Consolidated gross revenue from sales and services in 2009 reached R$ 2,087.6 million, representing a 5.1% increase compared to 2008. The highlight in the year was Itautec's operations in Brazil, which represented 69.2% of total, or R$ 1,445.5 million. This reflects a 5.6% increase over the previous year, indicating the recovery of the information technology segment in the Brazilian market.
In 2009, gross revenue in Automations - which includes sales of banking and retail automation hardware and software in Brazil, added to the operations of Itautec subsidiaries abroad - reached R$ 339.0 million, reflecting 30.3% increase compared to the previous year. This performance is a result of the higher number of competitive biddings won in the first half of 2009, which have significantly contributed to the shipment of 7.7 million ATMs until December. This represents a 90.9% increase over 2008, reflecting the continued investments in technology by financial institutions in Brazil and the confidence of these institutions in Itautec's capability for creating high value-added products and services in the banking automation industry.
In the Information Technology segment, which manufactures and sells notebooks, netbooks, desktops and servers, gross revenue was R$ 733.2 million, a 3.0% decrease compared to the previous year, representing 35.1% of total consolidated revenue. During the fiscal year, 433.7 thousand units of equipment were sold, a volume 5.9% lower in comparison to 2008. The decrease resulted from the higher competition noticed during the period, especially in the desktops segment, in which 197.6 thousand units were sold. Notebook sales reached 229.0 thousand units, reflecting 7.4% growth compared to the previous fiscal year. In the servers segment, Itautec had an outstanding expansion in 2009, with sales of 7.1 thousand units, which represents a 420.1% increase over 2008. The Services area was responsible for R$ 417.8 thousand in revenues, a 3.4% increase compared to 2008, resulting from outsourcing, technical support, infrastructure and installation services. The Distribution area, represented by Tallard subsidiaries, had R$ 597.6 million in revenues, a 5.4% increase compared to 2008, with highlights to the operations in Brazil and Ecuador, which presented 52.4% and 27.0% growth, respectively. Taxes and fees totaled R$ 215.9 million, representing 10.3% of the gross revenue from sales and services in 2009.
TAX INCENTIVES By its business nature, Itautec receives tax incentives from government. The most significant types of financial assistance received in 2009 were the following:
- Reduction of Excise Tax (IPI) rate - Information Technology Law(R$ 121.5 million): refers to reduction of IPI in the shipment of information technology products that meet the Basic Production Process. As of January 2009, ATMs manufactured by the Company were granted a greater reduction in the IPI tax rate (from 3.0% to 0.75%). - Exemption of PIS / COFINS (local taxes) - Digital Inclusion (R$ 36.8 million): refers to the rate of 0% for these two taxes on information technology products for the final consumer. - ICMS (Value-Added Tax on Sales and Services) authorized credit (R$ 44.1 million): a manufacturer located in the State of São Paulo that ships certain products with ICMS (Value-Added Tax) incidence may opt to receive a credit in the equivalent of 7.0% of the shipment amount, instead of receiving benefits from any other credits.
COST OF PRODUCTS SOLD AND SERVICES PROVIDED Cost of products sold and services provided in 2009 totaled R$ 1,516.1 million, with 38.5% representing purchase cost of raw materials and components. Purchase of raw materials in the internal market was increased, reaching 53.6% of the accumulated in 2009 over 45.1% in 2008. This resulted from the increase in sales of banking automation equipment, products that have a high amount of components purchased in the Brazilian market.
Gross profit Gross profit reached R$ 355.6 million, representing a gross margin of 19.0% - an increase of 2.5 percentage points over 2008. This variation is justified by the increase in sales of products with higher value added, especially ATMs and notebooks. With the increased production of ATMs occurred during the year and growth in the Service area operations, it was necessary to further increase the number of employees. This factor, plus the wage adjustments from collective agreements, affected the cost of salaries and direct payroll taxes in about R$ 6.0 million compared to 2008.
Operating expenses Selling expenses totaled R$ 141.1 million, an 8.7% increase compared to 2008, representing 7.5% of net revenues ? a 0.2 percentage points increase over the previous year. This growth is a result of the advertising expenditure, mainly in the second two quarters, needed to support sales in the retail segment, and the wage adjustments from collective agreements. Abroad, the expenses increase is due mainly to conversion of financial statements into reais, since the average dollar quotation in 2008 increased 8.8% over the quotation used in 2009, so that the values expressed in Brazilian currency were higher compared to the previous year. General and administrative expenses reached R$ 74.1 million, a 20.1% increase over 2008, representing 4.0% of net revenues in 2009. This result was significantly affected by the average wage adjustments and the average valuation of the dollar during the fiscal year, which influences the results of the Company?s subsidiaries abroad when converting figures into the Brazilian currency.
Investments in Development In 2009, R$ 60.7 million were allocated for development of solutions that increase business for clients and ensure the Company's competitiveness. From that amount, R$ 54.6 million were recorded in the fiscal year result, being about the same amount of previous year. The main projects comprised new equipment for retail and banking automation, software and new information technology products (notebooks, netbooks and servers).
Other operating revenues and expenses As determined by Provisional Measure 449/08, amounts classified as non-operating income were recorded as other revenues and operating expenses, account group that ended 2009 with net expenses of R$ 20.3 million, represented mainly by expenses with tax and labor contingencies.
Financial Result Net financial result of 2009 was a revenue of R$ 0.2 million. In 2008, it was an expense of R$ 12.0 million. The result in 2009 is due to the R$ 7.3 million discount granted by the Fiscal Recovery Program (REFIS) for payment of tax contingencies that the Company has included in the program.
Itautec maintains a policy of achieving hedge of 100% of its net foreign exchange exposure, for which reason it did not have significant impacts on results caused by currency fluctuations occurred in the fiscal year.
Cash Flow from Operating Activities and EBITDA During the first half of 2009, Itautec won important competitive biddings from large financial institutions, and, accordingly, the Company's working capital needed to be increased - especially during the second half of the year. This has negatively affected the cumulated cash flow from operating activities, which reached R$ 10.0 million. Yearly cumulated EBITDA (Earnings Before Interests, Taxes, Depreciation and Amortization) reached R$ 86.9 million, resulting in a 4.6% EBITDA margin.
Income Tax and Payroll Taxes The amount of Income Tax and Payroll Taxes comprises a short-term payment of R$ 22.2 million and was offset by the creation of a R$ 21.2 million long-term provision, for fiscal losses and temporary inclusions.
Net profit Consolidated net profit in 2009 reached R$ 53.6 million, a 32.1% increase over 2008, presenting a 2.9% net margin and average return on equity (ROE) of 11.4%.
Deliberations on the main Assets and Liabilities accounts, including financial indebtedness
Cash and Cash Equivalents / Financial Investments At the end of 2009, the consolidated balance of cash and cash equivalents / financial applications, which includes cash on hand, bank accounts and short-term investments, was R$ 32.7 million, a 49.6% decrease compared to 2008. The cash flow of this account group refers to the balance after all the Company's operational and financial cash inflows and payments as well as the balance of its investments, which at year-end had the following distribution:
Trade Accounts Receivable Balance of Trade Accounts Receivable at the end of December was R$ 464.8 million, a 16.6% increase in comparison to the same period in 2008. This was the result of an increase in the number of ATMs shipped occurred in the last months of 2009 in the Brazilian market due to the government bids won in the first two quarters of the year. At the end of the fiscal year, the balance of Trade Accounts Receivable was represented as follows:
Inventory In order to support sales occurred at the end of 2009 and deliveries scheduled for the first months of 2010, the number of purchases of components for equipment manufacturing was increased. Accordingly, at the end of 2009, the remaining consolidated balance of inventory totaled R$ 409.1 million, a 15.2% increase compared to the end of 2008. The balance of raw materials at end of 2009 was R$ 209.0 million, a R$ 17.4 million or 9.1% increase compared to 2008. The breakdown of the inventory group at year-end was the following:
Indebtedness The net financial indebtedness reached R$ 216.7 million, an 8.0% increase in comparison to the end of 2008. Itautec ended the fiscal year with total financial indebtedness of R$ 249.4 million, being R$ 126.6 million 50.8% long-term loans. The largest portion is in regards to the BNDES (the National Bank for Economic and Social Development) financing. The funds are for projects such as expansion of Itautec's internationalization, which began in 2006 with the acquisition of Tallard Technologies, Inc., modernization and transfer of the production lines to the industrial district of Jundiaí that occurred in 2007. The investment program aims also at the increment of current installed capacity and working capital for expansion, as well as research and development investments for innovation of products and continued products-and-processes improvement. BNDES agreements have provisions for keeping national control of capital, exports expansion, presenting licenses, measures and actions to prevent or correct any harm to the environment, measures regarding safety and health at workplace, and preservation of liquidity limit.
The Company had financing operations with Financiadora de Estudos e Projetos (Finep¹), intended for development of information technology equipment and applications. Balance at the end of 2009 was R$ 27.9 million, with amortization term up to 2018. Finep agreements require that all changes in stockholder control and/or corporate structure be informed, presenting licenses, measures and actions to prevent or correct any harm to the environment. In general, the agreements require notifying the financing institutions in case of change in stockholder control, being permitted acceleration of the loan due date in some cases.
1 - Finep - Financiadora de Estudos e Projetos - A public company linked to the Ministry of Science and Technology, that aims to support studies, projects and programs of interest for economic, social, scientific and technological development of Brazil, with the sector goals and priorities established at the federal government level.
Derivative financial instruments Itautec maintains a conservative financial policy, with all hedging instruments operations having the purpose to cover its debts and investments, and the Company does not and has not made any leveraged transactions in financial derivatives in 2009.
Distribution of Value Added (DVA) Creation of value added, which represents the social effects created and distributed by the Company, reached in 2009 R$ 495.2 million. From this total, R$ 318.3 million was distributed to employees, R$ 128.1 million for taxes and fees, and R$ 12.8 million to stockholders as dividends.
Amount distributed to employees In 2009, R$ 318.3 million of all resources generated by Itautec were intended for payment of wages and participation in the results, payroll taxes and benefits to employees and dependents. Direct remuneration by payment of wages reached R$ 232.5 million, a 3.6% increase over 2008, representing 73.0% of the value-added distributed to employees. In order to provide quality of life and maintain adequate work environment, employees receive a comprehensive benefit program, including medical and dental care, meal ticket, transport allowance, stipend for daycare, and technical and professional training. In 2009, R$ 26.2 million were allocated for benefits, representing 8.2% of the value-added distributed to employees.
Amount distributed to the government Itautec has its manufacturing pant in the city of Jundiaí, in São Paulo, and branches in every Brazilian state, which are benefited by the taxes paid by the Company. In 2009, R$ 128.1 million of the resources created by the Company were allocated for payment of taxes and fees, being 72.3% for federal, 13.6% for state and 14.1% for municipal government.
Financing institutions Itautec has some loan agreements for providing resources to expand its operational activities, such as modernization, installed capacity expansion and working capital increase, besides investments in development of innovative products and continual improvement of products and processes. In 2009, the Company had a credit balance of R$ 4.8 million from financing payments. The result is due, mainly, to the positive exchange rate variance occurred in the period.
Amount distributed to stockholders The amount of R$ 12.8 million was distributed to stockholders in the quality of dividends in 2009, a 7.8% increase compared to 2008, representing 25.1% of net profit adjusted in the fiscal year. Net profit per share in 2009 was R$ 4.62.
Value creation for the society Itautec continuously seek to establish relationships with the society that create value for all stakeholders. The Company is affiliated with several institutions that promote respect for human rights. Additionally, Itautec allocates resources yearly for social-educational actions, such as donation of equipment and investments in courses on microinformatics, developing citizenship, especially in communities where the Company operates. In 2009, Itautec invested R$ 474.6 thousand in social-educational programs.
Value creation for suppliers Itautec seeks to establish partnerships with suppliers that always adopt responsible practices in the social, environmental and economic aspects. Selection of companies is performed under the strictest criterion, ensuring that their profile is adequate to the values and needs of the Organization. The Company ended 2009 with 8,810 vendors considered assets, being 8,611 in Brazil and 199 abroad, from which it has purchased R$ 610.2 million in raw materials and services.
