November 12, 2008
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn: Mr. Doug Jones
Division of Corporation Finance
Re:TAM S.A.
Annual Report on Form 20-F
Filed on June 25, 2008
Response to Staff Comment Letter dated September 17, 2008
Dear Mr. Jones:
Please find hereafter the Registrants’ comments regarding question number 14, which the Registrants were unable to respond to in our letter of October 16, 2008.
Consolidated Statements of Cash Flows, page F-11
14. Please explain to us how “Transfer of property, plant and equipment intended for sale” within cash flows from investing activities represents a cash inflow from investing activities.
Concerning the question how the transfer of property, plant and equipment within cash flow from investing activities represents a cash inflow, the Registrants inform the Staff that the item relates to an oversight resulting from the failure to eliminate a non-cash item from the cash flow statement relating to a transfer of parts from property, plant and equipment to inventories.
The Registrants have concluded that the error is material to the 2007 financial statements and intend to restate the previously filed financial statements by filing an Amended Form 20-F. They are in the process of evaluating the impact of this error on internal controls and will include such evaluation in the Amended Form 20-F. In addition to changing the 2007 cash flow statement and related footnotes the following footnote 2 (s) will be included to describe the correction to the 2007 cash flow statement:
“(s) Change in the 2007 cash flow statement
The previously presented cash flow statement for 2007, included a non-cash item relating to a transfer of spare parts between property, plant and equipment and inventories. The 2007 cash flow statement presented herein has been altered to eliminate the effects of this non-cash item, as shown below:
Securities and Exchange Commission
Page 2
Brazilian GAAP Cash Flow Statement for the year ended December 31, 2007
| As previously | ||||||
| presented | Reclassification | As Corrected | ||||
| Cash flows from operating activities: | ||||||
| Net income for the period | 128,896 | 128,896 | ||||
| Other | (26,433) | (26,433) | ||||
| Inventories | (90,822) | 83,951 | (6,871) | |||
| Net cash provided by operating activities | 11,641 | 83,951 | 95,592 | |||
| Cash flows from investing activities: | ||||||
| Acquisition of property, plant and equipment | (251,955) | (251,955) | ||||
| Transfer of property, plant and equipment intended | ||||||
| for sale | 83,951 | (83,951) | – | |||
| Other | (13,156) | (13,156) | ||||
| Net cash (used in) investing activities | (181,160) | (83,951) | (265,111) | |||
| Net cash provided by financing activities | 323,418 | 323,418 | ||||
| Increase in cash and banks and financial | ||||||
| investments | 153,899 | 153,899 | ||||
| Cash and cash equivalents at the end | 2,606,877 | 2,606,877 | ||||
| Cash and cash equivalents at the beginning | 2,452,978 | 2,452,978 | ||||
| Change in cash and cash equivalents | 153,899 | 153,899 | ||||
This alteration also impacts the 2007 consolidated statements of cash flows under U.S. GAAP presented in footnote 29 (s)(iv):
| As previously | ||||||
| presented | Reclassification | As Corrected | ||||
| Cash flows from operating activities: | ||||||
| Net income for the period | 468,608 | 468,608 | ||||
| Other | (310,837) | (310,837) | ||||
| Inventories | (90,822) | 83,951 | (6,871) | |||
| Net cash provided by operating activities | 66,949 | 83,951 | 150,900 | |||
| Cash flows from investing activities: | ||||||
| Acquisition of property, plant and equipment | (168,004) | (83,951) | (251,955) | |||
| Other | (107,007) | (107,007) | ||||
| Net cash provided by (used in) investing | ||||||
| activities | (275,011) | (83,951) | (358,962) | |||
| Net cash provided by financing activities | 375,093 | 375,093 | ||||
| Increase (decrease) in cash and banks and | ||||||
| financial investments | 167,031 | 167,031 | ||||
| Cash and cash equivalents at the end of the period | 466,538 | 466,538 | ||||
| Cash and cash equivalents at the beginning of the | ||||||
| period | 299,507 | 299,507 | ||||
| Change in cash and cash equivalents | 167,031 | 167,031 | ||||
Please direct any comments or questions regarding the enclosed materials to the undersigned at 212-878-8014.
Sincerely,
/s/ Sara Hanks
Sara Hanks
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