Edgar Filing: TELEFONICA BRASIL S.A.

vivofs2015_6k.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2016

Commission File Number: 001-14475

TELEFÔNICA BRASIL S.A.
(Exact name of registrant as specified in its charter)

TELEFONICA BRAZIL S.A.
(Translation of registrant’s name into English)

Av. Eng° Luís Carlos Berrini, 1376 - 28º andar
São Paulo, S.P.
Federative Republic of Brazil
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

TELEFÔNICA BRASIL S.A.

QUARTERLY INFORMATION

DECEMBER 31, 2015

A free translation from Portuguese into English of Independent Auditor’s Report on Individual and Consolidated Financial Statements prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB)

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

The Shareholders, Board of Directors and Officers

Telefônica Brasil S.A.

São Paulo - SP

We have audited the accompanying individual and consolidated financial statements of Telefônica Brasil S.A. (“Company”), identified as Company and Consolidated, respectively, which comprise the balance sheet as at December 31, 2015, and the related statements of income, of comprehensive income, of changes in equity and of cash flows for the year then ended, and a summary of significant accounting practices and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with accounting practices adopted in Brazil and with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Brazilian and international standards on auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the Company’s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the individual and consolidated financial statements referred to above present fairly, in all material respects, the individual and consolidated financial position of Telefônica Brasil S.A. as at December 31, 2015, its individual and consolidated operating performance and its individual and consolidated cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Page 2

Other matters

Statements of value added

We have also audited the individual and consolidated statements of value added for the year ended December 31, 2015, prepared by the Company’s management, the presentation of which is required by Brazilian corporation law for publicly held companies, and as supplementary information under the IFRS, whereby no statement of value added presentation is required. These statements have been subject to the same auditing procedures previously described and, in our opinion, are presented fairly, in all material respects, in relation to the overall financial statements.

Audit of prior year corresponding figures

The financial statements for the year ended December 31, 2014 were audited by other independent auditors who expressed an unmodified opinion on those statements on February 12, 2015.

São Paulo, February 19, 2016.

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Cassio O. Barbosa

Accountant CRC-1SP269018/O-7

Héctor Ezequiel Rodríguez Padilla

Accountant CRC-1SP299427/O-9

Page 3

TELEFÔNICA BRASIL S.A.
Balance sheets
At December 31, 2015 and 2014
(In thousands of reais)

		Company		Consolidated				Company		Consolidated
ASSETS	Note	12.31.15	12.31.14	12.31.15	12.31.14	LIABILITIES AND EQUITY	Nota	12.31.15	12.31.14	12.31.15	12.31.14

Current assets		15,185,519	14,754,381	17,909,303	15,517,368	Current liabilities		15,948,843	16,102,171	17,981,713	16,011,006
Cash and cash equivalents	5	4,206,595	3,835,304	5,336,845	4,692,689	Personnel, social charges and benefits	15	520,023	585,770	698,846	591,381
Trade accounts receivable, net	6	7,000,379	6,470,764	8,285,319	6,724,061	Trade accounts payable	16	7,496,947	7,675,632	8,373,235	7,641,191
Inventories, net	7	558,264	458,488	603,631	479,801	Taxes, charges and contributions	17	1,175,293	1,236,330	1,716,002	1,281,673
Taxes recoverable	8.1	2,164,544	2,163,404	2,521,292	2,202,662	Dividends and interest on equity	18	2,209,362	1,495,321	2,209,362	1,495,321
Judicial deposits and garnishments	9	235,343	202,169	235,343	202,169	Provisions for contingencies	19	894,069	674,276	914,377	674,276
Prepaid expenses	10	317,325	300,567	356,446	303,551	Deferred income	20	562,601	704,589	564,557	717,019
Dividends and interest on equity	18	18,645	174,726	489	-	Loans, financing, finance lease and contingent consideration	21	1,811,037	1,509,471	2,222,067	1,509,471
Derivative transactions	34	81,306	613,939	81,306	613,939	Debentures	21	120,924	755,047	120,924	755,047
Other assets	11	603,118	535,020	488,632	298,496	Derivative transactions	34	151,686	23,011	151,686	23,011
						Other liabilities	22	1,006,901	1,442,724	1,010,657	1,322,616
Noncurrent assets		82,387,176	58,382,747	83,775,761	57,547,920
Short-term investments pledged as collateral		90,863	125,343	109,864	125,353	Noncurrent liabilities		13,056,610	12,084,862	15,136,109	12,104,187
Trade accounts receivable, net	6	217,621	190,288	330,451	299,405	Personnel, social charges and benefits	15	19,808	118,829	19,808	118,829
Taxes recoverable	8.1	337,477	340,205	409,653	340,205	Trade accounts payable	16	-	-	67,742	-
Deferred taxes	8.2	-	40,704	711,590	144,817	Taxes, charges contributions	17	57,416	41,379	87,018	67,126
Judicial deposits and garnishments	9	4,880,489	4,514,783	5,518,120	4,543,056	Deferred taxes	8.2	155,951	-	-	-
Prepaid expenses	10	28,632	24,346	30,609	26,223	Provisions for contingencies	19	5,077,839	4,440,756	5,890,319	4,461,654
Derivative transactions	34	417,558	152,843	417,558	152,843	Deferred revenues	20	358,963	480,957	359,237	482,782
Other assets	11	55,228	94,703	62,799	94,925	Loans , financing, finance lease and contingent consideration	21	3,141,987	2,123,126	4,454,509	2,123,126
Investments	12	24,342,692	1,445,014	101,161	79,805	Debentures	21	3,423,790	3,411,616	3,423,790	3,411,616
Property, plant and equipment, net	13	22,019,076	20,381,731	30,476,765	20,453,864	Derivative transactions	34	82,421	24,133	82,421	24,133
Intangible assets, net	14	29,997,540	31,072,787	45,607,191	31,287,424	Liabilities for post-retirement benefits plans	33	76,616	456,129	85,343	456,129
						Other liabilities	22	661,819	987,937	665,922	958,792

						Equity		68,567,242	44,950,095	68,567,242	44,950,095
						Capital	23	63,571,416	37,798,110	63,571,416	37,798,110
						Capital reserves	23	1,347,952	2,686,897	1,347,952	2,686,897
						Income reserves	23	2,410,571	1,534,479	2,410,571	1,534,479
						Premium on acquisition of non-controlling interests	23	(75,388)	(70,448)	(75,388)	(70,448)
						Other comprehensive income	23	25,468	232,465	25,468	232,465
						Additional proposed dividends	23	1,287,223	2,768,592	1,287,223	2,768,592

TOTAL ASSETS		97,572,695	73,137,128	101,685,064	73,065,288	TOTAL LIABILITIES AND EQUITY		97,572,695	73,137,128	101,685,064	73,065,288

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TELEFÔNICA BRASIL S.A.
Income statements
Years ended December 31, 2015 and 2014
(In thousands of reais, except earnings per share)

		Company		Consolidated
	Note	12.31.15	12.31.14	12.31.15	12.31.14

Net operating revenue	24	34,003,769	32,993,687	40,286,815	34,999,969

Cost of services and goods sold	25	(17,062,753)	(16,286,314)	(20,345,076)	(17,222,675)

Gross profit		16,941,016	16,707,373	19,941,739	17,777,294

Operating income (expenses)		(13,159,918)	(12,603,848)	(14,702,141)	(12,668,265)
Selling expenses	25	(10,801,148)	(10,403,171)	(12,005,477)	(10,466,725)
General and administrative expenses	25	(1,887,878)	(1,773,582)	(2,142,459)	(1,803,803)
Other operating income	26	503,944	482,788	538,239	510,628
Other operating expenses	26	(974,836)	(909,883)	(1,092,444)	(908,365)

Operating income		3,781,098	4,103,525	5,239,598	5,109,029

Financial income	27	3,763,877	1,869,331	4,728,665	1,983,386
Financial expenses	27	(4,239,194)	(2,341,430)	(5,576,843)	(2,345,381)
Equity pickup	12	748,526	742,628	2,036	6,940

Income before taxes		4,054,307	4,374,054	4,393,456	4,753,974

Income and social contribution taxes	28	(634,058)	562,605	(973,207)	182,685

Net income for the year		3,420,249	4,936,659	3,420,249	4,936,659


Basic and diluted earnings per common share (in R$)	29	2.15	4.12
Basic and diluted earnings per preferred share (in R$)	29	2.37	4.53

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TELEFÔNICA BRASIL S.A.
Statements of Changes in Equity
Years ended December 31, 2015 and 2014
(In thousands of reais)
			Capital reserves			Income reserves
	Capital	Premium on acquisition of interest	Special goodwill reserve	Other capital reserves	Treasury shares	Legal reserve	Tax incentives	Expansion and Modernization Reserve	Retained earnings	Additional Proposed Dividends	Other comprehensive income	Total Equity

Balances at December 31, 2013	37,798,110	(70,448)	63,074	2,735,930	(112,107)	1,285,797	1,699	-	-	1,175,538	16,849	42,894,442

Payment of additional dividend for 2013	-	-	-	-	-	-	-	-	-	(1,175,538)	-	(1,175,538)
Prescribed equity instruments	-	-	-	-	-	-	-	-	207,442	-	-	207,442
DIPJ adjustment - Tax incentives	-	-	-	-	-	-	150	-	(150)	-	-	-
Other comprehensive income (loss)	-	-	-	-	-	-	-	-	(36,526)	-	215,616	179,090
Net income for the year	-	-	-	-	-	-	-	-	4,936,659	-	-	4,936,659
Allocation of income:
Legal reserve	-	-	-	-	-	246,833	-	-	(246,833)	-	-	-
Interim interest on equity	-	-	-	-	-	-	-	-	(2,092,000)	-	-	(2,092,000)
Additional proposed dividends	-	-	-	-	-	-	-	-	(2,768,592)	2,768,592	-	-

Balances at December 31, 2014	37,798,110	(70,448)	63,074	2,735,930	(112,107)	1,532,630	1,849	-	-	2,768,592	232,465	44,950,095

Payment of additional dividend for 2014	-	-	-	-	-	-	-	-	-	(2,768,592)	-	(2,768,592)
Prescribed equity instruments	-	-	-	-	-	-	-	-	494,001	-	-	494,001
DIPJ adjustment - Tax incentives	-	-	-	-	-	-	5,079	-	(5,079)	-	-	-
Cancelation of treasury shares according to the Special Shareholders' Meeting (SGM) of 3/12/15	-	-	-	(112,107)	112,107	-	-	-	-	-	-	-
Capital increase – Special Shareholders’ Meeting of 04/28/15	15,812,000	-	-	-	-	-	-	-	-	-	-	15,812,000
Direct costs on capital increase (net of taxes) according to the Special Shareholders Meeting of 04/28/15	-	-	-	(58,657)	-	-	-	-	-	-	-	(58,657)
Capital increase – Special Shareholders’ Meeting of 04/30/15	295,285	-	-	-	-	-	-	-	-	-	-	295,285
Direct costs on capital increase (net of taxes) according to the Special Shareholders Meeting of 04/30/15	-	-	-	(3,776)	-	-	-	-	-	-	-	(3,776)
Capital increase – Merger of GVTPart shares – Special Shareholders’ Meeting of 05/28/15	9,666,021	-	-	(1,188,707)	-	-	-	-	-	-	-	8,477,314
Dissenters' right – Acquisition of GVTPart.	-	-	-	-	(87,805)	-	-	-	-	-	-	(87,805)
Premium on acquisition of equity interest by TData	-	(4,940)	-	-	-	-	-	-	-	-	-	(4,940)
Other comprehensive income (loss)	-	-	-	-	-	-	-	-	264,990	-	(206,997)	57,993
Net income for the year	-	-	-	-	-	-	-	-	3,420,249	-	-	3,420,249
Allocation of income:
Legal reserve	-	-	-	-	-	171,013	-	-	(171,013)	-	-	-
Interim interest on equity	-	-	-	-	-	-	-	-	(1,745,925)	-	-	(1,745,925)
Interim dividends	-	-	-	-	-	-	-	-	(270,000)	-	-	(270,000)
Expansion and Modernization Reserve	-	-	-	-	-	-	-	700,000	(700,000)	-	-	-
Additional proposed dividends	-	-	-	-	-	-	-	-	(1,287,223)	1,287,223	-	-

Balances at December 31, 2015	63,571,416	(75,388)	63,074	1,372,683	(87,805)	1,703,643	6,928	700,000	-	1,287,223	25,468	68,567,242

At 12.31.15
Outstanding shares (in thousands)												1,688,694
Equity value of Company shares												R$ 40.60

At 12.31.14
Outstanding shares (in thousands)												1,123,269
Equity value of Company shares												R$ 40.02

Page 6

TELEFÔNICA BRASIL S.A.
Cash flow statements
Years ended December 31, 2015 and 2014 (In thousands of reais)


	Company		Consolidated
	12.31.15	12.31.14	12.31.15	12.31.14

Total cash generated by operating activities	7,548,893	8,485,411	9,897,205	9,384,219

Expenses (revenues) not representing changes in cash	12,266,042	10,900,855	15,638,355	12,058,587
Income before taxes	4,054,307	4,374,054	4,393,456	4,753,974
Depreciation and amortization	5,657,646	5,273,256	6,814,951	5,295,589
Foreign exchange gains (losses) on loans	(49,847)	96,036	613,927	96,036
Monetary gains (losses)	282,009	(2,437)	280,280	(4,990)
Equity pickup	(748,526)	(742,628)	(2,036)	(6,940)
Losses on write-off/sale of goods	45,545	39,662	66,029	37,934
Provision for impairment - accounts receivable	1,016,816	832,184	1,230,675	896,336
Provision for (reversal) of trade accounts payable	288,769	(198,477)	265,072	(234,967)
Provision (write-off and reversals of) for impairment - inventories	(36,012)	(25,458)	(35,692)	(29,062)
Pension plans and other post-retirement benefits	35,239	33,690	36,666	33,691
Provisions for tax, civil, labor and regulatory contingencies	877,645	546,191	993,508	546,204
Interest expense	785,852	662,944	919,908	662,944
Provision for divestiture	51,822	10,931	58,396	10,931
Provision for customer loyalty program	3,223	907	3,223	907
Other	1,554	-	(8)	-

Increase or decrease in operating assets and liabilities:	(4,717,149)	(2,415,444)	(5,741,150)	(2,674,368)
Trade accounts receivable	(1,573,764)	(1,791,735)	(1,841,659)	(1,859,857)
Inventories	(63,764)	36,556	(81,820)	54,876
Taxes recoverable	(432,587)	(219,466)	(616,012)	(235,559)
Prepaid expenses	88,621	61,296	111,288	59,463
Other current assets	4,883	(12,862)	(104,706)	30,561
Other noncurrent assets	33,351	33,062	(159,315)	29,612
Personnel, social charges and benefits	(164,768)	258,834	(169,220)	260,109
Trade accounts payable	175,444	496,976	103,346	539,136
Taxes, charges and contributions	(21,610)	618,024	78,436	617,886
Interest paid	(824,952)	(800,302)	(949,386)	(800,302)
Income and social contribution taxes paid	-	(520,740)	(397,070)	(782,860)
Other current liabilities	(1,076,328)	(531,236)	(992,525)	(538,693)
Other noncurrent liabilities	(861,675)	(43,851)	(722,507)	(48,740)

Total cash used 9n investing activities	(18,601,377)	(7,333,582)	(14,625,707)	(7,607,642)
Acquisition of property, plant and equipment and intangible assets	(5,688,877)	(7,504,464)	(6,792,895)	(7,535,011)
Proceeds from disposal of property, plant and equipment	19,688	19,856	19,902	21,128
Cash paid for acquisition of companies, net of cash acquired	(8,903,954)	-	(8,528,986)	-
Capital increase in subsidiary	(5,827,064)	-	-	-
Redemption of (investiments in) investments in guarantee	-	4,567	-	4,567
Redemption of (investment in) judicial deposits	13,224	(105,228)	(6,431)	(104,707)
Dividends and interest on equity received	1,102,911	251,687	8	6,381
Net payment of derivative contracts on acquisition of GVT	682,695	-	682,695	-

Total cash generated by (used in) financing activities	11,423,775	(3,627,824)	5,372,658	(3,627,824)
Payment of loans, financing and debentures	(2,279,518)	(1,563,272)	(8,710,567)	(1,563,272)
Loans and debentures raised	1,115,210	318,573	1,285,210	318,573
Payment net of derivative agreements	336,873	63,741	546,805	63,741
Payment for reverse split of shares	-	(245)	-	(245)
Dividend and interest on equity paid	(3,678,665)	(2,446,621)	(3,678,665)	(2,446,621)
Capital increase	16,107,285	-	16,107,285	-
Direct capital increase costs	(89,605)	-	(89,605)	-
Payment to dissenters' rights - shareholders	(87,805)	-	(87,805)	-

Increase (decrease) in cash and cash equivalents	371,291	(2,475,995)	644,156	(1,851,247)

Cash and cash equivalents at the beginning of the year	3,835,304	6,311,299	4,692,689	6,543,936
Cash and cash equivalents at the end of the year	4,206,595	3,835,304	5,336,845	4,692,689

Changes in cash and cash equivalents for year	371,291	(2,475,995)	644,156	(1,851,247)

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TELEFÔNICA BRASIL S.A.
Statements of other comprehensive income
Years ended December 31, 2015 and 2014
(In thousands of reais)

	Company		Consolidated
	12.31.15	12.31.14	12.31.15	12.31.14
Net income for the year	3,420,249	4,936,659	3,420,249	4,936,659

Unrealized losses on investments available for sale	(1,870)	(7,643)	(1,870)	(7,643)
Taxes on unrealized losses on investments available for sale	636	2,599	636	2,599
	(1,234)	(5,044)	(1,234)	(5,044)

Gains (losses) on derivative transactions	227,167	335,169	227,167	335,169
Taxes on gains (losses) on derivative transactions	(77,236)	(113,958)	(77,236)	(113,958)
	149,931	221,211	149,931	221,211

Cumulative Translation Adjustments (CTA) on transactions in foreign currency	21,679	(551)	21,679	(551)

Other net comprehensive income to be reclassified into income in subsequent periods	170,376	215,616	170,376	215,616

Actuarial gains (losses) and limitation effect of the surplus plan assets	408,628	(55,343)	401,500	(55,343)
Tax on actuarial gains (losses) and limitation effect of the surplus plan assets	(138,933)	18,817	(136,510)	18,817
	269,695	(36,526)	264,990	(36,526)

Gains (losses) on derivative transactions	(571,777)	-	(571,777)	-
Taxes on gains (losses) on derivative transactions	194,404	-	194,404	-
	(377,373)	-	(377,373)	-

Interest in comprehensive income of subsidiaries	(4,705)	-	-	-

Other net comprehensive income that shall not be reclassified to P&L for subsequent periods	(112,383)	(36,526)	(112,383)	(36,526)

Comprehensive income for the year, net of taxes	3,478,242	5,115,749	3,478,242	5,115,749

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TELEFÔNICA BRASIL S.A.
Statements of value added
Years ended December 31, 2015 and 2014
(In thousands in reais)

	Company		Consolidated
	12.31.15	12.31.14	12.31.15	12.31.14

Revenues	46,382,330	44,917,406	54,401,532	47,302,732
Sale of goods and services	46,615,748	45,082,116	54,450,685	47,503,750
Other revenues	783,398	667,474	1,181,522	695,318
Provision for impairment of trade accounts receivable	(1,016,816)	(832,184)	(1,230,675)	(896,336)

Inputs acquired from third parties	(18,347,435)	(17,787,621)	(21,150,142)	(18,818,226)
Cost of goods and products sold and services rendered	(9,843,692)	(9,674,776)	(11,922,285)	(10,685,880)
Materials, electric energy, third-party services and other expenses	(8,523,931)	(8,101,062)	(9,218,942)	(8,125,895)
Loss/recovery of assets	20,188	(11,783)	(8,915)	(6,451)

Gross value added	28,034,895	27,129,785	33,251,390	28,484,506

Withholdings	(5,657,646)	(5,273,256)	(6,814,951)	(5,295,589)
Depreciation and amortization	(5,657,646)	(5,273,256)	(6,814,951)	(5,295,589)

Net value added produced	22,377,249	21,856,529	26,436,439	23,188,917

Value added received in transfer	4,512,403	2,611,959	4,730,701	1,990,326
Equity pickup	748,526	742,628	2,036	6,940
Financial income	3,763,877	1,869,331	4,728,665	1,983,386

Total undistributed value added	26,889,652	24,468,488	31,167,140	25,179,243

Distribution of value added	(26,889,652)	(24,468,488)	(31,167,140)	(25,179,243)

Personnel,social charges and benefits	(2,797,117)	(2,832,181)