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.
A free translation from Portuguese into English of Quarterly Financial | ||
Information prepared in Brazilian currency and in accordance with the | ||
accounting practices adopted in Brazil. | ||
FEDERAL GOVERNMENT SERVICE | ||
BRAZILIAN SECURITIES COMMISSION (CVM) | Corporate Legislation | |
QUARTERLY INFORMATION - ITR | June 30, 2007 | |
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 Av. das Américas, 3434, Bloco 1 7º andar parte |
2 - SUBURB OR DISTRICT Barra da Tijuca |
||||||||
3 - POSTAL CODE 22640-102 |
4 - MUNICIPALITY Rio de Janeiro |
5 - STATE Rio de Janeiro |
|||||||
6 - AREA CODE 21 |
7 - TELEPHONE 4009-3742 |
8 - TELEPHONE - |
9 - TELEPHONE - |
10 - TELEX - |
|||||
11 - AREA CODE 21 |
12 - FAX 4009-3314 |
13 - FAX 4009-4690 |
14 - FAX - |
- | |||||
15 - E-MAIL jserafim@timbrasil.com.br |
01.03 - INVESTOR RELATIONS OFFICER (Company Mail Address)
1- NAME Stefano De Angelis |
|||||||||
2 - ADDRESS Av. das Américas, 3434, Bloco 1 7º andar parte |
3 - SUBURB OR DISTRICT Barra da Tijuca |
||||||||
3 - ZIP CODE 22640-102 |
4 - MUNICIPALITY Rio de Janeiro |
5 - STATE Rio de Janeiro |
|||||||
6 - AREA CODE 21 |
7 - TELEPHONE 4009-3742 |
8 - TELEPHONE - |
9 - TELEPHONE - |
10 - TELEX - |
|||||
11 - AREA CODE 21 |
12 - FAX 4009-3314 |
13 - FAX 4009-4690 |
14 - FAX - |
- | |||||
15 - E-MAIL jserafim@timbrasil.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 |
01.01.2007 | 12.31.2007 | 2 | 04.01.2007 | 06.30.2007 | 1 | 01.01.2007 | 31.03.2007 |
09 - INDEPENDENT ACCOUNTANT Directa Auditores |
10 - CVM CODE 3670 |
||||||
11. PARTNER RESPONSIBLE Ernesto Rubens Gelbcke |
12 INDIVIDUAL TAXPAYERS REGISTRATION NUMBER OF THE PARTNER RESPONSIBLE 062.825.718-04 |
1
A free translation from Portuguese into English of Quarterly Financial | ||
Information prepared in Brazilian currency and in accordance with the | ||
accounting practices adopted in Brazil. | ||
FEDERAL GOVERNMENT SERVICE | ||
BRAZILIAN SECURITIES COMMISSION (CVM) | Corporate Legislation | |
QUARTERLY INFORMATION - ITR | June 30, 2007 | |
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES | ||
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 |
01.05 - CAPITAL COMPOSITION
Number of Shares (Thousands) |
Current quarter 06.30.2007 |
Prior quarter 03.31.2007 |
Same quarter in prior year 06.30.2006 |
Paid-up capital | |||
1 - Common | 793,544 | 793,544,277 | 791,117,235 |
2 - Preferred | 1,536,171 | 1,536,170,583 | 1,531,472,229 |
3 - Total | 2,329,715 | 2,329,714,860 | 2,322,589,464 |
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 AND OR INTEREST ON CAPITAL APPROVED AND/OR PAID DURING AND AFTER THE QUARTER
1 - ITEM | 2 - EVENT | 3 - DATE APPROVED | 4 - AMOUNT | 5 - DATE OF PAYMENT | 6 - TYPE OF SHARE | 7 - AMOUNT PER SHARE |
01 | AGO | 04/12/2007 | Dividends | 06/25/2007 | ON | 0,0001193484019 |
02 | AGO | 04/12/2007 | Dividends | 06/25/2007 | PN | 0,0001193484019 |
2
FEDERAL PUBLIC SERVICE | ||
CVM BRAZILIAN SECURITIES COMMISSION | ||
ITR Quarterly Information | Corporate Law | |
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY | Data-Base - 06/30/2007 |
01763-9 TIM PARTICIPAÇÕES S.A. | 02.558.115/0001-21 | |
Free Translation into English of Quarterly Information (ITR) | ||
Originally Issued in Portuguese | ||
04.01 NOTES TO QUARTERLY INFORMATION | ||
(In thousands of Reais, except where otherwise stated) |
A free translation from Portuguese into English of Quarterly Financial Information | ||
prepared in Brazilian currency and in accordance with the accounting practices | ||
adopted in Brazil. | ||
FEDERAL GOVERNMENT SERVICE | ||
BRAZILIAN SECURITIES COMMISSION (CVM) | ||
QUARTERLY INFORMATION - ITR | ||
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES | ||
01.01 IDENTIFICATION
1 - CVM CODE 01763-9 |
2 - COMPANY NAME TIM PARTICIPAÇÕES S.A. |
3 - Federal Corporate Taxpayers' Registration Number CNPJ 02.558.115/0001-21 |
01.09 - SUBSCRIBED CAPITAL AND CHANGES IN THE CURRENT YEAR
1 - ITEM | 2 - DATE OF CHANGE | 3 - CAPITAL (IN THOUSANDS OF REAIS) |
4 - TOTAL CHANGE (IN THOUSANDS OF REAIS) |
5 - NATURE OF CHANGE | 7 - NUMBER OF SHARES ISSUED (IN THOUSANDS) |
8 -SHARE PRICE ON ISSUED DATE (IN REAIS) |
01.10 - INVESTOR RELATIONS OFFICER
1- DATE | 2 - SIGNATURE |
3
FEDERAL PUBLIC SERVICE | ||
CVM BRAZILIAN SECURITIES COMMISSION | ||
ITR Quarterly Information | Corporate Law | |
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY | Data-Base - 06/30/2007 |
01763-9 TIM PARTICIPAÇÕES S.A. | 02.558.115/0001-21 | |
Free Translation into English of Quarterly Information (ITR) | ||
Originally Issued in Portuguese | ||
04.01 NOTES TO QUARTERLY INFORMATION | ||
(In thousands of Reais, except where otherwise stated) |
Code | Heading | 06/30/2007 | 03/31/2007 |
1 | Total assets | 7,937,038 | 8,342,685 |
1.01 | Current assets | 21,306 | 14,436 |
1.01.01 | Cash and cash equivalents | 20,812 | 13,793 |
1.01.01.01 | Cash and Bank | 1,021 | 792 |
1.01.01.02 | Short-term investments in the money market | 19,791 | 13,001 |
1.01.02 | Credits | - | - |
1.01.02.01 | Accounts receivable | - | - |
1.01.02.02 | Others Credits | - | - |
1.01.03 | Inventories | - | - |
1.01.04 | Others | 494 | 643 |
1.01.04.01 | Recoverable taxes and contributions | 423 | 450 |
1.01.04.02 | Other current assets | 71 | 193 |
1.02 | Noncurrent assets | 7,915,732 | 8,328,249 |
1.02.01 | Noncurrent assets | 9,528 | 8,324 |
1.02.01.01 | Others Credits | 5,951 | 5,802 |
1.02.01.01.01 | Taxes and contributions recoverable | 5,951 | 5,802 |
1.02.01.02 | Related parties | 65 | 58 |
1.02.01.02.01 | Affiliates | - | - |
1.02.01.02.02 | Subsidiaries | 65 | 58 |
1.02.01.02.03 | Other related parties | - | - |
1.02.01.03 | others | 3,512 | 2,464 |
1.02.01.03.01 | Judicial deposits | 3,512 | 2,464 |
1.02.02 | Permanent assets | 7,906,204 | 8,319,925 |
1.02.02.01 | Investments | 7,906,204 | 8,319,925 |
1.02.02.01.01 | Affiliates | - | - |
1.02.02.01.02 | Affiliates - Agio | - | - |
1.02.02.01.03 | Subsidiaries | 7,900,286 | 8,313,612 |
1.02.02.01.04 | Subsidiaries - Agio | - | - |
1.02.02.01.05 | Other investments | 5,918 | 6,313 |
1.02.02.02 | Property, plant and equipment | - | - |
1.02.02.03 | Intangible | - | - |
1.02.02.04 | Deferred charges | - | - |
4
FEDERAL PUBLIC SERVICE | ||
CVM BRAZILIAN SECURITIES COMMISSION | ||
ITR Quarterly Information | Corporate Law | |
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY | Data-Base - 06/30/2007 |
01763-9 TIM PARTICIPAÇÕES S.A. | 02.558.115/0001-21 | |
Free Translation into English of Quarterly Information (ITR) | ||
Originally Issued in Portuguese | ||
04.01 NOTES TO QUARTERLY INFORMATION | ||
(In thousands of Reais, except where otherwise stated) |
Code | Heading | 06/30/2007 | 03/31/2007 |
2 | Total liabilities and shareholders' equity | 7,937,038 | 8,342,685 |
2.01 | Current liabilities | 28,465 | 468,533 |
2.01.01 | Loans and financing | - | - |
2.01.02 | Debentures | - | - |
2.01.03 | Suppliers | 867 | 1,714 |
2.01.04 | Taxes, charges and contributions | 26 | 7 |
2.01.05 | Dividends payable | 24,777 | 464,422 |
2.01.06 | Provisions | - | - |
2.01.07 | Related parties | 2,209 | 1,284 |
2.01.08 | Other | 586 | 1,106 |
2.01.08.01 | Labor liabilities | 586 | 1,106 |
2.02 | Noncurrent liabilities | 7,678 | 7,239 |
2.02.01 | Noncurrent liabilities | 7,678 | 7,239 |
2.02.01.01 | Loans and financing | - | - |
2.02.01.02 | Debentures | - | - |
2.02.01.03 | Provisions | 7,678 | 7,239 |
2.02.01.03.01 | Provision for contingencies | 3,123 | 2,684 |
2.02.01.03.02 | Supplementary pension plan | 4,555 | 4,555 |
2.02.01.04 | Related parties | - | - |
2.02.01.05 | Advances for future capital increase | - | - |
2.02.01.06 | Other | - | - |
2.02.02 | Deferred income | - | - |
2.04 | Shareholders' equity | 7,900,895 | 7,866,913 |
2.04.01 | Capital | 7,512,710 | 7,512,710 |
2.04.02 | Capital reserves | 135,230 | 135,230 |
2.04.03 | Revaluation reserves | - | - |
2.04.03.01 | Own assets | - | - |
2.04.03.02 | Subsidiaries/affiliates | - | - |
2.04.04 | Income reserves | 238,438 | 238,438 |
2.04.04.01 | Legal reserve | 98,741 | 98,741 |
2.04.04.02 | Statutory reserve | - | - |
2.04.04.03 | Reserves for contingencies | - | - |
2.04.04.04 | Unearned income reserve | - | - |
2.04.04.05 | Retained earnings | 139,697 | 139,697 |
2.04.04.06 | Special reserve for undistributed dividends | - | - |
2.04.04.07 | Other income reserves | - | - |
2.04.05 | Retained earnings | 14,517 | (19,465) |
2.04.06 | Advances for future capital increase | - | - |
5
FEDERAL PUBLIC SERVICE | ||
CVM BRAZILIAN SECURITIES COMMISSION | ||
ITR Quarterly Information | Corporate Law | |
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY | Data-Base - 06/30/2007 |
01763-9 TIM PARTICIPAÇÕES S.A. | 02.558.115/0001-21 | |
Free Translation into English of Quarterly Information (ITR) | ||
Originally Issued in Portuguese | ||
04.01 NOTES TO QUARTERLY INFORMATION | ||
(In thousands of Reais, except where otherwise stated) |
Code | Heading | From 04/01/2007 a 06/30/2007 |
Acumulated from 04/01/2007 to 06/30/2007 |
From 04/01/2006 to 06/30/2006 |
Acumulated from 04/01/2006 to 06/30/2006 |
3.01 | Gross revenues | - | - | - | - |
3.02 | Deductions from gross revenues | - | - | - | - |
3.03 | Net revenues | - | - | - | - |
3.04 | Cost of goods sold and services rendered | - | - | - | - |
3.05 | Gross profit | - | - | - | - |
3.06 | Operating income (expenses) | 33,982 | 14,517 | (232,143) | (323,352) |
3.06.01 | Selling | - | - | 8 | - |
3.06.02 | General and administrative | (3,220) | (5,862) | (2,180) | (10,094) |
3.06.03 | Financial income (expenses) | 266 | 824 | 175 | 341 |
3.06.03.01 | Financial income | 622 | 1,195 | 513 | 941 |
3.06.03.02 | Financial expenses | (356) | (371) | (338) | (600) |
3.06.04 | Other operating income | 4 | 729 | - | 974 |
3.06.05 | Other operating expenses | (504) | (1,140) | 149 | (1,015) |
3.06.06 | Equity pickup | 37,436 | 19,966 | (230,295) | (313,558) |
3.07 | Operating income | 33,982 | 14,517 | (232,143) | (323,352) |
3.08 | Nonoperating result | - | - | - | - |
3.08.01 | Income | - | - | - | - |
3.08.02 | Expenses | - | - | - | - |
3.09 | Income before taxation and participations | 33,982 | 14,517 | (232,143) | (323,352) |
3.10 | Provision for income and social contribution taxes | - | - | - | - |
3.11 | Deferred income tax | - | - | (6,009) | (3,449) |
3.12 | Participations/statutory contributions | - | - | - | - |
3.12.01 | Participations | - | - | - | - |
3.12.02 | Contributions | - | - | - | - |
3.13 | Reversal of interest on shareholders' equity | - | - | - | - |
3.15 | Net income for the period | 33,982 | 14,517 | (238,152) | (326,801) |
6
FEDERAL PUBLIC SERVICE | ||
CVM BRAZILIAN SECURITIES COMMISSION | ||
ITR Quarterly Information | Corporate Law | |
COMMERCIAL, INDUSTRIAL & OTHER TYPES OF COMPANY | Data-Base - 06/30/2007 |
01763-9 TIM PARTICIPAÇÕES S.A. | 02.558.115/0001-21 | |
Free Translation into English of Quarterly Information (ITR) | ||
Originally Issued in Portuguese | ||
04.01 NOTES TO QUARTERLY INFORMATION | ||
(In thousands of Reais, except where otherwise stated) |
TIM PARTICIPAÇÕES S.A.
NOTES TO THE QUARTERLY INFORMATION
As of June 30, 2007
(In thousands of Reais, unless otherwise stated)
1 Operations
TIM Participações S.A. (the Company) headquartered at Avenida das Américas, 3434, block 1, 7th floor, Rio de Janeiro, RJ, is a publicly-held company directly controlled by TIM Brasil Serviços e Participações S.A., a Telecom Italia Groups company, who holds interests of 81.19% of its voting capital and 69.67% of its total capital
Its operations comprise, among other things, the control of companies exploring telecommunications services, including cellular telephones, in its concession and/or authorization areas.
The Company has full control of TIM Sul S.A., which in turn controls and TIM Nordeste S.A. TIM Celular S.A. and its subsidiary TIM Nordeste S.A. operate cellular telephony services in all Brazilian states.
The services provided by the subsidiaries and the respective tariffs are regulated by ANATEL Brazilian Telecommunications Agency in charge of regulating all Brazilian telecommunications. The subsidiaries authorizations mature as follows:
TIM Nordeste | Expiry Date | ||
Region 1 | |||
Pernambuco | May, | 2009 | |
Ceará | November, | 2008 | |
Paraíba, Rio Grande do Norte e Alagoas | December, | 2008 | |
Piauí | March, | 2009 | |
Region 2 | |||
Minas Gerais | April, | 2013 | |
Region 3 | |||
Bahia and Sergipe | August, | 2012 |
7
TIM Celular | |||
Region 1 | |||
Amapá, Roraima, Pará, Amazonas, Rio de | March, | 2016 | |
Janeiro and Espírito Santo | |||
Region 2 | |||
Acre, Rondônia, Mato Grosso, Mato Grosso do | March, | 2016 | |
Sul, Tocantins, Distrito Federal, Goiás and Rio | |||
Grande do Sul (except for the city of Pelotas) | |||
Region 3 | |||
São Paulo | March, | 2016 | |
Region 4 | |||
Paraná | September, | 2007 | |
Santa Catarina | September, | 2008 | |
Rio Grande do Sul (city of Pelotas) | April, | 2009 |
2 Presentation of the Quarterly Information
a. Presentation and Disclosure Criteria
The quarterly information (company and consolidated) was prepared in accordance with accounting practices adopted in Brazil, the rules applicable to concessionaires of public telecommunications services, and the CVMs (Brazilian Securities Commission) accounting standards and procedures and IBRACON´s (Brazilian Institute of Independent Auditors) pronouncements.
TIM Participações S.A. is a publicly-held company, with American Depositary Receipts being traded on the New York Stock Exchange USA. Therefore, the Company is subject to the rules of the Securities and Exchange Commission (SEC) and, aiming at meeting market needs, it is the Companys principle to disclose information simultaneously to both markets in Brazilian Reais, in both Portuguese and English.
b. Consolidated Quarterly Information
The consolidated quarterly information includes assets, liabilities and the result of operations of the Company and its subsidiaries, as follows:
8
% Ownership | ||||||||
06/2007 | 03/2007 | |||||||
Direct | Indirect | Direct | Indirect | |||||
TIM Participações | ||||||||
TIM Celular | 100,00 | - | 100,00 | - | ||||
TIM Nordeste | - | 100,00 | - | 100,00 |
The main consolidation procedures are as follows:
I. | Elimination of intercompany consolidated assets and
liabilities accounts; |
II. | Elimination of participation in capital, reserves and
retained earnings of the subsidiaries; |
III. | Elimination of intercompany revenues and expenses; |
IV. | Separate disclosure of the minority interest
participation in the consolidated quarterly information, where applicable. |
The reconciled income for the period can be thus shown:
06/2006 | ||||
06/2007 | Adjusted | |||
Parent Company | 14,517 | (326,801) | ||
ADENE´s benefit and fiscal incentive directly recorded as | ||||
shareholders equity of the indirect subsidiary TIM Nordeste | ||||
S.A. | - | (13,401) | ||
Others | 32 | - | ||
Consolidated | 14,549 | (340,202) | ||
c. Comparability of Quarterly Information
In order to continuously improve their corporate governance level, quarterly information and, especially ensure compliance with CVM´s and international accounting practices applicable to their field of activity, the Company and its subsidiaries have analyzed the best accounting practices used in their industry. The results are changes with the effects described below and quarterly information substantially different from those previously published and made available to the shareholders.
9
Below, a description of adjustments to quarterly information originally published in the second quarter of 2006:
(a) | Adjustments relating to assets retirement obligations; |
(b) | Reclassification of some discounts on cell phone sales
made in the quarter ended June 30, 2006, which were originally stated as
cost of goods sold and cost of sales; |
(c) | Adjustments arising from deferral of subsidized sale of
cell phone sets to the post-paid system users; |
(d) | Reclassification of amortization of goodwill paid upon
privatization. |
(e) | Reclassification of PIS/COFINS for financial revenue and
expense deductions; |
(f) | Equity accounting adjustment to the above items. |
Parent Company 06/2006 | ||||||
Original | (f) | Adjusted | ||||
Statement of income | ||||||
Operating revenues (expenses): | ||||||
General and administrative | (10,094) | - | (10,094) | |||
Equity pickup | (374,075) | 60,517 | (313,558) | |||
Other operating expenses, net | (41) | - | (41) | |||
Operating income before financial income | (384,210) | 60,517 | (323,693) | |||
Financial revenues (expenses): | ||||||
Financial revenues | 941 | - | 941 | |||
Financial expenses | (600) | - | (600) | |||
341 | - | 341 | ||||
Pretax loss | (383,869) | 60,517 | (323,352) | |||
Provision for income tax and social contribution | (3,449) | - | (3,449) | |||
Loss for the period | (387,318) | 60,517 | (326,801) | |||
Loss per thousand-share lot (R$) | (0.17) | 0.03 | (0.14) | |||
10
Consolidated 06/2006 | ||||||||||||||
Original | (a) | (b) | (c) | (d) | (e) | Adjusted | ||||||||
Statement of income | ||||||||||||||
Gross operating revenue | ||||||||||||||
Telecommunications services | 5,120,215 | - | - | - | - | - | 5,120,215 | |||||||
Goods sold | 970,528 | - | - | - | - | - | 970,528 | |||||||
6,090,743 | - | - | - | - | - | 6,090,743 | ||||||||
Deductions from gross revenue | (1,638,537) | - | (133,824) | - | - | 22,134 | (1,750,227) | |||||||
Net operating revenue | 4,452,206 | - | (133,824) | - | - | 22,134 | 4,340,516 | |||||||
Cost of services rendered | (1,601,997) | (7,290) | - | - | - | - | (1,609,287) | |||||||
Cost of goods sold | (782,905) | - | 62,255 | 101,465 | - | - | (619,185) | |||||||
Gross income | 2,067,304 | (7,290) | (71,569) | 101,465 | - | 22,134 | 2,112,044 | |||||||
Operating revenues (expenses) : | ||||||||||||||
Distribution | (1,590,010) | - | 71,569 | - | - | - | (1,518,441) | |||||||
General and administrative | (488,551) | - | - | - | - | - | (488,551) | |||||||
Other operating expenses, nets | (80,385) | - | - | - | 25,225 | (52,317) | (107,477) | |||||||
(2,158,946) | - | 71,569 | - | 25,225 | (52,317) | (2,114,469) | ||||||||
Operating income before financial | (91,642) | 25,225 | (30,183) | (2,425) | ||||||||||
income | (7,290) | - | 101,465 | |||||||||||
Financial revenues (expenses): | ||||||||||||||
Financial revenues | 280,725 | - | - | - | - | 30,183 | 310,908 | |||||||
Financial expenses | (453,037) | (17,626) | - | - | - | - | (470,663) | |||||||
(172,312) | (17,626) | - | - | - | 30,183 | (159,755) | ||||||||
Operating loss | (263,954) | (24,916) | - | 101,465 | 25,225 | - | (162,180) | |||||||
Non-operating income | 323 | - | - | - | - | - | 323 | |||||||
Pretax loss | (263,631) | (24,916) | - | 101,465 | 25,225 | - | (161,857) | |||||||
Provision for income tax and social | ||||||||||||||
contribution | (137,088) | (16,032) | - | - | (25,225) | - | (178,345) | |||||||
Loss for the period | (400,719) | (40,948) | - | 101,465 | - | - | (340,202) | |||||||
11
3 Summary of the main accounting practices
a. Short-term investments in the money market
These comprise investments maturing in over 90 days, which are stated at cost plus the related earnings up to the balance sheet date, up to the market value, where applicable.
b. Accounts receivable
Accounts receivable from the telecommunication service costumers are calculated at the tariff rate ruling on the date of service rendering, including credits for services rendered but not billed until the balance sheet date, receivables from network use and receivables from sales of cell phone sets and accessories.
c. Allowance for doubtful accounts
The allowance for doubtful accounts is recorded based on the customer base profile, the aging of past due accounts, the economic scenario and the risks involved in each case. The allowance amount is considered sufficient to cover possible losses on receivables.
d. Inventories
These refer to cell phone sets and accessories, which are stated at the average acquisition cost. A provision was set up to adjust slow-moving and obsolete items balance to the related realizable value.
e. Prepaid expenses
The prepaid expenses are shown at the amount actually disbursed and not yet incurred.
The subsidized sale of cell phone sets to the post-paid system users is deferred and amortized over the duration of the service agreement signed by clients (a minimum 12-month period). The contractual fine applicable to users who cancel their subscriptions or migrate to a prepaid system before the end of their agreements is invariably higher than the subsidy granted on cell phone sales.
Advertising expenses mostly refer to the sponsorship of Formula 1 car race transmission on TV.
f. Investments
The investments in subsidiaries are valued on the equity method, based on the subsidiaries´ shareholders equity, which is determined on the same date, by the same accounting principles used by the parent company.
12
The other investments are shown at cost, and reduced to the realizable value, where applicable.
g. Property, plant and equipment
The property, plant and equipment items are shown at the acquisition and/or construction cost, net of accumulated depreciation, calculated on the straight-line method, over the useful life of assets involved. Any repair and maintenance costs incurred representing improvement, higher capacity or longer useful life are capitalized, whereas the others are recorded as income for the year.
Interest and other financial charges on financing taken for funding construction work in progress (assets and facilities under construction) are capitalized up to the startup date.
The estimated cost of disassembly of towers and equipment in rented properties are capitalized and amortized over the useful life of these assets.
The long-term assets, especially property, plant and equipment, are periodically reviewed to determine the need for recording a provision for losses on any such items and recovery thereof.
The estimated useful lives of all property, plant and equipment items are regularly reviewed considering technological advances.
h. Intangibles
Intangibles are shown at the acquisition cost net of accumulated amortization. The amortization expenses are calculated on the straight-line method over the duration of the respective contracts, i.e., five years for radiofrequency bands and fifteen years for use authorization.
i. Deferred charges
Included in the deferred charges are pre-operating expenses and financial costs of the required working capital at the subsidiaries´ pre-operating stage, which are amortized in ten years from the date the subsidiaries become operative.
j. Income tax and social contribution
Income tax is calculated based on the income adjusted for legally stipulated additions and exclusions. The social contribution is calculated at the legally stipulated rates applied to pretax income.
13
Based on the Constitutive Reports nos. 0144/2003 and 0232/2003 issued by ADENE Northeast Development Agency on March 31, 2003, the subsidiary TIM Nordeste S.A. became eligible to fiscal incentive consisting of: (i) 75% reduction of income tax and non-reimbursable surtaxes for a ten-year period, from fiscal 2002 through 2011, calculated based on the exploration income arising from implementation of its installed capacity for rendering digital cellular telephone services; and (ii) reduction of 37.5%, 25% and 12.5% of income tax and non-reimbursable surtaxes for fiscal 2003, 2004-2008 and 2009-2013, respectively, calculated based on the exploration income arising from implementation of its installed capacity for rendering of analogical cellular telephone services. The amount corresponding to previously mentioned fiscal benefit reduction of income tax is accounted for as a reduction of the provision for income tax, against a Capital reserve Fiscal Incentive, under the Shareholders Equity of the indirect subsidiary TIM Nordeste S.A.
The deferred income tax and social contribution on accumulated tax losses and temporary differences are valued based on the expected taxable income generation and deducted from the provision for adjustment to the recovery value, set up in accordance with CVM Instruction 371/02. On June 30, 2007 and March 31, 2007, the Company did not recognize any deferred tax assets, because the Company itself and its subsidiaries have historically reported operating losses and unused credits.
k. Loans and financing
Loans and financing include accrued interest to the balance sheet date. The companys subsidiaries are party to certain derivative instruments related to their Real denominated liabilities with the objective of hedging them against risks associated with unexpected devaluation of the Real in relation to foreign currencies. Additionally, the Companys subsidiaries have hedge contracts to cover changes in market Income tax is calculated based on the income adjusted for legally stipulated additions and exclusions interest rates. Gains and losses from such operations are recognized in the income statement under the accrual method, based on the contracted rates contracts.
l Provision for contingencies
The provision for contingencies, recorded based on estimates which take into consideration the opinion of the Companys management and its legal advisors, is updated based on the probable losses and risks at the end of the litigations and possible disclosure in notes to financial statements.
m Assets retirement obligations
The provision for assets retirement obligations from disassembly of towers and equipment in rented properties, recorded against Property, plant and equipment, is discounted to present value so it can reflect the best current estimate.
14
n Revenue recognition
Service revenues are recognized as services are provided. Billing is monthly recorded. Unbilled revenues from the billing date to the month end are measured and recognized during the month in which services are provided. Revenues from prepaid telecommunication services are recognized on the accrual basis in the period of utilization. Revenues from the sale of cell phone sets and accessories are recognized as these products are delivered to, and accepted by, end-consumers or distributors.
o. Derivatives
The subsidiaries enter into swap contracts to manage exposure to risk involved in foreign exchange rate and interest rate variations, all accounted for on the accrual basis. Payments made and received are recognized as adjustments to exchange variation.
The derivative contracts are signed with big financial institutions, highly experienced in this field. The subsidiaries do not hold derivative contracts for commercial or speculative purposes.
p. Pension plans and other post-employment benefits
The Company and its subsidiaries record the adjustments connected with the employees pension plan obligations according to the rules established by IBRACON´s NPC 26, approved by CVM Deliberation 371, which defines the characteristics of plans, obligations and events (Note 34).
q. Use of estimates
The preparation of quarterly information in conformity with accounting practices adopted in Brazil requires management to make estimates and assumptions concerning the amounts of recorded assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date, as well as the estimation of revenues and expenses for the year. The actual results may differ from those estimates.
r. Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate prevailing at the transaction date. Foreign currency-denominated assets and liabilities are translated into Reais using the balance sheet date exchange rate, which is reported by the Brazilian Central Bank. Exchange gains and losses are recognized in the statement of income as incurred.
15
s. Employee profit sharing
The Company and its subsidiaries record a provision for employee profit sharing, based on the targets disclosed to its employees and approved by the Administrative Council. These amounts are recorded as personnel expenses and allocated to profit and loss accounts considering each employees cost center.
t. Supplementary information
For additional information purposes, the following is presented: a) Statements of Cash Flow, prepared in accordance with the NPC no. 20 issued by the Institute of Independent Auditors of Brazil IBRACON, ; and b) Value-Added Statements prepared in accordance with the CFC Federal Accounting Council - Resolution no. 1010, which approved NBCT 37.
4 Short-term investments in the money market
Parent Company | ||||
06/2007 | 03/2007 | |||
CDB | 19,525 | 12,738 | ||
Federal bills and bonds | 266 | 263 | ||
19,791 | 13,001 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
CDB | 88,428 | 134,853 | ||
Debentures | 10,120 | 30,328 | ||
Federal bills and bonds | 266 | 263 | ||
98,814 | 165,444 | |||
The average yield of TIM Participações´s investments (consolidated) is the equivalent to 102.19% of the CDI variation CDI (Interbank Deposit Certificate).
These investments are redeemable at any time, with no significant impact on recognized profitability.
16
5 Accounts Receivable
Consolidated | ||||
06/2007 | 03/2007 | |||
Billed services | 975,259 | 790,817 | ||
Unbilled services | 446,156 | 465,464 | ||
Network use | 858,931 | 858,815 | ||
Goods sold | 945,049 | 769,102 | ||
Other receivables | 12,957 | 10,484 | ||
3,238,352 | 2,894,682 | |||
Allowance for doubtful accounts | (474,424) | (382,847) | ||
2,763,928 | 2,511,835 | |||
Below, the changes in the allowance for doubtful accounts: | ||||
Consolidated | ||||
Balance at December 31, 2006 | 309,431 | |||
Provision set up | 341,373 | |||
Written off | (176,380) | |||
Balance at June 30, 2007 | 474,424 | |||
6 Inventories
Consolidated | ||||
06/2007 | 03/2007 | |||
Cell phone sets | 176,060 | 115,122 | ||
Accessories and prepaid card | 3,826 | 4,081 | ||
TIM "chips" | 15,856 | 13,327 | ||
195,742 | 132,530 | |||
Provision for adjustment to realizable value | (15,400) | (16,458) | ||
180,342 | 116,072 | |||
17
7 Recoverable Taxes and Contributions
Parent Company | ||||
06/2007 | 03/2007 | |||
Income tax | 6,220 | 6,162 | ||
IRRF recoverable | 152 | 88 | ||
Other | 2 | 2 | ||
6,374 | 6,252 | |||
Short-term portion | (423) | (450) | ||
Long-term portion | 5,951 | 5,802 | ||
Consolidated | ||||
06/2007 | 03/2007 | |||
Income tax | 59,564 | 42,140 | ||
Social contribution | 15,345 | 8,564 | ||
ICMS | 423,603 | 426,592 | ||
PIS / COFINS | 88,273 | 80,020 | ||
IRRF recoverable | 9,180 | 11,124 | ||
Other | 15,016 | 15,166 | ||
610,981 | 583,606 | |||
Short-term portion | (368,227) | (320,467) | ||
Long-term portion | 242,754 | 263,139 | ||
The parent companys long-term portion basically refers to income tax recoverable, whereas the consolidated figure also includes ICMS on the subsidiaries´ property, plant and equipment.
On March 13, 2006, the suit filed by the indirect subsidiary TIM Nordeste S.A. contesting the constitutionality of Law 9.718/98 that increased basis of calculation of taxes involved had a final judgement not subject to further appeal. Accordingly, the collection of PIS and COFINS on revenues not deriving from the Company´s sales was prohibited, and the subsidiary´s management recorded (in the first half of 2006) R$ 52,317 of PIS and COFINS credits, plus the related monetary restatement.
The other subsidiaries await a favorable sentence on a similar suit filed, having not recorded PIS and COFINS credits meanwhile. However, their managements believe on the probability of a favorable sentence, too. The amounts involved in these suits are being calculated.
18
8 Deferred Income Tax and Social Contribution
The deferred income tax and social contribution can be summarized as follows:
Consolidated | ||||
06/2007 | 03/2007 | |||
Goodwill paid upon privatization | 160,748 | 197,844 | ||
Provision for maintenance of shareholders´ equity integrity | (106,094) | (130,577) | ||
Merger-generated tax credit | 54,654 | 67,267 | ||
Short-term portion | (50,450) | (50,450) | ||
Long-term portion | 4,204 | 16,817 | ||
Merger-generated tax credit
The deferred tax asset represented by the merger-generated tax credit refers to future tax benefit under the restructuring plan started in 2000. As a counterentry to said tax is a special reserve composed of goodwill on shareholders´ equity. The tax is realized ratably to estimated future income, over the duration of the authorization granted, which is due to end by 2008. The goodwill amortization is recorded as provision for income tax and social contribution.
In the six-month period ended June 30, 2007, R$ 25,225 of tax benefits were realized in connection with the above mentioned goodwill (R$ 25,225 for the same period in 2006). Also, under the terms of the restructuring plan, the actual tax benefit for each fiscal year will be subsequently capitalized in the name of the controlling shareholder (Note 23-b)
As projected by the Management, the deferred, long-term income tax and social contribution remaining from the merger-generated tax credit will be realized in 2008.
9 Prepaid Expenses
Consolidated | ||||
06/2007 | 03/2007 | |||
Fistel Annual Rate | 173,836 | - | ||
Subsidized cell phone sales | 137,328 | 146,023 | ||
Rentals | 9,648 | 10,201 | ||
Advertising expenses non-aired ads | 27,162 | 47,348 | ||
Financial charges on loans | 7,003 | 7,908 | ||
Other | 1,994 | 3,236 | ||
356,971 | 214,716 | |||
Short-term portion | (346,689) | (203,129) | ||
Long-term portion | 10,282 | 11,587 | ||
19
10 Related Party Transactions
Below, the composition of the related-party transactions, which are performed under regular market conditions, similarly to those with third parties:
Parent Company
Assets | Liabilities | |||||||
06/2007 | 03/2007 | 06/2007 | 03/2007 | |||||
TIM Celular S.A. | 65 | 58 | 2,209 | 1,284 | ||||
Consolidated
Assets | ||||
06/2007 | 03/2007 | |||
Entel Bolívia (1) | 774 | 798 | ||
Telecom Personal Argentina (1) | 2,825 | 5,628 | ||
Telecom Sparkle (1) | 4,494 | 4,989 | ||
Telecom Italia S.p.A. (2) | 2,364 | 5,235 | ||
Other | 815 | 450 | ||
Total | 11,272 | 17,100 | ||
Liabilities | ||||
06/2007 | 03/2007 | |||
Telecom Italia S.p.A. (2) | 36,168 | 33,475 | ||
IT Telecom Italia (3) | 263 | 276 | ||
Entel Bolívia (1) | 134 | 91 | ||
Telecom Personal Argentina (1) | 1,010 | 1,478 | ||
Telecom Sparkle (1) | 5,813 | 6,192 | ||
Italtel (3) | 3,713 | 6,460 | ||
Other | 435 | 384 | ||
Total | 47,536 | 48,356 | ||
20
Revenue | ||||
06/2007 | 06/2006 | |||
Telecom Italia S.p.A. (2) | 7,041 | 3,103 | ||
Telecom Personal Argentina (1) | 2,143 | 1,618 | ||
Telecom Sparkle (1) | 4,178 | 1,553 | ||
Other | 686 | 873 | ||
Total | 14,048 | 7,147 | ||
Costs/Expenses | ||||
06/2007 | 06/2006 | |||
Telecom Italia S.p.A. (2) | 12,311 | 4,565 | ||
Telecom Sparkle (1) | 10,755 | 9,598 | ||
Telecom Personal Argentina (1) | 2,695 | 3,546 | ||
Other | 955 | 1,437 | ||
Total | 26,716 | 19,146 | ||
(1) | These refer to roaming, value-added services VAS and
media assignment. |
(2) | These refer to international roaming, post-sales
technical assistance and value-added services VAS. |
On May 3, 2007, the Administrative Council of TIM
Participações S.A. approved a cooperation and support agreement with
Telecom Italia S.p.A., valid for 12 months, in the amount of up to euro 14,521 (approximately R$41,000). This agreement is designed to
add value to the Company by benefiting from Telecom Italia´s experience to
(i) improve the effectiveness and efficiency through internally developed
solutions; and (ii) share systems, services, and processes, as well as the
best practices in use in the Italian market, which can be easily
customized for the Company. |
|
(3) | This refers to development and maintenance of software
pieces used in telecommunications service billing. |
In April 2007 a group of Italian investors, namely Assicurazioni Generali S.p.A., Intesa Sanpaolo S.p.A., Mediobanca S.p.A. and Sintonia S.A., together with Telefônica S.A. a Spain-based international telecommunications operator, agreed to buy the whole capital of Olímpia S.p.A. (who holds approximately 18% of the voting capital of Telecom Italia S.p.A., the Company´s indirect owner) through Telco S.p.A. This acquisition, through which Telco S.p.A. will hold some 23.6% of the voting capital of Telecom Italia S.p.A., is pending approval by the competent authorities in Italy , being due to be completed until the end of 2007. Currently, through their subsidiaries, Telefônica S.A. and Telecom Italia S.p.A. are competitors in certain other than their domestic markets, as for example, in Brazil. However, the agreement referred to above provides for an independent, autonomous management of the groups Telecom Italia and Telefônica.
21
Also, it stipulates that Telefônica will neither participate nor vote in Telco´s general shareholders´ meetings, with the directors to be appointed by Telefônica S.A. being instructed to neither participate nor vote in the Administrative Council´s meetings held to discuss political, administrative and operational resolutions and proposals of companies directly or indirectly controlled by Telecom Italia S.pA., who render services in countries with regulatory and legal limitations on the exercise of Telefônica S.A. voting rights. On June 30, 2007, as the agreement is pending of approval by the brazilian and international competent authorities, the Telefônica group was not considered as the Company´s related party.
11 Escrow Deposits
Parent Company | ||||
06/2007 | 03/2007 | |||
Civil | 190 | 190 | ||
Labor | 2,921 | 1,995 | ||
Tax | 401 | 279 | ||
3,512 | 2,464 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
Civil | 18,423 | 15,262 | ||
Labor | 23,190 | 18,732 | ||
ICMS Agreement 69/98 | 3,441 | 2,337 | ||
Other - Taxes | 42,753 | 30,999 | ||
87,807 | 67,330 | |||
The changes in escrow deposits can be summarized as follows:
Parent | ||||
Company | Consolidated | |||
Balance at December 31, 2006 | 1,182 | 57,420 | ||
Additions less write offs in the period | 2,208 | 17,352 | ||
Monetary restatement for the period | 122 | 13,035 | ||
Balance at June 30, 2007 | 3,512 | 87,807 | ||
22
12 Investments
Parent Company | ||||
06/2007 | 03/2007 | |||
Investments | ||||
Subsidiaries | 7,900,286 | 8,313,612 | ||
Goodwill | 5,918 | 6,313 | ||
7,906,204 | 8,319,925 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
Investments | ||||
Goodwill | 5,918 | 6,313 | ||
Other | 20 | 20 | ||
5,938 | 6,333 | |||
(a) Participation in subsidiaries:
06/2007 | ||
TIM Celular | ||
S.A. | ||
- Subsidiary: | ||
Number of shares held | 31.506.833.561 | |
Total participation in capital | 100% | |
Shareholders´ equity | 7,900,286 | |
Income for the period | 19,966 | |
Equity pickup | 19,966 | |
Investment amount | 7,833,866 | |
Special goodwill reserve (*) | 66,420 | |
Investment amount | 7,900,286 | |
23
03/2007 | ||
TIM Celular | ||
S.A. | ||
- Subsidiary | ||
Number of shares held | 31.506.833.561 | |
Total participation in capital | 100% | |
Shareholders´ equity | 8,313,612 | |
Loss for the period | (17,470) | |
Equity pickup | (17,470) | |
Investment amount | 8,247,192 | |
Special goodwill reserve (*) | 66,420 | |
Investment amount | 8,313,612 | |
(*) | The special goodwill reserve recorded at TIM Nordeste
S.A. and TIM Celular S.A. represents the parent companys rights in future
capitalizations. These tax benefits are connected with goodwill paid upon privatization of Tele
Nordeste Celular Participações S.A.,(merged into TIM Participações S.A. in August 2004) and
Tele Celular Sul Participações S.A.(TIM Participações S.As former name). This goodwill was
recorded against the special goodwill reserve, under Shareholders equity, being
realized ratably to the estimated future income and the time of the concession, which is expected to
end by 2008. |
(b) Changes in investment in subsidiary:
TIM Celular | ||
S.A. | ||
Investment balance at December 31, 2006 | 8,331,082 | |
Equity pickup | (17,470) | |
Investment balance at March 31, 2007 | 8,313,612 | |
Equity pickup | 37,436 | |
Capital decrease (i) | (450,762) | |
Investment balance at June 30, 2007 | 7,900,286 | |
(i) | Capital decrease in order to provide financial support to the parent company. |
24
(c) Goodwill:
Parent Company and | ||||
Consolidated | ||||
06/2007 | 03/2007 | |||
Goodwill upon acquisition of minority shareholding in the | ||||
subsidiary TIM Celular S.A. (ii) | 16,918 | 16,918 | ||
Accumulated amortization | (11,000) | (10,605) | ||
5,918 | 6,313 | |||
(ii) | The economic basis for goodwill at TIM Celular S.A.,
amortizable in ten years through 2010, was the future income
forecast. |
13 Property, plant and equipment
Consolidated | ||||||||||
06/2007 | 03/2007 | |||||||||
Accumulate | ||||||||||
Annual average | d | |||||||||
depreciation rate | Depreciatio | |||||||||
% | Cost | n | Net | Net | ||||||
Switching/transmission | ||||||||||
equipment | 14,29 | 6,716,145 | (3,972,963) | 2,743,182 | 2,881,527 | |||||
Loan-for-use handsets | 50 | 718,689 | (484,561) | 234,128 | 280,154 | |||||
Infrastructure | 33,33 | 1,516,417 | (656,356) | 860,061 | 890,705 | |||||
Leasehold improvements | 33,33 | 104,116 | (60,735) | 43,381 | 44,411 | |||||
Software and hardware | 20 | 1,003,975 | (575,745) | 428,230 | 455,221 | |||||
Assets for general use | 10 | 295,855 | (95,467) | 200,388 | 201,404 | |||||
Software licensing | 20 | 3,523,353 | (1,671,039) | 1,852,314 | 1,837,143 | |||||
Assets and installations in | ||||||||||
service | 13,878,550 | (7,516,866) | 6,361,684 | 6,590,565 | ||||||
Plots of land | 24,478 | - | 24,478 | 24,328 | ||||||
Construction work in progress | 358,795 | - | 358,795 | 310,828 | ||||||
14,261,823 | (7,516,866) | 6,744,957 | 6,925,721 | |||||||
The construction work in progress basically refers to the construction of new transmission units (Base Radio Broadcast Station - ERB) for network expansion.
In the six-month period ended June 30, 2007, R$5,616 of property, plant and equipment was capitalized, (March 31, 2007 R$ 2,619) relating to financial charges on loans taken to finance the construction, according to CVM Deliberation 193/96.
25
New technology implementation
The subsidiaries operate their service network using TDMA and GSM technology into their service network as a complement to current TDMA technology. On June 30, 2007, with the introduction of the GSM technology no provision for devaluation of fixed assets due to obsolescence was deemed necessary, as both technologies are to remain in operation at the companies until 2008, at least. The assets related to TDMA technology have been subject to accelerated depreciation and must be fully depreciated by 2008.
14 Intangibles
The authorizations for PCS Personal Communications Services - exploitation and radiofrequency licensing amounts can be thus shown:
Consolidated | ||||||
Average | ||||||
annual | ||||||
amortization | ||||||
rate % | 06/2007 | 03/2007 | ||||
PCS exploitation rights and radiofrequency | ||||||
licensing | 7-20 | 2,811,722 | 2,811,713 | |||
Capitalized charges | 7-20 | 411,356 | 411,356 | |||
3,223,078 | 3,223,069 | |||||
Accumulated amortization | (1,424,567) | (1,362,508) | ||||
1,798,511 | 1,860,561 | |||||
PCS authorizations and radiofrequency
The subsidiaries PCS (Personal Communications Services) authorizations are presented by the terms signed in the years from 2001 through 2004 with Anatel, for the exploration of this service. Previously, the subsidiaries TIM Celular S.A. and TIM Nordeste S.A. had been granted a fifteen-year concession for the SMC (Mobile Communication Service), which was changed into authorization for the SMP in 2002. The remaining SMC authorization period corresponds to the remainder of the SMC concession, initially connected with the 800 MHz radiofrequency licensing.
From 2001 through 2004, the subsidiaries were authorized by Anatel to use radio frequency blocs connected with the provision of SMP at 900 MHz and 1800 MHz.
26
Our radiofrequency authorizations for the 800 MHz, 900 MHz and 1800 MHz bands, referring to SMP service provision begin to expire in September 2007 and are renewable for only one 15-year period. The Company´s requests to ANATEL for renewal of these authorizations may be denied, if in ANATEL´s view we are not properly and rationally using the range granted, having seriously and repeatedly violated pertinent legislation, or if the range redistribution is deemed necessary.
15 Deferred Charges
Consolidated | ||||
06/2007 | 03/2007 | |||
Preoperating expenses: | ||||
Third-party services | 228,665 | 228,665 | ||
Personnel expenses | 79,367 | 79,367 | ||
Rentals | 48,914 | 48,914 | ||
Materials | 3,439 | 3,439 | ||
Depreciation | 10,202 | 10,202 | ||
Financial charges net | 46,774 | 46,774 | ||
Other expenses | 5,990 | 5,990 | ||
423,351 | 423,351 | |||
Accumulated amortization | (211,929) | (201,345) | ||
211,422 | 222,006 | |||
16 Suppliers Trade Payables
Parent Company | ||||
06/2007 | 03/2007 | |||
Local currency | ||||
Suppliers of materials and services | 867 | 1,714 | ||
867 | 1,714 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
Local currency | ||||
Suppliers of materials and services | 1,397,051 | 1,117,884 | ||
Interconnection (a) | 269,207 | 286,396 | ||
Roaming (b) | 1,276 | 1,119 | ||
Co-billing (c) | 156,637 | 162,029 | ||
1,824,171 | 1,567,428 | |||
Foreign currency | ||||
Suppliers of materials and services | 14,679 | 41,852 | ||
Roaming (b) | 35,937 | 33,982 | ||
50,616 | 75,834 | |||
1,874,787 | 1,643,262 | |||
27
(a) This refers to use of the network of other fixed and mobile cell telephone operators, where calls are initiated at TIM network and end in the network of other operators;
(b) This refers to calls made when customers are outside their registration area, and are therefore considered visitors in the other network (roaming); and
(c) This refers to calls made by customers when they choose another long-distance call operator.
17 Loans and Financing
Consolidated | ||||||
Guarantees | 06/2007 | 03/2007 | ||||
Local currency | ||||||
Banco do Nordeste - financing subject to pre-fixed | ||||||
interest of 11,5% p.a. and a 15% and 25% bonus on | ||||||
payment on maturity, the subject matter of a hedging | ||||||
operation for which the rate is 69.8% and 76.90% of | ||||||
the CDI monthly variation . | Bank surety | 182,900 | 191,594 | |||
BNDES (Banco Nacional do Desenvolvimento | ||||||
Econômico e Social): this financing bears interest at | ||||||
3.85% p.a plus variation of the TJLP (long-term | ||||||
interest rate) as disclosed by the Brazilian Brazilian | ||||||
Central Bank . or of the "UMBNDES" of the Basket | ||||||
of Currencies. plus res. Rate 635/87 (average BNDES | Direct portion: bank surety. | |||||
external funding rate). The Basket of Currencies | Indirect portion: TIM Brasil | |||||
financing was the subject matter of a swap to some | Serviços e Participações S.A. | |||||
128% of the CDI monthly variation. The TJLP-based | surety, with part of the blocked | |||||
financing was the subject matter of a swap at 85.85% | service collection up to the | |||||
of the CDI daily rate | amount of the debit balance. | 59,622 | 89,606 | |||
BNDES (Banco Nacional de Desenvolvimento | ||||||
Econômico e social): this financing bears interest at | ||||||
an average rate of 4.20% p.a., plus variation of the | TIM Brasil Serviços e | |||||
TJLP (long-term interest rate) as disclosed by the | Participações S.A. guarantee | |||||
Brazilian Central Bank. 44% of the TJLP-based | with part of the collection | |||||
financing was the subject matter of a swap at 91.43% | service blocked up to the | |||||
of the CDI daily rate | amount of the debit balance. | 1,140,232 | 1,138,245 | |||
BNDES (Banco Nacional de Desenvolvimento | ||||||
Econômico e social): this financing bears interest at | ||||||
an average rate of 3,0% p.a., plus variation of the | ||||||
TJLP (long-term interest rate) as disclosed by the | ||||||
Brazilian Central Bank. The TJLP-based financing | ||||||
was the subject matter of a swap at 81.80% of the | ||||||
CDI daily rate | Bank surety. | 51,206 | 51,144 |
28
Consolidated | ||||||
Guarantees | 06/2007 | 03/2007 | ||||
Local Currency | ||||||
Syndicated Loan (a) the debit balance is restated | ||||||
based on the CDI rate variation plus a 1.25% p.a. | ||||||
margin until 08/26/06, and from then on a margin | ||||||
established in accordance with the Net Consolidated | TIM Brasil Serviços e | |||||
Debt/Consolidated EBITDA ratio | Participações S.A. guarantee | 626,654 | 607,664 | |||
Compror 2770: Bank financing for payment of | ||||||
goods and services suppliers, linked to foreign | ||||||
currency variations. 28% of the agreements | ||||||
denominated in US dollars (average coupon of 7,16% | ||||||
p.a.) and 72% of the agreements denominated in Yen | ||||||
(average coupon of 1,23% p.a.) These agreements are | ||||||
under hedge protection which result in cost of some | ||||||
104,1% of the CDI daily rate. | N.A. | 127,323 | - | |||
Compror 2770: Bank financing for payment of | ||||||
goods and services suppliers, linked to foreign | ||||||
currency variations. 71% of the agreements | ||||||
denominated in US dollars (average coupon of 7,66% | ||||||
p.a.) and 29% of the agreements denominated in Yen | ||||||
(average coupon of 0,50% p.a.) These agreements are | ||||||
under hedge protection which result in cost of some | ||||||
104,3% of the CDI daily rate. | N.A. | 21,806 | - | |||
Rotation Compror: Bank financing for payment of | ||||||
goods and services suppliers at the cost of 103% of | ||||||
the CDI daily rate. | N.A. | 80,011 | - | |||
Swap contracts relating to the above loans and | ||||||
financing | 10,630 | 14,056 | ||||
2,300,384 | 2,092,309 | |||||
Short-term portion | (540,165) | (273,485) | ||||
Long-term portion | 1,760,219 | 1,818,824 | ||||
The syndicated loan taken by TIM Celular S.A. contains restrictive clauses concerning certain financial indices, which have been complied with by this subsidiary. The following Financial Institutions are part of this loan agreement: HSBC Bank Brasil S.A. Banco Múltiplo, Banco ABN AMRO Real S.A., Banco BNP Paribas Brasil S.A., Banco Bradesco S.A., Banco do Brasil S.A., Banco Itaú BBA S.A., Banco Santander Brasil S.A., Banco Société Générale Brasil S.A., Banco Votorantim S.A., Unibanco União de Bancos Brasileiros S.A.
29
The BNDES loan taken by TIM Celular S.A. for expanding its mobile telephony network contains restrictive clauses concerning certain financial indices, which have been complied with by this subsidiary.
The subsidiaries have contracted swap operations as a safeguard against the risk of devaluation of the Brazilian Real and variations of the fair value of loans bearing prefixed interest rates and TJLP. These operations are valid for the same period as the related financing.
The long-term portion of loans and financing as of June 30, 2007 mature as follows:
Consolidated | ||
2008 | 417,337 | |
2009 | 534,498 | |
2010 | 234,458 | |
2011 | 232,333 | |
2012 onwards | 341,593 | |
1,760,219 | ||
18 Labor obligations
Parent Company | ||||
06/2007 | 03/2007 | |||
Payroll taxes | 74 | 366 | ||
Labor provisions | 479 | 694 | ||
Employees´ withholding | 33 | 46 | ||
586 | 1,106 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
Salaries and fees | 90 | 12 | ||
Payroll taxes | 27,402 | 23,562 | ||
Labor provisions | 82,143 | 86,090 | ||
Employees´ withholding | 4,423 | 4,674 | ||
114,058 | 114,338 | |||
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19 Taxes, Charges and Contributions
Parent Company | ||||
06/2007 | 03/2007 | |||
ISS | 5 | 5 | ||
Other | 21 | 2 | ||
26 | 7 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
IRPJ and CSL | 67,413 | 24,330 | ||
ICMS | 268,107 | 265,286 | ||
COFINS | 36,442 | 36,173 | ||
PIS | 7,896 | 7,756 | ||
FISTEL | 12,634 | 89,120 | ||
FUST/FUNTTEL | 7,903 | 7,311 | ||
IRRF | 2,410 | 2,260 | ||
ISS | 18,313 | 19,339 | ||
Other | 9,236 | 8,172 | ||
430,354 | 459,747 | |||
20 Authorizations payable
Consolidated | ||||
06/2007 | 03/2007 | |||
SMP exploitation rights | ||||
Authorizations acquired | 164,560 | 164,560 | ||
Payments | (157,219) | (157,219) | ||
Monetary restatement | 38,102 | 37,807 | ||
45,443 | 45,148 | |||
Short-term portion | (38,806) | (38,545) | ||
Long-term portion | 6,637 | 6,603 | ||
The monetary restatement of payables is calculated base don the IGP-DI variation plus interest at 1% p.m.
Long-term authorizations payable on June 30, 2007 mature as follows:
31
Consolidated | ||
2008 | 1,106 | |
2009 | 1,106 | |
2010 | 1,106 | |
2011 | 1,106 | |
2012 onwards | 2,213 | |
6,637 | ||
21 Provision for Contingencies
The Company and its subsidiaries are party to certain lawsuits (labor, tax, regulatory and civil) arising in the normal course of their business, and have recorded provisions when management understands that the risk of loss is deemed probable, based on the opinion of their legal advisors.
The provision for contingencies is thus composed:
Parent Company | ||||
06/2007 | 03/2007 | |||
Civil | 981 | 642 | ||
Labor | 2,142 | 2,042 | ||
3,123 | 2,684 | |||
Consolidated | ||||
06/2007 | 03/2007 | |||
Civil | 70,806 | 51,394 | ||
Labor | 39,685 | 38,749 | ||
Tax | 55,613 | 38,753 | ||
Regulatory | 10,146 | 9,181 | ||
176,250 | 138,077 | |||
The changes in the provision for contingencies can be summarized as follows:
32
Parent | ||||
Company | Consolidated | |||
Balance at December 31, 2006 | 3,168 | 128,133 | ||
Additions in the period | 340 | 16,376 | ||
Reversals and payments in the period | (724) | (1,110) | ||
Monetary restatement in the period | 339 | 32,851 | ||
Balance at June 30, 2007 | 3,123 | 176,250 | ||
Civil contingencies
Several legal and administrative processes have been filed against the Company by consumers, suppliers, service providers and consumer protection agencies, dealing with various issues arising in the regular course of business. It is the Company´s policy to analyze each legal or administrative process to determine whether it involves probable, possible or remote risk of contingencies. In doing so, the Company always takes into account the opinion of lawyers engaged to conduct the processes. The evaluation is periodically reviewed, with the possibility of being modified over the processes due to facts of events such as case law changes.
Consumer lawsuits
Approximately 33,600 individual lawsuits (March 31, 2007 26,200) have been filed against the subsidiaries, mostly by consumers claiming for settlement of matters arising from their relationship with the Company. Among these, the allegedly undue collection, contract cancellation, defects of equipment and non-compliance with delivery deadlines stand out. Provisions have been set up for those processes involving probable losses.
Collective actions
There are four collective actions against subsidiaries involving the risk of probable loss, which can be summarized as follows: (i) a suit against TIM Celular S.;A. claiming for the installation of a service unit for personal assistance in Rio Branco, AC.; (ii) a suit against TIM Nordeste S.A. in the state of Pernambuco, questioning the Company´s policy of defective phone replacement, allegedly in disagreement with the manufacturer´s warranty terms; (iii) a suit against TIM Nordeste S.A. in the state of Ceará, claiming for the Company´s obligation to replace cell phone sets which have been the subject of fraud in that state; and (iv) a suit against TIM Nordeste S.A. in the state of Bahia, claiming for annulment of charges on long-distance calls originated and received by Petrolina/PE and Juazeiro/BA, allegedly because of the borderline areas between these two municipalities. No provisions have been recorded for these contingencies, given the obligations involved therein and the impossibility of accurately quantifying the possibility of losses at the current stage of the processes.
33
Other Actions and Proceedings
The indirect subsidiary TIM Nordeste S.A. has been sued by the Federal Audit Court at administrative level with the possibility of being submitted to a court of justice, for allegedly defaulting on payment of R$ 25,000 representing interest and monetary restatement on the second installment due on acquisition the Area 9 (Bahia and Sergipe) license. As the risk of an unfavorable outcome for the Company is deemed only possible by both internal and external advisors, no provision has been set up.
The indirect subsidiary TIM Nordeste S.A. is also defendant in an action filed by the legal services providers, the law firm Mattos & Callumby Lisboa Advogados, in Rio de Janeiro. They claim for success fees allegedly due under a service agreement for filing court injunctions against interest and monetary restatement on purchase prices of Maxitel S.A.´s Band B. As the risk of an unfavorable outcome for the Company is deemed possible by both internal and external advisors, no provision has been set up.
Labor contingencies
These refer to claims filed by both former employees in connection with salaries, salary differences and equalization, overtime, variable compensation/commissions, and former employees of service providers who, based on pertinent legislation, claim for the Company´s and/or its subsidiaries´ accountability for labor obligations defaulted on by their outsourced employers.
Labor claims
Of the 1,985 labor suits filed against the Company and its subsidiaries (March 31, 2007 1,778), over 65% involve claims against service providers, concentrated on certain companies from São Paulo, Rio de Janeiro and Recife.
Still on third parties´ claims, part of these relate to specific projects of service agreement review, often ended in rescission in 2006 and winding up of the companies and termination of employees involved. A further significant portion of contingencies refers to organizational restructuring, among which the discontinuance of the Client Relationship Centers (call centers) in Fortaleza, Salvador and Belo Horizonte, and the termination of 800 own employees and outsourced personnel stand out. All processes involving the risk of loss have been provided for by the Company.
The assessment of possible success of, and amounts involved in, the contingency is periodically reviewed, based on sentences issued during the processes, regulatory changes or modification of case law and higher courts´ abridgements of law.
34
Occupational Accidents
With the enactment of the Constitutional Amendment no. 45/2004, the litigations involving occupational accidents that resulted in claims for damages, previously judged by the State Court began to be judged by the Labor Courts. Given the issues under litigation and the fact that indemnification is determined by arbitration , thus involving high subjectiveness, the decision to set up provisions for these suits was made based on the total estimated losses amounting to some R$ 1,800.
DRT (Regional Labor Offices) and INSS (Nat´l Social Security Institute)
The indirect subsidiary TIM Nordeste S.A. was assessed for R$ 778 by the Regional Labor Office from Minas Gerais, on charges of allegedly irregular engagement of third parties. The risk of loss was deemed probable by the Company´s advisors, and an adequate provision was recorded.
Tax contingencies
IR and CSLL
In 2005, the indirect subsidiary TIM Nordeste S.A. was assessed by the Internal Revenue Secretariat of the State of Minas Gerais for R$ 126,933, for the following reasons: (i) taxation of monetary variations on swap operations and exchange variation on unsettled loans; (ii) a separate fine for default on payment of social contribution on an estimated monthly basis for the year 2002 and part of 2001; (iii) default on payment of corporate income tax on an estimated monthly basis for the year 2002; and (iv) remittance of interest (IRRF) a voluntary denunciation without payment of arrears charges. These assessments are now being discussed the taxing authorities. Based on its internal and external advisors´ opinion, the Management estimates probable losses on these processes at R$ 32,750. As they refer to income tax and social contribution, had these payments been made on schedule, they would have been recorded as income tax and social contribution, and accordingly, the Company found it correct to record the related provision for contingency against income tax and social contribution expenses.
ICMS
In 2003 and 2004 the subsidiary TIM Celular S.A. was assessed by the Internal Revenue Secretariat of the State of Santa Catarina for R$ 85,114, mainly relating to dispute on the levying of ICMS on certain services provided. The company is currently discussing these assessments with the tax authorities. According to its internal and external lawyers, the probable losses thereon, duly provided for, amount to R$ 2,650.
35
In October 2006, by adhering to the Santa Catarina State Economic Recuperation Program Revigorar II, intended to grant amnesty to state tax debtors, the subsidiary TIM Celular S.A. agreed to settle its debt referring to ICMS rate difference on acquisition of phone sets in other states. Consequently, the provision represented by a previous R$ 11,779 escrow deposit was reversed.
Regulatory Contingencies
Due to an alleged default on some SMPs provisions and quality targets defined under the PGMQ-SMP General SMP Quality Goals Plan ANATEL started some procedures for determining Default on Obligations PADO, involving the subsidiaries.
The subsidiaries have endeavored to avoid being assessed, with arguments, mostly of technical and legal nature, that may contribute to reduce significantly the initial fine charged or event definitively file the PADO, with no sanctions. The related provision was set up based on the amount of fines charged, the risk of loss involved being classified probable (Note 36).
Possible contingencies not provided for
Civil, Labor, Regulatory and Tax-related actions have been filed against the Company and its subsidiaries involving risk of loss that is classified as possible or remote by the management and the Companys lawyers. No provision has been set up for these contingencies.
Consolidated | ||||
06/2007 | 03/2007 | |||
Civil | 71,813 | 67,053 | ||
Labor | 61,654 | 52,415 | ||
Tax | 587,513 | 668,372 | ||
Regulatory | 21,261 | 21,260 | ||
742,241 | 809,100 | |||
The main actions involving risk of loss are described below:
Labor suits
A substantial portion of these suits refers to organization restructuring. Worth mentioning among these is the discontinuance of Client Relationship Centers in Fortaleza, Salvador and Belo Horizonte, which resulted in layoff of approximately 800 own and outsourced employees.
Of the labor suits involving risk of loss, the civil public action filed by the Minas Gerais Department of Labor Justice 3rd region on allegedly irregular outsourcing practices and collective pain an suffering is worth stressing.
36
IR and CSLL
On October 30, 200, the indirect subsidiary TIM Nordeste S.A. was assessed by the Internal Revenue Secretariat of the State of Minas Gerais for R$ 331,171 under a single administrative process referring to IRPJ, CSL and a separate fine, for different reasons. Most of the assessment refers to amortization of goodwill determined on a Telebrás System privatization auction and the related tax deductions. Under Law 9.532/97, art. 7, the proceeds of goodwill amortization can be included in the taxable income of a company resulting from merger or split, whereby one company holds investment in the other, and pays for it using the goodwill determined based on the investee´s expected profitability. Also, this is a usual operation performed in accordance with CVM Instruction 319/99. After timely impugnating these assessment notices the Subsidiary now awaits the taxing authorities´ decision on the matter. In March 2007, by means of a Fiscal Information Report, the Recife/PE´s Internal Revenue Secretariat informed TIM that the amounts of IRPJ, CSL and a separate fine totaling R$ 73,027 (principal and separate fine) had been excluded from the assessment notice. As a consequence, this assessment was partially reduced, the discussion on the remainder being transferred to 160 compensation processes. Based on its internal and external lawyers´ opinion, the Company has not set up a provision for the above mentioned processes.
In September 2003 the indirect subsidiary TIM Nordeste S.A. was assessed by the Internal Revenue Secretariat of the State of Ceará for R$ 12,721 referring to: (i) disallowance of R$ 8,402 expenses included in the IRPJ determination for the period from 1999 through 2001; (ii) R$ 3,208 of differences in CSLL payments for the years from 1998 through 2001; (iii) differences of R$ 334 and R$ 777, respectively, in the payment of PIS and COFINS for the years from 1998 through 2002. The Company filed an impugnation and a voluntary appeal against this assessment.
PIS and COFINS
In 2004, the subsidiary TIM Nordeste S.A. was assessed in connection with PIS and COFINS due on exchange variation arising from revenue generated in 1999. Both assessment notices amounted to R$ 30,913. Because this is a controversial matter involving interpretation of applicable legislation, a provision was set up, in 2004, for the same amount. On March 13, 2006 a decision with no right to further appeal was issued on the action filed by the company against Law 9718 of November 27, 1998, The company alleged that this law was unconstitutional concerning the expansion of the tax basis of calculation, preventing the collection of PIS and COFINS on non-operating revenue.
In view of the final decision, the Management requested extinction of the tax assessment against the subsidiary, concerning PIS and COFINS on exchange variation and reversed, in 2006, the provision set up in 2004 (Note 28). In April 2007 the amount of PIS on exchange variation claimed was reduced by R$ 5,372, the remainder R$ 25,541 being now under discussion.
37
FUST Telecommunications Service Universalization Fund
On December 15, 2005, Anatel issued its Summary no. 07 aimed at collecting contributions to the FUST out of interconnection revenues earned by providers of telecommunications services, as from the date of enactment of Law 9998 of August 17, 2000. The Company still believes that based on applicable legislation (including the sole paragraph of article 6 of Law 9998/00), the above revenues are not subject to the FUST charges, and accordingly, the Management has taken the necessary measures to protect their interests. In October and November 2006, ANATEL assessed the Company´s subsidiaries for R$ 82,096 referring to FUST on interconnection revenues and arrears fine, all because of Summary 07/05. Currently Anatels intended collection of FUST on interconnection revenues earned by the Company is suspended, because of the temporary order favorable to the Company.
ICMS
In 2006 the indirect subsidiary TIM Nordeste S.A. was assessed by the taxing authorities from the State of Piauí for R$ 7,308, in connection with the payment of a difference between intrastate and interstate ICMS rate on fixed assets items for use and consumption and the determination of ICMS basis of calculation for acquisition of goods intended for sale. The Company is impugnating these assessments at administrative level.
22 Assets for retirement obligations
Pursuant to Circular Communication CVM/SNC/SEP 01/2007, the assets for retirement obligations were recorded at present value, and accordingly, R$ 11,470 of financial expenses was reflected in the statement of income for the six-month period ended June 30, 2007 (same period of 2006- R$ 17,626).
The changes during the six-month period ended June 30, 2007 can be thus shown:
Consolidated | ||||
06/2007 | 03/2007 | |||
Opening balance | 166,688 | 158,168 | ||
Additions during the period | 2,713 | 299 | ||
Monetary restatement during the period | 3,519 | 8,221 | ||
Closing balance | 172,920 | 166,688 | ||
38
23 Shareholders Equity
a. Capital
As authorized by the Administrative Council, regardless of the statutory reform, the Company´s capital is represented by up to 2,500,000,000,000 (two trillion and five hundred billion) shares.
On May 30, 2007 at its General Extraordinary Shareholders´ Meeting TIM Participações S.A. approved the reverse split of all shares issued by the Company at the ratio of 1,000(thousand) : 1(one) of each class.
Capital subscribed and paid-in comprises shares without par value, thus distributed:
06/2007 | 03/2007 | |||
Number of common shares | 793,5444,277 | 793,544,276,988 | ||
Number of preferred shares | 1,536,170,583 | 1,537,170,582,578 | ||
2,329,714,860 | 2,329,714,859,566 | |||
b. Capital reserves
Special goodwill reserve
This reserve was set up during the corporate reorganization process in 2000. 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 no need for issuance of new shares. The respective capital increase will be subject to preemptive rights of the minority shareholders, in proportion to their shareholdings, by type and class, at the time of new issuance, and the amounts payable during the year in connection with this right must be delivered directly to the controlling shareholder, in accordance with CVM Instruction 319/99.
c. Revenue reserves
Legal reserve
This refers to the 5% (five percent) of net income for every year ended December 31 to be appropriated to the legal reserve, which should not exceed 20% (twenty percent) of capital.. Also, the Company is not authorized to set up a legal reserve when it exceeds 30% (thirty percent) of capital plus capital reserves. This reserve can be used only for capital increase or compensation of accumulated losses.
39
Reserve for expansion
This reserve set up in accordance with paragraph 2, article 40 of the by-laws and article 194 of Law 6.404/76 is intended to finance investment projects and plant expansion.
d. Dividends
Dividends are calculated in accordance with the Bylaws and Brazilian Corporate Law (Lei das Sociedades por Ações).
As stipulated in its by-laws, the Company shall distribute an amount equivalent to 25% of adjusted net income as minimum dividend every year ended December 31, provided there are funds available for distribution.
Preferred shares are nonvoting and take priority on (i) the payment of capital at no premium, and (ii) payment of a minimum non-cumulative dividend of 6% p.a. on the total obtained from dividing the capital stock representing this type of shares by the total number of the same class of shares issued by the Company.
In order to comply with Law 10.303/01, the Companys bylaws were amended, including the First Paragraph of Section 10, which ensures the holders of preferred shares, every year, the right to receive stock dividends corresponding to 3% (three percent) of net earnings per share, based on the balance sheet most recently approved, whenever the dividend established according to this criterion exceeds the dividend calculated according to the criteria previously established, described in the preceding paragraph.
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24. Net operating revenue
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Telecommunications service | ||||
Subscription | 217,952 | 280,806 | ||
Use | 3,366,477 | 2,486,654 | ||
Network use | 2,208,464 | 1,306,801 | ||
Long-distance | 906,471 | 581,726 | ||
VAS Additional services | 519,763 | 418,398 | ||
Other | 42,757 | 45,830 | ||
7,261,884 | 5,120,215 | |||
Sales of goods | 848,961 | 970,528 | ||
Gross operating revenue | 8,110,845 | 6,090,743 | ||
Deductions from gross revenue | ||||
Taxes | (1,705,628) | (1,324,647) | ||
Discounts granted | (423,027) | (328,547) | ||
Returns and other | (79,449) | (97,033) | ||
(2,208,104) | (1,750,227) | |||
5,902,741 | 4,340,516 | |||
25 Cost of services rendered and goods sold
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Personnel | (50,100) | (57,233) | ||
Third-party services | (114,579) | (153,845) | ||
Interconnection charges | (1,630,442) | (664,490) | ||
Depreciation and amortization | (654,575) | (652,345) | ||
Telecommunications inspection fund (FISTEL) | (3,476) | (4,926) | ||
Other | (59,998) | (76,448) | ||
Cost of services rendered | (2,513,170) | (1,609,287) | ||
Cost of goods sold | (640,028) | (619,185) | ||
Total cost of services rendered and goods sold | (3,153,198) | (2,228,472) | ||
41
26 Selling expenses
Consolidated | ||||
06/2006 | ||||
06/2007 | Ajusted | |||
Personnel | (163,220) | (142,334) | ||
Third-party services | (754,431) | (575,322) | ||
Advertising and publicity | (161,527) | (203,175) | ||
Allowance for doubtful accounts | (341,373) | (202,469) | ||
Telecommunications inspection fund | (230,376) | (193,336) | ||
Depreciation and amortization | (173,276) | (150,645) | ||
Other | (44,089) | (51,160) | ||
(1,868,292) | (1,518,441) | |||
27 General and administrative expenses
Parent Company | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Personnel | (1,178) | (3,116) | ||
Third-party services | (4,311) | (6,713) | ||
Other | (373) | (265) | ||
(5,862) | (10,094) | |||
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Personnel | (95,484) | (92,532) | ||
Third-party services | (187,271) | (194,839) | ||
Depreciation and amortization | (199,427) | (162,207) | ||
Other | (33,302) | (38,973) | ||
(515,484) | (488,551) | |||
42
28 Other operating revenues (expenses) - Net
Parent Company | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Revenues | ||||
Reversal of provision for contingencies | 724 | 974 | ||
Other receivables | 5 | - | ||
729 | 974 | |||
Expenses | ||||
Amortization of goodwill | (790) | (790) | ||
Provision for contingencies | (340) | (225) | ||
Other operating expenses | (10) | - | ||
(1,140) | (1,015) | |||
Other operating revenues (expenses) Net | (411) | (41) | ||
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Revenues | ||||
Fines on telecommunications services | 37,880 | 23,368 | ||
Reversal of provision for contingencies (a) | 1,110 | 33,811 | ||
Other operating revenues | 6,720 | 8,416 | ||
45,710 | 65,595 | |||
Expenses | ||||
Amortization of deferred charges | (64) | (1,849) | ||
Concession amortization | (124,119) | (124,119) | ||
Taxes, rates and contributions | (842) | (19,405) | ||
Amortization of goodwill | (790) | (790) | ||
Provision for contingencies | (16,376) | (16,553) | ||
Losses on legal actions | (13,766) | (10,356) | ||
Other operating expenses | (9) | - | ||
(155,966) | (173,072) | |||
Other operating revenues (expenses), net | (110,256) | (107,477) | ||
(a) In 2006, this refers mainly to the reversal of provision for PIS and COFINS at the indirect subsidiary TIM Nordeste (Note 21).
43
29 Financial revenues
Parent Company | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Interest on short-term investments in the money market | 757 | 572 | ||
Monetary restatement | 438 | 315 | ||
Other revenues | - | 54 | ||
1,195 | 941 | |||
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Interest on short-term investments in the money market | 13,494 | 66,621 | ||
Monetary restatement | 23,246 | 32,711 | ||
Interest on trade receivables | 8,699 | 7,265 | ||
Exchange variation | 20,219 | 193,557 | ||
Other revenues | 4,268 | 10,754 | ||
69,926 | 310,908 | |||
30 Financial Expenses
Parent Company | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
CPMF | (29) | (582) | ||
Monetary restatement | (339) | - | ||
Other expenses | (3) | (18) | ||
(371) | (600) | |||
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Interest on loans and financing | (105,152) | (116,294) | ||
Interest on suppliers trade payables | (2,166) | (29,225) | ||
Interest on financial revenues | - | (8,418) | ||
Monetary restatement | (47,744) | (30,726) | ||
Interest on taxes and rates | (2,870) | (7,516) | ||
CPMF | (28,366) | (25,687) | ||
Discounts granted | (4,151) | (3,098) | ||
Charges on payment in installments | - | (23,675) | ||
Exchange variation | (17,703) | (215,855) | ||
Other expenses | (6,491) | (10,169) | ||
(214,643) | (470,663) | |||
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31 Non-operating income (expense)
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Revenues | ||||
Disposal of property, plant and equipment | 12,229 | 4,103 | ||
12,229 | 4,103 | |||
Expenses | ||||
Cost of property, plant and equipment disposed of | (15,939) | (3,780) | ||
(15,939) | (3,780) | |||
Non-operating income | (3,710) | 323 | ||
32 Income tax and social contribution expenses and tax losses
Parent | ||||||
Company | Consolidated | |||||
06/2006 | 06/2006 | |||||
Adjusted | 06/2007 | Adjusted | ||||
Income tax for the period | - | (49,330) | (48,564) | |||
Social contribution for the period | - | (17,980) | (17,649) | |||
- | (67,310) | (66,213) | ||||
Deferred income tax | (2,536) | - | (63,887) | |||
Deferred social contribution | (913) | - | (23,020) | |||
(3,449) | - | (86,907) | ||||
Amortization of goodwill paid upon | ||||||
privatization | - | (25,225) | (25,225) | |||
(3,449) | (92,535) | (178,345) | ||||
Below, the reconciliation of income tax and social contribution calculated at tax rates combined with amounts reflected in the income:
45
Parent | ||
Company | ||
06/2006 | ||
Adjusted | ||
Pretax loss | (323,352) | |
Combined tax rate | 34% | |
Income tax and social contribution at the combined tax rate | 109,940 | |
(Additions)/Exclusions: | ||
Equity pickup | (106,610) | |
Amortization of goodwill reserve | (269) | |
Provision for devaluation of tax credits | (6,502) | |
Other amounts | (8) | |
(113,389) | ||
Income tax and social contribution credited to the income for the year | (3,449) | |
Tax rate in effect | 1,07% | |
Consolidated | ||||
06/2006 | ||||
06/2007 | Adjusted | |||
Pretax income (loss) | 107,084 | (161,857) | ||
Combined tax rate | 34% | 34% | ||
Income tax and social contribution at the combined tax rate | (36,409) | 55,031 | ||
(Additions)/Exclusions:: | ||||
Unrecognized tax losses and temporary differences | (30,901) | (208,151) | ||
Amortization of goodwill paid upon privatization | (25,225) | (25,225) | ||
(56,126) | (233,376) | |||
Income tax and social contribution charged to the income for | ||||
the year | (92,535) | (178,345) | ||
46
Accumulated tax losses
The tax credits arising from accumulated tax losses and negative social contribution basis, which are not recognized until there are consistent prospects of realization, can be summarized as follows:
06/2007 | 03/2007 | |||
TIM Celular S.A. | 3,609,822 | 3,653,308 | ||
TIM Nordeste S.A. | 2,385,691 | 2,397,870 | ||
TIM Participações S.A. | 19,338 | 16,533 | ||
6,014,851 | 6,067,711 | |||
33 Financial instruments and risk management
The following are the main risks to which the Company and its subsidiaries are exposed:
(i) Exchange rate risks
The exchange rate risk relates to the possibility of the subsidiaries to compute losses resulting from fluctuations in exchange 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.
On June 30, 2007, the subsidiaries loans and financing indexed to the UMBNDES exchange variance of a basket of currencies are covered by hedge contracts. Income or loss resulting from these hedge contracts is charged to the income.
There are no significant financial assets indexed to foreign currencies.
(ii) Interest rate risks
The interest rate risks relate to:
47
(iii) Credit risk inherent in services rendered
This risk is related to the possibility of the subsidiaries computing losses originating from the difficulty in collecting the amounts billed to customers. In order to mitigate this risk, the Company and its subsidiaries perform credit analysis that assist the management of risks related to collection problems, and monitor accounts receivable from subscribers, blocking the telephone, in case customers default on payment of their bills.
(iv) Credit risk inherent in sale of telephone sets and prepaid telephone cards
The policy adopted by the Companys subsidiaries for the sale of telephone sets and distribution of prepaid telephone cards is directly related to credit risk levels accepted during the normal course of business. The choice of partners, the diversification of the accounts receivable portfolio, the monitoring of loan conditions, the positions and limits defined for orders placed by traders, the adoption of guarantees are procedures adopted by the subsidiaries to minimize possible collection problems with its commercial partners. There is no single client who accounts for more than 10% of net receivables from sales of goods as of June 30, 2007 and 2006, or sales revenues earned during the quarters then ended.
(v) Financial credit risk
This risk relates to the possibility of the Company and its subsidiaries computing losses originating from the difficulty in realizing its short-term investments and swap contracts, in the event of either party´s insolvency. The subsidiaries minimize the risk associated to these financial instruments by investing in well-reputed financial institutions and adopting a policy that establishes maximum level of risk concentration on each financial institution.
There is no concentration of available resources in connection with work, service, concessions or rights that have not been mentioned above that could, if eliminated suddenly, severely impact the operations of the subsidiaries.
48
Market value of financial instruments
The estimated market value of financial instruments, especially cash and cash equivalents, accounts receivable and short-term financial instruments approximates their book value, given their short duration. Below, the financial instruments with market value different from their book value:
Consolidated | ||||||||
06/2007 | 03/2007 | |||||||
Book | Market | Book | Market | |||||
value | value | value | value | |||||
Loans and financing | 2,289,754 | 2,292,267 | 2,078,253 | 2,070,419 | ||||
Swap contracts | 10,630 | (12,781) | 14,056 | 1,174 | ||||
2,300,384 | 2,279,486 | 2,092,309 | 2,071,593 | |||||
The market value of loans and financing and swap contracts was determined based on future discounted cash flow and at interest rates applicable to similar instruments which involve the same risks and conditions or are based on their market quotations.
The market values were estimated at a specific time, using available information and the Companys own evaluation methods. Any change in the underlying assumptions may significantly affect the estimates.
34 Pension Plan and other post-employment benefits
Supplementary Pension Plan
On August 7, 2006, TIM Participações S.A.´s approved the implementation by Itaú Vida e Previdência S.A. of PGBL and VGBL Supplementary Pension Plans for the Company and its subsidiaries TIM Celular S.A. and TIM Nordeste S.A. All employees not benefiting from pension plans sponsored by the Company and its subsidiaries are eligible for these supplementary plans.
Atypical contractual relationship
The Company is the succeeding sponsoring company arising from the partial spin-off of Telecomunicações do Paraná S.A TELEPAR, of the private pension supplementation plans introduced in 1970 under a Collective Agreement, approved by the Atypical Contractual Agreement entered into by said company and the Unions representing the professional categories then existing.
49
This agreement covers 86 employees hired before December 31, 1982 to whom a supplementary pension is granted, providing that they retire after a minimum service length of 30 years for men and 25 years for women.
As a result of Telebrás split in June 1998, the Company opted for extinguishment of this supplementary pension plan, and accordingly, the participants were entitled to payment in cash of accumulated benefits or transfer of the obligations assumed under this plan to the PBS-A-SISTEL plan. Most of the participants opted for payment in cash. The remainder, duly provided for, will be used to cover benefits due to employees who have not made their option (4 employees as of June 30, and March 31, 2007).
TIMPREV and SISTEL
TIM Participações S.A. and its subsidiaries TIM Nordeste S.A and TIM Celular S.A have sponsored a private defined benefits pension plan for a group of TELEBRÁS system´s former employees, which is managed by Fundação Sistel de Seguridade Social SISTEL, as a consequence of the legal provisions applicable to the privatization process of these companies in July 1998.
Considering that, in 1999 and 2000, the sponsors of the pension plans managed by SISTEL had already negotiated conditions for the creation of individual pension plans per sponsoring company and maintenance of joint liability only in relation to the participants already assisted on January 31, 2000, the Companies and their subsidiaries in 2002, like other companies resulting from the former TELEBRÁS system, started the creation of a pension plan for defined contributions meeting the most modern social security standards adopted by private companies and allowing the possibility of migration to this plan of the employee groups linked to SISTEL.
On November 13, 2002, the Brazilian Secretariat for Supplementary Pension Plans, through official ruling No. 1917 CGAJ/SPC, approved the statutes of the new pension plan, denominated Statutes of the TIMPREV Benefits Plan, defined contributions, which provide for new conditions for benefits granting and maintenance, as well as the rights and obligations of the Plan Managing Entity, the sponsoring companies, participants and the beneficiaries thereof.
Under this new plan, the sponsor´s regular contribution will correspond to 100% of a participant´s basic contribution , and TIMPREV´s managing entity will ensure the benefits listed below, under the terms and conditions agreed upon, with no obligation to grant any other benefits, even if the government-sponsored social security entity starts granting them.
50
However, as not all of the Company´s and its subsidiaries´ employees have migrated to TIMPREV plan, the pension and health care plans deriving from the TELEBRÁS system briefly listed below remain:
PBS: benefits plan of SISTEL for defined benefits, which includes the employees paying contributions to the plan (active) who participated in the plans sponsored by the companies of the former TELEBRÁS system;
PBS Assistidos: private pension plan for employees receiving benefits (inactive), for multi-sponsored benefits;
Convênio de Administração: for managing pension payment to retirees and pensioners of the predecessors of the subsidiary companies;
PAMEC: health care plan granted to pensioners of the predecessors of the subsidiary companies;
PBT: plan for defined benefits for pensioners of the predecessors of the company and its subsidiaries;
PAMA: health care plan for retired employees and their dependents, on a shared cost basis.
In accordance with the rules established by NPC-26 issued by the Institute of Independent Auditors of Brazil IBRACON, as approved by CVM Deliberation No. 371, the actuarial position of these plans represents a surplus not recorded by the Company in view of the impossibility to recover such amounts and also considering that the amount of contributions will not be reduced for the future sponsor.
On January 31, 2006, TIM Participações S.A.´s administrative council approved the proposed migration of Fundação SISTEL de Seguridade Social´s Pension Funds sponsored by TIM Celular S.A. and TIM Nordeste S.A. to a multi-sponsored HSBC-linked pension fund. Throughout 2006, the entities involved conducted studies focused on migration, having finally registered the respective Terms of Transfer with the Ministry of Social Security´s Supplementary Pension Secretariat in December 2006.
In the six-month period ended June 30, 2007, the contributions to the pension funds and other post-employment benefits totaled R$118 (R$129 in the same period of 2006).
51
35 Insurance (unaudited)
It is the Company´s and its subsidiaries´ policy to monitor risks inherent in their operations, which is why as of June 30, 2007 they have insurance coverage against operating risks, third party liability, and health, among others. The Management of the Company and its subsidiaries find the insurance coverage sufficient to cover any losses. The table below shows the main assets, liabilities or interests insured and the respective amounts:
Types | Amounts insured | |
Operating Risks | R$ 9,818,787 | |
General Third Party Liability RCG | R$ 13,440 | |
100% Fipe Table, | ||
Cars (Executive and Operational Fleets) | R$ 1,000 for RC (DM and DC) |
36 Commitments
ANATEL
Under the terms of the Authorization for Mobile Personal Service (SMP) Exploitation, the subsidiaries have committed to implement mobile personal telecommunications cover for the assigned area, on a phased basis, within the quality standards established by such authorization. Should said terms fail to be met, the subsidiaries are subject to penalties.
Anatel has brought administrative proceedings against the subsidiaries for (i) noncompliance with certain quality service indicators in 2004, 2005 and 2006 as established by the licenses for Personal Mobile Service (SMP); and (ii) noncompliance with other obligations assumed under the Terms of Authorization.
In their defense, the subsidiaries have claimed that (i) noncompliance with quality indicators were mainly due to the migration from the Cellular Mobile Service (SMC) to the Personal Mobile Service (SMP), the change in the long-distance system, and the implementation of the GSM network; and (ii) in certain cases the obligations assumed under the Terms of Authorization were not met, whereas in others, this was due to several factors, many of which involuntary and unrelated to the companies´ activities and actions. The subsidiaries are unable to foresee the outcome of Anatel processes at the moment. The provision for regulatory contingencies reflected in the balance sheet corresponds to losses expected by the Management (Note 21).
52
37. Supplementary information
a. Cash Flow Statements
Parent Company | Consolidated | |||||||
06/2007 | 06/2006 | 06/2007 | 06/2006 | |||||
Adjusted | Adjusted | |||||||
Operating Activities | ||||||||
Net Income (Loss) for the period | 14,517 | (326,801) | 14,549 | (340,202) | ||||
Adjustments for reconciliation of income to cash and cash | ||||||||
equivalents: | ||||||||
Depreciation and amortization | 790 | 790 | 1,152,251 | 1,091,955 | ||||
Equity pickup | (19,966) | 313,558 | - | - | ||||
Residual value of permanent assets written off | - | - | 15,939 | 3,984 | ||||
Deferred income tax and social contribution | - | 3,449 | 25,225 | 112,132 | ||||
Interest and monetary variation on loans | - | - | 109,621 | 161,652 | ||||
Monetary restatement on obligations arising from discontinuance | ||||||||
of assets | - | - | 11,740 | 17,626 | ||||
Interest on short-term investments in the money market | (757) | (572) | (13,494) | (66,621) | ||||
Allowance for doubtful accounts | - | - | 341,373 | 202,469 | ||||
Decrease (increase) in operating assets | ||||||||
Trade receivables | - | - | (599,468) | (140,970) | ||||
Taxes and contributions recoverable | (371) | 16,930 | (32,758) | (30,803) | ||||
Inventories | - | - | (16,234) | (938) | ||||
Related-party transactions | (7) | - | 5,031 | 861 | ||||
Prepaid expenses | - | - | (122,706) | (243,977) | ||||
Interest received on own capital | - | 146,776 | - | - | ||||
Other current assets | (68) | (691) | (10,839) | (7,057) | ||||
Other long-term assets | (2,331) | (529) | (30,460) | (11,036) | ||||
Increase (decrease) in operating liabilities | ||||||||
Labor obligations | (169) | (524) | 21,565 | 12,080 | ||||
Suppliers Trade payables | (1,092) | (2,432) | (268,875) | (544,081) | ||||
Taxes, rates and contributions | (39) | (20,893) | 60,057 | (43,217) | ||||
Provision for contingencies | (45) | (261) | 48,117 | (20,579) | ||||
Related-party transactions | 2,209 | - | (36,528) | (25,881) | ||||
Other short-term liabilities | - | (196) | (7,260) | 41 | ||||
Net cash and cash equiv. generated (used) by operating activities | (7,329) | 128,604 | 666,846 | 127,438 | ||||
Investment activities: | ||||||||
Capital decrease | 450,763 | - | - | - | ||||
Short-term investments in the money market | (2,751) | (14,205) | 667,290 | 507,156 | ||||
Additions to property, plant and equipment | - | - | (1,071,783) | (1,633,942) | ||||
Net cash and cash equiv. generated (used) by investment activities | 448,012 | (14,205) | (404,493) | (1,126,786) | ||||
Financing activities | ||||||||
New loans | - | - | 355,261 | 1,078,445 | ||||
Loan amortization | - | - | (389,930) | (199,704) | ||||
Dividends and interest paid on own capital | (439,749) | (114,421) | (439,857) | (114,577) | ||||
Net cash and cash equiv. generated (used) by financing activities | (439,749) | (114,421) | (474,526) | 764,164 | ||||
Increase (decrease) in cash and cash equivalents | 934 | (22) | (212,173) | (235,184) | ||||
Cash and cash equivalents at the beginning of period | 87 | 55 | 440,866 | 519,300 | ||||
Cash and cash equivalents at the end of period | 1,021 | 33 | 228,693 | 284,116 |
53
Parent Company | Consolidated | |||||||
06/2006 | 06/2006 | |||||||
06/2007 | Adjusted | 06/2007 | Adjusted | |||||
Supplementary cash flow information: | ||||||||
Income tax and social contribution paid | - | - | 25,523 | 24,866 | ||||
Interest paid | - | - | 114,922 | 118,656 | ||||
Interest capitalized | - | - | 5,616 | 8,962 | ||||
Accounts payable referring to addition to property, | ||||||||
plant and equipment expenses | - | - | 432,655 | 478,618 |
b. Value-Added Statements
Parent Company | Consolidated | |||||||
06/2006 | 06/2006 | |||||||
06/2007 | Adjusted | 06/2007 | Adjusted | |||||
Revenues | ||||||||
Gross operating revenue | - | - | 8,110,845 | 6,090,743 | ||||
Allowance for doubtful accounts | - | - | (341,373) | (202,469) | ||||
Discounts granted, returns and other | - | - | (502,476) | (425,580) | ||||
Non-operating revenues (expenses) Net | (3,946) | 6,032 | (3,710) | 323 | ||||
(3,946) | 6,032 | 7,263,286 | 5,463,017 | |||||
Input bought from third parties | ||||||||
Costs of services rendered and goods sold | - | - | (2,389,462) | (1,442,079) | ||||
Materials, energy, third-party services and other | (3,946) | (6,032) | (1,131,433) | (1,003,763) | ||||
(3,946) | (6,032) | (3,520,895) | (2,445,842) | |||||
Withholding | ||||||||
Depreciation and amortization | (790) | (790) | (1,152,251) | (1,091,955) | ||||
Net added value produced | (4,736) | (6,822) | 2,590,140 | 1,925,220 | ||||
Added value received through transfer | ||||||||
Equity pickup | 19,966 | (313,558) | - | - | ||||
Financial revenues | 1,195 | 941 | 69,926 | 310,908 | ||||
21,161 | (312,617) | 69,926 | 310,908 | |||||
Total undistributed value-added | 16,425 | (319,439) | 2,660,066 | 2,236,128 | ||||
Value-added distribution | ||||||||
Personnel and related charges | 1,017 | 2,666 | 263,498 | 249,370 | ||||
Taxes, rates and contributions | 500 | 4,601 | 2,103,336 | 1,783,542 | ||||
Interest and rentals | 391 | 95 | 278,683 | 543,418 | ||||
Retained earnings (accumulated losses) | 14,517 | (326,801) | 14,549 | (340,202) | ||||
16,425 | 319,439 | 2,660,066 | 2,236,128 | |||||
54
38 Subsequent events
As a result of the reverse split of all shares issued by the Company (Note 23), the shareholders adjusted their stakes to lots of multiples of 1,000-share lots, by class, through private trading over the counter or at BOVESPA São Paulo Stock Exchange, at their free and exclusive discretion, in the period from June 1, 2007 through July 2, 2007. The auction of the remaining share fractions is due to be held by September 30, 2007.
55
Code | Heading | 06/30/2007 | 03/31/2007 |
1 | Total assets | 13,187,998 | 13,131,272 |
1.01 | Current assets | 4,063,586 | 3,733,413 |
1.01.01 | Cash and cash equivalents | 327,507 | 509,971 |
1.01.01.01 | Cash and Banks | 228,693 | 344,527 |
1.01.01.02 | Short-term investments in the money market | 98,814 | 165,444 |
1.01.02 | Accounts receivable | 2,763,928 | 2,511,835 |
1.01.02.01 | Accounts receivable | - | - |
1.01.02.02 | Accounts receivable | 2,763,928 | 2,511,835 |
1.01.02.02.01 | Accounts receivable | 2,763,928 | 2,511,835 |
1.01.03 | Inventories | 180,342 | 116,072 |
1.01.04 | Others | 791,809 | 595,535 |
1.01.04.01 | Recoverable taxes and contributions | 368,227 | 320,467 |
1.01.04.02 | Deferred income and social contribution taxes | 50,450 | 50,450 |
1.01.04.03 | Prepaid expenses | 346,689 | 203,129 |
1.01.04.04 | Other | 26,443 | 21,489 |
1.02 | Noncurrent assets | 9,124,412 | 9,397,859 |
1.02.01 | Noncurrent assets | 363,584 | 383,238 |
1.02.01.01 | Sundry receivables | 246,958 | 279,956 |
1.02.01.01.01 | Taxes and contributions recoverable | 242,754 | 263,139 |
1.02.01.01.02 | Deferred income and social contribution taxes | 4,204 | 16,817 |
1.02.01.02 | Related parties | 11,272 | 17,100 |
1.02.01.02.01 | Affiliates | - | - |
1.02.01.02.02 | Subsidiaries | - | - |
1.02.01.02.03 | Other related parties | 11,272 | 17,100 |
1.02.01.03 | Other | 105,354 | 86,182 |
1.02.01.03.01 | Judicial deposits | 87,807 | 67,330 |
1.02.01.03.02 | Prepaid expenses | 10,282 | 11,587 |
1.02.01.03.03 | Other assets | 7,265 | 7,265 |
1.02.02 | Permanent assets | 8,760,828 | 9,014,621 |
1.02.02.01 | Investments | 5,938 | 6,333 |
1.02.02.01.01 | Affiliates | - | - |
1.02.02.01.02 | Affiliates - Agio | - | - |
1.02.02.01.03 | Subsidiaries | - | - |
1.02.02.01.04 | Subsidiaries - Agio | - | - |
1.02.02.01.05 | Others Investments | 5,938 | 6,333 |
1.02.02.02 | Other investments | 6,744,957 | 6,925,721 |
1.02.02.03 | Property, plant and equipment | 1,798,511 | 1,860,561 |
1.02.02.04 | Deferred charges | 211,422 | 222,006 |
56
Heading | 06/30/2007 | 03/31/2007 |
Total liabilities and shareholders' equity | 13,187,998 | 13,131,272 |
Current liabilities | 3,164,994 | 3,128,084 |
Loans and financing | 540,165 | 273,485 |
Debentures | - | - |
Suppliers | 1,874,787 | 1,643,262 |
Taxes, charges and contributions | 430,354 | 459,747 |
Dividends payable | 33,101 | 472,788 |
Provisions | - | - |
Related parties | 47,536 | 48,356 |
Other | 239,051 | 230,446 |
Labor liabilities | 114,058 | 114,338 |
Authorizations payable | 38,806 | 38,545 |
Other liabilities | 86,187 | 77,563 |
Noncurrent liabilities | 2,122,109 | 2,136,275 |
Noncurrent liabilities | 2,122,109 | 2,136,275 |
Loans and financing | 1,760,219 | 1,818,824 |
Debentures | - | - |
Provisions | 182,333 | 144,160 |
Supplementary pension plan | 176,250 | 138,077 |
Provision for contingency | 6,083 | 6,083 |
Related parties | - | - |
Advances for future capital increase | - | - |
Others | 179,557 | 173,291 |
Authorizations payable | 6,637 | 6,603 |
Assets retirement obligations | 172,920 | 166,688 |
Deferred income | - | - |
Minority interests | - | - |
Shareholders' equity | 7,900,895 | 7,866,913 |
Capital | 7,512,710 | 7,512,710 |
Capital reserves | 135,230 | 135,230 |
Revaluation reserves | - | - |
Own assets | - | - |
Subsidiaries/affiliates | - | - |
Income reserves | 238,438 | 238,438 |
Legal reserve | 98,741 | 98,741 |
Statutory reserve | - | - |
Reserve for contingencies | - | - |
Unearned income reserve | - | - |
Retained earnings | 139,697 | 139,697 |
Special reserve for undistributed dividends | - | - |
Other income reserves | - | - |
Retained earnings | 14,517 | (19,465) |
Advances for future capital increase | - | - |
57
Heading | From 04/01/2007 a 06/30/2007 |
Acumulated from 04/01/2007 to 06/30/2007 |
From 04/01/2006 to 06/30/2006 |
Acumulated from 04/01/2006 to 06/30/2006 |
Gross revenues | 4,215,510 | 8,110,845 | 3,201,785 | 6,090,743 |
Deductions from gross revenues | (1,155,942) | (2,208,104) | (926,991) | (1,750,227) |
Net revenues | 3,059,568 | 5,902,741 | 2,274,794 | 4,340,516 |
Cost of goods sold and services rendered | (1,625,095) | (3,153,198) | (1,181,360) | (2,228,472) |
Gross profit | 1,434,473 | 2,749,543 | 1,093,434 | 2,112,044 |
Operating income (expenses) | (1,342,210) | (2,638,749) | (1,202,481) | (2,274,224) |
Selling | (953,964) | (1,868,292) | (833,548) | (1,518,441) |
General and administrative | (256,335) | (515,484) | (245,082) | (488,551) |
Financial income (expenses) | (81,463) | (144,717) | (70,747) | (159,755) |
Financial income | 35,303 | 69,926 | 212,696 | 310,908 |
Financial expenses | (116,766) | (214,643) | (283,443) | (470,663) |
Other operating income | 22,607 | 45,710 | 21,621 | 65,595 |
Other operating expenses | (73,055) | (155,966) | (74,725) | (173,072) |
Equity pickup | - | - | - | - |
Operating income | 92,263 | 110,794 | (109,047) | (162,180) |
Nonoperating income | (2,554) | (3,710) | (94) | 323 |
Income | 7,498 | 12,229 | 2,934 | 4,103 |
Expenses | (10,052) | (15,939) | (3,028) | (3,780) |
Income before taxation and participations | 89,709 | 107,084 | (109,141) | (161,857) |
Provision for income and social contribution taxes | (55,695) | (92,535) | (37,622) | (91,438) |
Deferred income tax | - | - | (91,878) | (86,907) |
Participations/statutory contributions | - | - | - | - |
Participations | - | - | - | - |
Contributions | - | - | - | - |
Reversal of interest on shareholders' equity | - | - | - | - |
Minority interests | - | - | - | - |
Net income for the period | 34,014 | 14,549 | (238,641) | (340,202) |
58
INDEPENDENT AUDITORS´ SPECIAL REVIEW REPORT
The
Management and Shareholders
TIM PARTICIPAÇÕES S.A.
1. We have performed a special review of the Quarterly Information (ITR) of TIM PARTICIPAÇÕES S.A., for the quarter ended June 30, 2007, comprising the balance sheet, and the statement of income, both individual and consolidated, the performance report and relevant information prepared in accordance with accounting practices adopted in Brazil, all prepared under the responsibility of the management. Our responsibility is to issue an opinion on this information. TIM PARTICIPAÇÕES S.A. has full control of Tim Celular S.A., who, in turn, fully controls Tim Nordeste S.A. The financial statements of these subsidiaries for the quarter ended June 30, 2007, which serve as a basis for investment evaluation on the equity method and consolidation, were examined by Ernst & Young Auditores Independentes S.S Our report, with respect to the book value of these investments and their effects on the income for the quarter and consolidated figures, is based solely on those auditors´ examination, and given the size of the subsidiaries´ amounts involved, required a coordinated monitoring work and review of auditing procedures performed by that firm.
2. Our review was conducted in accordance with specific standards jointly set by IBRACON Brazilian Independent Auditors´ Institute and the Federal Accounting Council, mainly consisting of: (a) inquiry of, and discussion with, the heads of the Company´s accounting, financial and operational departments about the criteria used in preparing Quarterly Information; and (b) review of subsequent information and events that may significantly affect the Company´s financial condition and operations.
3. Based on our special review and that of other independent auditors´ of the subsidiary Tim Celular S.A. and the indirect subsidiary Tim Nordeste S.A., we are not aware of any relevant change that might required for the Quarter Information referred to above to comply with accounting practices adopted in Brazil and used consistently with CVM Brazilian Securities Commission´s standards, specifically applicable to Quarterly Information.
Rio de Janeiro, July 12, 2007
59
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.
TIM PARTICIPAÇÕES S.A. | |||
Date: July 23, 2007 | By: | /s/ Stefano De Angelis | |
Name: Stefano De Angelis | |||
Title: Chief Financial Officer |
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will a ctually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.