Edgar Filing: TELEFONICA BRASIL S.A.

vivitr2q18_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 July, 2018

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

JUNE 30, 2018

(A free translation of the original in Portuguese)

Independent auditor's report

Report on review of quarterly information

To the Board of Directors and Shareholders

Telefônica Brasil S.A.

Introduction

We have reviewed the accompanying parent company and consolidated interim accounting information of Telefônica Brasil S.A. ("Company"), included in the Quarterly Information Form (ITR) for the quarter ended June 30, 2018, comprising the balance sheet as at that date and the income statements and other comprehensive income for the quarter and six-month periods then ended, and the statements of changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation of the parent company interim accounting information in accordance with the accounting standard CPC 21 - "Interim Financial Reporting", of the Brazilian Accounting Pronouncements Committee (CPC), and of the consolidated interim accounting information in accordance with CPC 21 and International Accounting Standard (IAS) 34 - "Interim Financial Reporting" issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 - "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" and ISRE 2410 - "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the parent company interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

Conclusion on the consolidated interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

Other matters

Statements of value added

We have also reviewed the parent company and consolidated statements of value added for the
six-month period ended June 30, 2018. These statements are the responsibility of the Company's management, and are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under IFRS, which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the parent company and consolidated interim accounting information taken as a whole.

São Paulo, July 20, 2018

PricewaterhouseCoopers

Auditores Independentes

CRC 2SP000160/O-5

Estela Maris Vieira de Souza

Contadora CRC 1RS046957/O-3

TELEFÔNICA BRASIL S.A. Balance Sheets
At June 30, 2018 and December 31, 2017
(In thousands of reais)						(A free translation of the original in Portuguese)
(In thousands of reais)
		Company		Consolidated				Company		Consolidated
ASSETS	Note	06.30.18	12.31.17	06.30.18	12.31.17	LIABILITIES AND EQUITY	Note	06.30.18	12.31.17	06.30.18	12.31.17

Current assets		17,655,390	16,668,039	17,659,616	16,731,666	Current liabilities		20,595,723	18,819,861	19,550,241	17,862,531
Cash and cash equivalents	3	3,866,359	3,681,173	4,429,805	4,050,338	Personnel, social charges and benefits	14	655,308	648,957	731,890	723,380
Trade accounts receivable	4	8,705,375	8,413,403	8,619,214	8,588,466	Trade accounts payable	15	9,606,050	8,560,844	8,021,236	7,447,100
Inventories	5	464,334	324,711	491,358	348,755	Income and social contribution taxes payable	6	32,979	-	332,593	4,479
Income and social contribution taxes recoverable	6	450,114	401,259	523,167	505,535	Taxes, charges and contributions payable	16	1,659,290	1,669,741	1,803,657	1,726,836
Taxes, charges and contributions recoverable	7	1,843,176	1,984,999	1,856,724	2,058,455	Dividends and interest on equity	17	4,852,484	2,396,116	4,852,484	2,396,116
Judicial deposits and garnishments	8	301,521	324,465	301,743	324,638	Provisions	18	1,269,257	1,434,911	1,269,257	1,434,911
Prepaid expenses	9	1,020,507	425,298	1,037,835	446,439	Deferred revenue	19	521,370	370,493	522,531	372,561
Dividends and interest on equity	17	426,709	323,206	-	-	Loans and financing	20	1,453,296	1,620,955	1,453,296	1,620,955
Derivative financial instruments	30	109,149	87,643	109,196	87,643	Debentures	20	83,975	1,412,486	83,975	1,412,486
Other assets	10	468,146	701,882	290,574	321,397	Derivative financial instruments	30	19,542	5,107	20,520	5,239
						Other liabilities	21	442,172	700,251	458,802	718,468
Non-current assets		87,855,954	85,495,114	86,981,419	84,651,169
Long-term assets						Non-current liabilities		13,833,923	13,881,934	14,009,096	14,058,946
Short-term investments pledged as collateral		86,843	81,472	86,843	81,486	Personnel, social charges and benefits	14	-	21,648	-	23,284
Trade accounts receivable	4	181,793	167,682	330,925	273,888	Taxes, charges and contributions payable	16	17,296	18,463	33,820	49,448
Deferred taxes	6	-	-	404,781	371,408	Deferred taxes	6	2,030,136	709,325	2,030,136	709,325
Taxes, charges and contributions recoverable	7	4,592,038	740,104	4,650,869	743,285	Provisions	18	5,636,051	6,566,056	5,785,053	6,709,839
Judicial deposits and garnishments	8	4,826,057	6,155,821	5,012,724	6,339,167	Deferred revenue	19	369,117	350,637	369,117	350,637
Prepaid expenses	9	89,102	21,684	91,823	23,116	Loans and financing	20	1,853,682	2,320,147	1,853,682	2,320,147
Derivative financial instruments	30	34,322	76,762	34,322	76,762	Debentures	20	3,115,010	3,108,253	3,115,010	3,108,253
Other assets	10	61,837	86,345	62,423	88,935	Derivative financial instruments	30	18,274	15,412	18,274	15,412
Investments	11	2,121,278	1,949,276	110,465	98,902	Other liabilities	21	794,357	771,993	804,004	772,601
Property, plant and equipment	12	33,370,060	33,112,532	33,473,083	33,222,316
Intangible assets	13	42,492,624	43,103,436	42,723,161	43,331,904	TOTAL LIABILITIES		34,429,646	32,701,795	33,559,337	31,921,477

						Equity		71,081,698	69,461,358	71,081,698	69,461,358
						Capital	22	63,571,416	63,571,416	63,571,416	63,571,416
						Capital reserves	22	1,213,522	1,213,522	1,213,522	1,213,522
						Income reserves	22	2,468,775	2,463,228	2,468,775	2,463,228
						Other comprehensive income	22	31,359	21,328	31,359	21,328
						Retained earnings	22	3,796,626	-	3,796,626	-
						Additional proposed dividends	22	-	2,191,864	-	2,191,864

TOTAL ASSETS		105,511,344	102,163,153	104,641,035	101,382,835	TOTAL LIABILITIES AND EQUITY		105,511,344	102,163,153	104,641,035	101,382,835

TELEFÔNICA BRASIL S.A.
Income Statements
Three and six-month periods ended June 30, 2018 and 2017
(In thousands of reais, except earnings per share)					(A free translation of the original in Portuguese)


		Company				Consolidated
		Three-month periods ended		Six-month periods ended		Three-month periods ended		Six-month periods ended
	Note	06.30.18	06.30.17	06.30.18	06.30.17	06.30.18	06.30.17	06.30.18	06.30.17

Net operating revenue	23	9,019,489	10,054,580	18,162,289	20,134,226	10,823,398	10,697,193	21,612,359	21,287,343

Cost of sales and services	24	(4,927,372)	(4,796,315)	(9,653,109)	(9,575,713)	(5,303,716)	(5,018,398)	(10,324,646)	(10,076,829)

Gross profit		4,092,117	5,258,265	8,509,180	10,558,513	5,519,682	5,678,795	11,287,713	11,210,514

Operating income (expenses)		(1,752,314)	(4,071,014)	(5,210,798)	(8,023,853)	(2,329,147)	(4,107,601)	(6,301,000)	(8,069,038)
Selling expenses	24	(3,061,185)	(3,288,205)	(6,076,884)	(6,444,193)	(3,291,686)	(3,305,711)	(6,490,388)	(6,487,849)
General and administrative expenses	24	(662,042)	(588,247)	(1,213,117)	(1,204,477)	(670,836)	(596,956)	(1,271,652)	(1,208,957)
Other operating income	25	2,386,211	65,366	2,704,004	179,557	2,145,347	66,497	2,234,780	182,122
Other operating expenses	25	(415,298)	(259,928)	(624,801)	(554,740)	(511,972)	(271,431)	(773,740)	(554,354)

Operating profit		2,339,803	1,187,251	3,298,382	2,534,660	3,190,535	1,571,194	4,986,713	3,141,476

Financial income	26	1,997,241	451,443	2,247,471	977,067	2,048,551	480,998	2,327,547	1,034,912
Financial expenses	26	(568,546)	(732,166)	(1,013,845)	(1,571,420)	(577,441)	(745,284)	(1,029,163)	(1,589,570)
Equity in results of investees	11	578,892	262,926	1,146,820	424,784	62	544	627	1,349

Income before taxes		4,347,390	1,169,454	5,678,828	2,365,091	4,661,707	1,307,452	6,285,724	2,588,167

Income and social contribution taxes	6	(1,181,093)	(296,532)	(1,414,512)	(495,972)	(1,495,410)	(434,530)	(2,021,408)	(719,048)

Net income for the period		3,166,297	872,922	4,264,316	1,869,119	3,166,297	872,922	4,264,316	1,869,119


Basic and diluted earnings per common share (in R$)	22	1.76	0.48	2.37	1.04
Basic and diluted earnings per preferred share (in R$)	22	1.93	0.53	2.61	1.14

TELEFÔNICA BRASIL S.A.
Statements of Changes in Equity
Six-month periods ended June 30, 2018 and 2017
(In thousands of reais)							(A free translation of the original in Portuguese)
		Capital reserves			Income reserves
	Capital	Special goodwill reserve	Other capital reserves	Treasury shares	Legal reserve	Tax incentive reserve	Expansion and modernization reserve	Retained earnings	Proposed additional dividends	Other comprehensive income	Total equity

Balances at December 31, 2016	63,571,416	63,074	1,297,297	(87,790)	1,907,905	17,069	550,000	-	1,913,987	11,461	69,244,419
Payment of additional dividend for 2016	-	-	-	-	-	-	-	-	(1,913,987)	-	(1,913,987)
Unclaimed dividends and interest on equity	-	-	-	-	-	-	-	72,840	-	-	72,840
Repurchase of preferred shares	-	-	-	(2)	-	-	-	-	-	-	(2)
Preferred shares delivered referring to the judicial process of expansion plan	-	-	-	2	-	-	-	-	-	-	2
Transfer of tax incentives	-	-	-	-	-	5,358	-	(5,358)	-	-	-
Other comprehensive income	-	-	-	-	-	-	-	-	-	9,969	9,969
Net income for the period	-	-	-	-	-	-	-	1,869,119	-	-	1,869,119
Interim interest on equity	-	-	-	-	-	-	-	(625,000)	-	-	(625,000)

Balances at June 30, 2017	63,571,416	63,074	1,297,297	(87,790)	1,907,905	22,427	550,000	1,311,601	-	21,430	68,657,360
Unclaimed dividends and interest on equity	-	-	-	-	-	-	-	28,938	-	-	28,938
Repurchase of preferred shares	-	-	-	(30)	-	-	-	-	-	-	(30)
Transfer of tax incentives	-	-	-	-	-	5,457	-	(5,457)	-	-	-
Other comprehensive income	-	-	-	-	-	-	-	(113,811)	-	(102)	(113,913)
Equity transactions (Note 1 c)	-	-	(59,029)	-	-	-	-	-	-	-	(59,029)
Net income for the period	-	-	-	-	-	-	-	2,739,671	-	-	2,739,671
Allocation of income:
Legal reserve	-	-	-	-	230,439	-	-	(230,439)	-	-	-
Interim interest on equity	-	-	-	-	-	-	-	(1,791,639)	-	-	(1,791,639)
Reversal of expansion and Modernization Reserve	-	-	-	-	-	-	(550,000)	550,000	-	-	-
Expansion and Modernization Reserve	-	-	-	-	-	-	297,000	(297,000)	-	-	-
Additional proposed dividends	-	-	-	-	-	-	-	(2,191,864)	2,191,864	-	-

Balances at December 31, 2017	63,571,416	63,074	1,238,268	(87,820)	2,138,344	27,884	297,000	-	2,191,864	21,328	69,461,358
Effects of the initial adoption of IFRS 9 and 15, net of taxes	-	-	-	-	-	-	-	(138,663)	-	-	(138,663)
Payment of additional dividend for 2017	-	-	-	-	-	-	-	-	(2,191,864)	-	(2,191,864)
Unclaimed dividends and interest on equity	-	-	-	-	-	-	-	76,520	-	-	76,520
Transfer of tax incentives	-	-	-	-	-	5,547	-	(5,547)	-	-	-
Other comprehensive income	-	-	-	-	-	-	-	-	-	10,031	10,031
Net income for the period	-	-	-	-	-	-	-	4,264,316	-	-	4,264,316
Interim interest on equity	-	-	-	-	-	-	-	(400,000)	-	-	(400,000)

Balances at June 30, 2018	63,571,416	63,074	1,238,268	(87,820)	2,138,344	33,431	297,000	3,796,626	-	31,359	71,081,698

TELEFÔNICA BRASIL S.A.
Statements of Other Comprehensive Income
Three and six-month periods ended June 30, 2018 and 2017
(In thousands of reais)				(A free translation of the original in Portuguese)

		Company				Consolidated
		Three-month periods ended		Six-month periods ended		Three-month periods ended		Six-month periods ended
	Note	06.30.18	06.30.17	06.30.18	06.30.17	06.30.18	06.30.17	06.30.18	06.30.17
Net income for the period		3,166,297	872,922	4,264,316	1,869,119	3,166,297	872,922	4,264,316	1,869,119

Other comprehensive income (losses) that may be reclassified into income (losses) in subsequent periods		7,847	6,666	10,032	9,969	7,847	6,666	10,032	9,969
Unrealized gains on investments available for sale	11	(171)	(131)	(151)	334	(171)	(131)	(151)	334
Gains (losses) on derivative financial instruments	30	(712)	(2,164)	(1,482)	3,968	(676)	(2,164)	(1,446)	3,968
Taxes		300	780	555	(1,463)	287	780	542	(1,463)

Cumulative Translation Adjustments (CTA) on transactions in foreign currency	11	8,407	8,181	11,087	7,130	8,407	8,181	11,087	7,130

Interest in comprehensive income of subsidiaries	11	23	-	23	-	-	-	-	-

Other comprehensive income		7,847	6,666	10,032	9,969	7,847	6,666	10,032	9,969

Comprehensive income for the period - net of taxes		3,174,144	879,588	4,274,348	1,879,088	3,174,144	879,588	4,274,348	1,879,088

TELEFÔNICA BRASIL S.A. Consolidated Statements of Cash Flows
Six-month periods ended June 30, 2018 and 2017
(In thousands in reais)			(A free translation of the original in Portuguese)

	Company		Consolidated
	Six-month periods ended
	06.30.18	06.30.17	06.30.18	06.30.17
Cash flows from operating activities

Income before taxes	5,678,828	2,365,091	6,285,724	2,588,167
Ajustement for:
Depreciation and amortization	3,993,847	3,887,106	4,011,150	3,900,834
Foreign exchange gains on loans and derivative financial instruments	31,486	54,286	32,924	54,286
Monetary assets and liabilities	325,154	327,745	325,054	337,006
Equity pickup	(1,146,820)	(424,784)	(627)	(1,349)
Loss (gains) on write-off/sale of assets	31,135	10,791	31,263	10,264
Provision for impairment - accounts receivable	664,735	682,800	766,722	728,525
Change in liability provisions	(185,477)	121,672	(134,407)	91,698
Write-off and reversals for impairment - inventories	(23,364)	(36,005)	(24,432)	(31,727)
Pension plans and other post-retirement benefits	23,728	15,410	24,573	15,400
Provisions for tax, civil, labor and regulatory contingencies	455,485	448,505	463,172	460,494
Interest expense	265,103	529,876	265,103	529,876
Others	(11,560)	6,205	(11,560)	6,205

Changes in assets and liabilities
Trade accounts receivable	(1,168,929)	(758,408)	(1,084,947)	(773,594)
Inventories	(116,259)	44,200	(119,272)	52,273
Taxes recoverable	(3,882,043)	(193,192)	(3,892,119)	(166,008)
Prepaid expenses	(478,211)	(425,483)	(475,687)	(436,748)
Other assets	220,104	(19,953)	20,057	(26,733)
Personnel, social charges and benefits	(15,297)	(17,386)	(14,773)	(17,726)
Trade accounts payable	1,314,422	(4,952)	896,588	(36,592)
Taxes, charges and contributions	52,923	286,211	159,546	290,342
Provisions for tax, civil, labor and regulatory contingencies	(1,869,354)	(623,364)	(1,877,295)	(625,202)
Other liabilities	(123,306)	(603,864)	(115,727)	(582,341)
	(1,642,498)	3,307,416	(754,694)	3,779,183

Cash generated from operations	4,036,330	5,672,507	5,531,030	6,367,350

Interest paid	(296,721)	(398,438)	(296,721)	(398,438)
Income and social contribution taxes paid	-	-	(323,357)	(175,170)

Net cash (used in) generated by operating activities	3,739,609	5,274,069	4,910,952	5,793,742

Cash flows from investing activities
Additions to PP&E and intangible assets and others	(3,609,882)	(4,091,019)	(3,726,926)	(4,158,712)
Cash received from sale of PP&E items	1,468	16,721	1,468	17,948
Redemption of (increase in) judicial deposits	1,353,488	(46,215)	1,354,074	(46,665)
Dividends and interest on equity received	860,000	-	-	-

Net cash (used in) generated by investing activities	(1,394,926)	(4,120,513)	(2,371,384)	(4,187,429)

Cash flows from financing activities
Payment of loans, financing and debentures	(2,191,600)	(1,223,083)	(2,191,600)	(1,223,083)
Loans and financing obtained	-	2,039,878	-	2,039,878
Received of derivative financial instruments	60,412	50,927	60,728	50,927
Payment of derivative financial instruments	(27,660)	(131,411)	(28,580)	(131,411)
Dividend and interest on equity paid	(649)	(671)	(649)	(671)
Treasury shares	-	(2)	-	(2)

Net cash (used in) generated by financing activities	(2,159,497)	735,638	(2,160,101)	735,638

Increase (decrease) in cash and cash equivalents	185,186	1,889,194	379,467	2,341,951

Cash and cash equivalents at the beginning of the year	3,681,173	4,675,627	4,050,338	5,105,110
Cash and cash equivalents at the end of the year	3,866,359	6,564,821	4,429,805	7,447,061

TELEFÔNICA BRASIL S.A.
Statements of Value Added
Six-month periods ended June 30, 2018 and 2017
(In thousands in reais)			(A free translation of the original in Portuguese)

	Company		Consolidated
	Six-month periods ended
	06.30.18	06.30.17	06.30.18	06.30.17

Revenues	27,635,567	28,190,119	30,822,497	29,486,687
Sale of goods and services	25,104,811	28,335,138	29,008,073	29,649,858
Other revenues	3,195,491	537,781	2,581,146	565,354
Impairment losses of trade accounts receivable	(664,735)	(682,800)	(766,722)	(728,525)

Inputs acquired from third parties	(9,291,219)	(9,398,203)	(10,166,304)	(9,913,958)
Cost of goods and products sold and services rendered	(4,826,228)	(4,681,846)	(5,569,673)	(5,198,167)
Materials, electric energy, third-party services and other expenses	(4,457,220)	(4,711,195)	(4,589,800)	(4,706,749)
Loss/recovery of assets	(7,771)	(5,162)	(6,831)	(9,042)

Gross value added	18,344,348	18,791,916	20,656,193	19,572,729

Withholdings	(3,993,847)	(3,887,106)	(4,011,150)