panhia Brasileira de Distribuicao(CBD) - 2019 Q4 - Annual Report

Financial Risk Management - The company is exposed to market risks from changes in foreign currency and interest rates, with a net foreign currency exposure to U.S. dollars of R$15 million as of December 31, 2019, down from R$76 million in 2018[345]. - The company has a treasury policy to manage financial market risk, primarily by swapping a substantial part of U.S. dollar-denominated liabilities to obligations denominated in reais[339]. - The company uses cross-currency interest rate swaps to mitigate risks from fluctuating U.S. dollar currency and interest rates, with realized and unrealized gains and losses included in financial income and expense[339]. - The company engages in derivatives to hedge against foreign exchange variations on imports and bank loans, particularly in U.S. dollars and euros[345]. - The company has a strategy to mitigate U.S. dollar currency risks through the use of derivative financial instruments, specifically cross-currency interest rate swaps[346]. Financial Position and Performance - As of December 31, 2019, total cash and cash equivalents amounted to R$4,596 million, with 89.94% of CDI as the average interest rate[342]. - Total loans and financing as of December 31, 2019, were R$2,268 million, with significant portions in floating rates[342]. - The company reported that sales to customers using credit cards accounted for 39.9% of consolidated net operating revenue in 2019, indicating a stable reliance on credit card transactions[348]. - Net operating revenue for 2019 was R$56,635 million, an increase from R$49,388 million in 2018, representing a growth of 14.5%[394]. - Gross profit for 2019 reached R$12,190 million, up from R$11,609 million in 2018, indicating a growth of 5.0%[394]. - Net income for the year from continuing operations was R$488 million, a decrease from R$1,156 million in 2018, reflecting a decline of 57.8%[394]. - Total current assets as of December 31, 2019, were R$19,968 million, a decrease from R$40,518 million in 2018[395]. - Total assets decreased to R$58,475 million in 2019 from R$61,657 million in 2018, a decline of 5.5%[395]. - The company reported a net income for the year of R$836 million, down from R$1,284 million in 2018, a decline of 34.8%[394]. Internal Controls and Governance - The company has implemented remedial actions to address a material weakness in internal control over financial reporting, particularly in monitoring financial information from subsidiaries[355]. - The independent registered accounting firm, Ernst & Young, audited the company's consolidated financial statements, confirming the effectiveness of internal controls[356]. - The company plans to continue implementing remedial actions through the end of 2020 to address previously identified weaknesses in financial reporting[357]. - The audit committee is composed of independent directors, with Luiz Nelson Guedes de Carvalho identified as a financial expert[358]. - The company has adopted a code of ethics, last amended on February 6, 2020, to comply with Novo Mercado listing requirements[359]. Tax and Legal Matters - As of December 31, 2019, the Company reported ICMS tax credits amounting to R$ 2,621 million, with recoverability dependent on future ICMS tax payable generation[378]. - The Company is involved in tax claims totaling R$ 10,829 million, assessed as possible losses, with no provisions recorded as of December 31, 2019[381]. - Total taxes payable increased from R$841 million in 2018 to R$907 million in 2019[534]. - Current taxes payable rose from R$370 million in 2018 to R$531 million in 2019, while noncurrent taxes payable decreased from R$471 million to R$376 million[534]. Acquisitions and Investments - On November 27, 2019, the Company completed the acquisition of Almacenes Éxito S.A. for a net consideration of R$ 9,371 million, resulting in R$ 165 million goodwill recognized[385]. - Almacenes Éxito S.A. constituted 38% of total and net assets as of December 31, 2019, and contributed 4% and 17% to revenues and net income, respectively, for the year then ended[388]. - The company disposed of its interest in Via Varejo S.A. in June 2019, which was previously classified as a discontinued operation[410]. - The company reported a loss of R$385 million on the investment in associate Cnova N.V. as of December 31, 2019[482]. Debt and Financing - Total borrowings and financing amounted to R$2,546 million, with noncurrent borrowings at R$2,060 million[484]. - The company reported cash and cash equivalents of R$ 7,954 million, an increase from R$ 4,369 million in 2018[518]. - The total financial liabilities, including debentures and promissory notes, amounted to R$ 11,863 million, up from R$ 4,146 million in 2018[518]. - The company maintained a consolidated net debt/EBITDA ratio lower than or equal to 3.25, complying with financial covenants[516]. - The company utilized swap contracts for 100% of its US dollar borrowings to mitigate interest rate risk, converting obligations to floating rates linked to CDI[516]. Assets and Liabilities - The company’s total equity rose to R$12,666 million in 2019, up from R$10,263 million in 2018, reflecting a growth of 23.4%[494]. - Total liabilities increased to R$11,624 million in 2019 from R$8,789 million in 2018, indicating a rise in financial obligations[496]. - The company’s total shareholders' equity decreased to R$11,487 million from R$12,417 million, a decline of about 7.5%[444]. - The company reported additions to property and equipment of R$3,268 million in 2019, up from R$2,236 million in 2018, representing a 46.2% increase[497]. Cash Flow and Financial Performance - Cash flow provided by operating activities in 2019 was BRL 1,135 million, down from BRL 4,267 million in 2018[403]. - The company reported a significant increase in borrowings and financing, which rose to $10,706 million from $3,392 million, an increase of 215.5%[398]. - The company’s comprehensive income for the year was BRL 945 million, compared to BRL 790 million in 2018[402]. - The company’s financial performance is supported by its strategic partnerships and investments in various sectors, including logistics and e-commerce[477].