Press 1q15 ingles

Earnings Release 1st Quarter

2015

EARNINGS RELEASE 1st QUARTER 2015

1.

1Q 2015 Highlights

2.

Recent Events

3.

Consolidated Income Statements

4.

Retail Business Indicators

5.

Stores

6.

Financial Business Indicators

7.

Financial Statements La Polar S.A. - IFRS a.

Consolidated income statements by function

b.

Consolidated Balance Sheet

c.

Cash Flow

8.

Debt Restructure Stages

9.

Annex

Notes:     

Quarters are named as: 1Q, 2Q, 3Q, 4Q accordingly Semesters are named as: 1H, 2H accordingly and 12M for year to date Calendar years are named LTM (Last twelve months) Currency symbols: CLP $ for Chilean Pesos, US $ U.S. Dollars, M Millions, B Billions Exchange rate used in this 4Q report: 1 US $ = CLP $ 607.32 Source: Internal Revenues Service ( Servicio de Impuestos Interno – SII – Chile)

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EARNINGS RELEASE 1st QUARTER 2015

1.

1Q 2015 Highlights

 The retail business grew 230 basis points in its gross margin compared to the same period last year. This increase was mainly due to increased sales of own brands which came to represent 34% versus 30% last year. There was also an improvement in inventory control allowing a decrease in product settlements. This, despite revenue fell 6% to CLP B 68.6, so the contribution margin ended 2.9% over the same period last year with CLP B 18.6 compared to CLP B 18.1 respectively.

This occurred in a context in which the country is still under a macroeconomic scenario of low growth, which has affected consumption, especially of durable goods in the industry. In La Polar this results in a decrease of 12% in the sale of electronics that were also affected by the restrictions on credit lines with our suppliers. These credit lines have been regularized in recent months.

SSS of the first quarter was of -5.7% mainly attributed to reasons previously mentioned.  In the financial business revenues decreased by 13.2% over the first quarter of 2014, obtaining CLP B 17.4 this quarter. This decrease is due to a lower financial product placement, which was experienced through entire 2014, that led to a lower average portfolio (CLP B 136 in the first quarter of 2015 vs. CLP B 163 in the first quarter of 2014) explained by restrictions on financing and credit lines due to the debt restructuring that was completed in the first quarter, forcing to prioritize the use of funds for store supplies. However, there was an increase in the card usage by costumers in the first quarter of 2015 into a 53% of sales compared with 49% in the same period last year.  The efficiency plan implemented during 2014 has led to a significant reduction in the SG&A in the first quarter of 2015 with a reduction of 7.6% over the same period last year, reaching CLP B 30.5. This decrease in SG&A was due to a compliance of the many saving initiatives taken by the company, as the executive staff reduction and the back office in stores efficiency. Additionally in 2014, 2 stores were closed (Panamericana and San Fernando). Finally, another efficiency initiative was the implementation of the self-service model in stores, which at the end of this quarter has been completed in 9 stores. Also during the first quarter of 2015 it began the incorporation of the self-service model in another 17 stores. These implementations generated one-time expenses for about CLP M 500, excluding these expenses; the SG&A would have decreased by 9% over the same period 2014.  On March the 17th of 2015, the Board announced the resignation of Mr. César Barros Montero, as Chairman and Director of Empresas La Polar. Such resignation was effective from March the 31st of 2015.  On February the 6th of 2015, after the successful negotiation of the company debt, it was done the partial prepayment of the Senior and Junior debt through convertible bonds (H Bond) in the amount of CLP B 163.6. This partial prepayment left remnants of the F and G Bond of CLP B 65.3 and CLP B 236.3 payable in a single coupon on the 31st of December 2113, without amortization or interests.

The culmination of this agreement allowed the company to improve its financial position as well as its debt ratios See Page (13).

At the end of these financial statements 454,617,395 shares or 23% of a total of 1,997,235,044 shares equivalent to CLP B 37 of convertible bonds. This implies a growth of 46% on the opening balance of 998,617,522 shares.

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EARNINGS RELEASE 1st QUARTER 2015

2.

Recent Events

ORDINARY SHAREHOLDERS 'MEETING  On the 24th of April of 2015 it was held at La Polar headquarters the ordinary shareholders' meeting, were the following was addressed:

1.

Boards revocation and election.

Since there were changes in the composition of the board during this year, for the resignation of Mr. César Barros Montero, it was preceded to the complete revocation of the Board members and the election of its new members.

The following candidates were chosen: a. b. c. d. e. f. g.

Jorge Id Sánchez Bernardo Fontaine Talavera Juan Enrique Vilajuana Rigau Pedro Pellegrini Ripamonti Richard Urresti Gundlach Cristobal Hurtado Rourke Alberto Sobredo del Amo

It was also placed on record that Mr. Alberto Sobredo del Amo was chosen in his capacity as independent director.

2.

The shareholders instructed the new board to find a strategic partner that through a mechanism of incorporation, partnership contribution or any other method, could increase the value of the company or to assist in its growth.  On the 8th of May of 2015, it was agreed to appoint as President of the Board Mr. Juan Enrique Vilajuana Rigau and as Vice President Mr. Jorge Sanchez Id. It was also appointed as members of the Board of directors Mr. Jorge Sanchez Id, Pedro Pellegrini Ripamonti and Mr. Alberto Sobredo del Amo in his capacity as independent director.

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EARNINGS RELEASE 1st QUARTER 2015

 On the 16th of May of 2015, the store located in Copiapo in Av. Bernardo O'Higgins 540, was affected by a fire early in the morning. The fire was concentrated on the 4th and 5th floor destroying facilities and merchandise. Technical reports are being made, that will define the deadlines for the reopening of the store. La Polar has property insurance as well as merchandise insurance and any lost profits.

 On the 26th of May of 2015, the company received from the Treasury a refund for the tax year of 2014 for partial payments for absorbed profits for CLP Th 8,981,108, that are considered in this financial statements under “ Recoverable Taxes”, producing no effect on the outcome.

On the 28th of May of 2015, the company subsidiaries, Inversiones LP S.A., Collect S.A., Agencia de Publicidad Conexión S.A. y Operadora y Administradora Nueva Polar S.A., received from the Treasury a refund for the tax year of 2015 for partial payments for absorbed profits for CLP Th, 2,831,993 that are considered in this financial statements under “Recoverable Taxes”, producing no effect on the outcome.

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EARNINGS RELEASE 1st QUARTER 2015

3.

Consolidated Income Statements 1Q 2015 CLP $ B Revenues Costs Gross Margin % Revenues SG&A (w/o depreciation) % Revenues EBITDA % Revenues Depretiation Operating Income Non - Operating Income Profit (Loss) Before Taxes Benefits (Expenses) Income Tax Profit (Loss)

Consolidated 1Q 2015 r 1Q 2014 84.7 -7.5% 91.6 (56.1) (60.4) 28.6 -8.5% 31.3 33.8% 34.1% (30.5) -7.6% (33.0) -36.0% -36.0% (1.9) (1.8) -2.3% -1.9% (1.9) (3.8) (4.4) (8.1) 2.3 (5.9)

1Q 2015 68.6 (50.0) 18.6 27.1% (23.1) -33.7% (4.5) -6.5%

Retail r -6.0% 2.9% -4.2%

1Q 2014 72.9 (54.9) 18.1 24.8% (24.1) -33.0% (6.0) -8.2%

1Q 2015 17.4 (6.4) 11.0 63.1% (8.4) -48.4% 2.6 14.7%

Financial r 1Q 2014 -13.2% 20.1 (5.8) -22.8% 14.2 70.9% -15.6% (10.0) -49.7% 4.2 21.2%

(1.7) (3.5) (6.7) (10.2) 0.6 (9.6)

Revenues from retail business in the first quarter reached CLP B 68.6 representing a decrease of 6.0% compared to 1Q14, which added to a 13.2% reduction in financial income is reached a decrease of 7.5% in total revenues for the quarter.

SG&A decrease in 7.6%, which is aligned with the efficiency plan which started the first half of 2014 that are reflected in the results of the fourth quarter of 2014. This plan will continue to show significant efficiency savings throughout 2015, especially in the first half.

Consolidated EBITDA for the first quarter reached CLP B -1.9 that gives us a margin of -2.3% over total revenues. It is important to mention that the inclusion of the self-service model of some stores in the first quarter generated a one-time expense of CLP M 500. If not consider these extraordinary expenses, the EBITDA would have been CLP B -1.4 and -1.7% of margin.

The non-operating expenses are included accrued interest of the old debt that was restructured on 6th of February of 2015. This interest reached the amount of CLP M 2,7. One factor to consider in this debt restructuring is that it does not accrue interest and depreciation, so that payment of interest in which the company incurred for the old debt, will not happen again.

As shown in the results of the first quarter of 2015, the company has placed emphasis on increasing gross margin through greater participation of own brands which is reflected even in marketing campaigns where greater visibility was given. One of the main strategies is to strengthen the financial business. In this trimester La Polar card has an increase in its participation. All that was previously mentioned added to the savings associated with efficiency plan makes the EBITDA margin, excluding one-time costs, present an improvement over the first quarter of 2014.

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EARNINGS RELEASE 1st QUARTER 2015

4.

Retail Business Indicators

1Q´14

2Q´14

3Q´14

4Q´14

1Q´15

72,942

82,811

69,605

100,134

68,578

1Q´14

1Q´15

D%

72,942

68,578

-6%

Retail Revenues (CLP $ M)

Retail Revenues (CLP $ M)

LTM 1Q14

%

LTM 1Q15

Retail Revenues (CLP $ M) 334,418

-1,7%

0,3%

321,128

-1,3%

-4%

Retail Revenues LTM

-1,3%

Revenues ( CLP B $)

334

335

330 325 321

1Q 14

2Q 14

3Q 14

4Q 14

1Q 15

The retail revenues over the last 12 months have decreased 1.3% explained entirely by a decrease in sales of electronics. Which as previously mentioned is partly due to the restriction of credit lines that affect the product mix.

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EARNINGS RELEASE 1st QUARTER 2015

Retail Margin % LTM

28,3% 27,8% 26,9%

26,7%

1Q 14

2Q 14

26,9%

3Q 14

4Q 14

1Q 15

Sales UF/sqm 1Q

2Q

3Q

4Q

2014

6.4

7.2

6.0

8.5

2015

5.8

Var %

-9%

The UF/sqm sales for the end of the first quarter of 2015 were 5.8, which represents a decrease of 9% over the same period last year that was 6.4

5. Stores 2014

Number of Stores Sales Surface (Th sqm) Revenues ( Th $/sqm)

2015

Q1

Q2

Q3

Q4

Q1

40 161.500 452

40 160.700 515

38 159.700 436

38 159.000 630

38 159.000 431

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EARNINGS RELEASE 1st QUARTER 2015

6.

Financial Business Indicators

1Q´14

2Q´14

3Q´14

4Q´14

1Q´15

20,087

19,018

16,902

16,606

17,426

1Q´14

1Q´15

D%

20,087

17,426

-13%

LTM 1Q14

LTM 1Q15

%

75,502

69,952

-7%

Financial Revenues (CLP $ M)

Financial Revenues (CLP $ M)

Financial Revenues (CLP $ M)

Financial Revenues LTM -1,4%

3,8%

76

78

1Q 14

2Q 14

-6,0%

77

3Q 14

Revenues ( CLP B $)

-3,7%

73

70

4Q 14

1Q 15

Revenues decreased by 13.2% over the same period last year, which is mainly explained by a lower average portfolio which decreased by 20%.

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EARNINGS RELEASE 1st QUARTER 2015

Financial Indicators 2014 FINANCIAL BUSINESS

2015

1Q´14

2Q´14

3Q´14

4Q´14

1Q´15

Credit Card Loan Stock (CLP $ B)

163

153

133

144

136

Provision for loan losses (CLP $ B)

15

15

14

15

15

% Provision for loan losses

9.1%

9.9%

10.4%

10.3%

10.8%

Net loan losses ( CLP $ B)

5

5

9

7

7

Open accounts w/balance (Th.)

508

524

492

531

509

Average Debt (CLP $ Th.)

322

292

271

271

268

% of sales with credit card

49.2%

56.0%

52.5%

51.4%

53.0%

It is important to mention the increased percentage of card usage by customers coming in the first quarter 2015 to 53% of sales (versus 49% in the same period last year). Cards with balance meanwhile, remain similar in the month of March 2015 compared to March 2014.

Credit Card Loans1 (CLP B$)

Credit Card Loan Portfolio (CLP B$)

23 21

140

53

115

51

1Q´

2014

MAR´14

2015

-18%

Normal

MAR´15 Renegociated

Loans fell by 3% in the first quarter versus the same period last year. This low placement produced a decline in the total portfolio.

1

Credit card loans with credit card La Polar includes: Cash Advances, and use in Associated Business and finance in La Polar Retail stores. Includes VAT. 9

EARNINGS RELEASE 1st QUARTER 2015

Risk Rate

26% 23% 19% 16% 12%

13%

11%

08% 08%

09%

10% 10,4% 10,3% 10,8%

While the rate for 2014 has experienced an increase, this level of provision at the end of the first quarter of 2015, is considered suitable for the segment in which the company operates.

Loan Portfolio Indicators – Gross Loans (%)

29% 44%

19%

17%

15%

13%

12%

81%

83%

85%

87%

88%

14%

18%

20%

18%

15%

86%

82%

80%

82%

85%

37%

71% 56%

24%

76%

63%

Normal

Renegociated

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EARNINGS RELEASE 1st QUARTER 2015

Loan Portfolio Indicators – Portfolio by aging segments 5% 9%

6% 8%

13%

11% 91 to 180

31 to 90 72%

75%

MAR´14

MAR´15

01 to 30 Current

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EARNINGS RELEASE 1st QUARTER 2015

7.

Financial Statements of La Polar S.A. - IFRS

Complete Financial Statements of Empresas La Polar S.A are available on the website of the Securities and Insurance Supervisor (www.svs.cl) and the website of Empresas La Polar, www.nuevapolar.cl

a. Consolidated Income Statements

Revenues

31-mar-15

31-mar-14

CLP $ M

CLP $ M

84,724

91,641

Cost of Sales

(56,129)

(60,528)

Gross Profit

28,595

31,113

Distribution Costs

(420)

(446)

(31,945)

(34,316)

Other Profit (Loss)

364

153

Financial Revenue

204

371

Administrative Expenses

2

Financial Costs

(5,160)

(6,626)

Foreign Currency Exchange Differemces

120

(44)

Income from Indexation Units

105

(364)

Profit (Loss) Before Taxes

(8,137)

(10,159)

3

2,259

553

(5,878)

(9,607)

0

0

(5,878)

(9,607)

(5,878)

(9,607)

(5,878)

(9,607)

Profit (Loss) Income Taxes Profit (Loss) After Taxes Discontinue Operations

Profit (Loss) of the Discontinue Operations of the Period Profit (Loss)

Loss (gain) attributable to: The owners of the company Non-controlling interests Loss

2

Finance costs include approximately CLP M $ 2,700 of the accrual for the period between the F and G bonds on January 1 and 6 February of 2015. It also includes restructuring charges of liabilities of CLP M $ 800.

3 For further detail see Note 17 of the Financial Statements 12

EARNINGS RELEASE 1st QUARTER 2015

b. Consolidated Balance Sheet 31-mar-15 CLP $ M

31-dec-14 CLP $ M

Current Assets Cash and cash equivalents Other current financial assets Other current non financial assets Current trade and accounts receivables Inventory Tax assets Total current assets

12,212 619 9,450 108,870 52,168 37,302 220,621

20,882 593 7,620 110,031 51,456 37,338 227,920

Non - Current Assets Fees receivable Other non - current financial assets Intangible assets other than goodwill Properties, plant and equipment Deferred tax assets Total Non - Current Assets

24,266 260 20,253 58,356 9,829 112,963

31,129 314 20,066 59,215 8,230 118,954

333,584

346,874

Current Liabilities Other current financial liabilities Other trade and other accounts payable Other current provisions Current tax liabilities Employee benefits provisions Other current non - financial liabilities Total Current Liabilities

28,246 56,853 3,399 4,402 3,806 1,083 97,790

44,125 60,942 3,385 4,098 4,949 4,201 121,700

Non - Current Liabilities Other non - current financial liabilities Other long term provisions Defered tax liabilities Total non - current liabilities

24,414 2,334 62,087 88,835

186,050 1,730 56,552 244,332

186,625

366,031

307,416 (344,268) 183,812

302,678 (338,389) 16,554

146,960 146,960

(19,157)

333,584

346,874

Non Current Assets held for sale Total Assets

Liabilities directly associated with non - current assets held for sale Total Liabilities Equity Issued capital Retained earnings Other reserves Equity attibutable to: Owners of the parent Non - controlling interests Total Equity Total Liabilities and Equity

(19,157)

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EARNINGS RELEASE 1st QUARTER 2015

Indicators Indicators Current Ratio Acid Ratio

Unit Times Times

Mar´15 2.26 1.72

Dic´14 1.87 1.45

Sep´14 2.03 1.50

Jun´14 2.18 1.65

Mar´14 2.04 1.50

Indicators Inventory Turnover Inventory Turnover

Unit Times Days

Mar´15 4 88

Dic´14 4 88

Sep´14 4 87

Jun´14 4 87

Mar´14 4 88

Indicators Average Payment Period

Unit Days

Mar´15 52

Dic´14 58

Sep´14 62

Jun´14 70

Mar´14 80

Indicators Current Liabilities Non - Current Liabilities

Unit % %

Mar´15 52.4% 47.6%

Dic´14 33.2% 66.8%

Sep´14 30.6% 69.4%

Jun´14 30.8% 69.2%

Mar´14 32.5% 67.5%

Indicators Average Collection Period

Unit Days

Mar´15 190

Dic´14 201

Sep´14 169

Jun´14 171

Mar´14 172

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EARNINGS RELEASE 1st QUARTER 2015

c. Cash Flow Statements Cash Flow Statements

31-mar-15

31-mar-14

CLP $ M

CLP $ M

Cash Flow from (used in ) operating activities Proceeds from sales of goods providing activities

104,620

Payment to suppliers for goods and services

(77,229)

(111,738)

Payment to and on behalf of employees

(13,700)

(16,115)

Other payments related to operating activities

(19,784)

(18,766)

Interest received

729

Interest paid

(84)

145,166

116

Reimbursed (paid) income taxes Cash Flow from (used in ) operating activities

(5,448)

(1,336)

Cash Flow from (used in ) investing activities Cash receipts from the loss of control of subsidaries and other businesses Loans to related entities Proceeds from the sale of property, plant and equipment

13

Acquisition of property, plant and equipment

(998)

Proceeds from sales of intangible assets

(357)

(1,537)

Other incomes (outflows) of cash

Cash Flow from (used in ) investing activities

(1,342)

(1,537)

Cash Flow from (used in ) financing activities Proceeds from shot - term borrowings

6,000

Loan payments

(252)

Payments for finance leases

(442)

(410)

Interest payments

(7,187)

(4,829)

Cash Flow from (used in ) financing activities

(1,880)

(5,388)

Net decrease in cash and equivalents

(8,670)

(8,260)

Cash and cash equivalents at the beginning of the period

20,882

21,403

Cash and cash equivalents at the end of the period

12,212

13,143

(148)

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EARNINGS RELEASE 1st QUARTER 2015

8. Debt Restructure

* Paid in one coupon, without interest or amortization and with one maturity in 2113

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EARNINGS RELEASE 1st QUARTER 2015

Approval of the Securities and Insurance Supervisor On the 19th of December 0f 2014, the Securities and Insurance Supervisor approved the modification of the F and G Bonds on the following terms:  Maturity until the 31st of December of 2015.  Elimination of interest accrual.  Elimination of amortization payments.  Pay table, with one coupon.

On the 19th of December 0f 2014, the Securities and Insurance Supervisor approved the issuance of a convertible bond, called H Bond with the following characteristics:  Maximum amount of emission of CLP $ 163.633 billion  1.997.235.044 debt instruments for an amount of CLP $ 81.92976 each  The H Bond will not accrue interest  This issue includes a single payment of capital on the 31st of December of 2015.  A preferred option of 30 days.

Preferential Option Period On the 29th of December of 2014, it was published in the “ Diario Financiero”, the start of the preferential option period where the following was announced:  The Securities and Insurance Supervisor approved and inscribed on the 19th of December of 2014 the so called H Bond.  In accordance with Article 25 of Law 18,046 on Corporations, this issue of convertible bonds will preferably be offered to existing shareholders of La Polar.  The preferred option period will be extended for a period of 30 days from the date 29th of December of 2014 until the 27th of January of 2015..

Debt Partial Prepayment Notice On the 30th of January of 2015, it was published in the “ Diario Financiero” the notice of the debt partial prepayment of the “ Convenio Judicial Preventivo”, where it is stated the following:  The amount of CLP $ 1,372,732 was raised in money for the preferential option period.  The debt was partially prepaid with 1,997,218,289 convertible bonds for a total of CLP $ 163,631,615,085 for the remaining of the Convertible Bonds H Series that were not subscribed or paid by the shareholders of the company during the Preferential Option Period at the same subscription price (CLP $ 81,92976).  Of this amount, 80% was used to prepay the F Bond and Senior Debt that was not exchanged at the time, and 20% was used to prepay the G Bond and Junior Debt that was not exchanged at the time.  It was paid CLP M$ 6,214 corresponding to the interest of the Senior Debt until the prepayment day.  It was issued new pay tables for the amounts that weren’t prepaid of the F and G Bonds.

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EARNINGS RELEASE 1st QUARTER 2015

Ending of the partial prepayment On the 6th of February of 2015, it was announced it was announced through an essential fact to the Securities and Insurance Supervisor and the Stock Exchange ( Bolsa de Santiago, Bolsa Electronica and Bolsa de Valparaiso), the ending of the debt partial prepayment, explaining the following:  La Polar proceeded to prepay the “Convenio Judicial Preventivo” debt as follows: i. With the amount of CLP $ 1,372,732 in cash for the preferential option period. ii. By paying with debt instruments for the amount of 1,997,218,219 H Bond.  Also, on this date La Polar made the payment of the last installment of interest of the Senior Debt, for a total of CLP $ 6,213,549,242.

The effect generated by this restructuring on the financial position at the end of March 2015, it is reflected in the graph below.

Financial Debt/ B$

dic-14

mar-15

Equity/ B$

-19

230

53

147

For further details on the process of financial restructuring, see Note 1.1 of the Financial Statements of March 2015

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EARNINGS RELEASE 1st QUARTER 2015

9

Annex CLP $ M 1Q 2014

2Q 2014

3Q 2014

4Q 2014

1Q 2015

Revenues

72,942

82,811

69,605

100,134

68,578

Costs

-54,865

-58,603

-51,639

-69,961

-49,974

Gross Margin

18,078

24,208

17,966

30,173

18,603

Retail Business

% Revenues

SG&A (w/o depreciation) EBITDA % Revenues

Financial Business Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

Consolidation Adjustments¹ Revenues Costs SG&A (w/o depreciation)

24.8%

29.2%

25.8%

30.1%

26.0%

-24,083 -6,006

-28,413 -4,205

-24,776 -6,810

-27,174 3,000

-23,084 -4,480

-8.2%

-5.1%

-9.8%

3.0%

-6.6%

20,087 -5,849 14,238

19,018 -6,619 12,399

16,902 -6,506 10,395

16,606 -7,946 8,660

17,426 -6,433 10,993

70.9%

65.2%

61.5%

52.1%

63.1%

-9,989 4,249

-9,515 2,884

-8,958 1438

-8,407 253

-8,431 2,562

21.2%

15.2%

8.5%

1.5%

14.7%

-1,388 333 1,055

-1,459 292 1,167

-1,378 277 1,100

-1,242 242 1,001

-1,279 278 1,002

91,641 -60,380 31,261

100,371 -64,930 35,441

85,129 -57,868 27,261

115,498 -77,665 37,833

84,724 -56,129 28,595

Consolidated² Revenues Costs Gross Margin % Revenues

SG&A (w/o depreciation) EBITDA % Revenues

34.1%

35.3%

32.0%

32.8%

33.8%

-33,018 -1,757

-36,761 -1,321

-32,633 -5,372

-34,580 3,253

-30,513 -1,918

-1.9%

-1.3%

-6.3%

2.8%

-2.3%

¹ Intercompany billing, of the financial business to the retail business for purchases made with the TLP card ² Financial interests that are related to the portfolio financing , which are considered in the cost of sales

In 2014 the criteria for allocation of costs between segments retail and retail financial 2014 was corrected to homologate with the one used in the fourth quarter of 2014.

19