BRAZILIAN DISTRIBUTION CO COMPANHIA BRASILEIRA DE DISTR CBD [CBD] Filings

20-F 1 cbdform20f_2021.htm 20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________________________________________________________
FORM 20-F

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-14626

_______________________________________________________________________
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
(Exact Name of Registrant as Specified in its Charter)

BRAZILIAN DISTRIBUTION COMPANY
(Translation of Registrant’s name into English)

THE FEDERATIVE REPUBLIC OF BRAZIL
(Jurisdiction of incorporation or organization)

_______________________________________________________________________

Guillaume Marie Didier Gras, Chief Financial Officer and Investor Relations Officer
Phone: +55 11 3886-0421
gpa.ri@gpabr.com
Avenida Brigadeiro Luiz Antonio, 3142
01402-901 São Paulo, SP, Brazil
(Address of principal executive offices)

_______________________________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Shares, without par value

New York Stock Exchange*

American Depositary Shares (as evidenced by American Depositary Receipts), each representing one Common Share

CBD

New York Stock Exchange

_______________________________________________________________________
*Not for trading purposes, but only in connection with the listing on the New York Stock Exchange of American Depositary Shares representing those Common Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the period covered by the annual report:

As of December 31, 2021, the registrant had outstanding 269,375,860 common shares, no par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act

¨ Yes x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨ Yes x No

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

¨ Yes x No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x Accelerated Filer ¨ Non-accelerated Filer ¨ Emerging Growth Company ¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b)

of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that

prepared or issued its audit report x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ¨

International Financial Reporting Standards as issued by the International Accounting Standards Board x

Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

TABLE OF CONTENTS

Page

PART I		1
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS	1
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3.	KEY INFORMATION	1
3A.	Selected Financial Data	1
3B.	Capitalization and Indebtedness	5
3C.	Reasons for the Offer and Use of Proceeds	5
3D.	Risk Factors	5
ITEM 4.	INFORMATION ON THE COMPANY	19
4A.	History and Development of the Company	19
4B.	Business Overview	27
4C.	Organizational Structure	52
4D.	Property, Plant and Equipment	53
ITEM 4A.	UNRESOLVED STAFF COMMENTS	54
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	54
5A.	Operating Results	54
5B.	Liquidity and Capital Resources	68
5C.	Research and Development, Patents and Licenses, Etc.	71
5D.	Trend Information	72
5E.	Critical Accounting Policies and Estimates	73
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	76
6A.	Directors and Senior Management	76
6B.	Compensation	79
6C.	Board Practices	84
6D.	Employees	89
6E.	Share Ownership	89
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	90
7A.	Major Shareholders	90
7B.	Related Party Transactions	91
7C.	Interests of Experts and Counsel	97
ITEM 8.	FINANCIAL INFORMATION	97
8A.	Consolidated Statements and Other Financial Information	97

8B.	Significant Changes	102
ITEM 9.	THE OFFER AND LISTING	102
9A.	Offer and Listing Details	102
9B.	Plan of Distribution	102
9C.	Markets	102
9D	Selling Shareholders	105
9E.	Dilution	105
9F.	Expenses of the Issue	105
ITEM 10.	ADDITIONAL INFORMATION	105
10A.	Share Capital	105
10B.	Memorandum and Articles of Association	105
10C.	Material Contracts	116
10D.	Exchange Controls	116
10E.	Taxation	117
10F.	Dividends and Paying Agents	127
10G.	Statement by Experts	127
10H.	Documents on Display	127
10I.	Subsidiary Information	127
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	127
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	131
12A.	Debt Securities	131
12B.	Warrants and Rights	131
12C.	Other Securities	131
12D.	American Depositary Shares	131
PART II		132
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	132
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	133
ITEM 15.	CONTROLS AND PROCEDURES	133
ITEM 16.	RESERVED	135
16A.	Audit Committee Financial Expert	135
16B.	Code of Ethics	135
16C.	Principal Accountant Fees and Services	135
16D.	Exemptions from the Listing Standards for Audit Committees	136
16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	136
16F.	RESERVED	136
16G.	Corporate Governance	136
16H.	Mine Safety Disclosure	138
16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	138

PART III		139
ITEM 17.	FINANCIAL STATEMENTS	139
ITEM 18.	FINANCIAL STATEMENTS	139
ITEM 19.	EXHIBITS	139

iii

Table of Contents

INTRODUCTION

All references in this annual report to (i) “CBD,” “we,” “us,” “our,” “Company” and “Pão de Açúcar Group” are references to Companhia Brasileira de Distribuição and its consolidated subsidiaries, unless the context requires otherwise; (ii) the “Brazilian government” are references to the federal government of the Federative Republic of Brazil, or Brazil; (iii) the “Colombian government” are references to the federal government of the Federative Republic of Colombia, or Colombia; (iv) the “Argentinian government” are references to the federal government of the Federative Republic of Argentina, or Argentina; (v) “common shares” are references to our authorized and outstanding common shares (ações ordinárias), without par value; and (vi) “preferred shares” are references to our formerly issued preferred shares, all of which were converted into common shares on February 28, 2020. For additional information on the conversion of our preferred shares into common shares, see “Item 9. The Offer and Listing—9A. Offer and Listing Details.” All references to “ADSs” are to American Depositary Shares, each representing one common share, without par value. The ADSs are evidenced by American Depositary Receipts, or ADRs, issued by J.P. Morgan Chase Bank N.A., the depositary bank for the ADSs. All references to “real,” “reais” or “R$” are to the Brazilian real, the official currency of Brazil. All references to “COP$” are to Colombian pesos, the official currency of Colombia. All references to “US$,” “dollars” or “U.S. dollars” are to United States dollars. All references to “€” or “euro” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as amended.

Presentation of Financial and Other Data

Financial Data

We have prepared our consolidated financial statements included in this annual report in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB.

Our consolidated financial statements are presented in Brazilian reais. We have translated some of the real amounts contained in this annual report into U.S. dollars and COP. The rate used to translate the U.S. dollars amounts as of December 31, 2021 was R$5.5805 to US$1.00, which was the commercial selling rate of U.S. dollars in effect as of December 31, 2021, as reported by the Central Bank of Brazil, or the Central Bank. Unless otherwise stated, the rate used to translate the Colombian pesos amounts as of December 31, 2021 was COP$0.0015 to R$1.00, which was the commercial selling rate of Colombian pesos in effect as of December 31, 2021, as reported by the Central Bank. The U.S. dollar and Colombian pesos equivalent information presented in this annual report are solely for the convenience of investors and should not be construed as implying that the real amounts represent, or could have been or could be converted into, U.S. dollars and Colombian pesos at that rate or at any other rate.

Other Data

In this annual report:

some of the financial data reflects the effect of rounding;

the term “Brazilian retail segment” refers to our food and non-food retail operating segment in Brazil that operates under different formats through the banners Pão de Açúcar, Extra Hiper, Mercado Extra, Compre Bem, Mini Extra, Minuto Pão de Açúcar, Aliados Minimercado and Pão de Açúcar Adega, and GPA Malls, our real estate business unit that operates in Brazil;

the term “Casino” refers to Casino, Guichard-Perrachon S.A., a French corporation (société anonyme). Casino is our indirect controlling shareholder. It is ultimately controlled by Mr. Jean-Charles Naouri, the chairman of our board of directors. For additional information on our direct and indirect shareholders, see “Item 7A. Major Shareholders;”

the term “Casino Group” refers to Casino and Casino’s subsidiaries, including Rallye S.A., or Rallye, and Euris S.A.S., or Euris, Wilkes Participações S.A., Segisor S.A., King LLC, Geant International B.V. and Helicco Participações Ltda., which are ultimately controlled by Mr. Jean-Charles Naouri;

the term “Cnova” refers to CNova N.V., a Dutch corporation, and, where appropriate, its subsidiaries. Cnova was one of our consolidated subsidiaries until October 31, 2016 and, starting on November 1, 2016, we began recording our investment in Cnova according to the equity pick-up accounting method. For additional information on our investment in Cnova, see “Item 4A. History and Development of the Company—Changes in Our Business;”

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the term “Cnova Brazil” refers to Cnova Comércio Eletrônico S.A., a Brazilian corporation (sociedade anônima), which until October 31, 2016 was a wholly owned subsidiary of Cnova and operated and owned the Brazilian non-food e-commerce businesses of CBD and Via, as defined below. Following the completion of the Cnova corporate reorganization on October 31, 2016, Cnova Brazil became a wholly owned subsidiary of Via. For additional information on the Cnova reorganization, see “Item 4A. History and Development of the Company;”

“Éxito” are to Almacenes Éxito S.A., a Colombian corporation, one of our consolidated subsidiaries, which became part of the Pão de Açúcar Group in November 2019. For additional information on the acquisition of Éxito, see “Item 4A. History and Development of the Company—Changes in our Business—Acquisition of Grupo Éxito;”

“Grupo Éxito” are to Éxito and its consolidated subsidiaries;

“Grupo Éxito segment” refers to Grupo Éxito’s food and non-food retail operating segment in Colombia, Uruguay and Argentina

“FIC” are to Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento, a Brazilian financial services company;

the term “home appliances” refers to durable goods (i.e., electronics, furniture and other items for the home);

the term “low-cost supermarkets” refers to a grocery store or supermarket retail format that sell products at prices that are in principle lower than the regular retail price;

the term “private label” refers to our own branded products, including Qualitá, Taeq, Cheftime, Casino, Club des Sommeliers, Fábrica 1959, Confraria, Finlandek, Arkitect, Bronzini, Cast, Bambini, Boomy Nous, Frescampo and Custer;

the term “same-store sales” refers to sales made in stores open for at least 12 consecutive months and that did not close nor remain closed for a period of seven or more consecutive days;

the term “Sendas” refers to Sendas Distribuidora S.A., a Brazilian corporation (sociedade anônima) and, where appropriate, its subsidiaries. Sendas was one of our subsidiaries until December 31, 2020 and it operated in the cash and carry business under the banner Assaí. The spin-off and separation of Sendas from CBD was completed on December 31, 2020. For additional information on the spin-off and separation of Sendas, see “Item 4. Information on the Company—Changes in Our Business—Spin-off of Cash and Carry Operating Segment.”

“Sendas Separation” refers to our separation from Sendas. On December 14, 2020, we entered into a Separation Agreement with Sendas to provide a framework for our relationship with Sendas following the Separation and the Sendas Spin-Off. For more information on the Separation Agreement, see “Item 7B. Related Party Transactions—Agreements With Sendas”;

“Sendas Spin-Off” refers to the distribution of substantially all of the issued and outstanding Sendas common shares to holders of CBD common shares, on a pro rata basis for no consideration. For more information on the Sendas Spin-Off, see “Item 4A. History and Development of the Company—Changes in Our Business—Spin-Off of Cash and Carry Operating Segment; and

the term “Stix” refers to Stix Fidelidade e Inteligência S.A., a Brazilian corporation (sociedade anônima), focused on loyalty programs, in which we hold 66.7% of the capital stock and Raia Drogasil S.A., or RD, a pharmacy retailer in Brazil, holds the remaining 33.3% of the capital stock.

the term “Via” refers to Via S.A., a Brazilian corporation (sociedade anônima) and, where appropriate, its subsidiaries. Via was one of our subsidiaries until June 2019 and it operated in the home appliances business under the banners Ponto Frio and Casas Bahia. Via’s operations were classified and presented as discontinued operations in the periods from November 2016 through June 2019. On June 14, 2019, we consummated the sale of all equity interest we held in Via. For additional information on the sale of the discontinued operations of Via, see “Item 4. Information on the Company—4A. History and Development of the Company—Recent Changes in Our Business—Via Sale;”

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None of the information available on our website or on websites referred to in this annual report is incorporated by reference into this annual report.

FORWARD-LOOKING STATEMENTS

This annual report includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, principally in “Item 3. Key Information—3D. Risk Factors,” “Item 4. Information on the Company—4B. Business Overview” and “Item 5. Operating and Financial Review and Prospects.” We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions including, among other things:

the economic, financial, political and social effects of the COVID-19 pandemic, including new variants, and any restrictive measures imposed by governmental authorities to contain the COVID-19 pandemic (or other pandemics, epidemics and similar crises) particularly in Brazil and in other Latin American countries where we operate, and to the extent that they continue to cause negative macroeconomic effects, thus prompting and exacerbating the risks described under “Item 3. Key Information—3D. Risk Factors;”

the impacts of the COVID-19 pandemic, and new variants, on customer demand and purchasing habits, as well as on our expected results of operations, financial condition and cash flows;

fluctuations in crude oil prices and its effect on fuel costs, especially in light of the conflict between Russia and Ukraine;

global economic conditions, including any adverse effects arising from the ongoing war between Russia and Ukraine, and their impact on consumer spending patterns, particularly in Brazil, including, but not limited to, unemployment rates, interest rates, monetary policies and inflation rates;

our ability to sustain or improve our performance;

competition in the retail industry of Brazil, Colombia, Uruguay and Argentina in the sectors in which we operate;

government regulations and tax matters in the countries where we operate;

adverse legal or regulatory disputes or proceedings;

our ability to implement our strategy, including our digital transformation initiatives;

credit and other risks of lending and investment activities;

our ability to expand our operations outside of our existing markets;

hedge risks; and

other risk factors as set forth under “Item 3. Key Information—3D. Risk Factors.”

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

Table of Contents

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

3A. Selected Financial Data

We present in this section summary financial and operating data derived from our audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, or our audited consolidated financial statements, included elsewhere in this annual report and prepared in accordance with IFRS as issued by the IASB, and from our audited consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018, not included in this annual report and prepared in accordance with IFRS as issued by the IASB.

IFRS 16 – Leases, or IFRS 16, became effective on January 1, 2019 and supersedes (i) IAS 17 – Leases, (ii) IFRIC 4 – Determining whether an Arrangement contains a Lease, (iii) SIC-15 – Operating Leases-Incentives, and (iv) SIC-27 – Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets forth the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognize most leases on the balance sheet.

Lessor accounting under IFRS 16 is substantially unchanged when compared to IAS 17. Lessors will continue to classify leases as either operating or finance leases using principles that are similar to IAS 17. Accordingly, IFRS 16 does not have an adverse impact on the recognition of a lease by the lessor.

We adopted IFRS 16 using the full retrospective method of adoption on January 1, 2019. Accordingly, operating lease expenses are replaced by depreciation expenses related to the right-of-use and interest expenses in connection with lease liabilities. We have also applied the practical expedient that exempts us from the reassessment of contracts as to whether they contain a lease. Additionally, we elected not to recognize a right-of-use and lease liabilities for leases with a lease term of 12 months or less.

As a result of the application of the full retrospective method of adoption of IFRS 16, we have recasted the comparative financial information as of and for the years ended December 31, 2018 and 2017 with the following impacts:

	As of and for the Year Ended December 31,
	2018	2017
	(millions of R$)
Right-of-use assets	4,545	4,108
Lease liabilities	5,787	5,267
Depreciation expense	(481)	(483)
Interest expense	(587)	(565)

The following tables present certain of our summary historical consolidated financial and operating data for each of the periods indicated. Solely for the convenience of the reader, real amounts as of and for the year ended December 31, 2021, have been translated into U.S. dollars at a rate of R$5.5805 to US$1.00, which was the commercial selling rate of U.S. dollars in effect as of December 31, 2021, as reported by the Central Bank.

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	As of and for the Year Ended December 31,
	2021^(*)	2021	2020	2019^{(**)(1)(2)(3)}	2018^(**)(1)(2)	2017^(**)(1)(2)
	(millions of US$, except per share/ADS data)	(millions of R$, except per share/ADS data)
Statement of operations and comprehensive income
Net operating revenue	9,191	51,291	51,253	28,838	26,490	26,195
Cost of sales	(6,871)	(38,341)	(37,504)	(21,225)	(19,046)	(18,092)
Gross profit	2,321	12,950	13,749	7,613	7,444	8,103
Selling, general and administrative expenses	(1,676)	(9,353)	(9,343)	(5,698)	(5,396)	(5,433)
Depreciation and amortization	(332)	(1,853)	(1,804)	(1,028)	(892)	(935)
Other operating expenses, net	(1)	(7)	(71)	(386)	(199)	(551)
Operating expenses	(2,009)	(11,213)	(11,218)	(7,112)	(6,487)	(6,919)
Profit from operations before net financial expenses and share of profit of associates	311	1,737	2,531	501	957	1,184
Financial income	87	488	909	353	193	144
Financial expenses	(324)	(1,809)	(1,637)	(1,224)	(1,095)	(1,391)
Finance expenses, net	(237)	(1,321)	(728)	(871)	(902)	(1,247)
Share of profit of associates	(8)	(47)	98	2	28	(93)
Profit (loss) before income tax and social contribution	66	369	1,901	(368)	83	(155)
Income tax and social contribution	106	594	(662)	95	41	(28)
Net income (loss) for the year from continuing operations	173	963	1,239	(273)	124	(183)
Net income (loss) for the year from discontinued operations	(1)	(3)	1,087	1,109	1,160	1,012
Net income for the year	172	960	2,326	836	1,284	829
Attributed to controlling shareholders from continuing operations	144	805	1,092	(287)	124	(183)
Attributed to controlling shareholders from discontinued operations	(1)	(3)	1,087	1,077	1,025	682
Total attributed to controlling shareholders	144	802	2,179	790	1,149	499
Attributed to non-controlling shareholders from continuing operations	28	158	147	14	-	-
Attributed to non-controlling shareholders from discontinued operations	-	-	-	32	135	330
Total attributed to non-controlling shareholders	28	158	147	46	135	330
Other comprehensive income (loss) for the year, net of income tax	(252)	(1,408)	2,162	218	(9)	(36)
Total comprehensive income (loss) for the year	(80)	(448)	4,488	1,054	1,275	821
Attributed to controlling shareholders	(57)	(316)	3,748	945	1,132	478
Attributed to non-controlling shareholders	(24)