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 October 2021

Commission File Number: 001-39519

 

Vitru Limited

(Exact name of registrant as specified in its charter)

 

Rodovia José Carlos Daux, 5500, Torre Jurerê A,
2nd floor, Saco Grande, Florianópolis, State of
Santa Catarina, 88032-005, Brazil
+55 (47) 3281-9500
(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

X

  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     No

X

 

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     No

 

 

 

 
 

VITRU LIMITED

 

TABLE OF CONTENTS

 

ITEM  
1.

CESUMAR – Centro de Ensino Superior de Maringá Ltda. — Unaudited condensed interim financial statements of CESUMAR – Centro de Ensino Superior de Maringá Ltda. as of June 30, 2021 and for the six months ended June 30, 2021 and 2020.

 

2.

CESUMAR – Centro de Ensino Superior de Maringá Ltda. — Audited financial statements of CESUMAR – Centro de Ensino Superior de Maringá Ltda. as of and for the years ended December 31, 2020 and 2019.

 

3. Vitru Limited — Unaudited pro forma condensed consolidated financial information of Vitru Limited as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020.

 

 
 

Item 1

 

CESUMAR – Centro de Ensino Superior de Maringá Ltda. — Unaudited condensed interim financial statements of CESUMAR – Centro de Ensino Superior de Maringá Ltda. as of June 30, 2021 and for the six months ended June 30, 2021 and 2020.

 

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Condensed interim balance sheet as at

All amounts in thousands of reais  

 

Assets

June 30,

2021

  December 31, 2020   Liabilities and equity

June 30,

2021

  December 31, 2020
                 
Current assets         Current liabilities      
Cash and cash equivalents (Note 5) 221,155   129,042   Borrowings (Note 14) 13,698   16,569
Trade receivables (Note 6) 57,188   45,848   Trade payables (Note 16) 21,880   20,232
Advances (Note 7) 63,210   54,412   Obligations and social charges (Note 17) 33,436   24,873
Inventories (Note 10) 3,092   3,101   Taxes payable (Note 18) 6,159   7,774
Prepaid expenses 1,067   487   Related parties (Note 8) 27   26
Recoverable taxes (Note 9) 4,994   4,956   Lease liabilities (Note 15) 1,376   1,961
Other assets (Note 11) 2,501   4,579   Other payables (Note 16) 7,307   11,518
  353,207   242,426     83,884   82,953
                 
          Non-current liabilities      
Non-current assets         Borrowings (Note 14) 20,294   23,248
Trade receivables (Note 6) 12,134   15,962   Lease liabilities (Note 15) 2,640   2,170
Related parties (Note 8) 1,509   1,543   Provision for civil, labor and tax risks (Note 19) 14,584   15,067
Advances (Note 7) 4,661   5,871   Government grants 3,526    
Other assets (Note 11) 1,735   1,550     41,044   40,485
Deferred taxes (Note 25) 16,665   15,948          
                 
          Equity (Note 20)      
Property and equipment (Note 12) 287,650   278,555   Share Capital 58,500   58,500
Leases right-of-use (Note 15) 3,764   3,914   Capital reserve 39,548   39,548
Intangible assets (Note 13) 12,362   13,233   Retained earnings 470,711   357,516
                 
Total non-current assets 340,480   336,575     568,758   455,563
                 
                 
Total assets 693,687   579,001   Total liabilities and equity 693,687   579,001

  

The accompanying notes are an integral part of these condensed interim financial statements. 

 

1-1

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Condensed interim statement of income

Six-month period ended June 30

All amounts in thousands of reais  

         
    2021   2020
         
Continuing operations        
   Net revenue (Note 21)      356,266   302,238
Cost of services and sales (Note 23)    (82,246)   (72,465)
         
Gross profit      274,019   229,773
         
Operating expenses        
Selling expenses (Note 23)      (27,725)      (21,465)
Net impairment losses on financial assets   (12,063)   (12,037)
General and administrative expenses (Note 23)    (105,126)      (95,961)
Other operating income and expenses (Note 22)    (595)       1,901
         
         
Operating profit before finance result      128,511      102,212
         
Finance result, net (Note 24)        
Finance income       6,810       4,165
Finance costs     (6,539)     (5,378)
         
       271     (1,214)
         
Profit before income tax and social contribution      128,782      100,998
         
Income tax and social contribution (Note 25)     (5,962)     (6,410)
         
Profit for the period      122,820     94,589

  

The accompanying notes are an integral part of these condensed interim financial statements.

 

1-2

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Condensed interim statement of comprehensive income

Six-month period ended June 30 

All amounts in thousands of reais  

 

    2021   2020
         
         
Profit for the period     122,820    94,589
Other comprehensive income     -        -   
         
Total comprehensive income for the period     122,820    94,589

  

The accompanying notes are an integral part of these condensed interim financial statements.

 

1-3

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Condensed interim statement of changes in equity 

All amounts in thousands of reais  

 

      Reserves        
 

Share

Capital

          Retained earnings    
Donations Capital Total
                   
At December 31, 2019 58,500   11   39,537   228,763   326,811
                   
   Profit for the period             94,589   94,589
   Dividends distributed             (12,770)   (12,770)
                   
At June 30, 2020 58,500   11   39,537   310,582   408,630
                   
At December 31, 2020 58,500   11   39,537   357,515   455,563
                   
   Profit for the period             122,820   122,820
   Dividends distributed             (9,624)   (9,624)
                   
At June 30, 2021 58,500   11   39,537   470,711   568,759

 

The accompanying notes are an integral part of these condensed interim financial statements.

 

1-4

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Condensed interim statement of cash flows at June 30

All amounts in thousands of reais unless otherwise stated

 

     2021    2020
Cash flows from operating activities        
         
Profit before income tax and social contribution    128,782    100,998
         
Adjustments for:        
Depreciation and amortization (Note 23)      10,694     10,210
Depreciation of right-of-use assets (Note 15)     1,014       1,463
Loss on disposal of property and equipment (Note 22)     2,668     11
Impairment of trade receivables and advances      12,063     12,037
Interest and monetary variations, net (Note 15)    821      596
         
Changes in assets and liabilities:        
Trade receivables (Note 6)    (18,423)      (23,096)
Advances (Note 7)      (8,740)     (2,449)
Inventories (Note 10)      10    (298)
Recoverable taxes (Note 9)    (37)     (1)
Related parties (Note 8)      36      114
Other current and non-current assets (Note 11)      1,313      622
Trade payables (Note 16)     1,648     (5,017)
Obligations and social charges (Note 17)     8,564     10,192
Taxes payable (Note 18)      (1,615)       1,382
Other current and non-current liabilities      (4,694)     (9,326)
         
Cash from operations    134,102     97,436
         
Interest paid (Note 14)      (137)    
Income tax and social contribution paid      (6,679)     (5,580)
         
Net cash provided by operating activities    127,244     91,856
         
Cash flows from investing activities        
Purchases of property and equipment (Note 12)    (16,470)      (31,558)
Purchases of intangible assets (Note 13)      (1,590)     (1,377)
         
Net cash used in investing activities    (18,060)      (32,935)
         
Cash flows from financing activities        
Proceeds from borrowings (Note 14)    -        40,000
Payment of borrowings (Note 14)      (6,327)     (2,017)
Payment of leases (Note 15)      (1,162)     (1,914)
Dividends paid to quotaholders (Note 20)      (9,624)      (12,770)
         
Net cash (used in) provided by financing activities    (17,113)     23,299
         
Net increase in cash and        
 cash equivalents for the period      92,113     82,220
         
Cash and cash equivalents at the beginning of the period    129,042     26,833
         
Cash and cash equivalents at the end of the period      221,155    109,053

  

1-5

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

1General information

 

1.1Operations

 

Cesumar - Centro de Ensino Superior de Maringá Ltda. (the “Entity”) is a limited liability entity headquartered in the city of Maringá, State of Paraná – Brazil.

 

In addition to its head office, the Entity has three other campuses in the following cities of the State of Paraná: Curitiba, Ponta Grossa and Londrina and 1 (one) campus in the city of Corumbá-MS. The Entity also has a presence all over Brazil through distance learning (EAD) units, with 747 units (2020 - 701) (unaudited).

 

The Entity is primarily engaged in the provision of educational, cultural, scientific and social services, at several educational levels, through the offering of graduation, extension and specialization courses for people in public and private enterprises.

 

The issue of these condensed interim financial statements was authorized by the Entity’s Executive Board on October 20, 2021.

 

Purpose of financial statements

 

These financial statements have been prepared for inclusion in VITRU Limited’s Registration Statement with the United States Securities and Exchange Commission (SEC), pursuant to Rule 3-05 of Regulation SX under the Securities Act (“Rule 3-05”).

 

1.2Basis of preparation

 

The condensed interim financial statements have been prepared in accordance with the International Accounting Standard (IAS) 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), and disclose all (and only) the applicable significant information related to the interim financial statements, which is consistent with the information utilized by management in the performance of its duties.

 

The condensed interim financial statements at June 30, 2021 do not incorporate all the notes and disclosures required by accounting standards for annual financial statements, as their purpose is to provide an update of significant activities, events, and circumstances in relation to those annual financial statements. Therefore, these condensed interim financial statements should be read in conjunction with the financial statements for the year ended December 31, 2020, issued on October 22, 2021.

 

The condensed interim financial statements have been prepared consistently with the accounting policies disclosed in Note 2 to the financial statements at December 31, 2020, already aggregating the changes in accounting policies of the standards that became effective as from January 1, 2020. There are no new standards to be applied for 2021.

 

1-6

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

   

1.3Covid-19 impacts

 

The Entity has been monitoring the spread of the Coronavirus (COVID-19), which was declared a pandemic by the World Health Organization (WHO). The Entity has been following the decisions of the WHO and the guidance of the Ministry of Health and decisions of the State and Municipal governments, and, since March 2, 2020, has been adopting measures to fight the COVID-19 pandemic, aiming to safeguard the health and interests of all the parties involved in the activities of the institution and preserve business continuity.

 

As regards onsite teaching, from March 20, 2020 the Entity’s onsite undergraduate and graduate education activities were replaced by remote activities through the digital platform “Studeo”, to ensure the learning process of students, without affecting the completion of the activities of the semester. The 2021 school year began on February 15 and classes returned in a hybrid form; a different group of students have onsite classes each week, and the other students have classes via the digital platform.

 

The Entity’s distance learning activities were not impacted and onsite tests were replaced by online tests. The new enrollment and re-enrollment processes continue as usual, with no initial impact on the recognition of revenue of enrolled students.

 

As to the Entity’s administrative activities, it adopted measures such as the change from onsite work to remote work from March 23, 2020, for positions that permit this type of system. There is no estimated date for the return of employees to onsite classes.

 

Despite the circumstances imposed by Covid-19, the Entity reported a profit before taxes for the second quarter of 2021 of R$130,017, 28% higher if compared to the same period of 2020, due to the increase in the number of students by 36%, mainly from EAD. The default rate averaged 20.88%, increasing by 3% compared to the same period last year (17.88% in 2020), the variation is attributed to the effects and prolongation of the pandemic.

 

2Critical accounting estimates and judgments

 

The critical accounting estimates and judgments used in the preparation of the condensed interim financial statements are consistent with those disclosed in the financial statements at December 31, 2020.

 

3Financial risk management

 

3.1Financial risk factors

 

The Entity’s activities expose it to a variety of financial risks: market risk (including cash flow or fair value interest rate risk), credit risk and liquidity risk. The Entity’s risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse impacts on the Entity’s financial performance. The Entity does not use derivative financial instruments to hedge certain risk exposures.

 

Risk management is carried out by the Entity’s Central treasury department. The Entity’s treasury identifies, evaluates and hedges financial risks. The Board of Directors establishes principles for risk management, as well as for specific areas.

 

1-7

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

(a)Market risk (including cash flow and fair value interest rate risk)

 

The Entity’s interest rate risk arises from short and long-term borrowings and financial investments, substantially linked to the floating rates of the Interbank Deposit Certificate (CDI).

 

The Entity analyzes its interest rate exposure on a dynamic basis. Scenarios are analyzed taking into consideration refinancing and renewal of existing positions. Based on this analysis, the Entity monitors the risk of significant variation in the interest rate and calculates the impact on profit or loss.

 

(b)Credit risk

 

Credit risk is managed on a centralized basis. Credit risk arises from cash and cash equivalents, financial instruments and deposits with banks and other financial institutions, as well as credit exposures to customers, including outstanding receivables.

 

The Entity’s sales policy considers the credit risk level it is willing to accept in the course of its business. Enrollment for the next school period is blocked whenever a student is in default with the institution. The broad diversification of the receivables portfolio, the selectivity in accepting students, as well as the follow-up of maturities, are procedures adopted in order to minimize issues arising from default on accounts receivable.

 

The Entity maintains a provision for impairment of trade receivables to address credit risk. This credit analysis evaluates the credit quality of students taking into account the payment history, the period of the relationship with the institution and the credit analysis (SPC and Serasa).

 

(c)Liquidity risk

 

This is the risk of the Entity not having sufficient liquid funds to meet its financial commitments, due to the mismatch of terms or volume in expected receipts and payments.

 

To manage liquidity of cash, assumptions for future disbursements and receipts are determined, and these are monitored daily by the treasury area.

 

3.2Capital management

 

The Entity’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for quotaholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

The Entity monitors capital on the basis of the gearing ratio. This ratio corresponds to the net debt expressed as a percentage of total capitalization. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the balance sheet) less cash and cash equivalents.

 

At June 30, 2020, the Entity has a cash surplus of R$ 187,163 (R$ 89,225 at December 31, 2020).

 

1-8

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

4Financial instruments by category

 

    June 30, 2021   December 31, 2020
    Amortized
cost
  Amortized
cost
 Financial assets        
Cash and cash equivalents   221,155   129,042
Trade receivables   69,322   62,574
Other assets (Rotesma)   1,746   3,950
Judicial deposits   711   717
Related parties   1,509   1,543
         
    294,443   197,826
         
         
         
    Amortized
cost
  Amortized
cost
 Financial liabilities        
Trade payables   21,880   20,232
   Borrowings   33,992   39,818
Related parties   27   26
   Other payables   984   1,186
   Lease liabilities   4,016   4,131
         
    60,899   65,392

  

 

5Cash and cash equivalents

 

    June 30, 2021   December 31, 2020
         
Cash and checks   47   498
Short-term bank deposits   221,108   128,543
         
    221,155   129,042

 

The Entity’s cash and cash equivalents comprise cash and short-term bank deposits with a maturity not exceeding 90 days, held to meet short-term commitments and not for investment or other purposes, which are readily convertible into a known amount of cash and subject to an insignificant risk of change in value. The average remuneration for financial investments is 120% of the CDI (120% of the CDI in 2020).

 

1-9

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

6Trade receivables

 

    June 30,
2021
  December 31,
2020
         
Current        
   Monthly tuition fees receivable    96,502      84,988
   Credit agreements (a)    57,278      53,462
   Monthly tuition fees receivable (b)    22,929      16,893
   Student Financing Program (FIES) receivable      7,634      9,598
  Other receivables    5,996    3,137
  Provision for impairment of trade receivables (i)      (133,151)     (122,240)
         
       57,188      45,848
         
Non-current        
   Monthly tuition fees receivable (b)    12,134      15,962
         
         
Total trade receivables      69,322   61,180

  

(a)   Refers to the renegotiation of monthly tuition fees that are past due. 

(b)   Refers to tuition fees receivable from students through its own financing program.

 

The aging of trade receivables at June 30 is as follows:

 

    June 30,
2021
  December
31, 2020
         
         
Not yet due   30,222      27,848
From 01 to 30 days past due    12,715      10,238
From 31 to 60 days past due      9,064      6,919
From 61 to 90 days past due    10,289     7,848
From 91 to 120 days past due      8,144      5,818
From 121 to 150 days past due      7,690      5,958
From 151 to 180 days past due      5,306     2,868
From 181 to 365 days past due    25,448      24,804
More than 366 days past due    93,596    91,751
(-) Provision for impairment of trade receivables      (133,151)     (122,240)
         
    69,322   61,810

   

The increase in trade receivables is due to the expansion of the customer portfolio, which in the same period in 2020 comprised 230 thousand students and in June 2021 comprises approximately 307 thousand students.

 

1-10

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

(i)The changes in the provision for impairment of trade receivables are as follows:

 

         
    2021   2020
         
Opening balance – January, 31     122,240    80,833
         
Provision for the period    10,911      12,037
         
Closing balance – June, 30    133,151       92,870

  

 

7Advances

 

    June 30,
2021
  December 31,
2020
         
         
Advances to suppliers    907       1,368
Advances to employees     137       4,065
Advances to hub partners – Distance Learning Centers (i)     69,326    57,101
(-) Provision for losses with hub partners – Distance Learning Centers (i)   (4,341)   (3,189)
Other advances    1,843      939
         
      67,871    60,283
         
(-) Current     63,210    54,412
         
Non-current    4,661       5,871

   

(i)A hub is a local operating unit and has the responsibility for offering to students the necessary structure in terms of audiovisual resources, library and information technology, to support the distance learning courses.

 

Advances represent amounts advanced to hub partner so that they can generate initial cash, develop the first customer portfolio and invest in media for the promotion of the unit. These amounts will be reimbursed by hub partner on a monthly basis in accordance with the terms stipulated in the contract, through the provision of services.

 

In 2020, due to the impacts of the COVID-19 pandemic, management carried out an analysis of the recoverability of the amounts advanced to the Distance Learning Centers and the subsequent recording of a provision for these recoverability of these credits. The change aimed to capture situations that could increase the risks of loss. Thus, there has been an increase in the provision for hub partner that have significant debt.

 

To this end, the Entity analyzes, in each partner, the relation between the balance of advances and the accumulated amount transferred. For partners with an index greater than 1.4, the Entity recorded a provision of 25%. For all others, the provision percentage used was 2%.

 

1-11

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

   

In relation to the amounts that are recorded as past due, as a result of the COVID-19 pandemic, the Entity launched the “Sou + Mútuo” program, which will grant new payment deadlines for loans (past due and not yet due) for the units that achieve specific fund raising targets.

 

8Related parties

 

(a)Breakdown of balances

 

                                June 30, 2021   December 31, 2020
                                     
    Centro Universitário   Soedmar   GP Adm.   Cesutec   ICETI   WWW ADM.   Other (i)   Total   Total
                                     
Assets                                  
Non-current                                  
  Advances 2   1,257   130   8       54   58   1,509   1,543
                                     
Liabilities                                  
Current                                  
  Trade payables                 26           26   26
                                     
Profit or loss                                  
  Donations 830               1,480           2,310   5,624

   

(i)Refers to:

Fundação Cesumar

Hoper Administração e Participações Ltda.

UPR - Unidade Paranaense de Ensino Superior Ltda.

WL Administração e Participações Ltda.

PL Administração e Participações Ltda.

 

(b)   Key management compensation

 

Key management includes members of the rectorate, prorectorate and executive board. The compensation paid or payable to key management totals R$ 14,399 at June 30, 2021 (2020 – R$ 13,005).

 

Benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), variable compensation and social security charges (contributions to the National Institute of Social Security (INSS) and the Government Severance Indemnity Fund for Employees (FGTS).

 

1-12

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

9Recoverable taxes

 

    June 30,
2021
  December 31,
2020
         
Income tax and social contribution (i)       3,264       3,264
Withholding Income Tax (IRRF)    237    200
PIS and COFINS    1,485    1,485
Other      8      6
         
        4,994    4,956

  

(i)Due to the changes in legislation through RFB Normative Instruction 1,394/2013 referring to the calculation of income tax and social contribution using the method of the operating profit on tax-incentive activities, applicable to private higher education institutions that enrolled in PROUNI, the expectation of the Entity’s management is to realize in 2021 the balance of income tax and social contribution.

 

10Inventories

 

    June 30,
2021
  December 31,
2020
         
Storeroom supplies      308      486
Consumables      762      696
Inventory - Distance learning     1,473       1,825
Other    549    95
         
    3,092   3,101

   

11Other assets

 

    June 30,
2021
  December 31,
2020
         
Judicial deposits   711   717
Rotesma Ind. de Pré Moldados (i)   1,745   3,950
Instituto Salgado de Saude Integral   179   179
Sicoob quotas   396   339
Other   1,205   944
    4,236   6,129
         
(-) Current   2,501   4,579
Non-current   1,735   1,550

  

(i)The balance refers to the termination of the contract signed with Rotesma Industria de Pré Moldados, initially contracted to build one of the blocks intended for the courses offered. The initial debt balance of R$ 6,200 will be received in 24 equal and monthly installments.

 

1-13

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

12Property and equipment

 

    Land   Buildings, facilities and improvements   IT and communication equipment   Industrial machinery and equipment   Furniture, fittings and tools   Vehicles   Other   Construction in progress   Total
                                     
At December 31, 2019      43,994    126,366    9,150      7,573    11,748    2,573     22,900      20,531       244,835
Additions    -       -      2,000    1,861    2,150     649    2,060     22,838      31,558
Disposals    -       -        -        (3)      -      -      -      (8)      (11)
Transfers    -       1,985      -        -        -      -      54      (2,039)    -  
Depreciation    -         (2,335)     (2,065)     (608)     (897)      (459)      (1,546)    -        (7,910)
At June 30, 2020      43,994    126,016    9,085      8,823    13,001    2,763     23,468      41,322       268,472
At December 31, 2020      43,994    127,109    8,007      8,745    12,221    2,522     31,763      44,194       278,555
Additions    -       3,526    3,229       553       706     246   7,568    4,168      19,996
Disposals    -       -        -              -           -        (2,518)      (2,518)
Transfers    -        678           -        -      -             (678)   -   
Depreciation    -         (2,503)      (1,917)     (679)     (958)      (446)      (1,880)    -        (8,383)
 At June 30, 2021      43,994    128,810    9,319      8,619    11,969    2,322     37,451      45,166       287,650
Total cost    43,994    164,663    34,492    16,463    28,790    7,057    67,782    45,204    408,445
Accumulated depreciation    -      (35,853)    (25,173)    (7,844)    (16,821)    (4,735)    (30,331)    (38)    (120,794)
Net book value      43,994    128,810    9,319      8,619    11,969    2,322     37,451      45,166       287,650
Annual depreciation rate %    -   2    20    10    10    20    10    -    

 

(a)Review and adjustment of estimated useful lives

The Entity annually reviews the estimated economic useful lives of property and equipment items to calculate depreciation, as well as to determine the residual value of property and equipment items. There was no change in useful lives of property and equipment items in the period.

 

(b)Significant transactions

The significant balances that comprise the construction in progress refer to the Curitiba campus R$ 23,177 and the 2nd phase of expansion of the Ponta Grossa unit amounting to R$ 8,454.

 

1-14

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

13Intangible assets

 

  Software   Other   Total
           
At December 31, 2019 8,152   1,000   9,152
Purchases   1,377         1,377
Amortization     (2,299)           (2,299)
Net book value at June 30, 2019   7,230     1,000     8,230
At December 31, 2020   7,381     5,852       13,233
Purchases   1,590    -        1,590
Disposals  (150)    -       (150)
Amortization     (2,311)    -          (2,311)
Net book value   6,510     5,852       12,362
Total cost  25,172    5,852    31,024
Accumulated amortization  (18,662)        (18,662)
At June 30, 2021   6,510     5,852       12,362
Average annual amortization rate - % 20   20    

  

1-15

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

14Borrowings

 

(a)Breakdown of balances

 

      June 30, 2021   December 31, 2020
           
Current          
Working capital 100% DI*   13,554   16,171
BNDES** - machinery TJLP + 3.2 p.a.   22   26
Other Amplified Consumer Price Index (IPCA)   122   372
           
      13,698   16,569
           
Non-current          
Working capital 100% DI*   20,294   23,238
BNDES** - machinery TJLP + 3.2 p.a.       10
           
      20,294   23,248
           
Total borrowings     33,992   39,817

 

*Interbank Deposit 

** National Economic and Social Development Bank

 

Borrowings are held in local currency (R$).

 

(b)Maturity of contracts classified in non-current liabilities

 

Year     2021   2020
           
           
2022     5,587   11,388
2023     10,549   10,549
2024     4,158   4,158
      20,294   26,095
(c)Changes in balances

 

    2021   2020
         
         
Opening balance January 1st      39,817     3,654
         
  Proceeds from borrowings     -      40,000
  Interest, monetary and foreign exchange variations provided for   638      347
  Repayment - principal       (6,326)      (2,017)
  Payment - interest    (137)     
         
Closing balance June 30th       33,992     41,984

  

 

1-16

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

15Leases

 

(i)Balances recorded in the balance sheet

 

The balance sheet shows the following amounts relating to leases:

 

    June 30,
2021
  December 31,
2020
         
Right-of-use assets        
Buildings   3,764   3,914
         
    3,764   3,914
         
Lease liabilities        
Current   1,376   1,961
Non-current   2,640   2,170
         
    4,016   4,131

 

(ii)Balances recorded in the statement of income

 

The statement of income shows the following amounts relating to leases:

 

    June 30, 2021   June 30,
2020
         
Amortization of right-of-use assets          
Buildings   1,014   1,463
Interest expense (included in finance costs)   183   249
         
    1,197   1,712

 

The Entity leases commercial buildings to its own distance learning units and logistics warehouses. Rental contracts are typically made for fixed periods of 1 to 5 years.

 

Right-of-use assets

 

The changes in right-of-use assets are as follows:

 

    2021   2020
Opening balances - At January 1st   3,914   5,505
Additions due to new contracts   864   0
Depreciation expense   (1,014)   (1,463)
         
Closing balances - Right-of-use assets at June 30th   3,764   4,042

  

 

1-17

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

Lease liabilities

 

The changes in lease liabilities are as follows:

 

    2021   2020
Opening balances - At January 1st     4,131   6,106
Interest provided   183   249
Additions due to new contracts   864    
Lease payments   (1,162)   (1,936)
         
Closing balances - Lease liabilities at June 30th     4,016   4,419

 

The Entity’s analysis of its contracts based on their maturity dates is presented below. The amounts are discounted to present value.

 

Contract maturity dates

 

Installment maturity dates      
       
Less than 1 year     1,428
Between 1 and 2 years     2,095
Between 3 and 5 years     493
       

Lease liabilities at June 30, 2021

 

    4,016

 

16Trade and other payables

 

    June 30,
2021
  December 31,
2020
         
Trade payables        
Hub partners - Distance Learning Centers       13,448    10,638
Sundry suppliers     8,432       9,594
    21,880    20,232
         
Other payables        
 Advances from customers     6,049    10,332
 Other      1,258       1,186
    7,307    11,518
         
Total - Trade and other payables       29,187    31,750

  

 

1-18

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

17Obligations and social charges

 

    June 30,
2021
  December 31,
2020
         
         
Salaries payable     8,931    6,472
Social security obligations and social charges     4,998    5,165
Provision for vacation pay and related charges       19,412     13,067
Other   95   169
         
    33,436   24,873
18Taxes payable

 

    June 30,
2021
  December 31,
2020
         
         
Services Tax (ISS)     2,635      2,079
Income tax and social contribution        
  -  IRPJ and CSLL      112      570
Social Integration Program (PIS)    76      46
Social Contribution on Revenues (COFINS)      351      235
Withholding Income Tax (IRRF)     2,741       4,610
Other      244      234
      6,159      7,774

 

19Provision for civil, labor and tax risks

 

(a)Breakdown and changes in the provisions for legal claims

 

      Tax   Civil   Labor   Total
                   
At December 31, 2019       3,551      2,079      5,789    11,419
                   
  Write-offs due to payment       -         (57)    (139)    (196)
                   
At June 30, 2020       3,551      2,022      5,650    11,223
                   
At December 31, 2020      3,704   3,408    7,955    15,067 
                   
  Write-offs due to payment       -       (169)    (314)       (483)
                   
At June 30, 2021      3,704   3,239     7,641    14,584 

  

 

1-19

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

(b)Possible losses, not provided for in the balance sheet

 

At June 30, 2021, the Entity has tax litigation involving risks of loss classified by management as possible, based on the evaluation of the legal advisors, for which no provision for estimated possible losses has been recorded, as shown below:

 

    2021   2020
         
Labor   2,203   1,498
Civil   2,328   1,947
         
    4,531   3,445

 

20Equity

 

(a)Share Capital

 

At June 30, 2021 and December 31, 2020, fully paid-up share capital is divided into 58,500,000 registered common quotas, with a par value of R$ 1.00 (one real) each.

 

(b)Capital reserve

 

At June 30, 2021 and December 31, 2020, the Entity had a capital reserve of R$ 39,548, referring to the surplus for the period in which it operated as a not-for-profit entity.

 

(c)Dividends

 

In June 2021, dividends of R$ 9,624 (R$ 12,770 in the same period of 2020) were distributed.

 

(d)Retained earnings

 

The retained earnings refers to the retention of the remaining balance of retained earnings and remains at the disposal of the quotaholders.

 

1-20

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

21Net revenue

 

    June 30,
2021
  June 30,
2020
         
         
Gross amount from undergraduate services     811,052     576,329
Gross amount from graduate services    16,820       17,552
Gross amount from clerk services      2,395      2,058
Gross amount from other services       818       691
Taxes on services     (13,206)     (10,160)
Scholarships (i)     (383,496)      (227,655)
Discounts and other deductions      (78,117)     (56,576)
         
      356,266     302,238

 

The net revenue of the onsite teaching increased by approximately 20% compared to 2020, mainly due to the increase in places for the Medicine course and the increase in the number of students, captured through new courses and expansion of campuses, as well as adjustment in the price list.

 

The net revenue of the EAD increased by approximately 33% compared to 2020, mainly as a result of the increase in the number of students.

 

(i)The scholarships are divided as follows:

 

    June 30,
2021
  June 30,
2020
         
         
PROUNI    48,658       39,248
Institutional - undergraduate     331,790     185,169
Institutional - graduate      3,048      3,238
         
      383,496     227,655
         

  

 

1-21

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

22Other operating income and expenses

 

    June 30,
2021
  June 30,
2020
         
         
Gain (loss) on disposal of property and equipment   (2,518)      -  
Medical and veterinary services   783    1,024 
Gym       330    206
Income - restaurant       100    596
Other operating income and expenses       701     75
         
      (595)    1,901

 

23Costs and expenses by nature

 

    June 30,
2021
  June 30,
2020
         
Personnel and payroll charges (i)   123,778   115,039
Third-party services   8,983   5,789 
Utilities, cleaning and security   2,539   2,472
Teaching materials   7,141   2,735
Maintenance   10,811   9,595
Depreciation of right-of-use assets   1,014   1,463
Advertising and publicity   28,167   16,960
Travel   3,474   3,867
Depreciation and amortization   10,692   10,210
Other   18,498   21,761
         
    215,097   189,891
         
Distributed by:        
Costs of services and sales   78,923   69,536
Selling expenses   27,725   21,465
General and administrative expenses   108,449   98,890

 

(i)The costs with personnel and payroll charges increased due to the increase in the number of class-hours given because of the mix of courses offered and the related payroll charges.

 

1-22

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

24Finance result, net

 

    June 30,
2021
  June 30,
2020
         
Finance income        
 Interest income from monthly tuition fees      3,899      3,954
 Income from financial investments      2,845       186
 Discounts obtained      5      14
 Other      61      10
         
     6,810      4,165
         
Finance costs        
 Interest on financial transactions     (946)     (135)
 Discounts granted on monthly tuition fees    (2,040)    (1,848)
 Interest paid on payments to suppliers      (8)       (39)
 Bank expenses    (3,342)    (2,676)
Interest on lease liability     (183)     (249)
 Other - finance costs    (20)     (432)
         
     (6,539)    (5,378)
         
Finance result, net    272    (1,214)

 

25Income tax and social contribution

 

In accordance with Law 11,096/2005, regulated by Decree 5,493/2005 and standardized by Normative Instruction 456/2004 of the Internal Revenue Service, pursuant to Article 5 of Provisional Measure 213/2004, and Normative Instruction 1,394/2013, the higher education institutions enrolled in PROUNI are exempt, during the period of effectiveness of the enrollment agreement, from IRPJ and CSLL; among others, computation shall be based on the operating profit of exempt activities. The reconciliation of taxes calculated in accordance with the nominal rates and the amounts of taxes recorded in the years ended June 30, 2021 and 2020 are presented below:

 

1-23

 

Cesumar - Centro de Ensino Superior de Maringá Ltda.

 

Notes to the condensed interim

financial statements at June 30, 2021

All amounts in thousands of reais unless otherwise stated

  

    June 30,
2021
  June 30,
2020
         
         
Profit before taxes    128,782    100,998
Nominal rates   34%   34%
         
IRPJ and CSLL at the        
nominal rates      (43,786)      (34,339)
         
PROUNI adjustments      39,778      29,175
Permanent additions (donations, health care), net       (1,955)      (1,246)
         
IRPJ and CSLL in the results      (5,963)      (6,410)
         
Current      (6,679)      (6,398)
Deferred   718    (12)
         
IRPJ and CSLL in the results      (5,963)      (6,410)

 

26Events after the reporting period – corporate change

 

On August 23, 2021, the Institution’s quotaholders entered into an agreement for the purchase and sale of quotas with VITRU Brasil Empreendimentos, Participações e Comércio S.A. (Vitru) for the sale of 100% of the entity’s share capital to Vitru. This transaction is subject to compliance with the conditions precedent provided for the aforementioned instrument and the approval of the Administrative Council for Economic Defense (CADE).

 

* * *

 

1-24

 

Item 2

 

CESUMAR – Centro de Ensino Superior de Maringá Ltda. — Audited financial statements of CESUMAR – Centro de Ensino Superior de Maringá Ltda. as of and for the years ended December 31, 2020 and 2019.

 

 

 

 

 

 

 

 

Report of Independent Auditors

 

To the Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

We have audited the accompanying financial statements of Cesumar – Centro de Ensino Superior de Maringá Ltda., which comprise the balance sheets as of December 31, 2020 and 2019, and the related statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards – IFRS as issued by the International Accounting Standards Board - IASB; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our 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, we consider internal control relevant to the Company's preparation and fair presentation of the 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cesumar – Centro de Ensino Superior de Maringá Ltda. as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards – IFRS as issued by the International Accounting Standards Board – IASB.

 

/s/ PricewaterhouseCoopers Auditores Independentes

Maringá, Paraná

 

October, 22 2021

 

2-1

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Balance sheet as at December 31

All amounts in thousands of reais

 

 

Assets 2020   2019   Liabilities and equity 2020   2019
                 
Current assets         Current liabilities      
Cash and cash equivalents (Note 6) 129,042   26,833   Borrowings (Note 15) 16,569   3,047
Trade receivables (Note 7) 45,848   35,043   Trade payables (Note 17) 20,232   19,988
Advances (Note 8) 54,412   38,707   Obligations and social charges (Note 18) 24,873   26,317
Inventories (Note 11) 3,101   2,804   Taxes payable (Note 19) 7,774   5,605
Prepaid expenses 487   524   Related parties (Note 9) 26   27
Recoverable taxes (Note 10) 4,956   4,956   Lease liabilities (Note 16) 1,961   3,030
Other assets (Note 12) 4,579   3,974   Other payables (Note 17) 11,518   14,470
  242,426   112,841     82,953   72,485
                 
Non-current assets         Non-current liabilities      
Trade receivables (Note 7) 15,962   14,656   Borrowings (Note 15) 23,248   607
Related parties (Note 9) 1,543   1,447   Lease liabilities (Note 16) 2,170   3,076
Advances (Note 8) 5,871   7,110   Provision for civil, labor and tax risks (Note 20) 15,067   11,419
Other assets (Note 12) 1,550   5,421     40,485   15,102
Deferred taxes (Note 26) 15,948   13,429          
                 
                 
Property and equipment (Note 13) 278,555   244,835   Equity (Note 21)      
Leases – right of use (Note 16) 3,914   5,505   Share Capital 58,500   58,500
Intangible assets (Note 14) 13,233   9,152   Capital reserve 39,548   39,548
  336,575   301,556   Retained earnings 357,515   228,763
            455,563   326,811
                 
Total assets 579,001   414,397   Total liabilities and equity 579,001   414,397

 

The accompanying notes are an integral part of these financial statements.

 

2-2

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Statement of income

Years ended December 31

All amounts in thousands of reais

 

Statement of income        
    2020   2019
Continuing operations        
   Net revenue (Note 22)    610,047    519,281
Cost of services and sales (Note 24)    (149,376)    (150,712)
Gross profit    460,671    368,569
         
Operating expenses        
Selling expenses (Note 24)    (47,604)    (54,049)
Net impairment losses on financial assets   (20,368)   (21,039)
General and administrative expenses (Note 24)    (194,810)    (209,437)
Other operating income, net (Note 23)     3,229     8,270
Operating profit before finance result    201,118   92,314
         
Finance result, net (Note 25)        
Finance income     9,640   10,444
Finance costs    (12,239)   (9,590)
    (2,599)   854
         
Profit before income tax and social contribution    198,519    93,168 
         
Income tax and social contribution (Note 26)   (7,776)   (3,522)
         
Profit for the year    190,743   89,646

 

 

The accompanying notes are an integral part of these financial statements.

 

2-3

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Statement of comprehensive income

Years ended December 31

All amounts in thousands of reais

 

    2020   2019
Profit for the year   190,743     89,646
Other comprehensive income     -        -   
Total comprehensive income for the year   190,743     89,646

 

The accompanying notes are an integral part of these financial statements.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Statement of changes in equity

All amounts in thousands of reais

 

      Reserves        
              Retained    
Capital Donations Capital earnings Total
At December 31, 2018  58,500   11   39,537   178,505    276,553 
                   
   Profit for the year -   -       -    89,646   89,646 
   Dividends distributed (Note 21) -   -       -   (39,388)   (39,388)
At December 31, 2019  58,500   11   39,537     228,763   326,811 
                   
   Profit for the year -   -       -    190,743   190,743 
   Dividends distributed (Note 21) -   -       -   (61,991)       (61,991)
At December 31, 2020 58,500   11   39,537     357,515   455,563 

 

The accompanying notes are an integral part of these financial statements.

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

Statement of cash flows

Years ended December 31

All amounts in thousands of reais

 

     2020    2019
Cash flows from operating activities        
         
Profit before income tax and social contribution     198,519     93,168
         
Adjustments for:        
Depreciation and amortization (Note 24)   21,192   18,531
Amortization of right-of-use assets (Note 16)   2,702     2,724
Provision for civil, labor and tax (Note 20)   3,648     2,628
Impairment of trade receivables (Note 7)   20,368   21,039
Interest and monetary variations, net (Notes 15 and 16)   1,926      576
         
Changes in assets and liabilities:        
Trade receivables (Note 7)     (32,479)      (27,411)
Advances (Note 8)     (14,466)      (16,721)
Inventories (Note 11)       (297)      (434)
Recoverable taxes (Note 10)      (1)       62
Related parties (Note 9)    (97)      (139)
Other current and non-current assets (Note 12)   3,314      554
Trade payables (Note 17)     244     3,005
Obligations and social charges (Note 18)    (1,445)     3,683
Taxes payable (Note 19)    2,169   (1,549)
Other current and non-current liabilities    (2,951)      (315)
Cash from operations      202,346   99,401
         
Interest paid (Note 15)    (61)      (123)
Income tax and social contribution paid     (10,305)   (8,900)
Net cash provided by operating activities      191,980   90,378
         
Cash flows from investing activities        
Purchases of property and equipment (Note 13)     (50,344)      (46,818)
Purchases of intangible assets (Note 14)    (8,649)   (3,278)
Net cash used in investing activities     (58,993)      (50,096)
         
Cash flows from financing activities        
Proceeds from borrowings (Note 15)     40,276     248
Payment of borrowings (Note 15)    (5,536)   (4,099)
Payment of leases (Note 16)    (3,527)   (3,044)
Dividends paid to quotaholders (Note 21)     (61,991)      (39,388)
Net cash used in financing activities     (30,778)      (46,283)
         
Net increase (decrease) in cash and        
 cash equivalents for the year      102,209   (6,001)
Cash and cash equivalents at the beginning of the year     26,833   32,834
Cash and cash equivalents at the end of the year      129,042    26,833

 

The accompanying notes are an integral part of these financial statements.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

1General information

 

1.1Operations

 

Cesumar – Centro de Ensino Superior de Maringá Ltda. (the “Entity”) is a limited liability entity headquartered in the city of Maringá, State of Paraná - Brazil.

 

In addition to its head office, the Entity has three other campuses in the following cities of the State of Paraná: Curitiba, Ponta Grossa and Londrina. The Entity also has a presence all over Brazil through distance learning (EAD) units, with 734 units at December 31, 2020 (unaudited).

 

The Entity is primarily engaged in the provision of educational, cultural, scientific and social services, at several educational levels, through the offering of graduation, extension and specialization courses for people in public and private enterprises.

 

The issue of these financial statements was authorized by the Entity’s Executive Board on October 20, 2021.

 

Purpose of financial statements

 

These financial statements have been prepared for inclusion in VITRU Limited’s Registration Statement with the United States Securities and Exchange Commission (SEC), pursuant to Rule 3-05 of Regulation SX under the Securities Act (“Rule 3-05”).

 

1.2Basis of preparation

 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and disclose all (and only) the applicable significant information related to the financial statements, which is consistent with the information utilized by management in the performance of its duties.

 

The financial statements have been prepared under the historical cost convention.

 

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Entity’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

 

1.3COVID-19 impacts

 

The Entity has been monitoring the spread of the Coronavirus (COVID-19), which was declared a pandemic by the World Health Organization (WHO). The Entity has been following the decisions of the WHO and the guidance of the Ministry of Health and decisions of the State and Municipal governments, and, since March 2, 2020, has been adopting measures to fight the COVID-19 pandemic, aiming to safeguard the health and interests of all the parties involved in the activities of the institution and preserve business continuity.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

  

As regards onsite teaching, from March 20, 2020 the Entity’s onsite undergraduate and graduate education activities were replaced by remote activities through the digital platform “Studeo”, to ensure the learning process of students, without affecting the completion of the activities of the semester. The 2021 school year began on February 15 and classes returned in a hybrid form; a different group of students have onsite classes each week, and the other students have classes via the digital platform.

 

The Entity’s distance learning activities were not impacted and onsite tests were replaced by online tests. The new enrollment and re-enrollment processes continue as usual, with no initial impact on the recognition of revenue of enrolled students.

 

As to the Entity’s administrative activities, it adopted measures such as the change from onsite work to remote work from March 23, 2020, for positions that permit this type of system. There is no estimated date for the return of employees to onsite classes. Therefore, no relevant impacts related to this topic were identified in the Entity’s financial statements.

 

2Summary of significant accounting policies

 

The main accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied in the years presented, unless otherwise stated.

 

2.1Functional and presentation currency

 

The items included in the financial statements are measured using the currency of the primary economic environment in which the Entity operates (“the functional currency”).

 

The financial statements are presented in Brazilian reais (R$), which is the Entity’s functional and presentation currency.

 

2.2Cash and cash equivalents

 

Cash and cash equivalents include cash on hand and short-term highly liquid bank deposits with original maturities of three months or less, and with immaterial risk of change in value.

 

2.3Financial assets

 

2.3.1Classification

 

The Entity classifies its financial assets in the following measurement categories:

 

·Measured at amortized cost.

 

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

 

2-8

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

2.3.2Recognition and derecognition

 

Purchases and sales of financial assets, when applicable, are recognized on the trade date, that is, the date on which the Entity commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows have expired or have been transferred and the Entity has transferred substantially all the risks and rewards of ownership.

 

2.3.3Measurement

 

At initial recognition, the Entity measures a financial asset at its fair value plus, in the case of a financial asset not carried at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

 

Subsequent measurements of financial assets depend on the Entity’s business model for managing the asset and the cash flow characteristics of the asset. There are measurement categories into which the Entity classifies its financial assets:

 

·Amortized cost: Assets that are held for receipt of the contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition of the asset is recognized directly in profit or loss and presented in other net operating income. Impairment losses are presented as selling expenses in the statement of income.

 

2.3.4Impairment of financial assets

 

The Entity assesses on a prospective basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through profit or loss.

 

For trade receivables, the Entity applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

 

2.3.5Offsetting of financial instruments

 

Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the entity or the counterparty.

 

2.4Trade receivables

 

Trade receivables are amounts due for onsite and online higher education services rendered in the ordinary course of the Entity’s business. If receipt is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

 

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less provision for impairment of trade receivables.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

2.5Inventories

 

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost. Net realizable value is the estimated selling price in the ordinary course of business, less completion costs and selling expenses.

 

2.6Property and equipment

 

Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributed to the acquisition of the items. Historical cost includes finance costs related to the acquisition of qualifying assets.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with these costs will flow to the Entity and they can be measured reliably. The carrying amount of the replaced items or parts is derecognized. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.

 

Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to reduce their cost to their residual values over their estimated useful lives, as follows:

 

  Years
   
Buildings, facilities and improvements 50
Furniture fittings and tools 10
Machinery and equipment 5 – 10
Vehicles 5
IT and communication equipment 5

 

The assets’ useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

An asset’s carrying amount is immediately written down to the recoverable amount when it exceeds that amount.

 

Gains and losses on disposals are determined by comparing the amounts of sales with the carrying amounts and are recognized within “Other operating income, net” in the statement of income.

 

2.7Intangible assets

 

Software

 

Computer software licenses are capitalized on the basis of the costs incurred to purchase and bring to use the specific software. These costs are amortized over the estimated useful life of the software (three to five years).

 

Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Entity are recognized as intangible assets.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

2.8Impairment of non-financial assets

 

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

 

Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash-generating units (CGUs)).

 

The Entity assessed the existence of indications of impairment for the period and did not identify any.

 

2.9Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due in one year or less. If not, they are presented as non-current liabilities.

 

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method.

 

2.10Borrowings

 

Borrowings are recognized initially at fair value, net of transaction costs incurred, and are subsequently carried at amortized cost. Any difference between the proceeds (net of transaction costs) and the total amount payable is recognized in the statement of income over the period of the borrowings using the effective interest rate method.

 

Borrowings are classified as current liabilities unless the Entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

 

Both general and specific borrowing costs directly related to the acquisition, construction or production of a qualifying asset that requires a substantial period of time to be prepared for its intended use or sale are capitalized as part of the cost of that asset when it is probable that future economic benefits associated with the item will flow to the Entity and the costs can be measured reliably. The other borrowing costs are recognized as finance costs in the period in which they are incurred.

 

2.11Provisions

 

Provisions for legal claims are recognized when: (i) the Entity has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount can be reliably estimated.

 

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

2.12Capital

 

Capital quotas are classified in equity.

 

2.13Revenue recognition

 

Revenue comprises the fair value of the consideration received or receivable for the sale of undergraduate and graduate teaching services in the ordinary course of the Entity’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts.

 

(a)Net revenue from teaching services

 

Revenues include monthly tuition fees for undergraduate and graduate courses, monthly tuition fees for extension courses and certifications, in addition to charges and other services.

 

Revenue from teaching services are recognized over time when services are rendered to the customer and the Entity satisfies its performance obligation under the contract at an amount that reflects the consideration to which the Entity expects to be entitled in exchange for those services. Revenues from teaching services are recognized net of scholarships from government programs, cancelations and other discounts, refunds and taxes.

 

(b)Interest income

 

Interest income is recognized on the accrual basis, using the effective interest rate method.

 

Interest income on financial assets at amortized cost and financial assets at fair value through other comprehensive income calculated using the effective interest method is recognized in the statement of income as part of interest income.

 

(c)Joint operations with hub partners

 

A hub is a local operating unit owned by third parties (hub partners) and has the responsibility for offering to students the necessary structure in terms of audiovisual resources, library and information technology, to support the distance learning courses.

 

The contractual agreement between the Entity and each hub partner is a joint operation and establishes the rights of each hub partner on the related revenues and obligations for the related expenses. In this sense, the revenue from distance learning and related accounts receivable are recognized only to the portion of the Company’s right to the jointly revenue. As a result, when the Company receives the student’s monthly tuition fee in whole, an obligation to the hub partner is accrued under trade payables.

 

2.14Taxation

 

(a)Current income tax and social contribution

 

The income tax and social contribution benefit or expense for the period comprise current taxes. Taxes on profit are recognized in the statement of income, except to the extent that they relate to items recognized directly in equity. In such cases, the taxes are also recognized in equity. For institutions that are enrolled in the University for All Program (PROUNI), the undergraduate teaching activities are subject to exemption, for the period of the enrollment contract, as regards Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL).

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(b)University for All Program (PROUNI)

 

The Entity is enrolled in PROUNI and therefore is exempt, from the following federal taxes:

 

.IRPJ and CSLL, established by Law 7,689 of December 15, 1988;

 

.Social Contribution on Revenues (COFINS), established by Complementary Law 70 of December 30, 1991; and,

 

.Social Integration Program (PIS), established by Complementary Law 7 of September 07, 1970.

 

The ProUni program benefit for income taxes is based on a fixed percentage of approved scholarships granted by the federal government to students upon each student’s request and is deducted from tuition gross revenue during the entire duration of such student's undergraduate studies (regardless of the tuition fee set out in the service contract) and as long as the student continues to comply with the scholarship requirements imposed by the government for each semester during the undergraduate course. The Company recognizes the economic benefits from the ProUni scholarships as tax deductions, as applicable. The regulation of PROUNI defines that the revenue from traditional and technological under-graduation courses are exempt from PIS and COFINS.

 

(c)PIS and COFINS

 

Revenues from teaching activities, except for undergraduate activities due to the enrollment in PROUNI, are subject to PIS and COFINS at the rates of 0.65% and 3.00%, respectively.

 

(d)Municipal Scholarship Program (PROMUBE)

 

The Municipal Scholarship Program (PROMUBE) was established by the Municipal Government of Maringá, through Municipal Law 7,359/2006, and aims to grant full and partial (50%) scholarships for students of specific undergraduate or sequential courses in private higher education institutions of Maringá that are enrolled in PROMUBE, pursuant to the legislation that regulates the program.

 

Management understands that the number of scholarships offered is in accordance with the rules of the Scholarship Program and has been deducting from its obligations related to the Services Tax (ISSQN) the benefits of joining this program. The Entity obtained a reduction in the ISS payable of R$ 9,280 in 2020 (R$ 7,655 in 2019).

 

(e)Deferred income taxes

 

Deferred income tax and social contribution are recognized, using the liability method, on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred taxes are not accounted for if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects either accounting nor taxable profit or loss.

 

Deferred tax assets are recognized only to the extent it is probable that future taxable profit will be available against which the temporary differences and/or tax losses can be utilized. In accordance with the Brazilian tax legislation, loss carryforwards can be used to offset up to 30% of taxable profit for the year and do not expire.

 

Deferred tax assets and liabilities are presented net in the statement of financial position when there is a legally enforceable right and the intention to offset them upon the calculation of current taxes, generally when related to the same legal entity and the same jurisdiction.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

2.15Leases

 

The Entity leases commercial buildings to its own distance learning units and logistics warehouses. Rental contracts are typically made for fixed periods of one to five years.

 

Lease terms are negotiated on an individual basis. Lease contracts do not include restrictive covenants. However, the related leased assets must not be given as guarantees for borrowings.

 

Assets and liabilities arising from a lease are initially measured at present value, using the implicit lease rate or an incremental rate.

 

Lease liabilities include the net present value of the following lease payments:

 

.fixed payments (including in-substance fixed payments), less any lease incentives receivable;

 

.variable lease payments that depend on an index or rate;

 

.amounts expected to be paid by the lessee, according to the residual value guarantees;

 

.payments of penalties for terminating the lease if the lease term reflects the lessee exercising the option to terminate the lease.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment and with similar terms and conditions.

 

To determine the incremental borrowing rate, the Entity:

 

.where possible, uses recent third-party financing received as a starting point, adjusted to reflect changes in financing conditions since the third-party financing was received;

 

.uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Entity, which does not have recent third party financing; and

 

.makes adjustments specific to the rate, such as term, country, currency, and security.

 

The Entity is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

 

Lease payments are allocated between the principal and finance cost. Finance costs are charged to the statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost according to the following items:

 

.the amount of the initial measurement of the lease liability;

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

.any lease payments made at or before the commencement date less any lease incentives received;

 

.any initial direct costs; and

 

.restoration costs.

 

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term, on a straight-line basis. If the Entity is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

 

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

 

2.16Profit distribution

 

Because the articles of incorporation do not establish minimum levels and/or rules for profit distribution, it only requires the approval of the partners. The profits paid to the Entity’s partners are recognized as deductions from retained earnings at the time of distribution.

 

2.17Rounding of amounts

 

All amounts disclosed in the financial statements and notes have been rounded off to the nearest thousand reais, unless otherwise stated.

 

2.18Joint arrangements

 

Investments in joint arrangements are classified as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. The Entity has only joint operations.

 

Joint operations

 

The Entity recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Details of the joint operations are set out in Note 2.13 (c).

 

2.19Amendments to new standards that are not yet effective

 

The following amendments to new standards were issued by the IASB but are not effective for 2020. The early adoption of standards, even though encouraged by the IASB, has not been implemented in Brazil by the Brazilian Accounting Pronouncements Committee (CPC).

 

·Amendments to IFRS 9, IAS 39 and IFRS 7 “Financial Instruments”, IFRS 4 “Insurance Contracts” and IFRS 16 “Leases”: the amendments set out in Phase 2 of the IBOR reform address issues that may affect financial reporting during the interest rate benchmark reform, including the effects of changes in contractual cash flows or hedge relationships arising from the replacement of a rate with an alternative benchmark interest rate (replacement issues). The effective date to apply such amendment is January 1, 2021. The Group’s contracts linked to EURIBOR and LIBOR are being reviewed between the parties and will be updated by the respective published alternative rates, plus spread. Management estimates that the adjusted cash flows will be economically equivalent to the original ones, and does not expect material impacts related to this replacement.

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

·Amendment to IAS 16 “Property, Plant and Equipment”: in May 2020, IASB issued an amendment prohibiting an entity from deducting from the cost of the property, plant and equipment the amounts received from the sale of items produced while the asset is being prepared for its intended use. These revenues and related costs must be recognized in profit or loss. The effective date to apply this amendment is January 1, 2022.

 

·Amendment to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”: in May 2020, IASB issued this amendment to clarify that, to assess if a contract is onerous, the cost for the performance of a contract includes the incremental fulfillment costs of this contract and an allocation of other costs directly related to its fulfillment. The effective date to apply this amendment is January 1, 2022.

 

·Amendment to IFRS 3 “Business Combinations”: issued in May 2020 with the objective of replacing the references of the former version of the conceptual framework with the most recent version. The amendment to IFRS 3 will be effective as from January 1, 2022.

 

·Annual Improvements – 2018-2020 Cycle: in May 2020, IASB issued the following amendments as part of the annual improvement process, applicable as from January 1, 2022:

 

(i)IFRS 9 – “Financial Instruments” – clarifies which rates should be included in the 10% test for the derecognition of financial liabilities.

 

(ii)IFRS 16 – “Leases” – amendment of example 13 to exclude the example of lessor payments related to leasehold improvements.

 

(iii)IFRS 1 – “First-time Adoption of the International Financial Reporting Standards” – simplifies the application of this standard by a subsidiary that adopts IFRS for the first time after its parent company, in relation to the measurement of the accumulated amount of foreign exchange variations. IAS 41 – “Biological Assets” – removal of the requirement to exclude cash flows from taxation when measuring the fair value of biological assets and agricultural produce, thus aligning the fair value measurement requirements in IAS 41 with those of other IFRS standards.

 

These changes will not have a material impact on the Entity.

 

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Entity’s financial statements.

 

3Critical accounting estimates and judgments

 

Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Based on assumptions, the Entity makes estimates concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

 

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Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(a)Provisions for civil, labor and tax risks

 

The Entity is a party to lawsuits at various levels. The provisions against potentially unfavorable outcomes of litigation in progress are established and updated based on management evaluation, as supported by external legal counsel, and require a high judgment level on the matters involved.

 

(b)Incremental rate on lessee’s borrowing

 

The incremental rate on the lessee’s borrowing is the one that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the leased asset, with similar terms.

 

IFRS 16/CPC 06(R2) allows the incremental rate to be determined for a group of contracts, based on the validation that the grouped contracts share similar features. The incremental borrowing rate was measured taking into account the Entity’s borrowing cost for real estate construction (object to which the lease contracts refer), which was (Long-Term Interest Rate) TJLP + 3%. The incremental rate established was 10.23% p.a. for contracts of up to 48 months; accordingly, the incremental rate used was the same for all lease contracts as none of the contracts in force, on the date of adoption, had a term that exceeded this period.

 

The Entity is not able to establish the implicit discount rate to be applied to its lease contracts. Accordingly, the incremental rate applied to the lessee’s borrowing is used to calculate the present value of lease liabilities at the initial recording of the contract.

 

(c)Provision for expected credit losses for accounts receivable

 

The Entity recognizes a provision for expected credit losses for accounts receivable applying a simplified approach. As a result, the Entity does not track changes in credit risk, but recognizes an allowance for loan losses at each reporting date.

 

The Entity established a provision matrix based on its historical credit loss experience, adjusted for prospective factors specific to the debtors and the economic environment. In certain cases, however, the Entity may also consider an asset to be in default when internal or external information indicates that the Entity is unlikely to receive the contractual amount with the customer in full.

 

4Financial risk management

 

4.1Financial risk factors

 

The Entity’s activities expose it to a variety of financial risks: market risk (including cash flow or fair value interest rate risk), credit risk and liquidity risk. The Entity’s risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse impacts on the Entity’s financial performance. The Entity does not use derivative financial instruments to hedge certain risk exposures.

 

Risk management is carried out by the Entity’s Central treasury department. The Entity’s treasury identifies, evaluates and hedges financial risks. The Board of Directors establishes principles for risk management, as well as for specific areas.

 

2-17

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(a)Market risk (including cash flow and fair value interest rate risk)

 

The Entity’s interest rate risk arises from short and long-term borrowings and financial investments, substantially linked to the floating rates of the Interbank Deposit Certificate (CDI).

 

The Entity analyzes its interest rate exposure on a dynamic basis. Scenarios are analyzed taking into consideration refinancing and renewal of existing positions. Based on this analysis, the Entity monitors the risk of significant variation in the interest rate and calculates the impact on profit or loss.

 

(b)Credit risk

 

Credit risk is managed on a centralized basis. Credit risk arises from cash and cash equivalents, financial instruments and deposits with banks and other financial institutions, as well as credit exposures to customers, including outstanding receivables.

 

The Entity’s sales policy considers the credit risk level it is willing to accept in the course of its business. Enrollment for the next school period is blocked whenever a student is in default with the institution. The broad diversification of the receivables portfolio, the selectivity in accepting students, as well as the follow-up of maturities, are procedures adopted in order to minimize issues arising from default on accounts receivable.

 

The Entity maintains a provision for impairment of trade receivables to address credit risk. This credit analysis evaluates the credit quality of students taking into account the payment history, the period of the relationship with the institution and the credit analysis (SPC and Serasa).

 

(c)Liquidity risk

 

This is the risk of the Entity not having sufficient liquid funds to meet its financial commitments, due to the mismatch of terms or volume in expected receipts and payments.

 

To manage liquidity of cash, assumptions for future disbursements and receipts are determined, and these are monitored daily by the treasury area.

 

4.2Capital management

 

The Entity’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for quotaholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

The Entity manages its capital structure and makes adjustments in light of changes in economic conditions and to maintain and adjust the capital structure, the Entity may adjust the dividend payment to quotaholders.

 

At December 31, 2020, the Entity had a capital structure designed to enable its growth strategy. Investment decisions take into consideration the expected return potential. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2020 and 2019.

 

2-18

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

5Financial instruments by category

 

    2020   2019
Financial assets   Amortized cost   Amortized cost
Cash and cash equivalents   129,042   26,833
Trade receivables   61,810   49,699
Other assets (Rotesma)   3,950   5,425
Judicial deposits   717   1,952
Related parties   1,543   1,447
    197,062   85,356
         
         
Financial liabilities   Amortized cost   Amortized cost
Trade payables   20,232   19,988
 Borrowings   39,818   3,654
Related parties   26   27
Lease liabilities   4,131   6,106
 Other payables   1,186   1,634
    65,393   31,409

 

Fair Values

 

The Entity assessed that the fair values of cash and cash equivalents, trade receivables, other assets, trade payables, borrowings, lease liabilities and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.

 

6Cash and cash equivalents

 

    2020   2019
         
Cash and checks   499   271
Short-term bank deposits   128,543   26,562
         
    129,042   26,833

 

The Entity’s cash and cash equivalents comprise cash and short-term bank deposits with a maturity not exceeding 90 days, held to meet short-term commitments and not for investment or other purposes, which are readily convertible into a known amount of cash and subject to an insignificant risk of change in value. The average remuneration for financial investments in 2020 was 120% of the CDI (100% of the CDI in 2019).

 

2-19

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

7Trade receivables

 

    2020   2019
         
Current        
   Monthly tuition fees receivable    84,998      72,055
   Credit agreements     53,463      43,253
   Monthly tuition fees receivable (a)   16,893      12,454
   Student Financing Program (FIES) receivable    9,598    6,814
  Other receivables     3,136    2,341
  Provision for impairment of trade receivables (i)   (122,240)    (101,872)
     45,848      35,043
Non-current        
   Monthly tuition fees receivable (a)     15,962   14,656 
         
Total trade receivables    61,810      49,699

 

(a)Refers to tuition fees receivable from students through its own financing program.

 

The aging of trade receivables at December 31 is as follows:

 

    2020   2019
Not yet due     27,848      22,758
From 01 to 30 days past due    10,238      10,209
From 31 to 60 days past due    6,919   4,642
From 61 to 90 days past due    7,848    5,759
From 91 to 120 days past due    5,818   6,406
From 121 to 150 days past due    5,958    5,048
From 151 to 180 days past due    2,868    4,168
From 181 to 365 days past due    24,804      17,952
More than 366 days past due     91,751      74,631
(-) Provision for impairment of trade receivables   (122,240)    (101,872)
    61,810    49,699 

 

(i)The changes in the provision for impairment of trade receivables are as follows:

 

    2020   2019
Opening balance   101,872   80,833
Provision for the year   20,368   21,039
Closing balance   122,240   101,872

  

 

2-20

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

8Advances

 

    2020   2019
Advances to suppliers   1,368   4,174
Advances to employees   4,065   4,875
Advances to hub partners – Distance Learning Centers (i)     57,101     38,309
(-) Provision for losses with partners – Distance Learning Centers (i)   (3,189)   (2,589)
Other advances      938   1,048
      60,283     45,817
         
(-) Current     54,412     38,707
Non-current   5,871   7,110

 

(i)A hub is a local operating unit and has the responsibility for offering to students the necessary structure in terms of audiovisual resources, library and information technology, to support the distance learning courses.

 

Advances represent amounts advanced to hub partner so that they can generate initial cash, develop the first customer portfolio and invest in media for the promotion of the unit. These amounts will be reimbursed by hub partner on a monthly basis in accordance with the terms stipulated in the contract, through the provision of services.

 

In 2020, due to the impacts of the COVID-19 pandemic, management carried out an analysis of the recoverability of the amounts advanced to the Distance Learning Centers and the subsequent recording of a provision for these recoverability of these credits. The change aimed to capture situations that could increase the risks of loss. Thus, there has been an increase in the provision for hub partner that have significant debt.

 

To this end, the entity analyzes, in each partner, the relation between the balance of advances at December 31, 2020 and the 2020 accumulated amount transferred. For partners with an index greater than 1.4, the Entity recorded a provision of 25%. For all others, the provision percentage used was 2%.

 

In relation to the amounts that are recorded as past due, as a result of the COVID-19 pandemic, the Entity launched the “Sou + Mútuo” program, which will grant new payment deadlines for loans (past due and not yet due) for the units that achieve specific fund raising targets.

 

2-21

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

9Related parties

 

(a)Breakdown of balances

 

                                2020   2019
    Centro
Universitário
  Soedmar   GP Adm.   Cesutec   ICETI   WWW ADM.   Other (i)   Total   Total
                                     
Assets                                  
Non-current                                  
  Advances 2   1,312   116   8       54   51   1,543   1,447
                                     
Liabilities                                  
Current                                  
  Trade payables                 26           26   27
                                     
Profit or loss                                  
  Donations 1,394               4,230           5,624   4,375

 

(i)Refers to:

Fundação Cesumar 

Hoper Administração e Participações Ltda. 

UPR – Unidade Paranaense de Ensino Superior Ltda. 

PL Administração e Participações Ltda. 

WL Administração e Participações Ltda.

 

(b)Significant transactions

 

Cesumar acquired 50% (fifty percent) of a PHENOM 100 aircraft, model BEM-500, year of manufacture 2014, Brazilian registration PP-WMP, jointly with the holding company WM Administração e Participações. The contract was signed between the parties on July 21, 2020, with a value of R$ 8,340 as follows: payment of R$ 6,386 on September 10, 2020 and R$ 1,954, subject to monthly settlement of the financing installments.

 

(c)Key management compensation

 

Key management includes members of the rectorate, prorectorate and executive board. The compensation paid or payable to key management totals R$ 26,263 at December 31, 2020 (2019 – R$ 26,483).

 

Benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), variable compensation and social security charges (contributions to the National Institute of Social Security (INSS) and the Government Severance Indemnity Fund for Employees (FGTS).

 

2-22

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

10Recoverable taxes

 

    2020   2019
Income tax and social contribution (i)     3,264     3,264
Withholding Income Tax (IRRF)    199      200
PIS and COFINS (ii)      1,485      1,485
Other    8     7 
       4,956      4,956
         

 

(i)Due to the changes in legislation through RFB Normative Instruction 1,394/2013 referring to the calculation of income tax and social contribution using the method of the operating profit on tax-incentive activities, applicable to private higher education institutions enrolled in PROUNI, the expectation of the Entity’s management is to realize in 2021 the balance of income tax and social contribution.

 

(ii)For PIS and COFINS balances, realization is expected in 2021.

 

11Inventories

 

The Entity maintains as inventory items:

 

    2020   2019
Storeroom supplies      486      234
Consumables      695      405
Inventory – Distance learning    1,825    1,973
Other      95      192
    3,101   2,804

 

12Other assets

 

Other assets include credits arising from unusual businesses in relation to the Entity’s main activity, and their balance comprises:

 

    2020   2019
         
Judicial deposits (ii)   717   1,952
Rotesma Ind. De Pré Moldados (i)   3,950   5,425
Instituto Salgado de Saude Integral   179   179
Sicoob quotas   339   279
Other   944   1,560
         
    6,129   9,395

 

(i)The balance refers to the termination of the contract signed with Rotesma Industria de Pré Moldados, initially contracted to build one of the blocks intended for the courses offered. The initial debt balance of R$ 6,200 will be received in 24 equal and monthly installments.

 

(ii)Refers to judicial deposits, mostly of a labor nature.

 

2-23

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

13Property and equipment

 

(a)Breakdown of balances

 

                                     
        Buildings,   IT and   Industrial   Furniture,                
        facilities and   communication   machinery and   fittings           Construction    
    Land   improvements   equipment   equipment   and tools   Vehicles   Other   in progress   Total
At December 31, 2018   42,894   93,716   8,059   5,775   11,369   1,420   19,408   36,317   218,958
Additions   1,100   270   5,174   2,678   2,413   1,877   5,231   28,075   46,818
Disposals   -   -   (18)   (1)   (477)   (2)   (2)   (6,320)   (6,820)
Transfers   -   36,479   11   99   79   -   873   (37,541)   -
Depreciation   -   (4,099)   (4,076)   (978)   (1,636)   (722)   (2,610)   -   (14,121)
                                     
At December 31, 2019   43,994   126,366   9,150   7,573   11,748   2,573   22,900   20,531   244,835
                                     
Additions   -       2,808   2,434   2,323   899   11,350   31,840   51,654
Disposals   -   -   -   (3)   -   -   -   (1,307)   (1,310)
Transfers   -   5,430   112   -   -   -   1,073   (6,615)   -
Depreciation   -   (4,687)   (4,063)   (1,259)   (1,850)   (1,205)   (3,560)   -   (16,624)
                                     
 At December 31, 2020   43,994   127,109   8,007   8,745   12,221   2,267   31,763   44,449   278,555
                                     
Total cost   43,994    160,460    31,792    15,911    27,890    6,531    59,905    44,449    390,931
Accumulated depreciation   -    (33,351)    (23,785)    (7,166)    (15,669)    (4,264)    (28,142)    -      (112,376)
                                     
Net book value   43,994   127,109   8,007   8,745   12,221   2,267   31,763   44,449   278,555
                                     
Average annual depreciation rate %   -   2   20   10   10   20   10   -    

 

2-24

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(b)Review and adjustment of estimated useful lives

 

The Entity annually reviews the estimated economic useful lives of property and equipment items to calculate depreciation, as well as to determine the residual value of property and equipment items.

 

(c)Significant transactions

 

The significant balances that comprise the construction in progress refer to the Curitiba campus R$ 22,196 and the 2nd phase of expansion of the Ponta Grossa unit amounting to R$ 7,466. The balance referring to the acquisition of the aircraft is disclosed in Note 9 – Related parties.

 

14Intangible assets

 

  Software   Other   Total
At December 31, 2018 9,283   1,001   10,284
           
Purchases   3,278      -     3,278
Disposals   - -    --      
Amortization    (4,409)    (1)      (4,410)
Net book value  (1,131)    (1)      (1,132)
           
Total cost  20,025      1,001    21,026
Accumulated amortization  (11,873)    (1)    (11,874)
At December 31, 2019   8,152     1,000     9,152
           
Purchases 3,796      4,853     8,649
Transfers -   -    -
Disposals    --      -    -
Amortization   (4,567)     (1)      (4,568)
Net book value    7,381     5,852      13,233
           
Total cost  23,821    5,853    29,674
Accumulated amortization  (16,440)   (1)      (16,441)
At December 31, 2020    7,381    5,852      13,233
Average annual amortization rate – % 20        

 

2-25

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

15Borrowings

 

(a)Breakdown of balances

 

      2020   2019
Current          
Working capital 100% DI*   16,171      -
BNDES** – machinery TJLP + 3.2 p.a.   26   2,542
Other Amplified Consumer Price Index (IPCA)   372   505
      16,569   3,047
           
Non-current          
Working capital 100% DI*   23,238   -
BNDES** – machinery TJLP + 3.2 p.a.   10   33
Other IPCA     574
      23,248   607
Total borrowings     39,817   3,654

* Interbank Deposit

** National Economic and Social Development Bank

 

In view of the uncertainties at the beginning of the pandemic and the credit offer at lower cost by banks, due to the reduction in the Special System for Settlement and Custody (SELIC) rate, the Entity obtained a borrowing of R$ 40 million from Banco Itaú during the first half of the year, seeking to be prepared in the event it required funds; however, the use of these funds was not necessary up to the end of the current year.

 

Borrowings are held in local currency (R$).

 

(b)Maturity of contracts classified in non-current liabilities

 

Year   2020   2019
2021       497
2022   8,541   69
2023   10,549   41
2024   4,158    -
    23,248   607

 

(c)Changes in balances

 

    2020   2019
Opening balance   3,654   7,972
         
  Proceeds from borrowings   40,276   248
  Interest, monetary and foreign exchange variations provided for   1,485   82
  Transfers (leases)   -   (427)
Payment- principal   (5,536)   (4,098)
  Payment – interest   (60)   (123)
Closing balance   39,817   3,654

 

2-26

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(d)Covenants

 

The Entity is in compliance with all covenants in its borrowing contracts, namely:

 

Contract number  Bank Covenants
013610970-9 Itaú (clause 9): “(f) occurrence of any process of corporate reorganization or change of control, either direct or indirect, in which the Client is involved".
12287294 Bradesco (clause 8): “e) if there is a change or transfer, for any purpose, of the shareholding control or ownership of the issuer's quotas, and also if it is merged, spun off, combined or undergoes a corporate reorganization."
22126864 Itaú (f) occurrence of any process of corporate reorganization or change of control, either direct or indirect, in which the Client is involved;
22126864 Itaú (g) change in the Client's corporate purpose or core business or sale of commercial establishment or significant portion of assets or rights of its permanent assets.

 

16Leases

 

(i)Balances recorded in the balance sheet

 

The balance sheet shows the following amounts relating to leases:

 

    2020   2019
Right-of-use assets        
Buildings   3,914   5,505
    3,914   5,505
Lease liabilities        
Current   1,961   3,030
Non-current   2,170   3,076
    4,131   6,106

 

Additions to the right-of-use assets during the 2020 financial year were R$ 1,111. The amounts shown in the table above are net of depreciation.

 

(ii)Balances recorded in the statement of income

 

The statement of income shows the following amounts relating to leases:

 

    2020   2019
Amortization of right-of-use assets          
Buildings   2,702   2,724
Interest expense (included in finance costs)   441   494
    3,143   3,218

Lease payments in 2020 with interest totaled R$ 3,527 thousand.

 

2-27

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

Right-of-use assets

 

The changes in right-of-use assets are as follows:

 

At January 1, 2019 5.219
Additions due to new contracts 3.010
Depreciation expense (2.724)
   
Right-of-use assets at December 31, 2019 5.505

 

At January 1, 2020   5,505
Additions due to new contracts   1,111
Depreciation expense   (2,702)
Right-of-use assets at December 31, 2020   3,914

 

Lease liabilities

 

The changes in lease liabilities are as follows:

 

At January 1, 2019 5,219
Transfer of financial liabilities 426
Interest provided 494
Additions due to new contracts 3,010
Lease payments (3,043)
   
Lease liabilities at December 31, 2019 6,106
   
At January 1, 2020 6,106
Interest provided 441
Additions due to new contracts 1,111
Lease payments (3,527)
Lease liabilities at December 31, 2020 4,131
   

The Entity’s analysis of its contracts based on their maturity dates is presented below. The amounts are not discounted to present value.

 

Contract maturity dates

 

Installment maturity dates    
     
Less than 1 year   1,637
Between 1 and 2 years   1,019
Between 3 and 5 years   1,475
Lease liabilities at December 31, 2020   4,131

  

 

2-28

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

17Trade and other payables

 

    2020   2019
Trade payables        
EAD units (i)   10,638   8,526
Sundry suppliers   9,594   11,462
    20,232   19,988
         
Other payables        
  Advances from customers   10,332   12,936
  Other   1,186   1,534
    11,518   14,470
Total - Trade and other payables   31,750   34,458

 

(i)Refers to the amount to be transferred to the EAD units in the normal course of their activities. The EAD units receive a portion of monthly fees for services provided at distance learning units.

 

18Obligations and social charges

 

    2020   2019
Salaries payable   6,472   6,777
Social security obligations and social charges   5,165   5,189
Provision for vacation pay and related charges      13,067      14,305
Other   169   46
    24,873   26,317

 

19Taxes payable

 

    2020   2019
Services Tax (ISS)    2,079      534
Income tax and social contribution        
  -  IRPJ and CSLL      570      698
Social Integration Program (PIS)      46      43
Social Contribution on Revenues (COFINS)      235      205
Withholding Income Tax (IRRF)    4,610    3,419
Taxes payable in installments (i)     -      537
Other      234      169
         
     7,774    5,605

 

20Provision for civil, labor and tax risks

 

(a)Breakdown and changes in the provisions for legal claims

 

      Tax   Civil   Labor   Total
At December 31, 2018    3,407    1,453    3,936    8,796
  Additions     144     626    1,853    2,623
  Write-offs due to payment    -            
At December 31, 2019     3,551    2,079    5,789    11,419
  Additions   153   1,329   2,166   3,648
  Write-offs      -      -      -    -
At December 31, 2020   3,704   3,408   7,955   15,067

 

2-29

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(b)Possible losses, not provided for in the balance sheet

 

At December 31, 2020, the Entity has tax litigation involving risks of loss classified by management as possible, based on the evaluation of the legal advisors, for which no provision for estimated possible losses has been recorded, as shown below:

 

    2020   2019
Labor   2,203   1,498
Civil   2,328   1,947
    4,531   3,445

 

21Equity

 

(a)Share Capital

 

At December 31, 2020, fully paid-up share capital is divided into 58,500,000 registered common quotas, with a par value of R$ 1.00 (one real) each.

 

(b)Capital reserve

 

At December 31, 2020, the Entity had a capital reserve of R$ 39,548, referring to the surplus for the period in which it operated as a not-for-profit entity.

 

(c)Dividends

 

At December 31, 2020, dividends of R$ 61,991 (2019 – R$ 39,388) were distributed.

 

(d)Retained earnings

 

The Retained earnings refers to the retention of the remaining balance of retained earnings and remains at the disposal of the quotaholders.

 

22Net revenue

 

    2020   2019
         
Gross amount from undergraduate services    1,180,250   873,765 
Gross amount from graduate services     34,095      30,153
Gross amount  from clerk services   3,896   4,936
Gross amount from other services   1,562   2,255
Taxes on services      (22,072)      (17,099)
Returns    (30)    (2)
Scholarships (i)   (494,638)   (299,364)
Discounts and other deductions      (93,016)      (75,364)
         
       610,047   519,281

 

2-30

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

(i)The scholarships are divided as follows:

 

    2020   2019
PROUNI     89,004     74,404
Institutional – undergraduate     399,403      218,710
Institutional – graduate   6,231   6,250
    494,638    299,364 

 

23Other operating income, net

 

    2020   2019
Medical and veterinary services    1,147    3,191 
Gym      140    631
Income – restaurant     1,113   1,787
Other operating income and expenses     828   2,661
         
     3,229   8,270
24Costs and expenses by nature

 

    2020   2019
Personnel and payroll charges   236,242   244,453
Third-party services   13,516   11,688
Utilities, cleaning and security   3,901   4,802
Teaching materials   5,513   6,854
Maintenance   17,382   19,395
Advertising and publicity   45,257   54,227
Travel   5,971   12,872
Depreciation and amortization   23,895   18,531
Contingencies   3,856   2,628
Other   36,259   38,748
    391,790    414,198 
         
Costs of services and sales   143,531   146,203
Selling expenses   47,604   54,049
General and administrative expenses   200,656    213,946
    391,790   414,198

 

2-31

 

Cesumar – Centro de Ensino Superior de Maringá Ltda.

 

Notes to the financial statements
at December 31, 2020

All amounts in thousands of reais unless otherwise stated

 

25Finance result, net

 

    2020   2019
Finance income        
 Interest income from monthly tuition fees    6,964     7,517
 Income from financial investments    1,799     2,292
 Discounts obtained   18   33
 Other     859      601
     9,640    10,444
Finance costs        
 Interest on financial transactions     (1,528)      (544)
 Discounts granted on monthly tuition fees    (3,751)    (3,569)
 Interest paid on payments to suppliers     (49)      (33)
 Bank expenses    (5,412)    (4,387)
 Interest on lease liability      (441)      (494)
 Other – finance costs    (1,058)      (563)
     (12,239)    (9,590)
Finance result, net      (2,600)      855

 

26Income tax and social contribution

 

In accordance with Law 11,096/2005, regulated by Decree 5,493/2005 and standardized by Normative Instruction 456/2004 of the Internal Revenue Service, pursuant to Article 5 of Provisional Measure 213/2004, and Normative Instruction 1,394/2013, the higher education institutions enrolled in PROUNI are exempt, during the period of effectiveness of the enrollment agreement, from IRPJ and CSLL, among others; computation shall be based on the operating profit of exempt activities. The reconciliation of taxes calculated in accordance with the nominal rates and the amounts of taxes recorded in the years ended December 31, 2020 and 2019 are presented below:

 

    2020   2019
Profit before taxes     198,519    93,168
Nominal rates   34%   34%
IRPJ and CSLL at the        
nominal rates     (67,496)     (31,677)
PROUNI tax benefits     61,198    29,099
Permanent additions (donations, health care), net     (1,478)    (944)
IRPJ and CSLL in the results     (7,776)     (3,522)
Current     (10,295)    (9,493)
Deferred    2,519     5,971
IRPJ and CSLL in the results     (7,776)     (3,522)

 

27Events after the reporting period – corporate change

 

Through the ninth amendment to the articles of incorporation, the owners decided to transfer the ownership interest belonging to two family holding companies to the individuals who constituted the capital of the holding companies. This decision had no impact of control or change of officers – it was only a strategic decision of management, and had no impact on covenants disclosed in note 15 (d).

 

On August 23, 2021, the Institution’s quotaholders entered into an agreement for the purchase and sale of quotas with VITRU Brasil Empreendimentos, Participações e Comércio S.A. (Vitru) for the sale of 100% of the entity’s share capital to Vitru. This transaction is subject to compliance with the conditions precedent provided for the aforementioned instrument and the approval of the Administrative Council for Economic Defense (CADE).

 

* * *

 

2-32

 

 

Item 3

 

Vitru Limited — Unaudited pro forma condensed consolidated financial information of Vitru Limited as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020.

 

 

 

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

On August 23, 2021, we entered into a purchase agreement with the shareholders of CESUMAR - Centro de Ensino Superior de Maringá Ltda, or “Unicesumar,” to acquire the entire share capital of Unicesumar. Unicesumar is a leading and fast-growing higher education institution in Brazil focused on the distance learning market, founded 30 years ago in Maringá – Paraná. Unicesumar has approximately 760 hubs and 331 thousand students, including 314 thousand in digital education. Unicesumar also has a sizeable presence in health-related on-campus courses, particularly Medicine, with more than 1,600 students in 348 current medical seats.

 

The closing of the transaction is subject to customary conditions precedent, including antitrust and other regulatory approvals.

 

Set forth below are the unaudited pro forma condensed consolidated statement of financial position as of June 30, 2021 and the unaudited pro forma condensed consolidated statements of operations for the six-month period ended June 30, 2021 and for the year ended December 31, 2020.

 

Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed consolidated financial information.

 

We expect to incur integration costs and synergies from the consolidation of Unicesumar. The unaudited pro forma condensed consolidated financial information does not reflect any future integration costs or synergies that may result from the consolidation of Unicesumar.

 

The Unicesumar acquisition by Vitru will be accounted for as a business combination in accordance with IFRS 3 — Business Combinations, using the purchase method of accounting. The pro forma information presented, including allocation of the purchase price, is based upon our preliminary estimates of the fair value of the assets acquired and liabilities assumed, available information as of this date and management assumptions, and will be revised upon final calculations during the one year measurement period as from the acquisition date. Therefore, the actual adjustments may differ from the pro forma adjustments, and the differences may be material.

 

Additionally, the final determination of the fair value of assets acquired and liabilities assumed on the Unicesumar acquisition will be based on the actual net tangible and intangible assets and liabilities of Unicesumar that existed as of the closing date. Accordingly, the pro forma purchase price adjustments presented herein may not reflect any final purchase price adjustments. We estimated the fair value of Unicesumar’s assets and liabilities based on discussions with Unicesumar’s management, due diligence and preliminary work performed by third-party valuation specialists. As the final valuations are being performed, increases or decreases in the fair value of the assets acquired and liabilities assumed will result in adjustments, which may result in material differences from the information presented herein.

 

3-1

 

Unaudited pro forma condensed consolidated statement of financial position

As of June 30, 2021

(amounts in thousands of reais)

 

           
ASSETS Vitru
Historical
Unicesumar Historical Pro forma adjustments Note Total
pro forma
CURRENT ASSETS          
Cash and cash equivalents  143,229  221,155  (82,457) 2(b)/(c)  281,927
Short-term investments  486,104  -  (400,000) 2(b)  86,104
Trade receivables  136,990  57,188      194,178
Income taxes recoverable  -  -      -
Prepaid expenses  9,776  64,277      74,053
Other current assets  1,459  10,587      12,046
TOTAL CURRENT ASSETS  777,558  353,207  (482,457)    648,308
NON-CURRENT ASSETS          
Trade receivables  6,248  12,134      18,382
Indemnification assets  7,753  -      7,753
Deferred tax assets  72,646  16,665  (89,311)  2  -
Other non-current assets  1,577  7,905      9,482
Right-of-use assets  134,971  3,764  244,267 2(d)  383,002
Property and equipment  99,287  287,650  (226,122) 2(c)  160,815
Intangible assets  664,825  12,362  3,464,039 2(e)  4,141,226
TOTAL NON-CURRENT ASSETS  987,307  340,480  3,392,873    4,720,660
TOTAL ASSETS  1,764,865  693,687  2,910,416    5,368,968
LIABILITIES          
CURRENT LIABILITIES          
Trade payables  35,051  21,880  20,967 2(g)  77,898
Loans and financing  152,155  13,698      165,853
Lease liabilities  25,840  1,376  21,235 2(d)  48,451
Labor and social obligations  38,413  33,436      71,849
Income taxes payable  5,147  6,159      11,306
Taxes payable  2,881  -      2,881
Prepayments from customers  6,782  -      6,782
Accounts payable from acquisition of subsidiaries  142,665  -  539,940 2(a)  682,605
Other current liabilities  2,092  7,334      9,426
TOTAL CURRENT LIABILITIES  411,026  83,884  582,142    1,077,052
NON-CURRENT          
Loans and financing  -  20,294  1,553,779 2(b)  1,574,073
Lease liabilities  132,631  2,640  223,032 2(d)  358,303
Share-based compensation  52,409  -      52,409
Accounts payable from acquisition of subsidiaries  136,495  -      136,495
Provisions for contingencies  13,392  14,584      27,976
Deferred tax liabilities  -  -  523,234  2  523,234
Other non-current liabilities  634  3,526      4,160
TOTAL NON-CURRENT LIABILITIES  335,561  41,044  2,300,045    2,676,650
TOTAL LIABILITIES  746,587  124,929  2,882,187    3,753,703
EQUITY  1,018,278  568,758  28,229 2(f)  1,615,265
TOTAL LIABILITIES AND EQUITY  1,764,865  693,687  2,910,416    5,368,968

3-2

 

Unaudited pro forma condensed consolidated statement of profit and loss

For the six-month period ended June 30, 2021

(amounts in thousands of reais, except per share data)

 

           
  Vitru
Historical
Unicesumar Historical Pro forma adjustments Note Total
pro forma
NET REVENUE  317,146  356,266      673,412
Cost of services rendered  (112,563)  (82,246)  (10,309) 2(c)/(d)/(e)  (205,118)
GROSS PROFIT  204,583  274,019  (10,309)    468,293
General and administrative expenses  (42,045)  (105,126)  (19,542) 2(e)  (166,713)
Selling expenses  (63,295)  (27,725)  (28,819) 2(e)  (119,839)
Net impairment losses on financial assets  (52,908)  (12,063)      (64,971)
Other income (expenses), net  426  (595)      (169)
Operating expenses  (157,822)  (145,509)  (48,361)    (351,692)
OPERATING PROFIT  46,761  128,511  (58,670)    116,602
Financial income  17,822  6,810      24,632
Financial expenses  (31,317)  (6,539)  (51,324) 2(b)/(d)  (89,180)
Financial results  (13,495)  271  (51,324)    (64,548)
PROFIT (LOSS) BEFORE TAXES  33,266  128,782  (109,994)    52,054
Current income taxes  (17,888)  (6,679)  13,561 2(h)  (11,006)
Deferred income taxes  21,871  717  23,837 2(h)  46,425
Income taxes  3,983  (5,962)  37,398    35,419
NET INCOME (LOSS) FOR THE PERIOD  37,249  122,820  (72,596)    87,473
Basic earnings per share (R$)  0.68     2(i)  2.89
Diluted earnings per share (R$)  0.63     2(i)  2.75

3-3

 

Unaudited pro forma condensed consolidated statement of operations

For the year ended December 31, 2020

(amounts in thousands of reais, except per share data)

 

           
  Vitru
Historical
Unicesumar Historical Pro forma adjustments Note Total
pro forma
NET REVENUE  519,179  610,047      1,129,226
Cost of services rendered  (221,452)  (149,376)  (21,902) 2(c)/(d)/(e)  (392,730)
GROSS PROFIT  297,727  460,671  (21,902)    736,496
General and administrative expenses  (73,852)  (194,810)  (60,051) 2(e)/(g)  (328,713)
Selling expenses  (86,604)  (47,604)  (57,639) 2(e)  (191,847)
Net impairment losses on financial assets  (76,840)  (20,368)      (97,208)
Other income (expenses), net  512  3,229      3,741
Operating expenses  (236,784)  (259,553)  (117,690)    (614,027)
OPERATING PROFIT  60,943  201,118  (139,592)    122,469
Financial income  36,558  9,640      46,198
Financial expenses  (64,418)  (12,239)  (143,464) 2(a)/(b)/(d)  (220,121)
Financial results  (27,860)  (2,599)  (143,464)    (173,923)
PROFIT (LOSS) BEFORE TAXES  33,083  198,519  (283,056)    (51,454)
Current income taxes  (19,556)  (10,295)  34,303 2(h)  4,452
Deferred income taxes  38,587  2,519  61,936 2(h)  103,042
Income taxes  19,031  (7,776)  96,239    107,494
NET INCOME (LOSS) FOR THE PERIOD  52,114  190,743  (186,817)