COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO  

Corporate Taxpayer’s Registry (CNPJ/MF) number 47.508.411/0001-56

Company Number at the Commercial Registry (NIRE) 35.300.089.901

São Paulo, March 5, 2014.

MANAGEMENT PROPOSALS FOR THE ANNUAL AND SPECIAL SHAREHOLDERS MEETING TO BE HELD ON APRIL 16, 2014

Content

At Annual Shareholders Meeting:

AT ANNUAL SHAREHOLDERS MEETING

Proposal for Designation of Net Income for the Fiscal Year  

(Article 9º of CVM Instruction 481/2009)

To the Shareholders: The Management of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (“Company”) hereby proposes to the Annual and Special Shareholders meeting of 2014, in compliance with Annex 9-1-II of CVM Instruction 481/2009, the hereunder:

1.            Net income for the fiscal year

The Company’s Net Income on December 31, 2013 totals R$ 1,052,495,220.41. From this amount, R$ 52,624,761.02 shall be designated for Legal Reserve.

2.            Overall amount and the value per share of the dividends, including advanced dividends and interest on the Company capital already declared

3.            Percentage of net income distributed for the exercise

Management proposes the distribution of twenty-five percent (25%) of the Company’s net income, provided for in Article 36 of the Company Bylaws.

4.            Overall amount and the amount per share of the dividends distributed based on income from previous fiscal years

There is no proposal for distribution of dividends based on income from previous years.

5.            Inform, upon deduction of advanced dividends and interest on the Company capital already declared:

a.            The gross amount of the dividend and interests on the Company capital, separately, per share of each type and class

The amount of the proposed dividends is R$ 0.5353953451 per common share and R$ 0.5889348796 per preferred share, upon deduction of the amount of the advanced dividends already distributed. There was no declaration of interests on the Company capital.

b.            Terms and deadline for payment of dividends and interest on the Company capital

As permitted by the Bylaws, the Management proposes that the dividends proposed for the Annual Shareholders’ Meeting shall be paid within up to sixty (60) days following its approval at the Meeting.

c.            Possible adjustment and interests on the dividends and interests on the Company capital

The dividends shall be paid within the above mentioned deadline, without any interest between the date of its declaration and the date of its actual payment.

d.            Date of declaration of payment of the dividends and interests on the Company capital considered for identification of the shareholders entitled to be paid

6.            Declaration of dividends or interests on the Company capital based on income calculated on six-month balance sheets or balance sheets for shorter periods

There is no declaration of dividends or interests on the Company capital based on income calculated on six-month balance sheets or balance sheets for shorter periods.

7.            Comparative table indicating the following amounts per share of each type and class:

8.            Designation of income for the legal reserve

a.            Identify the amount designed for the legal reserve

Pursuant to Law 6,404/76, the management proposes the designation of R$ 52,624,761.02 to legal reserve.

b.            Provide details as concerns the calculation of the legal reserve

9.            If the Company has preferred shares entitled to fixed or minimum dividends

a.         Describe the calculation of the fixed or minimum dividends

The owners of the Company’s preferred shares have priority on the payment of an annual minimum dividend in the amount of R$ 0.08 per one (1) share, non-cumulative. In addition, to each preferred share, a dividend ten percent (10%) higher than that granted to each common share is granted, in accordance with Section 17, Paragraph 1, of Law 6,404/76, as amended by Law 10,303/01, including, for purposes of this calculation, in the sum of the total dividend paid to the preferred shares, the amount paid as minimum annual dividend.

b.         Inform whether the income for the fiscal year is sufficient for full payment of the fixed or minimum dividends

Yes, it is sufficient.

c.         Inform whether an unpaid part is cumulative

There is no unpaid part of fixed or minimum dividends.

d.         Identify the overall amount of the fixed or minimum dividends to be paid to each class of preferred shares

e.         Identify the fixed or minimum dividends to be paid per preferred share of each class

10.          With respect to the mandatory dividend

a.            Describe the calculation stipulated by the Bylaws

In accordance with Article 36, Paragraph 1 of the Company Bylaws, the shareholders shall have the right to receive, in each fiscal year, as dividends, a mandatory percentage of twenty-five percent (25%) on the net income for the fiscal year, with the following adjustments: (a) the deduction of the amounts designed for, in the fiscal year, legal reserve and contingencies reserve; and (b) the addition of the amounts resulting from reversion, in the fiscal year, of contingencies reserve previously composed.

The payment of dividend stipulated under the above mentioned terms may be limited to the amount of net income for the fiscal year in which it was realized under the law, provided that the difference be registered as reserve of income to be realized.

The earnings registered under the reserve of income to be realized, whenever realized and if they are not absorbed by losses incurred in subsequent fiscal years, shall be added to the first dividend declared following realization.

b.            Inform whether it is being fully paid

The mandatory dividend is being fully paid.

c.         Inform the amount occasionally retained

Not applicable.

11.          Retained mandatory dividend as a result of the financial situation of the Company

Not applicable.

12.          Designation of income for contingencies reserve

There is no designation of income for the contingencies reserve.

13.          Designation of income for the reserve of income to be realized

Not applicable.

14.          Designation of income for reserves stipulated by the Bylaws

a          Describe the Articles contained in the Bylaws providing for the reserve

The reserve for expansion is provided for by Article 36, Paragraph 2 of the Company Bylaws, to wit:

“Article 36 – (...) Paragraph 2 – The Reserve for Expansion is created and has the purpose of ensuring funds to finance additional applications of fixed and working capital and shall be formed with up to one hundred percent (100%) of the remaining net income after the designations stipulated by letters "a" [legal reserve], "b" [contingencies reserve], and "c" [dividend] of item IV, in that the total amount of such reserve may not exceed the amount of the Company’s Capital Stock.”

b.         Identify the amount designated for the reserve

The Management proposes the retained earnings designated for the reserve for expansion in the amount of R$ 674,912,560.09

c.         Describe the calculation

The amount designated for the reserve for expansion is equivalent to 90% of the Adjusted Net Income for the fiscal year ended on December 31, 2013. The Adjusted Income is calculated as follows:

15.          Retained earnings provided for by capital budgeting

a.         Identify the amount of retained earnings

Management proposes that earnings be retained in the amount of R$ 749,902,844.54, in that R$ 674,912,560.09 for the reserve for expansion (under Article 36, Paragraph 2 of the Company Bylaws) and R$ 74,990,284.45 based on capital budgeting under Section 196, Paragraph 2 of Law 6,404/76.

b.         Provide a copy of the capital budgeting

See the proposal for Capital Budgeting on page 10. 

16.          Designation of the income for the tax incentives reserve

Not applicable.

São Paulo, March 5^th, 2014

BOARD OF OFFICERS

Capital Budgeting

To the Shareholders: In accordance with Section 196 of Law 6,404/76, the Management of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO does hereby:

1.         Inform the designation of the Retained Earnings for 2012 (Reserve for Expansion and Capital Budgeting) as approved at the 2013 Annual and Special Shareholders’ Meeting, as follows:

(i) The Company’s Investment Plan for 2013 amounted to R$ 2,022,000,000.00. Nonetheless, the investment made by the Company totaled R$ 1,849,856,119.00, that is R$ 825,220,242.24 for the opening of new stores and purchase of land, R$ 477,452,106.90 for refurbishment of stores and R$ 547,183,769.86 for infrastructure (IT, Logistics and others); and

(ii) The Reserve for Expansion, in the amount of R$ 674,069,284.02, and the Budgeting Capital, in the amount of R$ 74,896,587.11, approved at the 2013 Annual and Special Shareholders’ Meeting were used to support those investments. The difference was borne both with funds from the very Company, resulting from the Company’s operational activity, and with funds raised from third parties.

2.                       Propose that retention of R$ 749,902,844.54 from the earnings of 2013 in order to borne the Investment Plan of 2014, to be approved by the Board of Directors and by the shareholders, in that R$ 674,912,560.09  to the Reserve for Expansion (Article 35 – Paragraph 2 of the Company Bylaws) and R$ 74,990,284.45 to the Capital Budgeting (Section 196 of Law 6,404/76).

This is our proposal.

São Paulo, March 5^th, 2014.

THE BOARD OF OFFICERS

Comments of the Management about the Company’s financial situation

Item 10 of the Reference Form, CVM Rule 480/2009 of December 7, 2009 (“ICVM 480”) 

10.1      General financial and equity conditions 

general financial and equity conditions

Currently, the Group is in the pursuit of improving operational efficiency and capturing synergies among its various businesses, and it is confident that in 2014 it will find a more favorable scenario to advance its strategy of competitive pricing, strong organic growth and market share gain in all its businesses.

Despite the challenging macroeconomic environment, GPA demonstrated the capacity and agility to adjust its strategy to market conditions and deliver strong results accompanied by market share gains in its various business segments. In recent years, we have delivered growth and positive results, strengthening GPA as a group poised for sustainable and structured growth going forward, which is an important differential in the retail business.

In 2013, we consolidated our multi-format model with a diversified yet convergent business portfolio, while expanding our competitive advantages. We have definitively selected the multi-channel approach as our strategic priority. For this, we implemented a series of initiatives focused on integration, capturing synergies and creative solutions to make the buying experience increasingly more practical, convenient and attractive for our customers. As a result, we identified opportunities that enable us to act in a coordinated fashion to offer the best buying solution, while ensuring the alignment of processes, synergy gains, financial discipline and consequently lower costs.

We believe that the Company presents the financial and equity conditions required for the execution of its plans for capital expansion and investment, while also meeting all liquidity requirements and complying with short and long-term obligations. Even so, these conditions are subject to certain events beyond our control, such as the stability and behavior of the Brazilian economy.

Our understanding of the Group’s financial and equity conditions is based on the following economic and financial fundamentals, considering our consolidated financial statements for the fiscal year ended December 31, 2013: 

• we recorded gross revenue of R$64.405 billion and net sales of R$57.730 billion, up 12.5% and 13.4%, respectively, in relation to 2012. The upturn in 2013 resulted from the Company’s competitive pricing and organic growth approach, which led us to a higher growth in relation to the figure recorded in 2012, of 8.6% and 9.3% in gross revenue and net revenue, respectively, when compared to 2011;

• our gross profit was R$15.026 billion and our gross margin stood at 26.0%, an increase of 9.2% in relation to 2012, whose gross profit totaled R$13.757 billion, accompanied by a gross margin of 27.0%. This decrease in gross margin is due to the Group’s investments in competitiveness;

• our total operating expenses accounted for 19.6% of net sales, and in absolute terms totaled R$11.291 billion, 11.4% up over 2012, whose amount of R$10.136 accounted for 19.9% of net revenue;

• our Adjusted EBITDA by nonrecurring expenses, classified as “Other Operating Revenue (Expenses)" came to R$4.487 billion, with an EBITDA margin of 7.8%, an increase of 0.5 p.p. in relation to the adjusted EBITDA margin of 7.3% recorded in 2012.

• our net financial result was a negative R$1.193 billion, remaining at the same level as in 2012, and as a ratio of net revenue it represented 2.1%, while in 2012 this ratio stood at 2.3%;

• our net income amounted to R$1.396 billion and our net margin stood at 2.4%, 20.7% up on the R$1.156 billion recorded in 2012;

• our net debt totaled R$1.102 billion, a sharp reduction over the R$3.406 billion recorded in 2012, chiefly due to higher cash flow in the period, mainly leveraged by the efforts to improve working capital. The public offer of Units composed of one (1) common share and two (2) preferred shares issued by Varejo also strengthened GPA’s financial structure, helping to reduce its net debt position at year-end 2013;

• we posted shareholders' equity of R$12.712 billion, 14.9% up in relation to the R$11.068 billion recorded in the previous year.

(a)         capital structure and eventual redemption of shares

Below is the Group’s capital structure for the periods mentioned, considering (i) as a percentage of equity, the amount resulting from total shareholders’ equity divided by total liabilities and shareholders’ equity, and (ii) as a percentage of debt capital, the amount resulting from the sum of current and noncurrent liabilities divided by total liabilities and shareholders' equity:

·         On December 31, 2013, the Group’s capital structure was composed of 33.4% of equity and 66.6% of debt capital.

·         On December 31, 2012, the Group’s capital structure was composed of 31.8% of equity and 68.2% of debt capital.

·         On December 31, 2011, the Group’s capital structure was composed of 30.2% of equity and 69.8% of debt capital.

We understand that Company’s current capital structure, mainly measured by the Net Debt/EBITDA ratio of 0.29x, presents a significant reduction in leverage when compared with the levels recorded in 2012 and 2011, as the table below shows:

There is no assumption of share redemption. 

(b)         ability to pay financial commitments

The Company’s executive officers believe that the cash flow and the funds currently available show that the Group is fully able to pay all its short- and long-term financial commitments.

On December 31, 2013, our EBITDA was R$3.814 billion, and our net financial result was a negative R$1.193 billion. Therefore, EBITDA reported an interest coverage ratio of 3.2 times in relation to Company’s financial expenses, and cash exceeded gross debt.

The results presented in the paragraph above show that our cash flow and our available funds make us able to fulfill our short and long-term financial commitments, which reinforces the Group’s historical capacity to meet all commitments undertaken.

(c)         sources of financing for working capital and investments in non-current assets utilized by the Group

The Company raised funds in 2013, 2012 and 2011 through: (A) financial agreements that represent: (i) Brazilian reais denominated loans with obligation to payment principal and DI (interbank deposit)-pegged interest rates; (ii) foreign currency-denominated loans, which are immediately and fully “swapped,” with Brazilian reais denominated payment obligations with DI-pegged interest rates, through swap operations; and (iii) loans with the Brazilian Economic and Social Development Bank (“BNDES”), partially denominated in reais and partially pegged to a foreign currency basket (also “swapped” with payment obligations denominated in reais with DI- pegged interest rates), plus annual interest rates; (B) funding on capital markets, through the issue of debentures; and (C) cash generation through its operations.

In 2013, 2012 and 2011, we had no difficulties in obtaining loans or refinancing its current debt. For more information on agreements entered into by the Group and the BNDES, see “Relevant Loan and Financing Agreements,” item "f,” below.

(d)         sources of financing for working capital and investments in non-current assets that the Group plans to utilize to cover liquidity deficiencies

In the opinion of the Company’s executive officers, the funding sources used in the fiscal years ended December 31, 2013, 2012 and 2011 are adequate, and will continue to be used by the Group as sources for raising working capital and investments in non-current assets.

(e)         debt levels and debt characteristics

i.          Relevant loans and financing agreements

The tables below present the Company’s debt with financial institutions and the funding transactions performed on capital markets on December 31, 2013, 2012 and 2011.

Debt breakdown (including Loans and Financing, Debentures and payment vouchers – consumer finance – CDCI).

In R$ thousand

Maturity schedule of loans and financing recognized as non-current liabilities.

Direct consumer credit – CDCI

The operations of the consumer finance intervention correspond to the financing activities of installment sales to customers by means of a financial institution. Sales can be paid in up to 24 months, however, are substantially less than 12 months. The average financial charges are 110.8% of the CDI (111.40% in December 31, 2012). In these contracts, the subsidiary retains substantially all the risks and benefits related to loans financed, guaranteed by assignment of receivables. 

Financing of working capital, swap and direct consumer credit - CDCI

In R$ thousand

Swap contracts

In terms of foreign currency, we use swap transactions to exchange liabilities denominated in U.S. dollars and fixed interest rates for Real pegged to CDI floating interest rates. The average weighted annual CDI rate was 8.06% in 2013 (8.40% in 2012 and 11.60% in 2011).

BNDES

Our credit line with the Brazilian Development Bank (BNDES) is subject to the indexation based on the long-term interest rate - TJLP, plus spread, resulting in the final interest rate or fixed interest rate.

Financing is paid in monthly installments after a grace period, as mentioned below.

The Group cannot offer any assets as collateral for loans to other parties without the BNDES’ prior consent and it must comply with certain financial debt covenants, calculated based on the consolidated balance sheet, as follows: (i) maintenance of a capitalization ratio (equity/total assets) equal to or greater than 0.30 and (ii) EBITDA/net debt equal to or greater than 0.35. The Group controls and monitors these ratios, and on December 31, 2013 it was in compliance with the established parameters.

In R$ thousand

Debentures

In R$ thousand

The following table shows a breakdown of debentures issued on December 31, 2013 and on December 31, 2012:

In R$ thousand

Financial Lease Obligations

Financial lease agreements, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are allocated between finance charges and reduction of leasing liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the income statement. Leased assets are depreciated over their estimated useful life or lease term, whichever is shorter.

Lease agreements classified as financial lease are listed below:

Receivable Securitization Fund – Pão de Açúcar (“PAFIDC” and “Globex FIDC”)

GPA maintained, until December of 2012, an operation of transfer of part of its trade receivables of credit cards and services for two receivables securitization fund constituted for such purposes, Globex FIDC and PAFIDC.  

The fund’s capital structure on December 31, 2011 was composed by 10,295 senior quotas held by third parties (“Banco Rabobank”) in the amount of R$1,235,901, which represent 89.90% of the fund’s equity and 2,864 subordinated quotas held by the Company (CBD) and its subsidiaries in the amount of R$138,849, which represent 10.10% of the fund’s equity.

The capital structure of Globex FIDC on December 31, 2011 was composed by 11,666 quotas held by third parties (capital markets investors) in the amount of R$1.184.522, which represent 85.00% of the fund’s equity, and 1,910 subordinated quotas held by Via Varejo in the amount of R$209,068, which represent 15.00% of the fund’s equity.

At the time of the transfer operation of part of receivables, the subordinated quotas had the risk to absorb possible losses on receivables transferred and losses attributed to the fund. Holders of the senior quotas had no right of indemnification against other assets of the Company and its subsidiaries in the event of default of the amounts owed by customers.

Funds Restructuring in 2012

Due to changes in the receivable discount policy, changes in the receivable funds were negotiated, as follows:

a) PAFIDC: Alteration on Regulation of PAFIDC was approved on the General Quotaholder Meeting of December 21, 2012, in which the Company no longer holds any participation or obligation in the fund. The fund had its corporate name changed, answering by the denomination of Multicredit FIDC and no longer holds, on an exclusive basis, receivable from GPA.

As GPA holds no further participation on the current MultiCredit FIDC and no further obligation of absorbing any of the risks expected on Fund’s assets, the Fund are no longer consolidated since December 26, 2012.

b) Globex FIDC: The discount operations with credit cards by means of Globex FIDC were terminated on December 14, 2012, under mutual agreement between senior quotaholders.

As a result, the senior quotas were paid to Fund’s quotaholders and on December 31, 2012, it remained in the Fund a cash balance amount and subordinates quotas obligations to be settled, concluding the process of Fund’s settlement, during the first quarter of 2013.

ii.          Other long-term relations with financial institutions

Currently, the Company has no relevant long-term relations with financial institutions referring to the fiscal years ended December 31, 2013, 2012 and 2011, in addition to those already described in item 10.1 (f) of this Reference Form.

iii.         Level of subordination in Company’s debt

GPA’s executive officers inform that the level of subordination in the Group’s debt is determined in accordance with the provisions set forth by the legislation in force.

iv.           Restrictions imposed on indebtedness limits and new debt contracting, the distribution of dividends, the sale of assets, the issue of new securities and the sale of controlling interest

Agreements signed with the BNDES are subject to “Provisions Applicable to BNDES Agreements”, which borrowers of the BNDES, without previous authorization from BNDES cannot: (i) give priority to other credits; (ii) amortize shares; (iii) issue debentures above the established limit; (iv) issue profit-sharing bonds; (v) taking on new debt; and (vi) sell or encumber permanent assets, in observance to the reservations expressly mentioned in the “Provisions Applicable to BNDES Agreements.”

The debentures issued are not convertible into shares and hold no guarantee, exception made to subsidiaries issuance, in which the Company grants suretyship.

These debentures are amortized according to the issue. The methods of amortization are as follows: (i) payment only at maturity (including all series of Nova Pontocom and the 9^th issue of CBD), (ii) payment only at maturity with annual remuneration (10^th  issue of CBD), (iii) payment only at maturity with semiannual remuneration (11^th issue of GPA, 3^rd issue of Via Varejo and 1^st issue of NCB) incorporated by Via Varejo, (iv) annual installments (6^th series of CBD) and semiannual payments as of the 4^th anniversary of the issue, and (v) semiannual payments and remuneration as of the third anniversary of the issue (8^th issue of CBD).).

The 8^th, 9^th, 10^th and 11^th issues are entitled to early redemption at any time, in accordance with the terms and conditions envisaged in the indenture. The 6^th and 3^rd issues of Via Varejo may be redeemed after 18 months. The issues of NCB and Nova Pontocom are not eligible for early redemption.

GPA is required to maintain certain debt financial covenants in connection with the issues made, except in the case of Nova Pontocom. These ratios are calculated based on consolidated interim financial information of the Group prepared in accordance with accounting practices adopted in Brazil, as follows: (i) net debt (debt minus cash and cash equivalents and trade accounts receivable) not greater than equity and (ii) consolidated net debt/EBITDA ratio lower than or equal to 3,25 (effective at December 31, 2013 was 0.34), At December 31, 2013, GPA was in compliance with these ratios.

Additionally, some loans and financing agreements of the subsidiary Via Varejo envisage early maturity of the debt in the event of transfer of control, including:

·         loan agreements signed with IBM and Itaú banks;

·         issue of debentures of NCB (merged into Via Varejo on January 2, 2013)

·         financing agreements (FINAME) signed with Banco do Brasil;

·         Contract of Adhesion to System of Protection Against Financial Risks – Derivatives (swap, forwards and options) entered into by the Company and Santander on April 12, 2010.

The provisions applicable to BNDES contracts also forbid any changes in the effective control, whether direct or indirect, without prior express authorization from BNDES.

(f)          limits on the use of the financing already contracted

The Company has a credit limit of approximately R$900 million approved with the BNDES to partially finance the Company’s expansion and renovation plan. On December 31, 2013, R$630 million had not been used by the Company. All other loans took out have been already released, and part of such amount were already paid. 

(g)         relevant changes in each item of the financial statements

The executive officers highlight that, in fiscal year 2012, the Company restructured the receivable securitization fund, aiming to change the debt structure, and started to perform the receivable sale operation through credit card operators. This change has significant impacts on the debt structure and accounts receivable of the Company.

Income Statement

Fiscal Years Ended December 31, 2013, 2012 and 2011

Net sales revenues

Group’s net sales revenue increased 13.4% in 2013, from R$50.924 billion in 2012 to R$57.730 billion in 2013.

The Group’s main revenues arise from GPA foods’ operations, comprised by self-service retail and wholesale, electronics transactions (bricks-and-mortar stores of Via Varejo) and e-commerce (Nova Pontocom). The Company’s net revenues are shown in the table below for the years ended December 31, 2013, 2012 and 2011.

Net revenue growth was driven by ‘same-store’ sales that increased by 9.0%, 3 percentage points above the inflation measured by the IPCA (Extended Consumer Price Index), closing the year with excellent performance and growth reported in each business.

The investment in organic growth was an essential guideline that allowed us to achieve important growth in the sales area in the year. The Group entered in segments it did not operate, especially with the Assaí framework; reinforced its presence in relevant markets, such as in the Northeast, with Via Varejo and expanded the closeness format with Minimercado Extra, in the state of São Paulo. The Group closed 2013 with 128 new stores, 87 of which GPA foods and 41 Via Varejo. 

As part of our strategy to expand flow and attract customers to the stores, in addition to increase the Group’s results from commercial room rental revenues, GPA Malls added approximately 45,000 sq.m. of gross leasable area (GLA), closing the period with a total of 288,000 sq.m. of GLA.

GPA foods - Highlights

In retail, the growth of revenue sped up throughout the year for all brands, as a result of the implementation of a commercial competitive strategy in the first half of 2013, leveraged by an assertive communication both in the stores and with the media. This strategy already reflects an increased flow of clients at stores, an upturn in the average ticked and gains in market share, especially in the hypermarkets.

Retail sales also benefited from the excellent performance of the Black Friday sales, an initiative expanded to the food segment, especially perishable goods and liquid products. The non-food segment under the hypermarket format was also driven by the Black Friday sales, especially the telephony and video segments, mainly in the last quarter of the year.

Assaí’s sales performance stood out in 2013. Throughout the year, we consolidated the new framework and invested in organic expansion with the inauguration of 14 stores and the penetration in other five states, which remain posting results above expected.

Nova Pontocom - Highlights

In 2013, Nova Pontocom’s net revenue grew by 26.1%, in a level above the market. The strategy adopted by the Company focused on competitive prices and growth, with efficiency gains, increase in market share and positive return as of the second quarter. Additionally, we launched Extra Marketplace, the new sales model that unites offers from different stores from several segments in the same website, allowing us to increase significantly the range of products.

Via Varejo - Highlights

In 2013, sales grew by 11.9%, with same-store growth of 9.0%, driven by several factors throughout the year, such as: i) Christmas and Children’s Day campaigns; ii) history record of Black Friday sales; iii) opening of 41 stores, 36 of which Casas Bahia and 5 Pontofrio; and iv) confirmation of the technology consumption cycle in Brazil, especially in the telephony and computing categories.

2012 x 2011

Net sales revenue increased by 9.3% in 2012, from R$46.594 billion in 2011 to R$50.924 billion in 2012.

On the retail food, the highlights were the conclusion of the process to convert Extra Fácil into Minimercado Extra, the consolidation of the changes started in 2011 at the Assaí brand, the resumption of the expansion process of the Pão de Açúcar brand and the strengthening of Extra as a nationwide player.

It was the first full year of operations of Extra Supermercado. Up to the last quarter of 2011, the brand operated only through Extra Hiper. In the last quarter of the year, Extra Delivery was launched to consolidate the Extra brand as a multichannel.

The Group closed December with 1,568 thousand sq.m. of selling area on the food retail area, with growth of 4.8%, or 72.0 thousand sq.m., for a total of 55 stores opened, with highlight for the growth of Minimercado Extra.

At Via Varejo, we highlight the repositioning and improvement of the assortment of products at Pontofrio stores, as well as the positive sales effect from the maintenance of the IPI tax reduction for home appliances. In real terms, growth was 7.9% given that we consider deflation on the electronics category and inflation in categories such as furniture and mattress on the last 12 months, as published by the Brazilian Geography and Statistics Institute (IBGE), weighted by the assortment of bricks-and-mortar stores and Nova Pontocom.

2011 x 2010

Net sales revenue increased by 45.2% in 2011, from R$32.092 billion in 2010 to R$46.594 billion.

Among the factors that contributed to increase our net sales revenue in 2011, we can highlight: (i) the consolidation of results from Novas Casas Bahia, (ii) the opening of 41 stores, (iii) the completion of the conversion of CompreBem and Sendas to Extra Supermercado (which represents higher growth compared to the previous formats), (iv) the repositioning of Assaí and Mini Mercado Extra, (v) and Nova Pontocom (with high growth levels and the inclusion of new categories into its portfolio).

Gross Profit

Gross profit moved up 9.2%, from R$13.757 billion in 2012 to R$15.026 billion in 2013. Gross margin stood at 26.0% in 2013, over 27.0% in 2012, chiefly due to:

ü Food retail area (Extra and Pão de Açúcar): decrease of 1.1 p.p. in the margin in 2013, chiefly due to the implementation of the commercial competitiveness strategy, supported by the optimization of sales, general and administrative expenses.

ü Assaí: maintenance of the margin in 2013 compared to 2012 (14.6% and 14.5%, respectively);

ü Via Varejo and Nova Pontocom: decline of 0.6 p.p. in the margin in 2013, chiefly due to the increase in the interest of Nova Pontocom, whose business model operates with margins lower than in bricks-and-mortar store margins. 

In 2012, gross profit went up 8.7%, from R$12.659 billion in 2011 to R$13.757 billion, in line with the growth of sales in the same period. Gross margin stood at 27.0% in 2012, 0.2 p.p. down on 2011.

In 2011, gross profit went up 61.3%, from R$7.850 billion in 2010 to R$12.659 billion, chiefly due to: (i) better negotiations with suppliers, in line with a business strategy that applies specific IT systems, thus enabling improved business management; (ii) the consolidation of Nova Casas Bahia’s results which, together with Pontofrio and Nova Pontocom operations, allowed scale gains with suppliers and access to a wider range of products.

Operating Revenue (Expenses)

Total operating expenses came to R$11.291 billion in 2013, 11.4% up on the R$10.136 billion reported in 2012. Selling expenses as percentage of net sales declined from 16.4% in 2012 to 15.9% in 2013, while general and administrative expenses moved down from 3.4% in 2012 to 2.6% in 2013.

ü Food retail area (Extra and Pão de Açúcar): selling, general and administrative expenses decrease by 1.0 p.p. as a result of the discipline to control expenses, with highlight to efficiency gains in the stores and decline of marketing expenses, in addition to the optimization of corporate expenses, such as consulting services and projects;

ü Assaí: selling, general and administrative expenses increased by 0.2 p.p. in 2013 over 2012 (10.6% and 10.4%, respectively), due to the aggressive plan to open stores in 2013;

ü Via Varejo and Nova Pontocom: selling, general and administrative expenses decreased by 1.7 p.p. in 2013, chiefly due to the efficiency gain of processes at the stores, optimization in the hiring of outside services, increased logistics efficiency and the rationalization of administrative, IT and marketing expenses.

In 2012, total operating expenses came to R$10.136 billion, 3.0% up on the R$9.844 billion posted in 2011, increasing in a percentage lower than the growth of net sales. Selling expenses declined from 17% of net sales in 2011 to 16.4% in 2012, and general and administrative expenses reduced from 3.6% of net sales in 2011 to 3.4% in 2012.

In 2011, total operating expenses came to R$9.844 billion, up 66.5% on the R$5.911 billion recorded in 2010, mainly due to the consolidation of Nova Casas Bahia’s results that contributed to an increase in operating expenses as percentage of net sales compared to other brands.

Other Operating Revenue (Expenses)

Other operating revenue (expenses) came to R$673,106 million in 2013, 1.939% up on 2012, to R$33,014 million, chiefly due to the provisions for tax and labor claims totaling R$392,308 million, the indemnity paid to Via Varejo, totaling R$147,233 million, and restructuring expenses of R$104,636 million.

Depreciation and Amortization

Depreciation and amortization totaled R$787 million in 2013, 4.8% up on the R$752 million posted in 2012, chiefly due to the depreciation and amortization of new the investments made in 2013.

In 2012, depreciation and amortization totaled R$752 million, 10.8% up on the R$678 million posted in 2011, chiefly due to the depreciation and amortization of the new investments made in 2012.

In 2011, depreciation and amortization came to R$678 million, 52.1% up on the R$ 446 million recorded in 2010, mainly due to: (i) the amortization of intangible assets deriving from the business combination with Nova Casas Bahia; (ii) the consolidation of Novas Casas Bahia’s results.

Net Financial Result

Net financial result came to R$1.193 billion in 2013, the same amount reported in 2012. As a percentage of net sales, the financial result declined from 2.3% to 2.1%, due to: (i) the reduction of interest on net debt of R$14 million, as a result of the gradual reduction in indebtedness in 2013; (ii) the increase in the cost of prepayment of receivables related to payment vouchers and sale of credit cards receivables totaling R$106 million, in line with the upturn in net revenue, and the increase in the interest rate; and (iii) gain in the adjustment of other assets and liabilities, totaling R$92 million, chiefly due to the prepayment of the tax repayment program (REFIS) in the year, in addition to greater prepayment to suppliers, generating increased financial revenue in 2013 over 2012.

Net debt came to R$1.102 billion in 2013, R$2.304 billion down on 2012, mainly due to the greater cash generation in the period, leveraged by the efforts to improve working capital. Additionally, the public offering for the distribution of Units comprised by one (1) common share and two (2) preferred shares issued by Via Varejo, which represented an increase in gross cash of R$896 million, also contributed to reduce the Company’s indebtedness.

Net financial result decreased by 10.5% in 2012, from R$1.333 billion in 2011 to R$1.193 billion, chiefly due to: (i) the decline of indebtedness, mostly at the end of the year with the restructuring of FIDCs, and (ii) the reduction of the CDI rate, whose annual weighted average rate fell from 11.6% in 2011 to 8.4%.

Net debt totaled R$3,406 billion in 2012, R$363 million down on 2011, mainly due to changes in the structure of FIDCs (as described on item d above “financing sources for noncurrent used by the Group”). 

Net financial result went up 61.9% in 2011, from R$823 million in 2010 to R$1.333 billion in 2011, mainly due to: (i) an increase in debt to finance business growth; (ii) an increase in receivables discount due to the growth of the household appliances segment.

Net debt came to R$3.769 billion in 2011, down R$319 million on 2010, mainly due to (i) greater cash generation, and (ii) higher volume of discounted receivables at year end.

Net Income

Due to the reasons mentioned above, net income increased by 20.7% in 2013, from R$1.156 billion in 2012 to R$1.396 billion in 2013. In addition to the reasons above, the effective income tax rate declined from 31.0% in 2012 to 20.5% in 2013, chiefly due to: i) the reversal of deferred tax liability of R$106 million on the purchase option exercised in the last quarter; and ii) the non-taxation of Bartira’s reassessment gain of R$157 million, an increase of R$53 million over 2012.

In the beginning of 2013, GPA defined and made public some of its business estimates. For the food segment, comprised by the food retail area and Assaí, the objectives were: (i) gross revenue above R$34.5 billion; (ii) EBITDA margin of around 7.7%; (iii) CAPEX of R$1.5 billion; (iv) net financial result as a percentage of net selling revenue below 1.8%;  and (v) expansion of the sales area above 6.0%. For Via Varejo and Nova Pontocom, the objectives were:(i) gross revenue above R$28.5 billion; (ii) EBITDA margin above 6.6%; (iii) CAPEX of R$500 million; (iv) net financial result as a percentage of net selling revenue below 2.9%;  and (v) expansion of the sales area between 2.0% and 3.0%. The results achieved in 2013 allowed us to reach all of those estimates.

Balance Sheet

Fiscal Years Ended December 31, 2013, 2012 and 2011

Balance Sheet – Consolidated Assets

Balance Sheet – Consolidated Liabilities