Edgar Filing: ULTRAPAR HOLDINGS INC

6-K

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report Of Foreign Private Issuer

Pursuant To Rule 13a-16 Or 15d-16 Of

The Securities Exchange Act Of 1934

For the month of February, 2019

Commission File Number: 001-14950

ULTRAPAR HOLDINGS INC.

(Translation of Registrant’s Name into English)

Avenida Brigadeiro Luis Antonio, 1343, 9º Andar

São Paulo, SP, Brazil 01317-910

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F X Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes No X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes No X

ULTRAPAR HOLDINGS INC.

TABLE OF CONTENTS


ITEM
1.		2018 Financial Report
2.		4Q18 and 2018 Earnings release
3.		Board of Directors minutes
4.		Fiscal Council minutes
5.		Notice to shareholders
6.		Material notice

(Convenience Translation into English from

the Original Previously Issued in Portuguese)

Ultrapar Participações S.A.

Parent and Consolidated

Financial Statements

for the Year Ended

December 31, 2018 and

Independent Auditor’s Report

Financial Information

KPMG Auditores Independentes

Ultrapar Participações S.A. and Subsidiaries

Parent and Consolidated Financial Statements

for the Years Ended December 31, 2018 and 2017

Table of Contents


Independent Auditor’s Report in the Parent and Consolidated Financial Statements			3 – 6
Statements of Financial Position			7 –8
Statements of Profit or Loss			9
Statements of Other Comprehensive Income			10
Statements of Changes in Equity			11 – 12
Statements of Cash Flows—Indirect Method			13 –14
Statements of Value Added			15
Notes to the Financial Statements			16 –110

(Convenience Translation into English from the Original Previously Issued in Portuguese)

Independent Auditor’s Report in the Individual and Consolidated Financial Statements

To the Shareholders of the

Ultrapar Participações S.A.

São Paulo—SP

Opinion

We have audited the individual and consolidated financial statements of Ultrapar Participações S.A. (“the Company”), respectively referred to as Parent and Consolidated, which comprise the statement of financial position as at December 31, 2018, the statements of income and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and consolidated financial position of the Ultrapar Participações S.A. as at December 31, 2018, and of its individual and consolidated financial performance and its cash flows for the year then ended in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), 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 Auditors’ Responsibilities for the Audit of the Individual and Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements included in the Accountant Professional Code of Ethics (“Código de Ética Profissional do Contador”) and in the professional standards issued by the Brazilian Federal Accounting Council (“Conselho Federal de Contabilidade”) 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 opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Recoverable amount of goodwill recorded in business combination– individual and consolidated (Refer to notes 2. (t) Impairment of assets and 14 Intangible Assets)

The acquisition of the Imifarma Produtos Farmacêuticos S.A. (Extrafarma) operations in previous years resulted in recognition of goodwill, which the recoverable amount must be tested annually. The determination of the necessity of recording for impairment is supported by future profitability based on the business plan and budget as prepared by the Company and approved by the Board of Directors, which are made based on methodologies and assumptions, which involve judgment such as: discount and growth rates, revenue, costs, gross margin and new investments.

The process of determining the future profitability of the cash generating units for the purpose of evaluating the recoverable value of such assets involving complex, judgment and uncertain, and to the impacts that eventual changes in the assumptions used in the referred calculation might have in the consolidated financial statements as well as in the amount of the investment recorded under the equity method in the parent company’s financial statements, we consider this a key audit matter.

Our response

We evaluated the design and effectiveness of the key internal control of finance projections related to the identification and measurement of the recoverable value of the cash generating units where the goodwill was allocated.

Within the involvement of our corporate finance specialists, we evaluate the methodology used by the Company and the assumptions used in calculating discounted cash flows, including growth and discount rates, comparing historical information and testing the arithmetic accuracy of the formulas used in discounted cash flow models. We evaluated the sensitivity of results prepared by the Company considering reasonable changes in the key assumptions and comparing the budgets approved in the previous year with the actual amounts calculated in order to verify the Company’s ability to project future net income.

In addition, we compared the recoverable amount calculated based on the discounted cash flows, per cash generating unit, to the carrying amount of the respective cash generating units and we evaluated the adequacy of the disclosures made in the financial statements.

As a result of the evidence obtained through the procedures as described above, we consider that the is acceptable the goodwill amount on the business combination and the respect disclosures are acceptable in the context of the individual and consolidated statements taken as a whole.

Disclosure of impacts of the new accounting standard CPC 06 (R2) and IFRS 16 - Lease Accounting (Note 2.y - Individual and Consolidated)

The revised accounting standard CPC 06 (R2) and IFRS 16 - accounting, introduces complex accounting requirements that are used as basis for measuring the registration of the right of use of an asset as well as the lease liability, especially with respect to the determination of the discount rate on each lease contract, as well as the disclosure of aspects related to the transition of the accounting standard and its accounting impact that will come into effect as of January 1, 2019.

The Company and its subsidiaries maintain significant commitments arising from operating leases of land, real estate and stores in Brazil, as well as harbor concessions and offices as administrative headquarters and disclosed the potential impacts arising from the transition of the new accounting standard among other information required by these accounting standards.

Due to the complexity and judgments involved in determining the discount rates on the lease loans and the relevance of the impacts of this rate on the measurement of the lease liability, as well as the relevance of the disclosures of the effects of the initial adoption of CPC 06 (R2) / IFRS 16, this matter was considered significant for our audit.

Our response

We analyze the process to identify the information necessary to disclosure the potential impact of the new accounting standard. With support of our corporate finance specialists, we evaluate the assumptions used in determining discount rates and sensitivity analysis on the model adopted by the Company and its subsidiaries. We evaluate the judgments applied by the Company and its subsidiaries for the other assumptions used as lease term and aggregate costs to the estimated value of right of use. We performed the reconciliation with the basis records and carried out documentary tests on the database used to support the disclosed values.

As a result of the evidence obtained through the procedures as described above, we consider that the is acceptable the disclosure of potential impacts of the new accounting standard in the context of the individual and consolidated statements taken as a whole.

Other matters - Statements of value added

The individual and consolidated statements of value added (DVA) for the year ended December 31, 2018 prepared under the responsibility of the Company’s management, and presented herein as supplementary information for IFRS purposes, have been subject to audit procedures jointly performed with the audit of the Company’s financial statements. In order to form our opinion, we assessed whether those statements are reconciled with the financial statements and accounting records, as applicable, and whether their format and contents are in accordance with criteria determined in the Technical Pronouncement 09 (CPC 09) - Statement of Value Added. In our opinion, the statements of value added have been fairly prepared, in all material respects, in accordance with the criteria determined by the aforementioned Technical Pronouncement, and are consistent with the overall individual and consolidated financial statements.

Other information accompanying the individual and consolidated financial statements and the auditor’s report

Management is responsible for the other information comprising the management report.

Our opinion on the individual and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the individual and consolidated 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 of this other information, we are required to report that fact. We have no issues to report on this.

Responsibilities of Management and Those Charged with Governance for the Individual and Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), 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 individual 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 and subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and subsidiaries financial reporting process.

Auditors’ Responsibilities for the Audit of the Individual and Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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.

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 individual 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 Company’s and its subsidiaries internal control.

•

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 Company’s and its subsidiaries ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual 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 auditors’ report. However, future events or conditions may cause the Company and subsidiaries to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the indidual and consolidated 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 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 communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ 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.

São Paulo, February 20, 2019

KPMG Auditores Independentes

CRC 2SP014428/O-6

Original report in Portuguese signed by

Wagner Bottino

Accountant CRC 1SP196907/O-7

Ultrapar Participações S.A. and Subsidiaries

Statements of Financial Position

as of December 31, 2018 and 2017

(In thousands of Brazilian Reais)


			Parent						Consolidated
Assets	Note		12/31/2018		12/31/2017		1/1/2017		12/31/2018		12/31/2017		1/1/2017
					Restated		Restated				Restated		Restated
Current assets
Cash and cash equivalents		4.a		172,315		93,174		127,944		3,938,951		5,002,004		4,274,156
Financial investments and hedging instruments		4.b		565,930		21,657		1,052		2,853,106		1,283,498		1,412,588
Trade receivables		5.a		—		—		—		4,069,307		3,861,325		3,177,112
Reseller financing		5.b		—		—		—		367,262		286,569		211,055
Inventories		6		—		—		—		3,354,532		3,513,710		2,781,377
Recoverable taxes		7.a		—		—		—		639,699		664,954		382,361
Recoverable income and social contribution taxes		7.b		39,705		33,070		37,620		257,182		216,630		159,411
Dividends receivable				260,483		27,930		354,150		1,064		11,137		8,616
Other receivables				1,527		2,404		3,884		58,561		44,025		387,252
Prepaid expenses		10		1,962		1,597		98		187,570		150,046		123,883
Contractual assets with customers – exclusive rights		11		—		—		—		484,473		456,213		448,316

Total current assets				1,041,922		179,832		524,748		16,211,707		15,490,111		13,366,127
Non-current assets
Financial investments and hedging instruments		4.b		—		—		—		202,349		84,426		15,104
Trade receivables		5.a		—		—		—		81,569		46,301		49,601
Reseller financing		5.b		—		—		—		348,268		283,690		177,484
Related parties		8.a		761,288		762,562		772,425		490		490		490
Deferred income and social contribution taxes		9.a		14,034		29,158		22,462		514,187		614,061		459,618
Recoverable taxes		7.a		—		—		—		747,180		234,700		146,753
Recoverable income and social contribution taxes		7.b		48,685		48,685		35,010		105,602		78,542		35,864
Escrow deposits		21.a		—		148		148		881,507		822,660		778,770
Indemnity asset – business combination		21.c		—		—		—		194,719		202,352		—
Other receivables				—		—		—		1,411		7,918		2,678
Prepaid expenses		10		30		—		—		399,095		346,886		222,518
Contractual assets with customers – exclusive rights		11		—		—		—		1,034,004		1,046,147		989,768

Total long term assets				824,037		840,553		830,045		4,510,381		3,768,173		2,878,648
Investments
In subsidiaries		12.a		9,509,480		9,263,442		8,107,673		—		—		—
In joint-ventures		12.a; 12.b		20,118		54,739		45,409		101,954		122,061		116,142
In associates		12.c		—		—		—		24,338		25,341		22,731
Other				—		—		—		2,795		2,792		2,814

				9,529,598		9,318,181		8,153,082		129,087		150,194		141,687
Property, plant, and equipment, net		13		—		—		—		7,278,865		6,637,826		5,796,418
Intangible assets, net		14		246,163		246,163		246,163		2,369,355		2,238,042		1,891,636
Total non-current assets				10,599,798		10,404,897		9,229,290		14,287,688		12,794,235		10,708,389


Total assets				11,641,720		10,584,729		9,754,038		30,499,395		28,284,346		24,074,516

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Financial Position

as of December 31, 2018 and 2017

(In thousands of Brazilian Reais)


			Parent									Consolidated
Liabilities	Note		12/31/2018			12/31/2017			1/1/2017			12/31/2018			12/31/2017			1/1/2017
						Restated			Restated						Restated			Restated
Current liabilities
Loans and hedging instruments		15		—			—			—			2,007,430			1,819,766			1,821,398
Debentures		15.g		34,504			817,654			32,479			263,718			1,681,199			651,591
Finance leases		15.i		—			—			—			2,849			2,710			2,615
Trade payables		16		272			461			330			2,551,607			2,155,498			1,709,563
Trade payables - agreement		16		—			—			—			180,070			—			—
Salaries and related charges		17		228			244			204			428,192			388,118			362,718
Taxes payable		18		11,563			343			726			268,005			221,529			168,386
Dividends payable		25.h		282,334			335,930			316,848			284,024			338,845			320,883
Income and social contribution taxes payable				9,238			—			—			55,477			86,836			139,981
Post-employment benefits		19.b		—			—			—			45,655			30,059			24,940
Provision for asset retirement obligation		20		—			—			—			4,382			4,799			4,563
Provision for tax, civil, and labor risks		21.a		—			—			—			77,822			64,550			52,694
Trade payables – customers and third parties’ indemnification		22		—			—			—			3,501			72,216			99,863
Other payables				3,975			7,439			2,359			137,494			125,150			102,714
Deferred revenue		23		—			—			—			26,572			18,413			22,300

Total current liabilities				342,114			1,162,071			352,946			6,336,798			7,009,688			5,484,299
Non-current liabilities
Loans and hedging instruments		15		—			—			—			6,487,400			6,113,545			6,800,135
Debentures		15.g		1,722,450			—			799,904			6,401,535			3,927,569			2,095,290
Finance leases		15.i		—			—			—			43,217			45,805			46,101
Related parties		8.a		5,158			4,003			679			4,071			4,185			4,272
Deferred income and social contribution taxes		9.a		—			—			—			9,297			83,642			7,645
Post-employment benefits		19.b		—			—			—			204,160			207,464			119,811
Provision for asset retirement obligation		20		—			—			—			50,285			59,975			73,001
Provision for tax, civil, and labor risks		21.a; 21.c		798			982			1,884			865,249			861,246			727,088
Deferred revenue		23		—			—			—			11,850			12,896			12,510
Subscription warrants – indemnification		24		123,095			171,459			153,429			123,095			171,459			153,429
Other payables				—			—			—			162,409			162,834			74,884

Total non-current liabilities				1,851,501			176,444			955,896			14,362,568			11,650,620			10,114,166
Equity
Share capital		25.a; 25.f		5,171,752			5,171,752			3,838,686			5,171,752			5,171,752			3,838,686
Equity instrument granted		25.b		4,309			536			—			4,309			536			—
Capital reserve		25.d		542,400			549,778			552,038			542,400			549,778			552,038
Treasury shares		25.c		(485,383	)		(482,260	)		(483,879	)		(485,383	)		(482,260	)		(483,879	)
Revaluation reserve on subsidiaries		25.e		4,712			4,930			5,339			4,712			4,930			5,339
Profit reserves		25.f		4,099,092			3,629,851			4,383,965			4,099,092			3,629,851			4,383,965
Valuation adjustments		25.g		(63,989	)		154,824			(23,987	)		(63,989	)		154,824			(23,987	)
Cumulative translation adjustments		25.g		65,857			53,061			7,519			65,857			53,061			7,519
Additional dividends to the minimum mandatory dividends		25.h		109,355			163,742			165,515			109,355			163,742			165,515

Equity attributable to:
Shareholders of the Company				9,448,105			9,246,214			8,445,196			9,448,105			9,246,214			8,445,196
Non-controlling interests in subsidiaries				—			—			—			351,924			377,824			30,855

Total equity				9,448,105			9,246,214			8,445,196			9,800,029			9,624,038			8,476,051

Total liabilities and equity				11,641,720			10,584,729			9,754,038			30,499,395			28,284,346			24,074,516

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Profit or Loss

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais, except earnings per share)


			Parent						Consolidated
	Note		2018			2017			2018			2017
						Restated						Restated
Net revenue from sales and services		26		—			—			90,697,983			79,230,014
Cost of products and services sold		27		—			—			(84,537,368	)		(72,431,473	)

Gross profit				—			—			6,160,615			6,798,541
Operating income (expenses)
Selling and marketing		27		—			—			(2,670,867	)		(2,486,389	)
General and administrative		27		—			—			(1,625,839	)		(1,576,528	)
Loss on disposal of property, plant and equipment and intangibles		28		—			—			(22,088	)		(2,242	)
Other operating income, net		29		(313	)		1			57,533			59,360

Operating income before financial income (expenses) and share of profit of subsidiaries, joint ventures and associates				(313	)		1			1,899,354			2,792,742

Share of profit of subsidiaries, joint ventures and associates		12		1,174,985			1,536,388			(14,779	)		20,673

Income before financial result, income and social contribution taxes				1,174,672			1,536,389			1,884,575			2,813,415
Financial income		30		146,137			95,218			681,235			585,101
Financial expenses		30		(119,900	)		(107,701	)		(794,771	)		(1,059,397	)

Financial result, net				26,237			(12,483	)		(113,536	)		(474,296	)

Income before income and social contribution taxes				1,200,909			1,523,906			1,771,039			2,339,119

Income and social contribution taxes
Current		9.b; 9c		(35,363	)		(4,098	)		(476,302	)		(922,458	)
Deferred		9.b		(15,125	)		6,697			(162,417	)		109,204

				(50,488	)		2,599			(638,719	)		(813,254	)
Net income for the year				1,150,421			1,526,505			1,132,320			1,525,865

Net income for the year attributable to:
Shareholders of the Company				1,150,421			1,526,505			1,150,421			1,526,505
Non-controlling interests in subsidiaries				—			—			(18,101	)		(640	)
Earnings per share (based on weighted average number of shares outstanding) – R$
Basic		31		2.1223			2.8169			2.1223			2.8169
Diluted		31		2.1083			2.7968			2.1083			2.7968

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Other Comprehensive Income

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais)


			Parent						Consolidated
	Note		2018			2017			2018			2017
						Restated						Restated
Net income for the year attributable to shareholders of the Company				1,150,421			1,526,505			1,150,421			1,526,505
Net income for the year attributable to non-controlling interests in subsidiaries				—			—			(18,101	)		(640	)

Net income for the year				1,150,421			1,526,505			1,132,320			1,525,865


Items that are subsequently reclassified to profit or loss:
Fair value adjustments of financial instruments of subsidiaries, net		25.g		(213,916	)		(4,016	)		(213,937	)		(4,016	)
Fair value adjustments of financial instruments of joint ventures, net		25.g		(2,329	)		3,535			(2,329	)		3,535
Cumulative translation adjustments, net of hedge of net investments in foreign operations and income and social contribution taxes		25.g		12,796			45,542			12,796			45,542
Items that are not subsequently reclassified to profit or loss:
Actuarial losses of post-employment benefits of subsidiaries, net		25.g		(1,193	)		(18,621	)		(5,282	)		(23,856	)
Actuarial gains of post-employment benefits of joint ventures, net		25.g		(1,375	)		544			(1,375	)		544


Total comprehensive income for the year				944,404			1,553,489			922,193			1,547,614

Total comprehensive income for the year attributable to shareholders of the Company				944,404			1,553,489			944,404			1,553,489
Total comprehensive income for the year attributable to non-controlling interest in subsidiaries				—			—			(22,211	)		(5,875	)

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais)


																	Profit reserve																Equity attributable to:
	Note	Share capital		Equity instrument granted		Capital reserve			Treasury shares			Revaluation reserve on subsidiaries			Legal reserve		Investments statutory reserve		Valuation adjustments			Cumulative translation adjustments		Retained earnings			Additional dividends to the minimum mandatory dividends			Shareholders of the Company			Non-controlling interests in subsidiaries			Consolidated equity
Balance as of December 31, 2017—Restated			5,171,752		536		549,778			(482,260	)		4,930			629,144		3,000,707		154,824			53,061		—			163,742			9,246,214			377,824			9,624,038
Net income for the year			—		—		—			—			—			—		—		—			—		1,150,421			—			1,150,421			(18,101	)		1,132,320
Other comprehensive income:
Fair value adjustments of financial assets, net of income taxes	25.g		—		—		—			—			—			—		—		(216,245	)		—		—			—			(216,245	)		(21	)		(216,266	)
Actuarial losses of post-employment benefits, net of income taxes	25.g		—		—		—			—			—			—		—		(2,568	)		—		—			—			(2,568	)		(4,089	)		(6,657	)
Currency translation of foreign subsidiaries, including the effect of net investments hedge	25.g		—		—		—			—			—			—		—		—			12,796		—			—			12,796			—			12,796

Total comprehensive income for the year			—		—		—			—			—			—		—		(218,813	)		12,796		1,150,421			—			944,404			(22,211	)		922,193
Equity instrument granted	25.b		—		3,773		—			—			—			—		—		—			—		—			—			3,773			—			3,773
Stock plan	8.c; 25.c		—		—		(7,378	)		(3,123	)		—			—		—		—			—		—			—			(10,501	)		—			(10,501	)
Realization of revaluation reserve of subsidiaries	25.e		—		—		—			—			(218	)		—		—		—			—		218			—			—			—			—
Income and social contribution taxes on realization of revaluation reserve of subsidiaries	25.e		—		—		—			—			—			—		—		—			—		(3	)		—			(3	)		—			(3	)
Expired dividends			—		—		—			—			—			—		—		—			—		3,170			—			3,170			—			3,170
Transfer to investments reserve			—		—		—			—			—			—		3,385		—			—		(3,385	)		—			—			—			—
Additional dividends attributable to non-controlling interests			—		—		—			—			—			—		—		—			—		—			—			—			(3,689	)		(3,689	)
Approval of additional dividends by the Shareholders’ Meeting	25.h		—		—		—			—			—			—		—		—			—		—			(163,742	)		(163,742	)		—			(163,742	)
Allocation of net income:
Legal reserve	25.f; 25.h		—		—		—			—			—			57,521		—		—			—		(57,521	)		—			—			—			—
Interim dividends (R$ 0.56 per share of the Company)	25.h		—		—		—			—			—			—		—		—			—		(304,241	)		—			(304,241	)		—			(304,241	)
Proposed dividends (R$ 0.70 per share of the Company)	25.h		—		—		—			—			—			—		—		—			—		(380,324	)		109,355			(270,969	)		—			(270,969	)
Statutory reserve	25.f; 25.h		—		—		—			—			—			—		408,335		—			—		(408,335	)		—			—			—			—

Balance as of December 31, 2018			5,171,752		4,309		542,400			(485,383	)		4,712			686,665		3,412,427		(63,989	)		65,857		—			109,355			9,448,105			351,924			9,800,029

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais)


																Profit reserve																			Equity attributable to:
	Note		Share capital		Equity instrument granted		Capital reserve			Treasury shares			Revaluation reserve on subsidiaries			Legal reserve		Investments statutory reserve			Retention of profits			Valuation adjustments			Cumulative translation adjustments		Retained earnings			Additional dividends to the minimum mandatory dividends			Shareholders of the Company			Non-controlling interests in subsidiaries			Consolidated equity
Balance as of December 31, 2016				3,838,686		—		552,038			(483,879	)		5,339			550,428		2,582,898			1,333,066			(23,987	)		7,519		—			165,515			8,527,623			30,935			8,558,558
Effects of IFRS adoption		2.y		—		—		—			—			—			—		(82,427	)		—			—			—		—			—			(82,427	)		(81	)		(82,508	)

Balance as of January 1, 2017—Restated				3,838,686		—		552,038			(483,879	)		5,339			550,428		2,500,471			1,333,066			(23,987	)		7,519		—			165,515			8,445,196			30,854			8,476,050
Net income for the year				—		—		—			—			—			—		—			—			—			—		1,526,505			—			1,526,505			(640	)		1,525,865
Other comprehensive income:
Fair value adjustments of financial assets, net of income taxes		25.g		—		—		—			—			—			—		—			—			(481	)		—		—			—			(481	)		—			(481	)
Actuarial losses of post-employment benefits, net of income taxes		25.g		—		—		—			—			—			—		—			—			(18,077	)		—		—			—			(18,077	)		(5,235	)		(23,312	)
Currency translation of foreign subsidiaries, including the effect of net investments hedge		25.g		—		—		—			—			—			—		—			—			—			45,542		—			—			45,542			—			45,542

Total comprehensive income for the year				—		—		—			—			—			—		—			—			(18,558	)		45,542		1,526,505			—			1,553,489			(5,875	)		1,547,614
Equity instrument granted		25.b		—		536		—			—			—			—		—			—			—			—		—			—			536			—			536
Capital increase with reserves		25.f		1,333,066		—		—			—			—			—		—			(1,333,066	)		—			—		—			—			—			—			—
Stock plan		25.c		—		—		(2,260	)		1,619			—			—		—			—			—			—		—			—			(641	)		—			(641	)
Realization of revaluation reserve of subsidiaries		25.e		—		—		—			—			(409	)		—		—			—			—			—		409			—			—			—			—
Income and social contribution taxes on realization of revaluation reserve of subsidiaries		25.e		—		—		—			—			—			—		—			—			—			—		(96	)		—			(96	)		—			(96	)
Expired dividends				—		—		—			—			—			—		—			—			—			—		3,029			—			3,029			—			3,029
Transfer to investments reserve				—		—		—			—			—			—		3,342			—			—			—		(3,342	)		—			—			—			—
Additional dividends attributable to non-controlling interests				—		—		—			—			—			—		—			—			—			—		—			—			—			(8,730	)		(8,730	)
Approval of additional dividends by the Shareholders’ Meeting		25.h		—		—		—			—			—			—		—			—			—			—		—			(165,515	)		(165,515	)		—			(165,515	)
Non-controlling interests added due to business combination		3.c		—		—		—			—			—			—		—			—			—			—		—			—			—			182,603			182,603
Non-controlling interests changes – CBLSA		3.c;25.g		—		—		—			—			—			—		—			—			197,369			—		—			—			197,369			178,972			376,341
Allocation of net income:
Legal reserve		25.f; 25.g		—		—		—			—			—			78,716		—			—			—			—		(78,716	)		—			—			—			—
Interim dividends (R$ 0.85 per share of the Company)		25.h		—		—		—			—			—			—		—			—			—			—		(461,868	)		—			(461,868	)		—			(461,868	)
Proposed dividends (R$ 0.90 per share of the Company)		25.h		—		—		—			—			—			—		—			—			—			—		(489,027	)		163,742			(325,285	)		—			(325,285	)
Statutory reserve		25.f; 25.h		—		—		—			—			—			—		496,894			—			—			—		(496,894	)		—			—			—			—

Balance as of December 31, 2017—Restated				5,171,752		536		549,778			(482,260	)		4,930			629,144		3,000,707			—			154,824			53,061		—			163,742			9,246,214			377,824			9,624,038

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows – Indirect Method

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais)


			Parent						Consolidated
	Note		2018			2017			2018			2017
						Restated						Restated
Cash flows from operating activities
Net income for the year				1,150,421			1,526,505			1,132,320			1,525,865
Adjustments to reconcile net income to cash provided by operating activities
Share of loss (profit) of subsidiaries, joint ventures and associates		12		(1,174,985	)		(1,536,388	)		14,779			(20,673	)
Amortization of contractual assets with customers – exclusive rights		11		—			—			371,825			463,049
Depreciation and amortization		13;14		—			—			812,489			704,544
PIS and COFINS credits on depreciation		13;14		—			—			15,721			13,134
Interest, monetary, and foreign exchange rate variations				1,776			103,106			1,026,515			854,671
Deferred income and social contribution taxes		9.b		15,125			(6,697	)		162,417			(109,204	)
(Gain) loss on disposal of property, plant and equipment and intangibles		28		—			—			22,088			2,242
Estimated losses on doubtful accounts				—			—			69,250			132,756
Provision for losses in inventories				—			—			(1,498	)		(802	)
Provision for post-employment benefits				—			—			4,854			13,968
Other provisions and adjustments				(6	)		—			(135	)		1,539

				(7,669	)		86,526			3,630,625			3,581,089
(Increase) decrease in current assets
Trade receivables and reseller financing		5		—			—			(355,854	)		(725,240	)
Inventories		6		—			—			168,704			(606,484	)
Recoverable taxes		7		(6,635	)		4,550			(11,467	)		(334,217	)
Dividends received from subsidiaries and joint-ventures				528,778			922,301			42,436			29,411
Insurance and other receivables				877			1,480			(14,536	)		358,682
Prepaid expenses		10		(365	)		(1,499	)		(37,525	)		(23,016	)
Increase (decrease) in current liabilities
Trade payables		16		(190	)		131			576,164			412,393
Salaries and related charges		17		(16	)		40			40,074			7,149
Taxes payable		18		11,220			(383	)		46,476			33,054
Income and social contribution taxes				9,238			—			166,527			783,663
Post-employment benefits		19.b		—			—			15,596			5,119
Provision for tax, civil, and labor risks		21.a		—			—			13,272			11,857
Insurance and other payables				(3,466	)		(2,360	)		(59,237	)		(49,387	)
Deferred revenue		23		—			—			8,159			(3,887	)
(Increase) decrease in non-current assets
Trade receivables and reseller financing		5		—			—			(99,622	)		(102,905	)
Recoverable taxes		7		—			(13,675	)		(539,539	)		(130,200	)
Escrow deposits				148			—			(58,757	)		(39,795	)
Other receivables				—			—			6,350			(4,356	)
Prepaid expenses		10		(30	)		—			(58,735	)		(116,735	)
Increase (decrease) in non-current liabilities
Post-employment benefits		19.b		—			—			(8,457	)		(759	)
Provision for tax, civil, and labor risks		21.a; 21.c		(184	)		(902	)		11,811			(68,193	)
Other payables				(2,818	)		—			(4,397	)		87,950
Deferred revenue		23		—			—			(1,046	)		385
Payments of contractual assets with customers – exclusive rights		11		—			—			(390,177	)		(529,732	)
Income and social contribution taxes paid				—			—			(197,886	)		(836,808	)

Net cash provided by operating activities				528,888			996,209			2,888,959			1,739,038

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows – Indirect Method

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais)


			Parent						Consolidated
	Note		2018			2017			2018			2017
						Restated						Restated
Cash flows from investing activities
Financial investments, net of redemptions				(544,273	)		(20,605	)		(1,669,937	)		60,859
Cash and cash equivalents of subsidiary acquired		3.c; 3.d		—			—			3,662			59,863
Acquisition of property, plant, and equipment		13		—			—			(1,178,312	)		(1,302,187	)
Acquisition of intangible assets		14		—			—			(237,593	)		(221,960	)
Acquisition of companies		3.d		—			—			(103,373	)		—
Capital increase in joint ventures		12.b		—			—			(31,908	)		(16,000	)
Capital reduction in associates		12.c		—			—			1,250			—
Proceeds from disposal of property, plant and equipment and intangibles		28		—			—			38,578			47,670

Net cash used in investing activities				(544,273	)		(20,605	)		(3,177,633	)		(1,371,755	)

Cash flows from financing activities
Loans, debentures, and finance leases
Proceeds		15		1,721,596			—			4,461,112			4,510,694
Repayments		15		(800,336	)		—			(3,710,718	)		(2,462,200	)
Interest paid		15		(86,806	)		(99,803	)		(737,564	)		(769,740	)
Payments of financial lease		15.i		—			—			(5,120	)		(5,191	)
Dividends paid				(789,378	)		(930,557	)		(808,603	)		(940,250	)
Acquisition of treasury shares		23.c		(6,526	)		—			—			—
Sale of treasury shares		25.c		—			6,799			—			—
Related parties		8.a		55,976			13,187			(114	)		7,036

Net cash provided by (used in) financing activities				94,526			(1,010,374	)		(801,007	)		340,349

Effect of exchange rate changes on cash and cash equivalents in foreign currency				—			—			26,628			20,214

Increase (decrease) in cash and cash equivalents				79,141			(34,770	)		(1,063,053	)		727,846

Cash and cash equivalents at the beginning of the year		4		93,174			127,944			5,002,004			4,274,158
Cash and cash equivalents at the end of the year		4		172,315			93,174			3,938,951			5,002,004

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Statements of Value Added

For the years ended December 31, 2018 and 2017

(In thousands of Brazilian Reais, except percentages)


			Parent								Consolidated
	Note		2018		%		2017		%		2018			%		2017			%
							Restated									Restated
Revenue
Gross revenue from sales and services, except rents and royalties		26		—				—				95,297,114					82,720,797
Rebates, discounts, and returns		26		—				—				(1,342,799	)				(927,557	)
Estimated losses on doubtful accounts—allowance				—				—				(69,250	)				(138,086	)
Amortization of contractual assets with customers – exclusive rights		11		—				—				(371,825	)				(463,049	)
Loss on disposal of property, plant and equipment and intangibles and other operating income, net		28;29		—				—				35,445					57,118

				—				—				93,548,685					81,249,223
Materials purchased from third parties
Raw materials used				—				—				(6,173,615	)				(5,333,301	)
Cost of goods, products, and services sold				—				—				(78,330,739	)				(66,434,670	)
Third-party materials, energy, services, and others				7,306				8,142				(2,351,100	)				(2,293,904	)
Provisions for losses of assets				—				—				(23,141	)				(27,090	)

				7,306				8,142				(86,878,595	)				(74,088,965	)
Gross value added				7,306				8,142				6,670,090					7,160,258

Deductions
Depreciation and amortization		13;14		—				—				(812,489	)				(704,544	)
PIS and COFINS credits on depreciation		13;14		—				—				(15,721	)				(13,134	)

				—				—				(828,210	)				(717,678	)
Net value added by the Company				7,306				8,142				5,841,880					6,442,580

Value added received in transfer
Share of profit (loss) of subsidiaries, joint-ventures, and associates		12		1,174,985				1,536,388				(14,779	)				20,673
Rents and royalties		26		—				—				143,090					137,026
Financial income		30		146,137				95,218				681,235					585,101

				1,321,122				1,631,606				809,546					742,800
Total value added available for distribution				1,328,428				1,639,748				6,651,426					7,185,380

Distribution of value added
Labor and benefits				6,218		—		6,921		—		2,187,994			33		1,924,541			27
Taxes, fees, and contributions				66,114		5		136		—		2,312,328			35		2,476,497			34
Financial expenses and rents				105,675		8		106,186		6		1,018,784			15		1,258,477			18
Dividends distributed				684,565		52		950,895		59		688,254			10		959,625			13
Retained earnings				465,856		35		575,610		35		444,066			7		566,240			8

Value added distributed				1,328,428		100		1,639,748		100		6,651,426			100		7,185,380			100

The accompanying notes are an integral part of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

1.	Operations

Ultrapar Participações S.A. (“Ultrapar” or “Company”) is a publicly-traded company headquartered at the Brigadeiro Luis Antônio Avenue, 1343 in the city of São Paulo – SP, Brazil, listed on B3 S.A. – Brasil, Bolsa, Balcão (“B3”), in the Novo Mercado listing segment under the ticker “UGPA3” and on the New York Stock Exchange (“NYSE”) in the form of level III American Depositary Receipts (“ADRs”) under the ticker “UGP”.

The Company engages in the investment of its own capital in services, commercial, and industrial activities, through the subscription or acquisition of shares of other companies. Through its subsidiaries, it operates in the segments of liquefied petroleum gas—LPG distribution (“Ultragaz”), fuel distribution and related businesses (“Ipiranga”), production and marketing of chemicals (“Oxiteno”), and storage services for liquid bulk (“Ultracargo”) and retail distribution of pharmaceutical, hygiene, beauty, and skincare products (“Extrafarma”). For further information about segments, see Note 32.

2.	Presentation of Financial Statements and Summary of Significant Accounting Policies

The Company’s parent and consolidated financial statements (“financial statements”) were prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the accounting policies adopted in Brazil.

The accounting policies adopted in Brazil include those in the Brazilian corporate law and in the Pronouncements, Orientations and Interpretations issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Federal Accounting Council (“CFC”) and the Brazilian Securities and Exchange Commission (“CVM”).

All relevant specific information of the financial statements, and only this information, were presented and correspond to that used by the Company’s and its subsidiaries’ Management.

The presentation currency of the Company’s financial statements is the Brazilian Real (“R$”), which is the Company’s functional currency.

The Company and its subsidiaries applied the accounting policies described below in a consistent manner for all years presented in the financial statements.

a.	*Recognition of Income*

Revenue of sales and services rendered is measured at the value of the consideration that the Company’s subsidiaries expect to be entitled to, net of sales returns, discounts, amortization of contractual assets with customers and other deductions, if applicable, being recognized as the entity fulfills its performance obligation. At Ipiranga, the revenue from sales of fuels and lubricants is recognized when the products are delivered to gas stations and to large consumers. At Ultragaz, revenue from sales of LPG is recognized when the products are delivered to customers at home, to independent dealers and to industrial and commercial customers. At Extrafarma, the revenue from sales of pharmaceuticals is recognized when the products are delivered to end user customers in own drugstores and when the products are delivered to independent resellers. At Oxiteno, the revenue from sales of chemical products is recognized when the products are delivered to industrial customers, depending of the freight mode of delivery. At Ultracargo, the revenue provided from storage services is recognized as services are performed. The breakdowns of revenues from sales and services are shown in Notes 26 and 32.

Amortization of contractual assets with customers for the exclusive rights in Ipiranga’s reseller service stations and the bonuses paid in performance obligation sales are recognized in the income statement as a deduction of the sales revenue according to the conditions established in the agreements which is reviewed as per the changes occurred in the agreements (see Notes 2.f and 11).

The am/pm franchising upfront fee received by Ipiranga is deferred and recognized in profit or loss on the straight-line accrual basis throughout the terms of the agreements with the franchisees. For more information, see Note 23.a.

Deferred revenue from loyalty program is recognized in the income statement when the points are redeemed, on which occasion the costs incurred are also recognized in profit or loss. Deferred revenue of unredeemed points is also recognized in profit or loss when points expire. For more information, see Note 23.b.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Costs of products sold and services provided include goods (mainly fuels, lubricants, LPG, and pharmaceutical products), raw materials (chemicals and petrochemicals) and production, distribution, storage, and filling costs.

Research and development expenses are recognized in the statements of profit or loss and amounted to R$ 63,085 in 2018 (R$ 55,836 in 2017).

b.	*Cash and Cash Equivalents*

Includes cash, banks deposits, and short-term, highly-liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of change in value. See Note 4.a for further details on cash and cash equivalents of the Company and its subsidiaries.

c.	*Financial Assets*

The Company and its subsidiaries evaluated the classification and measurement of financial assets based on its business model of financial assets as follows:

•

Amortized cost: financial assets held in order to collect contractual cash flows, solely principal and interest. The interest earned and the foreign currency exchange variation are recognized in profit or loss, and balances are stated at acquisition cost plus the interest earned, using the effective interest rate method. Financial investments in guarantee of loans are classified as amortized cost.

•

Measured at fair value through other comprehensive income: financial assets that are acquired or originated for the purpose of collecting contractual cash flows or selling financial assets. The balances are stated at fair value, and the interest earned and the foreign currency exchange variation are recognized in profit or loss. Differences between fair value and initial amount of financial investments plus the interest earned are recognized in equity in other comprehensive income in the “Valuation adjustments”. Accumulated gains and losses recognized in equity are reclassified to profit or loss at the time of their settlement. Substantially the financial investments in Bank Certificates of Deposit (“CDB”) and repurchase agreements are classified as measured at fair value through other comprehensive income.

•

Measured at fair value through profit or loss: financial assets that were not classified as amortized cost or measured at fair value through other comprehensive income. The balances are stated at fair value and both the interest earned and the exchange variations and changes in fair value are recognized in the income statement. Investment funds and derivatives are classified as measured at fair value through profit or loss.

The Company and its subsidiaries use financial instruments for hedging purposes, applying the concepts described below:

•

Hedge accounting—fair value hedge: financial instruments used to hedge exposure to changes in the fair value of an item, attributable to a particular risk, which can affect the entity’s profit or loss. In the initial designation of the fair value hedge, the relationship between the hedging instrument and the hedged item is documented, including the objectives of risk management, the strategy in conducting the transaction, and the methods to be used to evaluate its effectiveness. Once the fair value hedge has been qualified as effective, the hedge item is also measured at fair value. Gains and losses from hedge instruments and hedge items are recognized in profit or loss. The hedge accounting must be discontinued when the hedge becomes ineffective.

•

Hedge accounting—cash flow hedge: financial instruments used to hedge the exposure to variability in cash flows that is attributable to a risk associated with an asset or liability or highly probable transaction or firm commitment that may affect the statements of profit or loss. The portion of the gain or loss on the hedging instrument that is determined to be effective relating to the effects of exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as “Valuation adjustments” while the ineffective portion is recognized in profit or loss. Gains or losses on the hedging instrument relating to the effective portion of this hedge that had been recognized directly in accumulated other comprehensive income shall be recognized in profit or loss in the period in which the hedged item is recognized in profit or loss or as initial cost of non- financial assets, in the same line of the statement that the hedged item is recognized. The hedge accounting shall be discontinued when (i) the hedging relationship is canceled; (ii) the hedging instrument expires; and (iii) the hedging instrument no longer qualifies for hedge accounting. When hedge accounting is discontinued, gains and losses recognized in equity in other comprehensive income are reclassified to profit or loss in the period which the hedged item is recognized in profit or loss. If the transaction hedged is canceled or is not expected to occur, the cumulative gains and losses in equity in other comprehensive income shall be recognized immediately in profit or loss.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

•

Hedge accounting—hedge of net investments in foreign operation: financial instruments used to hedge exposure on net investments in foreign subsidiaries due to the fact that the local functional currency is different from the functional currency of the Company. The portion of the gain or loss on the hedging instrument that is determined to be effective, referring to the exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as cumulative translation adjustments, while the ineffective portion and the operating costs are recognized in profit or loss. The gain or loss on the hedging instrument that has been recognized directly in accumulated other comprehensive income shall be recognized in income when the disposal of the foreign subsidiary occurs.

For further detail on financial instruments of the Company and its subsidiaries, see Note 33.

d.	*Trade Receivables*

Trade receivables are recognized at the amount invoiced of the counterparty that the Company subsidiaries are entitled. The estimated losses take into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the lifetime of the contract when the deterioration or improvement of the customers’ credit quality (see Notes 5 and 33.d.3), considering the customers’ characteristics in each business segment. The amount of the allowance for estimated losses on doubtful accounts is deemed by management to be sufficient to cover any probable loss on realization of trade receivables.

e.	*Inventories*

Inventories are stated at the lower of acquisition cost or net realizable value (see Note 6). The cost value of inventory is measured using the weighted average cost and includes the costs of acquisition and processing directly and indirectly related to the units produced based on the normal capacity of production. Estimates of net realizable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling expenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realizable values are below inventory costs, a provision corresponding to this difference is recognized. Provisions are also made for obsolescence of products, materials, or supplies that (i) do not meet its subsidiaries’ specifications, (ii) have exceeded their expiration date, or (iii) are considered slow-moving inventory. This classification is made by management with the support of its industrial and operations teams.

f.	*Contractual assets with customers – exclusive rights*

Exclusive rights disbursements as provided in Ipiranga’s agreements with reseller service stations and major consumers are recognized as contractual assets when paid and amortized according to the conditions established in the agreements (see Note 2.a and 11).

g.	*Investments*

Investments in subsidiaries are accounted for under the equity method of accounting in the financial statements of the parent company (see Notes 3.b and 12.a). A subsidiary is an investee in which the investor is entitled to variable returns on investment and has the ability to interfere in its financial and operational activities. Usually the equity interest in a subsidiary is more than 50%.

Investments in associates and joint ventures are accounted for under the equity method of accounting in the financial statements (see Note 12 items b and c). An associate is an investment, in which an investor has significant influence, that is, has the power to participate in the financial and operating decisions of the investee but does not exercise control. A joint venture is an investment in which the shareholders have the right to net assets on behalf of a joint control. Joint control is the agreement, which establish that decisions about the relevant activities of the investee require the consent from the parties that share control.

Other investments are stated at acquisition cost less provision for losses, unless the loss is considered temporary.

h.	*Property, Plant, and Equipment*

Property, plant, and equipment is recognized at acquisition or construction cost, including financial charges incurred on property, plant, and equipment under construction, as well as qualifying maintenance costs resulting from scheduled plant outages and estimated costs to remove, to decommission, or to restore assets (see Notes 2.n and 20), less accumulated depreciation and, when applicable, less provision for losses (see Note 13).

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Depreciation is calculated using the straight-line method, over the periods mentioned in Note 13, taking into account the estimated useful lives of the assets, which are reviewed annually.

Leasehold improvements are depreciated over the shorter of the lease contract term and useful life of the property.

i.	*Leases*

•

Finance Leases

Certain lease contracts transfer substantially all the risks and benefits associated with the ownership of an asset to the subsidiaries. These contracts are characterized as finance leases, and assets thereunder are capitalized at lease commencement at their fair value or, if lower, present value of the minimum lease payments under the contracts. The items recognized as assets are depreciated and amortized using the lower of the straight-line method over the lower of the useful lives applicable to each group of assets or the contract terms, as mentioned in Notes 13 and 14. Financial charges under the finance lease contracts are allocated to profit or loss over the lease contract term, based on the amortized cost and the effective interest rate method of the related lease obligation (see Notes 2.l and 15.i).

•

Operating Leases

There are lease transactions where the risks and benefits associated with the ownership of the asset are not transferred and where there is no purchase option, or the purchase option at the end of the contract is equivalent to the market value of the leased asset. Payments made under an operating lease contract are recognized as cost or expense in the income statement on a straight-line basis over the term of the lease contract (see Note 34.c).

j.	*Intangible Assets*

Intangible assets include assets acquired by the Company and its subsidiaries from third parties, according to the criteria below (see Note 14):

•

Goodwill is shown as intangible assets corresponding to the positive difference between the amount paid or payable to the seller and the fair value of the identified assets and liabilities assumed of the acquired entity. Goodwill is tested annually for impairment. Goodwill is allocated to the business segments, which represent the lowest level that goodwill is monitored for impairment testing purposes (see Note 14.a).

•

Other intangible assets acquired from third parties, such as software, technology, and commercial property rights, are measured at the total acquisition cost and amortized using straight-line method, over the periods mentioned in Note 14, taking into account their useful lives, which are reviewed annually.

The Company and its subsidiaries have not recognized intangible assets that were generated internally. The Company and its subsidiaries have goodwill and brands acquired in business combinations, which are evaluated as intangible assets with indefinite useful life (see Note 14 items a and e).

k.	*Other Assets*

Other assets are stated at the lower of cost and realizable value, including, if applicable, interest earned, monetary changes and changes in exchange rates incurred or less a provision for loss and, if applicable, adjustment to present value.

l.	*Financial Liabilities*

The Company and its subsidiaries’ financial liabilities include trade payables and other payables, loans, debentures, finance leases and derivative financial instruments. Financial liabilities are classified as “financial liabilities at fair value through profit or loss” or “financial liabilities at amortized cost”. The financial liabilities at fair value through profit or loss refer to derivative financial instruments, subscription warrants—indemnification, and financial liabilities designated as hedged items in a fair value hedge relationship upon initial recognition (see Note 2.c – Fair Value Hedge). The financial liabilities at amortized cost are stated at the initial transaction amount plus related charges and net of amortization and transaction costs. The charges are recognized in profit or loss using the effective interest rate method.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Transaction costs incurred and directly attributable to the activities necessary for contracting loans or for issuing bonds, as well as premiums and discounts upon issuance of debentures and other debt, are allocated to the instrument and amortized to profit or loss over its term, using the effective interest rate method (see Note 15.j).

m.	*Income and Social Contribution Taxes on Income*

Current and deferred income tax (“IRPJ”) and social contribution on net income tax (“CSLL”) are calculated based on their current rates. For the calculation of current IRPJ and CSLL, the value of tax incentives is also considered. Taxes are recognized based on the rates of IRPJ and CSLL provided for by the laws enacted on the last day of the financial statements. The current rates in Brazil are 25% for IRPJ and 9% for CSLL. For further details about recognition and realization of IRPJ and CSLL, see Note 9.

For purposes of disclosure, deferred tax assets were offset against the deferred tax liability, IRPJ and CSLL, in the same taxable entity and the same taxation authority.

n.	*Provision for Asset Retirement Obligation – Fuel Tanks*

The subsidiary Ipiranga has the legal obligation to remove the underground fuel tanks located at Ipiranga-branded service stations after a certain period. The estimated cost of the obligation to remove these fuel tanks is recognized as a liability when the tanks are installed. The estimated cost is recognized in property, plant, and equipment and depreciated over the respective useful lives of the tanks. The amounts recognized as a liability accrue interest using the National Consumer Price Index (“IPCA”) until the respective tank is removed (see Note 20). An increase in the estimated cost of the obligation to remove the tanks could result in negative impact in future results. The estimated removal cost is reviewed and updated annually or when there is significant change in its amount and change in the estimated costs are recognized in statements of profit or loss when they become known.

o.	*Provisions for Tax, Civil, and Labor Risks*

A provision for tax, civil and labor risks is recognized for quantifiable risks, when the chance of loss is more-likely-than-not in the opinion of management and internal and external legal counsel, and the amounts are recognized based on the evaluation of the outcomes of the legal proceedings (see Note 21).

p.	*Post-Employment Benefits*

Post-employment benefits granted and to be granted to employees, retirees, and pensioners are based on an actuarial calculation prepared by an independent actuary and reviewed by management, using the projected unit credit method (see Note 19.b). The actuarial gains and losses are recognized in equity in cumulative other comprehensive income in the “Valuation adjustments”.

q.	*Other Liabilities*

Other liabilities are stated at known or measurable amounts plus, if applicable, related charges, and changes in exchange rates incurred. When applicable, other liabilities are recognized at present value, based on interest rates that reflect the term, currency, and risk of each transaction.

r.	*Foreign Currency Transactions*

Foreign currency transactions carried out by the Company or its subsidiaries are remeasured into their functional currency at the exchange rate prevailing at the date of each transaction. Outstanding monetary assets and liabilities of the Company and its subsidiaries are translated using the exchange rate at the date of the financial statements. The effect of the difference between those exchange rates is recognized in profit or loss until the conclusion of each transaction.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

s.	*Basis for Translation of Financial Statements of Foreign Subsidiaries*

s.1.

Subsidiaries with administrative autonomy

Assets and liabilities of the foreign subsidiaries, denominated in currencies other than that of the Company (functional currency: Brazilian Real), which have administrative autonomy, are translated using the exchange rate at the date of the financial statements. Revenues and expenses are translated using the average exchange rate of each year and equity is translated at the historical exchange rate of each transaction affecting equity. Gains and losses resulting from changes in these foreign investments are directly recognized in equity in cumulative other comprehensive income in the “cumulative translation adjustments” and will be recognized in profit or loss if these investments are disposed of. The balance in cumulative other comprehensive income on December 31, 2018 was a gain of R$ 65,857 (gain of R$ 53,061 on December 31, 2017)—see Note 25.g.2.

The foreign subsidiaries with functional currency different from the Company and which have administrative autonomy are listed below:


Subsidiary	Functional currency	Location
Oxiteno México S.A. de C.V.	Mexican Peso	Mexico
Oxiteno Servicios Corporativos S.A. de C.V.	Mexican Peso	Mexico
Oxiteno Servicios Industriales S.A. de C.V.	Mexican Peso	Mexico
Oxiteno USA LLC	U.S. Dollar	United States
Oxiteno Uruguay S.A. (i)	U.S. Dollar	Uruguay
Oxiteno Andina, C.A. (ii)	Bolivar Soberano	Venezuela

(i)	The subsidiary Oxiteno Uruguay S.A. (“Oxiteno Uruguay”) determined its functional currency as the U.S. dollar (“US$”), as its inventory sales, purchases of raw material inputs, and financing activities are performed substantially in this currency.

(ii)

According the definition and general guidance of IAS 29 (CPC 42), the characteristics of the economic environment of Venezuela indicate that this country is a hyperinflationary economy. As a result, the financial information of Oxiteno Andina, C.A. (“Oxiteno Andina”) was adjusted by the Venezuelan Consumer Price Index.

On August 20, 2018, the Venezuelan Central Bank put into effect the currency conversion (elimination of five zeros of the currency) and the Bolivar Soberano (“VES”). This implies a change in the monetary scale to simplify commercial transactions and accounting records, being the Bolivar Soberano traded as of December 31, 2018 at the variable exchange rate of 636.58 VES/US$ for sale and 638.18 VES/US$ for purchase.

Due to the economic and political situation in Venezuela and the uncertainty of its assets realization by Oxiteno S.A. Indústria e Comércio (”Oxiteno S.A.”), the Company’s management recognized an impairment loss for subsidiary Oxiteno Andina in the amount of R$ 5,565, as shown below:


Current assets
Cash and cash equivalents			1,703
Trade receivables			290
Inventories			985
Other receivables			160

			3,138
Non-current assets
Property, plant, and equipment, net			2,427

Total of impairment loss			5,565

s.2.

Subsidiaries without self-administrative autonomy

Assets and liabilities of the other foreign subsidiaries, which do not have administrative autonomy, are considered an extension of the activities of their parent company and are translated using the exchange rate at the date of the financial statements. Gains and losses resulting from changes in these foreign investments are directly recognized as financial income or loss. The gain recognized in income in 2018 amounted to R$ 4,090 (R$ 7,368 gain in 2017).

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

t.	*Use of Estimates, Assumptions and Judgments*

The preparation of the financial statements requires the use of estimates, assumptions, and judgments for the accounting and disclosure of certain assets, liabilities, and income. Therefore, the Company and subsidiaries’ management use the best information available at the date of preparation of the financial statements, as well as the experience of past and current events, also considering assumptions regarding future events. The estimates and assumptions are reviewed periodically.

t.1

Judgments

Information on the judgments is included: in the determination of control in subsidiaries (Notes 2.g, 2.s.1, 3 and 12.a), the determination of joint control in joint venture (Notes 2.g, 12.a and 12.b) and the determination of significant influence in associates (Notes 2.g and 12.c).

t.2

Uncertainties related to the assumptions and estimates

The information regarding uncertainties related to the assumptions and estimates are included: in determining the fair value of financial instruments (Notes 2.c, 2.l, 4, 15 and 33), the determination of the estimated losses on doubtful accounts (Notes 2.d, 5 and 33.d.3), the determination of provisions for losses of inventories (Notes 2.e and 6), the determination of deferred IRPJ and CSLL amounts (Notes 2.m and 9.a), , the determination of exchange rate used to translation of Oxiteno Andina’ information (Note 2.s.1.ii), the useful lives of property, plant, and equipment (Notes 2.h and 13), the useful lives of intangible assets, and the determination of the recoverable amount of goodwill (Notes 2.j and 14.a), provisions for assets retirement obligations (Notes 2.n and 20), provisions for tax, civil, and labor risks (Notes 2.o and 21), estimates for the preparation of actuarial reports (Notes 2.p and 19.b) and the determination of fair value of subscription warrants – indemnification (Notes 24 and 33.j). The actual result of the transactions and information may differ from their estimates.

u.	*Impairment of Assets*

The Company and its subsidiaries review, in every report period, the existence of any indication that an asset may be impaired and annually test intangible assets with undefined useful life. If there is an indication, the Company and its subsidiaries estimate the recoverable amount of the asset. Assets that cannot be evaluated individually are grouped in the smallest group of assets that generate cash inflow from continuous use and that are largely independent of cash flows of other assets (cash generating units “CGU”). The recoverable amount of assets or CGUs corresponds to the greater of their fair value net of applicable direct selling costs and their value in use.

The fair value less costs of disposal is determined by the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, net of costs of removing the asset, and direct incremental costs to bring an asset into condition for its sale, legal costs, and taxes.

To assess the value in use, the projections of future cash flows, trends, and outlooks, as well as the effects of obsolescence, demand, competition, and other economic factors were considered. Such cash flows are discounted to their present values using the discount rate before tax that reflects market conditions for the period of impairment testing and the specific risks of the asset or CGU being evaluated. In cases where the expected discounted future cash flows are less than their carrying amount, an impairment loss is recognized for the amount by which the carrying value exceeds the fair value of these assets. Losses for impairment of assets are recognized in profit or loss. In case goodwill has been allocated to a CGU, the recognized losses are first allocated to reduce the corresponding goodwill. If the goodwill is not enough to absorb such losses, the surplus is allocated to the assets on a pro-rata basis. An impairment of goodwill cannot be reversed. For other assets, impairment losses may be reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if the impairment had not been recognized.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

As of December 31, 2018, the Company recognized an impairment loss for subsidiary Oxiteno Andina (see Note 2.s.1.ii).

v.	*Business Combination*

A business combination is accounted applying the acquisition method. The cost of the acquisition is measured based on the consideration transferred and to be transferred, measured at fair value at the acquisition date. In a business combination, the assets acquired and liabilities assumed are measured in order to classify and allocate them accordingly to the contractual terms, economic circumstances and relevant conditions on the acquisition date. The non-controlling interest in the acquiree is measured based on its interest in identifiable net assets acquired. Goodwill is measured as the excess of the consideration transferred and to be transferred over the fair value of net assets acquired (identifiable assets and liabilities assumed, net). After the initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing purposes, goodwill is allocated to the Company’s operating segments. When the cost of the acquisition is lower than the fair value of net assets acquired, a gain is recognized directly in the income statement. Costs related to the acquisition are recorded in the income statement when incurred.

w.	*Statements of Value Added*

As required by Brazilian Corporate Law, the Company and its subsidiaries prepare the parent and consolidated statements of value added (“DVA”) according to CPC 09 – Statement of Value Added, as an integral part of the financial statements as applicable to publicly-traded companies, and as supplemental information for the IFRS, which does not require the presentation of DVA.

x.	*Statements of Cash Flows Indirect Method*

The Company and its subsidiaries prepared its parent and consolidated statements of cash flows in accordance with IAS 7 (CPC 03)—Cash Flow Statement. The Company and its subsidiaries present the interest paid on loans and debentures in financing activities. The Company and its subsidiaries present financial investments on a net basis of income and redemptions in the investment activities.

y.	*Adoption of the Pronouncements Issued by CPC and IASB*

The following standards, amendments, and interpretations to IFRS were issued by the IASB, which are effective as of January 1, 2018:


		Equivalent CPC
• IFRS 9 – Financial instrument classification and measurement: includes new requirements for the classification and measurement of financial assets and liabilities, derecognition requirements, new impairment methodology for financial instruments, and new hedge accounting guidance.		48
• IFRS 15—Revenue from contracts with customers: establish the principles of nature, amount, timing and uncertainty of revenue and cash flow arising from a contract with a customer.		47
• Financial Reporting in hyperinflationary economies – IAS 29 and the applying the restatement approach under IAS 29 – IFRIC 7.		42 and ICPC 23

The Company and its subsidiaries disclose below the information of the impacts of the adoption of IFRS 9 (CPC 48) and 15 (CPC 47) and reclassifications to the better presentation of the financial statements.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

(1)	IFRS 9 adoption (CPC 48)—Financial instruments

Classification and measurement of financial instruments

The Company and its subsidiaries evaluated the classification and measurement of financial instruments and, based on its business model, concluded that the target is achieved, receiving contractual cash flows and selling financial assets (hold for collect and sell). Accordingly, most part of the financial investments are classified as measured at fair value through other comprehensive income. Funds that are classified as measured at fair value through profit or loss and financial investments given as collateral for loans that are stated at amortized cost (see Note 2.c).


	2017
	Classification as previously reported according to IAS 39 / CPC 38				New classification according to IFRS 9 / CPC 48
	Category		Carrying value		Measured at fair value through profit or loss		Measured at fair value through other comprehensive income		Measured at amortized cost
Financial assets:
Cash and cash equivalents
Cash and bank deposits		Loans and receivables		147,926		—		—		147,926
Financial investments in local currency		Measured at fair value through profit or loss		4,821,605		—		4,821,605		—
Financial investments in foreign currency		Measured at fair value through profit or loss		32,473		32,473		—		—
Financial investments:
Fixed-income securities and funds in local currency		Available for sale		68,742		—		2,720		66,022
Fixed-income securities and funds in local currency		Measured at fair value through profit or loss		1,076,849		1,076,849		—		—
Fixed-income securities and funds in local currency		Held to maturity		7,449		—		—		7,449
Fixed-income securities and funds in foreign currency		Available for sale		129,131		—		129,131		—
Currency and interest rate hedging instruments		Measured at fair value through profit or loss		85,753		85,753		—		—

Total				6,369,928		1,195,075		4,953,456		221,397

b)	Estimated losses on doubtful accounts

The Company and its subsidiaries assessed the estimated credit losses on doubtful accounts on trade receivables, taking into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the lifetime of the contract when the deterioration or improvement of customers’ credit quality (see Note 2.d).

c)	Derivative financial instruments

The Company and its subsidiaries have not identified impacts arising from this change keeping the permanence of the application of IAS 39.

(2)	IFRS 15 adoption (CPC 47)—Revenue recognition from contracts with customers

The Company and its subsidiaries evaluated all the stages for the recognition of their revenues from contracts with customers and based on their diagnosis did not identify material measurement impacts resulting from the adoption of this standard (see Note 2.a).

In relation to the presentation in the income statement, the Company and its subsidiaries evaluated that certain expenses, allocated as selling and marketing until December 31, 2017, should be better presented as a reduction of revenue, substantially in relation to the amortization expenses of exclusive contracts to operate Ipiranga service station.

The Company and its subsidiaries adopted retrospectively the impacts of the IFRS 9 and 15.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

(3)	Reclassifications

The following reclassifications were made to the better presentation of the financial statements: i) in the statements of financial position the reclassification between property, plant, and equipment and intangible assets related to the participation of subsidiary Cia. Ultragaz in the acquisition of GLP tanks and bottles for its resellers was made; and ii) in the statements of profit or loss the segregation of sales and purchase taxes between the sales revenue and the cost of products were made.

(4)	Retrospective effect of the fair value related to CBLSA acquisition

As required by the item 45 of CPC 15/IFRS 3, the Company is presenting the retrospective effects of the fair value of assets in the statements of financial position as of December 31, 2017, related to the conclusion of the purchase price allocation from the association with Chevron Brasil Lubrificantes S.A. (“CBLSA”) -see Note 3.c.

The tables below summarize the effects of the IFRS 9 (CPC 48) and 15 (CPC 47) adoption, reclassifications, on consolidated statements of financial position, statements of profit or loss and statements of cash flow:

Statements of Financial Position as of January 1, 2017


Assets	As previously reported		IFRS 9 adoption (1)			IFRS 15 adoption (2)			Reclassifications (3)			After adoption IFRS 9 and 15
	12/31/2016
Current assets
Trade receivables and reseller financing		3,502,322		(84,713	)		(29,442	)		—			3,388,167
Inventories		2,761,207		—			20,170			—			2,781,377
Contractual assets with customers – exclusive rights		—		—			448,316			—			448,316
Other current assets		6,748,267		—			—			—			6,748,267

Total current assets		13,011,796		(84,713	)		439,044			—			13,366,127

Non-current assets
Contractual assets with customers – exclusive rights		—		—			989,768			—			989,768
Deferred income and social contribution taxes		417,344		28,802			13,472			—			459,618
Other non-current assets		1,429,262		—			—			—			1,429,262

Total long term assets		1,846,606		28,802			1,003,240			—			2,878,648

Investments		141,687		—			—			—			141,687
Property, plant, and equipment		5,787,982		—			—			8,436			5,796,418
Intangible assets		3,371,599		—			(1,471,527	)		(8,436	)		1,891,636


Total non-current assets		11,147,874		28,802			(468,287	)		—			10,708,389

Total assets		24,159,670		(55,911	)		(29,243	)		—			24,074,516

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Statements of Financial Position as of January 1, 2017


Liabilities	As previously reported		IFRS 9 adoption (1)			IFRS 15 adoption (2)			Reclassifications (3)		After adoption IFRS 9 and 15
	12/31/2016
Current liabilities
Taxes payable		171,033		—			(2,647	)		—		168,386
Other current liabilities		5,315,913		—			—			—		5,315,913

Total current liabilities		5,486,946		—			(2,647	)		—		5,484,299

Non-current liabilities
Total non-current liabilities		10,114,166		—			—			—		10,114,166

Equity
Profit reserves		4,466,392		(55,831	)		(26,596	)		—		4,383,965
Other equity items		4,061,231		—			—			—		4,061,231

Equity attributable to:
Shareholders of the Company		8,527,623		(55,831	)		(26,596	)		—		8,445,196
Non-controlling interests in subsidiaries		30,935		(80	)		—			—		30,855

Total equity		8,558,558		(55,911	)		(26,596	)		—		8,476,051

Total liabilities and equity		24,159,670		(55,911	)		(29,243	)		—		24,074,516

Statements of Financial Position as of December 31, 2017


Assets	As previously reported		IFRS 9 adoption (1)			IFRS 15 adoption (2)			Reclassifications (3)			Fair value CBLSA (4)		After adoption IFRS 9 and 15
Current assets
Trade receivables and reseller financing		4,337,118		(157,198	)		(32,026	)		—			—		4,147,894
Inventories		3,491,879		—			21,698			—			133		3,513,710
Contractual assets with customers – exclusive rights		—		—			456,213			—			—		456,213
Other current assets		7,372,294		—			—			—			—		7,372,294

Total current assets		15,201,291		(157,198	)		(445,885	)		—			133		15,490,111

Non-current assets
Contractual assets with customers – exclusive rights		—		—			1,046,147			—			—		1,046,147
Deferred income and social contribution taxes		545,611		53,447			15,003			—			—		614,061
Other non-current assets		2,107,965		—			—			—			—		2,107,965

Total long term assets		2,653,576		53,447			1,061,150			—			—		3,768,173

Investments		150,194		—			—			—			—		150,194
Property, plant, and equipment		6,607,788		—			—			26,740			3,298		6,637,826
Intangible assets		3,727,473		—			(1,538,095	)		(26,740	)		75,404		2,238,042

Total non-current assets		13,139,031		53,447			(476,945	)		—			78,702		12,794,235

Total assets		28,340,322		(103,751	)		(31,060	)		—			78,835		28,284,346

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Statements of Financial Position as of December 31, 2017


Liabilities	As previously reported		IFRS 9 adoption(1)			IFRS 15 adoption(2)			Reclassifications(3)		Fair value CBLSA(4)			After adoption IFRS 9 and 15
Current liabilities
Taxes payable		225,829		—			(4,300	)		—		—			221,529
Other current liabilities		6,788,159		—			—			—		—			6,788,159

Total current liabilities		7,013,988		—			(4,300	)		—		—			7,009,688

Non-current liabilities
Deferred income and social contribution taxes		38,524		—			—			—		45,118			83,642
Other non-current assets		11,566,978		—			—			—		—			11,566,978

Total non-current liabilities		11,605,502		—			—			—		45,118			11,650,620

Equity
Profit reserves		3,760,079		(103,468	)		(26,760	)		—		—			3,629,851
Valuation adjustments		159,643		—			—			—		(4,819	)		154,824
Other equity items		5,461,539		—			—			—		—			5,461,539

Equity attributable to:
Shareholders of the Company		9,381,261		(103,468	)		(26,760	)		—		(4,819	)		9,246,214
Non-controlling interests in subsidiaries		339,571		(283	)		—			—		38,536			377,824

Total equity		9,720,832		(103,751	)		(26,760	)		—		33,717			9,624,038

Total liabilities and equity		28,340,322		(103,751	)		(31,060	)		—		78,835			28,284,346

Statements of Profit or Loss for the year ended December 31, 2017


	As previously reported			IFRS 9 adoption(1)			IFRS 15 adoption(2)			Reclassifications(3)			After adoption IFRS 9 and 15
Net revenue from sales and services		80,007,422			—			(474,628	)		(302,780	)		79,230,014
Cost of products and services sold		(72,735,781	)		—			1,528			302,780			(72,431,473	)


Gross profit		7,271,641			—			(473,100	)		—			6,798,541
Operating income (expenses)
Selling and marketing		(2,885,311	)		(72,485	)		471,407			—			(2,486,389	)
Other operating income (expenses) items		(1,519,410	)		—			—			—			(1,519,410	)


Operating income before financial income (expenses) and share of profit of joint ventures and associates		2,866,920			(72,485	)		(1,693	)		—			2,792,742
Financial result, net		(474,296	)		—			—			—			(474,296	)
Share of profit of joint ventures and associates		20,673			—			—			—			20,673

Income before income and social contribution taxes		2,413,297			(72,485	)		(1,693	)		—			2,339,119

Income and social contribution taxes
Current		(922,458	)		—			—			—			(922,458	)
Deferred		83,029			25,599			576			—			109,204

		(839,429	)		25,599			576			—			(813,254	)
Net income for the year		1,573,868			(46,886	)		(1,117	)		—			1,525,865

Net income for the year attributable to:
Shareholders of the Company		1,574,306			(46,825	)		(976	)		—			1,526,505
Non-controlling interests in subsidiaries		(438	)		(61	)		(141	)		—			(640	)
Earnings per share (based on weighted average number of shares outstanding) – R$
Basic		2.9056												2.8169
Diluted		2.8847												2.7968

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

Statements of Cash Flows for the year ended December 31, 2017


	As previously reported			IFRS 9 adoption (1)			IFRS 15 adoption (2)			Reclassifications (3)			After adoption IFRS 9 and 15
Cash flows from operating activities
Net income for the year		1,573,868			(46,886	)		(1,117	)		—			1,525,865
Adjustments to reconcile net income to cash provided by operating activities
Share of loss (profit) of joint ventures and associates		(20,673	)		—			—			—			(20,673	)
Amortization of contractual assets with customers – exclusive rights		—			—			463,049			—			463,049
Depreciation and amortization		1,175,951			—			(471,407	)		—			704,544
PIS and COFINS credits on depreciation		13,134			—			—			—			13,134
Asset retirement obligation		(15,432	)		—			—			15,432			—
Interest, monetary, and foreign exchange rate variations		854,671			—			—			—			854,671
Deferred income and social contribution taxes		(83,029	)		(25,599	)		(576	)		—			(109,204	)
(Gain) loss on disposal of property, plant and equipment and intangibles		2,242			—			—			—			2,242
Estimated credit losses on doubtful accounts		—			—			—			132,756			132,756
Provision for losses in inventories		—			—			—			(802	)		(802	)
Provision for post-employment benefits		—			—			—			13,968			13,968
Other provisions and adjustments		(868	)		—			2,407			—			1,539

		3,499,864			(72,485	)		(7,644	)		161,354			3,581,089
(Increase) decrease in current assets
Trade receivables and reseller financing		(665,145	)		72,485			(3,006	)		(129,574	)		(725,240	)
Inventories		(605,757	)		—			—			(727	)		(606,484	)
Other current asset items		30,860			—			—			—			30,860
Increase (decrease) in current liabilities
Taxes payable		34,707			—			—			(1,653	)		33,054
Insurance and other payables		(33,955	)		—			—			(15,432	)		(49,387	)
Other current liabilities items		1,216,294			—			—			—			1,216,294
(Increase) decrease in non-current assets
Other non-current asset items		(393,991	)		—			—			—			(393,991	)
Increase (decrease) in non-current liabilities
Post-employment benefits		13,209			—			—			(13,968	)		(759	)
Other non-current liabilities items		20,142			—			—			—			20,142
Payments of contractual assets with customers – exclusive rights		—			—			(529,732	)		—			(529,732	)
Income and social contribution taxes paid		(836,808	)		—			—			—			(836,808	)

Net cash provided by operating activities		2,279,420			—			(540,382	)		—			1,739,038

Cash flows from investing activities
Acquisition of property, plant, and equipment		(1,262,558	)		—			—			(39,629	)		(1,302,187	)
Acquisition of intangible assets		(801,971	)		—			540,382			39,629			(221,960	)
Other investing activities items		152,392			—			—			—			152,392

Net cash used in investing activities		(1,912,137	)		—			540,382			—			(1,371,755	)

Net cash provided by financing activities		340,349			—			—			—			340,349

Effect of exchange rate changes on cash and cash equivalents in foreign currency		20,214			—			—			—			20,214
Increase in cash and cash equivalents		727,846			—			—			—			727,846

Cash and cash equivalents at the beginning of the year		4,274,158			—			—			—			4,274,158
Cash and cash equivalents at the end of the year		5,002,004			—			—			—			5,002,004

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

(5)	CPC 42 – Financial Reporting in hyperinflationary economies (equivalent to IAS 29) and ICPC 23 – Applying the restatement approach under CPC 42 (equivalent to IFRIC 7)

On December 7, 2018, CPC 42 and ICPC 23 were approved by the CPC. The subsidiaries Oxiteno Andina and Oxiteno Argentina are included in this context, and the Company had already adopted the definition and general guidance of IAS 29, not having impact on the financial statements.

The following standards, amendments, and interpretations to IFRS were issued by the IASB are not effective as of December 31, 2018:


	Equivalent CPC	Effective date
(i) IFRS 16—Lease: requires lessees’ record, in the financial statements, a liability reflecting future payments of a lease and the right to use an asset for the lease contracts, except for certain short-term leases and low asset value contracts. The criteria for recognition and measurement of leases in the financial statements of lessors are substantially maintained.	06 (R2)	2019
(ii) Uncertainty over income tax treatments – IFRIC 23: clarifies how to apply the recognition and measurement requirements in IAS 12 (CPC 32) – when there is uncertainty over income tax treatments. In such circumstance, an entity shall recognize and measure its current or deferred tax asset or liability applying the requirements in IAS 12 (CPC 32) based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, applying this interpretation.	ICPC 22	2019

(i)	With the adoption of IFRS 16 (CPC 06 R2), as of the fiscal year beginning January 1, 2019, the leases contracted by the Company’s subsidiaries will impact the financial statements as follows:

•

recognition of right to use assets and lease liabilities in the balance sheet, initially measured at the present value of future lease payments;

•

recognition of amortization expenses of right to use assets and interest expenses on the lease liabilities in the financial result in the income statements; and

•

split of the total amount of cash paid in these operations between principal and interest paid in operating activities in the statements of cash flows.

The requirements for the accounting of lessors will remain unchanged. However, in sublease cases, the intermediate lessor is required to classify its sublease operations as financial or operating leases by reference to the right of use asset arising from the principal lease rather than by reference to the underlying asset as previously required by IAS 17 (CPC 06 R1).

The Company selected as transition method the modified retrospective approach, with the cumulative effect of initial application of this new pronouncement recorded as an adjustment to the opening balance of equity and without the restatement of comparative periods.

The new lease definitions have been applied to all identified contracts in effect on the transition date. IFRS 16/CPC 06 (R2) determines whether a contract contains a lease if a customer has the right to control the use of an identified asset for a period in return for consideration.

In the diagnosis of the adoption, the Company’s management, with the assistance of specialized consulting, carried out the inventory of the contracts, evaluating whether or not each agreement contains a lease in accordance with IFRS 16/CPC 06 (R2). This analysis identified impacts mainly related to the lease of properties from third parties, port areas and lower amounts arising from other operations where the existence of leased assets individually or combined in service contracts was identified.

As provided in the standard, short-term leases with a term of 12 months or less, variable amounts, indefinite term and leases of low amount assets such as computers and office furniture, will maintain the recognition of their lease expenses on a straight-line basis in the statements of profit or loss.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

In addition, the following practical records will be used to transition to new lease accounting requirements:

•

application of the CPC 06 (R2) / IFRS 16 to all contracts initiated before January 1, 2019 that were identified as leases in accordance with CPC 06 (R1) / IAS 7 and ICPC 03 / IFRIC 4;

•

use of discount rate according to the lease term and similar characteristics;

•

contracts with a term of 12 months from the date of the initial adoption of the standard or with indefinite term will not be recorded;

•

exclusion of the initial direct costs of the measurement of the opening balance from right of use asset; and

•

options for extension of the term or termination were considered, when applicable.

The table below summarizes the range of estimated impacts on the adoption of the IFRS 16 (CPC 06 R2), as of January 1, 2019:


	From			To
Current assets
Prepaid expenses		(38,939	)		(38,939	)

Non-current assets
Prepaid expenses		(288,630	)		(288,630	)
Right of use assets		1,731,314			1,940,091
Intangible assets		(39,178	)		(39,178	)

Total assets		1,364,567			1,573,344

Current liabilities
Lease contracts payable		184,136			219,399
Non-Current liabilities
Lease contracts payable		1,180,431			1,353,945

Total liabilities		1,364,567			1,573,344

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

The analyzes associated with the measurement and accounting of the lease agreements are substantially completed, with the definition of the following topics pending for its conclusion:

•

discount rate;

•

payment flows estimates from the lease agreements to be estimated for the gross or net portion of taxes.

Therefore, considering the existence of significant components of judgment in this pronouncement, the administration understands that there may be changes in the amounts presented above.

(ii) In the evaluation of management, no significant impacts are expected as a result of the adoption of IFRIC 23/ICPC 22, since all the procedures adopted for the determination and collection of income taxes are supported by the legislation and precedents from Administrative and Judicial Courts.

z.	*Authorization for Issuance of the Financial Statements*

These financial statements were authorized for issue by the Board of Directors on February 20, 2019.

3.	Principles of Consolidation, Investments in Subsidiaries and Acquisition

a.	*Principles of Consolidation*

In the preparation of the consolidated financial statements the investments of one company in another, balances of asset and liability accounts, revenues transactions, costs and expenses were eliminated, as well as the effects of transactions conducted between the companies. Non-controlling interests in subsidiaries are presented within consolidated equity and net income.

Consolidation of a subsidiary begins when the parent company obtains direct or indirect control over a company and ceases when the parent company loses control of a company. Income and expenses of a subsidiary acquired are included in the consolidated income statement and other comprehensive income from the date the parent company gains the control. Income and expenses of a subsidiary, in which the parent company loses control, are included in the consolidated income statement and other comprehensive income until the date the parent company loses control.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

b.	*Investments in Subsidiaries*

The consolidated financial statements include the following direct and indirect subsidiaries:


			% interest in the share
			12/31/2018				12/31/2017
			Control				Control
	Location	Segment	Direct control		Indirect control		Direct control		Indirect control
Ipiranga Produtos de Petróleo S.A.	Brazil	Ipiranga		100		—		100		—
am/pm Comestíveis Ltda.	Brazil	Ipiranga		—		100		—		100
Centro de Conveniências Millennium Ltda.	Brazil	Ipiranga		—		100		—		100
Icorban—Correspondente Bancário Ltda.	Brazil	Ipiranga		—		100		—		100
Ipiranga Trading Limited	Virgin Islands	Ipiranga		—		100		—		100
Tropical Transportes Ipiranga Ltda.	Brazil	Ipiranga		—		100		—		100
Ipiranga Imobiliária Ltda.	Brazil	Ipiranga		—		100		—		100
Ipiranga Logística Ltda.	Brazil	Ipiranga		—		100		—		100
Oil Trading Importadora e Exportadora Ltda.	Brazil	Ipiranga		—		100		—		100
Iconic Lubrificantes S.A. (see Note 3.c)	Brazil	Ipiranga		—		56		—		56
Ipiranga Lubrificantes S.A. (see Note 3.c)	Brazil	Ipiranga		—		—		—		100
Integra Frotas Ltda.	Brazil	Ipiranga		—		100		—		100
Companhia Ultragaz S.A.	Brazil	Ultragaz		—		99		—		99
Ultragaz Comercial Ltda.	Brazil	Ultragaz		—		100		—		100
Bahiana Distribuidora de Gás Ltda.	Brazil	Ultragaz		—		100		—		100
Utingás Armazenadora S.A.	Brazil	Ultragaz		—		57		—		57
LPG International Inc.	Cayman Islands	Ultragaz		—		100		—		100
Imaven Imóveis Ltda.	Brazil	Others		—		100		—		100
Imifarma Produtos Farmacêuticos e Cosméticos S.A.	Brazil	Extrafarma		—		100		—		100
Oxiteno S.A. Indústria e Comércio	Brazil	Oxiteno		100		—		100		—
Oxiteno Nordeste S.A. Indústria e Comércio	Brazil	Oxiteno		—		99		—		99
Oxiteno Argentina Sociedad de Responsabilidad Ltda.	Argentina	Oxiteno		—		100		—		100
Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.	Brazil	Oxiteno		—		100		—		100
Oxiteno Uruguay S.A.	Uruguay	Oxiteno		—		100		—		100
Oxiteno México S.A. de C.V.	Mexico	Oxiteno		—		100		—		100
Oxiteno Servicios Corporativos S.A. de C.V.	Mexico	Oxiteno		—		100		—		100
Oxiteno Servicios Industriales S.A. de C.V.	Mexico	Oxiteno		—		100		—		100
Oxiteno USA LLC	United States	Oxiteno		—		100		—		100
Global Petroleum Products Trading Corp.	Virgin Islands	Oxiteno		—		100		—		100
Oxiteno Andina, C.A.	Venezuela	Oxiteno		—		100		—		100
Oxiteno Europe SPRL	Belgium	Oxiteno		—		100		—		100
Oxiteno Colombia S.A.S	Colombia	Oxiteno		—		100		—		100
Oxiteno Shanghai LTD.	China	Oxiteno		—		100		—		100
Empresa Carioca de Produtos Químicos S.A.	Brazil	Oxiteno		—		100		—		100
Ultracargo—Operações Logísticas e Participações Ltda.	Brazil	Ultracargo		100		—		100		—
Terminal Químico de Aratu S.A. – Tequimar	Brazil	Ultracargo		—		99		—		99
TEAS – Terminal Exportador de Álcool de Santos Ltda. (see Note 3.d)	Brazil	Ultracargo		—		100		—		—
Ultrapar International S.A.	Luxembourg	Others		100		—		100		—
SERMA—Ass. dos usuários equip. proc. de dados	Brazil	Others		—		100		—		100

The percentages in the table above are rounded.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

c.	*Association with Chevron Brasil Lubrificantes S.A.*

On August 4, 2016, the Company through its subsidiary Ipiranga Produtos de Petróleo S.A. (“IPP”) entered into an association agreement with Chevron Latin America Marketing LLC and Chevron Amazonas LLC (“Chevron”) to create a new company in the lubricants market. The association is formed by Ipiranga and Chevron’s lubricants operations in Brazil. On February 2017, this transaction was approved without restrictions through an opinion issued by the General Superintendence (“SG”) of the Brazilian Antitrust Authority (“CADE”) and published in the Brazilian Federal Official Gazette. On December 1, 2017, the association was concluded, through the contribution of the subsidiary Ipiranga Lubrificantes S.A. (“IpiLubs”) to CBLSA and consequently IPP obtained direct control of CBLSA. IPP and Chevron hold 56% and 44%, respectively, of the CBLSA.

The Company measured the open balance, fair value of assets and liabilities, and, consequently, the goodwill of their transaction. The Company, supported by a third party company specialized in valuations, estimated the amount for the purchase price allocation and calculated the goodwill in the amount of R$ 69,807. The goodwill is based on the synergy between the lubricant operations of CBLSA and IpiLubs.

The amounts for the purchase price allocation were temporary on the date on which they were disclosed in the financial statements of December 31, 2017. In 2018, the Company calculated the definitive amounts and adjusted retrospectively to December 1, 2017 the purchase price allocation during the fourth quarter of 2018. The table below summarize the assets acquired and liabilities assumed as of the acquisition date (December 1, 2017):


Current assets	Temporary amount		Final amount		Adjustment			Current liabilities	Temporary amount		Final amount		Adjustment
Cash and cash equivalents (1)		73,316		73,316		—		Trade payables		33,453		33,453		—
Trade receivables		157,016		157,016		—		Salaries and related charges		18,251		18,251		—
Inventories		112,998		113,131		133		Taxes payable		20,089		20,089		—
Recoverable taxes		5,595		5,595		—		Other payables		28,743		28,743		—
Other receivables		15,497		15,497		—

		364,422		364,555		133				100,536		100,536		—

Non-current assets								Non-current liabilities
Related parties		7,077		7,077		—		Provision for tax, civil, and labor risks		202,352		202,352		—
Indemnity asset		202,352		202,352		—		Deferred income and social contribution taxes		3,300		48,418		45,118
Escrow deposits		4,095		4,095		—		Post-employment benefits		44,478		44,478		—

Other receivables		5,257		5,257		—				250,130		295,248		45,118
Property, plant, and equipment		172,526		175,823		3,298
Intangible assets		9,944		139,215		129,270

		401,251		533,819		132,568

Total assets acquired		765,673		898,374		132,701		Total liabilities assumed		350,666		395,784		45,118

Goodwill		123,673		69,807		(53,866	)	Participation of non-controlling interests		182,603		221,139		38,536
Total assets acquired and goodwill		889,346		968,181		78,835		Consideration transferred		356,077		351,258		(4,819	)

(1)	Includes the cash contribution from IPP.

Ultrapar Participações S.A. and Subsidiaries

Notes to the Parent and Consolidated Financial Statements

(In thousands of Brazilian Reais, unless otherwise stated)

During the process of identification of assets and liabilities, intangible assets, which were not recognized in the acquired entity’s books were also taken into account, as shown below: