Business Context and Reporting Period
This Form 6-K filing by Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE: SBS) was submitted on February 19, 2010. SABESP is one of the world's largest water and sewage service providers. The filing addresses a delay in submitting its annual report on Form 20-F for the fiscal year ended December 31, 2008.
Key Financial Metrics
The filing does not provide current revenue, profit, cash flow, or liquidity metrics for the period ending March 31, 2010. Instead, it details specific financial adjustments required for the 2008 fiscal year:
- Provision for Expenses: R$409.1 million recorded in income for the 2008 fiscal year.
- Provision for Liability: R$535.4 million related to actuarial commitments for beneficiaries of Law 4819/58.
- Total Disputed Amount: The combined provisions address a controversial issue regarding supplementary pension plan benefits originally under the State of São Paulo's responsibility but paid by SABESP due to court decisions.
Material Changes and Restatements
The primary material change involves the restatement of financial statements for the fiscal year ended December 31, 2008. This restatement was necessitated by a qualified report from independent auditors due to the lack of provisions for the "Disputed Amount." The restatement includes:
- Recording the R$409.1 million expense provision.
- Recording the R$535.4 million liability provision.
- Enabling the issuance of an unqualified audit report for 2008.
Management notes that this restatement does not affect the reconciliation of Brazilian GAAP to U.S. GAAP, as the amounts were already accounted for as expenses under U.S. GAAP.
Guidance, Outlook, and Risks
Outlook and Filing Status: The New York Stock Exchange (NYSE) has granted SABESP an additional four-month trading period, expiring on May 16, 2010, to file its 2008 Form 20-F. The Company expects to file within this window following the approval of the restatement by shareholders.
Risks and Contingencies: The filing highlights the risk associated with the "Disputed Amount" regarding pension benefits under Law 4819/58. The delay in filing was directly caused by the auditor's qualification regarding these provisions. The filing includes standard forward-looking statement disclaimers regarding economic conditions, industry trends, and capital expenditure plans.
Investor Verification Checklist
- Verify the outcome of the extraordinary general shareholders' meeting regarding the approval of the 2008 financial restatement.
- Confirm the timely submission of the 2008 Form 20-F before the May 16, 2010, NYSE deadline.
- Monitor the status of the legal dispute regarding Law 4819/58 pension benefits and any further court rulings.
- Review the unqualified audit report for the 2008 fiscal year once filed.