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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

 
FORM 6-K
 
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
FOR June 7, 2004

(Commission File No. 1-31317)
 

 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
(Exact name of registrant as specified in its charter)
 
Basic Sanitation Company of the State of Sao Paulo - SABESP
(Translation of Registrant's name into English)
 


Rua Costa Carvalho, 300
São Paulo, S.P., 05429-900
Federative Republic of Brazil
(Address of Regristrant's principal executive offices)



Indicate by check mark whether the registrant files or will file
annual reports under cover 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)__.

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)__.

Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.

Yes ______ No ___X___

If "Yes" is marked, indicated below the file number assigned to the
registrant in connection with Rule 12g3-2(b):

 






 

(Convenience Translation into English from
the Original Previously Issued in Portuguese)


 

Companhia de Saneamento Básico
do Estado de São Paulo - SABESP

Interim Financial Statements for the Quarter
Ended March 31, 2004 and
Independent Accountants’ Review Report



Deloitte Touche Tohmatsu Auditores Independentes






(Convenience Translation into English from the Original Previously Issued in Portuguese)

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Shareholders and Management of
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
São Paulo - SP

1.

We have performed a special review of the accompanying interim financial statements of Companhia de Saneamento Básico do Estado de São Paulo - SABESP (the “Company”), consisting of the balance sheet as of March 31, 2004, and the related statement of income for the quarter then ended and the performance report, all expressed in Brazilian reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company’s management.


2.

We conducted our review in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council, which consisted principally of: (a) inquiries of and discussions with persons responsible for the accounting, financial and operating areas as to the criteria adopted in preparing the quarterly financial statements, and (b) review of the information and subsequent events that had or might have had material effects on the financial position and operations of the Company.


3.

Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements.


4.

The supplementary information for the quarter ended March 31, 2004, consisting of the financial statements in constant purchasing power, and the statement of cash flows are presented for purposes of permitting additional analyses and are not a required part of the basic financial statements. This supplementary information was reviewed by us in accordance with the auditing procedures mentioned in paragraph 2 and, based on our review, we are not aware of any material modifications that should be made for them to be fairly presented, in all material respects, in relation to the financial statements taken as a whole.


5.

We had previously audited the balance sheet as of December 31, 2003, presented for comparative purposes, and issued an unqualified opinion thereon, dated March 25, 2004. The statement of income for the quarter ended March 31, 2003, the supplementary information in constant purchasing power, and the statement of cash flows for the quarter then ended, presented for comparative purposes, were reviewed by other independent accountants, whose special review report thereon, dated May 9, 2003, was unqualified.


6.

The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil.


São Paulo, May 12, 2004

DELOITTE TOUCHE TOHMATSU Marco Antonio Brandão Simurro
Auditores Independentes Engagement Partner

(Convenience Translation into English from the Original Previously Issued in Portuguese)

FEDERAL GOVERNMENT SERVICE  
BRAZILIAN SECURITIES COMMISSION (CVM) Corporate Law
INTERIM FINANCIAL STATEMENTS (ITR) 03/31/2004
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES  


REGISTRATION WITH THE CVM DOES NOT IMPLY ANY ANALYSIS OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION PROVIDED.


01.01 – IDENTIFICATION
1 –CVM CODE
01444-3
2 – COMPANY NAME
CIA SANEAMENTO BÁSICO ESTADO SÃO PAULO
3 –Federal Corporate Taxpayers’
Registration Number (CNPJ)
43.776.517/0001-80
4 – State Registration Number (NIRE)
35300016831


01.02 – HEAD OFFICE
1 – ADDRESS
Rua Costa Carvalho. 300
2 – SUBURB OR DISTRICT
Pinheiros
3 – POSTAL CODE
05429-900
4 – MUNICIPALITY
São Paulo
5 – STATE
SP
6 – AREA CODE
011
7 – TELEPHONE
3388-8000
8 – TELEPHONE
3388-8200
9 – TELEPHONE
3388-8201
10 – TELEX
 
11 – AREA CODE
011
12 – FAX
3813-0254
13 – FAX
-
14 – FAX
-
 
15 – E-MAIL
sabesp@sabesp.com.br


01.03 – INVESTOR RELATIONS OFFICER (Company Mail Address)
1 – NAME
Rui de Britto Álvares Affonso
2 – ADDRESS
Rua Costa Carvalho. 300
3 – SUBURB OR DISTRICT
Pinheiros
4 – POSTAL CODE
05429-900
5 – MUNICIPALITY
São Paulo
6 – STATE
SP
7 – AREA CODE
011
8 – TELEPHONE
3388-8247
9 – TELEPHONE
 
10 – TELEPHONE
 
11 – TELEX
 
12 – AREA CODE
011
13 – FAX
3815-4465
14 – FAX
-
15 – FAX
-
 
16 – E-MAIL
raffonso@sabesp.com.br

01.04 – GENERAL INFORMATION/INDEPENDENT ACCOUNTANT
CURRENT YEAR CURRENT QUARTER PRIOR QUARTER
1 – BEGINNING 2 – END 3 – QUARTER 4 - BEGINNING 5 – END 6 – QUARTER 7 – BEGINNING 8- END
01/01/2004 12/31/2004 1 01/01/2004 03/31/2004 10/01/2003 12/31/2003
9 – INDEPENDENT ACCOUNTANT
Deloitte Touche Tohmatsu Auditores Independentes
10 –CVM CODE
00385-9
11 – PARTNER RESPONSIBLE
Marco Antonio Brandão Simurro
12 – INDIVIDUAL TAXPAYERS’
REGISTRATION NUMBER OF
THE PARTNER RESPONSIBLE
755.400.708-44


01.05 – CAPITAL COMPOSITION
NUMBER OF SHARES
(THOUSAND)
1 – CURRENT QUARTER
03/31/2004
2 – PRIOR QUARTER
12/31/2003
3 – SAME QUARTER IN PRIOR YEAR
03/31/2003
Paid-up Capital
1 –Common 28,479,577  28,479,577  28,479,577 
2 – Preferred
3 – Total 28,479,577  28,479,577  28,479,577 
Treasury Shares
4 – Common
5 – Preferred
6 – Total


01.06 – CHARACTERISTICS OF THE COMPANY
1 – TYPE OF COMPANY
Commercial. Industrial and Other Companies
2 – SITUATION
Operating
3 – NATURE OF OWNERSHIP
State-owned
4 – ACTIVITY CODE
116 – Water. Sanitation and Gas Services
5 – MAIN ACTIVITY
Water treatment and distribution; Sewage collection and treatment
6 – TYPE OF CONSOLIDATION
Not submitted
7 – TYPE OF REPORT OF INDEPENDENT ACCOUNTANT
Unqualified


01.07 – COMPANIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENTS
1 – ITEM 2 – CNPJ 3 – NAME


01.08 –DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER
1 – Item 2 – event 3 – approval 4 – income 5 - beginning of
the payment
6 – Share type 7 – income per share
01  RCA 02/26/2004 Interest on capital   ON 0.0013800000 
02  RCA 04/24/2003 Interest on capital 06/30/2004 ON 0.0014100000 
03  RCA 05/29/2003 Interest on capital 06/30/2004 ON 0.0041500000 
04  RCA 11/20/2003 Interest on capital 06/30/2004 ON 0.0054400000 
05  RCA 01/08/2004 Interest on capital 06/30/2004 ON 0.0067000000 


01.09 – SUBSCRIBED CAPITAL AND ALTERATIONS IN THE CURRENT YEAR
1 – ITEM 2 – DATE OF
ALTERATION
3 – CAPITAL
(In thousands of reais)
4 – AMOUNT OF
THE ALTERATION
(In thousands of reais)
5 – NATURE OF
ALTERATION
7 – NUMBER OF SHARES ISSUED
(Thousands)
7 – SHARE PRICE ON ISSUE DATE
(Reais)


01.10 – INVESTORS RELATIONS OFFICER
1 – DATE
5/14/2004

2 – SIGNATURE

02.01 – BALANCE SHEET - ASSETS (In thousands of Brazilian reais)
Code Description 03/31/2004  12/31/2003 
1 Total assets 16,568,612  16,530,670 
1.01 Current assets 1,162,961  1,157,721 
1.01.01 Cash and cash equivalents 231,507  281,013 
1.01.01.01 Cash, banks and temporary cash investments 230,067  252,441 
1.01.01.02 Purchase of foreign currency 26,590 
1.01.01.03 Other cash equivalents 1,440  1,982 
1.01.02 Receivables 851,136  811,701 
1.01.02.01 Accounts receivable 851,136  811,701 
1.01.03 Inventories 21,152  22,308 
1.01.03.01 Supplies 21,152  22,308 
1.01.04 Other 59,166  42,699 
1.01.04.01 Recoverable taxes 11,154  1,140 
1.01.04.02 Deferred income and social contribution taxes 29,714  29,684 
1.01.04.03 Other receivables 18,298  11,875 
1.02 Long-term assets 1,308,242  1,260,010 
1.02.01 Sundry receivables 1,308,242  1,260,010 
1.02.01.01 Accounts receivable 195,796  185,090 
1.02.01.02 Indemnities receivable 148,794  148,794 
1.02.01.03 Escrow deposits 17,501  17,576 
1.02.01.04 GESP agreement 497,513  484,800 
1.02.01.05 Receivables from shareholder 185,973  170,363 
1.02.01.06 Deferred income and social contribution taxes 231,282  222,804 
1.02.01.07 Other receivables 31,383  30,583 
1.02.02 Receivables from related companies
1.02.02.01 Affiliates
1.02.02.02 Subsidiaries
1.02.02.03 Other related companies
1.02.03 Other
1.03 Permanent assets 14,097,409  14,112,939 
1.03.01 Investments 740  740 
1.03.01.01 Affiliates
1.03.01.02 Subsidiaries
1.03.01.03 Other investments 740  740 
1.03.01.03.01 Shares of other companies 669  669 
1.03.01.03.02 Shares of other companies with tax incentive 49  49 
1.03.01.03.03 Compulsory deposits – Eletrobrás 22  22 
1.03.02 Property, plant and equipment 14,049,832  14,063,248 
1.03.02.01 Technical assets 12,079,387  11,871,106 
1.03.02.02 Construction in progress 1,970,445  2,192,142 
1.03.03 Deferred charges 46,837  48,951 
1.03.03.01 Organizational and reorganization costs 46,837  48,951 

02.02 – BALANCE SHEET - LIABILITIES AND SHAREHOLDERS’ EQUITY (In thousands of Brazilian reais)
Code Description 03/31/2004  12/31/2003 
2 Total liabilities 16,568,612  16,530,670 
2.01 Current liabilities 1,662,552  1,728,322 
2.01.01 Loans and financing 475,115  500,537 
2.01.02 Debentures 498,816  496,461 
2.01.02.01 3th issue debentures 366,597  366,465 
2.01.02.02 4th issue debentures 100,001  100,001 
2.01.02.03 Interest on debentures 32,218  29,995 
2.01.03 Suppliers 26,436  51,934 
2.01.04 Taxes payable 64,140  84,488 
2.01.04.01 PAES Program 33,993  33,201 
2.01.04.02 COFINS and PASEP 12,965  23,428 
2.01.04.03 Corporate income tax 4,396 
2.01.04.04 I.N.S.S. 15,114  15,055 
2.01.04.05 Other 2,068  8,408 
2.01.05 Dividends payable
2.01.06 Provisions 19,353  19,266 
2.01.06.01 Finsocial 7,872  7,872 
2.01.06.02 Customer claims 11,481  11,394 
2.01.07 Debts with related companies
2.01.08 Other 578,692  575,636 
2.01.08.01 Payroll and related charges 141,384  135,294 
2.01.08.02 Services 51,522  47,580 
2.01.08.03 Interest on capital 262,274  242,524 
2.01.08.04 Deferred income and social contribution taxes 58,622  45,502 
2.01.08.05 Agreements – Municipal authorities 61,119  100,526 
2.01.08.06 Other payables 3,771  4,210 
2.02 Long-term liabilities 7,252,617  7,225,405 
2.02.01 Loans and financing 5,646,189  5,636,641 
2.02.02 Debentures 608,791  630,624 
2.02.02.01 4rd issue debentures 174,999  199,999 
2.02.02.02 5th issue debentures 433,792  430,625 
2.02.03 Provisions 409,850  384,571 
2.02.03.01 Provision for labor indemnities 24,539  24,195 
2.02.03.02 Civil 20,408  20,031 
2.02.03.03 Social securities charges 6,759  6,594 
2.02.03.04 Suppliers 165,162  157,832 
2.02.03.05 Customers 178,283  169,773 
2.02.03.06 Other 14,699  6,146 
2.02.04 Debts with related companies
2.02.05 Other 587,787  573,569 
2.02.05.01 Deferred income and social contribution taxes 117,099  121,117 
2.02.05.02 PAES Program 280,450  282,214 
2.02.05.03 Social security charges 164,649  145,540 
2.02.05.04 Other payables 25,589  24,698 
2.03 Deferred income
2.05 Shareholders’ equity 7,653,443  7,576,943 
2.05.01 Capital 3,403,688  3,403,688 
2.05.02 Capital reserves 51,055  50,739 
2.05.02.01 Support for projects 35,275  34,959 
2.05.02.02 Incentive reserves 15,780  15,780 
2.05.03 Revaluation reserves 2,700,714  2,723,720 
2.05.03.01 Own assets 2,700,714  2,723,720 
2.05.03.02 Subsidiaries/affiliates
2.05.04 Profit reserves 1,398,796  1,398,796 
2.05.04.01 Legal 146,340  146,340 
2.05.04.02 Statutory
2.05.04.03 For contingencies
2.05.04.04 Unrealized profits
2.05.04.05 Profit retention
2.05.04.06 Special for undistributed dividends
2.05.04.07 Other profit reserves 1,252,456  1,252,456 
2.05.04.07.01 Investment reserve 1,252,456  1,252,456 
2.05.05 Retained earnings/accumulated deficit 99,190 

03.01 – STATEMENT OF INCOME (In thousands of Brazilian reais)
Code Description 01/01/2004 to 03/31/2004 01/01/2004 to 03/31/2004 01/01/2003 to 03/31/2003 01/01/2003 to 03/31/2003
3.01 Gross revenue from sales and services 1,138,816  1,138,816  1,039,891  1,039,891 
3.01.01 Water supply – retail 588,826  588,826  529,415  529,415 
3.01.02 Water supply – bulk 53,377  53,377  61,543  61,543 
3.01.03 Sewage collection and treatment 475,138  475,138  416,414  416,414 
3.01.04 Other services rendered 21,475  21,475  32,519  32,519 
3.02 Gross revenue deductions (51,425) (51,425) (46,395) (46,395)
3.02.01 Cofins (38,271) (38,271) (33,089) (33,089)
3.02.02 Pasep (13,154) (13,154) (13,306) (13,306)
3.03 Net revenue from sales and services 1,087,391  1,087,391  993,496  993,496 
3.04 Cost of sales and services (536,408) (536,408) (473,202) (473,202)
3.05 Gross profit 550,983  550,983  520,294  520,294 
3.06 Operating expenses/income (372,009) (372,009) (208,925) (208,925)
3.06.01 Selling expenses (99,006) (99,006) (79,956) (79,956)
3.06.02 General and administrative expenses (70,187) (70,187) (48,422) (48,422)
3.06.03 Financial (202,816) (202,816) (80,547) (80,547)
3.06.03.01 Financial income 25,391  25,391  39,937  39,937 
3.06.03.01.01 Financial income 24,626  24,626  38,706  38,706 
3.06.03.01.02 Cofins/Pasep 765  765  1,231  1,231 
3.06.03.02 Financial expenses (228,207) (228,207) (120,484) (120,484)
3.06.03.02.01 Financial expenses (228,207) (228,207) (120,484) (120,484)
3.06.04 Other operating income
3.06.05 Other operating expenses
3.06.06 Equity in subsidiaries and affiliates
3.07 Income from operations 178,974  178,974  311,369  311,369 
3.08 Nonoperating income (expenses) (483) (483) (29,751) (29,751)
3.08.01 Revenue 2,636  2,636  1,237  1,237 
3.08.01.01 Revenue 2,755  2,755  1,285  1,285 
3.08.01.02 COFINS / PASEP (119) (119) (48) (48)
3.08.02 Expenses (3,119) (3,119) (30,988) (30,988)
3.08.02.01 Loss on disposal of property, plant and equipment (2,966) (2,966) (31,196) (31,196)
3.08.02.02 Other (153) (153) 208  208 
3.09 Income before taxes/profit sharing 178,491  178,491  281,618  281,618 
3.10 Provision for income and social contribution taxes (55,953) (55,953) (78,326) (78,326)
3.10.01 Provision for income tax (44,474) (44,474) (57,853) (57,853)
3.10.02 Provision for social contribution tax (11,479) (11,479) (20,473) (20,473)
3.11 Deferred income tax 1,729  1,729  (22,638) (22,638)
3.11.01 Deferred income tax 4,889  4,889  (14,702) (14,702)
3.11.02 Deferred social contribution tax (3,160) (3,160) (7,936) (7,936)
3.11.03 Reversal of deferred income tax
3.12 Profit sharing/ statutory contributions (8,781) (8,781) (8,781) (8,781)
3.12.01 Profit sharing
3.12.02 Contributions (8,781) (8,781) (8,781) (8,781)
3.12.02.01 Extraordinary item (8,781) (8,781) (8,781) (8,781)
3.13 Reversal of interest on capital
3.15 Net income (loss) 115,486  115,486  171,873  171,873 
  NUMBER OF SHARES, EX-TREASURY SHARES (THOUSAND) 28,479,577  28,479,577  28,479,577  28,479,577 
  EARNINGS PER SHARE 0.00406  0.00406  0.00603  0.00603 
  LOSS PER SHARE            

04.01. Notes to the Interim Financial Statements

1. OPERATIONS

Companhia de Saneamento Básico do Estado de São Paulo - SABESP is engaged in the operation of public water and sewage systems in the State of São Paulo, Brazil, providing water and sewage services to a broad range of residential, commercial, industrial and public-sector customers. The Company also provides water on a bulk basis to certain municipalities in the São Paulo Metropolitan Region that do not have water production systems.

The Company provides water and sewage services in 368 municipalities in the State of São Paulo, nearly all of which are through concessions granted by the municipalities. Most of these concessions have 30-year terms, one of which expires in 2004 and the rest between 2005 and 2034. Each of these concessions is automatically renewable for a period equal to its initial term, unless the municipality or SABESP exercises the right to terminate the concession, through notification by either party at least six months prior to its expiration date.

The Company does not have a formal concession to provide water and sewage services in the City of São Paulo, which accounts for a substantial portion of the sales and services rendered. In Santos, a municipality in the Santos Coastal Area which also has a large population, SABESP operates based on a public authorization, like in some other municipalities in the Santos Coastal Area and the Ribeira Valley, where the Company started operating after the merger of the companies that formed SABESP.

2. PRESENTATION OF FINANCIAL STATEMENTS

The interim financial statements have been prepared in accordance with Brazilian accounting practices and standards of the Brazilian Securities Commission - CVM.

3. SIGNIFICANT ACCOUNTING PRACTICES

a) Determination of results of operations

(i) Revenues from sales and services

Revenues are recorded as the services are provided. Unbilled revenue from water supply and sewage collection and treatment services are measured and recorded in accounts receivable, so that costs can be matched against revenues for the period.

(ii) Financial income and expenses

Represented mainly by interest, monetary and exchange variations on loans and financing and investments, calculated and recorded on the accrual basis of accounting.

(iii) Income and social contribution taxes

Recorded on the accrual basis of accounting.

The provisions for income tax and deferred income tax on tax losses and temporary differences are calculated at the base rate of 15%, plus a 10% surtax. Provisions for social contribution tax and deferred social contribution tax on tax losses and on temporary differences are calculated at the rate of 9%.

(iv) Other income and expenses

Recognized on the accrual basis.

b) Temporary cash investments

Substantially represented by Financial Investment Fund (FIF) and Bank Deposit Certificates (CDB), stated at invested amounts plus income earned (on a pro rata basis) to the balance sheet date.

c) Allowance for doubtful accounts

Recognized in an amount considered sufficient to cover probable losses on the realization of receivables. The allowance is recorded in the statement of operations under the caption “selling expenses”.

d) Inventories

Inventories of materials used in operations and in the maintenance of the water and sewage systems are stated at average cost or realizable value, and are classified in current assets.

Inventories for capital projects are classified under property, plant and equipment and recorded at average cost.

e) Other current and long-term assets

Stated at cost or realizable value plus income earned, when applicable.

f) Permanent assets

Stated at cost, monetarily restated through December 31, 1995, together with the following:

Depreciation of property, plant, and equipment is calculated under the straight-line method at the annual rates indicated in Note 6.

The revaluation of property items, carried out in two stages in 1990 and 1991, was based on an appraisal report issued by independent appraisers and is realized through depreciation, sale, and disposal of the respective assets, with an offsetting credit to “Retained earnings”.

Financial charges on loans, obtained from third parties, for construction in progress are allocated to the costs of the assets.

Amortization of deferred charges is calculated on the straight-line basis over a period of five years from the date benefits start to be generated.

g) Loans and financing

Restated based on monetary and exchange variations, plus the respective charges incurred to the balance sheet date.

h) Accrued vacations

Accrued vacations and the related charges are recognized as incurred.

i) Reserve for contingencies

Recorded to cover losses on labor, tax, civil, and commercial lawsuits, at administrative and judicial levels, which are considered by legal counsel to be probable and estimable as of March 31, 2004.

j) Environmental costs

Costs relating to ongoing environmental programs are expensed as incurred. Ongoing programs are designed and conducted to minimize the environmental impact of the operations and to manage the environmental risks inherent in the activities. Accruals for these costs are recorded when they are considered to be probable and reasonably estimable.

k) Actuarial liability

The Company sponsors a private defined benefit pension plan. CVM Resolution No. 371 of December 13, 2000 requires the recognition of actuarial liabilities in excess of plan assets. As permitted by this regulation, these liabilities are being recognized over a period of five years starting in 2002.

l) Other current and long-term liabilities

Stated at their known or payable amounts, including, when applicable, charges and monetary variations.

m) Interest on capital

This interest has been recorded in accordance with Law No. 9249/95 for tax deductibility purposes, calculated on a daily pro rata basis based on the Long-term Interest Rate (TJLP), and recorded in conformity with CVM Resolution No. 207/96.

n) Earnings per thousand shares

Calculated based on the number of shares outstanding at the balance sheet date.

o) Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses for the reporting periods. Actual results may differ from those estimates.

4. ACCOUNTS RECEIVABLE

Amounts receivable, except for agreements to refinance past-due accounts receivable, do not include interest, fines or any other charges on past-due bills, summarized as follows:

a) Balance sheet amounts

  March 2004  December 2003
 

       
Current assets:      
Private-sector customers:      
General customers (i) 471,023  453,730 
Special customers (ii) 129,536  118,147 
Agreements (iii) 51,680  48,502 
 

  652,239  620,379 
 

       
Government entities:      
Municipal – São Paulo 221,844  216,833 
Municipal – other 70,403  96,005 
State 42,074  -
Agreements with government entities (iii) 2,010  1,815 
Federal 10,915  9,045 
 

  347,246  323,698 
 

       
Permittees:      
Guarulhos 11,245  14,855 
Mauá 1,246  2,032 
Mogi das Cruzes 2,351  2,332 
Santo André 4,423  4,508 
São Caetano do Sul 2,504  2,519 
Diadema 949  950 
 

  22,718  27,196 
 

Unbilled amounts 189,975  192,160 
 

Subtotal 1,212,178  1,163,433 
 

Allowance for doubtful accounts:      
Private and government sectors (361,042) (351,732)
 

Total current assets 851,136  811,701 
 

       
Long-term assets:      
Private-sector customers:      
Agreements 27,544  23,676 
 

       
Permittees:      
Guarulhos 208,697  199,036 
Mauá 59,068  55,375 
Mogi das Cruzes 1,194  1,194 
Santo André 183,395  175,681 
Diadema 51,871  47,827 
 

  504,225  479,113 
 

       
Allowance for doubtful accounts:      
Bulk sales (335,973) (317,699)
 

Total long-term assets 195,796  185,090 
 

Total accounts receivable 1,046,932  996,791 
 

Receivables from private-sector customers refer to:

(i) General customers - residential and small and medium-sized businesses.

(ii) Special customers - large consumers, commercial, industries, condominiums and special billing consumers (industrial waste, wells, etc.).

(iii) Agreements - to refinance past-due receivables.

b) Aging summary

  March 2004  December 2003
 

       
Current 504,136  541,752 
Past due:      
Up to 30 days 145,114  144,612 
From 31 to 60 days 74,660  56,983 
From 61 to 90 days 36,447  34,038 
From 91 to 120 days 35,053  33,927 
From 121 to 180 days 66,542  60,957 
From 181 to 360 days 94,765  82,232 
For more than 360 days 787,230  711,721 
 

Subtotal 1,743,947  1,666,222 
       
Allowance for doubtful accounts (697,015) (669,431)
 

Total 1,046,932  996,791 
 

       
Current 851,136  811,701 
Long-term 195,796  185,090 

c) Allowance for doubtful accounts

(i) Changes in the allowance during the year were as follows:

  Jan-Mar/04 Oct-Dec/03
 

  Addition Addition 
 

       
Beginning balance 669,431  756,419 
       
Private-sector customers/government entities 9,310  11,913 
Permittees 18,274  (98,901)
 

Additions (reversals) for the year 27,584  (86,988)
 

Ending balance 697,015  669,431 
 

       
Current 361,042  351,732 
Long-term 335,973  317,699 

(ii) In results

The Company recorded probable losses on accounts receivable generated in the first quarter of 2004 in the amount of R$39,530 (net of recoveries, of which R$11,946 up to R$5 and R$27,584 over R$5), directly in income, under “Selling expenses”, in accordance with Law No. 9,430/96. In the first quarter of 2003, these losses amounted to R$24,219.

  March 2004 March 2003
 

       
Allowances (over R$5) (30,184) (30,709)
Recoveries (over R$5) 2,600  10,935 
Allowances (under R$5) (22,880) (18,564)
Recoveries (under R$5) 10,934  14,119 
 

Expenses (39,530) (24,219)
 

The Company’s accounting policy for recognizing the allowance for doubtful accounts is summarized below. The amounts determined are considered by management to be sufficient to cover possible losses.

d) Bulk supply - Municipal authorities

Accounts receivable from bulk supply refer to the sale of “treated water” to certain municipalities, which distribute, bill, and charge the final consumers.

Changes for the period Jan-Mar/04 Oct-Dec/03



     
Beginning balance 506,309  641,055 
     
Billings 53,413  73,070 
Collections for current quarter (32,772) (26,228)
 

Collections for prior year    
  (7) (181,588)
 

Ending balance 526,943  506,309 
 

     
Current 22,718  27,196 
Long-term 504,225  479,113 

c) São Paulo State Government (GESP)

Changes for the period Jan-Mar/04 Oct-Dec/03 



       
Beginning balance 77,495 
       
Billings 65,519  71,677 
Collections (7,355)
Matching of accounts – amendment compensation (16,090) (149,172)
 

Ending balance 42,074  -
 

5. RELATED-PARTY TRANSACTIONS

  March 2004  December 2003 
 

Current assets:      
Cash, banks and temporary cash investments with financial institutions controlled by the State Government - Nossa Caixa S.A.  185,330  216,982 
State Government customers (Note 4): 42,074 
       
Long-term assets:      
Accounts receivable - retirement benefits (ii) 185,973  170,363 
GESP Agreement - retirement benefits (i) 320,623  320,623 
GESP Agreement - providing of services, water supply and sewage collection (i)  176,890  164,177 
       
Permanent assets:      
Property, plant and equipment - DAEE Agreement (iii) 64,338  64,723 
       
Current liabilities: (i)      
Interest on capital through 2003 98,857  117,020 
Interest on capital accrued in 2004 28,120 
       
  Jan-Mar/04  Jan-Mar/03 
 

Gross revenue from sales and services: (*)      
Water sales 36,691  33,713 
Sewage services 28,828  26,488 
Collections (23,445) (20,258)
       
Financial income:      
Temporary cash investments - Nossa Caixa S.A. 6,838  17,104 

(*)

Refers to sales transactions to State Government entities carried out under conditions considered by management as usual in the market, except for the form of settlement of receivables, which may be made under the following conditions:


Agreement amendment: (i) Mar/04 Dec/03 
 

       
Bills past due to November 2001 324,563  358,207 
Bills past due from December 2001 to February 2004 196,967  149,172 
Monetary restatement 60,249  58,510 
 

GESP agreement 581,779  565,889 
 

Offset with interest on capital for 2003 (360,667) (360,667)
Offset with interest on capital for 2001 (44,222) (41,045)
 

  (404,889) (401,712)
 

Agreement balance 176,890  164,177 
 

(i) First Amendment to the Agreement for Debt Acknowledgement, Payment Commitment and Other Clauses

The first Amendment, signed on March 22, 2004, consolidates the State’s debt to SABESP, which covers water supply and sewage collection services accounts due to February 2004, in the amount of R$581,779, monetarily restated based on the Referential Rate (TR) at the end of each year to February 2004. This amount will be audited by the State within 180 days.

SABESP acknowledged a debt to the State for interest on capital related to results for years prior to 2003 in the amount of R$158,065, restated based on the annual change in the Consumer Price Index (IPC/FIPE) to December each year in which the interest on capital became due, and to February 2004, and of the portion related to results for 2003 in the amount of R$360,667, which becomes due after the next Annual Shareholders’ Meeting, totaling R$518,732.

The State and SABESP will provide reciprocal offset of their receivables up to the limit of R$360,667, by means of monthly and consecutive installments from June to December 2004. The remaining balance of R$221,111 of the State’s consolidated debt will be paid in 60 equal and consecutive monthly installments, the first of which falling due on May 30, 2004. Part of the interest on capital for the years prior to 2003 will be offset against the first 12 installments, at the nominal amount of R$44,222. The remaining portion of this amount will be subject to monetary restatement based on the monthly Expanded Consumer Price Index (IPCA-IBGE) plus 0.5% per month, starting in March 2004 and until the month when the respective payment is made or offset, and will be used for settling the water supply and sewage collection bills.

The debt in the amount of R$320,623, which refers to the reimbursement for supplementary retirement and pension benefits in the period from March 1986 to November 2001, as established in State Law No. 200/74, is under discussion as set forth in the agreement and will be partially resolved by the transfer of the Alto Tietê Reservoir System, in the amount of R$300,880, as part of the payment.

The amounts stated in the balance sheet consider the accounts due and monetary restatement up to December 2003.

(ii) Receivables from shareholder

These receivables refer to supplementary pensions and paid leave benefits paid by the Company to former employees of the state-owned companies which were merged to form SABESP. These amounts should be reimbursed by the State Government, which is responsible for fulfilling these obligations, established by State Law No. 200/74. These receivables amounted to R$185,973 as of March 31, 2004. As of December 31, 2003, these receivables amounted to R$170,363. They are classified in long-term assets.

(iii) Agreement with the Department of Water and Electric Power (DAEE)

This agreement, signed on April 24, 1997, between DAEE and SABESP has the purpose of establishing joint operations for interconnecting the Tietê River with the Biritiba Reservoir and the interconnection of this Reservoir to the Jundiaí Reservoir, for optimizing the Alto Tietê Basin by adding 5.0 m3/s of water. DAEE grants a concession to SABESP for the use of the water for a 30-year period.

6. PROPERTY, PLANT AND EQUIPMENT

  March 2004 Dec 2003 
 

  Accumulated  
  Cost  depreciation Net  Net 
 



             
In use:            
Water systems:            
Land 930,239  - 930,239  928,115 
Buildings 2,600,514  (1,126,567) 1,473,947  1,489,224 
Connections 749,182  (268,252) 480,930  480,947 
Water meters 251,947  (115,667) 136,280  138,885 
Networks 3,059,442  (804,051) 2,255,391  2,234,301 
Equipment 231,656  (123,249) 108,407  106,963 
Other 434,401  (157,091) 277,310  275,291 
 



  8,257,381  (2,594,877) 5,662,504  5,653,726 
 



Sewage systems:            
Land 348,202  - 348,202  347,938 
Buildings 1,327,528  (408,208) 919,320  893,074 
Connections 775,961  (265,451) 510,510  507,895 
Networks 4,273,867  (869,629) 3,404,238  3,250,079 
Equipment 444,219  (263,173) 181,046  174,542 
Other 11,736  (2,162) 9,574  7,425 
 



  7,181,513  (1,808,623) 5,372,890  5,180,953 
 



General use:            
Land 102,527  - 102,527  102,527 
Buildings 116,612  (56,211) 60,401  60,886 
Transportation equipment 130,670  (109,431) 21,239  23,164 
Furniture, fixtures and equipment 274,164  (141,920) 132,244  131,325 
Free lease land 25,312  - 25,312  25,312 
Free lease assets 9,618  (3,027) 6,591  6,591 
 



  658,903  (310,589) 348,314  349,805 
 



  16,097,797  (4,714,089) 11,383,708  11,184,484 
 



Construction in progress:            
Water systems 528,386  - 528,386  579,650 
Sewage systems 1,420,506  - 1,420,506  1,590,264 
Other 21,553  - 21,553  22,228 
 



  1,970,445  - 1,970,445  2,192,142 
 



Intangible assets (e) 744,386  - 695,679  686,622 
 



Total 18,812,628  (4,762,796) 14,049,832  14,063,248 
 



a) Depreciation

Depreciation is calculated at the following annual rates: buildings – 4%; connections – 5%; water meters – 10%; networks – 2%; transportation equipment – 20%; furniture, fixtures and equipment – 10 to 20%, and other – 2 to 20%.

b) Construction in progress

Estimated disbursement for the period from April 2004 to 2009, related to construction works already contracted, is approximately R$648,000 (unaudited).

c) Disposals of property, plant, and equipment:

In the first quarter of 2004, the Company wrote off property, plant and equipment items in the amount of R$3,142, which resulted in a loss of R$2,966 (2003 - R$31,196), related to items in use, due to obsolescence, theft and sale.

d) Expropriations

As a result of the construction of priority projects related to water and sewage systems, the Company was required to expropriate or establish rights of way in third-party properties, in conformity with the related legislation. The owners of these properties will be compensated either amicably or through the courts. The amount of compensation to be paid starting in the second quarter of 2004, without estimated date for actual disbursement, is estimated at approximately R$230,000 which will be paid with internal funds. The assets to be received as a result of these negotiations will be recorded as property, plant, and equipment after the transaction is completed. In the first quarter of 2004, the total recorded as property, plant and equipment from expropriations was R$325 (2003 - R$976).

e) Tax effects on the revaluation of assets

As permitted by CVM Instruction No. 197/93, the Company did not record accruals for the tax effects (deferred taxes) on the revaluation write-up recorded as a result of the revaluations of property, plant, and equipment carried out in 1990 and 1991. Had this effect been accounted for, the unrealized amount as of March 31, 2004 would be R$519,201 ( 2003 - R$526,900). In the period from January to March 2004, the realization of the revaluation reserve amounted to R$23,006 (January to March 2003 - R$52,936).

f) Intangible assets

Starting in 1999, negotiations for new concessions are made on the basis of the economic and financial results of the transaction determined in appraisal reports issued by independent experts.

The amount defined in the respective contract, after the transaction is closed with the municipal authorities, with payment through Company shares or in cash, is recorded in this account and amortized over the concession period.

7. LOANS AND FINANCING

  Loan debt balance
March 2004

December 2003
Final Annual Monetary  
  Current  Long-term  Total  Current  Long-term  Total  maturity  interest rate  restatement  Collaterals 
In local currency:                              
Federal Government/Banco do Brasil 160,508  2,259,921  2,420,429  156,592  2,293,260  2,449,852  2014  8.5% UPR  GESP 
Debentures 3rd Issue 366,597  - 366,597  366,465  - 366,465  2004  CDI+2.85% 
Debentures 4th Issue 100,001  174,999  275,000  100,001  199,999  300,000  2006  CDI+1.2% 
Debentures 5th Issue - 433,792  433,792  - 430,625  430,625  2007  CDI + 2.0% and 12.7%  IGPM 
Caixa Econômica Federal 37,291  478,857  516,148  36,415  486,282  522,697  2007 to 2018  5% to 9.5%  UPR  Own funds 
Brazilian Economic and Social Development Bank - BNDES - 119,253  119,253  - 102,181  102,181  2012  3% + TJLP  Own funds 
Other 2,299  25,422  27,721  2,285  25,528  27,813  2009/11  12% / CDI  UPR 
Interest and charges 54,254  - 54,254  51,942  - 51,942             
 





  720,950  3,492,244  4,213,194  713,700  3,537,875  4,251,575             
 





In foreign currency:                           
International Bank for Reconstruction and Development (World Bank): US$15,614,000 12,976  32,439  45,415  53,789  32,452  86,241  2007  4.85% Var.basket of currencies +US$  Federal Gov. 
Société Générale: € 2,746,000 2,916  6,924  9,840  2,971  7,055  10,026  2006  4.49% €  Federal Gov. 
Interamerican Development Bank (IDB): US$454,358,000 110,645  1,210,901  1,321,546  110,199  1,187,499  1,297,698  2007/25  3% to 7.7%  Var. basket of currencies  Federal Gov. 
Eurobonds: US$500,000,000 - 1,454,300  1,454,300  - 1,444,600  1,444,600  2005/08  10% - 12%  US$ 
Deutsche Bank Luxembourg: US$40,000,000 58,172  58,172  116,344  57,784  57,784  115,568  2005  11.125% US$ 
Interest and charges 68,272  - 68,272  58,555  - 58,555             
 





  252,981  2,762,736  3,015,717  283,298  2,729,390  3,012,688             
 





Total 973,931  6,254,980  7,228,911  996,998  6,267,265  7,264,263             
 





UPR: Standard Reference Unit TJLP: Long-term interest rate
VARIATION OF BASKET OF CURRENCIES: Amount related to IDB and IBRD EUR: Euro
CDI: Interbank Deposit rate IGP-M: General Market Price Index

In March 2004, the Company paid the last installment of contract No. 3102 to the International Bank for Reconstruction and Development (IBRD), in the amount of R$40,756, related to principal and interest.

In March 2004, the Company started the amortization of the principal of the 4th issue debentures, payable in 12 quarterly installments of R$25,000.

8. INCOME AND SOCIAL CONTRIBUTION TAXES

a) Balance sheet and income statement amounts

  March 2004 December 2003
 

       
In current assets: (i)      
Income tax available for offset 9,046  -
Social contribution tax available for offset 2,108  1,140 
 

  11,154  1,140 
 

       
Deferred income tax 2,871  2,849 
Deferred social contribution tax 26,843  26,835 
 

  29,714  29,684 
 

       
In long-term assets: (ii)      
Deferred income tax 143,205  133,354 
Deferred social contribution tax 88,077  89,450 
 

  231,282  222,804 
 

       
In current liabilities:      
Income tax - 4,396 
 

  - 4,396 
 

       
Deferred PASEP (tax on revenue) 19,851  15,850 
Deferred COFINS (tax on revenue) 38,771  29,652 
 

       
  58,622  45,502 
 

       
In long-term liabilities: (iii)      
Deferred income tax 65,408  63,751 
Deferred social contribution tax 19,038  18,440 
Deferred PASEP 11,277  13,812 
Deferred COFINS 21,376  25,114 
 

  117,099  121,117 
 

b) Deferred Taxes

(i) In current assets

Mainly calculated on temporary differences totaling R$11,481 (2003 - R$11,395). As of March 31, 2004, social contribution tax loss carryforwards are R$286,776 (2003 - R$286,776).

(ii) In long-term assets

Mainly calculated on temporary differences totaling R$572,820 (2003 - R$533,417) related to income tax, and R$584,742 (2003 - R$545,340) related to social contribution tax.

The Company is claiming in court the right to fully offset the tax loss carryforwards without the 30% annual limitation imposed by Law No. 8,981/95; however, the portion offset in the year was within the limitation established in this law. As of March 31, 2004, social contribution tax loss carryforwards total R$393,884 (2003 - R$448,548).

In compliance with CVM Resolution No. 273/98 and CVM Instruction No. 371/02, the realization of credits arising from tax loss carryforwards and temporary differences should occur by the end of 2006, based on budget projections, as follows:

Estimated realization

Year 2004  2005  2006  Total





Realization 40% 48% 12% 100%

(iii) In long-term liabilities

Mainly calculated on temporary differences totaling R$261,633 (2003 - R$255,003) related to income tax and R$211,527 (2003 - R$204,897) related to social contribution tax.

c) Reconciliation of the effective tax rate

The amount recorded as income and social contribution tax expense in the financial statements is reconciled to the statutory rates, as shown below:

  1st quarter/2004 1st quarter/2003
 

 
Income before taxes on income 178,491  281,618 
 

Cost at 34% statutory rate (60,687) (95,750)
Reconciliation:      
Additions:      
Nondeductible realization of the revaluation reserve (7,822) (17,998)
Exclusions:      
Interest on capital 13,362  13,653 
Other differences 923  (869)
 

Income and social contribution taxes in the results of operations (54,224) (100,964)
 

The effective tax rate for the quarter was affected by contingent liabilities (customers and suppliers), actuarial liability and realization of the revaluation reserve.

9. PAES – Special Installment Payment Plan

The Company applied for enrollment in PAES on July 15, 2003, in accordance with Law No. 10,684 of May 30, 2003, and included in its application the debts related to COFINS and PASEP which were involved in a legal action challenging application of Law No. 9718/98, and the outstanding balance under the Tax Recovery Program (REFIS), amounting to R$316,953. The debt, which is pending confirmation by the Federal Revenue Authorities, plus interest based on the TJLP, will be paid in 120 months.

After enrolling in the PAES program, from July to March 2004, the Company paid R$24,657 and accrued R$22,147 for charges.

The assets pledged as guarantee under the REFIS program, in the amount of R$249,034, remain as guarantee under the PAES program.

10. PROVISIONS AND CONTINGENCIES

a) Provisions in long-term liabilities

The Company, based on an analysis with its lawyers, recorded a reserve for contingencies in the amount of R$409,850 (December 2003 - R$384,571), considered sufficient to cover probable losses in legal actions.

(i) Labor claims - the Company is a defendant in various labor claims, and a significant portion of the involved amounts is under provisional or definitive execution. This amount is thus classified as a probable loss, and a reserve has been duly recorded. The reserve refers mainly to claims concerning overtime payment and health hazard premium, which are currently at various court levels.

(ii) Suppliers - refer to lawsuits filed by service providers arising from construction contracts, which have already been judged by lower courts and await decision on the appeals filed by SABESP.

(iii) Customers - these amounts refer to various lawsuits filed by customers seeking tariff parity, currently in trial or appellate courts, where decisions have been both favorable and unfavorable to the Company.

b) Lawsuits

The Company is a party to judicial and administrative lawsuits related to environmental, tax, civil and labor issues, whose chances of success/loss are considered by legal counsel as possible, and are not being recorded in the Company’s accounting books. The amount involved in these lawsuits is approximately R$572,800 as of March 31, 2004 (R$459,700 in December 2003).

11. EMPLOYEE ASSISTANCE AND PENSION PLANS

The Company sponsors Fundação Sabesp de Seguridade Social - SABESPREV, established in August 1990 with the primary purpose of managing SABESP employees’ supplementary pension plans and assistance plan.

Monthly contributions to the defined-benefit plan are as follows: 2.10% refer to Company’s contributions, and 2.10% refer to participating employees’ contributions.

The participating employees’ contributions mentioned above is an average, since the discount amount varies according to the salary range, from 1% to 8.5%.

The assistance plan provides optional, freely-chosen health plans maintained by contributions from the Company and participants, which were as follows in period:

12. EMPLOYEES’ BENEFITS

In order to comply with CVM Resolution No. 371 of December 13, 2000, the amounts of the pension plan benefits granted or to be granted, to which employees are entitled after retirement, are presented below.

As of December 31, 2003, based on the report of the independent actuary, SABESP had a net actuarial liability of R$305,184 representing the difference between the present value of the Company’s obligations to the participating employees, retired employees, and pensioners, and the value of the related assets

The Company opted to record the liability over a five-year period starting in 2002. The actuarial liability as of March 31, 2004, in the amount of R$164,649 (2003 – R$145,540), is recorded in long-term liabilities.

  1st quarter 2004
 
Repass to Sabesprev 3,291 
Recorded actuarial liability 19,109 
 
Total recorded 22,400 
 

The amount related to cost of past service is recorded as an “Extraordinary item” net of taxes.

13. PROFIT SHARING

As a result of negotiations held by the Company with entities representing the employees, a Profit Sharing Program was implemented for the period from July 2003 to June 2004, with the payment of an amount corresponding to up to one month’s payroll, depending on achievement of targets.

In December 2003, the Company paid an advance of R$20,382, equivalent to 50% of one month’s payroll. The Company accrued the amount of R$10,192 for the quarter, recorded in current liabilities, with additional payment scheduled for the end of August 2004.

14. FINANCIAL INSTRUMENTS

(a) Market value of financial instruments

The Company’s management calculates the market value of these financial instruments on an annual basis.

(b) Credit risk concentration

A substantial part of sales is dispersed among a large number of customers. In the case of these customers, the credit risk is minimum due to the large portfolio and control procedures, which monitor this risk. Doubtful receivables are properly covered by a provision for loss on their realization.

(c) Foreign currency

Foreign currency operations comprise financing for specific works related to improvement and expansion of the water supply and sewage systems.

15. OPERATING COSTS AND EXPENSES

  Jan-Mar/04 Jan-Mar/03
 

1. Cost of sales and services:      
Payroll and related charges 193,879  167,967 
General supplies 17,945  17,170 
Treatment supplies 27,355  26,868 
Outside services 54,263  47,879 
Electric power 96,385  74,810 
General expenses 7,626  8,493 
Depreciation and amortization 138,955  130,015 
 

  536,408  473,202 
2. Selling expenses:      
Payroll and related charges 32,646  25,552 
General supplies 1,544  1,218 
Outside services 14,035  21,278 
Electric power 200  209 
General expenses 10,431  6,908 
Depreciation and amortization 620  572 
Write-off of receivables 39,530  24,219 
 

  99,006  79,956 
3. General and administrative expenses:      
Payroll and related charges 26,785  21,733 
General supplies 761  885 
Outside services 20,654  9,746 
Electric power 202  199 
General expenses 11,102  6,383 
Depreciation and amortization 3,928  3,029 
Tax expenses 6,755  6,447 
 

  70,187  48,422 
4. Costs, selling and general and administrative expenses (1+2+3):      
Payroll and related charges 253,310  215,252 
General supplies 20,250  19,273 
Treatment supplies 27,355  26,868 
Outside services 88,952  78,903 
Electric power 96,787  75,218 
General expenses 29,159  21,784 
Depreciation and amortization 143,503  133,616 
Tax expenses 6,755  6,447 
Write-off of receivables 39,530  24,219 
 

  705,601  601,580 
5. Financial expenses:      
Interest, fines and late payment charges on loans and financing – in local currency 111,060  133,307 
Interest, fines and late payment charges on loans and financing - in foreign currency 56,742  65,686 
Interest on capital 39,302  40,156 
Interest on capital (reversal) (39,302) (40,156)
Other expenses on loans 82  5,563 
Income tax on remittances abroad 6,021  12,740 
Other financial expenses 8,046  11,382 
Monetary variations on loans and financing 13,466  44,828 
Exchange variations on loans and financing 17,634  (162,181)
Other monetary and exchange variations 1,349  1,771 
Provisions 13,807  7,388 
 

  228,207  120,484 
 

6. Financial income:      
Monetary variations 11,739  11,919 
Income from temporary cash investments 6,838  18,089 
Interest 6,049  8,698 
 

Total financial income 24,626  38,706 
       
COFINS and PASEP (taxes on financial income) (1,954) (1,800)
COFINS and PASEP Credit 2,719  3,031 
 

  765  1,231 
 

Total financial income, net 25,391  39,937 
 

Financial expenses, net 202,816  80,547 
 

16. INDEMNITIES RECEIVABLE

The Municipalities of Diadema and Mauá terminated the concessions for water supply and sewage collection at the beginning of 1995.

In December 1996, the Company filed claims to seek compensation for investments made during the terms of the concession agreements.

Although the Company has not yet been compensated for these investments, water is still supplied on a bulk basis to these municipalities, which currently operate their own water distribution and sewage collection systems.

The net book value of property, plant, and equipment relating to the Municipality of Diadema, written off in December 1996, amounted to R$75,231, and the claim balance and other receivables from the municipality amounting to R$62,876 are recorded under long-term receivables as “Indemnities receivable”.

The net book value of property, plant and equipment relating to the Municipality of Mauá, written off in December in 1999, amounted to R$103,763, and the claim balance of R$85,918 is recorded under long-term receivables as “Indemnities receivable”.

Both claims are pending court decisions, although the legal counsel conducting the litigation expects a favorable outcome for the Company.

As regards the Municipality of Mauá, in February 2003 an examining trial was held. Presently, the case is awaiting the judge’s decision as to the significance of the queries resulting from the examining trial.

After this phase, the usual procedure is that the parties manifest their intent, and subsequently the case is sent for judgment. In June 2003, the records were taken away by the judicial expert, who still holds them.

As regards the Municipality of Diadema, there are various claims challenging the settlement reached by the parties, including a class action and an action for annulment, both of which were judged in favor of SABESP.

17. SHAREHOLDERS’ EQUITY

a) Authorized capital

The Company is authorized to increase its capital up to a maximum of R$4,100,000, corresponding to 40,000,000,000 registered common shares without par value.

b) Subscribed and paid-up capital

Subscribed and paid-up capital is represented by 28,479,577,827 registered common shares without par value, held as follows:

  March 2004 December 2003
 

Shareholders Number of shares Number of shares





 
São Paulo State Finance Department 20,376,674,058  71.55  20,376,674,058  71.55 
Shares held in custody by Stock Exchanges 8,073,374,511  28.33  8,073,310,852  28.33 
Other 29,529,258  0.12  29,592,917  0.12 
 



  28,479,577,827  100.00  28,479,577,827  100.00 
 



c) Remuneration of shareholders

Shareholders are entitled to a mandatory minimum dividend distribution of 25% of adjusted net income, calculated in conformity with Brazilian corporate law.

Interest declared in 2004 will be paid up to 60 days after the Annual Shareholders’ Meeting that approves the balance sheet.

d) Capital reserve

Comprises tax incentives and donations from government entities.

e) Revaluation reserve

As permitted by CVM Instruction No. 197/93, the Company opted not to recognize income and social contribution taxes on the revaluation reserve for property, plant and equipment items recorded up to 1991.

The revaluation reserve is transferred to retained earnings in proportion to the depreciation and disposal of the respective assets.

f) Changes in retained earnings

 

  Mar/04  Dec/03 
 

Beginning balance
Realization of revaluation reserve 23,006  134,245 
Net income 115,486  833,320 
Legal reserve (41,666)
Interest on capital (39,302) (504,089)
Investment reserve (421,810)
 

Ending balance 99,190 
 

18. INCENTIVE PROGRAM FOR WATER CONSUMPTION REDUCTION

SABESP has implemented the Incentive Program for Water Consumption Reduction, the purpose of which is to encourage the population of the São Paulo Metropolitan Area to reduce water use, in order to help face the water shortage caused by the low rainfall levels and the resulting low water levels in the reservoirs that supply the region.

The program will encompass the municipalities of the Metropolitan Region supplied by the metropolitan aqueduct system and will be effective for six months starting March 15, 2004.

A 20% discount on the water bill, or on the water and sewage bill, will be granted in the months when consumption is reduced by 20% in relation to the average consumption calculated by SABESP, based on the consumption in the same period of the previous year.

05.01. Comment on the Company’s Performance in the Quarter

1. Sabesp had a 9.5% increase in revenue while EBITDA remained unchanged.

    (R$ million)

Main indicators 1Q03  1Q04  Variation

Net operating revenue 993.5  1,087.4  9.5%
Operating revenue before financial expenses 391.9  381.8  (2.6%)
EBITDA (*) 525.5  525.3 
EBITDA margin 52.9% 48.3%
Net income 171.9  115.5  (32.8%)

(*)

Earnings before interest, taxes, depreciation and amortization.

Sabesp had a net revenue of R$1,087.4 million, and EBITDA of R$525.3 million in 1Q04. Net income for the period, of R$115.5 million, was mainly due to increase in operating revenue.

2. Operating revenue – 9.5% growth

Net operating revenue increased by R$93.9 million or 9.5%, as a result of the 18.95% tariff adjustment starting August 29, 2003.

The volumes of retail water and sewage billed decreased 2.6%, influenced by the strong campaign for rational use of water, in order to face the low levels of the reservoirs that feed the São Paulo Metropolitan Region.

The tables below show the volume of retail water and sewage billed according to the user category and region, in the first quarters of 2003 and 2004:

VOLUME OF RETAIL WATER AND SEWAGE BILLED - millions of m3
User Category Water Var.% Sewage Var.% Water+Sewage Var.%
1Q03 1Q04 1Q03 1Q04 1Q03 1Q04
Residential 309.1  300.4  (2.8) 234.9  230.0  (2.1) 544.0  530.4  (2.5)
Commercial 36.3  34.9  (3.9) 31.5  30.7  (2.5) 67.8  65.6  (3.2)
Industrial 7.7  7.5  (2.6) 7.2  7.5  4.2  14.9  15.0  0.7 
Public 11.3  10.6  (6.2) 8.8  8.3  (5.7) 20.1  18.9  (6.0)
Total 364.4  353.4  (3.0) 282.4  276.5  (2.1) 646.8  629.9  (2.6)


VOLUME OF RETAIL WATER AND SEWAGE BILLED - millions of m3
Region Water Var.% Sewage Var.% Water+Sewage Var.%
1Q03 1Q04 1Q03 1Q04 1Q03 1Q04
SP Metropolitan region 236.4  229.4  (3.0) 186.8  183.3  (1.9) 423.2  412.7  (2.5)
Regional (*) 128.0  124.0  (3.1) 95.6  93.2  (2.5) 223.6  217.2  (2.9)
Total 364.4  353.4  (3.0) 282.4  276.5  (2.1) 646.8  629.9  (2.6)
(*)

Comprising the Coastal and Interior regions of the State

3. Costs, Administrative and Selling Expenses

Costs, Administrative and Selling Expenses increased R$104.0 million or 17.3%. The main differences were as follows:

      (R$ million)
 
  1Q03  1Q04  Difference

Payroll and related charges 215.3  253.3  38.0  17.7 
General supplies 19.3  20.2  0.9  4.7 
Treatment supplies 26.9  27.4  0.5  1.9 
Outside services 78.9  88.9  10.0  12.7 
Electric power 75.2  96.8  21.6  28.7 
General expenses 21.8  29.2  7.4  33.9 
Depreciation and amortization 133.6  143.5  9.9  7.4 
Write-off of receivables 24.2  39.5  15.3  63.2 
Tax expenses 6.4  6.8  0.4  6.3 

Costs, administrative and selling expenses 601.6  705.6  104.0  17.3 

3.1. Payroll and related charges

Payroll and related charges increased by R$38.0 million or 17.7%. This growth was mainly due to the following factors:

a) A 14.5% increase in salaries, benefits and payroll charges after May 2003, as a result of the collective labor agreement;

b) Allocation of 2% of payroll to employees’ salary adjustment (starting September 2003), related to the Competency-Based Management Plan.

3.2. General supplies

General supplies increased by R$0.9 million or 4.7%, mainly in relation to maintenance of residential connections and Company’s networks.

3.3. Outside services

Services increased by R$10.0 million or 12.7%, as a result of increases in advertising and publicity, and professional technical services.

3.4. Electric power

Electric power increased by R$21.6 million or 28.7%, due to the following factors:

a) Consumption growth from 509,233 MWh (1Q03) to 513,928 MWh (1Q04), or 0.9 %;
b) A 0.45% growth due to collection of the Emergency Capacity Charge (ECE), resulting in an increase from R$5.7 /MWh to R$8.5 /MWh;
c) Adjustments authorized by ANEEL for several electric energy concessionaires that provide services to Sabesp, with a weighted average increase in electric energy tariffs of 15.69% between April 2003 and March 2004.
d) Estimated consumption, based on water meter reading by the concessionaires.

3.5. General expenses

General expenses increased by R$7.4 million or 33.9%, mainly as a result of reserves for environmental contingencies.

3.6. Depreciation and amortization

Depreciation and amortization increased by R$9.9 million or 7.4%, due to the addition, to the Company’s property, plant and equipment in use, of construction in progress, mostly in the first quarter of 2004.

4. Financial Expenses and Monetary Variations on Liabilities

a) Financial Expenses

Financial expenses decreased by R$40.3 million or 17.1%, due to:

b) Exchange and Monetary Variations on Liabilities

Exchange and monetary variations on liabilities decreased by R$148.0 million, due to the 5.1% appreciation of the Brazilian real against the US dollar in 1Q03 when compared to the 0.67% devaluation in 1Q04, which affected loans denominated in foreign currency.

5. Operating indicators

As shown in the table below, the Company is still expanding its services. The inclusion of the municipality of São Bernardo do Campo generated a significant increase in the number of water and sewage connections when compared to the prior year.


Main Operating Indicators 1Q03  1Q04 

Water connections (1) 5,935  6,231  5.0 
Sewage connections (1) 4,349  4,621  6.3 
Population served - water (2) 21.2  22.0  3.8 
Population served - sewage (2) 16.9  17.9  5.9 
Billed volume – bulk water (3) 86.6  63.1  (27.1)
Billed volume – retail water (3) 364.4  353.4  (3.0)
Billed volume – sewage (3) 282.4  276.5  (2.1)
Number of employees 18,417  18,091  (1.8)
Operating productivity (4) 558  600  7.5 

(1)

In thousand units at the end of the period

(2)

In millions of inhabitants at the end of the period (not including bulk supply)

(3)

In millions of m3

(4)

Number of water and sewage connections per employee

6. Funding operations

Sanitation Program

In 2003, SABESP signed 16 financing agreements for water and sewage construction work with FGTS funds, whose financial agent is the federal savings bank - Caixa Econômica Federal, subject to interest of 8.0% p.a. + Reference Rate (TR) for water, and 6.5% p.a. + TR for sewage, plus management fee of 2% p.a. and credit risk rate from 2 to 2.5% p.a., with a maximum grace period of 36 months and an amortization period of 180 months. Funds in the amount of R$ 324.5 million were financed for a R$ 361 million investment, of which R$ 36.5 million was provided from the Company’s own funds.

Sanitation Program - 2004

SABESP has filed with the Ministry of Cities, through Caixa Econômica Federal - financial agent of the FGTS, a request to obtain financing for 40 new projects in the amount of R$ 714.2 million (total investment of R$ 794.6 million), under the Water and Institutional Development formats. The consultation letters referring to the 40 projects are with the Ministry of Cities (FGTS fund management body) for first selection, seeking to contract the credit operation by the end of May 2004, in accordance with National Monetary Council Resolution No. 3,191 of April 29, 2004.

BNDES

SABESP is concluding all the procedures for the signing, in the second half of 2004 , of a R$ 300 million new financing, of which R$ 140 million is for payment of the federal government’s contribution to the Environmental Recovery Program of the Santos Metropolitan Region, which will be financed by the JBIC for sewage projects, and R$ 160 million to finance water projects contractually agreed upon by the JBIC for the Santos Metropolitan Region. The payment conditions will be 4.5% p.a. (3% p.a. + 1.5% p.a. of credit risk rate) + TJLP (Long-Term Interest Rate) for water, and 2.5% p.a. (1% p.a. + 1.5% p.a. of credit risk rate) + TJLP for sewage, with a 10-year term, including a 3-year grace period.

Japan Bank for International Cooperation (JBIC)

SABESP concluded negotiations with the JBIC to obtain financing in the amount of ¥ 21,320 million, equivalent to R$ 571.5 million, for the Environmental Recovery Program of the Santos Metropolitan Region, a project involving ¥ 39,221 million, equivalent to R$ 1,051.4 million, with SABESP contributing ¥ 17,901 million, equivalent to R$ 479.9 million.

The Legislature of the State of São Paulo passed Law No. 10,820/01, granting a counter-guarantee to the Federal Government’s guarantee. The financing has already been approved by COFIEX (Foreign Financing Commission), the Federal Government body that reviews and approves credit operations with foreign government agencies.

In August 2003, the “Agreement based on Exchange of Diplomatic Notes” was signed between the representatives of the governments of Brazil and Japan. This agreement was sent to the National Congress and was approved by the Chamber of Deputies, and is currently pending approval in the Federal Senate (Presidential Message No. 700/2003).

The operation’s financial conditions have already been duly approved by the Company’s Executive Board and Board of Directors.

The process related to the granting of the guarantee by the Federal Government to the JBIC will be submitted for approval by the Federal Senate. The respective process is undergoing final analysis in the National Treasury Secretariat (STN) and the Attorney General of the National Treasury (PGFN).

The program was included in the State’s budget for fiscal year 2004, Law No. 11,607, of December 29, 2003, and the Budget Guidelines Law, for fiscal year 2004, Law No. 11,437, of July 16, 2003.

The main future events are the signing of the financing agreement between SABESP and JBIC, scheduled for June 2004, following the finalization of the process of contracting the Program Manager.

7. Settlement of Loans and Financing

Total debts payable through the yearend amount to R$883 million, of which only 26.5% are indexed to the US dollar.

(R$ million)

INSTITUTION Apr-Dec 2005  2006  2007  2008  2009  2010 and TOTAL 
  2004            thereafter  

IN LOCAL CURRENCY                
Banco do Brasil 119  171  186  203  221  240  1,281  2,421 
Caixa Econômica Federal 31  37  40  44  52  44  268  516 
Debentures 442  245  244  144  1,075 
BNDES 17  17  17  17  46  119 
Other 28 
Interest and charges 54  54 

  649  462  491  411  294  305  1,601  4,213 

IN FOREIGN CURRENCY                
World Bank 13  13  13  46 
Société Génerale 10 
IDB 92  111  120  120  81  81  717  1,322 
Eurobonds 800  654  1,454 
Deutsche Bank Luxembourg 58  58  116 
Interest and charges 68  68 

  234  985  137  127  735  81  717  3,016 

Total 883  1,447  628  538  1,029  386  2,318  7,229 

10.01. CHARACTERISTICS OF PUBLIC OR PRIVATE DEBENTURE ISSUES



1 – ITEM 01 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM/SRE/DEB/1999-030 
4 – DATE OF REGISTRATION WITH CVM 03/18/1999 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 02/01/1999 
9 – DUE DATE 09/24/2004 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2.85% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 1,003.51 
14 – AMOUNT ISSUED (Thousand of reais) 115,403 
15 – DEBENTURES ISSUED (Units) 115,000 
16 – OUTSTANDING DEBENTURES (Units) 103,807 
17 – TREASURY DEBENTURES (Units) 11,193 
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 03/24/2003 
22 – DATE OF NEXT EVENT 06/24/2004 

1 – ITEM 02 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM/SRE/DEB/1999-031 
4 – DATE OF REGISTRATION WITH CVM 03/18/1999 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 02/01/1999 
9 – DUE DATE 09/24/2004 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2.85% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 1,003.51 
14 – AMOUNT ISSUED (Thousand of reais) 115,403 
15 – DEBENTURES ISSUED (Units) 115,000 
16 – OUTSTANDING DEBENTURES (Units) 103,198 
17 – TREASURY DEBENTURES (Units) 11,802 
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 03/24/2003 
22 – DATE OF NEXT EVENT 06/24/2004 

1 – ITEM 03 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM/SRE/DEB/1999-032 
4 – DATE OF REGISTRATION WITH CVM 03/18/1999 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 02/01/1999 
9 – DUE DATE 09/24/2004 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2.85% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 1,003.51 
14 – AMOUNT ISSUED (Thousand of reais) 115,403 
15 – DEBENTURES ISSUED (Units) 115,000 
16 – OUTSTANDING DEBENTURES (Units) 102,159 
17 – TREASURY DEBENTURES (Units) 12,841 
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 03/24/2003 
22 – DATE OF NEXT EVENT 06/24/2004 

1 – ITEM 04 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM/SRE/DEB/1999-033 
4 – DATE OF REGISTRATION WITH CVM 03/18/1999 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 02/01/1999 
9 – DUE DATE 09/24/2004 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2.85% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 1,003.51 
14 – AMOUNT ISSUED (Thousand of reais) 51,847 
15 – DEBENTURES ISSUED (Units) 51,666 
16 – OUTSTANDING DEBENTURES (Units) 41,005 
17 – TREASURY DEBENTURES (Units) 10,661 
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 03/24/2003 
22 – DATE OF NEXT EVENT 06/24/2004 

1 – ITEM 05 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM/SRE/DEB/1999-034 
4 – DATE OF REGISTRATION WITH CVM 03/18/1999 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 02/01/1999 
9 – DUE DATE 09/24/2004 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2.85% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 1,003.51 
14 – AMOUNT ISSUED (Thousand of reais) 16,485 
15 – DEBENTURES ISSUED (Units) 16,428 
16 – OUTSTANDING DEBENTURES (Units) 16,428 
17 – TREASURY DEBENTURES (Units)
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 03/24/2003 
22 – DATE OF NEXT EVENT 06/24/2004 

1 – ITEM 06 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM\SRE\DEB\2001-022 
4 – DATE OF REGISTRATION WITH CVM 06/04/2001 
5 – ISSUED SERIES SOLE 
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 04/01/2001 
9 – DUE DATE 12/15/2006 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 1.2% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 9,237.18 
14 – AMOUNT ISSUED (Thousand of reais) 277,115 
15 – DEBENTURES ISSUED (Units) 30,000 
16 – OUTSTANDING DEBENTURES (Units) 30,000 
17 – TREASURY DEBENTURES (Units)
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION   
22 – DATE OF NEXT EVENT 06/15/2004 

1 – ITEM 07 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM\SRE\DEB\2002-013 
4 – DATE OF REGISTRATION WITH CVM 05/14/2002 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 04/01/2002 
9 – DUE DATE 03/01/2007 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS CDI RATE + 2% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 10,419.76 
14 – AMOUNT ISSUED (Thousand of reais) 326,888 
15 – DEBENTURES ISSUED (Units) 31,372 
16 – OUTSTANDING DEBENTURES (Units) 31,372 
17 – TREASURY DEBENTURES (Units)
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 10/01/2003 
22 – DATE OF NEXT EVENT 04/01/2004 

1 – ITEM 08 
2 – ORDER NUMBER
3 – CVM REGISTRATION NUMBER CVM\SRE\DEB\2002-014 
4 – DATE OF REGISTRATION WITH CVM 05/14/2002 
5 – ISSUED SERIES
6 – TYPE OF ISSUE SIMPLE 
7 – NATURE OF ISSUE PUBLIC 
8 – ISSUE DATE 04/01/2002 
9 – DUE DATE 03/01/2007 
10 – TYPE OF DEBENTURE WITHOUT PREFERENCE 
11 – REMUNERATION CONDITIONS IGP-M + 12.7% PER ANNUM 
12 – PREMIUM/DISCOUNT NONE 
13 – NOMINAL VALUE (reais) 15,729.98 
14 – AMOUNT ISSUED (Thousand of reais) 135,718 
15 – DEBENTURES ISSUED (Units) 8,628 
16 – OUTSTANDING DEBENTURES (Units) 8,628 
17 – TREASURY DEBENTURES (Units)
18 – REDEEMED DEBENTURES (Units)
19 – CONVERTED DEBENTURES (Number)
20 – DEBENTURES TO PLACE (Number)
21 – DATE OF LAST RENEGOTIATION 10/01/2003 
22 – DATE OF NEXT EVENT 04/01/2004 


16.01. OTHER INFORMATION CONSIDERED RELEVANT BY THE COMPANY



Supplementary information

In order to provide improved information to the market, the Company is also presenting as supplementary information its statements of cash flows prepared in accordance with IBRACON Accounting Standard No. 20, and the supplementary information in constant purchasing power.

1. SUPPLEMENTARY INFORMATION – STATEMENTS OF CASH FLOW

    (R$ million)
Description Jan-Mar/04 Jan-Mar/03
 

Cash flow from operating activities
Net income 115,486  171,873 
Adjustments to reconcile net income:
Deferred income and social contribution taxes 594  (58,151)
Reserve for contingencies 25,366  32,611 
Social security charges 19,109  19,299 
Property, plant and equipment received in donation (private sector) (301)
Loss on disposal of property, plant and equipment 2,966  31,196 
Depreciation 135,202  127,175 
Amortization 8,301  6,441 
Interest on loans and financing payable 173,955  208,864 
Monetary and exchange variations on loans and financing 31,100  (117,353)
Monetary variation on interest on capital 1,104 
Allowance for doubtful accounts 39,530  24,219 
   
(Increase) decrease in assets:
Customers (78,965) (100,027)
Receivables from shareholders (18,473)
Inventories 1,156  4,360 
Income and social contribution taxes available for offset (10,014)
Other receivables (6,423) 61,180 


Description Jan-Mar/04 Jan-Mar/03
 

Customers – long-term (10,706) (877)
Receivables from shareholders – GESP Agreement (12,712)
Receivables from shareholders – GESP Agreement (15,610)
Escrow deposits 75  490 
Other long-term receivables (801) (913)
 
Increase (decrease) in liabilities:
Suppliers (25,498) (12,259)
Payroll and related charges 6,090  16,753 
Interest on capital payable (1,704)
Taxes payable (20,348) 91,914 
Other payables (35,904) (5,053)
Long-term liabilities – taxes payable (1,764) (14,191)
Other long-term liabilities 891 
 
Cash provided by operating activities 341,879  467,374 
Cash flow from investing activities:
Purchase of property, plant and equipment (124,242) (108,323)
Disposal of property, plant and equipment 176 
Increase in deferred charges (68) (2,502)
Cash used in investing activities (124,134) (110,825)
Cash flow from financing activities:      
Loans and financing – long-term:
Funding operations 51,893  16,520 
Payments (298,488) (345,434)
Interest on capital      
Interest on capital paid (1,389) (3,535)
Matching of accounts (19,267)
Cash used in financing activities (267,251) (332,449)


Description Jan-Mar/04 Jan-Mar/03
 

Increase (decrease) in cash and cash equivalents (49,506) 24,100 
 
Cash and cash equivalents at beginning of period 281,013  414,671 
Cash and cash equivalents at end of period 231,507  438,771 
 
Supplementary cash flow information:      
Interest and fees paid on loans and financing 165,853  236,933 
Capitalization of interest and financial charges 6,188  (2,187)
Income and social contribution taxes paid 67,710 
Property, plant and equipment received in donation and/or paid with shares 316  539 
Cofins and Pasep paid 52,744  31,113 

2. SUPPLEMENTARY INFORMATION IN CONSTANT PURCHASING POWER

a) Restatement index

The restatement of permanent assets, shareholders’ equity, income and expense accounts, and the calculation of gains and losses on monetary items was based on the Accounting Monetary Unit (UMC), which considers as a basis the General Market Price Index (IGP-M), which was 2.72% for the quarter.

b) Balance sheet accounts

Monetary assets and liabilities shown in the financial statements in constant purchasing power are the same as those shown as under “corporate law”, except accounts receivable from customers, accounts payable to suppliers and contractors, and deferred income and social contribution taxes in long-term liabilities, which are adjusted to reflect the purchasing power or realization value in currency as of March 31, 2004, taking as a basis the rate disclosed by the National Association of Investment Banks and Securities Dealers (ANBID).

Permanent assets and shareholders’ equity have been adjusted based on the monthly change in the UMC, which was restated based on the IGP-M index through March 31, 2004.

c) Income and expense accounts

All income and expense accounts were restated using the UMC from the month originally recorded, adjusted according to inflationary gains and losses calculated on the monthly beginning and ending balances of the monetary assets and liabilities generating financial income and expenses or nominal inflationary gains and losses which were considered as reductions of the income and expense accounts to which they are linked.

d) Deferred taxes

Deferred income and social contribution taxes were calculated based on the 15% tax rate plus surtaxes of 10% and 9%, respectively, on the increased value of the permanent asset items arising from their monetary restatement, in accordance with CVM instructions included in Pronouncement No. 99/006 from IBRACON (Brazilian Institute of Independent Auditors).

The amounts are in constant purchasing power as of March 31, 2004.

Balance sheet Nominal currency (R$ million)
Constant
purchasing
power
 

Total assets 16,568,612  32,173,493 
Current assets 1,162,961  1,160,492 
Long-term assets 1,308,242  1,308,242 
Permanent assets 14,097,409  29,704,759 
Investments 740  1,657 
Property, plant and equipment 14,049,832  29,620,502 
Deferred charges 46,837  82,600 
 

Total liabilities 16,568,612  32,173,493 
Current liabilities 1,662,552  1,662,216 
Long-term liabilities 7,252,617  11,880,871 
Shareholders’ equity 7,653,443  18,630,406 
Capital 3,403,688  8,238,415 
Capital reserves 51,055  95,131 
Revaluation reserves 2,700,714  6,594,213 
Profit reserves 1,398,796  3,626,369 
Retained earnings 99,190  76,278 
 



    (R$ million)
  January to March 2004
 
Statement of Income Nominal currency Constant
purchasing
power
 

Net revenue from sales and services 1,087,391  1,095,517 
Cost of sales and services (536,408) (709,638)
 

Gross profit 550,983  385,879 
Selling expenses (99,006) (100,660)
Administrative expenses (70,187) (75,145)
 



  January to March 2004
 
Statement of Income Nominal currency Constant
purchasing
power
 

Income before financial expenses 381,790  210,074 
Financial expenses, net (202,816) (30,162)
 

Income from operations 178,974  179,912 
Nonoperating expenses (483) (4,969)
 

Income before taxes and profit sharing 178,491  174,943 
Provision for income and social contribution taxes (55,953) (56,214)
Deferred income and social contribution taxes 1,729  8,444 
 

Extraordinary item, net of income and social contribution taxes (8,781) (8,926)
Net income 115,486  118,247 
 

Earnings per share 0.00406  0.00415 
 

Reconciliation between net income and shareholders’ equity

    (R$ million)
  Net income Shareholder’s equity
 

 
Corporate law 115,486  7,653,443 
Price-level restatements:
Of permanent assets 608,707  15,607,350 
Of shareholders’ equity (613,416)
Adjustment to present value - net 745  (2,133)
Reversal (provision) of taxes:
Income tax 4,945  (3,403,128)
Social contribution tax 1,780  (1,225,126)
 

In constant purchasing power 118,247  18,630,406 
 

3. NATIONAL BANK FOR ECONOMIC AND SOCIAL DEVELOPMENT (BNDES)

SABESP is concluding all the procedures for the signing, in the second half of 2004, of R$ 300 million in new financing, of which R$ 140 million is allocated for payment of the federal government’s contribution to the Environmental Recovery Program of the Santos Metropolitan Region, which will be financed by the JBIC for sewage projects, and R$ 160 million to finance water projects contractually agreed upon by the JBIC for the Santos Metropolitan Region. The payment conditions will be 4.5% p.a. (3% p.a. + 1.5% p.a. of credit risk rate) + TJLP (Long-Term Interest Rate) for water, and 2.5% p.a. (1% p.a. + 1.5% p.a. of credit risk rate) + TJLP for sewage, with a 10-year term, including a 3-year grace period.

This agreement should comply with the same covenants applicable to current agreements, such as:

4. CHANGE IN OWNERSHIP CONTROL OF CONTROLLING SHAREHOLDERS, BOARD MEMBERS AND DIRECTORS FROM MARCH 31, 2003 TO MARCH 31, 2004

  3/31/2003 New shareholders   No longer with the Company   3/31/04
Shareholders Number of shares % Shares Shares Sharequotas Number of shares %
Controlling shareholder 20,376,674,058 71.55       20,376,674,058  71.55
Board of Directors 17   90,000 (1)   90,016   
Executive Board 110,000
2,493,526*
       
(2,493,526)*
 
110,000
 
Fiscal Council               
Other shareholders 8,102,793,752          8,102,703,753  
Outstanding shares 8,102,903,752 28.45       8,102,903,753  28.45
Total shares 28,479,577,827 100.00 90,000 (1) (2,493,526)* 28,479,577,827  100.00
*

Sharequotas of investment fund based on Sabesp shares (each sharequota is equivalent to 20,000 shares)

5. OWNERSHIP CONTROL


Holders of more than 5% of the shares
São Paulo State Finance Department
Common Shares
20,376,674,058 
%
71.55 



Shareholder Common Shares 



 
MAJORITY SHAREHOLDER 20,376,674,058  71.55 
 
MANAGEMENT
Board of Directors 90,016 
Executive Board 110,000 
Fiscal Council
 
TREASURY SHARES
 
OTHER SHAREHOLDERS 8,102,703,753  28.45 
 
TOTAL 28,479,577,827  100.00 
 
SHARES OUTSTANDING IN THE MARKET 8,102,903,753  28.45 



17.01. UNQUALIFIED SPECIAL REVIEW REPORT

(Convenience Translation into English from the Original Previously Issued in Portuguese)

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Shareholders and Management of
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
São Paulo - SP

1. We have performed a special review of the accompanying interim financial statements of Companhia de Saneamento Básico do Estado de São Paulo - SABESP (the “Company”), consisting of the balance sheet as of March 31, 2004, and the related statement of income for the quarter then ended and the performance report, all expressed in Brazilian reais and prepared in accordance with Brazilian accounting practices under the responsibility of the Company’s management.

2. We conducted our review in accordance with specific standards established by the Brazilian Institute of Independent Auditors (IBRACON), together with the Federal Accounting Council, which consisted principally of: (a) inquiries of and discussions with persons responsible for the accounting, financial and operating areas as to the criteria adopted in preparing the quarterly financial statements, and (b) review of the information and subsequent events that had or might have had material effects on the financial position and operations of the Company.

3. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to in paragraph 1 for them to be in conformity with Brazilian accounting practices and standards established by the Brazilian Securities Commission (CVM), specifically applicable to the preparation of mandatory interim financial statements.

4. The supplementary information for the quarter ended March 31, 2004, consisting of the financial statements in constant purchasing power, and the statement of cash flows are presented for purposes of permitting additional analyses and are not a required part of the basic financial statements. This supplementary information was reviewed by us in accordance with the auditing procedures mentioned in paragraph 2 and, based on our review, we are not aware of any material modifications that should be made for them to be fairly presented, in all material respects, in relation to the financial statements taken as a whole.

5. We had previously audited the balance sheet as of December 31, 2003, presented for comparative purposes, and issued an unqualified opinion thereon, dated March 25, 2004. The statement of income for the quarter ended March 31, 2003, the supplementary information in constant purchasing power, and the statement of cash flows for the quarter then ended, presented for comparative purposes, were reviewed by other independent accountants, whose special review report thereon, dated May 9, 2003, was unqualified.

6. The accompanying interim financial statements have been translated into English for the convenience of readers outside Brazil.

São Paulo, May 12, 2004

DELOITTE TOUCHE TOHMATSU Marco Antonio Brandão Simurro
Auditores Independentes Engagement Partner


Contents

GROUP EXHIBIT DESCRIPTION PAGE
01 01 IDENTIFICATION 1
01 02 HEAD OFFICE 1
01 03 INVESTOR RELATIONS OFFICER (Company Mail Address) 1
01 04 GENERAL INFORMATION/INDEPENDENT ACCOUNTANT 1
01 05 CAPITAL COMPOSITION 2
01 06 CHARACTERISTICS OF THE COMPANY 2
01 07 COMPANIES EXCLUDED FROM THE CONSOLIDATED FINANCIAL STATEMENTS 2
01 08 DIVIDENDS APPROVED AND/OR PAID DURING AND AFTER THE QUARTER 2
01 09 SUBSCRIBED CAPITAL AND ALTERATIONS IN THE CURRENT YEAR 3
01 10 INVESTOR RELATIONS OFFICER 3
02 01 BALANCE SHEET – ASSETS 4
02 02 BALANCE SHEET – LIABILITIES AND SHAREHOLDERS’ EQUITY 6
03 01 STATEMENT OF INCOME 8
04 01 NOTES TO THE INTERIM FINANCIAL STATEMENTS 10
05 01 COMMENTS ON THE COMPANY'S PERFORMANCE IN THE QUARTER 37
10 01 CHARACTERISTICS OF PUBLIC OR PRIVATE DEBENTURE ISSUES 44
16 01 OTHER INFORMATION CONSIDERED RELEVANT BY THE COMPANY 52
17 01 SPECIAL REVIEW REPORT 54

 


 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city São Paulo, Brazil.

Date: June 7, 2004

 
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
By:
/S/  Rui de Britto Álvares Affonso

 
Name: Rui de Britto Álvares Affonso
Title: Economic-Financial Officer and Investor Relations Officer
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.