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____
Quarterly Financial Information | |
TIM Participações S.A. | |
Three-month period ended September 30, 2004 | |
With Special Review Report of the Independent Auditors |
A free translation from Portuguese into English of Quarterly Financial Information prepared in Brazilian currency, in accordance with the accounting practices adopted in Brazil.
FEDERAL GOVERNMENT SERVICE | |
BRAZILIAN SECURITIES COMMISSION (CVM) | Corporate Legislation |
QUARTERLY INFORMATION ITR September 30, 2004 | |
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES |
REGISTRATION WITH THE CVM DOES NOT IMPLY ANY ANALYSIS OF THE COMPANY, COMPANY MANAGEMENT IS RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION PROVIDED. |
01.01 IDENTIFICATION
1 - CVM CODE 01763-9 |
2 COMPANY NAME TIM PARTICIPAÇÕES S.A. |
3 - National Corporate Taxpayers' Registration Number CNPJ 02.558.115/0001-21 |
4 State Registration Number NIRE 53 3 0000572 9 |
01.02 - HEAD OFFICE
1 - ADDRESS Rua Comendador Araújo, 299 |
2 SUBURB OR DISTRICT Centro | |||
3 POSTAL CODE 80420-000 |
4 MUNICIPALITY Curitiba |
5 STATE PR | ||
6 AREA CODE 55 - 41 |
7 TELEPHONE 312-6893 |
8 TELEPHONE - |
9 TELEPHONE - |
10 TELEX - |
11 - AREA CODE 55 - 41 |
12 FAX 312-6520 |
13 FAX - |
14 FAX - |
- |
15 - E-MAIL knozela@timbrasil.com.br |
01.03 - INVESTOR RELATIONS OFFICER (Company Mail Address)
1 NAME Paulo Roberto Cruz Cozza | ||||
2 - ADDRESS Rua Comendador Araújo, 299 |
3 SUBURB OR DISTRICT Centro | |||
4 POSTAL CODE 80420-000 |
5 MUNICIPALITY Curitiba |
6 STATE PR | ||
7 AREA CODE 55 - 41 |
8 TELEPHONE 312-6702 |
9 TELEPHONE - |
10 TELEPHONE - |
11 TELEX - |
12 - AREA CODE 55 - 41 |
13 FAX 312-6222 |
14 FAX - |
15 FAX - |
- |
16 - E-MAIL pcozza@timsul.com.br |
01.04 - GENERAL INFORMATION/INDEPENDENT ACCOUNTANT
CURRENT YEAR | CURRENT QUARTER | PRIOR QUARTER | |||||
1 - BEGINNING | 2 END | 3 - QUARTER | 4 BEGINNING | 5 END | 6 QUARTER | 7 BEGINNING | 8 END |
01.01.2004 |
12.31.2004 |
3 |
07.01.2004 |
09.30.2004 |
2 |
04.01.2004 |
06.30.2004 |
9 - INDEPENDENT ACCOUNTANT Ernst & Young Auditores Independentes S.S. |
10 - CVM CODE 00471-5 | ||||||
11 PARTNER RESPONSIBLE Mauro Moreira |
12 INDIVIDUAL TAXPAYERS REGISTRATION NUMBER
OF THE PARTNER RESPONSIBLE
510.931.467-53 |
01.05 - CAPITAL COMPOSITION
Number of shares (Thousand) |
Current quarter 09.30.2004 |
Prior quarter 06.30.2004 |
Same quarter in prior year 09.30.2003 |
Paid-up capital | |||
1 Common | 264,793,444 | 137,198,693 | 134,452,842 |
2 Preferred | 437,711,795 | 226,559,929 | 222,025,630 |
3 Total | 702,505,239 | 363,758,622 | 356,478,472 |
Treasury stock | |||
4 Common | 0 | 0 | 0 |
5 Preferred | 0 | 0 | 0 |
6 Total | 0 | 0 | 0 |
01.06 CHARACTERISTICS OF THE COMPANY
1 - TYPE OF COMPANY Commercial, industrial and other |
2 SITUATION Operational |
3 NATURE OF OWNERSHIP Local Private |
4 ACTIVITY CODE 113 Telecommunication |
5 - MAIN ACTIVITY Cellular Telecommunication Services |
6 TYPE OF CONSOLIDATION Full |
7 - TYPE OF REPORT OF INDEPENDENT ACCOUNTANT Unqualified |
01.07 - COMPANIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENTS
1 ITEM | 2 - CNPJ | 3 NAME |
01.08 - DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER
1 - ITEM | 2 EVENT | 3 - APPROVAL | 4 AMOUNT | 5 - BEGINNING OF PAYMENT | 6 - TYPE OF SHARE | 7 - AMOUNT PER SHARE |
01.09 - SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT YEAR
1 ITEM | 2 DATE OF CHANGE | 3 CAPITAL (IN THOUSANDS OF REAIS) |
4 - AMOUNT OF THE CHANGE (IN THOUSANDS OF REAIS) |
5 NATURE OF CHANGE | 7 - NUMBER OF SHARES ISSUED (IN THOUSAND) |
8 SHARE PRICE ON ISSUE
DATE (IN REAIS) |
01 | 05.06.2004 | 456,266 | 87,102 | Capital reserve | 7,280,151 | 4,1290 |
02 | 08.30.2004 | 884,504 | 428,238 | Companies incorporation | 338,746,617 | 0,0000 |
01.10 - INVESTOR RELATIONS OFFICER
1 DATE |
2 SIGNATURE |
02.01 - Balance Sheet - Assets (R$ thousand)
1 Code | 2 Description | 3 09.30.2004 | 4 06.30.2004 |
1 | Total assets | 2,060,164 | 990,453 |
1.01 | Current assets | 11,853 | 4,314 |
1.01.01 | Cash and cash equivalents | 503 | 396 |
1.01.01.01 | Banks | 235 | 136 |
1.01.01.02 | Marketable securities | 268 | 260 |
1.01.02 | Receivables | 0 | 0 |
1.01.03 | Inventories | 0 | 0 |
1.01.04 | Others | 11,350 | 3,918 |
1.01.04.01 | Recoverable taxes | 2,810 | 73 |
1.01.04.02 | Deferred income and social contribution taxes | 8,120 | 3,607 |
1.01.04.03 | Other current assets | 420 | 238 |
1.02 | Long-term assets | 3,408 | 2,150 |
1.02.01 | Receivables | 2,167 | 1,639 |
1.02.01.01 | Deferred income and social contribution taxes | 2,167 | 1,639 |
1.02.02 | Receivables from related companies | 900 | 501 |
1.02.02.01 | Associated companies | 0 | 0 |
1.02.02.02 | Subsidiaries | 0 | 0 |
1.02.02.03 | Other related companies | 900 | 501 |
1.02.03 | Others | 341 | 10 |
1.02.03.01 | Judicial deposits | 341 | 10 |
1.03 | Permanent assets | 2,044,903 | 983,989 |
1.03.01 | Investments | 2,043,109 | 983,932 |
1.03.01.01 | In associated companies | 0 | 0 |
1.03.01.02 | In Subsidiaries | 2,043,109 | 983,932 |
1.03.01.03 | Others | 0 | 0 |
1.03.02 | Property, plant and equipment | 1,794 | 57 |
1.03.03 | Deferred charges | 0 | 0 |
02.02 - Balance Sheet - Liabilities and Stockholders' Equity (R$ thousand)
1 Code | 2 Description | 3 09.30.2004 | 4 06.30.2004 |
2 | Total liabilities and shareholders' equity | 2,060,164 | 990,453 |
2.01 | Current liabilities | 12,244 | 6,658 |
2.01.01 | Loans and financing | 0 | 0 |
2.01.02 | Debentures | 0 | 0 |
2.01.03 | Suppliers | 3,019 | 2,089 |
2.01.04 | Taxes, charges and contributions | (170) | 85 |
2.01.05 | Dividends payable | 8,662 | 3,847 |
2.01.05.01 | Dividends payable | 5,821 | 1,712 |
2.01.05.02 | Interest on shareholders equity | 2,841 | 2,135 |
2.01.06 | Provisions | 0 | 0 |
2.01.07 | Payables to related companies | 0 | 0 |
2.01.08 | Others | 733 | 637 |
2.01.08.01 | Labor obligations | 733 | 637 |
2.02 | Long-term liabilities | 38,265 | 6,343 |
2.02.01 | Loans and financing | 0 | 0 |
2.02.02 | Debentures | 0 | 0 |
2.02.03 | Provisions | 6,424 | 4,820 |
2.02.03.01 | Provision for pension plan | 3,733 | 3,733 |
2.02.03.02 | Provision for contingencies | 2,691 | 1,087 |
2.02.04 | Payables to related companies | 31,841 | 1,523 |
2.02.05 | Others | 0 | 0 |
2.03 | Deferred income | 0 | 0 |
2.05 | Shareholders' equity | 2,009,655 | 977,452 |
2.05.01 | Paid-up capital | 884,504 | 456,266 |
2.05.02 | Capital reserves | 240,634 | 121,463 |
2.05.03 | Revaluation reserves | 0 | 0 |
2.05.03.01 | Own assets | 0 | 0 |
2.05.03.02 | Associated/subsidiary companies' assets | 0 | 0 |
2.05.04 | Revenue reserves | 471,550 | 349,257 |
2.05.04.01 | Legal | 62,674 | 29,835 |
2.05.04.02 | Statutory | 87,154 | 0 |
2.05.04.03 | Contingencies | 0 | 0 |
2.05.04.04 | Realizable profits | 18,838 | 0 |
2.05.04.05 | Retention of profits | 0 | 0 |
2.05.04.06 | Special reserve for undistributed dividends | 2,301 | 0 |
2.05.04.07 | Other revenue reserves | 300,583 | 319,422 |
2.05.05 | Retained earnings/accumulated deficit | 412,967 | 50,466 |
03.01 Income Statement (R$ thousand)
1 Code | 2 Description | 3 07.01.2004 to 09.30.2004 | 4 - 01.01.2004 to 09.30.2004 | 5 - 07.01.2003 to 09.30.2003 | 6 - 01.01.2003 to 09.30.2003 |
3.01 | Gross revenues from goods sold and services rendered | 0 | 0 | 0 | 0 |
3.02 | Deductions to gross revenues | 0 | 0 | 0 | 0 |
3.03 | Net revenue from goods sold and services rendered | 0 | 0 | 0 | 0 |
3.04 | Cost of goods sold and services rendered | 0 | 0 | 0 | 0 |
3.05 | Gross profit | 0 | 0 | 0 | 0 |
3.06 | Operating expenses/income | 153,351 | 204,525 | 26,801 | 86,132 |
3.06.01 | Selling | 0 | 0 | 0 | 0 |
3.06.02 | General and administrative | (17,797) | (18,160) | (1,840) | (6,096) |
3.06.03 | Financial, net | (784) | (598) | 166 | 289 |
3.06.03.01 | Financial income | 992 | 1,676 | 792 | 2,790 |
3.06.03.02 | Financial expenses | (1,776) | (2,274) | (626) | (2,501) |
3.06.04 | Other operating income | 53 | 1,019 | 0 | 1,236 |
3.06.05 | Other operating expenses | (2,618) | (5,225) | (420) | (1,344) |
3.06.06 | Equity pick-up | 174,497 | 227,489 | 28,895 | 92,047 |
3.07 | Operating profit (loss) | 153,351 | 204,525 | 26,801 | 86,132 |
3.08 | Non-operating results | (4,109) | (5,165) | (933) | (2,967) |
3.08.01 | Income | 132 | 132 | 0 | 0 |
3.08.02 | Expenses | (4,241) | (5,297) | (933) | (2,967) |
3.09 | Income (loss) before taxes/profit sharing | 149,242 | 199,360 | 25,868 | 83,165 |
3.10 | Provision for income and social contribution taxes | 4,294 | 4,346 | 268 | (6,348) |
3.11 | Deferred income and social contribution taxes | (2,913) | (2,618) | 321 | (129) |
3.12 | Statutory profit sharing and contributions | 0 | 0 | 0 | 0 |
3.12.01 | Profit sharing | 0 | 0 | 0 | 0 |
3.12.02 | Contributions | 0 | 0 | 0 | 0 |
3.13 | Reversal of interest on shareholders capital | 0 | 0 | 0 | 0 |
3.15 | Net income (loss) for the period | 150,623 | 201,088 | 26,457 | 76,688 |
Number of shares (thousand), excluding treasury stock | 702,505,239 | 702,505,239 | 356,478,472 | 356,478,472 | |
Net income per share | 0.00021 | 0.00029 | 0.00007 | 0.00022 | |
Net loss per share | 0 | 0 | 0 | 0 |
04.01 - Notes to the
Quarterly Information
(All amounts in thousands of reais unless otherwise indicated)
1. Operations
TIM Participações S.A. (former Tele Celular Sul Participações S.A.) is a listed entity directly controlled by Tim Brasil Serviços e Participações S.A. which has a shareholding of 53.23% of the voting capital and 23.73% of the total capital.
The Company has the controlled ownership of TIM Sul S.A. and TIM Nordeste Telecomunicações S.A. (former Telpe Celular S.A.). Tim Sul S.A. provides mobile telephony services in the states of Paraná (except for the cities of Londrina and Tamarana), Santa Catarina and in the cities of Pelotas, Capão do Leão, Morro Redondo and Turuçu, in the state of Rio Grande do Sul. TIM Nordeste Telecomunicações S.A. provides mobile telephony services in the states of Alagoas, Ceará, Piauí, Rio Grande do Norte, Paraíba and Pernambuco.
1. Corporate reorganization
(a) Corporate incorporation
On June 01, 2004, Tele Celular Sul Participações S.A. and Tele Nordeste Celular Participações S.A., subsidiaries of TIM Brasil Serviços e Participações, issued significant information (Fato Relevante), stating that their Board Meeting authorized the Protocol of Justification of Incorporation, through which Tele Nordeste Celular Participações S.A., the company which provides mobile telephony services in the states of Pernambuco, Paraíba, Ceará, Rio Grande do Norte, Piauí and Alagoas, will be incorporated by TIM Participações S.A. (former Tele Celular Sul Participações S.A.)
On August 30, 2004, with ANATEL approval, in the Shareholders General Meeting of Tele Celular Sul Participações S.A. (current TIM Participações S.A.), it was approved the proposal of the Board for the incorporation of the net assets of Tele Nordeste Celular Participações S.A.
The objective of the proposed merger is the integration of the companies operations, which are under common control of TIM Brasil Serviços e Participações S.A., seeking benefits from operating and administrative synergies. Such merger should also aggregate market liquidity, turning the Company more attractive for institutional investors and bringing benefits to the shareholders.
(b) Incorporation of Operating Companies - Northeast
The corporate reorganization consisted, basically, in the Telesa Celular SA., Teleceará Celular S.A., Telepisa Celular S.A., Telern Celular S.A., Telpa Celular S.A. incorporation by Telpe Celular S.A. (current TIM Nordeste Telecomunicações S.A.). In December 2003, the operating companies controlled by Tele Nordeste Celular Participações S.A. submitted to the ANATEL pre-approval the implementation of the reorganization, considering the migration from SMC Serviço Móvel Celular (Mobile Cellular Service) to SMP Serviço Móvel Pessoal (Personal Mobile Service).
On January 30, 2004, the Protocol of Justification of Incorporation of the companies Telasa Celular S.A., Teleceará Celular S.A., Telepisa Celular S.A., Telern Celular S.A. and Telpa Celular S.A. by Telpe Celular S.A. (current TIM Nordeste Telecomunicações S.A.) was approved.
This corporate reorganization aims at integrating the activities of these operating companies that belong to the same economic group, to allow increased synergy, expansion of Companys operations, reduction of expenses related to maintenance of six individual companies and concentration of liquidity of shares of Tele Nordeste Celular Participacoes S.A.'s subsidiaries.
3. Presentation of the Quarterly Information
(a) Basis of presentation
The parent company and consolidated quarterly information were prepared in accordance with the accounting principles adopted in Brazil and the rules applicable to concessionaires of telecommunications public services.
TIM Participações S.A. is a publicly trade Company and has American Depository Receipts trade in the New York stock market. Based on that, it is subjected to the rules of the Security Exchange Commission (SEC) and aiming to attend the market needs, the Company adpts the procedure to issue simultaneously information to both markets, in Brazilian Reais, in Portuguese and in English.
(b) Consolidated Quarterly Information
The consolidated quarterly information includes consolidated assets, liabilities and result of operations of the Company and its subsidiaries, which are as follows:
Partipation % | |
TIM Sul S.A. | |
TIM Sul S.A. | 81.73% |
TIM Nordeste Telecomunicações S.A. | 81.82% |
The main consolidation procedures are as follows:
I.
Elimination of assets and liabilities balances between the consolidated
companies;
II. Elimination of the participation in the capital, reserves and
retained earnings of the subsidiaries;
III. Elimination of revenues and expenses
generated by transactions between the companies;
IV. Disclosure of the minority
interest participation in the consolidated quarterly information.
(c) Comparability of the Quarterly Information
As a consequence of the restructuring process mentioned in Note 2-a, the comparison of the quarterly information with the previous period is impaired.
For comparison purposes of this quarterly information with prior periods, follows the pro-forma information, as the incorporation mentioned in Note 2 had occurred on June 30, 2004, for the balance sheet, and nine-month period ended September 30, 2003, for income statement purposes.
06/2004 Pro-forma | ||
ASSETS | Parent Company | Consolidated |
Current Assets | ||
Cash and banks | 174 | 17,589 |
Marketable securities | 260 | 662,107 |
Accounts receivables | - | 504,393 |
Inventories | - | 47,890 |
Recoverable taxes | 2,791 | 104,315 |
Deferred taxes | 4,410 | 113,862 |
Other current assets | 349 | 38,700 |
7,984 | 1,488,856 | |
Long-term assets | ||
Marketable securities | - | 8,145 |
Recoverable taxes | - | 31,698 |
Deferred taxes | 5,565 | 199,194 |
Judicial deposits | 62 | 21,001 |
Related party transactions | 889 | 3,271 |
Other long-term assets | - | 622 |
6,516 | 263,931 | |
Permanent assets | 1,950,009 | 10,680 |
Investments | 2,061 | 1,367,432 |
Property, plant and equipment | 1,952,070 | 1,378,112 |
1,966,570 | 3,130,899 | |
06/2004 Pro-forma | ||
LIABILITIES and SHAREHOLDERS EQUITY | Parent Company | Consolidated |
Current Liabilities | ||
Loans and financing | - | 73,433 |
Suppliers | 2,881 | 383,864 |
Taxes, charges and contributions | 149 | 121,130 |
Dividends payable | 8,879 | 16,584 |
Labor obligations | 963 | 23,689 |
Concession payable | - | 40,967 |
Others current liabilities | - | 18,827 |
12,872 | 678,494 | |
Long-term liabilities | ||
Loans and financing | - | 50,669 |
Provision for contingencies | 1,134 | 23,377 |
Taxes, charges and contributions | - | 42,490 |
Related party transactions | 16,274 | 21,034 |
Other long-term liabilities | 3,734 | 3,734 |
21,142 | 141,304 | |
Minority interest participation | - | 378,545 |
Shareholders equity | ||
Paid-up capital | 884,504 | 884,504 |
Revenue reserves | 471,550 | 471,550 |
Capital reserves | 240,634 | 240,634 |
Retained earnings | 335,868 | 335,868 |
1,932,556 | 1,932,556 | |
1,966,570 | 3,130,899 | |
09/2003 Pro-forma | ||
INCOME STATEMENT | Parent Company | Consolidated |
Gross revenues | - | 1,977,013 |
Deductions to gross revenues | - | (440,225) |
Net revenues | - | 1,536,788 |
Cost of goods sold and services rendered | - | (793,457) |
Gross profit | - | 743,331 |
Operating income (expenses): | ||
Selling | - | (327,272) |
General and administrative | (13,522) | (148,898) |
Equity pick-up | 184,620 | (5,948) |
Other operating income (expenses), net | 797 | (21,454) |
171,895 | (503,572) | |
Operating income before financial result | 171,895 | 239,759 |
Financial income (expenses) | ||
Financial income | 13,362 | 184,232 |
Financial expenses | (8,189) | (136,351) |
Exchange variations, net | 210 | (5,805) |
5,383 | 42,076 | |
Operating income | 177,278 | 281,835 |
Non-operating income (expenses), net | (790) | 1,312 |
Income (loss) before taxes and minority interest | 176,488 | 283,147 |
participation | ||
Income and social contribution taxes | (6,564) | (66,357) |
Reversal of interest on shareholderscapital | - | 2,859 |
Net income before minority interest participation | 169,924 | 219,649 |
Minority interest participation | - | (49,725) |
Net income for the period | 169,924 | 169,924 |
4. Summary of Accounting Practices
(a) Cash and cash equivalents
It represents cash and bank balances and marketable securities, recorded at cost, plus interest incurred up to the balance sheet date.
(b) Trade accounts receivable
Accounts receivable from mobile telephone subscribers are calculated at the tariff rate on the date the services were rendered. Trade accounts receivable also include services provided to customers up to the balance sheet date but not yet invoiced and receivables from sales of handsets.
(c) Allowance for doubtful accounts
The allowance for doubtful accounts is recorded based on the customer base profile, the aging of overdue accounts, the economic scenario and the risks involved in each case. The allowance amount is considered sufficient to cover possible losses of the receivables.
(d) Inventories
Refer to cellular handsets and acessories, which are stated at average acquisition cost. It was set-up a provision to adjust the obsolete items balance to its realization value.
(e) Investments
Investments in subsidiaries are carried under the equity method based on the subsidiariesshareholdersequity at the balance sheet date and consistent with the accounting practices adopted by the Company.
Other investments are stated at acquisition cost, reduced to the realization value, when applicable.
(f) Property, plat and equipment
Property, plant and equipment is stated at acquisition and/or construction cost, less accumulated depreciation calculated based on the straight-line method at the rates shown in Note 9, based on the estimated useful lives of the assets. Expenditures for repairs and maintenance which extend the useful lives of the related assets are capitalized, while other routine costs are charged to results of operations.
Interest computed on debts that finance the construction of property, plant and equipment, are capitalized until the moment they start to operate. The expenses with repair and maintenance which represent improvements increase of capacity or useful lives are capitalized.
Long-term assets, mainly property, plant and equipment, are periodically reviewed for possible impairment.
The useful lives of all property, plant and equipment items are regularly reviewed to reflect the technological changes.
(g) Income tax and social contribution
Income tax is calculated based on the taxable income for the period, as determined by the current legislation. The social contribution is calculated based on the prevailing tax rates, based on the income before income tax.
The subsidiary TIM Nordeste Telecomunicações S.A., through the Certificates (Laudos Constitutivos) No. 0144/2003 and 0232/2003, issued on March 31, 2003 by Agency for Development of the Northeast Region of Brazil - ADENE, became beneficiary of the following tax incentives: (i) 75% reduction in income tax and non-refundable surtaxes, for 10 (ten) years, from 2002 to 2011, calculated on profit from tax incentive activities ("lucro da exploracao") resulting from implementation of their installed capacity to render digital mobile telephony services; and (ii) reduction by 37.5%, 25% and 12.5% in income tax and refundable surtaxes, for fiscal years 2003, 2004 to 2008 and 2009 to 2013, respectively, calculated on profit from tax incentive activities resulting from the installed capacity for rendering analogical mobile telephony services.
Taxes are calculated and recorded based on the enacted rates on the financial statement date, and in accordance with the accrual method of accounting. The effect of the aforementioned tax benefit is recorded as a reduction in the income tax payable against the constitution of a Capital Reserve Fiscal Incentive, in the shareholders equity.
Deferred taxes related to temporary differences and tax losses are recorded in the current and long-term assets, based on expected realization thereof, which is reviewed every year.
(h) Loans and financing
Loans and financing include accrued interest to the balance sheet date. As discussed in Note 14, the Companys subsidiaries are party to certain derivative instruments, related to its US dollar denominated liabilities with the objective of hedging itself against risks associated with unexpected real/US dollar exchange rates. The gain and losses from such operations are recognized in the income statement based on the accrual method, based on the rates established in the contracts.
(i) Provision for contingencies
The provision for contingencies is recorded based on estimates which take into consideration the opinion of the Company and its subsidiaries managements and of its legal advisers, and is updated to the balance sheet date, based on the probable losses at the end of the claims.
(j) Revenue recognition
Revenues for services are recognized when the services are provided. Billings are monthly recorded. Unbilled revenues from the billing date to the month end are measured and recognized during the month in which the service was provided. Revenues from pre-paid telecommunication services are recognized on the accrual basis in the period in which they are utilized.
(k) Financial income (expenses)
It represents interest and exchange and monetary variations related to marketable securities, hedge contracts, loans and financing received and granted.
(l) Pension plan
The Companys subsidiaries record the adjustments related to the obligations of the employees pension plan in the income for the period, over a 5-year period or the remaining expected service life of employees if these are less.
(m) Minority interest
The minority interest corresponds to the interest of the minority shareholders in the subsidiaries.
(n) Derivatives
The Company and its subsidiaries calculate based on the market relevant information available or other evaluation techniques, the market value of the financial instruments, including hedge, at the balance sheet date.
(o) Use of estimates
The preparation of the quarterly information in comformity with accounting practices requires management to make estimates and assumptions concerning the amounts of recorded assets and liabilities and the disclosures of contingent assets and liabilities at the Quarterly Information date, as well as the estimation of revenues and expenses for the period. The actual results may differ from those estimates.
(p) Foreign currency transactions
Transactions in foreign currency are recorded at the prevailing exchange rate at the date of the transaction. Foreign currency denominated assets and liabilities are adjusted using the exchange rate at the balance sheet date, which is reported by the Central Bank of Brazil at each balance sheet date. Exchange gains and losses are recognized in the of income as they occur.
(q) Employees profit share
The Company and its subsidiaries record a provision for employees profit share, based on the targets disclosed to its co-workers and approved by the Board. Such expenses are recorded as general and administrative expenses.
5. Accounts receivable
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Services billed | 209,734 | 61,020 | 188,338 |
Unbilled services | 83,223 | 49,162 | 113,865 |
Network usage | 190,829 | 98,794 | 154,681 |
Sales of handsets | 138,679 | 90,695 | 128,259 |
622,465 | 299,671 | 585,143 | |
Allowance for doubtful accounts | (66,422) | (36,776) | (80,750) |
556,043 | 262,895 | 504,393 | |
IN August 2004, the company received R$19,540, related to network usage, that had been being contested by Brasil Telecom, reducing the amount recorded.
6. Inventories
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Cellular handsets | 45,607 | 23,741 | 43,418 |
Accessories and kits of pre-paid cards | 1,877 | 648 | 2,006 |
TIM chips | 5,522 | 1,613 | 3,974 |
53,006 | 26,002 | 49,398 | |
Provision for adjustment to realizable value | (4,245) | (1,017) | (1,508) |
48,761 | 24,985 | 47,890 | |
7. Recoverable Taxes
Parent Company | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Income tax | 2,801 | 64 | 2,783 |
Social contribution | 9 | 9 | 8 |
2,810 | 73 | 2,791 | |
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Income tax | 42,287 | 2,422 | 59,031 |
Social contribution | 11,224 | 122 | 6,728 |
State VAT | 66,648 | 18,588 | 56,671 |
PIS (Social Integration Program) and Cofins (Social | |||
Investment Program) | 17,370 | 8,976 | 13,088 |
Others | 703 | - | 495 |
138,232 | 30,108 | 136,013 | |
Current | (99,819) | (18,309) | (104,315) |
Long-term | 38,413 | 11,799 | 31,698 |
The long-term portion refers to the State VAT on property, plant and equipment acquisitions.
8. Income and Social Contributions Deferred Taxes
The Company, based on the expectation of future taxable profit generation, recognizes the tax credits related to tax loss carryforwards and negative basis of social contribution from prior years, which have no expiration date. The utilization of these tax credits is limited to 30% of the taxable income in given year.
The deferred income and social contribution taxes are comprised as follows:
Parent Company | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Tax loss carryforwards | 5,751 | 2,595 | 5,483 |
Negative basis for social contribution tax | 2,073 | 936 | 1,975 |
Provision for pension plan | 1,269 | 1,269 | 1,269 |
Provision for contingencies | 915 | 370 | 386 |
Other provisions | 279 | 76 | 862 |
10,287 | 5,246 | 9,975 | |
Current | (8,120) | (3,607) | (4,410) |
Long-term | 2,167 | 1,639 | 5,565 |
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro-forma | |
Fiscal credit related to incorporation process | 193,392 | 103,184 | 206,004 |
Allowance for doubtful accounts | 22,583 | 12,503 | 26,418 |
Tax Loss carryforwards | 30,898 | 32,406 | 35,293 |
Depreciation of free leased handsets | 15,324 | 5,831 | 15,111 |
Negative basis for social contribution tax | 11,153 | 11,695 | 12,734 |
Amortization of the goodwill paid on privatization | 4,504 | 4,504 | 4,504 |
Provision for pension plan | 1,269 | 1,269 | 1,269 |
Provision for contingencies | 7,978 | 4,913 | 7,946 |
Others provisions | 3,876 | 2,139 | 3,777 |
Total | 290,977 | 178,444 | 313,056 |
Current | (114,752) | (60,816) | (113,862) |
Long-term | 176,225 | 117,628 | 199,194 |
The deferred tax asset related to goodwill paid on privatization is related to the future tax benefit, as a consequence of the restructuring plan started in 2000. The contra account of the referred tax is a special reserve for goodwill in the shareholders equity and is realized based on the estimated future profitability and the time of the concession, which is expected to terminate in 2008. The goodwill amortization is recorded as Other operating expenses.
In the period ended September 30, 2004, R$37,837 (R$12,634 at June 30, 2004) related to such goodwill were realized. Also under the terms of the restructuring plan, the effective tax benefit for each fiscal year will be subsequently capitalized in the name of the controlling shareholder. The minority shareholders have ensured the right to preference in the acquisition of an amount proportional to the new capital of the controlling shareholder. The special reserve of goodwill recorded by the Companys subsidiaries represents the parent company rights to the future capitalization (see note 18-b).
In accordance with projections made by the Companys Management, the long-term deferred taxes as of Sepetember 30, 2004 will be realized as follows:
Consolidated | |
09/2004 | |
2005 | 44,626 |
2006 | 50,450 |
2007 | 50,450 |
2008 | 30,699 |
176,225 | |
Income and social contribution tax expenses as of September 2004 and 2003 are as follows:
Parent Company | ||
09/2004 | 09/2003 | |
Current income tax | 3,194 | (4,649) |
Current social contribution | 1,152 | (1,699) |
4,346 | (6,348) | |
Deferred income tax | (1,925) | (94) |
Deferred social contribution | (693) | (35) |
(2,618) | (129) | |
1,728 | (6,477) | |
Consolidated | ||
09/2004 | 09/2003 | |
Current income tax | (65,114) | (17,626) |
Current social contribution | (23,842) | (6,457) |
Fiscal incentive ADENE | 18,525 | - |
Total | (70,431) | (24,083) |
Deferred income tax | 993 | (3,549) |
Deferred social contribution | 803 | (1,281) |
1,796 | (4,830) | |
(68,635) | (28,913) | |
The reconciliation between the income and social contribution tax expenses, the tax expense calculated based on the statutory rates, and the amount recorded in the income statement of the period for 2004 and 2003 is as follow:
Parent Company | ||
09/2004 | 09/2003 | |
Income before income and social contribution taxes | 199,360 | 83,165 |
Statutory rate | 34% | 34% |
Income tax and social contribution according to statutory rate | (67,782) | (28,276) |
Exclusions: | ||
Equity pick-up | 77,346 | 29,284 |
Amortization related to goodwill paid | (403) | (403) |
Other | (7,433) | (7,082) |
69,510 | 21,799 | |
Income and social contribution tax of the period | 1,728 | (6,477) |
Effective rate | 1,16% | 7,79% |
Consolidated | ||
09/2004 | 09/2003 | |
Income before income and social contribution taxes | 316,297 | 126,988 |
Fiscal rate | 34% | 34% |
Income tax and social contribution | (107,541) | (43,176) |
Exclusion: | ||
Provision for shareholders equity integrity | 24,973 | 12,009 |
Tax incentive ADENE Income tax reduction | 18,525 | - |
Exclusion of amortization related to goodwill | (403) | (403) |
Other | (4,189) | 2,567 |
38,906 | 14,263 | |
Income tax and social contribution of the period | (68,635) | (28,913) |
Effective rate | 21,70% | 22,77% |
9. Related party transactions
The related party transactions are carried out, as considered by Management, under normal market conditions. The balances of the related party transactions of the parent company are as follows:
TIM Celular S.A. |
Tim Nordeste Telecomuni- cações S.A. |
TIM Sul S.A. |
TIM Brasil S.A. |
Total | Jun/04 | |
Assets | ||||||
Long-term | ||||||
Receivables from related | 237 | 512 | - | 151 | 900 | 501 |
companies | ||||||
Liabilities | ||||||
Long-term | ||||||
Payables to related companies | 6 | 19,392 | 12,439 | 4 | 31,841 | 1,523 |
Income Statement | ||||||
Revenues | 41 | 174 | 76 | 12 | 303 | 83 |
Service expenses | - | - | - | - | - | 6,912 |
Financial expenses | - | 822 | 356 | - | 1,178 | 433 |
The loans amounting R$12,439 with TIM Sul and R$15,304 with TIM Nordeste Telecomunicações relate to intercompany loan agreements bearing charges equivalent to 104.22% and 104.5%, respectively, of the monthly variation of the Interbank Certificate Deposits (CDI) rate.
At September, 2004 the consolidated related party transactions are as follow:
Maxitel S.A. | Tim Celular S.A. | Blah S.A. de serviços e comercio | TIM Brasil Serv. Particip. S.A. | Total | Jun/04 | |
Assets | ||||||
Long Term | ||||||
Receivables from related companies | 13 | 1,749 | - | 281 | 2,043 | 2,220 |
Liabilities | ||||||
Long Term | ||||||
Payables to related companies | 54 | 7,467 | 5,114 | 4 | 12,639 | 12,723 |
Income Statement | ||||||
Revenues | - | 112 | - | 12 | 124 | 403 |
Service expenses | - | - | 10,964 | - | 10,964 | 913 |
10. Judicial deposit
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro forma | |
Convênio ICMS 69/98 | 11,745 | 11,653 | 11,653 |
ICMS tax rate difference | 4,809 | 2,327 | 2,327 |
COFINS/ CSSL/ PIS/ IRF | 2,441 | - | - |
Others | 7,216 | 3,596 | 7,021 |
26,211 | 17,576 | 21,001 | |
For the judicial deposits related to the ICMS Convênio 69/98 claim and the late payment of COFINS/CSSL/PIS/IRF, the Company, based on the opinion of the external legal advisors, believes that there is a remoteprobability of loss and therefore, no provision for contingency was recorded in relation to these issues.
Others judicial deposits refer to sundry fiscal and civil claims.
11. Investments
Parent Company | |||
09/2004 | 06/2004 | 06/2004 Pro-form | |
Investments | |||
Subsidiary | 2,032,844 | 973,272 | 1,939,349 |
Other | 10,265 | 10,660 | 10,660 |
2,043,109 | 983,932 | 1,950,009 | |
Consolidated | |||
09/2004 | 06/2004 | 06/2004 Pro-form | |
Investments | |||
Other | 10,286 | 10,680 | 10,680 |
10,286 | 10,680 | 10,680 | |
Participation in subsidiaries:
09/2004 | |||
Tim Nordeste Telecomunicações S.A. | Tim Sul S.A. | Total | |
Capital | 508,799 | 971,470 | |
Number of shares held - thousands | 23,779,645 | 12,529,890 | |
Total capital participation | 81.82% | 81.73% | |
Voting capital participation | 94.11% | 90.65% | |
Adjusted Shareholders Equity | 1,202,715 | 1,229,521 | |
Net income | 124,865 | 130,673 | |
Equity pickup | 120,690 | 106,799 | 227,489 |
Investment | 886,381 | 905,616 | |
Goodwill reserve | 119,384 | 121,463 | |
Investment amount | 1,005,765 | 1,027,079 | 2,032,844 |
Goodwill cost | - | 16,918 | 16,918 |
Goodwill accumulated amortization | - | (6,653) | (6,653) |
- | 10,265 | 10,265 | |
06/2004 | ||
Tim Sul S.A. | Total | |
Capital | 971,470 | |
Number of shares held thousands | 12,529,890 | |
Total capital participation | 81,73% | |
Voting capital participation | 90,65% | |
Adjusted Shareholders Equity | 1,163,687 | |
Net income | 64,839 | |
Equity pickup | 52,992 | 52,992 |
Investment | 851,809 | 851,809 |
Goodwill reserve | 121,463 | 121,463 |
Investment amount | 973,272 | 973,272 |
Goodwill cost | 16,918 | 16,918 |
Goodwill accumulated amortization | (6,258) | (6,258 |
10,660 | 10,660 | |
06/2004 Pro-form | |||
Tim Nordeste Telecomunicações S.A. | Tim Sul S.A. | Total | |
Capital | 508,799 | 971,470 | |
Number of shares held thousands | 23,779,645 | 12,529,890 | |
Total capital participation | 81,82% | 81,73% | |
Voting capital participation | 94,11% | 90,65% | |
Adjusted Shareholders Equity | 1,154,207 | 1,163,687 | |
Net income | 85,140 | 64,839 | |
Equity pickup | 81,100 | 52,992 | 133,992 |
Investment | 846,693 | 851,809 | 1,698,502 |
Goodwill reserve | 119,384 | 121,463 | 240,847 |
Investment amount | 966,077 | 973,272 | 1,939,349 |
Goodwill cost | - | 16,918 | 16,918 |
Goodwill accumulated amortization | - | (6,258) | (6,258) |
- | 10,660 | 10,660 | |
12. Property, Plant and Equipment
Parent Company | ||||||
09/2004 | 06/04 | |||||
Annual depreciation rate % | Cost | Accumulated depreciation | Net balance | Net balance | Pro-form 06/2004 | |
Assets for general use | 10,00 | 1,442 | (719) | 723 | 57 | 710 |
Leased handsets | 50.00 | 12 | (7) | 5 | - | 5 |
Network infrastructure | 33.33 | 1,149 | (869) | 280 | - | 191 |
Software and hardware | 20.00 | 2,405 | (2,205) | 200 | - | 270 |
Intangible assets | 20.00 | 2,806 | (2,220) | 586 | - | 726 |
7,814 | (6,020) | 1,794 | 57 | 1,902 | ||
Construction in progress | - | - | - | - | 159 | |
7,814 | (6,020) | 1,794 | 57 | 2,061 | ||
Consolidated | ||||||
09/2004 | 06/04 | |||||
Annual depreciation rate % | Cost | Accumulated depreciation | Net balance | Net balance | Pro-form 06/2004 | |
Usage license | 10.00 | 43,527 | (10,571) | 32,956 | 13,779 | 32,348 |
Automatic transmission and switching equipment | 14.29 | 2,265,340 | (1,482,454) | 782,886 | 445,483 | 782,244 |
Leased handsets | 50,00 | 148,831 | (97,726) | 51,105 | 6,795 | 37,693 |
Leased handsets | 33.33 | 282,178 | (120,748) | 161,430 | 97,456 | 164,761 |
Software and hardware | 20.00 | 112,746 | (66,312) | 46,434 | 17,464 | 32,939 |
Assets for general use | 20.00 | 30,999 | (15,121) | 15,878 | 5,300 | 16,108 |
Intangible assets | 20.00 | 399,052 | (204,401) | 194,651 | 63,637 | 204,828 |
3,282,673 | (1,997,333) | 1,285,340 | 649,914 | 1,270,921 | ||
Lands | 5,967 | - | 5,967 | 4,649 | 5,967 | |
Construction in progress | 159,485 | - | 159,485 | 59,880 | 90,544 | |
3,448,125 | (1,997,333) | 1,450,792 | 714,443 | 1,367,432 | ||
13. Suppliers
Parent company | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Suppliers | 3,019 | 2,089 | 2,881 |
3,019 | 2,089 | 2,881 | |
Consolidated | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Suppliers | 384,251 | 220,954 | 342,483 |
Network usage service | 47,834 | 13,353 | 41,381 |
432,085 | 234,307 | 383,864 | |
14. Loans and financings
Consolidated | |||
09/2004 | 06/2004 | Pro forma 06/2004 | |
Foreign currency United States dollars Supplier bearing exchange rate variation and interest of 7.3% p.a. Subject matter of a swap operation to CDI. |
1,062 | 889 | 889 |
Eximbank refers to a direct financing with the Export and Import Bank of the United States (EXIMBANK), bearing exchange rate variation and interest of 7.03% p.a., subject matter of a swap operation to CDI. | - | 11,586 | 11,586 |
European Bank of Investment - financing in the amount of US$ 50,000,000, bearing interest based on the Libor rate for 3-month deposits + 0.15% p.a., subject matter of a hedging operation for which the rate is 100% of the CDI monthly variation to final maturity. | 40,913 | - | 61,837 |
Banco do Nordeste financing in the amount of R$20,000 thousands (R$14,156 already used as of September 30, 2004) subject to pre-fixed interest of 14% p.a. | 14,164 | - | - |
Local currency | |||
BNDES Banco Nacional de Desenvolvimento Econômico e Social- The financing is comprised by 68% bearing TJLP rate (9.75% p.a as of September 30, 2004) plus spread of 4% p.a. The remaining 32% is bearing exchange rate variation of UMBNDES plus the BNDES international average rate (6.934821% p.a. as of September 30, 2004), plus spread of 4% p.a. Subject matter of a swap operation to CDI. | 45,642 | 49,790 | 49,790 |
Total debt | 101,781 | 62,265 | 124,102 |
Current | (61,853) | (31,983) | (73,433) |
Non current | 39,928 | 30,282 | 50,669 |
The financing from the European Bank of Investment has financial covenants that are quarterly monitored. The financial covenants valuate the evolution of the relation between the EBITDA and the net financial expenses and the evolution of net revenue. As of September 30, 2004, The Company complies with these covenants.
The BNDES loans are subject to certain covenants covering EBITDA margin, debt coverage, coverage of net financial expenses and indebtedness. The Company and its subsidiary comply with these covenants as of September 30, 2004.
The long-term portion of loans and financings matures up to 2005, as follows:
Consolidated | ||
09/2004 | 06/2004 | |
2005 | 5,336 | 10,156 |
2006 | 21,083 | 19,605 |
2007 | 2,892 | 521 |
2008 | 2,359 | - |
2009 | 2,359 | - |
2010 | 2,359 | - |
2011 | 2,359 | - |
2012 | 1,181 | - |
39,928 | 30,282 | |
15. Salaries and related charges
Parent Company | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Salaries | 34 | 60 | 60 |
Social charges | 127 | 116 | 220 |
Labor provisions | 496 | 417 | 599 |
Employees retention | 76 | 44 | 84 |
733 | 637 | 963 | |
Consolidated | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Salaries | 1,705 | 1,866 | 1,866 |
Social charges | 4,746 | 2,793 | 5,481 |
Labor provisions | 17,966 | 7,551 | 15,517 |
Employees retention | 151 | 514 | 825 |
24,568 | 12,724 | 23,689 | |
16. Taxes and contributions payable current and non-current
Parent Company | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
PIS | - | 11 | 14 |
COFINS | 2 | 51 | 63 |
Other | (172) | 23 | 72 |
170 | 85 | 149 | |
Consolidated | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Income and social contribution taxes | 25,773 | - | 12,933 |
ICMS | 134,589 | 104,509 | 135,431 |
PIS | 1,545 | 768 | 1,656 |
COFINS | 7,161 | 3,547 | 7,669 |
FISTEL fee | 3,387 | 2,271 | 3,408 |
FUST fee | 1,108 | 599 | 1,124 |
FUNTTEL fee | 567 | 299 | 559 |
Other | 872 | 327 | 840 |
175,002 | 111,870 | 163,620 | |
Current | (139,293) | (69,380) | (121,130) |
Long term | 35,709 | 42,490 | 42,490 |
The subsidiary TIM Sul S.A., entered into an agreement with the Paraná State to defer ICMS tax to be paid in 48 months after the respective generating event. This benefit was granted by the State of Paraná through the Programa Paraná Mais Emprego.
17. Contingencies provision
The Company and its subsidiaries are a party to certain legal proceedings (labor, fiscal and civil) arising in the normal course of their business, and has recorded provisions when management believes that it can reasonably estimate probable losses, based on their legal advisors. No provisions are recorded for the lawsuits whose outcome is considered favorable to by the lawyers, including lawsuit challenging the ICMS tax (State VAT), as described in the note 10.
The provision for contingencies can be comprised as follows:
Parent Company | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Civil | 193 | 327 | 327 |
Labor | 2,498 | 760 | 807 |
2,691 | 1,087 | 1,134 | |
Consolidated | |||
09/2004 | 06/2004 | Pro-form 06/2004 | |
Civil | 11,189 | 8,029 | 12,328 |
Fiscal | 7,437 | 3,529 | 7,064 |
Labor | 5,633 | 2,887 | 3,985 |
24,259 | 14,445 | 23,377 | |
18. Shareholders equity
(a) Capital
The Company is authorized to increase its capital, through approval by a shareholders meeting, so as not to exceed 700 billion common or preferred shares, without the need to maintain the proportion between the shares, but keeping the legal limit of 2/3 (two thirds) for issuing preferred shares without voting rights.
The limit to increase the Companys capital may be modified with the approval of an Extraordinary General Meeting if and when the capital has been fully utilized or when the difference between such limit and the subscribed capital is not sufficient to guarantee the capitalization plan for the year.
At September 30, 2004, the subscribed and paid up capital amounted R$884,504 and was represented by 264,793,443,731 common shares and 437,711,795,252 preferred shares.
(b) Capital reserve special goodwill reserve
This reserve was set up during the corporate reorganization process in 2000 as stated in 2000 (see note 8). The portion of the special reserve corresponding to the tax benefit obtained may be capitalized at the end of each fiscal year for the benefit of the controlling shareholder, with the issuance of new shares. The respective capital increase will be subject to preference rights of the minority shareholders, in proportion to their shareholdings, by kind and class, at the time of issuance, and the amounts payable during the year in connection with this right must be delivered directly to the controlling shareholder, in accordance with Instruction No. 319/99 of the Brazilian Securities Commission.
(c) Income reserve
Legal reserve
In conformity with the legislation in force (Law No. 6404/76, article 193), 5% (five percent) of net income computed in the year should be applied to the legal reserve prior to any other destination, which should not exceed 20% (twenty percent) of capital or 30% (thirty percent) of capital plus capital reserves; after this limit no appropriations to this reserve are obligatory. These reserves can be used only for capital increase or compensation of accumulated losses.
Realizable profit reserve
At December 31, 2003, the Company set up a realizable profit reserve originating from the portion of equity pickup to be financially realized, substantially represented by the capital reserve from income tax incentive set up by the subsidiaries and not allowing distribution by them, in the amount of R$ 49,807. Said reserve will be reversed by the Company upon its actual realization or upon capitalization of the tax incentive reserve by the subsidiaries.
In conformity with Law No. 10303/01, the reserve amounting to R$ 18,838 was set up for the amount of compulsory dividends, which exceeded the realized portion of net income for the year.
Dividends payable reserve
The Shareholders Meeting of April 4, 2002 approved the proposal made by management for the formation of a reserve for dividends payable in the amount of R$ 14,825, referring to the portion of dividends declared based on the balance sheet at December 31, 2001, with the objective of preserving the economic and financial equilibrium of the Company and concurrently satisfying the needs of relevant investments to meet demand. The Company realized a portion of this reserve in the amount of R$ 10,280 (R$2,244 in 2002) in the year ended December 31, 2003.
(d) Income reserve for expansion
This reserve was set up as determined by Instruction CVM 59/86 to be used in the expansion of the Companys network.
(e) Stock option plan
Due to the incorporation process mentioned in note 2-a, TIM Participações S.A. (former Tele Celular Sul PArticipações S.A.) Board will deliberate about the adjustments to be made to the stock option plan of its managers and employees and of Tele Nordeste Celular Participações S.A. managers and employees. These plans were approved in May 4, 2001 and May 2, 2001 in General Meetings of Tele Nordeste Celular Participações S.A. and Tele Celular Sul PArticipações S.A., respectively.
19. Net Operating Revenue
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Revenues from telecommunication services | |||
Subscriptions charges | 279,884 | 168,025 | 265,588 |
Usage charges | 877,821 | 328,701 | 769,747 |
Long distance charges | 141,187 | 18,480 | 39,457 |
Use of network | 610,090 | 291,434 | 594,344 |
Value Added Services | 77,477 | 22,812 | 38,696 |
Other services | 22,931 | 10,191 | 17,061 |
2,009,390 | 839,643 | 1,724,893 | |
Sale of products | 418,199 | 152,556 | 252,120 |
Gross revenues | 2,427,589 | 992,199 | 1,977,013 |
Deduction from Gross revenues | |||
Taxes | (508,952) | (189,110) | (401,853) |
Discounts | (97,171) | (33,942) | (33,984) |
Other | (4,537) | (45) | (4,388) |
(610,660) | (223,097) | (440,225) | |
1,816,929 | 769,102 | 1,536,788 | |
20. Cost of Services Rendered and Goods Sold
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2004 | |
Salaries and social contribution charges | (16,216) | (6,984) | (13,694) |
Third-party services | (40,857) | (20,099) | (32,342) |
Interconnection charges | (251.669) | (112.005) | (287,554) |
Depreciation and amortization | (246,093) | (126,209) | (233,385) |
Telecommunication supervision fund | (2,402) | (760) | (1,640) |
Cost of goods sold | (347,619) | (139,994) | (216,326) |
Other | (12,843) | (3,144) | (8,156) |
(917,699) | (409,195) | (793,457) | |
21. Selling Expenses
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Salaries and social contribution charges | (38,535) | (17,039) | (27,591) |
Third-party services | (214,736) | (84,128) | (159,977) |
Allowance for doubtful accounts and provision for losses | (82,457) | (15,457) | (61,079) |
Telecommunication supervision fund | (67,963) | (21,706) | (45,407) |
Depreciation and amortization | (33,562) | (10,330) | (28,186) |
Other | (13,270) | (2,385) | (5,032) |
(450,523) | (151,135) | (327,272) | |
22. General and Administrative Expenses
Parent Company | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Salaries and social contribution charges | (12,051) | (4,312) | (22,336) |
Third-party services | (3,712) | (1,674) | 12,967 |
Depreciation and amortization | (892) | (12) | (1,014) |
Other | (1,505) | (98) | (3,139) |
(18,160) | (6,096) | (13,522) | |
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Salaries and social contribution charges | (29,857) | (16,750) | (40,298) |
Third-party services | (72,537) | (34,021) | (68,532) |
Depreciation and amortization | (29,050) | (17,816) | (30,507) |
Other | (10,974) | (5,492) | (9,561) |
(142,418) | (74,079) | (148,898) | |
23. Other Operating Income
Parent Company | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Other operating income | 1,019 | 1,236 | 2,168 |
1,019 | 1,236 | 2,168 | |
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Telecommunication service fines | 8,209 | 2,638 | 6,159 |
Reversal of provision for Contingencies | 3,200 | - | 7,243 |
Reversal of allowance for doubtful account | 10,000 | - | - |
Other | 4,250 | 4,986 | 13,848 |
25,659 | 7,624 | 27,250 | |
24. Other Operating Expenses
Parent Company | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Goodwill amortization | (1,186) | (1,186) | (1,186) |
Provision for contingencies | (2,394) | (113) | (113) |
Taxes | (986) | (25) | (41) |
Other | (659) | (20) | (31) |
(5,225) | (1,344) | (1,371) | |
Consolidated | |||
09/2004 | 09/2003 | Pro-form 09/2003 | |
Amortization related to goodwill paid on privatization | (37,838) | (18,971) | (37,856) |
Goodwill amortization | (1,186) | (2,276) | (2,276) |
Provision for contingencies | (8,902) | (2,212) | (3,076) |
Taxes | (2,043) | (282) | (488) |
Other | (10,804) | (3,201) | (5,008) |
(60,773) | (26,942) | (48,704) | |
25. Financial Instruments
The Company and its subsidiaries carry out transactions involving financial instruments with the purpose of reducing risks related to market, exchange rates and interest. Such risks are controlled by specific policies, the establishment of operating limits and strategies, and other techniques for the monitoring of the positions.
The estimated market value of financial instruments, mainly cash and cash equivalents, accounts receivable and short-term financial instruments approximates the accounting value because of the short maturity of such instruments.
At September 30, 2004, the Company and its subsidiaries invested their financial resources mainly in Interbank Deposit Certificates (CDI). There are no financial assets linked to foreign currency.
Loans and financing
The fair values of loans and financing, determined through future cash flows and use of interest rate applicable to instruments with a similar nature, involves the same conditions and risks or are based on market quotations for these securities.
Limitations
The market values were estimated at a certain period, based on significant market information. Changes in assumptions may affect significantly the estimates presented.
Risk factors
The risk factors affecting the Company and its subsidiaries instruments are the following:
(i) Exchange and interest rates risk
The exchange and interest rates risk relate to the possibility of the Company and its subsidiaries computing losses resulting from fluctuations in exchange and interest rates, thus increasing debt balances of loans obtained in the market and the corresponding financial charges. In order to mitigate this kind of risk, the Company carries out hedge contracts with financial institutions.
At September 30, 2004, a portion of Company loans and financing was denominated in U.S. dollars and 100% of the loans and financing were covered by hedge contracts. The income or loss resulting from these hedge contracts is charged to operating results.
(ii) Credit operating risk
The risk is related to the possibility of the Company and its subsidiaries computing losses originating from the difficulty of collecting the amounts billed to customers, which are represented by traders of prepaid telephone cards and distributors of cellular equipment. In order to have this risk reduced, the Company and its subsidiaries perform credit analyses to assist the risk management in respect to collection problems and monitors the accounts receivable from subscribers, blocking the telephony ability in case customers do not pay their bills. With respect to distributors, the Company maintains individual credit limits, based on potential sales analysis, risk history and risk with collection problems.
(iii) Credit risk related to the sale of telephone sets
The Companys policy for the sale of telephone sets and distribution of prepaid telephone cards is directly related to the risk of credit levels accepted during the normal course of business. The selection of partners, the diversification of the accounts payable portfolio, the monitoring of loan conditions, the positions and limits of requests established for traders, the constitution of real guarantees are procedures adopted by the Company to minimize possible collection problems with its commercial partners.
(iv) Financial credit risk
The risks related to the possibility of the Company computing losses originating from the difficulty in realizing its short-term investments and hedge contracts. The Company and its subsidiaries minimize the risk associated to these financial instruments by investing in well-reputed financial institutions.
There is no concentration of available resources of work, service, concessions or rights that have not been mentioned above that could, if eliminated suddenly, severely impact the operations of the Company and its subsidiaries.
26. Insurance coverage (not reviewed)
As of September 30, 2004, the Company presents insurance cover operational risks, civil against fire and various risks for the inventories and fixed assets. This insurance is extended to all companies of the TIM group and TIM Brasil Serviços e Participações S.A. is the mainly insured. Management consider the amounts sufficient to cover eventual losses.
05.01 - Comments on Company Performance
See 08.01- Comments on the consolidated company performance in the quarter.
06.01 - Consolidated Balance Sheet - Assets (R$ thousand)
06.01 CONSOLIDATED BALANCE SHEET (In Thousands of Reais)
1 Code | 2 Description | 3 9.30.2004 | 4 6.30.2004 |
1 | Total assets | 3,230,879 | 1,650,689 |
1.01 | Current assets | 1,524,847 | 767,902 |
1.01.01 | Cash and cash equivalents | 656,730 | 384,987 |
1.01.01.01 | Banks | 14,789 | 4,883 |
1.01.01.02 | Marketable securities | 641,941 | 380,104 |
1.01.02 | Receivables | 556,043 | 262,895 |
1.01.02.01 | Receivables from customers | 556,043 | 262,895 |
1.01.03 | Inventories | 48,761 | 24,985 |
1.01.04 | Other current assets | 263,313 | 95,035 |
1.01.04.01 | Recoverable taxes | 99,819 | 18,309 |
1.01.04.02 | Deferred taxes | 114,752 | 60,816 |
1.01.04.03 | Prepaid expenses | 18,796 | 14,361 |
1.01.04.04 | Advances to suppliers | 23,967 | 400 |
1.01.04.05 | Other | 5,979 | 1,149 |
1.02 | Long-term assets | 244,954 | 157,664 |
1.02.01 | Other receivables | 214,638 | 129,427 |
1.02.01.01 | Recoverable taxes | 38,413 | 11,799 |
1.02.01.02 | Deferred taxes | 176,225 | 117,628 |
1.02.02 | Receivables from related companies | 2,043 | 2,220 |
1.02.02.01 | Associated companies | - | - |
1.02.02.02 | Subsidiaries | - | - |
1.02.02.03 | Other related companies | 2,043 | 2,220 |
1.02.03 | Other | 28,273 | 26,017 |
1.02.03.01 | Judicial deposits | 26,211 | 17,576 |
1.02.03.02 | Marketable securities | - | 8,145 |
1.02.03.02 | Other | 2,062 | 296 |
1.03 | Permanent assets | 1,461,078 | 725,123 |
1.03.01 | Investments | 10,286 | 10,680 |
1.03.01.01 | In associated companies | - | - |
1.03.01.02 | In Subsidiaries | - | - |
1.03.01.03 | Other | - | - |
1.03.02 | Property, plant and equipment | 1,450,792 | 714,443 |
1.03.03 | Deferred charges | - |
06.02 - Consolidated Balance Sheet - Liabilities and Stockholders' Equity (R$ thousand)
06.02 CONSOLIDATED BALANCE SHEET (In Thousands of Reais)
1 Code | 2 Description | 3 9.30.2004 | 4 6.30.2004 |
2 | Total liabilities and shareholders' equity | 3,230,879 | 1,650,689 |
2.01 | Current liabilities | 705,395 | 379,150 |
2.01.01 | Debt current portion | 61,853 | 31,983 |
2.01.02 | Debentures | - | - |
2.01.03 | Suppliers | 432,085 | 234,307 |
2.01.04 | Taxes, charges and contributions | 139,293 | 69,380 |
2.01.05 | Dividends payable | 16,239 | 5,808 |
2.01.05.01 | Interest on shareholders equity | 9,793 | 3,476 |
2.01.05.02 | Dividends payable | 6,446 | 2,332 |
2.01.06 | Provisions | - | - |
2.01.07 | Payable to related companies | - | - |
2.01.08 | Other | 55,925 | 37,672 |
2.01.08.01 | Salaries, charges and social benefits | 24,568 | 12,724 |
2.01.08.02 | Use License | 7,383 | 17,633 |
2.01.08.03 | Pass to other carriers | 23,974 | 7,315 |
2.01.08.04 | Deferred revenue | - | - |
2.01.08.05 | Other liabilities | - | - |
2.02 | Long-term liabilities | 116,437 | 103,673 |
2.02.01 | Debt | 39,928 | 30,282 |
2.02.02 | Debentures | - | - |
2.02.03 | Provisions | 27,992 | 18,178 |
2.02.03.01 | Provision for pension plan | 3,733 | 3,733 |
2.02.03.02 | Provision for contingencies | 24,259 | 14,445 |
2.02.04 | Payables to related companies | 12,639 | 12,723 |
2.02.05 | Other | 35,878 | 42,490 |
2.02.05.01 | Taxes and contributions payable | 35,709 | 42,490 |
2.02.05.02 | Others | 169 | - |
2.03 | Deferred income | - | - |
2.04 | Minority interest | 399,392 | 190,414 |
2.05 | Shareholders' equity | 2,009,655 | 977,452 |
2.05.01 | Paid-up capital | 884,504 | 456,266 |
2.05.02 | Capital reserves | 240,634 | 121,463 |
2.05.03 | Revaluation reserves | - | - |
2.05.03.01 | Own assets | - | - |
2.05.03.02 | Associated/subsidiary companies' assets | - | - |
2.05.04 | Revenue reserves | 471,550 | 349,257 |
2.05.04.01 | Legal | 62,674 | 29,835 |
2.05.04.02 | Statutory | 87,154 | - |
2.05.04.03 | Contingencies | - | - |
2.05.04.04 | Unrealized profits | 18,838 | - |
2.05.04.05 | Retention of profits | - | - |
2.05.04.06 | Special reserve for undistributed dividends | 2,301 | - |
2.05.04.07 | Other revenue reserves | 300,583 | 319,422 |
2.05.05 | Retained earnings/accumulated deficit | 412,967 | 50,466 |
08.01 - Consolidated Statement of Operations
1 Code | 2 Description | 3 07.01.2004 to 9.30.2004 | 4 - 01.01.2004 to 9.30.2004 | 5 07.01.2003 to 9.30.2003 | 6 - 01.01.2003 to 9.30.2003 |
3.01 | Gross revenue from goods sold and services rendered | 1,542,377 | 2,427,589 | 341,006 | 992,199 |
3.02 | Deductions to gross revenue | (384,303) | (610,660) | (78,232) | (223,097) |
3.03 | Net revenue from goods sold and services rendered | 1,158,074 | 1,816,929 | 262,774 | 769,102 |
3.04 | Cost of goods sold and services rendered | (554,949) | (917,699) | (141,532) | (409,195) |
3.05 | Gross profit | 603,125 | 899,230 | 121,242 | 359,907 |
3.06 | Operating expenses/income | (365,662) | (578,740) | (77,313) | (232,074) |
3.06.01 | Selling | (287,188) | (450,523) | (52,461) | (151,135) |
3.06.02 | General and administrative | (90,358) | (142,418) | (22,899) | (74,079) |
3.06.03 | Financial, net | 36,118 | 49,315 | 9,194 | 15,425 |
3.06.03.01 | Financial income | 65,521 | 99,387 | 33,818 | 108,762 |
3.06.03.02 | Financial expenses | (29,403) | (50,072) | (24,624) | (93,337) |
3.06.04 | Other operating income | 15,222 | 25,659 | 1,875 | 7,624 |
3.06.05 | Other operating expenses | (39,456) | (60,773) | (11,112) | (26,942) |
3.06.06 | Equity interest in income of subsidiary and associated companies | - | - | (1,910) | (2,967) |
3.07 | Operating profit (loss) | 237,463 | 320,490 | 43,929 | 127,833 |
3.08 | Non-operating results | (3,602) | (4,193) | 1,038 | (845) |
3.08.01 | Income | 1,192 | 1,741 | 70 | 1,115 |
3.08.02 | Expenses | (4,794) | (5,934) | 968 | (1,960) |
3.09 | Income (loss) before taxes and participation | 233,861 | 316,297 | 44,967 | 126,988 |
3.10 | Provision for income tax and social contribution | (42,932) | (70,431) | (12,454) | (24,083) |
3.11 | Deferred income tax | (5,578) | 1,796 | 581 | (4,830) |
3.12 | Statutory profit sharing and contributions | - | - | - | - |
3.12.01 | Participation | - | - | - | - |
3.12.01.01 | Profit sharing | - | - | - | - |
3.12.02 | Contributions | - | - | - | - |
3.13 | Reversal of interest attributed to shareholders capital | - | - | - | - |
3.14 | Minority interest | (34,728) | (46,574) | (6,637) | (21,387) |
3.15 | Net income (loss) for the period | 150,623 | 201,088 | 26,457 | 76,688 |
Number of shares (thousand), excluding treasury stock | 702,505,239 | 702,505,239 | 356,478,472 | 356,478,472 | |
Net income per share | 0.00021 | 0.00029 | 0.00007 | 0.00022 | |
Net loss per share |
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.
TELE CELULAR SUL PARTICIPACTES, S.A. | ||
Date: October 26, 2004 | By: | /s/ Paulo Roberto Cruz Cozza |
Name: Paulo Roberto Cruz Cozza | ||
Title: Chief Financial Officer |