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NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
BALANCE SHEETS AS OF JUNE 30, 2004 AND MARCH 31, 2004 ­ (In thousands of Brazilian reais ­ R$)
Company
Consolidated
ASSETS ........................................................................
06/2004
03/2004
06/2004
03/2004
CURRENT ASSETS
Cash and banks ...........................................................
29.380
5.601
32.449
11.700
Temporary cash investments ........................................
95.137
6.910
157.299
110.497
Trade accounts receivable ...........................................
152.453
159.665
162.071
166.878
Inventories ...................................................................
820
753
98.287
89.293
Recoverable taxes .......................................................
2.815
1.055
13.518
10.457
Advances to employees ...............................................
2.533
4.912
5.010
6.926
Related parties .............................................................
932
867
­
­
Deferred income and social contribution taxes ............
10.252
10.506
21.462
21.663
Other receivables .........................................................
5.624
6.903
12.172
11.810
Total current assets .....................................................
299.946
197.172
502.268
429.224
LONG-TERM ASSETS
Advance for future capital increase .............................
3.239
550
2.689
­
Tax incentives ..............................................................
1.452
1.452
1.492
1.492
Deferred income and social contribution taxes ............
11.457
9.656
15.914
11.457
Escrow deposits ...........................................................
16.491
15.103
19.635
17.118
Other receivables .........................................................
1.721
663
3.438
2.379
Total long-term assets ..................................................
34.360
27.424
43.168
32.446
PERMANENT ASSETS
Investments .................................................................
366.586
355.834
2.670
2.739
Property, plant and equipment ......................................
9.756
10.395
263.192
256.333
Total permanent assets ................................................
376.342
366.229
265.862
259.072
TOTAL ASSETS ............................................................
710.648
590.825
811.298
720.742
Company
Consolidated
LIABILITIES AND SHAREHOLDERS' EQUITY ..............
06/2004
03/2004
06/2004
03/2004
CURRENT LIABILITIES
Loans and financing .....................................................
13.052
31.463
24.300
39.716
Domestic suppliers .......................................................
5.980
4.201
64.846
60.821
Foreign suppliers ..........................................................
­
­
1.983
404
Suppliers ­ related parties ...........................................
76.608
32.057
­
­
Payroll and related charges ..........................................
19.972
13.561
45.046
29.380
Taxes payable ..............................................................
36.048
38.843
47.299
55.225
Related parties .............................................................
138
95
­
­
Dividends ......................................................................
73.333
­
73.333
­
Interest on capital ........................................................
11.418
­
11.418
­
Other payables .............................................................
20.050
31.922
23.091
35.377
Reserve for losses on swap contracts .........................
1.041
2.847
1.016
2.839
Total current liabilities ...................................................
257.640
154.989
292.332
223.762
LONG-TERM LIABILITIES
Loans and financing .....................................................
25.958
45.325
79.870
101.181
Reserve for contingencies ...........................................
34.809
29.706
48.063
35.578
Provision for losses on subsidiaries ............................
67
­
­
­
Other payables .............................................................
­
7.731
872
8.603
Total long-term liabilities ...............................................
60.834
82.762
128.805
145.362
MINORITY INTEREST ...................................................
­
­
8
8
SHAREHOLDERS' EQUITY
Capital ..........................................................................
230.762
196.371
230.762
196.371
Treasury shares ............................................................
(3.554)
(3.762)
(3.554)
(3.762)
Capital reserves ...........................................................
114.947
110.714
114.947
110.714
Profit reserves ..............................................................
3.629
3.629
3.629
3.629
Retained earnings .........................................................
46.390
46.122
44.369
44.658
Total shareholders' equity .............................................
392.174
353.074
390.153
351.610
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...
710.648
590.825
811.298
720.742
STATEMENTS OF INCOME FOR THE QUARTERS ENDED JUNE 30, 2004 AND 2003
(In thousands of Brazilian reais ­ R$)
Company
Consolidated
4/1/2004
4/1/2003
1/1/2004
1/1/2003
4/1/2004
4/1/2003
1/1/2004
1/1/2003
to
to
to
to
to
to
to
to
6/30/2004
6/30/2003
6/30/2004
6/30/2003
6/30/2004
6/30/2003
6/30/2004
6/30/2003
Gross sales to domestic market ....................................................................................................................................
595.893
446.919
1.055.910
777.843
598.199
452.090
1.060.191
787.648
Gross sales to foreign market ........................................................................................................................................
­
­
­
­
18.699
10.156
32.243
19.226
Other sales .....................................................................................................................................................................
5
­
5
72
203
565
316
788
GROSS OPERATING REVENUES ..................................................................................................................................
595.898
446.919
1.055.915
777.915
617.101
462.811
1.092.750
807.662
Taxes on sales, returns and rebates ..............................................................................................................................
(140.649)
(105.836)
(249.660)
(184.530)
(188.557)
(140.565)
(335.036)
(245.537)
NET OPERATING REVENUES ........................................................................................................................................
455.249
341.083
806.255
593.385
428.544
322.246
757.714
562.125
Cost of sales ..................................................................................................................................................................
(202.646)
(160.518)
(351.346)
(272.933)
(145.934)
(119.850)
(254.309)
(208.560)
GROSS PROFIT .............................................................................................................................................................
252.603
180.565
454.909
320.452
282.610
202.396
503.405
353.565
OPERATING (EXPENSES) INCOME
Selling .............................................................................................................................................................................
(109.423)
(86.898)
(196.761)
(152.850)
(128.344)
(99.191)
(230.520)
(175.606)
General and administrative .............................................................................................................................................
(56.477)
(38.391)
(111.018)
(68.441)
(49.109)
(40.237)
(87.884)
(72.308)
Employee profit sharing ..................................................................................................................................................
(3.405)
(1.806)
(5.340)
(4.208)
(8.890)
(3.454)
(13.701)
(7.216)
Management compensation ............................................................................................................................................
(1.689)
(928)
(3.314)
(1.910)
(2.089)
(1.246)
(3.998)
(2.586)
Equity in subsidiaries .....................................................................................................................................................
6.558
2.326
14.542
(1.717)
­
­
­
­
INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS ......................................................................................
88.167
54.868
153.018
91.326
94.178
58.268
167.302
95.849
Financial expenses .........................................................................................................................................................
(453)
(30.039)
(6.106)
(54.017)
(5.764)
(31.697)
(20.495)
(57.147)
Financial income .............................................................................................................................................................
2.330
19.744
11.490
32.771
6.542
21.281
20.232
36.142
INCOME FROM OPERATIONS ........................................................................................................................................
90.044
44.573
158.402
70.080
94.956
47.852
167.039
74.844
Nonoperating income (expense) .....................................................................................................................................
75
242
337
452
(577)
39
111
(1.127)
INCOME BEFORE DEBENTURE PARTICIPATION ...........................................................................................................
90.119
44.815
158.739
70.532
94.379
47.891
167.150
73.717
Debenture participation ..................................................................................................................................................
­
(27.024)
(7.178)
(42.798)
­
(27.024)
(7.178)
(42.798)
INCOME BEFORE TAXES ON INCOME ..........................................................................................................................
90.119
17.791
151.561
27.734
94.379
20.867
159.972
30.919
Income and social contribution taxes .........................................................................................................................
(10.745)
(5.706)
(26.065)
(9.786)
(15.562)
(8.976)
(36.497)
(14.008)
NET INCOME BEFORE MINORITY INTEREST ...............................................................................................................
79.374
12.085
125.496
17.948
78.817
11.891
123.475
16.911
Minority interest ..........................................................................................................................................................
­
­
­
­
­
10
­
28
NET INCOME ..................................................................................................................................................................
79.374
12.085
125.496
17.948
78.817
11.901
123.475
16.939
Capital
reserves Profit reserves
Treasury
Share
Investment
Retained
COMPANY
Capital
shares
premium
grants
Legal
Retention
earnings
Total
BALANCES AS OF DECEMBER 31, 2003 ....................................................................................................................
56.387
­
­
9.998
10.687
45.544
­
122.616
Net income .....................................................................................................................................................................
­
­
­
­
­
­
46.122
46.122
Capitalization of debentures ..........................................................................................................................................
138.569
­
100.000
­
­
­
­
238.569
Capital increase through merger of Natura Empreendimentos SA .................................................................................
1.415
­
­
­
­
­
­
1.415
Treasury shares ............................................................................................................................................................
­
(1.415)
­
­
­
­
­
(1.415)
Sale of treasury shares through exercise of stock options (item f) ..............................................................................
­
38
716
­
­
­
­
754
Receivables from shareholders .....................................................................................................................................
­
(2.385)
­
­
­
­
­
(2.385)
Absorption of excess liabilities through merger of Natura Empreendimentos S.A, after elimination of the merged
company's investment in the Company ...................................................................................................................
­
­
­
­
­
(23.367)
­
(23.367)
Absorption of excess liabilities through merger of Natura Participações S.A, after elimination of the merged
company's investment in the Company ...................................................................................................................
­
­
­
­
­
(29.235)
­
(29.235)
Absorption of reserve ....................................................................................................................................................
­
­
­
­
(7.058)
7.058
­
­
BALANCES AS OF MARCH 31, 2004 ...........................................................................................................................
196.371
(3.762)
100.716
9.998
3.629
­
46.122
353.074
Net income ....................................................................................................................................................................
­
­
­
­
­
­
79.374
79.374
Capital increase through subscription of shares ...........................................................................................................
34.391
­
­
­
­
­
­
34.391
Sale of treasury shares through exercise of stock options (item f) ..............................................................................
­
208
3.892
­
­
­
­
4.100
Profit on sale of shares .................................................................................................................................................
­
­
341
­
­
­
­
341
Additional absorption of excess liabilities through merger of Natura Empreendimentos S.A, after elimination of
the merged company's investment in the Company ................................................................................................
­
­
­
­
­
­
7.660
7.660
Dividends payable .........................................................................................................................................................
­
­
­
­
­
­
(73.333)
(73.333)
Interest on capital .........................................................................................................................................................
­
­
­
­
­
­
(13.433)
(13.433)
BALANCES AS OF JUNE 30, 2004 ..............................................................................................................................
230.762
(3.554)
104.949
9.998
3.629
­
46.390
392.174
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE QUARTERS ENDED MARCH 31, 2004 AND JUNE 30, 2004
(In thousands of Brazilian reais ­ R$)
Continua...
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NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
Continuação
Continua...
1. OPERATIONS
The Company and its subsidiaries are engaged in the development, production, distribution and sale, substantially through direct
sales by Natura beauty consultants, of cosmetics, perfumery in general, and hygiene and health products, and hold equity interests
in other companies in Brazil and abroad.
The Extraordinary Shareholders' Meeting held on March 5, 2004 approved the merger into the Company of the net assets of the
companies Natura Empreendimentos S.A. and Natura Participações S.A. based on the accounting valuation supported by a
valuation report issued by independent experts. These mergers did not modify the activities described in the paragraph above.
The amounts of the net assets merged into the Company as of January 31, 2004 were R$104,951 related to Natura Empreendimen-
tos S.A. and R$75,716 related to Natura Participações S.A.
In the recording of the adjustments of the mergers of the net assets, the eliminations of the accounts receivable and payable
existing between the merged companies and the Company, as well as corporate investments and shareholders' equity, were
considered, as required by Brazilian accounting practices.
In light of the aforementioned, the liabilities of Natura Empreendimentos S.A. and Natura Participações S.A., in the amounts of
R$23,367 and R$29,235, respectively, were absorbed.
The amounts of the net assets are as follows:
NATURA EMPREENDIMENTOS S.A.
ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT ASSETS .........................................
CURRENT LIABILITIES
Cash and banks ..............................................
24,105
Loans and financing .........................................
17,566
Recoverable taxes ..........................................
645
Taxes payable ..................................................
660
Other receivables ............................................
33,338
Dividends ..........................................................
61,215
Total current assets ........................................
58,088
Other payables .................................................
3,747
Total current liabilities .......................................
83,188
LONG-TERM ASSETS
Related parties ................................................
10,544
LONG-TERM LIABILITIES
Total long-term assets .....................................
10,544
Loans and financing .........................................
17,004
Other payables .................................................
11
PERMANENT ASSETS ....................................
Total long-term liabilities ...................................
17,015
Investments ....................................................
136,522
Total permanent assets ...................................
136,522
SHAREHOLDERS' EQUITY
Capital ..............................................................
86,950
Capital reserves ...............................................
5,347
Profit reserves ..................................................
12,654
Total shareholders' equity .................................
104,951
TOTAL LIABILITIES AND
TOTAL ASSETS ...............................................
205,154
SHAREHOLDERS' EQUITY ...............................
205,154
NATURA PARTICIPAÇÕES S.A.
ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT ASSETS
CURRENT LIABILITIES
Cash and banks ..............................................
307
Other payables .................................................
86,001
Recoverable taxes ..........................................
129 Total
current liabilities .......................................
86,001
Related parties ................................................
61,215
Total current assets ........................................
61,651
LONG-TERM LIABILITIES
Related parties .................................................
10,391
LONG-TERM ASSETS .....................................
Total long-term liabilities ...................................
10,391
Receivables from sale of shares ....................
5,506
Total long-term assets
5,506
SHAREHOLDERS' EQUITY ...............................
Capital ..............................................................
1,107,776
PERMANENT ASSETS ....................................
Capital reserves ...............................................
5,450
Investments ....................................................
104,951
Profit reserves ..................................................
5,550
Goodwill on investments ................................. 1,028,041
Accumulated deficit ..........................................
(1,043,060)
(-) Provision for maintenance
of dividend payment capacity ......................... (1,028,041)
Total shareholders' equity .................................
75,716
Total permanent assets ...................................
104,951
TOTAL LIABILITIES AND ..................................
TOTAL ASSETS ............................................... 172,108
SHAREHOLDERS' EQUITY ...............................
172,108
2. PRESENTATION OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in accordance with Brazilian accounting practices and standards
established by the Brazilian Securities Commission (CVM).
Until December 31, 1995, the Brazilian corporate law established a simplified methodology for the recording of inflation effects
determined to that date. This methodology, named Monetary Restatement of the Balance Sheet, consisted of the restatement of
permanent assets (investments, property, plant and equipment, and deferred charges) and shareholders' equity accounts at the
indexes disclosed by the Federal Government. The net effect of the monetary restatement was accounted for in the statements of
income in a specific account under the heading Monetary Restatement of the Balance Sheet.
This methodology was prohibited by Law No. 9,249, of December 26, 1995.
3. SIGNIFICANT ACCOUNTING PRACTICES
a) Results of operations
Determined on the accrual basis of accounting.
b) Temporary cash investments
Consists of highly liquid temporary investments with maturities of less than three months, stated at cost plus income earned to
the balance sheet dates.
c) Allowance for doubtful accounts
Recognized based on an analysis of risks on realization of receivables, in an amount considered sufficient to cover possible
losses.
d) Inventories
Stated at average cost of acquisition or production, adjusted to market value, when applicable.
e) Investments
Investments in subsidiaries are accounted for under the equity method, plus goodwill on acquisition of investments, as shown
in Note 11.
f) Property, plant and equipment
Recorded at acquisition cost, monetarily restated to December 31, 1995, plus interest capitalized during the construction period.
Depreciation is calculated under the straight-line method, based on the estimated economic useful lives of the assets, at the
rates shown in Note 12.
g) Deferred charges
Represented by goodwill arising from the merger of shares of Natura Empreendimentos S.A. by Natura Participações S.A., less
the provision for adjustment to realizable value, as described in Note 13.
h) Current and long-term liabilities
Stated at amounts payable plus, if applicable, interest and monetary and exchange variations incurred to the balance sheet
dates.
i) Income and social contribution taxes
The provision for income tax was recorded at the rate of 15%, plus a 10% surtax on annual taxable income exceeding R$240.
Social contribution tax was calculated at the rate of 9% of taxable income. Deferred income and social contribution taxes
recorded in current and long-term assets result from expenses recorded in income, although temporarily nondeductible for tax
purposes. Additionally, deferred income and social contribution taxes were recorded on tax loss carryforwards.
Pursuant to CVM Resolution No. 273/98 and CVM Instruction No. 371/02, deferred taxes are recorded at their estimated realizable
values, as detailed in Note 9.
j) Loans and financing
Adjusted based on exchange variations and interest incurred to the balance sheet dates, as provided for by contract and
mentioned in Note 14.
k) Reserve for contingencies
Adjusted to the balance sheet dates based on the probable loss amount, according to the nature of each contingency. The
fundamentals and the nature of reserves are described in Note 16.
l) Hedge transactions
The nominal values of hedge transactions are not recorded in the balance sheet. Unrealized gains or losses on these
transactions are recorded on the accrual basis of accounting, as mentioned in Note 18, item b.
m) Financial income and expenses
Represented by interest and monetary and exchange variations on temporary cash investments, loans and financing.
n) Interest on capital
Interest on capital is accounted for directly in retained earnings, rather than in income, as required by CVM Resolution No. 207/
96, and is shown in note 17, item c.
o) Earnings per share
Calculated based on the number of shares at the balance sheet dates.
p) Stock option plan
The Company offers to its directors and certain managers the option for purchase of shares through stock option plans. The
information and effects related to the plans are mentioned in note 17, item g.
q) Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting periods. Since the management's judgment involves estimates
of the probability of future events, actual results may differ from the estimates.
4. CONSOLIDATION CRITERIA
The consolidated balance sheets as of June 30, 2004 and March 31, 2004 and the consolidated statements of income for the six-
month periods ended June 30, 2004 and 2003 have been prepared in accordance with the consolidation principles established by
Brazilian accounting practices and regulatory instructions established by CVM, and include the financial statements of the
Company and its direct and indirect subsidiaries, as follows:
Ownership interest - %
06/2004
03/2004
Direct:
Indústria e Comércio de Cosméticos Natura Ltda. ........................................................
99.76
99.76
Natura Cosméticos S.A. ­ Chile ....................................................................................
99.96
99.96
Natura Cosméticos S.A. ­ Peru ....................................................................................
99.85
99.85
Natura Cosméticos S.A. ­ Argentina .............................................................................
99.99
99.99
Natura Brasil Cosmética Ltda. ­ Portugal .....................................................................
99.99
99.99
Commodities Trading S.A. ­ Uruguay ............................................................................
100.00
100.00
Nova Flora Participações Ltda. .....................................................................................
100.00
100.00
Natura Inovação e Tecnologia de Produtos Ltda. .........................................................
100.00
100.00
Indirect:
Natura Logística e Serviços Ltda. ................................................................................
99.99
99.99
Flora Medicinal J. Monteiro da Silva Ltda. .....................................................................
100.00
100.00
The consolidated financial statements have been prepared based on the financial statements as of the same date and consistent
with the accounting practices described in Note 3. Investments in subsidiaries were proportionately eliminated against shareholders'
equity and net income of the respective subsidiaries. Intercompany balances and transactions and unrealized profit were also
eliminated. The minority interest in the Company's subsidiaries was shown separately. The financial statements of foreign
subsidiaries were translated into Brazilian reais at the exchange rates in effect on the date of the related financial statements.
The Company's shareholders' equity as of June 30, 2004 and March 31, 2004 differs by R$ 2,021 and R$1,464, respectively, from
those amounts stated in the consolidated financial statements, due to the elimination of subsidiaries' unrealized profit.
In addition, net income as of June 30, 2004 and 2003 differs by R$2,021 and R$1,009, respectively, due to the elimination of
unrealized profit on inventories of the Companies in Peru, Chile and Argentina.
Reconciliation between consolidated and individual (Company) net income and shareholders' equity:
Net income
Shareholders' equity
06/2004
06/2003
06/2004
03/2004
Company ....................................................................................
125,496
17,948
392,174
353,074
Elimination of unrealized profits of the subsidiary Indústria e
Comércio de Cosméticos Natura Ltda. with other subsidiaries .
(2,021)
(1,009)
(2,021)
(1,464)
Consolidated ..............................................................................
123,475
16,939
390,153
351,610
The operations of the direct and indirect subsidiaries are as follows:
Indústria e Comércio de Cosméticos Natura Ltda. ­ Engaged in the production and sale of Natura products to Natura Cosméticos
S.A. ­ Brazil, Chile, Peru and Argentina, whose amounts are mentioned in Note 10.
Foreign operations (Natura Cosméticos S.A. ­ Argentina, Natura Cosméticos S.A. ­ Chile and Natura Cosméticos S.A. ­ Peru)
­ Their operations are an extension of the operations developed by the parent company Natura Cosméticos S.A. ­ Brazil.
Nova Flora Participações Ltda. ­ Holds equity interest in the subsidiary Flora Medicinal J. Monteiro da Silva Ltda.
Natura Logística e Serviços Ltda. ­ Engaged in the provision of administrative and logistics services to other Group companies.
Flora Medicinal J. Monteiro da Silva Ltda. ­ Engaged in the production and sale of phytotherapics of its own brand.
Natura Inovação e Tecnologia de Produtos Ltda. ­ Engaged in product research and development.
5. TEMPORARY CASH INVESTMENTS
Company Consolidated
06/2004
03/2004
06/2004
03/2004
Bank CDs ...................................................................................
85,332
474
132,506
48,269
Investment funds .......................................................................
9,805
6,436
24,793
62,228
95,137
6,910
157,299
110,497
As of June 30, 2004, bank CDs are remunerated at rates ranging from 100% to 100.75% of the CDI (interbank deposit rate) (100%
to 101.5% as of March 31, 2004). As of June 30, 2004, investment funds are remunerated at rates ranging from 83.06% to 104.04%
of the CDI (100% to 106% as of March 31, 2004).
6. TRADE ACCOUNTS RECEIVABLE
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Trade accounts receivable .........................................................
167,069
174,951
177,637
182,835
Allowance for doubtful accounts ................................................
(14,242)
(14,916)
(15,192)
(15,587)
Allowance for return of goods ....................................................
(374)
(370)
(374)
(370)
152,453
159,665
162,071
166,878
7. INVENTORIES
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Finished products ...........................................................................
803
739
50,580
44,299
Raw materials and packaging .........................................................
­
­
42,491
40,311
Work in process .............................................................................
­
­
5,775
8,844
Promotional material .......................................................................
17
14
9,536
4,326
Imports in transit ............................................................................
­
­
2,649
906
Reserve for losses .........................................................................
­
­
(12,744)
(9,393)
820
753
98,287
89,293
8. RECOVERABLE TAXES
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Social contribution tax ....................................................................
302
­
598
284
IRPJ (corporate income tax) ..........................................................
1,833
267
6,524
4,151
IPI (Federal VAT) ............................................................................
­
­
180
­
ICMS (State VAT) ............................................................................
680
737
1,948
1,925
Other ..............................................................................................
­
51
4,268
4,097
2,815
1,055
13,518
10,457
9. INCOME AND SOCIAL CONTRIBUTION TAXES
a) Deferred
Deferred income and social contribution taxes recorded in the financial statements result from temporary differences (Company)
and temporary differences and tax loss carryforwards (subsidiaries). These credits are recorded in current and long-term assets,
in view of their expected realization based on projections of taxable income, considering the limit of 30% for annual taxable
income offset by tax loss carryforwards, pursuant to the applicable legislation. The amounts are as follows:
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Current:
Tax loss carryforwards ...................................................................
­
­
1.793
4.765
Temporary differences:
Reserve for inventory losses ......................................................
­
­
4,333
3,193
Allowance for doubtful accounts .................................................
5,068
5,072
5,068
5,072
Reserve for losses on swap contracts ........................................
382
968
382
968
Other ...........................................................................................
4,802
4,466
9,886
7,665
Deferred income and social contribution taxes credits ..................
10,252
10,506
21,462
21,663
Long-term:
Temporary differences:
Reserve for contingencies ..........................................................
10,744
9,010
14,898
10,506
Other ...........................................................................................
713
646
1,016
951
Deferred income and social contribution taxes ..............................
11,457
9,656
15,914
11,457
As required by CVM Resolution No. 273/98 and CVM Instruction No. 371/02, management, based on projections of results,
estimates that the recorded tax credits will be fully realized within five years. The amounts recorded in long-term assets will be
realized as follows:
06/2004
03/2004
2005 ..............................................................................................................................
5,482
5,339
2006 ..............................................................................................................................
1,095
1,171
2007 ..............................................................................................................................
7,450
3,115
2008 ..............................................................................................................................
1,887
1,832
15,914
11,457
b) Current expense
Reconciliation of income and social contribution taxes:
Company
Consolidated
06/2004
06/2003
06/2004
06/2003
Income before taxes on income .....................................................
151,561
27,734
159,972
30,919
Income and social contribution taxes at the rate of 34% ...............
(51,530)
(9,430)
(54,390)
(10,512)
Tax effect on principal additions and exclusions:
Equity in subsidiaries .................................................................
4,944
(584)
­
­
Losses generated by subsidiaries .............................................
­
­
(2,664)
(3,695)
Deferral of exchange variation ...................................................
­
(724)
­
(724)
Interest on capital ......................................................................
4,567
4,567
Other ..........................................................................................
(690)
952
(654)
923
Reversal of provision for maintenance of dividend payment capacity
16,644
­
16,644
­
Income and social contribution taxes .............................................
(26,065)
(9,786)
(36,497)
(14,008)
Current income and social contribution taxes ................................
(27,480)
(16,979)
(40,577)
(22,435)
Deferred income and social contribution taxes ..............................
1,415
7,193
4,080
8,427
(26,065)
(9,786)
(36,497)
(14,008)
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 30, 2004 AND MARCH 31, 2004
(Amounts in thousands of Brazilian reais ­ R$)
background image
NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
Continuação
Continua...
10. RELATED PARTIES
Receivables from and payables to related parties are as follows:
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Current assets:
Accounts receivable:
Indústria e Comércio de Cosméticos Natura Ltda. (b) ....................
50
15
­
­
Nova Flora Participações Ltda (a) ..................................................
833
833
­
­
Natura Logística e Serviços Ltda. (b) .............................................
42
15
­
­
Natura Inovação e Tecnologia de Produtos Ltda. (b) .....................
7
4
­
­
932
867
­
­
Long-term assets:
Advance for future capital increase (j)
Nova Flora Participações Ltda. ......................................................
3,239
550
­
­
Current liabilities:
Suppliers:
Natura Inovação e Tecnologia de Produtos Ltda. (c) .....................
5,935
5,935
­
­
Indústria e Comércio de Cosméticos Natura Ltda. (d) ....................
64,548
19,997
­
­
Natura Logística e Serviços Ltda. (e) .............................................
6,125
6,125
­
­
76,608
32,057
­
­
Accounts payable:
Natura Inovação e Tecnologia de Produtos Ltda. .........................
137
95
­
­
Natura Logística e Serviços Ltda. ..................................................
1
­
­
­
138
95
­
­
Transactions with related parties in the quarters ended June 30, 2004 and 2003 are summarized below:
Product sales
Product purchases
06/2004
06/2003
06/2004
06/2003
Natura Cosméticos S.A. .................................................................
­
­
421,961
334,031
Indústria e Comércio de Cosméticos Natura Ltda. .........................
433,052
341,565
­
­
Natura Inovação e Tecnologia de Produtos Ltda. ..........................
­
­
9
291
Flora Medicinal J. Monteiro da Silva Ltda. ......................................
­
­
16
182
Natura Cosméticos S.A. ­ Chile .....................................................
­
­
5,458
3,338
Natura Cosméticos S.A. ­ Peru ......................................................
­
­
2,144
1,227
Natura Cosméticos S.A. ­ Argentina ..............................................
­
­
3,464
2,496
433,052
341,565
433,052
341,565
..............................................................................................................................
Indústria Comércio
Natura
Natura
Natura
Natura Brasil
Commodities
Nova Flora
Natura
..............................................................................................................................
e Cosméticos Cosméticos S.A Cosméticos S.A Cosméticos S.A Cosmética Ltda
Trading S.A.
Participações Inov. Tec. Prod.
..............................................................................................................................
Ltda Chile Peru Argentina Portugal
Uruguai
Ltda Ltda
Total
Shares of subsidiaries ...........................................................................................
328.992
49.295
24.841
75.899
19
347
2.413
5.008
Number of shares (common shares) held ..............................................................
328.213
49.275
24.804
75.891
19
347
2.413
5.008
Ownership interest ................................................................................................
99,76%
99,96%
99,85%
99,99%
99,99%
100,00%
100,00%
100,00%
Capital ...................................................................................................................
328.992
49.295
24.841
75.899
19
347
2.413
5.008
486.814
Shareholders' equity of subsidiaries ......................................................................
349.216
646
2.925
4.156
(67)
23
1.759
8.693
367.351
Share in shareholders' equity ................................................................................
348.388
646
2.921
4.156
(67)
23
1.759
8.693
366.518
Net income (loss) of subsidiaries from April 1 to June 30, 2004 ...........................
9.652
(882)
98
(2.071)
(78)
(3)
91
(227)
6.580
Book value of Company investment:
Balances as of March 31, 2004 ............................................................................
338.759
835
2.823
2.792
11
26
1.668
8.920
355.834
Increase in investments ...................................................................................
­
692
­
3.435
­
­
­
­
4.127
Equity in subsidiaries: ......................................................................................
9.629
(882)
98
(2.071)
(78)
(3)
91
(227)
6.558
Recognition of provision for losses ..................................................................
­
­
­
­
67
­
­
­
67
Balances as of June 30, 2004 ..............................................................................
348.388
645
2.921
4.156
­
23
1.759
8.693
366.586
Provision for losses:
Balances as of March 31, 2004 ............................................................................
­
­
­
­
­
­
­
­
­
Provision for losses ..........................................................................................
­
­
­
­
67
­
­
­
67
Balances as of June 30, 2004 ..............................................................................
­
­
­
­
67
­
­
­
67
Service sales
Service purchases
06/2004
06/2003
06/2004
06/2003
Guarantees commission: (f)
Natura Empreendimentos S.A. .......................................................
­
1,898
­
­
Natura Cosméticos S.A ..................................................................
­
­
­
1,652
Indústria e Comércio de Cosméticos Natura Ltda. .........................
­
­
­
237
Natura Logística e Serviços Ltda. ..................................................
­
­
­
9
­
1,898
­
1,898
Administrative structure: (g)
Natura Logística e Serviços Ltda. ..................................................
57,219
32,800
­
­
Natura Cosméticos S.A. .................................................................
­
­
40,647
26,435
Indústria e Comércio de Cosméticos Natura Ltda. .........................
­
­
12,028
6,365
Natura Inovação e Tecnologia de Produtos Ltda. ..........................
­
­
4,544
­
57,219
32,800
57,219
32,800
Product research and development: (h)
Natura Inovação e Tecnologia de Produtos Ltda. ..........................
29,229
20,000
­
­
Natura Cosméticos S.A. .................................................................
29,229
20,000
29,229
20,000
29,229
20,000
Service sales
Service purchases
06/2004
06/2003
06/2004
06/2003
Lease of properties and common charges: (i)
Natura Cosméticos S.A. .................................................................
­
­
524
­
Natura Empreendimentos S.A ........................................................
­
­
27
323
Natura Participações S.A ...............................................................
­
­
14
­
Natura Inovação e Tecnologia de Produtos Ltda. ..........................
­
­
542
1,617
Indústria e Comércio de Cosméticos Natura Ltda. .........................
2,726
1,940
­
­
Natura Logística e Serviços Ltda. ..................................................
­
­
1,619
­
Total service sales/purchases ........................................................
2,726
1,940
2,726
1,940
a) Amount receivable due to the capital reduction made on January 30, 2004, approved by the shareholders' meeting held on the
same date.
b) Receivables from sale of Natura products to employees.
c) Payables for the provision of services described in item (h).
d) Payables for the purchase of products. Prices and terms are within normal market conditions.
e) Payables for the provision of services described in item (g).
f) Guarantees of Natura Empreendimentos S.A., merged into Natura Cosméticos S.A., as mentioned in note 1.
g) Provision of logistic and general administrative services.
h) Provision of product and market development.
i) Rental of the industrial complex located in Cajamar and several units that compose Natura's facilities.
j) Remittances to Nova Flora Participações Ltda. and advance to the subsidiary in France.
The main intercompany balances as of June 30, 2004 and March 31, 2004, as well as the intercompany transactions that affected
results for the periods refer to transactions with the Company and its subsidiaries, which were substantially carried out under usual
market conditions for each type of transaction.
11. INVESTMENTS
Investments are represented by:
Company
Consolidated
.......................................................................................................
06/2004
03/2004
06/2004
03/2004
Investments in subsidiaries ............................................................
366,586
355,834
­
­
Goodwill on acquisition of investment ............................................
­
­
8,015
8,015
Amortization of goodwill ..................................................................
­
­
(5,345)
(5,276)
.......................................................................................................
366,586
355,834
2,670
2,739
The goodwill on the acquisition made by the subsidiary Nova Flora Participações Ltda. is supported by an appraisal report issued
by independent appraisers, based on expectation of future profitability which, as of December 31, 2003, was reviewed by
management based on new projections of future results, also supported by an appraisal report issued by independent appraisers,
and is being amortized over ten years.
12. PROPERTY, PLANT AND EQUIPMENT
Is composed of:
Annual
Company
Depreciation
06/2004
03/2004
Restated
Accumulated
Net book
Restated
Accumulated
Net book
Rate -%
Cost
Depreciation
value
Cost
Depreciation
value
Machinery and equipment
10
950
(566)
384
950
(543)
407
Furniture and fixtures .........................................................................................
10
3.878
(2.881)
997
3.868
(2.804)
1.064
Vehicles .............................................................................................................
20
10.746
(5.959)
4.787
10.448
(5.429)
5.019
IT equipment ......................................................................................................
20
6.705
(5.281)
1.424
6.823
(5.194)
1.629
Leasehold improvements ....................................................................................
12
660
(142)
518
660
(135)
525
Software licenses ..............................................................................................
20
2.579
(959)
1.620
2.579
(832)
1.747
Other .................................................................................................................
10
6
(3)
3
6
(2)
4
Advances to suppliers .......................................................................................
0
23
­
23
­
­
­
..........................................................................................................................
25.547
(15.791)
9.756
25.334
(14.939)
10.395
Annual
Consolidated
Depreciation
06/2004
03/2004
Restated
Accumulated
Net book
Restated
Accumulated
Net book
Rate -%
Cost
Depreciation
value
Cost
Depreciation
value
Machinery and equipment
10
70.120
(28.869)
41.251
69.460
(27.186)
42.274
Molds .................................................................................................................
33
24.209
(18.313)
5.896
22.877
(17.253)
5.624
Furniture and fixtures .........................................................................................
10
12.326
(6.455)
5.871
12.183
(6.134)
6.049
Installations .......................................................................................................
10
63.040
(21.835)
41.205
62.703
(20.184)
42.519
Vehicles .............................................................................................................
20
17.449
(9.250)
8.199
16.417
(8.495)
7.922
IT equipment ......................................................................................................
20
30.340
(17.672)
12.668
29.737
(16.548)
13.189
Land ..................................................................................................................
0
15.910
­
15.910
15.910
­
15.910
Buildings ............................................................................................................
4
126.990
(16.652)
110.338
126.963
(15.408)
111.555
Construction in progress ....................................................................................
0
8.089
­
8.089
243
­
243
Leasehold improvements ....................................................................................
12
679
(161)
518
679
(154)
525
Software licenses ..............................................................................................
20
10.960
(4.448)
6.512
10.005
(3.932)
6.073
Other .................................................................................................................
10
6.373
(4.902)
1.471
2.452
(942)
1.510
Advances to suppliers .......................................................................................
0
5.264
­
5.264
2.940
­
2.940
..........................................................................................................................
391.749
(128.557)
263.192
372.569
(116.236)
256.333
13 DEFERRED CHARGES
As mentioned in Note 1, on March 5, 2004 the Company merged the company Natura Participações S.A., which had goodwill on the
investment in the then subsidiary Natura Empreendimentos S.A. in the amount of R$1,028,041 and a corresponding provision for
maintenance of devidend payment capacity in the same amount. This goodwill arose from the merger of the shares of Natura
Empreendimentos S.A. into Natura Participações S.A. on December 27, 2000. This share merger operation was approved by the
Extraordinary Shareholders' Meeting held on that date, and the amounts are supported by a valuation report issued by independent
experts.
14 LOANS AND FINANCING
The amounts are as follows:
Company
06/2004
03/2004
Goodwill on investments
979,086
1,028,041
Provision for maintenance of dividend payment capacity
(979,086)
(1,028,041)
The provision for maintenance of dividend payment capacity will result in the payment of goodwill amortization tax benefits to all
shareholders. The goodwill amount is being amortized over a seven-year period.
Import financing (BNDES Exim)
BNDES (Brazilian Bank for Economic and Social Development)
BNDES-FINAME (Government Agency for Machinery and
Equipment Financing)
BNDES-Poc*
FINEP (Financing Agency for Studies and Projects)
Bank loans and financing
Total
Current
Long term
(*) Poc - Proposal of Credit Operation
(**) UMBNDES ­ BNDES monetary unit
06/2004
03/2004
06/2004
03/2004
­
3,782
4,403
37,841
75,195
37,841
75,195
­
3,754
3,943
1,169
1,593
1,169
1,593
­
26,447
26,215
­
31,177
29,548
39,010
76,788
104,170
140,897
13,052
31,463
24,300
39,716
25,958
45,325
79,870
101,181
Company Consolidated
Charges
Guarantees
Interest of 3.7% per year + TJLP (longterm interest rate)
Natura Cosméticos
70% Interest of 4% per year + TJLP
Guarantee, mortgage and bank guarantee
30% Interest of 4% per year + UMBNDES(**)
Interest of 5.0% per year + TJLP
Chattel mortgage and Natura Cosméticos
Interest of 4.5% per year + TJLP
Natura Indústria
Interest of 3% per year + TJLP
Guarantee and promissory notes
Libor + 6.05% per year
Promissory notes and Natura Cosméticos
Type
background image
NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
Continuação
Maturities of long-term debt are as follows:
Consolidated
06/2004
03/2004
2005 ..............................................................................................................................
12,741
21,570
2006 ..............................................................................................................................
23,100
29,272
2007 ..............................................................................................................................
19,446
19,758
2008 ..............................................................................................................................
11,258
16,438
2009 ..............................................................................................................................
4,437
5,028
2010 ..............................................................................................................................
4,437
4,711
2011 ..............................................................................................................................
4,451
4,404
79,870
101,181
Financing in local currency from BNDES is guaranteed mainly by the Itapecerica da Serra and Cajamar units.
Natura Inovação e Tecnologia de Produtos Ltda. contracted financing from the Financing Agency for Studies and Projects (FINEP)
in the amount of R$39,153. The amount of R$24,287 has been released to date. The funds are being used in the development of new
products in the biodiversity segment.
Other bank loans and financing in the amount of R$31,177 (R$ 29,548 as of March 31, 2004) refer mainly to a repass from the
International Finance Corporation (IFC) financing line, which is being used to finance the increase in production capacity and
production optimization.
15. TAXES PAYABLE
Taxes payable are represented by:
Company
Consolidated
06/2004
03/2004
06/2004
03/2004
Current liabilities:
ICMS (State VAT) ............................................................................
31,696
32,962
34,238
35,387
Cofins (tax on revenue) ..................................................................
337
2
4,338
7,589
PIS (tax on revenue) ......................................................................
71
1
932
1,670
Income tax .....................................................................................
­
2,522
922
4,868
Social contribution tax ....................................................................
­
1,554
468
1,989
Withholding income tax ..................................................................
3,241
1,135
4,021
1,637
PIS/Cofins/CSLL (Law No. 10,633/03) ............................................
647
629
813
838
Other ..............................................................................................
56
38
1,567
1,247
36,048
38,843
47,299
55,225
16. RESERVE FOR CONTINGENCIES
The Company and its subsidiaries are parties to labor, tax and civil lawsuits involving contingent liabilities. These lawsuits are at
administrative or judicial levels.
Reserves for contingencies are recognized by management based on the opinion of legal counsel, at amounts restated according
to estimates of probable losses.
Accrued amounts are classified as follows, according to the nature of the respective lawsuits:
Consolidated
06/2004
03/2004
Labor .............................................................................................................................
2,748
3,032
Civil ...............................................................................................................................
2,697
2,644
Tax ................................................................................................................................
42,618
29,902
48,063
35,578
The Company and its subsidiaries are parties to other labor, civil and tax lawsuits, for which the chance of loss is considered
possible but not probable by management and its legal counsel. The amounts involved in these lawsuits as of June 30, 2004 are as
follows: tax ­ R$12,236, civil ­ R$4,659 and labor ­ R$7,334 (R$11,183, R$3,528 and R$6,498, respectively, as of March 31, 2004).
The Company did not record a provision for these lawsuits.
a) Labor/civil lawsuits
The Company and its subsidiaries are parties to 154 labor lawsuits filed by former employees and third parties (156 as of March
31, 2004) claiming the payment of severance amounts, salary premiums and overtime, as well as 413 civil lawsuits (325 as of
March 31, 2004), mostly related to indemnity claims.
b) Tax lawsuits
Refer mainly to tax assessment notices related to IPI (Federal VAT) and ICMS (State VAT) of the State of Minas Gerais, as well
as injunctions contesting the deductibility of social contribution on profit in its own tax basis and in the income tax basis, the II
(import tax) rate, and the judgment of the lawsuits referring to payment of PIS on a six-month basis, and to zero rate, exempt
and non-taxed IPI.
c) Escrow deposits
The Company and its subsidiaries have escrow deposits for certain lawsuits amounting to R$19,635 as of June 30, 2004
(R$17,118 as of March 31, 2004). A substantial part of these deposits refers to tax lawsuits.
17. SHAREHOLDERS' EQUITY
a) Merger of companies
As mentioned in Note 1, on March 5, 2004 the Company conducted the merger of the companies Natura Empreendimentos S.A.
and Natura Participações S.A.
The merger adjustments referring to the shareholders' equity accounts of the merged companies produced significant effects on
the statement of changes in shareholders' equity of the Company (merging company) for the quarter ended March 31, 2004. To
allow for an analysis of these effects, the changes in shareholders' equity of the Company are stated below:
Capital reserves
Profit reserves
Treasury
Share
Investment
Retained
Capital
shares
premium
grants
Legal
Retention
earnings
Total
BALANCES AS OF DECEMBER 31, 2003 .............................................................................................
56.387
­
­
9.998
10.687
45.544
­
122.616
Net income ...........................................................................................................................................
­
­
­
­
­
­
46.122
46.122
Capitalization of debentures ................................................................................................................
138.569
­
100.000
­
­
­
­
238.569
Capital increase through merger of Natura Empreendimentos SA .......................................................
1.415
­
­
­
­
­
­
1.415
Treasury shares ...................................................................................................................................
­
(1.415)
­
­
­
­
­
(1.415)
Sale of treasury shares through exercise of stock options (item f) ....................................................
­
38
716
­
­
­
­
754
Receivables from shareholders .............................................................................................................
­
(2.385)
­
­
­
­
­
(2.385)
Absorption of excess liabilities through merger of Natura Empreendimentos S.A,
after elimination of the merged company's investment in the Company ...........................................
­
­
­
­
­
(23.367)
­
(23.367)
Absorption of excess liabilities through merger of Natura Participações S.A,
after elimination of the merged company's investment in the Company ...........................................
­
­
­
­
­
(29.235)
­
(29.235)
Absorption of reserve ...........................................................................................................................
­
­
­
­
(7.058)
7.058
­
­
BALANCES AS OF MARCH 31, 2004 ....................................................................................................
196.371
(3.762)
100.716
9.998
3.629
­
46.122
353.074
Net income ............................................................................................................................................
­
­
­
­
­
­
79.374
79.374
Capital increase through subscription of shares .................................................................................
34.391
­
­
­
­
­
­
34.391
Sale of treasury shares through exercise of stock options (item f) ....................................................
­
208
3.892
­
­
­
­
4.100
Profit on sale of shares .......................................................................................................................
­
­
341
­
­
­
­
341
Additional absorption of excess liabilities through merger of Natura Empreendimentos S.A,
after elimination of the merged company's investment in the Company ...........................................
­
­
­
­
­
­
7.660
7.660
Dividends payable .................................................................................................................................
­
­
­
­
­
­
(73.333)
(73.333)
Interest on capital ................................................................................................................................
­
­
­
­
­
­
(13.433)
(13.433)
BALANCES AS OF JUNE 30, 2004 .......................................................................................................
230.762
(3.554)
104.949
9.998
3.629
­
46.390
392.174
b) Capital
On December 31, 2003, the Company's capital was R$56,387, divided into 25,000 common shares without par value and 10,955
preferred shares without par value.
On March 2, 2004, the shareholders decided at an Extraordinary General Shareholders' Meeting to: (i) capitalize the credits
arising from the redemption of the subordinated debentures held by them and from the net remuneration on the debentures
through January 31, 2004; and (ii) split the shares issued by the Company in the proportion of 2,099 new shares for each existing
share. The total amount of the capitalized credits was R$238,569, and they were applied to a capital reserve in the amount of
R$100,000 and a capital increase in the amount of R$138,569 through the issuance of 3,299 new common shares at the issue
price of R$72.3 thousand per share. These shares were subsequently split in the proportion of 2,099 new shares for each existing
share, resulting in a capital of R$194,956, divided into 59,399,601 common shares and 22,994,545 preferred shares. In the
General Shareholders' Meeting held on March 5, 2004, the shareholders approved, among other matters:
a) Merging the Companies Natura Participações S.A. and Natura Empreendimentos S.A., which were until then the Compa-
ny's parent companies;
b) Cancelling the Company shares held by the merged parent companies;
c) Amending the bylaws to R$196,371, represented by 83,266,061 shares.
On May 24, 2004, the Board of Directors' Meeting approved (i) an increase in the Company's capital within the limit of authorized
capital, due to the exercise of the right to convert the debentures issued by the Company and fully subscribed by BNDES
Participações S.A. into common shares of the Company, as allowed by the Private Indenture of Issuance of Registered Debentures
Convertible into Common Shares, dated February 23, 2001.
Consequently, 2,172,550 registered common shares without par value, totaling R$34,391, were subscribed, and the Company's
capital was changed from R$196,371, represented by 83,266,061 common shares, to R$230,762, represented by 85,438,611
common shares.
As of June 30, 2004, the Company's capital is R$230,762. The subscribed and paid-up capital is represented by 85,438,611 common
shares without par value.
c) Interest on capital
The Company's management recorded interest on capital pursuant to CVM Resolution No. 207/86 and Law No. 9,249/95.
As of June 30, 2004, the gross amount of interest on capital is R$13,433 and was calculated in accordance with statutory limits,
and the withholding income tax was retained and paid by the Company.
d) Dividend distribution policy
Each year, shareholders are entitled to a minimum dividend equivalent to 30% of net income for the year, considering principally
the following adjustments:
The increase in the amounts resulting from the reversal, in the year, of reserves for contingencies, recognized previously.
The decrease in the amounts intended for the recognition, in the year, of the legal reserve and reserve for contingencies.
The bylaws allow the Company to prepare semi-annual and interim balance sheets, and based on these balance sheets, authorize
the payment of dividends upon approval by the Board of Directors.
Dividends were calculated as follows:
Net income ....................................................................................................................
125,496
Legal reserve on net income .........................................................................................
(6,275)
Calculation basis for minimum dividends .......................................................................
119,221
Mandatory minimum dividends (30%) ............................................................................
35,766
Proposed dividends ......................................................................................................
73,333
Interest on capital .........................................................................................................
13,433
Dividends per share ......................................................................................................
0.865276623
Interest on capital per share .........................................................................................
0.13472337
Amount exceeding mandatory minimum dividend ..........................................................
51,000
e) Goodwill on the issuance of shares
Refers to the goodwill arising from the issuance of 3,299 common shares resulting from the capitalization of debentures in the
amount of R$100,000, as mentioned in detail in item b) above.
f) Reserve for profit retention
As of December 31, 2003, this reserve was recorded in accordance with article 196 of Law No. 6,404/76. On March 5, 2004 it was
used for absorbing excess liabilities arising from the mergers of the companies Natura Empreendimentos S.A. and Natura
Participações S.A. See details in item b) above.
g) Stock option program
In 1998, the extinguished Natura Empreendimentos S.A. approved an incentive policy for certain directors and managers of the
group's companies, through which they would be entitled to buy shares. Subsequently, this Program was also assumed by the
extinguished Natura Participações S.A., and the general bases of the Stock Option Grant Program remained unchanged.
On March 5, 2004, the General Shareholders Meeting of Natura Cosméticos S.A. approved the merger of Natura Empreendimen-
tos S.A. and Natura Participações S.A. into the Company, and fully assumed the Stock Option Program. As it became a publicly-
held company, Natura Cosméticos S.A. changed its Stock Option Program, and the main changes were the criteria for
establishing the subscription or purchase price, and the Company's obligation to repurchase the shares was discontinued.
The Board of Directors meets once a year for the purpose of, within the Program's general bases, establish the Plan, indicating
the directors and managers who will receive the options.
Before the Company went public, the amount established for exercising the options was updated according to inflation levels as
measured by the Expanded Consumer Price Index (IPC-A), and the Company had the obligation to repurchase the shares. The
plans for 2000, 2001, 2002, 2003 and 2004 were approved under these rules.
The plans for 2000 and 2001 have a 3-year time span for exercising the options, that is, the right to exercise options will be based
on 1/3 per year. The plans for 2002, 2003 and 2004 have a four-year time span for exercising the options, and the exercising
rights are 50% at the end of the third year and 50% at the end of the 4th year.
After the Company went public, the Company's Management, in a meeting held on April 26, 2004, changed these Programs in
which the Company is no longer obliged to repurchase the shares acquired under the Program, and modified the criteria for
determining the purchase or subscription price of the shares, which became the average market price of the Company's common
shares at BOVESPA over the last ten sessions, and maintained the rules regarding updating based on the IPC-A index.
The deadline for exercising the options received is two years, counted from the date when all the holder's options have matured
(became exercisable).
The information related to the stock option plans is summarized as follows:
Number of stock options (in shares):
Balance of options as of February 1, 2004
(after merger of Natura Participações S.A.) ..................................................................
2,476,351
Cancelled options ..........................................................................................................
(24,127)
Exercised options (*) ....................................................................................................
(511,321)
Balance of options as of March 31, 2004 .................................................................
1,940,903
Distributed options ....................................................................................................
380,292
Cancelled options .....................................................................................................
(51,019)
Exercised options (*) ................................................................................................
(438,556)
Balance of options as of June 30, 2004 ...................................................................
1,831,620
(*) Breakdown of exercised options through June 30, 2004
Options converted into shares and sold .......................................................................
805,064
Options converted into shares and held .......................................................................
144,813
Total options exercised .............................................................................................
949,877
Options converted into shares and sold generated a cash disbursement in the amount of R$11,086, resulting from the difference
between the amount paid by option holders in the amount of R$16,574 and the amount of R$27,660, which was paid by Natura
Cosméticos S.A. for the repurchase.
Breakdown of call options by plan:
....................................................................................................
Amount for
....................................................................................................
the year updated
....................................................................................................
Number of call
by IPCA through
....................................................................................................
options (in shares)
June 30, 2004
2000 ............................................................................................
46,348
16.97
2001 ............................................................................................
84,513
17.80
2002 ............................................................................................
585,786
24.71
2003 ............................................................................................
743,439
13.84
2004 ............................................................................................
371,534
34.06
Total ............................................................................................
1,831,620
As already mentioned above, the Company, after going public, no longer is obliged to repurchase the shares acquired under the
program, and, since the recording of the provision related to the stock option program as set forth in CVM's Official Circular No. 01/
2004 is no longer mandatory and is a practice not adopted by publicly-held companies in Brazil, the amount of R$9,564 related to this
provision was reversed as of June 30, 2004, against the administrative expenses account, in the amount of R$2,578, and retained
earnings, in the amount of R$6,986. The amount of R$6,986 recorded in the retained earnings account is due to the fact that the
provision was originated in the company Natura Participações S/A and received by Natura Cosméticos S/A as net assets in the merger
process of March 2004, as disclosed in Note 1, and therefore had no effect on the income of Natura Cosméticos S/A.
On June 30, 2004, if the Company's Management had opted to recognize in the accounting books the effects of the plans, taking
into account the time span for maturity, and using the intrinsic value method (the difference between market price as of June 30,
2004 and the option value updated by the IPC-A), the pro forma statement of income would be as follows, comparing the statement
of income for the three and six-month periods ended June 30, 2004:
IFS
Pro Forma
IFS
Pro Forma
1/1/2004 to
1/1/2004 to
4/1/2004 to
4/1/2004 to
6/30/2004
6/30/2004
6/30/2004
6/30/200
GROSS OPERATING REVENUES
1.092.750
1.092.750
617.101
617.101
Taxes on sales, returns and rebates .........................................
(335.036)
(335.036)
(188.557)
(188.557)
NET OPERATING REVENUES ...................................................
757.714
757.714
428.544
428.544
Cost of sales .............................................................................
(254.309)
(254.309)
(145.934)
(145.934)
GROSS PROFIT ........................................................................
503.405
503.405
282.610
282.610
OPERATING (EXPENSES) INCOME
Operating expenses ..................................................................
(336.103)
(350.997)
(188.432)
(200.748)
INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS .
167.302
152.408
94.178
81.862
Financial expenses ....................................................................
(20.495)
(20.495)
(5.764)
(5.764)
Financial income ........................................................................
20.232
20.232
6.542
6.542
INCOME FROM OPERATIONS ...................................................
167.039
152.145
94.956
82.640
Nonoperating income (expense) ................................................
111
111
(577)
(577)
INCOME BEFORE DEBENTURE PARTICIPATION ......................
167.150
152.256
94.379
82.063
Debenture participation .............................................................
(7.178)
(7.178)
­
­
INCOME BEFORE TAXES ON INCOME .....................................
159.972
145.078
94.379
82.063
Income and social contribution taxes ....................................
(36.497)
(36.497)
(15.562)
(15.562)
NET INCOME .............................................................................
123.475
108.581
78.817
66.501
h) Receivables from shareholder
On December 30, 2002, the Company sold 2,413 registered common shares to a shareholder. The amount of the sale will be
settled through 2009, with interest rate of 3% per year. For 2004, the amount of R$2,385 was classified as a charge to capital
reserves until full settlement.
Continua...
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NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
18. FINANCIAL INSTRUMENTS
a) General conditions
The Company and its subsidiaries enter into transactions involving financial instruments, all recorded in balance sheet accounts,
to meet their own needs, and reduce exposure to market, currency, and interest rate risks. These risks and the respective
financial instruments are managed through the definition of strategies, establishment of control systems, and determination of
exchange exposure limits.
Temporary cash investments are mainly made at negotiated return rates, since the Companies intend to hold these investments
to redemption. These investments reflect the market conditions at the balance sheet dates.
Loans and financing are recorded at the contractual interest rates of each transaction.
b) Exchange risk
The Company has entered into swap and forward transactions to hedge against exchange variation on its liabilities resulting from
assumed liabilities. According to the Company's policy, hedge transactions should be contracted for all debts that may expose
the Company to exchange risks. As of June 30, 2004 and March 31, 2004, the Company had swap transactions with financial
institutions in the amounts of R$43,685 (US$14,058,000) and R$36,336 (US$12,493,000), respectively. Forward transactions as
of June 30, 2004 amounted to R$7,477 (Euros $ 2,000,000). These transactions generated losses as of June 30, 2004 and March
31, 2004, of R$1,124 and R$2,839 respectively, which were recorded in current liabilities. The exchange risk is substantially
indexed to the U.S. dollar and euro.
The Company and its subsidiaries do not have derivative financial instruments.
c) Interest rate risk
The Company and its subsidiaries are exposed to fluctuations in the long-term interest rate (TJLP) due to the financing
agreements entered into with BNDES and Finep, as well as to Libor on the agreement with ItaúBBA / IFC.
d) Fair values
As of June 30, 2004 and March 31, 2004, the fair values of cash and banks, temporary cash investments, and accounts
receivable and payable approximate the amounts recorded in the financial statements due to their short term. The fair values of
loans and financing substantially approximate the amounts recorded in the financial statements since these financial instruments
have variable interest rates.
The amounts of swap operations are as follows, considering book value curves and fair value curves.
Company e Consolidated
06/2004
03/2004
Book value
Fair value
Book value
Fair value
Payables - swap transactions
1,124
896
2,839
1,248
e) Credit risk
The Company's sales are made to a large number of beauty consultants. The Company manages the credit risk through a strict
credit granting process.
19. INSURANCE
The Company and its subsidiaries contract insurance based principally on risk concentration and significance, at amounts
considered by management to be sufficient, taking into consideration the nature of its activities and opinion of its insurance
advisors. As of June 30, 2004, the insurance coverage was as follows:
Item
Coverage
Insured amount
Industrial complex/inventories
Any material damages to buildings,
installation and machinery and equipment
365,032
Vehicles
Fire, theft and collision for
816 vehicles
17,000
Loss of profits
Nonrealization of profits arising from
material damages to production installation,
buildings and machinery and equipment
428,398
To the Board of Directors and Shareholders of
Natura Cosméticos S.A.
São Paulo ­ SP
1. We have performed a special review of the accompanying interim financial statements of Natura Cosméticos S.A. and subsidiaries
(Company and Consolidated), consisting of the balance sheets (Company and consolidated) as of June 30, 2004, the related
statements of income for the quarter and six-month period then ended, and the performance report, all expressed in Brazilian
reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company's management. We
have also reviewed the statements of income for the quarter and six-month period ended June 30, 2003, Company and
consolidated.
2. We conducted our review in accordance with specific standards established by the Brazilian Institute of Independent Auditors
(IBRACON), together with the Federal Accounting Council, which consisted principally of: (a) inquiries of and discussions with
persons responsible for the accounting, financial and operating areas as to the criteria adopted in preparing the interim financial
INDEPENDENT AUDITORS' REVIEW REPORT
statements, and (b) review of the information and subsequent events that had or might have had material effects on the financial
position and results of operations of the Company and its subsidiaries.
3. Based on our special review, we are not aware of any material modifications that should be made to the financial statements
referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the
Brazilian Securities Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements.
4. We had previously reviewed the Company and consolidated balance sheets as of March 31, 2004, presented for comparative
purposes, and issued an unqualified special review report thereon, dated April 15, 2004.
5. The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil.
São Paulo, July 16, 2004
DELOITTE TOUCHE TOHMATSU ­ Auditores Independentes
Edimar Facco ­ Engagement Partner
COMMENTS ON PERFORMANCE 2
nd
QUARTER OF 2004
OPERATIONAL AND FINANCIAL HIGHLIGHTS
Unit sales increased 27.9% in 2Q04, compared to the same period last year;
Net revenue grew 33.0%, reaching R$ 428.5 million in 2Q04;
Gross margin was 65.9% in 2Q04, compared to 62.8% in the same period in 2003;
EBITDA reached R$ 102.2 million in 2Q04, representing growth of 51.5%, compared to the same period in 2003;
Net income in 2Q04 was R$ 78.8 million, compared to R$ 11.9 million in the same period in 2003. In the first half of 2004, net
income was R$ 123.5 million (R$ 16.9 million in 1H03).
The number of Natura active consultants in Brazil was 366,900 as of June 30, 2004 (growth of 16.1%, compared to the number
as of June 30, 2003).
Financial Summary ­ Consolidated Data
In R$ million
2Q04
2Q03
Variação %
Units Sold (in million)
46,3
36,2
27,9
Gross Revenue
617,1
462,8
33,3
Net Revenue
428,5
322,2
33,0
Gross Profit
282,6
202,4
39,6
Gross Margin (%)
65,9
62,8
­
EBITDA
102,2
67,4
51,5
EBITDA Margin (%)
23,8
20,9
­
Net Income
78,8
11,9
562,3
Net Debt(Investments)
(84,6)
94,7
n/a
Active consultants at en of period ­ Brazil
(in thousands)
366,9
316,1
16,1
Active consultants at end of period ­
Latin America
(1)
(in thousands)
22,0
16,8
31,5
Note 1 ­ Number of consultants in our operations in Argentina, Chile and Peru.
n/a ­ not applicable
1. Consolidated Operating Revenue
Natura's consolidated gross revenue in 2Q04 was R$ 617.1 million (R$ 462.8 million in 2Q03), representing growth of 33.3%.
In 1H04, consolidated gross revenue was R$ 1,092.7 million, growing 35.3% compared to the first half of 2003 (R$ 807.7 million).
The graphs below provide the breakdown of our consolidated gross revenue by region and category, in 1H03 and 1H04:
Gross revenue in the domestic market reached R$ 598.2 million in 2Q04 (R$ 452.1 million in 2Q03), improving 32.3%. This growth
was driven by the 27.5% increase in the quantity sold and the average price adjustment of 6.2%, at the end of March.
The increase in sales reflects the success of our strategy in recent years: greater and more diversified marketing efforts,
investments in innovation, the evolution of the sales channel and higher productivity.
The innovation index (internal methodology that measures the proportion of products considered innovative, launched in the last 24
months, in relation to total revenue in the period) increased from 33.5% in 2Q03 to 42.7% in 2Q04.
The number of active consultants increased 21.4%, while productivity increased 6.7% in the comparison of periods.
2. Costs and Expenses
Costs ­ The cost of sales in relation to net revenue decreased from 37.2% in 2Q03 to 34.1% in 2Q04. This decrease is essentially
related to the: (i) appreciation of the Brazilian real against the US dollar, between the quarters compared, which benefited raw
material costs by approximately 30% (direct imports: 5%, and products indexed to hard currencies: 25%), (ii) change in tax
legislation (Law No. 10,865), which allowed the Company to take credits on PIS and Cofins (taxes on revenue) incorporated in prices
of materials acquired starting May 1, 2004, and (iii) scale gains. In addition, the average price adjustment of 6.2% in March 2004
offset the average increase in other production costs.
The table below presents the components of cost of sales as a percentage of net revenue for the respective periods:
Composition of Cost of Sales (% of Net Revenue)
2Q04
2Q03
Raw material
26.9
29.7
Labor
2.4
2.7
Depreciation
1.2
1.6
Other (1)
3.5
3.2
Total
34.1
37.2
Note 1 ­ "Other costs" include electric energy, water, gas, consulting, IT services, etc.
The increase in "Other costs", above the growth in net revenue, was due to the reclassification of costs previously classified as
labor, due to the outsourcing of engineering services.
Selling Expenses ­ in relation to net revenue, selling expenses decreased from 30.8% in 2Q03 to 29.9% in 2Q04. This
improvement was due to a 6.7% increase in our consultants' productivity and the dilution of fixed costs.
Administrative Expenses ­ in relation to net revenue, administrative expenses represented 13.5% in 2Q04, compared to 13.6%
in 2Q03. This percentage remained practically constant despite the dilution of fixed costs, mainly due to: (i) expenses referring to
the process of going public (not including commissions to banks) and (ii) an increase in the provision for employee profit sharing,
reflecting the growth in income above the rate of sales growth.
3. EBITDA
EBITDA in 2Q04 was R$ 102.2 million (R$ 67.4 million in 2Q03), growing 48.7%. The EBITDA margin in 2Q04 was 23.8%, compared
to 20.9% in the same period last year. In 1H04, EBITDA reached R$ 184.5 million, 67.5% higher than in the first half of 2003. The
EBITDA margin went from 19.6% in 1H03 to 24.3% in 1H04.
4. Net Income
The net income generated in 2Q04 was R$ 78.8 million (R$ 11.9 million in 2Q03). Among other factors, the improvement in income
was due to the: (i) significant growth in revenue and margin described previously, (ii) reduction in average net indebtedness,
benefiting financial income and (iii) the end of subordinated debenture participation in income, as a result of their capitalization on
March 2, 2004.
5. Debt and Cash
In R$ million
6/30/2004
6/30/2003
Gross debt
(1)
105.3
167.0
Cash and banks and Temporary
cash investments
189.8
72.3
Net debt
(84.5)
94.7
Note 1­ Includes provision for adjustment on swap operations.
The Company ended 2Q04 with a negative net debt of R$ 84.5 million, against a R$ 94.7 million positive net debt in 2Q03. The
reduction in our net indebtedness was basically due to cash generation and the capitalization of R$34.4 million in debentures placed
by BNDESPAR (conducted in May 2004).
6. Investments
Investments in property, plant and equipment in 2Q04 totaled R$ 16.2 million (R$ 22.7 million in 1H04). The main investments are
concentrated in the construction of a new vertical warehouse, which will allow the Company to increase its raw material and finished
product storage capacity by approximately 120%. In the first half of 2003, R$ 12.5 million had been invested.
7. Operations in Latin America (Argentina, Chile and Peru)
Summary of Results ­ US$ million
1H04
1H03
Variation %
Units sold (in million)
1,514
932
62,4
Net revenue
7.6
4.9
55.1
Loss from operations
(1.5)
(1.4)
7.1
Operating margin (%)
(19,7)
(28,6)
­
Net revenue (in US dollars) in Latin American operations grew 55.1% in 1H04, in comparison with 1H03. This growth is the result of
our intensified marketing efforts and the increase in the operations' sales structure.
Loss from operations as a percentage of net revenue decreased from (28.6%) in 1H03, to (19.7%) in 1H04. The slight increase in
the absolute value of the loss is due to the expansion of our sales force in the period.
In terms of local currency, growth in net revenue weighted according to each country's share was 48.9% in the comparison of
periods.
8. Listing of Shares on Bovespa
The listing of Natura shares on the São Paulo Stock Exchange (BOVESPA) occurred last May 26 at the price of R$ 36.50 per share.
On the first trading day, Natura shares appreciated 16% (closing price: R$ 42.20 per share) and trading volume was R$ 166 million,
or 14% of the volume traded on the exchange that day.
The average volumes traded in the months of June and July were as follows:
Nº of average
Daily average
Period
daily trades
Percentage*
volume (R$ 000)
Percentage **
06/01 to 06/15
204
0.4%
12,212
1.4%
06/15 to 06/30
92
0.2%
7,318
0.6%
07/01 to 07/15
93
0.2%
3,815
0.3%
07/16 to 07/22
106
0.2%
4,293
0.4%
* Percentage of total number of trades on Bovespa.
** Percentage of financial trading volume on Bovespa.
By the end of the share placement, Natura had the participation of nearly 5,000 shareholders, including approximately 4,800
individual shareholders.
The price of Natura shares before the closing of this comment was R$53.30 (07/23/04), having appreciated 46.0% since the
beginning of trading, confirming the strong interest in the Company displayed by investors.
The performance of Natura shares (NATU3) in the period from 05/26 to 07/23 is shown in the graph below:
In this first quarterly report, we express our appreciation to all the employees, who have dedicated their work in support of a
genuinely Brazilian company, and to our long-time and new shareholders, who will certainly continue participating actively in
Natura's evolution.
9. Dividends and Interest on Capital
The Board of Directors, in a meeting held on July 27, 2004, approved the distribution of dividends and payment of interest on capital
in the total gross amount of R$ 86,765,687 , corresponding to R$ 1.023774714 per share, and in reference to the first half of 2004,
as follows: (i) R$ 73,332,853 in the form of dividends, corresponding to R$ 0.865276623 per share, free of taxes, and (ii) R$
13,432,834 in the form of interest on capital, corresponding to R$ 0.158498091 per share, or R$ 0.134723377 per share, net of
income tax, except for shareholders who have tax immunity or exemption.
Dividends and interest on capital will be paid to the shareholders existing as of August 3, 2004, and credited to their bank accounts
on August 16, 2004.
Continua...
Continuação
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NATURA COSMÉTICOS S/A
C.N.P.J. 71.673.990/0001­77
2Q04
% net revenue
2Q03
% net revenue
VARIATION
Gross operating revenues .....................................................................
617.101
100,0
462.811
100,0
33,3%
Taxes on sales, returns and rebates .........................................................
(188.557)
30,6
(140.565)
30,4
34,1%
Net operating revenues ..........................................................................
428.544
100,0
322.246
100,0
33,0%
Cost of sales .............................................................................................
(145.934)
34,1
(119.850)
37,2
21,8%
Gross profit .............................................................................................
282.610
65,9
202.396
62,8
39,6%
Operating (expenses) income
Selling ........................................................................................................
(128.344)
29,9
(99.191)
30,8
29,4%
General and administrative ........................................................................
(57.999)
13,5
(43.691)
13,6
32,7%
Management compensation ........................................................................
(2.089)
0,5
(1.246)
0,4
67,7%
Income from operations before financial effects ................................
94.178
22,0
58.268
18,1
61,6%
Financial expenses ....................................................................................
(5.764)
(31.697)
0,0
-81,8%
Financial income ........................................................................................
6.542
21.281
-69,3%
Income from operations .........................................................................
94.956
22,2
47.852
14,8
98,4%
Nonoperating income (expense) .................................................................
(577)
(0,1)
39
0,0
-1579,5%
Income before debenture participation ................................................
94.379
22,0
47.891
14,9
97,1%
Debenture participation ..............................................................................
­
­
(27.024)
8,4
-100,0%
Income before taxes on income ............................................................
94.379
22,0
20.867
6,5
352,3%
Income and social contribution taxes .........................................................
(15.562)
3,6
(8.976)
2,8
73,4%
Income before minority interest ............................................................
78.817
18,4
11.891
3,7
562,8%
Minority interest ......................................................................................
­
10
0,0
-100,0%
Net income ...............................................................................................
78.817
18,4
11.901
3,7
562,3%
STATEMENT OF INCOME ­ CONSOLIDATED (R$ 000)
ASSETS .........................................................................................................................
06/2004
03/2004
Cash and banks ............................................................................................................
32.449
11.700
Temporary cash investments ........................................................................................
157.299
110.497
Trade accounts receivable ............................................................................................
162.071
166.878
Inventories ....................................................................................................................
98.287
89.293
Recoverable taxes ........................................................................................................
13.518
10.457
Advances to employees ................................................................................................
5.010
6.926
Deferred income and social contribution taxes .............................................................
21.462
21.663
Other receivable ...........................................................................................................
12.172
11.810
Total current assets ......................................................................................................
502.268
429.224
Advance for future capital increase ..............................................................................
2.689
­
Tax incentives ...............................................................................................................
1.492
1.492
Deferred income and social contribution taxes .............................................................
15.914
11.457
Escrow deposits ...........................................................................................................
19.635
17.118
Other receivables ..........................................................................................................
3.438
2.379
Total long-term assets ...................................................................................................
43.168
32.446
Investments ..................................................................................................................
2.670
2.739
Property, plant and equipment ......................................................................................
263.192
256.333
Total permanent assets ................................................................................................
265.862
259.072
TOTAL ASSETS .............................................................................................................
811.298
720.742
BALANCE SHEETS AS OF JUNE 30,2004 AND MARCH 31, 2004
LIABILITIES AND SHAREHOLDERS' EQUITY ...........................................................
06/2004
03/2004
Loans and financing ......................................................................................................
24.300
39.716
Domestic suppliers ........................................................................................................
64.846
60.821
Foreign suppliers ...........................................................................................................
1.983
404
Payroll and related charges ..........................................................................................
45.046
29.380
Taxes payable ...............................................................................................................
47.299
55.225
Dividends ......................................................................................................................
73.333
­
Interest on capital .........................................................................................................
11.418
­
Other payables .............................................................................................................
23.091
35.377
Reserve for losses on swap contracts .........................................................................
1.016
2.839
Total current liabilities ...................................................................................................
292.332
223.762
Loans and financing ......................................................................................................
79.870
101.181
Reserve for contingencies ............................................................................................
48.063
35.578
Other payables .............................................................................................................
872
8.603
Total long-term liabilities ................................................................................................
128.805
145.362
Minority interest ............................................................................................................
8
8
Capital ...........................................................................................................................
230.762
196.371
Treasury shares ............................................................................................................
(3.554)
(3.762)
Capital reserves ............................................................................................................
114.947
110.714
Profit reserves ..............................................................................................................
3.629
3.629
Retained earnings .........................................................................................................
44.369
44.658
Total shareholders' equity ..............................................................................................
390.153
351.610
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...............................................
811.298
720.742
Continuação