
9,289 |
83,210 |
27,287 |
Derivatives |
28 |
- |
- |
40,647 |
3,817 |
Other current assets |
55,563 |
64,770 |
123,721 |
113,345 | |
Total current assets |
|
909,636 |
131,486 |
3,344,998 |
2,080,714 |
|
|
|
|||
Noncurrent assets |
|
|
|||
Deposits |
9 |
64,736 |
38,760 |
1,163,759 |
1,188,992 |
Restricted cash |
5 |
38,432 |
32,656 |
268,047 |
168,769 |
Recoverable taxes |
8.1 |
6,163 |
17,286 |
7,045 |
72,060 |
Deferred taxes |
8.2 |
27,703 |
13,409 |
276,514 |
107,159 |
Other noncurrent assets |
- |
- |
- |
4,713 | |
Related parties |
10 |
1,570,591 |
1,873,350 |
- |
- |
Investments |
12 |
388,235 |
281,758 |
1,333 |
17,222 |
Property, plant and equipment |
14 |
323,013 |
323,013 |
3,195,767 |
3,025,010 |
Intangible assets |
15 |
- |
- |
1,747,285 |
1,739,716 |
Total noncurrent assets |
|
2,418,873 |
2,580,232 |
6,659,750 |
6,323,641 |
|
|
|
|||
Total assets |
|
3,328,509 |
2,711,718 |
10,004,748 |
8,404,355 |
The accompanying notes are an integral part of the financial statements.
18
Statements of financial positionFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | |||
Liabilities and equity |
Note |
2017 |
2016 |
2017 |
2016 |
Current liabilities |
|||||
Short-term debt |
16 |
95,027 |
277,219 |
1,162,872 |
835,290 |
Suppliers |
|
13,473 |
1,314 |
1,249,124 |
1,097,997 |
Suppliers - Forfaiting |
17 |
- |
- |
78,416 |
- |
Salaries |
|
311 |
309 |
305,454 |
283,522 |
Taxes payable |
18 |
7,856 |
119 |
134,951 |
146,174 |
Landing fees |
- |
- |
365,651 |
239,566 | |
Advance ticket sales |
19 |
- |
- |
1,456,939 |
1,185,945 |
Mileage program |
20 |
- |
- |
765,114 |
781,707 |
Advances from customers |
- |
- |
21,718 |
16,823 | |
Provisions |
21 |
- |
- |
46,561 |
66,502 |
Derivatives |
28 |
- |
- |
34,457 |
89,211 |
Operating leases |
27 |
- |
- |
28,387 |
7,233 |
Other current liabilities |
2,357 |
2,252 |
100,401 |
98,772 | |
Total current liabilities |
|
119,024 |
281,213 |
5,750,045 |
4,848,742 |
|
|
|
|
|
|
Noncurrent liabilities |
|
|
|||
Long-term debt |
16 |
3,939,948 |
2,984,495 |
5,942,795 |
5,543,930 |
Suppliers |
- |
- |
222,026 |
13,517 | |
Provisions |
21 |
- |
- |
562,628 |
723,713 |
Mileage program |
20 |
- |
- |
188,204 |
219,325 |
Deferred taxes |
8.2 |
- |
- |
188,005 |
338,020 |
Taxes payable |
18 |
14,678 |
- |
66,196 |
42,803 |
Related companies |
10 |
135,010 |
21,818 |
- |
- |
Provision for loss on investment |
12 |
2,590,503 |
3,074,190 |
- |
- |
Operating leases |
27 |
- |
- |
110,723 |
- |
Other noncurrent liabilities |
10,305 |
- |
43,072 |
31,056 | |
Total noncurrent liabilities |
|
6,690,444 |
6,080,503 |
7,323,649 |
6,912,364 |
|
|
|
|
|
|
Equity |
22 |
|
|
||
Capital stock |
3,082,802 |
3,080,110 |
3,082,802 |
3,080,110 | |
Share issuance costs |
|
(42,290) |
(42,290) |
(155,618) |
(155,618) |
Treasury shares |
|
(4,168) |
(13,371) |
(4,168) |
(13,371) |
Capital reserves |
|
88,762 |
91,399 |
88,762 |
91,399 |
Equity valuation adjustments |
|
(79,316) |
(147,229) |
(79,316) |
(147,229) |
Share-based payments reserve |
|
119,308 |
113,918 |
119,308 |
113,918 |
Gains on change in investment |
|
760,545 |
693,251 |
760,545 |
693,251 |
Accumulated losses |
|
(7,406,602) |
(7,425,786) |
(7,293,274) |
(7,312,458) |
Deficit attributable to equity holders of the parent |
|
(3,480,959) |
(3,649,998) |
(3,480,959) |
(3,649,998) |
|
|
|
|
||
Non-controlling interests from Smiles |
|
- |
- |
412,013 |
293,247 |
|
|
|
|
|
|
Total deficit |
|
(3,480,959) |
(3,649,998) |
(3,068,946) |
(3,356,751) |
|
|
|
|
||
Total liabilities and deficit |
|
3,328,509 |
2,711,718 |
10,004,748 |
8,404,355 |
The accompanying notes are an integral part of the financial statements.
19
Statements of incomeFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
Parent Company |
Consolidated | ||
|
Note |
2017 |
2016 |
2017 |
2016 |
Net revenue |
|
|
|
|
|
Passenger |
|
- |
- |
9,185,805 |
8,671,442 |
Cargo and other |
|
- |
- |
1,390,217 |
1,195,893 |
Total net revenue |
23 |
- |
- |
10,576,022 |
9,867,335 |
|
|
|
|
|
|
Cost of services provided |
24 |
- |
- |
(7,681,376) |
(7,610,920) |
|
|
|
|
|
|
Gross profit |
|
- |
- |
2,894,646 |
2,256,415 |
|
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
|
Selling expenses |
24 |
- |
- |
(922,298) |
(989,269) |
Administrative expenses |
24 |
(31,693) |
(7,276) |
(976,065) |
(671,869) |
Other operating (expenses) income, net |
24 |
(7,072) |
219,434 |
(7,072) |
102,548 |
Total operating (expenses) income |
|
(38,765) |
212,158 |
(1,905,435) |
(1,558,590) |
|
|
|
|
|
|
Equity results |
12 |
365,938 |
(18,955) |
544 |
(1,280) |
|
|
|
|
|
|
Income before financial result, net and income taxes |
|
327,173 |
193,203 |
989,755 |
696,545 |
|
|
|
|
|
|
Financial result |
25 |
|
|
|
|
Financial income |
|
89,153 |
384,650 |
213,446 |
568,504 |
Financial expenses |
|
(389,509) |
(363,016) |
(1,050,461) |
(1,271,564) |
Exchange rate variation, net |
|
(24,612) |
629,325 |
(81,744) |
1,367,937 |
Total financial result |
|
(324,968) |
650,959 |
(918,759) |
664,877 |
|
|
|
|
|
|
Income before income taxes |
|
2,205 |
844,162 |
70,996 |
1,361,422 |
|
|
|
|
|
|
Income and social contribution taxes |
|
|
|
|
|
Current |
|
- |
- |
(239,846) |
(257,944) |
Deferred |
|
16,979 |
5,457 |
547,059 |
(1,114) |
Total income and social contribution taxes |
8 |
16,979 |
5,457 |
307,213 |
(259,058) |
|
|
|
|
|
|
Net income for the year before non-controlling interests |
|
19,184 |
849,619 |
378,209 |
1,102,364 |
|
|
|
|
|
|
Net income attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
19,184 |
849,619 |
19,184 |
849,619 |
Non-controlling interests from Smiles |
|
- |
- |
359,025 |
252,745 |
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
|
Per common share |
13 |
0.002 |
0.070 |
0.002 |
0.070 |
Per preferred share |
13 |
0.055 |
2.455 |
0.055 |
2.455 |
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
Per common share |
13 |
0.002 |
0.070 |
0.002 |
0.070 |
Per preferred share |
13 |
0.055 |
2.450 |
0.055 |
2.450 |
The accompanying notes are an integral part of the financial statements.
20
Statements of comprehensive income(In thousands of Brazilian reais - R$, except when otherwise indicated) Fiscal year ended December 31, 2017 |
|
|
Parent Company |
Consolidated | ||
|
Note |
2017 |
2016 |
2017 |
2016 |
|
|
|
|
|
|
Net income for the year |
|
19,184 |
849,619 |
378,209 |
1,102,364 |
|
|
|
|
|
|
Other comprehensive income to be reclassified to profit or loss in subsequent periods |
28 |
|
|
|
|
Cash flow hedges |
|
67,913 |
123,889 |
67,913 |
123,889 |
Tax effect |
|
- |
(92,179) |
- |
(92,179) |
|
|
67,913 |
31,710 |
67,913 |
31,710 |
|
|
|
|
|
|
Total comprehensive income for the year |
|
87,097 |
881,329 |
446,122 |
1,134,074 |
|
|
|
|
|
|
Comprehensive income attributable to: |
|
|
|
|
|
Equity holders of the parent |
|
87,097 |
881,329 |
87,097 |
881,329 |
Non-controlling interests from Smiles |
|
- |
- |
359,025 |
252,745 |
The accompanying notes are an integral part of the financial statements.
21
Statements of changes in equity - Parent CompanyFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
|
|
|
Capital reserves |
Equity valuation adjustments |
|
|
|
| |
|
Note |
Capital stock |
Share issuance costs |
Treasury shares |
Goodwill on transfer of shares |
Special goodwill reserve of subsidiary |
Unrealized hedge gain (losses) |
Share-based payments |
Gains on change in investment |
Accumulated losses |
Total |
Balances as of December 31, 2015 |
|
3,080,110 |
(41,895) |
(22,699) |
27,882 |
70,979 |
(178,939) |
103,126 |
690,379 |
(8,275,405) |
(4,546,462) |
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
31,710 |
- |
- |
- |
31,710 |
Share issuance costs |
|
- |
(395) |
- |
- |
- |
- |
- |
- |
- |
(395) |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
12,658 |
- |
- |
12,658 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
2,872 |
- |
2,872 |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
849,619 |
849,619 |
Restricted shares transferred |
|
- |
- |
9,328 |
(7,462) |
- |
- |
(1,866) |
- |
- |
- |
Balances as of December 31, 2016 |
|
3,080,110 |
(42,290) |
(13,371) |
20,420 |
70,979 |
(147,229) |
113,918 |
693,251 |
(7,425,786) |
(3,649,998) |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option exercised |
|
2,692 |
- |
- |
- |
- |
- |
- |
- |
- |
2,692 |
Other comprehensive income, net |
|
- |
- |
- |
- |
- |
67,913 |
- |
- |
- |
67,913 |
Share-based payments |
22 |
- |
- |
- |
- |
- |
- |
11,956 |
- |
- |
11,956 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
3,994 |
- |
3,994 |
Sale of interest in subsidiary |
12 |
- |
- |
- |
- |
- |
- |
- |
63,300 |
- |
63,300 |
Treasury shares transferred |
|
- |
- |
9,203 |
(2,637) |
- |
- |
(6,566) |
- |
- |
- |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
19,184 |
19,184 |
Balances as of December 31, 2017 |
|
3,082,802 |
(42,290) |
(4,168) |
17,783 |
70,979 |
(79,316) |
119,308 |
760,545 |
(7,406,602) |
(3,480,959) |
The accompanying notes are an integral part of the financial statements.
22
Statements of changes in equity - ConsolidatedFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
|
|
|
Capital reserves |
Equity valuation adjustments |
|
|
|
|
|
| |
|
Note |
Capital stock |
Share issuance costs |
Treasury shares |
Goodwill on transfer of shares |
Special goodwill reserve of subsidiary |
Unrealized hedge gains (losses) |
Share-based payments |
Gains on change in investment |
Accumulated losses |
Deficit attributable to equity holders of the parent |
Smiles’ non-controlling interests |
Total |
Balances as of December 31, 2015 |
|
3,080,110 |
(155,223) |
(22,699) |
27,882 |
70,979 |
(178,939) |
103,126 |
690,379 |
(8,162,077) |
(4,546,462) |
224,022 |
(4,322,440) |
Capital increase from exercise of stock option in subsidiary |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
3,507 |
3,507 |
Other comprehensive income (loss), net |
|
- |
- |
- |
- |
- |
31,710 |
- |
- |
- |
31,710 |
- |
31,710 |
Share issuance costs |
|
- |
(395) |
- |
- |
- |
- |
- |
- |
- |
(395) |
- |
(395) |
Share-based payments |
|
- |
- |
- |
- |
- |
- |
12,658 |
- |
- |
12,658 |
413 |
13,071 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
2,872 |
- |
2,872 |
313 |
3,185 |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
849,619 |
849,619 |
252,745 |
1,102,364 |
Restricted shares transferred |
|
- |
- |
9,328 |
(7,462) |
- |
- |
(1,866) |
- |
- |
- |
- |
- |
Interest on equity paid |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(10,422) |
(10,422) |
Dividends distributed |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(177,331) |
(177,331) |
Balances as of December 31, 2016 |
|
3,080,110 |
(155,618) |
(13,371) |
20,420 |
70,979 |
(147,229) |
113,918 |
693,251 |
(7,312,458) |
(3,649,998) |
293,247 |
(3,356,751) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
2,692 |
- |
- |
- |
- |
- |
- |
- |
- |
2,692 |
- |
2,692 |
Other comprehensive income (loss), net |
|
- |
- |
- |
- |
- |
67,913 |
- |
- |
- |
67,913 |
- |
67,913 |
Capital increase from exercise of stock option in subsidiary |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
1,988 |
1,988 |
Share issuance costs |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(523) |
(523) |
Share-based payments |
23 |
- |
- |
- |
- |
- |
- |
11,956 |
- |
- |
11,956 |
192 |
12,148 |
Gains on change in investment |
|
- |
- |
- |
- |
- |
- |
- |
3,994 |
- |
3,994 |
- |
3,994 |
Sale of interest in subsidiary |
13 |
- |
- |
- |
- |
- |
- |
- |
63,300 |
- |
63,300 |
4,865 |
68,165 |
Treasury shares transferred |
|
- |
- |
9,203 |
(2,637) |
- |
- |
(6,566) |
- |
- |
- |
- |
- |
Net income for the year |
|
- |
- |
- |
- |
- |
- |
- |
- |
19,184 |
19,184 |
359,025 |
378,209 |
Interest on equity distributed by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(14,071) |
(14,071) |
Minimum dividends distributed by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(46,931) |
(46,931) |
Additional dividends distributed by Smiles |
|
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(185,779) |
(185,779) |
Balances as of December 31, 2017 |
|
3,082,802 |
(155,618) |
(4,168) |
17,783 |
70,979 |
(79,316) |
119,308 |
760,545 |
(7,293,274) |
(3,480,959) |
412,013 |
(3,068,946) |
The accompanying notes are an integral part of the financial statements.
23
Statements of cash flowsFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | ||
|
2017 |
2016 |
2017 |
2016 |
Net income for the year |
19,184 |
849,619 |
378,209 |
1,102,364 |
Adjustment to reconcile net income to net cash provided by operating activities |
|
|
|
|
Depreciation and amortization |
- |
- |
505,425 |
447,668 |
Allowance for doubtful accounts |
- |
- |
24,913 |
9,806 |
Provision for legal proceedings |
- |
- |
158,263 |
189,244 |
Provision for inventory obsolescence |
- |
- |
3,059 |
- |
Deferred taxes |
(16,979) |
(5,457) |
(547,059) |
1,114 |
Equity results |
(365,938) |
18,955 |
(544) |
1,280 |
Share-based payments |
- |
775 |
14,849 |
13,524 |
Exchange and monetary variations, net |
52,589 |
(463,800) |
95,132 |
(1,149,616) |
Interest on debt, financial lease and other liabilities |
210,639 |
239,368 |
566,902 |
682,188 |
Unrealized hedge results |
- |
- |
8.639 |
82,990 |
Provision for profit sharing |
- |
- |
65,573 |
56,238 |
Write-off of property, plant and equipment and intangible assets |
- |
104,287 |
145,855 |
181,308 |
Write-off of goodwill on investment acquisition in associate |
- |
- |
15,184 |
- |
Losses from capital increase in associate |
- |
- |
- |
1,368 |
Other provisions |
- |
- |
- |
16,232 |
Gain on redemption of debt |
- |
(286,799) |
- |
(286,799) |
Adjusted net income (loss) |
(100,505) |
456,948 |
1,434,400 |
1,348,909 |
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
Trade receivables |
- |
- |
(198,370) |
(307,574) |
Short-term investments |
(730,851) |
179,077 |
(353,231) |
83,062 |
Inventories |
- |
- |
1,038 |
16,648 |
Deposits |
(22,500) |
(7,479) |
46,388 |
(323,641) |
Suppliers |
12,156 |
(5,559) |
(202,462) |
204,184 |
Suppliers - Forfaiting |
- |
- |
76,157 |
- |
Advance ticket sales |
- |
- |
270,994 |
(20,710) |
Mileage program |
- |
- |
(47,714) |
9,374 |
Advances from customers |
- |
- |
4,895 |
3,364 |
Salaries |
2 |
(75) |
(43,641) |
(23,351) |
Landing fees |
- |
- |
126,085 |
(74,090) |
Taxes payable |
25,099 |
(183) |
460,980 |
257,464 |
Derivatives |
- |
- |
(32.310) |
(13,384) |
Provisions |
- |
- |
(270,970) |
(253,643) |
Operating leases |
- |
- |
131,877 |
(158,994) |
Other assets |
21,361 |
29,871 |
18,157 |
64,220 |
Interest paid |
(272,597) |
(325,397) |
(528,398) |
(606,405) |
Income tax paid |
- |
- |
(221,122) |
(226,500) |
Net cash flows (used in) from operating activities |
(1,067,835) |
327,203 |
672,753 |
(21,067) |
|
|
|
|
|
Sale of interest in subsidiary |
68,163 |
- |
68,163 |
- |
Transactions with related parties |
372,582 |
(1,160,978) |
- |
- |
Short-term investments of Smiles |
- |
- |
(171,174) |
(45,651) |
Restricted cash |
(5,776) |
46,091 |
(100,835) |
542,107 |
Capital increase in associate |
- |
- |
- |
(3,439) |
Capital increase in subsidiary and investee |
(451,610) |
(191,587) |
- |
- |
Advances for property, plant and equipment acquisition, net |
- |
555,519 |
68,679 |
536,444 |
Property, plant and equipment |
- |
- |
(370,438) |
(409,709) |
Intangible assets |
- |
- |
(55,449) |
(29,656) |
Dividends and interest on shareholders’ equity received from associate |
293,651 |
166,411 |
1,249 |
1,993 |
Net cash flows (used in) from investing activities |
277,010 |
(584,544) |
(559,805) |
592,089 |
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
24
Statements of cash flowsFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
|
| ||
|
Parent Company |
Consolidated | ||
|
2017 |
2016 |
2017 |
2016 |
|
|
|
|
|
Loan funding, net of issuance costs |
1,654,000 |
- |
1,898,738 |
- |
Loan funding and exchange offer costs |
(56,950) |
(27,249) |
(65,628) |
(27,249) |
Loan payments |
(166,752) |
(50,298) |
(274,480) |
(520,519) |
Early payment of Senior Notes |
(707,142) |
- |
(707,142) |
- |
Finance lease payments |
- |
- |
(239,092) |
(342,791) |
|
|
| ||
Dividends and interest on equity paid to non-controlling interests of Smiles |
- |
- |
(254,892) |
(171,829) |
Capital increase |
2,692 |
- |
2,692 |
- |
Share issuance costs |
- |
(395) |
(523) |
(395) |
Transactions with related parties |
111,551 |
(1,161) |
- |
- |
Net cash flows (used in) from financing activities |
837,399 |
(79,103) |
359,673 |
(1,062,783) |
|
|
|
|
|
Foreign exchange variation on cash held in foreign currencies |
(225) |
6,499 |
(7,966) |
(18,364) |
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
46,349 |
(329,945) |
464,655 |
(510,125) |
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
57,378 |
387,323 |
562,207 |
1,072,332 |
Cash and cash equivalents at the end of the year |
103,282 |
57,378 |
1,026,862 |
562,207 |
|
|
|
|
|
Statements of cash flows - Additional information |
|
|
|
|
|
|
|
|
|
Non-cash transactions |
|
|
|
|
|
|
|
|
|
Interest on shareholders’ equity and dividends, net of taxes |
55,343 |
- |
(49,602) |
- |
Costs on sale in subsidiary’s interest |
4,865 |
- |
- |
- |
Escrow deposits |
10,307 |
- |
10,307 |
- |
Write-off of finance lease agreements |
- |
- |
(15,334) |
- |
Renegotiation of finance lease agreements |
- |
- |
- |
549,144 |
Provision for aircraft return |
- |
- |
- |
97,423 |
Software acquisition |
- |
- |
- |
25,660 |
Engine maintenance financing |
- |
- |
529,775 |
201,170 |
Property, plant and equipment acquisition through Finimp |
- |
- |
63,066 |
- |
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
25
Statements of value addedFiscal year ended December 31, 2017 (In thousands of Brazilian reais - R$, except when otherwise indicated) |
|
Parent Company |
Consolidated | ||
|
2017 |
2016 |
2017 |
2016 |
Revenues |
|
|
|
|
Passengers, cargo and other |
- |
- |
11,292,388 |
10,547,831 |
Other operating income |
268 |
299,177 |
40,607 |
336,933 |
Allowance for doubtful accounts |
- |
- |
(4,499) |
16,207 |
|
268 |
299,177 |
11,328,496 |
10,900,971 |
Inputs acquired from third parties (including ICMS and IPI) |
|
|
|
|
Suppliers of aircraft fuel |
- |
- |
(2,930,442) |
(2,753,918) |
Material, electricity, third-party services and others |
(32,796) |
(84,198) |
(2,940,355) |
(3,105,132) |
Aircraft insurance |
- |
- |
(12,495) |
(35,938) |
Sales and marketing |
(326) |
(215) |
(586,513) |
(572,388) |
Gross value added |
(32,854) |
214,764 |
4,858,691 |
4,433,595 |
|
|
|
|
|
Depreciation and amortization |
- |