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 12, 2015.

MANAGEMENT PROPOSALS FOR THE ANNUAL AND SPECIAL SHAREHOLDERS
MEETING TO BE HELD ON APRIL 24, 2015

Content

At Annual Shareholders Meeting:

Proposal for Designation of Retained Earnings for the fiscal year                             04

Capital Budgeting                                                                                                            09

Comments of the Administrators about the Company’s Financial Situation                    10

Proposal of Management, Fiscal Council and Advisory Board Global  Remuneration   58

Annex to the Proposal of Management, Fiscal Council and Advisory Board Global Remuneration………………………………………...………………………………………………...59

At Special Shareholders Meeting:

Investment Plan for the Fiscal Year of 2015……………………………………………………..92

Proposal of Amendment to the Remuneration and Stock Option Plan……………………..93

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 2015, in compliance with Annex 9-1-II of CVM Instruction 481/2009, as follows:

1.            Net income for the fiscal year

The Company’s Net Income on December 31, 2014 totals R$ 1,269,384,047.65. Out of this amount, R$ 63,469,202.38 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, as 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 preceding fiscal years

There is no proposal for distribution of dividends based on income from preceding 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$ 0.6889912644 per common share and R$ 0.7578903909 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$ 63,469,202.38 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.

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

14.          Not applicable.

15.          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$ 813,992,520.55, that is, 90% of Net Income after dividend.

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, 2014. The Adjusted Income is calculated as follows:

16.          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$ 904,436,133.95, in that R$ 813,992,520.55 for the reserve for expansion (under Article 36, Paragraph 2 of the Company Bylaws) and R$ 90,443,613.40 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 9.

17.          Designation of the income for the tax incentives reserve

Not applicable.

São Paulo, March 12, 2015

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 2013 (Reserve for Expansion and Capital Budgeting) as approved at the 2014 Annual and Special Shareholders’ Meeting, as follows:

(i) The Multivarejo, GPA Malls and Assaí Investment Plan for 2014 amounted to R$ 1,619,000,000.00. Nonetheless, the investment made by the Company totaled R$ 1,896,145,926.45, of which R$ 539,014,178.32 are for opening of new stores and for the purchase of land, R$ 360,427,853.39 are for refurbishment of stores and R$ 996,703,894.74 are for infrastructure (IT, Logistics and others); and

(ii) The Reserve for Expansion, in the amount of R$ 674,912,560.09, and the Budgeting Capital, in the amount of R$ 74,990,284.45, approved at the 2014 Annual and Special Shareholders’ Meeting were used to support those investments. The difference was paid both with funds from the very Company, resulting from the Company’s operational activity, and with funds raised from third parties.

2.         Propose a retention of R$ 904,436,133.95 from the earnings of 2014 in order to fund the Investment Plan of 2015, to be approved by the Board of Directors and by the shareholders, in that R$ 813,992,520.55 are for Reserve for Expansion (Article 35 – Paragraph 2 of the Company Bylaws) and R$ 90,443,613.40 to the Capital Budgeting.

This is our proposal.

São Paulo, March 12, 2015.

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

Introduction

The following comments should be considered together with our individual and consolidated financial statements, filed with the Securities and Exchange Commission of Brazil (CVM) on February 12, 2015, including Notes to the financial statements, as well as other financial information contained herein. 

As described in Note 2 to said financial statements, we reclassified certain items, especially those related to revenue from commercial centers in our stores.  As such, the amounts shown here may differ from those previously released.

(a)         general financial and equity conditions

The year 2014 was one of major achievements for GPA. During this complex period, we made use of many levers that guaranteed the success of our strategy and the achievement of our goals, despite the challenges imposed by Brazil's macroeconomic scenario. Through sustainable and structured actions, we managed to guarantee profitability in all businesses, along with higher sales and market share gains.

Anchored by our multi-format, multichannel and multi-region model and supported by the exchange of experiences and synergies with the Casino Group, we maintained a solid growth pace and improved our results. The diversity of the business, supported by a solid financial structure, attests to the effectiveness of our strategy, our competitive advantages and our strong focus on the customer.

It is important to highlight the support provided by the Board of Directors, which in turn was supported by the committees and the company's commitment to continuous advances in governance processes. It is this principle that guides us to deliver results in each period, but that also ensures our continuous growth in the long run and establishes GPA as a company poised for further growth.

In 2014:

• we recorded gross sales revenue of R$72.804 billion and net sales revenue of R$65.525 billion, up 12.8% and 13.3%, respectively, in relation to 2013.  The upturn in 2014 resulted from the significant organic growth and a more competitive pricing policy, which led to growth similar to 2013, of 12.5% and 13.4% in gross and net sales revenue respectively in comparison with 2012;

• gross profit totaled R$16.945 billion, increasing 12.2% from 2013. Gross margin in 2014 stood at 25.9%, versus 26.1% in 2013.  This decrease in gross margin is mainly due to the Group’s continued investments in competitiveness, and the higher share of Assaí and Cnova;

• total operating expenses corresponded to 18.5% of net sales revenue, totaling R$12.121 billion, an increase of 6.6% from 2013, when they totaled R$11.368 billion,  representing 19.6% of net sales revenue, demonstrating greater control and discipline in spending, combined with higher share of Assaí and Cnova, which are formats with lower expenses;

• EBITDA adjusted for the “Other Operating Income (Expenses)” line increased by 19.7% over 2013, totaling R$5.371 billion, with EBITDA margin of 8.2%, increasing 40 bps from 7.8% in 2013, which shows the improvement in the Company’s operations, backed by efficiency gains in practically all businesses, especially in Multivarejo and Via Varejo;

• net financial result was an expense of R$1.508 billion, increasing 26.3% from 2013, but lower than the increase in the overnight interbank rate (CDI) during the period (33.9%), mainly reflecting the deleveraging carried out by the Company and improved working capital;  

• net income amounted to R$1.760 billion, increasing 26.0% from 2013. Net margin reached 2.7%, 30 bps higher than in 2013, due to greater profitability of the Multivarejo, Via Varejo and Assaí businesses;

• cash exceeded debt by R$1.421 billion (positive), an important gain compared to the debt of R$1.104 (negative) in 2013, mainly resulting from increased cash flow in the period, resulting from efforts to improve working capital;

• shareholders' equity totaled R$14.482 billion, up 13.9% from shareholders’ equity of R$12.712 billion the previous year, chiefly due to the improved profitability of the Company and the share offering by CNova.  

(b)         capital structure and eventual redemption of shares

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

GPA believes its current capital structure, mainly measured by the Net Debt/EBITDA ratio, which was healthy in 2014, presents a significant reduction in leverage when compared with the levels recorded in 2013 and 2012. This improvement is the result of higher cash flow in the period, improved working capital and proceeds from the IPO of CNOVA, as the table below shows:

There is no assumption of share redemption.

(c)         ability to pay financial commitments

GPA’s executive officers believe that the cash flow and the funds currently available fully enable the GPA to pay all its short- and long-term financial commitments.

Note that due to the higher cash flow, driven by operational improvement of the Group’s businesses, GPA has shown a trend of reduction in gross and net debt.

These results demonstrate GPA’s capacity to continue meeting its financial commitments in the short and long terms. 

(d)         sources of financing for working capital and investments in non-current assets utilized by GPA

The Company raised funds in 2014, 2013 and 2012 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”), denominated in reais plus annual interest payments; (B) funding on capital markets, through the issue of debentures; and (C) cash generation through its operations.

In 2014, 2013 and 2012, we had no difficulties in obtaining loans or refinancing its current debt. For more information on agreements entered into by GPA and the BNDES, see “Relevant Loan and Financing Agreements,” item "f,” below.

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

In the opinion of the Group’s executive officers, the funding sources used in the fiscal years ended December 31, 2014, 2013 and 2012 are adequate, and will continue to be used by GPA as sources of financing, if necessary.

(f)          debt levels and debt characteristics

i.          Relevant loans and financing agreements

The tables below present the GPA’s debt with financial institutions and the funding transactions performed on capital markets on December 31, 2014, 2013 and 2012.

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

In R$ million

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

Direct consumer credit – CDCI

Refers to direct consumer credit through an intervening party (CDCI), which can be paid in up to 24 installments, however, the most utilized term is substantially less than 12 months.

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

Financing of working capital

GPA and its subsidiaries raise loans and financing with major financial institutions to meet cash needs for investments.

Swap contracts

In terms of foreign currency, GPA uses swap transactions to exchange liabilities denominated in U.S. dollars and fixed interest rates for Real pegged to CDI floating interest rates. The average annual CDI rate was 10.81% in 2014 (8.06% in 2013 and 8.40% in 2012).

BNDES

GPA’s credit facility 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.

GPA 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, 2014 it was in compliance with the established parameters.

Debentures

In R$ million

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.

The total amount recorded from 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.

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 GPA 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.

 GPA currently no longer transfers its credit card receivables through any FIDC.

ii.          Other long-term relations with financial institutions

Currently, GPA has no relevant long-term relations with financial institutions referring to the fiscal years ended December 31, 2014, 2013 and 2012, 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 GPA’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

BNDES

Agreements signed with the BNDES are subject to “Provisions Applicable to BNDES Agreements”, which borrowers of the BNDES, without previous authorization from BNDES, including GPA, may not: (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.”

Debentures

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

These debentures are amortized according to the issue. The methods of amortization are as follows: (i) payment only at maturity with annual remuneration payment (10^th issue of CBD), (iii) payment only at maturity with semiannual remuneration payment (11^th issue of GPA and 3^rd issue of Via Varejo; (iii) annual installments (12^th issue of CBD) and semiannual payments as of the 4^th anniversary of the issue.

The 10^th, 11^th and 12^th issues are entitled to early redemption at any time, in accordance with the terms and conditions envisaged in the indenture. The 3^rd issue of Via Varejo may be redeemed after 18 months. The issue of NCB, merged into Via Varejo, is 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 GPA 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. At December 31, 2014, GPA was in compliance with these ratios.

Other covenants

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 GPA 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.

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

Though the Company does not have any fixed financing agreement contracted, on December 31, 2013, it signed loan agreements amounting to R$ 1.350 billion.

As mentioned in the financial statements disclosed by the Company in 2015, the agreements were entered into as per market practices and are valid till 2016 and 2017.

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

The executive officers highlight that, in fiscal year 2012, GPA 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 GPA.

There are no other items materially affecting the financial statements of 2013 and 2014.

Income Statement

Fiscal Years Ended December 31, 2014, 2013 and 2012

2014 vs. 2013

Net revenue

GPA’s consolidated net revenue increased 13.3% in 2014, from R$57.854 billion in 2013 to R$65.525 billion in 2014.

The Group’s main revenues arise from GPA foods’ operations, comprised by Multivarejo and Assaí, sales of electronics and home appliances (bricks-and-mortar stores of Via Varejo) and e-commerce (CNova). GPA’s net revenues are shown in the table below for the years ended December 31, 2014, 2013 and 2012.

(1) Excludes revenue from intercompany transactions; (2) Extra and Pão de Açúcar banners. Includes revenue from the leasing of commercial centers; (3) Cnova: Cnova Brasil + Cdiscount Group. Includes only revenue from the commissions in the marketplace, without considering total revenue from goods; (4) Includes revenue from intercompany transactions

The highlight of 2014 was strong organic growth, with 212 new stores opened, of which 124 were inaugurated by GPA Food (Multivarejo +Assaí) and 88 by Via Varejo. The consolidation of Cdiscount made since August 1, 2014 also drove sales growth, as disclosed under the item “CNova Highlights”.

GPA Food Highlights

The organic expansion had a significant impact on GPA Food. We opened 97 new stores in the convenience format, which included Minimercado Extra and Minuto Pão de Açúcar stores. In the premium supermarket segment, through the Pão de Açúcar banner, revenue growth was driven by the unique offering of this format, such as its increasingly innovative assortment, as well as by opening new units and converting existing units, adding a total of 17 new stores to the chain.

In the Extra banner, a series of measures were taken to recover sales in the hiper format, especially from the second half of the year, which included operational improvements at stores, adjustments to assortments, better communication and continuous reinforcement of the price competitiveness strategy. These measures supported better customer traffic trends at stores and a recovery in market share.

At Assaí, we opened nine new stores and expanded our operations in Brazil’s Northeast, while reinforcing the strategy to grow the Cash and Carry operation. This expansion of operations has been making an important contribution to driving sales at Assaí, which registered net sales growth of 32.7% in the year

CNova Highlights

In 2014, Cnova was created, the product of the consolidation of Nova Pontocom, already operated by GPA, and Cdiscount, present in France and another ten other countries. In November 2014, CNova carried out its IPO on the NASDAQ and in January 2015, listed its shares in Euronext Paris.

In 2014, CNova’s net sales revenue increased 90.2% as it includes CDiscount results as of August 1, 2014.   On comparable bases, net sales revenue grew 28.1%, outpacing market levels.  The strategy adopted in the year sought a balance between competitiveness and growth, with gains in efficiency and market share. 

Via Varejo Highlights

In 2014, the company focused on its expansion plan by opening 88 new stores and launching pioneering initiatives, such as opening of 20 new Mobile stores¹ under the Casas Bahia and Pontofrio brands and expanding in the furniture segment by opening units focused on selling customized furniture, a segment in frank expansion.

2013 vs. 2012

In 2013, net sales revenue increased 13.4%, from R$51.016 billion in 2012 to R$57.854 billion in 2013. 

GPA foods - Highlights

In Multivarejo, 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.

Sales in Multivarejo 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.

¹ Stores dedicated to selling mobile phones, tablets and accessories, as well as prepaid and postpaid plants of major Brazilian mobile operators.

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 in the year focused on competitive prices and growth, with efficiency gains, increase in market share and positive return as of the second quarter. Additionally, his year saw the launch of 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 9.5% in 2012, from R$46.594 billion in 2011 to R$51.016 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.

A total of 55 stores were opened in the year, 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.

Gross Profit

Gross profit increased 12.2%, from R$15.104 billion in 2013 to R$16.945 billion in 2014. Gross margin stood at 25.9% in 2014, compared to 26.1% in 2013, as a result of the ongoing price competitiveness strategy, and the higher share of lower margin formats. The business highlights were:

ü Multivarejo (Extra and Pão de Açúcar): margin expansion of 80 bps in the year, mainly due to growth in revenue from rental of commercial centers; higher share in the sales mix, of sales in the Pão de Açúcar and Minimercado Extra formats, which operate with higher margins; and the lower share of electronics in the sales mix, reflecting the macroeconomic scenario in the year;

ü Assaí: maintenance of the gross margin in 2014 compared to 2013 (14.5% and 14.6%, respectively);

ü Via Varejo: margin expansion of 9.8%, mainly the result of initiatives to boost efficiency in logistics and assembly operations, growth in services and financial services, and synergies captured in the group.

In 2013, gross profit increased 9.4% to R$15.104 billion in 2013 from R$13.807 billion in 2012, in line with the growth of sales in the same period. Gross margin stood at 26.1% in 2013, down 100 bps on 2012.

In 2012, gross profit increased 9.1% to R$13.807 billion, from R$12.659 billion in 2011, 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 Income (Expenses)

Total operating expenses reached R$12.121 billion in 2014, up 6.6% from R$11.368 billion reported in 2013.  Selling, general and administrative expenses totaled R$11.787 billion, growing 9.7% from 2013. As a percentage of net sales revenue, selling, general and administrative expenses fell from 18.6% in 2013 to 18.0% in 2014.  The main effects were: 

ü Multivarejo: the 70 bps increase in selling, general and administrative expenses as a percentage of net sales revenue (19.7% in 2014 versus 19.0% in 2013), mainly due to the impact of the collective bargaining agreement in 2014, increased spending on medical insurance, which saw increases that outpaced inflation; greater spending with marketing to ensure broad dissemination of commercial incentives; and expenses with opening and renovation of stores; Assaí: selling, general and administrative expenses decreased by 20 bps (10.4% in 2014 and 10.6% in2 013), due to operating efficiency gains, despite the aggressive store opening plan;

ü Assaí: decrease of 20 bps in selling expenses, general and administrative of net revenue (10.4% in 2014 vs. 10.6% in 2013) due to operational efficiencies, even with aggressive opening plan stores;

ü Via Varejo: selling, general and administrative expenses decreased by 30 bps. (22.4% in 2014 vs. 22.7% 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 2013, total operating expenses came to R$11.368 billion, up 11.6% from the 2012 total of R$10.186 billion, growing slower than net sales revenue.   Selling, general and administrative expenses came to R$10.742 billion. As a percentage of net sales revenue, selling, general and administrative expenses fell from 19.9% in 2012 to 18.6% in 2013. 

In 2012, total operating expenses came to R$10.186 billion, up 3.5% on the R$9.844 billion posted in 2011, increasing in a percentage lower than the growth of net sales revenue. Selling, general and administrative expenses came to R$10.164 billion. As a percentage of net sales revenue, selling, general and administrative expenses fell from 20.6% in 2011 to 19.9% in 2012.

Other Operating Income and Expenses

In 2014, other operating income (expenses) came to an expense of R$441 million, down 34.4% from the 2013 total of R$673 million. This decrease was driven by lower expenses with lawsuits in 2014 compared to 2013. 

Depreciation and Amortization

Depreciation and amortization totaled R$821 million in 2014, up 4.2% from R$787 million in 2013.  This increase was mainly due to depreciation and amortization of the new investments made in 2014. 

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

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

Net Financial Result

Net financial result in 2014 was an expense of R$1.508 billion, compared to an expense of R$1.193 billion in 2013, increasing 26.3% from 2013, lower than the CDI rate in the period (33.9%). The key impacts on the net financial result were: (i) the increase of 12.0% in bank debt charges, which was lower than the increase in the CDI, reflecting the improvement in working capital in the period; (ii) the increase in the cost of sales of payment book receivables and the sale of credit card receivables by R$220 million, in line with the growth in net sales revenue, as well as the hike in interest rates; and (iii) the R$68 million increase in the line “Restatement of other assets and liabilities”, mainly related to the variation in cash returns, which was offset by the increase in the provisions for lawsuits.

GPA ended 2014 with a net cash position of R$1.421 billion, compared to the net debt position of R$1.104 billion in 2013, due mainly to increased cash generation in the period on improved working capital needs. GPA held cash reserves of approximately R$11.1 billion, compared to R$8.4 billion at the end of 2013, which attests to its solid capital structure, especially given the economic environment marked by high volatility.

Net financial result came to R$1.193 billion in 2013, the same amount reported in 2012 (R$1.193 billion). 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$1.104 billion in 2013, R$2.302 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 GPA’s indebtedness.

Net financial result decreased by 10.5% in 2012, from R$1.333 billion in 2011 to R$1.193 billion.

 This decrease was mainly the result of: (i) the reduction in debt, mainly at the close of the year with the restructuring of FIDCs, and (ii) the reduction in the CDI rate, whose average weighted annual rate fell from 11.6% in 2011 to 8.4%.

Net debt was R$3.406 billion in 2012, down R$363 million from 2011, mainly due to alterations to the structure of FIDCs (as described in item d, above, “sources of financing for working capital and investments in non-current assets used by GPA”).

Net Income

Net income increased 26.0% from R$1.396 billion in 2013 to R$1.760 billion in 2014. Net margin stood at 2.7% in 2014, compared to 2.4% in 2013. The business highlights were:  

ü  Multivarejo: 38.6% increase in net income, mainly due to the growth in gross profit, driven by rental revenue from commercial centers, the higher share in the sales mix of Pão de Açúcar and Minimercado Extra, and the reduction in operating expenses;

ü  Assaí: growth of 6.9% in net income due to solid revenue growth and disciplined control of operating expenses despite the strong expansion of new stores; 

ü  Via Varejo: Net income up 25.9%, due to better operating result arising from the program of efficiency initiatives implemented and captured throughout the year.  

Balance Sheet

Fiscal Years Ended December 31, 2014, 2013 and 2012

Balance Sheet – Consolidated Assets