Post on 21-Jul-2020
transcript
Lojas Americanas S.A. Financial statements at December 31, 2019 and independent auditors’ report
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Independent auditor's report To the Board of Directors and Stockholders Lojas Americanas S.A. Opinion
We have audited the accompanying parent company financial statements of Lojas Americanas S.A. (the "Company"), which comprise the balance sheet as at December 31, 2019 and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, as well as the accompanying consolidated financial statements of Lojas Americanas S.A. and its subsidiaries ("Consolidated"), which comprise the consolidated balance sheet as at December 31, 2019 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lojas Americanas S.A. and of Lojas Americanas S.A. and its subsidiaries as at December 31, 2019, and the financial performance and the cash flows for the year then ended, as well as the consolidated financial performance and the cash flows for the year then ended, in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Basis for opinion
We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Parent Company and Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the ethical requirements established in the Code of Professional Ethics and Professional Standards issued by the Brazilian Federal Accounting Council, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Lojas Americanas S.A. Financial statements at
December 31, 2019 and independente auditors’ report on anual information
(A free translation of the original in Portuguese) Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the parent company and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Why it is a Key Audit Matter How the matter was addressed in the audit
Assessment of the recoverable amount of the intangible asset (note 16) and of the realization of deferred taxes (note 12)
The Company’s subsidiaries have material balances of intangible assets with definite and indefinite useful lives, related to expenditures on development of websites and systems for which a provision for impairment may be required whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, as well as goodwill arising on acquisition of investments in prior years tested annually to determine the need or not of a provision for impairment. The assessment of recoverability is based on projections of expected future cash flows of each subsidiary to which the balances relate (cash-generating unit – CGU).
Our audit procedures included, but were not limited to, obtaining an understanding and performing an assessment of the internal control environment with respect to the processes to assess the recoverable amount of the Company’s assets and to calculate and record the tax credits. We assessed the governance related to this process, including the approval of the budgets used in this calculation and reviews of the teams of specialists in financial calculations of the Company.
We involved our specialists in financial projections in the assessment of the reasonableness of the main operating and financial assumptions used by management, comparing them with the economic and industry forecasts available. We also tested the logical and arithmetical accuracy of the projections.
In addition, the subsidiary B2W Companhia Digital has balances of deferred income tax and social contribution assets related basically to income tax and social contribution losses and temporary differences, which were recognized considering their expected realization based on projections of future taxable income. The projections of cash flow and future taxable income were prepared based on the business plan approved by the management and consider assumptions related to the results of the activities of each CGU, as well as other assumptions supporting these projections. The use of different assumptions could modify significantly the recoverable amounts determined by the Company. For this reason, we
With the support of our specialists in tax matters, we tested the calculation bases of the income tax and social contribution tax losses and temporary differences, comparing them with the related tax records. We also analyzed the reasonableness of the term for utilization of the accumulated tax losses over the next years. We performed a sensitivity analysis and recalculated the projections considering scenarios of discount rates and profit margin percentage, and read management’s disclosures regarding the financial statements. We also compared the projections with the history of results for the prior years.
Matters
Why it is a Key Audit Matter ?
How the matter was addressed
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Why it is a Key Audit Matter How the matter was addressed in the audit
considered this a key audit matter.
Our audit procedures evidenced that the judgments and the assumptions used by management in the projection of results are reasonable and consistent with the data and information obtained.
Adoption of the new accounting standard CPC 06 (R2)/IFRS 16 – Leases (notes 2.2 and 17)
The Company and its subsidiaries adopted CPC 06 (R2)/IFRS 16 as from January 1, 2019, using the modified retrospective approach, which permits the recognition of the cumulative effect of the initial adoption in the opening balance of the revenue reserve at January 1, 2019, without restatement of the comparative information. As a result, at January 1, 2019 the Company and its subsidiaries recognized material amounts of right-of-use asset related to properties and lease liability. Considering the specificity and the volume of the lease contracts held by the Company and its subsidiaries and the materiality of the effects of the adoption of the new standard on the Company’s financial statements, we considered this a key audit matter.
Our audit procedures included, but were not limited to, obtaining an understanding and performing an assessment of the internal control environment for identification of lease contracts or contracts that contain leases and of the internal policies adopted by the Company’s management for determination of the lease assets and liabilities. By sampling, we read the terms of the contracts to confirm management’s assessment with respect to the identification of contracts that contain leases.
We obtained the calculation spreadsheet of the initial impacts of the adoption of the standard and, based on a sample of contracts, we assessed the assumptions used to measure the leases identified, the practical expedients permitted by the standard, and assessed the discount rate used and tested the logical and arithmetical accuracy of the calculations. We assessed the recording of the right-of-use asset related to properties and the lease liability and read management’s disclosures regarding the financial statements. Our audit procedures evidenced that the judgments and the assumptions used by management to measure the right-of-use asset related to properties and the lease liability are reasonable, the calculations are adequate and the disclosures are consistent with the data and information obtained.
Lawsuit with final and unappealable decision in respect of the exclusion of the ICMS base from the calculation base of PIS and COFINS (note 11)
During the year the Company and its subsidiary B2W Companhia Digital recorded tax credits amounting to R$ 470 million, related to lawsuits for which final and unappealable decisions were issued in 2019, in connection with the right to exclude the ICMS base
Our audit procedures included, but were not limited to:
(a) With the support of our tax specialists, we read the decisions and discussed with management and its legal counselors for assessment of the criteria
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Why it is a Key Audit Matter How the matter was addressed in the audit
from the PIS and COFINS calculation base for the periods covered by the lawsuits. This matter was addressed in our audit due to the materiality of the amount involved, the volume of operations that gave rise to the credits, and the existence of significant management’s judgment in determining the estimates related to the measurement and realization of the tax credit, supported by the opinion of the legal counselors.
adopted by the Company and its subsidiary for the recognition of the credit. (b) On a test basis, we confirmed the existence and origin of the balances of PIS and COFINS recoverable based on the supporting documentation. (c) By sampling, we tested the calculations prepared by the Company to measure the amounts of taxes recoverable and, when applicable, the monetary restatement for the period included in the lawsuit, identifying and reporting adjustments considered immaterial by management. (d) Understanding and assessment of the material internal controls related to the process of review and approval of the asset measurement. (e) Understanding and assessment of the estimate adopted by the Company’s management to determine the segregation into current and long term portions. (f) Based on the sales projections prepared by management, we performed an assessment of the likelihood of realization of such tax credit. (g) Reading of the disclosures presented in the notes to the financial statements.
We consider that the assumptions and criteria used by Management are consistent with the disclosures in the explanatory notes and the information obtained in our work.
Tax, labor and civil contingencies (notes 2.18 and 22)
The Company and its subsidiaries are defendants in legal and administrative proceedings involving tax, labor and civil matters arising in the normal course of business. The determination of the amount of the provisions and of the other disclosures required, as well as the classification of the likelihood of loss, require significant judgment by the Company and its subsidiaries. Due to the complexity and uncertainties related to legal and constitutional aspects involved in tax, civil and labor matters and their possible impacts on the financial statements, we considered this a key audit matter.
Our audit procedures included, but were not limited to, obtaining an understanding and performing an assessment of the internal control environment with respect to the identification, assessment, measurement and disclosure of provisions and contingent liabilities.
We obtained confirmation from the internal and external legal counselors handling the Company’s lawsuits in order to confirm the amounts and the classification of loss used by the Company’s management. We identified and reported adjustments considered immaterial by management. For certain tax lawsuits, with the support of our tax specialists, we obtained and discussed the legal
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Why it is a Key Audit Matter How the matter was addressed in the audit
opinions with other legal counselors, in order to assess the reasonableness of the estimates made by the lawyers handing the lawsuits, as well as the arguments and the existence of case laws. Finally, we read the disclosures presented in the notes to the financial statements. Our audit procedures evidenced that the judgments and the assumptions used by management for determination of provisions are reasonable and consistent with the disclosures made and the data and information obtained.
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Other matters
Statements of Value Added The parent company and consolidated Statements of Value Added for the year ended December 31, 2019, prepared under the responsibility of the Company's management and presented as supplementary information for IFRS purposes, were submitted to audit procedures performed in conjunction with the audit of the Company’s financial statements. For the purposes of forming our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria defined in Technical Pronouncement CPC 09 - "Statement of Value Added". In our opinion, these Statements of Value Added have been properly prepared in all material respects, in accordance with the criteria established in the Technical Pronouncement, and are consistent with the parent company and consolidated financial statements taken as a whole.
Audit of the prior year figures The audit of the financial statements for the year ended December 31, 2018 was conducted under the responsibility of other independent auditors, who issued an unqualified opinion thereon, dated March 20, 2019.
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Other information accompanying the parent company and consolidated financial statements and the auditor's report
The Company’s management is responsible for the other information that comprises the Management Report. Our opinion on the parent company and consolidated financial statements does not cover the Management Report, and we do not express any form of audit conclusion thereon. In connection with the audit of the parent company and consolidated financial statements, our responsibility is to read the Management Report and, in doing so, consider whether this report is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management Report, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the parent company and consolidated financial statements
Management is responsible for the preparation and fair presentation of the parent company and consolidated financial statements in accordance with accounting practices adopted in Brazil and with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the parent company and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of the Company and its subsidiaries. Auditor’s responsibilities for the audit of the parent company and consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the parent company and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Brazilian and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the parent company and
consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Company and its subsidiaries.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the parent company and
consolidated financial statements, including the disclosures, and whether these financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the parent company and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
(A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Rio de Janeiro, February 14, 2020 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Claudia Eliza Medeiros de Miranda Contadora CRC 1RJ087128/O-0
Lojas Americanas S.A. Balance Sheet Year ended December 31, 2019 and 2018 In thousands of Brazilian reais, except net earnings per share
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Parent Company Consolidated Parent Company Consolidated
12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018 12/31/2019 12/31/2018
ASSETS LIABILITIES
CURRENT CURRENT
Cash and cash equivalents 2,752,618 3,693,154 6,291,718 6,813,846 Suppliers 3,273,060 2,967,313 6,031,720 4,973,577
Marketable securities and other financial assets 836,497 1,174,872 4,314,814 3,239,485 Leasing to pay 360,507 440,155
Clients accounts receivable 1,558,582 1,713,390 2,321,052 1,870,081 Loans and financing 566,324 1,028,157 2,113,377 1,751,247
Inventories 2,607,149 2,626,906 3,558,531 3,506,678 Debentures 199,662 483,243 199,662 483,243
Recoverable taxes 552,402 404,919 1,243,798 906,836 Payroll and related charges 108,696 93,896 172,157 152,235
Prepaid expenses 11,152 21,743 46,594 59,036 Taxes payable 163,704 123,108 271,031 181,555
Other accounts receivable 589,564 617,322 1,132,205 1,061,295 Income tax and currents social contribution 76,597 127,063 80,224 144,643
Dividends and participations proposed 296,000 126,215 296,000 126,215
Provisions for contingencies 40,471 33,650 40,471 33,650
Accounts payable - business combination 10,342 1,534
Other current liabilities 405,680 157,077 902,682 498,736
Total current assets 8,907,964 10,252,306 18,908,712 17,457,257
5,490,701 5,139,722 10,557,821 8,346,635
NON-CURRENT ASSETS
Long-term assets: NON-CURRENT
Marketable securities and other financial assets 54,818 - 193,451 -
Loans and advances to subsidiaries companies 154,216 20,971 - - Long term liabilities:
Receivables from stockholders - Stock Option Plan 50,056 51,008 50,056 51,008 Accounts payables to subsidiaries companies 131,690 60,399
Deferred income tax and social contribution 623 26,369 1,338,031 1,197,780 Leasing to pay 1,903,466 2,113,214
Escrow deposits 318,728 320,490 427,289 404,679 Loans and financing 2,944,794 3,235,525 7,856,978 9,156,453
Recoverable taxes 797,090 400,231 1,994,257 1,655,755 Debentures 5,105,021 4,233,530 5,105,021 4,233,530
Other non-current - - 69,047 70,872 Taxes payable 96,549 59,723 246,827 211,677
Provision for judicial proceedings and contingencies 15,357 11,590
Provisions for loss on investiments 5,500 7,788
Accounts payable - business combination 3,806 6,084
Other non-current liabilities
10,196,877 7,600,767 15,331,346 13,615,532
SHAREHOLDER'S EQUITY
Social capital 4,009,961 3,957,961 4,009,961 3,957,961
Capital reserves 147,079 145,514 147,079 145,514
Investments 4,412,137 2,959,712 - - Profit reserves 1,055,136 865,667 1,055,136 865,667
Property, plant and equipment 3,670,284 3,211,642 4,094,344 3,647,720 Treasury shares (44,545) (44,545) (44,545) (44,545)
Intangible assets 520,317 422,357 3,972,720 3,763,221 Adjustment of equity valuation
Right to use real state 1,968,976.00 - 2,221,134 Profit/loss for the period
5,167,631 4,924,597 5,167,631 4,924,597
Minority interest 2,212,242 1,361,528
Total non-current assets 11,947,245 7,412,780 14,360,329 10,791,035 Total shareholders' equity 5,167,631 4,924,597 7,379,873 6,286,125
TOTAL ASSETS 20,855,209 17,665,086 33,269,041 28,248,292 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 20,855,209 17,665,086 33,269,040 28,248,292
Lojas Americanas S.A. Income Statement Year ended December 31, 2019 and 2018 In thousands of Brazilian reais, except net earnings per share
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
12/31/2019 12/31/2018 12/31/2019 12/31/2018
NET REVENUE 12,356,260 11,349,903 18,956,331 17,689,862
Cost of goods and services rendered (7,432,652) (6,946,058) (12,061,659) (11,630,229)
GROSS PROFIT 4,923,608 4,403,845 6,894,672 6,059,633
OPERATING REVENUE (EXPENSES)
Selling expenses (1,761,679) (1,928,748) (2,841,996) (3,029,007)
General and administrative expenses (1,009,518) (614,256) (1,759,569) (1,171,519)
Other operating income (expenses) (142,451) (120,342) (188,012) (140,062)
(2,913,648) (2,663,346) (4,789,577) (4,340,588)
OPERATING INCOME BEFORE NET FINACIAL RESULT 2,009,960 1,740,499 2,105,095 1,719,045
Financial income 434,627 337,640 968,058 768,360
Financial expenses (1,262,211) (1,187,833) (2,343,704) (2,181,877)
Net Financial Result (827,584) (850,193) (1,375,646) (1,413,517)
Equity results of subsidiaries (187,445) (241,277)
Income (loss) for the period before income and
social contribution taxes 994,931 649,029 729,449 305,528
Income and social contribution taxes
. Current (158,338) (245,039) (180,225) (265,436)
. Deferred (132,539) (23,500) 32,059 187,418
Net income for the period 704,054 380,490 581,283 227,510
Net income attributable to:
Company's shareholders 704,054 380,490 704,054 380,490
Interest of non-controlling shareholders (122,771) (152,980)
Parent Company Consolidated
Lojas Americanas S.A. Comprehensive Income statement Year ended December 31, 2019 and 2018 In thousands of Brazilian reais, except net earnings per share
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Parent Company Consolidated
12/31/2019 12/31/2018 12/31/2019 12/31/2018
Net income for the period 704,054 380,490 581,283 227,510
Items to be subsequently reclassified to the result
Currency variation in overseas investee 4,606 4,352 4,606 4,352
Total comprehensive result 708,660 384,842 585,889 231,862
Lojas Americanas S.A. Statement of changes in equity Parent company In thousands of Brazilian reais
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Social capital
Subscriptio
n of shares
plan
Goodwill in
capital
transactio
Adjustmen
t of equity
valuation Legal
To new
ventures
Treasure
shares
Accumulate
d profit Total
Balance as of December 31, 2018 3,957,961 134,856 (20,127) 30,785 54,001 811,666 (44,545) - 4,924,597
Currency variation in overseas investee 4,606 4,606
Capital transactions (22,119) (22,119)
Net income of the period 704,054 704,054
Capital increase by issuance of stock option plan 20,895 20,895
Capital increase by reserve incorporation 31,105 (31,105) -
Advance for future capital increase -
Legal reserve 35,203 (35,203) -
Stock option plan 50,183 50,183
Reserve for new ventures 375,969 (375,969) -
IFRS 16 adjustment - leasing of real state (221,703) (221,703)
Interest on own capital (292,882) (292,882)
Balance as of December 30, 2019 4,009,961 153,934 (42,246) 35,391 89,204 965,932 (44,545) - 5,167,631
Capital reserve Profit reserve
Lojas Americanas S.A. Statement of changes in equity Consolidated In thousands of Brazilian reais
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Social capital
Subscriptio
n of shares
plan reserve
Goodwill in
capital
transactio
ns
Adjustmen
t of equity
valuation Legal
To new
ventures
Treasure
shares
Accumulated
profit
Total before the
participation of
non controllers
Participation of
non controllers
shareholders Total
Balance as of December 31, 2018 3,957,961 134,856 (20,127) 30,785 54,001 811,666 (44,545) - 4,924,597 1,361,528 6,286,125
Currency variation in overseas investee 4,606 4,606 4,606
Net income of the period 704,054 704,054 (122,771) 581,283
Capital transactions (22,119) (22,119) 22,119 -
Capital increase by subscription of shares - 935,515 935,515
Capital increase by issuance of stock option plan 20,895 20,895 16,004 36,899
Capital increase by reserve incorporation 31,105 (31,105) - -
Stock option plan 50,183 50,183 8,859 59,042
IFRS 16 adjustment - leasing of real state (221,703) (221,703) (9,012) (230,715)
Advance for future capital increase - -
Legal reserve 35,203 (35,203) - -
Reserve for new ventures 375,969 (375,969) - - Adjustment of non-controlling shareholders’ interest - -
Capital increase in subsidiary - -
Interest on own capital (292,882) (292,882) (292,882)
Balance as of September 30, 2019 4,009,961 153,934 (42,246) 35,391 89,204 965,932 (44,545) - 5,167,631 2,212,242 7,379,873
Capital reserve Profit reserve
Lojas Americanas S.A. Statement of Cash Flows – Indirect Method Year ended December 31, 2019 and 2018 In thousands of Brazilian reais, except net earnings per share
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
PARENT COMPANY CONSOLIDATED
12/31/2019 12/31/2018 12/31/2019 12/31/2018
Net income (loss) for the period: 704,054 380,490 581,283 227,510
Adjustments to the net income:
Depreciation and amortization 499,103 500,150 954,777 935,359
Depreciation right to use real state 340,383 417,725
Residual and deferred value of fixed assets write-off 17,514 13,375 17,842 15,391
Equity accounting 187,445 241,277
Income tax and social contribution current 158,338 245,039 180,225 265,436
Income tax and social contribution diferred 132,538 23,500 (32,059) (187,418)
Interest on credits and debits 1,170 1,671 1,170 2,831
Interest and variations financing 786,209 669,005 1,310,729 1,155,528
Adjustment in provision for contingencies 75,619 52,350 94,873 65,263
Reversal of provision for contingencies (8,665) (13,520) (29,595) (85,399)
Stock option plan 36,077 36,628 50,183 46,962
Provision for doubtfull accounts - credit cards 731 (41) 6,723 10,629
Provision for losses in inventories (3,731) 2,530 (9,229) (6,688)
Participation of employees and directors 42,194 22,600 42,194 22,600
Others (4,405) (18,782) (24,267) 1,206
Adjusted net income 2,964,573 2,156,272 3,562,574 2,469,210
Decrease (increase) in operating assets:
Clients accounts receivable 163,608 (152,446) (454,399) 95,169
Inventories 23,187 (208,008) (44,123) 141,090
Recoverable taxes (525,769) (107,597) (645,522) (320,678)
Prepaid expenses 2,855 10,320 30,313 (26,452)
Escrow deposits 1,762 (40,647) (22,610) (69,520)
Other accounts receivable 29,518 (39,078) (69,792) 5,479
(304,839) (537,456) (1,206,133) (174,912)
Increase (decrease) in operating liabilities:
Suppliers 304,684 259,991 1,059,985 500,692
Payroll and related charges 14,800 13,547 19,922 19,024
Taxes payable 673 (11,425) 48,694 (2,168)
Current income tax and social contribution (227,377) (243,167) (263,218) (252,068)
Contingencies payments (29,332) (37,874) (29,332) (37,874)
Operations with related parties (61,954) 167,882
Interest settlement on loans and debentures (596,145) (607,063) (1,085,728) (1,086,922)
Interest over leasing right to use real state (152,912) (175,961)
Other accounts payable 248,602 (42,980) 440,158 28,309
(498,961) (501,089) 14,520 (831,007)
Net cash used by operating activities 2,160,773 1,117,727 2,370,961 1,463,291
Cash Flow from Investing Activities
Marketable securities 283,557 1,840,896 (1,268,780) 3,278,046
Investments in subsidiaries (1,578,789) (52)
Plant, property and equipment (899,594) (823,052) (934,022) (849,274)
Intangible (224,933) (126,111) (655,193) (451,861)
Dividends received 519 4,013
Acquisition of indirect subsidiaries (2,500)
Net cash provided (used) by investment activities (2,419,240) 895,694 (2,860,495) 1,976,911
Cash Flow from Financing Activities
Loans e financing (current and non-current):
Borrowings 1,105,498 811,321 3,546,941 3,210,205
Liquidations (1,879,763) (1,424,156) (4,559,625) (3,667,461)
(774,265) (612,835) (1,012,684) (457,256)
Debentures (current and non-current):
Borrowings 1,000,000 1,000,000 1,000,000 1,000,000
Liquidations (427,538) (639,800) (427,538) (639,800)
572,462 360,200 572,462 360,200
Leasing right to use real state (359,482) (429,222) Accounts receivables from stock option plan 6,655 1,683 6,655 1,683
Goodwill in transactions of subsidiary's shares (22,119) (22,119) Capital increase 20,895 3,205 20,895 3,205 Non-controlling resources 957,634
Interest on equity and dividends paid (126,215) (101,733) (126,215) (101,733)
Net cash provided by financing activities (682,069) (349,480) (32,594) (193,901)
Net increase in cash and cash equivalents (940,536) 1,663,941 (522,128) 3,246,301
Cash and cash equivalents at the begining of the period 3,693,154 2,029,213 6,813,846 3,567,545
Cash and cash equivalents at the end of the period 2,752,618 3,693,154 6,291,718 6,813,846
Net increase in cash and cash equivalents (940,536) 1,663,941 (522,128) 3,246,301
Lojas Americanas S.A. Statement of Added Value Year ended December 31, 2019 and 2018 In thousands of Brazilian reais, except net earnings per share
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
PARENT COMPANY CONSOLIDATED
12/31/2019 12/31/2018 12/31/2019 12/31/2018
REVENUES
Sales of goods and services 14,006,508 12,959,410 22,179,747 20,842,775
Other revenues 79,677 46,649 85,753 49,971
Reversal (provision) for doubtful accounts (28,750) (17,153) (71,284) (48,599)
14,057,435 12,988,906 22,194,216 20,844,147
INPUTS ACQUIRED FROM THIRD PARTIES
Costs of goods sold (include ICMS, PIS and COFINS) (8,592,038) (8,067,434) (14,289,944) (13,868,529)
Materials, energy, third party services and others (887,463) (694,279) (1,842,694) (1,474,184)
Loss by decrease in recoverable value 1,673 1,921
Others (67,643) (62,679) (67,643) (62,679)
(9,547,144) (8,824,392) (16,198,608) (15,403,471)
GROSS VALUE ADDED 4,510,291 4,164,514 5,995,608 5,440,676
DEPRECIATION AND AMORTIZATION (839,486) (500,150) (1,372,502) (935,359)
NET VALUE ADDED GENERATED BY THE COMPANY 3,670,805 3,664,364 4,623,106 4,505,317
ADDED VALUE RECEIVED AS TRANSFER
Equity in net income of subsidiaries (187,445) (241,277)
Gain indirect controlled alienation 2,009
Financial income 434,627 337,640 968,058 768,360
Others 1,881 26,002 1,880 26,424
249,063 122,365 971,947 794,784
TOTAL ADDED VALUE PAYABLE 3,919,868 3,786,729 5,595,053 5,300,101
DISTRIBUTION OF ADDED VALUE
Personnel
- Direct remuneration (728,765) (615,164) (1,087,559) (914,933)
- Benefits (145,856) (131,002) (219,690) (202,485)
- FGTS (38,430) (32,832) (72,969) (64,136)
(913,051) (778,998) (1,380,218) (1,181,554)
Taxes, rates and contributions
- Federal 1,957 (182,742) 144,918 13,735
- State (763,614) (621,098) (1,110,515) (966,852)
- Municipal (59,815) (57,302) (80,422) (71,656)
(821,472) (861,142) (1,046,019) (1,024,773)
Compensation of third party capital
- Interest (1,262,211) (1,187,833) (2,343,704) (2,181,877)
- Rents (219,080) (578,266) (243,829) (684,387)
(1,481,291) (1,766,099) (2,587,533) (2,866,264)
Remuneration of own capital
- Interest on own capital (292,882) (120,000) (292,882) (120,000)
- Dividendos
- Reserva Legal
- Distributed earnings (retained) (411,172) (260,490) (411,172) (260,490)
(704,054) (380,490) (704,054) (380,490)
Interest of non-controlling shareholders - - 122,771 152,980
(3,919,868) (3,786,729) (5,595,053) (5,300,101)
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
1. ORGANIZATIONAL PROFILE – AMERICANAS UNIVERSE
Americanas adopts an unique approach to serve its customers, offering a physical platform with
different store formats, and a digital platform, with various brands, seeking to “Make people's dreams
come true and meet their consumption needs, saving time and money and exceeding your
expectations”. In addition, the Company has an innovation engine to accelerate the platforms, build
disruptive businesses and enhance different initiatives. Together, these fronts constitute the
Americanas Universe, which is unique, flexible and resilient.
In the Americanas Universe, the physical, digital platforms and the innovation engine are complementary
to each other and all initiatives are implemented seeking to enhance the synergy between the business
fronts and offering the customer the best service. With the increasing integration between platforms,
greater capillarity and digital insertion in the country, the Company believes that it will be closer to the
consumer, offering “Everything. Anytime. Anywhere."
1.1. Physical Platform
Americanas opened its first store in 1929 in Niterói, Rio de Janeiro. In that same year, the Company
established itself in the state capital, where it installed its headquarters, and began to gain space
throughout Brazil, offering a huge variety of products from major brands, in addition to quality services,
at fair prices.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Currently, the physical platform has five store models: (i) Traditional, with an average sales area of 1,000
m², automatic inventory replenishment and assortment of up to 60,000 items; (ii) Express, with an
average sales area of 400 m², just-in-time logistics and assortment of up to 15,000 items; (iii)
Convenience (Local), with an average sales area of 100 m², daily replenishment of inventory and 80% of
the product mix composed of food convenience and assortment of up to 3,000 items; (iv) Ame Go, with
an average sales area of 50 m² and assortment aimed at convenience, developed with exclusive
technology that combines artificial intelligence and sensors, enabling autonomous purchase; and (v)
Digital, with an average sales area of 70 m², about 70% of the product mix composed of electronics, also
with a focus to offer services and O2O.
In addition, the Expansion Plan “85 years in 5 - Somos Mais Brasil” was successfully concluded. 230
stores were opened in 2019, a new record for openings at the Company. Americanas currently has 1,700
stores in 739 cities and seven distribution centers installed in the states of Minas Gerais, Pará,
Pernambuco, Rio de Janeiro, Rio Grande do Sul and São Paulo.
1.2. Digital Platform
B2W is a digital company, leader in Latin America, and whose history is intertwined with the history of e-
commerce in Brazil. The company operates on the following fronts: e-commerce through the brands
americanas, Submarino, Shoptime and Sou Barato; the consumer credit service platforms Submarino
Finance and Digital Finance; payments, credit and financial services through Ame; technology platform;
logistics, distribution and customer service platform; and Marketplace.
With the purpose to CONNECT PEOPLE, BUSINESS, PRODUCTS AND SERVICES on the same digital
platform, B2W constantly invests to be closer to its customers, offering the best shopping experience,
attracting the best talents and creating barriers to new entrants.
The Company has the main internet brands (americanas, Submarino, Shoptime and Sou Barato), which
together recorded 2.4 billion visits in 2019. With this, the built platform allowed the development of B2W
Marketplace, which continues to grow rapidly, reaching R $ 11.6 billion in GMV in 2019 (growth of 49.7%)
and more than 46.8 thousand connected sellers.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
1.3. Innovation Engine
IF - Innovation and Future is the innovation engine of the Americanas Universe, responsible for building
disruptive businesses and leveraging the various initiatives within the physical and digital platforms. Its
main areas of activity are: incubating new businesses, accelerating existing initiatives, investing in
startups (venture capital), leading the O2O fronts and prospecting for new opportunities, including M&A
operations.
Ame, the fintech and mobile business platform, is one of IF's first initiatives and was
created to revolutionize the way people deal with money. With just over 18 months of
operation, the number of downloads of the app has already exceeded 6 million, allowing customers to pay
for their purchases with the app on all websites, in more than 1.5 million stores and in the 1,700
Americanas all over the country. Throughout the year, Ame continued to evolve and several partnerships
were established, increasing acceptance also in the off-us world. In addition, several services have been
included in the app, increasingly becoming a powerful one-stop app.
In addition to Ame, LET’S is also one of the initiatives of our innovation engine. LET'S is
the shared management platform for Americanas and B2W's logistics and distribution
assets, which aims to optimize the Companies' operations through a flexible fulfillment model.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2. MESSAGE FROM THE MANAGEMENT
The year of 2019 was special to Americanas Universe. This year, we have celebrated the “90 Years of
Lojas Americanas”, the “20 Years of Americanas and Submarino websites”, the “13 Years of the creation of
B2W”, the “2 years of the creation of LET'S” and, finally, the “18 Months of Ame ”.
All those companies, with the firm inspiration and coordination by “IF – Inovação e Futuro” and jointly with
our clients, sellers, merchants and suppliers, compose the Americanas Universe. Today, we are present
in over 700 cities, we are over 37 thousand employees, work with over 2 thousand suppliers and with
more than 46.8 thousand sellers, besides offering over 29.5 million items to more than 38 million active
customers. An Universe that work united by a greater propose: “Fulfill consumer’s dreams and meet the
consumption needs, sparing them time and money and exceeding their expectations”.
The date also invites us to think in retrospect. In our 90 years of life, we are proud to actively participate
in the development of the country and the evolution of society. We were pioneers in hiring women, we
promoted social inclusion by offering great brands at fair prices, we went public on the stock exchange in
1940, we introduced the barcode in Brazil and much more. Innovation was what brought us here.
Still in that analysis, we highlight that our Universe is unique, flexible and resilient.
Unique, because it was conceived from an original dream. When we created Americanas.com in 1999, we
believed it was a path of no return. And even the following year, when the so-called "internet bubble" burst
and many gave up, we continued to pursue our dreams. We grew, learned, acquired other companies and
created the largest digital company in Brazil - B2W. In these 20 years, millions of Brazilians had their first
digital experience through our websites. Today, we are proud to offer millions of items and deliver them
all over Brazil through LET'S, the shared management platform for Americanas and B2W's logistics
assets, which today offers its services to thousands of sellers in our Universe.
Our Universe is also flexible, since it was designed and created from multiple and complementary
businesses. Our physical and virtual stores have always been complementary to each other, allowing
customers to choose their preferred channel option. Currently, with O2O (online to offline) initiatives it
has become even easier, since there are several possible combinations of service, leaving the customer
the choice of the most convenient option at the moment. In 2019, O2O initiatives grew 153%, exceeding R
$ 2 billion in GMV. It should also be noted that the Universe, in the last 20 years, increased its product
offering by more than 500 times, reaching more than 29.5 million items.
The resilience of the Americanas Universe is evident when we find that the GMV CAGR in the last 20 years
was + 16.6%, while the EBITDA CAGR in the same period was 27.9%, reinforcing the commitment to
growth with profitability. In other words, there were several singular moments in the history of our
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
country, when our team knew how to use the flexibility of our Universe to better match growth with the
profitability necessary to keep growing.
The Universe consists of a team of more than 37 thousand associates, where diversity and harmony
prevails on a daily basis. Many of those who work here are in their first job, chasing the goal of self-
development and overcoming. In recent years, we have adopted the GPTW (Great Place to Work) climate
survey to improve our relationship dynamics with employees and, as a result, our companies have earned
the Great Place to Work seal. Our dynamics of forming leaders continues evolving, making 99% of our
leadership formed in-house.
2019 was also a year of celebration as we closed two important development cycles. The first was the
conclusion, on the physical platform, of the “85 years in 5 – Somos Mais Brasil” program, with the opening
of 806 stores in the last 5 years, reaching 1,700 stores in 739 cities, which gives us a unique capillarity.
The second, pursued over the last 3 years on the digital platform, was the achievement of a positive cash
generation of R$ 189.9 million in 2019, successfully completing the plan to transition the business model
to a hybrid platform with the marketplace and increasingly relevant digital services.
In addition, in 2019 the Americanas Universe reached the marks of R$ 32.6 billion GMV, R$ 3.5 billion
EBITDA, with an EBITDA margin of 18.5%, which led us to a net income of R$ 704.1 million, the highest
profit in our history.
Ame has been gaining relevance in the Americanas Universe and in the daily lives of our customers,
growing exponentially, having reached the mark of 6.5 million downloads, already having more than 35
active features, and having an ambitious expansion plan both in our Universe, as in the off-us world.
The physical and digital worlds are in constant change, and in this context, we ended 2019 with more than
327 million transactions and more than 38 million active customers, 26 million on the physical platform, 16
million on the digital platform and only 4 million common customers . Nevertheless, this growth was
followed by a progressive improvement in customer satisfaction rates, which in some months reached an
NPS (Net Promoter Score) of 80.
In 2019, we strengthen our commitment to the UN Sustainable Development Goals (SDG) 2030 agenda. In
line with our sustainability strategy, we expanded our efforts to promote quality education, creating
projects to expand connectivity in the Amazon, as well as the development of people with school learning,
the correct disposal of waste and encouraging entrepreneurship in the riverside communities. In
addition, we make public commitments related to reducing inequalities with the Racial and Gender
Equality Coalition and with the UN Principles of Women's Empowerment. The journey is long, but we
believe in the strength of our business to transform the way of thinking and changing realities.
As a vision of the future, we believe that we have built a powerful business model, in which we are more
qualified and, above all, excited to be even more relevant in people's daily lives. Being relevant means
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
becoming more and more part of customers ’journeys, whether they want to have coffee at one of our
Local stores, when they transfer to a friend’s Ame account, when they pay for a drink with Ame on the
carnival, when he goes to Americanas and buys a toy as a gift for his son’s friend’s party, when he finds
and buys in the Americanas app that auto part that was difficult to find or when the Ame Flash courrier
arrives with the cell phone he bought one hour before. For that, we established the motto: “Everything.
Anytime. Anywhere." - which will guide the decisions of our entire team to keep our current customers,
increasing their frequency of relationship with us, and attract new customers, seeking to exceed their
expectations.
To get there, we intend to: continue to seek for the best talents, increase the offer of products and
services, intensify the use of data analytics, increase customer recurrence, expand O2O initiatives,
expand the Supply Chain platform, further improve the innovation environment, continue to generate
value and reinvest. We believe that all these initiatives will take us to a new level of operational excellence
and profitability, reflected in the increase in earnings per share. We are very proud of what we have
already done and understand that the best is yet to come.
Finally, we would like to thank the more than 37 thousand employees, whose determination and
commitment have made us reach this point, the customers, suppliers, sellers, business partners and
shareholders who are part of these achievements. For each one, our Thank You. We count on you to build
our story together.
Best regards,
Miguel Gutierrez CEO, Americanas Universe “Everything. Anytime. Anywhere.”
3. STRATEGY AND INVESTMENT
3.1. Physical Platform
The year 2019 marked the delivery of the most ambitious expansion plan in the Company's history, the
“85 Years in 5 – Somos mais Brasil”, opening of 806 stores between 2015 and 2019, reaching 1,700 stores
distributed in 739 cities, and presence in all regions of the country. In December 2019, the physical
platform had more than 27 thousand members, a 1,209.3 thousand square meters sales area.
In addition, over the past 10 years, Americanas has expanded its store network more than 3 times,
reiterating our commitment to the business model, in addition to the optimism regarding the country's
economic scenario.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The following chart details the Company's expansion over the past 10 years:
3.1.1. Convenience Stores – Local
Under IF's leadership, Local's strategy and business model continued to improve during the year. Thus,
the format continued to expand in the states of Rio de Janeiro and São Paulo, opening of 15 stores in
2019, ending the year with a total of 53 stores in operation.
The current store portfolio allows us to improve the model adapted to each location, always seeking to
be the best option for customers who want to find everything they need in one location, quickly. During
the year, aiming to improve the consumer experience, new categories of food and services were tested,
in addition to the creation of a new layout to make the customer's daily journey more practical and
increase their independence in relation to other formats of store.
In the front of services, the model continued to invest in order to become a hub of convenience
solutions, taking advantage of the integration with +AQUI and O2O solutions and developing actions with
Ame.
3.1.2. +AQUI
+AQUI is the platform responsible for the management and promotion of services in Americanas’ stores,
offering customers solutions in the fronts of credit, insurance, gift cards, services and assisted sales. In
order to provide credit, protect assets and exceed customer expectations with excellent service, +AQUI
seeks partnerships with specialized companies that are prominent in their sectors, expanding the
portfolio of services and ensuring solutions for the various demands.
In 2019, in order to improve the customer experience, the platform internalized the integrated services
system and expanded its capacity. In addition, mobile service via tablet was also activated in some
stores. During the year, a partnership with Ame was also signed, which contributed to increase the
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
number of users and the offer of benefits. Partnerships were also made with mobile network operators
to offer plans and grant discounts for the purchase of devices, in addition to the partnership renewal
with Blackhawk to sell content cards.
With the development of this process, +AQUI has great growth prospects, through investment in the
customer experience and focus on assisted sales. Thus, the platform ends the year with a base of more
than 870 thousand unique customers and presence in more than 650 stores, and continues to improve
the customer's shopping journey.
3.1.3. Private Label
Americanas has 15 private label brands designed especially for those seeking quality and fair prices in
several categories. Over 7 thousand products are offered in the segments of food, candies, housewares,
clothing, stationery, toys, hygiene, beauty, among others. Throughout the year, the brands continued to
diversify their product offerings, operating in the main events and bringing new products to customers,
in addition to establishing partnerships for licensing.
In 4Q19, private label products showed excellent performance in the main events, such as: Children's Day,
Red Friday and Christmas. We highlight the presence of the Brink+ brand, which launched more than 100
new items on Children's Day and which, in the year, showed growth of more than 20% when compared to
the previous year. During Red Friday, some items from the Casual Home brand reached the sales volume
of one month in just 3 days of the event.
At Christmas, the performance of the Christmas Traditions, D´elicce and Brink+ brands was a highlight.
The first offered customers a complete assortment for decoration. The D´elicce brand, on the other
hand, expanded its product portfolio, with emphasis on panettones licensed in a partnership signed with
the company Mattel. And Brink+ consolidated itself as the Company's largest toy brand, becoming the
market leader in some categories.
3.1.4. Digital Lab
The "Digital Lab" proposes to strengthen the interaction between the Company and academic
institutions. The connection with academic knowledge is one of the ways of updating the business,
putting the Company in contact with the most modern and innovative and bringing new perspectives.
Americanas believes that fostering research and innovation, in addition to bring real solutions to our
challenges, can bear fruit for the country's socioeconomic development.
Throughout the year, the Company developed and stimulated several projects related to innovation and
research. We highlight below the main initiatives of the year.
• Partnership with MIT Industrial Liaison Program (ILP) Renewal: the objective of the program is to
create and strengthen mutually beneficial relationships between MIT and corporations worldwide;
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
• Brazil Conference at Harvard & MIT Sponsorship: the event is held by the Brazilian community of
students in Boston to promote the meeting with leaders and representatives of Brazil's diversity;
• Hackathons: throughout the year we promoted and participated as mentors of several hackathons with
educational institutions such as IED, UFRJ, PUC-Rio and IBMEC;
• Partnership with UFRJ and CEFET to mentor disciplines and Projects with IESE Business School and
University of Illinois: Students were invited to develop solutions to real challenges facing the Company.
Pricing
The pricing laboratory at PUC-RJ continues to advance in modeling and refining studies of product lines
that have the greatest impact on results. In the last quarter of the year, the company deepened its
knowledge of the home appliance market and the development of new pricing models to capture
opportunities in different departments, aiming to obtain sales and margin gains.
3.2. Digital Platform
On the digital platform, 2019 was marked by the conclusion of the three-year Strategic Plan (2017-2019),
which sought to migrate from the direct sales (1P) business model to the hybrid digital platform model (1P
+ 3P + Services).
3.2.1. Marketplace
B2W Marketplace offers the best value proposition for sellers, who can use the brands with the best
reputation on the internet and highly qualified traffic to leverage their sales. To deliver the best shopping
experience to the customer, Sellers also have the support of an extremely experienced and qualified
sales team, in addition to the entire B2W Digital platform. Sellers' feedback has been that they sell more
on the B2W Marketplace than on other platforms available on the market.
In just five years, the Marketplace has already reached R$ 11.6 billion in GMV in 2019, a growth of 49.7%
over the previous year, representing 64.2% of the total GMV. Over the past year, 24,900 new sellers were
connected, increasing the base to 46,800 sellers. As a result, the number of items (SKUs) offered on the
websites totaled 29.5 million at the end of 4Q19, an increase of 264% versus 4Q18, driven by the
Marketplace.
A relevant part of B2W's strategy, the Marketplace will contribute strongly to its growth and profitability.
3.2.2. Americanas Mundo
Cross border operation that allows customers to buy products from all over the world (including USA and
China), creating a new growth front for B2W Marketplace. Launched in March 2019, the cross border
operation continues its fast expansion and already has more than 13.4 million SKUs, 33 times more than
the initial 410 thousand SKUs. The operation was responsible for the best-selling item on Black Friday.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
3.2.3. Digital Lab
B2W created BIT - B2W Innovation and Technology, aiming to create an inspiring and collaborative
environment focused on the development of new technologies and innovative solutions. They are offices
with the concept of open spaces, areas for informal meetings, decompression environments and arenas
for events. B2W currently has BITs in the cities of Rio de Janeiro, São Paulo, Recife and Boston.
Our BITs were inspired by the largest and best centers of innovation and entrepreneurship in the world
and currently have more than 1,500 software engineers experimenting with new approaches and tools all
the time. Considering the scale of B2W, when the right tools are not available in the market, they are
developed and made available in-house, such as Asgard, RestQL and Apache Marvin, our open source
projects.
In recent years, BITs have become a reference in disruptive initiatives, developing innovative projects
with Harvard and MIT universities, which resulted in articles published with the scientific community. The
fronts developed were: marketing optimization (in partnership with the artificial intelligence laboratory
at Stanford University, by professor Andrew Ng, founder of Google Brains and co-founder of Coursera),
last mile (with professor Matthias Winkenbach, director of MIT Megacity Logistics Lab) and artificial
intelligence (creation of Marvin, open source artificial intelligence platform currently incubated by the
Apache Foundation).
To meet the specific demands of B2W's business, engineers developed projects in the areas of machine
learning, scalable software architecture and natural language processing in partnership with the Federal
University of São Carlos (UFSCAR).
3.2.4. Supermercado Now
B2W acquired Supermercado Now, an innovative e-commerce platform focused on the online
supermarket category. The business model, of proven success in other countries, has great growth
opportunity in Brazil and will allow B2W to expand its presence in the category, opening a new growth
front and offering an even more complete assortment to customers.
3.3. Innovation Engine
IF – Innovation and Future, is the Americanas Universe innovation engine, responsible for building
disruptive businesses and leveraging the various initiatives within Americanas and B2W Digital. During
the year, consistent advances were observed on the most diverse fronts of IF's operations.
3.3.1. Ame
Ame Digital continues to rapidly develop its extensive roadmap. The app already has more than 6.5 million
downloads in just over 18 months of operation. Currently, Ame already is present in more than 1.5 million
stores, including 63 thousand organic accredited storeowners.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
In order to accelerate its presence in the physical and online world, Ame has been establishing
important partnerships with acquirers, card brands and technology platforms for retail, such as:
Cielo, Stone, Matercard, Linx and Vtex.
Americanas continues to develop exclusive features for the physical world. Thus, Ame is already
accepted in all 1,700 Americanas stores throughout Brazil.
In December 2019, the partnership with Banco do Brasil was announced to offer a co-branded
credit card through the application. The card, which uses the concept of digital first, will have the
Ame Digital app as its main channel of relationship with the customer.
Ame continues to develop new features and increasingly becomes a powerful one-stop-app.
During the quarter, new features were launched, such as donations to NGOs, mini-games and a
cold beer delivery pilot, through Ame Flash. Ame already has more than 35 features in order to
simplify the customer's life
In December 2019, Ame Pro (POS and ERP Mobile) was launched, a complete solution for tenant
management in the physical world, with features such as payment, inventory and treasury
management for points of sale. Ame Pro has native integration with Ame and B2W Marketplace.
Ame is the official payment method for the “Rio de Janeiro Street Carnival 2020”. During the
event, more than 10,000 street vendors will be accredited to sell with Ame, impacting millions of
people.
Ame Go
In 2019 Ame Go was launched, a store format that offers an innovative experience with exclusive
technology in Brazil, allowing customers to buy products without queues or checkout. The store uses
artificial intelligence, machine learning and computer vision, refrigerators and shelves are integrated
with sensors that detect when products are removed or returned from the shelves. During the year, the
unassisted sales experiment was expanded through the opening of 2 Ame Go stores and 1 itinerant Ame
Go store, located in Rio de Janeiro and São Paulo.
Ame Flash
Ame Flash, a proprietary crowdshipping platform that connects independent couriers to the O2O
logistics network, keeps developing. Currently, more than 100 stores in Rio de Janeiro and São Paulo
offer Ship From Store services from the platform.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Pedala and Courri
In December 2019, Ame completed the acquisition of startups Pedala and Courri, which specialize in fast
and sustainable deliveries by bicycles and scooters. The acquisition aims to accelerate the operation of
Ame Flash, making deliveries in large urban centers with different low-carbon modes, in addition to
expanding the network of connected partner deliverers, allowing the acceleration of the “Ship from
Store”.
3.3.2. LET’S – Logistics and Distribution
LET'S, a shared management platform for Americanas and B2W's logistics assets, continuously promotes
the concept of “Everything. Every time. Anywhere. ”, accelerating and consolidating O2O initiatives as the
main vehicles to improve our customers' purchasing journey. In 2019, the combined O2O modalities
surpassed the R$ 2 billion mark in GMV (+ 153% vs 2018).
o Infinite Shelf: Americanas assisted sales operation for products offered on the digital
platform (1P and 3P). In the 4Q19, the operation had an average ticket approximately 15
times higher than the physical stores and an increase of 57% compared to 4Q18.
o Click and Collect: Customer buys online and picks up at the physical store. In 2019 we
became the largest network of pick-up points in Brazil, with more than 8,000 connected
points (Americanas, sellers stores and partner points) in more than 5,000 cities in Brazil,
offering to 99% of the Brazilian population access to the service.
o LASA Seller: Americanas increasingly connected to B2W's marketplace. In 2019, the
available assortment expanded 3 times and sales grew 2.5 times over the previous year.
During Red Friday, Americanas was the biggest seller of B2W Marketplace in terms of
items sold.
o Click and Collect Now: Available in all 1,700 Americanas, allowing the customer to buy
the store's inventory online and pick up the product within 1 hour without shipping costs.
The modality continues to develop fast, reaching the mark of more than 100 thousand
orders in December.
o Ship from Store: Buy products online from the nearest Americanas and receive them
within 2 hours at the address you desire. Available in 110 cities, of which 13 are capitals,
totaling 300 stores.
In the 4Q19, LET'S started the operation of three new distribution centers, located in the states
of Pará, Minas Gerais and Rio Grande do Sul, with the objective to reduce the distance to the final
consumer and increase the region eligible for deliveries in up to 24 hours. With the
inaugurations, LET'S totals 18 distribution centers distributed in all regions of the country.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
3.4. Client Base
Pursuing the strategic objective of becoming increasingly relevant in our customers’ daily lives, in 2019,
the Americanas Universe reached the mark of 38 million active clients, considering those who made at
least one purchase in the last 12 months.
In addition, the analytical capacity for understanding the client has been expanded, especially in
behavioral segmentations. This individualized view assists in directing marketing actions for each type of
customer, at each moment of their relationship with stores, websites and products. In this sense, an
important initiative during 2019 was the creation of the discounts area in the Americanas app. In the area
called "Aqui tem Desconto", the customer can activate exclusive offers available in stores. There were
more than 1.4 million customers who activated offers on the app, reaching approximately 17 million
product activations with discounts.
More than 4 million requests of satisfaction surveys were made, and the presence of Americanas
Universe brands on social media was also intensified, concluding the year with more than 27 million likes
on Facebook and more than 11 million followers on Instagram, generating an impact higher than 10 billion
views.
3.5. Customer Satisfaction Survey
On the physical platform, the customer satisfaction is measured with the Net Promoter Score (NPS)
methodology, using survey data from e-mail, presential and by store totems. More than 700 thousand
surveys were carried out in all stores and achieved more than 80% of promoter customers, those who
attribute a satisfaction score greater than 90 points. In 2019, Americanas ended the year with an NPS of
80 points.
The digital platform brands were once again considered as reference in customer service, reaching the
highest levels of Reclame Aqui evaluation, with an average score of 7.6, while competitors had an average
score of 6.7. In addition, 75.9% of customers who registered complaints indicated they would buy again
on B2W's brands, while only 55.0% of customers would buy again on competitors' websites. Regarding the
average index of solution of the brands, B2W has an index of 87.5% on the Reclame Aqui website, while
competitors register an index of 82.3%.
3.6. Economic Scenario
The year of 2019 was marked by a gradual improvement in the economic environment, with the recovery
of GDP, inflation control and the basic interest rate (Selic) reduction, which reached the historic level of
4.5% p.y. in December. Additionally, the inflation measured by the IPCA ended the year at 4.31%, 0.56 p.p.
above the rate recorded in 2018, remaining within the target.
Throughout the year, the unemployment rate showed a downward trend, reaching an average rate of
11.9% when in 2018 reached 12.3%, reflecting the gradual improvement in the economy. In line with this
positive trend, the year was also marked by a recovery in retail trade, with sales volume, as measured by
IBGE's Monthly Survey of Trade (PMC), up 1.8%, the third consecutive increase since 2017.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
4. OVERVIEW OF THE RESULTS
The accounting information that serves as the basis for the comments that follow are presented in accordance with the international financial reporting standards (IFRS), and the rules issued by the Brazilian Securities Exchange Commission (CVM) and in Reais (R$). In order to maintain the comparability between the periods, the results presented for 4Q19 and year 2019 were adjusted in order to disregard non-recurring tax credits arising from a final and unappealable action regarding the inclusion of ICMS in the PIS/COFINS calculation basis, as the Fact Material published on 12/20/2019. The comparisons refer to the 4th quarter of 2018 (4Q18) and year 2018 adjusted by the effects of CPC 06 (R2)/IFRS 16.
Total GMV +17.2% GMV continues to grow rapdly, combining an acceleration of B2W Marketplace (GMV +49.7%) and a solid growth of the physical platform (Gross Revenue +8.1%), reflecting the success in the execution of the year’s end events.
Stores Expansion Finalizing the expansion cycle “85 Years in 5 - Somos Mais Brasil”, the year of 2019 registered a record number of 230 stores, exceeding the original target of the plan and reaching 739 Brazilian cities.
Cash Flow Generation In 2019, the Americanas Universe cash generation reached R$ 586.8 millions, with R$ 363.4 millions through the physical platform and R$ 189.9 through the digital platform.
Adjusted EBITDA +10.9% and +0.9 p.p. Adjusted EBITDA Margin The recurring EBITDA advanced due to margin expansion in the physical platform and the progressive profitability increase in the digital platform with the marketplace growth.
Recurring Net Income +65.4% and +1.0 p.p. Net Margin Growth driven by the increase in operating income, as well as the decrease in net financial income. Considering the effect of tax credits, Net Income increased 130.4% yoy.
Consistent improvement in the Working Capital The consolidated Working Capital ended the year in 3 days (vs 36 days in 2018), driven by the significant improvement of 20 days in the operational cycle of the physical platform.
Increased participation of O2O initiatives The multiple O2O initiatives of Lojas Americanas and B2W together registered more than R$ 2 billion of GMV in 2019, presenting a growth of 153% over the previous year.
Rapid development of Ame Digital Ame, the one-stop-app of the American Universe, continues to develop its extensive roadmap, expanding the penetration of on-us sales and growing more and more in the off-us environment, being currently accepted in more than 1.5 million establishments.
CONSOLIDATED HIGHLIGHTS (R$ MM) 4Q19 4Q18 Δ 2019 2018 Δ
GMV 11,483.0 9,522.2 20.6% 32,599.8 27,804.0 17.2%
Net Revenue* 6,460.7 5,918.4 9.2% 18,662.7 17,689.8 5.5%
Gross Profit* 2,276.7 2,045.7 11.3% 6,601.1 6,059.6 8.9%
Gross Margin (%NR) 35.2% 34.6% +0.6 p.p. 35.4% 34.3% +1.1 p.p.
Adjusted EBITDA* 1,306.3 1,123.7 16.2% 3,456.1 3,115.2 10.9%Adjusted EBITDA Margin (%NR) 20.2% 19.0% +01 p.p. 18.5% 17.6% +0.9 p.p.
Adjusted Net Income* 398.0 245.5 62.1% 505.5 305.6 65.4%Adjusted Net Margin (%NR) 6.2% 4.1% +2.1 p.p. 2.7% 1.7% +1.0 p.p.
Net Income 596.6 245.5 143.0% 704.1 305.6 130.4%Net Margin (%NR) 9.2% 4.1% +5.1 p.p. 3.8% 1.7% +2.1 p.p.
* Excluding the effects of non-recurring tax credits.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
5. CORPORATE GOVERNANCE
Values such as transparency, equity, responsibility, ethics, clarity of accountability and greater fluidity of
information are part of Americanas' good governance practices. Based on these principles, the Board of
Directors, the Executive Board and the internal Committees guide business decisions.
The Company has been listed on B3 - Brasil, Bolsa, Balcão since 1940 and has a shareholder base
composed of common shares (LAME3) and preferred shares (LAME4). Since 2017, it has been in the Level
1 of Corporate Governance of B3’s segment.
The preferred shares are part of the Ibovespa, the most important indicator of the average performance
of quotations on the Brazilian stock market. In addition, Americanas is also part of other important
indexes such as IBRX-50, ISE, ITAG, ICO2, ICON, IVBX-2, MLCX, MSCI-Barra and FTSE.
5.1. Board of Directors
The Board of Directors is composed of a minimum of three and a maximum of ten directors with a 2-year
term, with the right to re-election.
The Board of Directors has the duties assigned to it by law and by the Bylaws, also having the following
competencies: (i) to elect and remove the Officers, establishing duties and replacement criteria; (ii)
determine the distribution of the remuneration fixed by the General Meeting to its members and Officers;
(iii) resolve on the issue of shares and subscription bonuses and commercial promissory notes; (iv) to
express its opinion regarding corporate reorganizations, capital increases and other transactions that
imply a change of control.
Americanas currently has eight members on the board, two of whom are independent, reaching the 25%
board independence mark, as shown in the table below.
Board of Directors Position Carlos Alberto da Veiga Sicupira Chairman
Cecília Sicupira Member
Claudio Moniz Barreto Garcia Member
Miguel Gomes Pereira Sarmiento Gutierrez Member
Paulo Alberto Lemann Member
Paulo Veiga Ferraz Pereira Independent Member
Roberto Moses Thompson Motta Member
Sidney Victor da Costa Breyer Independent Member
Eduardo Saggioro Garcia Alternate
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
5.2. Executive Board
The Executive Board is composed of a minimum of two and a maximum of twelve Directors, one
appointed as Superintendent Director, one Investor Relations Officer and the others without special
designation, elected by the Board of Directors for a period of 1 year with the right to reelection.
The Executive Board acts as a collegiate body in the deliberations on all matters that must be submitted
to the Board of Directors, such as, for example, Management Report and Financial Statements, Monthly
Balance Sheets, proposals for capital increase and dividend distribution, and any decision which is
beyond the competence of the Director.
Americanas currently has twelve members on the Executive Board, which are represented in the table
below.
Excutive Board Members Position Miguel Gomes Pereira Sarmiento Gutierrez Superintendent Director
Carlos Eduardo Rosalba Padilha Finance and Investor Relations Director
Andrea Silva Barra Director
Anna Christina Ramos Saicali Director
Celso Alves Ferreira Louro Director
João Guerra Duarte Neto Director
José Timótheo de Barros Director
Marcelo Pinto Director
Marcio Cruz Meirelles Director
Maria Christina Ferreira Nascimento Director
Milena de Andrade Sacramento Director
Welington de Almeida Souza Director
5.3. The Role of the Committees and the Auditors
The Board of Directors and the Executive Board determine the Company's guidelines supported by five
internal Committees: Finance Committee, People and Compensation Committee, Digital Committee,
Audit Committee and Sustainability Committee. They function as working groups, with defined
objectives to report themes and/or situations they have examined, as well as to present their
recommendation to the highest governance body of Americanas.
The Committees meet at least once a quarter, or extraordinarily, whenever called by their Chairman, with
the exception of the Sustainability Committee, which meets weekly.
Finance Committee
The Finance Committee's main objective is to inform and advise the Board of Directors regarding all
decisions related to the Company's financial policies, ensuring that the Company always complies with
its financial obligations, policies and responsibilities.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
People and Compensation Committee
The People and Compensation Committee main objective is to inform the Board of Directors regarding all
decisions related to the Company's personnel and compensation policies, aiming (i) that the members of
the Board of Directors, the Executive Board and all associates to have incentives to achieve exceptional
results, to be adequately rewarded; and (ii) that the Company is able to attract, retain and develop the
best professionals and leaders, ensuring the succession of its main executives.
Digital Committee
The Digital Committee main objective is to assist the Board of Directors in fulfilling its responsibilities of
digital supervision in the areas of technology and technology involved in commerce through the internet,
television, mobile telephony, directly to the consumer as well as emerging channels.
Audit Committee
The Audit Committee is included in the Company’s Bylaws since 2019 General Shareholders’ Meeting. The
purpose of the committee is to assist the Board of Directors to monitor and control the quality of
financial statements, internal controls, risk management and compliance.
Sustainability Committee
The Sustainability Committee main objective is to assist the Board of Directors defining the best
management practices, aiming the balance between the economic, environmental and social pillars.
5.4. Fiscal Council
Americanas also has a Fiscal Council, of non-permanent functioning, composed by four members, two
elected by the controllers, one by the preferred shareholders and one by the ordinary shareholders,
which are represented in the table below.
Fiscal Council Members Position Domenica Eisestein Noronha Member (nominated by ordinary shareholders)
Márcio Luciano Mancini Member Ricardo Scalzo Member (nominated by preferred shareholders)
Vicente Antonio de Castro Ferreira Member André Amaral de Castro Leal Alternate
Carlos Alberto de Souza Alternate Pedro Carvalho de Mello Alternate Ricardo Reisen de Pinho Alternate
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
5.5. Independent Auditors
In accordance with CVM Instruction 381, the Company informs that the independent auditors KPMG
Auditores Independentes and PricewaterhouseCoopers, provided only external audit services in the first
half and second half of 2019, respectively. The Company's contracting services policy, other than
external auditing, from independent auditors ensures that there is no conflict of interest and that the
contracted services do not compromise the independence of its auditors. Thus, the company seeks to
provide its auditors with objective service and to issue an impartial opinion on the Company's Financial
Statements.
5.6. 100% Tag Along to all Shareholders
Since 2006 Americanas' Bylaws has the commitment to grant full Tag Along (100%) to the Company's
common and preferred shares. As a result, all Americanas shareholders are treated equally in case the
Company’s control changes, with the right to sell their shares under the same conditions negotiated by
the controlling shareholders being ensured.
5.7. Dividends Policy
In 2019, it was proposed to shareholders to distribute profits of R$ 292.9 million, as interest on capital
(before income tax withheld at source), based on net income for the year. During the year, the Company's
capital increase was also proposed with the possibility of paying in the interest on capital credit. The
Company's Bylaws, in line with the principles of current legislation, set the minimum amount for
dividends at 25% of net income for the year, after the formation of a legal reserve of 5%.
5.8. Shares Repurchase Program
The Company does not have a current Share Repurchase Program.
5.9. Policies and Regulations
During 2019, Americanas maintained its commitment to fight corruption and promote ethics in
relationship with all its stakeholders. In addition to the Code of Ethics and Conduct, approved by the
Board of Directors and the Executive Board, the Company has a Compliance and Anti-Corruption Policy,
valuing integrity, transparency and solidarity.
The Company also has 14 other policies and regulations, which contribute to the governance process by
establishing strict rules and severe punishments for offenders and those who commit fraudulent acts, in
order to be aligned with the best Corporate Governance practices.
In 2019, following the sustainability strategy, defined in accordance with the United Nations (UN) Agenda
2030 Sustainable Development Goals (SDGs), Americanas became a signatory of the UN Women
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Empowerment Principles. The Company also joined the Ethos Institute's Racial and Gender Equality
Coalition, whose mission is to mobilize, raise awareness and assist companies manage their business in
a socially responsible manner, making them partners in building a sustainable and just society. In this
way, the Company reinforces its commitment to reduce inequalities and promoting equal opportunities
for all.
During the year, the evolution of the level of engagement in adherence to the UN Global Compact, of
which the Company has a signatory since 2013, was maintained and brings together companies
committed to the best corporate practices regarding respect for human rights, especially in relation to
labor issues, the environment and business ethics.
Americanas promotes and values the dissemination of protection and valorization of human rights
principles, highlighting these terms in commercial contracts aiming to collaborate to eradicate forced
labor and combat any practice that disrespect the Principle of Human Dignity in the production chain of
value. To reinforce this commitment, in 2019, the Business Charter for Human Rights and the Promotion
of Decent Work, also from the Ethos Institute, was signed seeking to continue promoting sustained,
productive and inclusive economic growth. All contracts impose punitive clauses such as the provision
of fines and immediate disqualification in the case of this type of irregularity. In addition, the Company
supports several initiatives in the public and private sectors, engaged in identifying the risks and
potential impacts of violations of human rights associated with its activities.
6. PEOPLE COMES FIRST
Americanas believes in and invests in the potential of those who are part of our team. It was the
dedication and work of our associates that brought us here and that will continue to move us forward.
We continue to believe that we have the best people and that is why we bring them the best practices in
the world, betting that they will build the best Company that we can be.
6.1. Talent attraction and recruitment
The success of the business is in people’s development, in an environment of constant learning, which
fosters innovation. Daily impacting the lives of millions of people, with more than 1,700 stores and a team
of more than 37 thousand employees, we offer several opportunities for young people who want to start
a successful career.
In order to guarantee more assertive and fair recruitment and selection processes, with the support of
automated and intelligent tools, the Company relies solely on the professional and behavioral profiles of
people for hiring.
Among the entrance doors to the Company, we highlight the Internship Program, Trainee Program, New
Talents Program, Summer Job Program, Summer Job Master Program, New Talents Master Program,
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
MBA Program and Young Apprentice Program. In addition, Americanas promotes the inclusion and
qualification of people with disabilities (PCD) in its team of associates. In 2019, more than 560 new
talents, 34 trainees and 19 summer jobs were hired to work in different areas of the Company. More than
250 interns were also selected, in the program that had more than 60 thousand enrolled.
Reinforcing our commitment to having the best talents, during the year we intensified our partnership
with educational institutions in Brazil and abroad to attract talent. In 2019, we increased our participation
in events with universities by 300%.
6.2. Corporate Education
Training and development are priorities at the Company. The training seeks not only to ensure that
associates are aligned with the Company's objectives, but also to provide constant learning and growth
opportunities.
In this context, the following programs stand out:
DNA Leadership Program. Through a complex work of people analytics, developed together with
research professors from Harvard and West Point, we identified and statistically proved the attributes
that differentiate an exceptional manager, who makes him “out of the curve”, and we built a Leadership
Program. This program aimed at our store managers, aims to change the level of our method of training
professionals and internal development.
Continuous Improvement Program. The Company promoted more than 17 thousand hours of training in
method through the Lean Six Sigma Program (Master Black Belts, Black Belts, Green Belts and Yellow
Belts), in addition to other topics such as process management, project development and problem
solving.
Faculty of Retail. Development incentive program that offers scholarships to associates who excel in
their roles and have been with the Company for more than 2 years.
The Company also has the American Development Center (CDA). Created in 2005 based on the concept
of corporate university, the CDA is headquartered in Rio de Janeiro, 43 centers across the country and a
virtual learning environment. In 2019, training was intensified, totaling 491 thousand hours.
Engagement
The Company carries out several initiatives with the objective of strengthening the culture, providing
integration between associates and constant dialogue between areas. It is worth mentioning the
Engagement Survey, conducted annually with associates to find out what their perception on important
topics is. Based on the results, an action plan is developed and implemented.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
In 2019, Americanas, B2W Digital, Ame, and LET’S were certified by the Great Place to Work (GPTW). This
was an important recognition made by the associates, of the Companies' commitment to continuously
invest in people and their work environments.
Periodically, Americanas conducts performance reviews of all associates, with the objective of
promoting continuous learning and development.
6.2.1. Workplace
The Company has Workplace, a tool that values network communication and facilitates team
management. It also allows senior management to communicate with all members at once, and
members can comment, question and provide feedback on communications. 2019 was marked by the
widespread use of the tool, which covers all of our business units.
Workplace also encourages the production of content in a collaborative way. This allows associates to
be constantly invited to get involved in decision making and contribute to the main projects of the
Company.
7. SUSTAINABILITY
In the quest to collaborate for a sustainable society and share its values, throughout 2019, initiatives
were carried out aligned with the Universal Principles of the Global Compact and the Sustainable
Development Goals (SDGs) of the United Nations (UN) Agenda 2030, that seek to balance the
environmental, social and economic dimensions of the business.
For the sixth consecutive year, Americanas and B2W's shares are components of B3's Corporate
Sustainability Index (ISE) and are included in B3's Carbon Efficient Index (ICO2).
7.1. Social and Environmental Management
Americanas seeks to work with communities through social projects and support for external initiatives
aligned with the UN 2030 Agenda. Present in all states of Brazil, the Company seeks to develop projects
in regions close to its operations, aiming to promote access to quality education, formal work for young
people in situation of social vulnerability, reduction of inequalities, improvement of quality of life and
social transformation.
In addition, in partnership with the Instituto de Rumo Náutico, young people in situation of social
vulnerability were trained as retail operators within the “Grael Project” and as logistics operators in the
partnership with the NGO Galpão Aplauso. Both projects are supported by BNDES.
Throughout the year, other projects were continued, such as “Livros nas Praças”, which promotes access
to literature in communities in Rio de Janeiro and São Paulo through a library bus; the running and
walking circuit “Todo Mundo Vai”, a project focused on quality of life and well-being; the socio-cultural
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
urban intervention project “Grafitarte”, which is exclusively sponsored by Submarino; and the “Natal Sem
Fome” campaign, promoted by the NGO Ação Cidadania, which aims to end the country's hunger. Aiming
to show the future possibilities for cities and the importance of combating global warming and its
effects, the exhibition " The Next Day ", held in Rio de Janeiro, was also sponsored by the Company.
As a way to develop a project of national relevance, the Company operates in the Amazon, in partnership
with the Amazonas Sustainable Foundation (FAS) and support from the National Bank for Economic and
Social Development (BNDES), to promote digital inclusion, education, income generation and waste
management so that riverside community and indigenous people in the region remain in their
communities with better living conditions, contributing to combat illegal deforestation. Also in
partnership with FAS, Americanas is promoting the sale of products made by residents of the Amazon
Rainforest throughout Brazil, valuing local handicrafts and helping to conserve people's way of life. All
the income obtained from the sale of the products goes to the communities and the development of the
project.
The Carbon Disclosure Project (CDP) questionnaire is answered voluntarily, aiming to increase
transparency and management of emissions. Additionally, the greenhouse gas (GHG) emissions inventory
was published for the ninth consecutive year, receiving the Gold seal from the GHG Protocol program
since 2016.
7.2. Inclusion and Diversity
Americanas is part of the “Women Empowerment Principles”, from UN Women, as well as the “Business
Coalition for Racial and Gender Equity” and the “Business Charter for Human Rights and the Promotion of
Decent Work”, both from the Ethos Institute, reinforcing our commitment to promote diversity and
equity.
In 2019, women accounted fo 49.79% of the employees of the physical platform, representing 60.56% of
management positions, whereas on the digital platform, women account for 50.13% of their members,
representing 36.27% of management positions and 11.11% of the statutory board. On the physical
platform, 8,474 members were promoted and took on new positions, of which 47.78% are women, while
on the digital platform 1,405 members were promoted and took on new positions, of which 52.60% are
women.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
7.3. Awards and Recognitions
Americanas invests in actions that improve its management processes and promote diversity and
sustainability. As a result of this effort, the Company received several awards and recognitions that
reinforce the brand's value, its reputation and its commitment to customers and employees. The
highlights of 2019 were:
1st place in the “Retail” category - Reputation Pulse (Reputation Institute): The ranking aims to
facilitate reputation management for leaders to create better companies for society.
11th place - Most Valuable Brazilian Brands (Interbrand): This analysis assesses and interrelates
brands' financial performance, perception and influence with their customers. Americanas'
brand value in 2019 was R$ 1,304MM, an increase of 13% compared to the previous year.
Listed as one of the most sustainable companies in the country - Exame Sustainability Guide
(Exame Magazine): The guide seeks to evaluate and disseminate the best social responsibility
practices adopted by companies in Brazil.
Green Seal - Chico Mendes Socioenvironmental Award (Chico Mendes Institute): The award
seeks to recognize sustainable initiatives, with the best successful cases of companies,
certifying institutions with the Green Seal. Americanas won the seal for the Grael Project case.
Americanas and B2W are first in the “Retail Network” and “E-commerce” categories - Época
Reclame Aqui Award (Reclame Aqui and Época Magazine): Brazil's service award, evaluated by
popular vote, identifies, awards and disseminates successful practices for companies that
respect the consumer.
Procon Carioca Award for customer service: The award recognizes companies that excel in
customer service. B2W was the only retail company awarded the award in December 2019.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
APPENDIX I – CONSOLIDATED INCOME STATEMENT
Adjusted EBITDA - Operating income before interest, taxes, depreciation and amortization, other operating income / expenses, equity income,
minority interest.
Lojas Americanas S.A.
Income Statement
(in million of Brazilian reais) 4Q19 4Q18w/ IFRS 16
Variation 2019 2018w/ IFRS 16
Variation
Gross Merchandise Volume (GMV) 11,483.0 9,522.2 20.6% 32,599.8 27,804.0 17.2%
Gross Sales and Services Revenue 7,642.2 6,913.2 10.5% 22,179.7 20,842.8 6.4%
Taxes on sales and services (1,181.5) (994.8) 18.8% (3,517.0) (3,153.0) 11.5%
Net Sales and Services Revenue 6,460.7 5,918.4 9.2% 18,662.7 17,689.8 5.5%
Cost of goods and services sold (4,184.0) (3,872.7) 8.0% (12,061.6) (11,630.2) 3.7%
Gross Profit 2,276.7 2,045.7 11.3% 6,601.1 6,059.6 8.9%
Gross Margin (% NR) 35.2% 34.6% +0.6 p.p. 35.4% 34.3% +1.1 p.p.
Operating Revenue (Expenses) (1,346.7) (1,246.7) 8.0% (4,514.5) (4,167.4) 8.3%
Selling expenses (893.7) (862.4) 3.6% (2,842.0) (2,705.6) 5.0%
General and administrative expenses (76.7) (59.6) 28.7% (303.0) (238.8) 26.9%
Depreciation and amortization (376.3) (324.7) 15.9% (1,369.5) (1,223.0) 12.0%
Operating Income before Net Financial Result 930.0 799.0 16.4% 2,086.6 1,892.2 10.3%
Net Financial Result (398.3) (440.1) -9.5% (1,525.2) (1,564.8) -2.5%
Other operating income (expenses)* (71.6) (45.0) 59.1% (145.8) (117.4) 24.2%
Minority interest (21.8) 4.2 -619.0% 121.1 133.3 -9.2%
Income tax and social contribution (40.3) (72.6) -44.5% (31.2) (37.7) -17.2%
Net Income of the Period 398.0 245.5 62.1% 505.5 305.6 65.4%
Net Margin (% NR) 6.2% 4.1% +2.1 p.p. 2.7% 1.7% +1 p.p.
Adjusted EBITDA 1,306.3 1,123.7 16.2% 3,456.1 3,115.2 10.9%
Adjusted EBITDA Margin (% NR) 20.2% 19.0% +1.2 p.p. 18.5% 17.6% +0.9 p.p.
*Under the old accounting norm, called "non-operational result"
Consolidated
Quarters ended in December 31
Consolidated
Periods ended in December 31
Note: Excluding the effects of non-recurring tax credits.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
APPENDIX II – PARENT COMPANY INCOME STATEMENT
Adjusted EBITDA - Operating income before interest, taxes, depreciation and amortization, other operating income / expenses, equity income,
minority interest.
Lojas Americanas S.A.
Income Statement
(in million of Brazilian reais) 4Q19 4Q18w/ IFRS 16
Variation 2019 2018w/ IFRS 16
Variation
Gross Sales and Services Revenue 4,915.6 4,499.4 9.3% 14,006.5 12,959.5 8.1%
Taxes on sales and services (598.2) (508.9) 17.5% (1,837.5) (1,609.5) 14.2%
Net Sales and Services Revenue 4,317.4 3,990.5 8.2% 12,169.0 11,350.0 7.2%
Cost of goods and services sold (2,680.3) (2,490.1) 7.6% (7,432.7) (6,946.1) 7.0%
Gross Profit 1,637.1 1,500.4 9.1% 4,736.3 4,403.9 7.5%
Gross Margin (% NR) 37.9% 37.6% +0.3 p.p. 38.9% 38.8% +0.1 p.p.
Operating Revenue (Expenses) (817.0) (758.5) 7.7% (2,716.8) (2,519.3) 7.8%
Selling expenses (556.3) (533.8) 4.2% (1,761.7) (1,667.8) 5.6%
General and administrative expenses (26.0) (28.4) -8.5% (115.6) (114.1) 1.3%
Depreciation and amortization (234.7) (196.3) 19.6% (839.5) (737.4) 13.8%
Operating Income before Net Financial Result 820.1 741.9 10.5% 2,019.5 1,884.6 7.2%
Net Financial Result (264.5) (281.4) -6.0% (939.6) (980.4) -4.2%
Equity accounting (15.2) (38.0) -60.0% (232.5) (246.0) -5.5%
Other operating income (expenses)* (64.3) (56.5) 13.8% (100.2) (97.7) 2.6%
Statutory interest (30.0) (22.6) 0.3 (30.0) (22.6) 0.3
Income tax and social contribution (48.1) (97.9) -50.9% (211.7) (232.3) -8.9%
Net Income of the Period 398.0 245.5 62.1% 505.5 305.6 65.4%
Net Margin (% NR) 9.2% 6.2% +3,0 p.p. 4.2% 2.7% +1.5 p.p.
Adjusted EBITDA 1,054.8 938.2 12.4% 2,859.0 2,622.0 9.0%
Adjusted EBITDA Margin (% NR) 24.4% 23.5% +0.9 p.p. 23.5% 23.1% +0.4 p.p.
*Under the old accounting norm, called "non-operational result"
Parent Company
Quarters ended in Deceber 31
Parent Company
Periods ended in December 31
Note: Excluding the effects of non-recurring tax credits.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
APPENDIX III – CONCILIATION OF NON-RECURRING EFFECTS ON CONSOLIDATED INCOME STATEMENT
Adjusted EBITDA - Operating income before interest, taxes, depreciation and amortization, other operating income / expenses, equity income,
minority interest.
Lojas Americanas S.A.
Income Statement
(in million of Brazilian reais) 4T19 Reported
Adjustment4T19
Adjusted
4T19 Reported
Adjustment4T19
Adjusted
Gross Merchandise Volume (GMV) 11,483.0 - 11,483.0 32,599.8 - 32,599.8
Gross Sales and Services Revenue 7,642.2 - 7,642.2 22,179.7 - 22,179.7
Taxes on sales and services (887.9) 293.6 (1,181.5) (3,223.4) 293.6 (3,517.0)
Net Sales and Services Revenue 6,754.3 293.6 6,460.7 18,956.3 293.6 18,662.7
Cost of goods and services sold (4,184.0) - (4,184.0) (12,061.6) - (12,061.6)
Gross Profit 2,570.3 293.6 2,276.7 6,894.7 293.6 6,601.1
Gross Margin (% NR) 38.1% - 35.2% 36.4% - 35.4%
Operating Revenue (Expenses) (1,433.8) (87.1) (1,346.7) (4,601.6) (87.1) (4,514.5)
Selling expenses (893.7) - (893.7) (2,842.0) - (2,842.0)
General and administrative expenses (163.8) (87.1) (76.7) (390.1) (87.1) (303.0)
Depreciation and amortization (376.3) - (376.3) (1,369.5) - (1,369.5)
Operating Income before Net Financial Result 1,136.5 206.5 930.0 2,293.1 206.5 2,086.6
Net Financial Result (248.7) 149.6 (398.3) (1,375.6) 149.6 (1,525.2)
Other operating income (expenses)* (71.6) - (71.6) (145.8) - (145.8)
Minority interest (62.3) (40.5) (21.8) 80.6 (40.5) 121.1
Income tax and social contribution (157.3) (117.0) (40.3) (148.2) (117.0) (31.2)
Net Income of the Period 596.6 198.6 398.0 704.1 198.6 505.5
Net Margin (% NR) 8.8% 6.2% 3.7% 2.7%
Adjusted EBITDA 1,512.8 206.5 1,306.3 3,662.6 206.5 3,456.1
Adjusted EBITDA Margin (% NR) 22.4% 20.2% 19.3% 18.5%
*Under the old accounting norm, called "non-operational result"
Consolidated
Quarters ended in December 31
Consolidated
Periods ended in December 31
Note: Excluding the effects of non-recurring tax credits.
Lojas Americanas S.A. Management Report 2019 (A free translation of the original in Portuguese)
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
APPENDIX IV – CONCILIATION OF NON-RECURRING EFFECTS ON PARENT COMPANY INCOME STATEMENT
Adjusted EBITDA - Operating income before interest, taxes, depreciation and amortization, other operating income / expenses, equity income,
minority interest.
Lojas Americanas S.A.
Income Statement
(in million of Brazilian reais)4T19
ReportedAdjustment
4T19 Adjusted
4T19 Reported
Adjustment4T19
Adjusted
Gross Sales and Services Revenue 4,915.6 - 4,915.6 14,006.5 - 14,006.5
Taxes on sales and services (410.9) 187.3 (598.2) (1,650.2) 187.3 (1,837.5)
Net Sales and Services Revenue 4,504.7 187.3 4,317.4 12,356.3 187.3 12,169.0
Cost of goods and services sold (2,680.3) - (2,680.3) (7,432.7) - (7,432.7)
Gross Profit 1,824.4 187.3 1,637.1 4,923.6 187.3 4,736.3
Gross Margin (% NR) 40.5% 37.9% 39.8% 38.9%
Operating Revenue (Expenses) (871.5) (54.5) (817.0) (2,771.3) (54.5) (2,716.8)
Selling expenses (556.3) - (556.3) (1,761.7) - (1,761.7)
General and administrative expenses (80.5) (54.5) (26.0) (170.1) (54.5) (115.6)
Depreciation and amortization (234.7) - (234.7) (839.5) - (839.5)
Operating Income before Net Financial Result 952.9 132.8 820.1 2,152.3 132.8 2,019.5
Net Financial Result (152.5) 112.0 (264.5) (827.6) 112.0 (939.6)
Equity accounting 29.9 45.1 (15.2) (187.4) 45.1 (232.5)
Other operating income (expenses)* (64.3) - (64.3) (100.2) - (100.2)
Statutory interest (42.2) (12.2) (30.0) (42.2) (12.2) (30.0)
Income tax and social contribution (127.2) (79.1) (48.1) (290.8) (79.1) (211.7)
Net Income of the Period 596.6 198.6 398.0 704.1 198.6 505.5
Net Margin (% NR) 13.2% 9.2% 5.7% 4.2%
Adjusted EBITDA 1,187.6 132.8 1,054.8 2,991.8 132.8 2,859.0
Adjusted EBITDA Margin (% NR) 26.4% 24.4% 24.2% 23.5%
*Under the old accounting norm, called "non-operational result"
Consolidated
Quarters ended in December 31
Consolidated
Periods ended in December 31
Note: Excluding the effects of non-recurring tax credits.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
1. Operational context Lojas Americanas S.A. (“LASA” or “Company”), headquartered at Rua Sacadurura Cabral 102, Saúde, Rio de Janeiro – RJ, Zip Code 20.081-902, is a publicly traded company with shares traded on B3 – Brasil, Bolsa, Balcão under the codes LAME3 - ON and LAME4 - PN and is engaged in the retail trade of consumer products through stores in the traditional, AmericanasExpress and convenience, “Local”, models, located in the main capitals and cities of the country, as well as distribution centers.
The Company, through its subsidiaries (the “Group”), also operates e-commerce and marketplace through its subsidiary B2W COMPANHIA DIGITAL (“B2W”), that operates the following brands: Americanas.com, Submarino, Shoptime and Sou Barato, besides offering a complete platform of services in the verticals of technology, storage and customer service, consumer financing and digital payments through Ame.
2. Description of significant accounting policies The main accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently in the financial years presented, unless otherwise stated.
2.1 Basis of accounting
The preparation of the financial statements requires the use of certain critical accounting estimates and also the exercise of judgment by the Company's management in the process of applying the Group's accounting policies. Those areas that require a higher level of judgment and have greater complexity, as well as those areas in which assumptions and estimates are significant for the consolidated financial statements, are disclosed (note 3). The financial statements were prepared based on historical cost, with the exception of financial assets at fair value through profit or loss and derivative financial instruments, which are measured at fair value and financial liabilities which are measured at amortized cost. The issuance of these financial statements was authorized by the Executive Board on February 14, 2020. (a) Declaration of conformity
The individual and consolidated financial statements were prepared in accordance with international financial reporting standards International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), the accounting practices adopted in Brazil, Law 6,404/76 and pronouncements and interpretations issued by the Accounting Pronouncements Committee - CPC and ratified by the Brazilian Securities and Exchange Commission - CVM. (b) Statement of added value (DVA)
The presentation of the Statement of Added Value (DVA), individual and consolidated, is required by Brazilian corporate law and the accounting practices adopted in Brazil applicable to publicly-held companies. IFRS does not require the presentation of this statement. As a consequence, under IFRS, this statement is presented as supplementary information, without prejudice to the set of financial statements.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2.2 Change in the significant accounting policies
The following standard first adopted for the year started on January 1, 2019 had material impacts for the Group: CPC 06 (R2) / IFRS 16 - Leasing Operations The CPC 06 (R2) 16/IFRS introduced a single model of accounting for leases in the balance sheet of tenants. As a result, the group as tenant, recognized the right to use assets that represent your rights to use the underlying assets and lease liabilities that represent your obligation to make lease payments (note 16). Lessor accounting remains similar to previous accounting policies. The Group adopted the CPC 06 (R2)/IFRS 16 - Leasing Operations (see a), and used the modified retrospective approach, in which the cumulative effect of the initial adoption was recognized as an adjustment to the opening balance of retained earnings at January 1, 2019. Therefore, the comparative information presented for 2018 was not revived – i.e., is presented as previously reported in accordance with the CPC 06/IAS 17 and related interpretations. Below we present the main lines of financial statements, with the amendments introduced by the CPC 06 (R2)/IFRS 16 - Leasing Operations, on the base date of its initial adoption: Balance Sheet on January 1, 2019
Parent Company
Consolidated
Original balances
Adoption impact
Resetting opening
balances
Original balances
Adoption impact
Resetting opening
balances Non current asset 7,412,780 1,688,192 9,100,972 10,791,035 1,958,895 12,749,930 Investment 2,959,712 (14,401) 2,945,311 - - - Differed IR/CSLL 26,369 106,793 133,162 1,197,780 118,854 1,316,634 Right to use real state - 1,595,800 1,595,800 - 1,840,041 1,840,041 Current Liability 5,192,108 282,776 5,474,884 8,402,748 348,752 8,751,500 Leasing to pay – net - 282,776 282,776 - 348,752 348,752 Non current liability 7,600,767 1,627,119 9,227,886 13,615,783 1,840,858 15,456,641
Leasing to pay – net - 1,627,119 1,627,119 - 1,840,858 1,840,858 Shareholders Equity
4,924,597 (221,703) 4,702,894
6,286,125 (230,715) 6,055,410
Earnings reserve 865,667 (221,703) 643,964 865,667 (221,703) 643,964 Participation of non controlling shareholders - - - 1,361,528 (9,012) 1,352,516
In the initial adoption of IFRS 16/CPC 06 (R2), the Group used the following practical procedures permitted by the standard:
use of a single discount rate on a lease portfolio with reasonably similar characteristics; use of previous assessments on whether leases are costly; accounting for operating leases with a remaining term of less than 12 months on January 1, 2019
as short-term leases; exclusion of initial direct costs for measuring the right-of-use asset on the initial application
date; and use of retrospective analyzes to determine the lease period, when the contract includes options
for extending or terminating the lease.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The Group has also chosen not to reassess whether a contract is, or whether it contains a lease on the date of initial adoption. Instead, for contracts signed before the transition date, the Group used its valuation using IAS 17/CPC 06 (R1) and IFRIC 4 - "Determination if an Agreement contains a Lease". The standards listed below were also adopted for the first time for the year started on January 1, 2019, but had no material impact on the Group: (a) IFIC 23/ ICPC 22 - Uncertainty about Treatment of Income Taxes
This interpretation clarifies how to measure and to recognize current and deferred income tax assets and liabilities (IR/CSLL), in the light of IAS 12/CPC 32, in cases where there is uncertainty about treatments applied in the calculation of the respective taxes. The management evaluated the main tax treatments adopted by the Group in the open periods subject to question by the tax authorities and concluded that there is no significant impact to be recorded in the financial statements. Management's critical estimates, as well as the main contingent liabilities related to uncertain tax treatment of income taxes, are disclosed in notes 3 and 22, respectively. (b) IAS 12/ CPC 32 - Income taxes
The standard clarifies that the tax effects (taxes on income) on dividend distributions related to financial instruments classified in equity, must follow the classification of past transactions or events that generated distributable profits. This requirement is applicable to all income tax effects related to dividends, including distributions whose accounting treatments are similar to dividends, for example: interest on equity. (c) IAS 13/ CPC 20 – Loan costs
The amendment clarifies that if a specific loan remains open after the corresponding qualifying asset is ready for use or sale (as the case may be), it will become part of the general loans for purposes of determining the costs of loans eligible for capitalization in others qualifying assets, for which there are no specific loans. (d) IFRS 3/ CPC 15 - Business combination
The standard clarifies that the acquisition of control over a business that was previously a joint operation (under IFRS 11) of the acquirer, is a combination of business in stages (step-acquisition). Accordingly, the acquirer must remeasure the interest previously held in the joint operation at fair value, on the acquisition date. (e) IAS 28/ CPC 19 - Investment in associate, subsidiary and joint venture
IFRS 9 excludes from its scope equity interests in associates and joint ventures, which are accounted for using the equity method in accordance with IAS 28. The amendment to IAS 28 clarified that the aforementioned scope exclusion in IFRS 9 applies only to elements of investments that are accounted for using the equity method. Accordingly, the accounting of long-term financial instruments with an associate or joint venture that, in substance, are part of the net investment in these investees, but for which the equity method does not apply, must follow the requirements of IFRS 9.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2.3 Consolidation The following accounting policies are applied in the preparation of the consolidated financial statements: (a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The subsidiaries are fully consolidated from the date on which control is transferred to the Group. The consolidation is interrupted as from the date when the Group ceases to have control. The identifiable assets acquired and the contingent liabilities assumed for the acquisition of subsidiaries in a business combination are initially measured at fair values on the acquisition date. The Group recognizes the non-controlling interest in the acquiree, both at fair value and at the proportional portion of the non-controlling interest in the fair value of the acquiree's net assets. The measurement of non-controlling interest is determined on each acquisition made. Acquisition-related costs are recorded in the income statement for the year as incurred. Transactions, balances and unrealized gains on transactions between the Group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. The accounting policies of subsidiaries are changed, when necessary, to ensure consistency with the policies adopted by the Group. In the parent company's financial statements, the accounting information of subsidiaries is recognized using the equity method (note 14). (b) Loss of control in subsidiaries When the Group ceases to have control, any interest held in the entity is measured at fair value, with the change in book value recognized in the income statement. The amounts previously recognized in other comprehensive income are reclassified to income.
2.4 Presentation of information by segments The operating segments are disclosed in a manner consistent with the internal report provided to the Group's Management, which allocates resources and evaluates performance through the review of results and other information related to the operating segments. The Group's management defined its operating segments as follows:
Physical commerce - retail commerce, through Lojas Americanas stores in traditional, express and convenience stores “Local”;
Electronic commerce - commerce of products and provision of services through various non-face-to-face means, especially the Internet through the subsidiary B2W;
Others - other activities that did not reach the minimum quantitative and qualitative parameters for separate presentation.
These segments are identified based on the legal formalization of the Group's businesses and are disclosed in (note 32).
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2.5 Operations of foreign currency conversion
(a) Functional currency and presentation currency
The individual and consolidated financial statements are presented in Reais, which is the Group's functional currency. All balances have been rounded to the nearest thousands, except where otherwise indicated. (b) Transactions and balances
Foreign currency transactions, that is, all transactions that are not carried out in the functional currency are translated using the exchange rate on the dates of each transaction. Monetary assets and liabilities in foreign currency are translated into the functional currency at the exchange rate on the closing date. Gains and losses on changes in exchange rates on monetary assets and liabilities are recognized in the income statement. Non-monetary assets and liabilities acquired or contracted in foreign currency, when applicable, are converted based on the exchange rates of the transaction dates or on the fair value valuation dates when it is used. The difference in foreign currency generated when converting the financial statements of subsidiaries, whose functional currency is not the real (“R$”), to the real presentation currency (“R$”) is recognized in other comprehensive income and accumulated in equity valuation in shareholders' equity.
2.6 Cash and cash equivalents Cash and cash equivalents include cash, bank deposits and other highly liquid short-term bonds and securities, with the intention and possibility of being redeemed in the short term (up to 90 days) and with an insignificant risk of change in value.
2.7 Financial assets and liabilities (a) Classification
The Group classifies, on initial recognition, its financial assets and liabilities, as measured: (i) amortized cost; (ii) fair value through other comprehensive income (VJORA); (iii) fair value through profit or loss (VJR). The classification of financial assets according to CPC 48/IFRS 9 is generally based on the business model in which a financial asset is managed and on its contractual cash flow characteristics.
(b) Recognition and measurement
The Group performs an assessment of the objective of the business model in which a financial asset is kept in the portfolio because it better reflects the way in which the business is managed and the information is provided to management. The financial assets are initially recognized at fair value, plus transaction costs for all financial assets not classified at fair value through profit or loss. Financial assets at VJR are initially recognized at fair value, and transaction costs are charged to the income statement. Financial assets are written off when the rights to receive cash flows have expired or have been transferred, in the latter case, provided that the Group has significantly transferred all risks and benefits of ownership. If financial assets are valued at VJORA, they will be measured at fair value and changes in fair value, except for impairment losses, interest and exchange differences on debt instruments, were recognized in VJORA and accumulated in
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
the fair value reserve. Financial assets measured at VJR are subsequently recorded at fair value. Loans and receivables are recorded at amortized cost, using the effective interest rate method. The gains or losses arising from changes in the fair value of financial assets measured at VJR are presented in the income statement under "Financial income or expenses" in the year in which they occur. The exchange variations on monetary securities are recognized in the income statement. The changes in the fair value of monetary and non-monetary securities classified as VJORA are recognized in equity. When securities classified as VJORA are sold or suffer impairment, the accumulated adjustments to fair value, recognized in equity, are included in the income statement as "Financial income or expenses". The interest on securities to VJORA, calculated using the effective interest rate method, is recognized in the income statement as part of other income. The fair values of publicly quoted investments are based on current purchase prices. If the market for a financial asset (and for securities not listed on a stock exchange) is not active, the Group establishes fair value through valuation techniques. These techniques include the use of recent transactions contracted with third parties, reference to other instruments that are substantially similar, analysis of discounted cash flows and option pricing models that make the greatest possible use of information generated by the market and rely as little as possible on information generated by the administration of the entity itself. For purposes of assessing whether contractual cash flows are only principal and interest payments, ‘principal’ is defined as the fair value of the financial asset upon initial recognition. 'Interest' is defined as a consideration for the time value of money and for the credit risk associated with the principal outstanding over a given period of time and for the other basic risks and costs of borrowing (for example, liquidity risk and costs administrative costs), as well as a profit margin. The Group considers the contractual terms of the instrument to assess whether the contractual cash flows are only payments of principal and interest. This includes assessing whether the financial asset contains a contractual term that could change the timing or the value of contractual cash flows so that it would not meet this condition. (c) Clearing of financial instruments
Financial assets and liabilities are offset and the net amount is shown in the balance sheet when there is a legal right to offset the recognized amounts and there is an intention to settle them on a net basis, or to realize the asset and settle the liability simultaneously. The legal right must not be contingent on future events, it must be applicable in the normal course of business and, in the event of default, insolvency or bankruptcy of the company or the counterparty. (d) Impairment of financial assets
The Group opted to measure provisions for losses on accounts receivable and other receivables and contractual assets for an amount equal to the expected credit loss until the receivable is realized. In determining whether the credit risk of a financial asset has increased significantly since initial recognition and in estimating expected credit losses, the Group considers reasonable and bearable information that is relevant and available without undue cost or effort. This includes quantitative and qualitative information and analysis, based on the Group's historical experience, credit assessment and considering forward looking information. The Group considers a financial asset to be in default when:
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(i) unlikely that the creditor will pay its credit obligations in full, without resorting to actions such
as the realization of the guarantee (if any); or
(ii) the financial asset has been past due for more than 180 days; or
(iii) probability that the debtor will go bankrupt, or undergo another type of financial reorganization.
The expected credit losses are estimates weighted by the probability of credit losses. Credit losses are measured at present value based on the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive. At each balance sheet date, the Group assesses whether the financial assets are in trouble with recovery. A financial asset has “recovery problems” when one or more events occur that have a detrimental impact on the estimated future cash flows of the financial asset. (e) Derecognition
The Group derecognizes a financial asset when the contractual rights to the asset's cash flows expire, or when the Group transfers contractual rights of receipt to the contractual cash flows on a financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor substantially maintains all the risks and benefits of the ownership of the financial asset and also does not retain control over the financial asset. The Group derecognizes a financial liability when its contractual obligation is withdrawn, canceled or expires. The Group also derecognizes a financial liability when the terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
2.8 Derivative financial instruments - hedge activities The Group maintains derivative financial instruments to hedge its exposures to the risks of changes in foreign currency and interest rates. The derivatives are recognized at fair value on the date of the signing of the contract and are subsequently measured at fair value and gains and losses are recorded in the income statement. More details in note 4.3.
2.9 Accounts receivable from customers The accounts receivable from credit card companies are presented net of the adjustment to present value, calculated on the share of sales and the provision for estimated credit loss. Also recorded under this heading are sales made through corporate transactions, which are highlighted as “Other accounts receivable” (note 9). The accounts receivable from customers, unless it is an accounts receivable from customers without a significant financing component, are initially recognized at fair value. Accounts receivable from customers without a significant financing component are initially measured at the transaction price less the estimated credit loss provision ("Impairment").
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2.10 Inventories The inventories are stated at average acquisition cost or net realizable value, whichever is less. The average acquisition cost is shown net of the adjustment to present value of suppliers (term purchases) and bonuses agreed with suppliers, when applicable. The net realizable value is the estimated selling price in the normal course of business and the estimated costs necessary to make the sale. The inventories are reduced by the provision for losses, which is periodically analyzed and evaluated for their adequacy.
2.11 Intangible assets
(a) Goodwill
The goodwill results from the acquisition of subsidiaries and represents the excess:
(i) the consideration transferred; (ii) the value of the non-controlling interest in the acquiree; and (iii) the fair value on the acquisition date of any previous equity interest in the acquired company in
relation to the fair value of the identifiable net assets acquired.
If the total consideration transferred, the non-controlling interest recognized and the previously held interest measured at fair value is less than the fair value of the acquired subsidiary's net assets, in the case of an advantageous purchase, the difference is recognized directly in the financial statement. In the consolidated financial statements, goodwill on the acquisition of subsidiaries is recorded as "intangible asset".
(b) Trademarks and licences
The trademarks and licenses purchased separately are initially shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value on the acquisition date. Subsequently, brands and licenses, assessed for a defined useful life, are recorded at cost less accumulated amortization. The amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful life of 15 to 20 years.
(c) Software/Website
The Software/Website Expenses related to the development of web sites (B2W's main sales channel), such as development of operational applications and technological infrastructure (purchase and internal development of software and installation of applications on the websites), software usage rights, as well as graphic development, they are recorded in intangible assets, as provided for in Technical Pronouncement CPC 04 (IAS 38), being amortized on a straight-line basis over the stipulated term of their use and benefits to be earned (note 16). The software licenses are capitalized based on the costs incurred to purchase the software and websites and make them ready for use. The costs associated with software maintenance are recognized as an expense, as incurred. The development costs that are directly attributable to the design and testing of new software and identifiable and exclusive websites, controlled by the Group, are recognized as intangible assets when the following criteria are met:
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
It is technically feasible to complete the software/website so that it is available for use; The management intends to complete the software/website and use or sell it; The software/website can be sold or used; It can be demonstrated that the software/website is likely to generate future economic benefits; Adequate technical, financial and other resources are available to complete the development
and to use or sell the software/website; The expense attributable to the software/website during its development can be safely
measured.
The directly attributable costs, which are capitalized as part of the software/website product, include employee costs allocated to the development of software/websites and an appropriate portion of applicable indirect expenses. The costs also include borrowing costs incurred during the software/website development exercise. The amount of charges on capitalized loans is obtained by applying the weighted average rate on loans that were in effect during the year on investments made in obtaining the asset and does not exceed the amount of borrowing costs incurred during the year. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. The development costs previously recognized as an expense are not recognized as an asset in a subsequent year.
2.12 Property, plant and equipment The property, plant and equipment are measured at historical cost less accumulated depreciation. The historical cost includes the expenses directly attributable to the acquisition of the items and the financing costs related to the acquisition of qualified assets. The subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with these costs will flow and can be reliably measured. All other repairs and maintenance are recorded against the income for the year, when incurred. The land is not depreciated. Depreciation of other property, plant and equipment is calculated using the straight-line method considering their costs and their residual values during the estimated useful life, as shown in note 15. The residual values and useful lives of assets are reviewed at the end of each year and, if appropriate, adjusted. The impacts of accounting for the costs of loans taken with the purpose of acquiring and / or building qualifying fixed assets are not relevant due to the short time spent in setting up the stores (its main qualifying asset) and, therefore, were not accounted for. The gains and losses on disposals are determined by comparing the results with their book value and are recognized in "Other net operating expenses and income" in the income statement.
2.13 Leasing Operations The Group assesses whether a contract is or contains a lease based on the new definition of lease. According to CPC 06 (R2) / IFRS 16, a contract is or contains a lease if it transfers the right to control the use of an identified asset for a period of time in exchange for consideration. Previously, the Group determined, at the beginning of the contract, whether it was or contained a lease under ICPC 03 / IFRIC 4 - Complementary Aspects of Leasing Operations.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The Group recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of lease payments that were not paid on the start date, discounted using the interest rate implicit in the lease or, if that rate cannot be determined immediately, the Group's incremental loan rate . In transition, for leases classified as operating leases under CPC 06 (R1)/IAS 17, lease liabilities were measured at the present value of the remaining payments, discounted at the Group's incremental lending rate on January 1, 2019. Assets Rights of use are measured at their book value as if CPC 06 (R2)/IFRS 16 had been applied from the commencement date, less the lessee's incremental lending rate at the date of initial application.
2.14 Impairment of non-financial assets The assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually to identify any need for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds its recoverable amount, which represents the higher of an asset's fair value less its selling costs and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (Cash-Generating Units - CGU). The non-financial assets, except for goodwill, which have been adjusted for impairment, are subsequently reviewed for the analysis of a possible reversal of impairment on the balance sheet date. The goodwill calculated by the Company and its subsidiaries, in the acquisition of investments until December 31, 2008, was amortized at the rate of 10% a.a. and, as of fiscal year 2009, subject only to impairment assessment. The adjusted goodwill, as a result of the year, due to impairment, is no longer reversed.
2.15 Accounts payable to suppliers Accounts payable to suppliers are obligations contracted for goods or services acquired in the normal course of business. These obligations can be deducted from receivables when there are commercial agreements signed with suppliers for disclosure or promotion of certain products. They are classified as current liabilities if payment is due within a period of up to one year. Otherwise, these accounts payable are presented as non-current liabilities. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method (note 18).
2.16 Adjustment to present value The purchases in terms, basically suppliers from merchandise and services, were carried at their present value considering the terms of said transactions. Using the average rate of 5.98% p.y. on December 31, 2019 (6.48% p.y. in December 31, 2018), the base of funding base for the respective base dates. The constitution of the adjustment to present value of purchases is recorded under "Suppliers" (note 18) as the counterpart to the "Inventories" account (note 10) and your rollback has as a counterpart to the item "Financial Expenses" (note 29), for the enjoyment of term, in the case of suppliers, and completion of inventories in relation to values on them recorded under "cost of goods sold and services rendered". Sales operations in the long term, with the same value of sale, prefixed, represented mainly by the sales period with credit cards, were brought to your present value considering the deadlines of such
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
transactions. We used the average 6.59% p.y. on December 31, 2019 (7.24% p.a. in December 31, 2018), base discounts of receivables in the respective base dates period-bases. About the adjustments identified, applied the tax rates in the bases. The adjustment to present value of sales in the long term has in return the item "trade accounts receivable" (note 9) as a counterpart to the “Sales Revenue” account and the achievement is recorded under "financial income" (note 29) for the enjoyment of the period.
2.17 Loans and financing Loans and financing are recognized at amortized cost, net of costs incurred in the transaction. Any difference between the amounts raised (net of transaction costs) and the total amount payable is recognized in the income statement during the period in which the loans are open, using the effective interest rate method. Hedged loans, with swap contracts as instruments for the purpose of protecting against fluctuations in the exchange rate, are recorded at fair value, as shown in note 4.1 (a). The loans are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
2.18 Provisions Provisions are recognized when: (i) the Group has a present or non-formalized obligation as a result of events that have already occurred; (ii) it is probable that an outflow of funds will be necessary to settle the obligation; and (iii) the amount can be reliably estimated. When there are a series of similar obligations, the likelihood of settling them is determined taking into account the class of obligations as a whole. A provision is recognized even if the probability of settlement related to any individual item included in the same class of obligations is small. The provisions are measured at the present value of expenses that must be required to settle the obligation, using a rate before tax effects, which reflects current market assessments of the value of money over time and the specific risks of the obligation. The increase in the obligation due to the passage of time is recognized as a financial expense. The Group assesses, at least once a year, the sufficiency of its provisions for events likely to occur over the next fiscal year.
2.19 Current and deferred income tax and social contribution The income and social contribution taxes for the year comprise current and deferred taxes and are recognized in the income statement. The current and deferred income tax and social contribution charge is calculated based on tax laws enacted, or substantially enacted, on the balance sheet date. Management periodically evaluates the positions taken by the Group in calculating income taxes in relation to situations in which the applicable tax regulations give rise to interpretations, and establishes provisions, when appropriate, based on estimated amounts of payment to tax authorities. The current income tax and social contribution are shown net, by taxpayer entity, in liabilities when there are amounts payable or, in assets, when the amounts paid in advance exceed the total due on the date of the financial statements. However, deferred tax assets and liabilities are presented separately (note 12 (a)).
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The deferred income tax and social contribution assets are recognized only in proportion to the likelihood that future taxable income will be available and against which temporary differences can be used. The deferred income tax assets and liabilities are shown net in the balance sheet when there is a legal right and the intention to offset them when calculating current taxes, in general, related to the same legal entity and the same tax authority.
2.20 Employee benefits
(a) Share-based compensation
The Group operates a share-based compensation plan, settled with shares, according to which entities receive the services of employees as consideration for the Group's equity instruments (BTOW3 shares in B2W and LAME4 shares in the Company). The fair value of employee services, received in exchange for granting options, is recognized as an expense. The total amount to be recognized as an expense over the duration and vesting period of the plan's shares (vesting period) is determined based on the fair value of the instruments granted, calculated on the grant date of the share purchase programs, based on in the average quotation of the closings of shares on the stock exchange where they are traded, this total amount being appropriated to the result, with corresponding adjustment in shareholders' equity, by the linear method during the vesting period, considering the expectation of withdrawal. On the balance sheet date, the Group reviews the withdrawal estimates on the number of shares that are in vesting period, based on historical data, and recognizes the impact of the revision of the estimates, if any, in the income statement, with an adjustment corresponding in equity. On the date of granting the plan, the amounts received from employees, net of any directly attributable transaction costs, are credited to the share capital (nominal value). The issued shares or restricted shares, as the case may be, issued at the end of the vesting period are also credited to the share capital, but based on the capitalization of the reserves that were constituted during the vesting period.
(b) Profit sharing
When applicable, the Group recognizes a liability and an expense for profit sharing based on a methodology that takes into account the net profit attributable to the Company's shareholders.
(c) Other benefits
The Company and its subsidiaries do not grant other post-employment benefits, termination benefits or other long-term benefits to Management and its employees, in addition to those provided for in the labor legislation.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2.21 Share capital The common and preferred shares are classified in equity (note 25). The incremental costs, directly attributable to the issue of new shares or options, are shown in equity as a deduction from the amount raised, net of taxes. When the Company purchases shares of its own capital (treasury shares), the amount paid, including any additional directly attributable costs (net of income tax), is deducted from shareholders' equity until the shares are canceled or traded. When these shares are subsequently traded, any amount received, net of any additional transaction costs directly attributable and the respective effects of income tax and social contribution, is included in the shareholders' equity attributable to the Company's shareholders.
2.22 Revenue recognition The Group adopted CPC 47 / IFRS 15 as of January 1, 2018. The revenue comprises the fair value of the consideration received or receivable for the sale of products and services in the normal course of the Group's activities. The revenue is shown net of taxes, returns, rebates and discounts, as well as eliminations of sales between Group companies. The Group recognizes revenue when its value can be reliably measured, when it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the activities. The Group bases its estimates taking into account the type of customer, the type of transaction and the specifications of each sale.
(a) Sale of goods and services
The revenues from sales of goods and services that include freight charged to customers are recognized when transferring ownership and risks to third parties, only at the amount the company expects to be entitled to in the transaction, (its gross amounts and deducted from unconditional discounts, returns, adjustment to present value calculated on installment sales and sales taxes) and when the transfer of control of goods and services to customers occurs. At subsidiary B2W, sales orders approved by credit card administrators, whose products have not yet been invoiced, nor delivered to customers, and sales of gift cards, which are in the possession of customers and which will be used in the future, are recorded as "other obligations" classified in current liabilities.
(b) Financial income
The financial income is recognized on an accrual basis, using the effective interest rate method.
2.23 Distribution of dividends and interest on equity When applicable, the distribution of dividends and interest on equity to the Group's shareholders is recognized as a liability in the Group's financial statements at the end of the year based on each company's bylaws. Any amount above the mandatory minimum is recorded in equity until the date of approval. The tax benefit of interest on own capital is recognized in the income statement for tax purposes and in shareholders' equity for corporate purposes.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
3. Accounting estimates and judgments
Accounting estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events, which are considered reasonable for the circumstances.
3.1 Critical accounting estimates and assumptions By definition, the resulting accounting estimates will rarely be equal to the respective actual results. The estimates and assumptions that present a significant risk, with the probability of causing a relevant adjustment in the book values of assets and liabilities for the next year, are contemplated below:
(a) Reduction to goodwill impairment
Annually, the Group tests for possible impairment losses on goodwill in accordance with the accounting policy presented in note 2.14. For the subsidiary B2W, the goodwill determined on the acquisition of the investment was evaluated for impairment, using the quotation of its market value calculated based on the average quotation of the share disclosed in B3, as shown in note 16 (b). At subsidiary B2W, the recoverable amounts of Cash Generating Units (CGUs) were determined based on calculations of the value in use, made based on estimates. No goodwill impairment losses were recognized in the financial statements for the years ended December 31, 2019 and 2018.
(b) Recovery of deferred income tax and social contribution
Significant judgment by Management is required to determine the amount of deferred tax assets that can be recognized and considers the probable realization period based on projections of future taxable income. The assumptions for the projection of future taxable profits are in line with the Group's business plan approved by management and are presented in note 12. The expectation for realizing deferred income tax and social contribution assets is shown in note 12 (b).
(c) Fair value of derivative and other financial instruments
The fair value of the financial instruments presented in note 4.3 is based on market prices, quoted on the balance sheet date or, if they do not exist, on other instruments that allow their measurement.
(d) Tax credit resulting from the exclusion of ICMS in the PIS and COFINS calculation basis
As mentioned in note 11, the PIS and COFINS tax credit resulting from the exclusion of ICMS in its calculation base was calculated considering the management's best estimate determined based on the survey of the identified and available documents. The long period involving the right to credit, including dates prior to the validity and mandatory nature of the electronic invoice and digital fiscal bookkeeping (SPED), creates greater complexity in calculating the amounts and, therefore, the amount recognized may still change.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
3.2 Critical judgments in the application of the Group's accounting policies
(a) Impairment of accounts receivable from customers
The CPC 48 / IFRS 9 requires Management to evaluate accounts receivable from customers, based on twelve months or the entire life of the financial asset, and record the effects if there are indications of expected credit losses on that financial asset. The Group applied the simplified approach and recorded expected losses over the life of financial assets for accounts receivable from customers (note 9).
(b) Estimated losses on inventories
The provision for losses on inventories is estimated based on the history of losses on the execution of physical inventories at distribution centers, as well as the sale of items below the purchase price and unsold inventories. This provision is considered sufficient by Management to cover probable losses on the realization of its inventories (note 10).
(c) Useful life of fixed and intangible assets
The depreciation or amortization of property, plant and equipment and intangible assets, based on an appraisal report issued by independent experts, considers the best estimate of the use of these assets throughout their operations. Management periodically assesses whether changes in the economic scenario and / or the consumer market may require a revision of these estimates of useful life (notes 15 and 16).
(d) Impairment of non-financial assets
The impairment tests are performed considering projections of future results, calculated based on internal and market assumptions, discounted to present value. These projections are calculated considering Management's best estimates, which are reviewed when there is a change in the economic scenario or in the consumer market.
(e) Contingent assets and liabilities
The Group recorded provisions, which involve considerable judgment by Management, for tax, labor and civil risks that, as a result of a past event, it is probable that an outflow of resources, involving economic benefits, will be necessary to settle the obligation and a reasonable estimate can be made of the amount of that obligation. The Company is subject to legal, civil and labor claims covering matters arising from the normal course of its business activities (note 22). The assessment of the likelihood of loss includes the assessment of the available evidence, the hierarchy of laws, the available jurisprudence, the most recent court decisions and their relevance in the legal system, as well as the assessment of outside lawyers. The provisions are reviewed and adjusted to take into account changes in circumstances such as the applicable statute of limitations, conclusions of tax inspections or additional exposures identified based on new matters or court decisions. Actual results may differ from estimates. The contingent assets are events that give rise to the possibility of economic benefits for the Company. When practically certain, based on legal opinions that support their realization, they are recognized in the income for the year (note 11).
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
4. Financial Risk Management 4.1 Financial risk factors
In the normal course of its business, the Group is exposed to market risks related to fluctuations in interest rates and exchange rate variations, as well as credit risk in its term sales and liquidity risk. The Group use hedging instruments to minimize their exposure to these risks, based on their monitoring under the management of their directors and supervised by the Board of Directors. This management determines the strategies to be adopted and the Administration contracts protection instruments appropriate to each circumstance and inherent risks. The Group does not have options, swaptions, repurchase swaps, flexible options, derivatives embedded in other products, structured transactions with derivatives and “exotic derivatives”. The Group does not operate with derivative financial instruments for the purpose of speculation, thus reaffirming their commitment to the conservative cash management policy, both in relation to their financial liabilities and to their cash position. (a) Market risk
(i) Foreign exchange risk The Group use traditional swaps for the purpose of eliminating exchange losses arising from sharp devaluations of the Brazilian Real currency (BRL) against these funds in foreign currencies. Traditional swaps (recorded in the loans and financing account) The counterpart of these traditional swaps is the financial institution that provides loans in foreign currency (US dollars and Euro). These CDI-denominated swap operations aim to offset exchange rate risk by transforming the cost of debt (note 19) to local currency and local interest rates, varying from 118.9% to 122.6% of the CDI. These agreements have a reference value of R$ 212,834 in the parent company and R$ 1,046,167 in the consolidated on December 31, 2019 (R$ 496,109 and R$ 1,632,433 on December 31, 2018, respectively). These transactions are matched in terms of value, terms and interest rates. The Group intend to settle such contracts simultaneously with the respective loans. In this type of operation there are no contractual terms of margin call. As of December 31, 2019, the position of these derivative financial instruments was as follows: Parent Comapny Consolidated 2019 2018 2019 2018
Hedge item 222,740 615,050 1,013,236 1,783,334
Swap passive position (% CDI) (213,990) (562,807) (1,030,551) (1,727,114)
Accounting balance swap adjustment (note 19 (a)) 8,750 52,243
(17,315) 56,220
Parent Company Consolidated
2019 2018 2019 2018
Amortized Cost 222,740 615,050 1,013,236 1,783,334 Hedge item (debt) Fair Value 234,306 614,309 1,037,077 1,751,720 11,566 (741) 23,841 (31,614)
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Swaps
Asset position (Dollar/Euro + Pre) Amortized Cost (222,740) (615,050) (1,013,236) (1,783,334)
Fair Value (241,472) (627,392) (1,045,937) (1,793,334) 18,732 12,342 32,701 10,000
Passive position (% CDI) Amortized Cost (213,991) (562,807) (1,030,551) (1,727,114) Fair Value (221,156) (575,890) (1,039,411) (1,768,728)
(7,166) (13,083) (8,860) (41,614) 11,566 (741) 23,841 (31,614)
Considering that the Company’s exposure to the risk of exchange rate fluctuations is mitigated by the traditional swap operations contracted for exchange protection, and therefore simultaneously with the respective foreign currency loans, the variation of the US Dollar and of the Euro against the Brazilian Real, is due to the current market condition, and has no material effects on the Company’s financial statements.
(ii) Interest rate risk The Group uses resources generated by operating activities to manage their operations, as well as to guarantee their investments and growth. In order to complement its cash requirements for growth, as well as sustain cash applications when necessary, the Group obtains loans and financing from the country’s main financial institutions, which are substantially indexed to the CDI variation (around 84%). The inherent risk arises from the possibility of significant fluctuations in the CDI (sensitivity analysis in item (d) below). The CDI indexed financial investments policy partially mitigates this effect.
(b) Credit risk The credit risk is managed on a Company-wide basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks and other financial institutions, as well as from credit exposures to customers. For banks and other financial institutions, individual risk limits are determined based on internal or external classifications in accordance with the limits determined by the Board of Directors. The use of credit limits is monitored regularly. Sales to retail customers are settled in cash or through the major credit cards on the market. The credit risk is minimized as the receivables of the Group are essentially with the main credit card companies that have excellent levels of credit rating. Approximately 53% (30.7% in Consolidated) of the Company's sales are made in cash and the remainder mainly through credit cards managed by third parties.
(c) Liquidity risk Management monitors ongoing forecasts of the Company's liquidity requirements to ensure that it has sufficient cash to meet its operating needs. This forecast takes into account the Group debt financing plans, compliance with clauses, compliance with the internal targets of the balance sheet quotient and, if applicable, external or legal regulatory requirements, such as currency restrictions. Treasury invests excess cash in interest-bearing bank accounts, term deposits, short-term deposits and securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient margin, as determined by the aforementioned forecasts. The table below analyzes the non-derivative financial liabilities of the Group and the derivative financial
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
liabilities that are paid off on a net basis by the Group by maturity bands corresponding to the period remaining between the balance sheet date and the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of cash flows. Parent Company
Less than one
year
Between one and two
years
Between two and five
years
Above five
years
On December 31, 2019
Suppliers 3,273,060 - - -
Loans and financing and debentures 768,661 1,201,918 6,442,857 3,028,599
Leasing to pay 511,734 497,440 1,131,076 748,790 On December 31, 2018
Suppliers 2,967,313 - - -
Loans and financing and debentures 1,813,347 909,929 7,176,038 2,288,886
Consolidated
Less than one
year
Between one and two
years
Between two and five
years
Above five
years
On December 30, 2019
Suppliers 6,031,720 - - -
Loans and financing and debentures 2,337,189 1,662,604 11,915,201 3,674,765
Leasing to pay 610,722 568,679 1,267,774 789,002 On December 31, 2018 Suppliers 4,973,577 - - -
Loans and financing and debentures 2,556,208 3,416,684 11,721,692 3,149,317
(d) Additional sensitivity analysis (i) Sensitivity analysis of swap transactions The swap transactions recorded by the Group, were contracted simultaneously with the foreign currency loan operations, including maturities, rates and equivalent amounts, exchanging exchange exposure of the loans with the CDI exposure. The Company’s gross debt in USD was represented as follows:
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Parent Company Consolidated
2019
2018
2019
2018
Loans in foreign currency - USD (Note 19 (a))
222,740 615,050 519,108 1,299,141
EUR (Note 19 (a)) - - 494,128 484,193
USD rate at closing date 4.0307 3.8748 4.0307 3.8748
EUR rate at closing date - - 4.5305 4.4390
USD estimated final rate, published by Bacen 4.0900 3.8000 4.0900 3.8000
EUR estimated final, published by Bacen - - 4.6203 4.4825
Scenarios I and II were estimated with a deterioration of 25% and 50%, respectively, above the probable expectation, as shown in the table below: Parent Company:
Scenario I - Scenario II -
Probable 25% 50% Operation Risk Scenario Deterioration Deterioration
US Dollar
Exchange rate on December 31, 2019
4.0307 4.0307 4.0307
Estimated exchange rate for 2019
4.0900 5.1125 6.1350
Loans in foreign currency (variation US$) 3,277 59,781 116,286
Swaps (Active End in Foreign Currency) (variation US$) (3,277) (59,781) (116,286)
Net Effect
Null Null Null Consolidated:
Scenario I - Scenario II -
Operation Risk Probable Scenario
25% Deterioration
50% Deterioration
US Dollar
Exchange rate as of December 31, 2019 4.0307 4.0307 4.0307
Estimated exchange rate for 2019 4.0900 5.1125 6.1350
Loans in foreign currency (variation US$) 7,637
139,323 271,010
Swaps (Active End in Foreign Currency) (variation US$) (7,637) (139,323) (271,010)
Net Effect
Null Null Null
Euro
Exchange rate as of December 31, 2019 4.5305 4.5305 4.5305
Estimated exchange rate for 2018 4.6203 5.7754 6.9304
Loans in foreign currency (variation EUR) 9,792 135,772 261,752
Swaps (Active End in Foreign Currency) (variation EUR) (9,792) (135,772) (261,752)
Net Effect
Null Null Null
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(ii) Sensitivity analysis to CDI rate variation
The Group maintains big part of its debt (around 89%) and its cash and cash equivalents indexed to the CDI variation, considering the foreign currency debt swap due to CDI variation with traditional swaps. The net debt was represented as follows:
Parent Company Consolidated
2019
2018 2019
2018
Net debt: - Cash and cash equivalents 2,752,618 3,693,154 6,291,718 6,813,846
- Securities 891,315 1,174,872 4,508,265 3,239,485
- Loans and funds (3,511,118) (4,263,682) (9,970,355) (10,907,700)
- Debentures (5,304,683) (4,716,773) (5,304,683) (4,716,773)
(5,171,868) (4,112,429) (4,475,055) (5,571,142) CDI rate on the closing date 4.40% 6.40% 4.40% 6.40%
CDI rate final estimated, published by Bacen
4.40% 6.40% 4.40% 6.40%
In addition, Management performed sensitivity tests for adverse scenarios, deteriorating the CDI rate by 25% or 50% higher than the probable scenario (judged by Management), as shown in the table below: Parent Company:
Scenario I - Scenario II -
Probable 25% 50% Operation Scenario Deterioration Deterioration
Annual effective CDI rate in December 31, 2019 4.40% 4.40% 4.40%
Net debt 5,171,867 5,171,867 5,171,867 Estimated annual CDI rate in 2020 4.50% 5.63% 6.75% Annual effect on net debt: Increase 5,172 63,614 121,539 Consolidated:
Scenario I - Scenario II -
Probable 25% 50% Operation Scenario Deterioration Deterioration
Annual effective CDI rate in December 31, 2019 4.40% 4.40% 4.40% Net debt 4,475,055 4,475,055 4,475,055
Estimated annual CDI rate in 2020 4.50% 5.63% 6.75%
Annual effect on net debt Increase 4,475 55,043 105,164
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
4.2 Capital management The objective of the Group in managing its capital is to ensure the continuity of its operations to offer shareholder returns and benefits to other stakeholders, as well as maintaining an ideal capital structure to minimize the associated costs. The Group monitors the levels of indebtedness through the Net debt / Adjusted EBITDA ratio, which represents, more appropriately, its debt metrics, since it reflects the consolidated financial obligations net of immediate cash and cash equivalents, considering its generation operating cash flow.
4.3 Fair Value Estimate
It is assumed that the balances of accounts receivable from customers and accounts payable to suppliers at their book value, less impairment in the case of accounts receivable, are close to their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the prevailing market interest rate that is available to the Group for similar financial instruments. The group uses the market approach to estimate the fair value of its financial instruments. The Group applies the CPC 46 / IFRS 13 to financial instruments measured in the balance sheet at fair value, which requires disclosure of fair value measurements at the following hierarchy level: (iii) (Level 1) quoted (unadjusted) prices in active markets for identical assets or liabilities, which the entity
may have access on the measurement date;
(iv) (Level 2) inputs other than prices traded in active markets included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices);
(v) (Level 3) inputs to assets or liabilities that are not based on observable market variables (unobservable
inputs). The following table shows the Group’s assets and liabilities measured at fair value through profit or loss on December 31, 2019. Consolidated
Level 1 Level 2 Level 3 Total
Balance Assets Investment Fund (Fenícia and Faísca-FIDC) - 193,451 - 193,451 CDB - 8,694,660 - 8,694,660 Financial letters, LAM’s and fixed income fund quotas - 1,576,549 - 1,576,549 Total assets - 10,464,660 - 10,464,660
Liabilities Loans and Financing (Foreign Currency) - 1,013,236 - 1,013,236 Derivatives used to hedge - swap 17,315 17,315 Total liabilities - 1,030,551 - 1,030,551
The following table shows the Group’s assets and liabilities measured at fair value through profit or loss
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
on December 31, 2018. Consolidated
Level 1 Level 2 Level 3 Total
Balance Assets Investment Fund (Fenícia - FIDC) - 12,044 - 12,044 CDB - 9,363,961 - 9,363,961 Financial letters, LAM’s and fixed income fund quotas - 429,040 - 429,040 Total assets - 9,805,045 - 9,805,045
Liabilities Loans and Financing (Foreign Currency) - 1,751,720 - 1,751,720 Derivatives used for hedge - swap - 24,606 - 24,606 Total liabilities - 1,839,555 - 1,839,555
There are no relevant financial assets and liabilities subject to offsetting agreement.
5 Financial instruments by category
Amounts presented free of funding costs:
Consolidated
Loans and receivables
Fair value through profit or
loss Total As of December 31, 2019 Assets Marketable securities - 1,770,000 1,770,000 CDB - 8,694,660 8,694,660 Accounts receivable from clients and other accounts receivable, excluding prepayments 3,522,304 - 3,522,304 Cash and cash equivalents 335,324 - 335,324 3,857,628 10,464,660 14,322,288
Consolidated
Fair Value through profit
or loss
Amortized Cost
Total As of December 31, 2019 Liabilities
Loans
National currency - 9,068,265 9,068,265
Derivative financial instruments - swaps (1,907) - (1,907)
Foreign currency 1,037,076 - 1,037,076
Derivative financial instruments - swaps (6,525) - (6,525)
Suppliers and other obligations, excluding legal obligations
- 6,954,050 6,954,050
Debentures - 5,333,842 5,333,842
1,028,644 21,356,157 22,384,801
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
6 Credit quality of financial assets The Company's financial assets are composed mainly of the balance of cash and cash equivalents, marketable securities and accounts receivable from credit cards. The Company's cash is invested in the largest financial institutions in Brazil - all top-tier institutions - and the receivables of the Company and its subsidiaries are essentially with the main credit card operators, which have low levels of credit risk, as assessed by major rating agencies. The Group's exposure to the use of interest rates and sensitivity analysis for financial assets and liabilities are disclosed in (note 4.1 (d)). There are no material restrictions on the ability to recover or use the assets mentioned above.
Consolidated
Loans and
receivables
Fair value through profit or
loss Total As of December 31, 2018 Assets, according to the balance sheet Marketable securities - 441,084 441,084 CDB - 9,363,961 9,363,961 Accounts receivable from clients and other accounts
3,002,248
-
3,002,248 receivable, excluding prepayments 3,002,248 - 3,002,248 Cash and cash equivalents 248,286 - 248,286
3,250,534 9,805,045 13,055,579
Consolidated Fair value
through result
Amortized Cost
Total
Balance on 31 December 2018
Liabilities, according to the balance sheet
Loans - 9,307,018 9,307,018
Local currency
Foreign currency 1,751,720 - 1,751,720
Derivative financial instruments - swap 24,606 - 24,606
Suppliers and other obligations,
excluding legal obligations - 5,487,719 5,487,719
Debentures - 4,749,473 4,749,473 1,727,114 19,544,210 21,383,765
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
7 Cash and cash equivalents
Parent Company Consolidated
2019
2018
2019
2018
Cash resources 236,128
150,614 236,128
150,691
Bank resources 80,723 88,059 99,196 97,595
Certificates of Deposit Banking – CBD’s
2,435,767
3,454,481
5,940,256
6,522,176 CDBs and LAM’s (i) - - 16,138 43,384
2,752,618
3,693,154
6,291,718
6,813,846
(i) Remunerated at average CDI rate of up to 105.5% as of December 31, 2019 (up to 106.25% of CDI in December 31, 2018). The CDB's are classified as cash equivalents have immediate liquidity without risk of changing value in the event of early redemption. (ii) Remunerated at a rate of up to 103.0% of the CDI on December 31, 2019 (up to 101.0% of the CDI on December 31, 2018). The LAM’s are classified as cash equivalents and have immediate liquidity without risk of change in value in case of early redemption.
8 Securities and other financial assets
Parent Company
Consolidated
2019
2018
2019
2018
Certificate of Bank Deposit - CDB (i) 811,922 1,151,494 2,754,404 2,798,401 Committed operations - Debentures and LAM’s (ii)
-
-
148,048
390,525
Financial Letters (iii) - - 1,109,237 - Junior Quota (Fênix – FIDC) (a) 54,818 - - - Senior Quota (Fenícia – FIDC) (b)
- - 192,951 12,044
Senior Quota (Faísca – FIDC) (c) - - 500 - Fixed income funds (iv)
24,575 23,378 303,125 38,515
891,315
1,174,872
4,508,265
3,239,485
Current Part 836,497 1,174,872 4,314,814 3,239,485
Non current Part 54,818 - 193,451 - (i) – Remunerated at the average CDI rate of up to 105.5% in 2019 (up to 106.25% as of 2018). (ii) – Leasing Letters, wholly from first-tier financial institutions, bear interest of up to 103% of the CDI in the consolidated as of December 31, 2019 (up to 101.0% of CDI in the consolidated as of December 31, 2018). There is no intention to sell these securities in a period longer than 1 year, which is why they are classified in current assets. (iii) - The Financial Letters, wholly owned by top-tier financial institutions, bear interest at rates up to 146.6% of the CDI as of December 31, 2019. There is no intention to dispose of these securities within one year, which is why they are classified in current assets. (iv) - Composed of 535,478.80 quotas and 27,748,378.10 quotas as of 2019 (8.609.023,37 quotas 14.178.497,02 quotas as of 12/31/2018), parent company and consolidated, respectively. Managed by a leading financial institution, which basically applies to federal government securities, debentures and bank deposit certificates, and can be traded at any time.
(a) Investment Fund in Retail Credit Rights – Fênix FIDC do Varejo I
In October 2018, was approved by the Company's administration the structure of Fênix DO Varejo II Credit Rights Investment Fund ("Fênix FIDC do Varejo II"), with the duration of 20 (twenty) years, whose goal set in regulation is the acquisition of credit rights owned by the Company, among others, originating through credit cards used in transactions for the purchase and sale of products and services, whose electronic transactions are captured and processed by systems of accrediting of commercial establishments. The “Fênix FIDC do Varejo II”, started operations in February 2019 and issued 1,100,000 shares with a unit face value of R$ 1 (one thousand reais), of which 1,017,500 are senior shares with a profitability target of 106.50 % of the DI variation and 82,500 subordinated quotas, 52,500 of which are subscribed by the Company and 30,000 are subscribed by the subsidiary B2W, totaling the senior shares and subordinated to a net worth of R $ 1,100,000 from the “Fênix FIDC do Varejo II”.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The total amount of the senior shares corresponding to the principal invested will be amortized/redeemed on a single date, on the business day corresponding to the end of the period of 5 (five) years from the date of issue. The value of the senior shares corresponding to the profitability added to the senior shares after their date of issue will be amortized semiannually from the date of issue. The structure of the Fênix FIDC do Varejo II, as well as the remuneration of quotas is so represented: QUOTAS
Quantity
% 12/31/2019
Bechmark - DI
Senior
1,017,500
92.3 % 1,039,107
106.50% Subordinate
85,810
7.7 % 86,142
-
100.0% 1,125,249
Balance Sheet at December 31, 2019:
2019 Assets Cash and cash equivalente 4
Marketable securities 299,967
Accounts receivable Lojas Americanas 364,181
B2W 448,982
Others 12,226
Total assets 1,125,360
Liabilities Accounts payable (Current) 111
Financing (Non current) 1,039,107
Shareholders equity 86,142
Total liabilities and shareholders equity 1,125,360
Income Statement in the year ended in: 2019 Financial revenues 3,298 Financial expenses (2,956)
Period net income 342
(b) Investment Fund in Retail Credit Rights Fenícia – Controlling Company B2W The subsidiary B2W holds 197,762 shares of the Fenícia Fund, whose purpose is to raise funds for application mainly in Credit Rights of third parties, under the investment policy, composition and diversification of the Fund's portfolio.
It is constituted in the form of a closed condominium, so that its Quotas will only be redeemed according to the redemption dates defined in the respective supplements or due to its settlement.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The Fund will have an indefinite term and may be settled by resolution of the General Meeting in accordance with the Fund's Rules of Procedure.
(c) Faísca Non-Standard Credit Rights Investment Fund The subsidiary B2W holds 1,000 shares of the Faísca Fund, which aims to provide quota holders with the appreciation of their shares, through the application of the Fund's resources mainly in the acquisition of Credit Rights from third parties, and the others in Financial Assets. It is constituted in the form of a closed condominium, so that its Quotas will only be redeemed at the end of the term, in accordance with the provisions of the regulation or due to its liquidation. The Fund will have an indefinite term and may be settled by resolution of the General Meeting in accordance with the Fund's regulations.
(d) Changes in financial assets at fair value through profit or loss The Bank Deposit Certificates, wholly from top-tier financial institutions, are remunerated at a rate of up to 105.5% of the CDI on December 31, 2019 (up to 106.25 %% of the CDI on December 31, 2018). There is no intention to sell these securities over a period of more than 1 year, which is why they are classified in current assets. The Repurchase Agreements are composed of debentures issued by a first-rate financial institution, and are recorded at fair value, remunerated at a rate of up to 103.0% of the controlling CDI and consolidated on December 31, 2019 (up to 101.0% parent company and consolidated on December 31, 2018), and may be traded at any time.
Parent Company Consolidated As of January 1st, 2018 3,015,768 6,517,532 Additions
8,567,057 21,827,997
Disposals
(7,173,885) (18,954,707)
Transfer to cash and cash equivalents (note 7) (3,454,481) (6,565,560)
Net gains and losses (note 29) 220,413 414,223
As of December 31, 2018 1,174,872 3,239,485 Additions
7,431,865 20,528,507
Disposals
(5,492,865) (13,817,875)
Transfer to cash and cash equivalents (note 7) (2,435,767) (5,956,394) Net gains and losses (note 29) 213,210 514,542 As of December 31, 2019
891,315 4,508,265
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
9 Accounts Receivable
(i) - Credit card transactions can be split up, usually within twelve months. The credit risk of the Group is minimized as the receivables portfolio is monitored by the credit card management companies. (ii) - Other accounts receivable represent, mainly, sales made to corporations through corporate operations, by the subsidiary B2W, loyalty projects and commercial agreements. (iii) - The adjustment to present value was calculated on the accounts receivable net of FIDC anticipations. The aging list of trade accounts receivable is as follows:
Parent Company
Consolidated
2019 2018 2019 2018
Due 1,570,591 1,734,200 2,354,061 1,904,565
Due Up to 30 days - - 10,593 8,225
From 1 until 60 days -
-
6,422
1,693
From 61 until 90 days -
-
3,746
781
From 91 until 120 days -
-
1,687
696
From 121 until 180 days -
-
1,786
496
> 180 days - - 13,940 21,381
1,570,591 1,734,200 2,392,235 1,937,837
There are no overdue installments at the parent company, as credits receivable are maintained with credit card operators. In the Consolidated, the amount of expected losses on doubtful accounts is based on the Management’s analysis of expected losses on loans due and overdue.
Parent Company Consolidated
2019
2018 2019 2018
Credit Cards (i) 1,189,107 1,712,285 1,450,124 1,815,356 Investment fund in creditory
rights (FIDC) (note 8 (a)) 364,181 - 813,163 -
Electronic debits and checks 13,529 13,197 13,529 13,346
Other accounts receivable (ii) 3,774 8,718 115,419 109,135
1,570,591 1,734,200 2,392,235 1,937,837
Adjustment to present value (Note 2.16) (iii) (10,312) (19,844) (18,489) (21,785)
Provision for estimated credit loss (1,697) (966) (52,694) (45,971)
1,558,582 1,713,390 2,321,052 1,870,081
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The movement of the estimated credit loss provision is as follows:
Parent Company
Consolidated
Balance as of January 1, 2018 (1,007) (35,342)
(Additions) / reversals 41 (10,629)
Balance as of December 31, 2018 (966) (45,971)
(Additions) / reversals (731) (6,723) Balance as of December 31, 2019 (1,697) (52,694)
10 Inventories
Parent Company Consolidated
2019 2018 2019 2018 Goods: In stores
1,994,055 1,898,612 1,994,055 1,898,612
In distribution centers 628,542
720,684 1,578,993 1,598,777
Adjustment to present value (note 2.16) (35,625)
(29,024) (38,461) (30,661)
Supplies and packaging 20,177
18,284 23,944 21,600
Advances to suppliers - 18,350 - 18,350
2,607,149
2,626,906
3,558,531
3,506,678
The balances above are presented by the net amounts of the provision for inventory and obsolescence losses. The changes in the provision for losses are shown below:
Parent Company
Consolidated
Balances as of January 1, 2018 (50,998) (131,563)
(Additions) / reversals (2,530) 6,688
Balances as of December 31, 2018 (53,528) (124,875) (Additions) / reversals 3,731 9,229 Balances as of December 31, 2019 (49,797) (115,646)
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
11 Recoverable Taxes
Parent Company
Consolidated
2019
2018
2019
2018
Tax on Circulation of Goods and Services (ICMS):
Marketing of goods 837,264 604,681 1,047,213 787,334
Property, plant and equipment 28,984
23,399
28,984
23,399
866,248
628,080
1,076,197
810,733
Withholding Income Tax (IRRF)
40,714
18,601
100,047
87,169
Social Integration Program (PIS) and Social Security Financing Contribution (COFINS)
118,188 152,668
1,327,466 1,369,591
Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL)
-
-
248,220
279,957
Others
5,894
5,801
15,777
15,141
1,031,044
805,150
2,767,707
2,562,591
Net effects of tax credits – ICMS on PIS and Cofins basis
318,448 - 470,348
-
1,349,492 805,150 3,238,055 2,562,591
Current portion
552,402
404,919
1,243,798
906,836
Non-current portion
797,090
400,231
1,994,257
1,655,755
Considering the current tax rules, the expectation of realization of the main taxes to be recovered follows:
Parent Company Consolidated
In
PIS and COFINS
IR and CSLL
ICMS
PIS and COFINS
IR and CSLL
ICMS
2020 307,286
230,952
40,714 198,508
230,952
707,884
230,952
209,629
230,952
319,098
2021 129,350 - 264,871 625,505 23,539 354,230
2022
-
- 179,279
432,269
4
8,930
179,279 2023 to 2026
- - 223,590 32,156 66,169 223,590
436,636 40,714 866,248 1,797,814 348,267 1,076,197
- PIS and COFINS: Subsidiary B2W expects to recover R$ 396,875 in 2020 and R$ 960,580 within 3 years (2021 to 2023) through debts through calculation and offsetting with other federal taxes. - IRPJ and CSLL: Subsidiary B2W expects to recover R$ 288,455 in up to 4 years (2020 to 2023), by requesting restitution and/or compensation with other federal taxes. - ICMS: The Company's management, aiming at realizing the ICMS credit balance arising from the sale of goods, carried out studies based on the normal course of its trading operations for the next fiscal years. This study was conducted based on current operations and future expectations, always backed
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
by the Company's long-term strategic business plan. Thus, the Company expects to recover ICMS credits from its own operations in the amount of R$ 198,508 in 2020 and R$ 667,740 in up to 4 years (2021 to 2023). The subsidiary B2W expects to recover ICMS credits from its own operations in the amount of R$ 111,907 in 2020 and R$ 89,359 in 2021. The Company constantly evaluates the recovery of its tax credits and maintains the net balance of the recovery expectation in the balance sheet. Res judicata - Exclusion of ICMS on the basis of calculation of PIS and Cofins
In the 4th Quarter of 2019, the Company and its subsidiary B2W were successful in a lawsuit that questioned the constitutionality of including the Tax on the Circulation of Goods and Services (ICMS) in the PIS and COFINS calculation basis. With the final and unappealable transits, the Company recognized the right to recover the amount of taxes calculated in the period object of the claims, duly corrected. In view of the current position of the tax authorities on the criterion for measuring tax credits, which will be confirmed by the Federal Supreme Court through the judgment of the Motion for Clarification filed by the Federal Union in Extraordinary Appeal No. 574,706, the Company, supported by opinion of its legal advisors, chose to record tax credits based on the criteria currently recognized by tax authorities (COSIT Solution No. 13/18 and IN No. 1911/19), that is, tax credits were measured based on the amount of the ICMS actually paid. The long period that involves the right to credit, including dates that precede the mandatory electronic invoice and digital fiscal bookkeeping (SPED), creates greater complexity in calculating the amounts. Thus, the registered amount of R$ 318,000 in the Parent Company and R$ 470,000 in the Consolidated, consists of management's best estimate, determined based on the survey of the available information and, therefore, may undergo changes. It is emphasized that the referred credit, to be used through compensation, must be subject to validation via administrative procedure before the Superintendence of the Federal Revenue of Brazil. The segregation between current and non-current takes into account the expectation of using these credits to settle taxes administered by SRF. For more details, see Notes 11, 12, 27, 28 and 29.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
12 Income and social contribution taxes
(a) Breakdown of deferred income and social contribution taxes Parent Company Consolidated
2019
2018 2019 2018
Tax losses - - 780,479
681,298
Negative bases of social contribution - - 280,976 245,271
Tax credit of subsidiaries abroad 68,835 71,398 68,835 71,398 Temporary differences:
Contingencies 46,587 31,747 66,402 50,957
Unsettled swap transactions 2,916 30,622 20,333 59,317
Adjustment to present value credits
and obligations 2,033 3,954
42,876
49,718
Provision for inventory losses and estimated credit loss and other provisions
29,402 30,453 245,567 216,670
Interest and lease depreciation 57,030 49,020 57,030 49,020
Temporal differed without leasing operations 100,299 - 112,960 -
Others 21,963 25,671 49,703 29,145
Asset 329,065 242,865 1,725,161 1,452,794
Temporary differences Review of the useful life 183,290 153,499 183,290 154,510
Capitalization of interest - - 15,192 32,153
Expenses with lease 61,924 62,997 61,924 62,997
PIS and COFINS tax credits (Note 11) 83,228 - 121,017 -
Others - - 5,707 5,354 Liability 328,442 216,496 387,130 255,014
Net balance 623 26,369 1,338,031 1,197,780
(b) Expected realization of deferred income and social contribution taxes
The Group presents a history of projections of taxable income, taking into account various financial and business assumptions considered in technical studies carried out at the end of the year ended December 31, 2019. With respect to tax credits, it is estimated that they will be recoverable, as follows:
In
Parent Company
Consolidated
2020
41,994 48,277 2021
55,461 59,818
2022
55,042 73,140 2023
30,227 115,903
2024
27,853 190,784
2025
26,653 304,032 2026 28,830 418,395 2027 to 2029 63,005 514,812
329,065 1,725,161
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The realization of deferred taxes was determined based on the business plan approved by the Company's management and is reviewed at least every year. The projections are made through operating cash flows started from the year 2020, in nominal terms, considering the inflation of the economy due to changes in financial market indices using the maximum period of 10 years. The Management reiterates its confidence in its Business Plan, which has made the operational structure of business development platforms more robust and will continue to monitor its internal and external indicators as a way of ratifying its estimates.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated (c) Changes in deferred taxes
The movement of deferred tax assets and liabilities during the year, without taking into account the balancing of balances, is as follows:
Parent Company
Credits of subsidiaries
abroad Provisions
Unpaid swaps
Adjust to present
value Interest and leasing
depreciation Leasing operations
Others Total
Deffered tax asset
As of January 1, 2018 73,891
55,461
40,557
3,932
37,653
- 16,166 227,660
(Credited / (debited) to the income statement (2,493)
6,739
(9,935)
22
11,367
- 9,505 15,205
As of December 31, 2018 71,398
62,200
30,622
3,954
49,020
- 25,671 242,865
Initial adoption IFRS 16 - - - - - 106,793 - 106,793 Credited (debited) to the income statement (2,563)
13,789
(27,706)
(1,921)
8,010
(6,494) (3,708) (20,593)
As of December 31, 2019 68,835
75,989
2,916
2,033
57,030
100,299 21,963 329,065
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
Parent Company
Fixed asset life
Leasing expense
PIS and COFINS tax credits
Total
Deferred tax liability
As of January 1, 2018 133,732 44,059
177,791 Debited to the income statement 19,767 18,938 -
38,705
As of Deecember 31, 2018 153,499 62,997
216,496 Debited to the income statement 29,791 (1,073) 83,228
111,946
As of December 31, 2019 183,290 61,924 83,228
328,442
Consolidated
Tax losses and
negative basis
Credits of subsidiaries
abroad Provisions
Unpaid swaps
Adjust to present
value
Leasing operations
Interest and
leasing depreciation
Others
Total
Deffered tax asset
As of January 1, 2018 789,342
73,891
132,825
63,790
50,781
- 37,653
92,272
1,240,554
Write-off of indirect subsidiary - - - - - - (1,663) (1,663)
(Credited / (debited) to the income statement 137,227
(2,493)
134,802
(4,473)
(1,063)
-
11,367
(61,464)
213,903
As of December 31, 2018 926,569
71,398
267,627
59,317
49,718
- 49,020
29,145
1,452,794
Initial adoption IFRS 16 and others - - - - - 118,854 - (10,662) 108,192
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(Credited / (debited) to the income statement 134,886
(2,563)
44,342
(38,984)
(6,842)
(5,894) 8,010
31,220
164,175
As of December 31, 2019 1,061,455
68,835
311,969
20,333
42,876
112,960 57,030
49,703
1,725,161
Consolidated
Consolidado
Fixed asset
Capitalization of interes
PIS and COFINS
tax credits
Leasing expense
Others
Total
Deferred tax liability
As of January 1, 2018 134,566
48,216
-
44,059
1,688
228,529
Debited (credited) to the income statement 19,944
(16,063)
-
18,938
3,666
26,485
As of December 31, 2018 154,510
32,153
-
62,997
5,354
255,014
Debited (credited) to the income statement 28,780
(16,961)
121,017
(1,073)
353
132,116
As of December 31, 2019 183,290
15,192
121,017
61,924
5,707
387,130
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
(d) Reconciliation between nominal and effective rates
The reconciliation between income tax and social contribution at the nominal rate, in addition to the actual amounts in income, is shown below:
Parent Company Consolidated
2019
2018 2019 2018
Income for the year before income tax, social contribution and employee participation 994,931 649,029 729,449 305,528
Participation in subsidiaries 187,445 241,277
Employee participation 42,494 22,600 42,194 22,600
Profit of the period before income tax, social contribution and participation in subsidiaries 1,224,570 912,906 771,643 328,128
Nominal tax rate 34% 34% 34% 34%
(416,354) (310,388) (262,359) (111,564)
Effect of (additions) or exclusions to accounting profit Interest on own capital
99,580
40,800 99,580 40,800
Employee participation
14,346
7,684 14,346 7,684
Other permanent net additions 11,551 (6,635) 267 (14,938)
Tax return and social contribution
at the effective rate (290,877) (268,539) (148,166) (78,018)
Current (158,338) (245,039) (180,225) (265,436) Deferred (132,539) (23,500) 32,059 187,418
Income tax and social contribution (290,877) (268,539) (148,166) (78,018) Effective rate 23.8% 29.4% 19.2% 23.8%
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
13 Related party transactions
Receivable (payable)
Revenues (expenses)
Transactions 2019
2018
2019
2018
a) Operations of the Parent Company with direct and indirect subsidiaries: B2W Companhia Digital (ii) 117,328
(10,926)
37,756
48,336
- Rental of headquarters, distribution centers and sundry 6,227 3,148
19,541 20,211 - Resale Goods - sale 3,255 2,988
413 1,931
- Digital Services and O2O operations 133,974 2,724 18,459 26,759 - Resale Goods - purchase (26,128) (19,786)
(657) (565)
ST Impostações Ltda. / QSM (36,558) (16,297)
(80,751) (95,930)
- Goods for resale (36,558) (16,297)
(80,751) (95,930)
Other operations with subsidiaries (58,244) (12,205)
(106,154) (51,324)
- BWU Comércio e Entretenimento S.A. 1,267 839
- -
- Louise Holdings Ltda. - Current Account 29 1 - - - Cheyney Financial S.A - Current Account 445 381 - - - Auchal Investments S.A - Current Account 170 136 - - - Direct (35,213) (7,968) (64,863) (31,675) - Bit Services (25,190) (5,822) (41,291) (19,649) - Freijó Administrações e Participações Ltda. 248
228
- -
Non-current assets 154,216 20,971
- -
Non-current liabilities (131,690)
(60,399)
-
-
b) Operations of the direct subsidiary B2W Companhia Digital (200,214) (200,246)
15,098 8,404 - Management remuneration - -
- (7,715)
- Debentures (i) (200,214) (200,246)
15,098 16,119
(i) On 7 December 2010, at a meeting of the Board of Directors of the subsidiary B2W, the first private issue of simple, non-convertible debentures of the subordinated type, in a single series, in the amount of R$ 200,000, eliminated in the consolidation of the Company. The debentures were subscribed by BWU, as described in note 19 (b);
(ii) Licensing of the use of the Americanas.com brand and similar trademarks - The subsidiary B2W has entered into a license agreement for the use of the Company's trademark, where the trademark licensing will be free of charge as long as the Company has a relevant equity interest in the Subsidiary.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
14 Investments - parent company
Parent Company
2019 2018
Interest in subsidiaries 4,037,545 2,585,120 Goodwill on the acquisition of BWU 173,160 173,160 Goodwill on the acquisition of B2W 201,432 201,432
4,412,137 2,959,712
(a) Changes in investments in subsidiaries
BWU
Freijó
B2W
Comércio e
Administração
Louise
Klanil
Companhia
Entretenimento
Ame Participações
JSM Holdings
Services
Digital (ii) S.A. (ii) Digital Ltda. Global Ltda. Ltd. Total
As of January 1, 2018
2,622,568 454,346 - 2,333 - 109,659 - 3,188,906 Constitution - 52 52 Profit sharing (244,447) 1,372 - 351 - 4,900 (3,453) (241,277) Direct adjustments to shareholders’ equity of subsidiaries
(1,102) - - - - 10,023 (6,331) 2,590
Transfer to provision for investment losses (i) - - - - - - 9,784 9,784 Dividends - (343) - - - - - (343)
Balance on December 31, 2018
2,377,019 455,375 - 2,684 52 124,582 - 2,959,712
Capital Increase 1,564,485 - 36,423 - - - - 1,600,908 Goodwill on capital transactions (22,119) - - - - - - (22,119) Constitution with tangible and intangible assets - 55,284 55,284
Profit sharing (195,467) 11,244 (4,908) (27) (97) 5,054 (3,244) (187,445) Direct adjustments to shareholders’ equity of subsidiaries
(296) 708 - - - 5,084 (478) (5,018)
Transfer to provision for investment losses (i) - - - - 45 - 3,722 3,767 Dividends - (2,988) - - - - - (2,988) Balance on December 31, 2019
3,723,622 464,339 86,799 2,657 - 134,720 - 4,412,137
(i) A provision for losses on interest in a company with an uncovered liability, classified in noncurrent liabilities, was recorded. (ii) The balances of the investments in the subsidiaries B2W and BWU includes the goodwill calculated in the acquisition in the amount of R$ 201,432 and R$ 173,160, respectively.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(b) Subsidiaries
(i) BWU Comércio Entretenimento S.A. As of December 31, 2019, the subsidiary has R$ 263,641 in cash and cash equivalents and securities (R$ 246,595 at December 31, 2018). These amounts include debentures issued by the subsidiary B2W Companhia Digital (note 20 (c)).
(ii) B2W - Companhia Digital
Capital Increase At the Extraordinary General Meeting held by subsidiary B2W, on August 19, 2019, the capital increase in the amount of R$ 2,500,000 was approved, through the private issue of 64,102,565 registered common shares at the price of R$ 39, 00 per share. The capital increase was approved at a meeting of the subsidiary's Board of Directors, held on October 23, 2019. The Company subscribed a total of 40,114,986 shares, 39,403,206 of which correspond to the interest that the Company holds in the subsidiary's share capital, on the date of the notice of capital increase to shareholders, and 711,780 shares of non-controlling shareholders, which do not exercised the preemptive right within the legal term. With the subscription, the Company's participation in the subsidiary's capital stock, on the date of approval, increased to 61.42%. The goodwill calculated on the transaction in the amount of R$ 22,119 was recorded in equity in the Goodwill account in capital transactions. Find below the movement that occurred in the year:
Non
Controlling shareholder
Controlling shareholder
Total
Balances as of December 31, 2018 - net of goodwill 2,175,587 1,361,528 3,537,115
Result for the year (195,467) (122,771) (318,238) Capital increase – Board Meeting 08.19.2019 1,564,485 935,515 2,500,000 Capital transactions (22,119) 22,119 - Capital increase stock option plan - 16,004 16,004 Direct adjustments to shareholders’ equity (296) (153) (449) Balances on December 31, 2019 – Net of goodwill 3,522,190 2,212,242 5,734,432 Number of common shares 321,376,659 201,852,603 523,229,262 Participation % 61.42% 38.58% 100%
In 2019 and 2018, the Company did not acquire shares of the subsidiary B2W on the market.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(iii) Financial investments in subsidiaries abroad The subsidiaries Louise and Klanil have investments in bonds and securities abroad in the amounts of R$ 15,502 and R$ 89,605 respectively. These financial investments generated a remuneration of R$ 1,910 recognized as financial income in the consolidated result of the company. (iv) Ame Digital AME Digital Brasil Ltda. “AME”, business mobile platform, developed by the Company and its subsidiary B2W, has the social object, basically, the provision of services with advanced technologies involving payment structures in physical and digital sales including through partnerships with other companies, retail or not with advantages for the final consumers. It was constituted in July 31, 2019, with a capital of R$ 97,124, represented by 97,124,100, quotas with nominal value of R$ 1.00 each, being 55,284,057 quotas subscribed by Lojas Americanas and 41,840,043 quotas subscribed by the subsidiary B2W. This way, Lojas Americanas holds 56.92% of the capital and consequently the subsidiary B2W 43.08%. These percentages were fixed on the basis of intangible assets and fixed assets related to the Ame Project. In December 2019, the Company and its subsidiary B2W, the sole shareholders of AME, contributed resources, proportional to their participation, for a future capital increase in the total amount of R$ 63,990. Consequently, the company made the amount of R$ 36,423 available and the subsidiary B2W R$ 27,567.
(c) Investment Information in subsidiaries
2019
% Social Shareholder’s Net income Interest Capital Equity (loss) Direct subsidiaries BWU Comércio e Entretenimento S.A. 100 17,753 291,179 11,244 B2W - Companhia Digital 61.42 8,289,558 5,734,432 (318,238) Freijó Administrações e Participações Ltda. 100 5 2,657 (27) Louise Holdings Ltd. 100 526,580 134,720 5,054 Klanil Services Ltd. 100 67,948 (15,315) (3,244) JSM Global 100 52 (42) (97) Ame Digital 56.92 97,124 152,491 (8,622) Indirect subsidiaries Submarino Finance Promotora de Crédito Ltda. 61.42 12,005 97,439 10,337 ST Importações Ltda. 61.42 4,050 88,646 12,263 BFF Logistica e Distribuição Ltda. 61.42 163,198 181,480 1,565 Mesa Express 61.42 275 - - QSM 61.42 5,000 29,713 1,675 BIT Services Tecnologia e Inovação Ltda. 61.42 170,013 192,207 2,513 Click-Rodo 61.42 44,928 12,205 (142) Direct 61.42 237,755 80,506 (604) Digital Finance 61.42 500 13,191 2,618 Rental 61.40 2 (23,298) (61) Ecolivery Courrieros 56.92 40 (2,238) (107) Courrieros Transportes 56.92 1 982 102 Eco Logística 56.92 40 (90) (160)
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2018
% Capital Shareholder’s Net income Interest
Equity (loss)
Direct subsidiaries BWU Comércio e Entretenimento S.A. 100 17,753 282,215 1,372 B2W - Companhia Digital 61.51 5,742,330 3,537,115 (397,427) Freijó Administrações e Participações Ltda. 100 5 2,684 351 Louise Holdings Ltd. 100 506,213 124,582 4,900 Klanil Services Ltd. 100 65,320 (11,590) (3,453) JSM Global 100 52 52 - Indirect subsidiaries Posto Vicom Ltda. 100 4,129 1,589 (392) Submarino Finance Promotora de Crédito Ltda. 61.51 12,005 87,102 7,301 ST Importações Ltda. 61.51 4,050 76,461 14,561 BFF Logistica e Distribuição Ltda. 61.51 163,198 181,398 21,342 Mesa Express 61.51 275 - - QSM 61.51 5,000 29,528 6,706 BIT Services Tecnologia e Inovação Ltda. 61.51 170,013 191,746 7,923 Click-Rodo 61.51 44,928 12,346 (1,131) Direct 61.51 237,755 82,593 2,232 Digital Finance 61.51 500 10,573 9,584 Rental 61.51 2 (23,238) (107) Infoprice 36.90 - - (1,218)
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
15 Property, plant and equipment
Parent Company Facilities,
Buildings
furniture IT machinery Lease hold
and fixtures
and equipment
improvements
Others
Total
Balances as of January 1, 2018
642,668 685,491 1,313,793 108,637 60,196 2,810,785
Acquisitions 170,632 249,016 382,444 - 20,960 823,052
Write-offs (2,752) (4,948) (5,675) - - (13,375)
Depreciation (80,590) (146,179) (167,994) (5,394) (8,663) (408,820)
Balances on December 31, 2018
729,958 783,380 1,522,568 103,243 72,493 3,211,642
Acquisitions 181,591 247,651 412,580 23,500 34,272 899,594
Write-offs (3,476) (4,768) (7,897) - (1,373) (17,514)
Goods destinated for the payment of Ame’s capital Digital -
(15,446)
-
-
-
(15,446)
Depreciation (93,505) (166,345) (139,077) (5,629) (3,436) (407,992)
Balances on December 31, 2019
814,568 844,472 1,788,174 121,114 101,956 3,670,284
Balances on December 31, 2019 Total cost
1,177,847 1,485,493 2,836,630 158,362 174,193 5,832,525
Acumulated depeciation (363,279) (641,021) (1,048,456) (37,248) (72,237) (2,162,241)
Residual value
814,568 844,472 1,788,174 121,114 101,956 3,670,284
Balances on December 31, 2018 Total cost
1,039,041 1,449,335 2,483,285 134,862 141,294 5,247,817
Acumulated depeciation (309,083) (665,955) (960,717) (31,619) (68,801) (2,036,175)
Residual value
729,958 783,380 1,522,568 103,243 72,493 3,211,642
Weighted average annual depreciation rates - % 4.5% 6.7% Contracts
term. 4.0%
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Consolidated Facilities,
Buildings
furniture IT machinery Lease hold and fixtures and equipment improvements Others Total Balances as of January 1, 2018
704,784 1,035,244 1,328,728 116,437 97,853 3,283,046
Acquisitions 171,918
267,938
383,006
- 26,412
849,274
Write-offs
(2,873)
(5,247)
(5,756)
- (1,515)
(15,391) Transfers 117
245
4,874
(1,782) (3,454)
-
Depreciation (i) (88,390)
(191,439)
(175,134)
(5,394)
(8,852)
(469,209)
Balances on December 31, 2018
785,556
1,106,741
1,535,718
109,261
110,444
3,647,720 Acquisitions
183,950 269,361 413,588 23,500
43,623 934,022
Write-offs (3,505) (4,823) (7,897)) -
(1,617) (17,842)
Depreciation (i) (99,920) (211,758) (148,678) (5,629) (3,571) (469,556)
Balances on December 31, 2019
866,081 1,159,521 1,792,731 127,132 148,879 4,094,344
Balances on December 31, 2019 Total cost
1,327,079 2,282,648 2,953,580 164,380 351,633 7,079,320
Acumulated depeciation (460,998) (1,123,127) (1,160,849) (37,248) (202,754) (2,984,976)
Residual value
866,081 1,159,521 1,792,731 127,132 148,879 4,094,344
Balances on December 31, 2018 Total cost
1,146,634
2,018,110
2,547,889
140,880
309,647
6,163,160 Acumulated depeciation
(361,078)
(911,369)
(1,012,171)
(31,619)
(199,203)
(2,515,440)
Residual value
785,556
1,106,741
1,535,718
109,261
110,444 3,647,720
Weighted average annual depreciation rates - % 4.5% 6.7% Contracts term. 4.0%
(i) In the consolidated, in the years ended December 31, 2019, the depreciation of Direct's fleet, in the amount of R$ 2,954 (R$ 2,669 on December 31, 2018), was recorded in the cost of goods sold.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
As of December 31, 2019 and December 31, 2018, there are no assets pledged as collateral. In accordance with Technical Pronouncement CPC 01 (IAS 36), items of property, plant and equipment and intangible assets, which show signs that their recorded costs are higher than their recovery values, are reviewed annually to determine the need for a provision to reduce the balance book value at its realization value. The smallest cash-generating unit determined by the Group to assess the recovery of tangible and intangible assets corresponds to each of its stores. Management did not identify changes in circumstances or signs of technological obsolescence, nor evidence that its assets used in its operations are not recoverable in view of its operational and financial performance and concluded that, as of December 31, 2019, there was no need to record any provision for loss on property, plant and equipment and intangible assets. In Consolidated, likewise, the fixed and intangible assets of subsidiary B2W were analyzed in relation to their recovery values and it was not necessary to record a provision for losses (impairment).
16 Intangible
Parent Company
Software
right of use Brands
right of use (i) Others Total
Balances as of January 1, 2018 321,018 61,832 4,726 387,576 Additions 126,111 - - 126,111 Amortization (79,326) (7,724) (4,280) (91,330)
Balances as of December 31, 2018 367,803 54,108 446 422,357 Additions 224,933 - - 224,933 Softwares destinated for the payment of Ame Digital capital (35,862) - - (35,862)
Amortization (83,388) (7,723) - (91,111) Balances as of December 31, 2019 473,486 46,385 446 520,317
Balances as of December 31, 2019 Total cost 896,754 95,945 46,808 1,039,507 Acumulated amortization (423,268) (49,560) (46,362) (519,190)
Residual value 473,486 46,385 446 520,317
Balances as of December 31, 2018 Total cost 791,890 95,945 63,228 951,063 Acumulated amortization (424,087) (41,837) (62,782) (528,706)
Residual value 367,803 54,108 446 422,357
Average annual depreciation rates 20.0% 8.0% 5.00%
(i) Repurchase of the right to use the Lojas Americanas brand, in the sale of financial products (Lojas Americanas credit card and others) upon termination of the FAI - Financeira Americanas Itaú contract.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Consolidated
Goodwill Development acquisitions Software Brands of websites of investments right of use right of use and systems Others Total
Balances as of January 1, 2018
929,133 423,958 72,062 2,305,945 18,247 3,749,345
Additions 195
158,916
- 289,848
2,902
451,861 Capitalization of interest (i) - - - 28,165 - 28,165
Amortization of indirectly controlled added value – Bit Services
(889)
- - - - (889)
Amortization - (114,322)
(9,044)
(329,904)
(11,991)
(465,261)
Balances as of December 31, 2018
928,439
468,552
63,018
2,294,054
9,158
3,763,221 Additions
11,786 259,963 -
379,826 3,618
655,193
Capitalization of interest (i) - - - 39,527 - 39,527 Amortization of indirectly controlled added value – Bit Services
(889) -
-
- -
(889) Amortization - (137,473) (9,043) (337,669) (147) (484,332)
Balances as of December 31, 2019 939,336
591,042 53,975 2,375,738
12,629
3,972,720
Balances as of December 31, 2019 Total cost 1,033,585 1,431,313 112,445 4,017,050 97,511 6,691,904
Acumulated amortization (94,249) (840,271) (58,470) (1,641,312) (84,882) (2,719,184)
Residual value
939,336
591,042 53,975 2,375,738
12,629
3,972,720
Balances as of December 31, 2018
Total cost 1,021,799 1,171,350 112,445 3,597,697 93,893 5,997,184
Acumulated amortization (93,360) (702,798) (49,427) (1,303,643) (84,735) (2,233,963)
Residual value
928,439
468,552
63,018
2,294,054
9,158
3,763,221
Average annual depreciation rates Undefined 12.7% 8.0% 12.17%
(i) The weighted average CDI rate on loans raised by subsidiary B2W in the year ended December 31, 2019 was 124.00% and on December 31, 2018 was 120.00
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(a) Goodwill on investment acquisitions
The Group evaluates goodwill annually to verify probable losses (impairment), the last assessment being made in December 31, 2019. of future results for a period of 10 years using nominal IPCA rate plus 2% pa and 1% growth rate for perpetuity. The discount rate of future cash flows was estimated at 10.3% a.a. The need for a provision for impairment of these assets was not identified. The business model adopted by the Group corresponds to a vertical structure, thus, the consolidated balances more adequately represent the only cash-generating unit (CGU), which is considered for the impairment test. As of December 31, 2019 and December 31, 2018, the goodwill from investment acquisitions was represented as follows:
Parent Company
Consolidated
2019 2018
2019 2018
Acumulated
Acumulated
Cost amortizatio
n Net Net
Cost amortizati
on Net Net
Goodwill on investments acquisitions
B2W 233,369 (31,937) 201,432 201,432
233,369 (31,937) 201,432 201,432 BWU 173,160 - 173,160 173,160
173,160 - 173,160 173,160
TV Sky Shop - - - -
135,305 (53,866) 81,439 81,439 BIT Services - - - -
264,881 (7,832) 257,049 257,938
Click Rodo - - - -
19,426 - 19,426 19,426 Direct - - - -
195,038 - 195,038 195,038
Others 310 (307) 3 3
620 (614) 6 6 Ecolivery Courrieros - - - - 7,919 - 7,919 -
Eco Logística - - - - 3,867 - 3,867 -
406,839 (32,244) 374,595 374,595
1,033,585 (94,249) 939,336 928,439
(b) Goodwill on investment in B2W and its subsidiaries The Company assessed for impairment the goodwill determined on the acquisition of B2W as per the calculation below: Number of B2w shares held by the Company
321,376,659
Stock market value (weighted average of 12 months)
44.138913
Market value of the stake in B2W
14,185,216
(-) Company's investment in B2W
3,522,190
(-) Goodwill on the acquisition of B2W net of amortization
201,432
Sufficiency
10,461,594
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
The business model adopted by B2W corresponds to a vertical structure, thus, consolidated balances more adequately represent the only cash-generating unit (CGU), see Note 2.4, which is considered for the impairment test, with no impact in any negative result of the investees. The goodwill balances calculated on the acquisition of equity interests are supported by technical studies based on the expectation of future profitability and the company monitored the assumptions used and did not identify indications of loss or need for a new valuation on December 31, 2019.
(c) Development of websites and systems/software usage rights They represent expenses with e-commerce platform (development of technological infrastructure, content, applications and graphic layout of the sites), expenses with implementation of ERP system and development of own systems, being amortized in a linear way considering the stipulated term of use and benefits earned. Following its innovation trajectory, B2W continues to invest in new features with the objective, mainly, of improving the shopping experience, increasing the conversion rate and reinforcing the positioning of the brands, in addition to implementing new operational features of the Company. Among the recently launched projects are: • New Shoptime: website with new layout and more optimized for desktop and mobile; • Store in store pet love: the largest online pet shop in Brazil; • Insurance and services portal: installation of air conditioning, theft and robbery insurance for mobile devices, PET health plan, Extended Warranty; • Media Center Shoptime: TV experience on the web, live and last seen on TV; • Insurance Platform - Shoptime: insurance recommendation during the purchase flow of the site and pilot with the sale of cell phone theft and robbery insurance (cell phone break, loss or theft); • TV Shoptime in the APP: TV programming in your pocket; • Submarino.com - improvement in the home of the book department, organization in navigation, highlighting the authors, literary lists and official stores; • “Best seller” for readers - Automatic page with customized window to highlight the best-selling books in the last 15 days in Brazil and on the Submarino.com website. • Favorite Cross Devices - In addition to the App, it is also possible to favor products on the Submarino website. Being an important feature in customer engagement, whose goal is to offer one more option for the user to assemble their wishlist; • To allow greater visibility of the offers of an item, a product page was adapted on the Submarino website to present the 3 best offers in order to facilitate the choice and purchase of our customers; • In Submarino.com website was developed or a pre-sale filter that made possible an automatic page of products in this condition. In addition, we started to allow strategic salespeople to register products as pre-sales;
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
• A visual identity of the header on the Submarino website has been changed according to the repositioning of the brand. Updates an institutional body, brings the user a more modern look and focuses on the target audience, in addition to replacing the old logo with the current signature of the brand. Improvements in usability and user experience were also implemented; • Banner card - On Shoptime pages, this component allows the automated diagram of a banner, from the insertion of the content of the company's internal platform (Spacey). The goal is to reduce image loading, visual standardization and consistency in Shoptime communication. • With emphasis on the most relevant lines of the baby department, Americanas.com, with a new page, is betting on the best mobile experience and presenting more content. More practical and intuitive navigation. • Sou Barato's new application - Coupons, promotions and various products for the price the customer can pay. We launched the APP with different features, such as favorites, highlights, recommendations, among others. The Company used the same assumptions in item (a) above for the impairment test of intangible assets and did not identify the need for a provision for asset recoverability. • Americanas.com website with a new product page whose objective is to facilitate customer decision making; • New order summary for all the websites of our brands, Americanas.com, Submarino, Shoptime and Sou Barato. We improve the arrangement of values in a manner consistent with the order in which the discounts are applied, thus facilitating the client's better understanding; • Vertical Pocket Móveis - new format for Shoptime furniture home; • New format to highlight used Submarino products, aiming at better communication with the user; • Automatic registration of books on the Submarino website from the integration with Metabooks, a platform specialized in the sector's metadata; • Reformulation of the Subamrino Wow Offer page; • Implementation of the latest orders on the Submarino mobile home. B2W used the same assumptions in item (a) above for the impairment test of intangible assets and did not identify the need for a provision for asset recoverability.
17 Assets and Liabilities of leasing On December 31, 2019, the Group have classified as contracts of lease to its commercial, logistics and administrative units From January 1, 2019, in compliance with the CPC 06 (R2)/ IFRS 16, the Group adopted the modified retrospective approach and started to recognize the value of the minimum leasing, established in lease agreements, as assets and lease liabilities. The portion of rent and expenses set out in the contracts continue to be recognized, by competence, as occupancy costs. The measurement of the cost of the asset of right to use immovable property corresponds to the net amount of the lease liability, calculated on the minimum rent set out in contracts, discounted to present value by the projected rates and lease terms, which is the non-cancelable period and covered by option to extend the lease, if the Company is reasonably certain to exercise this option. The monthly depreciation
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
of the right to use property is calculated on a straight-line basis over the term of the agreement, regardless of any renewal clause in accordance with the Group's internal policies. Below we present the assets to the right to use the real state property and the corresponding obligations:
(a) Right to use real state property - Leasing Parent Company Consolidated
2019
2019
Accumulated
Accumulated
Cost
depreciation
Net
Cost
depreciation
Net
Right to use real state 3,430,881
(1,461,905)
1,968,976
3,760,381
(1,539,247)
2,221,134
Net balance at the end of the year
3,430,881
(1,461,905)
1,968,976
3,760,381
(1,539,247)
2,221,134
The right to use real state property rentals in the year:
Parent Company
Consolidated
2019
2019
Net balances arising in the beginning of the year 1,595,800
1,840,041 Additions
713,559
798,818
Depreciation
(340,383)
(417,725) Net balances arising in the end of the year
1,968,976
2,221,134
(b) Leasing to pay
Parent Company
Consolidated
2019
2019
Leasing to pay
2,889,040
3,236,178 Leasing interest
(625,067)
(682,809)
2,263,973
2,553,369
Current part 360,507 440,155
Non current part 1,903,466 2,113,214
Movement of rentals in the year:
Parent Company
Consolidated
2019
2019
Net balances arising in the beginning of the year 1,909,895
2,189,610 Additions by new contracts
713,559
792,981
Payments
(512,395)
(605,183) Appropriate interest
152,914
175,961
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Net balances arising in the end of the year
2,263,973
2,553,369
(c) Effects CVM Circular Letter No. 02/2019 - Misleading
In order to calculate the cost of the right to use real estate assets and the value of the lease liability, the Group used the nominal incremental interest rate to discount the actual payment flow to present value. As required by Official Letter-Circular/CVM/SNC/SEP/ No. 02/2019, the Group performed the recalculation, using the same bases, discounting the real incremental interest rate of the actual payment flow. We present below the non-material effects, calculated considering the calculation methodologies practiced by the Group and that required by the Circular Letter:
(c.1) Effect by the application of nominal and effective rates in the calculation of leasing
Parent Company
Consolidated
Intial adoption
12/31/2019
Variation
Intial adoption
12/31/2019
Variation
Leasing assets 274,059
334,093
60,035
270,983
333,912
62,929
Leasing liabilities (225,250)
(294,066)
(68,816)
(222,245)
(293,996)
(71,751)
Non-controlling interest -
-
-
70
111
41
Shareholders’ equity
48,809
40,028
(8,781)
48,809
40,028
(8,781)
Result of the year
(8,781)
(8,781)
(c.2) Real Rate vs. Nominal Rate Comparison
Parent Company
Subsidiary B2W
Real Flow x Real Rate (i)
3.26%
7.65%
Real Flow x Nominal Rate (i) 7.25%
7.16%
3.99%
-0.49%
(i) Average discount rate used in 2019
(d) PIS and COFINS potential embedded in the lease consideration
Parent Company
Consolidated
Nominal
Adjust to presente
value
Nominal
Adjust to presente
value
Lease consideration 2,484,267
1,946,776
2,831,404
2,236,171
Potential PIS/COFINS (9.25%) 229,795
180,077
261,905
206,846
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(e) Commitments - Lease agreements
(e.1) Parent Company
On December 31, 2019, the Company has 1,714 leasing contracts (1,483 leasing contracts on December 31, 2018) to their commercial, logistics and administrative units. These leasing contracts, in your most, provide variable rent payments on sales, or minimum value. The Company's monthly obligation is to pay the greater value between both with computation semiannual or annual. Were framed as leasing liabilities, as CPC 06 (R2)/IFRS 16 portions of the contracts defined as minimum rent. The plots defined as variables, continue to be recognized, by competence, as occupancy expense. The minimum values of contracts are adjusted annually according to the variation of main indices of inflation. The contracts of rent of logistics and administrative areas have values set on contract, with annual adjustments as variation of main indices of inflation, these being classified as leasing liabilities (see (b)).
For the year ended December 31, 2019 the variables expenses from rentals, condominiums and other related totaled R$ 280,566 in the parent company. Future commitments, based on the existing stores in December 31, 2019, with adjustment in the ratio of 3.56% (IPCA designed for 2020) from these leases, are as follows:
2020 2021 2022 2023 2024 onwards
290,554 300,898 311,610 322,703 334,191
(e.2) Controlled company B2W B2W and its subsidiaries maintains Particular Instrument of Lease of Commercial Property and Other Covenants for all their real states, with short-and long-term maturities, whose rent is updated annually based mainly in the IGP-M and IPCA. Were framed as leasing liabilities, as CPC 06 (R2)/IFRS 16 rental values specified in contracts with duration of more than 12 months. The rent corresponding to the short-term contracts continues to be recognized, by jurisdiction, as occupancy expense. In the period ended on December 31, 2019, the Group incurred R$ 19,460 for short-term and other real estate lease expenses and future commitments related to these agreements totaled R$ 395.
18 Suppliers Parent Company Consolidated
2019 2018 2019 2018
Suppliers of goods, supplies and others 4,385,583 4,000,442 7,464,106 6,344,820
Commercial agreements (1,069,184) (995,026) (1,373,305) (1,320,304)
Adjustment to Present value (note 2.16) (43,340) (38,103) (59,081) (50,939)
3,273,060 2,967,313 6,031,720 4,973,577
The commercial agreements are receivable, defined in partnership agreements entered into with suppliers. In financial transactions, when foreseen in a commercial agreement, settlements are made at the time of payment of invoices, to suppliers, by the net amount.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
19 Loans and financing (a) Breakdown
Parent Company Consolidated
Annual charges Final Maturity 2019 2018 2019 2018
In local currency BNDES (i) TJLP + 1.4% p.y. to 5.0% p.y. 06.15.2026
575,999
703,135
1,044,009 1,360,933
BNDES (i) Interest of up to 6% p.y. 07.17.2023 12,878 30,479 13,236 39,942
BNDES (i) Selic + up to 3.68% p.y. 06.15.2026 267,104 475,396 315,436 826,071
FINEP Interest from 3.5% to 7.0% p.y. 08.15.2028 144,035 139,265 257,770 318,076
Working Capital
109% to 136% of CDI
12.20.2027
908,231
1,159,515
5,315,836 5,522,187
Swap operations 119.8% of CDI 01.23.2024 (1,907) - (1,907) -
Commercial Promissory Notes (iv) 112.0% to 115.3% of CDI 06.28.2022 1,082,870 1,239,809 1,082,870 1,239,809
FIDC Quotas (v) Interest of 106.5% of CDI 02.14.2024 364,181 - 1,039,107 -
In foreign currency (ii)
Working capital (iii) USD + interest of up to 7.472% p.y. 11.03.2023 234,307
614,309
548,886 1,317,741
Swap operations Interest from 118.9% to 131.0% of CDI 11.03.2023 (20,317) (51,502) (29,265) (103,645)
Working capital (iii) EUR + 2.1% p.y. to 2.3% p.y. 01.18.2923 - - 488,190 434,720
Swap operations 121,95% CDI a 122,6% CDI
01.18.2023 -
-
22,740 78,297
Cost of borrowing (IOF and others)
(56,263)
(46,724)
(126,553) (126,431)
3,511,118
4,263,682 9,970,355 10,907,700
Non-current portion
566,324
1,028,157
2,113,377 1,751,247
Current portion 2,944,794
3,235,525 7,856,978 9,156,453
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(i)Financing of BNDES related to the FINEM program (opening and remodeling of stores, logistics and technology), FINAME (acquisition of machinery and equipment) and PEC (Working Capital). (ii) The operations in foreing currency are protected against the exchange oscillations through swap derivative financial instruments (note 4.1). (iii)Captation according to Resolution n. 2,770 of Brazilian Central Bank (BACEN). (iv) Commercial Promissory Notes being 1,800 with a nominal value of R$ 500, issued in 06/29/2017, with the expiration date of 06/28/2022, remunerated at the rates 115.3% p.y. for DI rate, base in 252 working days, occurring the interest payment in the final expiration date. (v) Represents the balance of qoutas issued by the Fênix - FIDC (Note 8 (a)).
(b) Movement
Parent Company
Consolidated
Balance on December 31, 2018 4,263,682
10,907,700
Fundraising 1,105,498
3,546,941 Principal Amortization (1,879,763)
(4,559,625)
Interest Amortization (234,935)
(724,518) Financial charge 256,636
799,857
Balance on December 31, 2019 3,511,118
9,970,355
(c) Non-current loans and financing by maturity year
Parent Company Consolidated
2019 2018 2019 2018
2020 - 459,971 - 2,707,174
2021 176,027 422,972 595,707 1,620,104 2022
1,239,405 1,314,660 1,506,379 2,708,700
2023 349,320 413,583 973,374 1,002,146
2024 356,608 491,572 3,589,526 872,281
2025 152,716 112,623 241,843 188,144
2026 onwards 670,718 20,144 950,149 57,904
2,944,794 3,235,525 7,856,978 9,156,453
The Group is subject to certain debt restrictive clauses (Debt Covenants and Cross Default) included in some loan and financing agreements. These clauses include, among others, the maintenance of certain financial ratios, calculated based on the financial statements disclosed by Management. As of December 31, 2019 and December 31, 2018, all indexes were met.
(d) Guarantees
Parent Company Consolidated
2019
2018
2019
2018
Letter of guarantee 809,228 845,540 1,439,664 2,042,287
Promissory notes - 148,320 - 148,320
Guarantee insurance 26,424 26,316 26,424 26,316
835,652 1,020,176 1,466,088 2,216,923
(e) Available credit lines
As of December 31, 2019, the Group had credit lines with several institutions in order to use them at the times necessary to drive the Group's organic growth.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
20 Debentures (a) Breakdown
Parent Company and Consolidated Issuing Company 2019 2018 Lojas Americanas S.A. 5,333,842 4,749,473 Funding cost (29,159) (32,700) 5,304,683 4,716,773 Current portion 199,662 483,243 Non current portion 5,105,021 4,233,530
(b) Issuance of debentures by the Company
Nature 4th issue
Lame 14
7th issue
Lame 27
8th issue
Lame 38
9th issue
Lame 19
9th issue
Lame 29
10th issue
Lame 10
11st issue
Lame A1
11st issue
Lame B1
12nd issue
Lame A2
13rd issue
Lame A3
Issue date 09/05/2011 12/21/2012 07/15/2013 06/25/2014 06/25/2014 11/21/2016 04/15/2017 04/15/2017 04/20/2018 01/10/2019
Due date 06/25/2024 12/21/2022 07/15/2021 06/25/2024 06/25/2021 11/21/2019 04/15/2022 04/15/2024 04/20/2023 01/10/2026
Quantity issued 50,000 35,000 20,000 70,000 25,000 30,000 126,335 23,665 100,000 100,000
Unit value (In Reais) R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000 R$ 10,000
Financial index for covenants math Consolidated net debt /
EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤
3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Consolidated net
debt / EBITDA ≤ 3.5
Annual financial charges 117.5% of CDI 114.50% of DI
(base 252) IPCA + 6.39% 117.5% of CDI 113% of CDI 112% of CDI 115% of CDI
IPCA + 7.0972% (base
252) 116% of CDI (base 252)
116.7% of CDI (base
252)
Covertibility simple, not convertible
into shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
simple, not
convertible into
shares
Type and form nominative and book- nominative and nominative and nominative and nominative and nominative and nominative and book- nominative and book- nominative and book- nominative and book-
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
entry book-entry book-entry book-entry book-entry book-entry entry entry entry entry
Amortization of the principal
amount
09/05/2016 – 5%
09/05/2017 – 5%
25/06/2022 – 4.5%
06/25/2023 – 13.5%
06/25/2024 – 72%
12/21/2021 - 50%
12/21/2022 - 50%
07/15/2019 –
33.33%, 07/15/2020
– 33.33% and
07/15/2021 –
33.34%
06/25/2022- 5%
06/25/2023 - 15%
06/25/2024 - 80%
06/25/2018- 25%
06/25/2019 - 25%
06/25/2020 - 25%
06/25/2021 - 25%
Amortization at
maturity
04/15/2021-50%
04/15/2022- 50%
04/15/2023- 50%
04/15/2024-50%
Amortization at
maturity
Amortization at
maturity
Payment of
remunerative interest
March 5th and
September 5th of each
year
(2015 to 2024)
June 21st and
December 21st of
each year
July 15th of each
year (2014 to 2021)
June 25th abd
December 25th of
each year
June 25th of each
year
May 21st and
November 21st of
each year
October 15th and
April 15th of each
year
April 15th of each year
(2018 to 2024)
April 20th and
October 20th of each
year (2018 to 2023)
January 10th and July
10th of each year
(2019 to 2026)
Guarantees Floating Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured
Renegotiation doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have doesn’t have
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(i) Breakdown
Due Date
Nominal Nominal
Annual
Date of Type of Securities in amount at amount in financial
issue issue circulation issue 2019 fees 2019 2018
4th Issuance – Lame 14
09/05/2011
06/25/2024
Public
50,000
500,000 450,000
117.5% of CDI
450,270
450,390
7th Issuance - Lame 27 12/21/2012 12/21/2022 Public 35,000 350,000 350,000 114.50% CDI 350,342
350,493
8th Issuance - Lame 38 07/15/2013 07/15/2021 Public 20,000 200,000 133,333 IPCA + 6.9%
137,394 206,778
9th Issuance - Lame 19 06/25/2014 06/25/2024 Public 70,000 700,000 700,000 117.5% of CDI 700,422 700,608 9th Issuance - Lame 29 – Lame 38
06/25/2014 06/25/2021 Public 25,000 250,000 125,000 113% of CDI 129,081 194,399 10th Issuance - Lame 10 – Lame 38
11/21/2016 11/21/2019 Public 30,000 300,000 - 112% of CDI - 302,242 11th Issuance - Lame A1
04/15/2017 04/15/2022 Public 126,335 1,263,350
1,263,350
115% of CDI 1,278,051 1,282,085 11th Issuance - Lame B1
04/15/2017 04/15/2024 Public 23,665 236,650 236,650 IPCA +7.0972% 247,058 248,967 12th Issuance - Lame A2 04/20/2018 04/20/2023 Public 100,000 1,000,000 1,000,000 116% of CDI 1,010,758 1,013,511
13th Issuance - Lame A3 (i) 01/10/2019 01/10/2026 Public 100,000 1,000,000 1,000,000 116.7% of CDI 1,030,466 -
5,333,842
4,749,473
(29,159)
(32,700) Funding costs
5,304,683
4,716,773
Current portion
199,662 483,243
Non-current portion 5,105,021 4,233,530
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(ii) Movement
4th Private
Issue
6th Issue
Lame 16
6th Issue
Lame 26
7th Issue
Lame 27
8th Issue
Lame 38
8th Issue
Lame 38
9th Issue
Lame 19
9th Issue
Lame 29
10th Issue
Lame 10
11st Issue
Lame A1
11st Issue
Lame B1
12nd Issue
Lame A2
13rd Issue
Total Lame A3 Balance as of January 1, 2018 461,812 311,271
207,514
350,530 80,445
209,005 700,628 261,962 302,484 1,284,404 253,975 -
- 4,424,030
Funding – 12nd issue - - - - - - - - - - - 1,000,000 - 1,000,000
Amortization of principal - (300,00) (200,00) - (77,300) - - (62,500) - - - - - (639,800)
Interest amortization (44,395) (13,027) (8,685) (25,436) (6,144) (17,000) (51,183) (21,080) (21,535) (94,452) (23,084) (34,518) - (360,539)
Financial charges 32,973
1,756 1,171 25,399
2,999 14,773
51,163
16,017
21,293
92,133
18,076
48,029 -
325,782
Balance as of December 31, 2018 450,390 -
-
350,493 -
206,778 700,608 194,399 302,242 1,282,085 ,248,967 1,013,511
- 4,749,473
Funding – 13rd issue - - - - - - - - - - - - 1,000,000 1,000,000
Amortization of principal - - - - - (68,580) - (62,500) (300,000) - - - - (431,080)
Interest amortization (31,301) - - (23,776) - (12,977) (48,690) (13,497) (20,403) (89,753) (18,104) (71,197) (31,512) (361,210)
Financial charges 31,181 - - 23,625 - 12,173 48,504 10,679 18,161 85,719 16,195 68,444 61,978 376,659
Balance as of December 31, 2019 450,270 -
-
350,342 -
137,394 700,422 129,081 - 1,278,051 247,058 1,010,758
1,030,466 5,333,842
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
(c) Issuance of debentures by the subsidiary B2W - Companhia Digital
(i) Breakdown
Type of Titles in Value on the
date of Financial Charges
Issuing Date Due Date issue circulation issue annual 2019 2018 1st private issue 12.22.2010 12.22.2022 Private 200,000 1,000 125.0% CDI 200,214 200,246
(ii) Movement
1st Private
Issue
On January 1, 2018 200,265
Interest amortization (16,138)
Financial charges 16,119
On December 31, 2018 200,246
Interest amortization (15,130)
Financial charges 15,098
On December 31, 2019 200,214
(iii) Information on debentures issues:
The following are the descriptions of the debentures issued and which are in effect on December 31, 2019.
Nature 1st private issue
Date of Issuance 12. 22.2010 Maturity Dates 12.22.2022 Amount issued 200 Unit price R$ 1,000 Annual financial charges 125.0% DI Convertibility Simple, non-convertible into shares Type and form Nominative and book entry
Amortization of unit value Full on the due date
Payment of remunerative interest December 22 of each year (2011 to 2022)
Guarantees Does not have
Renegotiation
Permitted, provided that by common agreement between issuer and debenture holder
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
21 Taxes payables
Parent Company Consolidated 2019 2018 2019 2018
Tax on Circulation of Goods and Services (ICMS)
136,976 112,868
213,610 149,529
Withholding Income Tax – (IRRF) - 3,795 1,195 4,561
Social Integration Program (PIS)/Contribution for Social Security Financing (COFINS) 19,229 1 35,238 12,848
Tax on services (ISS) 3,028
1,180
10,126
5,336
Others 4,471 5,264
10,862 9,281
163,704 123,108 271,031 181,555
22 Provision for court lawsuits and contingencies
The Company and its subsidiaries are parties to lawsuits and administrative proceedings before courts and government agencies involving tax, labor, civil and other matters. Management has a system for monitoring its judicial and administrative actions conducted by the internal legal department and external lawyers. The Management, based on information from its legal advisors, analysis of pending lawsuits and, regarding labor claims, based on previous experiences regarding the amounts claimed, set up a provision, in an amount deemed sufficient, to cover potential losses on the lawsuits ongoing. Certain lawsuits are secured by letters of guarantee. The judicial deposits made in the year, parent company and consolidated, basically derive from resources in tax proceedings pending at the federal level.
(a) Judicial deposits
When legally required, judicial deposits are made, which total:
Movement
Parent
Company Consolidated
As of January 1, 2018 279,843 335,159
Additions 42,751 77,437
Reversal (2,104) (7,917)
As of December 31, 2018 320,490 404,679
Additions 41,214 79,776
Reversal (42,976) (57,166)
As of December 31, 2019 318,728 427,289
Parent Company Consolidated
2019 2018 2019 2018
Judicial Deposits 318,728 320,490 427,289 404,679
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(b) Provisions recorded
Parent Company Consolidated
2019 2018 2019 2018
Tax 74,815 41,659 110,319 82,442
Labor 51,125 38,596 120,095 96,702
Civil 10,972 13,017 56,776 66,082
Others 108 101 108 101
137,020 93,373 287,298 245,327
Current portion 40,471 33,650 40,471 33,650
Non-current portion 96,549 59,723 246,827 211,677
Tax The main tax lawsuits of the Group, in the amount of R$ 110,319, are represented by lawsuits included by the Company in the Special Installment of Federal Debts (PAES), instituted by Law No. 10,684/2003, which were improperly excluded by the Federal Revenue under the allegation of non-compliance with the rule that determined the inclusion of all federal liabilities in installments, which generated assessments of the full amount of debts without reducing the charges provided for in the program. Labor The Group is also part to lawsuits of a labor nature. None of these lawsuits refers to individually significant amounts and the discussions involve mainly overtime claims among others. Civil The Company is a party, together with its subsidiaries, in lawsuits arising from the ordinary course of its operations and its subsidiaries, of a civil nature, representing, as of December 31, 2019, the amount indicated as contingent liability referring to these matters. There is no individual action of significant value.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(c) Movement
Parent Company
Tax Labor Civil Others Total
Balance on January 1, 2018 45,550 26,937 13,996 95 86,578
Additions 17,900 27,798 6,652 - 52,350 Payments (12,776) (16,568) (8,530) - (37,874) Reversions (12,220) (1,300) - - (13,520) Restatement
3,205
1,729
899
6
5,839
Balance on December 31, 2018 41,659 38,596 13,017 101 93,373
Additions 38,976 29,824 6,819 - 75,619
Payments (583) (18,999) (9,750) - (29,332) Reversions (8,665) - - - (8,665)
Restatement 3,428 1,704 886 7 6,025
Balance at December 31, 2019 74,815 51,125 10,972 108 137,020
Consolidated
Tax Labor Civil Others Total Balance on January 1, 2018 87,135 109,38
8 99,720 95 296,338
Additions 18,435 33,811 13,017 - 65,263 Payments (12,776) (16,568) (8,530) - (37,874) Reversions (13,557) (31,658) (40,184) - (85,399)
Restatement 3,205 1,729 2,059 6 6,999
Balance at December 31, 2018 82,442 96,702 66,082 101 245,327
Additions 40,081 47,292 7,500 - 94,873
Payments (583) (18,999) (9,750) - (29,332) Reversions (15,049) (6,664) (7,942) - (29,595) Restatement 3,428 1,704 886 7 6,025 Balance on December 31, 2019 110,319 120,09
5 56,776 108 287,298
(d) Contingent liabilities not provisioned
As of December 31, 2019, the Group has administrative, judicial, tax, civil and labor claims in the approximate amount of R$ 3,108,328 (R $ 2,220,823 on December 31, 2018) in the parent company and R$ 4,256,526 consolidated (R $ 3,039,000 as of December 31, 2018). Below we present the main administrative/judicial demands, classified by their legal advisors as "possible losses", for which no provision was made. The other demands, in significant volume and of small individual value, that make up the balance above are not being presented. The variation in relation to 2018 is due to monetary restatement and new assessments of existing processes.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
At the Parent Company:
Base Date December, 31, 2019 Estimated
value
Disallowance or contestaiom of tax credit Due to the use of credit related to the unconstitutional increase of the percentage of 1% of the ICMS, between the years 1990 and 1997, promoted by the State of São Paulo. 100,362
Regarding the ICMS ST subject to reimbursement, due to non-compliance with the specific legal standard.
330,060
ICMS requirement Relates to the difference between the amount of inventory reported in the magnetic file and the physical inventory of establishments, recorded in the inventory record book. 109,944
As a result of the reduced collection in transfers from Distribution Centers to stores in other states. Divergence of the amount taken as the basis for calculation or incident rate. Tax substitution due to lack of payment or underpayment of tax on the entry of goods into State territory.
76,390
166,005
Decree Law No. 1,455, of April 7, 1976 Infraction notices drawn up for the application of a substitutive fine for the penalty of forfeiture, on the grounds that the real importer of the goods was concealed in the Import Declaration.
1,053,785
Corporate Income Tax - IRPJ and Social Contribution on Net Income - CSLL Tax requirement for the calendar year 2009 and 2010, due to disallowance of expenses considered as not proven, due to the alleged lack of addition of the amortized goodwill in the CSLL calculation base, the absence of addition of the cost or non-deductible expense in the base calculation of CSLL, as well as the non-addition of non-deductible provisions in the CSLL calculation base. Tax requirement resulting from the lack of homologation of the Clearing Statements, on the grounds that the claimed credit would not be liquid and certain. Corporate Income Tax Requirement arising from failure to comply with the 30% compensation limit of the IRPJ calculation base.
66,489
82,570
95,753
PIS and COFINS Disallowance of tax credits and collection of supposedly untaxed revenues, resulting from the Contribution to the Financing of Social Security - COFINS and Contribution to the Social Integration Program - PIS.
274,076
(e) Contingent liabilities not provisioned - Subsidiary B2W
As of December 31, 2019, the subsidiary B2W has administrative, judicial, tax, civil and labor claims classified by the legal advisors as “possible losses” and, for this reason, no provision was recorded. The approximate amount of the lawsuits is R$ 824,225 (R$ 597,122 on December 31, 2018) at the parent company and R$ 1,148,198 (R$ 818,177 on December 31, 2018) in the consolidated. Among the main tax lawsuits classified as “possible losses”, we highlight:
(i) the tax assessment notice issued for the collection of IRPJ and CSLL debts resulting from allegedly undue use of tax losses and negative CSLL basis, since the 30% limit for carrying out the compensation is not observed, in the approximate amount of R$ 80,307; and
(ii) assessment notices resulting from the attribution of responsibility for the payment of a fine, in the approximate amount of R$ 526,160.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
23 Accounts Payable - Business Combinations In order to expand its business and in accordance with the strategic plan, Subsidiary B2W acquired companies with operations related to digital services. Between 2013 and 2015, 19 companies operating in the areas of systems development, operations and e-commerce services, customer and product intelligence consulting were acquired, in addition to two of the main carriers specialized in e-commerce in Brazil. As of December 31, 2019, the balance payable for acquisitions of these companies is R$ 8,092 (consolidated). "AME" acquired the totality of the shares of the companies Pedala (Eco Logística Ltda.) Courri (Ecolivery Courrieros Ltda.) and Transportes (Courrieros Transportes Ltda.), Specialized in fast and sustainable bicycle deliveries. The acquisitions are aimed at speeding up the Ame Flash operation, making deliveries in large urban centers with different low-carbon modes, in addition to expanding the network of connected partner deliverers. The acquisition price was R$ 10,000, R$ 2,250 of which was paid in cash and the remainder divided into 5 annual installments. As of December 31, 2019, the balance payable was R$ 7,750.
Consolidated
Current Non current
2019
2018
2019
2018
BIT Services
8,092
490 - 7,788 Others - 1,044 - - Ecolivery Courrieros 1,416 - 2,855 - Courrieros Transportes 83 - 333 - Eco Logística
751
- 2,312 -
10,342 1,534 5,500 7,788
24 Antecipated Revenue - Subsidiary B2W On October 18, 2013, the subsidiary B2W signed an Extended Warranty Insurance Commercial Agreement Contract with the insurance company CARDIF do Brasil Seguros e Garantias SA, with the intervention of TRR Securitas Corretora de Seguros Ltda., And Panamericano Administração e Corretagem de Seguros e de Previdência Privada LTDA., in order to explore the Extended Warranty offer, of purchases made by customers through the subsidiary's sales channels. As a result of this contract, B2W received R$ 35,000 as anticipated revenue, which is being appropriated to the result through the achievement of goals. The amounts received and not yet appropriated are recorded, in the consolidated, in liabilities, under the captions "Other current liabilities" and "Other non-current liabilities".
Advance received 35,000 Suitable in 2013 to 2016 (24,627) Suitable in 2017 (1,616) Suitable in 2018 (1,820) Suitable in 2019 (1,716) To be appropriated 5,221 Current portion 2,489
Non-current portion 2,732
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
25 Shareholders’ Equity
(a) Capital
The capital stock may be increased by the Board of Directors, regardless of statutory reform, up to the limit of 2,000,000,000 common and/or preferred shares. There is no preemptive right to subscribe for shares. The shareholding composition of the Company's capital as of December 31, 2019 and December 31, 2018 is as follows:
2019 2018 ON PN Total ON PN Total
Carlos Alberto da Veiga Sicupira - 4.47% 2.96% - 4.49% 2.98% Administrators 2.30% 5.58% 4.48% 2.33% 5.58% 4.48% Cathos Holding LLC - 2.41% 1.60% - 2.42% 1.60% S-Velame Adm. de Recursos e Participações S.A. 54.00% - 18.19% 54.00% - 18.24% CEDAR TRADE LLC - 0.50% 0.33% - 0.50% 0.33% LTS TRADING COMPANY LLC 0.03% 0.01% 0.02% 0.03% 0.01% 0.02% BRC S.à r.l. 6.78% 22.10% 16.94% 7.85% 22.20% 17.35% Total of Controllers 63.11% 35.07% 44.52% 64.21% 35.20% 45.00%
Tobias Cepelowicz 5.34% - 1.80% 6.06% - 2.05% Invesco LTD. - 12.19% 8.09% - 9.52% 6.30% BlackRock - 4.99% 3.30% - 6.19% 4.10% Others 31.55% 47.75% 42.29% 29.73% 49.09% 42.55% Total Free Float 36.89% 64.93% 55.48% 35.79% 64.80% 55.00% Total without treasury 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
(b) Changes in capital shares
Number of book-entry shares, without par value.
Nominative Nominative Balance
common
shares preferred
shares Total
in Reais As of January 1, 2018 539,943,630 1,057,488,141 1,597,431,771 4,019,358 Capital Increase – Stock option plan - 3,222,193 3,222,193 31,443 As of December 31, 2018 539,943,630 1,060,710,334 1,600,653,964 4,050,801 Capital Increase – Stock option plan – Capitalization of reserves - 3,384,868 3,384,868
31,105
Capital Increase – Stock option plan – Financial Resources 1,339,132 1,339,132
20,895
As of December 31, 2019 539,943,630 1,065,434,334 1,605,377,964 4,102,801 Costs attributable to the public offering - - - (92,840) As of December 31, 2019 – net of cost 539,943,630 1,065,434,334 1,605,377,964 4,009,961
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
At a meeting of the Board of Directors "RCA" held on December 2, 2019, the capital increase was approved, through a private subscription, in the amount of R$ 228,919, with the issue of 5,211,026 common shares and 10,260,362 preferred shares , for the issue price of R$ 12.19 per common share and R$ 16.12 per preferred share. The payment, at the shareholder's discretion, may be made using interest on equity credit, net of income tax declared in the aforementioned “RCA” or in national currency, on the date of subscription. The holders of shares of the Company on December 9, 2019 will have preemptive rights in the subscription, and must exercise this preference within a maximum period of 30 days. When exercising the preemptive right, the shareholders must express their interest in the reserve of any surplus or additional surplus. The shareholders of the Company's control group undertake to exercise the preemptive right to subscribe the shares in proportion to their participation, as well as to subscribe up to the totality of the eventual balance of the remaining unsubscribed shares. At meetings of the “RCA” Board of Directors, capital increases in the total amount of R$ 52,000 were approved, with the issue, in the year, of 4,724,000 preferred shares, with 3,384,868 preferred shares paid up by capitalization of reserves and 1,339,132 preferred shares with financial resources. The payments are due to the exercise of the purchase options granted under the terms of the Plan approved by the General Meeting of April 30, 2012, as shown below: At meetings of the “RCA” Board of Directors, capital increases in the total amount of R$ 52,000 were approved, with the issue, in the year, of 4,724,000 preferred shares, with 3,384,868 preferred shares paid up by capitalization of reserves and 1,339,132 preferred shares with financial resources. The payments are due to the exercise of the purchase options granted under the terms of the Plan approved by the General Meeting of April 30, 2012, as shown below:
Payment
RCA Date Capitalization of
reserves Financial Resources Capital Increase – R$
07/23/2019 3,355,465 - 31,105
09/30/2019 17,833 1,318,832 20,475
10/31/2019 11,570 20,300 420
Total 3,384,868 1,339,132 52,000
At the Board of Directors' meeting held on September 3, 2018, the capital increase was approved with the issue of 3,222,193 preferred shares, of which 2,869,693 of these shares were paid up by capitalization of reserves, due to the exercise of the stock options purchase granted under the Plan approved by the General Meeting of April 30, 2012.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(c) Treasury shares Changes in treasury shares:
Ordinary Preferred Balance
nominative nominative Total in Reais
As of January 1, 2018 - 2,300,719 2,300,719 44,545 As of December 31, 2018 and 2019 - 2,300,719 2,300,719 44,545
Average acquisition cost on -
19.36
December 31, 2019 per share – R$
Market value on December 31, 2019 19.70 25.91 per share – R$
(d) Goodwill on transactions with subsidiary shares
In 2019 and 2018, the Company did not acquire, on the market, common shares of subsidiary B2W.
(e) Reserve for new developments
The reserve for new ventures is constituted based on capital budgets, submitted for approval by shareholders at the General Meeting, and is intended for future investment plans of the Company and repurchase of own shares for later cancellation. It was proposed to allocate retained earnings for the years 2019 and 2018, respectively, R$ 375,969 and R$ 241,466 to reserve new projects.
(f) Legal reserve
The legal reserve is constituted annually as a destination of 5% of the net income for the year and cannot exceed 20% of the share capital. The purpose of the legal reserve is to ensure the integrity of the share capital and can only be used to offset losses and increase capital.
(g) Dividends and interest on equity
The shareholders are guaranteed a statutory minimum mandatory dividend corresponding to 25% of net income for the year, which can be offset against declared interest on own capital and will have the same gross amount per share, both for common shares (ON) and for preferred shares (PN). The Board of Directors has the competence to distribute a value higher than the mandatory minimum. At the Extraordinary Meeting of the Board of Directors on 12/02/2019, the distribution of Interest on Equity was calculated, based on the variation of Long Term Interest Rates on Shareholders' Equity, for the year of 2019, in the amount of R$ 269,317. Distribution will take place on 2/3/2020. At the Extraordinary Meeting of the Board of Directors on 12/23/2020, the complementary distribution of Interest on own capital, for the year of 2019, in the amount of R$ 23,565 was approved. The complement will be distributed on April 13, 2019. The amounts distributed may be imputed to the amount of the minimum mandatory dividend due, to be calculated on the result for the year in accordance with future resolutions of the Annual General Meeting (AGM).
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(i) Financial year 2019:
2019 Net income of the year 704,054 Legal reserve (5% of the net income of the exercise) (35,203) Basis for calculation of dividends 668,851 Minimum mandatory dividend (25%) 167,213 Additional dividends to distribute 125,669 Dividends to distribute 292,882
Dividends distribuition Interest on own capital RCA of 12.024.2018 (Integrals R$ 0.1680000000 per share ON/PN) 269,317 RCA of 23.12.2019 (Integrals R$ 0.0147000000 per share ON/PN) 23,565 Total of proposed dividends 292,882
(ii) Financial year 2018:
2018
Net income of the year 380,490 Legal reserve (5% of the net income of the exercise) (19,024)
Basis for calculation of dividends 361,466
Minimum mandatory divident (25%) 90,366 Additional dividends to distribute 29,634
Dividends to distribute 120,000
Dividends distribuition Interest on own capital RCA of 12.24.2018 (Integrals R$ 0.075077272 per share ON/PN) 120,000
Total of proposed dividends 120,000
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
26 Share-based Payment
(a) Share Subscription Plan of the Parent Company (Lojas Americanas S.A.)
The Company makes its share subscription plans available to its managers and employees, these being the Company's Stock Option Plan “Option Plan”, approved at the Shareholders' Meeting held on April 30, 2012 and the Share Option Plan Incentive with Restricted Shares “Restricted Stock Plan”, approved at the Shareholders' Meeting held on April 30, 2018. The main objectives of the programs are to stimulate the expansion, success and social objectives of the Company and the interests of its shareholders, in addition to maintaining the services of high-level executives and employees, offering as an additional advantage becoming shareholders of Company. The maximum limit for granting options under the Stock Option Plan is shared with the limit of the Restricted Shares Plan. Accordingly, the Restricted Shares Plan and the Option Plan will be limited, jointly, to 5% of the total shares of the Company's share capital existing on the date of their grant, considering, in this total, the effect of the dilution resulting from the exercise of all options granted and not yet exercised under the Option Plan, as well as restricted shares that have not yet been effectively transferred to the Beneficiaries. (i) Stock Option Plan (2014 – 2017):
The programs currently in force provide for options consisting of two lots subject to certain conditions, among them, that the Beneficiary must allocate a certain percentage of the bonus attributed to him by the Company, for the exercise, partially or in full, of the Options that make up Lot A and Lot B. The Options in Lot A and the Options in Lot B entitle to the acquisition of a certain number of shares, as follows: Lot A: Each Option in Lot A entitles the acquisition of a preferred share issued by the Company. Lot B: Each Option in Lot B entitles you to acquire up to four preferred shares issued by the Company. Once the Options are exercised, whether from Lot A or Lot B, and on the exercise date, the Company will make available to the Beneficiary a Share for each Option in Lot A and one Share for each Option in Lot B. The remaining four Shares that make up each Option of Lot B will be delivered after a grace period of 60 months from the date of the respective Program. The general rule of the Stock Option Plan is that the exercise price must be established by the Board of Directors or by the Committee, using the average closing prices of the shares traded at B3, in a certain period prior to the date of granting the option. The Board of Directors or the Committee, as the case may be, may determine, when the Program is launched, that the Beneficiaries be granted a discount of up to 20% in the fixing of the exercise price. Specifically in relation to the programs currently in force, the exercise price of each option in Lot A and Lot B corresponds to the average price of the shares issued by the Company in the last 22 sessions of B3, to which a 10% discount will be applied. In addition, the Beneficiaries of the Plan, as holders of the Company's shares, are entitled to receive dividends and interest on equity from the moment the options are exercised.
Program 2017 2016 2015 2014
Date of the Management Committee Meeting - Program approval 07.06.2017 03.10.2016 03.10.2015 03.11.2014
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Quantity of PN shares granted 1,878,817 2,566,039 2,048,525 2,564,378
Beginning of the vesting period Oct/17 Jul/16 Jul/15 Jul/14
End of the vesting period Oct/24 Jul/21 Jul/20 Jul/19
Subscription value of the share on the grant date 12.36 13.62 14.49 10.26
Exercise value of the share - average price in the month of approval 13.73 15.13 16.10 11.40
Benefit amount 1.37 1.51 1.61 1.14
Market value of the share in the grant date 19.25 18.9 16.37 14.10
Number of shares estimated by the Company to be issued and held after the vesting period
2,141,851 2,925,285 2,359,901 2,930,150
Grant date 09.29.2017 08.09.2016 06.05.2015 06.30.2014
Vesting period 60 months 60 months 60 months 60 months
(ii) Restricted Shares Plan
The program approved in 2019 provides that the Beneficiary may choose to exercise the Options allocating part of its Bonus. Each Option exercised will be entitled to the acquisition of 1 (one) preferred share issued by the Company (“Share”). Additionally, for the year 2019, the Board of Directors may grant Restricted Shares within the scope of the Restricted Shares Plan approved by the 2018 General Meeting, and may condition the eligibility and/or effective participation of the respective Beneficiary in this Restricted Shares Plan for the effective exercise of options granted under such plans or programs. The Restricted Shares will be delivered after a grace period ending in 5 (five) years from the date of the Program.
Program 2019 Date of the Committee Meeting – Program approval 05.31.2019 Quantity of shares PN granted 1,691,632 Beginning of the vesting period Oct/19 End of the vesting period Oct/22 Share’s subscription value in the date of grant 15.40 Share’s market value in the date of grant 19.96 Date of grant 09.30.2019 Vesting period 60 months
The costs of executive remuneration from the existing plans to the year ended in December 31, 2019, were R$ 36,351 in the parent company and R$ 59.111 in the consolidated, recorded under operational expenses (R$ 36,551 in the parent company and R$ 53,447 in the consolidated in December 31, 2018) and the counterpart registered in capital reserves, in the consolidated. The compensation costs of the programs to be recognized (from 2019 to 2023) for the vesting period of the plans, considering the assumptions used, totaled R$ 47,341 in the parent company and R$ 76,058 in the consolidated.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
(b) Share Subscription Plan of subsidiary B2W The compensation costs arising from the Plan of payment based in shares for the year ended on December 31, 2019 was R$ 22,760 (R$ 16,896 on December 31, 2018). Remuneration costs are recorded in shareholders’ equity in reserve capital - reserve of recognized options granted, since the options, when exercised, are settled through the issuance of new shares or use of shares held in treasury. The cost of remuneration corresponds to the fair value of the B2W Plan, calculated on the date of grant, recorded during the service year that starts on the date of grant until the date the beneficiary acquires the right to exercise the option. The remuneration costs of the Plan to be recognized by the Company for the remaining term (service rendering period to occur) based on the assumptions used totaled approximately R$ 33,717 on December 31, 2019 (R$ 32,091 on December 31, 2018). Based on the shareholding composition of the capital stock as of December 31, 2019, the maximum percentage of dilution of interest that may be submitted to the current shareholders of the Company in case of exercise of all the options granted is less than 1%.
Planos 2019 2018 2016 2015 2015
2015
2014 Date of the Management Committee
Meeting - Program approval 08/09/19 10/10/18 06/30/16 06/11/15 06/11/15
03/10/15
03/11/14
Quantity of PN shares granted 474,612 444,065 2,845,194 476,807 177,474
1,357,147
1,285,208
Beginning of the vesting period Aug/19 Oct/18
Apr/16
Jul/15
Jul/15
Apr/15
Sep/14
End of the vesting period Aug/24 Sep/23 Mar/21 Jun/20
Jun/20
Mar/20
Jul/19
Subscription value of the share on the grant date
33.72 22.70 8.46 11.87 17.37
18.41
20.49
Exercise value of the share - average price in the month of approval
44.05 31.13 9.40 25.82 25.82
20.46
22.77
Number of shares estimated by the Company to be issued and held after the vesting period
237,306 222,033 1,422,597 238,404 88,737
678,574
642,604
Grant date 08.09.19 10.10.18 06.30.16 06.11.15 06.11.15
03.10.15
03.11.14
Vesting period 60
Months
60 Months
60
Months
60 Months
60
Months 60
Months 60
Months
The maximum limit for granting the granting of Restricted Shares, pursuant to this Restricted Stock Plan, will be shared with the maximum limit provided for in the Stock Option Plan approved on December 13, 2006, as amended and ratified (“Plan of Options"). Thus, the Restricted Stock Plan and the Stock Option Plan will be limited, jointly, to 5% of the total shares of the Company's capital stock existing on the date of their grant, considering, in this total, the effect of the dilution resulting from the exercise of all options granted and not yet exercised under the Stock Option Plan, as well as Restricted Shares that have not yet been effectively transferred to the Beneficiaries.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
27 Net revenue
Parent Company Consolidated 12/31/2019 12/31/2018 12/31/2019 12/31/2018
Gross sales of goods and services 14,006,508 12,959,410 22,179,747 20,842,775 Taxes on sales and services (1,827,716) (1,600,035) (3,507,197) (3,143,439)
Others (9,731) (9,472) (9,731) (9,474)
12,169,061 11,349,903 18,662,819 17,689,862
Net effects of taxes on ICMS tax credits on PIS/COFINS calculation base (Note 11) 187,199 - 293,512
12,356,260 11,349,903 18,956,331 17,689,862
28 Expenses by nature
The Group chose to present its statements of profit or loss for the years ended on December 31, 2019 and 2018 by function and presents the following breakdown by nature:
Parent Company
Consolidated
2019
2018
2019
2018
Sales Personnel (913,691) (785,061) (1,200,806) (1,075,423) Occupancy (i) (528,118) (824,754) (555,160) (926,226) Supplies (38,634) (33,369) (63,287) (52,598) Fees and commissions (161,707) (158,415) (417,425) (370,073) Distribution (36,614) (34,113) (73,727) (62,628) Others (ii) (82,915) (93,036) (531,592) (542,059) Total Selling Expenses (1,761,679) (1,928,748) (2,841,996) (3,029,007)
General and administrative
Personnel (63,677) (62,045) (158,210) (110,752)
Occupancy (187) (282) (9,381) (11,280)
Fees (25,711) (25,166) (34,935) (36,401)
Depreciation and amortization (iii) (839,486) (500,150) (1,369,548) (932,690)
Others (iv) (26,023) (26,613) (100,478) (80,396)
(955,084) (614,256) (1,672,462) (1,171,519)
Lawyers costs regarding the action of tax credits of ICMS in PIS/COFINS calculation basis (Note 11) (vi)
(54,434) - (87,107) -
Total General and Administrative Expenses (1,009,518) (614,256) (1,759,569) (1,171,519)
Other operating income (expenses) (v) (142,451) (120,342) (188,012) (140,062)
(i) Until December 31, 2018, the rental expense corresponding to real estate lease agreements was recognized on an accrual basis as occupancy expense. See notes 2.13 and 17 (e). (ii) In the consolidated refer mainly to on-line and off-line media and outsourced customer service. (iii) As a result of CPC 06 R2/IFRS 16, as of January 1, 2019, the Company recognized an asset right to use its property lease agreements and consequently its depreciation expenses in the amount of R$ 340,383 in the parent company of R$ 413,472 in the consolidated. See notes 2.13 and 17 (e). (iv) In the consolidated refer mainly to the legal fees, advisory services and consulting and judicial compensation. (v) Refers to the Parent Company, basically, the provisions for contingencies of R$ 55,807 (R$ 51,637 on December 31, 2018), expenses with an action plan of R$ 36,351 (R$ 36,551 on December 31, 2018) and employee participation of R$ 42,194 in December 2019 (R$ 22,600 on December 31, 2018). (vi) Recorded against other current liabilities
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
29 Financial result
Parent Company Consolidated
2019 2018 2019 2018
Interest and monetary securities 213,210 220,413 508,920 414,223 Financial discounts received and restatement monetary 4,851 6,232 8,174 50,139
Adjustment to present value of accounts 82,559 89,518 278,684 264,842
Other financial income
2,758
21,477
3,524
39,156
Total of financial income 303,378 337,640 799,302 768,360
Interest monetary restatement on financing, anticipation of receivables and leasing (683,313) (730,044) (1,510,216) (1,530,289)
Monetary restatement of fiscal liabilities (24,701) (26,043) (24,766) (27,204)
Bank expenses, taxes on financial transaction taxes and other financial expenses (180,833) (216,453) (254,845) (290,724)
Adjustment to present value of suppliers (201,224) (215,293) (358,690) (333,660)
Total financial expenses (1,090,071) (1,187,833) (2,148,517) (2,181,877)
Lease agreements (152,914) - (175,961) -
Net financial result (subtotal) (939,607) (850,193) (1,525,176) (1,413,517)
Net effect of monetary restatement of tax credits ICMS in PIS and COFINS calculation base (Note 11) 112,023 - 149,530 -
Net financial result (827,584) (850,193) (1,375,646) (1,413,517)
30 Earnings per share
Basic result per share are computed by dividing net income by the weighted average number of common and preferred shares outstanding in the year. There is no difference between classes in the distribution of the result per share. The calculation of basic and diluted result per share is as follows:
Parent Company
Consolidated
2019
2018
2019
2018
Numerator
Net profit (loss) in the period
704,054 380,490 581,283 227,510
Non-controlling
- - (122,771) (152,980) Result attributable to shareholders
704,054 380,490 704,054 380,490
Denominator (in thousands of shares) basic
Weighted average number of outstanding shares
1,602,476 1,596,182 1,602,476 1,596,182
Basic Profit per share
Attributable to shareholders
0.439 0.238 0.439 0.238 Result per share (ON and PN)
0.439 0.238 0.439 0.238
Denominator (in thousands of shares) diluted Weighted average number of outstanding shares 1,609,071 1,605,839 1,609,071 1,605,839 Net profit per diluted share
Attributable to shareholders
0.437 0.237 0.437 0.237 Result per share (ON and PN) 0.437 0.237 0.437 0.237
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
31 Insurances Coverage - Unaudited The company maintains insurance policies taken out with some of the main insurance companies in the country, which were defined by expert guidance and take into consideration the nature and the amount of risk involved. In December 31, 2019, the Company had insurance coverage in the forms of civil responsibility, property insurance and inventories, as presented below:
Parent Company Consolidated Material damage R$5,556,128 R$7,262,619 Civil Responsability and D&O R$90,000 R$11,927,034 Loss or damages (i) R$302,987 R$531,173 Aviation (ii) USD 6,800 USD 6,800 Civil Responsability International Transportation - USD 200,000 (i) It does not include coverage of insured cars for the amount of 110% of the table of the Fundação Instituto de Pesquisa Econômicas (“FIPE”); (ii) Does not include coverage of R$ 2,154 per passenger of the aircraft, in case of accidents.
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
32 Segment information
The information related to each reported segment are described below. The revenues of the segments is used to measure performance, because the understanding of this Administration is the most relevant information on the assessment of the results of the respective segments. Foreign operations are not relevant.
2019
Physical trade
E-commerce Others
Total
Eliminations
Total
Net sales
12,356,260 6,767,982 3,821
19,128,063 (171,732) 18,956,331 Cost of goods and/or of services rendered (7,432,652) (4,756,354) (3,094) (12,192,100) 130,441 (12,061,659)
4,923,608 2,011,628 727 6,935,963 (41,291) 6,894,672
Gross profit
Depreciation and amortization
(839,486) (519,745) (10,317) (1,369,548) - (1,369,548)
Selling, general and administrative expenses
(1,931,711) (1,337,917) (3,580) (3,273,208)
41,191 (3,232,017)
Financial revenue/(expense)
(827,584) (566,351) 18,289 (1,375,646) 1 (1,375,646)
Interest in subsidiaries
(187,445) (3,714) - (191,159) 191,159 - Other operational expenses
(142,451) (46,597) 362 (188,686) 674 (188,012)
Operating income (loss)
994,931 (462,696) 5,481 537,716 191,733 729,449
Tax return and social contribution
(290,877) 144,458 (1,747) (148,166) - (148,166)
Net income (loss) of the period 704,054 (318,238) 3,734 389,550 191,733 581,283
Net income (loss) of the attributable segment to the Company’s Shareholders
704,054 (318,238) 3,734 389,546
314,504 704,054
Interest of non-parent companies
- - - - (122,771) (122,771)
2019 March 31, 2018 Current assets
8,907,964 9,431,729 1,585,205 19,924,898 (1,016,186) 18,908,712
Non-current assets
11,947,245 6,624,841 242,748 18,814,834 (4,454,505) 14,360,329
Current liability
5,490,701 4,827,543 16,420 10,334,664 223,158 10,557,822
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
Non-current liability
10,196,877 5,494,595 1,159,704 16,851,176 (1,519,830) 15,331,346
Net equity
5,167,631 5,734,432 651,829 11,553,892 (4,174,019) 7,379,873
Other information:
Investments in property, plant and equipment and/or intangible assets
1,124,527
443,046 -
1,567,572
15,524 1,583,096
2018
Physical trade
E-commerce Others
Total
Eliminations
Total
Net sales
11,349,903 6,488,473 8,151 17,846,527 (156,665) 17,689,862
Cost of goods and/or
of services provided
(6,946,058) (4,813,573) (7,615) (11,767,246) 137,017 (11,630,229)
Gross profit
4,403,845 1,674,900 536 6,079,281 (19,648) 6,059,633
Depreciation and amortization
(500,150) (432,484) (56) (932,690) - (932,690)
Selling, general and administrative expenses
(2,042,854) (1,220,247) (841) (3,263,942) (3,894) (3,267,836)
Financial revenue/(expense)
(850,193) (566,334) 3,010 (1,413,517) - (1,413,517)
Interest in subsidiaries
(241,277) - - (241,277) 241,277 -
Other operational expenses
(120,342) (45,007) 1,276 (164,073) 24,011 (140,062)
Operating income (loss)
649,029 (589,172) 3,925 63,782 241,746 305,528
Tax return and social contribution
(268,539) 191,258 (737) (78,018) - (78,018)
Net income (loss) of the semester
380,490 (397,914) 3,188 (14,236) 241,746 227,510
Net income (loss) of the attributable segment attributable to the Company’s Shareholders 380,490 (397,427) 3,188 (13,749) 394,239 380,490
Interest of non-parent companies
- (487) - (487) (152,493) (152,980)
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
2018 December 31, 2017 Current assets
10,252,306 7,032,072 377,638 17,662,016 (204,759) 17,457,257
Non-current assets
7,412,780 7,412,780 7,412,780 7,412,780
5,999,122 132,793 13,544,695 (2,753,660) 10,791,035
Current liability
5,192,108 3,209,425 1,977 8,403,510 (762) 8,402,748
Non-current liability
7,600,767 6,284,654 108,931 13,994,352 (378,820) 13,615,532 Net equity
4,924,597 3,537,115 399,523 8,861,235 (2,575,110) 6,286,125
Other information:
Investments in property, plant and equipment and/or intangible assets
949,163 379,975 162 1,329,300 - 1,329,300
Lojas Americanas S.A. Notes to the financial statements December 31, 2019 and 2018 In thousands of Brazilian Reais, unless otherwise stated
PricewaterhouseCoopers, Rua do Russel 804, 6º e 7º, Edifício Manchete, Rio de Janeiro, RJ, Brasil, 22210-907, T: +55 (21) 3232 6112, www.pwc.com.br
33 Remuneration of employees and administrators Pursuant to the Brazilian Corporation Law and the Company's Bylaws, it is the responsibility of the
shareholders, at the General Meeting, to determine the total amount of the annual compensation of the managers. It is the responsibility of the Board of Directors to distribute the amount among the administrators. At the Annual General Meeting held on April 30, 2019, was set the monthly compensation limit of the Company's Directors (Board of Directors and Executive Officers).
In the years ended December 31, 2019 and 2018, the total compensation (salaries and profit sharing) of the Company's directors, officers and chief executives was R$ 63,228 and R$ 61,390, respectively (R$ 98,484 and R$ 91,851 in the consolidated), remunerations are within the limits approved in the corresponding Shareholders' Meetings.
34 Other Information
(a) The shares of B2W - Companhia Digital, a subsidiary of Lojas Americanas SA, are traded by BOVESPA
in the special listing segment of the Novo Mercado under the ticker BTOW3, being quoted on December 31, 2019 for R $ 62.86 per share (R $ 42.02 per share on December 31, 2018).
35 Subsequent events
The subsidiary B2W acquired, in January 13, 2020, the totality of shares of capital of SuperNow Portal e Serviços de Internet Ltda. (“Supermercado Now”). The company is an innovative e-commerce platform focused in the online grocery category in Brazil. The acquisition is aligned with the strategy of the subsidiary B2W of expanding its presence in the online grocery category, opening a new growth front and offering an even more complete assortment for the company’s client base. At a meeting of the Board of Directors "RCA", held on December 2, 2019, the capital increase was approved, through a private subscription, in the amount of R$ 228,919, with the issue of 5,211,026 common shares and 10,260,362 shares preferred shares, at the issue price of R$ 12.19 per common share and R$ 16.12 per preferred share. The payment, at the shareholder's discretion, may be made using interest on equity credit, net of income tax declared in the aforementioned “RCA” or in national currency, on the date of subscription.
*****