values in r$ ('000) chg.% 3q12 chg.% 2012 2011 chg ...€¦operating cash flow after recurring...

4Q12 Earnings Release

1

Belo Horizonte, March 19, 2013, Kroton Educacional S.A. (BM&FBovespa: KROT3), “Kroton” or “Company”,

announces today its results for the fourth quarter of 2012 (4Q12). The Company’s financial information is

presented on a consolidated basis and in Brazilian real, in accordance with Brazilian Corporate Law and

Generally Accepted Accounting Principles in Brazil (BRGAAP), and already conforms to International Financial

Reporting Standards (IFRS), except where stated otherwise.

HIGHLIGHTS

1 Includes the impacts from the December 2011 results of Unopar. 2 Based on the number of shares after the stock split (268,703,876 common shares) 3 Excludes investments in M&A and Special Projects.

1Q13 new enrollment and re-enrollment rates exceed the Company's targets. Admission of 161,200 new On-Campus Undergraduate and Distance Learning students, representing growth of 22.4% from 1Q12. Total student base surpasses 500,000 students by March 15, 2013, approximately 21% higher than the same period last year. FIES student loans contracted by 58,900 students, representing 45.0% of the total student base in the 4Q12 On-Campus Undergraduate business. Of the total number of new enrollments in 1Q13, 47.2% held FIES student loans. Net revenue up 85.1% from 4Q11, driven by the growth in the number of Postsecondary students resulting from the Unopar and Uniasselvi acquisitions. Organic (same-unit) net revenue growth of 29.8% compared to 4Q11. Operating income of R$98.6 million, increasing 245.0% from 4Q11. Operating margin was 27.0%, increasing 12.5 p.p. from the same period last year. In 2012, operating income grew 194.4% from 2011, mainly reflecting the higher share of the Distance Learning business. Adjusted EBITDA was R$72.1 million, growing 286.3% from 4Q11. Adjusted EBITDA margin was 19.8%, expanding 10.3 p.p. from the year-ago quarter. In 2012, adjusted EBITDA was R$387.6 million, or 8.3% above the guidance disclosed. Adjusted net income was R$38.2 million in 4Q12, increasing from R$1.6 million in the 4Q11. Adjusted net margin stood at 10.5%, or 9.7 p.p. higher than in 4Q11. In 2012, adjusted net income was R$268.0 million. Operating cash flow after recurring capex was R$81.5 million and R$313.5 million in 4Q12 and 2012, respectively. The ratio of this indicator to EBITDA (non-adjusted) represents a conversion rate of 87.8% in the year. The Company's migration to the Novo Mercado segment of the BM&FBovespa reaffirms its commitment to adopting best practices in corporate governance.

Values in R$ ('000) 4Q12 4Q11 1 Chg.% 3Q12 Chg.% 2012 2011 1 Chg.%

Gross Revenue 449,476 246,789 82.1% 465,704 -3.5% 1,715,433 879,975 94.9%

Net Revenue 364,950 197,196 85.1% 385,483 -5.3% 1,405,567 734,553 91.3%

Gross Income 163,550 65,882 148.2% 189,563 -13.7% 693,520 270,933 156.0%

Gross Margin 44.8% 33.4% 11.4 p.p. 49.2% -4.4 p.p. 49.3% 36.9% 12.5 p.p.

Operating Result 98,582 28,576 245.0% 137,809 -28.5% 472,308 160,437 194.4%

Operating Margin 27.0% 14.5% 12.5 p.p. 35.7% -8.7 p.p. 33.6% 21.8% 11.8 p.p.

Adjusted EBITDA 72,097 18,663 286.3% 115,916 -37.8% 387,621 111,118 248.8%

Adjusted EBITDA Margin 19.8% 9.5% 10.3 p.p. 30.1% -10.3 p.p. 27.6% 15.1% 12.5 p.p.

Adjusted Net Income (Loss) 38,211 1,572 n.a. 82,106 -53.5% 268,038 52,417 411.4%

Adjusted Net Margin 10.5% 0.8% 9.7 p.p. 21.3% -10.8 p.p. 19.1% 7.1% 11.9 p.p.

Adjusted Net Income (Loss)/share2 0.14 0.01 n.a. 0.31 -53.5% 1.00 0.20 411.4%

Operating Cash Generation (OCG) after Capex - Recurring3 81,475 (38,178) n.a. 123,258 -33.9% 313,546 (48,276) n.a.

OCG after Capex 3 / EBITDA 122.4% -358.6% n.a. 115.7% 6.7 p.p. 87.8% -49.8% n.a.

Tel: + 55 (11) 3775-2288 /2249/2003 E-mail: [email protected]

Investor Relations

Carlos Lazar - IR Officer

José Eduardo Szuster - IR Coordinator

Carolina Igi - IR Analyst


2

MESSAGE FROM MANAGEMENT “The year 2012 should be a memorable one for Kroton…”. That was the phrase that began the Message from Management in our 1Q12 earnings release. Today, we can in fact confirm this statement, given everything we accomplished last year and the various achievements made in both the operational and financial areas. On the operational front, the highlight was the progress made on integrating Unopar and the acquisition of Uniasselvi, which further strengthened our positioning in Distance Learning. We ended the year with 410,000 Postsecondary students, for strong growth of 62% from 2011, which was driven by the acquisitions made as well as by organic growth. Another important factor in these achievements was the continuous effort made by Kroton to expand the base of students contracting loans under FIES, which is a program of critical importance to increasing penetration in Brazil’s postsecondary education. Operational improvements supported robust financial performance in 2012. With net revenue of R$1.4 billion, adjusted EBITDA of R$387.6 million (over three times more than in 2011) and adjusted EBITDA margin of 27.6%, Kroton has consolidated at a new level of profitability that exceeds even our guidance. Moreover, cash generation after capex disbursements in the period surpassed R$313 million, which was only made possible by the relentless efforts of our nearly 15,000 employees in order to achieve the best efficiency and ensure that the institution offers responsible, high-quality education to all our students. However, we know that many challenges still remain! Therefore, we have dedicated considerable attention to the long-term strategic planning and have invested time and capital in structural projects to ensure the sustainability of the Company. These include the Kroton Learning System (KLS), which ensures continuous improvement in the quality of our educational services, especially with regard to the use of technology applied to education. For 2013, we are also optimistic on our operational and financial performance, since the partial results of the new enrollment and re-enrollment processes for the first semester of the year are already showing significant improvement from last year. The number of undergraduate new enrollments is already 22% higher than 2012, while re-enrollments grew 20% in the same period. Thus, the total base in the Postsecondary business surpassed the extraordinary mark of 500,000 students, clearly demonstrating the recognition achieved by the Institutions that form Kroton. In the capital markets front, in December 2012, we migrated to the Novo Mercado segment of the BM&FBovespa, reaffirming the commitment to all our stakeholders that Kroton adheres to the country’s highest standards of transparency and corporate governance. For these reasons and in view of the facts already observed early this year, we believe another memorable year is being built and that we will continue to play a leading role in Brazil’s education sector and capital markets.


3

OPERATING PERFORMANCE

POSTSECONDARY EDUCATION

Number of Students, 3Q12 vs. 4Q12

1 Includes the enrollment and re-enrollment of 4,919 students that solved registration information pending issues.

The evolution in the number of Postsecondary students, broken down by product (Undergraduate and Graduate) and teaching model (On-Campus and Distance Learning), is presented below.

1 Enrollment and re-enrollment of students that solved registration information pending issues. Of the 4,919 students, 3,540 contracted FIES loans in 4Q12. 2 Regular enrollment and re-enrollment of students in 4Q12.

At the end of 4Q12, the number of Postsecondary students, considering both the On-Campus and Distance Learning businesses, was 410,035, stable in relation to 3Q12. Broken down by teaching model, the On-Campus student base represented 34.9% of the total student base, while the Distance Learning student base accounted for 65.1%. Note that during the quarter there were enrollments and re-enrollments of 4,919 students who had registration information pending issues (i.e., restrictions by credit bureaus and missing documentation) and could not conclude the process to contract FIES loans in 3Q12. Of these, 3,540 students solved the pending issues in 4Q12 and were able to FIES financing. The other 1,379 students also concluded the process and effectively enrolled or re-enrolled, but did not contract financing at the time.

410,996 410,035 13,289 (2,120) ( 12,130) -

3Q12 Students New Students¹ Graduates Dropouts 4Q12 Students

Undergraduate Graduate Total Undergraduate Graduate Total

3Q12 Base 128,110 13,044 141,154 242,904 26,938 269,842

4Q12 New Students¹ 4,919 - 4,919 - - -

4Q12 New Students² 1,228 1,159 2,387 2,621 3,362 5,983

Graduates - (819) (819) - (1,301) (1,301)

Dropouts (3,281) (1,144) (4,425) (4,982) (2,723) (7,705)

4Q12 Base 130,976 12,240 143,216 240,543 26,276 266,819

% 4Q12 Base / 3Q12 Base 2.2% -6.2% 1.5% -1.0% -2.5% -1.1%

3Q12 Base 371,014 39,982 410,996

4Q12 New Students¹ 4,919 - 4,919

4Q12 New Students² 3,849 4,521 8,370

Graduates - (2,120) (2,120)

Dropouts (8,263) (3,867) (12,130)

4Q12 Base 371,519 38,516 410,035

% 4Q12 Base / 3Q12 Base 0.1% -3.7% -0.2%

StudentsOn-Campus Distance Learning

StudentsTotal

Undergraduate

Total

GraduateTotal


4

1Q13 New Enrollments and Re-Enrollments - Undergraduate (base date: March 15, 2013) Note that the figures for 1Q12 include not only the data for Kroton and Unopar, but also the managerial data for Uniasselvi and Unirondon. Despite it is not completely concluded, the results of the processes of enrollments and re-enrollments for the first semester of 2013 are noteworthy as the targets are being achieved thanks to strength of Kroton brands,

the dedicated efforts of the sales team and to the marketing and commercial actions implemented. Up to March 15, 2013, new enrollments came to 161,000 Undergraduate students while re-enrollments totaled 298,000 students.

New Enrollments - Undergraduate

1 In addition to the data for Kroton, the figures for 1Q12 consider also the managerial data for Uniasselvi and Unirondon.

The highlight in new enrollments was the result achieved in the Distance Learning Undergraduate business, which grew by 28% from the same period last year. In the On-Campus Undergraduate programs, growth was 9% from the previous year, with more than 40,000 new students.

Re-enrollments - Undergraduate


Total re-enrollments grew over last year by 13% in the On-Campus Undergraduate business, demonstrating the positive effects of FIES. In the same comparison, Distance Learning Undergraduate business is indicating a re-enrollment growth of 24%, reflecting the effectiveness of the actions to minimize dropouts, with even the Company's managerial targets surpassed in the period.

37,29940,599

1Q12¹ 1Q13

94,347

120,588

1Q12¹ 1Q13

131,646

161,187

1Q12¹ 1Q13

9% 28% 22%

On-CampusNew enrollments

DL New enrollments

Total New enrollments

90,749

102,868

1Q12¹ 1Q13

157,760

194,862

1Q12¹ 1Q13

248,509

297,730

1Q12¹ 1Q13

On-CampusRe-enrollments

DLRe-enrollments

Total Re-enrollments

13% 24% 20%


5

5.5%14.1%

27.6%

47.0% 48.4% 47.2%

2H10 1H11 2H11 1H12 2H12 1Q13

Base - Undergraduate


With the significant levels reached in the enrollment and in the re-enrollments process, the base for Undergraduate students achieved a 21% growth, reaching almost 459,000 students, driven by on-campus undergraduate student base growth of 12%, and by 25% increase of the distance learning undergraduate base.

Total Student Base

Considering all students in the undergraduate and graduate programs, Kroton reached, by March, 15, 2013 a total of 500,000 Postsecondary students. This amount is around 21% higher than 1Q12, demonstrating the exceptional positions that Kroton’s Institutions enjoy in their respective markets.

STUDENT LOAN PROGRAM (FIES)

* Considers data of March 15, 2013 for the 1Q13.

Kroton continues to excel nationally in its offering of student loans under the federal government’s FIES program, due to the high rate with which its academic programs qualify for this program (reflecting the high quality of its educational services), as well as to the marketing, communication and sales actions it has implemented to promote this financing program at all of its Units. At the end of 4Q12, 58,943 students held FIES student loans, up 6.0% from the previous quarter. Therefore the importance of FIES in the new enrollment remains relevant as verified in the chart above on the right. And this is only possible thanks to the still high percentage (97.3%) of students that qualify for the program.

128,048

143,467

1Q12¹ 1Q13

252,107

315,450

1Q12¹ 1Q13

380,155

458,917

1Q12¹ 1Q13

12% 25% 21%

On-CampusStudent Base

DL Student Base

Total Student Base

Undergraduate 143,467 315,450 458,917

Graduate 12,661 28,736 41,397

Total 156,128 344,186 500,314

Students On-CampusDistance

LearningTotal

% Base 4.4% 10.9% 18.2% 21.1% 33.9% 43.2%

3,5068,329

14,04820,494

43,32155,403 58,943

1H10 2H10 1H11 2H11 1H12 3Q12 4Q12

45.0%

Number of Kroton students with FIES New Enrollments % FIES*


6

Language Courses The Company also offers language courses at a number of its Postsecondary Education units, seeking to offer yet another opportunity for its students’ development. The initiative also works to attract students while they are still in Secondary Education and establish a relationship that could culminate in the selection of one of Kroton’s units for their Postsecondary Education. At the end of 4Q12, the number of students in this business was 6,464 (note that these students are not included in the figure for Postsecondary students informed above).

Unregulated Programs As of the second semester of 2012, Kroton began offering short-duration distance learning programs, in line with its strategy of expanding the portfolio of services offered by the Distance Learning centers. These short-duration programs allow students to increase their knowledge in various fields, such as Management, Education and Mathematics. By the end of 2012, Kroton had already administered short-duration programs to 12,416 students (as with language courses, these students are not considered in the figure for Postsecondary Education students).

Ministry of Education (MEC) Evaluations

At the end of 4Q12, around 99.3% of the academic programs and 95.9% of the institutions that form Kroton had received evaluations ranging from satisfactory to excellent, which reinforces its commitment to teaching quality in all of the educational services offered to students.

Integration Processes

Unopar As already disclosed, the Unopar integration comprises four distinct phases. To date, the three first phases have been concluded, which included optimizing the corporate structure, developing revenue upside projects and fully implementing the new Academic Model for all on-campus students at Unopar (from freshmen to seniors) as of the start of classes for the second semester of 2012. Phase 4, which consists of the full integration of systems and processes, is on track and will be concluded in 2013.

Uniasselvi The Uniasselvi integration process was also divided into four phases. Phase 1 focused on integrating and restructuring the commercial area and on integrating the systems, while Phase 2 focused on optimizing the corporate structure, both of which were concluded in 2012. The start of 2013 marked the conclusion of Phase 3, which involved the migration to Kroton’s Academic Model. As a result, students in the first semester of 2013 are already using the same Academic Model adopted at the other On-Campus Undergraduate units. Lastly, the deliverables for Phase 4, which focuses on fully integrating the systems and processes, were accelerated and should be concluded by June 2013.

Course Concept (CC) 0.7% 45.4% 53.9% 99.3%

Institutional Concept (IC) 4.1% 69.4% 26.5% 95.9%

Ratio Below 3 Equal as 3 Above 3Total Equal or

Above 3


7

PRIMARY AND SECONDARY EDUCATION

In the Primary and Secondary Education business, Kroton’s main business is to offer, through the Pitágoras Network, teaching book collections, teacher training, educational evaluations and other services to private schools in the Pre-School, Primary and Secondary Education businesses. In 2012, Kroton served 289,000 students, of whom 272,000 were enrolled in private schools. Meanwhile, the number of Associated Schools increased by 5.1% from the prior year to 810 associated schools in 2012, reflecting the successful commercial negotiations and high quality services offered. In 4Q12, the Company adopted certain strategic actions to maximize this segment’s financial and operational performance. These measures included divesting the own school located in São Luís, State of Maranhão and the commercial repositioning of the only remaining school in Belo Horizonte, State of Minas Gerais to better place it as a show room of the services we offer. In addition, Kroton opted to reduce its exposure to public schools by not renewing in 4Q12 some of the contracts. This will allow the Company to focus its efforts on expanding the Rede Pitágoras operation, which should post substantial growth in 2013 and more than offset the revenue lost from other businesses mentioned above.


8

FINANCIAL PERFORMANCE

4Q12 RESULTS

Except where stated otherwise, all of the following analyses exclude the impacts of nonrecurring events in the periods and include any effects from Unopar as of December 2011 and from Uniasselvi as of June 2012.

4Q12% of Net

Revenue4Q12

% of Net

Revenue4Q12

% of Net

Revenue4Q12

% of Net

Revenue

Gross Revenue 298,173 127.4% 128,792 117.5% 22,511 106.3% 449,476 123.2%

(-) Gross Profit Deductions (64,058) -27.4% (19,141) -17.5% (1,327) -6.3% (84,526) -23.2%

Tax (6,681) -2.9% (2,329) -2.1% (1,231) -5.8% (10,242) -2.8%

ProUni (26,084) -11.1% (9,768) -8.9% - 0.0% (35,852) -9.8%

Returns - 0.0% - 0.0% (95) -0.4% (95) 0.0%

Total Discounts (31,294) -13.4% (7,044) -6.4% - 0.0% (38,338) -10.5%

Net Revenue 234,115 100.0% 109,651 100.0% 21,184 100.0% 364,950 100.0%

Costs (COGS) (151,904) -64.9% (34,020) -31.0% (15,476) -73.1% (201,401) -55.2%

Cost of Goods - 0.0% - 0.0% (2,581) -12.2% (2,581) -0.7%

Cost of Services (151,904) -64.9% (34,020) -31.0% (12,895) -60.9% (198,820) -54.5%

Faculty, Other Personnel and Third-Party Services (131,702) -56.3% (32,369) -29.5% (12,673) -59.8% (176,743) -48.4%

Rent (19,179) -8.2% (1,641) -1.5% (272) -1.3% (21,091) -5.8%

Other (1,024) -0.4% (11) 0.0% 50 0.2% (985) -0.3%

Gross Income 82,211 35.1% 75,631 69.0% 5,708 26.9% 163,550 44.8%

Operating Expenses (32,747) -14.0% (13,847) -12.6% (7,439) -35.1% (54,033) -14.8%

Personnel, General and Administrative Expenses (19,475) -8.3% (7,106) -6.5% (3,517) -16.6% (30,097) -8.2%

Personnel (2,917) -1.2% (4,137) -3.8% (549) -2.6% (7,604) -2.1%

General and Administrative (16,557) -7.1% (2,968) -2.7% (2,968) -14.0% (22,493) -6.2%

Sales and Marketing Expenses (13,272) -5.7% (6,741) -6.1% (3,923) -18.5% (23,936) -6.6%

Provision for Doubtful Accounts - PDA (10,399) -4.4% (6,773) -6.2% (267) -1.3% (17,440) -4.8%

(+) Interest and Penalties on Tuition 3,880 1.7% 2,518 2.3% 106 0.5% 6,504 1.8%

Operating Result 42,945 18.3% 57,529 52.5% (1,893) -8.9% 98,582 27.0%

(26,485) -7.3%

72,097 19.8%

(5,542) -1.5%

66,554 18.2%

(23,112) -6.3%

Financial Result (17,886) -4.9%

(1,639) -0.4%

23,918 6.6%

5,542 1.5%

8,750 2.4%

38,211 10.5%

Kroton Consolidated

Net Profit (Loss)

(+) Nonrecurring Costs and Expenses

(+) Intagible Amortization (Acquisitions)

Adjusted Net Profit (Loss)

Adjusted EBITDA

(-) Nonrecurring Costs and Expenses

EBITDA

Depreciation and Amortization

Income and Social Contribuition Tax

Corporate Expenses

Values in R$ ('000)

On-Campus Postsecondary

EducationDistance Learning

Primary and Secondary

Education


9

2012 RESULTS

2012% of Net

Revenue2012

% of Net

Revenue2012

% of Net

Revenue2012

% of Net

Revenue

Gross Revenue 1,090,633 125.3% 466,803 120.7% 157,996 106.7% 1,715,433 122.0%

(-) Gross Profit Deductions (220,063) -25.3% (79,913) -20.7% (9,890) -6.7% (309,866) -22.0%

Tax (24,292) -2.8% (8,688) -2.2% (5,071) -3.4% (38,052) -2.7%

ProUni (93,487) -10.7% (36,727) -9.5% - 0.0% (130,214) -9.3%

Returns - 0.0% - 0.0% (4,819) -3.3% (4,819) -0.3%

Total Discounts (102,284) -11.7% (34,497) -8.9% - 0.0% (136,781) -9.7%

Net Revenue 870,570 100.0% 386,891 100.0% 148,106 100.0% 1,405,567 100.0%

Costs (COGS) (542,733) -62.3% (94,713) -24.5% (74,602) -50.4% (712,048) -50.7%

Cost of Goods - 0.0% - 0.0% (25,896) -17.5% (25,896) -1.8%

Cost of Services (542,733) -62.3% (94,713) -24.5% (48,705) -32.9% (686,151) -48.8%

Faculty, Other Personnel and Third-Party Services (466,937) -53.6% (90,901) -23.5% (46,174) -31.2% (604,011) -43.0%

Rent (72,644) -8.3% (3,801) -1.0% (1,192) -0.8% (77,638) -5.5%

Other (3,152) -0.4% (11) 0.0% (1,339) -0.9% (4,502) -0.3%

Gross Income 327,837 37.7% 292,178 75.5% 73,505 49.6% 693,520 49.3%

Operating Expenses (104,041) -12.0% (45,318) -11.7% (34,029) -23.0% (183,388) -13.0%

Personnel, General and Administrative Expenses (67,511) -7.8% (28,219) -7.3% (15,549) -10.5% (111,279) -7.9%

Personnel (10,105) -1.2% (15,962) -4.1% (2,305) -1.6% (28,372) -2.0%

General and Administrative (57,406) -6.6% (12,257) -3.2% (13,244) -8.9% (82,907) -5.9%

Sales and Marketing Expenses (36,530) -4.2% (17,100) -4.4% (18,479) -12.5% (72,109) -5.1%

Provision for Doubtful Accounts - PDA (39,443) -4.5% (24,405) -6.3% (2,236) -1.5% (66,083) -4.7%

(+) Interest and Penalties on Tuition 19,619 2.3% 8,180 2.1% 461 0.3% 28,260 2.0%

Operating Result 203,972 23.4% 230,634 59.6% 37,701 25.5% 472,308 33.6%

(84,687) -6.0%

387,621 27.6%

(30,370) -2.2%

357,251 25.4%

(85,934) -6.1%

Financial Result ex-Intereste and Penalties on Tuition (62,695) -4.5%

(6,577) -0.5%

202,044 14.4%

30,370 2.2%

35,624 2.5%

268,038 19.1%

Kroton Consolidated

Net Profit (Loss)

(+) Nonrecurring Costs and Expenses

(+) Intagible Amortization (Acquisitions)

Adjusted Net Profit (Loss)

Adjusted EBITDA

(-) Nonrecurring Costs and Expenses

EBITDA

Depreciation and Amortization

Income and Social Contribuition Tax

Corporate Expenses

Values in R$ ('000)

On-Campus Postsecondary

EducationDistance Learning

Primary and Secondary

Education


10

FINANCIAL PERFORMANCE – ON-CAMPUS POSTSECONDARY

On-Campus Postsecondary Education

Values in R$ ('000)

Gross Revenue 298,173 197,396 51.1% 288,075 3.5% 1,090,633 713,216 52.9%

(-) Deductions from Gross Revenue (64,058) (39,957) 60.3% (56,607) 13.2% (220,063) (131,371) 67.5%

Taxes (6,681) (4,181) 59.8% (6,819) -2.0% (24,292) (15,003) 61.9%

ProUni (26,084) (19,291) 35.2% (24,900) 4.8% (93,487) (71,885) 30.1%

Returns - - n.a. - n.a. - - n.a.

Total Discounts (31,294) (16,485) 89.8% (24,887) 25.7% (102,284) (44,482) 129.9%

Net Revenue 234,115 157,438 48.7% 231,468 1.1% 870,570 581,845 49.6%

Net Revenue - FIES 106,514 44,108 141.5% 114,963 -7.3% 383,457 133,025 188.3%

Total of Costs (151,904) (110,162) 37.9% (146,230) 3.9% (542,733) (387,086) 40.2%

Cost of Goods (CG) - - n.a. - n.a. - - n.a.

Cost of Services (CS) (151,904) (110,162) 37.9% (146,230) 3.9% (542,733) (387,086) 40.2%

Faculty, Other Personnel and Third-Party Services (131,702) (94,933) 38.7% (126,686) 4.0% (466,937) (329,596) 41.7%

Rent (19,179) (14,949) 28.3% (18,874) 1.6% (72,644) (55,973) 29.8%

Other (1,024) (280) 265.2% (670) 52.8% (3,152) (1,517) 107.7%

Gross Income 82,211 47,276 73.9% 85,238 -3.6% 327,837 194,759 68.3%


Total Operating Expenses (32,747) (19,626) 66.9% (24,704) 32.6% (104,041) (63,781) 63.1%

Personnel, General and Administrative Expenses (19,475) (10,972) 77.5% (17,137) 13.6% (67,511) (38,182) 76.8%

Personnel Expenses (2,917) (1,065) 174.0% (2,719) 7.3% (10,105) (2,757) 266.5%

General and Administrative Expenses (16,557) (9,907) 67.1% (14,418) 14.8% (57,406) (35,425) 62.1%

Selling and Marketing Expenses (13,272) (8,655) 53.4% (7,567) 75.4% (36,530) (25,599) 42.7%

Provision for Doubtfull Account - PDA (10,399) (6,852) 51.8% (9,340) 11.3% (39,443) (28,403) 38.9%

(+) Interest and Penalties on Tuition 3,880 2,536 53.0% 6,327 -38.7% 19,619 14,116 39.0%


Operating Margin 18.3% 14.8% 3.5 p.p. 24.9% -6.5 p.p. 23.4% 20.1% 3.4 p.p.

2012 2011 Chg.%4Q12 4Q11 Chg.% 3Q12 Chg.%

47.3

82.230.0%

35.1%

20.0%

22.0%

24.0%

26.0%

28.0%

30.0%

32.0%

34.0%

36.0%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

4Q11 4Q12% Gross Margin

157.4

234.1

4Q11 4Q12

23.3

42,9

14.8%18.3%

4Q11 4Q12% Operating Margin

+49% +74% +84%

% Business GI / Total GI

72% 50%

% Business NR / Total NR

80% 64%

% Business OR / Total OR

82% 44%

Net Revenue (NR)12 Months - R$ million

Gross Income (GI)12 Months - R$ million

Operating Result (OR)12 Months - R$ million

Net Revenue (NR)Quarterly - R$ million

Gross Income (GI)Quarterly - R$ million

Operating Result (OR)Quarterly - R$ million

581.8

870.6

2011 2012

116.7

204.020.1%

23.4%

2011 2012% Operating Margin

194.8

327.833.5%

37.7%

20%

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

00

50

100

150

200

250

300

350

2011 2012% Gross Margin

+50% +68% +75%

% Business GI / Total GI

72% 47%

% Business NR / Total NR

79% 62%

% Business OR / Total OR

73% 43%


11

Revenue and Deductions

Deductions Deductions as a percentage of gross revenue increased 1.2 p.p. in 4Q12 compared to 4Q11, mainly due to the increase in the line total discounts, which was impacted by the different discount practices adopted at the acquired institutions (Uniasselvi and Unirondon). Compared to 3Q12, total deductions as a percentage of gross revenue increased 1.8 p.p., mainly due to the Tuition Adjustment Process (“TAP”) carried out in 4Q12.

Net Revenue Net revenue rose 48.7% in 4Q12 from same period last year, driven by the growth in the number of students through both organic growth and acquisitions, combined with the increase in the average ticket. Net revenue growth on a same-unit basis in the On-Campus Postsecondary Education segment was 29.8%.

Average Net Ticket

In the On-Campus Postsecondary business, the average monthly tuition in 4Q12 for the courses and programs offered was R$543.32, relatively stable compared to the prior quarter and 4.6% above 4Q11. A highlight was the 10.8% increase in the average ticket for Graduate programs over 3Q12, which reflected the improvements made to the program portfolio and the graduation of scholarship students in the period.


Values in R$ ('000)

Gross Revenue 298,173 197,396 51.1% 288,075 3.5%

(-) Deductions from Gross Revenue (64,058) (39,957) 60.3% (56,607) 13.2%

Taxes (6,681) (4,181) 59.8% (6,819) -2.0%

ProUni (26,084) (19,291) 35.2% (24,900) 4.8%

Returns - - n.a. - n.a.

Total Discounts (31,294) (16,485) 89.8% (24,887) 25.7%

Net Revenue 234,115 157,438 48.7% 231,468 1.1%

Net Revenue - FIES 106,514 44,108 141.5% 114,963 -7.3%

Chg.%4Q12 4Q11 Chg.% 3Q12


Values in R$

On-Campus Undergraduate 573.35 548.32 4.6% 581.86 -1.5%

On-Campus Graduate 222.03 207.96 6.8% 200.36 10.8%

Total 543.32 514.72 5.6% 546.61 -0.6%

Chg.% 3Q12 Chg.%4Q12 4Q11


12

Costs

Cost of services as a ratio of net revenue in this business decreased 5.1 p.p. in 4Q12 from the same quarter of 2011. The decrease was mainly due to the scale gains from the increase in the number of students per class. Analyzing rent costs separately shows an improvement of 1.3 p.p. from the same period of 2011, reflecting the Company’s effective management of contracts.

Gross Income

The Company's rigorous control of costs, coupled with revenue growth, supported gross income growth of 73.9% in 4Q12 same period last year, with gross margin expanding by 5.1 p.p.

Operating Expenses


Values in R$ ('000)

Total of Costs (151,904) (110,162) 37.9% (146,230) 3.9%

Cost of Goods (CG) - - n.a. - n.a.

Cost of Services (CS) (151,904) (110,162) 37.9% (146,230) 3.9%

Faculty, Other Personnel and Third-Party Services (131,702) (94,933) 38.7% (126,686) 4.0%

Rent (19,179) (14,949) 28.3% (18,874) 1.6%

Other (1,024) (280) 265.2% (670) 52.8%


% of Net Revenues

Total of Costs -64.9% -70.0% 5.1 p.p. -63.2% -1.7 p.p.


Cost of Services (CS) -64.9% -70.0% 5.1 p.p. -63.2% -1.7 p.p.

Faculty, Other Personnel and Third-Party Services -56.3% -60.3% 4.0 p.p. -54.7% -1.5 p.p.

Rent -8.2% -9.5% 1.3 p.p. -8.2% 0.0 p.p.

Other -0.4% -0.2% -0.3 p.p. -0.3% -0.1 p.p.

Chg.%

Chg.%4Q11 Chg.% 3Q12

4Q12 4Q11 Chg.% 3Q12

4Q12


Values in R$ ('000)

Gross Income 82,211 47,276 73.9% 85,238 -3.6%

Gross Margin 35.1% 30.0% 5.1 p.p. 36.8% -1.7 p.p.

Chg.%4Q12 4Q11 Chg.% 3Q12


Values in R$ ('000)

Total Operating Expenses (32,747) (19,626) 66.9% (24,704) 32.6%

Personnel, General and Administrative Expenses (19,475) (10,972) 77.5% (17,137) 13.6%

Personnel Expenses (2,917) (1,065) 174.0% (2,719) 7.3%

General and Administrative Expenses (16,557) (9,907) 67.1% (14,418) 14.8%

Selling and Marketing Expenses (13,272) (8,655) 53.4% (7,567) 75.4%


% of Net Revenues

Total Operating Expenses -14.0% -12.5% -1.5 p.p. -10.7% -3.3 p.p.

Personnel, General and Administrative Expenses -8.3% -7.0% -1.3 p.p. -7.4% -0.9 p.p.

Personnel Expenses -1.2% -0.7% -0.6 p.p. -1.2% -0.1 p.p.

General and Administrative Expenses -7.1% -6.3% -0.8 p.p. -6.2% -0.8 p.p.

Selling and Marketing Expenses -5.7% -5.5% -0.2 p.p. -3.3% -2.4 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%

Chg.%4Q12 4Q11 Chg.% 3Q12


13

Personnel, General and Administrative Expenses General and administrative expenses as a ratio of net revenue increased 1.3 p.p. in 4Q12 compared to 4Q11, driven by the increase in personnel that is still related to the Uniasselvi acquisition. Compared to 3Q12, the 0.9 p.p. expansion was due to the increase in administrative expenses in the period to support the projected growth in this segment in 2013. Selling and Marketing Expenses In 4Q12 compared to 4Q11, selling and marketing expenses as a ratio of net revenue remained pratically stable, despite the higher expenses with the new enrollment and re-enrollment processes for the first semester of 2013, which promoted an increase of 2.4 p.p. compared to 3Q12.

Provision for Doubtful Accounts (PDA)

Total PDA for the On-Campus Postsecondary Education business stood at 4.4% of net revenue in 4Q12, which was higher than in 3Q12 due to seasonality. Compared to 4Q11, PDA remained stable. The 1.1 p.p. increase in PDA excluding FIES compared to 4Q11 was in line with the behavior observed throughout the year, which led PDA to stabilize at a more conservative level than in the previous year as can be verified in the growth between 2012 and 2011. However, PDA excluding FIES in 4Q12 reaffirms the trend observed in recent quarters of a natural decline, which can be verified in the comparison with 2Q12, when PDA stood at 6.7%. On the other hand, the 0.5 p.p. increase compared to 3Q12 was due to seasonality.

Accounts Receivable

1 Includes R$44.2 million in the line FIES related to the repurchase for September that was made on October 2 due to the strike by bank employees in the period.

The 3.6% increase in total accounts receivable net of PDA between 4Q12 and 3Q12 was driven by the seasonal increase in short-term accounts receivable, which offset the improvements in FIES accounts receivable and the long-term portfolio. In 4Q12, Kroton paid R$2.8 million in federal taxes and received R$115.3 million in monthly repurchases.

Average Accounts Receivable Term

For the calculation of the average term of accounts receivable in the Postsecondary business, Kroton presents three distinct analyses:


Values in R$ ('000)


PDA / Postsecondary Net Revenues -4.4% -4.4% -0.1 p.p. -4.0% -0.4 p.p. -4.5% -4.9% 0.4 p.p

Provision for Doubtfull Account - PDA ex-FIES (8,003) (5,860) 36.6% (6,753) 18.5% (30,815) (25,410) 21.3%

PDA ex-FIES / Postsecondary Net Revenues ex-FIES -6.3% -5.2% -1.1 p.p. -5.8% -0.5 p.p. -6.3% -5.7% -0.7 p.p.

2012 2011 Chg.%3Q12 Chg.%4Q12 4Q11 Chg.%

Post Secondary Education

Values in R$ ('000)

Net Accounts Receivable 195,546 205,862 -5.0% 188,823 3.6%

Short Term - Tuition and Agreements Receivable 101,575 93,478 8.7% 81,690 24.3%

Long Term Receivables 10,439 17,003 -38.6% 15,780 -33.8%

FIES 83,531 95,381 -12.4% 91,353 -8.6%

%Chg.4Q12 3Q121%Chg.4Q11


14

1. Accounts Receivable, excluding the balance of FIES receivables

Calculation base: net balance of short-term accounts receivable related solely to monthly tuition fees and agreements receivable (ex-FIES), divided by Postsecondary net revenue in the last 12 months, multiplied by 360 days. The average term registered a reduction of 16 days compared to 4Q11, due to the higher share of FIES students in the base. 2. Accounts Receivable, excluding the balances of FIES receivables and revenues

Calculation base: net balance of short-term accounts receivable related solely to monthly tuition fees and agreements receivable, divided by Postsecondary net revenue (ex-FIES) in the last 12 months, multiplied by 360 days. Analyzed using this method, the average term increased compared to 3Q12, due to seasonality. Compared to 4Q11, the reduction of 3 days was due to the lower balance of accounts receivable resulting from the more effective provisioning, collection and recovery practices adopted.

3. FIES Accounts Receivable

1 FIES accounts receivable adjusted by R$44.2 million related to the repurchase for September that was made on October 2 due to the strike by bank employees in the period.

Calculation base: net balance of short-term accounts receivable related solely to FIES, divided by net revenue from monthly FIES payments in the last 12 months, multiplied by 360 days. The average term of FIES accounts receivable in 4Q12 was 78 days, or 24 days fewer than in 3Q12, reflecting the improvement in internal operational processes and in the National Education Development Fund (FNDE), in addition to the complete normalization of Kroton’s tax status, which allows the Company to participate in processes to repurchase the entire available balance. Note that the Company believed the average term should stabilize at around 80 days by the end of 2013, which was achieved nearly one year ahead of schedule.

Post Secondary - Accounts Receivable Average

Turnover Days4Q12 4Q11 Chg. (days) 3Q12 Chg. (days)

Net Accounts Receivable (ex-FIES)

Net Revenues 41 57 -16 days 35 + 6 days

Post Secondary - Accounts Receivable Average


Net Accounts Receivable (ex-FIES)

Net Revenues (ex-FIES) 71 74 - 3 days 55 + 15 days

Post Secondary -FIES Accounts Receivable

Average Turnover Days4Q12 4Q11 Chg. (days) 3Q121 Chg. (days)

FIES Net Accounts Receivable ex-blocked CND

FIES Net Revenues 78 258 - 180 days 102 - 24 days


15

OPERATING RESULT

In 4Q12, operating income was R$42.9 million, representing operating margin of 18.3%, which expanded by 3.5 p.p. from the same period of 2011. In the year, operating margin stood at 23.4%, expanding by 3.4 p.p. from 2011.


Values in R$ ('000)

Gross Income 82,211 47,276 73.9% 85,238 -3.6%

(-) Total Operating Expenses (32,747) (19,626) 66.9% (24,704) 32.6%

(-) Provision for Doubtfull Account - PDA (10,399) (6,852) 51.8% (9,340) 11.3%

(+) Interest and Penalties on Tuition 3,880 2,536 53.0% 6,327 -38.7%

Operating Result 42,945 23,334 84.0% 57,522 -25.3%

Operating Margin 18.3% 14.8% 3.5 p.p. 24.9% -6.5 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%


16

FINANCIAL PERFORMANCE – DISTANCE LEARNING POSTSECONDARY

Distance Learning

Values in R$ ('000)

Gross Revenue 128,792 24,006 n.a. 139,355 -7.6% 466,803 24,006 n.a.

(-) Deductions from Gross Revenue (19,141) (7,977) n.a. (21,075) -9.2% (79,913) (7,977) n.a.

Taxes (2,329) (475) n.a. (2,267) 2.8% (8,688) (475) n.a.

ProUni (9,768) (1,851) n.a. (11,018) -11.3% (36,727) (1,851) n.a.

Returns - - n.a. - n.a. - - n.a.

Total Discounts (7,044) (5,651) n.a. (7,790) -9.6% (34,497) (5,651) n.a.

Net Revenue 109,651 16,029 n.a. 118,280 -7.3% 386,891 16,029 n.a.

Total of Costs (34,020) (2,801) n.a. (30,788) 10.5% (94,713) (2,801) n.a.

Cost of Goods (CG) - - n.a. - n.a. - - n.a.

Cost of Services (CS) (34,020) (2,801) n.a. (30,788) 10.5% (94,713) (2,801) n.a.

Faculty, Other Personnel and Third-Party Services (32,369) (2,736) n.a. (29,503) 9.7% (90,901) (2,736) n.a.

Rent (1,641) (66) n.a. (1,285) 27.6% (3,801) (66) n.a.

Other (11) - n.a. - n.a. (11) - n.a.

Gross Income 75,631 13,228 n.a. 87,492 -13.6% 292,178 13,228 n.a.

Gross Margin 69.0% 82.5% n.a. 74.0% -5.0 p.p. 75.5% 82.5% n.a.

Total Operating Expenses (13,847) (4,525) n.a. (10,990) 26.0% (45,318) (4,525) n.a.

Personnel, General and Administrative Expenses (7,106) (4,435) n.a. (7,692) -7.6% (28,219) (4,435) n.a.

Personnel Expenses (4,137) (2,121) n.a. (4,171) -0.8% (15,962) (2,121) n.a.

General and Administrative Expenses (2,968) (2,314) n.a. (3,521) -15.7% (12,257) (2,314) n.a.

Selling and Marketing Expenses (6,741) (90) n.a. (3,297) 104.4% (17,100) (90) n.a.

Provision for Doubtfull Account - PDA (6,773) (1,420) n.a. (7,153) -5.3% (24,405) (1,420) n.a.

(+) Interest and Penalties on Tuition 2,518 346 n.a. 3,554 -29.2% 8,180 346 n.a.

Operating Result 57,529 7,629 n.a. 72,904 -21.1% 230,634 7,629 n.a.

Operating Margin 52.5% 47.6% n.a. 61.6% -9.2 p.p. 59.6% 47.6% n.a.

2012 2011 Chg.%4Q12 4Q11 Chg.% 3Q12 Chg.%

118.3109.7

3Q12 4Q12

-7%

46% 46%31% 30% 53% 58%

72.9

57.5

61.6%

52.5%


87.5

75.6

74.0% 69.0%


-14%-21%




% Business GI / Total GI% Business NR / Total NR % Business OR / Total OR

386.9

2012

230.6

59.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2012% Operating Margin

292.2

75.5%

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2012% Gross Margin

42%28% 49%






17

Note: the figures for distance learning in 4Q11 and in 2011 refer solely to December for Unopar. As a result, comparisons with the same periods of 2012 are not accurate.


1 Amounts for 3Q12 were impacted by reclassifications between the lines Gross Revenue and Total Discounts

Deductions As demonstrated in previous releases, the main items in gross revenue deductions in the Distance Learning business are discounts and ProUni, which together corresponded to 13.1% of total gross revenue in 4Q12. The reduction in ProUni from the previous quarter is related to the recognition of revenue from the program related to the Uniasselvi operation for months prior to 3Q12, while the reduction in the line total discounts is explained by the lower revenue in the period.

Net Revenue As already explained in the 3Q12 earnings release, the recognition of revenue from the Distance Learning students of Uniasselvi follows the same criteria adopted by Kroton for Unopar, which is to account as from gross revenue the services rendered already discounting the transfers made to the centers, respecting only the different commercial practices (transfer amounts) of the Institutions. In 4Q12, net revenue in the Distance Learning business was R$109.7 million, which corresponded to 30.0% of Kroton’s total net revenue in the period. In the year, this business accounted for 27.5% of the Company's total net revenue. Average Net Ticket

As in the previous quarter and for comparison purposes, Kroton reports the effective ticket paid by the student, without discounting the transfers. Therefore, considering all (100%) revenue for both Institutions, the combined average ticket of the Undergraduate and Graduate segments is R$213.73, or 2.4% lower than in 3Q12.

Distance Learning

Values in R$ ('000)

Gross Revenue 128,792 24,006 n.a. 139,355 -7.6%

(-) Deductions from Gross Revenue (19,141) (7,977) n.a. (21,075) -9.2%

Taxes (2,329) (475) n.a. (2,267) 2.8%

ProUni (9,768) (1,851) n.a. (11,018) -11.3%

Returns - - n.a. - n.a.

Total Discounts (7,044) (5,651) n.a. (7,790) -9.6%

Net Revenue 109,651 16,029 n.a. 118,280 -7.3%

Chg.%4Q12 4Q11 Chg.% 3Q12 1

Distance Learning

Values in R$

DL Undergraduate 225.19 231.74 -2.8%

DL Graduate 108.83 103.17 5.5%

Total (Student) 213.73 218.90 -2.4%

3Q12 Chg.%4Q12


18

Costs

In 4Q12, cost of services rendered (CSR) was R$34.0 million, representing 16.9% of Kroton’s total costs in the period. Compared to 3Q12, the highest increase was in the line faculty, other personnel and third-party services, due to complementary provisions booked during the period.

Gross Income

Gross income in the Distance Learning business was R$75.6 million, which represents 46.2% of the total registered by Kroton in 4Q12. Gross margin in 4Q12 decreased 5.0 p.p. from 3Q12, due to the seasonality of the business.

Operating Expenses

Distance Learning

Values in R$ ('000)

Total of Costs (34,020) (2,801) n.a. (30,788) 10.5%


Cost of Services (CS) (34,020) (2,801) n.a. (30,788) 10.5%

Faculty, Other Personnel and Third-Party Services (32,369) (2,736) n.a. (29,503) 9.7%

Rent (1,641) (66) n.a. (1,285) 27.6%

Other (11) - n.a. - n.a.

Distance Learning

% of Net Revenues

Total of Costs -31.0% -17.5% n.a. -26.0% -5.0 p.p.

Cost of Goods (CG) 0.0% 0.0% n.a. 0.0% 0.0 p.p.

Cost of Services (CS) -31.0% -17.5% n.a. -26.0% -5.0 p.p.

Faculty, Other Personnel and Third-Party Services -29.5% -17.1% n.a. -24.9% -4.6 p.p.

Rent -1.5% -0.4% n.a. -1.1% -0.4 p.p.

Other 0.0% 0.0% n.a. 0.0% 0.0 p.p.

Chg.%4Q12 4Q11 Chg.% 3Q12

4Q12 4Q11 Chg.% 3Q12 Chg.%

Distance Learning

Values in R$ ('000)

Gross Income 75,631 13,228 n.a. 87,492 -13.6%

Gross Margin 69.0% 82.5% n.a. 74.0% -5.0 p.p.

Chg.%4Q12 4Q11 Chg.% 3Q12

Distance Learning

Values in R$ ('000)

Total Operating Expenses (13,847) (4,525) n.a. (10,990) 26.0%

Personnel, General and Administrative Expenses (7,106) (4,435) n.a. (7,692) -7.6%

Personnel Expenses (4,137) (2,121) n.a. (4,171) -0.8%

General and Administrative Expenses (2,968) (2,314) n.a. (3,521) -15.7%

Selling and Marketing Expenses (6,741) (90) n.a. (3,297) 104.4%

Distance Learning

% of Net Revenues

Total Operating Expenses -12.6% -28.2% n.a. -9.3% -3.3 p.p.

Personnel, General and Administrative Expenses -6.5% -27.7% n.a. -6.5% 0.0 p.p.

Personnel Expenses -3.8% -13.2% n.a. -3.5% -0.2 p.p.

General and Administrative Expenses -2.7% -14.4% n.a. -3.0% 0.3 p.p.

Selling and Marketing Expenses -6.1% -0.6% n.a. -2.8% -3.4 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%

Chg.%4Q12 4Q11 Chg.% 3Q12


19

Personnel, General and Administrative Expenses This group of expenses corresponded to 6.5% of net revenue in 4Q12, stable compared to 3Q12, reflecting the successful integration processes that enabled gains in the operating and administrative areas. Selling and Marketing Expenses Selling and marketing expenses represented 6.1% of total net revenue, increasing from 3Q12 due to the seasonality of the business, since the expenses with the enrollment process for the first semester of 2013 began during 4Q12.


The level of PDA in this business follows the same criteria adopted in the On-Campus business, with some of the collection and recovery practices that were already successful at Kroton beginning to be replicated to Unopar and Uniasselvi. As a result, despite the seasonal effects, the level of provisioning in 4Q12 was virtually stable compared to 3Q12, corresponding to 6.2% of the net revenue of the business.

Accounts Receivable

In 4Q12, Distance Learning accounts receivable was R$38.0 million, increasing from 3Q12 due to the natural seasonal effects of the business.


Calculation base: net balance of short-term accounts receivable, divided by estimated Distance Learning net revenue in the last 12 months, multiplied by 360 days. In 4Q12, the average receivables term in the Distance Learning business was 29 days, increasing 4 days from 3Q12 due to seasonality and in line with the maturing of the portfolio of receivables from the Distance Learning business.

Distance Learning

Values in R$ ('000)

Provision for Doubtfull Account - PDA (6,773) (1,420) n.a. (7,153) -5.3% (24,405) (1,420) n.a.

PDA / Distance Learning Net Revenues -6.2% -8.9% n.a. -6.0% -0.1 p.p. -6.3% -8.9% n.a.

2012 2011 Chg.%4Q12 4Q11 Chg.% 3Q12 Chg.%

Distance Leaning

Values in R$ ('000)

Net Accounts Receivable 37,995 - n.a. 30,712 23.7%

4Q12 3Q12 %Chg.%Chg.4Q11

Distance Learning - Accounts Receivable Average


Net Accounts Receivable

Net Revenues 29 - n.a. 25 + 4 days


20

Operating Result

Operating income in the Distance Learning business in 4Q12 was R$57.5 million, which corresponded to 58.4% of the Company’s total in the period. In the year, the Distance Learning business accounted for 48.8% of the Company’s total operating income, with R$230.6 million.

Distance Learning

Values in R$ ('000)

Gross Income 75,631 13,228 n.a. 87,492 -13.6%

(-) Total Operating Expenses (13,847) (4,525) n.a. (10,990) 26.0%

(-) Provision for Doubtfull Account - PDA (6,773) (1,420) n.a. (7,153) -5.3%

(+) Interest and Penalties on Tuition 2,518 346 n.a. 3,554 -29.2%

Operating Result 57,529 7,629 n.a. 72,904 -21.1%

Operating Margin 52.5% 47.6% n.a. 61.6% -9.2 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%


21

FINANCIAL PERFORMANCE – PRIMARY AND SECONDARY

Primary and Secondary Education

Values in R$ ('000)

Gross Revenue 22,511 25,387 -11.3% 38,274 -41.2% 157,996 142,752 10.7%

(-) Deductions from Gross Revenue (1,327) (1,659) -20.1% (2,540) -47.8% (9,890) (6,073) 62.8%

Taxes (1,231) (1,256) -1.9% (1,157) 6.4% (5,071) (3,895) 30.2%

ProUni - - n.a. - n.a. - - n.a.

Returns (95) (404) -76.4% (1,382) -93.1% (4,819) (2,179) 121.2%

Total Discounts - - n.a. - n.a. - - n.a.

Net Revenue 21,184 23,728 -10.7% 35,734 -40.7% 148,106 136,679 8.4%

Management Contracts and Own Operations 12,374 11,484 7.8% 12,385 -0.1% 48,668 37,909 28.4%

Associated Schools Network 8,810 12,244 -28.0% 23,349 -62.3% 99,439 98,771 0.7%

Total of Costs (15,476) (18,350) -15.7% (18,901) -18.1% (74,602) (73,732) 1.2%

Cost of Goods (CG) (2,581) (5,006) -48.4% (7,768) -66.8% (25,896) (22,713) 14.0%

Cost of Services (CS) (12,895) (13,344) -3.4% (11,133) 15.8% (48,705) (51,019) -4.5%

Faculty, Other Personnel and Third-Party Services (12,673) (12,660) 0.1% (10,647) 19.0% (46,174) (48,447) -4.7%

Rent (272) (312) -12.9% (312) -12.7% (1,192) (1,264) -5.7%

Other 50 (372) -113.4% (174) -128.5% (1,339) (1,307) 2.4%

Gross Income 5,708 5,378 6.1% 16,833 -66.1% 73,505 62,947 16.8%

Management Contracts and Own Operations 2,851 2,272 25.5% 4,573 -37.7% 13,522 4,845 n.a.

Associated Schools Network 2,857 3,128 -8.7% 12,260 -76.7% 59,982 58,123 3.2%


Management Contracts and Own Operations 13.5% 9.6% 3.9 p.p. 12.8% 0.7 p.p. 9.1% 3.5% 5.6 p.p.

Associated Schools Network 13.5% 13.2% 0.3 p.p. 34.3% -20.8 p.p. 40.5% 42.5% -2.0 p.p.

Total Operating Expenses (7,439) (7,118) 4.5% (9,061) -17.9% (34,029) (25,617) 32.8%

Personnel, General and Administrative Expenses (3,517) (3,429) 2.5% (3,806) -7.6% (15,549) (12,652) 22.9%

Personnel Expenses (549) (119) 362.1% (388) 41.7% (2,305) (1,214) 89.8%

General and Administrative Expenses (2,968) (3,310) -10.4% (3,419) -13.2% (13,244) (11,438) 15.8%

Selling and Marketing Expenses (3,923) (3,689) 6.3% (5,254) -25.3% (18,479) (12,966) 42.5%

Provision for Doubtfull Account - PDA (267) (732) -63.4% (475) -43.7% (2,236) (1,491) 50.0%

(+) Interest and Penalties on Tuition 106 84 25.7% 86 22.7% 461 277 66.4%

Operating Result (1,893) (2,388) -20.7% 7,384 n.a. 37,701 36,116 4.4%

Operating Margin -8.9% -10.1% 1.1 p.p. 20.7% -29.6 p.p. 25.5% 26.4% -1.0 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.% 2011 Chg.%2012

23.7

21.2

4Q11 4Q12

5.4

5.7

22.7%26.9%


-2.4-1.9

-10.1%

-8.9%


-11%

+6%

8% 3%12% 6% -8% -2%

+21%





136.7

148.1

2011 2012

62.9

73.5

46.1% 49.6%

56.0

58.0

60.0

62.0

64.0

66.0

68.0

70.0

72.0

74.0

76.0


36.1

37.7

26.4% 25.5%


+8% +17%

23% 11%19% 11% 23% 8%

+4%






22


Deductions Deductions as a ratio of gross revenue decreased by 0.6 p.p. in 4Q12 from the year-ago quarter, mainly due to the reduction in returns of materials in the period. Net Revenue The 10.7% reduction in net revenue from 4Q11 was driven by the decision to not renew certain contracts with public schools in 4Q12. The 40.7% reduction from 3Q12 is related to seasonality, since the fourth quarter is historically the weakest of the year.

Average Net Ticket In the Primary and Secondary Education business, the average annual amount charged for the sale of teaching materials to the Associated Schools is R$393.16 per student, which represents an increase of 4.8% from R$375.19 in the previous year.

Costs

In 4Q12, cost of goods sold as a ratio of net revenue in the business decreased 8.9 p.p. from the same quarter of 2011, reflecting the improved management of the process to produce collections during 2012. Meanwhile, the increase in costs of services rendered of 4.6 p.p. in the same period was due to the stability in headcount.


Values in R$ ('000)

Gross Revenue 22,511 25,387 -11.3% 38,274 -41.2%

(-) Deductions from Gross Revenue (1,327) (1,659) -20.1% (2,540) -47.8%

Taxes (1,231) (1,256) -1.9% (1,157) 6.4%

ProUni - - n.a. - n.a.

Returns (95) (404) -76.4% (1,382) -93.1%

Total Discounts - - n.a. - n.a.

Net Revenue 21,184 23,728 -10.7% 35,734 -40.7%

Management Contracts and Own Operations 12,374 11,484 7.8% 12,385 -0.1%

Associated Schools Network 8,810 12,244 -28.0% 23,349 -62.3%

Chg.%4Q12 4Q11 Chg.% 3Q12


Values in R$ ('000)

Total of Costs (15,476) (18,350) -15.7% (18,901) -18.1%

Cost of Goods (CG) (2,581) (5,006) -48.4% (7,768) -66.8%

Cost of Services (CS) (12,895) (13,344) -3.4% (11,133) 15.8%

Faculty, Other Personnel and Third-Party Services (12,673) (12,660) 0.1% (10,647) 19.0%

Rent (272) (312) -12.9% (312) -12.7%

Other 50 (372) -113.4% (174) -128.5%


% of Net Revenues

Total of Costs -73.1% -77.3% 4.3 p.p. -52.9% -20.2 p.p.

Cost of Goods (CG) -12.2% -21.1% 8.9 p.p. -21.7% 9.6 p.p.

Cost of Services (CS) -60.9% -56.2% -4.6 p.p. -31.2% -29.7 p.p.

Faculty, Other Personnel and Third-Party Services -59.8% -53.4% -6.5 p.p. -29.8% -30.0 p.p.

Rent -1.3% -1.3% 0.0 p.p. -0.9% -0.4 p.p.

Other 0.2% -1.6% 1.8 p.p. -0.5% 0.7 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%

4Q12 4Q11 Chg.% 3Q12 Chg.%


23

Gross Income

In 4Q12, gross margin expanded by 4.3 p.p. from the same period of 2011, due to the reduction in the segment’s costs between the periods outpacing the reduction in its net revenue.

Operating Expenses

Personnel, General and Administrative Expenses The increase of 2.1 p.p. in General and Administrative Expenses as a ratio of net revenue in 4Q12 compared to 4Q11 reflects the increase in the number of service agreements within the revenue mix.

Selling and Marketing Expenses As previously announced, the Company adopted a strategy of strengthening the commercial structure in this segment over the course of the year with the aim of boosting growth rates over the coming years, which could be observed already in 1Q13. As a result, selling and marketing expenses as a ratio of net revenue increased by 3.0 p.p. in 4Q12 compared to 4Q11.


In 4Q12, PDA accounted for 1.3% of net revenue, unchanged from 3Q12. In the year, PDA as a ratio of net revenue increased from 1.1% in 2011 to 1.5% in 2012, reflecting the more conservative policy adopted to offset the more restrictive posture in renegotiations with the Associated Schools.


Values in R$ ('000)

Gross Income 5,708 5,378 6.1% 16,833 -66.1%

Management Contracts and Own Operations 2,851 2,272 25.5% 4,573 -37.7%

Associated Schools Network 2,857 3,128 -8.7% 12,260 -76.7%

Gross Margin 26.9% 22.7% 4.3 p.p. 47.1% -20.2 p.p.

Management Contracts and Own Operations 13.5% 9.6% 3.9 p.p. 12.8% 0.7 p.p.

Associated Schools Network 13.5% 13.2% 0.3 p.p. 34.3% -20.8 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%


Values in R$ ('000)

Total Operating Expenses (7,439) (7,118) 4.5% (9,061) -17.9%

Personnel, General and Administrative Expenses (3,517) (3,429) 2.5% (3,806) -7.6%

Personnel Expenses (549) (119) 362.1% (388) 41.7%

General and Administrative Expenses (2,968) (3,310) -10.4% (3,419) -13.2%

Selling and Marketing Expenses (3,923) (3,689) 6.3% (5,254) -25.3%


% of Net Revenues

Total Operating Expenses -35.1% -30.0% -5.1 p.p. -25.4% -9.8 p.p.

Personnel, General and Administrative Expenses -16.6% -14.5% -2.1 p.p. -10.7% -5.9 p.p.

Personnel Expenses -2.6% -0.5% -2.1 p.p. -1.1% -1.5 p.p.


Selling and Marketing Expenses -18.5% -15.5% -3.0 p.p. -14.7% -3.8 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%

4Q12 4Q11 Chg.% 3Q12 Chg.%


Values in R$ ('000)

Provision for Doubtfull Account - PDA (267) (732) -63.4% (475) -43.7% (2,236) (1,491) 50.0%

PDA / Primary and Secondary Education Net Revenues -1.3% -3.1% 1.8 p.p. -1.3% 0.1 p.p. -1.5% -1.1% -0.4 p.p.

2012 2011 Chg.%3Q12 Chg.%4Q12 4Q11 Chg.%


24

Accounts Receivable

Accounts receivable from Primary and Secondary Education decreased in relation to both 4Q11 and 3Q12, due to the renegotiation and recovery policies adopted during the contract renewal period.


Calculation base: net balance of short-term accounts receivable, divided by Primary and Secondary Education net revenue in the last 12 months, multiplied by 360 days. The average accounts receivable term in the Primary and Secondary Education business decreased by 19 days from the same period last year, following the reduction in the amount of accounts receivable.

Operating Result

The aforementioned variations in costs and expenses had a positive impact on operating margin in 4Q12, which improved by 1.1 p.p. from 4Q11. In the year, operating margin in Primary and Secondary Education was 25.5%, decreasing from 26.4% in 2011, while operating income increased by 4.4% to R$37.7 million in 2012.


Values in R$ ('000)

Net Accounts Receivable 25,965 30,979 -16.2% 32,007 -18.9%

4Q12 3Q12 %Chg.%Chg.4Q11

Primary and Secondary Education - Accounts

Receivable Average Turnover Days4Q12 4Q11 Chg. (days) 3Q12 Chg. (days)

Net Accounts Receivable

Net Revenues 63 82 - 19 days 77 - 13 days


Values in R$ ('000)

Gross Income 5,708 5,378 6.1% 16,833 -66.1%

(-) Total Operating Expenses (7,439) (7,118) 4.5% (9,061) -17.9%

(-) Provision for Doubtfull Account - PDA (267) (732) -63.4% (475) -43.7%

(+) Interest and Penalties on Tuition 106 84 25.7% 86 22.7%

Operating Result (1,893) (2,388) -20.7% 7,384 n.a.

Operating Margin -8.9% -10.1% 1.1 p.p. 20.7% -29.6 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%


25

FINANCIAL PERFORMANCE – KROTON

Consolidated

Values in R$ ('000)

Gross Revenue 449,476 246,789 82.1% 465,704 -3.5% 1,715,433 879,975 94.9%

(-) Gross Revenue Deductions (84,526) (49,593) 70.4% (80,221) 5.4% (309,866) (145,421) 113.1%

Taxes (10,242) (5,911) 73.3% (10,243) 0.0% (38,052) (19,373) 96.4%

ProUni (35,852) (21,143) 69.6% (35,918) -0.2% (130,214) (71,885) 81.1%

Returns (95) (404) -76.4% (1,382) -93.1% (4,819) (2,179) 121.2%

Total Discounts (38,338) (22,136) 73.2% (32,677) 17.3% (136,781) (50,133) 172.8%

Net Revenue 364,950 197,196 85.1% 385,483 -5.3% 1,405,567 734,553 91.3%

Total of Costs (201,401) (131,313) 53.4% (195,919) 2.8% (712,048) (463,620) 53.6%

Cost of Goods (CG) (2,581) (5,006) -48.4% (7,768) -66.8% (25,896) (22,713) 14.0%

Cost of Services (CS) (198,820) (126,307) 57.4% (188,151) 5.7% (686,151) (440,906) 55.6%

Faculty, Other Personnel and Third-Party Services (176,743) (110,328) 60.2% (166,835) 5.9% (604,011) (380,779) 58.6%

Rent (21,091) (15,327) 37.6% (20,471) 3.0% (77,638) (57,303) 35.5%

Other (985) (652) 51.0% (844) 16.6% (4,502) (2,825) 59.4%

Gross Income 163,550 65,882 148.2% 189,563 -13.7% 693,520 270,934 156.0%


Total Operating Expenses (54,033) (31,270) 72.8% (44,755) 20.7% (183,388) (93,923) 95.3%

Personnel, General and Administrative Expenses (30,097) (18,836) 59.8% (28,636) 5.1% (111,279) (55,269) 101.3%

Personnel Expenses (7,604) (3,305) 130.1% (7,278) 4.5% (28,372) (6,092) 365.7%

General and Administrative Expenses (22,493) (15,531) 44.8% (21,358) 5.3% (82,907) (49,176) 68.6%

Selling and Marketing Expenses (23,936) (12,434) 92.5% (16,119) 48.5% (72,109) (38,655) 86.5%


(+) Interest and Penalties on Tuition 6,504 2,967 119.2% 9,967 -34.7% 28,260 14,740 91.7% - - 0.0% - 0.0% - - 0.0%


Operating Margin 27.0% 14.5% 12.5 p.p. 35.7% -8.7 p.p. 33.6% 21.8% 11.8 p.p.0 0 0 0 0 0 0 0

Corporate Expenses (26,485) (9,913) 167.2% (21,893) 21.0% (84,687) (49,318) 71.7%0 0 0 0 0 0 0 0

Adjusted EBITDA 72,097 18,663 286.3% 115,916 -37.8% 387,621 111,118 248.8%

Adjusted EBITDA Margin 19.8% 9.5% 10.3 p.p. 30.1% -10.3 p.p. 27.6% 15.1% 12.5 p.p.

(-) Non-Recurring Costs and Expenses (5,542) (8,015) -30.8% (9,383) -40.9% (30,370) (14,207) 113.8%

EBITDA 66,554 10,648 525.1% 106,533 -37.5% 357,251 96,911 268.6%

Depreciation and Amortization (23,112) (13,243) 74.5% (25,181) -8.2% (85,934) (44,406) 93.5%

Financial Result (17,886) (4,122) 334.0% (18,920) -5.5% (62,695) (9,824) 538.2%

Income Tax / Social Contribution (5,292) 365 n.a. (3,366) 57.2% (16,300) (2,338) 597.3%

Deferred Income Tax / Social Contribution 3,654 (926) n.a. 1,840 98.6% 9,723 (2,967) n.a.

Net Income (Loss) 23,918 (7,277) -428.7% 60,906 -60.7% 202,044 37,375 440.6%

Net Margin 6.6% -3.7% 10.2 p.p. 15.8% -9.2 p.p. 14.4% 5.1% 9.3 p.p.

(+) Non Recurring Costs and Expenses 5,542 8,015 -30.8% 9,383 -40.9% 30,370 14,207 113.8%

(+) Intagible Amortization (Aquisitions) 8,750 834 948.7% 11,817 -26.0% 35,624 834 n.a.

Adjusted Net Income (Loss) 38,211 1,572 n.a. 82,106 -53.5% 268,038 52,417 411.4%

Adjusted Net Margin 10.5% 0.8% 9.7 p.p. 21.3% -10.8 p.p. 19.1% 7.1% 11.9 p.p.

2012 2011 Chg.%4Q12 4Q11 Chg.% 3Q12 Chg.%

28.6

98.6

14.5%

27.0%


65.9163.6

33.4%

44.8%


+85%

197.2

365.0

4Q11 4Q12

+148%+245%







160.4

472.3

21.8%

33.6%


270.9693.5

36.9%

49.3%


+91%

734.6

1405.6

2011 2012

+156%+194%


26

CORPORATE EXPENSES

In 4Q12, corporate expenses as a ratio of net revenue increased 1.6 p.p. compared to 3Q12, due to higher general and administrative expenses with consulting services and the additional provision for variable compensation related to the net profit in 2012. In the year, however, corporate expenses as a ratio of net revenue improved, from 6.7% in 2011 to 6.0% in 2012.

NONRECURRING EVENTS

As mentioned above, Kroton already expected nonrecurring events during 2012, mainly those related to the acquisitions. In 4Q12, the Company recorded R$2.2 million in expenses related to the Uniasselvi integration and R$1.6 million in expenses related to the Unopar integration. In addition, another R$1.4 million was recorded in expenses related to M&A projects (excluding Unopar and Uniasselvi), which included auditing and integration processes, especially at Unirondon. Lastly, another R$0.3 million was recognized related to the hiring of consulting services for special projects of a nonrecurring nature.

EBITDA

Consolidated

Values in R$ ('000)

Corporate Expenses (26,485) (9,913) 167.2% (21,893) 21.0%

Personnel Expenses (16,691) (7,331) 127.7% (17,660) -5.5%

General and Administrative Expenses (9,794) (2,582) 279.3% (4,233) 131.4%

Consolidated

% of Net Revenue

Corporate Expenses -7.3% -5.0% -2.2 p.p. -5.7% -1.6 p.p.

Personnel Expenses -4.6% -3.7% -0.9 p.p. -4.6% 0.0 p.p.


3Q12 Chg.%

4Q12 4Q11 Chg.% 3Q12 Chg.%

4Q12 4Q11 Chg.%

Item (R$ '000) 1Q12 2Q12 3Q12 4Q12 2012

Unopar Integration

(4,137) (5,255) (1,390) (1,598) (12,380)

Uniasselvi Integration

- (253) (3,727) (2,164) (6,144)

M&A Projects

(3,455) (2,345) (2,151) (1,442) (9,393)

Consulting Projects

- - (2,115) (338) (2,453)

Total of Nonrecurring Items (7,591) (7,853) (9,383) (5,542) (30,370)

Consolidated

Values in R$ ('000)

Operating Result 98,582 28,576 245.0% 137,809 -28.5%

(-) Corporate Expenses (26,485) (9,913) 167.2% (21,893) 21.0%

Adjusted EBITDA 72,097 18,663 286.3% 115,916 -37.8%

Adjusted EBITDA Margin 19.8% 9.5% 10.3 p.p. 30.1% -10.3 p.p.

(+) Nonrecurring Costs and Expenses (5,542) (8,015) -30.8% (9,383) -40.9%

EBITDA 66,554 10,648 525.1% 106,533 -37.5%

EBITDA Margin 18.2% 5.4% 12.8 p.p. 27.6% -9.4 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%


27

In 4Q12, Adjusted EBITDA was R$72.1 million, increasing 286.3% from the same quarter of 2011, with Adjusted EBITDA margin of 19.8%. EBITDA performance in the period reaffirms the increase in the operational efficiency, the rigorous control of costs and expenses and the successful acquisition and integration processes. In 2012, Adjusted EBITDA was R$387.6 million (margin of 27.6%), exceeding the Company's official guidance by 8.3%. Excluding the adjustments for nonrecurring costs and expenses, the Company generated EBITDA of R$66.6 million, with margin of 18.2% in 4Q12, for margin expansion of 12.8 p.p. from 4Q11.

FINANCIAL RESULT

In 4Q12, the net financial result was an expense of R$17.9 million, impacted by the higher interest on related loans, especially the R$550 million debentures issue related to the Unopar acquisition maturing in seven years and restated by the variation in the CDI overnight rate + 2.0% per annum, as well as the interest on obligations related to acquisitions, especially Unopar and Uniasselvi. In relation to 3Q12, the improvement in the financial result is explained by the higher interest income from financial investments, due to the higher average cash balance in the period driven by cash generation of the Company.

111.1

387.615.1%

27.6%

2011 2012

% Adjusted EBITDA Margin

+249%

18.7

72.19.5%

19.8%

4Q11 4Q12

% Adjusted EBITDA Margin

+286%

Quarterly - R$ million 12 Months - R$ million

Consolidated

Values in R$ ('000)

(+) Financial Revenues 5,535 6,769 -18.2% 4,806 15.2%

Interest on Financial Investment 5,056 6,179 -18.2% 4,132 22.4%

Others 479 591 -18.9% 673 -28.8%

(-) Financial Expenses (23,421) (10,891) 115.1% (23,726) -1.3%

Banks Expenses (1,611) (819) 96.7% (1,702) -5.4%

Interest on Loans (12,699) (2,753) 361.3% (14,175) -10.4%

Interest and Tax on Late Payment (1,913) (4,840) -60.5% (1,188) 61.0%

Interest on Loans for Acquisitions (5,644) (1,771) 218.7% (6,280) -10.1%

Others (1,555) (708) 119.6% (381) 307.8%

Financial Result (17,886) (4,122) 334.0% (18,920) -5.5%

Chg.%4Q12 4Q11 Chg.% 3Q12

Adjusted EBITDA / Adjusted EBITDA Margin R$ million


28

NET INCOME

In 4Q12, the Company posted net income of R$38.2 million, increasing from R$1.6 million in the same period of 2011. Note that the adjustments to net income include the line amortization of intangible assets, which mainly combines the impacts of the Unopar and Uniasselvi acquisitions. The lower amount recorded in this line in 4Q12 compared to prior quarters was due to the Uniasselvi valuation report received by the Company in the period, which led to an adjustment in the amount of amortization of intangible assets in 4Q12 to offset differences from prior periods. For 2013, this line should stabilize at around R$10 million per quarter In 2012, adjusted net income was R$268.0 million, more than 5 times the net income for 2011. Excluding the adjustments for nonrecurring costs and expenses and the amortization of intangible assets, net income was R$23.9 million in 4Q12 and R$202.0 million in 2012.

Consolidated

Values in R$ ('000)

Adjusted EBITDA 72,097 18,663 286.3% 115,916 -37.8%

(+) Depreciation and Amortization ex-Intangible (14,362) (12,409) 15.7% (13,363) 7.5%

(+) Financial Result 1 (17,886) (4,122) 334.0% (18,920) -5.5%

(+) Income Tax / Social Contribution (5,292) 365 n.a. (3,366) 57.2%

(+) Deferred Income Tax / Social Contribution 3,654 (926) n.a. 1,840 98.6%

Adjusted Net Income (Loss) 38,211 1,572 n.a. 82,106 -53.5%

Adjusted Net Margin 10.5% 0.8% 9.7 p.p. 21.3% -10.8 p.p.

(+) Nonrecurring Costs and Expenses (5,542) (8,015) -30.8% (9,383) -40.9%

(+) Intangible Amortization (Aquisitions) (8,750) (834) n.a. (11,817) -26.0%

Net Income (Loss) 23,918 (7,277) -428.7% 60,906 -60.7%

Net Margin 6.6% -3.7% 10.2 p.p. 15.8% -9.2 p.p.

4Q12 4Q11 Chg.% 3Q12 Chg.%

1.6

38.2

0.8%

10.5%

4Q11 4Q12% Adjusted Net Margin

52.4

268.0

7.1%

19.1%

2011 2012% Adjusted Net Margin

+411%

Quarterly - R$ million 12 Months - R$ million

Adjusted Net Income / Adjusted Net Margin R$ million


29

INVESTMENT (CAPEX)

In 4Q12, Kroton invested R$23.1 million, allocated as follows:

(i) information technology and library equipment: R$3.3 million; (ii) content and systems development and software licenses: R$4.2 million; (iii) laboratory and related equipment: R$4.6 million; (iv) expansions – construction and improvements: R$11.0 million. In 4Q12, investments totaled R$23.1 million, or 6.3% as a ratio of net revenue, with most of this amount allocated to expansion projects to meet the growth in the student base projected for 2013. In the year, total capex was R$74.6 million, or 5.3% of net revenue, below the guidance of R$90 million, since certain investments were postponed to 2013.

As previously announced, Kroton is also investing in special projects, which include the acquisition of brownfields properties and buildings to support stronger growth rates over the coming years. In 4Q12, these investments totaled R$3.1 million (not included in the above chart) and are basically related to ongoing construction projects. In the year, these investments totaled R$45.4 million, which is also below the guidance of R$60 million.

NET DEBT

1 Considers only bank obligations. 2 Net cash (debt) considering all short- and long-term obligations related to the taxes paid in installments and the acquisitions, including the amount to be paid within 6 years related to the Uniasselvi acquisition.

At the end of 4Q12, Kroton’s cash and financial investments totaled R$219.5 million. The reduction compared to 3Q12 is due to the payment, in December 2012, of R$141.5 million related to the last installment of the Unopar acquisition. As mentioned before, the Company's debt is directly related to the financing of the Unopar acquisition, given the R$550 million debentures issue. As a result, the company’s net debt considering only bank debt totaled R$336.0 million in 4Q12.

12,512,7

23,13,2%

7,2%6,3%

-0, 7%

0,3%

1,3%

2,3%

3,3%

4,3%

5,3%

6,3%

7,3%

3Q12 4Q11 4Q12

14%

18%

20%

48%

Computer Equipment andLibrary

System development andcontent and software

Laboratory and similarequipment

Expansion of physicalfacilities

Consolidated

Values in R$ ('000)

Cash and Cash Equivalents 219,460 321,262

Cash 132,226 45,971

Securities 87,234 275,291

Loans and Financing 555,441 569,309

Short-term Debt 6,404 20,089

Long-term Debt 549,037 549,220

Net Cash (Debt)1 (335,981) (248,047)

Other Short and Long Term Debt 276,553 422,413

Net Cash (Debt)2 (612,534) (670,460)

4Q12 3Q12

Breakdown of Investments in 4Q12 Investments / % of Net Revenue R$ million


30

Considering all short- and long-term obligations, which include the tax liabilities under the Refis tax amnesty program and the obligations related to the acquisitions made through 4Q12, net debt stood at R$612.5 million. This amount is represented mostly by the outstanding amount for the Uniasselvi acquisition (up to R$197.5 million, considering restatement by the CDI rate through December), which will be paid in six annual installments as from 2013.

CASH FLOW

The Company’s free cash flow stems from cash flow from operating activities, which is derived from net income adjusted for all non-cash effects in the profit and loss and comprises all variations in working capital, taxes paid (income tax and social contribution) and investments made (ex-acquisitions), and from cash flow from non-operating activities, which includes all financial flows not related to the operations.

The above table provides a breakdown of the groups that form the Company’s free cash flow. In 4Q12, operating cash flow before capex was R$105.9 million, higher than in the same quarter of 2011, mainly due to the financial performance in the period and the increase in working capital, which reflects the FIES credit repurchases and the cash inflows from the Distance Learning business. In the year, the performance of this line was also very positive, reaching R$388.2 million. Considering the disbursements for recurring capex, operating cash flow was R$81.5 million in 4Q12. Adding the capex for special projects, operating cash flow was R$66.5 million. The Company's free cash flow was negative R$103.0 million in 4Q12, mainly impacted by the payment of the last installment related to the Unopar acquisition.

Operating cash generation after capex corresponded to 122.4% of EBITDA in 4Q12 and to 87.8% in 2012. After the disbursements for capex, both recurring and for special projects, cash generation corresponded to 75.1% of EBITDA in the year.

R$ million 4Q12 4Q11 Chg.% 3Q12 Chg.% 2012 2011 Chg.%

Net Income (Loss) before Income Interest 25,556 (6,477) -494.6% 62,433 -59.1% 208,621 42,680 388.8%

(+) Net Income (Loss) adjustments before Income Interest 53,995 31,048 73.9% 63,441 -14.9% 214,675 83,570 156.9%

Depreciation and Amortization 23,112 13,243 74.5% 25,181 -8.2% 85,935 44,407 93.5%

Provision for Doubtful Accounts (PDA) 17,440 9,003 93.7% 16,967 2.8% 66,083 31,314 111.0%

Others 13,443 8,802 52.7% 21,293 -36.9% 62,657 7,849 698.3%

(+) Income Tax and Social Contribution (2,659) (1,659) 60.3% (1,554) 71.1% (10,322) (2,249) 359.0%

(+) Changes in Working Capital 28,988 (47,393) -161.2% 11,462 152.9% (24,787) (125,709) -80.3%

(Increase) Reduction in Accounts Receivable 16,461 (29,577) -155.7% 6,765 143.3% (56,728) (117,944) -51.9%

Others 12,527 (17,816) -170.3% 4,697 166.7% 31,941 (7,765) -511.4%

Operating Cash Generation before Capex 105,880 (24,481) n.a. 135,782 -22.0% 388,187 (1,708) n.a.

Capex - Recurring (24,405) (13,697) 78.2% (12,524) 94.9% (74,641) (46,568) 60.3%

Operating Cash Generation after Capex - Recurring 81,475 (38,178) n.a. 123,258 -33.9% 313,546 (48,276) n.a.

Capex - Special Projects (14,956) - n.a. (12,069) n.a. (45,398) - n.a.

Operating Cash Generation after Capex - Recurring and Special Projects 66,519 (38,178) n.a. 111,189 -40.2% 268,148 (48,276) n.a.

(+) M&A Activities (142,917) (644,108) -77.8% (16,110) 787.1% (738,302) (651,776) 13.3%

(+) Cash Flow from Financing Activities (26,565) 557,541 n.a. (7,922) 235.3% 534,427 825,231 -35.2%- - 0.0% - 0.0% - - 0.0%

Free Cash Flow (102,963) (124,745) -17.5% 87,157 n.a. 64,273 125,179 -48.7%

R$ million 4Q12 2012105880.2

Operating Cash Generation (OCG) before Capex 105,880 388,187

OCG / EBITDA 159.1% 108.7%

Operating Cash Generation after Capex - Recurring 81,475 313,546

OCG / EBITDA 122.4% 87.8%

Operating Cash Generation after Capex - Recurring and Special Projects 66,519 268,148

OCG / EBITDA 99.9% 75.1%

Free Cash Flow (102,963) 64,273


31

FINANCIAL PERFORMANCE – KROTON (Ex-Unopar and Uniasselvi)

To provide an analysis of the evolution in Kroton’s results (excluding Unopar and Uniasselvi), we once again provide a managerial analysis showing the unmistakable improvement in the Company's performance. This analysis excludes all impacts related to Unopar and considers three different forms of allocating corporate expenses in Kroton’s profit or loss, as shown in the following tables:

1 – Considers 100% of corporate expenses allocated to Kroton

2 – Corporate expenses allocated in accordance with net revenue

3 – Corporate expenses in 2011 restated by the IPCA

Considering the allocation of expenses according to net revenue (scenario 2) or the restatement of expenses in 2011 by the IPCA index (scenario 3), we see that the 21% margin has been reached. Therefore, as of 1Q13, this managerial analysis will no longer be included in the earnings release.

-24.5

105.9

-38.2

81.5

-38.2

66.5

159% 122% 100%

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

4Q11 4Q12 4Q11after

Capex

4Q12after

Capex

4Q11after

Capex +SpecialProjects

4Q12after


-1.7

388.2

-48.3

313.5

-48.3

268.1

109% 88%75%

-70%

-50%

-30%

-10%

10%

30%

50%

70%

90%

110%

-100.0

-50.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

2011 2012 2011after

Capex

2012after

Capex

2011after


2012after


Quarterly - R$ million and % EBITDA 12 Months - R$ million and % EBITDA

Values in R$ ('000) 2012 2011 Chg.%

Net Revenue 918,407 713,934 28.6%

Adjusted EBITDA 161,398 105,007 53.7%

Adjusted EBITDA Margin 17.6% 14.7% 2.9 p.p.

Values in R$ ('000) 2012 2011 Chg.%

Net Revenue 918,407 713,934 28.6%

Adjusted EBITDA 190,750 105,007 81.7%


Values in R$ ('000) 2012 2011 Chg.%

Net Revenue 918,407 713,934 28.6%

Adjusted EBITDA 193,887 105,007 84.6%


Operating Cash Flow / % EBITDA R$ million


32

CAPITAL MARKETS AND SUBSEQUENT EVENTS NOVO MERCADO

The Extraordinary Shareholders’ Meeting held on November 30, 2012 approved Kroton’s migration to the Novo Mercado segment of the BM&FBovespa. The listing segment requires the highest levels of corporate governance and reaffirms Kroton’s commitment to the financial community and to its shareholders. With the migration to the Novo Mercado, all shares issued by the Company were converted into common shares (KROT3) proportional to the existing units (KROT11). Furthermore, as a result of this event, Kroton ceased to have a group of controlling shareholders and became a full corporation. The migration to the Novo Mercado took effect on December 5, 2012.

STOCK SPLIT

The Extraordinary Shareholders’ Meeting held on March 5, 2013 approved a split in Kroton’s stock at the ratio of 2 common shares for each existing common share. As a result, the number of shares in Kroton’s capital stock increased from 134,351,938 common shares to 268,703,876 common shares, with each shareholder holding twice as many shares as previously.

DIVIDENDS

The Board of Directors of Kroton approved on today’s date the allocation of net income for fiscal year 2012. The proposal to be submitted to the Annual Shareholders Meeting to be held on April 19, 2013 calls for the distribution to shareholders of R$60 million in dividends.

STOCK PERFORMANCE

With Kroton’s migration to the Novo Mercado, as mentioned above, the analyses of stock performance consider the units (KROT11) until December 4, 2012 and the common shares (KROT3) as from December 5, 2012. This is possible since the conversion of shares was proportional. Kroton stock (KROT3) is a component of the Special Corporate Governance Stock Index (IGC), Special Tag-Along Stock Index (ITAG), Consumption Sector Index (ICON), Small Cap Index (SMLL) and MSCI Brazil.

The stock was traded in 100% of trading sessions during 4Q12, registering financial trading volume of R$2.0 billion and 115,559 orders in the period, which represents average daily trading volume of R$35.8 million. On December 28, 2012, Kroton’s market capitalization was R$6.2 billion.

During 4Q12, the stock price gained 33.3%, while the Brazil Index (Ibovespa) gained 3.0%, the SMLL 5.2%, the ITAG 6.6%, the IGC 7.2% and the ICON 10.5%. Kroton stock is currently covered by research analysts at 15 different local and international institutions.


33

OWNERSHIP STRUCTURE

With the above mentioned stock split, Kroton’s capital is now composed of 268,703,876 common shares, distributed as follows:

* Position at February 20, 2013

ABOUT KROTON EDUCACIONAL

Kroton Educacional S.A. (BM&FBovespa: KROT3) is one of the largest for-profit private educational organizations in the world. Operating for over 45 years, Kroton has a nationwide presence in all of Brazil’s states. As of December 2012, Kroton had approximately 410,000 Postsecondary students in both the On-Campus and Distance Learning formats, primarily through its 53 Postsecondary units and 447 active Undergraduate Distance Learning centers. In Primary and Secondary Education, its main business is offering Learning Systems, which in 2012 served some 800 private schools in the country.

DISCLAIMER

This document contains forward-looking statements and information. These forward-looking statements and information are merely forecasts and not guarantees of future performance. All stakeholders are cautioned that such forward-looking statements and information involve risks, uncertainties and factors relating to the operations and business environments of Kroton and its subsidiaries and affiliates, and that the actual results of the companies could differ materially from the future results anticipated explicitly or implicitly by such forward-looking statements and information.

Highlights

(Consider share value before share split) 4Q12 2012

Average Daily Trade Volume (quarter average) R$ 35.8 million R$ 16.6 million

Maximum (R$ per share) R$ 47.50 R$ 47.50

Minimun (R$ per share) R$ 34.97 R$ 17.58

Average (R$ por share) R$ 41.27 R$ 31.37

Closing Quote R$ 46.25 R$ 46.25

Variation in the period (%) 59.2% 151.5%

Quantity % Quanti ty %

Executive Directors and Board Members 45,261,010 33.7% 90,522,020 33.7%

Advent 13,694,671 10.2% 27,389,342 10.2%

Others 31,566,339 23.5% 63,132,678 23.5%

Treasury 362,142 0.3% 724,284 0.3%Free Float 88,728,786 66.0% 177,457,572 66.0%

Total 134,351,938 100.0% 268,703,876 100.0%

Kroton Ownership Structure* Ownership before Split Current ownership


34

APPENDIX 1 – CONSOLIDATED BALANCE SHEET

R$ thousand 4Q12 % AV 3Q12 % AV

Assets

Current Assets 540,543 14.3% 662,214 16.8%

Cash and Banks 132,226 3.5% 45,971 1.2%

Financial Investments 83,394 2.2% 272,612 6.9%

Accounts Receivable 245,104 6.5% 279,061 7.1%

Inventories 15,903 0.4% 6,213 0.2%

Advances 27,443 0.7% 16,579 0.4%

Recoverable Taxes 25,555 0.7% 30,678 0.8%

Other Accounts Receivable 10,918 0.3% 11,100 0.3%

Non current Assets 3,243,377 85.7% 3,286,866 83.2%

Long Term Assets 209,142 5.5% 326,397 8.3%

Securities 3,840 0.1% 2,679 0.1%

Accounts Receivables 14,402 0.4% 15,781 0.4%

Deferred Taxes 1,546 0.0% 1,599 0.0%

Judicial Escrow Deposits 8,646 0.2% 9,501 0.2%

Advances to Suppliers 8,777 0.2% 8,952 0.2%

Judicial Escrow Deposits 9,811 0.3% 9,396 0.2%

Warranty for fiscal, work and civil losses 159,098 4.2% 275,533 7.0%

Other 3,022 0.1% 2,956 0.1%

Investments 1,600 0.0% 1,600 0.0%

Fixed Assets 371,852 9.8% 356,345 9.0%

Intangible 2,660,783 70.3% 2,602,524 65.9%

Total Assets 3,783,920 100.0% 3,949,080 100.0%

Liabilities and Shareholders' Equity

Current Liabilities 368,557 9.7% 467,904 11.8%

Suppliers 72,666 1.9% 59,180 1.5%

Loans and Financing 4,706 0.1% 4,286 0.1%

Debenture 1,698 0.0% 15,803 0.4%

Payroll and Related Charges 100,538 2.7% 115,691 2.9%

Income Tax and Social Contribuition 4,993 0.1% 11,181 0.3%

Taxes and Contribuition 17,353 0.5% 16,856 0.4%

Advances to Clients 36,307 1.0% 16,302 0.4%

Tax and Contribuion Payment Installments 7,764 0.2% 6,750 0.2%

Accounts Payable - Acquisitions 54,823 1.4% 207,387 5.3%

Dividends Payable 44,803 1.2% 0 0.0%

Other 22,906 0.6% 14,468 0.4%

Non current Liabilities 1,169,159 30.9% 1,216,546 30.8%

Suppliers 0 0.0% 941 0.0%

Loans and Financing 6,926 0.2% 7,438 0.2%

Debenture 542,111 14.3% 541,782 13.7%

Provision for Tax, Labor and Civil Lawsuit Losses 244,574 6.5% 361,922 9.2%

Tax and Contribuion Payment Installments 42,443 1.1% 39,434 1.0%

Accounts Payable - Acquisitions 171,523 4.5% 168,842 4.3%

Deferred Taxes 159,312 4.2% 93,984 2.4%

Others 2,270 0.1% 2,203 0.1%

Shareholder´s Equity 2,246,204 59.4% 2,264,630 57.3%

Total Liabilities and Shareholders' Equity 3,783,920 100.0% 3,949,080 100.0%


35

APPENDIX 2 – QUARTERLY INCOME STATEMENT RECONCILIATION

4Q12

Results

(Book)

Interest and

Penalties

on Tuition

Depre-

ciation

Intangible

Amortization

(Aquisitions)

Non-

recurring

Costs and

Expenses

4Q12

Results

(Release)

Gross Revenue 449,476 449,476

Postsecondary 426,965 - - - - 426,965

Primary and Secondary 22,511 - - - - 22,511

Deductions from Gross Revenue (84,526) (84,526)

Postsecondary (83,199) - - - - (83,199)

Primary and Secondary (1,327) - - - - (1,327)

Net Revenue 364,950 364,950

Postsecondary 343,766 - - - - 343,766


Costs of Goods/Services (213,552) (201,401)

Cost of Goods Sold (2,581) - - - - (2,581)

Cost of Services Rendered (210,971) - 10,891 - 1,260 (198,820)

Gross Income 151,399 163,550

Operating Expenses (114,460) (97,957)

Selling Expenses (24,046) - - - 110 (23,936)

Provision for Doubtful Accounts (17,440) - - - - (17,440)

Personnel Expenses (24,639) - - - 345 (24,294)

General and Administrative Expenses (48,238) - 12,220 - 3,730 (32,287)

Other Operating Income (Expenses) (97) - - - 97 -

Income (Loss) before Financial Result 36,939 65,593

Interest and Penalties on Tuition - 6,504 - - - 6,504

Depreciation and Amortization - - (23,111) 8,750 - (14,362)

Financial Result (11,382) (17,886)

Financial Expenses (23,421) - - - - (23,421)

Financial Revenues 12,039 (6,504) - - - 5,535

Income (Loss) from Operations 25,557 39,850

Income and Social Contribuition Tax (1,639) - - - - (1,639)

Current (5,292) - - - - (5,292)

Deferred 3,654 - - - - 3,654

Net Income (Loss) 23,918 - - 8,750 5,542 38,211

Non-accounting adjustments

(In thousand reais, except otherwise indicated)


36

APPENDIX 3 – FULL YEAR INCOME STATEMENT RECONCILIATION

2012

Results

(Book)

Interest and

Penalties

on Tuition

Depre-

ciation

Intangible

Amortization

(Aquisitions)

Non-

recurring

Costs and

Expenses

2012

Results

(Release)

Gross Revenue 1,715,433 1,715,433

Postsecondary 1,557,437 - - - - 1,557,437


Deductions from Gross Revenue (309,866) (309,866)

Postsecondary (299,976) - - - - (299,976)

Primary and Secondary (9,890) - - - - (9,890)

Net Revenue 1,405,567 1,405,567

Postsecondary 1,257,461 - - - - 1,257,461


Costs of Goods/Services (762,841) (712,048)

Cost of Goods Sold (25,896) - - - - (25,896)

Cost of Services Rendered (736,944) - 39,627 - 11,167 (686,151)

Gross Income 642,726 693,520

Operating Expenses (399,671) (334,159)

Selling Expenses (72,428) - - - 319 (72,109)

Provision for Doubtful Accounts (66,083) - - - - (66,083)

Personnel Expenses (92,325) - - - 6,382 (85,943)

General and Administrative Expenses (168,485) - 46,308 - 12,153 (110,024)

Other Operating Income (Expenses) (349) - - - 349 -

Income (Loss) before Financial Result 243,056 359,361

Interest and Penalties on Tuition - 28,260 - - - 28,260

Depreciation and Amortization - - (85,935) 35,624 - (50,311)

Financial Result (34,435) (62,695)

Financial Expenses (95,143) - - - - (95,143)

Financial Revenues 60,708 (28,260) - - - 32,448

Income (Loss) from Operations 208,621 274,615

Income and Social Contribuition Tax (6,577) - - - - (6,577)

Current (16,300) - - - - (16,300)

Deferred 9,723 - - - - 9,723

Net Income (Loss) 202,044 - - 35,624 30,370 268,038

Non-accounting adjustments



37

APPENDIX 4 – QUARTERLY INCOME STATEMENT

4Q12 % Net Rev. 4Q11 % Net Rev. 4Q12 / 4Q11 3Q12 % Net Rev. 4Q12 / 3Q12

Gross Revenue 449,476 123.2% 246,787 125.1% 82.1% 463,863 120.3% -3.1%

Postsecondary 426,965 117.0% 221,400 112.3% 92.8% 425,590 110.4% 0.3%

Primary and Secondary 22,511 6.2% 25,387 12.9% -11.3% 38,274 9.9% -41.2%

Deductions from Gross Revenue (84,526) -23.2% (49,594) -25.1% 70.4% (78,381) -20.3% 7.8%

Postsecondary (83,199) -22.8% (47,935) -24.3% 73.6% (75,841) -19.7% 9.7%

Primary and Secondary (1,327) -0.4% (1,659) -0.8% -20.0% (2,540) -0.7% -47.8%

Net Revenue 364,950 100.0% 197,193 100.0% 85.1% 385,483 100.0% -5.3%

Postsecondary 343,766 94.2% 173,465 88.0% 98.2% 349,748 90.7% -1.7%

Primary and Secondary 21,184 5.8% 23,728 12.0% -10.7% 35,734 9.3% -40.7%

Costs of Goods/Services (213,552) -58.5% (139,151) -70.6% 53.5% (210,413) -54.6% 1.5%

Cost of Goods Sold (2,581) -0.7% (5,820) -3.0% -55.7% (7,768) -2.0% -66.8%

Cost of Services Rendered (210,971) -57.8% (133,331) -67.6% 58.2% (202,645) -52.6% 4.1%

Gross Income 151,399 41.5% 58,042 29.4% 160.8% 175,070 45.4% -13.5%

Operating Expenses (114,460) -31.4% (63,607) -32.3% 79.9% (103,683) -26.9% 10.4%

Selling Expenses (24,046) -6.6% (13,269) -6.7% 81.2% (16,292) -4.2% 47.6%

Provision for Doubtful Accounts (17,440) -4.8% (9,003) -4.6% 93.7% (16,967) -4.4% 2.8%

Personnel Expenses (24,639) -6.8% (11,527) -5.8% 113.8% (26,146) -6.8% -5.8%

General and Administrative Expenses (48,238) -13.2% (24,478) -12.4% 97.1% (44,278) -11.5% 8.9%

Other Operating Income (Expenses) (97) 0.0% (5,328) -2.7% -98.2% - 0.0% n.a.

Income (Loss) before Financial Result 36,939 18.7% (5,564) -2.8% n.a. 71,386 18.5% -48.3%

Financial Result (11,382) -3.1% (1,153) -0.6% 887.5% (8,953) -2.3% 27.1%

Financial Expenses (23,421) -6.4% (10,808) -5.5% 116.7% (23,726) -6.2% -1.3%

Financial Revenues 12,039 3.3% 9,655 4.9% 24.7% 14,773 3.8% -18.5%

Income (Loss) from Operations 25,557 7.0% (6,717) -3.4% n.a. 62,433 16.2% -59.1%

Income and Social Contribuition Tax (1,639) -0.4% (560) -0.3% 192.4% (1,526) -0.4% n.a.

Current (5,292) -1.5% 365 0.2% n.a. (3,366) -0.9% 57.2%

Deferred 3,654 1.0% (926) -0.5% n.a. 1,840 0.5% 98.6%

Net Income (Loss) 23,918 6.6% (7,277) -3.7% n.a. 60,907 15.8% -60.7%



38

APPENDIX 5 – FULL YEAR INCOME STATEMENT

2012 % Net Rev. 2011 % Net Rev. 2012 / 2011

Gross Revenue 1,715,433 122.0% 879,974 119.8% 94.9%

Postsecondary 1,557,437 110.8% 737,221 100.4% 111.3%

Primary and Secondary 157,996 11.2% 142,752 19.4% 10.7%

Deductions from Gross Revenue (309,866) -22.0% (145,423) -19.8% 113.1%

Postsecondary (299,976) -21.3% (139,349) -19.0% 115.3%

Primary and Secondary (9,890) -0.7% (6,073) -0.8% 62.8%

Net Revenue 1,405,567 100.0% 734,551 100.0% 91.4%

Postsecondary 1,257,461 89.5% 597,872 81.4% 110.3%

Primary and Secondary 148,106 10.5% 136,679 18.6% 8.4%

Costs of Goods/Services (762,841) -54.3% (493,844) -67.2% 54.5%

Cost of Goods Sold (25,896) -1.8% (23,528) -3.2% 10.1%

Cost of Services Rendered (736,944) -52.4% (470,316) -64.0% 56.7%

Gross Income 642,726 45.7% 240,708 32.8% 167.0%

Operating Expenses (399,671) -28.4% (202,945) -27.6% 96.9%

Selling Expenses (72,428) -5.2% (40,630) -5.5% 78.3%

Provision for Doubtful Accounts (66,083) -4.7% (31,314) -4.3% 111.0%

Personnel Expenses (92,325) -6.6% (41,033) -5.6% 125.0%

General and Administrative Expenses (168,485) -12.0% (85,865) -11.7% 96.2%

Other Operating Income (Expenses) (349) 0.0% (4,103) -0.6% n.a.

Income (Loss) before Financial Result 243,056 33.1% 37,763 5.1% 543.6%

Financial Result (34,435) -2.4% 4,918 0.7% n.a.

Financial Expenses (95,143) -6.8% (26,111) -3.6% 264.4%

Financial Revenues 60,708 4.3% 31,029 4.2% 95.7%

Income (Loss) from Operations 208,621 14.8% 42,680 5.8% 388.8%

Income and Social Contribuition Tax (6,577) -0.5% (5,305) -0.7% 24.0%

Current (16,300) -1.2% (2,338) -0.3% 597.3%

Deferred 9,723 0.7% (2,967) -0.4% n.a.

Net Income (Loss) 202,044 14.4% 37,375 5.1% 440.6%



39

APPENDIX 6 – CASH FLOW STATEMENT

R$ million

4Q12 4Q11 2012 2011

Net Income (Loss) before Income Interest 25,556 (6,477) 208,621 42,680 - - - -

Net Income (Loss) adjustments before Income Interest

Depreciation and Amortization 23,112 13,243 85,935 44,407

Capital Reserve - (Stock Option) 2,459 988 7,109 4,150

Provision for Doubtful Accounts 17,440 9,003 66,083 31,314

Provision for Tax, Labor and Civil Losses 717 4,296 5,272 3,076

Provision for Losses in Inventory (3,041) (552) 257 (1,858)

Financial Charges 18,342 4,870 79,198 12,393

Income from Financial Investments (5,057) (6,179) (29,514) (13,775)

Losses with Other Long Term Asset Write offs 23 5,379 335 832 -

Changes in Working Capital 28,988 (47,393) (24,787) (125,709) -

(Increase) Reduction in Accounts Receivable (ex-FIES) (33,078) (9,168) (59,887) (35,448)

(Increase) Reduction in Accounts Receivable FIES 49,539 (20,409) 3,159 (82,496)

(Increase) Reduction in Inventories (6,649) (6,256) 982 (1,173)

(Increase) Reduction in Other Receivables (2,930) 3,225 (12,014) 480

Increase (Reduction) in Suppliers 14,694 (3,612) (2,224) (7,786)

Increase (Reduction) in Advances to Clients 20,005 8,926 13,698 11,146

Increase (Reduction) in Other Payables (12,593) (20,099) 31,499 (10,432) -

Income Tax and Social Contribution (2,659) (1,659) (10,322) (2,249)-

Capex - Recurring (24,405) (13,697) (74,641) (46,568) -

Additions to Fixed Assets (20,816) (7,988) (61,270) (33,013)

Additions to Intangible Assets (3,589) (5,709) (13,371) (13,555) -

Cash Flow from Operating Activities after Capex - Recurring 81,475 (38,178) 313,546 (48,276)-

Cash Flow from Operating Activities (ex-FIES) after Capex - Recurring 31,937 (17,769) 310,388 34,220

Capex - Special Projects (14,956) - (45,398) -

Asset acquisiton (10,884) - (25,251) -

Browfields (4,072) - (20,147) - 0 0 0

Cash Flow from Operating Activities after total Capex 66,519 (38,178) 268,148 (48,276)- - - -

(+) M&A Activities (142,917) (644,108) (738,302) (651,776)

Acquisition of New Units (142,917) (646,432) (738,302) (669,122)

Received for Property Sale Net of Sales Expenses - 2,324 - 17,346 - - - -

(+) Cash Flow from Financing Activities (26,565) 557,541 534,427 825,231 - - - -

Treasury Stocks - - 14,574 (45)

Loans and Financing (1,435) (1,454) (24,562) (79,032)

Payment of Interest (26,476) (377) (61,702) (7,609)

Income from Financial Investments 5,057 6,179 29,514 13,775

Redemption (investment) of securities (1,161) 15,875 (2,613) 6,208

Net of Costs Debentures issuance - 541,378 - 541,378

Net of Costs Capital Increase - (855) 591,949 357,675

Disposal of Non Current Asset 95 - 131 -

Cost of Debentures - - (530) -

Refis Payment (2,645) (3,205) (12,334) (7,119) -

(=) Cash Flow from Non-Operating Activities (169,482) (86,567) (203,875) 173,455 -

Total Cash Generation (102,963) (124,745) 64,273 125,179 -

Net Increase (Reduction) in Cash and Cash Equivalents -

Cash and Cash Equivalents at the Start of the Period 318,583 276,092 151,347 26,168

Cash and Cash Equivalents at the End of the Period 215,620 151,347 215,620 151,347 -

Net Increase (Reduction) in Cash and Cash Equivalents (102,963) (124,745) 64,273 125,179

values in r$ ('000) chg.% 3q12 chg.% 2012 2011 chg ...€¦operating cash flow after recurring...

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