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ANNUAL REPORT 2009
www.alsea.com.mx
TO BE CLOSER
EVERY MOMENT
AND MAKE
SPECIAL
WE HAVE EVIDENCE
Alsea is the leading Quick Service Restaurant (QSR) and Casual Dining operator in Latin
America, operating brands of proven success such as Domino’s Pizza, Starbucks Coffee,
Burger King, Chili’s Grill & Bar, California Pizza Kitchen and P.F. Chang’s China Bistro. Its
multi-unit operation is backed by its Shared Services Center, including the supply chain
through DIA, real estate and development services, as well as administrative services such
as finance, human resources and technology.
20 YEARS OF OPERATION // 1,171 STORES // 20,000 EMPLOYEES // PRESENCE IN 5
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INVESTOR INFORMATION
Help us celebrate 20 years
of making every moment special.
Come in and have a cup of coffee!
Valid in all Starbucks Coffee stores in
Mexico and the United States of America
Investor Relations
Diego Gaxiola Cuevas
Corporate Finance
ri@alsea.com.mx
Tel: +52 (55) 5241-7151
Enrique González Casillas
Investor Relations
ri@alsea.com.mx
Tel: +52 (55) 5241-7035
Headquarters
Alsea S.A.B. de C.V.
Av. Paseo de la Reforma #222 - 3er. Piso
Torre 1 Corporativo
Col. Juárez, Del. Cuauhtémoc
C.P. 06600, México D.F.
Tel: +52 (55) 5241-7100
Independent Auditors
KPMG Cárdenas Dosal, S.C.
Boulevard Manuel Ávila Camacho #176
C.P. 11650, México D.F.
Tel: +52 (55) 5246-8300
Information on Alsea’s Stock
The single series shares of Alsea S.A.B. de C.V.
have been traded on the Mexican Stock Exchange
(Bolsa Mexicana de Valores or BMV)
since June 25, 1999.
Ticker Symbol: BMV Alsea*
Alsea’s 2009 Annual Report may include certain expectations regarding the results of Alsea, S.A.B. de C.V. and its subsidiaries. All
such projections, which depend on the judgment of the Company’s Management, are based on currently known information; however,
expectations may vary as a result of facts, circumstances and events beyond the control of Alsea and its subsidiaries.
IT’S POSSIBLE TO SAVE THE PLANET
All efforts are important, and although the press run of this report is relatively small, we reiterate
our commitment to the environment by using environmentally-safe materials.
The following are savings resulting from the use of recycled fiber.
We used 4,900 lb of paper -meaning 10% recycled material- thereby allowing us to:
14 trees preserved for the future
5,162 gallons wastewater flow saved
147 lbs solid waste not generated
9,870,000 BTUs energy not consumed
This report was printed on Earth Aware paper,
FSC certified, Elementally Chlorine Free.
OUR MISSION:
Our reason of being
To ensure the success of the Alsea brands, based
on human talent by employing a synergy and
critical mass model, with social responsibility
“Whith people and for the people”
OUR VISION:
Where do we go
To be the best and largest operator of QSR and
Casual Dining establishments with proven success
brands in the countries in wich we participate
VALUES:
What makes us great
Respect and loyalty toward our people
Excellence in our customer service
Commitment to our results
COUNTRIES
COUNTRIES // 5 DISTRIBUTION CENTERS // 90 MILLION OF CUSTOMERS SERVED
OUTSTANDING RESULTS
% TACC(6)
16.5
2009
%
2008
%
2007
%
2006
%
2005
%
8,587.1
100.0
7,786.8
100.0
6,985.4
100.0
6,026.4
100.0
4,665.3
100.0
17.0
20.6
-9.0
9.0
-21.7
5,420.6
5,085.6
335.1
1,000.3
107.0
63.1
59.2
3.9
11.6
1.2
5,005.5
4,546.4
459.1
1,032.1
139.5
64.3
58.4
5.9
13.3
1.8
4,661.7
3,946.0
715.7
1,153.0
489.1
66.7
56.5
10.2
16.5
7.0
3,959.9
3,523.8
436.1
1,007.4
228.6
65.7
58.5
7.2
16.7
3.8
2,896.2
2,406.6
489.6
708.4
285.2
62.1
51.6
10.5
15.2
6.1
5,808.8
100.0
6,510.6
100.0
5,295.7
100.0
4,040.5
100.0
3,365.9
100.0
463.2
1,302.1
2,908.6
8.0
22.4
50.1
661.9
1,790.2
2,997.1
10.2
27.5
46.0
209.3
1,033.5
2,997.5
4.0
19.5
56.6
244.3
610.9
2,653.9
6.0
15.1
65.7
Net Sales
Gross Income
Operating Expenses
Operating Income
EBITDA (2)
Consolidated Net Income
Total Assets
Cash
Non-Interest-Bearing Liabilities
Majority Shareholders’ Equity
ROIC(3)
ROE(4)
ROA(5)
6.8%
3.4%
1.8%
10.09
0.17
0.07
4.84
601.4
Share Price(7)
Earnings per Share(7)
Dividend per Share(7)
Book Value per Share(7)
Shares in Circulation (millions)(7)
9.8
-24.1
10.6
Number of Total Stores
Employees
12.6
10.0
1,171
19,981
9.6%
4.4%
2.4%
6.23
0.21
0.23
4.85
618.0
1,135
21,024
14.9%
16.7%
10.5%
15.30
0.77
0.11
4.84
618.8
989
19,200
9.6%
9.1%
6.2%
14.72
0.38
0.28
4.26
623.2
865
16,797
5.1
23.7
54.5
171.3
798.3
1,834.0
18.7%
16.9%
9.9%
6.94
0.51
0.19
3.24
546.4
728
13,629
(1) iNUMBERS iN MiLLiONS OF NOMiNAL PESOS FOR 2008 AND 2009, FOR THE OTHER PERiODS
TO DECEMBER 31, 2007, EXCEPT PER-SHARE DATA, NUMBER OF UNiTS AND EMPLOYEES.
(2) EBiTDA iS DEFiNED AS OPERATiNG iNCOME BEFORE DEPRECiATiON AND AMORTiZATiON.
(3) ROiC iS DEFiNED AS OPERATiNG iNCOME AFTER TAXES OVER NET OPERATiNG iNVESTMENT
(TOTAL ASSETS – CASH AND SHORT-TERM iNVESTMENTS – NON-iNTEREST-BEARiNG LiABiLiTiES).
(4) ROE iS DEFiNED AS NET EARNiNGS OVER SHAREHOLDERS’ EQUiTY.
(5) ROA iS DEFiNED AS NET iNCOME OVER TOTAL ASSETS.
(6) TACC iS THE ANNUAL COMPOUND GROWTH RATE FROM 2005 TO 2009.
(7) FOR PURPOSES OF COMPARiSON, THE NUMBER OF SHARES WAS ADJUSTED BASED
ON THE 4 TO 1 SPLiT iN 2007.
.
1
7
8
5
8
,
.
8
6
8
7
7
,
.
4
5
8
9
6
,
.
4
6
2
0
6
,
.
3
5
6
6
4
,
.
3
0
0
0
1
,
.
1
2
3
0
1
,
.
0
3
5
1
1
,
.
4
7
0
0
1
,
4
.
8
0
7
.
0
7
0
1
5
.
9
3
1
1
.
9
8
4
6
.
8
2
2
2
.
5
8
2
1
7
1
1
,
5
3
1
1
,
9
8
9
5
6
8
8
2
7
9
0
8
0
7
0
6
0
5
0
NET SALES
9
8
0
0
EBITDA(2)
7
0
6
0
5
0
9
0
8
0
7
0
6
0
5
0
9
9
0
0
8
8
0
0
7
7
0
0
6
6
0
0
5
5
0
0
CONSOLIDATED
NET INCOME
NUMBER OF STORES
Acquisition of the
master franchise of
Dominos Pizza in
Mexico is finalized.
1990
Operations begin in
the Brazilian market
with Domino’s Pizza.
1998
Alsea signs a
Joint Venture
with Starbucks
Coffee and begins
operations with
Burger King.
2002
1989
Domino’s Pizza
begins operations
in Mexico.
1992
We open the first
distribution center
in Mexico, initiating
our operating model.
1999
Alsea lists its shares
on the Mexican
Stock Exchange.
We enter into the
casual dining market
with Chili’s.
2005
Agreement with
Starbucks Coffee to
develop the brand in
Argentina and Chile.
2007
We began
developing the P.F.
Chang’s brand in
Mexico.
2009
2004
We celebrate
the opening
of our 500th store.
2006
We acquire all
Burger King stores
in Argentina and
Chile. We sign a
strategic alliance
with Starbucks
Coffee to develop
the brand in Brazil.
2008
Start of operations
of the Domino’s
Pizza and Burger
King brands
in Colombia.
Acquisition of
California Pizza
Kitchen in Mexico.
2009:
POSITIVE RESULTS
IN A YEAR OF CHALLENGES
10.3%
GROWTH IN SALES
A RESULT OF OPENING 36 STORES —INCLUDING
THE FIRST P.F. CHANG’S CHINA BISTRO IN
MEXICO— DESPITE THE 3.7% DECREASE
IN SAME-STORE SALES
[ 7 ] the essential:
THE COMMITMENT
OF OUR PEOPLE
90,000,000
CUSTOMERS SERVED
BY ALMOST 20,000 EMPLOYEES AT 952
CORPORaTE STORES SuppOrTed BY
ALSeA’S ShAred ServiceS cenTer
[ 9 ] the key:
OUR DYNAMIC
OPERATING MODEL
1,000
MILLION PESOS IN EBITDa
WiTh A cOrpOrATe reSTrucTurinG ThAT
GenerATed AnnuALiZed SaVINGS OF 70
MILLION PESOS And pOSiTiOnS uS TOenSure
The cOMpAnY’S GrOWTh
[ 11 ] the result:
A SOLID
FINANCIAL POSITION
487MILLION PESOS
IN FREE CaSH FLOW
ThiS enABLed uS TO reduce TOTAL deBT
BY 488 MILLION PESOS, in AddiTiOn TO The
deBT reSTrucTure Which iMprOve
The MATuriTY prOFiLe
[ 13 ] the objective:
TO GENERATE
SHAREHOLDER VALUE
62%
SHARE PRICE
We decLAred A DIVIDEND OF 42 MILLION
PESOS And repurchASed 16.4 MILLION
SHaRES FOr 132.3 MiLLiOn peSOS
[ 15 ] the opportunity:
TO REAFFIRM OUR VISION
AND CONSOLIDATE LEADERSHIP
405,000,000
PEOPLE
ThiS iS The pOTenTiAL MArkeT in The
cOunTrieS Where We Are preSenT,
ThereFOre Our expAnSiOn pLAn
incLudeS ExCEEDING 1,000 CORPORaTE
STORES in 2010
[ 17 ] the commitment:
CONTINUE ACTING WITH
SOCIAL RESPONSIBILITY
1,600,000
PEOPLE HAVE BENEFITED
We chAnneLed dOnATiOnS OF MOre
ThAn 7.3 MILLION PESOS ThrOuGh vAriOuS
cOMMuniTY SuppOrT prOGrAMS, WiTh
The pArTicipATiOn OF MOre ThAn 12,000
VOLUNTEER EMPLOYEES
[ 19 ] Dear Shareholders:
Ten years of correct decisions have
positioned us as the leading operator of
quick-service and casual dining in Latin
America. In fact, not only did we
celebrate 10 years of Alsea in 2009, we
also commemorated 20 years since the
introduction of Domino’s Pizza in
Mexico.
Ninety million clients served during
2009 in our 952 corporate stores is the
best indicator of our vocation for
service, and it is also an indication that
it’s possible to go farther. It also says
that we are a dynamic and flexible
company that is focused on getting
closer to our clients, enriching their
lives with unforgettable moments.
[ 21 ]
How do we do it?
At Alsea, our proven model of success is built on
very well-defined pillars:
Human talent:
We know that the human factor is the main differentiator of our
business. This is why we place so much importance on having
people who are well trained, motivated, satisfied, passionate
about what they do, and who have a vocation to serve each and
every one of our clients.
The majority of our employees are young and dynamic people
whom we offer the chance to develop through training and
recognition programs. In 2009, we provided 467,000 hours of
training, at an investment of 15 million pesos. We are interested
in retaining the best talent, and we compensate our people for
generating value and providing excellent service to our clients.
We also value integration at Alsea, and of the 20,000 employees
we have today, 11,500 are men, 8,500 are women, and 207 are
people with different abilities, all of whom we offer a place to
continue growing and improving their quality of life.
[ 22 ] Synergy:
At Alsea, we know a lot about the potential of synergies. We support
the operations of different brands of stores with the Shared Services
Center, which includes the supply chain of DIA, real estate services and
development, as well as administrative services: finance, human
resources and technology.
We are experts at creating links to take advantage of and maximize
the possibilities of each brand. And even though operating a diversified
portfolio is a complex process, DIA has enabled us to create a logistics
chain that delivers the product punctually, “complete and on time,” to
all points of sale.
This year DIA served 1,305 units through its five distribution centers,
which increased its net sales by 3.7%. Sales to third parties increased
6.6%, which represented 13.2% of Alsea’s consolidated earnings.
[ 24 ][ 25 ] Critical mass:
The strategy to rapidly reach critical mass to attain a significant
volume of business has worked successfully in Mexico, where we
already have 952 corporate stores, 165 sub-franchisee stores of
Domino’s Pizza and 54 associates stores of Starbucks Coffee Chile
and Brazil.
In addition to continuing our growth in Mexico, our objective is to
expand critical mass in the four countries in the Southern Cone that
are part of our strategic plan. Today we have at least some of our
brands established in each of our target countries, which together
represent more than 72% of the total economy of Latin America, and
a potential market of 405 million people.
In 2009, we opened a total of 36 stores in Mexico, Argentina, Brazil,
Colombia and Chile – notably the first P.F. Chang’s China Bistro in
Mexico, which is the first outside of the United States – all of which
resulted in an annual increase of 10.3% in net sales.
In Latin America, the most spectacular sales growth was seen at
Burger King Argentina, with nearly 63%, followed by Burger King Chile,
with 19%. Without a doubt, opening four Burger King stores in
Argentina was a contributing factor.
Due to the foregoing, same-store sales recorded a 3.7% decrease due
to the deceleration in consumption caused by the economic climate,
and aggravated by the swine flu outbreak in the second and third
quarters of the year.
Thus, although gross profit showed a considerable increase of
415 million pesos to 5,421 million pesos, the gross margin dropped
1.2 percentage points due to the increase in the cost of some of
the main inputs, due to the peso depreciation against the dollar,
since approximately 35% of our cost of sales is exposed to the
exchange rate.
[ 26 ]
Social responsibility:
A clear sign that social responsibility is one of our fundamental
business values is that it has become one of the Company’s pillars.
Our commitment to the country is evident. Our corporate behavior
toward our interest groups – our people, shareholders, providers,
clients, and the community – is solid and responsible.
This year, through Fundación Alsea, A.C., whose mission is to
contribute to improving the quality of life of the neediest populations
through integral community development programs, we benefited a
total of more than 1,600,000 people, channeling donations in the
amount of 7,300,000 pesos.
In turn, 12,105 of our employees volunteered 5,000 hours of their time
to participate in activities to support their communities, such as
planting trees, cleaning and remodeling schools, among others.
You can learn more about our activities as a responsible corporate
citizen in our Social Responsibility Report.
[ 29 ] In conclusion, I can affirm that although 2009 was not an easy year for
all the reasons mentioned above, it was, however, another year of
correct decisions. And thanks to the Company’s dynamism and
flexibility, we were able to glimpse opportunities and redefine
strategies, such as:
• Starbucks Corporation deferring its option to increase its current
ownership of 18% in the joint venture with Alsea to 50%, at least
until 2012.
• Undertaking a strategic restructuring of the management team,
which generated annualized savings of 70 million pesos.
• Adjusting our schedule of store openings according to market
conditions.
With the above, we not only concluded the year with EBITDA
of 1 billion pesos, we also generated free cash flow of 487 million
pesos, which allowed us to pay down matured bank loans and
to decrease the total amount of debt by 488 million pesos.
Supported by timely decisions, and positioned to continue growing
in 2010, we will continue focusing on operations and service,
buoyed by the experience of brands that are recognized worldwide,
creating long-term bonds with our consumers, and redoubling our
creativity to continue offering you, our shareholders, the best
return on your investment.
Respectfully,
Alberto Torrado Martínez
Chief Executive Officer
Chairman of the Board of Directors
BOARD OF DIRECTORS 2009
CHaIRMaN
Alberto Torrado Martínez
CHAIRMAN OF THE BORD OF DIRECTORS
SHaREHOLDER BOaRD
aND STaFF MEMBERS
Alberto Torrado Martínez
CHIEF EXECUTIVE OFFICER
Cosme Torrado Martínez
APPOINTED DIRECTOR, LATIN AMERICA
Armando Torrado Martínez
MANAGING DIRECTOR, CASUAL DINING
Fabián Gerardo Gosselin Castro
MANAGING DIRECTOR, SERVICIOS COMPARTIDOS ALSEA
Federico Tejado Bárcena
MANAGING DIRECTOR, DOMINO´S PIZZA ALSEA
INDEPENDENT BOaRD MEMBERS
José Manuel Canal Hernando
INDEPENDENT CONSULTANT
Marcelo Rivero Garza
CHIEF EXECUTIVE OFFICER, GRUPO JUMEX
Salvador Cerón Aguilar
PRESIDENT, STF CONSULTING GROUP
Sergio Mario Larraguivel Cuervo
CHIEF EXECUTIVE OFFICER, ANESLA S.A. DE C.V.
SECRETaRIES
Guillermo Díaz de Rivera Álvarez
PARTNER DÍAZ DE RIVERA Y MANGINO, S.C.
Xavier Mangino Dueñas
PARTNER DÍAZ DE RIVERA Y MANGINO, S.C.
aUDIT COMMITTEE
José Manuel Canal Hernando
CHAIRMAN
Marcelo Rivero Garza
MEMBER
Sergio Mario Larraguivel Cuervo
MEMBER
Mario Sánchez Martínez
TECHNICAL SECRETARY
CORPORaTE GOVERNaNCE
COMMITTEE
Salvador Cerón Aguilar
CHAIRMAN
Sergio Mario Larraguivel Cuervo
MEMBER
Cosme Torrado Martínez
MEMBER
Fabián Gerardo Gosselin Castro
MEMBER
Roberto Rodríguez Elvira
TECHNICAL SECRETARY
[ 30 ][ 31 ]
MANAGEMENT’S DISCUSSION AND ANALYSIS
CONSOLIDaTED RESULTS FOR THE YEaR 2009
The following table shows a condensed Income Statement in millions of pesos (except EPS). The margin for
each item represents net sales, as well as the percentage change for the quarter ended December 31, 2009, in
comparison with the same period of 2008:
Net sales
Gross income
EBITDA(1)
Operating income
Net income
EPS(2)
2009
MARGIN %
2008
MARGIN %
CHANGE %
$ 8,587.1
100.0%
$ 7,786.8
100.0%
5,420.6
1,000.3
335.1
107.0
0.1695
63.1%
11.6%
3.9%
1.2%
N.A.
5,005.5
1,032.1
459.1
139.5
0.2078
64.3%
13.3%
5.9%
1.8%
N.A.
10.3 %
8.3 %
(3.1)%
(27.0)%
(23.3)%
(18.4)%
(1) EBITDA is defined as operating income before depreciation and amortization.
(2) EPS is earnings per share of the last 12 months.
% Increased
5.1%
44.8%
3.7%
Mexico
Latin America
Distribution
2009
2008
10.3%
8,587.1 million pesos
SaLES
Net sales increased 10.3% to 8,587.1 million pesos for full-year 2009, in comparison with 7,786.8 million pesos
in the same quarter of the prior year. This increase reflects the sales growth of the brands in Mexico and Latin
America, as well as the increase in food distribution sales to third parties.
The growth in brand sales was due to the net increase of 23 corporate stores, including the opening of the first
P.F. Chang’s China Bistro, which started operations in the month of October. This increase was partially offset by
the 3.7% decrease in same-store sales, which were affected by the slowdown in consumption, as well as by the
swine flu effect during the second and third quarters of the year.
5,420.6
million pesos
8.3% more
than in 2008
GROSS INCOME
During 2009, gross income increased 415.1 million pesos, reaching 5,420.6 million pesos, with gross margin of
63.1%, in comparison with 64.3% recorded in the prior year. The decrease in gross margin is mainly attributed
to the increase in the cost of some of the main inputs, as a result of the peso’s deprecation against the US dollar,
which on average was 13.49 pesos per dollar in 2009, compared with 11.13 pesos per dollar in 2008, considering
that approximately 35% of the cost of sales has exchange rate exposure. That variation was partially offset by the
decreased in the cost of some inputs, such as mozzarella cheese, as well as the plan to optimize the use of raw
materials that was put into place during the year.
0.5%
as a percentage
of sales
OPERaTING ExPENSES
Operating expenses (excluding depreciation and amortization) increased as a percentage of sales by 0.5%,
rising from 51.0% during full-year 2008, to 51.5% during the same period in 2009. The foregoing was mainly
due to the loss of marginality due to the decrease in same-store sales, the start of operations of new businesses,
such as P.F. Chang’s China Bistro, Burger King Colombia and Starbucks Argentina, as well as expenses related
to the lawsuit with Italianni’s, and the increase above inflation of expenses related to the cost of utilities, such
as electricity and gas. The decrease was partially offset by the marginality produced by the additional week of
operations according to the accounting calendar in Mexico’s operations, resulting in 53 weeks of operations instead
of 52 weeks for the prior year, as well as savings that were generated due to the expense-reduction program.
EBITDa
EBITDA decreased 3.1% to 1,000.3 million pesos for full-year 2009, in comparison with 1,032.1 million pesos in
the prior year. The EBITDA margin also decreased 1.7%, dropping from 13.3% during full-year 2008, to 11.6%
in the same period of 2009. This decrease was due to the consequence of variations in gross income and the
increase of the operating expenses that were mentioned above.
OPERaTING INCOME
Operating income in 2009 decreased 124 million pesos, due mainly to the decrease of 3.18 million pesos in
the EBITDA and the increase of 92.2 million pesos in depreciation and amortization, as a consequence of the
amortization of the preoperative expenses and the incremental depreciation as a result of the acquisition of assets
related to the expansion plan.
NET INCOME
Net consolidated income decreased 32.5 million pesos, due mainly to the decrease of 124 million pesos in
operating income, which was partially offset by the decrease of 62.7 million pesos in the all-in cost of financing,
the decrease of 20.1 million pesos in other expenses, and the decrease of 8.1 million pesos in taxes on earnings.
EaRNINGS PER SHaRE
Earnings per share “EPS”(2) for the 12 months ended December 31, 2009 dropped to 0.1695 pesos, in comparison
with 0.2078 pesos for the 12 months ended December 31, 2008.
RESULTS BY SEGMENT
Net sales and EBITDA are shown below by business segment in millions of pesos, for full-year 2009 and 2008.
QSR
CASUAL DINING
DIA
OTHERS
68.2%
8.2%
17.1%
6.4%
The operating income
335.1
million pesos
for 2009
alsea closes
the year with
107.0
million pesos
2009
2008
2007
2006
2005
0.17
0.21
0.77
0.38
0.51
NET SALES BY SEGMENT
Food and Beverages – Mexico
Food and Beverages – Latin America
Distribution
Intercompany Operations(3)
Consolidated Net Sales
2009 % CONT.
2008 % CONT.
ANNUAL
$ 6,032.0
70.2%
$ 5,738.7
1,407.7
3,065.5
16.4%
35.7%
972.0
2,955.1
73.7%
12.5%
37.9%
(1,918.0)
(22.3)%
(1,878.9)
(24.1)%
5.1%
44.8%
3.7%
2.1%
$8,587.1
100.0%
$7,768.8
100.0%
10.3%
%
EBITDA BY SEGMENT
2009
CONT. MARGIN
2008 % CONT. MARGEN
% VAR.
Food and Beverages – Mexico
$ 696.8
69.7%
11.6%
$ 714.4
69.2%
12.4%
Food and Beverages – Latin America
67.2
6.7%
Distribution
Others(3)
171.5
17.1%
64.8
6.5%
4.8%
5.6%
N.A.
72.9
7.1%
203.0
19.7%
41.8
4.0%
7.5%
6.9%
N.A.
(2.5)%
(7.8)%
(15.5)%
N.A.
Consolidated EBiTDA
$ 1,000.3
100.0% 11.6%
$ 1,032.1
100.0%
13.3%
(3.1)%
(3) For the purpose of information by segment, these operations were included in each respective segment.
[ 32 ]
[ 33 ]
% Brand Sales
Food and Beverages – Mexico
Sales for full-year 2009 increased 5.1% to 6,032.0 million pesos, compared with 5,738.7 million pesos in 2008.
This increase of 293.3 million pesos is mainly attributable to the net opening of five corporate stores and six sub-
franchisee units of Domino’s Pizza, which effects were partially offset with the decrease in same-store sales over
the last 12 months, mainly as a consequence of decreased consumption due to the economic crisis during the
year, and to the swine flu effect that significantly affected Mexico.
Domino’s
Starbucks
Burguer King
Chilli’s
CPK
P.F. Chang’s
42.5%
30.9%
15.9%
8.5%
2.1%
0.1%
% Brand Sales
EBITDA for Food and Beverages Mexico decreased 2.5% during 2009, to 696.8 million pesos, in comparison with
714.4 million pesos in the prior year. That decrease is mainly explained by the loss of marginality derived from the
decrease in same-store sales, and the increase in raw materials costs arising from depreciation of the Mexican
peso. This was partially offset by the decrease in costs of some of the main inputs.
Food and Beverages – Latin America
This division, which at the close of 2009 had 116 stores, is 12.2% of the total of corporate stores, comprising the
operations of Burger King in Argentina, Chile and Colombia, as well as Domino’s Pizza Colombia and Starbucks
Coffee Argentina. Sales in this division were 44.8% higher during the year, reaching 1,407.7 million pesos, in
comparison with 972.0 million pesos in the previous year. This variation was mainly due to the net opening of 18
units over the last 12 months, as well as to the increase in same-store sales.
BK Argentina
BK Chile
BK Colombia
Stbk Argentina
Domino’s Col.
62.8%
19.9%
2.3%
9.3%
6.4%
EBITDA for Food and Beverages – Latin America decreased 7.8% to 67.2 million pesos at the end of 2009,
in comparison with 72.9 million pesos in the prior year. That decrease is mainly attributable to the start-up of
operations of Starbucks Coffee Argentina and Burger King Colombia, to the influenza effects that occurred in the
middle of the year, which mainly affected operations in Argentina, and to the increase in the cost of raw materials
as a consequence of the depreciation of the different local currencies against the US dollar. These effects were
partially offset by the marginality obtained from the increase in the number of stores in operation, as well as by
the growth in same-store sales.
Net sales
3,065.5
million pesos
supplying 1,305 units
Distribution
Net sales during full-year 2009 increased 3.7% to 3,065.5 million pesos, compared with 2,955.1 million pesos in
2008. The foregoing is attributable to the number of stores served, supplying a total of 1,305 units at December
31, 2009, compared with 1,272 units in 2008, which was an increase of 2.6%. Sales to third parties increased
6.6% to 1,135.5 million pesos, which represented 13.2% of Alsea’s consolidated revenues.
EBITDA was 171.5 million pesos during 2009, compared with 203.0 million pesos in the same period of the
prior year, which represented an EBITDA margin of 5.6%, which is 1.3% less than the prior year. This decrease
is mainly attributable to higher distribution expenses for the number of stores attended, to the effect on the sales
mix because the brands with higher growth are those that have the lowest margins for DIA, and especially to the
restatement for recovery of corporate expenses.
NON-OPERaTING RESULTS
All-in Cost of Financing
The all-in cost of financing in 2009 decreased to 131.7 million pesos, compared with 194.4 million pesos in
the same period of the prior year, which is a net decrease of 32.2%. This is mainly due to a lower exchange
rate loss of 78.6 million pesos, a consequence of the peso’s appreciation against the US dollar during 2009.
The foregoing was partially offset with the increase of 8.8 million pesos in the result for monetary position,
which originated in the conversion of Latin American operations to Mexican pesos, as well as to the increase
of 7 million pesos in net interest paid.
32.2%
over 2008
Other Expenses and Products - Net
This line was a favorable variation of 20.1 million pesos in full-year 2009, compared with 2008, mainly due to
the actualization and interest on the favorable balance recovered from the Value Added Tax of OFA (Operado de
Franquicias Alsea) for the months of October 2006 to April 2007, which was received in August; as well as the
actualization of the favorable balance of a credit from a service provider recovered during the month of March.
This was partially offset by recognition of the deterioration in the value of the assets of Burger King México in the
last quarter of the year, according to the guidelines in Bulletin C-15, and payments made to personnel within the
organizational restructuring program to decrease operating expenses.
20.1
million pesos
of favorable
variation
Tax on earnings
Tax on earnings was 45.1 million pesos, a decrease of 8.1 million pesos for the 12 months ended December
31, 2009, compared with the same period of the prior year. This is mainly a consequence of a decrease of 43.7
million pesos in earnings before taxes.
8.1
million pesos
in taxes on earnings
BaLaNCE SHEET
Store Equipment, improvements to Leased Locations and Properties,
Brand Use Rights, Goodwill and Pre-Operating Assets
The 156.9 million pesos decrease in this line was due to the amortization and depreciation of assets, as well as
recognition of the 30 million pesos deterioration in value of the assets of Burger King México. This decrease was
partially offset with the expansion program.
During the 12 months ended December 31, 2009, Alsea made capital investments of 554.8 million pesos, of
which 505.1 million pesos, equal to 91.0% of total investments, were earmarked for store openings, equipment
refurbishing and remodeling existing stores for the different brands that the Company represents. The remaining
49.7 million pesos were invested in other concepts, namely software licenses, process-improvement projects,
including in the supply chain, as well as replacing DIA’s machinery and equipment.
CaPEx of
554.8
million pesos
inventory
Inventory decreased from 361.5 million pesos at December 31, 2008, to 336.9 million pesos at December 31,
2009. This 24.6 million pesos decrease, which is equal to the eight-day decrease in inventory from 47 to 39 days,
is mainly attributable to the decreased inventory in Latin American operations.
8 days
of inventory
Taxes Recoverable – Net
The decrease in the account Taxes Recoverable – Net of taxes payable of 454.7 million pesos at December 31,
2009, is mainly because Operadora de Franquicias Alsea, S.A. de C.V., (“OFA”) had VAT returned in its favor for
the period from October 2006 to April 2007, amounts returned in its favor of taxes on earnings from the prior year,
and the return in March of federal payroll tax of one of the service providers.
Deferred income Tax
Deferred income tax increased from 293.0 million pesos at December 31, 2008 to 457.8 million pesos at
December 31, 2009. This increase of 164.8 million pesos was mainly generated as a consequence of recognition
of tax losses, including the operations of California Pizza Kitchen and P.F. Chang’s, as well as the effect of greater
liability provisions related to a higher level of operations during the year.
Return
of favorable
balances from VaT
for the period from
October 2006
to april 2007
[ 34 ]
[ 35 ]
Discontinued operations
The net decrease in assets minus liabilities is 44.7 million pesos, which was due to conclusion of the process of
disincorporation of the Popeye’s brand.
4 days
of providers
Providers
Providers increased from 536.7 million pesos at December 31, 2008, to 559.1 million pesos at December 31,
2009. This increase of 22.4 million pesos was mainly generated by a greater number of stores in operation, which
was partially offset with the four-day decrease of providers, dropping from 38 to 34 days.
$1,790
$1,302
$1,128
$839
$662
$463
4Q 08
4Q 09
Cash
Net Debt
Bank and Stock Exchange Debt
At December 31, 2009, Alsea’s total bank debt decreased by 488.1 million pesos, closing at 1,302.1 million
pesos, in comparison with 1,790.2 million pesos on the same date of the previous year. This decrease is
attributable to cash flow generation arising from the operating cash flow, recovery of taxes, and the decrease in
capital investments.
At December 31, 2009, 54.4% of the debt is long term, compared with 63.1% in the same period of the prior year.
At December 31, 2009, 97.5% of the debt was denominated in Mexican pesos, and 2.5% was in Chilean pesos.
The Company’s consolidated net debt in comparison with 2008 decreased 289.4 million pesos, closing 2009 at
838.9 million pesos, in comparison with 1,128.3 million pesos at the end of the prior year.
The following table presents the structure and balance of total debt in millions of pesos at December 31, 2009, as
well as maturities by year and the percentage that they represent on the closing balance for 2009:
DEBT STRUCTURE
BALANCE
MATURITIES BY YEAR
Santander
Santander
Santander
BBVA
BBVA
Inbursa
Citi (Chile)(2)
CEBUR (Alsea 09)
Total
CREDiT SPREAD (1)
$340
150
300
500
450
200
32
300
0.20%
0.15%
3.50%
3.50%
0.10%
4.00%
7.27%(2)
2.15%
2009
$204
90
197
110
169
200
32
300
2010
%
2011
$68
33.3%
30
56
33.3%
28.4%
110
100.0%
113
66.9%
200
100.0%
16
-
53.1%
-
$68
30
113
-
56
-
16
-
%
33.3%
33.3%
57.4%
-
33.1%
-
50.0%
2012
$68
30
28
-
-
-
-
%
33.3%
33.3%
14.2%
-
-
-
-
-
300
100.0%
$1,302
$593
45.6%
$283
21.7%
$426
32.7%
Numbers in millions of pesos
(1) Spread over TIIE (Interbank equilibrium interest rate) of 28 days, except Citi (Chile)
(2) Credit in Chilean pesos with an effective rate
Share Repurchase Program
At December 31, 2009, the Company had an approximate balance in the repurchase fund set aside for the 16.4
million share by-back, equal to approximately 132.3 million pesos. During the 12 months of 2009, the Company
repurchased an average of 65,600 shares per day for approximately 530,000 pesos, at an average price of 8.06
pesos per share.
16.4
million shares
repurchased
Financial Ratios
At December 31, 2009, the Company met all financial restrictions established in its credit contracts. The net
debt to EBITDA ratio for the last 12 months was 0.84x, the total liabilities to shareholders’ equity ratio was 0.85x,
and the 12 month EBITDA to 12-month interest paid ratio was 7.3x. Leverage at the close of 2009 was 21.1%
all covenents
were complied
with during the year
The Return on Invested Capital (“ROIC”) decreased from 9.6% to 6.8% during the 12 months ended December
31, 2009. The Return on Equity (“ROE”) for the 12 months ended December 31, 2009 was 3.4%, compared
with 4.4% for the same period in the prior year. This was mainly due to the impact on the Company’s results as
a consequence of the economic crisis in 2009, which significantly affected consumption in the countries where
the Company has operations.
Stock Market indicators
ALSEA* closed 2009 with 601.4 million shares in circulation at a price of 10.09 pesos per share, which is a
62.0% increase over the 6.23 pesos per share at the close of 2008, and with a share float in circulation of 34.3%.
The Company’s value between EBITDA for the last 12 months was 7.1 times. Average daily trading during 2009
was 1.9 million shares, which is growth of 125% over the prior year.
34.3% float
with a price per share
at the close of 2009
of 10.09 pesos
Market Maker
Casa de Bolsa UBS, which was hired in the last quarter of 2008, was kept as the Market Maker. During 2009, of
the 3,360.6 million pesos traded in the market, the Market Maker traded 29.5%, attaining 991.7 million pesos
traded, which is equal to average trading per day of 4.2 million pesos.
991.7
million pesos
traded
Hedge Profile
The Chief Financial Officer, in conjunction with the Corporate Finance Director, manages risk as a function of:
mitigation of present and future risk; not diverting resources from operations, and the expansion plan; and having
certain future cash flows with which a strategy can be formed regarding the cost of debt. The instruments will
only be used for hedging purposes.
68%
of the Company’s
needs in US dollars
were hedged
In 2009, hedge derivatives in US dollars matured for 102.5 million dollars, at an average exchange rate of 13.32
pesos per dollar. As a result of this coverage, there was an exchange rate loss of 12.5 million pesos. For 2010,
Alsea has hedges to purchase dollars for approximately 41.6 million US dollars, with an average exchange rate
of 12.96 per dollar.
[ 36 ]
[ 37 ]
ReLeVANt FiGuReS
KEY NUMBERS
BRAND
Domino’s Pizza México
Domino’s Pizza Colombia
Starbucks Coffee México
Starbucks Coffee Argentina
Burger King México
Burger King Argentina
Burger King Chile
Burger King Colombia
Popeye’s
Chili’s Grill & Bar
California Pizza Kitchen
P.F. Chang’s China Bistro
total Corporate
Starbucks Coffee Chile
Starbucks Coffee Brasil
total Associated(7)
Domino’s Sub-Franchisees
totAL StoRES
StoRES
2009
StoRES
2008
VARIAtIoN
AnuAl % VAr.
425
22
266
14
108
45
32
3
0
29
7
1
952
30
24
54
165
1,171
425
21
258
3
107
41
32
1
10
27
4
0
929
29
18
47
159
1,135
0
1
8
0.0%
4.8%
3.1%
11
366.7%
1
4
0
2
0.9%
9.8%
0.0%
200.0%
(10)
(100.0)%
2
3
1
23
1
6
7
6
36
7.4%
75.0%
N.C.
2.5%
3.5%
33.3%
14.9%
3.8%
3.2%
Audit Committee RepoRt
February 11, 2010
In compliance with the provisions of Articles 42 and 43 of the Securities Market Law and Audit Committee
Regulation, I am pleased to inform you of the activities that we carried out during the year ended December 31,
2009. In performing our work, we have considered the recommendations in the Code of Best Corporate Practices,
and according to a work program that was prepared based on Committee Regulation, we met at least once per
quarter to perform the activities described below:
I. RISK ASSESSMENT
With Management, and Internal and External Auditors, we reviewed the critical risk factors that may affect the
Company’s operations and its capital, and we determined that they have been appropriately defined and managed.
II. INTERNAL CONTROL
We determined that Management, in compliance with its responsibilities in matters of internal control, has
established the appropriate policies and procedures. We also followed up on comments and observations that the
Internal and External Auditors made in that regard while performing their work.
III. EXTERNAL AUDIT
We recommended that the Board of Directors hire external auditors for the Group and its subsidiaries for fiscal
year 2009. In that regard, we verified their independence and compliance with the requirements established by
law. We jointly analyzed their focus and work program.
We maintained constant and direct communication regarding the progress of their work, their observations, and
to take note of their comments from their review of the yearly financial statements. We were informed in a timely
manner of their conclusions and reports on the yearly financial statements, and we implemented the observations
and recommendations that they made during the course of their work.
We authorized the fees paid to the external auditors for auditing and other allowed services, ensuring that their
independence from the company was not interfered with in any way.
Considering Management’s viewpoints, we evaluated their services for the prior year, and we began the evaluation
process for fiscal year 2009.
IV. INTERNAL AUDIT
In order to maintain its independence and objectivity, the Internal Audit Department functionally reports to the
Audit Committee. We carried out the following activities:
We reviewed and approved its schedule and annual budget for activities in a timely manner. Internal Audit participated
in the process of identifying risks, establishing controls and verifying controls in preparation of the report.
We received periodic reports on progress in the approved work program, possible variations, and the causes of
those variations.
We followed up on the observations and suggestions made, and their timely implementation.
V. FINANCIAL INFORMATION, ACCOUNTING POLICIES
AND REPORTS TO THIRD PARTIES
We reviewed the preparation of the Company’s quarterly and yearly financial statements with those responsible
for preparation, and we recommended that the Board of Directors approve and authorize their publication. As part
of this process, we considered the opinions and observations of the external auditors, and we verified that the
criteria, accounting policies and information used by Management to prepare the financial information is adequate
and sufficient, and has been applied consistently with the prior year; consequently, the information presented
by Management reasonably reflects the financial situation, the operating results, and changes to the Company’s
financial situation for the year ended December 31, 2009.
[ 38 ]
[ 39 ]
We also reviewed the quarterly reports prepared by Management to be presented to the shareholders and general
public, and we verified that these reports were prepared using the same accounting criteria used in preparation
of the annual report. our review included verification that there is an integral procedure that provides reasonable
safety regarding the content of the reports. In conclusion, we recommended that the Board authorize publication.
our review also included the reports and any other financial information required by the Regulatory Entities
in Mexico.
We approved the incorporation into the Company’s accounting policies of the new accounting procedures that
took effect in 2009, issued by the entity responsible for accounting rules in Mexico.
We received periodic reports of advances in the process that the Company is undertaking to adopt international
accounting standards, pursuant to the terms of the circular issued in that regard by the National Securities
and Exchange Commission. We will present our recommendations for implementation and approval at the
appropriate time.
VI. COMPLIANCE WITH REGULATIONS, LEGAL MATTERS
AND CONTINGENCIES
We confirmed the existence and reliability of the controls established by the Company to ensure compliance with
the different legal provisions that it must adhere to, ensuring that these controls are adequately disclosed in the
financial information.
CoRpoRAte GoVeRNANCe Committee RepoRt
February 17, 2010
To the Board of Directors of ALSEA, S.A. DE C.V.:
In compliance with Articles 42 and 43 of the new Securities Market Law, and on behalf of the Corporate
Governance Committee, I present you with my report on the activities that we performed during the year ended
December 31, 2009. In the performance of our work we considered the recommendations in the Code of Best
Corporate Practices.
to comply with the responsibilities of this Committee, we performed the following activities:
1. During this period we did not receive any requests for exemption in accordance with the provisions of Article
28, Section III, subsection (f) of the new Stock Market Law, thus it was not necessary to make any type of
recommendation in this regard.
2. the CEo’s Report was revised with the changes vs. budget for each quarter and for fiscal year 2009, with
the impacts of each of Alsea’s companies. the purpose of this exercise was to validate the changes and
to present the principal variations to the Board of Directors. the Committee recommends approval of that
report.
3. the quarterly results were presented for the 2009 Stock trading Plan and the 2010 Stock trading Plan, and
both were approved. the quarterly metrics will be reviewed and adjusted where applicable on a quarterly
basis during fiscal year 2010.
We periodically reviewed the Company’s various tax, legal and labor contingencies, we monitored the efficiency
of the procedure established to identify and follow up on those contingencies, and we ensured their adequate
disclosure and reporting.
4. the updated Shareholder’s Cost at the close of each quarter in 2009 was presented to us, using the
methodology authorized by the Board of Directors, and the Board approved continued use of the rate of
16.5%.
VII. CODE OF CONDUCT
With the support of Internal Audit, we verified the compliance of personnel with the Code of Business Ethics in
effect at the Company, we verified that there are adequate procedures for updating the Code and distributing it
to personnel, and we verified application of the appropriate sanctions in cases in which violations were found to
have occurred.
We reviewed the denunciations received in the System that was established by the Company for that purpose,
providing correct and timely follow up.
VIII. ADMINISTRATIVE ISSUES
the Committee held regular meetings with Management so that we would be informed of the Company’s progress,
activities, and relevant and unusual events. We also met with the external and internal auditors to discuss the
development of their work, limitations they might face, and to facilitate any private communication that they might
wish to have with the Committee.
5. the summary of risk management operations was presented to us on a quarterly basis, through forward
exchange rates (peso-dollar) used during the year. those operations were conducted as authorized, complying
with the objective of hedging the exchange rate risks in operations, based on the authorized budget.
6. Analysis of the optimal capital structure considering current market conditions was presented. Using the
authorized methodology, it was determined that the optimal structure is leverage of 39.8%.
7.
In response to the request to revise the dividend policy, the Committee was presented with a new policy
whose calculations are based on Free Cash Flow. this Committee recommends taking this initiative to the
Board for its approval.
8. this Committee was presented with the advance regarding the issuance of Stock Certificates for the amount
of 400 million pesos. our recommendation is to proceed with this initiative, which fulfills the strategy of
seeking larger financing sources that will benefit the company.
Where appropriate, we requested the support and opinion of independent experts. We did not encounter any
significant breaches to the operating policies, the internal control system, and accounting reporting policies.
9. the Committee was presented with a proposal to acquire 64% of Starbucks Chile. the Committee
recommends continuing with this process, subject to a detailed analysis of the purchase proposal.
We held executive meetings with the exclusive participation of Committee members, and during those meetings
agreements and recommendations for Management were established.
10. the Performance Evaluation corresponding to the 2009 period was reviewed for relevant executives. For that
period, the effect of influenza on the results of each evaluation is being excluded.
the Chairman of the Audit Committee reported to the Board of Directors on a quarterly basis on the activities
performed.
the work that we performed was duly documented in minutes prepared for each meeting, which minutes were
reviewed and approved in a timely manner by Committee members.
Sincerely,
11. We were presented with a proposal to give an extraordinary bonus to those Alsea employers who, despite the
environment during the year, showed exceptional performance. this Committee sees this initiative as being
a positive one, and recommends that it be approved by the Board.
Lastly, I would like to mention that as part of the activities that we performed, including preparation of this report,
we have at all times listened to and considered the viewpoints of senior managers, and no significant differences
of opinion were noted.
Chairman of the Audit Committee
José Manuel Canal Hernando
[ 40 ]
Chairman of Corporate Governance Committee
Salvador Cerón Aguilar
[ 41 ]
ALSEA, S. A. B. DE C. V. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2009 and 2008
(With Independent Auditors´ Report Thereon)
(Translation from original issued in Spanish)
TABLE oF CoNTENTS
Independent Auditors´ Report
Consolidated Financial Statements:
Balance Sheets
Statements of Income
Statements of Cash Flows
Statements of Changes in Stockholders’ Equity
Notes to the Consolidated Financial Statements
43
44
46
47
48
50
iNdepeNdeNt AuditoR´S RepoRt
To the Board of Directors and Stockholders
Alsea, S. A. B. de C. V. and subsidiaries:
(thousands of Mexican pesos)
We have examined the accompanying consolidated balance sheets of Alsea, S. A. B. de C. V. and subsidiaries as of
December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and cash
flows for the years then ended. these financial statements are the responsibility of the Company’s management.
our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Mexico. those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement and are prepared in accordance with Mexican Financial Reporting Standards
(FRS). An audit includes examining, on a test basis, evidence supporting the amounts and disclosures contained in
the financial statements. An audit also includes assessing the reporting standards used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As mentioned in note 18(e), in May 2009, the Company was notified of the final sentence annulling the rulings that
disallowed the refund of favorable Valued Added tax (VAt) and requiring that new rulings be issued to comply with
the appeal sentence, which allowed (oFA) to apply the 0% tax rate on prepared foods, as established in the VAt
Law. In August 2009, a refund was obtained of the favorable balances for the period from october 2006 to April
2007. the resources obtained include the historical favorable balances and the respective accessories, which are
recorded in the results of the year.
As mentioned in note 18(f), in December 2009, Alsea was notified of the first instance sentence which establishes
that Alsea and the codefendants must comply with the signed purchase-sale agreement and consequently pay the
price of Italcafe, S. A. de C. V. shares and the respective legal interest. Additionally, Alsea and the codefendants
must pay the liability related to the franchise rights and interest at twice the tIIE rate. Alsea considers that the
sentence was not issued according to law and on the same date it filed an appeal against it. the consequences
of the litigation results cannot be currently determined by the Company and its legal advisors, and therefore, no
provision has been recorded for that purpose in the financial statements at December 31, 2009.
As mentioned in note 8, a subsidiary company has recognized an impairment loss for one of the trademark rights
operated by the Company amounting to $30,000.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Alsea, S.A.B. de C. V. and subsidiaries as of December 31, 2009 and 2008, and the results of
its operations, the changes in its stockholders’ equity and cash flows for the years then ended, in conformity with
Mexican Financial Reporting Standards.
KPMG CArDEnAS DOSAl, S. C.
Jaime Sánchez-Mejorada Fernández
February 17, 2010
[ 42 ]
[ 43 ]
CoNSoLidAted BALANCe SheetS
ALSEA, S.A.B. DE C.V. ABD SUBSIDIARIES
Years ended December 31, 2009 and 2008
(thousands of Mexican pesos)
ASSEtS
Current assets:
Cash
Accounts receivable, net:
Customers, less allowance for doubtful accounts
of $13,662 in 2009 and $11,932 in 2008
Value added tax and other recoverable taxes
other
Inventories, net (note 5)
Prepaid expenses
total current assets
Investment in shares of associated companies (note 6)
2009
2008
$
463,214
661,863
163,442
138,513
321,341
775,247
32,705
336,870
117,786
44,360
361,524
111,083
1,435,358
2,092,590
25,033
28,884
Store equipment, leasehold improvements and property, net (note 7)
2,897,678
3,044,911
Goodwill of subsidiary companies, net (note 8)
Intangible assets, less accumulated amortization
of $712,496 in 2009 and $551,500 in 2008 (note 9)
Deferred income tax and employees’ statutory profit sharing
and for reinvestment of profits (note 16)
Discontinued operations (note 2(c))
189,979
219,979
802,621
782,325
457,832
292,989
308
48,962
liAbilitiES AnD StOCKHOlDErS’ Equity
2009
2008
Current liabilities:
Current installments of long-term debt (note 10)
$
593,316
Suppliers
Associated companies (note 4)
Accounts payable and other accrued liabilities
Accruals (note 12)
Income tax and employee’s statutory profit sharing
Income tax arising from tax consolidation
total current liabilities
Long-term debt, excluding current installments (note 10)
Debt stock exchange (note 11)
other liabilities
Income tax arising from tax consolidation
Labor obligations (note 15)
Discontinued operations (note 2(c))
total liabilities
Stockholders’ equity (note 17):
Majority stockholders’ equity:
Capital stock
Additional paid-in capital
Retained earnings
Reserve for repurchase of shares
Currency translation adjustment in foreing subsidiaries
and associated companies
Majority stockholders’ equity
Minority interest
total stockholders’ equity
Commitments and contingent liabilities (note 18)
559,149
26,031
62,515
440,015
62,670
3,891
660,080
536,729
67,939
162,045
473,041
65,860
-
1,747,587
1,965,694
408,787
1,130,098
300,000
50,621
-
43,028
147,077
110,907
21,605
769
26,445
4,675
2,676,446
3,280,847
525,722
534,017
1,236,603
1,228,880
832,576
1,125,821
335,875
110,322
(22,187)
(1,969)
2,908,589
2,997,071
223,774
232,722
3,132,363
3,229,793
$
5,808,809
6,510,640
$
5,808,809
6,510,640
See accompanying notes to consolidated financial statements.
[ 44 ]
[ 45 ]
lic. Alberto torrado Martínez
General Director
lic. José rivera río rocha
Chief Financial officer
C.P. Alejandro Villarruel Morales
Corporate Comptroller
CoNSoLidAted StAtemeNtS oF iNCome
CoNSoLidAted StAtemeNtS oF CASh FLowS
ALSEA, S.A.B. DE C.V. ABD SUBSIDIARIES
years ended December 31, 2009 and 2008
(thousands of Mexican pesos)
ALSEA, S.A.B. DE C.V. ABD SUBSIDIARIES
years ended December 31, 2009 and 2008
(thousands of Mexican pesos)
2009
2008
$
8,587,081
7,786,843
operating activities:
2009
2008
Net sales
Cost of sales
Gross profit
operating expenses
operating income
other expenses, net (note 14)
Comprehensive financing result (note 13)
3,166,461
2,781,324
5,420,620
5,005,519
5,085,550
4,546,432
335,070
459,087
(14,916)
(34,973)
(131,719)
(194,400)
Equity in the results of operations of associated companies (note 6)
(4,493)
(2,027)
Income from continuing operations, before income tax
183,942
227,687
Income tax (note 16)
Income before discontinued operations
Loss from discontinued operations, net (note 2(c))
Consolidated net income
Minority interest
Majority net income
Net earning per share (note 2(w))
See accompanying notes to consolidated financial statements.
45,086
53,148
138,856
174,539
(31,896)
(35,008)
106,960
139,531
3,212
10,752
103,748
128,779
0.17
0.21
$
$
Income from continuing operations, before income tax
$
183,942
227,687
Items relating to investing activities:
Depreciation and amortization
Effects from associated companies, net
Gain or loss on sale of fixed assets
Interest income
Valuation effects of financial instruments
Impairment loss
Items relating to financing activities - Interest expense
Subtotal
Customers
Inventories
Suppliers
taxes payable
other assets and liabilities
Net cash provided by operating activities
Investing activities:
Interest received
Store equipment, leasehold improvements and property
trademark rights and preoperating items
Investment in shares of subsidiaries and associated companies
Desincorporation of subsidiary
Acquisition of subsidiary
Net cash used in investment activities
Cash to be obtained from financing activities
Financing activities:
Bank loans received and payment of loans, net
Debt stock exchange
Interest paid
Dividends paid
Minority interest contribution
Repurchase of shares
Net cash provide by financing activities
Net increase in cash
Adjustments to cash flow to reflect foreing exchange fluctuations
Cash:
At beginning of year
At end of year
See accompanying notes to consolidated financial statements.
665,167
572,980
4,493
28,740
15,265
(5,535)
30,000
2,027
79,143
8,634
5,535
-
137,754
124,078
1,059,826
1,020,084
(24,929)
24,654
22,420
280,848
(166,782)
1,196,037
(15,265)
(123,447)
(443,524)
(642)
12,852
-
77,564
(123,803)
85,848
(293,359)
213,425
979,759
(8,634)
(569,812)
(399,168)
(8,037)
(15,523)
(93,806)
(570,026)
(1,094,980)
626,011
(115,221)
(791,191)
300,000
(134,639)
(41,834)
(18,743)
(118,035)
(804,442)
(178,431)
(20,218)
739,929
-
(120,864)
-
87,363
(125,748)
580,680
465,459
(12,923)
661,863
463,214
209,327
661,863
$
lic. Alberto torrado Martínez
General Director
lic. José rivera río rocha
Chief Financial officer
C.P. Alejandro Villarruel Morales
Corporate Comptroller
lic. Alberto torrado Martínez
General Director
lic. José rivera río rocha
Chief Financial officer
C.P. Alejandro Villarruel Morales
Corporate Comptroller
[ 46 ]
[ 47 ]
CoNSoLidAted StAtemeNtS oF ChANGeS
iN StoCkhoLdeRS’ equity
ALSEA, S.A.B. DE C.V. ABD SUBSIDIARIES
years ended December 31, 2009 and 2008
(thousands of Mexican pesos)
Balance as of December 31, 2007
$
534,364
1,090,334
56,560
1,168,477
1,225,037
140,739
7,009
2,997,483
134,605
3,132,088
CAPitAl StOCK
ADDitiOnAl
PAiD-in CAPitAl
rEtAinED EArninGS
rEtAinED
EArninGS
lEGAl
rESErVE
tOtAl
rESErVE fOr
rEPurCHASED
SHArES
CuMulAtiVE
trAnSlAtiOn
EffECt frOM
fOrEinG EntitiE
tOtAl MAJOrity
StOCKHOlDErS’
Equity
MinOrity
intErESt
tOtAl
StOCKHOlDErS’
Equity
Increase in minority interest (note 2 (b))
Repurchase of shares (note 17)
Appropriation to legal reserve
Valuation of financial instruments (note 2 (f))
Increase in reserve for repurchase of shares (note 17)
-
(5,331)
-
-
-
-
-
-
-
-
Dividends declared in shares ($0.23 per share) (note 17)
4,984
138,546
Comprehensive income
Balance as of December 31, 2008
Decrease in minority interest (note 2 (b))
Repurchase of shares (note 17)
Appropriation to legal reserve
Payment of premium for share subscription (note 17)
Valuation of financial instruments (note 2 (f))
Cancellation of repurchase of shares (note 17)
Extension to the reserve for repurchase of shares
Acquisition of non-controlling interest of subsidiaries in Colombia
(notes 1 (e) and (f))
Dividends declared in shares ($0.069 per share) (note 17)
Comprehensive income
-
-
-
(8,217)
-
-
-
(78)
-
-
-
-
-
-
-
14,306
-
-
-
(6,583)
-
-
-
-
-
-
23,922
(23,922)
-
-
-
-
(120,417)
-
-
-
-
-
-
6,439
(6,439)
-
-
-
-
-
-
-
-
-
-
-
5,535
5,535
(90,000)
(90,000)
90,000
(143,530)
(143,530)
128,779
128,779
-
-
-
-
-
-
-
(124,124)
-
-
-
-
(5,535)
(5,535)
-
-
78
(349,599)
(349,599)
349,599
-
-
(41,859)
(41,859)
103,748
103,748
-
-
-
-
-
-
-
-
-
-
87,365
87,365
(125,748)
-
5,535
-
-
-
-
-
-
-
(125,748)
-
5,535
-
-
(8,978)
119,801
10,752
130,553
-
-
-
-
-
-
-
-
-
-
(12,160)
(12,160)
(132,341)
-
14,306
(5,535)
-
-
(6,583)
(41,859)
-
-
-
-
-
-
-
-
(132,341)
-
14,306
(5,535)
-
-
(6,583)
(41,859)
(20,218)
83,530
3,212
86,742
534,017
1,228,880
80,482
1,045,339
1,125,821
110,322
(1,969)
2,997,071
232,722
3,229,793
Balance as of December 31, 2009
$
525,722
1,236,603
86,921
745,655
832,576
335,875
(22,187)
2,908,589
223,774
3,132,363
See accompanying notes to consolidated financial statements.
[ 48 ]
[ 49 ]
lic. Alberto torrado Martínez
General Director
lic. José rivera río rocha
Chief Financial officer
C.P. Alejandro Villarruel Morales
Corporate Comptroller
NoteS to CoNSoLidAted FiNANCiAL StAtemeNtS
ALSEA, S.A.B. DE C.V. ABD SUBSIDIARIES
December 31, 2009 and 2008
(thousands of Mexican pesos)
these financial statements have been translated from the Spanish language original and for the convenience of
foreign/English-speaking readers.
on February 17, 2010, the Board of Directors authorized the issuance of the accompanying consolidated financial
statements and the notes thereto. In accordance with the General Corporations Law and the Company’s bylaws, the
stockholders are empowered to modify the financial statements after their issuance. the accompanying financial
statements will be submitted for approval at the next Stockholders’ Meeting. the consolidated financial statements have
been prepared in accordance with the Financial Reporting Standards in force at the balance sheet date (note 2 (y)).
(1) DESCriPtiOn Of buSinESS AnD SiGnifiCAnt trAnSACtiOnS-
Description of business-
Alsea, S. A. B. de C. V. and Subsidiaries (Alsea or the Company) are mainly engaged in operating fast-food
stores, “QSR”, and casual restaurants, “Casual Dining”. In Mexico, Alsea operates Domino’s Pizza, Starbucks
Coffee, Burger King, Chili’s Grill & Bar, and since December 2008, it operates California Pizza Kitchen and since
october 2009, P.F. Chang’s. the operation of its multi-units is supported by its Shared Service Center, which
includes a supply chain through its distribution division (DIA), real estate and development services, as well as
administrative services, such as financial, human resources and technology. Since 2006, the Company operates
Starbucks Coffee in Brazil in association with Café Sereia do Brasil Participações, S. A. and Starbucks Coffee
International. In Chile and Argentina, Alsea operates Burger King and since 2007, Starbucks Coffee in those
countries in association with Starbuck Coffee International. In Colombia, it operates Domino´s Pizza and Burger
King since June and November 2008, respectively.
Significant transactions-
a) Placement of debt stock exchange-
In December 2009, the Company placed the debt stock exchange amounting to $300 million of Mexican pesos
on the Mexican market. Debt stock exchange issued is for a three-year term, which means that they expire in
December 2012. the debt stock exchange is subject to 28-day tIIE (Average Interbank Interest Rate) plus 2.15
percentage points. the issuance is part of the debt stock exchange program authorized by the Board of Directors
on october 21, 2009, for up to $700 million of Mexican pesos. the net resources obtained from the above
issuance will be used to repay bank liabilities, thus improving the debt maturity profile and reducing the cost
thereof.
b) refund of favorable VAt balances-
In August 2009, Alsea obtained a refund through its subsidiary, operadora de Franquicias Alsea, S. A. de C.
V. (oFA), of favorable VAt balances arising in the period from october 2006 to April 2007. At December 31,
2009, the Company is pending to obtain favorable balances of VAt and the respective accessories, which will be
recognized in the results of the year in which they are recovered.
the resources obtained include the historical favorable balances and the respective accessories, which have been
recorded in the results of the year (see notes 14 and 18(e)).
c) Agreement with P.f. Chang’s China bistro, inc.-
In May 2009, Alsea made an arrangement with P.F. Chang’s China Bistro, Inc., “PFCB” to develop the concept of
P.F. Chang’s restaurants in Mexico under an exclusivity agreement that covers the entire Mexican territory. As part
of the arrangement, Alsea will open 30 P.F. Chang’s units throughout Mexico over the next ten years. the first
restaurant started operating in october 2009.
the Company has contracted different commitments in relation to the arrangement established in the agreement
for the acquired brand (see note 2(k)).
d) Call option for Starbucks Coffee international-
In January 2009, Starbucks Coffee International, “SCI” confirmed that it will not exercise its purchase option this
year, under which it has the right to increase its equity interest in Starbucks Coffee México from 18% to 50%.
According to the agreement, the next and last date for “SCI” to exercise the above option is September 2012.
e) Acquisitions-
- Acquisitions in Colombia-
In June 2008, the Company concluded the acquisition of 75% of the capital stock of Dominalco, S. A. (Domino’s
Pizza Colombia or Dominalco); an additional 19.9% was subsequently acquired in December 2009. With the above
acquisitions, Alsea now has 95% of the capital stock of Dominalco. Domino’s Pizza Colombia has been operating
in that country for 20 years and it presently has 22 stores in four cities, Bogotá, Medellín, Cali and Pereira.
- Acquisition of 65% of California Pizza Kitchen-
In December 2008, through a subsidiary, the Company acquired 65% of the capital stock of Grupo Calpik, S. A. P. I.
de C. V. (Grupo Calpik), a company of Grupo BGM. Grupo Calpik currently operates seven California Pizza Kitchen
units and it is the exclusive franchiser and developer of the brand in Mexican territory.
A condensed balance sheet of the business acquired at the acquisition date is shown as follows:
COnDEnSED bAlAnCE SHEEt
Current assets
Store equipment, leasehold improvements and property
Franchise rights
Current liabilities
Stockholders’ equity
$
$
$
$
84,835
93,359
50,129
228,323
111,908
116,415
228,323
Acquisitions of businesses were recorded using the purchase method. the cost of acquired entities was
determined on the paid cash basis. Additionally, the excess of the cost of the acquired entity over the net total of
assets acquired and liabilities assumed was reassigned to net assets.
the operation results of acquired companies are included in the consolidated financial statements as from the
acquisition date.
f) Development of the burger King trademark in Colombia-
As part of the expansion strategy in Latin America, an arrangement was made in october 2008 with Burger
King Corp. through a subsidiary, in which Alsea holds 84.9% of equity, in order to develop the Burger King brand
in Bogotá, Colombia. Subsequently, in December 2009, the Company acquired 9.9% of the capital stock of
operadora Alsea in Colombia, S. A. (Burger King Colombia or opalcol). the remaining 5.2% is held by the current
partners of Alsea in Domino’s Pizza Colombia. the agreement contemplates a plan to develop 20 Burger King
units in the next 5 years.
g) Contract termination agreement of the master franchise of “Popeye’s” trademark-
In September 2008, the Company reached an agreement with AFC Enterprises, Inc. Popeye’s Chicken & Biscuits,
to finalize the master franchise agreement for operating the “Popeye’s” brand in Mexico. the 10 Popeyes stores
stopped operating in the second quarter of 2009, and as a result, certain assets and liabilities are in the process
of being realized and liquidated, respectively (see note 2(c)).
h)
incorporation of Servicios Múltiples Empresariales ACD, S. A. de C. V. SOfOM. Enr. (hereinafter SOfOM)-
In December 2009, the subsidiary operadora y Procesadora de Pollo, S. A. de C. V. (oPP) was spined off through
the division of a portion of its assets, liabilities and equity to be contributed as a whole to a company called
“SoFoM”. the spin off was performed based on the subsidiary’s audited financial statements of “oPP”.
the variable portion of the capital stock of “oPP” was reduced through the cancellation of 95,327,000 common,
nominative shares with a par value of $1.00 each. the proportion of the Company’s interest in the capital stock of
“SoFoM” will be the same as it is currently in “oPP”.
[ 50 ]
[ 51 ]
(2) SuMMAry Of SiGnifiCAnt ACCOuntinG POliCiES-
Preparation of the financial statements requires that management make estimations and assumptions that affect
the recorded amounts of assets and liabilities and the disclosure of contingent asset and liabilities at the date of
the financial statements, as well as the disclosure of recorded income and expenses during the reporting period.
Significant items subject to such estimates and assumptions include the carrying amount of property, plant and
equipment, intangibles and goodwill; valuation allowances for receivables, inventories, and deferred income tax assets;
valuation of financial instruments, and assets and liabilities related to employee benefits. Actual results could differ
from those estimates and assumptions.
For disclosure purposes in the notes to the financial statements, when reference is made to pesos, “$” or MXP, the
currency is thousands of Mexican pesos, and when reference is made to dollars, the currency is the US dollar.
the 2008 balance sheet includes a reclassification to conform the balance to the classification used in 2009, mainly
for the matter discussed in note 16, to present separately the benefit for tax consolidation as established in INIF 18,
“Recognition of the effects in the income tax of the amendments to the income tax law for 2010”, which came into
effect on December 7, 2009.
Following are the significant accounting policies applied in preparing the enclosed financial statements:
a) recognition of the effects of inflation -
the accompanying consolidated financial statements have been prepared in conformity with Mexican Financial
Reporting Standards (FRS) in effect at the balance sheet date, and include the recognition of the effects of inflation
on the financial information through December 31, 2007, based on the National Consumer Price Index (NCPI)
published by Banco de México.
the index and percentage of accumulated inflation for the three preceding years ended on December 31, of each
year are shown below:
yEAr
2009
2008
2007
nCPi
138.541
133.761
125.564
inflAtiOn
yEArly
CuMulAtiVE
3.57%
6.53%
3.76%
14.48%
15.01%
11.52%
b) Principles of consolidation-
the consolidated financial statements include the financial statements of Alsea, S. A. B. de C. V. and those of the
subsidiaries in which it holds or controls more than 50% of their equity. the significant balances and operations
between the companies of the group have been eliminated in the preparation of the consolidated financial statements.
the consolidation was performed based on the audited financial statements of the subsidiary companies.
the main operating subsidiaries are as follows:
SHArEHOlDinG PErCEntAGE
ACtiVity
2009
2008
OPErAtinG COMPAniES:
Café Sirena, S. de R. L. de C. V.
82.00%
82.00% Starbucks Coffee stores
operadora de Franquicias
Alsea, S. A. de C. V.
Gastrosur, S. A. de C. V.
Fast Food Sudamericana, S. A.
Café Sirena, S. R. L.
Fast Food Chile, S. A.
Dominalco, S. A.
operadora Alsea en Colombia, S. A.
Grupo Calpik, S. A. P. I. de C. V.
Especialistas en Restaurantes de Comida
Estilo Asiática, S. A. de C. V.
Distribuidora e Importadora
Alsea, S. A. de C. V.
ASSOCiAtED COMPAniES:
Starbucks Coffee Chile, S. A.
Starbucks Brasil Comércio
de Cafés, Ltda.
99.99%
99.99%
99.99%
82.00%
99.99%
95.00%
95.00%
65.00%
99.99%
99.99% Domino’s Pizza and Burger King stores
99.99% Chili’s Grill & Bar restaurants
99.99% Burger King stores in Argentina
82.00% Starbucks Coffee stores in Argentina
99.99% Burger King stores in Chile
75.00% Domino’ Pizza stores in Colombia
84.99% Burger King stores in Colombia
65.00% California Pizza Kitchen restaurants
-
P.F. Chang’s restaurants
99.99%
99.99% Food distribution
18.00%
18.00% Starbucks Coffee stores in Chile
11.06%
11.06% Starbucks Coffee stores in Brazil
the investment in shares of associated companies was valued through the equity method (see note 6).
c) Discontinued operations-
In September 2008, it was decided to discontinue the Popeye’s trademark in the subsidiary operadora y
Procesadora de Pollo, S. A. de C. V., for which a formal disinvestment plan was designed. At December 31, 2009,
the discontinuation process of the trademark was concluded, leaving certain assets and liabilities in the process
of being realized (see note 1(g)).
During the development and discontinuation conclusion, fixed assets were sold for a total of $12,327, leaving
certain assets available for sale. the accumulated net result recorded in the results of the year at December 31,
2009 and 2008, were ($31,896) and ($35,008), respectively, as a result of the discontinuation.
the effect generated from the aforementioned operation was included in the consolidated statement of income
as a discontinued operation.
[ 52 ]
[ 53 ]
Following is the condensed financial information on the discontinued operation at December 31, 2009 and 2008:
bAlAnCE SHEEt
Current assets
Fixed assets
other assets
Liabilities
rESultS
Income
Costs
operating expenses
Loss after income tax
$
$
$
2009
2008
-
308
-
(769)
(461)
17,056
6,760
18,202
7,394
30,221
11,347
(4,675)
44,287
52,471
19,894
47,517
(31,896)
(35,008)
d) Currency translation of foreign subsidiaries-
In order to consolidate the financial statements of the Company’s foreign subsidiaries operating independently
(located in Argentina, Chile, Brazil and Colombia), which represent 16% and 12% of net consolidated income at
December 31, 2009 and 2008, the Companies applied the same accounting policies of their holding Company.
Since 2008, the financial statements on consolidated foreign operations are translated into the reporting currency,
identifying initially if the functional and the recording currency of the foreign operations are different, and
subsequently the translation is made from the functional currency to the reporting currency. For that purpose, the
Company uses the historical exchange rate at the end of the year or the exchange rate at the year-end close and
the inflation index for the country of origin, depending on whether the information derives from a non-inflationary
or an inflationary economic environment.
e) Cash equivalents-
Cash equivalents include bank deposits, foreign currencies and other similar marketable securities and since
2009, the Company decided to include deposits in transit shown under accounts receivable; therefore, the
Company reclassified those items to the 2008 financial statements. As of the date of the consolidated financial
statements, interest earned and valuation gains or losses are included in income for the year as part of the
comprehensive financing result.
f) Derivative financial instruments-
Alsea uses derivative financial instruments (DFI) denominated forwards and swaps, to mitigate present and future
risks of adverse exchange fluctuations and interest rates, with the purpose of not distracting operating resources
and for the expansion plan, and have the certainty of future cash flows and keep a strategy for the debt cost. the
IFD’s used are only for hedging purposes and are used to generate the obligation to exchange cash flows on pre-
established future dates at the nominal value or reference value, and are valued at their fair value.
on a monthly basis, the Company will define the price levels at which the Corporate treasury department must
operate the different hedging instruments. Under no circumstances can it operate amounts exceeding the monthly
resource requirements, thus ensuring that it is always a hedging and not a speculative operation. Given the variety
of possible derivative instruments for hedging risks, management will be empowered to define their operating
level, provided that those instruments are for hedging and not for speculation purposes.
DFI operations are carried out under a master agreement using the ISDA (International Swap Dealers
Association) standardized form, which must be duly formalized by the legal representatives of the Company
and of the financial institutions.
In some cases, the Company and the financial institutions have signed an additional agreement to the ISDA master
agreement, which stipulates the conditions that force it to offer guarantees for margin calls if the market value
(mark-to-market) exceeds certain established credit limits.
the Company has the policy of monitoring the volume of operations contracted with each of those institutions, in
order to avoid margin calls.
DFIs are contracted on the local market with the following financial entities: Banco Nacional de México, S. A.,
Banco Santander, S. A., UBS Bank México, Deutsche Bank México, Merril Lynch Capital Services, Inc. and BBVA
Bancomer, S. A. the Company may select other regulated and authorized financial institutions, always if they are
regulated and authorized, to carry out this type of operations.
Valuation-
In the case of cash flow hedges, the effective portion of gains or losses on the hedging instrument is recorded
under comprehensive income or loss in stockholders’ equity and it is reclassified to income for the same period
or periods that the forecasted transaction affects. the ineffective portion is recorded immediately in the results of
the period under comprehensive financing result.
the valuation of the effective portion generated by the financial instruments is recorded every month in the
Company’s financial statements.
the identified risks are those related to exchange and interest rate fluctuations. the contracted derivative financial
instruments are managed under the Company’s policies and management does not foresee any risks that could
differ from the purpose for which such financial instruments were contracted.
During in 2009, the Company performed 236 operations of financial instruments related to foreign exchange
rates amounting 102,484 million dollars. the absolute value of the fair value of derivative financial instruments
used per quarter in the year does not represent more than 5% of total consolidated assets, liabilities or equity, or
otherwise, more than 3% of total consolidated sales for the last quarter. therefore, the risk faced by the Company
related to fluctuations in the exchange rate will have no negative effects on its operations, nor will it affect its
capacity to cover operations of derivative financial products.
At December 31, 2009, the Company has had no margin calls and no breach has been recorded in relation to the
contracts signed with the different financial institutions.
Positions in derivative financial operations-
At December 31, 2009, Alsea has contracted hedging to purchase dollars in 2010 amounting approximately to
41.65 million USD, at the average exchange rate of $12.96 pesos for each US dollar. to cover interest rates, the
Company acquired Variable Rate Swaps at Fixed Rates; that strategy has been applied to two Alsea loans, in which
the balance of one loan as of today is $169 million of Mexican pesos, and the Company has only 20% of that
balance in a 7.9% fixed rate swap, plus a spread of 10 bps. the loan is amortized on a monthly basis and expires
in June 2011. the second loan balance amounts to $200 million Mexican pesos and 100% of that balance is
covered by a 5.395% fixed rate Swap, plus a spread of 400 bps. this is a bullet loan subject to monthly interest
and expires in April 2010.
the type of derivative products and the hedged amounts are in line with the internal risk management policy
defined by the Corporate Practices Committee, which contemplates an approach for covering foreign currency
requirements without the possibility of carrying out speculative operations.
At December 31, 2009, the Company had contracted the following financial instruments:
INStItUtIoN
UBS
Banamex
Santander
Deutsche Bank
MILLIoN DoLLARS
AVERAGE EXCHANGE RAtE
At SEttLEMENt DAtE
26,250 $
6,750
750
7,900
13.0312
12.9804
12.9400
12.7094
MAtURING IN
2009/2010
2009/2010
2009/2010
2009/2010
At December 31, 2009, the Company recorded a debit to income of $4,340 and at December 31, 2008, it recorded a
credit in stockholders’ equity of $5,535, corresponding to the fluctuation between the exchange rate and the interest
rate from the date on which the derivative financial instrument was contracted to the settlement date.
g) Embedded derivatives-
the Company reviews all signed agreements to identify the existence of embedded derivatives. the embedded
derivatives are evaluated to determine whether or not they comply with the conditions established in the respective
regulations; if that is the case, they are separated from the host agreement and they are valued at fair value. If
the embedded derivatives are classified for trade purposes, the appreciation or the depreciation in the fair value
is recorded in income for the period. Embedded derivatives designated for hedging recognize the changes in
valuation based on the type of hedging: (1) when they are fair value instruments, the fluctuations of the implicit
instrument and of the hedged item are valued at fair value and are recorded in income; (2) when they are cash
flow instruments, the effective portion of the implicit instrument is temporarily recorded under comprehensive
income and it is recycled to income when the hedged item affects them; the ineffective portion is immediately
recorded in income.
[ 54 ]
[ 55 ]
h)
inventories and cost of sales-
Inventories at December 31, 2009 and 2008 are stated at original cost and determined by the last-in-first-out
method. Inventory values thus determined do not exceed market value and are not lower than their realization value.
the cost of sales represents the cost of inventories at the time of sale, and it increases with the reductions in the
net realization value over the year.
the Company records the necessary allowances to recognize reductions in the value of its inventories for
impairment, obsolescence, slow movement and other causes that indicate that the use or realization of the items
comprising the inventory will be lower that the recorded value.
i) Store equipment, leasehold improvements and property-
Store equipment, leasehold improvements and property are recorded at acquisition cost.
Depreciation of store equipment, leasehold improvements and property is calculated by the straight-line method,
based on their useful lives estimated by Company management. the annual depreciation rates for the main groups
of assets are shown below:
Buildings
Store equipment
Leasehold improvements
transportation equipment
Computer equipment
Production equipment
office furniture and equipment
rAtES
5%
5% al 30%
7% al 20%
25%
30%
10% al 20%
10%
Maintenance and minor repair expenses are recorded in income as they are incurred.
During 2009, the Company reviewed the economic useful lives of certain fixed asset and intangible asset captions;
this analysis was based on criteria elements provided by each of the brands operated by the Company, to adjust
the useful lives to the current business operating conditions (see note 7).
j) Goodwill of subsidiaries and associated companies-
Goodwill represents the future economic benefits arising from other acquired assets that are not identifiable
individually or recognized separately. Goodwill is subject to impairment tests at least once a year.
k)
intangible assets-
they represent payments made to third parties for the right to use the brands under which the Company operates
its establishments in accordance with franchise or association agreements. Amortization is calculated through the
straight-line method at the 5% to 15% annual rate. the term of brand rights is shown as follows:
trADEMArKS
Domino’s Pizza
Starbucks Coffee
Burger King
Chili’s Grill & Bar
California Pizza Kitchen
P.F. Chang’s
(Mexico)
(Colombia)
(Mexico)
(Argentina)
ExPirAtiOn DAtE
2025
2016
2022
2027
(Mexico, Argentina, Chile and Colombia)*
According to opening dates
2015
2016
2019
(*) Each store operating under this brand has an operating term of 20 years, starting as from the opening date.
the Company has obligations to do and not to do under the aforementioned agreements, including making capital
investments and opening establishments. At December 31, 2009, such obligations have been complied.
the association agreement signed by Starbucks Coffee International (SCI) and Alsea in 2008 allowed SCI to
increase its equity in the capital stock of Café Sirena by up to 50%, only if certain goals related to opening
Starbucks Coffee stores were not met. At December 31, 2008 such option was not exercised. In January 2009,
SCI confirmed that it would not exercise the purchase option this year, as established in the association agreement.
the following and last date to exercise the option is September 2012.
Preoperating and installation expenses are related to the opening of new points of sale in different locations.
Amortization is calculated by the straight-line method over one year, starting as from the date on which the new
points of sale start operations.
l)
impairment in the recovery value of long-lived assets, property, equipment and leasehold improvements,
goodwill and other intangible assets-
the Company periodically evaluates the carrying amount of its long-lived assets (store equipment, leasehold
improvements, property, goodwill and other intangible assets), to determine the existence of indicators that those
values exceed the recoverable amount.
the recoverable value represents the amount of net potential income expected to be obtained on a reasonable basis
as a result of the use or realization of such assets. If it is determined that the carrying amounts are excessive, the
Company records the necessary estimations to reduce them to their recovery value. When there is the intention of
selling the assets, they are shown in the financial statements at the lower of their carrying or realization value. Assets
and liabilities of a group classified as available for sale are shown separately in the balance sheet.
m) Accruals-
Based on management’s estimations, the Company records liability provisions for present obligations for which
the transfer of assets or the rendering of services are virtually unavoidable and which result from past events,
mainly in relation to supplies and to other personnel payments. these provisions have been recorded based on
management’s best estimate of the amount needed to cover the present liability; however, actual results could
differ from the provisions recognized (see note 12).
n) Employee benefits-
termination benefits for causes other than restructuring and retirement to which employees are entitled are
recorded in income for the year based on actuarial calculations prepared under the projected unit-credit method,
considering the projected salaries or the projected cost of the benefits.
the actuarial gain or loss is recorded directly in income for the period as it is accrued.
other compensation to which employees are entitled is recorded in income for the year in the year it is paid.
o) tax on earnings (income tax (it), flat rate business tax (iEtu))
and Employees’ Statutory Profit Sharing (ESPS)-
It, IEtU and ESPS incurred in the year are determined based on current legal provisions.
Deferred It and, as from January 1, 2008, deferred ESPS are recorded through the asset and liability method,
which compares the book and tax values of assets. Deferred tax and ESPS are recorded (assets and liabilities)
for future tax consequences attributable to the temporary differences between the values shown in the financial
statements of existing assets and liabilities and their respective tax bases, and in the case of taxes on profits,
for unamortized tax losses and other recoverable tax debts. Deferred tax and ESPS assets and liabilities are
calculated using the rates set forth in the respective Law, which are applied to taxable income in the years in which
the reversal of temporary differences is expected to take place. the effect of changes in the tax rates for deferred
tax and ESPS is recorded in income for the year in which the changes are approved.
p)
inflation adjustment of capital stock, other stockholder contributions and retained earnings-
At December 31, 2007, inflation adjustment of these items was calculated by multiplying contributions and
retained earnings by NCPI factors, which measure accrued inflation from the dates on which the contributions
were made and the results were accrued until the close of 2007, date on which Mexico became a non-inflationary
environment according to FRS B-10, “Effects of inflation”. Amounts thus obtained represented constant values
in shareholder investments.
[ 56 ]
[ 57 ]
q) Additional paid in capital-
It represents the excess difference between payment of subscribed shares and the nominal value thereof, less the
expenses related to the placement of shares
r) Cumulative effect of deferred income tax-
Until December 31, 2007, it represented the effect of recognizing accrued deferred taxes at the date on which the
respective FRS was adopted. In 2008, that amount was reclassified to retained earnings.
s) revenue recognition-
Income from the sale of food is recorded as food is delivered to customers; service income is recorded as services
are rendered. the Company records estimations for losses incurred in recovering accounts receivable, which are
included in operating expenses and rebates and discounts, which are deducted from sales.
t) Comprehensive financing result (Cfr)-
It includes interest, exchange differences, the effect of translation and the effect on financial instruments.
transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates they are entered
into and/or settled. Foreign currency assets and liabilities are translated using the exchange rate in effect at the
balance sheet date. Exchange differences incurred in relation to assets or liabilities contracted in foreign currency
are charged to income for the year.
(c) FRS C-7, “Investment in associated companies and other permanent investments” – this FRS establishes the
rules for recognizing investments in associated companies, and other permanent investments over which there
is no control, there is joint control or there is significant influence. the main changes with respect to the former
standard are:
(i)
It establishes the obligation to value EPEs with significant influence through the equity method.
(ii)
It considers the existence of the right to potential votes that can be exercised or transferred to the entity as
holder and that can change its participation in decision making at the time of evaluating the existence of
significant influence.
(iii) It establishes a specific procedure and a limit to recognize the losses of its associated company.
Application of this FRS had no significant effects in the year.
(d) FRS C-8 “Intangible Assets” – It supersedes Statement C-8, “Intangible Assets” and it establishes the following
changes:
(i)
It redefines the definition of intangible assets, establishing that the separation condition is not the only
condition required for an asset to be identifiable.
u) Cummulative translation effect-
It represents the difference arising from translating foreign operations from the functional currency to the reporting
currency.
(ii)
It establishes that the initial valuation must consider the acquisition cost, identifying the instances of individual
acquisitions, business acquisitions or of an internal generation, and that there must be a possibility of future
economic benefits for that entity.
v) Contingencies-
Significant obligations or losses related to contingencies are recorded when it is probable that their effects will
materialize and when there are reasonable elements for quantifying them. In the absence of such reasonable
elements, they are disclosed on qualitative bases in the notes to the consolidated financial statements. Income,
profits or contingent assets are not recorded until there is certainty of their realization.
w) Profit per share-
It is the result of dividing income for the year by the weighted average of current shares in the period.
x) Comprehensive income-
It represents the result of the Company’s total operations for the year and it is comprised of the net profit and the
translation effect of foreign entities that was applied directly to stockholders’ equity.
y) Accounting changes-
the FRS described below, issued by the Mexican Financial Reporting Standards Board (CINIF from Spanish) went
into effect for the years starting as from January 1, 2009; those standards cannot be applied in advance.
(a) FRS B-7, “Acquisitions of Businesses” – Replaces Statement B-7 and establishes the general valuation and
disclosure rules for initial recording at the acquisition date of net assets acquired as a result of a business
acquisition, reiterating that acquisitions of businesses must be recorded through the purchase method. the
provisions of this FRS are effective for acquisitions made as from January 1, 2009. Application of this FRS
had no significant effects in the year.
(b) FRS B-8, “Consolidated and combined financial statements” – this NIF replaces Statement B-8, “Consolidated
and Combined Financial statements and valuation of permanent investment in shares”, and establishes the
general rules for preparing and presenting consolidated and combined financial statements, as well as for the
disclosures included in those financial statements, including:
(i) the obligation to consolidate specific purpose entities (EPE from Spanish) when an entity has control.
(ii) the possibility, under certain rules, to submit non-consolidated financial statements.
(iii) Considers the existence of the right to potential votes that can be exercised or transferred to the
entity as holder and that can change its participation in decision making at the time of evaluating the
existence of control.
the Company’s management has exercised the option contained in FRS B-8, “Consolidated or combined
financial statements”, for not issuing the consolidated financial statements of its holding subsidiaries
companies, for decision making purposes, and its (controlling and non-controlling) stockholders have
expressed their consent to do so.
(iii) It specifies that subsequent expenses for research and development projects in progress must be recorded
as expenses as they are accrued, if they form part of the research phase, or as intangible assets, if they meet
the criteria in place to be recognized as such.
(iv) It eliminates the assumption that the useful life of an intangible asset may not exceed a period of twenty years.
Application of this FRS had no significant effects in the year.
(3) fOrEiGn CurrEnCy POSitiOn-
Monetary assets and liabilities denominated in US dollars, shown in the reporting currency at December 31, 2009 and
2008, were as follows:
Assets
Liabilities
Net liability position
tHOuSAnDS Of DOllArS
2009
21,136
28,369
(7,233)
2008
9,205
44,238
(35,033)
the exchange rate in relation to the dollar at December 31, 2009 and 2008 was $13.04 and $13.31, respectively.
At February 17, 2010, date of issuance of the audited financial statements, the rate of exchange was $12.86 to
the dollar.
the exchange rates used in the different translation processes in relation to the reporting currency at December 31,
2009 and at the date of issuance of the financial statements are as follows:
COuntry Of OriGin
CurrEnCy
At tHE yEAr EnD
iSSuAnCE
Argentina
Chile
Colombia
Argentinian pesos
Chilean pesos
Colombian pesos
$
(ARP)
(CLP)
(CoP)
3.4478
0.0256
0.0069
3.3372
0.0244
0.0066
ExCHAnGE rAtE
[ 58 ]
[ 59 ]
the following currencies were used for translation purposes:
(7) StOrE EquiPMEnt, lEASEHOlD iMPrOVEMEntS AnD PrOPErty-
this balance at December 31, 2009 and 2008 is comprised as follows:
CurrEnCy
fOrEiGn OPErAtiOn (*)
COuntry Of OriGin
rECOrDinG
funCtiOnAl
rEPOrtinG
Fast Food Sudamericana, S. A.
Café Sirena, S. R. L.
Fast Food Chile, S. A.
Dominalco, S. A.
operadora Alsea en Colombia, S. A.
Argentina
Argentina
Chile
Colombia
Colombia
ARP
ARP
CLP
CoP
CoP
ARP
ARP
CLP
CoP
CoP
MXP
MXP
MXP
MXP
MXP
the Company’s functional currency is the Mexican peso. the Company keeps investments in subsidiaries resident abroad,
whose functional currency is not the Mexican peso; therefore, in incorporating the results and financial position of foreign
operations into consolidation, those figures are translated to MXP (reporting currency).
(4) bAlAnCES AnD trAnSACtiOn witH ASSOCiAtED COMPAniES-
Accounts payable to associated companies at December 31, 2009 and 2008 are as follows:
PAyAblE:
Starbucks Coffee International
SBI Nevada, Inc.
2009
2008
$
$
14,328
11,703
26,031
58,390
9,549
67,939
the balance payable to SBI Nevada arose mainly from royalty payments, and the balance payable to Starbucks Coffee
International arose from the acquisition of inventories and fixed assets.
(5) inVEntOriES-
this balance at December 3, 2009 and 2008 is comprised as follows:
Buildings
Store equipment
Leasehold improvements
transportation equipment
Computer equipment
Production equipment
office furniture and equipment
Less accumulated depreciation
Land
Investments in progress*
2009
2008
$
133,452
133,452
1,685,705
1,550,891
2,237,604
2,022,795
128,638
245,667
232,004
129,260
225,086
185,140
97,628
92,098
4,760,698
4,338,722
(2,193,705)
(1,775,698)
2,566,993
2,563,024
63,185
61,864
267,500
420,023
$
2,897,678
3,044,911
(*) Corresponds mainly to store and restaurant openings whose termination date is 2010.
During 2009, the useful life of certain store equipment and leasehold improvements was reviewed and adjusted to the
current business operating conditions. the effect of that change was a credit to income of $3,698.
(8) GOODwill Of SubSiDiAry COMPAniES-
At December 31, 2009 and 2008, the Company’s goodwill is comprised as follows:
Food and beverages
Containers and packaging
other
obsolescence allowance
2009
2008
$
238,991
235,900
47,892
55,324
42,748
88,056
(5,337)
(5,180)
$
336,870
361,524
Alsea, S. A. B. de C. V.
West Alimentos, S. A. de C. V.
operadora DP de México, S. A. de C. V.
Dominalco, S. A.
Less accumulated amortization
(6) inVEStMEnt in SHArES Of ASSOCiAtED COMPAniES-
At December 31, 2009 and 2008, this item is comprised of the direct interest in the capital stock of the following
companies:
Starbucks Brasil Comercio de Cafés, Ltda.
Starbucks Coffee Chile, S. A.
Equity in
StOCKHOlDEr’S Equity
Equity in inCOME
2009
2008
2009
2008
$
$
17,631
18,140
(3,795)
(1,079)
7,402
10,744
(698)
(948)
25,033
28,884
(4,493)
(2,027)
2009
2008
$
124,912
124,912
60,061
19,619
90,061
19,619
2,367
2,367
206,959
236,959
(16,980)
(16,980)
$
189,979
219,979
As a result of the evaluation in the determination of the recoverable value of long-lived assets, the net book value of
fixed assets and goodwill recorded in the Alsea, S. A. B. de C. V. books at no time, except for the Burger King brand,
exceed their recoverable value. therefore, at December 31, 2009, an impairment loss was recorded amounting to
$30,000, thus reducing the goodwill balance related to that brand, with a debit to income for the year (see note 14).
[ 60 ]
[ 61 ]
(9) intAnGiblE ASSEtS-
Intangible assets at December 31, 2009 and 2008 are comprised as follows:
trADEMArKS
PrEOPErAtinG
ExPEnSES
frAnCHiSE
riGHtS AnD uSE
Of COMMErCiAl
fACilitiES
liCEnSES AnD
DEVElOPMEntS
tOtAl
Balances as
of December 31, 2008
$
603,600
317,480
254,771
157,974
1,333,825
Acquisitions
43,793
38,618
39,636
59,245
181,292
Less accumulated amortization
(253,687)
(220,173)
(121,208)
(117,428)
(712,496)
Balances as
of December 31, 2009
$
393,706
135,925
173,199
99,791
802,621
In 2009, Alsea increased its investment in brands and franchise rights, mainly due to the opening of Domino’s Pizza
stores in Mexico and Colombia, to the opening rights of Starbucks Coffee stores in Mexico and Argentina, and Burger
King in Colombia, and to the acquisition of California Pizza Kitchen and P.F. Chang’s. Pre-operating expenses are
directly related to the opening of new points of sale.
Additionally, the Company recorded an increase in franchise rights of $6,583 for the acquisition of the minority equity
of two subsidiaries in Colombia (see notes 1(e) and (f)).
(10) lOnG-tErM DEbt-
the long-term debt at December 31, 2009 and 2008 is comprised of loans with no guarantees, as shown below:
Unsecured loans
Less current installments
Long-term debt
MAturinG in
AVErAGE AnnuAl
intErESt rAtE
2009
2010-2012
5.00%-9.00% $
1,002,103
593,316
$
408,787
Annual maturities of the long-term loan are as follows:
yEAr
2011
2012
$
$
2008
1,790,178
660,080
1,130,098
AMOunt
282,662
126,125
408,787
Bank loans include certain obligations to do and not to do, and require keeping certain financial ratios. At the date of
the financial statements, all of the above obligations have been duly met.
(11) DEbt StOCK ExCHAnGE-
Based on the debt stock exchange program established by Alsea for a total of up to $700,000 Mexican pesos (seven
hundred million of Mexican pesos) or its equivalent in investment units (UDIs), in December 2009, a public offering
was made on the Mexican market of up to 3,000,000 debt stock exchange with a par value of $100 pesos (once
hundred pesos) each. the total amount of the offering was of $300 million Mexican pesos.
Debt stock exchange issued is for a three-year term, which means that they expire in December 2012. the certificates
are subject to 28-day tIIE (Average Interbank Interest Rate) plus 2.15 percentage points. Net resources obtained from
such issuance will be used to prepay bank liabilities.
the rating given is “AA”, which means that the issuer or issuance with such classification is considered to have high
credit quality and offers a high probability of timely payment of debt obligations. they keep a very low credit risk profile
under adverse economic scenarios.
the amount of issuance expenses, such as legal fees, issuance costs, printing fees, placement expenses, etc.
amounting to $3,945 were recorded as a deferred charge and are amortized on the straight-line basis over the period
in which the obligation is effective (see note 1 (a)).
(12) ACCruAlS-
Accruals at December 31, 2009 and 2008 are comprised as follows:
Balances as of December 31, 2008
Increases charged to operation
Payments
Balances as of December 31, 2009
rEMunErAtiOnS AnD
OtHEr EMPlOyEE
PAyMEntS
SuPPliES
AnD OtHErS
tOtAl
$
$
56,479
209,163
416,562
473,041
339,919
549,082
(231,229)
(350,879)
(582,108)
34,413
405,602
440,015
(13) COMPrEHEnSiVE finAnCinG rESult-
At December 31, 2009 and 2008, this item is comprised as follows:
Interest expense, net
Exchange loss, net
Favorable (unfavorable) monetary effect (1)
2009
2008
(122,489)
(115,444)
(5,349)
(83,914)
(3,881)
4,958
(131,719)
(194,400)
$
$
(1) In 2009 and 2008, it corresponds to the effect of unfavorable monetary position arising in the subsidiaries established in Argentina, which, based on the provisions of FRS
B-10 and the level of inflation accumulated in the preceding three most recent annual periods, are considered to be operating in an inflationary environment.
(14) OtHEr ExPEnSES, nEt-
At December 31, 2009 and 2008, this balance is comprised as follows:
2009
2008
Restatement and interest on tax refund (see note 18 (e))
$
111,487
Legal expenses (see note 18 (e))
Asset impairment (see note 8)
organizational restructuring (1)
Loss on fixed asset cancellation, net (2)
ESPS
other (expenses) income - net
(1) A formal restructuring plan was developed in 2009, which included liquidations and other inherent expenses.
(2) In 2008, it includes the provision for cancellations of leasehold improvements totaling $28,743.
(41,979)
(30,000)
-
-
-
(22,208)
(12,928)
(22,035)
(32,759)
(6,040)
6,820
(4,141)
3,894
$
(14,916)
(34,973)
[ 62 ]
[ 63 ]
(15) lAbOr ObliGAtiOnS-
At December 31, 2009 and 2008, the liability for seniority premiums and severance payments at the end of employment
for causes other than restructuring to which employees are entitled, are recorded in income for each year in which said
services are rendered, based on actuarial calculations.
the Company has not set up a trust to cover those benefits; the respective actuarial calculations are summarized below:
Defined benefit obligations
transition obligation and unamortized items
Net current liability
$
$
the net cost for the period is comprised as follows:
bEnEfitS
2009
2008
tErMinAtiOn rEtirEMEnt tErMinAtiOn rEtirEMEnt
14,453
14,204
24,848
18,934
(5,060)
(1,992)
(6,746)
(10,591)
9,393
12,212
18,102
8,343
bEnEfitS
2009
2008
tErMinAtiOn rEtirEMEnt tErMinAtiOn rEtirEMEnt
Labor cost
Financial cost
$
15,484
3,125
14,745
1,483
953
1,331
Amortization of transitory obligation
(13,235)
Net cost for the period
$
3,732
10
4,088
(8,980)
7,096
Following is a reconciliation of defined benefit obligations (DBo) at December 31, 2009 and 2008:
4,022
1,151
1,849
7,022
the most important assumptions of the above plans used in determining the net cost for the period are shown as follows:
Discount rate
Salary increase rate
Expected average labor life (years)
* Includes future compensation levels
bEnEfitS
2009
8%
5.9%*
5.3
2008
8%
9.4%*
7.4
the actuarial calculations were prepared consistently under the same financial reporting procedures and standards;
however, the main premises applied to the above studies were reviewed, mainly related to personnel turn over tables,
as a result of which the Company recorded a decrease in seniority premium and severance liabilities at the end of
employment for causes other than restructuring.
Derived from the review of the actuarial studies, the net decrease in labor obligations amounting $20,700, was
recognized in the results for the year (see note 2(n)).
(16) tAx On EArninGS (inCOME tAx (it), flAt rAtE buSinESS tAx (iEtu)) AnD EMPlOyEES’
StAtutOry PrOfit SHArinG (ESPS)-
Companies are required to pay the higher of IEtU and It. When the IEtU is payable, said payment is considered final
and not subject to recovery in subsequent years. the It Law in effect at December 31, 2009 establishes the 28%
rate, and based on the tax amendments in effect as from January 1, 2010, the It rate for fiscal years 2010 to 2012
is 30%, 29% for 2013 and 28% from 2014 onwards. the IEtU rate was 16.5% for 2008, 17% for 2009 and 17.5%
for 2010 and subsequent years. the Company determines It on a consolidated basis.
Given that according to Company estimations the tax payable in the following years is the Income tax, deferred taxes
at December 31, 2009 and 2008, was calculated on It bases.
the income tax expense at December 31, 2009 and 2008 is comprised as follows:
bEnEfitS
2009
2008
tErMinAtiOn rEtirEMEnt tErMinAtiOn rEtirEMEnt
It and IEtU on tax bases
Deferred It
2009
2008
196,676
160,180
(151,590)
(107,032)
45,086
53,148
$
$
Initial DBo balance
$
24,620
12,004
20,125
14,383
Labor cost of current service
15,484
3,125
14,745
Financial cost
1,483
953
1,331
4,052
1,151
Actuarial gains and losses for the period
(14,741)
(1,706)
(21,087)
(651)
Reduction and advance severance payments
-
-
16,842
-
Benefits paid
Final DBo balance
(12,393)
(172)
(7,108)
(2)
$
14,453
14,204
24,848
18,933
At December 31, 2009 and 2008, tax expenses attributable to pretax income and equity in the result of associated
companies differed from the amount resulting from applying the 28% rate in 2009 and 2008, as a result of the items
described as follows:
Expected It rate
Non-deductible expenses
Inflationary effect, net
Effect of published changes to laws and rates
Change in valuation reserve
others, net
Effective consolidated It rate
2009
28%
3%
(16%)
(13%)
19%
4%
25%
2008
28%
8%
(9%)
0%
(9%)
5%
23%
[ 64 ]
[ 65 ]
the tax effects of temporary differences giving rise to significant portions of deferred tax assets and liabilities at
December 31, 2009 and 2008 are described and shown below:
Following is the calendar for payment years established by the Company to cover income tax liabilities related to its tax
consolidation as a result of the enactment of the 2010 tax amendments:
inCOME tAx
2009
2008
Deferred (assets) liabilities:
Allowance for doubtful accounts
$
(3,846)
(3,152)
Liability accruals
Advances from customers
Unamortized tax losses, net of valuation reserv
Asset tax recoverable
(127,306)
(139,954)
(12,303)
(301)
(153,642)
(70,268)
(22,802)
(42,415)
Store equipment, leasehold improvements and property
(165,641)
(70,169)
other assets
Prepaid expenses
Deferred assets, net
It from reinvestment of profits and deferred ESPS
19,786
21,597
8,603
11,175
(457,151)
(293,487)
(681)
498
Assets recognized in the balance sheet
$
(457,832)
(292,989)
the valuation allowance at December 31, 2009 and 2008 amounted to $178,642 and $159,196, respectively. the
net change in the valuation allowance at December 31, 2009 and 2008 was an increase of $19,446 and $1,813,
respectively.
At December 31, 2009 and 2008, the Company generated a deferred ESPS asset, which was reserved in full by
Company’s management in light of the uncertainty of its realization.
the Company has not recorded a deferred tax liability for profits not distributed to its subsidiaries, recorded under the
equity method, arising in 2009 and previous years, since it currently does not expect those undistributed profits to be
reversed and become taxable in the near future. the above deferred liability will be recognized when the Company
considers that it will receive said undistributed profits and that they will become taxable, as in the case of the sale or
disposal of its investments in shares.
the reconciliation of It balances related to the Company’s tax consolidation before and after the enactment of the
2010 tax amendments is shown below:
Unamortized tax losses arising during consolidation for the controlling
and controlled companies
Profit derived from the comparison of the individual after-tax earnings account balance
versus the consolidated after-tax earnings account balance
2009
2008
$
$
145,723
110,907
5,245
150,968
-
110,907
yEAr
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
$
PAyMEnt
3,891
4,710
8,788
15,094
26,264
30,131
25,729
18,630
12,557
5,174
$
150,968
(17) StOCKHOlDErS’ Equity-
Following is a description of the main features of the accounts comprising stockholders’ equity:
(a) Capital stock structure-
Movements of capital stock and share issue premium are shown as follows:
tHOuSAnDS Of MExiCAn PESOS
nuMbEr
Of SHArES
CAPitAl
StOCK
ADDitiOnAl
PAiD-in CAPitAl
Balances as of December 31, 2007
618,656,796 $
534,364
1,090,334
Shares repurchased
from January 1 to December 31, 2008
(10,662,200)
(5,331)
-
April 2008, decree and payment of dividends in shares
9,967,388
4,984
138,546
Balances as of December 31, 2008
617,961,984
534,017
1,228,880
Shares repurchased from January to December 2009
(16,434,000)
(8,217)
-
Cancellation of repurchased shares
(157,260)
(78)
7,723
Balances as of December 31, 2009
601,370,724 $
525,722
1,236,603
In october 2009 and April 2008, Alsea declared dividends in the amount of $41,859 in cash and $143,530 in
shares, respectively.
[ 66 ]
[ 67 ]
the minimum portion of fixed capital with no withdrawal rights is comprised of Class I shares, while the variable
portion of capital stock is comprised of Class II shares, which at no time should exceed ten times the amount of
the minimum capital with no withdrawal rights.
At December 31, 2009, the fixed and variable portions of subscribed capital stock are comprised of 601,370,724
common, nominative shares, with no par value, as shown below:
nuMbEr Of SHArES
489,157,480
128,647,244
DESCriPtiOn
Fixed capital stock
Variable capital stock
(16,434,000)
Repurchased shares (nominal value)
601,370,724
Nominal capital stock
Increase for inflationary adjustment (note 2(p))
AMOunt
$
244,579
64,324
(8,217)
300,686
225,036
Capital stock as of December 31, 2009
$
525,722
the Mexican National Banking and Insurance Commission established a procedure that allows companies to
acquire their own shares on the stock market, for which purpose they must set up a “reserve for repurchase of
shares” with a debit to retained earnings.
total repurchased shares must not exceed 5% of total paid up shares, which must be replaced on the market in
a term not exceeding one year and which are not considered in the dividend payment. At December 31, 2009
and 2008, the Company repurchased 16,434,000 and 10,662,200 shares, which amounted to ($118,035) and
($125,748), respectively.
Available own repurchased shares are reclassified to contributed capital.
(b) Stock option plan for executives-
Alsea established a stock option plan for its executives. the plan started in 2005 and it concluded on December
31, 2009. the plan consisted of offering company executives the right to receive the appreciation in market
value of certain shares, which is determined from the difference in the price of the shares at the start of the plan
($5.70) and the price of the option for the year (market value) payable in cash. the market value at the close of
operations on December 31 was $8.73.
the Stockholders’ Meeting approved to assign 5,886,524 shares to the plan in question; those shares were
managed through a trust.
At the end of 2006, the executives exercised 20% of the rights acquired at that date ($1.05 per share) and the
remaining 80% was exercised in 2009, for which purpose a share subscription premium was recorded in the
amount of $14,306.
At December 31, 2009, procedures were started to extinguish the trust that managed the shares over the term
of the plan.
(c) restrictions on stockholders’ equity-
i) the net profit for the year is subject to the legal provision requiring that 5% of said profit be set aside to
constitute a legal reserve, until it equals one fifth of the capital stock. At December 31, 2009, the legal reserve
totals $86,921.
ii) Dividends paid from taxed profits are free from It if paid out of the After-tax Earnings Account (CUFIN). Any
excess over that account is subject to 30% tax on the result of multiplying the dividend paid by the 1.4286
factor. tax arising from dividend payments not paid out of the CUFIN is payable by the Company and it may be
credited against It payable in the following two years.
(18) COMMitMEntS AnD COntinGEnCiES-
Commitments:
a) the Company leases the locales that house its stores and distribution centers, as well as certain equipment, in
accordance with signed leasing agreements with defined expirations. Lease fees from January to December
2009 and 2008 totaled $688,751 and $565,606, respectively, and were established at fixed prices that increase
annually based on the NCPI.
b) the Company has contracted different commitments in relation to the arrangement established in the agreements
for the acquired trademarks (see note 2(k)).
c) During the regular course of operations, the Company contracts commitments arising from supply agreements,
which in certain cases establish conventional penalties in the event of non-compliance.
Contingent liabilities:
d) Alsea is involved in different lawsuits and trials derived from the course of its operations; the Company’s officers
and attorneys consider that the result of said lawsuits will not substantially affect the Company’s financial position.
e) Alsea filed an appeal in 2008 and 2007 through its subsidiary, operadora de Franquicias Alsea, S. A. de C. V. (oFA)
to ensure proper compliance with the Appeal Sentence related to application of the 0% VAt rate on the sale of
food. Application of that rate gave rise to favorable VAt balances in oFA. In May 2009, the Company was notified
of the final sentence annulling the rulings that disallowed the refund of favorable VAt and requiring that new rulings
be issued to comply with the appeal sentence, which allowed oFA to apply the 0% tax rate on prepared foods, as
established in the VAt Law. In August 2009, the Company received the refund of favorable tax balances for the
period from october 2006 to April 2007; the refunds for the period from May to December 2007, at the date of the
financial statements, are still in the process of being recovered.
the resources obtained include the historical favorable balances and the respective accessories, which have been
recorded in income for the year (see note 14).
f)
In December 2009, Alsea was notified of the first sentence handed down on November 19, 2009 in relation to the
lawsuit filed by Victor Eduardo Cachoua Flores and others against Alsea and others, and the accumulated lawsuit
field by Italcafe, S. A. de C. V. and others against Alsea and others, whereby Alsea and the codefendants were
sentenced to comply with the purchase-sale agreement signed with Messrs. Cachoua, and consequently pay the
price of the Italcafe, S.A. de C.V. shares and the respective legal interest.
Additionally, Alsea and the codefendants must pay the liability for franchise rights to Northern Stars Corporation
Limited at twice the tIIE interest rate. the foregoing means that Alsea must acquire the ownership of the Italianni’s
restaurants operating in Mexico, whose owner has a franchise agreement in place to exploit said brand. Alsea
considers that the sentence was not issued according to law and on the same date it filed an appeal against it.
the consequences of the result of the litigation cannot be currently determined by the Company and its legal
advisors, and therefore, no provision has been recorded for that purpose in the financial statements at December
31, 2009.
(19) finAnCiAl infOrMAtiOn PEr SEGMEnt-
the Company is organized in three large operating divisions comprised of sales of food and beverages in Mexico and
South America and distribution services, all of which are headed by the same management.
the information related to segments at December 31, 2009 and 2008 is shown in the following sheet (information in
millions of pesos):
[ 68 ]
[ 69 ]
External income
Inter-business income
FooD AND BEVERAGES
MEXICo
2009
2008
SoUtH AMERICA
2008
2009
DIStRIBUtIoN
2009
2008
ELIMINAtIoNS
2009
2008
CoNSoLIDAtED
2009
2008
$
6,032
5,738
1,408
972
1,135
1,065
12
11
$
8,587
$
7,786
-
-
-
-
1,930
1,890
(1,930)
(1,890)
-
-
6,032
5,738
1,408
972
3,065
2,955
(1,918)
(1,879)
8,587
7,786
operating costs and expenses
5,335
5,024
1,340
899
2,894
2,752
(1,982)
(1,921)
7,587
6,754
Depreciation and amortization
494
450
113
operating income
$
203
264
(45)
69
4
30
28
141
175
28
36
26
665
573
16
$
335
$
459
other income statement items
Majority net income
Assets
$
5,769
5,093
832
672
919
961
(2,244)
(1,274) $
5,276
(231)
$
104
Investment in associated companies
25
29
Investment in fixed assets an intangibles
296
628
201
223
29
69
(18)
(2)
25
508
$
$
(330)
129
5,452
29
918
total assets
$
6,065
5,721
1,058
924
948
1,030
(2,262)
(1,276) $
5,809
$
6,399
At December 31, 2009 and 2008, the net consolidated result for discontinuation in the Food and Beverage division is
of ($31,896) and ($35,008), respectively.
(20) PrO fOrMA infOrMAtiOn On ACquiSitiOnS Of buSinESS-
Following is the condensed consolidated pro forma financial information, as though the purchase of Domino’s Pizza
Colombia and Calpik had been concluded at the beginning of 2008 (see note 1(f)).
DECEMbEr 31, 2008
bASE
fiGurES
PrO fOrMA
ADJuStMEntS
(unAuDitED AMOuntS)
PrO fOrMA fiGurES
(unAuDitED AMOuntS)
Income
$
7,786,843
Income from continuous operations
Consolidated net income
Minority interest
Majority net profit
174,539
139,531
10,752
128,779
Net earnings per share
$
0.21
96,977
(8,977)
(8,977)
(711)
(8,266)
7,883,820
165,562
130,554
10,041
120,513
0.20
lic. Alberto torrado Martínez
General Director
lic. José rivera río rocha
Chief Financial officer
C.P. Alejandro Villarruel Morales
Corporate Comptroller
[ 70 ]
Alsea is the leading Quick Service Restaurant (QSR) and Casual Dining operator in Latin
America, operating brands of proven success such as Domino’s Pizza, Starbucks Coffee,
Burger King, Chili’s Grill & Bar, California Pizza Kitchen and P.F. Chang’s China Bistro. Its
multi-unit operation is backed by its Shared Services Center, including the supply chain
through DIA, real estate and development services, as well as administrative services such
as finance, human resources and technology.
20 YEARS OF OPERATION // 1,171 STORES // 20,000 EMPLOYEES // PRESENCE IN 5
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INVESTOR INFORMATION
Help us celebrate 20 years
of making every moment special.
Come in and have a cup of coffee!
Valid in all Starbucks Coffee stores in
Mexico and the United States of America
Investor Relations
Diego Gaxiola Cuevas
Corporate Finance
ri@alsea.com.mx
Tel: +52 (55) 5241-7151
Enrique González Casillas
Investor Relations
ri@alsea.com.mx
Tel: +52 (55) 5241-7035
Headquarters
Alsea S.A.B. de C.V.
Av. Paseo de la Reforma #222 - 3er. Piso
Torre 1 Corporativo
Col. Juárez, Del. Cuauhtémoc
C.P. 06600, México D.F.
Tel: +52 (55) 5241-7100
Independent Auditors
KPMG Cárdenas Dosal, S.C.
Boulevard Manuel Ávila Camacho #176
C.P. 11650, México D.F.
Tel: +52 (55) 5246-8300
Information on Alsea’s Stock
The single series shares of Alsea S.A.B. de C.V.
have been traded on the Mexican Stock Exchange
(Bolsa Mexicana de Valores or BMV)
since June 25, 1999.
Ticker Symbol: BMV Alsea*
Alsea’s 2009 Annual Report may include certain expectations regarding the results of Alsea, S.A.B. de C.V. and its subsidiaries. All
such projections, which depend on the judgment of the Company’s Management, are based on currently known information; however,
expectations may vary as a result of facts, circumstances and events beyond the control of Alsea and its subsidiaries.
IT’S POSSIBLE TO SAVE THE PLANET
All efforts are important, and although the press run of this report is relatively small, we reiterate
our commitment to the environment by using environmentally-safe materials.
The following are savings resulting from the use of recycled fiber.
We used 4,900 lb of paper -meaning 10% recycled material- thereby allowing us to:
14 trees preserved for the future
5,162 gallons wastewater flow saved
147 lbs solid waste not generated
9,870,000 BTUs energy not consumed
This report was printed on Earth Aware paper,
FSC certified, Elementally Chlorine Free.
TO BE CLOSER
EVERY MOMENT
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ANNUAL REPORT 2009
www.alsea.com.mx