Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes ______ No ___X___

Indicate by check mark whether by furnishing the information contained in this Form,
the Registrant 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, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b): N/A

GAFISA S.A.

Corporate Taxpayer’s ID (CNPJ/MF) No. 01.545.826/0001-07
Corporate Registry (NIRE) No. 35.300.147.952

Publicly-held Company

MANAGEMENT PROPOSAL


ANNUAL AND EXTRAORDINARY SHAREHOLDERS’ MEETINGS


APRIL 27, 2018

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INDEX

PROPOSAL FOR THE ANNUAL GENERAL MEETING

APPENDIX I – MANAGEMENT COMMENTS

APPENDIX II – BOARD OF DIRECTORS CANDIDATES’ PROFILE

APPENDIX III – MANAGEMENT COMPENSANTION

APPENDIX IV – AMENDMENT OF THE COMPANY’S BYLAWS

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GAFISA S.A.

Corporate Taxpayer’s ID (CNPJ/MF) No. 01.545.826/0001-07
Corporate Registry (NIRE) No. 35.300.147.952

Publicly-held Company

Dear Shareholders,

Below, we present for you appreciation the management proposal for the matters on the agenda of the Company’s Annual and Extraordinary Shareholders’ Meeting to be held, if on first call, on April 27, 2018 (“Meetings”):

(i) Review of the management accounts and analysis, discussion, and vote on the financial statements relative to the fiscal year ended December 31, 2017.

We propose the approval, without reservations, of the management accounts and the financial statements for the 2017 fiscal year, as disclosed on March 9, 2018 on the websites of the Brazilian Securities and Exchange Commission (“CVM”) and the B3 S.A. – Brazil, Stock Exchange, OTC (“B3”), via the Periodic Information System (IPE), and published on March 9, 2018 in the newspapers “O Estado de São Paulo” and “Official Gazette of the State of São Paulo” (“Financial Statements”).

Since the Company recorded net loss in the fiscal year ended December 31, 2017, there is no proposal for allocation of net income, and the reporting required by Exhibit 9-1-II of CVM Instruction No. 481 of December 17, 2009 (“ICVM 481”) is harmed. For this same reason, this is not the case of mentioning distribution of dividends.

As per Article 9, paragraph III of ICVM 481, the Management’s comments on the Company’s financial situation are detailed in Appendix I hereto.

We inform that in compliance with provisions of Article 9, V and sole paragraph, III of ICVM 481, the reports issued by Fiscal Council and Audit Committee are available at the Company’s headquarters, on its Investor Relations website (www.gafisa.com.br/ri/) and on the websites of the B3 (www.b3.com.br) and the Brazilian Securities and Exchange Commission (www.cvm.gov.br).

(ii) Definition of the number of members to compose the Board of Directors.

Pursuant to provisions of Article 17 of the Company’s Bylaws, we propose to elect 7 sitting members of the Company’s Board of Directors.

(iii) Election of members of the Board of Directors.

Members of the Company’s Board of Directors may be elected through two voting systems: (i) slate voting or (ii) multiple vote process. The slate voting allows the selection of members of each slate entitled to one shareholder or group of shareholders so that all the Board vacancies are filled by members of the most voted slate. In turn, the multiple vote process is a procedure by means of which each share receives as many votes as the number of vacancies to be filled in the Board of Directors, and shareholder has the right of cumulating votes in one single candidate or distribute them among various candidates.

The minimum percentage to request the adoption of the multiple vote process is 5% of the capital stock and shareholders may request the multiple vote process to the Company, in writing, within 48 hours prior to the Meetings.

If the Company’s shareholders did not request to adopt the multiple vote, members of the Board of Directors shall be elected by means of slates previously registered with the presiding board of the Meetings or submitted to the Company, as provided for in Article 28 of ICVM 481.

In addition, since the Company neither has a controlling shareholder, nor preferred shares, the separate voting mechanism provided for in Article 141, Paragraphs 4 and 5 of Law No. 6.404/76 shall not apply.

According to the advice of the Company’s Nomination and Corporate Governance Committee, we propose the electoral slate of the following members to the Company’s Board of Directors, all of them with term of office to expire at the 2020 Annual Shareholders’ Meeting:

(a)     Odair Garcia Senra;

(b)     Carlos Tonanni;

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(c)     Francisco Vidal Luna;

(d)     Edward Ruiz;

(e)     Tomás Rocha Awad;

(f)      Eric Alexandre Alencar; and

(g)     Rodolpho Amboss.

The candidates nominated herein are free and unimpeded to perform respective positions, pursuant to the Law, and they comply with legal requirements, regulations or statutory requirements in force, and this verification was made before being nominated to the position as member of the Board of Directors, by means of information provided by candidates to the Company, pursuant to Law No. 6.404/76 and CVM Instruction No. 367/02.

We also point out that as per candidates’ declarations and according to the opinion expressed by the Company’s Board of Directors in the minutes of the meeting held on March 26, 2018, all candidates fit into the independence criteria provided for in the Novo Mercado rules, segment in which the Company’s shares are traded.

Finally, pursuant to Article 10 of ICVM 481, the information about the candidates to the positions as members of the Board of Directors supported by the Company’s Management is detailed in Appendix II hereto.

(iv) Definition of the Management’s overall compensation for the 2018 fiscal year.

We propose that the Management’s overall compensation should be established at the limit of up to R$ 23.598.871,46, for current fiscal year, from January to December 2018.

We clarify that, pursuant to art. 152 of Law 6404/76, included in this amount are the fixed remuneration, short-term variable of the management, any benefits incurred or supported by the Company, social charges and expenses associated with the recognition of the fair value of stock options subject to a possible grant by the Company in this fiscal year, which are gradually recognized during the vesting period with accounting and non-financial effects provided for in CPC 10 and stem from a Stock Option Plan previously approved by the Company's shareholders, through a General Meeting.

For 2018, the Stock Option Program will have a volume covering several years, so the accounting cost to be incurred will be proportional to this larger volume and distributed during this period, increasing the total amount of remuneration to be approved in this general meeting – i.e., the difference between the volume of approximately R$18 million approved in 2017 and the volume proposed for the 2018 financial year is derived from this scope.

The Company’s short-term variable compensation program is connected to the achievement of specific goals that are established, agreed upon and approved by the Board of Directors each year.

The Annual Shareholders’ Meeting held in 2017 approved an overall compensation limit for the Management of up to R$18,739,227.00 and effective payment amounted to R$9,704,653.64. The main reason for the difference between the total compensation amount approved for 2017 compared to the amount effectively paid was the failure to meet the annual targets and the non-granting of the Company’s option purchase program for 2017.

Pursuant to Article 12 of ICVM 481, the information necessary to analyze the Management compensation proposal is detailed in Appendix III hereto.

(v) Amendment to the Company’s Bylaws to:

(a) update the caput of Article 5 in order to reflect the Company’s capital increase approved at the Extraordinary Shareholders’ Meeting held on December 20, 2017, and ratified by the Board of Directors on February 28, 2018 (“Capital Increase”);

(b) amend the caput of Article 6 to increase the limit of authorization to increase capital, regardless of the Bylaws restatement, since current limit has been exceeded due to the Capital Increase, in accordance with the Management Proposal;

(c) amend Article 8, Paragraph 2 to modify the form of indication of the chairman of Shareholders’ Meetings in the event of absence or impediment of the chairman of the board of directors

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(d) conform the Bylaws with the Novo Mercado Rules of B3 S.A. - Brazil, Stock Exchange, OTC (“B3”), as detailed in this Management Proposal;

(e) amend Article 57 to adjust the percentages indicated therein to those indicated in the caput of Article 53, amended by the Extraordinary Shareholders’ Meeting on January 22, 2018, excluding item “a” from Article 57, as it is inconsistent with the percentage established in the caput of Article 53; and

(f) reflect overall wording improvements.

As indicated above, the Management Proposal to amend the Company’s Bylaws is basically divided into five items.

Initially, the Company’s Management proposes, due to the capital increase approved at the Extraordinary Shareholders’ Meeting held on December 20, 2017 and ratified by the Board of Directors in a meeting held on February 28, 2018, (i) the restatement of the caput of Article 5 and (ii) the increase of limit of authorization to increase capital, regardless of Bylaws restatement, so that to maintain flexible the Company’s capital structure lost since current limit has been exceeded.

In relation to Article 8, Paragraph 2, the Management proposes an adjustment so that establishing, as detailed in Appendix IV, the form of indication of the chairman of the Shareholders’ Meetings in the event of absence or impediment of the chairman of the board of directors.

The Management also proposes to restate the Bylaws aiming at conforming them with provisions of the Novo Mercado Rules, a special listing segment of B3 S.A. – Brazil, Stock Exchange, OTC, effective as of January 02, 2018.

In addition, due to the change in the percentages contained in Article 53 of the Company’s Bylaws, approved at the Extraordinary Shareholders’ Meeting held on January 22, 2018, the Company proposes to adjust the percentage provided for in Article 57 of the Company’s Bylaws, so that to conform it with decision made in referred Extraordinary Shareholders’ Meeting. Since item “a” of Article 57 provides for no tender offer in view of reaching relevant shareholding when there is a controlling shareholder with more than 50% held in the Company’s capital stock, the new percentage provided for in Article 53, of 50%, is inconsistent with wording of this item, becoming impossible to any other shareholder reach referred percentage.

Finally, we suggest several small wording improvements targeting more transparency, standardization of the terms and reduction of redundancies.

Pursuant to Article 11 of ICVM 481, the information required to analyze the proposal for the Company’s Bylaws restatement is detailed in Appendix IV hereto.

(vi)  Restatement of the Company’s Bylaws in view of resolutions above.

As a result of the proposals, purpose of item (v) above, the Company’s Management also proposes to restate the Bylaws, as detailed in Appendix IV hereto.

Additional Information and Where to Find It.

The documents provided for by ICVM 481 were submitted to CVM on March 27, 2018, via the Periodic Information System (IPE), and are available to shareholders, at the Company’s headquarters, on its Investor Relations website (www.gafisa.com.br/ri/) and on the websites of B3 (www.b3.com.br) and CVM (www.cvm.gov.br). The documents may be consulted and examined at the Company’s headquarters, and if shareholders are interested, they shall schedule date and time with the Investor Relations Department.

Shareholders may exercise their remote voting right, by completing the remote voting form for the Meetings made available by the Company. Shareholders opting for exercising their voting right via the Remote Voting Form shall comply with the rules and formalities described in the Remote Voting From and item 12.2 of the Company’s Reference Form (Rules, policies, and practices referring to general meetings), available on the websites mentioned above.

São Paulo, March 27, 2018.

The Management

Gafisa S.A.

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APPENDIX I

10.1. general financial and equity conditions

The Management believes that Company is one of the leading players in the real estate development market, operating nationally with a focus on high-quality residential projects targeting the medium-high and high-income brackets.

The Company’s revenue largely derives from the development and sale of real estate projects. The Company recognizes the revenue from these real estate projects during the construction period, based on a financial calculation related to the value of the project on completion, and not when the sales contracts are signed. On a smaller scale, the Company also generates revenue from the provision of real estate services, such as construction, technical and real estate management, to third parties. The Company structures some of its projects through its subsidiaries or jointly controlled affiliates, set up as specific purpose enterprises (SPE).

The Company’s current working capital is sufficient for its present requirements and its cash position, including loans to third parties, and enough to meet the financing of all its activities and cover its capital requirement, for at least the next 12 months.

The Management understands that the Company has sufficient financial and equity conditions to implement its business plan and comply with its short-to-medium-term obligations.

In 2017, the political uncertainties still impacted Brazil’s macroeconomic scenario and more favorable economic indicators were only seen from the second half of the year. This gradual recovery, although positive, was not sufficient to bolster an upturn of the real estate market in 2017. Since this is a long-cycle market, it is one of the sectors which take longer period to respond to an improved business environment.  Such dynamics between economy and real estate market is even more relevant in the middle and medium-high income residential segment, where Gafisa concentrates its operations. Within this context, the Company outlined a strategy focused on its efforts to sell inventories, with lower level of residential, one-off and reasonable launches in the markets where the Company operates. In 2017, Gafisa launched five projects totaling R$554.0 million in PSV, 39.8% lower than in 2016. Net pre-sales, reflecting the factors mentioned above, went down 11.7% to R$720.2 million in 2017 and adjusted gross margin ended 2017 at -15.3%, versus 4.7% in 2016.

The Company’s strategy in relation to inventories and launches was reflected in liquidity and cash management, with an operating cash flow of R$321.8 million in 2017 and net cast generation of R$104.2 million, excluding the inflow of funds from Tenda separation transaction. Leverage, measured by the net debt to shareholders’ equity ratio was up to 126.1% at the end of 2017, mainly impacted by impairment and Alphaville equity income.

On December 31, 2017, Gafisa recorded a cash position of R$147,462 thousand. On the same date, net

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debt totaled R$957,436 thousand and net debt-to-equity ratio stood at 126.1%.

On December 31, 2016, the Company’s cash position was R$253,180 thousand. On the same date, net debt totaled R$1,385,624 thousand and net debt-to-equity ratio stood at 71.8%.

On December 31, 2015, the Company’s cash position was R$712,311 thousand. On the same date, net debt totaled R$1,443,377 thousand and the net debt-to-equity ratio stood at 46.6%.

In 2017, Gafisa’s adjusted EBITDA margin was -65.1% versus -26.6% in 2016, and 15.8% in 2015, impacted by accounting adjustments at the end of 2017. The first adjustment was due to the goodwill impairment test to remeasure the 30% stake in Alphaville, yearly carried out based on the future profitability estimate or when circumstances indicate the carrying amount impairment loss, which identified the need of recognizing a provision for loss of R$127.4 million. The second adjustment was pricing adjustments to inventory units, which were sold below the accounting cost due to the real estate market unfavorable conditions, in addition to landbank totaling R$147.3 million.  Excluding these effects, the adjusted EBITDA margin was -40.9% in 2017.

Net revenue in 2017, recognized under the “PoC” method totaled R$608.8 million, down 33.5% year-on-year, mainly affected by the net pre-sales mix in the period, which concentrated in more recent projects with slower work evolution, and, accordingly, lower revenue capacity and dissolutions, which still are materially impacting the Company’s revenues. As a result of a challenging scenario and pricing adjustments in certain landbank and inventory units, gross margin stood at -103.7%, in 2017, versus -12. 4% in 2016 and 26.4% in 2015.

Current liquidity ratio in 2017 was 1.43, versus 1.49 in 2015 and 2.11 in 2015.

As per Material Fact released on December 14, 2016, the Company entered into a stock purchase agreement with Jaguar Growth Asset Management, LLC, to acquire up to 30% of shares issued by Tenda, at the price of R$8.13 per share, representing within the context of operation, cash receivable for Gafisa of R$231.7 million, with total valuation of R$539.0 million for full payment of Tenda’s capital stock. The materialization of referred transaction was subject to the verification of certain conditions precedents, such as, for instance, Construtora Tenda S.A.’s capital reduction, without share cancellation, with refund to the Company, its sole shareholder, of R$100,000,000.00.

On February 20, 2017 the Company held two Extraordinary Shareholders’ Meeting, with the following resolutions: (a) reverse split of all common shares issued by the Company at the ratio of 13.483023074 to 1, now the 378,066,162 common shares issued by the Company represent 28,040,162 non-par registered common shares and proportional adjustment to the limit of authorized capital, from 600,000,000 to 44,500,405 common shares; (b) preemptive right was offered to the Company’s shareholders for acquisition at the percentage of their respective interest in the Company’s capital stock, of up to  50% of Tenda’s capital stock for R$8.13 per share, for cash payment, upon the exercise of the Preemptive Right, subject to the conclusion of the Company’s capital reduction; (c) Approval of the Company’s capital reduction in the total amount of R$219,510,000, from R$2,740,661,187.74 to R$2,521,151,187.74, without share cancellation, delivering to the Company’s shareholders, one common share of Tenda for each one common share of Gafisa held thereby after reverse split, excluding treasury shares, totaling 27,000,000 of Tenda’s common shares, accounting for remaining 50% of its total capital stock.

On April 22, 2017, the 60-day term provided for in Article 174 of Law No. 6.404/76 expired for creditors opposing to the Company’s capital reduction, without any creditor’s opposition. As a result, the Company’s The Management believes that Company is one of the leading players in the real estate development market, operating nationally with a focus on high-quality residential projects targeting the medium-high and high-income brackets.

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The Company’s revenue largely derives from the development and sale of real estate projects. The Company recognizes the revenue from these real estate projects during the construction period, based on a financial calculation related to the value of the project on completion, and not when the sales contracts are signed. On a smaller scale, the Company also generates revenue from the provision of real estate services, such as construction, technical and real estate management, to third parties. The Company structures some of its projects through its subsidiaries or jointly controlled affiliates, set up as specific purpose enterprises (SPE).

The Company’s current working capital is sufficient for its present requirements and its cash position, including loans to third parties, and enough to meet the financing of all its activities and cover its capital requirement, for at least the next 12 months.

The Management understands that the Company has sufficient financial and equity conditions to implement its business plan and comply with its short-to-medium-term obligations.

In 2017, the political uncertainties still impacted Brazil’s macroeconomic scenario and more favorable economic indicators were only seen from the second half of the year. This gradual recovery, although positive, was not sufficient to bolster an upturn of the real estate market in 2017. Since this is a long-cycle market, it is one of the sectors which take longer period to respond to an improved business environment.  Such dynamics between economy and real estate market is even more relevant in the middle and medium-high income residential segment, where Gafisa concentrates its operations. Within this context, the Company outlined a strategy focused on its efforts to sell inventories, with lower level of residential, one-off and reasonable launches in the markets where the Company operates. In 2017, Gafisa launched five projects totaling R$554.0 million in PSV, 39.8% lower than in 2016. Net pre-sales, reflecting the factors mentioned above, went down 11.7% to R$720.2 million in 2017 and adjusted gross margin ended 2017 at -15.3%, versus 4.7% in 2016.

The Company’s strategy in relation to inventories and launches was reflected in liquidity and cash management, with an operating cash flow of R$321.8 million in 2017 and net cast generation of R$104.2 million, excluding the inflow of funds from Tenda separation transaction. Leverage, measured by the net debt to shareholders’ equity ratio was up to 126.1% at the end of 2017, mainly impacted by impairment and Alphaville equity income.

On December 31, 2017, Gafisa recorded a cash position of R$147,462 thousand. On the same date, net debt totaled R$957,436 thousand and net debt-to-equity ratio stood at 126.1%.

On December 31, 2016, the Company’s cash position was R$253,180 thousand. On the same date, net debt totaled R$1,385,624 thousand and net debt-to-equity ratio stood at 71.8%.

On December 31, 2015, the Company’s cash position was R$712,311 thousand. On the same date, net debt totaled R$1,443,377 thousand and the net debt-to-equity ratio stood at 46.6%.

In 2017, Gafisa’s adjusted EBITDA margin was -65.1% versus -26.6% in 2016, and 15.8% in 2015, impacted by accounting adjustments at the end of 2017. The first adjustment was due to the goodwill impairment test to remeasure the 30% stake in Alphaville, yearly carried out based on the future profitability estimate or when circumstances indicate the carrying amount impairment loss, which identified the need of recognizing a provision for loss of R$127.4 million. The second adjustment was pricing adjustments to inventory units, which were sold below the accounting cost due to the real estate market unfavorable conditions, in addition to landbank totaling R$147.3 million.  Excluding these effects, the adjusted EBITDA margin was -40.9% in 2017.

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Net revenue in 2017, recognized under the “PoC” method totaled R$608.8 million, down 33.5% year-on-year, mainly affected by the net pre-sales mix in the period, which concentrated in more recent projects with slower work evolution, and, accordingly, lower revenue capacity and dissolutions, which still are materially impacting the Company’s revenues. As a result of a challenging scenario and pricing adjustments in certain landbank and inventory units, gross margin stood at -103.7%, in 2017, versus -12. 4% in 2016 and 26.4% in 2015.

Current liquidity ratio in 2017 was 1.43, versus 1.49 in 2015 and 2.11 in 2015.

As per Material Fact released on December 14, 2016, the Company entered into a stock purchase agreement with Jaguar Growth Asset Management, LLC, to acquire up to 30% of shares issued by Tenda, at the price of R$8.13 per share, representing within the context of operation, cash receivable for Gafisa of R$231.7 million, with total valuation of R$539.0 million for full payment of Tenda’s capital stock. The materialization of referred transaction was subject to the verification of certain conditions precedents, such as, for instance, Construtora Tenda S.A.’s capital reduction, without share cancellation, with refund to the Company, its sole shareholder, of R$100,000,000.00.

On February 20, 2017 the Company held two Extraordinary Shareholders’ Meeting, with the following resolutions: (a) reverse split of all common shares issued by the Company at the ratio of 13.483023074 to 1, now the 378,066,162 common shares issued by the Company represent 28,040,162 non-par registered common shares and proportional adjustment to the limit of authorized capital, from 600,000,000 to 44,500,405 common shares; (b) preemptive right was offered to the Company’s shareholders for acquisition at the percentage of their respective interest in the Company’s capital stock, of up to  50% of Tenda’s capital stock for R$8.13 per share, for cash payment, upon the exercise of the Preemptive Right, subject to the conclusion of the Company’s capital reduction; (c) Approval of the Company’s capital reduction in the total amount of R$219,510,000, from R$2,740,661,187.74 to R$2,521,151,187.74, without share cancellation, delivering to the Company’s shareholders, one common share of Tenda for each one common share of Gafisa held thereby after reverse split, excluding treasury shares, totaling 27,000,000 of Tenda’s common shares, accounting for remaining 50% of its total capital stock.

On April 22, 2017, the 60-day term provided for in Article 174 of Law No. 6.404/76 expired for creditors opposing to the Company’s capital reduction, without any creditor’s opposition. As a result, the Company’s capital stock now totals R$2,521,151,187.74 divided into 28,040,162 non-par, book-entry, registered, common shares.

Referring to the Preemptive Right, shareholders acquired 100% of the shares destined to Preemptive Right, not remaining any shares available for Jaguar acquisition. Thus, shares representing 50% of Tenda’s capital stock were delivered to shareholders who exercised the Preemptive Right and the agreement executed with Jaguar was terminated.

Tenda’s shares within the scope of the Preemptive Right were delivered to acquirers, together with shares of the Capital Reduction on May 4, 2017, date when Tenda started to be listed and trades initiated at the traditional segment of B3 S.A. From such date, the Company no longer holds any equity interest in Construtora Tenda S.A.’s capital.

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On December 20, 2017, the Extraordinary Shareholders’ Meeting approved the Company’s capital stock increase by means of the issue for private subscription of, at least, 13,333,334 shares (R$ 200,000,010.00) and, at most, twenty million (20,000,000) new non-par, book-entry, registered, common shares. Out of these, considering (i) the term to exercise the preemptive right, (ii) two periods to subscribe to unsubscribed shares and (iii) the cancellations of preemptive rights; the Board of Directors, in a meeting held on February 28, 2018, ratified the partial capital increase, so that the Company’s capital stock now totals R$2,521,318,365.26, divided into 44,757,914 non-par, book-entry, registered, common shares and total subscription, including the amount allocated to the capital reserve, reaching the amount of R$ 250,766,280.00.

In 2017, the impairment test referring to the goodwill on the acquisition and remeasurement of the Company’s investment in Alphaville resulted in the need of recognizing a provision for impairment totaling R$127.4 million.  The Company measured the recovery of the goodwill carrying amount using the concept of “value in use”, by means of discounted cash flows models, which involve the use of cash flows assumptions, judgments and estimates. These assumptions are based on the business plan approved by Management and on the market comparable data. The main assumptions adopted were: a) revenues – projected between 2018 and 2022 considering sales growth, work progress and customer base; b) operating costs and expenses projected in line with historical performance and historical growth of revenues; c) discount rate – 14.70% (nominal), d) growth rate used to extrapolate cash flow projections – 6.8% and e) perpetuity – 4.1% p.a. growth corresponding to the estimate of long-term inflation projected by the Brazilian Central Bank. It is also worth mentioning that due to the negative shareholders’ equity of Alphaville at the end of 2017, the Company reduced to zero the accounting balance of its 30% stake in Alphaville, which accordingly, implies the end of future consolidation of losses into Gafisa due to Alphaville’s results by means of equity income. From now on, only Alphaville’s positive results in the future may favorably impact Gafisa’s results, except for any potential investment impairment.

The table below shows the total amount used by the Company to finance its operations (total capitalization) and the segregation of such amounts between debt capital and equity capital (both in real terms and as a percentage) for each fiscal year, as follows:

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On December 31, 2017, the Company’s cash position was R$147,462 thousand. On the same date, net debt totaled R$957,436 thousand and the net debt-to-equity ratio stood at 126.1%.

On December 31, 2016, the Company’s cash position was R$253,180 thousand. On the same date, net debt totaled R$1,385,625 thousand and the net debt-to-equity ratio stood at 71.8%.

On December 31, 2015, the Company’s cash position was R$712,311 thousand. On the same date, net debt totaled R$1,443,377 thousand and the net debt-to-equity ratio stood at 46.6%.

On December 31, 2017, the Company’s net debt was R$957,436 thousand, and the cash position and cash equivalents amounted to R$147,462 thousand, compared to a total debt of R$1,104,898 thousand, a net debt-to-shareholders’ equity ratio of 126.1%.

Additionally, the Company had a total of R$1,328,417 thousand of real estate receivables and R$359,601 thousand gross amount considering impairment of unsold finished units, representing R$473,494 thousand in PSV (Potential Sales Value), compared to R$245,086 thousand of properties payable and R$405,064 thousand of costs to be incurred. When considering the sum of total receivables and inventory of unsold finished units, this exceeds 1.05 times the sum of net debt, properties payable and costs to be incurred.

Furthermore, of the Company’s R$1,104,898 thousand of total debt, R$733,103 thousand relates to Brazil’s Housing Finance System contracts, which use funds to finance the construction of real estate projects and rely on the fiduciary assignment or pledge of the real estate receivables of each project, which mostly mature upon the project’s delivery. Therefore, when finalizing the projects, the resources from the settlement of the outstanding balance by clients are obligatorily used to amortize the balance of the Company’s contracts. Out of total indebtedness of the Company, 66.4% refers to the finance of construction of real estate projects.

On December 31, 2016, the Company’s net debt was R$1,385,624 thousand, and the cash position and cash equivalents amounted to R$253,180 thousand, compared to a total debt of R$1,638,805 thousand, a net debt-to-shareholders’ equity ratio of 71.8%.

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Additionally, the Company had a total amount of R$1,519,121 thousand of real estate receivables and R$557,426 thousand, gross amount considering impairment of unsold finished units, representing R$592,616 thousand in PSV, compared to R$260,673 thousand of properties payable and R$315,061 thousand of costs to be incurred. When considering the sum of the total receivables and inventory of unsold finished units, this exceeds 1.06 times the sum of the net debt, properties payable and costs to be incurred.

Furthermore, of the Company’s R$1,638,804 thousand total debt, R$1,022,038 thousand relates to Brazil’s Housing Finance System contracts, as explained above. Out of total Company’s indebtedness, 80.8% refers to the finance of construction of real estate projects.

On December 31, 2015, the Company’s net debt was R$1,443,337 thousand, and the cash position and cash equivalents amounted to R$712,311 thousand, compared to a total debt of R$2,155,688 thousand with a net debt-to-shareholders’ equity ratio of 46.6%.

Additionally, the Company had a total of R$2,595,332 thousand of real estate receivables and R$333,036 thousand gross amount considering impairment, of unsold finished units, representing R$591,797 thousand in PSV, compared to R$570,191 thousand of properties payable and R$453,897 thousand of costs to be incurred. When considering the sum of the total receivables and Inventory of unsold finished units, this exceeds 2.25 times the sum of net debt, properties payable and costs to be Incurred.

Furthermore, of the Company’s R$2,155,688 thousand total debt, R$1,161,707 thousand relates to Brazil’s Housing Finance System contracts, which use funds to finance the construction of real estate projects, as explained above. Out of total Company’s indebtedness, 84.2% refers to the finance of construction of real estate projects.

Considering the Company's indebtedness profile, its most liquid assets against its obligations, reflected or not reflected in the Balance Sheet, the officers believe there is sufficient liquidity to meet the contractual obligations assumed on this date.

If needed, the Company has capacity to take out additional loans to finance investments and operations.

Over the past three fiscal years, our working capital and investment needs have been financed through a combination of own and third-party resources. Thus, according to our needs, we raise funds in the local capital market and / or obtain loans and financing to meet our cash requirements.

The Company does not make investments in non-current assets.

The Company currently has a liquidity level and cash generation prospects that allows for it to not use additional funding for its operations. But this does not eliminate the possibility to structure or take out new working capital facilities according to the instruments available and market conditions at the time of contracting, as indicated in items 10.1.c and 10.1. d.

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i) significant loan and financing agreements

The Company's officers show in the table below the Company’s total amount of debt of any consolidated nature, which is equal to the sum of total current liabilities and total non-current liabilities on December 31, 2017, 2016 and 2015:

Below, the Company’s officers show some key features of consolidated financing and loans of the Company, grouped by type, on December 31, 2017, 2016 and 2015:

Project Financing (SFH and SFI)

Project financing is represented by loans from national commercial banks to raise the necessary funds to develop the real estate projects of the Company and its subsidiaries and affiliates.  These contracts have security interest represented by the land’s mortgage and by the fiduciary assignment or pledge of receivables, and the funds are released upon proof of physical and financial development of the construction works; amortization begins after the construction works purpose of the contract are completed. During the amortization of the contract, the proceeds from the settlement of the outstanding balance by clients are used to amortize the debt.

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FGTS Debentures

On December 31, 2017, these refer to the 9th Issue, 10th Issue and 11th Issue of the Company, and the proceeds of these issues are allocated, respectively, to the Company’s working capital and to the development of selected real estate projects. In line with the Company’s risk strategy, the 9th issue of the Company was linked to the contract of hedge instruments to mitigate the risk of a CDI rate + to CDI percentage, aiming at leveling the debt remuneration against use of funds available by Treasury. For further information on these issues, please refer to item 18.5 of the Reference Form.

Working Capital

It consists of Bank Credit Notes (CCB) and other banking instruments that represent the Company’s debt, and the proceeds are allocated to the Company’s working capital. These instruments may have security interests or sureties, and feature covenants that may result in the early maturity of the obligations if not complied with. 

ii) other long-term arrangements with financial institutions

There are no other long-term arrangements with financial institutions but those detailed in this item.

iii) degree of Company debt subordination

For the fiscal years ended December 31, 2017, 2016 and 2015 the Company's debts, contracted as financing and loans with financial institutions, can be divided according to the nature of their guarantees, as follows:

The Company’s debts with security interest and floating guarantee have the preferences and prerogatives provided for by laws. Therefore, in the event of collective insolvency proceedings: (i) the debts with security interest have payment priority over the Company's other debts, up to the value of encumbered asset and (ii) the debts with floating guarantee have priority over unsecured debts.

iv) restrictions imposed to the issuer, especially with regards to indebtedness limits, taking of new loans, distribution of dividends, disposal of assets, issuance of new securities, and sale of controlling interest as well as if issuer has been complying with these restrictions;

The Company is party to agreements that set minimum and maximum limits on specific topics, in addition to restricting the Company regarding the taking of some actions. Noncompliance with the agreed ratios or restrictions may result in the early maturity of the agreements.

The financial instruments’ major restrictions in the fiscal years ended December 31, 2017, 2016 and 2015, are as follows:

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·         petition for any judicial or extrajudicial reorganization plan to any creditor or class of creditors, regardless of a judicial approval having been requested or obtained for said plan; or file at court a petition for judicial reorganization;

·         change in the direct or indirect control of the Issuer, under article 116 of Law 6,404 of December 15, 1976, as amended (“Brazilian Corporation Law”), to imply a downgrade in the Company’s risk rating to a lower level than that at the time of the issue or risk rating equivalent in national scale by the leading rating agencies;

·         payment by the Company of dividends, interest on equity, or any other profit sharing provided for in the Company’s Bylaws, whenever it is in arrears regarding the issues in effect at the time the event is declared, except for the payment of the minimum mandatory dividend provided for in Article 202 of the Brazilian Corporation Law;

·         declaration of early maturity of any financial obligation and debts of the Company and/or its Relevant Subsidiaries, in the domestic or international market;

·         amendment to or change in the Company’s business purpose so that the Company no longer operates as a real estate developer and builder company;

·         change in the corporate nature of the Company to a limited liability entity, under Articles 220 through 222 of the Brazilian Corporation Law;

·         spin-off, or merger of the Company into another Company, unless such transaction is previously approved by the holders of debt securities or holders are granted the right to withdraw;

·         reduction in the Company’s capital stock that results in a capital stock lower than ninety-five percent (95%) of the existing capital stock, except (i) in cases capital is reduced to absorb losses, under Article 173 of the Brazilian Corporation Law, or (ii) if previously approved by the holders of debt securities;

·         disposal, expropriation, seizure, or any other form of disposal of fixed assets by the Company in equivalent amount, as determined in indentures or contracts, and that may affect the Company’s financial capacity.

The restrictions described above may not fully apply to all agreements in effect on this date, and different limits may be determined for each agreement.

The Company also committed to keeping the following financial indicators within the limits established. The formulas and maximum and minimum limits, as well as their indicators are presented below:

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On December 31, 2017, the Company was complying with restrictive covenants, except for a financial covenant of a CCB and one Debenture, under item (i) above. Both debts were classified in the short term in the Company’s income statements and we are in waiver negotiation for covenants breached. Up to date, no notification from respective related parties characterizing an event of early maturity occurred.

In the fiscal years ended December 31, 2015, 2016 and 2017, the proceeds of construction financing contracted from national institutions considered by the Company as prime institutions in the National Financial System are exclusively allocated to the construction works of the relative projects. The funds are released to the Company according to the physical/financial development of the construction works. Besides, the Company also used other sources of funding, such as Debentures, Housing Financing System and Bank Credit Notes and these funds are released to the Company upon execution.

On December 31, 2017, the Company had contracted a total of R$1,140 million; of this amount, R$1,038 million had already been released, accounting for use of 91.06% of funds raised. Of this amount, the Company’s total indebtedness corresponds to R$1,105 million, of which R$733 million refers to SFH contracts.

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CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR

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Operating Results for the Fiscal Years ended December 31, 2017 compared to 2016

Net Revenue from Sales and/or Services

Consolidated net revenue for 2017, recognized by the “PoC” method came to R$608.8 million, down 33.5% year-over-year, especially impacted by: (i) net pre-sales mix in the period, with concentration in sales of more recent projects, slower work evolution and, accordingly, lower revenue capacity, (ii) high volume of dissolutions and (iii) pricing adjustments to the units sold due to market conditions.

Cost of Development and Sale of Property

Costs of development and sales of property and physical swap agreements totaled R$818.8 million in 2017, down 20.4% over the R$1.0 billion in 2016, due to lower operational volume and sales in 2017 and provisions recorded in the amount of R$147.3 million in view of impairment in certain landbank and inventory units, which were sold below accounting cost.

Gross Profit

Gross profit reported in 2017 came negative at R$209.9 million, compared to gross loss of R$113.5 million in 2016. Gross margin was -34.5%, in 2017, compared -12.4% in 2016, reflecting pricing adjustments to units sold due to market conditions, high volume of dissolutions and provisions recorded in the amount of R$147.3 million deriving from impairment in certain landbank and inventory units.

Selling expenses

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Selling expenses totaled R$87.6 million in 2017, down 7.8% over R$94.9 million in 2016. Selling expenses in 2017 accounted for 14.4% of its net operating revenue, compared to 10.4% in 2016. The nominal variation is a result of lower net pre-sales volume in the period and in relation to net revenues, the variation is an effect of lower revenue volume in 2017.

General and Administrative Expenses, and Stock Option Plan Expenses

General and administrative expenses totaled R$92.7 million in 2017 compared to R$106.6 million in 2016, down 13.0%, or R$13.9 million, a result of our efforts in the pursuit of greater efficiency and more balanced design of our operational structure. This reduction was especially impacted by the following items: (i) R$5.4 million referring to the decrease in the provision for profit sharing; and (ii) R$5.4 million referring to payroll and charges expenses.

Depreciation and Amortization

Depreciation and amortization totaled R$57.5 million in 2017, up 69.7% over R$33.9 million recorded in 2016. This increase in the period is due to the recognition of provision for losses totaling R$25.5 million referring to the goodwill on AUSA acquisition identified in the impairment test.

Other Operating Expenses

In 2017, our results reflected a negative impact of R$211.6 million, compared to R$79.0 million in 2016, due to the recognition of provision for loss totaling R$101.9 million referring to the goodwill resulting from remeasurement of remaining investment of 30% in the associated company AUSA identified in the impairment test and the R$37.1 million increase referring to litigation expenses in the period, of which R$28.1 million refers to arbitration proceedings filed by real estate partners whose main allegations are delay to conclude the project and supposed building defects in works built by the Company.

Financial income

The financial income decreased R$28.7 million, totaling R$29.7 million in 2017, compared to R$58.4 million in 2016, due to lower balance of cash and cash equivalents in the period.

Financial expenses

Financial expenses totaled R$137.0 million in 2017, compared to R$84.1 million in 2016, down 62.9%, due to higher financial costs linked to the renegotiation of debts in the year and new funding in the period,
including the issue of debentures in the period.

Provision for Income Tax and Social Contribution and Deferred Income Tax

In 2017, total income tax, social contribution and deferred taxes was a credit of R$23.1 million, compared to an expense of R$100.1 million in 2016, reflecting a tax credit of R$24.3 million due to goodwill impairment resulting from the measurement of remaining 30% interest in the associated company AUSA. 

Net income (loss) from Discontinued Operations

Result from discontinued operations was an income of R$98.2 million in 2017, compared to a loss of R$559.7 million in 2016. The amount recorded in 2017 is due to R$107.7 million referring to the restatement of the discontinued operation’s fair value, net of liabilities, due to the weighted average price of preemptive right exercise of R$12.12, besides R$9.5 million of the operation’s transaction cost. In the fiscal year ended December 31, 2016, the amount is due to impairment loss of R$610.1 million referring to the measurement of non-current asset held for sale for the lesser amount between its carrying amount and fair value less selling expenses, considering the value of R$8.13 per share, as per agreement executed for sale of Tenda’s shares.

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Non-Controlling Interest

The non-controlling interest (minority shareholders of subsidiaries in which the Company holds interest) came to R$0.3 million, compared to a result of R$1.9 million in 2016, due to variation in the Company’s associated companies’ results.

Net Income (Loss)

Gafisa ended 2017 with a net loss of R$849.9 million, compared to a net loss of R$1.2 billion in 2016. Net result of the year was impacted by accounting effects raised due to the recognition of goodwill impairment over AUSA of R$127.4 million, inventory and landbank impairment of R$147.3 million and AUSA equity income expense of R$186.9 million, besides pricing adjustments of units sold due to the market conditions. The 2016 results were impacted by the stock purchase agreement with Jaguar Growth Asset Management, LLC. Total effect amounted to R$680.2 million and was comprised by the following factors: (i) the price per share of Tenda, R$8.13, establishes a valuation of R$439.0 million for 100% of the share capital of Tenda, lower than Tenda’s shareholders’ equity (R$1.049 billion) and thus generating an impairment of R$610.1 million and; (ii) reversal of R$90.3 million as tax credits, previously recorded, due to the impact of the tax result of this operation over the net income for the year. In addition, inventory and landbank adjustments which totaled R$159.9 million also impacted the Company’s net results in 2016.

Operating Results for the Fiscal Years ended December 31, 2016 compared to 2015

Net Revenue from Sales and/or Services

Consolidated net revenue for 2016, recognized by the “PoC” method came to R$915.6 million, down 36.6% year-over-year, especially impacted by: (i) lower operating volume; (ii) lower speed of inventory sales, which records the highest contribution to revenue, (iii) higher volume of dissolutions and, (iv) result of assets pricing market conditions.

Cost of Development and Sale of Property

Cost of development and sale of property and physical swap agreements totaled R$1.0 billion in 2016, down 3.1% over the R$1.1 billion recorded in 2015, result of lower operating and sales volume in 2016.

Gross Profit

Gross profit reported in 2016 came negative at R$113.5 million, compared to R$381.4 million in 2015. As a result of a recessive environment and its effects on the business development, gross margin was -12.4%, in 2016, compared to 26.4% in 2015 and 26.3% in 2014, a decrease especially impacted by higher volume of dissolutions and pricing adjustments of units sold in view of current market conditions.

Selling expenses

Selling expenses totaled R$94.9 million in 2016, down 3.1% over R$97.9 million in 2015. Selling expenses in 2016 accounted for 10.4% of its net operating revenue, compared to 6.8% in 2015. The nominal variation is a result of lower net sales volume in the period, in relation to net revenue, the variation is an effect of lower revenue volume in 2016.

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General and Administrative Expenses, and Stock Option Plan Expenses

General and administrative expenses totaled R$106.6 million in 2016 compared to R$97.4 million in 2015, up 9.4%, or R$9.1 million, especially impacted by the last quarter of the year due to the following factors: (i) R$2.7 million due to severance pay and indemnity expenses as part of a year-end corporate restructuring; (ii) R$2.9 million referring to final expenses related to the separation of the Gafisa and Tenda units’ IT structure; and (iii) net effect of R$9.3 million related to reversal of provision for profit sharing recorded in 2015.

Depreciation and Amortization

Depreciation and amortization totaled R$33.9 million in 2016, up 4.0% over R$32.6 million recorded in 2015, reflecting current Gafisa segment’s business volume, with a volume of launches close to R$1.0 billion over the past four years.

Other Operating Expenses

In 2016, our results reflected a negative impact of R$79.0 million, compared to R$107.6 million in 2015, due to lower expenses with litigation in the period.

Financial income

The financial income decreased R$18.9 million, totaling R$58.4 million in 2016, due to lower balance of cash and cash equivalents in the period.

Financial expenses

Financial expenses totaled R$84.1 million in 2016, compared to R$127.7 million in 2015, down 34.1% year-over-year, due to decreased gross indebtedness in the period.

Provision for Income Tax and Social Contribution and Deferred Income Tax

Income tax, social contribution and deferred taxes totaled R$100.1 million in 2016, compared to R$0.7 million in 2015, impacted by R$90.3 million due to the reversal of tax credits previously recorded, in view of impact of the result from discontinued operation (Tenda) over net income for the year.

Net income (loss) from discontinued operations

Result from discontinued operations was a loss of R$559.7 million in 2016, compared to a net income of R$36.2 million in 2015. This variation is due to impairment of assets recorded in the amount of R$610.1 million, related to the measurement at the lower of carrying amount and fair value less costs to sell, based on the value of R$8,13 per share, according to the contract executed for the sale of Tenda’s shares.

Non-Controlling Interest

The non-controlling interest (minority shareholders of subsidiaries in which the Company holds investment) came to R$1.9 million compared to a negative result of R$3.5 million in 2015, due to variation of the Company’s associated companies’ results.

Net Income (Loss)

Gafisa ended 2016 with a net loss of R$1.2 billion, compared to a net income of R$74.4 million in 2015. Net result for the year was impacted by accounting effects generated by the execution of the stock purchase agreement with Jaguar Growth Asset Management, LLC. The total effect amounted to R$680.2 million, and was comprised by the following factors: (i) the price per share of Tenda, R$8.13, establishes a valuation of R$439.0 million for 100% of the share capital of Tenda, lower than Tenda’s shareholders’ equity (R$1.049 billion) and thus generating an impairment of R$610.1 million and; (ii) reversal of R$90.3 million as tax credits, previously recorded, due to the impact of the net result from this operation over the net income for the year.

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Additionally, inventory and landbank adjustments which totaled R$159.9 million also impacted net result. 

CONSOLIDATED BALANCE SHEET

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Balance Sheet for the Fiscal Year Ended December 31, 2017 compared to 2016

Current assets

Cash and Equivalents – Cash and Banks, Marketable Securities

The Company’s cash and cash equivalents on December 31, 2017, totaled R$147.5 million, compared to R$253.2 million on December 31, 2016, a decrease of R$105.7 million, or 71.7%. This decrease is mainly due to the reduced consolidated indebtedness of the Company. Payments of R$1.0 billion were made, thus allowing a net amortization of debt totaling R$532.7 million.

Accounts receivable from development and services provided – Current and Non-Current

The following tables show the client accounts receivable from development and the sale of the Company’s properties, as well as the receivables to be appropriated, and the maturity of the Company’s portfolio:

Current and non-current amounts expire in the following fiscal years:

On December 31, 2017, the balance of clients by real estate development totaled R$684.1 million, compared to R$993.9 million on December 31, 2016. Such decrease is due lower launches volume of the Company in 2017.

All the balances of accounts receivable presented herein are adjusted to present value, as required by Technical Pronouncement CPC 12 “Present Value Adjustment”.

Property for Sale – Current and Non-Current

The balance of property for sale was comprised as follows in the periods indicated:

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On December 31, 2017, the balance of properties for sale, both current and non-current, totaled R$1.2 billion, compared to R$1.7 billion on December 31, 2016. At the end of 2017, 22.8% of total inventory was represented by finished units, net of provision for realization losses, while units under construction accounted for 41.5% of total inventory. In 2017, the Company focused on inventory sales, with one-off launches.

Other accounts receivable – Current and Non-Current

The balance of other accounts receivable held by the Company on December 31, 2017 stood at R$122.5 million, 13.2% higher than the balance of same period in 2016, a result of higher volume of recoverable taxes of R$7.7 million and R$3.7 million of escrow deposits.

Intangible assets

On December 31, 2017, the balance of intangible assets reached R$18.3 million, compared to R$28.2 million on December 31, 2016, effect of write-offs and amortization of intangible assets in the year.

Assets from discontinued operations

The balance variation in the period is due to the conclusion of separation operation between Gafisa and Tenda in May 2017. In 2016, the amount of R$1,189.0 million is related to Tenda’s discontinued operation assets, net of consolidation elimination items and impairment of R$610.1 million, which is presented in a single line, according to CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.

Liabilities

Loans, Financing and Debentures - Current and Non-Current

The Company’s total level of indebtedness on December 31, 2017 was R$1.1 billion, down 32.5% from R$1.6 billion recorded on December 31, 2016, reflecting the Company’s conservative position concerning its capital discipline, and reduced gross indebtedness.

The table below shows the development of net indebtedness of the Company:

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Total debt

Obligations for property purchases and advances to clients – Current and Non-Current

On December 31, 2017, the Company’s obligations for the purchase of property and client advances totaled R$308.8 million, compared to R$295.7 million in 2016, a 4.4% year-over-year increase. This variation is mainly due to client advances, and R$14.6 million refers to lower balance of physical swap due to financial work evolution and R$28.7 million refers to higher balance of client advances from development and services due to the Company’s launches in the second half of 2017.

The chart below shows the evolution of obligations for the purchase of properties and clients advances, as well as distribution in the short and long terms.

Balance of obligations for the acquisition of property and client advances

Material and service providers

On December 31, 2017 the balance of payables to material and service providers came to R$98.7 million, a 24.7% increase over the 2016 balance of R$79.1 million. This increased liability is chiefly due to the change in the Company’s payment policy.

Taxes and contributions - Current

The balance of taxes and social contributions (current) on December 31, 2017 was R$46.4 million, down 10.6% over the R$51.8 million recorded on December 31,2016. This decrease is due to payments during 2017, with income tax and social contribution credits previously withheld.

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Deferred income tax and social contribution – current and non-current

The balance of deferred income tax and social contribution totaled R$74.7 million on December 31,2017. a 25.8% decrease over R$100.4 million recorded on December 31, 2016, impacted by the effect of R$24.3 million referring to a tax credit deriving from AUSA goodwill impairment.

Provision for Contingencies - Current and Non-Current

The Company and its subsidiaries are parties in legal and administrative proceedings in various courts and government agencies, as a result of regular business operations, involving tax, labor, and civil matters, among other issues. The Company, based on information from its legal counsels, analysis of the pending lawsuits and labor claims, based on its previous experience in terms of the amounts claimed, set up a provision considered sufficient to cover the estimated losses on the lawsuits in progress.

The table below shows the evolution of the Company’s provisions for contingencies.

(i)   Out of this amount, R$18,171 refers to the recording of provision and payment of adverse judgment in two arbitration proceedings filed by real estate partners who mainly alleged the delay in the conclusion of projects and R$10,000 refers to the recording of provision for arbitration proceeding filed by real estate partner whose main allegation refers to supposed building defects in works built by the Company.

The provision for contingencies related to civil proceedings on December 31, 2017 includes R$24.0 million referring to lawsuits (R$18.3 million in 2015), in which the Company was included as defendant with personal liability for collection of court and out-of-court debts in which the original debtor is a former shareholder of the Company, Cimob Companhia Imobiliária (“Cimob”), or involving other entities of same economic group of Cimob. In these lawsuits, the claimant alleges the Company should answer for Cimob’s debts, according to understanding that the requirements for disregard of Cimob corporate entity to affect the Company would exist (corporate succession, co-mingling of assets and/or the creation of same economic group involving the Company and Cimob Group).

The Company does not agree with the grounds through which it has been included in these lawsuits and is still questioning in court its personal liability for third party company’s debts, as well as the collection amount submitted by claimants. The Company already obtained favorable and unfavorable court decisions related to this issue, reason that it is not possible to estimate a consistent outcome for all lawsuits. The Company also seeks in lawsuit filed against Cimob and its former and current controlling shareholders the recognition that it should not be held liable for Cimob’s debts, as well as the refund of amounts already paid by the Company in lawsuits collecting debts only due by Cimob.

Other accounts payable – Current and Non-current

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On December 31, 2017, the balance of other accounts payable came to R$111.5 million, a 36.7% increase over the R$81.4 million on December 31, 2016. This increase is due to higher balance of dissolutions payable in the period of R$35.1 million.

Liabilities over assets from discontinued operation

The balance variation in the period is due to the conclusion of separation between Gafisa and Tenda in May 2017. In 2017, the amount recorded of R$651.8 million refers to liabilities of Tenda discontinued operation, net of consolidation eliminations, which is evidenced in a single item, pursuant to CPC 31 – Non-Current Assets Held for Sale and Discontinued Operation.

Shareholders’ equity                                              

As at December 31, 2017, the Company’s shareholders’ equity balance came to R$759.4 million, compared to R$1.9 billion in 2016. This decrease reflects the conclusion of separation between Gafisa and Tenda in May 2017, and the net income for year, mainly impacted by AUSA goodwill impairment adjustment of R$127.4 million, landbank and units impairment of R$147.3 million and the negative effect of AUSA equity income of R$186.9 million.

Other accounts

Other accounts of the Company’s balance sheet not discussed in this analysis varied in the regular course of the Company’s businesses or are of little relevance in terms of the consolidated total balance sheet.

Balance Sheet for the Fiscal Year Ended December 31, 2016 compared to 2015

Current assets

Cash and Equivalents – Cash and Banks, Marketable Securities

The Company’s cash and cash equivalents on December 31, 2016 totaled R$253.2 million, compared to R$712.3 million on December 31, 2015, a decrease of R$459.1 million, or 64.5%. This decrease is mainly due to the reduced consolidated indebtedness of the Company. Payments of R$1.4 billion were made in 2016, thus allowing a net amortization of debt in the amount of R$651.7 million.

Accounts receivable from development and services provided – Current and Non-Current

The following tables show the client accounts receivable from development and the sale of the Company’s properties, as well as the receivables to be appropriated, and the maturity of the Company’s portfolio:

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Current and non-current amounts expire in the following fiscal years:

On December 31, 2016, the balance of clients by real estate development totaled R$993.9 million, compared to R$1.8 billion on December 31, 2015. Such reduction reflects the compliance with CPC 31 – Non-Current Asset Held for Sale and Discontinued Operation, classifying the Tenda segment as asset held for sale.

All the balances of accounts receivable presented herein are adjusted to present value, as required by Technical Pronouncement CPC 12 “Present Value Adjustment.”

Property for Sale – Current and Non-Current

The balance of property for sale was comprised as follows in the periods indicated:

On December 31, 2016, the balance of properties for sale, both current and non-current, totaled R$1.7 billion, compared to R$2.6 billion on December 31, 2015. At the end of 2016, 36.8% of total inventory was represented by finished units, while units under construction accounted for 43.0% of total inventory. The Company remains focusing on inventory reduction.

Other accounts receivable – Current and Non-Current

The balance of other accounts receivable held by the Company on December 31, 2016 stood at R$108.3 million, 46.8% lower than the balance of same period in 2015, a result of lower volume of escrow deposits.

Intangible assets

On December 31, 2016, the balance of intangible assets reached R$28.2 million, compared to R$51.9 million on December 31, 2015, evidencing the alignment between additions and write-offs/amortization of intangible assets in the year.

Assets from discontinued operations

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The amount of R$1,189.0 million is related to Tenda’s discontinued operation assets, net of consolidation elimination items and impairment of R$610.1 million, which is presented in a single line, according to CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.

Liabilities

Loans, Financing and Debentures - Current and Non-Current

The Company’s total level of indebtedness on December 31, 2016 came to R$1.6 billion, a decrease of 23.9% over the balance of R$2.2 billion on December 31, 2015, reflecting the Company’s conservative position concerning its capital discipline, and reduced gross indebtedness.

The table below shows the development of net indebtedness and obligations with investors in the Company:

Total Debt

Obligations for property purchases and advances to clients – Current and Non-Current

On December 31, 2016, the Company’s obligations for the purchase of property and client advances totaled R$295.7 million, down 51.5% year-over-year. This variation is mainly due to higher liabilities with development client advances and services.

The following table shows the development of obligations for the purchase of properties and client advances, as well as its distribution between the short and long terms.

Balance of obligations for the acquisition of property and client advances

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Material and service providers

On December 31, 2016, the balance of payables due to material and service providers came to R$79.1 million, up 38.0% over the balance of R$57.3 million on December 31, 2015. This increased liability is chiefly due to the change in the Company’s payment policy.

Taxes and contributions - Current

The balance of taxes and social contributions (current) on December 31, 2016 totaled R$51.8 million, down 49.2% over the R$102.1 million recorded on December 31, 2015. This decrease derives from higher current results and their acquittance during 2016, with income tax and social contribution previously withheld.

Deferred income tax and social contribution – current and non-current

The balance of deferred income tax and social contribution totaled R$100.4 million on December 31, 2016, up 508.9% over the R$16.5 million recorded on December 31, 2015, impacted by the effect of R$90.3 million refering to a reversal of a tax credit provision previously recorded, which was reversed in view of the significant impact of Tenda’s purchase and sale operation on the net income for the period, thus, not allowing to maintain such amount of deferred tax asset in the Company’s balance sheet.

Provision for Contingencies - Current and Non-Current

The Company and its subsidiaries are parties in legal actions and administrative processes in various courts and with several government bodies, as a result of normal business operations, involving tax, labor, and civil matters, among other issues. The Company, based on information from its legal advisers, analysis of the pending lawsuits and labor claims, based on its previous experience in terms of the amounts claimed, made a provision considered sufficient to cover the estimated losses as a result of the claims being made.

The table below shows the evolvement of the Company’s provisions for contingencies.

The provision for contingencies related to civil proceedings on December 31, 2016 totaled R$18.3 million (R$42.3 milion in 2015) in which the Company was included as defendant with personal liability for collection of court and out-of-court debts in which the original debtor is a former shareholder of the Company, Cimob Companhia Imobiliária (“Cimob”), or involving other entities of same economic group of Cimob. In these lawsuits, the claimant alleges the Company should answer for Cimob’s debts, according to understanding that the requirements for disregard of Cimob corporate entity to affect the Company would exist (corporate succession, co-mingling of assets and/or the creation of same economic group involving the Company and Cimob Group). This reduction in the provision is related to an unfavorable court decision, which was settled with judicial deposit and with no additional disbursement of cash by the Company

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The Company does not agree with the grounds through which it has been included in these lawsuits and is still questioning in court its personal liability for third party company’s debts, as well as the collection amount submitted by claimants. The Company already obtained favorable and unfavorable court decisions related to this issue, reason that it is not possible to estimate a consistent outcome for all lawsuits. The Company also seeks in lawsuit filed against Cimob and its former and current controlling shareholders the recognition that it should not be held liable for Cimob’s debts, as well as the refund of amounts already paid by the Company in lawsuits collecting debts only due by Cimob.

Other accounts payable – Current and Non-current

On December 31, 2016, the balance of other accounts payable came to R$81.4 million, down 58.6% over the R$196.7 million on December 31, 2015. This decrease is due lower volume of provisions and fines for construction work delays, long-term suppliers and obligations with investors.

Liabilities over assets from discontinued operation

The amount of R$651.8 million is related to Tenda’s discontinued operations liabilities, net of consolidation elimination items, which is presented in a single line, according to CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.

Shareholders’ equity

As at December 31, 2016, the Company’s shareholders’ equity balance came to R$1.9 billion, compared to R$3.1 billion in 2015. Such reduction reflects the compliance with CPC 31 – Non-Current Assets Held for Sale and Discontinued Operation, classifying the Tenda segment as asset held for sale.

Other accounts

Other accounts on the Company’s balance sheet not discussed in this analysis varied in the normal course of the Company’s business or are of little importance in terms of the consolidated balance sheet.

Cash Flow for the Fiscal Year Ended December 31, 2017 compared to 2016

Operating activities

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In 2017, the net cash verified in operations totaled R$206.9 million, compared to R$269.7 million in 2016. This decrease reflects Gafisa’s lower operating volume and was mainly composed of: (i) higher balance of obligations for purchase of properties and client advances of R$13.1 million; (ii) a R$260.1 million increase in accounts receivable and R$258.5 million in inventory; (iii) a decrease in related party transactions of R$27.5 million; (iv) expenses not affecting cash of R$682.2 million, of which R$263.6 million refers to AUSA goodwill, landbank and units impairment; R$204.8 million refers to equity income expense in the period and R$107.8 million refers to provisions for contingencies; and (v) other less relevant changes in other operational categories.

Investment activities

The net cash verified in investment activities, including the acquisition of assets, equipment and new investments, came to R$445.4 million in 2017 compared to R$162.5 million in 2016. Out of cash generation recorded in 2017, R$219.5 million refers to the receipt of shareholders’ preemptive right exercise for the shares representing 50% of Tenda’s capital stock, R$105.2 million refers to the early receipt of Tenda’s capital refund and R$104.7 million refers to the net redemption of investments in marketable securities, collaterals and credits.

Financing activities

In 2017, the cash burn registered by financing activities totaled R$528.6 million, compared to R$456.8 million in 2016. This cash burn is mainly due to the amortization of loans and financing, net of new releases, totaling R$578.8 million, reiterating the Company’s conservative position in relation to its capital discipline.

Below, the change in cash during the year:

Cash Flow for the Fiscal Year Ended December 31, 2016 compared to 2015

 Operating activities

 In 2016, net cash verified in operations totaled R$269,7 million, compared to R$104.6 million in 2015. From the cash generated during the fiscal year, R$137.1 million is related to the cash generated from the discontinued operation of Tenda compared to the cash used of R$85.5 million in 2015 and R$132.6 million is related to the Gafisa segment, compared to R$190.1 million in 2015. This decrease reflects Gafisa segment’s lower operating volume, due to the recessive macroeconomic scenario. The R$132.6 million were mainly composed of: (1) an R$73.6 million decrease in obligations for purchase of land and advances from customers; (2) an R$288.9 million increase in receivables from clients; (3) an increase in related parties transactions of R$100.2 million; (4) R$75.2 million in expenses which did not affect the working capital; and (5) other less relevant variations in other operating categories.

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Investment activities

 The net cash verified in investment activities, including the acquisition of assets, equipment and new investments came to R$162.5 million in 2016 compared to R$384.7 million in 2015. From the cash generated during the fiscal year, R$5.0 million is related to the cash generated from the discontinued operation of Tenda compared to the cash used of R$222.3 million in 2015 and R$157.5 million is related to the Gafisa segment, compared to R$162.4 million in 2015. The cash applied in 2016 was mainly related to investments in securities, sureties and credits.

Financing Activities

In 2016, the cash used in financing activities totaled R$456.8 million, compared to R$516.5 million in 2015. From the cash used during the fiscal year, R$135.3 million is related to the cash generated from the discontinued operation of Tenda compared to the cash used of R$176.8 million in 2015 and R$321.5 million is related to the Gafisa segment, compared to R$339.7 million in 2015. This cash burn is mainly due to the amortization of loans and financing, net of new releases, totaling R$365.4 million, reiterating the Company’s conservative position in relation to its capital discipline.

Below is the change in cash during the year:

10.2.  Operating and Financial and Results

Description of any significant revenue items

The Company’s revenues come mainly from the development and sale of real estate properties. To a lesser extent, it also earns revenue from providing real estate services, such as construction, technical and real estate management to third parties.

Fatores que afetaram materialmente os resultados operacionais

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In the fiscal year ended December 31, 2015, net operating revenue decreased by 8.7% compared to 2014, due to lower volume of launches in the Gafisa segment.

In the fiscal year ended December 31, 2016, net operating revenue went down 36.6% year-over-year, chiefly due to the following items: (i) lower operating volume; (ii) lower speed of inventory sales, which records the highest contribution to revenues, (iii) higher volume of dissolutions and (iv) result of assets pricing current market conditions.

In the fiscal year ended December 31, 2017, net operating revenue went down 33.5% year-over-year, chiefly due to the following items: (i) net pre-sales mix in the period, with sales focusing on more recent projects, with slower work evolution, and accordingly, lower revenues, (ii) high volume of dissolutions and (iii) pricing adjustments of units sold due to the market conditions.

The Company recognizes revenue from real estate developments according to their construction, based on a financial calculation of project completion and not at the moment that the sale contract is signed.  The main impacts on revenue variations between the 2016, 2015 and 2014 fiscal years are changes in sales volumes and introduction of new products and services of the Company, as well as a detailed review of the Company’s operations and strategy defined in 2011.

The 33.5% decrease in net revenues in 2017, compared to 2016, is chiefly due to: (i) net pre-sales mix in the period, with sales focusing on more recent projects, with slower work evolution, and accordingly, lower revenues, (ii) high volume of dissolutions and (iii) pricing adjustments of units sold due to the market conditions.