FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of February, 2000
Brazilian Distribution Company (Companhia Brasileira de Distribuicao - CBD)
(Translation of Registrant's Name Into English)
Av. Brigadeiro Luiz Antonio,
3126 Sao Paulo, SP 01402-901
Brazil
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [ ]
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes [ ] No [X]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Date: February 15, 2000 By: /s/ Augusto Marques da Cruz Filho
-----------------------------------------
Name: Augusto Marques da Cruz Filho
Title: Chief Financial Officer
By: /s/ Ricardo Florence dos Santos
-----------------------------------------
Name: Ricardo Florence dos Santos
Title: Investors Relations Director
<PAGE>
1
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Companhia Brasileira de Distribuicao
1999 RESULTS
o Total sales grew 32.4% in 1999 (Same store sales grew 4.5%)
o EBITDA growth of 55.9% (EBITDA margin of 7.3%)
o Customer base increased by 48%
Sao Paulo, Brazil, February 15, 2000 - Companhia Brasileira de Distribuicao
(NYSE: CBD; BOVESPA: PCAR4) today announced fourth quarter and year-end 1999
financial results.
Net sales
During fourth quarter 1999, CBD consolidated net sales reached R$1,799.4 million
compared to R$1,401.5 million during the same period in 1998, a 28.4% increase.
Net sales in 1999 amounted to R$5,803.2 million, registering an 32.4% increase
compared to 1998. Including sales from the Peralta chain in February 1999, when
these stores were already operating to CBD but still under the Peralta Brand,
net sales amounted R$5,830.2 million in 1999.
Net Sales Evolution by Division- Variation (%)1999/1998 - Consolidated
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Nominal Currency
(Corporate Law)
-------------------------------------------------------------------
Fourth Quarter 1999 Accumulated year-end
--------------------------------- --------------------------------
All Stores Same Stores All Stores Same Stores
- --------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Pao de Acucar 9.4% 4.7% 19.3% 11.0%
Extra 42.5% -0.5% 51.2% 1.6%
Barateiro 70.4% 3.1% 135.6% 7.4%
Eletro -12.8% -12.5% -3.4% -16.0%
- -------------------------------------------------------------------------------------------
CBD 28.4% 0.8% 32.4% 4.5%
- -------------------------------------------------------------------------------------------
</TABLE>
Considering for 1999 net sales from the Peralta chain in February and for 1998
sales from the Millo's in the first quarter, June sales from the Barateiro
division and also sales from the retired Superbox stores - prior to the
incorporation of these into the CDB's Divisions, the 1999 growth was of
31.6%. Same stores sales include only stores that have been operating for more
than 12 months.
The factors that contributed to net sales growth in 1999 include:
o 41% growth in sales floor space in relation to 1998, reaching 663,237 m2 by
year-end.
o Performance of the newly acquired stores from Peralta, Mogiano/Shibata, as
well as the performance of the leased stores from Paes Mendonca and Mappin
chains.
o Positive effect of the continuous process of store remodeling in Pao de
Acucar and Barateiro Divisions; and optimization of store format in
relation to the primary zone in which the stores are located.
o 48% growth in the number of customers, reaching 256 million of sales
transactions in 1999. The factors that contributed to this increase
include the above mentioned process of store remodeling, together with
investments made to employee training and improvements in customer service.
<PAGE>
2
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Total sales variations are presented below in constant currency compared to
sector performance figures for total stores published by ABRAS (Brazilian Food
Retailers Association). CBD posted a total sales growth in constant currency of
18.5% while the sector reported a decrease in sales of 2.7%, demonstrating a
significant gain of market share by the Company.
<TABLE>
<CAPTION>
------------------------------
Constant Currency
(Indexed by IGP-DI)
------------------------------
CBD ABRAS
1999 x 1998 (All Stores) (All Stores)
----------------------------- ------------------------------
Fourth quarter 8.8% - 2.5%
Accumulated year-end 18.5% - 2.7%
------------------------------------------------------------
-------------------------------------------------------------------
Constant Currency
(Indexed by IGP-DI)
-------------------------------------------------------------------
Fourth Quarter Accumulated year-end
--------------------------------- --------------------------------
All Stores Same Stores All Stores Same Stores
- --------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Pao de Acucar -7.3% -11.3% 7.8% 0.4%
Extra 20.7% -15.7% 35.8% -8.1%
Barateiro 44.2% -12.7% 111.6% -4.9%
Eletro -26.2% -25.9% -13.0% -24.8%
- -------------------------------------------------------------------------------------------
CBD 8.8% - 14.6% 18.5% - 5.7%
- -------------------------------------------------------------------------------------------
</TABLE>
Due to the divergences that exist today between the IGP-DI and inflation indexes
that better represent the price evolution within the sector, ABRAS has been
developing studies aiming at modifying the index. As soon as a definition is
reached, CBD will also be adopting this index to present its performance in real
values to the market. Using the IPCA, the index adopted by the Government to
monitor inflation, and which, in our opinion, reflects more accurately the rise
in prices in the retail market, "same stores" sales in constant currency
presented a negative variation of 0.2%.
Same store sales during the fourth quarter of 1999 increased 0.8% compared to
the fourth quarter of 1998. For the accumulated year-end period, net sales
registered a growth of 4.5% compared to 1998. CBD experienced during 1999 a
strong comparative basis in same store sales due to the performance presented in
1998 (growth of 12.5%). A better performance was verified in the supermarket
operations, specially the Pao de Acucar stores which, besides a high food
products participation in their sales mix, have a target market that is less
sensitive to negative economic changes. The Extra and Eletro Divisions were
penalized by the weak sales performance of non-food products, especially
electronics.
<PAGE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT - CORPORATE LAW METHOD
- ------------------------------------------- ------------------------------------------ ------------------------------------------
Fourth Quarter Accumulated year-end
------------------------------------------ ------------------------------------------
-------------- --------------- ----------- -------------- --------------- -----------
R$ thousand 1999 1998 % 1999 1998 %
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales Revenue 1,799,467 1,401,530 28.4% 5,803,209 4,383,513 32.4%
Cost of Sales (1,333,482) (1,011,791) 31.8% (4,235,793) (3,194,373) 32.6%
Gross Profit 465,985 389,739 19.6% 1,567,416 1,189,140 31.8%
Operating Income (Expenses)
Selling Expenses (263,315) (258,053) 2.0% (912,292) (726,590) 25.6%
General and Administrative (60,918) (64,524) -5.6% (231,648) (190,835) 21.4%
Total Operating Expenses (324,233) (322,577) 0.5% (1,143,940) (917,425) 24.7%
Operating Income Before Taxes, Deprec.
and Fin. Income (Exp.) - EBITDA 141,752 67,162 111.1% 423,476 271,715 55.9%
Depreciation (30,570) (30,769) -0.6% (142,698) (102,669) 39.0%
Operating Income Before Taxes and
Financial Income (Exp.) - EBIT 111,182 36,393 205.5% 280,778 169,046 66.1%
Taxes and Charges (12,153) (6,170) 97.0% (31,944) (21,268) 50.2%
Financial Income 115,905 85,396 35.7% 378,912 263,193 44.0%
Financial Expense (98,424) (81,419) 20.9% (412,847) (215,401) 91.7%
Currency variation (4,477) (152,205)
Net Financial Income (Loss) 13,004 3,977 227.0% (186,140) 47,792 -489.5%
---------------------------
Operating Income (Loss) 112,033 34,200 227.6% 62,694 195,570 -67.9%
Losses in Invested Companies (431) 0 (1,630) 0
Equity Income 0 0 0 (420)
Non-Operating Results 1,283 230 457.8% 2,210 3,089 -28.5%
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
Income (Loss) Before Income Tax 112,885 34,430 227.9% 63,274 198,239 -68.1%
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
Income Tax (29,499) (845) 3,391.0% (1,242) (39,235) -96.8%
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
Net Income (Loss) 83,386 33,585 148.3% 62,032 159,004 -61.0%
Net Income (Loss) per 1,000 shares 0.86 0.43 100.0% 0.64 2.04 -68.6%
No. of shares (in thousand)
at the end of the period 96,977,709,862 78,116,125,080 24.1% 96,977,709,862 78,116,125,080 24.1%
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
% of Net Sales
Gross Profit 25.9% 27.8% 27.0% 27.1%
Total Operating Expenses -18.0% -23.0% -19.7% -20.9%
Selling Expenses -14.6% -18.4% -15.7% -16.6%
General and Administrative -3.4% -4.6% -4.0% -4.4%
EBITDA 7.9% 4.8% 7.3% 6.2%
Depreciation -1.7% -2.2% -2.5% -2.3%
EBIT 6.2% 2.6% 4.8% 3.9%
Taxes and Charges -0.7% -0.4% -0.6% -0.5%
Net Financial Income (Expense) 0.7% 0.3% -3.2% 1.1%
Income before Income Tax 6.3% 2.5% 1.1% 4.5%
Income Tax -1.6% -0.1% 0.0% -0.9%
Net Income (Loss) 4.6% 2.4% 1.1% 3.6%
- ------------------------------------------- -------------- --------------- ----------- -------------- --------------- -----------
</TABLE>
* 1998 values do not include MIllo's sales in the first quarter and Barateiro
sales in June (period prior to their incorporation into the CBD group. 1999
values do not include Peralta's sales in February.
<PAGE>
4
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CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
R$ thousand Fourth Quarter 99 Fourth Quarter 98
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and Banks 61,937 36,403
Short-term Investments 1,198,598 333,824
Accounts Receivable 506,602 446,996
Installment Sales 162,384 150,575
Post Dated Checks 109,638 134,039
Credit Card and Other 251,425 182,904
Allowance for Doubtful Accounts (16,845) (20,522)
Advances to Suppliers 18,082 9,435
Taxes Recoverable 64,635 63,663
Other Receivables 13,565 15,740
Inventories 538,197 344,967
Prepaid Expenses 16,979 5,779
Total Current Assets 2,418,595 1,256,807
Long-term Receivables
-----------------------
Installment Sales 97,755 4,951
Deferred Income Tax 29,448 18,584
Judicial Deposits 50,745 34,089
Associated Companies 5,108 1,721
Prepaid Expenses 4,055 5,728
Total Long-term Receivables 187,111 65,073
---------------------------
Investments 228,814 5,622
Property and Equipment 1,889,441 1,389,822
Deferred Charges 430,259 307,155
Exchange Variation 58,208 -
Total Permanent Assets 2,548,514 1,702,599
TOTAL ASSETS 5,154,220 3,024,479
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Suppliers 792,420 604,323
Loans and Financing 477,991 347,891
Domestic Currency 460,567 41,317
Foreign Currency 17,424 306,574
Payable on Purchase of Assets 111,148 44,502
Debentures 16,483 15,813
Taxes on Sales 25,496 28,304
Tax Installments 10,684 9,567
Salaries and Payroll Charges 64,409 57,515
Dividends 15,957 5,013
Interest on Capital - 40,000
Associated Companies and others 59,559 24,629
Total Current Liabilities 1,574,147 1,177,557
Long-term Liabilities
Financing 341,345 417,816
Domestic Currency 294,166 232,692
Foreign Currency 47,179 185,124
Payable on Purchase of Assets 54,127 3,504
Debentures 285,159 314,860
Deferred Income Tax and Installments 9,469 34,099
Other Accruals 264,150 104,912
Total Long-term Liabilities 954,250 875,191
Capitalizable Funds - Debentures 310,387 -
Shareholders' Equity
Capital 1,491,118 537,730
Capital Reserves 348,292 4,050
Revenue Reserves 476,026 429,951
Total Shareholders' Equity 2,315,436 971,731
Total Capitalizable Funds and Shareholders' Equity 2,625,823 971,731
TOTAL LIABILITIES AND SHAREH. EQUITY 5,154,220 3,024,479
------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
5
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Management's Comments
CBD's Operating Performance in 1999 (consolidated results)
Gross profit during the year amounted to R$1,567.4 million compared to R$1,189.1
million in 1998, an increase of 31.8%. Even with the higher participation of
hypermarkets in the Company's store mix, the increasing competition inside the
sector, not to mention the intense negotiation period with suppliers due to
currency devaluation verified in January 1999, CBD registered a gross margin of
27.0%, practically stable compared to 1998 (27.1%). The main factors
contributing to the gross margin during the period were: 1) intense control and
prevention of shrinkage, causing the index to reduce to 1.8% compared to 2.0% in
1998; 2) improved negotiations with suppliers, due to the increase in purchase
volumes, bonuses for the inauguration of new stores and improved purchasing
centralization at the Distribution Center and 3) development of products with
high contribution margin.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 55.9% during 1999, reaching R$ 423.5 million or 7.3% of net sales,
compared to 6.2% in the previous year. The EBITDA margin surpassed the goal to
present a margin between 6 and 7%, initially established by the Company, due
mainly to the maintenance of the scale gains in gross margin and higher sales
volume with dilution of fixed costs. In the fourth quarter of 1999, the EBITDA
margin was 7.9% of net sales compared to 4.8% in the same period of 1998.
We also emphasize, as productivity gains, the increase in EDI (Electronic Data
Interchange) purchases, reaching 48% compared to 32% at the end of 1998, with
positive effects on inventories administration, stock out reduction, shrinkage
reduction and improved logistics.
Earnings
Accumulated net income for the year was R$ 62.0 million compared to R$ 159.0
million in 1998. The impact of the devaluation of the Real against the dollar
ended up reducing the positive effects in the final result stemmed from the
sales growth and efficiency gains achieved by the Company in 1999. The Company
recorded an exchange loss of R$210.3 million, having recognized R$ 152.2 million
throughout 1999.
In the fourth quarter of 1999, CBD's net income was R$ 83.4 million, compared to
R$ 33.6 million in the same period of 1998, registering a growth of 148.2%. This
significant increase in the net income can be explained by two main factors: 1)
111.1% increase in EBITDA, due to the Company's growth, efficiency gains and to
the existence of extraordinary items in the fourth quarter of 1998 that affected
the operational margin of that period and 2) increase in the financial income as
a result of the inflow of resources deriving from the issue of debentures and
capital increase.
Net earnings per 1,000 shares (according to the Corporate Law Method and based
on the shares existing in December 31 1999) reached R$0.64 compared to R$2.04 in
1998. In the fourth quarter of 1999 the Company registered net earnings per
1,000 shares of R$0.86 compared to R$0.43 in the same period of 1998.
Dividends
Management will propose to the Annual General Meeting the distribution of
R$15,957 thousand reais, demonstrated as follows:
R$ thousand
Net Profit for 1999 62,032
Unrealized profits reserve 4,898
Legal Reserve (3,101)
Dividends calculation basis 63,829
Minimum mandatory dividend (25%) 15,957
The full rights stocks will receive R$0.188 per thousand shares, amounting
R$15,002 thousand, while the shares subscribred in the private capital increase
that took place in the second half of 1999 will be entitled to receive a pro
rata dividend of R$0.05469 per thousand shares equivalent to R$955 thousand.
Casino Group as CBD's new strategic partner
1999 was particularly important to CBD. The Company announced the admission of
the French Company Casino as its new strategic partner. The association occurred
through an issue of debentures convertible into preferred stock, followed by a
private capital increase.
<PAGE>
6
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Casino acquired CBD's convertible debentures (297 thousand, equivalent to 6
billion preferred shares), which generated an inflow of R$302.9 million to CBD;
and subscribed to a total of 12.57 billion common shares and 12.57 billion
warrants convertible into common shares, generating R$1.031,7 million.
Casino also acquired 4.8 billion preferred shares from a total of 4.9 billion
subscribed shares, generating an inflow of R$214.6 million for CBD.
The total inflow from the first part of the transaction was R$1,549.2 million.
CBD is pleased to have Casino Group as a shareholder and emphasizes that the
benefits are not restricted to the inflow of resources for the Company's growth
and reduction of short-term liabilities. Both parties are benefiting from a
continuous process of exchange of best practices in their many operation areas,
as well as synergies in global purchases, in-house brands, among others.
INVESTMENTS
With the consolidation of the process of expansion, modernization of stores and
improvement of the managerial systems, CBD invested, in 1999, R$785 million,
always maintaining its development focus in places where it is already present,
diluting fixed and administrative costs and generating greater productivity in
its operational area.
Among the main investments of the period, we emphasize:
- - Acquisition of the Peralta Supermarket chain in February 1999, fourteenth
company in the sector in terms of sales in 1998 (R$ 326 million in gross
revenues), with a total sales area of 48,000 square meters, consisting of 37
supermarkets and 1 hypermarket, all of them located in the state of Sao Paulo.
During the first quarter 1999, CBD converted 23 Peralta stores into Barateiro
supermarkets, 14 into Pao de Acucar stores and the hypermarket into an Extra
store;
- - Leasing of 25 stores from Paes Mendonca S.A. chain, through the affiliated
Company Novasoc, the seventh company in the sector in terms of sales in 1998
(R$829 million of gross revenues), with a total sales area of 119,120 square
meters, distributed as follows: 10 hypermarkets, (1 store in MG, 2 stores in SP
and 7 stores in RJ) and 15 supermarkets (3 stores in SP and 12 stores in RJ). Of
the 25 stores, 20 were remodeled and reinaugurated, 9 of which are hypermarkets
and 11 supermarkets. Three stores were closed and one was converted into a
Regional Warehouse;
- - Acquisition of the real estate for a hypermarket in Belo Horizonte, leased to
Paes Mendonca with a total area of 12,480 square meters.
- - Leasing of the installations and equipment of two stores previously operated
by Mappin Lojas de Departamento S.A. ("Mappin"), located in the city of Sao
Paulo at Juscelino Jubitschek Avenue (Itaim) and Praca Ramos (Ramos Square)
(downtown), for a period of 20 years;
- - Acquisition of the Mogiano/Shibata Chain, in Greater Sao Paulo , including 6
stores, with floor space totaling 18,752 square meters;
- - Inauguration of four new Extra hypermarkets: one inaugurated in October (Santo
Andre) and the other three inaugurated in November 1999 (Aeroporto, Praca Ramos,
and Fortaleza), representing an increase of 37,703 square meters;
- -Construction of a new warehouse adjacent to the current distribution center,
with 31,000 square meters, located at Anhanguera Highway - SP. This investment
will enable CBD to optimize the logistic operations of general merchandise, and
allocate a larger area for the distribution of fruits and vegetables as well as
cross-docking operations in the current distribution center.
- - Construction of a warehouse in Rio de Janeiro, with 27,000 square meters of
stocking area, that will concentrate grocery, fruits, vegetables and
cross-docking operations for home appliance products;
- - Opening of a new Pao de Acucar store in Brasilia and another one in Fortaleza;
- - Conversion of 26 Pao de Acucar stores into Barateiro supermarkets;
- - Conversion of one Barateiro store into the Extra format;
- - Renovation of 13 Pao de Acucar stores and 8 Extra Hypermarkets;
- - Closing of three Pao de Acucar stores (1 in Sao Paulo, 1 in Fortaleza and 1 in
Piaui), one Barateiro store in Sao Paulo and two stores of the Eletro Division
(in Sao Paulo).
<PAGE>
7
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Stores by Division
<TABLE>
<CAPTION>
----------------------------------------------------------------- --------------------------
Pao de Floor Space Number of
Acucar Extra Eletro Barateiro Peralta CBD (m2) Employees
- --------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/98 149 30 76 29 - 284 470,591 31,343
Opened 1 - - - 38 39
Closed - - (2) - - (2)
Converted (18) + 14 1 - 23+18 (38) -
03/31/99 146 31 74 70 - 321 514,229 33,653
Opened 10 - - 2 - 12
Closed (2) - - (1) - (3)
Converted - 1 - (1) - -
06/30/99 154 32 74 70 - 330 514,229 36,539
Opened - 9 - 1 - 10
Closed - - - - - -
Converted - - - - - -
09/30/99 154 41 74 71 - 340 611,254 36,762
Opened 6 - 4 - 10
Closed (1) - - - - (1)
Converted (8) + 1 (1) - 8 - -
- --------------------------------------------------------------------------------- --------------------------
12/31/99 146 46 74 83 - 349 663,237 39,642
- -------------------------------------------------------------------------------------------------------------
Summary of Store Conversions
-------------------------------------------------------------------------------------------
3Q98 4Q98 1Q99 2Q99 3Q99 4Q99
- ------------------------------------------------------------------------------------------------------------------------------
Peralta - Pao de Acucar 14
Superbox - Pao de Acucar 2
Pao de Acucar - Barateiro 1 18 8
Peralta - Barateiro 23
Superbox - Barateiro 2
Superbox - Extra 3 2
Barateiro - Extra 2 4 1
Peralta - Extra 1
Extra - Pao de Acucar 1
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
8
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Sales Breakdown per Division - Consolidated*
In R$ thousand - Nominal (Corporate Law)
<TABLE>
<CAPTION>
-------------------------------------------------- -------------
OCTOBER 1999 % 1998 % Var.(%)
- ----------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C>
Pao de Acucar 176,892 33.1% 162,161 38.9% 9.1%
Extra 267,667 50.2% 178,349 42.8% 50.1%
Barateiro 61,665 11.6% 45,519 11.0% 35.5%
Eletro 27,451 5.1% 30,314 7.3% -9.4%
- ----------------------------------------------------------------------- -------------
CBD 533,675 100.0% 416,343 100.0% 28.2%
- ----------------------------------------------------------------------- -------------
-------------------------------------------------- -------------
NOVEMBER 1999 % 1998 % Var.(%)
- ----------------------------------------------------------------------- -------------
Pao de Acucar 163,537 32.0% 149,751 38.0% 9.2%
Extra 258,767 50.6% 179,256 45.4% 44.4%
Barateiro 60,946 11.9% 34,919 8.8% 74.5%
Eletro 28,306 5.5% 30,672 7.8% -7.7%
- ----------------------------------------------------------------------- -------------
CBD 511,556 100.0% 394,598 100.0% 29.6%
- ----------------------------------------------------------------------- -------------
-------------------------------------------------- -------------
DECEMBER 1999 % 1998 % Var.(%)
- ----------------------------------------------------------------------- -------------
Pao de Acucar 222,514 29.5% 202,691 34.3% 9,8%
Extra 396,925 52.6% 290,292 49.2% 36,7%
Barateiro 92,014 12.2% 45,549 7.7% 102,0%
Eletro 42,783 5.7% 52,057 8.8% -17,8%
- ----------------------------------------------------------------------- -------------
CBD 754,236 100.0% 590,589 100.0% 27,7%
- ----------------------------------------------------------------------- -------------
-------------------------------------------------- -------------
4th QUARTER 1999 % 1998 % Var.(%)
- ----------------------------------------------------------------------- -------------
Pao de Acucar 562,943 31.3% 514,603 36.7% 9.4%
Extra 923,358 51.3% 647,896 46.2% 42.5%
Barateiro 214,626 11.9% 125,987 9.0% 70.4%
Eletro 98,540 5.5% 113,044 8.1% -12.8%
- ----------------------------------------------------------------------- -------------
CBD 1,799,467 100.0% 1,401,530 100.0% 28.4%
- ----------------------------------------------------------------------- -------------
-------------------------------------------------- -------------
YEAR 1999 % 1998 % Var.(%)
- ----------------------------------------------------------------------- -------------
Pao de Acucar 2,057,923 35.3% 1,724,924 38.9% 19.3%
Extra 2,753,887 47.2% 1,821,067 41.1% 51.2%
Barateiro 680,514 11.7% 288,856 6.5% 135.6%
Eletro 310,885 5.3% 321,807 7.3% -3.4%
Peralta 27,049 0.5% - - -
- ----------------------------------------------------------------------- -------------
CBD 5,830,258 100.0% 4,429,230 100.0% 31.6%
- ----------------------------------------------------------------------- -------------
</TABLE>
* Includes Peralta sales in February 1999, when these stores were not
incorporated into the CBD stores. The first quarter of 1998 includes sales from
the Millo's chain, when those stores were not incorporated into the CBD stores.
These results also include sales from the retired Superbox stores, as well as
June 1998 sales from the Barateiro division. * Not considering the sales above
mentioned the sales growth of CBD in 1999 was of 32.4%.
<PAGE>
9
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Productivity Indexes
In R$ thousand - Nominal (Corporate Law)
Sales per m2 / month
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
4Q99 4Q98 Var (%) Year 1999 Year 1998 Var (%)
- ----------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pao de Acucar 1,066 1,041 2.4% 1,005 894 12.4%
Extra 938 1,159 -19.1% 888 1,011 -12.2%
Barateiro 799 758 5.4% 698 597 16.9%
Eletro 845 964 -12.3% 665 729 -8.8%
- ----------------------------------------------------------- ---------------------------------------
CBD 948 1,049 -9.6% 878 815 7.7%
- ----------------------------------------------------------- ---------------------------------------
Sales per Employee/ month
-----------------------------------------------------------------------------
4Q99 4Q98 Var (%) Year 1999 Year 1998 Var (%)
- ----------------------------------------------------------- --------------------------------------
Pao de Acucar 14,364 14,376 -0.1% 13,334 13,373 -0.3%
Extra 20,867 19,642 6.2% 18,207 20,368 -10.6%
Barateiro 17,707 15,919 11.2% 14,727 12,179 20.9%
Eletro 21,283 18,535 14.8% 15,434 15,227 1.4%
- ----------------------------------------------------------- --------------------------------------
CBD 15,670 14,905 5.1% 13,756 14,824 -7.2%
- ----------------------------------------------------------- --------------------------------------
Average Ticket
-----------------------------------------------------------------------------
4Q99 4Q98 Var (%) Year 1999 Year 1998 Var (%)
- ----------------------------------------------------------- --------------------------------------
Pao de Acucar 17,3 17,4 -0.6% 16,9 16,7 1.2%
Extra 37,1 43,0 -13.7% 36,3 43,1 -15.8%
Barateiro 13,7 15,6 -12.2% 12,5 15,0 -16.7%
Eletro 194,5 204,8 5.0% 194,2 194,5 -0.2%
- ----------------------------------------------------------- --------------------------------------
CBD 24,4 26,3 -7.2% 22,8 25,5 -10.6%
- ----------------------------------------------------------- --------------------------------------
Sales per Checkout/ month
-----------------------------------------------------------------------------
4Q99 4Q98 Var (%) Year 1999 Year 1998 Var (%)
- ----------------------------------------------------------- --------------------------------------
Pao de Acucar 99,337 97,260 2.1% 93,704 83,738 11,9%
Extra 136,936 158,487 -13.6% 123,040 136,953 -10,2%
Barateiro 91,136 79,038 15.3% 72,326 68,877 5,0%
Eletro 175,650 199,724 -12,1% 138,048 149,915 -7,9%
- ----------------------------------------------------------- --------------------------------------
CBD 117,413 121,460 -3.3% 103,313 93,747 10,2%
- ----------------------------------------------------------- --------------------------------------
* Results referring to floor space, employees and checkouts were calculated
based on average values proportional to the period in which the stores were
open.
Sales Breakdown (% of net sales)
-----------------------------------------------------------------------------------------------
4Q98 1Q99 2Q99 3Q99 4Q99 1998 1999
- ---------------------------------------------------------------------------------------------------------------------------
Cash 53.8% 56.2% 55.8% 55.9% 57.0% 51.6% 56.3%
Credit Card 21.5% 22.9% 23.0% 22.8% 22.5% 21.7% 22.7%
Food Voucher 7.3% 7.2% 6.9% 6.2% 5.6% 7.5% 6.4%
Credit 17.4% 13.7% 14.3% 15.1% 14.9% 19.2% 14.6%
Posted Checks 11.9% 10.5% 10.4% 10.5% 9.4% 13.5% 10.2%
Installments 5.5% 3.2% 3.9% 4.6% 5.5% 5.7% 4.4%
- ---------------------------------------------------------------------------------------------------------------------------
Selected Data per Division at December 31, 1999
--------------------------------------------------------------
# # # Floor space
Checkouts employees stores (m2)
--------------------------------------------------------------
Pao de Acucar 1,914 12,983 146 174,183
Extra 2,410 15,653 46 350,794
Barateiro 828 4,412 83 99,391
Eletro 187 1,576 74 38,869
- -------------------------------------------------------------------------------------------
Total 5,339 34,624 349 663,237
- -------------------------------------------------------------------------------------------
Headquarters 5,018
- -------------------------------------------------------------------------------------------
CBD 5,339 39,642 349 663,237
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
10
- --------------------------------------------------------------------------------
NON-CONSOLIDATED INCOME STATEMENT - CORPORATE LAW METHOD (only CBD)
<TABLE>
<CAPTION>
- -------------------------------------------- ------------------------------------------- -------------------------------------------
4th quarter Accumulated year-end
------------------------------------------- -------------------------------------------
--------------- -------------- ------------ ---------------- -------------- -----------
R$ thousand 1999 1998 % 1999 1998 %
- -------------------------------------------- --------------- -------------- ------------ ---------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales Revenue 1,588,489 1,401,530 13.3% 5,548,899 4,383,513 26.6%
Cost of Sales (1,174,755) (1,011,791) 16.1% (4,059,521) (3,194,373) 27.1%
Gross Profit 413,734 389,739 6.2% 1,489,378 1,189,140 25.2%
Operating Income (Expenses)
Selling Expenses (223,045) (258,053) -13.6% (851,176) (726,590) 17.1%
General and Administrative (59,895) (64,524) -7.2% (230,668) (190,835) 20.9%
Total Operating Expenses (282,940) (322,577) -12.3% (1,081,844) (917,425) 17.9%
Operating Income Before Taxes, Deprec. And
Fin. Income (Exp.) - EBITDA 130,794 67,162 94.7% 407,534 271,715 50.0%
Depreciation (27,215) (30,769) -11.9% (138,365) (102,669) 34.8%
Operating Income Before Taxes and
Financial Income (Exp.) - EBIT 103,579 39,393 184.6% 269,169 169,046 59.2%
Taxes and Charges (11,312) (6,170) 83.3% (30,496) (21,268) 43.4%
Financial Income 109,855 85,396 28.6% 370,365 263,193 40.7%
Financial Expense (85,182) (81,419) 4.2% (392,590) (215,401) 82.3%
Currency variation (4,477) - - (152,205)
Net Financial Income (Loss) 20,196 3,977 416.2% (174,430) 47,792 -465.0%
---------------------------
Operating Income (Loss) 112,463 34,200 229.8% 64,243 195,570 -67.2%
Losses in Invested Companies (759) - - (2,806) 0
Equity Income - - - (1) (420)
Non-Operating Results 1,283 230 457.8% 2,210 3,089 -28.5%
- -------------------------------------------- --------------- -------------- ------------ ---------------- -------------- -----------
Income (Loss) Before Income Tax 112,987 34,430 228.2% 63,646 198,239 -67.9%
- -------------------------------------------- --------------- -------------- ------------ ---------------- -------------- -----------
Income Tax (29,601) (845) 3,403.1% (1,614) (39,235) -95.9%
- -------------------------------------------- --------------- -------------- ------------ ---------------- -------------- -----------
Net Income (Loss) 83,386 33,585 148.3% 62,032 159,004 -61.0%
Net Income (Loss) per 1,000 shares 0.86 0.43 100.0% 0.64 2.04 -68.6%
No. of shares (in thousand)
at the end of the period 96,977,709,862 78,116,125,080 96,977,709,862 78,116,125,080
- -------------------------------------------- --------------- -------------- ------------ ------------------------------ -----------
% of Net Sales
Gross Profit 26.0% 27.8% 26.8% 27.1%
Total Operating Expenses -17.8% -23.0% -19.5% -20.9%
Selling Expenses -14.0% -18.4% -15.3% -16.6%
General and Administrative -3.8% -4.6% -4.2% -4.4%
EBITDA 8.2% 4.8% 7.3% 6.2%
Depreciation -1.7% -2.2% -2.5% -2.3%
EBIT 6.5% 2.6% 4.9% 3.9%
Taxes and Charges -0.7% -0.4% -0.5% -0.5%
Net Financial Income (Expense) 1.3% 0.3% -3.1% 1.1%
Income before Income Tax 7.1% 2.5% 1.1% 4.5%
Income Tax -1.9% -0.1% 0.0% -0.9%
Net Income (Loss) 5.2% 2.4% 1.1% 3.6%
- -------------------------------------------- --------------- -------------- ------------ ---------------- -------------- -----------
</TABLE>
* 1998 values do not include MIllo's sales in the first quarter and Barateiro
sales in June (period prior to their incorporation into the CBD group. 1999
values do not include Peralta's sales in February.
<PAGE>
11
- --------------------------------------------------------------------------------
BALANCE SHEET - CORPORATE LAW METHOD (only CBD)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
R$ thousand Fourth Quarter 99 Fourth Quarter 98 Third Quarter 99
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Banks 54,965 36,403 19,446
Short-term Investments 1,198,598 333,824 1,496,991
Accounts Receivable 494,527 446,996 391,647
Installment Sales 156,364 150,575 118,698
Post Dated Checks 102,955 134,039 103,974
Credit Card and Other 251,341 182,904 184,820
Allowance for Doubtful Accounts (16,133) -20,522 -15,845
Advances to Suppliers 18,078 9,435 19,116
Taxes Recoverable 60,875 63,663 61,037
Other Receivables 11,462 15,740 21,646
Inventories 475,711 344,967 369,768
Prepaid Expenses 15,693 5,779 13,275
Total Current Assets 2,329,909 1,256,807 2,392,926
Long-term Receivables
-----------------------
Installment Sales 2,636 4,951 2,368
Deferred Income Tax 29,076 18,584 45,659
Judicial Deposits 50,731 34,089 84,066
Associated Companies 225,755 1,721 150,851
Prepaid Expenses 4,055 5,728 4,473
Total Long-term Receivables 312,253 65,073 287,417
---------------------------
Investments 228,814 5,622 149,605
Property and Equipment 1,780,379 1,389,822 1,619,642
Deferred Charges 393,708 307,155 370,957
Exchange Variation 58,208 - 62,685
Total Permanent Assets 2,402,901 1,702,599 2,140,204
TOTAL ASSETS 5,045,063 3,024,479 4,820,547
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Suppliers 747,531 604,323 535,350
Loans and Financing 425,196 347,891 894,627
Domestic Currency 407,772 52,675 63,447
Foreign Currency 17,424 295,216 831,180
Payable on Purchase of Assets 111,148 44,502 105,183
Debentures 16,483 15,813 7,672
Taxes on Sales 20,973 28,304 16,792
Tax Installments 10,684 9,567 10,685
Salaries and Payroll Charges 59,880 57,515 67,115
Dividends 15,957 5,013 -
Interest on Capital - 40,000 -
Associated Companies and others 57,138 24,629 27,491
Total Current Liabilities 1,464,990 1,177,557 1,664,915
Long-term Liabilities
Financing 341,345 417,816 257,892
Domestic Currency 294,166 277,391 196,721
Foreign Currency 47,179 140,425 61,171
Payable on Purchase of Assets 54,127 3,504 48,967
Debentures 285,159 314,860 346,226
Deferred Income Tax and Installments 9,469 34,099 12,150
Other Accruals 264,150 104,912 499,108
Total Long-term Liabilities 954,250 875,191 1,164,343
Capitalizable Funds - Debentures 310,387 - -
Shareholders' Equity
Capital 1,491,118 537,730 1,234,741
Capital Reserves 348,292 4,050 347,951
Revenue Reserves 476,026 429,951 408,597
Total Shareholders' Equity 2,315,436 971,731 1,991,289
Total Capitalizable Funds and Shareholders' Equity 2,625,823 971,731 1,991,289
TOTAL LIABILITIES AND SHAREH. EQUITY 5,045,063 3,024,479 4,820,547
-------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES
Conversion of Debentures into Preferred shares in 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Issued Debentures Converted Final Balance Amount of Preferred Capital Increase
(Balance) Debentures shares (R$ thousand)
converted
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1o issue 100,000 (50) 99,950 1,857,067 60
2o issue 175,000 (2,000) 173,000 66,666,000 2,153
- -----------------------------------------------------------------------------------------------------------------------
Total 2o quarter (2,050) 68,523,067
- -----------------------------------------------------------------------------------------------------------------------
1o issue 99,950 - 99,950
2o issue 173,000 (3,850) 169,150 128,332,050 4,246
- -----------------------------------------------------------------------------------------------------------------------
Total 3o quarter (3,850) 128,332,050
- -----------------------------------------------------------------------------------------------------------------------
1o issue 99,950 (14,704) 85,246 542,639,036 18,998
2o issue 169,150 (17,525) 151,625 584,160,825 20,722
- -----------------------------------------------------------------------------------------------------------------------
Total 4o quarter (32,229) 1,126,799,861
- -----------------------------------------------------------------------------------------------------------------------
Total (38,129) 1,323,654,978 46,179
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Recent Events
- -------------
1) Investment Program for 2000
On December 20, 1999, CBD announces its proposed Investment Plan for the year
2000, developed and discussed at the Board of Directors Meeting on December 7,
1999 and approved at the Shareholders Meeting to be held on December 23,
1999.The Program forecasts the opening of 46 to 50 new stores and the remodeling
of approximately 140 stores, representing a total investment of R$700 million.
CBD's sales area is expected to increase by 15 to 20%, and the Company expects
to create 8,000 new jobs.
CBD's proposed investment in the Hypermarket Division entails the opening of 6
to 8 new Extra stores, and the remodeling of 3 existing hypermarkets. The
Company will also direct its efforts to continue the Division's organic
expansion through the acquisition of land in strategic locations.
In the Supermarket Division, CBD will focus on the Barateiro chain by opening
approximately 30 new stores in the Greater Sao Paulo. CBD will also continue to
invest in the "New Face" project by remodeling 30 additional supermarkets.
In the Pao de Acucar Division, the Company's main focus will be to continue
remodeling stores in approximately 59 locations during the year 2000. In terms
of the chain's organic expansion, CBD plans to open 2 to 4 new stores during the
same period.
In the Eletro Division, which sells electronic home appliances, CBD will focus
on the project known as "Eletro of the Future", involving a complete layout
remodeling in 48 stores. The Company also plans to open 8 new stores in this
Division.
CBD's Program will also allocate R$82 million (included in the total investment)
to logistics, distribution, information technology and consulting for the
development of new systems, with the goal of realizing further operational
efficiencies.
2) Investments in Business to Supplier
Grupo Pao de Acucar has just launched pd@net, an E-commerce project which uses
the Internet for the exchange of electronic information between the company and
its suppliers. After having been the first company to launch a
Business-to-Consumer system - Pao de Acucar Delivery, in 1995 -, the Group now
invests R$ 6 million in Business-to-Supplier (B2S) with pd@net. This system will
allow Grupo Pao de Acucar and its suppliers to place purchase and sale orders
through the net, issue and process invoices, make payment notifications and
exchange on-line information about sales and inventories, speeding up the
process and reducing costs in the supplying chain.
<PAGE>
13
- --------------------------------------------------------------------------------
The Company's goal is that until the end of this year all its 6,000 suppliers
are integrated into the system - today, 48.7% of the Company's purchases are
already made electronically, via EDI (Electronic Data Interchange). The Company
believes that the Internet will substitute EDI as a Business-to-Supplier
interface, due to lower costs to the user, easier interaction and cultural
change in relation to safety in data and information flow. In order to be
integrated into the Internet system, the supplier will only need to have a
computer and a browser. Pao de Acucar provides all the support and technical
assistance services, specially conceived to integrate the suppliers. The
launching of pd@net is included in the total investment of R$ 82 million that
Grupo Pao de Acucar will make this year in the technology and logistics area.
- --------------------------------------------------------------------------------
Ricardo Florence dos Santos Monica Lopes
Companhia Brasilieira de Distribuicao Edelman Financial
Phone: 55 (11) 886 0421 Phone: 001 (212) 704 4428
Fax: 55 (11) 884 2677 Fax: 1 (212) 768 1025
Email: [email protected] Email: monica [email protected]
----------------------------- ------------------------
Fernando Tracanella
Email: [email protected]
Fone: 55 (11) 886 0421
- --------------------------------------------------------------------------------
Website: http://www.grupopaodeacucar.com.br
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
COMPANHIA BRASILEIRA DE DISTRIBUICAO
C.G.C. 47.508.411/0001-56
ANNUAL REPORT
Message from the President
During 1999, Companhia Brasileira de Distribuicao - CBD remained focused on its
search for growth and increased efficiency which it has followed consistently
since it became a listed company in 1995. In an economic environment marked by
the devaluation of the real in relation to the U.S. dollar, continuing high
interest rates and economic projections which at the beginning were pessimistic
indicating little or no growth for Brazil, CBD forged ahead as planned,
investing heavily in expansion, creating new jobs and consolidating its position
as the leader of the Brazilian retail industry.
Amongst the company's many achievements during 1999, I would like to mention the
opening of four new "Extra" hypermarkets and two "Pao de Acucar" supermarkets,
the purchase of the "Peralta" and the "Mogiano/Shibata" chains, the leasing of
25 stores of the "Paes Mendonca" chain, through CBD's subsidiary Novasoc, and of
two stores of the "Mappin" chain, in addition to the continued refurbishing and
remodelling of existing stores. We inaugurated 65 new Pao de Acucar stores,
thereby increasing our sales area by 41%, creating more than 8,000 jobs and
increasing our customer base by 48%. Since CBD became a listed company in 1995,
it has invested R$ 2.5 billion, opened 131 new stores and increased its sales
area by 145%. I would point out that this growth has been accompanied by ever
increasing efficiency and profitability. As compared with 1995, the company has
practically doubled its operating margin, reflecting the positive effects of
economies of scale and the investments made in training, technology, and
distribution logistics.
Early 1999 was also a crucial time for the Brazilian retail sector because of
the devaluation of the currency which took place in January. CBD went through a
period of intensive negotiations with its suppliers, maintaining its policy of
not accepting abusive increases in prices, thereby playing an important role in
controlling inflation in Brazil.
CBD took an important step in strengthening its position by admitting the French
company, Casino Guichard Perrachon (the Casino Group), as a strategic partner.
We are delighted to have the Casino Group as one of our shareholders. I would
stress that the benefits are not limited solely to the receipt of additional
funds for the company's growth. Both companies are profiting from a continuous
exchange of the best practices in their various areas of activity, from
synergies in worldwide purchasing and from strategies in the development of our
own brand names.
- --------------------------------------------------------------------------------
1
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
In 2000, we will continue to be active in the expansion of our operations and in
attaining even higher standards of quality. With an investment budget of R$ 700
million, we plan to open from 46 to 50 new stores, representing an increase in
sales area of between 15% and 20%, to remodel approximately 140 stores and to
create work for more than 8,000 new direct employees.
CBD is convinced that, counting on the support and confidence of our people,
which is the way we refer to the Pao de Acucar Group employees, of our
customers, shareholders and suppliers, the year 2000 will be marked by even
greater achievements, always in excess of our targets, and steps which will
prove us to be the most efficient retail chain in Brazil.
ABILIO DINIZ
- --------------------------------------------------------------------------------
2
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Discussion and Analysis of Results
Net Sales
Net sales for 1999 totaled R$ 5,803.2 million, which represented an increase of
32.4% over those for 1998. Sales for the year include sales of the Peralta chain
for the month of February 1999, the period during which their stores were
operated by CBD but under Peralta trade name.
Amongst the factors which contributed to the increase in net sales for 1999, the
following may be highlighted:
An increase of 41% in stores' sales area, as compared with the previous year,
reaching a total of 663,237m2 at the end of 1999;
The performance of the stores acquired from the "Peralta" and "Mogiano/Shibata"
chains, as well as of the stores leased from the "Paes Mendonca" and "Mappin"
chains;
The positive effect of continuously remodelling the "Pao de Acucar" and
"Barateiro" stores, and of ensuring that the type of store opened in each
neighborhood is appropriate considering the local purchasing power;
An increase of 48% in the company's customer base; there were 256 million
transactions in 1999. Amongst the factors responsible for this increase, we
would highlight the aforementioned remodelling of stores and also the
investments made in training employees and in improving service to customers.
Comparing the company's performance in 1999 with that of the sector as a whole,
using the "all stores" concept published by the Brazilian Association of
Supermarkets (ABRAS), CBD's sales in terms of constant purchasing power showed
an increase by 18.5% as compared with a reduction of 2.7% for the sector as a
whole, representing a significant increase in market share.
Using the "same stores" criterion, CBD showed an increase of 4.5% in net sales
as compared with 1998, even though sales for 1998 had shown an increase of 12.5%
over 1997. Supermarkets performed best, especially those under the name "Pao de
Acucar" which, in addition to a large proportion of food items in their sales
mix, serve a public which is less affected by unfavorable changes in the
economy. The operations of the "Extra" and "Eletro" divisions suffered as a
result of the weak sales of non-food products, especially of electric and
electronic products.
- --------------------------------------------------------------------------------
3
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
The Casino Group - CBD's new strategic partner
1999 was particularly important for CBD. The company announced the admission of
the Casino Group as its new strategic partner. This relationship was achieved by
the issue of debentures convertible into preferred shares, followed by a private
subscription of shares.
The whole of the convertible debentures issued (297 thousand, the equivalent of
6 billion nominative preferred shares) was acquired by the Casino Group,
representing additional funds for CBD of R$ 302.9 million. In addition, the
Casino Group subscribed 12.57 billion common shares and 12.57 million common
share bonuses, resulting in additional funds for the company of R$ 1,031.7
million; and acquired 4.8 billion preferred shares of a total of 4.9 billion
shares subscribed upon issue, resulting in further funds of R$ 214.6 million.
Total funds received by CBD in this first stage of the transaction amounted to
R$ 1,549.2 million.
CBD Operating Performance for 1999 (consolidated)
Gross profit for 1999 amounted to R$ 1,567.4 million as compared with R$ 1,189.1
million for the prior year, i.e. an increase by 31.8%. In spite of the fact that
hypermarkets now represent a larger proportion of the company's business, of the
growing competition in the sector and the period of intense negotiations with
suppliers as a result of the devaluation in January 1999, CBD showed a gross
profit of 27.0%, which was practically stable when compared with 27.1% for 1998.
The main factors which helped to maintain the gross margin during the period
were: 1) intense efforts on the control and prevention of shortages, reducing
the loss ratio from 2.0% in 1998 to 1.8%; 2) better price negotiations with
suppliers mainly as a result of the increase in volume, bonuses on the
inauguration of new stores and a greater centralization of purchases at the
Distribution Center and 3) the development of products with a high profit
margin.
Increase in EBITDA by 55.9%
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased by 55.9% in 1999, amounting to R$ 423.5 million, equal to 7.3% of net
sales as compared with 6.2% in the prior year. The EBITDA margin exceeded the
company's initial target of between 6% and 7%, basically due to the higher sales
volume and the maintenance of economies of scale, thereby diluting the effect of
fixed expenses.
- --------------------------------------------------------------------------------
4
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
The increase in purchases using EDI (Electronic Data Interchange), from 32% at
the end of 1998 to 48.7%, resulted in increased productivity with positive
effects on inventory management, reduction in levels of "stock out" (inventory
shortages), a reduction in breakages (losses) and more agile logistics.
Profitability
Net income for 1999 amounted to R$ 62.0 million, which was less than the R$ 159
million recorded in 1998. It was adversely affected by the devaluation of the
Real in relation to the U.S. dollar. Exchange losses amounted to R$ 210.3
million, of which R$ 152.2 million was taken to income in 1999, thereby
obscuring the gains achieved by increased sales and improved operating margins.
Investments
During 1999 CBD invested R$ 785 million in continuing the expansion program, the
modernization of stores and the improvement of management systems. The company
continues to focus its efforts on those locations where it already operates,
diluting fixed and administrative costs and achieving greater productivity in
its operations.
The principal investments made during the year included:
- - The acquisition of the "Peralta" supermarket chain in February 1999 - the
fourteenth largest company in the sector in terms of billings for 1998 (gross
invoicing amounted to R$ 326 million), with a sales area of 48,000 m2 and 38
stores in the State of Sao Paulo (37 supermarkets and one hypermarket). During
the first quarter of 1999, the company converted 23 of these into "Barateiro"
stores, 14 into "Pao de Acucar" stores; the hypermarket became an hypermarket
"Extra";
- - The leasing of 25 stores of the "Paes Mendonca" chain, through CBD's
subsidiary Novasoc. Paes Mendonca was the seventh largest company in the sector
in terms of billings for 1998 (gross invoicing amounted to R$ 829 million), with
a sales area of 119,120 m2, and 25 stores located as follows: 10 hypermarkets
(one in the State of Minas Gerais, two in the State of Sao Paulo and seven in
the State of Rio de Janeiro) and 15 supermarkets (three in the State of Sao
Paulo and 12 in the State of Rio de Janeiro). Of the 25 stores, 20 had been
refurbished and reinaugurated by December 31, 1999 (nine hypermarkets and 11
supermarkets). Three stores in the chain were closed down and one was converted
into a regional warehouse in Rio de Janeiro;
- - The purchase of the building housing the hypermarket located in Belo
Horizonte, formerly rented to the Paes Mendonca chain, which was owned by the
Usiminas Employees' Pension Fund (sales area of 12,480 m2);
- --------------------------------------------------------------------------------
5
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
- - The rental, for a period of twenty years, of the properties and equipment of
two stores previously operated by Mappin Lojas de Departamentos S.A. (Mappin) in
the city of Sao Paulo, one in the suburbs (Itaim) on Avenida Juscelino
Kubitschek and the other downtown on the Praca Ramos de Azevedo;
- - The purchase of the "Mogiano/Shibata" chain - six stores with a total sales
area of 18,752m2;
- - The inauguration of four new "Extra" hypermarkets in 1999, one in October
(Santo Andre, State of Sao Paulo), and three in November (Congonhas airport and
Praca Ramos de Azevedo, City of Sao Paulo and Fortaleza, State of Ceara), an
overall increase in sales area of 37,703 m2;
- - An increase in the capacity of the distribution center located on the Rodovia
Anhanguera, State of Sao Paulo, by the construction of a new warehouse,
alongside the existing one, with an area of 31,000 m2, to improve the handling
of non-food products and to make a larger area available in the present
warehouse for the distribution of fruit and vegetables, including "cross
docking" operations;
- - The construction of a warehouse in Rio de Janeiro, with an area of 27,000 m2,
to handle groceries, fruit and vegetables and "cross docking" for electronic
products;
- - The opening of a new Pao de Acucar store in Brasilia and another in Fortaleza;
- - The conversion of 26 stores from the "Pao de Acucar" to the "Barateiro" style;
- - The conversion of one "Barateiro" store into the "Extra" style;
- - The refurbishment of 13 "Pao de Acucar" stores and eight "Extra" hypermarkets;
- - The closing of three "Pao de Acucar" stores (one in Sao Paulo, one in
Fortaleza and one in the State of Piaui), of one "Barateiro" store in Sao Paulo
and of two "Eletro" division stores in Sao Paulo.
Investment Program for the Year 2000
On December 20, 1999, CBD announced its Investment Program for the year 2000,
which had been prepared and discussed at the meeting of the Administrative
Council held on December 7, 1999 and which was subsequently approved at the
Extraordinary General Meeting of shareholders held on December 23, 1999.
- --------------------------------------------------------------------------------
6
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
The main investments will be the opening of from 46 to 50 new stores and the
refurbishment of some 140 others; total investments will amount to approximately
R$ 700 million. The estimated increase in the company's sales area will be from
15% to 20% and approximately 8,000 new employees will be recruited.
CBD plans to open from 6 to 8 new "Extra" hypermarkets and to refurbish three
others. The company will also endeavor to acquire plots of land in strategic
locations to ensure the ongoing expansion of this division.
Priority will be given to the expansion of the "Barateiro" division, which is
expected to grow mainly in Greater Sao Paulo through the opening of some 30 new
stores. In addition, some 30 existing stores will be refurbished, as part of the
"New Face" program.
In the "Pao de Acucar" division, the emphasis will be on the remodelling stores;
it is hoped to cover some 59 points of sales during the year 2000. As far as
growth is concerned, CBD intends to open from two to four "Pao de Acucar" stores
during this period.
The "Eletro" division, an home appliances and electronic equipment chain, will
concentrate its efforts on the "Future Eletro", which will initially involve the
complete renewal of the layout of 48 stores. The division also plans to open
eight new stores.
The CBD investment program will also apply R$ 82 million (already included in
the total investment figure) to logistics, distribution, Information technology
and consulting services for development of new systems, in the continued search
for greater operating efficiency.
Investing in the Retail Future - INTERNET
For the convenience of its customers and to be ready for what will be one of the
main trends in the retail industry, CBD has been investing in e-business via
"Pao de Acucar Delivery" and "Eletro Online", the most recent way of purchasing
electric-electronic products. "Pao de Acucar Delivery" is a virtual supermarket,
currently available in some cities in the State of Sao Paulo and in Rio de
Janeiro and Brasilia, by which the customer has the convenience of shopping
without leaving home and access to a wide variety of products; some eight
thousand are offered on the electronic shelves at the same prices as those
charged in the stores.
- --------------------------------------------------------------------------------
7
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
"Eletro Online" was launched in December 1999 to satisfy the demand for home
appliances, electric-electronic products, furniture and equipment, which may be
purchased without leaving home, taking advantage of CBD's experience in this
segment of the market and the whole of its distribution capabilities. Currently,
CBD customers in the State of Sao Paulo are offered more than 1,000 products
which are displayed together with the related technical information. Personal
service is provided by salesmen, on-line, using communication software. "Eletro
Online" offers a variety of forms of payment for its products.
Aware of the importance of using advanced technologies to ensure its continued
presence in a competitive market and of accompanying the worldwide changes
resulting from the popularity and low cost of transactions via Internet
(E-Commerce), CBD has also been investing heavily in information technology and
management systems to reduce operating costs and to obtain greater productivity.
Having been a pioneer in the launching of a "Business-to-Consumer" system in
1995, denominated "Pao de Acucar Delivery", CBD is now investing approximately
R$ 6 million in a "Business-to-Supplier" system (B2S) which uses the internet
for the exchange of information electronically between the company and its
suppliers. This system will allow CBD and its suppliers to place purchase and
sale orders, issue and process invoices, issue payment advices and to exchange
information through the net, in real time, about sales and inventory levels,
facilitating and reducing costs in the supply chain.
The company's aim is to have all of its 6,000 suppliers (merchandise, services
and supplies) integrated with the system by the end of the year 2000. At
present, 48.7% of purchases are made electronically via EDI (Electronic Data
Interchange). The company believes that the EDI will probably be replaced by the
Internet as the interface in the "Business-to-Supplier" system because of the
reduced cost for the user, the fact that it is easier to operate and because of
the whole change in the nature of the relationships within the supply chain. For
a supplier to become integrated to the system, via Internet, he only needs a
microcomputer and a browser (access to the net). Pao de Acucar provides all the
support services needed to integrate suppliers. The system reduces differences
between purchase and sales orders, invoices issued and payment advices, as well
as the exchange of information, in real time, about sales and inventory levels
thereby eliminating manual procedures. In addition, it will speed up the
delivery and receipt of merchandise and inventory turnover, resulting in a
significant reduction in costs in the whole of the supply chain.
In 1999, CBD launched its intranet, which facilitates the distribution of
information to all employees. Through this portal it is possible to have access
to sites with information bulletins about each of the Business Units, to image
banks, to expense system applications and to the datawarehouse.
- --------------------------------------------------------------------------------
8
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Business Units
During 1999, CBD completed the implementation of management by Business Units.
This initiative resulted in changes in the operating, marketing and commercial
areas and the supply chain, ensuring more agility and better control over
actions taken, which, in their turn, resulted in gains in efficiency and better
means of appraising results.
In 1999, determined to develop and improve the concept of Business Units, CBD
created sub-committees with responsibility for developing the most efficient
processes for management, sales promotions, product lines, planning, plan
charts, clusterization and negotiation.
As a result of this restructuring, the company has brought all its internal
procedures into line with the "Pao de Acucar Way" philosophy, always being a
step ahead of the market, to ensure continuous growth with emphasis on the
customers' needs. The maturing of management by Business Units has resulted in
productivity gains, a clear view of the responsibilities of each Unit and, above
all, in the development of an "esprit de corps".
OUR PEOPLE, OUR CUSTOMERS AND THE COMMUNITY
Our People
As part of our policy of developing our people's potential, we invest in
training programs which ensure their professional development in an organized
manner. To this end, we encourage a continuous thoughtful exchange of new
concepts and ideas.
The "Managerial Self-Development Program - PROAUDE" is an example of this
stimulus to the exchange of knowledge and the development of intellectual
capital. Designed for executives, it is made up of over 120 training and
professional improvement programs. These are conducted by instructors, external
consultants and executives from different departments, who transmit knowledge
and the benefit of their own personal experience. More than 3,000 people took
part in the program in 1999.
- --------------------------------------------------------------------------------
9
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
To help the development of our executives' careers, we created the Talent Bank
whereby executives have the opportunity of displaying their professional skills
which may be applied when new opportunities arise within the company. We also
prepare employees to become new store managers using the "Trainee Training
Program". Last year, 400 new managers participated in training courses lasting
from 6 to 12 months.
In 1999, to help our people attain a better quality of life, we launched a "Live
Better" program based on the philosophy that the promotion of health and
education benefits human beings, both at work and in their private lives.
Amongst the steps taken we would highlight the following:
AlimentaPao: A program, coordinated by a professional nutritionist, to help our
people improve their eating habits. Employees are supplied with healthy meals
and have a series of well-balanced menus. This program will be introduced at the
stores and adapted to our people's needs, based on the same philosophy of
healthy nourishment.
PrevPao: A program for all employees and their relatives providing orientation
for the prevention and treatment of addiction. It counts on the support of our
social services department and that of specialized medical organizations. In
1999, information was spread by the distribution of educational booklets, videos
and internal publications and by lectures given by renowned professionals in the
field.
EducaPao - Telecourse 2000: This course offers employees the opportunity of
completing their primary and secondary education. In 1999, new classrooms were
established all over Brazil to attend to the needs of over 2,000 employees. In
1999, in partnership with the Bradesco Foundation and the National Service for
Industrial Training - Senai, which provide didactic and pedagogical assistance,
89% of the students completed their examinations successfully. In 2000, the
first group completing the course successfully will be awarded secondary
education certificates by the Ministry of Education, which will allow these
students to enter as candidates for any university in Brazil. We will continue
investing to allow the number of classrooms to be increased to be able to offer
courses to more than 4,000 new students.
Pao de Acucar Club: It is the first business-club in Brazil specialized in
training employees to participate in middle and long-distance running
competitions. The project "Running to the Future" was developed to motivate our
people to practice sports, offering realistic conditions to enable them to
compete. The Pao de Acucar Club also provides advice on physical fitness to some
600 employees, emphasizing the importance of medical examinations and proper
nutrition. In 1999, many of our athletes participated in major national and
international competitions such as the Sao Silvestre race in Sao Paulo and the
marathon in New York.
- --------------------------------------------------------------------------------
10
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Pao de Acucar Club - Academy: The academy is a place where our employees may
engage in physical training under the guidance of teachers and monitors. It has
sophisticated bodybuilding equipment, a room specially designed for
cardiovascular conditioning, gymnastic classes and also a squash court.
Pao de Acucar Institute: CBD has a sincere commitment towards the welfare of its
employees and the communities in which it operates. The Pao de Acucar Institute,
a non-profit organization, provides assistance to the children of company
employees and their communities, promoting social and economic development and
motivating the participation of our people. The Institute is managed following
four basic premises - learn, do, grow and share. Its aim is to make people aware
of their responsibilities as citizens and to give them the opportunity of
developing in an informed manner, complementing their formal education.
Pao de Acucar Country Club: The club, located in Sao Paulo, offers an ample
leisure infrastructure for our people. Another similar club will be inaugurated
in Santos, in the near future, to widen the range of leisure activities provided
for our employees and their relatives.
Our Customers
The Customers' Representation Group, under the responsibility of Vera
Giangrande, the Pao de Acucar Ombudsman, has played an important role in the
company's business since its was established in 1993. It looks after all the
matters raised by customers, passing them on to the Business Units for
consideration, thus improving their knowledge of the customers and improving
customer services.
The position of "Pao de Acucar Customer Advisor" was created to increase the
quality of service offered in the Pao de Acucar stores. As purchase consultants,
the Customer Advisors help customers to make intelligent and advantageous
purchases, not only with the intent of making economies, but also of satisfying
the real needs of each consumer.
In 1999, Pao de Acucar Kid's, the first educational supermarket in the world
specially developed for children, completed its first year of operations having
achieved great success with the public. Its main objective is to contribute to
the development of future generations, providing them with educational games and
fundamental information with respect to personal responsibility and promoting an
awareness of consumers' rights.
- --------------------------------------------------------------------------------
11
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Relationships with the Community
The year 1999 was marked by the success which CBD achieved, as a
company/citizen, by linking every bit of institutional marketing with the theme
"Proud of Being Brazilian". Approximately R$ 9.2 million was invested in
marketing connected with cultural, social, educational and sporting activities.
In 1999, Pao Music, a musical project sponsored by the Pao de Acucar Group with
the collaboration of the Municipal Secretariat for Culture, presented its
seventh series of musical events which, according to estimates made by the
organizers, attracted about 1 million people to Ibirapuera park, in the city of
Sao Paulo. The project benefits the community as a whole because it enables
citizens from all levels of society to watch concerts of popular music presented
by leading Brazilian and international musicians, free of charge.
Based on the Pao Music Project, the Pao de Acucar Group also presented fine
instrumental music in its stores thus consolidating the concept of "Pleasure
Shopping". During 1999, the project Pao Music Stores presented renowned
Brazilian instrumentalists, many of whom played, or still play, with the great
names in popular Brazilian music.
For the seventh consecutive year, the TAPA Group, one of the most important
repertory theater groups in Brazil, was sponsored by the Pao de Acucar group,
the first Brazilian company to provide permanent support to Brazilian theater.
The financial help provided by Pao de Acucar essentially covers the
administration of the group, allowing it to proceed with its theatrical
projects.
"Solidarity With Those Near You" was the name of the campaign of voluntary
donations conducted during 1999 in all the Pao de Acucar stores. The purpose of
this campaign was to raise funds for charitable organizations such as the Abrinq
Foundation, supporting childrens' rights and the Pro-Queimados Foundation, which
helps those with serious burns. In 2000, the campaign will re-enforce the idea
of voluntary assistance on a permanent basis. When making donations, customers
will receive Donation Certificates and will have the possibility of
accompanying, on the Internet, the amounts raised by the stores and the
charities which received these resources. The campaign represents transparent
citizenship within the reach of all Brazilians.
In 2000, the "Extra" network of stores will be responsible for carrying out the
"Solidarity Alphabetization Project", which will count with the support of the
Ministry of Culture and Education and of Unesco. Consumers will be able to adopt
a student and the resources will be used to establish classrooms all over
Brazil. Employees of the Pao de Acucar group will also participate in this
venture.
- --------------------------------------------------------------------------------
12
<PAGE>
[OBJECT OMITTED]
- --------------------------------------------------------------------------------
COMPANHIA BRASILEIRA DE DISTRIBUICAO
Since 1997, the Pao de Acucar group has sponsored the "Morumbi Children Project"
which provides help for 500 boys and girls, who live in poor areas in the
Morumbi suburb in the south zone of the city of Sao Paulo. By means of cultural
workshops, these children learn how to dance and to play percussion instruments.
In 1999, the support was intensified as the children participated in the opening
of all the shows of the Pao Music Project presented in the Ibirapuera park.
Closing remarks
The excellent performance achieved in 1999 resulted, not only from the
investments made in the opening of new stores, in technology and distribution,
but also those made in our people and in our relationships with the community.
We would like to thank all of our customers, employees, shareholders and
suppliers, who contribute to the company's success, and to express our firm
commitment to do our best to ensure that you all continue to participate in our
achievements in the year 2000.
MANAGEMENT
- --------------------------------------------------------------------------------
13
<PAGE>
(A free translation of the original report in Portuguese on financial statements
prepared in conformity with accounting principles determined by Brazilian
corporate legislation)
Companhia Brasileira de Distribuicao and Subsidiary Company
Financial Statements at December 31, 1999 and 1998 and
Report of Independent Accountants
<PAGE>
(A free translation of the original opinion in Portuguese expressed on financial
statements prepared in conformity with accounting principles determined by
Brazilian corporate legislation)
Report of Independent Accountants
February 7, 2000
To the Board of Directors and Shareholders
Companhia Brasileira de Distribuicao
1 We have audited the accompanying balance sheets of Companhia Brasileira
de Distribuicao as of December 31, 1999 and 1998 and the related
statements of income, of changes in shareholders' equity and of changes
in financial position for the years then ended, and the consolidated
balance sheets of Companhia Brasileira de Distribuicao and subsidiary
company as of December 31, 1999 and the related consolidated statements
of income and of changes in financial position for the year then ended.
These financial statements are the responsibility of companies
management. Our responsibility is to express an opinion on these
financial statements.
2 We conducted our audits in accordance with approved Brazilian auditing
standards which require that we perform the audits to obtain reasonable
assurance about whether the financial statements are fairly presented
in all material respects. Accordingly, our work included, among other
procedures: (a) planning our audits taking into consideration the
significance of balances, the volume of transactions and the accounting
and internal control systems of the companies, (b) examining, on a test
basis, evidence and records supporting the amounts and disclosures in
the financial statements and (c) assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
2
<PAGE>
February 7, 2000
Companhia Brasileira de Distribuicao
3 As mentioned in Note 9(a), based on Law 9816/99 and CVM Resolution
294/99, the Company deferred a portion of the net foreign currency
exchange losses on the loans and payables in foreign currency following
the Brazilian currency devaluation in the first quarter of 1999. Since
the accounting principles require that foreign exchange variations be
recorded in the results of the period in which they occur,
shareholders' equity at December 31, 1999 and net income for the year
then ended are overstated by R$ 58,208 thousand.
4 In our opinion, except for the effects of the deferral of foreign
exchange losses described in paragraph 3 above, the financial
statements audited by us present fairly, in all material respects, the
financial position of Companhia Brasileira de Distribuicao at December
31, 1999 and 1998 and the results of operations, the changes in
shareholders' equity and the changes in financial position for the
years then ended, and the financial position of Companhia Brasileira de
Distribuicao and subsidiary company at December 31, 1999, as well as
the consolidated results of operations and the changes in the
consolidated financial position for the year then ended, in conformity
with accounting principles determined by Brazilian corporate
legislation.
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Henrique Luz
Partner
Contador CRC 1RJ045789/T-2 "T" SP 002332
3
<PAGE>
<TABLE>
<CAPTION>
Companhia Brasileira de Distribuicao (A free translation of the original in Portuguese
and Subsidiary Company prepared in conformity with accounting principles
determined by Brazilian corporate legislation)
Balance Sheet at December 31
In thousands of reais
- ------------------------------------------------------------------------------------------------------------------------------------
Parent company Consolidated
---------------------------------- ----------------
Assets 1999 1998 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Current assets
Cash and banks 54,965 36,403 61,937
Financial investments 1,198,598 333,824 1,198,598
Trade accounts receivable 494,527 446,996 506,602
Inventories 475,711 344,967 538,197
Taxes recoverable 60,875 63,663 64,635
Advances to suppliers and employees 18,078 9,435 18,082
Prepaid expenses 15,693 5,779 16,979
Other 11,462 15,740 13,565
---------------- ---------------- ----------------
2,329,909 1,256,807 2,418,595
---------------- ---------------- ----------------
Long-term receivables
Trade accounts receivable 2,636 4,951 97,755
Deferred income tax 29,076 18,584 29,448
Loan to subsidiary companies 225,755 1,721 5,108
Judicial deposits 50,731 34,089 50,745
Prepaid expenses 4,055 5,728 4,055
---------------- ---------------- ----------------
312,253 65,073 187,111
---------------- ---------------- ----------------
Permanent assets
Investments 228,814 5,622 228,814
Property and equipment 1,780,379 1,389,822 1,889,441
Deferred charges 393,708 307,155 430,259
---------------- ---------------- ----------------
2,402,901 1,702,599 2,548,514
---------------- ---------------- ----------------
5,045,063 3,024,479 5,154,220
================ ================ ================
Parent company Consolidated
---------------------------------- ----------------
Liabilities and shareholders' equity 1999 1998 1999
---------------- ---------------- ----------------
Current liabilities
Suppliers 747,531 604,323 792,420
Payable on purchase of assets 111,148 44,502 111,148
Financing 425,196 347,891 477,991
Debentures 16,483 15,813 16,483
Salaries and payroll charges 59,880 57,515 64,409
Taxes on sales 20,973 28,304 25,496
Tax installments 10,684 9,567 10,684
Dividends proposed 15,957 5,013 15,957
Interest attributed to own capital and withholding income tax 40,000
Loan from parent company and other 57,138 24,629 59,559
---------------- ---------------- ----------------
1,464,990 1,177,557 1,574,147
---------------- ---------------- ----------------
Long-term liabilities
Financing 341,345 417,816 341,345
Debentures 285,159 314,860 285,159
Provision for contingencies 264,150 104,912 264,150
Payable on purchase of assets 54,127 3,504 54,127
Income tax and tax installments 9,469 34,099 9,469
---------------- ---------------- ----------------
954,250 875,191 954,250
---------------- ---------------- ----------------
Capitalizable funds - debentures 310,387 310,387
---------------- ----------------
Shareholders' equity
Capital 1,491,118 537,730 1,491,118
Capital reserves 348,292 4,050 348,292
Revenue reserves 476,026 429,951 476,026
---------------- ---------------- ----------------
2,315,436 971,731 2,315,436
---------------- ---------------- ----------------
2,625,823 971,731 2,625,823
---------------- ---------------- ----------------
5,045,063 3,024,479 5,154,220
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Companhia Brasileira de Distribuicao (A free translation of the original
and Subsidiary Company in Portuguese prepared in conformity
with accounting principles determined
Statement of Income by Brazilian corporate legislation)
Years Ended December 31
In thousands of reais
- ------------------------------------------------------------------------------------------------------------------------
Parent company Consolidated
----------------------------------- ----------------
1999 1998 1999
---------------- --------------- ----------------
<S> <C> <C> <C>
Gross sales 6,558,743 5,133,462 6,943,176
Taxes on sales (1,009,844) (749,949) (1,139,967)
---------------- --------------- ----------------
Net sales 5,548,899 4,383,513 5,803,209
Cost of sales (4,059,521) (3,194,373) (4,235,793)
---------------- --------------- ----------------
Gross profit 1,489,378 1,189,140 1,567,416
Operating expenses (income)
Selling 851,176 726,590 912,292
General and administrative 230,668 190,835 231,648
Depreciation and amortization 138,365 102,669 142,698
Taxes and charges 30,496 21,268 31,944
Financial expenses
Interest attributed to own capital 40,000
Foreign exchange losses (Note 9(a)) 152,205 152,205
Other 392,590 215,401 412,847
Financial income (370,365) (263,193) (378,912)
Loss on investment in subsidiary companies 2,806 1,630
Equity in the results of subsidiary companies 1 420
---------------- --------------- ----------------
1,427,942 1,033,990 1,506,352
---------------- --------------- ----------------
Operating profit 61,436 155,150 61,064
Non-operating results 2,210 3,089 2,210
---------------- ---------------- ----------------
Income before income tax and reversal of interest on own capital 63,646 158,239 63,274
Income tax (Note 13)
Current (13,330) (27,877) (13,330)
Deferred 11,716 (11,358) 12,088
---------------- ---------------- ----------------
Income before reversal of interest atributed to own capital 62,032 119,004 62,032
Reversal of interest attributed to own capital 40,000
---------------- ---------------- ----------------
Net income for the year 62,032 159,004 62,032
================ ================ ================
Net income for the year per thousand shares - R$ 0.64 2.04 0.64
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Companhia Brasileira de Distribuicao (A free translation of the original
and Subsidiary Company in Portuguese prepared in conformity
with accounting principles determined
Statement of Changes in Shareholders' Equity by Brazilian corporate legislation)
In thousands of reais
- ---------------------------------------------------------------------------------------------------------------
Capital reserves
------------------------------
Fiscal
investment Share
Capital incentive warrants
---------- ------------ ----------------
<S> <C> <C> <C>
At December 31, 1997 537,730 4,050
Appropriation of reserve
Realization of reserve
Net income for the year
Legal reserve
Dividends proposed (R$ 0.064 per thousand shares)
Interest attributed to own capital
Retention of profits reserve
---------- ------------ ----------------
At December 31, 1998 537,730 4,050
Capital increase
Company merger (Note 14(b)(i)) 2,744
Conversion of debentures (Note 11(b)) 46,179
Subscription (Note 14(b)(iii) and (iv)) 904,465 344,242
Appropriation of reserve
Realization of reserve
Net income for the year
Legal reserve
Dividends proposed (Note 14(d))
Retention of profits reserve
---------- ------------ ----------------
At December 31, 1999 1,491,118 4,050 344,242
========== ============ ================
</TABLE>
<TABLE>
<CAPTION>
Revenue reserves
------------------------------------------------
Unrealized Retention Retained
Legal Expansion profits of profits earnings Total
---------- ---------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1997 23,722 142,726 38,458 111,054 857,740
Appropriation of reserve 92,164 (92,164)
Realization of reserve (4,997) 4,997
Net income for the year 159,004 159,004
Legal reserve 7,950 (7,950)
Dividends proposed (R$ 0.064 per thousand shares) (5,013) (5,013)
Interest attributed to own capital (40,000) (40,000)
Retention of profits reserve 111,038 (111,038)
---------- ---------- ------------ ---------- -------- ---------
At December 31, 1998 31,672 234,890 33,461 129,928 971,731
Capital increase
Company merger (Note 14(b)(i)) 2,744
Conversion of debentures (Note 11(b)) 46,179
Subscription (Note 14(b)(iii) and (iv)) 1,248,707
Appropriation of reserve 99,935 (99,935)
Realization of reserve (4,898) 4,898
Net income for the year 62,032 62,032
Legal reserve 3,101 (3,101)
Dividends proposed (Note 14(d)) (15,957) (15,957)
Retention of profits reserve 47,872 (47,872)
---------- ---------- ------------ ---------- -------- ---------
At December 31, 1999 34,773 334,825 28,563 77,865 2,315,436
========== ========== ============ ========== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Companhia Brasileira de Distribuicao (A free translation of the original
and Subsidiary Company in Portuguese prepared in conformity
with accounting principles determined
Statement of Changes in Financial Position by Brazilian corporate legislation)
Years Ended December 31
In thousands of reais
- -------------------------------------------------------------------------------------------------------------------
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- --------------- ------------------
Financial resources were provided by
<S> <C> <C> <C>
Operations
Net income for the year 62,032 159,004 62,032
Expenses not affecting working capital
Depreciation and amortization 138,365 102,669 142,698
Amortization of the deferred exchange losses 13,431 13,431
Income tax 1,614 39,235 1,242
Residual value of property and equipment disposals 4,616 14,970 4,617
Interest and monetary variations on long-term items 68,906 39,866 68,906
Equity in the results of subsidiary companies 1 420
--------------- --------------- ------------------
288,965 356,164 292,926
Shareholders
Capital increase 1,248,707 1,248,707
Third parties
Increase in long-term liabilities and capitalizable funds
Financings 103,842 285,081 103,842
Debentures 297,000 200,000 297,000
Contingencies and other 168,864 17,680 168,864
Payables on purchase of assets 88,212 2,780 88,212
Reduction in long-term receivables 7,387
Transfers to current assets 3,987 30,821 3,987
Merger of subsidiaries' net assets 2,744 70,928 2,744
--------------- --------------- ------------------
Total funds provided 2,202,321 963,454 2,213,669
--------------- --------------- ------------------
Financial resources were used for
Dividends paid and proposed 15,957 5,013 15,957
Interest attributed to own capital 40,000
Reduction in long-term receivables 52,189 52,189
Transfer to current liabilities 350,170 112,725 350,170
Long-term receivables 213,260 21,173 95,133
Permanent assets
Investments 225,876 346,571 225,876
Property and equipment 512,125 557,252 623,797
Deferred charges 47,075 26,560 85,349
--------------- --------------- ------------------
Total funds used 1,416,652 1,109,294 1,448,471
--------------- --------------- ------------------
Increase (decrease) in working capital 785,669 (145,840) 765,198
=============== =============== ==================
</TABLE>
7
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Statement of Changes in Financial Position
Years Ended December 31
In thousands of reais (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- --------------- ------------------
Changes in working capital
<S> <C> <C> <C>
Current assets
At the end of the year 2,329,909 1,256,807 2,418,595
At the beginning of the year 1,256,807 1,034,082 1,256,807
--------------- --------------- ------------------
1,073,102 222,725 1,161,788
--------------- --------------- ------------------
Current liabilities
At the end of the year 1,464,990 1,177,557 1,574,147
At the beginning of the year 1,177,557 808,992 1,177,557
--------------- --------------- ------------------
287,433 368,565 396,590
--------------- --------------- ------------------
Increase (decrease) in working capital 785,669 (145,840) 765,198
=============== =============== ==================
</TABLE>
8
<PAGE>
(A free translation of the original notes in Portuguese to financial statements
prepared in conformity with accounting principles determined by Brazilian
corporate legislation)
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- --------------------------------------------------------------------------------
1 Operations
The main activities of Companhia Brasileira de Distribuicao (the "Company")
include the retailing of food, apparel, electronic goods and other products from
its chain of hypermarkets, supermarkets and specialized stores and departments
primarily under the tradenames "Pao de Acucar", "Extra", "Barateiro" and
"Eletro". At December 31, 1999, the Company operated 349 stores (December 31,
1998 - 284 stores), of which 329 are own stores and 20 stores managed by its
subsidiary Novasoc Comercial Ltda ("Novasoc").
As part of its Expansion Plan, the Company acquired on February 1, 1999 a
controlling interest in Peralta Comercial e Importadora S.A., ("Peralta") and as
from March 1, 1999 the operations carried out by such subsidiary have been
managed by the Company.
On May 10, 1999, the Company acquired 10% of the quotas of Novasoc which on
April 30, 1999 had signed an agreement to lease 25 stores of the Paes Mendonca
S.A. chain. Paes Mendonca S.A. will continue to exist as a separate corporate
entity and is contractually bound and is fully and solely responsible for the
obligations incurred before the date of the lease contract (Note 7(b)).
In September 1999, through a private subscription of shares (Note 14(b)(iii)),
the Company admitted a new strategic partner, the Casino Guichard Perrachon
Group, which acquired an interest representing 23.99% of the common shares and
22.24% of the total capital of the Company.
Consistent with the Expansion Plan, the Company's operations in 1999 increased
as a consequence of the transactions described in Note 7.
9
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
2 Significant Accounting Policies
The financial statements were prepared in conformity with accounting principles
prescribed by Brazilian corporate legislation.
(a) Determination of net income
Net income is determined on the accrual basis of accounting.
(b) Current assets and long-term receivables
Inventories purchased by the distribution centers are valued at average cost,
and those purchased directly by stores at the last purchase price which
approximates the "First In, First Out - FIFO basis", including storage and
handling costs, all lower than realizable amounts.
The remaining assets are stated at cost including, when applicable, accrued
income and monetary variations, net of provisions to reflect realizable amounts.
Deferred income tax on temporary differences is set up at 25%.
(c) Permanent assets
Permanent assets are shown at cost including restatements up to December 31,
1995, combined with the following:
. Investments in subsidiaries are shown at cost of acquisition or, when
applicable, on the equity accounting method (Note 7);
10
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
. Depreciation of property and equipment is calculated on the straight-line
method at the rates listed in Note 8 which reflect the economic useful
lives of the assets; and
. Amortization of purchase premiums are based on expected future
profitability; other-goodwill, deferred foreign exchange losses and
pre-operating expenses are amortized over the periods detailed in Notes 7
and 9.
(d) Current and long-term liabilities and capitalizable funds
These are stated at known or estimated amounts, including, when applicable,
accrued charges and monetary and exchange variations.
(e) Consolidated financial statements
The consolidated financial statements were prepared in conformity with the
consolidation accounting principles prescribed by corporate legislation and
Brazilian Securities Commission (CVM) Instruction 247, and include the financial
statements of the Company and its subsidiary Novasoc.
The investments account, intercompany asset and liability balances, and income
and expenses and unrealized profits arising from operations among consolidated
companies were eliminated from the consolidation. The Company's subsidiaries
are:
(i) Novasoc
In accordance with the articles of association of Novasoc, the company's results
may be distributed disproportionately to the interest held by quotaholders. At
the meeting held on December 30, 1999, the quotaholders decided that the Company
is to participate in 99.98% of results for 1999.
11
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
The consolidated financial statements are being presented to include Novasoc,
after any necessary eliminations.
(ii) Other subsidiary companies
In conformity with CVM Instruction 247, the financial statements prepared by the
wholly-owned subsidiaries Peralta, Nirpec Alimentos S.A. ("Nirpec"),
Supermercados Mogi S.A. ("Mogi") and Stratosfera Administradora S/C Ltda.
("Stratosfera") were not consolidated with the financial statements prepared by
the Company since management intends to decommission these companies, the
operations of which have been carried out by the Company.
3 Financial Investments
The majority of financial investments have interest rate swaps. At December 31,
1999, these operations amounted to R$ 1,029,842 (1998 - R$ 259,093).
The remaining investments, amounting to R$ 168,756 (1998 - R$ 74,731) are in
investment funds, with portfolios comprising mainly Bank Deposit Certificates
(CDB), Export Notes, Financial Treasury Bills (LFT) and National Treasury Bills
(LTN).
12
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4 Trade Accounts Receivable
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- -------------- ------------------
<S> <C> <C> <C>
Current
Customer credit financing 156,364 150,575 162,384
Installment sales (post-dated checks) 102,955 134,039 109,638
Credit card 181,701 150,642 214,345
Sales vouchers and others 30,137 32,262 37,080
Accounts receivable - Novasoc 39,503
Allowance for doubtful accounts (16,133) (20,522) (16,845)
--------------- -------------- ------------------
494,527 446,996 506,602
=============== ============== ==================
Long term
Customer credit financing 2,636 4,951 2,640
Accounts receivable - Paes Mendonca 95,115
--------------- -------------- ------------------
2,636 4,951 97,755
=============== ============== ==================
</TABLE>
Customer credit financings accrue prefixed financial charges for payment over
periods of up to 24 months.
Installment sales represent post-dated checks with pre-fixed interest of 6.0%
per month (1998 - 5.4% per month) for settlement in up to 90 days.
Credit card sales relate to sales of goods through co-branded third party credit
cards.
Accounts receivables from Novasoc relates to sales of products by the parent
company to supply the Novasoc stores.
13
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Accounts receivables - Paes Mendonca - relates mainly to payment by Novasoc of
certain of Paes Mendonca's liabilities (mainly suppliers) under the lease
agreements with Paes Mendonca which will be reimbursed through the end of the
lease term, including financial charges. As required by contractual provisions,
guarantees given comprise location rights for stores currently operated by
Novasoc.
The allowance for doubtful accounts is estimated based on average prior-years'
effective losses complemented by management's estimate of probable future
losses:
<TABLE>
<CAPTION>
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- -------------- ------------------
<S> <C> <C> <C>
Customer credit financing (14,180) (18,143) (14,892)
Installment sales (post-dated checks) (1,953) (2,379) (1,953)
--------------- -------------- ------------------
--------------- --------------
(16,133) (20,522) (16,845)
=============== ============== ==================
</TABLE>
The policies for establishing this allowance, by credit category, are:
. Customer credit financing
Provision: Based on historical loss indices during the last 12 months.
Write-off: Credits are written-off from accounts receivable against the
allowance, when 180 days overdue.
. Installment sales (post-dated checks)
14
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Provision: Based on average historical indices of checks returned and recoveries
during the last 12 months.
Write-off: Checks are deposited on their respective maturity dates. If checks
are returned by the bank and after all legal procedures have been exhausted,
they are charged-off against the allowance.
. Credit card and sales vouchers
No allowance for doubtful accounts is established for credit cards and sales
vouchers, since the credit risk are substantially assumed by third parties.
<TABLE>
<CAPTION>
5 Inventories
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- -------------- ------------------
<S> <C> <C> <C>
Hypermarkets, supermarkets and stores 341,305 231,813 396,621
Distribution centers 134,406 113,154 141,576
--------------- -------------- ------------------
475,711 344,967 538,197
=============== ============== ==================
</TABLE>
15
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Taxes Recoverable
Parent company Consolidated
-------------------------------- ------------------
1999 1998 1999
--------------- -------------- ------------------
<S> <C> <C> <C>
Taxes recoverable (i) 29,602 25,730 33,362
Prepaid income tax 14,525 14,525
PIS and FINSOCIAL recoverable 10,702 31,087 10,702
Income tax on financial investments 6,046 6,846 6,046
--------------- -------------- ------------------
60,875 63,663 64,635
=============== ============== ==================
</TABLE>
(i) Relate principally to inflation - indexed income tax and social contribution
credits arising on the merger of Rede Barateiro de Supermercados S.A.
<TABLE>
<CAPTION>
7 Investments
(a) Information on the investments at December 31, 1999
Novasoc Peralta Nirpec Mogi Stratosfera
------------ -------------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Shares/quotas held 1,000 477,233 5,925,844 1,900,291 122,999
Holding - % 10 99.99 99.99 99.99 99.99
Capital - R$ 10 1,335 5,926 7,400 123
Shareholders' equity (net deficit) - R$ (1,167) (6,696) 20,320 7,256 123
Net income (loss) for the year - R$ (1,177) (1,630) - (144) -
</TABLE>
16
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(b) Movement on investments
Novasoc Peralta Nirpec Mogi Stratosfera Barateiro
---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1997
Additions
Cost 123 58,355
Goodwill 4,127 222,517
Equity in the results of subsidiaries (480)
Amortization of goodwill
Transfers upon merger
Property and equipment (292)
Deferred charges (222,517)
Other net assets (57,583)
Results
---------- ------------ ------------ ------------ ------------ ------------
At December 31, 1998 4,250
Additions
Cost 1 20,320 6,938
Goodwill 148,559 24,680 25,378
Equity in results (1)
Amortization of goodwill (1,729) (150) (160) (52)
Disposals
---------- ------------ ------------ ------------ ------------ ------------
At December 31, 1999 146,830 44,850 32,156 4,198
---------- ------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Millo's Pat
Comercial MCP Comercial
Carajas S.A. S/C Ltda. Ltda.
("Millo's") ("MCP") ("Pat") Other Total
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
At December 31, 1997 10,842 823 11,665
Additions
Cost 1,651 13,536 549 74,214
Goodwill 34,217 11,496 272,357
Equity in the results of subsidiaries 60 (420)
Amortization of goodwill (2,386) (124) (1,098) (3,608)
Transfers upon merger
Property and equipment (13,275) (13,567)
Deferred charges (31,830) (9,744) (264,091)
Other net assets (1,625) (11,693) (70,901)
Results (27) (27)
------------ ------------ ----------- ------------ ------------
At December 31, 1998 1,372 5,622
Additions
Cost 27,259
Goodwill 198,617
Equity in results (1)
Amortization of goodwill (2,091)
Disposals (592) (592)
------------ ------------ ----------- ------------ ------------
At December 31, 1999 780 228,814
------------ ------------ ----------- ------------ ------------
</TABLE>
17
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Peralta
On February 1, 1999, the Company assumed a controlling interest in Peralta via
subscription of common shares. As from March 1, 1999, the Company has been
managing the Peralta operations.
The difference between the company's assets and liabilities on the date of
acquisition (R$ 5,066) as well as its loss for the year (R$ 1,630) are recorded
in the Company's liabilities.
Novasoc
On May 10, 1999, the Company acquired 10% of the quotas of Novasoc, which on
April 30, 1999 had leased 25 stores of the Paes Mendonca S.A. chain, which will
continue to exist as a separate corporate entity and is fully and solely
contractually bound for any and all tax, labor, social security and commercial
liabilities of any nature which occurred before the date of the lease. The
contract term is for five years and may be extended for a further two
consecutive periods of five years. Leased stores have been restructured and
refurbished, and by December 31, 1999, 20 stores had been reopened.
During the term of the contract, the shareholders of Paes Mendonca S.A. may not
dispose of their shares without prior and express consent of Novasoc.
As prescribed by the articles of association, the results of Novasoc shall be
distributed disproportionately to the interests held in the company. At the
meeting held on December 30, 1999, the quotaholders agreed that the Company
shall have a 99.98% participation in results for 1999. The subsidiary company's
net deficit is recorded in provision for losses on investments.
Nirpec
On October 15, 1999, the Company acquired 100% of the shares of Nirpec, which
owns a property located in the city of Sao Paulo.
18
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Mogi
In November 1999, the Company acquired the Mogi chain, comprised of three
supermarkets and one hypermarket located in the region of Mogi das Cruzes, in
the State of Sao Paulo.
Also, the operating assets and the goodwill of Supermercados Mogiano Ltda. were
acquired, comprising one hypermarket and one supermarket, located in the same
region. The purchase consideration of R$ 8,640 includes store location goodwill
of R$ 6,743 recorded in deferred charges (Note 9).
Barateiro, Millo's e MCP
The Company acquired the shares/quotas of these companies in the first semester
of 1998 and on September 28, 1998, merged them with the Company.
Stratosfera
The controlling interest in this company was acquired on December 3, 1998.
The goodwill paid on acquisition of these companies is based on appraisal
reports issued by independent valuers who took into consideration mainly the
expected future profitability and appreciation of property and equipment. Such
goodwill is being amortized based on the profitability of the stores acquired
over a period not exceeding 10 years. Upon merger, the portion of goodwill
relating to expected future profitability was transferred to deferred charges
(Note 9).
19
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(c) Balances and transactions with related parties
------------------------------------------------------------------------------
Pao de Acucar Peninsula Peralta,
S.A. Industria Participacoes Mogi and
e Comercio S.A. Novasoc other
------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Balances
Dividends proposed and/or interest
attributed to own capital (net) (8,485) (1,202)
Accounts receivable 39,503
Loan receivable (payable) (24,183) 220,647 5,108
Other accounts receivable (payable) 11
Transactions
Services rendered and rents 11,604
Sales, net 180,112 10,408
Advertising
Financial income, net 1,037 16,713 5,275
Purchase (sale) of fixed assets (16,893)
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
Total Total
----------------- -----------------
<S> <C> <C>
Balances
Dividends proposed and/or interest
attributed to own capital (net) (9,687) (27,936)
Accounts receivable 39,503
Loan receivable (payable) 201,572 1,721
Other accounts receivable (payable) 11 (977)
Transactions
Services rendered and rents 11,604 (13,503)
Sales, net 190,520 39,199
Advertising 1,108
Financial income, net 23,025 909
Purchase (sale) of fixed assets (16,893)
</TABLE>
Transactions with related parties are carried out at normal market prices and
conditions. The loan agreements between the parent company and its subsidiaries
bear financial charges comparable to market rates. The sales of goods relate to
the supply of the stores, mainly Novasoc, by the Company's distribution center
and were made at cost.
20
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8 Property and Equipment
Parent company
----------------------------------------------------------------------------
1999 1998
---------------------------------------------------------- ---------------
Accumulated
Cost depreciation Net Net
----------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Land 489,416 489,416 369,616
Building 737,466 95,001 642,465 537,064
Refurbishments and improvements 430,808 169,257 261,551 192,433
Equipment 360,120 181,643 178,477 131,020
Installations 166,634 62,244 104,390 60,640
Furniture and fixtures 56,252 38,962 17,290 12,322
Vehicles 18,639 6,300 12,339 10,515
Construction in progress 65,850 65,850 69,693
Other 10,888 2,287 8,601 6,519
----------------- -------------------- ---------------- ---------------
2,336,073 555,694 1,780,379 1,389,822
================= ==================== ================ ===============
</TABLE>
<TABLE>
<CAPTION>
Consolidated
-------------------------------------------------------------------------------
1999
-------------------------------------------------------------------------------
Annual
Accumulated depreciation
Cost depreciation Net rate - %
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Land 489,416 489,416
Building 737,466 95,001 642,465 4
Refurbishments and improvements 471,459 170,073 301,386 10 to 33
Equipment 373,551 182,305 191,246 10 to 20
Installations 182,564 63,257 119,307 20
Furniture and fixtures 60,439 39,051 21,388 10
Vehicles 19,079 6,330 12,749 20
Construction in progress 102,880 102,880
Other 10,891 2,287 8,604
----------------- ------------------ ------------------
2,447,745 558,304 1,889,441
================= ================== ==================
</TABLE>
21
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Property and equipment additions amounted to R$ 512,125 (1998 - R$ 557,252) and
R$ 623,797 in the consolidated financial statements. These additions relate
basically to the construction of new stores, expanding the distribution center,
remodeling of various stores, new equipment, as well as the purchase of land for
expansion of activities acquisition of assets of the companies acquired and
interest capitalization. These investments were partially financed and the
corresponding liabilities are classified as a payable on purchase of assets,
amounting to R$ 165,275 (1998 - R$ 48,006). Such account includes also the
balances payable on the purchase of Peralta and Mogi chains. Most of these
liabilities are subject to financial charges based on the General Market Price
Index (IGP-M), plus market interest.
In 1999, the Company capitalized the interest and financial charges arising from
loans obtained from third parties in the amount of R$ 43,418 (1998 - R$ 13,492),
during the process of construction and refurbishing of stores. The appropriation
of interest and financial charges to results is consistent with the depreciation
terms of the financed assets.
Construction in progress refers to remodeling of various stores owned by the
Company and subsidiary company and construction of new stores.
22
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9 Deferred Charges
Parent company
---------------------------------------------------------------------------------------
Foreign Pre-operating
Goodwill exchange expenses
(Note 7(b)) losses and other Subtotal
------------------ ------------------ --------------------- -----------------------
<S> <C> <C> <C> <C>
At December 31, 1997 32,007 32,007
Additions 26,560 26,560
Transferred from investments 264,091 264,091
Amortization (15,503) (15,503)
------------------ ------------------ --------------------- -----------------------
At December 31, 1998 307,155 307,155
Additions 7,243 71,639 39,832 118,714
Amortization (17,882) (13,431) (848) (32,161)
------------------ ------------------ --------------------- -----------------------
At December 31, 1999 296,516 58,208 38,984 393,708
================== ================== ===================== =======================
</TABLE>
<TABLE>
<CAPTION>
Subsidiary
company Consolidated
--------------------- --------------------
Pre-operating
expenses
and other Total
--------------------- --------------------
<S> <C> <C>
At December 31, 1997 32,007
Additions 26,560
Transferred from investments 264,091
Amortization (15,503)
--------------------- --------------------
At December 31, 1998 307,155
Additions 38,274 156,988
Amortization (1,723) (33,884)
--------------------- --------------------
At December 31, 1999 36,551 430,259
</TABLE>
23
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(a) Foreign exchange losses
As permitted by Provisional Measure 1818/99 (enacted into Federal Law 9816/99 on
August 23, 1999) and CVM Resolution 294/99, the Company opted to defer part of
the net foreign exchange losses in the first quarter of 1999. The net loss
determined at the end of the first quarter of 1999 resulting from the
devaluation of the Brazilian currency amounted to R$ 210,413 (recorded in
financial expenses - foreign exchange), and R$ 71,639 was deferred for
amortization over a period not exceeding four years in deferred charges.
(b) Pre-operating expenses and other
Pre-operating expenses, including R$ 38,274 relating to Novasoc are deferred up
to the opening/reopening of the stores (including personnel, training and rental
expenses), when they are then amortize over a five-year term.
Expenses include leases of various assets located in third party points of
sales, along with the assets owned by the former Mappin stores at Praca Ramos de
Azevedo and Itaim, city of Sao Paulo, to be amortized over a period not
exceeding ten years.
24
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 Financing
Parent company Consolidated
--------------------------- ------------------
Annual interest and charges 1999 1998 1999
----------------------------------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Current
Local currency
BNDES (i) Exchange variation + 3.5% 17,424 11,358 17,424
(i) TJLP + 3.5% 63,110 39,708 63,110
(ii) TJLP + 3.5% 1,284 1,284
------------- ------------- ------------------
81,818 51,066 81,818
Working capital 20.8% (1998 - 23.4%) 1,611 1,609 1,611
Foreign currency
Working capital
Third parties 8.1% to 36.6% (1998 - Exchange
variation and 5.7% to 15.1%) 308,829 276,744 361,624
Imports LIBOR + 0.5% to 3.0%
(1998 - LIBOR + 0.7% to 2.9%) 32,938 18,472 32,938
------------- ------------- ------------------
425,196 347,891 477,991
============= ============= ==================
Long-term
Local currency
BNDES (i) Exchange variation + 3.5% 47,179 44,699 47,179
(i) TJLP + 3.5% 184,775 232,692 184,775
(ii) TJLP + 3.5% 102,972 102,972
------------- ------------- -----------------
334,926 277,391 334,926
Foreign currency
Expansion
Third parties 9.8% to 12.1% (1998 - Exchange
variation and 5.7% to 13.0%) 6,419 139,845 6,419
Imports LIBOR + 0.7% to 2.9% 580
------------- ------------- ------------------
341,345 417,816 341,345
============= ============= ==================
</TABLE>
25
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
Long-term financing, falls due as follows:
1999 1998
------------------ ------------------
2000 203,828
2001 103,280 71,250
2002 96,791 67,326
2003 84,235 58,240
2004 onwards 57,039 17,172
------------------ ------------------
341,345 417,816
================== ==================
BNDES
(i) Contract signed on October 23, 1997
The Company raised funds totaling R$ 317,397 which bear interest of 3.5% per
annum above the TJLP - Federal Government Long-term Interest Rate (83% of the
line of credit) or above a BNDES basket of foreign currencies (17% of the line
of credit) which is being accrued monthly. Payments will be in 60 monthly
installments after a 12-month grace period.
(ii) Contract signed on November 16, 1999
The Company signed a new contract to open a line of credit with BNDES, the
principal of which amounts to R$ 130,000, and up to December 31, 1999 the
Company had drawn down R$ 103,130. Such loans bear interest of 3.5% p.a. above
the TJLP which is appropriated monthly. Payments will be in 60 monthly
installments after a 12 month grace period.
26
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
These contracts require that the Company maintain certain levels of
capitalization and current liquidity and use the funds in the Company's
investment program for the opening of stores and purchase of equipment. The
parent company offered a joint responsibility surety until the loan is settled.
Other financings
Working capital financings represent mainly funds raised with fixed financial
charges for direct customer credit operations, mainly customer credit and
post-dated checks.
As from October 1999, the Company signed swap contracts to mitigate foreign
exchange variations on foreign currency financings (Note 15).
Financings are guaranteed by promissory notes and shareholders' sureties.
27
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
11 Debentures
Annual interest
charges 1999 1998
---------------------- ------------------ ------------------
<S> <C> <C> <C>
Current
1st. issue - 1st. series TJLP + 8% 2,921 3,021
2nd. issue - 1st. series IGP-M + 13% 11,642 11,193
2nd. series IGP-M + 13% 1,920 1,599
------------------ ------------------
16,483 15,813
================== ==================
Long-term
1st. issue - 1st. series TJLP + 8% 89,937 115,292
2nd. issue - 1st. series IGP-M + 13% 165,274 174,622
2nd. series IGP-M + 13% 29,948 24,946
------------------ ------------------
285,159 314,860
================== ==================
Capitalizable Funds - Debentures
3rd. issue - 1st. series IGP-M + 13% 310,387
==================
</TABLE>
(a) 3rd. issue
At the Extraordinary General Meeting held on August 9, 1999, the Administrative
Council approved the third issue of debentures up to the limit of R$ 600,000,
represented by an indeterminate number of series, and public placement of
debentures, containing the following main characteristics:
28
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(i) date of beginning of issue and distribution: September 1, 1999;
(ii) form and type: nominative, book-entry and subordinated guarantee
debentures;
(iii) nominal value: debentures will have a unit nominal value of R$ 1,000.00
on the date of issue;
(iv) number: 1st. series of 297,000 debentures convertible into preferred
shares;
(v) premium: debentures were issued with a premium of 54.69%;
(vi) subscription price: nominal value restated based on the General Market
Price Index - IGP-M, plus interest of 13% p.a.;
(vii) remuneration: IGP-M plus interest of 13% p.a. Interest will be paid on
maturity dates;
(viii) maturity date of the debentures: September 1, 2000;
(ix) convertibility of the 1st. and 3rd. issue: such debentures may be
converted into preferred shares of the Company at their nominal value,
including the remuneration described above, at any time, as from the date
of subscription, at the discretion of the debentureholders. The number of
nominative preferred shares issued by the Company resulting from the
conversion of each debenture will be 20,202 shares.
The Company's controlling shareholders assigned the right to subscribe
the 3rd. issue 1st. series debentures to the Casino Guichard Perrachon
Group. These resources are restricted and destined for capital increases
as per contractual provisions contained in a shareholders' agreement and
are therefore recorded as Capitalizable Funds Debentures.
29
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(b) Debentures converted into preferred shares
Number of debentures
-------------------------------------------
Number of Share
converted price per
Date of December preferred thousand Capital
Issue conversion Issue Converted 31, 1999 shares shares (R$) increase
- ----------- ----------- -------------- ------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1st. issue 100,000
06.30.99 (50) 1,857,067 32.48368 60
11.23.99 (9,754) 360,730,714 34.92365 12,598
11.26.99 (4,950) 181,908,322 35.18024 6,400
-------------- ------------- -------------- -------------- -------------
Total 1st.
issue 100,000 (14,754) 85,246 544,496,103 19,058
-------------- ------------- -------------- -------------- -------------
2nd. issue 175,000
06.30.99 (2,000) 66,666,000 32.29152 2,153
08.05.99 (50) 1,666,650 32.98505 55
08.10.99 (3,210) 106,998,930 33.06698 3,538
08.17.99 (590) 19,666,470 33.18202 653
10.15.99 (100) 3,333,300 34.13921 114
11.09.99 (30) 999,990 34.64999 35
12.08.99 (50) 1,666,650 35.50787 59
12.14.99 (346) 11,533,218 35.67056 411
12.15.99 (3,000) 99,999,000 34.94327 3,494
12.15.99 (2,888) 96,265,704 35.31900 3,400
12.15.99 (3,000) 99,999,000 35.45381 3,545
12.15.99 (4,146) 138,198,618 35.69775 4,934
12.17.99 (3,030) 100,998,990 35.75219 3,611
12.22.99 (935) 31,166,355 35.88865 1,119
-------------- ------------- -------------- -------------- -------------
Total 2nd.
issue 175,000 (23,375) 151,625 779,158,875 27,121
-------------- ------------- -------------- -------------- -------------
Total conversions in 1999 1,323,654,978 46,179
============== =============
</TABLE>
At the Extraordinary General Meeting held on August 9, 1999, the shareholders
decided not to use the remaining balance relating to the 2nd issue of
debentures.
Expenses on placement of debentures comprising mainly commissions were recorded
in prepaid expenses and are appropriated according to the maturity of the
debentures.
30
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12 Provision for Contingencies
Parent company
---------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
National Institute of Social Security (INSS) 78,898
Income tax 83,937 58,075
Social Contribution on Revenues (COFINS) and
Social Integration Program (PIS) 78,628 14,835
Social Investment Fund (FINSOCIAL) 9,035 8,267
Labor claims and other 13,652 23,735
------------------ ------------------
264,150 104,912
================== ==================
</TABLE>
The Company obtained a preliminary injunction to offset the amounts paid in
excess as a contribution to the Labor Accident Insurance (SAT) and Education
Allowance against payables of the same nature to the INSS on the part of the
Company. The amounts not paid have been maintained in the provision for
contingencies - INSS until this matter is finally decided. Abiding by an order
of the court, the Company has been acquiring Public Debt Securities placed in
judicial escrow in order to have the right to offset the Education Allowance
amounts considered by it as having been paid in excess.
Supported by a preliminary injunction, the Company considers, when determining
income tax payable, the effects of depreciation of fixed assets relating to the
indexation differences arising from the "Summer Plan" (economic stabilization
plan). The additional depreciation charges amounted to approximately R$ 134,034,
and were fully used as a deduction in determining the income tax calculation
basis. However, conservatively, the Company has not recognized in the financial
statements the reduction in the tax obligation that results from this offset.
31
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
The Company obtained a favorable decision in the lower courts not to apply the
disposition of Law 9718/98. The Company has been authorized through an injuction
to pay COFINS under the terms of Complementary Law 70/91 (2% on revenues) and
PIS under Law 9715/98 (0.65% on revenues) as from February 1, 1999. However, the
difference in the amounts determined pursuant to the disposition of Law 9718/98
is, conservatively, being provided.
<TABLE>
<CAPTION>
13 Income Tax
Liabilities
------------------------------------
Assets Currency Long-term
--------------- ---------------- -----------------
<S> <C> <C> <C>
At December 31, 1997 31,191 5,737 9,590
Write-offs/reversal - net (12,607)
Payment/realization (5,737) (1,249)
Income tax at source - interest on own capital 6,000
--------------- ---------------- -----------------
At December 31, 1998 18,584 6,000 8,341
Increase - net 10,492
Payment/realization (6,000) (1,224)
--------------- ---------------- -----------------
At December 31, 1999 - parent company 29,076 7,117
Increase - net - subsidiary company 372
--------------- ---------------- -----------------
At December 31, 1999 - consolidated 29,448 7,117
=============== ================ =================
</TABLE>
32
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
14 Shareholders' Equity
(a) Capital and share rights
Subscribed and paid-up capital comprises 97,261,273,693 (1998 - 78,116,125,080)
nominative shares with no nominal value, of which 62,858,754,615 (1998 -
50,066,371,760) are common with voting rights and 34,402,519,078 (1998 -
28,049,753,320) are preferred shares.
At the Extraordinary General Meeting held on August 9, 1999, the Directors'
proposal for amendment to article 6 of the Company's by-laws was approved, and
the authorized capital limit was increased from 100,000,000,000 shares to
150,000,000,000 shares. Also, approval was given to the proposal for issuing
common shares following a decision made by the Administrative Council, without
need for amendment of the by-laws, within the authorized capital limit.
Preferred shares have no voting right but have the same rights and benefits as
the common shares, besides the priority assured in the by-laws in the event of a
return of capital and priority to receive a minimum annual dividend of R$ 0.15
(15 cents) per thousand shares on a non-cumulative basis.
All shareholders are entitled to annual dividends and/or interest attributed to
own capital of not less than 25% of net income calculated in conformity with
Brazilian corporate legislation.
33
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(b) Capital increases
(i) Mergers of companies
At the Extraordinary General Meeting on February 26, 1999, the shareholders
approved the merger of the net equity of Pao de Acucar Publicidade Ltda. The new
shares issued (220,632 thousand common shares) accrue rights for all of 1999.
The net equity of the merged company reflected in the financial statements as of
January 31, 1999 (base date for the merger) and detailed in the appraisal report
of independent valuers is as follows:
<TABLE>
<CAPTION>
Assets Liabilities
<S> <C> <C> <C>
Current assets 598 Current liabilities 1,305
Long-term receivables 2,691 Long-term liabilities 161
Permanent assets 921 Shareholders' equity 2,744
------------------ ------------------
4,210 4,210
================== ==================
</TABLE>
(ii) Conversion of debentures
A capital increase of R$ 46,179 (for 1,323,655 thousand preferred shares) was
approved relating to the conversion of debentures (Note 11(b)) into preferred
book-entry shares with no nominal value.
34
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(iii) Private share subscription
At the meeting held on August 9 and September 17, 1999, the Administrative
Council approved issue for private subscription of 12,571,750,933 common shares
and 7,029,569,097 preferred shares, all book-entry with no nominal value, and
12,571,750,884 common shares and 4,890,160,780 preferred shares were approved.
The common shares entitle subscribers to the same rights and have the same
characteristics as the shares already existing of the same type and are entitled
to the dividends of the year in which they were issued, calculated pro rata
temporis as from the date of capital subscription. The price of issue was fixed
at R$ 54.75 per thousand common shares and R$ 43.80 per thousand preferred
shares.
Movement on capital and number of shares
<TABLE>
<CAPTION>
Number of shares - thousand
----------------------------------------
Contributed
capital Preferred Common
------------------- -------------------- -----------------
<S> <C> <C> <C>
At December 31, 1998 537,730 28,049,753 50,066,372
Capital increase upon
company merger 2,744 220,632
Conversion of debentures
1st. Issue, 1st. series 19,058 544,496
2nd. Issue, 1st. series 27,121 779,159
Subscription
Private subscription
Common shares 688,303 12,571,751
Preferred shares 214,189 4,890,161
Stock option plan
(Note 14(e)) 1,973 138,950
------------------- -------------------- -----------------
At December 31, 1999 1,491,118 34,402,519 62,858,755
=================== ==================== =================
</TABLE>
35
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(iv) Private warrants subscription
At the meetings held on August 9 and September 17, 1999, the Administrative
Council approved a private subscription through the issue of 12,571,751 common
share warrants at the issue price of R$ 27.375 and 7,029,569 preferred share
warrants at the issue price of R$ 21.90, and 12,571,751 common share warrants
and 4,127 preferred share warrants were approved. Each warrant shall entitle the
holder to the subscription of 1,000 shares, that may be converted as from August
31, 2001 over a period of two to three years. The common share subscription
warrants were paid up in the same proportion as shares of paid-up share capital.
<TABLE>
<CAPTION>
Number of shares - 000
-------------------------------------
Capital
reserve Preferred Common
----------------- ----------------- -----------------
<S> <C> <C> <C>
Private subscription
Common share warrants 344,152 12,571,751
Preferred share warrants 90 4,127
----------------- ----------------- -----------------
At December 31, 1999 344,242 4,127 12,571,751
================= ================= =================
</TABLE>
(c) Revenue reserves
(i) Legal reserve: Amount appropriated to reserve equivalent to 5% of net
income for the year before any appropriations, and limited to 20% of
capital.
(ii) Expansion reserve: Amounts approved by the shareholders to maintain
resources to finance additional capital investments and working capital.
(iii) Unrealized profits reserve: This reserve is being realized in proportion
to the realization of the permanent assets which generated the related
credit balance.
(iv) Retention of profits: The balance of this reserve at December 31, 1999 is
to be designated by the Shareholders' General Meeting for appropriation.
36
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(d) Dividends proposed and/or interest on own capital
Management proposed, for approval at the Annual General Meeting, dividends to be
distributed and calculated as follows:
Net income for the year 62,032
Unrealized profits reserve 4,898
Legal reserve (3,101)
------------------
Dividends calculation basis 63,829
==================
Minimum mandatory dividend (25%) 15,957
==================
Shares which are entitled to a full dividend will receive R$ 0.188 per thousand
shares, totaling R$ 15,002, and shares which are entitled to a pro rata temporis
dividend, as described in Note 14(b)(iii), will receive R$ 0.05469 per thousand
shares, amounting to R$ 955.
Dividends to be distributed will be appropriated from 1999 net income.
(e) Preferred stock option plan
At the Annual and Extraordinary General Meeting held on April 28, 1997, the
preferred stock option plan for Company directors and employees became
effective, and the first options were granted relating to 1996.
The exercise price for each lot of shares is, at a minimum, 60% of the weighted
average of the preferred shares traded in the week the option is granted. The
percentage may vary for each beneficiary or series.
Exercise dates are as follows: (i) 50% in the last month of the third year
following the option grant date and (ii) 50% in the last month of the fifth year
following the option grant date, with the condition that a certain number of
shares will be restricted as to sale until the date of retirement of the
beneficiary.
Shares from options exercised have the same rights as granted to the other
shareholders. The
37
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
management of this plan was entrusted to a committee appointed
by the Administrative Council.
Information on the stock option plan is summarized as follows:
Preferred
shares
(in thousands)
------------------
I Series - May 9, 1997 278,600
II Series - December 22, 1997 373,200
III Series - December 18, 1998 1,007,074
------------------
Options granted 1,658,874
Options not granted (i) 3,400,000
------------------
Global volume of the plan 5,058,874
Exercised option
I Series - December 15, 1999 (ii) (138,950)
------------------
Current volume of the plan 4,919,924
==================
(i) At a meeting held on December 7, 1999, the Administratice Council approved
a new issue of a further 3.4 billion shares to the stock option plan. The
new series have yet to be determined.
38
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
(ii) At a meeting held on December 15, 1999, the Administrative Council approved
a capital increase of R$ 1,973 (138,950 thousand preferred shares) relating
to the exercise of the stock option plan.
15 Financial Instruments
(a) Risk management
The Company and subsidiary company engage in operations involving financial
instruments, which are recorded in balance sheet accounts for the purpose of
meeting their own needs, as well as to reduce exposure to market, currency and
interest rate risks. These risks are managed by defining operating strategies,
establishing control systems and determining position limits.
(b) Market value
The estimated market values of the financial instruments at December 31, 1999
and 1998 as detailed in Notes 3 and 10, are not significantly different from
those recorded in the financial statements.
39
<PAGE>
Companhia Brasileira de Distribuicao
and Subsidiary Company
Notes to the Financial Statements
at December 31, 1999 and 1998
All amounts in thousands of reais unless otherwise indicated
- -------------------------------------------------------------------------------
16 Insurance Coverage
Insurance coverage at December 31, 1999 is considered sufficient by management
to cover possible losses and is summarized as follows:
<TABLE>
<CAPTION>
Amount
Insured assets Risks covered insured
- -------------------------------------- --------------------------- ------------------
<S> <C> <C>
Property, equipment and inventories Fire and various risks 2,175,956
Cash Theft 40,591
</TABLE>
Additionally, the Company holds a specific policy covering civil
responsibilities.
* * *
40
