people’s spirits
Stirring
25 years
.net
alsea
www.
Stirring people’s spirits
2015 Annual Report
2015
Annual Report
Stirring
people’s spirits
Quick Service
Restaurants
1,499 units
G4-4
Coffee Shops
705 units
Casual Dining
Restaurants
498 units
Family Dining Restaurants
252 units
1
2015 Annual ReportStirring people’s spiritsALSEA Our
presence
G4-5, 6, 9, EC1
Mexico
2,092
units
Argentina
183
units
Chile
115
units
Colombia
93
units
Brazil
4
units
Spain
467
units
Sales
per segment
32,288
million pesos
Quick Service Restaurants
Casual Dining Restaurants
Cofee Shops
Family Dining Restaurants
DIA
%
36
23
22
15
4
Sales
per brand
+42% vs. 2014
Starbucks
Burger King
Domino’s
Vips
Foster’s Hollywood
Chili’s
Italianni’s
DIA
El Portón
P.F. Chang’s
Other*
* Includes: California Pizza Kitchen, La Vaca Argentina,
The Cheese Cake Factory, Cañas y Tapas and Il Tempietto
%
22
21
15
15
7
4
4
4
3
3
2
77% Corporate Units
23% Sub-franchised Units
A high-performance
team focused on
maximizing profitable,
sustainable growth
of the Company.
3
2015 Annual ReportStirring people’s spiritsALSEA Financial
highlights(1)
G4-9, EC1
CAGR (5)
Annual
Growth
2015
%
2014
%
Income Statement
Net Sales
Gross Profit
Operating Income
EBITDA(2)
Consolidated Net Profit
Balance Sheet
Total Assets
Cash
Liabilities with Cost
Major Shareholders’ Equity
Profitability
ROIC(3)
ROE(4)
Stock Information
Share Price
Earnings per Share
Dividend per Share
Book Value per Share
Shares outstanding (millions)
Operation
Number of Units
Employees
31.9%
33.9%
51.0%
39.9%
44.5%
23.2%
27.7%
41.7%
42.7%
60.3%
53.5%
65.5%
7.0%
7.5%
8.8%
3.1%
16.3%
38.7%
46.8%
38.3%
3.1%
-
6.1%
2.9%
32,288.4
22,139.1
2,353.8
4,301.7
1,032.8
32,853.5
1,195.8
12,233.3
8,948.2
9.3%
10.4%
59.85
1.171
0.50
10.83
837.5
2,954
61,822
100.0%
22,787.4
100.0%
68.6%
15,515.1
7.3%
13.3%
3.2%
1,468.5
2,801.8
624.1
68.1%
6.4%
12.3%
2.7%
100.0%
30,871.5
100.0%
3.8%
38.4%
28.5%
1,112.9
11,239.2
8,757.9
3.7%
37.8%
29.6%
8.0%
7.5%
40.77
0.847
-
10.51
837.6
2,784
60,051
(1) Figures in millions of nominal pesps under IFRS standards, exept data per share, 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 cash equivalents - no cost liabilities).
(4) ROE is defined as net profit over mayor shareholders’ equity.
(5) CAGR Compound Annual Growth Rate 2011 a 2015.
2015 Results
Million pesos
Net Sales
EBITDA
9
9
6
0
1
,
0
2
5
3
1
,
8
9
6
5
1
,
7
8
7
2
2
,
8
8
2
2
3
,
3
2
1
1
,
9
0
6
1
,
0
4
0
2
,
2
0
8
2
,
2
0
3
4
,
‘11
‘12
‘13
‘14
‘15
‘11
‘12
‘13
‘14
‘15
Consolidated Net Income 1,033 Million pesos
3,439 Million pesos
CAPEX
ROIC
ROE
9.3 %
10.4 %
5
2015 Annual ReportStirring people’s spiritsALSEA Financial
highlights
G4-9, EC1
Shares Outstanding
(million)
837.5
Average Value Traded
(million pesos)
100
Share price year ended 2015
$59.85
Dec’11
Dec’12
Dec’13
Dec’14
Dec’15
$
70
60
50
40
30
20
10
0
e
c
n
a
m
r
o
f
r
e
p
e
c
i
r
p
e
r
a
h
S
Same
Store Sales
Alsea
9.3%
Mexico
4.4%
South America
25.5%
Spain
7.2%
7
2015 Annual ReportStirring people’s spiritsALSEA General Management’s
Message
G4-1
To our
Shareholders
In 2015, we continued stirring the spirits of our stakeholders and the outstanding
results we achieved made the company even more solid.
After 25 years of operation, we have become the leading restaurant operator in
Mexico, Latin America and Spain. We are pleased to share with you our results in
2015, a year of strategic reorganization with eye to the company’s future.
As part of our strategy, bearing mind the brisk pace of expansion the company has
seen in both Mexico and international markets, and in order to maximize its growth
potential in those countries and focus more closely on its operations, in 2015 the
company decided to reorganize into two business units: Alsea Mexico and Alsea
International.
Alsea Mexico
In 2015, our goal at Alsea Mexico was to focus on
consolidating not only the growth of the brands in
our portfolio, but our recent acquisitions as well.
In Mexico, we kept our attention on operations unit
by unit, to obtain maximum return, shoring up our
growth and our process efficiency.
We increased the number of units we operate
to 2,092, which was a net growth of 93 units
throughout the year. Our sales grew 19.1% to
19.90 billion pesos, and a like-for-like growth of
4.4% in the full year. Our adjusted EBITDA margin
was 23.5% and adjusted EBITDA grew 15.6% to end
the year at 4.67 billion pesos.
We also made organizational changes relating to the
Vips and El Portón restaurants, incorporating the
latter into our portfolio of Casual Dining brands and
launching a multi-brand loyalty program called “Wow
Rewards” that we hope will forge closer ties with our
customers and reward them for their preference.
During the year we also kept up with our goal of
supporting more children and young people suffering
from hunger and malnutrition, opening up our sixth
children’s dining room in Saltillo, Coahuila, which
serves 2,000 boys and girls daily.
2016 will be a year of daunting challenges, but
also of opportunities to consolidate our position as
nationwide leaders. We will continue our plan to
grow our brands organically, focusing on profitability
and operating efficiency, backed by the efforts and
commitment of all of the employees that make up
Alsea Mexico.
9
2015 Annual ReportStirring people’s spiritsALSEA Alsea Internacional
In 2015, the company opened 77 new units in
international markets, continuing our strategy of
growth and consolidation of the portfolio in the
markets where we operate. Over the course of the
year, we made several strategic decisions to maximize
the company’s potential in those markets, enabling
us to replicate Alsea’s business model and achieving
greater depth in the synergies in each country.
Sales in South America accounted for 20.7% of Alsea’s
consolidated sales for the year. This segment saw
a 45.4% growth in sales, to an annual total of 6.72
billion pesos, and adjusted EBITDA for the full year
2015 grew 50.4% to 1.02 billion pesos. The adjusted
EBITDA margin improved by 50 basis points. In
Spain, 2015 revenues accounted for 17.8% of Alsea’s
consolidated sales, and adjusted EBITDA for the
year reached 1.08 billion pesos, driving a significant
improvement in the margin, reaching 19.1%.
In 2016 we will continue to focus on our strategy
of growth and consolidation in the international
markets where we operate, keeping up the pace of
organic growth while taking advantage of acquisition
opportunities that strengthen our portfolio in each
country and generate the dynamism we are seeking
in every market.
Other achievements in 2015:
• We improved our debt profile using the resources obtained from an issue of securities
certificates on the local market, which was the first time we issued securities debt at
10 years and also the first time an A+ rated issuer placed assets at this term.
• In Mexico we signed a cooperation agreement with the Federal Consumer Protection
Agency (PROFECO), through which we joined efforts established in the National
Strategy for the Prevention and Control Excess Weight, Obesity and Diabetes in
Mexico, which will promote a culture of responsible consumption and a healthy,
balanced lifestyle.
• For the fourth year in a row, we earned the Socially Responsible Enterprise distinction
from the Mexican Center for Philanthropy (CEMEFI).
• Included in the Mexican Stock Exchange Sustainable IPC index for the third year in a row.
• Signatories of the United Nations Global Compact for the fifth year in a row, by which
we pledge to operate under the principles established in that document.
We attribute our success in meeting our goals last year to a favorable climate for
consumption, our efficient business model, the strength of each of the brands that make
up our portfolio, and various product launches, campaigns and technological tools that
complemented our strategies.
We are grateful to all our employees, customers, partners and shareholders for placing their
trust and interest in our company, and we invite you to stir people’s spirits and accompany
us in meeting the goals and expectations we have for the future.
Federico
Tejado
Fabian
Gosselin
Alsea Mexico
Alsea Internacional
11
2015 Annual ReportStirring people’s spirits ALSEA G4-3
We are
Alsea...
01.
...the leading restaurant operator in Latin America
and Spain, with internationally-recognized brands in
the Quick Service, Coffee Shop, Casual and Family Dining
Restaurant segments.
Winning
Attitude
Engaged
Leadership
Surprising
Service
Collaborative
Spirit
Attention
to Detail
customers’ happiness”
are reflected in our
“Our achievements
Alsea’s World
“Our achievementsare reflected in ourcustomers’ happiness” Our passion for excellence inspires
us to find comprehensive solutions,
meet increasingly ambitious goals and
maximize great results
Winning
Attitude
“Our achievements are reflected
in our customers’ happiness”
“Passion is a symptom
of contagious happiness”
15
2015 Annual ReportStirring people’s spiritsALSEA Our restaurant managers think and
act like owners, always aware of the
business, the needs of the customer
and of the team
Engaged
Leadership
“Our achievements are reflected
in our customers’ happiness”
“The best attitude,
hands-on”
17
2015 Annual ReportStirring people’s spirits ALSEA We pursue increasingly high standards
of satisfaction with a contagious passion
to serve and surprise
Surprising
Service
“Our achievements are reflected
in our customers’ happiness”
“Every day can be
a big surprise”
19
2015 Annual ReportStirring people’s spiritsALSEA We combine ideas with talent, building
a hands-on community that helps each
other through challenges and multiplies
the value of our results
Collaborative
Spirit
“Our achievements are reflected
in our customers’ happiness”
“Friendship
multiplies joy”
21
2015 Annual ReportStirring people’s spiritsALSEA We strive for continuous improvement,
delivering excellent execution to enhance
the value of the Alsea experience
Attention
to Detail
“Our achievements are reflected
in our customers’ happiness”
“The magic is in
the smallest details”
23
2015 Annual ReportStirring people’s spiritsALSEA G4-56
Strategic
Approach
Stirring
people’s spirits
Purpose
Value
proposal
We are a community committed firmly to
excellence and integrity. We maximize
synergies to deliver a surprising array of
products and generate extraordinary results,
with just the right dose of happiness, down to
the smallest details, to fulfill our purpose of
stirring peoples’ spirits.
Strategic
areas
Customers
Employees
Synergy
Results
Consistently
surpass our
customers’
expectations.
Provide an
efficient platform
for synergies and
growth.
Support the
development of
our people and
have the best
management
talent in the
industry.
Incorporate and
operate brands of
proven success,
preserving
their essence
while ensuring
sustained,
profitable
growth.
Corporate
Responsibility
Promote a culture
focused intensively
on growth and
continual learning,
with a keen
sense of social
responsibility.
25
2015 Annual ReportStirring people’s spiritsALSEA Alsea’s business units are backed by five support areas: Supply Chain,
Property and Development, Finance, Human Resources, and Information
Technology. We also have a structured corporate governance that includes a
Board of Directors supported by Audit and Corporate Practices Committees.
G4-4, 56
Business
Model
Finance
Information
Technology
Human
Resources
Marketing
Internal
Audit
Supply
Chain
Real Estate
Development
Corporate
Responsibility
T
R
O
P
P
U
S
R
E
T
N
E
C
S
D
N
A
R
B
Operation
Marketing
Human Resources
BRANDS
BUSINESS MODEL
PEOPLE
OTHERS
• Portfolio diversity
• Leading global brands
• Leading own brands
E
V
I
T
I
T
E
P
M
O
C
S
E
G
A
T
N
A
V
D
A
• Shared services
• Brand synergies and best
practices
• Economies of scale
• Negotiating power with
suppliers and developers
• Geographic footprint
• Market experience
• Innate talent
• Alsea career plan
• Access to technology
• Corporate responsibility
• Corporate governance
• Ability to handle complexity
27
2015 Annual ReportStirring people’s spirits ALSEA
G4-56
Growth
strategy
Organic growth + Acquisitions
GROWTH
+ Same
Store Sales
+ Existing
Brands
+ Store
Openings
+ New
Brands
+ Franchisees &
Sub-franchisees
+ New
Markets
MARGIN
EXPANSION
Operating
Leverage
Same Store Sales
+ Units
Business Mix
Corporate
Franchised
Subfranchised
Brands
Segments
Geographies
Operating
Efficiencies
Cost of Sales
Pricing Strategy
Expenses
Synergies
Best Practices
Good
Macroeconomics
Solid
Business Plan
Great
Execution
Formula for
Success
29
2015 Annual ReportStirring people’s spiritsALSEA G4-18, 28, 24, 34, 35, 42, 56
Corporate
Responsibility
Model
Corporate Responsibility
Committee
Directed by the Chairman of the Board, Directors of Alsea Mexico,
Alsea International Director, Shared Services and Brand Directors
Stakeholders:
Shareholders, Customers, Employees, Suppliers, Community, Investors,
Government, NGOs, Media and Competitors.
S
N
O
I
S
S
I
M
M
O
C
Quality of life and
Business Ethics
Responsible
Consumption
Environment
We want working at Alsea to
be a source of satisfaction
and pride, and we support
comprehensive advancement
of our employees based on
a life-work balance and
ethical, responsible conduct.
We offer our customers the
best assortment of products
made with the highest quality
ingredients, promoting
balanced lifestyles and
being mindful of the social,
environmental and economic
implications of the product
life cycle, while building
awareness among our
customers and employees.
Promoting environmental
care through the sustainable
operation of our units, striving
for profitability through
innovation and leadership in
our 4 lines of action: energy,
water, supplies and waste.
Community
Support
We support the growth and
welfare of the communities
where we operate, with
engagement strategies that
bring us closer to them and
help us better understand
their needs. We work mainly
for nutrition and education.
Human
Resources
Directors
Marketing
Supply and
Product
Development
Directors
Media,
Marketing
and Públic
Relations
Operation
Managers
Corporate Responsibility is a strategic area at Alsea, and it is managed through
four pillars that guide our actions and enable us to respond to the expectations
and needs of our stakeholders: Employee Quality of Life and Business Ethics,
Responsible Consumption, Environment, and Community Engagement.
About this
Report
Our report “Stirring People’s Spirits” is the fourth
integrated annual report Alsea has published, and
includes the results of the period from January 1
to December 31, 2015.
This year it is prepared for the first time based on the G4
Guidelines of the Global Reporting Initiative (GRI), under
the Core “in-accordance” option for reporting without
external verification.
This document is an information tool whose content and
clarity are driven by the principles of clarity, balance,
comparability, precision, timeliness and reliability.
• Sustainability context
Corporate Responsibility for Alsea is not a program,
initiative or function but an attitude that
is
incorporated into all aspects of our business planning
and operations.
• Materiality
In 2015, we conducted a materiality analysis to
determine the most transcendent aspects for Alsea
and our stakeholders, which was essential for shaping
this report.
• Stakeholder involvement
We engaged in dialogue with our stakeholders and
took into account their opinions and expectations
regarding the key issues identified in the materiality
study.
report
• Exhaustiveness
documents Alsea’s
This
performance in 2015, detailing the impact of the
material aspects identified, how they were managed,
and the scope of each.
exhaustively
31
2015 Annual ReportStirring people’s spirits ALSEA Materiality
G4-25, 37
In 2015, we strengthened our connection with the
stakeholders, with whom we maintain a continuous
dialogue, using the channels we have established for
this purpose.
In partnership with a consulting company, we conducted
a materiality analysis for the first time in order to
identify aspects that were material to both Alsea and
our stakeholders. The methodology was the following:
Materiality
study
Qualitative and Quantitative study of:
Industry maturity
Sectorial risk
Social risk
Identifying key issues
Dialogue with stakeholders
(online survey)
Material aspects
Employees
Suppliers
Customers
33
2015 Annual ReportStirring people’s spiritsALSEA Materiality
Urgent
100%
G4-19, 20, 21
Once we completed our dialogue with stakeholders,
we related the data with the results of our analysis
of industry maturity, sectorial risk and social risk and
this gave us a set of material aspects validated by our
stakeholders.
Necessary
Environmental
policy
Product
development
Corporate
responsibility
management
Energy
eco-efficiency
Materials
Social impact
Ethics
Customer
management
Climate
change
Water resources
management
Health and
Safety
Talent
recruitment
Human Capital
Supplier
standards
Corruption
Financial
issues
Human
rights
s
r
o
t
a
v
i
t
o
m
l
a
i
c
o
S
+
s
r
o
t
a
v
i
t
o
m
l
a
i
r
o
t
c
e
S
+
y
t
i
r
u
t
a
m
y
r
t
s
u
d
n
I
50%
0%
50%
Emerging
Alsea + Stakeholders
100%
General
The coverage and scope of each material aspect are detailed in the table below:
Material aspect
Coverage
Scope
Corporate Social Responsibility Management
Economic performance
General
Customer health and safety
Product and service labeling
Marketing communications
Customer privacy
Regulatory compliance
Ethics and integrity
Anti-corruption
Public policy
Anti-competitive practices
Training and education
Investment
Jobs
Local communities
Indirect economic repercussions
Non-discrimination
Child labor
Forced labor
Procurement practices
Environmental evaluation of suppliers
Labor practices evaluation of suppliers
Human rights evaluation of suppliers
Social repercussions analysis of suppliers
Products and services
Regulatory compliance
General
Materials
Health and Safety
Emissions
Energy
Water
●
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●
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●
●
●
●
●
●
●
Shareholders, customers, employees, suppliers, community, investors, government, NGOs,
media, competitors
Shareholders, customers, employees, suppliers, investors, media and competitors
Investors, NGOs and media
Customers, employees, investors, authorities, media
Customers, authorities and competitors
Customers, authorities and media
Customers, employees and authorities
Shareholders, customers, employees, investors, authorities and media
Shareholders, customers, employees, suppliers, community, investors, authorities, NGOs,
media and competitors
Shareholders, customers, employees, suppliers, community, investors, authorities and
media
Authorities
Customers, employees, investors, authorities, media and competitors
Employees
Employees, suppliers, community and NGOs
Employees and communities
Employees, community and NGOs
Customers, employees, suppliers, community and NGOs
Shareholders, customers, employees, suppliers, community, investors, authorities, NGOs,
media and competitors
Employees, suppliers, community, authorities, NGOs, media
Employees, suppliers, community, authorities, NGOs, media
Suppliers
Suppliers, investors and authorities
Suppliers, investors and authorities
Suppliers, investors and authorities
Suppliers, investors and authorities
Investors, authorities and NGOs
Shareholders, investors, authorities, NGOs and media
NGOs
Suppliers and NGOs
Employees and authorities
Community, authorities and NGOs
Community, authorities and NGOs
Community, authorities and NGOs
● Material for the Company ● Material inside and outside the Company ● Material inside the Compay and its brands ● Material outside of the Company
35
2015 Annual ReportStirring people’s spirits ALSEA Message from the Chairman
of the Board of Directors
G4-1
Dear
Shareholders
This year at Alsea we are celebrating 25 years
of continuous work and constant expansion,
and it pleases us to share within the pages of
our 2015 Annual and Sustainability Report the
successes that have allowed us to spark the
spirit in people throughout our history.
We are very proud of the fact that we are now a
leading company in the restaurant sector, and that
we have almost 62,000 employees that make up an
exceptional team in six countries, with 14 brands.
Besides it being a year of celebration for us, 2015
was also a positive year during which we continued
to consolidate our position as leaders in the markets
where we are present. We found ourselves in an
environment that was favorable for consumption,
which allowed us to improve our operations and
optimize our company’s performance, to levels above
our original expectations.
We value innovation as a key component of our DNA,
and that drives us to continue to develop projects that
help us remain at the forefront in our sector, not only
because of the products and services we offer our
clients, but also for our technological advances. This
year, for example, we launched the Domino’s Pizza
and Burger King mobile apps, and our multi-brand
“Wow Rewards” fidelity program, through which we
are able to get closer to our clients and improve our
communication with them, by offering a simple way
to get immediate benefits at our stores.
With the opening of 170 stores—a record number in
our 25 years’ history—we reached 2,954 units, sales
for 32.3 billion pesos, and a 4.3 billion pesos EBITDA.
I reiterate: 2015 was a very successful year for Alsea.
To strengthen our long-term vision and ensure the
profitable growth of our company, during 2015 we
began operating under a new organizational structure
through which we separated the Alsea México and
Alsea International operations. With this measure,
we are able to focus more on the operation and
have greater flexibility and execution capabilities to
maximize the opportunities for growth we find in
each segment and market in which we participate.
Both business units report to the Alsea Board of
Directors that I have the honor to preside. Further,
the Administration and Finance, Human Resources,
and Strategic Planning divisions report directly to me,
making possible for them to support the operation of
our business units in all our markets.
The Board of Directors and its governing bodies
continue to collaborate to drive Alsea to accomplish
the levels of profitability and growth the market
expects from us. As part of this task, we are fully
aware of the managing risks that are inherent to a
company with a geographic coverage and critical
mass such as ours.
Additionally, at Alsea we reinforce every day our
commitment to being a company that strictly complies
with the Code of Best Corporate Practices. Through
the work of our Board of Directors, we make sure that
we comply with the highest corporate governance
standards to generate greater security and trust in
our national and international shareholders.
Based on our proven responsible and strong
entrepreneurial behavior, and on the value we generate
for our business, employees, and shareholders, we
were included for the third consecutive year in the
Sustainability Index of the Mexican Stock Exchange.
Furthermore, we obtained the distinction as a Socially
Responsible Company, for the fourth consecutive year.
We have accomplished outstanding results in terms
of profitability and operating efficiencies, and we
increased our diversification and financial strength.
Additionally, in our daily activities, we reiterate our
commitment to society, environmental stewardship,
the quality of life of our employees, and the satisfaction
of our clients.
As we embrace 2016, we will work to continue
increasing our profitability. We will focus our efforts
on facing up to the challenge of maintaining our
current growth rates to reach the five-year goals we
announced at the end of the year, during the first
Alsea Analyst and Investor Day.
We celebrated 25 years of success, grateful to all our
employees for their effort, passion and commitment,
as with our customers for their preference and
confidence, which motivates us to see the future of
Alsea with great optimism.
Alberto
Torrado
Executive Chairman of
the Board of Directors
37
2015 Annual ReportStirring people’s spiritsALSEA
02.
Corporate
Governance
Alsea follows the strictest
Corporate Governance practices
and abides by the law in every
country where we operate.
39
2015 Annual ReportStirring people’s spiritsALSEA G4-34, 38, 40, 51
12 Board Members
6 Related Members
6 Independent Members
Corporate Practices Committee
Audit Committee
Board of
Directors
Our Corporate Governance model begins with our Board
Directors, which is made up of 12 members who were
ratified or appointed in the General Ordinary and
Extraordinary Shareholders’ Meetings of October 19, 2015.
The Board includes six Independent Members. Its chairman
is Alberto Torrado Martínez, who is a related owner member.
To guarantee that the company’s strategic planning
is conducted with an impartial vision, 50% of Alsea’s
board members are independent. This is well above
the 25% minimum required by the Securities Exchange
Act. The Board does not have Alternate Members,
because we believe the Regular Members are
obligated to fulfill their duties by attending meetings.
Alsea may convene a meeting of the Board of Directors
at the request of at least 25% of the Board Members.
The compensation system for Board members is fixed
and calculated based on attendance to meetings of
the Board and the committees to which they belong,
in addition to their participation in deliberations and
the efficiency of the strategic decisions taken.
In compliance with the Securities Exchange Act, to
support the Board of Directors, Alsea created two
committees that act as intermediary management
bodies: The Corporate Practices Committee and the
Audit Committee, which are comprised exclusively of
Independent Board Members.
Corporate Practices Committee
Among the general duties of the Corporate Practices
Committee are:
• To make observations on the performance of key
executives.
• To monitor and report on transactions with related
parties, detailing the characteristics of any significant
transaction.
• To establish and review emoluments or comprehensive
compensation packages.
• To review and present the dispensations granted by
the Board of Directors.
41
2015 Annual ReportStirring people’s spirits ALSEA G4-38
Audit Committee
Among the general duties of the Audit Committee are:
• To monitor and report on the state of the Company’s
internal control system and internal audit system,
and those of the companies that it controls, and
where applicable, to identify any deficiencies and
discrepancies, as well as the aspects that require
improvement. To this end it must take into account
the opinions, reports, communiqués and reports by
the external auditor, as well as the reports issued by
independent experts who have provided their services
during the period covered by the report.
• To review, report and follow up on the preventive
and corrective measures taken on the basis of
investigations into any breach of guidelines and
operating policies, and accounting records; with
regard to either the Company itself or the companies
that it controls.
• To report on and evaluate the performance of the
company that provides external auditing services.
• To report on the main results of the review of the
Company’s financial statements and those of
companies that it controls.
• To report on the description and effects of
modifications to approved accounting policies.
• To report on the measures adopted pursuant to
observations by shareholders, Board Members, key
executives, employees and in general any third party,
with respect to accounting, internal controls and
matters related to the internal or external audit or
even matters arising from complaints made regarding
management events that are deemed irregular.
• To report on and follow up on the resolutions passed
in the Shareholders’ Meetings and by the Board of
Directors.
The compensation system for Board members is fixed
and calculated based on attendance to meetings of
the Board and the committees to which they belong, in
addition to their participation in deliberations and the
efficiency of the strategic decisions taken.
Board of
Directors
Alberto Torrado Martínez
Chairman
PROPRIETARY MEMBERS
INDEPENDENT BOARD MEMBERS
Alberto Torrado Martinez
Chairman
Cosme Torrado Martinez
Member
Armando Torrado Martinez
Member
Fabian Gerardo Gosselin Castro
Member
Federico Tejado Barcena
Member
Diego Gaxiola Cuevas
Member
Raul Mendez Segura
Chairman, Grupo Green River
Ivan Moguel Kuri
Partner of Chévez Ruiz Zamarripa y Cía, S.C.
Carlos Piedrahita
Global Reporting Initiative (GRI)
for Latin America
Julio Gutierrez Mercadillo
Chairman, Grupo Metis
Leon Kraig Eskenazi
Director and Partner, Ignia Partners, LLC
Steven J. Quamme
Chairman, Cartica Capital
SECRETARY
Xavier Mangino Dueñas
Partner of Diaz de Rivera y Mangino, S.C.
AUDIT COMMITTEE
Ivan Moguel Kuri
Julio Gutierrez Mercadillo
Raul Mendez Segura
Elizabeth Garrido Lopez
CORPORATE PRACTICES COMMITTEE
Chairman
Julio Gutierrez Mercadillo
Member
Member
Cosme Torrado
Leon Kraig Eskenazi
Secretary
Carlos Piedrahita
Elizabeth Garrido Lopez
Chairman
Member
Member
Member
Secretary
43
2015 Annual ReportStirring people’s spiritsALSEA Code of
Ethics
G4-56, 57, 58
United by a culture of commitment
At Alsea we create, develop and bring to life different
experiences to Stir people’s Spirits. This is possible when
our employees feel a sense of pride, belonging and
identification with the Company, inspiring them to work
with passion, commitment and dedication every day.
The full development of Alsea’s culture is indispensable
to its success and to developing a true competitive
advantage. This culture is made up of every one of us;
we are the ones who put it into practice, we shape it,
and we apply it every day, regardless of the brand or
country where we work and contribute to Alsea.
Every person is the living expression of their values.
That’s why our Code of Ethics is so important. It explains
the standards of conduct we promote and are eager
to apply to our daily actions within the organization.
This Code is a guide for all, because it embodies our
aspiration to be a company that conducts itself with a
winning attitude, involved leadership, surprising service,
collaborative spirit and attention to detail, generating
results in the right way to benefit our clients, employees,
shareholders and the community at large.
We are convinced that by living Alsea’s Values we can
build a culture based on high ethical standards, creating
a healthy, positive workplace where we can all work
together in harmony.
We all want to make this a better place to work, a safe
company, with equal opportunities, free of risk, and one
we can feel proud of. So we invite our employees to work
every day with an attitude of ethics and responsibility,
abiding by the guidelines established in our Code of
Ethics.
Our Code provides detailed standards of conduct
regarding:
• Compliance with the law, regulations, and internal
and external standards
• Our dealings with customers
• Equal opportunities
• A harassment-free workplace
• Occupational safety
• Conflicts of interest
• Policy against accepting gifts
• Transparent, corruption-free business dealings
• Care of our work tools
• Anti-fraud measures
• Protection of private and confidential information
• Environmental care and responsible use of resources
To guarantee compliance with our ethical guidelines,
we have created a hotline for stakeholders, which we
call Línea Correcta or “Right Line”, a mechanism for
receiving reports of violations to our Code of Conduct
by Alsea employees, supplies and brands, both in
Mexico and in Latin America. The hotline is managed
in a comply objective, reliable and confidential manner.
For more information about our Code of Conduct, visit:
http://www.alsea.net/investor-relations/code-of-
ethics
45
2015 Annual ReportStirring people’s spirits ALSEA 03.
Our
People
We support the
development of our people
and have the best management
talent in the industry.
47
2015 Annual ReportStirring people’s spiritsALSEA We are very proud to have a team made up of
61,822 employees spread out over six countries.
To all of them, we offer a pleasant workplace
environment, a culture of respect and service, and
the conditions they need to develop professionally
and personally, and to find the ideal life balance.
Talent
At Alsea, we are committed to attracting and retaining
talent. We provide the best working conditions in a healthy
environment, placing a priority on non-discrimination, equal
opportunity and fairness, and pursuing challenging projects
that support the comprehensive development of our
employees.
Our goal is to attract employees with innovative ideas
who can contribute to our best practices and experience.
Our recruitment and selection process is based on the
comprehensive Human Rights policy in Mexico and the
ÚNETE Business Rules on Talent Attraction, Recruitment
and Selection.
The benefits of correctly managing this process are
translated into greater business know-how, which
comes from the training of our new employees, lower
turnover, and development of leaders through various
leadership and motivation programs. We have also
identified some opportunities in defining a career plan
for some positions.
49
2015 Annual ReportStirring people’s spirits ALSEA G4-LA1
In order to attract the best candidates for filling positions
within Alsea, we have a recruitment team in every
country where we operate. We post our job openings
through various authorized recruitment sources, like
institutional, government or online job banks, social
networks, schools and universities, and we establish
specific strategies and lines of action for encouraging
employee retention for each of our brands.
The main challenge we faced in 2015 was attracting
the talent we needed to grow our brands and recruit
employees to fill more than 2,000 operating positions
and more than 500 corporate positions, due to the
opening of 122 corporate-owned units. We were able
to meet these goals on time to cover positions within
the corporation and stores, and we did this by setting
up a centralized service center for attracting talent
to the operation, by creating policies and procedures,
consolidating leadership and reorganizing in countries
where we are present, covering critical zones in peak
season, and encouraging internal advancement and
mobility by keeping our employees abreast of promotion
opportunities through a system for internal applications
and referrals.
New hires
in Mexico
217
women
244
men
461 new administrative
personnel hired
age
city
Less than 30 years
From 31 to 50 years
More than 51 years
54%
42%
4%
Mexico City
Monterrey
Guadalajara
Toluca
Cancun
Puebla
Others
83%
3.5%
3%
2.5%
1%
1%
5%
51
2015 Annual ReportStirring people’s spiritsALSEA
Training and
development
in Mexico
G4-LA2, 9, 10
Our restaurant managers think and act like
owners, always aware of the business, the needs
of the customer and of the team.
At Alsea, we make an effort to provide our employees
with advancement opportunities, giving them the tools
they need to build and update the skills inherent to their
positions, and encouraging a commitment to doing
their jobs right every day, so we can identify the impact
and scope of our training programs and make sure our
employees are taking full advantage of them.
We hire trained personnel and we keep them up to date
on their job responsibilities through a new, restaurant
focused attitude, starting with managers being
encouraged to take on responsibility for the actions and
goals of the units they are in charge of, maintaining a
focus on the persons and on the advancement of the
employees reporting to them.
Other challenges we dealt with in 2015 included
developing leadership, boosting sales, and controlling
expenses, training our employees in the Alsea Leadership
Model and reaching our financial goals.
In pursuit of this objective, we have policies and processes
in place for training our personnel according to the TNA
(Training Needs Assesment) of each our brands and
support area, and we coordinate training plans that boost
know-how in our company and operations, with internal
training programs, or when necessary specialized outside
courses and the soft and core issues of the business. We
also monitor our training process through satisfaction
surveys, learning and performance, depending on the
issue addressed and its impact on the business.
1,649 of our administration
employees have life insurance
and major medical insurance
benefits.
34.02 average work
hours of training
per employee
performance
evaluation
by gender
33.12
average hours women
35.40
average hours men
Men
Women
61%
39%
Directors / Associate Directors
10.69 hours
Managers / Middle Managers
35.41 hours
Operational workers
45.53 hours
53
2015 Annual ReportStirring people’s spiritsALSEA
2015 Initiatives
Quality of life
Commission
Design of the “Extra Day” policy for operating employees.
Launch of the vacation control system for administrative
personnel.
648 employee children benefited from the academic excellence
program.
Activation of the Emergency Employee Support Fund.
Goals
2016
• Continue pursuing the 2015 programs.
• Alsea Fellowships: Supporting high-potential store managers
in completing their professional studies.
• Launch the “Extra Day” in Operations.
• Standardize inter-brand benefits for newly hired operational
employees.
• Increase the number of women in executive positions.
• Regulate the process and activate the hiring of differently-abled
personnel, older adults and integration of persons belonging to
minorities and/or vulnerable groups.
55
2015 Annual ReportStirring people’s spiritsALSEA 04.
Environment
Promoting environmental
care through the
sustainable operation
of our units, striving
for profitability through
innovation and leadership
in our 4 lines of action:
energy, water, supplies
and waste.
57
2015 Annual ReportStirring people’s spiritsALSEA We make an effort to use all our resources wisely,
and we’ve developed various lines of action to fully
comply with environmental laws, while monitoring
our energy, water, supply and waste operations and
making them more efficient.
G4- EN 27, EN 31
We invested MXN 83,221,884 in initiatives to optimize
including consultancy on the National
operations,
Emissions Report, a project to replace lighting and boilers
in existing stores and installing more energy-efficient
lighting and water heating units in new stores.
8,508 metric tons of CO2, emissions mitigated through product
manufacturing process efficiency:
• 42% reduction in consumption by using of high-efficiency heaters.
• 70% reduction in energy consumption by using LED instead of
incandescent lighting.
Figures in Mexico
59
2015 Annual ReportStirring people’s spiritsALSEA Energy
in Mexico
G4-EN3, EN5, EN6
In 2015 we introduced some energy savings projects both in existing branches
and in newly built units. These included:
• Installation of high-efficiency heaters in 20 new stores.
• Installation of 23,473 overhead lights in new stores.
• Replacement of 140 existing boilers for high-efficiency heaters
in existing stores.
• Replacement of 110,639 overhead lights in existing stores.
78,799 Gj per year saved from energy conservation projects:
• 32,249 Gj from replacement of overhead lights in existing stores.
• 19,989 Gj from replacement of boilers in existing stores.
• 26,561 Gj from improvements in new stores.
Consumption of 166,792 KwH a year per restaurant.
energy
consumption
L.P. Gas
Electricity
Gasoline
Diesel
Natural gas
1,160,717
957,722
134,134
239,702
351,473
Notes:
• These data refer only to Mexico
• To calculate energy consumption, we used the billing information from the
Federal Electricity Commission (CFE) and suppliers of LP and natural gas
• The sources used to calculate the conversion factors were:
National Emissions Registry Guide: http://www.semarnat.gob.mx/sites/
default/files/documentos/cicc/20150915_guia_rene.pdf
IPCC 2006 “”006 IPCC Guidelines for National Greenhouse Gas Inventories”,
Volume 2 (chapter 1 - stationary combustion, table 2.2)
2016 Goals:
• To supply 80% of our establishments in Mexico with
electricity from renewable sources.
• To maintain the standard of efficiency of each new
opening, based on the experience of previous projects,
like lighting, heating and water pump.
Water
in Mexico
2,823,215 m3
of water consumed in 2015
One our biggest challenges in environmental terms in 2015 was accounting
for the consumption of water resources at Alsea. We were able to estimate
30% of this to establish a baseline, and we will continue to progress toward
this measurement in coming years.
2016 Goal:
• Calculate real measurement of
90% of our water consumption,
leaving only 10% to estimate.
61
2015 Annual ReportStirring people’s spiritsALSEA Emissions
in Mexico
G4-EN15, EN 16, EN18, EN19
In keeping with the Mexican General Law on Climate Change, as a result of
energy-saving programs introduced in the year, we were able to lower our
carbon dioxide (CO2) emissions in Mexico in 2015, establishing this exercise as
a baseline for monitoring due to the adjustment of our calculation methodology
to conform to the requirements of the National Emissions Registry.
119,915 metric tons of CO2, total direct emissions in 2015.
5,345 metric tons of CO2 saved through energy projects such as:
• Boiler replacement (scope 1): reduction of 1,260 metric tons of CO2
• Overhead lighting replacement (scope 2): reduction of 4,085 metric tons
of C02.
121,311 metric tons of CO2, total indirect emissions in 2015.
151 metric tons of CO2 emitted each year per restaurant.
(Direct and indirect emissions)
2016 Goals:
• Reduce CO2 emissions by supplying 80% of our establishments
in Mexico with electricity from renewable sources.
• Maintaining efficiency standards in new openings, based on
energy saving projects introduced successfully in the past.
2015 Iniciatives
Environment
Commission
Acquiring green energy (Cogeneration and wind).
Reduce electrical energy billing and CO2 generation.
Expansion of waste recycling programs.
Goals
2016
• Continue to pursue the 2015 programs.
• Acquire green energy (cogeneration and wind).
• Expand waste recycling programs.
• Seek out and incorporate environmentally-friendly inputs.
• Standardize the method of measuring water consumption.
63
2015 Annual ReportStirring people’s spiritsALSEA 05.
Community
engagement
At Alsea, we support the
growth and welfare
of the communities
where we operate, with
engagement strategies that
bring us closer to them and
help us better understand
their needs.
65
2015 Annual ReportStirring people’s spiritsALSEA Fundación
Alsea, A.C.
G4-EC7, EC8, SO1
Fundación Alsea has a mission of bringing food
security to vulnerable communities and
promoting human development by supporting
educational initiatives.
For the past 11 years, we have supported more than
500,000 low-income families in Mexico with an
investment of more than 80 million pesos.
At the instructions of the Board of Directors, every year
we allocate 1% of our net profits to Fundación Alsea,
which is the non-profit arm through which we carry
out our charitable work, so it can promote community
support programs.
MXN 42,450,000
Cash donations received in 2015
Va por mi cuenta Fundraising
Campaign- Customers
Fundraising Campaign-
Employees
Founding partners
Other campaigns
Alsea - 1% of net profits
%
53
14
2
15
16
80 metric tons
of food donated
22,267 hours
of volunteer time
donations
received
67
2015 Annual ReportStirring people’s spiritsALSEA Programs
G4-EC7, EC8, SO1
Va por mi Cuenta
In 2012, Fundación Alsea began supporting the “Va por
mi Cuenta” (It’s on Me) Campaign, a movement that
guarantees that children living in food insecurity in our
country have access to food in a healthy environment
and with a program of values that enables them to grow
physically and emotionally.
This work is carried out in dining centers for children,
which we call “Nuestro Comedor” (Our Dining Room).
• In 2015 we built and opened our 6th Dining Center in
the municipality of Saltillo, Coahuila.
• We currently have the capacity to feed 2,000 boys and
girls every day.
• From 2012 to the present we have provided more than
half a million nutritious meals, directly benefiting more
than 800 families.
• Through our fundraising campaign with customers, we
raised almost 20 million pesos, which will be used to
guarantee the operation of existing dining rooms.
• We expanded the capacity of the “Our Dining Centers”
facilities in Chalco and Ecatepec, benefiting another
270 children in those communities.
• In 2016 we expect to build and operate two more
Dining Centers in the State of Mexico and Mexico City,
with which we will positively impact the lives of another
1,000 children.
69
2015 Annual ReportStirring people’s spirits ALSEA Fondo para la Paz IAP
Fund for Opportunities and Employability
G4-EC7, EC8, SO1
In 2015 a program called Fund for Opportunities and
Employability was created, sponsored and supported by
Starbucks Foundation and Fundación Alsea. Its purpose
is to provide vulnerable youth with the tools they need
to become productive members of society and obtain a
formal job more easily.
• USD 300,281 invested by Starbucks Foundation and
Fundación Alsea.
• 1,044 direct beneficiaries.
• 5 young people received college scholarships.
• Community development supported through the
conservation and creation of jobs.
In 2015, with the support of Fundación Alsea, this
organization was able to improve food security conditions
for 155 people through sustainable intensification of
farming production among indigenous communities
along Oaxaca’s coast.
• Communities received 84 hours of training in setting up
6 bio-intensive community gardens.
• A local producers’ network was formed in the coastal
region of Oaxaca.
• 787 kgs of products were harvested (radishes, squash,
corn, cucumbers, beans and cilantro).
Mano Amiga
We support “Mano Amiga” school in Chalco, State
of Mexico, providing 136 scholarships to ensure the
education of young people in vulnerable situations.
Todos Sembramos Café
We continued our support for coffee growers in Chiapas
through this program, whose name means “We all plant
coffee,” providing them with 369,00 plants in 2015,
equivalent to 120 hectares of crops replaced.
71
2015 Annual ReportStirring people’s spiritsALSEA 2015 Initiatives
Community
Support Commission
Va por mi cuenta
2,000 kids
1 new dining room
2 extensions
Emergency/Natural
Disaster Support
528 basic supply packages delivered
200 cleaning kits delivered
2 charitable support cases
Social investment projects
USD 300,381 invested
1,044 people benefited
Goals
2016
• Continue pursuing the 2015 programs.
• Promote the “Va por mi Cuenta” campaign.
• Coordinate the Emergency/Natural Disaster Support program.
• Promote Latin American social investment projects
(Fund for Opportunities and Employability).
• Launch of the corporate Va por mi Cuenta volunteering program.
73
2015 Annual ReportStirring people’s spiritsALSEA 06.
Responsible
consumption
We contribute to
the welfare of the
community and
encourage better
nutrition in balanced
lifestyles, building
awareness among our
employees and customers
and exceeding legal
requirements in favor of
our customers.
75
2015 Annual ReportStirring people’s spiritsALSEA We are convinced that balanced lifestyles, which include
the pleasure of eating good food and beverages, and
being together with people who are important to us,
combined with proper hydration and physical activity, are
indispensable for well-rounded wellness.
Our primary objectives are:
• Activate Alsea’s stance and that of its brands toward
three basic pillars: product, physical activity and
communication.
• Build awareness within the company through workshops
and active follow-up on
legislative matters and
guidelines.
• Build awareness outside the company by organizing and
advertising activities.
• Build up our corporate reputation through execution of
our public relations strategy and cooperation with key
institutions.
G4-PR1, PR3
To meet these goals, we have a variety of initiatives, the
results of which are shown below::
• Update the Alsea Nutritional Index by 60%.
• Continue promoting balanced life styles by designing
content with a scope of 75% from Alsea.
• Work on the process of validating and communicating
with regulators (approved).
• Training operating personnel on the rights and
obligations of the consumer and the seller, through
corporate training.
• Work with procurement on aspects of social responsibility
and nutritional transparency (we already have approval
of criteria and percentage of supplier coverage).
• Mapping institutional relations .
information
In line with our strategy of encouraging responsible
consumption, we guarantee that all our products and
services meet national
transparency
standards with regard to the information we provide for
our customers on quality and food safety. We also meet
the requirements of our international customers by
providing them quality products and services and making
sure the new businesses we acquire operate in a manner
consistent with our quality standards and the regulations
on information regarding each product, standardizing it
with suppliers and affiliate businesses.
In 2015, we had some challenges, like modifying the
labeling on all our products in order to comply with
Mexican Official Standard (NOM) 051 and following up
on this process with the authorities. On this basis, we
obtained a 95% compliance in labeling based on this
standard and notified the authorities of the estimated
date for compliance with the last 5%, along with the
mapping and documentation about the procedure for
preparing, approving and managing labels.
The process of creating labels and preparing products
involves various areas, like Quality Assurance, new
Product Development, Regulatory Affairs, Marketing and
Legal. All of them are key to the product development.
Every label goes through a process of verification and
approval by the team in charge, while the procedures,
formats and specifications of ingredients and finished
product are reviewed and updated every quarter.
If necessary, we set up visits and meetings with the
health authorities to review our compliance with food
quality standards.
The information detailed on the labels of all our products
considered pre-packaged products include the origin of
the product components, the content, product safety
instructions and elimination method.
2016 Goals:
• Creating a plan of action to bring the Alsea Nutritional Index to 85%.
• Achieve a 100% Alsea scope in promoting balanced life styles,
distributing content online and in print media and learning about our
customers’ perceptions.
• Implement the process of validating and communicating with
regulators.
• Train 85% of operating personnel on the rights and obligations of
the consumer and the seller, through e-learning.
• Quantify the basis and objectives of the work with procurement on
aspects of social responsibility and nutritional transparency.
• Recommendations based on the mapping of institutional relations.
77
2015 Annual ReportStirring people’s spirits ALSEA Value Chain
in Mexico
G4-12, LA14, HR10
PROCUREMENT PRACTICES
At Alsea, we try to influence our value chain in order to
replicate best social responsibility practices. To this end,
we base our procurement process on our purchasing
policy, which establishes in a clear and transparent
manner the fair approach we take with our suppliers, and
the quality and price standards we expect them to meet.
Along the same lines, as part of our purchasing policy we
introduced a “letter of laws and ordinances,” a document
that is used in registering a supplier of Alsea and its
brands, which provides a blanket protection for Alsea
in terms of requirements for commercial relations with
vendors in Mexico, covering a variety of issues such as
human rights, labor practices, and others.
Also in 2015, we updated the purchasing files based on a
policy of supplier rights and obligations, and were able to
increase the total number of social responsibility letters
signed by current suppliers by 40%, to a total of 553.
We are currently in the process of identifying and
establishing key indicators for evaluating our suppliers’
performance and areas of opportunity in training and
other processes they must complete. In case this process
revealed some negative impacts or risks in our company’s
supply chain, so we conducted a commercial audit to
review the information that had been included in the
signed letter of laws and ordinances from the supplier,
including audits to evaluate the quality of products
delivered to our Distribution Centers.
144
new suppliers
signed the letter of laws and
ordinances during 2015
70%
of our purchases
are from local suppliers
79
2015 Annual ReportStirring people’s spiritsALSEA 2016 Goals:
• Make the laws and ordinances letter a formal part of the process of
registering every supplier with Alsea.
• Update 100% of the supplier acquisition files currently being
negotiated in the Purchasing department.
• Conduct commercial audits to check on the points indicated in the
letters of laws and ordinances for 100% of new suppliers brought in
by the Purchasing area.
• Visit suppliers with negotiations pending with the area according to
the work plan, beginning with an 80/20 based on purchasing volume.
2015 Initiatives
Responsible Consumption
Commission
Updating Alsea’s Nutritional Index.
Continuing to promote balanced lifestyles.
Work on the process of validating and communicating with
regulators.
Training operating personnel on the rights and obligations of the
consumer and the seller.
Work with procurement on aspects of social responsibility and
nutritional transparency.
Mapping institutional relations.
• Activate Alsea’s stance and that of its brands toward three basic
Goals
2016
pillars:
Product
Physical activity
Communication
• Build awareness within the company
Workshops
Active follow-up on legislative matters
• Build awareness outside the company
Publicity and activities
Spokespersons
Partners and suppliers
81
2015 Annual ReportStirring people’s spiritsALSEA
07.
Management
Discussion and
Analysis
CONSOLIDATED RESULTS FOR FULL-YEAR YEAR 2015
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 year ended December 31, 2015, in comparison with the
same period of 2014:
Net Sales
Gross Income
EBITDA(1)
Operating Income
Net Income
EPS(2)
2015 Margin %
2014 Margin % Change %
$32,288
100.0%
$22,787
100.0%
22,139
4,302
2,354
$1,033
1.171
68.6%
13.3%
7.3%
3.2%
N.A.
15,515
2,802
1,469
$624
0.847
68.1%
12.3%
6.4%
2.7%
N.A.
41.7%
42.7%
53.5%
60.3%
65.5%
38.2%
(1) EBITDA is defined as operating income before depreciation and amortization.
(2) EPS is earnings per share for the last 12 months.
SALES
Net sales increased 41.7% to 32,288 million pesos in 2015, compared to 22,787 million pesos during the prior year. This
increase was mainly due to the growth of 10.4% in same-store sales, revenues from the distribution and production
segment, and to the increase of 122 corporate units, for a total of 2,283 corporate stores at the end of December 2015,
which is growth of 5.6% over the same period of the prior year. This increase in sales was partially offset by the negative
effect of inclusion of one additional week of operations in the prior year.
18%
$32,288
$22,787
(0.5)%
0.6%
8%
7%
8%
2014
FX
Supply
SSS*
Openings
+ Run rate
Vips &
El Portón
Grupo
Zena
2015
*The percentage of SSS contribution is the effect on the total revenue base.
83
2015 Annual ReportStirring people’s spiritsALSEA The business portfolio in Mexico reported a growth of 4.4% in same-store sales at the end of 2015, and our brands in
South America presented growth of 25.5% in same-store sales, achieving a slightly below mid-single digit growth in
transactions. Likewise, the brands acquired in Spain posted positive results in the year, with growth of 7.2% in same-store
sales, in comparison with the same period of the prior year.
EBITDA
As a result of the 42.7% growth in gross income and the 40.3% increase in operating expenses (excluding depreciation
and amortization), EBITDA rose 53.5% to 4,302 million pesos at the close of 2015, compared to 2,802 million pesos in the
same period of the prior year. The 1.5-billion peso increase in EBITDA is mainly attributable to same-store sales growth,
operating efficiencies, and the increase in the number of units and the positive contribution from incorporating the brands
in Grupo Zena in Spain into our portfolio, as well as the Vips and El Portón brands in Mexico. That increase was partially
offset by the impact on results due to depreciation of the Mexican peso against the dollar, the negative effect of inclusion
of an additional week of operations in the previous year, and to a lesser extent to the devaluation of some currencies in
Latin America. EBITDA margin increased 100 basis points as a percentage of sales, rising from 12.3% in 2014, to 13.3%
in 2015.
NET INCOME
Net income in the year increased 409 million pesos over the same period in the prior year, closing at 1,033 million pesos,
compared with 624 million pesos in the prior year, mainly due to the 885-million peso increase in operating income. This
variation was partially offset by the increase of 365 million pesos in the all-in cost of financing, as a consequence of the
negative variation attributable to the exchange-rate result for the period. This was mainly caused by revaluation of the
liability related to the call and put options of the remaining 28.24% of Grupo Zena, due to depreciation of the Mexican
peso against the euro, as well as to the increase of 125 million pesos in income tax.
Earnings per share (“EPS”)(2) for the 12 months ended December 31, 2015, increased to 1.171 pesos, compared with 0.847
pesos for the 12 months ended December 31, 2014.
Net Income 2015 vs. 2014
$624
(98)%
240%
$1,033
(42)%
(20)%
(17)%
(0.7)%
3%
2014
D&A
All-in
cost of
financing
Taxes
PUT
Associated
Companies
Discontinued
Operations
EBITDA
2015
RESULTS BY SEGMENT FOR FULL YEAR 2015
Alsea Mexico
Food and Beverages
Distribution and Production
Total
2015
2014
Var. %Var.
2015
2014
Var. %Var.
2015
2014
Var. %Var.
Same-Store Sales
Number of Units
Sales
4.4% (0.4) 480 pbs
2,092 1,999
93
18,672 15,591
$3,081
Adjusted EBITDA*
4,091 3,566
$526
Adjusted EBITDA Margin*
21.9% 22.9% (100)pbs
-
5
20
15
-
-
-
-
-
-
-
-
-
(0.4) 480 pbs
2,092 1,999
93
6,375 5,064 $1,310
26 19,896 16,699
$3,197
582
478
$105
22
4,674 4,043
$631
9.1% 9.4% (30)pbs
-
23.5% 24.2% (70) bps
-
5
20
16
-
*Adjusted EBITDA does not include administrative expenses, thus it represents the “Store EBITDA.”
Sales at Alsea Mexico during the year ended December 31, 2015, increased 19.1% to 19,896 million pesos, compared to
16,699 million pesos in the same period of 2014. This favorable variation of 3,197 million pesos is mainly attributable to
the incorporation of 62 corporate units of the different brands over the last 12 months, the 4.4% growth in same-store
sales, as well as the increase of 9.1% in sales to third parties in the distribution and production segment in comparison
with 2014. This can be attributed to the growth in the number of units served over the last 12 months, supplying a total
of 2,097 units at December 31, 2015, in comparison with 2,028 units for the same period in the previous year, which was
a 3.4% increase. This increase was partially offset by the negative effect of inclusion of one additional week of operations
in the prior year.
Adjusted EBITDA increased 15.6% during the 12 months ended December 31, 2015, closing at 4,674 million pesos,
compared with 4,043 million pesos reported in the same period of the prior year. This increase is attributable to the
4.4% growth in same-store sales, in addition to the margin created by the higher number of units in operation and to the
business mix. The foregoing was partially offset by the impact from the devaluation of the peso against the dollar, as well
as the difficult comparative basis of 2014, due to the margin created by the additional week of operations.
85
2015 Annual ReportStirring people’s spiritsALSEA
Alsea South America
Same-Store Sales
Number of Units
Sales
Adjusted EBITDA*
Adjusted EBITDA Margin*
2015
25.5%
395
$6,718
$1,021
15.2%
2014
20.0%
343
$4,621
$679
14.7%
Var.
%Var.
550 pbs
52
$2,097
$342
50 pbs
-
15%
45%
50%
-
*Adjusted EBITDA does not include administrative expenses, thus it represents the “Store EBITDA.”
Sales at Alsea South America represented 20.7% of Alsea’s consolidated sales, and at the end of the fourth quarter of
2015 included Burger King operations in Argentina, Chile and Colombia, Domino’s Pizza Colombia, Starbucks Argentina,
Chile and Colombia, and P.F. Chang’s in Chile, Argentina, Colombia and Brazil. At the end of the period there were a
total of 376 corporate units and 19 sub-franchised units. Sales in this segment increased 45.4% to 6,718 million pesos,
in comparison with 4,621 million pesos in 2014. This positive variation of 2,097 million pesos was mainly due to the
increase of 49 corporate units and 3 sub-franchised units, which variation was partially offset by the devaluation of
the Colombian peso, which devalued 12.5% against the Mexican peso, as well as to the negative effect of including an
additional week of operations in the previous year.
Adjusted EBITDA at Alsea South America at the end of full year 2015 increased by 50.4%, closing at 1,021 million pesos,
in comparison with 679 million pesos in the same period in 2014. EBITDA margin at the close of the year ended December
31, 2015 improved 50 basis points over the same period of the prior year. That increase is partially attributable to the
economies of scale arising from the aforementioned increase in number of corporate units. This variation was partially
offset due to the effect of the devaluation of the Colombian currency, as well as to the difficult comparative basis of 2014,
as a result of the margin generated by the additional week of operations.
Alsea Spain
Same-Store Sales
Number of Units
Sales
Adjusted EBITDA*
Adjusted EBITDA Margin*
2015
7.2%
467
$5,674
$1,082
19.1%
*Adjusted EBITDA does not include administrative expenses,
thus it represents the “Store EBITDA.”
Sales at Alsea Spain in 2015 represented 17.8% of Alsea’s consolidated sales, and at the end of 2015 included the
operations of Foster’s Hollywood, Domino’s Pizza, Burger King, La Vaca Argentina, Cañas y Tapas and Il Tempietto. At the
end of the period there were a total of 313 corporate units and 154 sub-franchised units.
Adjusted EBITDA for Alsea Spain at the end of full year 2015 was 1,082 million pesos, which was a margin of 19.1%
NON-OPERATING RESULTS
All-In Cost of Financing
The all-in cost of financing in the fourth quarter of 2015 increased to 187 million pesos, compared with 145 million pesos
in the same period of the prior year. That variation is mainly attributable to exchange rate losses during the period, which
was caused mainly by the revaluation of the liability related to the call and put options of the remaining 28.24% of Grupo
Zena, due to depreciation of the Mexican peso against the euro in the fourth quarter of the year, as well as the revaluation
of accounts payable in dollars as a consequence of depreciation of the Mexican peso against the dollar.
BALANCE SHEET
During the 12 months ended December 31, 2015, Alsea made capital investments of 3,439 million pesos, of which
2,316 million pesos, equal to 67% of total investments, were earmarked for store openings, equipment refurbishing and
remodeling existing stores for the different brands that the Company operates. The remaining 1,123 million pesos were
mainly earmarked for the acquisition of new corporate offices, to improvement and logistics projects, and to software
licenses, among other items.
Other Long-Term Liabilities
The Other Long-Term Liabilities account increased 107 million pesos, due to recognition of the liability related to the call
and put options that were agreed with Britania Investments, S.A.R.L. (“Alia”), the local partner of Grupo Zena, for its entire
stake in the company of 28.24%.
Bank Debt and Fixed-Rate Bonds
As of December 31, 2015, Alsea’s total bank debt had increased by 994 million pesos, closing at 12,233 million pesos,
in comparison with 11,239 million pesos on the same date of the previous year. The Company’s consolidated net debt in
comparison with the close of 2014 increased 911 million pesos, closing on December 31, 2015 at 11,038 million pesos, in
comparison with 10,126 million pesos.
As of December 31, 2015, 94% of the debt was long term, and on that same date 82% of the debt was denominated in
Mexican pesos, 17% was in euros, and the remaining 1% was in Argentine and Chilean pesos.
87
2015 Annual ReportStirring people’s spiritsALSEA The following table shows the balance of total debt in millions of pesos at December 31, 2015, as well as the maturity
dates for the subsequent years:
Balance
4T 15
2016
Total Debt
$12,233 $1,005
Maturities
%
8
2017
$829
%
7
2018
%
2019
%
2020
%
2025
$2,974
24
$2,392
20
$4,033
33
$1,000
%
8
The following table shows the balance and structure of total debt in millions of pesos at December 31, 2014
INSTITUTION
Bank of America
SOCOTIABANK
BANK OF TOKYO
BANK OF TOKYO
SCOTIABANK
SCOTIABANK
CEBUR ALSEA´13
CEBUR ALSEA´15
CEBUR ALSEA´15
Argentina
Chile
ZENA ESPAÑA
TASA REF.
6.11%
TIIE 28 D
TIIE 28 D
TIIE 28 D
TIIE 28 D
TIIE 28 D
TIIE 28 D
TIIE 28 D
8.07%
24.72%
1.36%
3.00%
SPREAD
MATURITIES DATE
NA
1.18%
0.75%
0.75%
0.90%
0.80%
BANK DEBT
0.75%
1.10%
NA
BOND DEBT
NA
NA
NA
TOTAL LATIN AMERICA
AND SPAIN
TOTAL DEBT
18-sep-19
08-jul-19
20-mar-17
20-mar-17
30-sep-19
07-jul-19
14-jun-18
20-mar-20
14-mar-25
31-dic-20
Dic 2015
1,000,000
887,604
399,250
350,000
270,000
700,000
3,606,854
2,493,909
2,985,886
1,000,000
6,479,795
49,762
69,777
2,027,153
2,146,692
12,233,341
Shares Repurchase Program
At year ended, Alsea closed with a balance of 1,092, 281 shares in the repurchase fund. During the 12 months ended
December 31, 2015, the Company conducted purchase and sale operations amounting approximately to 179 million pesos.
Financial Ratios
At December 31, 2015, the financial restrictions established in the Company’s credit contracts were as follows: The ratio
of: (i) Total Debt to EBITDA (last 12 months) was 2.8x; (ii) Net Debt to EBITDA (last 12 months) was 2.6x; and (iii) EBITDA
(last 12 months) to interest paid over the last 12 months was 6.1x.
The Return on Net Invested Capital (“ROIC”)(2) increased from 8.0% to 9.3% during the 12 months ended December 31,
2015. The Return on Equity (“ROE”)(3) for the 12 months ended December 31, 2015 was 10.4%, in comparison with 7.5%
in the same period of the prior year.
KEY INFORMATION
Financial Indicators
EBITDA(1) / Interest Paid
Total Debt / EBITDA(1)
Net Debt / EBITDA(1)
ROIC (2)
ROE (3)
Stock market Indicators
EPS (12 months) (4)
Shares in circulation at the close of the period (millions)
Price per share at close
4Q15
6.1 x
2.8 x
2.6 x
9.3%
10.4%
4Q15
1.171
837.5
$59.85
4Q14
6.2 x
3.3 x
2.9 x
8.0%
7.5%
4T14
0.847
837.6
$40.77
Variation
N.A
N.A
N.A
130 pbs
290 pbs
Variation
38.2%
-
46.8%
(1) EBITDA ppro forma for the last 12 months
(2) ROIC is defined as operating income after taxes (last 12 months) by net operating investment
(total assets – cash and short-term investments – no-cost liabilities).
(3) ROE is defined as net earnings (last 12 months) over shareholders’ equity.
(4) EPS is earnings per share for the last 12 months.
Hedge Profile
The Finance Direction, joint with the Treasury Management, shall manage risks seeking to: mitigate present and future
risks; not deviate resources from the operation and the expansion plan and hold the certainty of the Company’s future
flows, along with a strategy regarding the debt’s cost. All instruments will only be used for hedging purposes.
During 2015 hedge derivatives in foreign exchange matured for $135.0 million dollars, at an average exchange rate of
15.72 pesos per dollar. This hedging resulted in an exchange rate profit of $26.8 million Mexican pesos. At December
31, 2015 Alsea holds hedges to purchase US dollars in the next 12 months for an approximate amount of $28 million
US dollars, at an average exchange rate of 16.26 pesos per dollar. The foregoing is estimated at an average exchange
rate of 16.50 pesos per dollar.
89
2015 Annual ReportStirring people’s spiritsALSEA Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Financial Statements for the years ended
December 31, 2015, 2014 and 2013, and Independent Auditors’
Report Dated March 31, 2016
Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Financial Statements for the years ended
December 31, 2015, 2014 and 2013, and Independent Auditors’
Report Dated March 31, 2016
Contents
Auditors’ Report
Consolidated Statements of Financial Position
Consolidated Statements of Income
Consolidated Statements of Other
Comprehensive Income
Consolidated Statements of Changes in
Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Page
92
94
96
97
98
100
102
3
Annual Report 2015Encendemos el espíritu de la gente ALSEA Independent Auditors’ Report to the
Board of Directors and Shareholders
of Alsea, S.A.B. de C.V.
We have audited the accompanying consolidated financial
statements of Alsea, S.A.B. de C.V. and Subsidiaries (the Entity),
which comprise the consolidated statements of financial position
as of December 31, 2015, 2014 and 2013, and the consolidated
statements of income, other comprehensive income, changes in
stockholders’ equity and cash flows for the years then ended, and
a summary of significant accounting policies and other explanatory
information.
Management’s responsibility for the consolidated
financial statements
Management is responsible for the preparation and fair presentation
of these consolidated financial statements in accordance with
International Financial Reporting Standards, as issued by the
International Accounting Standards Board and for such internal
control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits
in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Entity’s preparation
and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of Alsea, S.A.B. de C. V.
and subsidiaries as of December 31, 2015, 2014 and 2013, and their
financial performance and their cash flows for the years then ended
in accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited
C. P. C. Francisco Torres Uruchurtu
March 31, 2016
5
Annual Report 2015Encendemos el espíritu de la gente ALSEA Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Financial Position
At December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
Assets
Current assets
Cash and cash equivalents
Customers, net
Value-added tax and other recoverable taxes
Other accounts receivable
Inventories, net
Advance payments
Total current assets
Long-term assets
Guarantee deposits
Investment in shares of associated companies
Store equipment, leasehold improvements and property, net
Intangible assets, net
Deferred income taxes
Total long-term assets
Total assets
Notes
2015
2014
(As adjusted)
2013
(As adjusted)
6
7
8
9
14
10
11 y 16
20
$
1,195,814
$
1,112,850
$
639,943
205,453
264,910
1,377,981
322,386
4,006,487
384,328
922,962
11,137,776
14,691,004
1,710,943
28,847,013
673,749
218,301
221,794
1,055,174
503,219
3,785,087
291,139
829,824
10,021,037
14,623,621
1,320,881
27,086,502
663,270
360,104
369,350
268,714
641,880
304,323
2,607,641
128,108
788,665
4,764,397
3,386,043
760,782
9,827,995
$
32,853,500
$
30,871,589
$
12,435,636
Liabilities and stockholders’ equity
Notes
2015
2014
(As adjusted)
2013
(As adjusted)
Current liabilities
Current maturities of long-term debt
Current maturities of financial lease liabilities
Suppliers
Accounts payable and accrued liabilities
Accrued expenses and employee benefits
Income taxes
Taxes arising from tax consolidation
Total current liabilities
Long-term liabilities
Long-term debt, not including current maturities
Non-current financial lease liabilities
Obligation under put option of non-controlling interest
Debt instruments
Other liabilities
Taxes arising from tax consolidation
Deferred income taxes
Employee retirement benefits
Total long-term liabilities
Total liabilities
Stockholders’ equity
Capital stock
Premium on share issue
Retained earnings
Reserve for repurchase of shares
17
12
20
17
12
19
18
20
20
21
23
Reserve for obligation under put option of non-controlling interest
19 y 23
Other comprehensive income items
Stockholders’ equity attributable to the controlling interest
Non-controlling interest
Total stockholders’ equity
24
$
734,824
$
1,377,157
$
388,486
7,190
3,013,091
635,802
1,713,496
139,118
31,893
6,275,414
5,018,722
307,140
2,777,328
6,479,795
73,272
39,755
1,925,337
108,586
16,729,935
23,005,349
478,203
8,613,587
2,748,469
517,629
(2,673,053)
(736,604)
8,948,231
899,920
9,848,151
7,878
2,694,015
601,854
1,292,606
232,780
38,983
6,245,273
7,370,666
314,342
2,673,053
2,491,356
69,035
70,093
1,944,053
102,545
15,035,143
21,280,416
478,271
8,613,587
2,187,327
531,406
(2,673,053)
(379,578)
8,757,960
833,213
9,591,173
-
1,408,565
197,709
730,727
360,947
10,111
3,096,545
2,166,281
-
-
2,488,850
64,722
15,923
19,500
72,884
4,828,160
7,924,705
403,339
2,037,390
1,512,464
569,271
-
(251,037)
4,271,427
239,504
4,510,931
Total liabilities and stockholders’ equity
$
32,853,500 $
30,871,589 $
12,435,636
See accompanying notes to the consolidated financial statements.
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
7
Annual Report 2015Encendemos el espíritu de la gente ALSEA Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
Continuing operations
Net sales
Cost of sales
Leases
Depreciation and amortization
Other operating costs and expenses
Other expenses (income), net
Interest income
Interest expenses
Changes in the fair value of financial instruments
Exchange loss (gain), net
Equity in results of associated companies
Income before income taxes
Income tax expense
Consolidated net income from continuing operations
Discontinued operations:
Loss from discontinued operations - net of income taxes
Consolidated net income
Net income for the year attributable to:
Controlling interest
Non-controlling interest
Earnings per share:
Basic and diluted net earnings per share from continuing and
discontinued operations (cents per share)
Basic and diluted net earnings per share from continuing operations (cents per share)
See accompanying notes to the consolidated financial statements.
Note
2015
2014
2013
26
$
32,288,376
$
22,787,368
$
15,697,714
10,149,276
2,851,083
1,947,897
14,930,621
55,666
(30,512)
710,901
104,275
74,202
1,494,967
27,703
1,522,670
489,919
1,032,751
-
1,032,751
981,215
51,536
1.17
1.17
28
19
14
20
25
25
$
$
$
$
$
7,272,274
1,805,853
1,333,320
10,705,673
201,731
(33,257)
527,281
-
(562)
975,055
32,253
1,007,308
364,593
642,715
(18,621)
624,094
666,666
$
$
(42,572) $
0.85
0.87
$
$
$
$
$
$
$
5,220,825
1,257,559
920,355
7,202,075
(22,651)
(39,044)
241,389
-
8,125
909,081
43,582
952,663
284,867
667,796
(4,476)
663,320
681,014
(17,694)
0.99
0.99
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Other
Comprehensive Income
For the years ended December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
Consolidated net income
Items that may be reclassified subsequently to income:
2015
2014
(As adjusted)
2013
(As adjusted)
$
1,032,751
$
624,094
$
663,320
Valuation of financial instruments, net of income taxes
(80,460)
(7,242)
-
Exchange difference on translating foreign operations, net of income taxes
Total comprehensive income for the period, net of income taxes
Comprehensive income (loss) for the year attributable to:
Controlling interest
Non-controlling interest
See accompanying notes to the consolidated financial statements.
(276,566)
(357,026)
(121,299)
(128,541)
(164,487)
(164,487)
675,725
$
495,553
$
498,833
624,189
51,536
$
$
538,125
(42,572)
$
$
516,527
(17,694)
$
$
$
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
9
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes
in Stockholders’ Equity
For the years ended December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
Contributed capital
Retained earnings
Capital
stock
Premium
on issuance
of share
Repurchased
shares
Reserve for
repurchase of
shares
Reserve for
obligation under
put option of
non-controlling
interest
Legal
reserve
Retained
earnings
Other comprehensive
income items
Valuation
of financial
instruments
Effect of
translation
of foreign
operations
Total
controlling
interest
Non-
controlling
interest
Total
stockholders’
equity
Balances as of January 1, 2013 $ 403,339 $ 2,466,822 $
- $
564,201 $
- $ 100,736 $
1,072,957 $
(797) $
(86,550) $ 4,520,708 $ 308,189 $ 4,828,897
Repurchase of shares (note 23a)
Sales of shares (note 23a)
Purchase of non-controlling
(24a)
-
-
-
(1,011)
(67,927)
-
-
-
-
-
(68,938)
-
(68,938)
-
1,011
72,997
-
-
-
-
-
74,008
-
74,008
-
(429,262)
-
-
-
-
-
-
-
(429,262)
(28,020)
(457,282)
Dividends paid (note 23a)
-
-
-
-
-
-
(343,880)
-
-
(343,880)
(30,600)
(374,480)
Other movements (note 24a)
-
(170)
-
-
-
-
1,637
797
-
2,264
-
2,264
Valuation adjustment (note 2b)
-
-
-
-
-
-
-
-
-
-
7,629
7,629
Comprehensive income
-
-
-
-
-
-
681,014
-
(164,487)
516,527
(17,694)
498,833
Balances at December 31, 2013
as adjusted
403,339
2,037,390
-
569,271
-
100,736
1,411,728
-
(251,037)
4,271,427
239,504
4,510,931
Repurchase of shares (note 23a)
-
-
(498)
(39,566)
-
-
-
-
-
(40,064)
-
(40,064)
Sales of shares (note 23a)
-
-
20
1,701
-
-
-
-
-
1,721
-
1,721
Placement of shares, net of issuance
expenses (note 1c and 23a)
Business acquisitions and
obligation under put option of
non-controlling (note 19 and 24a)
75,410
6,576,197
-
-
-
-
-
-
-
6,651,607
-
6,651,607
-
-
-
-
(2,673,053)
-
-
-
-
(2,673,053)
736,456
(1,936,597)
Valuation adjustment (note 2a)
-
-
-
-
-
-
-
-
-
-
(101,520)
(101,520)
Other movements (note 24a)
-
-
-
-
-
-
8,197
-
-
8,197
1,345
9,542
Comprehensive income
-
-
-
-
-
-
666,666
(7,242)
(121,299)
538,125
(42,572)
495,553
Contributed capital
Retained earnings
Capital
stock
Premium
on issuance
of share
Repurchased
shares
Reserve for
repurchase of
shares
Reserve for
obligation under
put option of
non-controlling
interest
Legal
reserve
Retained
earnings
Other comprehensive
income items
Valuation
of financial
instruments
Effect of
translation
of foreign
operations
Total
controlling
interest
Non-
controlling
interest
Total
stockholders’
equity
Balances at December 31, 2014
478,749
8,613,587
(478)
531,406
(2,673,053)
100,736
2,086,591
(7,242)
(372,336)
8,757,960
833,213
9,591,173
Repurchase of shares (note 23a)
-
-
(965)
(93,422)
-
-
-
-
-
(94,387)
-
(94,387)
Sales of shares (note 23a)
-
-
897
79,645
-
-
-
-
-
80,542
-
80,542
Dividend paid
-
-
-
-
-
-
(419,173)
-
-
(419,173)
-
(419,173)
Business acquisitions and
obligation under put option of
non-controlling (note 24a)
-
-
-
-
-
-
(900)
-
-
(900)
5,015
4,115
Other movements
-
-
-
-
-
-
-
-
-
-
10,156
10,156
Comprehensive income
-
-
-
-
-
-
981,215
(80,460)
(276,566)
624,189
51,536
675,725
Balances at December 31, 2015 $ 478,749 $ 8,613,587 $
(546) $
517,629 $ (2,673,053) $ 100,736 $
2,647,733 $ (87,702) $
(648,902) $ 8,948,231 $ 899,920 $ 9,848,151
See accompanying notes to the consolidated financial statements.
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
11
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Alsea, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
Operating activities:
Consolidated net income
Adjustment for:
Income taxes
Equity in results of associated companies
Interest expense
Interest income
Disposal of store equipment and property
Provisions
Discontinued operations
Income from revaluation of financial liabilities (option)
Depreciation and amortization
Changes in working capital
Customers
Other accounts receivable
Inventories
Advance payments
Guarantee deposits
Suppliers
Taxes paid
Other liabilities
Labor obligations
Discontinued operations
Net cash flows provided by operating activities
Cash flows from investing activities:
Interest collected
Store equipment, leasehold improvements and property
Intangible assets
Acquisitions of business, net of cash acquired
Net cash flows used in investing activities
See accompanying notes to the consolidated financial statements.
1 y 16
Note
2015
2014
2013
1,032,751
$
642,715
$
667,796
489,919
(27,703)
710,901
(30,512)
162,734
285,807
-
104,275
1,947,897
4,676,069
18,847
(48,207)
(352,815)
3,932
-
344,836
(818,934)
(93,336)
6,041
-
3,736,433
30,512
(2,984,818)
(411,472)
-
(3,365,778)
364,593
(32,253)
527,281
(33,257)
60,418
512,160
3,219
-
1,333,320
3,378,196
(188,430)
(23,803)
(159,470)
(270,678)
-
259,932
(384,787)
(240,515)
(5,240)
(21,840)
2,343,365
33,257
(1,996,173)
(393,984)
(9,816,311)
(12,173,211)
284,867
(43,582)
241,389
(39,044)
24,386
68,993
1,710
-
923,121
2,129,636
(15,629)
(84,317)
(82,506)
(102,645)
(18,088)
264,222
(456,397)
(41,453)
21,674
(6,186)
1,608,311
39,044
(1,127,548)
(339,428)
(1,764,508)
(3,192,440)
Cash flows from financing activities:
Bank loans
Repayments of loans
Repayments of financial leases
Issuance of debt instruments
Increase in capital stock from placement of shares, net of premium and issuance expenses
Interest paid
Dividends paid
Acquisition of non-controlling interest
Repurchase of shares
Sales of shares
Nota
2015
2014
2013
22
4,272,000
$
12,230,892
$
2,538,686
(7,389,420)
(8,042,822)
(2,449,815)
1 y 18
24
(7,890)
4,000,000
-
(710,901)
(419,173)
(27,265)
(94,387)
80,542
(9,679)
-
6,651,607
(527,281)
-
-
(40,064)
1,721
-
2,488,850
-
(241,389)
(343,880)
(683,441)
(67,927)
72,997
Net cash flows (used in) provided by financing activities
(296,494)
10,264,374
1,314,081
Net increase (decrease) in cash and cash equivalents
74,161
434,528
(270,048)
Exchange effects on value of cash
8,803
15,052
724
Cash and cash equivalents:
At the beginning of the year
At end of year
See accompanying notes to the consolidated financial statements.
1,112,850
1,195,814
$
663,270
1,112,850
932,594
663,270
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
13
Annual Report 2015Encendemos el espíritu de la gente ALSEA Alsea, S.A.B. de C.V. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Figures in thousands of Mexican pesos)
1. ACTIVITY, MAIN OPERATIONS AND SIGNIFICANT EVENTS
Alsea, S.A.B. de C.V. and Subsidiaries (Alsea or the Entity) was incorporated as a variable income stock company on May 16, 1997 in
Mexico. The Entity’s domicile is Paseo de la Reforma No. 222, tercer piso, Col. Juárez, Delegación Cuauhtémoc C.P. 06600, México, D.F.
The Entity was incorporated for a period of 99 years, beginning on the date in which the deed was signed, which was April 7, 1997.
For disclosure purposes in the notes to the consolidated financial statements, reference made to pesos, “$” or MXP is for thousands of
Mexican pesos, and reference made to dollars is for US dollars.
Operations
Alsea is mainly engaged in operating fast food restaurants “QSR” cafes and casual dining “Casual Dining”. The brands operated in
Mexico are Domino’s Pizza, Starbucks, Burger King, Chili’s Grill & Bar, California Pizza Kitchen, P.F. Chang’s, Italianni’s, The Cheese Cake
Factory, VIPS and Porton. In order to operate its multi-units, the Entity has the support of its shared service center, which includes
the supply chain through Distribuidora e Importadora Alsea, S.A. de C.V. (DIA), real property and development services, as well as
administrative services (financial, human resources and technology). The Entity operates the Burger King, P.F. Chang’s and Starbucks
brands in Chile and Argentina. In Colombia, Alsea operates the Domino’s Pizza, Burger King, Starbucks and P.F. Chang’s brands. Starting
in 2014, the P.F. Chang’s brands operates in Brazil. As mentioned below, starting October 2014, Alsea operates in Spain the brands
Foster’s Hollywood, Cañas y Tapas, Il Tempietto, La Vaca Argentina, Burger King and Domino’s Pizza.
Significant events
a. Placement of debt instruments - In March 2015, Alsea concluded the placement of debt instruments worth $3,000,000, maturing
in March 2020, and bear interest at the 28-day TIIE rate (Mexican Interbank Offering rate) plus 1.10 percentage points; and other the
placement of debt instrument worth $1,000,000, maturing in March 2025, bearing interest at a fixed rate of 8.07%; this placement
received a rating of “A+” for local currency debt by Fitch Rating & HR Ratings.
In June 2013, Alsea concluded the placement of debt instruments worth $2,500,000. Those debt instruments are for a five-year
term, maturing in June 2018, and bear interest at the 28-day TIIE rate (Mexican Interbank Offering rate) plus 0.75 percentage points.
This is the first issuance under the debt instrument program, which was approved on April 25, 2013 by the Board of Directors for
issuances up to $3,500,000.
b. Acquisition of the non-controlling interest of Grupo Amigos de San Angel - In July 2015, Alsea completed the acquisition of
the remaining 10.23% of Grupo Amigos de San Angel S.A. de C.V. (“GASA”); the company owns 29 Italianni’s units. Since February
2012, Alsea maintained 89.77% of the shares of GASA. (see effects in note 24b)
c. Primary offering to subscribe and pay shares for the amount of $5,999,999 - In June 2014, Alsea made a share placement
of $5,999,999 on the Mexican and international markets (without considering an overallotment option for the total amount of
$6,899,999). In Mexico, the offering amount is up to $2,881,043, while the international offering amount is up to $3,118,956. The
global offering was made for 131,147,540 shares (without considering the overallotment option of 150,819,671 shares); a total of
62,973,627 shares were placed in Mexico, together with 68,173,913 shares on the international market. The placement price was
$45.75 per share. Issuance expenses of $248,392 were incurred to make the public offering.
d. Acquisition of VIPS - In September 2013, Alsea reached an agreement with Wal-Mart de México, S.A.B. de C.V. (Grupo Wal-Mart)
to acquire 100% of VIPS, the Grupo Wal-Mart restaurant division, for a total of $8,200,000. On April 30, 2014, the regulatory
authorities approved the transaction, becoming effective as of such date; Alsea consolidates the financial information of VIPS
since such date. (see effects in note 15). VIPS’ operations include a total of 360 restaurants, of which 262 are of the “Vips” brand,
90 are of the “El Portón” brand, 6 are of the “Ragazzi” brand and two are of the “La Finca” brand. Those operations also include: I)
the rights to intellectual property over the four brands, menus, development of the product, operating processes and other items;
II) the acquisition of 18 real property assets; III) the buildings which total 214 units; and IV) an administrative office dedicated
to the standardization of products, bulk purchases, the centralization of deliveries by suppliers and the production of desserts,
sauces and food dressings. The transaction included the acquisition of Operadora VIPS, S. de R.L. de C.V. (OVI) and Arrendadora de
Restaurantes, S. de R.L. de C.V. (ARE), as well as the transfer of personnel who provide services to VIPS and that at the date of the
transaction worked in different Grupo Wal-Mart service companies; the transfer became effective in August 2013 and the personnel
were transferred to Servicios Ejecutivos de Restaurantes, S. de R.L. de C.V. (SER) and Holding de Restaurantes, S. de R.L. de C.V.
(HRE), which are newly created companies.
e. Acquisition of Grupo Zena.- In August 2014, Alsea reached an agreement with the Food Service Group, S.A. and Tuera 16, S.A. ,
S.C.R., incorporated in Luxemburgo and Spain, respectively, to acquire 71.76% of the capital stock of the entity Food Service Project,
S.L. (“FSP”), incorporated in Spain and which is denominated, together with its subsidiaries “Grupo Zena”, and which is engaged in
the operation of restaurants of the brands “Foster’s Hollywood”, “Cañas y Tapas”, “Il Tempietto”, “La Vaca Argentina”, “Burger King”
and “Domino’s Pizza”, for a total of 107,445 Euros (equivalent to $1,934,023) (“Acquisition Price”). Alsea consolidates the financial
information of Grupo Zena beginning in October 2014, date in which the transaction was formalized. (see effects in note 15)
Grupo Zena’s operations include a total of 427 restaurant, of which 195 are of the “Foster’s Hollywood” brand, 127 are of the
“Domino’s Pizza” brand, 60 are of the “Burger King” brand, 13 are of the “La Vaca Argentina” brand, 21 are of the “Cañas y Tapas”
brand and 11 are of the “Il Tempietto” brand. Also, Grupo Zena has given two subfranchises of the Domino’s brand, 122 subfranchises
of the Foster’s Hollywood brand, 13 subfranchises of the Cañas y Tapas brand, and 6 subfranchises of the Il Tempietto brand to
another parties.
f. Acquisition of Starbucks operations in Mexico, Chile and Argentina.- As part of its expansion plan, in July 2013, Alsea entered
into an agreement to acquire 100% of the operations of the Starbucks coffee chain in Chile and Argentina. Such acquisition resulted
in Alsea acquiring the remaining 82% of Starbucks Coffee Chile and the remaining 18% of Starbucks Coffee Argentina. With such
acquisition, Alsea will control the 94 Starbucks stores in Argentina and the 81 stores in Chile (see note 15 and 24). In September
2013, Alsea finalized the acquisition of the remaining shares of Starbucks Coffee Chile, S.A. de C.V., as from which date it has
consolidated the financial information.
15
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Additionally, in April 2013, Alsea acquired from Starbucks Coffee International (“SCI”, an affiliate of the Starbucks Coffee Company)
the remaining 18% of Café Sirena, S.A. de C.V. (Café Sirena), a subsidiary created by both entities in Mexico. As a result of that
acquisition, Alsea will control 100% of operations in Mexico (see note 24). Additionally, Alsea committed to a new openings plan that
contemplates approximately 50 units per year over the next five years.
The parties agreed to review continuity of a contractual expansion plan after that period has elapsed.
In June 2013, SCI signed an agreement to develop the brand in the Colombian market through an association between Alsea (70%)
and Nutressa (a Colombian company - 30%), whereby a commitment is made to open 51 stores in the following 5 years.
g. Acquisition of 25% of Grupo Axo, S.A.P.I de C.V. - In June 2013, the Entity formalized the acquisition of 25% of the shares of
Grupo Axo, S.A.P.I. de C.V. (Grupo Axo), a leader in sales of international brands of clothes, cosmetics and household appliances.
Grupo Axo has more than 2,276 points of sale inside a number of department stores in Mexico. It has 116 of its own stores and it
carries the following brands: Tommy Hilfiger, Coach, Guess, Rapsodia, Thomas Pink, Brooks Brothers, Marc Jacobs, Etro, Emporio
Armani, Brunello Cucinelli, Theory, Kate Spade Express, Crate & Barrel, Chaps, Kate Spade, Victoria’s Secret Bath Accesories (VSBA),
Loft, Abercrombie, Hollister, Bath & Body Works (BBW) and Promoda. (see note 14).
h. Acquisition of the master franchise of Burger King in Mexico.- In April 2013, Alsea acquired the master franchise rights to
the Burger King restaurants in México, S.A. de C.V. (“BKM”), pursuant to a strategic association agreement signed between Alsea
and Burger King Worldwide Inc. (“BKW”). BKM, a subsidiary of BKW in Mexico was merged with Operadora de Franquicias Alsea
S.A. de C.V. (“OFA”), a subsidiary of Alsea, a result of which Alsea holds an 80% stake in OFA with the remaining 20% held by BKW.
The Entity’s management has assessed the terms of the above agreement and strategic partnership concluding that it continues to
exercise control over OFA, both before and after the transaction, such that the financial information of BKM has been consolidated
in the accompanying consolidated financial statements, as from the closing date of transaction.
Additionally, as part of the master plan for development of the franchise, Alsea committed to a plan for new openings that
contemplates opening 175 units the next five years. The parties agreed to review the continuity of a contractual expansion plan
after that period has elapsed (see accounting effects in note 15).
i. Acquisition of the exclusive rights to develop the P.F. Chang´s China Bistro in Brazil - In January 2013, the Entity signed
a Development and Operation agreement for the exclusive rights to develop the P.F. Chang’s China Bistro brand in Brazil. The
agreement contemplates the opening of 30 units over the next 10 years. P.F. Chang’s is the leading brand in the Casual Asian Food
segment in the US with more than 225 operating units. It currently has points of sale in Mexico, Puerto Rico, Canada, Kuwait, Beirut,
Chile, Hawaii, the Philippines and the United Arab Emirates. In order to enter the Brazilian market with the P.F. Chang’s China Bistro
brand, a development and expansion strategy has been designed based on the successful business model used to operate the brand
portfolio in South America. That model has made it possible to position Alsea as the leading Casual and Fast-food operator in Latin
America. With Brazil operations as the new path for growth, the Entity will work towards generating greater diversification and
profitability of its portfolio.
j. Signing of the exclusive rights to develop and operate the Cheesecake Factory® restaurants in Mexico - Alsea signed an
agreement to the exclusive rights to develop and operate the The Cheesecake Factory® restaurants in Mexico and Chile, which also
contemplates the option for Argentina, Brazil, Colombia and Peru, thus becoming the strategic partner of the prestigious brand in
the entire region.
The agreement initially contemplates 12 openings between Mexico and Chile in the following eight years with 10-year agreements
per restaurant, and the right to extend that period for an additional 10 years.
The Cheesecake Factory® chain is considered the best seller per unit in its category. The brand focuses on providing customers with
top quality products and services. Its operations include 200 restaurants under The Cheesecake Factory® brand in over 35 states
of the US operating under a franchise license.
2. BASES FOR PRESENTATION
a. Restatement of the consolidated financial statements 2014
During May and October 2015, the period allowed by IFRS 3, Business Combinations, for the valuation of the acquisitions of VIPS and
Grupo Zena mentioned in note 1, respectively, ended. The final valuation resulted in changes to the preliminary accounting of such
acquisitions; the changes are presented in note 15. Following is a summary of the effects of the adjustments to the consolidated
statements of financial position:
Concept
Long-term assets:
Store equipment, leasehold improvements and property, net
Intangible assets
Goodwill (included in intangible assets)
Deferred income taxes
Current liabilities:
Accrued expenses and employee benefits
Long-term liabilities:
Deferred income taxes
Stockholders’ equity:
Other comprehensive income items
Non-controlling interest
Adjustments explanations:
Figures previously
reported
Valuation
adjustment
Balance as of
December 31, 2014
(As adjusted)
$
$
$
$
9,804,299
2,963,667
10,359,089
1,304,454
216,738 (1)
4,795,642 (1)
(3,494,777)
16,427 (2)
$
10,021,037
7,759,309
6,864,312
1,320,881
24,431,509
$
1,534,030
$
25,965,539
1,269,734
$
22,872 (1)
1,292,606
289,207
1,654,846 (2)
1,944,053
(337,410)
934,733
(42,168)
(101,520)
(1)
(1)
(379,578)
833,213
$
2,156,264
$
1,534,030
$
3,690,294
(1) Related to the net effect of the valuation at fair value of the fixed assets, intangible assets and accrued expenses and employee
benefits of Grupo Zena and VIPS, and the increase in the non-controlling interest of Grupo Zena. (see note 15).
(2) Related to the effect in income taxes due to the increase in the fair value of fixed assets and intangible assets by $1,654,846,
and the effect of the assets deferred tax pending register by $(16,427). (see note 15).
17
Annual Report 2015Encendemos el espíritu de la gente ALSEA
b. Restatement of the consolidated financial statements 2013
During April and August 2014, the period allowed by IFRS 3, Business Combinations, for the valuation of the acquisitions of Burger
King Mexicana (BKM), and Starbucks Chile mentioned in note 1, respectively, ended. The final valuation resulted in changes to the
preliminary accounting of such acquisitions; the changes are presented in note 15. Following is a summary of the effects of the
adjustments to the consolidated statements of financial position:
Concept
Long-term assets:
Figures
previously
reported
Valuation
adjustment
Balance as of
December 31, 2013
(As adjusted)
Store equipment, leasehold improvements and property, net
Intangible assets
Goodwill (included in intangible assets)
Deferred income taxes
$
4,610,942 $
1,498,224
1,765,672
982,407
$
153,455
650,296
(528,149)
(221,625)
(1)
(1)
(2)
4,764,397
2,148,520
1,237,523
760,782
Current liabilities:
Accounts payable and accrued liabilities
Long-term liabilities:
Deferred income taxes
Stockholders’ equity:
Non-controlling interest
Adjustments explanations:
$
8,857,245
$
53,976
$
8,911,222
170,862
26,847
(1)
197,709
-
19,500
(2)
19,500
231,875
7,629
(1)
239,504
$
402,736
$
53,976
$
456,713
(1) Related to the net effect of the valuation at fair value of the fixed assets, intangible assets and account payable, and the increase
in the non-controlling interest of BKM. (see note 15).
(2) Related to the effect in income taxes due to the increase in the fair value of fixed assets and intangible assets in the amount
of $241,125, and the liability for deferred taxes which was presented net of the assets deferred tax in prior year for $(19,500).
(see note 15)
c. Application of new and revised International Financing Reporting Standards (“IFRSs” or “IAS”) and interpretations that
are mandatorily effective for the current year
In the current year, the Entity has applied a number of amendments to IFRSs and new Interpretation issued by the International
Accounting Standards Board (“IASB”) that are mandatorily effective for an accounting period that begins on or after January 1, 2015.
Amendments to IAS 19, Defined Benefit Plans: Employee Contributions
The Entity has applied the amendments for the first time in the current year. Prior to the amendments, the Entity accounted for
discretionary employee contributions to defined benefit plans as a reduction of the service cost when contributions were paid to
the plans, and accounted for employee contributions specified in the defined benefit plans as a reduction of the service cost when
services are rendered.
The amendments require the Entity to account for employee contributions as follows:
• Discretionary employee contributions are accounted for as reduction of the service cost upon payments to the plans.
• Employee contributions specified in the defined benefit plans are accounted for as reduction of the service cost, only if such
contributions are linked to services. Specifically, when the amount of such contribution depends on the number of years of
service, the reduction to service cost is made by attributing the contributions to periods of service in the same manner as
the benefit attribution. On the other hand, when such contributions are determined based on a fixed percentage of salary (i.e.
independent of the number of years of service), the Entity recognizes the reduction in the service cost in the period in which the
related services are rendered.
These amendments have been applied retrospectively. The application of these amendments has had no material impact on the
disclosures or the amounts recognized in the Entity’s consolidated financial statements.
Annual Improvements to IFRSs 2010 - 2012 Cycle and 2011 – 2013 Cycle
The Entity has applied the amendments to IFRSs included in the Annual Improvements to IFRSs 2010-2012 Cycle and 2011 –
2013 Cycle for the first time in the current year. One of the annual improvements requires entities to disclose judgments made by
management in applying the aggregation criteria set out in paragraph 12 of IFRS 8 Operating Segments. The application of the
other amendments has had no impact on the disclosures or amounts recognized in the Entity’s consolidated financial statements.
d. New and revised IFRSs in issue but not yet effective
The Entity has not applied the following new and revised IFRSs that have been issued but are not yet effective:
IFRS 9
IFRS 15
Amendments to IFRS 11
Amendments to IAS 1
Amendments to IAS 16 and IAS 38
Amendments to IFRS 10 and IAS 28
Amendments to IFRS 10, IFRS 12 and IAS 28
Amendments to IFRSs
Financial Instruments3
Revenue from Contracts with Customers1
Accounting for Acquisitions of Interests in Joint Operations2
Disclosure Initiative1
Clarification of Acceptable Methods of Depreciation and Amortization1
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture1
Investment Entities: Applying the Consolidation Exception1
Annual Improvements to IFRSs 2012-2014 Cycle1
1 Effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.
2 Effective for annual periods beginning on or after January 1, 2018, with earlier application permitted.
The directors of the Entity do not anticipate that the application of these amendments will have a material effect on the Entity’s
consolidated financial statements.
19
Annual Report 2015Encendemos el espíritu de la gente ALSEA
3. SIGNIFICANT ACCOUNTING POLICIES
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards released
by IASB.
b. Basis of preparation
The Entity’s consolidated financial statements have been prepared on the historical cost basis, except for certain financial
instruments that are valued at fair value, as explained in further detail within the significant accounting policies.
i. Historical cost
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
ii. Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated
using another valuation technique. In estimating the fair value of an asset or a liability, the Entity takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for share-based payment transactions that are within the scope
of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have some similarities to fair
value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at
the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
c. Basis of consolidation of financial statements
The consolidated financial statements incorporate the financial statements of the Entity and entities controlled by the Entity and
its subsidiaries. Control is obtained when the Entity:
• Has power over the investee;
•
• Has the ability to use its power to affect its returns.
Is exposed, or has rights, to variable returns from its involvement with the investee; and
The Entity reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
When the Entity has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Entity considers all relevant facts
and circumstances in assessing whether or not the Entity’s voting rights in an investee are sufficient to give it power, including:
• The size of the Entity’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• Potential voting rights held by the Entity, other vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate that the Entity has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Entity obtains control over the subsidiary and ceases when the Entity loses control
of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated statements of income and other comprehensive income from the date the Entity gains control until the date when the
Entity ceases to control the subsidiary.
Net income (loss) and each component of other comprehensive income are attributed to the owners of the Entity and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Entity and to the non-controlling
interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with the Entity’s accounting policies.
All intercompany balances and operations have been eliminated in the consolidation.
Changes in the Entity’s ownership interests in existing subsidiaries
Changes in the Entity’s ownership interests in subsidiaries that do not result in the Entity losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Entity’s interests and the non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognized directly in equity and attributed to owners of the Entity.
When the Entity loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and
any non-controlling interests. All amounts previously recognized in other comprehensive income in relation to that
subsidiary are accounted for as if the Entity had directly disposed of the related assets or liabilities of the subsidiary
(i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs).
The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition
of an investment in an associate or a joint venture.
d. Financial instruments
Financial assets and financial liabilities are recognized when the Entity becomes a party to the contractual provisions of the
instruments.
Financial assets and financial liabilities are initially measured at fair value.
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Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of financial
assets and financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of
financial assets and financial liabilities at fair value through profit or loss are recognize immediately in profit or loss.
e. Financial assets
Financial assets are classified into the following specific categories: financial assets “at fair value through profit or loss” (FVTPL),
“held-to-maturity” investments, “available-for-sale” (AFS) and financial assets and “loans and receivables”. The classification
depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular purchases
or sales of financial assets are recognized and derecognized on the trade date basis. Regular way purchases or sales are purchases
or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the
marketplace.
1. Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the
net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as of FVTPL.
2. Financial assets at FVTPL
Financial assets are classified as of FVTPL when the financial asset is (i) contingent consideration that may be paid by an
acquirer as part of a business combination to which IFRS 3 applies, (ii) held for trading, or (iii) it is designated as of FVTPL
A financial asset is classified as held for trading if:
It has been acquired principally for the purpose of selling it in the near term; or
•
• On initial recognition it is part of a portfolio of identified financial instruments that the Entity manages together and has a
recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and effective as a hedging instrument
•
A financial asset other that a financial asset held for trading may be designated as of FVTPL upon initial recognition, if:
• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with the Entity’s documented risk management or investment
strategy, and information about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract
to be designated as of FVTPL.
•
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included
in the “other income and expenses” in the consolidated statements of income.
3. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not traded on an active
market are classified as loans and receivables. Loans and receivables are valued at amortized cost using the effective interest
method, less impairment identified.
Interest income is recognized by applying the effective interest rate, except for short term receivables when the effect of
discounting is immaterial.
4. Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For all other financial assets, objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty; or
• Breach of contract, such as a default or delinquency in interest or principal payments; or
•
It becoming probable that the borrower will enter bankruptcy or financial re-organization; or
• The disappearance of an active market for that financial asset because of financial difficulties.
For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis
even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could
include the Entity’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past
the average credit period of 15 days, as well as observable changes in national or local economic conditions that correlate with
default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the
asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return
for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception
of trade receivables, where the carrying amount is reduced through the use of an allowance account.
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When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance
account are recognized in profit or loss.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
f.
Inventories and cost of sales
Inventories are valued at the lower of cost or net realizable value. Costs of inventories are determined using the average cost
method. Net realizable value represents the estimated selling price for inventories less all estimated cost of completion and costs
necessary to make the sale.
Cost of sales represents the cost of inventories at the time of sale, increased, when applicable, by reductions in the value of
inventory during the year to its net realizable value.
The Entity records the necessary estimations to recognize reductions in the value of its inventories due to impairment, obsolescence,
slow movement and other causes that indicate that utilization or realization of the items comprising the inventories will be below
the recorded value.
g. 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 the
useful lives estimated by the Entity’s management. Annual depreciation rates of the main groups of assets are as follows:
Store equipment
Transportation equipment
Production equipment
Buildings
Leasehold improvements
Computer equipment
Office furniture and equipment
Rates
5 al 30
25
10 al 20
5
7 al 20
30
10
Any significant components of store equipment, leasehold improvements and property that must be replaced periodically are
depreciated as separate components of the asset and to the extent they are not fully depreciated at the time of their replacement,
are written off by the Entity and replaced by the new component, considering its respective useful life and depreciation. Likewise,
when major maintenance is performed, the cost is recognized as a replacement of a component provided that all recognition
requirements are met. All other routine repair and maintenance costs are recorded as an expense in the period as they are incurred.
Buildings, furniture and equipment held under finance leases are depreciated based on their estimated useful life as own assets.
However, when there is no reasonable certainty that the property is obtained at the end of the lease term, the assets are depreciated
over the shorter of the lease life and life period.
The Entity does not maintain a policy of selling fixed assets at the end of their useful lives. Instead, in order to protect its image and
the Alsea brands, those assets are destroyed or in some cases sold as scrap. The use or lease of equipment outside the provisions
of the franchise agreements is subject to sanctions. Additionally, given the high costs of maintenance or storage required, those
assets are not used as spare parts for other brand stores.
h. Advance payments
Advance payments include advances for purchase of inventories, leasehold improvements and services that are received in the
twelve months subsequent to the date of the consolidated statements of financial position and are incurred in the course of regular
operations.
i.
Intangible assets
1. Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their
fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Brands owned by Alsea included under intangibles assets are the following:
Brand
Foster’s Hollywood
Cañas y Tapas
La Vaca Argentina
Il Tempietto
VIPS
El Portón
La Finca
Country
Spain
Spain
Spain
Spain
Mexico
Mexico
Mexico
Own brand
Own brand
Own brand
Own brand
Own brand
Own brand
Own brand
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2. Intangible assets acquired separately
Other intangible assets represent payments made to third parties for the rights to use the brands with which the Entity operates
its establishments under the respective franchise or association agreements. Amortization is calculated by the straight line
method based on the use period of each brand, including renewals considered to be certain, which are generally for 10 to 20
years. The terms of brand rights are as follows:
Brands
Domino’s Pizza
Starbucks Coffee
Burger King
Chili’s Grill & Bar
California Pizza Kitchen
P.F. Chang’s
The Cheesecake Factory
Italianni’s
Country
Mexico
Colombia
Spain (3)
Mexico
Argentina
Colombia
Chile
Year of expiration
2025
2016
2018
2037
2027
2033
2027
Mexico, Argentina, Chile
and Colombia Spain (3)
Depending on opening dates
Mexico
Mexico
Mexico (2)
Argentina, Chile, Brazil, Colombia (2)
2018
2022
2019
2021
Mexico and Chile (2)
Depending on opening dates
Mexico (1)
2031
(1) The term for each store under this brand is 20 years as of the opening date, with the right to a 10 year extension.
(2) The term for each store under this brand is 10 years as of the opening date, with the right to a 10 year extension.
(3) Term of 10 years with the right to an extension.
Domino’s Pizza Spain renew his contract in 2018, Burger King Spain is valid for 20 years.
The Entity has affirmative and negative covenants under the aforementioned agreements, the most important of which are carrying
out capital investments and opening establishments. At December 31, 2015, 2014 and 2013, the Entity has fully complied with those
obligations.
Amortization of intangible assets is included in the depreciation and amortization accounts in the consolidated statements of
income.
An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the
carrying amount of the asset are recognized in profit or loss when the asset is derecognized.
j. Impairment in the value of long-lived assets, equipment, leasehold improvements, properties, and other intangible assets
At the end of each reporting period, the Entity reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset, the Entity estimates the recoverable amount of the cash-generating unit to which
the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least
annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in
profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation
decrease. The Entity performs impairment test annually to identify any indication.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal
of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation increase.
k. Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Entity,
liabilities incurred by the Entity to the former owners of the acquire and the equity interests issued by the Entity in exchange for
control of the acquire. Acquisition-related costs are generally recognized in profit or loss as incurred.
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At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:
- Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured
in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefit, respectively;
- Liabilities or equity instruments related to share-based payment arrangements of the acquire or share-based payment
arrangements of the Entity entered into to replace share-based payment arrangements of the acquire are measured in
accordance with IFRS 2 at the acquisition date;
- Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquire, and the fair value of the acquirer’s previously held equity interest in the acquire (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquire and the fair value of the acquirer’s previously held interest in the acquire (if any), the
excess is recognized immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net
assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share
of the recognized amounts of the acquirer’s identifiable net assets. The choice of measurement basis is made on a transaction-by-
transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in
another IFRS.
When the consideration transferred by the Entity in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of
the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement
period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot
exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37,
Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in
profit or loss.
When a business combination is achieved in stages, the Entity’s previously held equity interest in the acquire is remeasured to its
acquisition-date fair value and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the
acquire prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit
or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Entity reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted
during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained
about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at
that date.
l. Goodwill
Goodwill arising from an acquisition of a business is carried at cost as established at the date of acquisition of the business less
accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Entity’s cash-generating units that is expected to
benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly
in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
m. Investment in associates
An associate is an entity over which the Entity has significant influence. Significant influence is the power to participate in the
financial and operating policies decisions of the investee, but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements
using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case
it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate or a joint venture is initially
recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Entity’s share of the
profit or loss and other comprehensive income of the associate or joint venture. When the Entity’s share of losses of an associate
or a joint venture exceeds the Entity’s interest in that associate or joint venture (which includes any long-term interests that, in
substance, form part of the Entity’s net investment in the associate or joint venture), the Entity discontinues recognizing its share
of further losses. Additional losses are recognized only to the extent that the Entity has incurred legal or constructive obligations or
made payments on behalf of the associate or joint venture.
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When the Entity´s share of losses of an associate or join venture exceeds the Entity´s interest in that associate or joint venture
(which includes any long-term interests that, in substance, form part of the Entity´s net investment in the associate or joint venture),
the Entity discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Entity has
incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee
becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost
of the investment over the Entity’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized
as goodwill, which is included within the carrying amount of the investment. Any excess of the Entity’s share of the net fair value of
the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized immediately in profit or loss
in the period in which the investment is acquired.
The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the
Entity’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including
goodwill) is tested for impairment in accordance with IAS 36, Impairment of Assets as a single asset by comparing its recoverable
amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part
of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent
that the recoverable amount of the investment subsequently increases.
The Entity discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint
venture, or when the investment is classified as held for sale. When the Entity retains an interest in the former associate or joint
venture and the retained interest is a financial asset, the Entity measures the retained interest at fair value at that date and the fair
value is regarded as its fair value on initial recognition in accordance with IAS 39.
The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and
the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included
in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Entity accounts for all amounts
previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis as would
be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss
previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the
disposal of the related assets or liabilities, the Entity reclassifies the gain or loss from equity to profit or loss (as a reclassification
adjustment) when the equity method is discontinued.
The Entity continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an
investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes
in ownership interests.
When the Entity reduces its ownership interest in an associate or a joint venture but the Entity continues to use the equity method,
the Entity reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive
income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of
the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Entity, profits and losses resulting from the transactions
with the associate or joint venture are recognized in the Entity’s consolidated financial statements only to the extent of interests in
the associate or joint venture that are not related to the Entity.
n. Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognized as assets of the Entity at their fair value at the inception of the lease or, if
lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated
statements of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
Lessors of leased properties require deposits equivalent guarantee of 1 to 2 months’ rent. The deposits are classified as noncurrent.
o. Foreign currency transactions
In order to consolidate the financial statements of foreign operations carried out independently from the Entity (located in Argentina,
Chile, Colombia, Brazil and Spain), which comprise 38%, 27% and 27% of consolidated net income and 22%, 23% and 21% of the
total consolidated assets at December 31, 2015, 2014 and 2013, respectively, companies apply the policies followed by the Entity.
The financial statements of consolidating foreign operations are converted to the reporting currency by initially identifying whether
or not the functional and recording currency of foreign operations is different, and subsequently converting the functional currency
to the reporting currency. The functional currency is equal to recording currency of foreign operations, but different to the reporting
currency.
In order to convert the financial statements of subsidiaries resident abroad from the functional currency to the reporting currency
at the reporting date, the following steps are carried out:
- Assets and liabilities, both monetary and non-monetary, are converted at the closing exchange rates in effect at the reporting
date of each consolidated statements of financial position.
-
Income, cost and expense items of the consolidated statements of income are converted at the average exchange rates for
the period, unless those exchange rates will fluctuate significantly over the year, in which case operations are converted at the
exchange rates prevailing at the date on which the related operations were carried out.
- All conversion differences are recognized as a separate component under stockholders’ equity and form part of other
comprehensive income items.
p. Employee benefits
Retirement benefits costs from termination benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service
entitling them to the contributions.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains
and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the period
in which they occur.
Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified
to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination
benefit and when the entity recognizes any related restructuring costs.
Short-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period
the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected
to be paid in exchange for the related service.
Statutory employee profit sharing
As result of the PTU is recorded in the results of the year in which it is incurred and is presented in other expenses and other income.
As result of the 2014 Income Tax Law, as of December 31, 2015, 2014 and 2013, PTU is determined based on taxable income,
according to Section I of Article 10 of the that Law.
q. Income taxes
The income tax expense represents the sum of the tax currently payable and deferred tax.
- Current tax
In Mexico, current income tax (ISR) and until December 31, 2013, the Business Flat Tax (IETU) is recognized in the results of the
year in which is incurred.
- Deferred income tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference
arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Entity is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only recognized to the extent that it is
probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive
income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or
directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination,
the tax effect is included in the accounting for the business combination.
r. Provisions
Provisions are recorded when the Entity has a present obligation (be it legal or assumed) as a result of a past event, and it is
probable that the Entity will have to settle the obligation and it is possible to prepare a reliable estimation of the total amount.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flow.
When some or all of the economic benefits required to settle a provision are expected to be recovered by a third party, a receivable
is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be
measured reliably.
Provisions are classified as current or non-current based on the estimated period of time estimated for settling the related
obligations.
Contingent liabilities acquired as part of a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of
subsequent reporting periods, such contingent liabilities are measured at the higher of the amount that would be recognized in
accordance with IAS 37 and the amount initially recognized less cumulative amortization recognized in accordance with IAS 18,
Revenue.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
s. Financial liabilities and equity instruments
1. Classification as debt or equity
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
2. Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
3. Other financial liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortized cost
using the effective interest method.
t. Derivative financial instruments
Alsea uses derivative financial instruments (DFI) known as forwards or swaps, in order to a) mitigate present and future risks of
adverse fluctuations in exchange and interest rates, b) avoid distracting resources from its operations and the expansion plan, and c)
have certainty over its future cash flows, which also helps to maintain a cost of debt strategy. DFI’s used are only held for economic
hedge purposes, through which the Entity agrees to the trade cash flows at future fixed dates, at the nominal or reference value,
and they are valued at fair value.
Embedded derivatives: The Entity reviews all signed contracts to identify the existence of embedded derivatives. Identified
embedded derivatives are subject to evaluation to determine whether or not they comply with the provisions of the applicable
regulations; if so, they are separated from the host contract and are valued at fair value. If an embedded derivative is classified as
trading instruments, changes in their fair value are recognized in income for the period.
Changes in the fair value of embedded derivatives designated for hedging recognize in based on the type of hedging: (1) when
they relate to fair value hedges, fluctuations in the embedded derivative and in the hedged item they are valued at fair value and
are recorded in income; (2) when they relate to cash flows hedges, the effective portion of the embedded derivative is temporarily
recorded under other comprehensive income, and it is recycled to income when the hedged item affects results. The ineffective
portion is immediately recorded in income.
Strategy for contracting DFI’s: Every month, the Corporate Finance Director’s office must define the price levels at which the
Corporate Treasury must operate the different hedging instruments. Under no circumstances should amounts above the monthly
resource requirements be operated, thus ensuring that operations are always carried out for hedging and not for speculation
purposes. Given the variety of derivative instruments available to hedge risks, Management is empowered to define the operations
for which such instruments are to be contracted, provided they are held for hedging and not for speculative purposes.
Processes and authorization levels: The Corporate Treasury Manager must quantify and report to the Financial Director the
monthly requirements of operating resources. The Corporate Financial Director may operate at his discretion up to 50% of the
needs for the resources being hedged, and the Administration and Financial Management may cover up to 75% of the exposure
risk. Under no circumstances may amounts above the limits authorized by the Entity’s General Management be operated, in order
to ensure that operations are always for hedging and not for speculation purposes. The foregoing is applicable to interest rates
with respect to the amount of debt contracted at variable rates and the exchange rate with respect to currency requirements. If it
becomes necessary to sell positions for the purpose of making a profit and/or incurring a “stop loss”, the Administration and Finance
Director must first authorize the operation.
Internal control processes: With the assistance of the Corporate Treasury Manager, the Corporate Financial Director must issue
a report the following working day, specifying the Entity’s resource requirements for the period and the percentage covered by
the Administration and Financial Manager. Every month, the Corporate Treasury Manager will provide the Accounting department
with the necessary documentation to properly record such operations. The Administration and Finance Director will submit to the
Corporate Practices Committee a quarterly report on the balance of positions taken.
The actions to be taken in the event that the identified risks associated with exchange rate and interest rate fluctuations materialize,
are to be carried out by the Internal Risk Management and Investment Committee, of which the Alsea General Director and the main
Entity’s directors form part.
Main terms and conditions of the agreements: Operations with DFI’s are carried out under a master agreement on an ISDA
(International Swap Dealers Association) form, which must be standardized and duly formalized by the legal representatives of the
Entity and the financial institutions.
Margins, collateral and credit line policies: In certain cases, the Entity and the financial institutions have signed an agreement
enclosed to the ISDA master agreement, which stipulates conditions that require them to offer guarantees for margin calls in the
event that the mark-to-market value exceeds certain established credit limits.
The Entity has the policy of monitoring the volume of operations contracted with each institution, in order to avoid as much as
possible margin calls and diversify its counterparty risks.
Identified risks are those related to variations in exchange rate and interest rate. Derivative instruments are contracted under the
Entity’s policies and no risks are expected to occur that differ from the purpose for which those instruments are contracted.
Markets and counterparties: Derivative financial instruments are contracted in the local market under the over the counter (OTC)
mode. Following are the financial entities that are eligible to close operations in relation to the Entity’s risk management: BBVA
Bancomer S.A., Banco Santander, S. A., Barclays Bank México S. A., UBS AG Actinver Casa De Bolsa, Banorte-Ixe, BTG Pactual, Citi,
Credit Suisse, Grupo Bursátil Mexicano GBM Casa De Bolsa, HSBC Global Research, Interacciones Casa de Bolsa, Intercam Casa de
Bolsa, Invex, Itau BBA, Monex Casa de Bolsa, UBS Investment Research, Grupo Financiero BX+, and Vector Casa de Bolsa.
The Corporate Financial Director is empowered to select other participants, provided that they are regulated institutions authorized
to carry out this type of operations, and that they can offer the guarantees required by the Entity.
Accounting of hedging: DFI’s are initially recorded at their fair value, which is represented by the transaction cost. After initial
recognition, DFI’s are valued at each reporting period at their fair value and changes in such value are recognized in the consolidated
statements of income, except if those derivative instruments have been formally designated as and they meet the requirements to
be considered hedge instruments associated to a hedge relation.
Polices for designating calculation and valuation agents
The fair value of DFIs is reviewed monthly. The calculation or valuation agent used is the same counterparty or financial entity
with whom the instrument is contracted, who is asked to issue the respective reports at the month-end closing dates specified
by the Entity.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
Likewise, as established in the master agreements (ISDA) that cover derivative financial operations, the respective calculations
and valuations are presented in the quarterly report. The designated calculation agents are the corresponding counterparties.
Nevertheless, the Entity validates all calculations and valuations received by each counterparty.
u. Revenue recognition
Income generated from ordinary operations is recorded to the extent that future economic benefits are likely to flow into the Entity
and income can be measured reliably, irrespective of the moment in which payment is made. Income is measured based on the fair
value of the consideration received or receivable, bearing in mind the payment conditions specified in the respective agreement,
without including taxes or tariffs.
Sale of goods
Revenues from the sale of food and beverages are recognized when they are delivered to and/or consumed by customers.
Provision of services
Revenues from services are recognized given the stage of completion, which is generally when the services have been rendered and
accepted by customers.
Dividends
Dividend income is recognized when the Entity’s right to collect dividends has been established.
Royalties
Royalty income is recorded as it is earned, based on a fixed percentage of sub-franchise sales.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES FOR ESTIMATING UNCERTAINTIES
In the application of the Entity’s accounting policies, which are described in Note 3, the Entity’s management is required to make certain
judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates. Estimations and assumptions are reviewed on a regular basis. Changes to the accounting estimations are
recognized in the period in which changes are made, or in future periods if the changes affect the current period and other subsequent periods.
a. Critical judgments for applying the accounting policies
There are critical judgments, apart from those involving estimations, that the Entity’s management has made in the process of
applying the Entity´s accounting policies and that have the most significant effect on the amounts recognized in the consolidated
financial statements.
Control over Food Service Project, S.L. (Grupo Zena) and obligation under put option of non-controlling interest
Note 1 and 15 indicates that Grupo Zena is a 71.76% owned subsidiary of Alsea. Based on the contractual agreements executed
between the Entity and other investors, Alsea is empowered to appoint or remove the majority of the members of the board of
directors, executive commission and management positions of Grupo Zena, which manage the relevant activities of Grupo Zena.
Consequently, the Entity’s management concluded that Alsea has the capacity to manage the relevant activities of Grupo Zena and
therefore has control over it.
Similarly, Alsea has the obligation under the put option to acquire the non-controlling interest of the other investors (purchase option).
This purchase option can be exercised four years after the acquisition date of Grupo Zena. Alsea’s management has calculated the
financial liability derived from the contractual requirements in effect at the purchase option date, as well as the current value of the
financial liability according to the requirements of IAS 32, Financial Instruments. Details of this liability can be consulted in Note 19.
Control over Operadora de Franquicias Alsea, S.A. de C.V. (OFA)
Note 1 and 15 indicates that OFA is an 80% owned subsidiary of the Entity. Based on the contractual agreements signed by the
Entity and other investors, the Entity is empowered to appoint and remove most of the members of the board of directors of OFA,
which has the power to control the relevant operations of OFA. Therefore, the Entity’s management concluded that the Entity has
the capacity to unilaterally control the relevant activities of OFA and therefore it has control over OFA.
Certain significant decisions, including the following are subject to the unanimous consent of the two stockholders: 1) the approval
or modification of the budget of the year, and 2) changes to the development schedule, which do not modify the Entity’s control over
the subsidiary, as established in the master franchise contract.
b. Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year.
1. Impairment of long-lived assets
The Entity annually evaluates whether or not there is indication of impairment in long-lived assets and calculates the recoverable
amount when indicators are present. Impairment occurs when the net carrying value of a long-lived asset exceeds its recoverable
amount, which is the higher of the fair value of the asset less costs to sell and the value in-use of the asset. Calculation of
the value in-use is based on the discounted cash flow model, using the Entity’s projections of its operating results for the near
future. The recoverable amount of long-lived assets is subject to uncertainties inherent to the preparation of projections and
the discount rate used for the calculation.
2. Useful life of store equipment, leasehold improvements and property
Fixed assets acquired separately are recognized at cost less accumulated depreciation and amortization and accrued losses for
impairment. Depreciation is calculated based the straight-line method over the estimated useful life of assets. The estimated
useful life and the depreciation method are reviewed at the end of each reporting period, and the effect of any changes in the
estimation recorded is recognized prospectively.
3. Income tax valuation
The Entity recognizes net future tax benefits associated with deferred income tax assets based on the probability that future
taxable income will be generated against which the deferred income tax assets can be utilized. Evaluating the recoverability
of deferred income tax assets requires the Entity to prepare significant estimates related to the possibility of generating
future taxable income. Future taxable income estimates are based on projected cash flows from the Entity’s operations and
the application of the existing tax laws in Mexico. The Entity’s capacity to realize the net deferred tax assets recorded at any
reporting date could be negatively affected to the extent that future cash flows and taxable income differ significantly from the
Entity’s estimates.
Additionally, future changes in Mexico’s tax laws could limit the capacity to obtain tax deductions in future periods.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
4. Intangible assets
The period and amortization method of an intangible asset with a defined life is reviewed at a minimum at each reporting date.
Changes to the expected useful life or the expected pattern of consumption of future economic benefits are made changing the
period or amortization method, as the case may be, and are treated as changes in the accounting estimations. Amortization
expenses of an intangible asset with a definite useful life are recorded in income under the expense caption in accordance with
the function of the intangible asset.
5. Fair value measurements and valuation processes
Some of the Entity’s assets and liabilities are measured at fair value for financial reporting purposes. The Entity’s Board of
Directors has set up a valuation committee, which is headed up by the Entity’s Financial Director, to determine the appropriate
valuation techniques and inputs for fair value measurements.
In estimating the fair value of an asset or liability, the Entity uses market-observable data to the extent it is available. When level
1 inputs are not available, the Entity engages third party qualified appraisers to perform the valuation. The valuation committee
works closely with the qualified external appraiser to establish the appropriate valuation techniques and inputs to the model.
Every three months, the Financial Director reports the findings of the valuation committee to the Entity’s board of directors to
explain the causes of fluctuations in the fair value of assets and liabilities.
Information about the valuation techniques and inputs used in the determining the fair value of various assets and liabilities are
disclosed Note 22 i.
6. Contingencies
Given their nature, contingencies are only resolved when one or more future events occur or cease to occur. The
evaluation of contingencies inherently includes the use of significant judgment and estimations of the outcomes of
future events.
5. NON-MONETARY TRANSACTIONS
During the year, the Entity carried out the following activities which did not generate or utilize cash, for which reason, they are not
shown in the consolidated statements of cash flows:
During 2013, the Entity acquired 82% of Starbucks Coffee Chile, S.A. (Starbucks Chile) and formalized the mergers of OFA and Burger
King Mexicana, S.A de C.V. (“BKM”), whereby the Entity also acquired 28.1% of the shares of OFA held by BKW, with which Alsea’s final
shareholding in OFA is 80% and in BKW is 20%. The breakdown of those acquisitions and the consideration paid in shares and assumed
liabilities are shown in Note 15.
During October 2014, Alsea acquired 71.76% of the capital stock of Food Service Project, S.L. (“FSP”), incorporated in Spain, and
which, together with its subsidiaries, is denominated “Grupo Zena”. Under the terms of this transaction, in this transaction an option to
purchase and sale was recorded in accordance with IAS 32, Financial Instruments: Presentation, is established (see note 19).
6. CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statements of cash flows, the cash and cash equivalents caption includes cash, banks and
investments in money market instruments. The cash and cash equivalents balance included in the consolidated statements of financial
position and the consolidated statements of cash flows at December 31, 2015, 2014 and 2013 is comprised as follows:
Cash
Investments with original maturities of under three months
$
2015
632,628 $
563,186
2014
589,565 $
523,285
2013
545,708
117,562
Total cash and cash equivalents
$
1,195,814 $
1,112,850 $
663,270
The Entity maintains its cash and cash equivalents with accepted financial entities and it has not historically experienced losses due to
credit risk concentration.
7. CUSTOMERS
The accounts receivable from customers disclosed in the consolidated statements of financial position are classified as loans and
accounts receivable and therefore they are valued at their amortized cost.
At December 31, 2015, 2014 and 2013, the customer balance is comprised as follows:
Franchises
Credit card
Other
Allowance for doubtful accounts (1)
$
2015
332,485 $
163,584
261,971
758,040
(118,097)
2014
359,008 $
188,456
233,084
780,548
(106,799)
2013
213,231
110,442
90,505
414,178
(54,074)
$
639,943 $
673,749 $
360,104
(1) The estimates presented in the consolidated statements of financial position refer to the balances of doubtful accounts aged more
than 90 days involving franchisees. The estimates recognized mainly for the concept are $ $118,097, $106,799 and $54,074 in
2015, 2014 and 2013, respectively. These estimates plus certain guarantees cover the overdue amount. The recognized impairment
represents the difference between the book values of these customer account receivables and the current value of the resources
expected from their settlement. The Entity does not hold any collateral for these balances.
The average credit term for the sale of food, beverages, containers, packaging, royalties and other items to owners of sub-franchises is
from 8-30 days. Starting from the day next dates of the contractual maturity are generated interests on the defeated balance at moment
of settlement. The rate comprises the Mexican Interbank Equilibrium Rate (TIIE) plus 5 points and is multiplied by 2.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
Following is the aging of past due but unimpaired accounts receivable:
15-60 days
60-90 days
More than 90 days
Total
2015
43,648
9,230
95,161
$
2014
28,739
11,443
97,270
$
2013
37,376
12,327
73,615
148,039
$
137,452
$
123,318
$
$
Average time overdue (days)
60
65
77
The concentration of credit risk is limited because the balance is composed of franchisees which are supported or controlled by a
service contract and / or master franchise; likewise consists of balances with from financial institutions cards, which are recovered
within from 15 days.
8. INVENTORIES
At December 31, 2015, 2014 and 2013, inventories are as follows:
Food and beverages
Containers and packaging
Other (1)
Obsolescence allowance
Total
2015
1,083,807 $
84,235
214,983
(5,044)
2014
836,993 $
78,966
145,850
(6,635)
2013
491,256
57,682
99,403
(6,461)
1,377,981 $
1,055,174 $
641,880
$
$
(1) Concepts are of toys, uniforms, cleaning utensils, kitchen appliances and souvenirs.
Inventories recognized under cost of sales for inventory consumption in the period related to continuous operations totaled $10,149,276,
$7,277,438 and $5,227,739 for the years ended December 31, 2015, 2014 and 2013, respectively. The balances in 2014 and 2013 do not
include information from discontinued operations, referred to in note 29.
9. ADVANCE PAYMENTS
Advance payments were made for the acquisition of:
Insurance and other services
Inventories
Lease of locales
Total
2015
220,783 $
62,249
39,354
2014
267,635 $
202,051
33,533
2013
136,796
134,459
33,068
322,386 $
503,219 $
304,323
$
$
10. STORE EQUIPMENT, LEASEHOLD IMPROVEMENTS AND PROPERTY
a. Store equipment, leasehold improvements and properties are as follows:
Buildings
Store
equipment
Leasehold
improvements
Capital lease
Transportation
equipment
Computer
equipment
Production
equipment
Office
furniture
and
equipment
Construction
in process
Total
$
212,855 $ 2,231,978 $
3,260,274 $
- $
98,679 $
364,749 $
588,464 $
82,813 $
506,834 $ 7,346,646
93,449
263,512
-
91,529
375,472
264,705
-
-
27,091
180
94,508
4,690
194,299
-
10,533
1,408
68,684
31,860
1,127,548
394,372
-
99,936
38,202
-
-
-
-
15,316
-
153,454
-
(7,139)
(70,620)
(60,775)
(25,561)
(116,515)
-
-
(10,519)
(2,100)
(10,750)
(13,206)
(2,096)
-
(176)
(4,269)
-
(18,560)
(119,722)
(222,564)
299,165
2,555,560
3,796,577
-
113,331
439,991
780,667
105,625
588,818
8,679,734
65,708
432,266
-
746,674
1,030,175
38,875
659,201
1,807,732
157,970
-
321,351
-
36,228
39,854
2,266
74,360
51,803
5,478
72,332
97,969
-
107,857
60,523
12,149
233,813
325,936
-
1,996,173
4,167,609
216,738
-
-
(239,161)
(22,828)
(134,656)
(96,367)
(32,923)
-
(18,912)
(740)
(13,098)
(6,279)
(8,588)
(1,930)
(3,720)
(5,019)
-
(3,288)
(451,058)
(136,451)
797,139
4,109,295
6,190,457
288,428
172,027
552,255
940,450
277,415
1,145,279
14,472,745
14,783
-
(5,617)
1,153,047
(183,125)
(58,817)
1,239,062
(335,952)
(98,739)
-
-
-
41,315
(23,113)
(1,826)
205,232
(23,962)
(4,945)
41,196
(5,903)
(1,076)
36,161
(163)
(4,649)
254,022
-
(11,976)
2,984,818
(572,218)
(187,645)
$
806,305 $ 5,020,400 $
6,994,828 $
288,428 $
188,403 $
728,580 $
974,667 $
308,764 $ 1,387,325 $ 16,697,700
Cost
Balance as of
January 1, 2013
Acquisitions
Business
acquisition
Valuation
adjustment
(note 2a)
Disposals
Adjustment for
currency conversion
Balance as of
December 31, 2013
Acquisitions
Business acquisition
Valuation
adjustment
(note 2a)
Disposals
Adjustment for
currency conversion
Balance as of
December 31, 2014
Acquisitions
Disposals
Adjustment for
currency conversion
Balance as of
December 31, 2015
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
Buildings
Store
equipment
Leasehold
improvements
Capital lease
Transportation
equipment
Computer
equipment
Production
equipment
Office
furniture
and
equipment
Construction
in process
Total
$
69,743 $
983,230 $
1,573,894 $
- $
63,432 $
235,501 $
453,308 $
43,430 $
- $ 3,422,538
7,296
240,616
267,480
-
16,271
57,799
28,014
4,748
-
622,224
(16)
(21,057)
-
-
(879)
(10,602)
-
(1,990)
-
(34,544)
-
(65,424)
(10,557)
-
(7,628)
(9,498)
(1,622)
(152)
-
(94,881)
77,023
1,137,365
1,830,817
-
71,196
273,200
479,700
46,036
-
3,915,337
7,848
400,780
399,389
11,031
29,075
72,539
48,654
9,560
-
978,876
-
(15,678)
(22,622)
-
(444)
(5,504)
(1,496)
(3,737)
-
(49,481)
-
(98,798)
(247,797)
(16,212)
(13,933)
(11,537)
(4,327)
(420)
-
(393,024)
84,871
1,423,669
1,959,787
(5,181)
85,894
328,698
522,531
51,439
-
4,451,708
8,743
633,620
727,164
14,708
33,161
112,523
45,595
20,827
-
1,596,341
-
(22,824)
(42,948)
-
(1,094)
(3,406)
(1,490)
3
-
(71,759)
-
(141,946)
(229,691)
-
(20,106)
(22,056)
(2,421)
(146)
-
(416,366)
$
93,614 $ 1,892,519 $
2,414,312 $
9,527 $
97,855 $
415,759 $
564,215 $
72,123 $
- $
5,559,924
$
222,142 $
1,418,195 $
1,965,760 $
- $
42,135 $
166,791 $
300,967 $
59,589 $
588,818 $ 4,764,397
$
712,268 $ 2,685,626 $
4,230,670 $
293,609 $
86,133 $
223,557 $
417,919 $
225,976 $
1,145,279 $ 10,021,037
$
712,691 $
3,127,881 $
4,580,516 $
278,901 $
90,548 $
312,821 $
410,452 $
236,641 $ 1,387,325 $ 11,137,776
Depreciation
Balance as of
January 1, 2013
Charge for
depreciation for
the year
Adjustment
for currency
conversion
Disposals
Balance as of
December 31, 2013
Charge for
depreciation for
the year
Adjustment
for currency
conversion
Disposals
Balance as of
December 31, 2014
Charge for
depreciation for
the year
Adjustment
for currency
conversion
Disposals
Balance as of
December 31, 2015
Net cost
Balance as of
December 31, 2013
as adjusted
Balance as of
December 31, 2014
as adjusted
Balance as of
December 31, 2015
11. INTANGIBLE ASSETS
a.
Intangible assets are comprised as follows:
Cost
Balance as of January 1, 2013 $
Acquisitions
Business acquisition
Adjustment for currency
conversion
Valuation adjustment
(note 2a)
Disposals
Balance as of December 31,
2013 as adjusted
Acquisitions
Business acquisition
Adjustment for currency
conversion
Valuation adjustment
(note 2a)
Disposals
Balance as of December 31,
2014 as adjusted
Acquisitions
Adjustment for currency
conversion
Disposals
Balance as of December
31, 2015
Brand rights
Commissions
for store
opening
Franchise and
use of locale
rights
Licenses and
developments
Goodwill
Total
$
1,566,528
9,789
17,985
(24,015)
$
386,743
11,489
-
(14,239)
564,660
-
(649)
(2,860)
2,134,298
381,133
94,824
782,103
8,986
243
-
143
387,620
212,177
18,366
(3,441)
87,008
(110)
701,620
158,933
16,241
2,577
$
348,372
105,973
113
(838)
$
992,748 $
-
789,877
-
3,682,011
339,428
826,341
(42,533)
(1,372)
(528,149)
122,147
(66)
-
(3,685)
452,182
1,254,476
4,923,709
77,308
38,072
5,258
62,676
9,016,715
42,175
393,984
9,853,131
59,139
4,795,642
-
-
-
(3,494,777)
1,300,865
(2,598)
(2,875)
(4,241)
(359)
-
(10,073)
7,813,255
378,644
94,601
15,359
(9,313)
603
(1,031)
(8,227)
875,130
173,013
(6,574)
(5,219)
572,461
6,881,265
16,520,755
143,255
(841)
-
-
411,472
6,913
(275)
-
(23,034)
$
7,913,902
$
369,989
$
1,036,350
$
714,600
$
6,881,265
$
16,916,106
43
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Brand rights
Commissions
for store
opening
Franchise and
use of locale
rights
Licenses and
developments
Goodwill
Total
$
438,948
166,703
(6,182)
$
366,528
17,916
(13,946)
$
178,415
41,756
(1,414)
$
262,337
71,756
(207)
$
16,953
-
-
1,263,181
298,131
(21,749)
(252)
(652)
(951)
(42)
-
(1,897)
599,217
369,846
217,806
333,844
16,953
1,537,666
206,596
6,514
3,800
114
(1,312)
(2,634)
65,861
7
(3,692)
78,187
6,078
-
-
354,444
12,713
(51)
-
(7,689)
811,015
371,126
279,982
418,058
16,953
1,897,134
128,657
(593)
9,693
(3,243)
95,598
(3,243)
117,608
(357)
-
-
351,556
(7,436)
(3,880)
(10,472)
(1,732)
(68)
-
(16,152)
Amortization
Balance as of January 1, 2013
$
Amortization
Adjustment for currency
conversion
Disposals
Balance as of December 31,
2013 as adjusted
Amortization
Adjustment for currency
conversion
Disposals
Balance as of December 31,
2014 as adjusted
Amortization
Adjustment for currency
conversion
Disposals
Balance as of December
31, 2015
$
935,199
$
367,104
$
370,605
$
535,241
$
16,953
$
2,225,102
Brand rights
Commissions
for store
opening
Franchise and
use of locale
rights
Licenses and
developments
Goodwill
Total
Net cost
Balance as of December 31,
2013 as adjusted
Balance as of December 31,
2014 as adjusted
Balance as of December
31, 2015
$
$
$
1,535,081
$
11,287
$
483,814
$
118,338
$
1,237,523
$
3,386,043
7,002,240
$
7,518
$
595,148
$
154,403
$
6,864,312
$
14,623,621
6,978,703
$
2,885
$
665,745
$
179,359
$
6,864,312
$
14,691,004
12. OPERATING LEASE AGREEMENTS
a. Operating leases
The real estate housing the majority of the stores of Alsea are leased from third parties. In general terms, lease agreements signed
for the operations of the Entity’s establishments are for a term of between five and ten years, with fixed rates set in pesos. Lease
payments are generally revised annually and they increase on the basis of inflation. Alsea considers that it depends on no specific
lessor and there are no restrictions for the entity as a result of having signed such agreements.
Some of the Entity’s subsidiaries have signed operating leases for company vehicles and computer equipment.
In the event of breach of any of the lease agreements, the Entity is required to settle in advance all its obligations, including
payments and penalties for early termination, and it must immediately return all vehicles to a location specified by the lessor.
Rental expense derived from operating lease agreements related to the real estate housing the stores of the different Alsea brands
are as follows:
Rental expense
a. Commitments non-cancellable operating leases
Less than a year
Between one and five years
b. Financial lease liabilities
$
$
2015
2,851,083
$
2014
1,805,853
$
2013
1,257,559
2015
1,744,166
7,833,383
$
2014
1,533,805
6,888,298
$
2013
917,838
4,061,677
From 2014, the Company has entered into leases that qualify as finance in the VIPS brand, which are recorded at present value of
minimum lease payments or the market value of the property, whichever is less, and are amortized over the period of the lease
renewals considering them.
45
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Future minimum lease payments and the present value of the minimum lease payments are summarized below:
No more than one year
More than one year and not more than five years
More than five years
Less future finance charges
Minimum lease payments
No more than one year
More than one year and not more than five years
More than five years
Present value of minimum lease payments
Included in the consolidated financial statements as:
Short-term financial liability
Long-term financial liability
Minimum payments of leases
$
$
2015
32,789
97,195
566,261
696,245
(381,915)
2014
33,723
162,569
533,685
729,977
(407,757)
$
314,330
$
322,220
Present value of minimum payments
of leases
$
$
$
$
2015
7,190
20,398
286,742
$
2014
7,878
33,651
280,691
314,330
$
322,220
2015
2014
7,190
307,140
$
7,878
314,342
314,330
$
322,220
13. INVESTMENT IN SUBSIDIARIES
a. The Entity’s shareholding in the capital stock of its main subsidiaries is as follows:
Principal activity
Name of Subsidiary
Panadería y Alimentos para Food Service, S.A. de C.V. Distribution of Alsea brand foods
Café Sirena, S. de R.L de C.V.
Operadora de Franquicias Alsea, S.A. de C.V.
Operadora y Procesadora de Productos de
Panificación S.A. de C.V.
Gastrosur, S.A. de C.V.
Fast Food Sudamericana, S.A.
Fast Food Chile, S.A.
Starbucks Coffee Argentina, S.R.L
Dominalco, S.A.
Servicios Múltiples Empresariales ACD S.A. de
C.V. SOFOM E.N.R
Asian Bistro Colombia, S.A.S
Asian Bistro Argentina S.R.L.
Operadora Alsea en Colombia, S.A.
Asian Food Ltda.
Grupo Calpik, S.A.P.I. de C.V.
Operator of the Starbucks brand in Chile
Operator of the Burger King brand in Mexico
Operator of the Domino’s Pizza brand in Mexico
Operator of the Chili’s Grill & Bar brand in Mexico
Operator of the Burger King brand in Argentina
Operator of the Burger King brand in Chile
Operator of the Starbucks brand in Argentina
Operator of the Domino’s Pizza brand in Colombia
Operator of Factoring and Financial Leasing in
Mexico
Operator of the P.F. Chang’s brand in Colombia
Operator of the P.F. Chang’s brand in Argentina
Operator of the Burger King brand in Colombia
Operator of the P.F. Chang’s brand in Chile
Operator of the California Pizza Kitchen brand in
Mexico
Operator of the P.F. Chang’s Chang´s and Pei Wei
in Mexico
Distributor of foods and production materials for
the Alsea and related brands
Operator of Italianni’s brand
Operator of Italianni’s brand
Operator of Italianni’s brand
Operator of Italianni’s brand
Operator of the Starbucks brand in Chile
Italcafe, S.A. de C.V.
Grupo Amigos de San Ángel, S.A. de C.V.
Grupo Amigos de Torreón, S.A. de C.V.
Grupo Amigos de Perisur, S.A. de C.V.
Starbucks Coffee Chile, S.A.
Distribuidora e Importadora Alsea Colombia S.A.S. Distributor of food and supplies for Alsea brands
Estrella Andina S.A.S.
Operadora Vips S. de R.L. de C.V.
OPQR, S.A de C.V.
Food Service Project, S.L (Grupo Zena)
in Colombia
Operator of the Starbucks brand in Colombia
Operator of Vips brand
Operator Brand Cheesecake Factory in Mexico
Operator of Spain
Especialista en Restaurantes de Comida Estilo
Asiática, S.A. de C.V.
Distribuidora e Importadora Alsea, S.A. de C.V.
2015
100%
100%
80.00%
100%
100%
100%
100%
100%
93.25%
100%
100%
100%
94.91%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70.00%
100%
100%
71.76%
2014
100%
100%
80.00%
100%
100%
100%
100%
100%
95.00%
100%
100%
100%
95%
100%
100%
100%
100%
100%
89.77%
100%
100%
100%
100%
70.00%
100%
100%
71.76%
2013
100%
100%
80.00%
100%
100%
100%
100%
100%
95.00%
100%
100%
100%
95%
100%
100%
100%
100%
100%
89.77%
100%
100%
100%
-
70.00%
-
-
-
47
Annual Report 2015Encendemos el espíritu de la gente ALSEA 14. INVESTMENT IN SHARES OF ASSOCIATED COMPANIES
Investment in the non-controlling interest of Blue Stripes Chile
During May 2015, Alsea reached an agreement to contribute 33% of the capital stock of Blue Stripes Chile, entity incorporated in Chile.
Initial contribution by Alsea amounted to $6,477, recognized in the consolidated statements of financial position as investment in shares
of associated companies. The remaining 67% was contributed by Grupo Axo, associated company. In accordance with the bylaws, Alsea
will not have control over such operation.
Investment in the non-controlling interest of Stripes Chile
During August 2014, Alsea reached an agreement to contribute 33% of the capital stock of Stripes Chile, entity incorporated in Chile.
Initial contribution by Alsea amounted to $4,041, recognized in the consolidated statements of financial position as investment in
associated companies. The remaining 67% was contributed by Grupo Axo, associated company. In accordance with the bylaws, Alsea
will not have control over such operation.
Acquisition of the non-controlling interest of Grupo Axo
In June 2013, Alsea reached an agreement to acquire 25% of the capital stock of Grupo Axo. The respective carrying entry was made
in the consolidated statements of financial position as investments in shares of associated companies, and that operation gave rise
goodwill of $559,887, which is included in the balance of the investment.
Goodwill arising from the acquisition of Grupo Axo resulted from the consideration paid, which included the amounts of the benefits of
new businesses, mainly the sale of international brands of clothes and cosmetics, from which growth is expected through a development
plan. Those benefits are recognized separately in goodwill because they fail to meet the recognition criteria for identifiable intangible
assets.
At December 31, 2015, 2014 and 2013, the investment in shares of associated companies is comprised of the Entity’s direct interest in
the capital stock of the companies listed below:
(%)
Interest in associated company
2015
25.00%
2014
25.00%
2013 Main operations
25.00% Sales of prestigious
$
31/12/2015
892,169
$
31/12/2014
826,067
$
31/12/2013
788,665
33.33%
-
33.33%
33.33%
brands of clothes and
accessories in Mexico
- Sales of prestigious
brands of clothes and
accessories in Chile
- Sales of prestigious
brands of clothes and
accessories in Chile
6,511
-
-
24,282
3,757
-
$
922,962
$
829,824
$
788,665
Grupo Axo (2)
Blue Stripes
Chile SPA (1)
Stripes Chile
SPA (3)
Total
(%)
Interest in associated company
2015
25.00%
2014
25.00%
2013 Main operations
25.00% Sales of prestigious
$
31/12/2015
27,396
$
31/12/2014
32,663
$
31/12/2013
43,582
33.33%
-
33.33%
33.33%
brands of clothes and
accessories in Mexico
- Sales of prestigious
brands of clothes and
accessories in Chile
- Sales of prestigious
brands of clothes and
accessories in Chile
2
-
305
(410)
-
-
$
27,703
$
32,253
$
43,582
Grupo Axo,
Blue Stripes
Chile SPA (1)
Stripes Chile
SPA
Total
(1) Stripes Chile SPA is a direct subsidiary of Grupo Axo together with another subsidiary of the Entity.
(2) In 2015 and 2014, contributions were made to increase the capital in Grupo Axo, by $38,706 and $4,739, respectively.
(3) In 2015, the contribution to the capital increase of $20,220 in Stripes Chile made.
Stripes Chile SPA
Total assets, liabilities, equity and profit and losses of the associated company are as follows:
Current assets
Non-current assets
Current liabilities
Income
Net profit (loss) for the period
$
$
$
$
$
2015
43,621
55,315
26,081
2015
85,486
915
$
$
$
$
$
2014
15,609
4,731
9,068
01/08/2014 al
31/12/2014
10,764
(1,230)
49
Annual Report 2015Encendemos el espíritu de la gente ALSEA
Blue Stripes Chile SPA
Total assets, liabilities, equity and profit and losses of the associated company are as follows:
Current assets
Non-current assets
Current liabilities
Income
Net profit for the period
Grupo Axo, S.A.P.I. de C.V.
The associated company’s total assets, liabilities and equity and its results are as follows:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Revenues
Net profit for the period
2015
2,380,902
3,169,338
1,733,052
2,488,060
2015
4,504,291
109,584
$
$
$
$
$
$
$
$
$
$
$
$
2014
1,551,287
1,276,883
752,650
1,010,797
2014
2,531,914
130,654
2015
16,478
9,531
6,475
01/06/2015 al
31/12/2015
11,904
5
2013
1,435,557
911,862
997,003
435,302
2013
1,207,860
174,328
$
$
$
$
$
$
$
$
$
$
$
The reconciliation of the financial information summarized above regarding the carrying value of the interest in Grupo Axo is as follows:
Net assets of the associated company
Entity’s interest in Grupo Axo
Plus: goodwill
Carrying value of the Entity’s interest in Grupo Axo
2015
1,329,128
332,282
559,887
$
$
2014
1,064,723
266,180
559,887
$
$
2013
919,114
228,778
559,887
892,169
$
826,067
$
788,665
$
$
$
15. BUSINESS COMBINATION
The following transactions classify as a business combination and have been recognized by utilizing the purchase method as of the
acquisition date based on the following steps:
i.- Recognize and value the assets, liabilities and non-controlling interest.
ii.- In a business combination performed by stages, the buyer revalues its equity in the acquired entity prior to the acquisition date at
face value to recognize the resulting profit or loss, as the case may be in results.
iii.- Identify intangible assets and determine goodwill.
Acquisition of Grupo Zena
In October 2014, the process to acquire of Food Service Group, S.A. and Tuera 16, S.A., S.C.R., entities resident in Luxembourg and
Spain, respectively, was concluded. The acquisition involved 71.76% of the common stock of the company denominated as Food Service
Project, S.L. (“FSP”), an entity incorporated according to the laws of Spain and which, in conjunction with its subsidiaries, is known as
“Grupo Zena”.
The acquisition amount was $102,872 Euros, payable in cash (equal to $1,794,245).
The acquisition does not consider any contingent payment. The transaction establishes an obligation under put option involving 28.24% of
common stock four years after the acquisition date, which was recorded according to IAS 32, Financial Instruments: Presentation (Note 19).
51
Annual Report 2015Encendemos el espíritu de la gente ALSEA
In October 2015, the acquisition measurement period concluded. An analysis of the assignment of the acquisition cost based on the
fair values of the acquired net assets at the acquisition date is presented below. Certain interim accounting changes were made to the
acquisition at that date, as detailed below:
Concept
Current assets:
Cash and cash equivalents
Accounts receivable and other accounts receivable
Non-current assets:
Store equipment, leasehold improvements and property, net
Intangible assets
Reassigning Goodwill included in Grupo Zena
Deferred income taxes
Current liabilities:
Suppliers and other accounts payable
Non-current liabilities:
Deferred income taxes
Long-term debt
Other long-term liabilities
Fair value of net assets
Considerations paid in cash
Fair value of non-controlling interest
Total consideration paid
Preliminary
book entry
Adjustment
for valuation
Fair
value
$
89,287 $
245,968
1,231,979
470,473
1,313,786
174,859
-
-
$
89,287
245,968
261,998
1,222,642
(1,313,786)
-
1,493,977
1,693,115
-
174,859
(1,279,228)
-
(1,279,229)
(1,845,132)
(165,459)
236,533
1,794,245
706,098
2,500,343
(445,393)
-
-
(274,540)
-
(101,521)
(101,521)
(445,393)
(1,845,132)
(165,459)
(38,007)
1,794,245
604,577
2,398,822
Goodwill
$
2,263,810
$
173,018
$
2,436,829
Goodwill arising from the acquisition of Grupo Zena derives from the price paid, which includes amounts in relation to the benefits of
operating 427 stores for which market growth is expected based on a development plan over the next five years, as well the adjacent
benefits, mainly the growth in income, operating synergies and the purchase of supplies. Those benefits are recognized separately in
goodwill because they fail to meet the recognition criteria for identifiable intangible assets.
As from the acquisition date and until December 31, 2014, Grupo Zena has contributed $1,468,036 to revenues and $118,487 to the
profit for the period. If the acquisition had occurred at beginning of year, Alsea’s consolidated net profit for the period, according to IFRS,
would have been $496,005 and revenues would have been $26,464,123. Acquisition expenses related to this transaction amounted to
$12,096, which is shown within other expenses.
None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.
Net cash flows related to the acquisition of the subsidiary total $1,704,958, corresponding to the consideration paid in cash of
$1,794,245, less cash and cash and cash equivalent balances acquired in the amount of $89,287.
Acquisition of VIPS
In April 2014, the process to acquire 100% of the equity of VIPS (the restaurant division of Grupo Wal-Mart, described in Note 1) was
concluded. Based on the agreement executed between Alsea and Wal-Mart de México, S.A.B. de C.V., the final acquisition price was
$8,200,000. Additional expenses of $516,753 were incurred by the parties, thereby resulting in a total price of $8,716,753.
The acquisition does not consider any contingent payment.
In March 2015, the acquisition measurement period concluded. An analysis of the assignment of the acquisition cost based on the fair
values of the acquired net assets at the acquisition date is presented below. Certain interim accounting changes were made to the
acquisition at that date, as detailed below:
Concept
Current assets:
Cash and cash equivalents
Accounts receivable and other accounts receivable
Non-current assets:
Store equipment, leasehold improvements and property, net
Intangible assets
Deferred income taxes
Current liabilities:
Accrued expenses and employee benefits
Non-current liabilities:
Deferred income taxes
Other long-term liabilities
Fair value of net assets
Considerations paid in cash
Goodwill
Preliminary
book entry
Adjustment
for valuation
Fair
Value
$
605,400
304,964
$
-
-
$
605,400
304,964
2,935,630
365,944
201,845
(45,260)
3,573,000
16,427
2,890,370
3,938,944
218,272
(700,918)
(22,872)
(723,790)
(366,651)
3,346,214
(1,209,453)
-
2,311,842
(1,209,453)
(366,651)
5,658,056
8,716,753
-
8,716,753
$
5,370,539
$
(2,311,842) $
3,058,697
Goodwill arising from the acquisition of VIPS derives from the price paid, which includes amounts in relation to the benefits of operating
360 stores for which market growth is expected based on a development plan over the next five years, as well the adjacent benefits,
mainly the growth in income, operating synergies and the purchase of supplies.
Those benefits are recognized separately in goodwill because they fail to meet the recognition criteria for identifiable intangible assets.
None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.
Net cash flows related to the acquisition of the subsidiary total $8,111,353, corresponding to the consideration paid in cash of $8,716,753,
less cash and cash and cash equivalent balances acquired for $605,400.
53
Annual Report 2015Encendemos el espíritu de la gente ALSEA
As from the acquisition date and until December 31, 2014, VIPS has contributed $4,016,325 to consolidated revenues and $111,628
to the profit before income taxes for the period. If the acquisition had occurred at beginning of year, Alsea’s consolidated net profit
for the period would have been $683,119 and revenues would have been $24,723,880. Acquisition expenses related to this transaction
amounted to $9,357, which is shown within other expenses.
Acquisition of the controlling interest in Starbucks Coffee Chile
In September 2013, Alsea acquired 82% of Starbucks Coffee Chile, S.A. (Starbucks Chile), which operates the Starbucks restaurants in
Chile. Through this transaction, the shareholding and voting rights of Alsea increased from 18% to 100%, thus allowing the Entity to
acquire control, while constituting a business combination recorded by means of the purchase method according to IFRS.
In August 2014, the acquisition measurement period concluded. An analysis of the assignment of the acquisition cost based on the
fair values of the acquired net assets at the acquisition date is presented below. Certain interim accounting changes were made to the
acquisition at that date, as detailed below:
Concept
Current assets
Cash and cash equivalents
Accounts receivable and other accounts receivable
Non-current assets:
Store equipment, leasehold improvements and property, net
Intangible assets
Deferred income taxes
Current liabilities:
Suppliers and other accounts payable
Non-current liabilities:
Other long-term liabilities
Fair value of net assets
Fair value of non-controlling interest
Consideration paid in cash
Total consideration paid
Preliminary
book entry
Adjustment
for valuation
$
128,656 $
89,427
141,993
6,132
-
-
-
$
21,758
558,180
(173,981)
Fair
value
128,656
89,427
163,751
564,312
(173,981)
(88,683)
-
(88,683)
(13,124)
264,401
47,593
928,595
976,188
-
405,957
62,683
-
62,683
(13,124)
670,358
110,276
928,595
1,038,871
Goodwill
$
711,787
$
(343,274) $
368,513
Goodwill arising from the acquisition of Starbucks Coffee Chile derives from the price paid, which included amounts in relation to the
benefits of operating 44 stores for which market growth is expected based on a development plan over the next five years in Chile,
as well the adjacent benefits, mainly the growth in income, operating synergies and the purchase of supplies. Those benefits are
recognized separately in goodwill because they fail to meet the recognition criteria for identifiable intangible assets.
As from the acquisition date, Starbucks Chile has contributed $231,131 to consolidated revenues and $32,772 to the profit before
income taxes for the period. If the acquisition had occurred on January 1, 2013, Alsea’s consolidated net profit for the period would have
been $694,362 and revenues would have been $16,087,950. Acquisition expenses related to this transaction amounted to $1,028, which
is shown under other expenses.
Net cash flows related to the acquisition of the subsidiary total $799,939, corresponding to the consideration paid in cash of $928,595,
less cash and cash and cash equivalent balances acquired for $128,656.
Acquisition of Burger King Mexicana
In April 2013, the acquisition of the BURGER KING® master franchise in Mexico concluded. According to the strategic association
agreement signed by Alsea and Burger King Worldwide Inc. (BKW), the BKW subsidiary in Mexico, Burger King Mexicana, S.A. de C.V.
(BKM) was merged with OFA, a subsidiary of Alsea, with the latter as the surviving company and operator of 204 BURGER KING®
restaurants in Mexico. After the merger concluded, Alsea also acquired 28.1% of the shares of OFA held by BKW, after which Alsea’s final
shareholding in OFA is 80% and BKW´s final shareholding in OFA is 20%.
Given that the operation was considered the acquisition of is business, the related acquisition accounting was applied as of the
acquisition date and according to IFRS. The acquisition price did not include any contingent consideration.
In April 2014, the acquisition measurement period concluded. An analysis of the assignment of the acquisition cost based on the fair
values of the acquired net assets at the acquisition date is presented below. Certain interim accounting changes were made to the
acquisition at that date, as detailed below:
Concept
Current assets
Cash and cash equivalents
Accounts receivable and other accounts receivable
Non-current assets:
Store equipment, leasehold improvements and property, net
Intangible assets
Deferred income taxes
Non-current liabilities:
Other long-term liabilities
Fair value of net assets
Consideration paid in actions
Consideration paid in cash
Total consideration paid
Goodwill
Preliminary
book entry
Adjustment
for valuation
$
47,828
58,300
$
-
-
$
283,531
25,843
62,803
(73,547)
404,758
217,534
333,895
551,429
131,697
92,116
(67,144)
(26,847)
129,822
7,629
-
7,629
Fair
value
47,828
58,300
415,228
117,959
(4,341)
(100,394)
534,580
225,163
333,895
559,058
$
146,671 $
(122,193) $
24,478
The consideration paid in OFA shares, which is in the measurement phase, totals $225,163 and comprises 20% of its stockholders’
equity.
Goodwill arising from the acquisition of Burger King Mexicana derives from the price paid, which included amounts related to the
benefits of operating 204 stores (97 acquired and 107 own stores), for which market growth is expected based on a development plan
over the next five years, as well the adjacent benefits, mainly the growth in income, operating synergies and the purchase of supplies
resulting from the merger of the Burger King brand in Mexico. Those benefits are recognized separately in goodwill because they fail to
meet the recognition criteria for identifiable intangible assets.
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During 2013, as from the acquisition date, Burger King Mexicana contributed $564,376 to revenues and $3,756 to the profit before
income taxes for the period. If the acquisition had occurred on January 1, 2013, Alsea’s consolidated net profit for the period would have
been $647,842 and revenues would have been $15,893,611. Acquisition expenses related to this transaction amounted to $1,101, which
is shown under other expenses.
Net cash flows related to the acquisition of the subsidiary total $288,067, corresponding to the consideration paid in cash of $333,895,
less cash and cash and cash equivalents balances acquired totaling $47,828.
16. GOODWILL
Goodwill is comprised as follows:
Item
Balance as of January 1, 2013
Burger King Mexicana
Starbucks Coffee Chile
Balance as of December 31, 2013 (as restated)
Starbucks Coffee Chile
VIPS
Foster’s Hollywood
La Vaca Argentina
Burger King
Domino’s Pizza
Il Tempietto
Cañas y Tapas
Balance as of December 31, 2014 (as restated)
Balance as of December 31, 2015
$
Amount
975,795
24,478
237,250
1,237,523
131,263
3,058,697
198,598
3,270
1,219,404
1,008,342
377
6,838
6,864,312
$
6,864,312
Assignment of goodwill to cash generating units
In order to carry out impairment tests, goodwill was assigned to the following cash generating units:
Concept
Burger King
Domino’s Pizza
Chili’s
Italianni’s
VIPS
Starbucks Coffee
Foster’s Hollywood
La Vaca Argentina
Il Tempietto
Cañas y Tapas
$
$
2015
1,336,967
1,078,622
26,614
785,816
3,058,697
368,513
198,598
3,270
377
6,838
$
2014
1,336,967
1,078,622
26,614
785,816
3,058,697
368,513
198,598
3,270
377
6,838
2013
117,563
70,280
26,614
785,816
-
237,250
-
-
-
-
$
6,864,312
$
6,864,312
$
1,237,523
At December 31, 2015, 2014 and 2013, studies performed on impairment testing concluded that goodwill shows no signs of impairment.
17. LONG-TERM DEBT
Long-term debt at December 31, 2015, 2014 and 2013 is comprised of unsecured loans, as shown below:
Single loans
Less current maturities
Long-term maturities
Maturities
2014-2025
Average annual
interest rate
4.11-8.07% $
2015
5,753,546
734,824
$
2014
8,747,823
1,377,157
$
2013
2,554,767
388,486
$
5,018,722
$
7,370,666
$
2,166,281
Annual long-term debt maturities at December 31, 2015 are as follows:
Year
2017
2018
2019
2020
$
Amount
882,402
502,281
2,433,871
1,200,168
$
5,018,722
Bank loans include certain affirmative and negative covenants, such as maintaining certain financial ratios. At December 31, 2015, 2014
and 2013, all such obligations have been duly met.
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18. DEBT INSTRUMENTS
In March 2015, Alsea placed of debt instruments worth $3,000,000 over 5 years as from the issuance date, maturing in March 2020.
Those instruments will accrue interest at the 28-day TIIE rate plus 1.10 percentage points; and other debt instrument worth $1,000,000
over 10 years as from the issue date, maturing in March 2015. Those instruments will accrue interest at a fixed rate of 8.07%.
In June 2013, the Entity decided to issue debt instruments for a total of $2,500,000 over 5 years as from the issue date, maturing in
June 2018. Those instruments will accrue interest at the 28-day TIIE rate plus 0.75 percentage points.
The balance at December 31, 2015, 2014 and 2013 amounts to $6,479,795, $2,491,356 and $2,488,850, respectively.
Year
2018
2020
2025
Amount
2,493,909
2,985,886
1,000,000
6,479,795
$
$
19. OBLIGATION OVER PUT OPTION
As mentioned in Note 1c, the Entity acquired Grupo Zena; Alsea has the obligation over put option to purchase the non-controlling
interest of the other investors (call option) starting in the fourth year since the date of acquisition. The amount represents the present
value of the estimated debt that will be paid at the time of exercising the put option under the terms of the contract. The liability will be
updated each year until the option date, and the effects will be recognized in the consolidated statements of income, as stated by IAS
32, Financial instruments: Presentation. The financial liability of the put option amounts to $2,777,328 and $2,673,053, at December
31, 2015 and 2014, respectively. The revaluation of this option as of December 31, 2015, generated a profit in results by $104,275, and
is included in ‘Changes in the fair value of financial instruments’ in the consolidated Statements of Income.
20. INCOME TAXES
In Mexico, the Entity is subject to ISR. The rate of current income is 30%. The Entity incurred ISR on a consolidated basis until 2014
with its Mexican subsidiaries. As a result of the 2014 Tax Law, the tax consolidation regime was eliminated, and the Entity and its
subsidiaries have the obligation to pay the deferred income tax benefit calculated as of that date over a five-year period beginning in
2014, as illustrated below.
Pursuant to Transitory Article 9, section XV, subsection d) of the 2014 Tax Law, given that as of December 31, 2013, the Entity was
considered to be a holding company and was subject to the payment scheme contained in Article 4, Section VI of the transitory
provisions of the ISR law published in the Federal Official Gazette on December 7, 2009, or article 70-A of the ISR law of 2013 which
was repealed, it must continue to pay the tax that it deferred under the tax consolidation scheme in 2007 and previous years based on
the aforementioned provisions, until such payment is concluded.
As of 2008, the Asset Tax Law (LIMPAC) was eliminated, but under certain the amount of this tax paid in the 10 years immediately prior
to that in which ISR is first paid may be recovered in accordance with applicable tax provisions.
At December 31, 2014, the ISR liability derived from the effects of benefits and tax deconsolidation will be paid in the following years.
Year of expiration
2016
2017
2018
$
$
Amount
31,893
21,828
17,927
71,648
In Chile, in September 2014, the government promulgates in its tax reform increased the rate gradually according to the following 21%
in 2014, 22.5% to 2015, 24% to 2016, 25.5% to 2017 and to 2018 will be of 27%, based taxation system chose for the years 2017 and
2018. The change in the First Category Tax was pronounced in July 2010.
In Colombia, the tax provisions provide that the rate applicable to income tax for the years 2014 and 2015 is 25% and the income tax
for equity –CREE is 9%, respectively. Also, a surtax CREE 5% for companies whose profit is equal to or greater than 800 million sets.
In Argentina i.- Tax on income The Entity applies the deferred tax method to recognize the accounting effects of taxes on earnings at
the 35% rate. ii.- Tax on presumptive minimum earnings (IGMP for its acronym in Spanish), the Entity determines IGMP applying the
current 1% rate to assets computable at each year-end closing, iii.- Tax on personal goods of individuals or business entities residing
abroad, the tax is determined applying the 0.5% to the proportional value of equity at the year-end closing and it is considered a single
and final payment.
In Spain, tax reforms were approved for 2015, which include the reduction of this tax rate to 28% and 25% in 2016, with the exception
of credit institutions and entities engaged in hydrocarbon exploration, research and exploration. Newly-created companies will pay tax
at the 15% rate during the first tax period in which their tax basis is positive and in the following period. Similarly, as part of these tax
reforms, tax losses will be applicable without a time limitation; until 2014, the right to apply such losses expired after 18 years.
a.
Income taxes recognized in income
Income tax (tax basis)
Deferred income tax
$
$
2015
691,060
(201,141)
$
2014
597,045
(232,452)
$
2013
422,573
(137,706)
489,919
$
364,593
$
284,867
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
The tax expense attributable to income before ISR differs from that arrived at by applying the 30% statutory rate in 2015, 2014 and
2013 due to the following items:
Statutory income tax rate
Non-deductible expenses
Effects of inflation and others
2015
30%
8%
(6%)
2014
30%
7%
(1%)
2013
30%
3%
(3%)
Tasa efectiva de ISR consolidada
32%
36%
30%
b. Deferred taxes - balance sheet
Following is an analysis of deferred tax assets shown in the consolidated statements of financial position:
Estimation for doubtful accounts and inventory obsolescence
Estimation for doubtful accounts and inventory obsolescence
Liability provisions
Advances from customers
Unamortized tax losses
Recoverable asset tax
Store equipment, leasehold improvements and property
Other assets
Advance payments
2015
2014
2013
$
(36,942) $
(488,383)
(105,167)
(219,508)
(12,269)
882,625
5,752
71,418
97,526
(34,028) $
(447,253)
(70,341)
(75,874)
(12,269)
1,208,752
7,172
47,013
623,172
(10,863)
(368,176)
(18,565)
(166,337)
(12,269)
(230,345)
12,224
53,049
(741,282)
Estimation for unamortized tax losses
116,868
-
-
$
214,394
$
623,172
$
(741,282)
c. Deferred tax in statement of financial position
The following is the analysis of deferred tax assets (liabilities) presented in the consolidated statements of financial position:
Deferred tax assets
Deferred tax liabilities
2015
1,710,943
1,925,337
$
2014
1,320,881
1,944,053
$
2013
760,782
19,500
214,394
$
623,172
$
(741,282)
$
$
d. Deferred income tax balances
2015
Temporary differences
Estimation for doubtful accounts and
inventory obsolescence
Liability provisions
Advances from customers
Store equipment, leasehold improvements
and property
Prepaid expenses
Other assets
Tax loss carryforwards and unused tax
credits
Tax loss carryforwards
Recoverable IMPAC
2015
Temporary differences
Estimation for doubtful accounts and
inventory obsolescence
Liability provisions
Advances from customers
Store equipment, leasehold improvements
and property
Prepaid expenses
Other assets
Tax loss carryforwards and tax credits
not used
Tax loss carryforwards
Recoverable IMPAC
Beginning
balance
Recognized in
profit or loss
Recognized in
stockholders’
equity
Acquisitions
Ending
balance
$
(34,028) $
(2,914) $
-
$
-
$
(36,942)
(447,253)
(70,341)
1,208,752
47,013
7,172
711,315
(14,330)
(34,826)
(316,476)
168,825
(1,420)
(201,141)
(26,800)
-
(9,651)
(144,420)
-
(180,871)
-
-
-
-
-
-
(75,874)
(12,269)
(88,143)
-
-
-
(26,766)
-
(26,766)
-
-
-
(488,383)
(105,167)
882,625
71,418
5,752
329,303
(102,640)
(12,269)
(114,909)
$
$
623,172 $
(201,141)
$
(207,637) $
-
$
214,394
Beginning
balance
Recognized in
profit or loss
Recognized in
stockholders’
equity
Acquisitions/
disposals
Ending
balance
(10,863) $
(23,165) $
-
$
-
$
(34,028)
(368,176)
(18,565)
(230,345)
53,049
12,224
(562,676)
(71,488)
(51,776)
(79,877)
(1,094)
(5,052)
(232,452)
(7,589)
-
16,135
(4,942)
-
3,604
-
-
1,502,839
-
-
1,502,839
(447,253)
(70,341)
1,208,752
47,013
7,172
711,315
(166,337)
(12,269)
(178,606)
-
-
-
90,463
-
90,463
-
-
-
(75,874)
(12,269)
(88,143)
$
(741,282) $
(232,452) $
94,067
$
1,502,839
$
623,172
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Annual Report 2015Encendemos el espíritu de la gente ALSEA 2015
Temporary differences
Estimation for doubtful accounts and
inventory obsolescence
Liability provisions
Advances from customers
Store equipment, leasehold improvements
and property
Prepaid expenses
Other assets
Tax loss carryforwards and tax credits
not used
Tax loss carryforwards
Recoverable IMPAC
Beginning
balance
Recognized in
profit or loss
Recognized in
stockholders’
equity
Acquisitions/
disposals
Ending
balance
$
(5,997) $
(4,866) $
-
$
-
$
(10,863)
(220,682)
(30,072)
(380,473)
21,186
807
(615,231)
(149,336)
11,507
(81,172)
39,616
11,417
(172,834)
1,842
-
1,199
(7,753)
-
(4,712)
-
-
230,101
-
-
230,101
(368,176)
(18,565)
(230,345)
53,049
12,224
(562,676)
(201,465)
(12,269)
(213,734)
35,128
-
35,128
-
-
-
-
-
-
(166,337)
(12,269)
(178,606)
$
(828,965) $
(137,706)
$
(4,712) $
230,101
$
(741,282)
The benefits of restated tax loss carryforwards and recoverable IMPAC for which the deferred ISR asset and tax credit, respectively,
have been (in such case partially) recognized, can be recovered subject to certain conditions. Expiration dates and restated amounts
as of December 31, 2015, are:
Year of maturity
2020
2021
2022
2023
2024
2025
$
Amortizable
losses
44,425
22,265
24,139
124,948
108,197
407,718
$
731,692
21. EMPLOYEE RETIREMENT BENEFITS
The total expense recognized in profit or loss and other comprehensive income is $78,353 represents the contributions payables by the
Entity to these plans. As of December 31, 2015, contributions of $78,353 that was owed on the plan had not been paid.
The expense for employee benefits as of December 31, 2015, 2014 and 2013 was $8,171,055, $5,332,897 and $3,361,176, respectively,
not including the cost defined benefit described below.
The net cost for the period related to obligations derived from seniority premiums amounted to $6,041, $29,661 and $21,674 in 2015,
2014 and 2013, respectively.
22. FINANCIAL INSTRUMENTS
a. Capital risk management
The Entity manages its capital to ensure that the companies that it controls are able to continue operating as a going concern while
they maximize the yield for their shareholders by streamlining the debt and equity balances. The Entity’s general strategy has not
changed in relation to 2014.
The Entity’s capital structure consists of the net debt (the loans described in Note 17, compensated by cash balances and banks) and
the Entity’s capital (made up of issued capital stock, reserves and retained earnings, as shown in Note 23).
The Entity is not subject to external requirements to manage its capital.
The main purpose for managing the Entity’s capital risk is to ensure that it maintains a solid credit rating and sound equity ratios
to support its business and maximize value to its shareholders.
The Entity manages its capital structure and makes any necessary adjustments based on changes in economic conditions. In order
to maintain and adjust its capital structure, the Entity can modify the dividend payments to the shareholders, reimburse capital to
them or issue new shares.
For the years ended December 31, 2015, 2014 and 2013, there were no modifications to the objectives, policies or processes
pertaining to capital management.
The following ratio is used by the Entity and by different rating agencies and banks to measure credit risk.
- Net Debt to EBITDA = Net Debt / EBITDA ltm.
At December 31, 2015, 2014 and 2013, the financial restriction established in the Entity’s loan agreements relates to the Net Debt
to EBITDA ratio for the last twelve months. The Entity complied with the established ratio.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
b.
Financial instrument categories
Financial assets
Cash and cash equivalents
Loans and accounts receivable at amortized cost
Financial liabilities at amortized cost
Suppliers
Accounts payable and accrued liabilities
Current maturities of long-term debt
Current maturities of financial lease liabilities
Long-term debt, not including current maturities
Non-current financial lease liabilities
Debt instruments
2015
2014
2013
$
1,195,814
904,853
$
1,112,850
895,543
$
663,270
628,818
3,013,091
635,802
734,824
7,190
2,694,015
601,854
1,377,157
7,878
1,408,565
197,709
388,486
-
2015
2014
2013
5,018,722
307,140
6,479,795
7,370,666
314,342
2,491,356
2,166,281
-
2,488,850
c. Objectives of managing financial risks
Alsea is mainly exposed to the following financial risks: (i) market (foreign currency and interest rate), (ii) credit and (iii) liquidity.
The Entity seeks to minimize the potential negative effects of the aforementioned risks on its financial performance by applying
different strategies. The first involves securing risk coverage through derivative financial instruments.
Derivative instruments are only traded with well-established institutions and limits have been set for each financial institution. The
Entity has the policy of not carrying out operations with derivative financial instruments for speculative purposes.
d. Market risk
The Entity is exposed to market risks resulting from changes in exchange and interest rates. Variations in exchange and
interest rates may arise as a result of changes in domestic and international economic conditions, tax and monetary
policies, market liquidity, political events and natural catastrophes or disasters, among others.
Exchange fluctuations and devaluation or depreciation of the local currency in the countries in which Alsea participates could limit
the Entity’s capacity to convert local currency to US dollars or to other foreign currency, thus affecting their operations, results of
operations and financial position.
The Entity currently has a risk management policy aimed at mitigating present and future risks involving those variables, which arise
mainly from purchases of inventories, payments in foreign currencies and public debt contracted at a floating rate. The contracting
of derivative financial instruments is intended to cover or mitigate a primary position representing some type of identified or
associated risk for the Entity. Instruments used are merely for economic hedging purposes, not for speculation or negotiation.
The types of derivative financial instruments approved by the Entity for the purpose of mitigating exchange fluctuation and interest
rate risk are as follows:
- USD/MXN exchange-rate forwards contracts
- USD/MXN exchange-rate options
-
- Cross Currency Swaps
Interest Rate Swaps and Swaptions
Given the variety of possible derivative financial instruments for hedging the risks identified by the Entity, the Director of Corporate
Finance is authorized to select such instruments and determine how they are to be operated.
e. Currency exchange risk management
The Entity carries out transactions in foreign currency and therefore it is exposed to exchange rate fluctuations. Exposure to
exchange rate fluctuations is managed within the parameters of approved policies, using foreign currency forwards contracts.
Note 32 shows foreign currency positions at December 31, 2015, 2014 and 2013. It also shows the exchange rates in effect at those
dates.
USD hedging and its requirements are determined based on the cash flow budgeted by the Entity, and it is aligned to the current
Risk Management Policy approved by the Corporate Practices Committee, the General Director’s office and the Administration and
Financial Director’s office. The policy is overseen by the Internal Audit Department.
The exchange rate risk expressed in a foreign currency (USD) is internally monitored on a weekly basis with the positions or hedges
approximating maturity at market exchange rates. The agent calculating or valuing the derivative financial instruments is in all
cases the counterparty designated under the master agreement.
The purpose of the internal review is to identify any significant changes in exchange rates that could pose a risk or cause the Entity
to incur in non-compliance with its obligations. If a significant risk position is identified, the Corporate Treasury Manager informs
the Corporate Financial Director’s office.
The following table shows a quantitative description of exposure to exchange risk based on foreign currency forwards and options
agreements contracted by the Entity in USD/MXN, in effect as of December 31, 2015, 2014 and 2013.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
Underlying / reference
variable
Notional amount/
face value (thousands of USD)
Fair value
(thousands of USD)
Type of
derivative,
security or
contract
Objective
of the
hedging
Position
31/12/2015
current
31/12/2014
previous
31/12/2013
previous
31/12/2015
current
31/12/2014
previous
31/12/2013
previous
31/12/2015
current
31/12/2014
previous
31/12/2013
previous
Amounts of
maturities
(thousands
of USD)
Forwards
Long
Economic
17.34
USDMXN
14.74
USDMXN
13.06
USDMXN
14,000
1,000
2,500
$
(306) $
(117) $
(16)
14,000
Options
Long
Economic
17.34
USDMXN
14.74
USDMXN
13.06
USDMXN
14,500
6,500
13,750
$
(9) $
(19) $
(9)
14,500
Forwards Short
Economic
1.09
EURUSD
NA
NA
900
-
-
$
0.1
-
-
900
1. Foreign currency sensitivity analysis
At December 31, 2015, the Entity has contracted hedging in order to purchase US dollars for the next 12 months at the average
exchange rate of 16.26 for a total of $28 million dollars, the valuation is based on an average exchange rate of $16.50 pesos
per US dollar over the next 12 months as of December 31, 2015. The initial price of currency derivatives is $7.6 million Mexican
pesos payable to the Entity.
Given the values and amounts of exchange rate hedges, management does not foresee a significant risk that could affect its
results at the December 31, 2015 close or the obligations contracted under current operations that will expire during the next
12 months. The Entity does not match its net asset position with financial liabilities denominated in US dollars because it is not
representative or material. The analysis shows only the effect on hedging for purchases of US dollars contracted and in effect
at the December 31, 2015 closing.
Management considers that in the event of a stress scenario as the one described above, the Entity’s liquidity capacity would
not be affected, there would be no negative effects on its operations, nor would compliance with the commitments assumed in
relation to contracted derivative financial instruments be at risk.
2. Foreign currency forwards and options contracts
At December 31, 2015, 2014 and 2013, a total of 67, 212 and 309 derivative financial instrument operations (forwards and
options) were carried out, respectively, for a total of 41.5, 82.5 and 146.1 million US dollars, respectively. The absolute value of
the fair value of the derivative financial instruments entered into per quarter over the year does not comprise more than 5% of
assets, liabilities or total consolidated capital, or otherwise 3% of the total consolidated sales for the last quarter. Therefore, the
risk for the Entity of exchange rate fluctuations will have no negative effects, nor will it affect its capacity to carry out derivative
financial instrument operations.
At December 31, 2015, 2014 and 2013, Alsea has contracted DFI’s to purchase US dollars in the next twelve months for a total
of approximately $28, $7.5 and $16.3 million USD, at the average exchange rate of $16.26, $13.80 and $12.6 pesos to the dollar,
respectively.
At December 31, 2015, 2014 and 2013, the Entity had contracted the financial instruments shown in the table above.
f.
Interest rate risk management
The Entity faces certain exposure to the volatility of interest rates as a result of contracting bank and public stock exchange debt
at fixed and variable interest rates. The respective risks are monitored and evaluated monthly on the basis of:
- Cash flow requirements
- Budget reviews
- Observation of the market and interest rate trends in the local market and in the countries in which Alsea operates (Mexico,
Argentina, Chile and Colombia).
- Differences between negative and positive market rates
The aforementioned evaluation is intended to mitigate the Entity’s risk concerning debt subject to floating rates or indicators, to
streamline the respective prices and to determine the most advisable mix of fixed and variable rates.
The Corporate Treasury Manager is responsible for monitoring and reporting to the Administration and Financial Director any
events or contingencies of importance that could affect the hedging, liquidity, maturities, etc. of DFI’s. He in turn informs Alsea’s
General Management of any identified risks that might materialize.
The type of derivative products utilized and the hedged amounts are in line with the internal risk management policy defined by the
Entity’s Corporate Practices Committee, which contemplates an approach to cover foreign currency needs without the possibility to
carry out speculative operations.
-
Interest rate swap contracts
According to contracts for swaps of interest (Interest Rate Swap – ISR), the Entity agrees to exchange the difference between
the amounts of the fixed and variable rates calculated on the agreed notional amount. Such contracts allow the Entity to
mitigate interest rate change risks on the fair value of the debt issued at a fixed interest rate and the exposure to cash flows on
the debt issued at a variable interest rate. The starting price of the swaps of interest at the end of the period being reported is
determined by discounting future cash flows using the curves at the end of the period being reported and the credit risk inherent
to the contract, as described further on in these consolidated financial statements. The average interest rate is based on current
balances at the end of the period being reported.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
The following table shows a quantitative description of exposure to interest rate risk based on interest rate forwards and options
agreements contracted by the Entity, in effect as of December 31, 2015, 2014 and 2013.
Underlying / reference
variable
Notional amount/
face value (USD)
Fair value (USD)
Type of
derivative,
security or
contract
RS Plain
Vanilla
Objective
of the
hedging
Coverage
Position
Long
IRS Plain
Vanilla
Long
Economic
KO Out
IRS
Limited
IRS
Capped
IRS
Long
Economic
Long
Economic
Long
Economic
31/12/2015
current
3.34%
- TIIE
28 d
31/12/2014
previous
3.31%
-TIIE
28 d
3.34%
- TIIE
28 d
3.34%
- TIIE
28 d
3.34%
- TIIE
28 d
3.34%
- TIIE
28 d
3.31%
-TIIE
28 d
3.31%
- TIIE
28 d
3.31%
- TIIE
28 d
3.31%
- TIIE
28 d
31/12/2013
previous
-
31/12/2015
current
99,158
31/12/2014
previous
51,842
31/12/2013
previous
-
$
31/12/2015
current
5,650
$
31/12/2014
previous
(307)
31/12/2013
previous
-
Amounts of
expiration
(USD)
99,158
3.79%
TIIE d
3.79%
TIIE d
3.79%
TIIE d
3.79%
TIIE d
15,420
21,545
38,270
$
32
$
13
$
315
15,420
2,941
6,210
11,481
$
11
$
43
$
56
2,941
2,941
6,210
11,481
$
15
$
53
$
64
2,941
2,553
4,265
7,654
$
0.4
$
9
$
47
2,553
IRS Plain
Vanilla
Long
Coverage
EURIBOR
1M
EURIBOR
1M
-
87,391
100,521
-
$
(549)
$
741
-
87,391
1. Analysis of interest rate sensitivity
The following sensitivity analysis has been determined on the basis of the exposure to interest rates of derivative instruments
and of non-derivative instruments at the end of the period being reported. In the case of variable rate liabilities, an analysis
is prepared assuming that the amount of the liability held at the end of the period being reported has been the amount of the
liability throughout the year.
• The first stress scenario considered by the Entity’s management is a 200 bps increase in the 28-day TIIE reference rate while
the rest of the variables remain constant. With the mix in the hedging portfolio of plain vanilla interest rate swaps and the
swaptions contracted at the December 31, 2015 close, the increase in financial costs is of approximately $162 million. The
above effect arises because the barriers protecting the increase in the interest rates are exceeded, which leaves the Entity
exposed to market rates.
• A 150 bps increase in the 28-day TIIE rate represents an increase in the financial cost of approximately $122 million,
which poses no risk to the Entity’s liquidity nor gives rise to a negative effect on the business’s operations or in assuming
commitments for contracting interest rate derivative financial instruments.
•
Lastly, the scenario with a 100 bps increase in the 28-day TIIE reference rate would have a positive effect on the financial
cost of approximately $81 million.
The above scenarios were performed on bank and market debt contracted in Mexican pesos with floating reference rate TIIE
28 days, which represents about 80% of the total debt contracted by the Bank. The bank debt denominated in euros is covered
at a fixed rate by 70%, so an increase or decrease in rates would not represent a material or significant risk to the company,
offsetting effectively in the starting price and value the underlying liabilities.
g. Credit risk management
Credit risk refers to the uncertainty of whether one or several of the counterparties will comply with their contractual obligations,
which would result in a financial loss for the Entity. The Entity has adopted the policy of only operating with solvent institutions and
obtaining sufficient collateral, when deemed necessary, as a way to mitigate the risk of financial loss caused by non-compliance.
The Entity’s exposure and the credit ratings of its counterparties are supervised on a regular basis. The maximum credit exposure
levels allowed are established in the Entity’s risk management internal policies. Credit risk over liquid funds and derivative financial
instruments is limited because the counterparties are banks with high credit ratings issued by accepted rating agencies.
In order to reduce to a minimum the credit risk associated to counterparties, the Entity contracts its financial instruments with
domestic and foreign institutions that are duly authorized to engage in those operations and which form part of the Mexican
Financial System.
With respect to derivative financial instruments, the Entity signs a standard agreement approved by the International Swaps and
Derivatives Association Inc. with each counterparty along with the standard confirmation forms for each operation. Additionally, the
Entity signs bilateral guarantee agreements with each counterparty that establish the margin, collateral and credit line policies to be
followed. Such agreements, commonly known as “Credit Support Annexes”, establish the credit limits offered by credit institutions
that would apply in the event of negative scenarios or fluctuations that might affect the fair value of open positions of derivative
financial instruments. Such agreements establish the margin calls for instances in which credit facility limits are exceeded.
In addition to the bilateral agreements signed further to the ISDA maser agreement, known as Credit Support Annexes (CSA), the
Entity monitors the favorable or negative fair value on a monthly basis. Should the Entity incur a positive result, and that result be
considered material in light of the amount, a CDS could be contracted to reduce the risk of breach by counterparties.
The methodologies and practices generally accepted in the market and which are applied by the Entity to quantify the credit risk
related to a given financial agent are detailed below.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
1.- Credit Default Swap (CDS), the credit risk is quantified based on the quoted market price. The CDS is the additional premium that
an investor is willing to pay to cover a credit position, meaning that the risk quantification is equal to this premium. This practice
is utilized as long as quoted CDS are available on the market
2.- Issuance Credit Spread, if issuances are available for quotation on different financial markets, the credit risk can be quantified
as the difference between the internal rate of return of the bonds and the risk-free rate.
3.- Comparable items, if the risk cannot be quantified by using the above methodologies, the use of comparable items is generally
accepted; i.e., the use of entities or bonds of the sector that the company wishes to analyze as a reference.
The Entity has the policy of monitoring the volume of operations contracted with each institution, in order to avoid margin calls and
mitigate credit risks with counterparties.
At the December 31, 2015, 2014 and 2013 closing, the Entity has incurred no margin calls, nor does it hold any type of securities
pledged as a guarantee by a counterparty with which it may have carried out interest rate hedging operations.
At December 31, 2015, 2014 and 2013, the Entity has recorded no breaches to the agreements signed with different financial
entities for exchange rate hedging operations.
The Entity’s maximum exposure to credit risk is represented by the carrying value of its financial assets. At December 31, 2015, 2014
and 2013, that risk amounts to $2,100,657, $2,088,393 and $1,292,088, respectively.
The credit risk generated by the management of the Entity’s temporary investments reflects its current investment policy, which
has the following objectives: I) enhance resource efficiency, and II) mitigate the credit risk. In order to fulfill these objectives, certain
guidelines and maximum amounts were established for counterparties, instruments and periods within the Entity’s policies.
All transactions performed in Mexican pesos and foreign currency are supported by an outline brokerage agreement duly executed
by both parties with regulated institutions belonging to the Mexican Financial System, which have the guarantees required by the
company and recognized credit ratings. The only instruments authorized for temporary investments are those issued by the federal
government, corporate and banking institutions under the repurchase modality. As the Entity does not consider its credit risk to be
material or significant, it does not perform a measurement for temporary investments
h. Liquidity risk management
The ultimate responsibility for managing liquidity lies in the Financial Director, for which purpose the Entity has established policies
to control and follow up on working capital, thus making it possible to manage the Entity’s short-term and long-term financing
requirements. In keeping this type of control, cash flows are prepared periodically to manage risk and maintain proper reserves,
credit lines are contracted and investments are planned.
The Entity’s main source of liquidity is the cash earned from its operations.
The following table describes the contractual maturities of the Entity’s financial liabilities considering agreed payment periods. The
table has been designed based on undiscounted, projected cash flows and financial liabilities considering the respective payment
dates. The table includes the projected interest rate flows and the capital disbursements made towards the financial debt included
in the consolidated statements of financial position. If interest is agreed at variable rates, the undiscounted amount is calculated
based on the interest rate curves at the end of the period being reported. Contractual maturities are based on the minimum date
on which the Entity must make the respective payments.
As of
December 31,
2015
Long-term
debt
Average
effective
interest rate
5.49% $
Up to 1 year
1,000,986
$
Up to 2 years
1,048,079
$
Up to 3 years
717,767
$
Up to 4 years
2,669,308
Up to 5 years
or more
$
1,471,296 $
Total
6,907,436
Debt
instruments
Financial
leasing
Derivatives
Suppliers
Accounts
payable
Total
4.70%
321,818
331,341
2,772,813
222,647
4,481,332
8,129,951
4.00%
32,789
32,789
32,789
32,789
565,089
696,245
97,806
3,013,091
-
-
-
-
-
-
-
97,806
-
3,013,091
635,802
-
-
-
-
635,802
$
5,102,292 $
1,412,209
$
3,523,369
$
2,924,744
$
6,517,717
$
19,480,331
As of
December 31,
2014
Long-term
debt
Average
effective
interest rate
4.97% $
Up to 1 year
1,751,434
$
Up to 2 years
1,946,208
$
Up to 3 years
2,152,688
Up to 4 years
$
1,945,586 $
Up to 5 years
or more
2,217,377
$
Total
10,013,293
Debt
instruments
Financial
leasing
Derivatives
Suppliers
Accounts
payable
Total
4.05%
102,346
102,628
102,628
2,547,367
-
2,854,969
4.00%
33,723
33,723
33,723
33,723
595,085
729,977
6,146
2,694,015
601,854
-
-
-
-
-
-
-
-
-
-
6,146
-
2,694,015
-
601,854
$
5,189,518
$
2,082,559
$
2,289,039
$
4,526,676 $
2,812,462 $
16,900,254
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
As of
December 31,
2013
Long-term
debt
Debt
instruments
Financial
leasing
Suppliers
Accounts
payable
Total
Average
effective
interest rate
4.79% $
Up to 1 year
520,240
$
Up to 2 years
581,546
$
Up to 3 years
629,085
$
Up to 4 years
748,952
$
Up to 5 years
or more
451,006
$
Total
2,930,829
4.54%
115,014
123,861
106,167
123,861
2,541,933
3,010,836
5,964
-
-
-
-
5,964
1,408,565
197,709
-
-
-
-
-
-
-
1,408,565
-
197,709
$
2,247,492
$
705,407
$
735,252
$
872,813
$
2,992,939
$
7,553,903
i. Fair value of financial instruments
This notes provides information on the manner in which the Entity determines the fair values of the different financial assets and
liabilities.
Some of the Entity’s financial assets and liabilities are valued at fair value at each reporting period. The following table contains
information on the procedure for determining the fair values of financial assets and financial liabilities (specifically the valuation
technique(s) and input data used).
Financial assets/liabilities
1)
Forwards and currency options agreements
$
Fair value (1)(2) Figures in thousands of USD
31.dic13
(25)
31.dic.14
(136)
$
$
31.dic.15
(315)
Fair value
hierarchy
Nivel 2
Valuation technique(s) and main input data
Plain vanilla forwards are calculated based on discounted cash flows on
forward exchange type bases. The main input data are the Spot, the risk-free
rates in MXN and USD + a rate that reflects the credit risk of counterparties.
In the case of options, the methods used are Black and Scholes and Montecarlo
digital and/or binary algorithms.
Activos/pasivos financieros
Interest rate swaps
2)
$
31.dic.15
5,159
Valor razonable (1)(2) Cifras en miles USD
31.dic13
482
31.dic.14
552
$
$
Jerarquía del
valor razonable
Nivel 2
Valuation technique(s) and main input data
Discounted cash flows are estimated based on forwards interest rates (using
the observable yield curves at the end of the period being reported) and the
contractual rates, discounted at a rate that reflects the credit risk of the
counterparties.
(1) The fair value is presented from a bank’s perspective, which means that a negative amount represents a favorable result for the
Entity.
(2) The calculation or valuation agent used is the same counterparty or financial entity with whom the instrument is contracted,
who is asked to issue the respective reports at the month-end closing dates specified by the Entity.
(3) Techniques and valuations applied are those generally used by financial entities, with official price sources from banks such
as Banxico for exchange rates, Proveedor Integral de Precios (PIP) and Valmer for supply and databases of rate prices, volatility,
etc.
In order to reduce to a minimum the credit risk associated with counterparties, the Entity contracts its financial instruments
with domestic and foreign institutions that are duly authorized to engage in those operations.
In the case of derivative financial instruments, a standard contract approved by the International Swaps and Derivatives
Association Inc. (“ISDA”) is executed with each counterparty; the standard confirmation forms required for each transaction are
also completed.
Likewise, bilateral guarantee agreements are executed with each counterparty to determine policies for the margins, collateral
and credit lines to be granted.
This type of agreement is usually known as a “Credit Support Annex”; it establishes the credit limits that financial institutions
grant to the company and which are applicable in the event of negative scenarios or fluctuations that affect the fair value of the
open positions of derivative financial instruments. These agreements establish the margin calls to be implemented if credit line
limits are exceeded.
Aside from the bilateral agreements attached to the ISDA outline agreement known as the Credit Support Annex (CSA), the
Entity monthly monitors the fair value of payable or receivable amounts. If the result is positive for the Entity and is considered
relevant due to its amount, a CDS can be contracted to reduce the risk of counterparty noncompliance.
The Entity has the policy of monitoring the number of operations contracted with each of these institutions so as to avoid
margin calls and mitigate the counterparty credit risk.
At December 31, 2015, 2014 and 2013, the Entity has not received any margin calls and does not have any securities given as a
guarantee with counterparties as interest rate hedges. Furthermore, it did not record any instances of noncompliance with the
contracts executed with different financial institutions for operations involving interest rate hedges.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
a. Fair value of financial assets and liabilities that are not valued at fair value on a recurring basis (but that require fair
value disclosure)
Except for the matter described in the following table, Management considers that the carrying values of financial assets and
liabilities recognized at amortized cost in the consolidated financial statements approximate their fair value.
Financial liabilities
Financial liabilities maintained
at amortized cost:
12/31/2015
12/31/2014
12/31/2013
Carrying
value
Fair
value
Carrying
value
Fair
value
Carrying
value
Fair
value
Suppliers
$
3,013,091
$
3,013,091
$
2,694,015
$
2,694,015
$
1,408,565
$
1,408,565
Accounts payable and accrued
liabilities
635,802
635,802
601,854
601,854
197,709
197,709
Bank loans
734,824
766,303
1,377,157
1,403,930
388,486
395,680
Current maturities of financial
lease liabilities
Long-term bank loans
Non-current financial lease
liabilities
7,190
7,190
7,878
7,878
-
-
5,018,722
307,140
5,018,722
307,140
7,370,666
314,342
7,370,666
314,342
2,166,281
-
2,166,281
-
Debt instruments
6,479,795
6,539,804
2,491,356
2,498,969
2,488,850
2,507,550
Total
$
16,196,564
$
16,288,052
$
14,857,268
$
14,891,654
6,649,891
6,675,785
Financial liabilities 2015
Financial liabilities maintained at amortized cost:
Bank loans
Current maturities of financial lease liabilities
Long-term bank loans
Non-current financial lease liabilities
Debt instruments
Total
Financial liabilities 2014
Financial liabilities maintained at amortized cost:
Bank loans
Current maturities of financial lease liabilities
Long-term bank loans
Non-current financial lease liabilities
Debt instruments
$
$
$
Level 1
734,824
7,190
5,018,722
307,140
6,479,795
12,547,671
Level 1
1,377,157
7,878
7,370,666
314,342
2,491,356
Total
$
11,561,399
Financial liabilities 2013
Financial liabilities maintained at amortized cost:
Bank loans
Long-term bank loans
Debt instruments
Total
Level 1
388,486
2,166,281
2,488,850
5,043,617
$
$
Valuation
a) Description of valuation techniques, policies and frequency:
The derivative financial instruments used by Alsea (forwards and swaps) are contracted to reduce the risk of adverse fluctuations
in exchange and interest rates. Those instruments require the Entity to exchange cash flows at future fixed dates on the face value
or reference value and are valued at fair value.
b) Liquidity in derivative financial operations:
1. The resources used to address financial instrument requirements will derive from the resources generated by the issuer.
2. External sources of liquidity: No external sources of financing will be used to address requirements pertaining to derivative
financial instruments.
23. STOCKHOLDERS’ EQUITY
Following is a description of the principal features of the stockholders’ equity accounts:
a. Capital stock structure
The movements in capital stock and premium on share issue are shown below:
Figures at January 1, 2013
Purchase of non-controlling interest
Placement of shares
Figures at December 31, 2013
Repurchase of shares
Placement of shares
Figures at December 31, 2014
Placement of shares
Number of shares
687,759,054
-
-
$
Capital stock
(thousands of pesos)
403,339
-
-
$
Premium on issuance of share
2,466,822
(429,262)
(170)
687,759,054
(956,201)
150,819,671
837,622,524
(136,080)
403,339
(478)
75,410
478,271
(68)
2,037,390
-
6,576,197
8,613,587
-
8,613,587
Figures at December 31, 2015
837,486,444
$
478,203
$
As discussed in Note 19, the Entity has the put option of acquiring the non-controlling interest of Grupo Zena, this effect resulted in
the application of a charge of $2,673,053 to net worth.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
In April 2015, Alsea declared a dividend payment of $419,289 with a charge to the after-tax earnings account, which is to be paid
against net earnings at the $0.50 (zero pesos fifty cents) per share. It authorizes the Treasury society make payment on May 29,
2015 for an amount of $419,173.
In June 2014, Alsea issued 131,147,540 shares with an overallotment of 19,672,131, which was exercised with an asking price of
$45.75 (forty-five Mexican pesos and 75/100 centavos) per share. The issuance was recorded net of placement expenses (see
Note 1c).
In April 2013, Alsea declared a dividend payment of $343,880 with a charge to the after-tax earnings account, which is to be paid
against net earnings at the $0.50 (zero pesos fifty cents) per share.
The fixed minimum capital with no withdrawal rights is comprised of Class I shares, while the variable portion is represented by
Class II shares, and it must in no case exceed 10 times the value of the minimum capital with no withdrawal rights.
The National Banking and Securities Commission has established a mechanism that allows the Entity to acquire its own shares in
the market, for which purpose a reserve for repurchase of shares must be created and charged to retained earnings, which Alsea
has created as of December 31, 2015.
Total repurchased shares must not exceed 5% of total issued shares; they must be replaced in no more than one year, and they are
not considered in the payment of dividends.
The premium on the issuance of shares is the difference between the payment for subscribed shares and the par value of those
same shares, or their notional value (paid-in capital stock divided by the number of outstanding shares) in the case of shares with
no par value, including inflation, at December 31, 2012. Available repurchased shares are reclassified to contribute capital.
In February 2013, Café Sirena, S. de R.L. de C.V. declared a cash dividend of $170,000, which was paid in proportion to the value
of each of the equity participation units comprising capital stock. The amount corresponding to the non-controlling interest was
$30,600.
b. Stockholders’ equity restrictions
I. Five percent of net earnings for the period must be set aside to create the legal reserve until it reaches 20 percent of the capital
stock. At December 31, 2015, 2014 and 2013, the legal reserve amounted to $100,736, which amount does not reach the required
20%.
II. Dividends paid from retained earnings are not subject to ISR if paid from the after-tax earnings account (CUFIN), and 30%
must be paid on the excess, i.e., the result arrived at by multiplying the dividend paid by a factor of 1.0408. The tax accrued on
the dividend payment not arising from the CUFIN must be paid by the Entity and may be credited against corporate IT in the
following two years.
23. NON-CONTROLLING INTEREST
a. Following is a detail of the non-controlling interest.
Beginning balance at January 1, 2013
Equity in results for the year ended December 31, 2013
Café Sirena dividends declared
Acquisition of Burger King Mexicana, S.A. de C.V. (2)
Acquisition of the non-controlling interest of Café Sirena, S. de R.L. de C.V.
Acquisition of the non-controlling interest of Starbucks Coffee Argentina, S. de R.L. de C.V.
Ending balance at December 31, 2013
Equity in results for the year ended December 31, 2014
Other movements in capital
Contributions of Capital in Estrella Andina, S.A.S. (1)
Fair value of the non-controlling interest in Grupo Zena (note 15) (3)
Ending balance at December 31, 2014 as adjustment
Equity in results for the year ended December 31, 2015
Other movements in capital
Capital contributions in subsidiaries
Acquisition of the non-controlling interest of GASA
$
Amount
308,189
(17,694)
(30,600)
225,163
(201,445)
(44,109)
239,504
(42,572)
1,345
27,904
607,032
833,213
51,536
10,156
31,380
(26,365)
Ending balance at December 31, 2015
$
899,920
(1) In 2014, the Entity executed an agreement with Starbucks Coffee International, Inc. (SCI) to develop and operate Starbucks®
in Colombia in conjunction with Grupo Nutresa. The strategic partnership of Alsea and Grupo Nutresa to develop the brand in
Colombia was implemented through a joint venture in which Alsea holds 70% equity, while Nutresa holds the remaining 30%.
(2) The balance includes the restatement adjustment of $7,629 (see Notes 2b).
(3) The balance includes the restatement adjustment of $101,520 (see Notes 2a).
b. Acquisition of the non-controlling interest of Grupo Amigos de San Ángel-
In 2015, the Entity acquired the 10.23% that it did not hold in Grupo Amigos de San Ángel, a subsidiary of Alsea that operates in the
different Italiani´s stores in Mexico.
For consolidation purposes, the transaction did not constitute a change in control over Grupo Amigos de San Ángel, prior to the
purchase of the non-controlling interest. As the Entity had been previously consolidating the subsidiary, such accounting remained
unchanged.
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
The change of interest in Grupo Amigos de San Ángel by Alsea upon acquisition of the non-controlling interest (from 89.77% to
100%) qualified as an equity transaction.
Accordingly, the difference between the carrying value of the non-controlling interest at the time of acquisition and the fair value
of amount paid was recorded directly in stockholders’ equity.
The accounting entry gave rise to a decrease in the non-controlling interest of $26,365.
c. Acquisition of the non-controlling interest of Starbucks Coffee Argentina-
The Entity acquired from Starbucks Coffee International (an affiliate of Starbucks Coffee Company) the remaining 18% of Starbucks
Coffee Argentina, S.R.L. (Starbucks Argentina), a subsidiary of Alsea that operates the Starbucks Coffee stores in Argentina.
For accounting purposes, the transaction did not constitute a change in control over Starbucks Coffee Argentina prior to the
purchase of the non-controlling interest. As the Entity had been previously consolidating with the subsidiary, such accounting
remained unchanged.
The change of interest in Starbucks Coffee Argentina by Alsea upon acquisition of the non-controlling interest (from 82% to 100%)
qualified as an equity transaction.
Accordingly, the difference between the carrying of the non-controlling interest at the time of acquisition and the fair value of the
amount paid was recorded directly in stockholders’ equity.
The accounting entry gave rise to a $44,109 decrease in the non-controlling interest.
d. Acquisition of the non-controlling interest of Starbucks Coffee Mexico
In April 2014, the Entity acquired from SCI the 18% that it did not hold in Café Sirena, a subsidiary of Alsea that operates in the
different Starbucks® stores in Mexico.
For consolidation purposes, the transaction did not constitute a change in control over Café Sirena prior to the purchase of the non-
controlling interest. As the Entity had been previously consolidating the subsidiary, such accounting remained unchanged.
The change of interest in Café Sirena by Alsea upon acquisition of the non-controlling interest (from 82% to 100%) qualified as an
equity transaction.
Accordingly, the difference between the carrying value of the non-controlling interest at the time of acquisition and the fair value
of amount paid was recorded directly in stockholders’ equity.
The accounting entry gave rise to a decrease in the non-controlling interest of $201,445.
e. Following is the detail of the Non-Controlling interest of the subsidiaries of the Entity:
Subsidiary
Country
Percentages of the
non-controlling interest
31/12/2014
31/12/2015
31/12/2013
Income (loss) attributable to the
non-controlling interest
31/12/2014
31/12/2015
31/12/2013
Accumulated non-controlling interest
31/12/2014
31/12/2015
31/12/2013
Food Service
Project, S.L
(Grupo Zena)
Operadora
de Franquicias
Alsea,
S.A. de C.V.
Estrella
Andina S.A.S.
España
28.24 %
28.24 %
0.00 %
86,131
25,132
-
1,187,814
708,552
-
México
20.00 %
20.00 %
20.00 %
(28,676)
(59,326)
(18,570)
116,966
225,163
225,163
Colombia
30.00 %
30.00 %
0.00 %
(5,480)
(6,749)
-
35,157
27,904
-
25. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the period attributable to the controlling interest holders of ordinary
capital by the average weighted number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the net profit attributable to controlling interest holders of ordinary capital (after
adjusting for interest on the convertible preferential shares, if any) by the average weighted ordinary shares outstanding during the
year plus average weighted ordinary shares issued when converting all potentially ordinary diluted shares to ordinary shares. For the
years ended December 31, 2015, 2014 and 2013, the Entity has no potentially dilutive shares, for which reason diluted earnings per
share is equal to basic earnings per share.
The following table contains data on income and shares used in calculating basic and diluted earnings per share:
Net profit (in thousands of pesos):
Attributable to shareholders
Shares (in thousands of shares):
Weighted average of shares outstanding
Basic earnings per share
Basic earnings per share continuing operations
2015
2014
2013
$
981,215
$
666,666
$
681,014
837,486
837,623
687,514
$
$
1.17
1.17
$
$
0.85
0.87
$
$
0.99
0.99
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
26. REVENUES
Revenues from the sale of goods
Services
Royalties
$
2015
31,471,313
487,346
329,717
$
2014
22,178,483
378,654
230,231
$
2013
15,284,589
249,174
163,951
Total
$
32,288,376
$
22,787,368
$
15,697,714
27. EMPLOYEE BENEFIT EXPENSES
Following are the expenses incurred for employee benefits included under other operating costs and expenses in the consolidated
statements of income.
Wages and salaries
Social Security costs
Retirement benefits
Total
28. OTHER EXPENSES (INCOME)
In 2015, 2014 and 2013, this caption is comprised as follows:
Legal expenses
Loss on fixed assets disposals, net
PTU on tax base
Inflation and interest on tax refund
Other income, net
Total
2015
7,188,412
962,914
25,770
$
2014
4,585,809
731,405
41,332
$
2013
2,832,469
517,627
27,678
8,177,096
$
5,358,546
$
3,377,774
2015
2014
2013
$
25,019
40,227
6,371
(32,649)
16,698
$
23,118
189,306
20,371
(10,035)
(21,029)
18,552
24,386
3,920
(24,347)
(45,162)
55,666
$
201,731
$
(22,651)
$
$
$
$
29. DISCONTINUED OPERATIONS
a. Disposal of operations related to the Pei Wei Asian Dinner brand
At the end of 2014, the Entity’s management decided to discontinue the operations of the Pei Wei Asian Dinner Brand in Mexico: The
stores of such brand will end its operation at the beginning of 2015, consequently such operations are presented as discontinued
operations in the consolidated financial statements.
b. Analysis of the results for the year from discontinued operations
The comparative results of discontinued operations included in the consolidated statements of income are detailed below.
Results for the year from discontinued operations
Income
Costs
Expenses
Loss for the year of the discontinued operations
2014
2013
15,676
5,164
29,133
(18,621)
$
$
20,827
6,914
18,389
(4,476)
$
Cash flows are presented in the consolidated statements of cash flows.
30. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Officer compensations and benefits
The total amount of compensation paid by the Entity to its main advisors and officers for the nine-month period ended December 31,
2015, 2014 and 2013 was of approximately $121,800, $98,400 and $87,700, respectively. That amount includes payments determined
at a General Stockholders’ Meeting for performance of their duties during that year, as well as for salaries and wages.
The Entity continuously reviews salaries, bonuses and other compensation plans in order to ensure more competitive employee
compensation conditions.
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31. FINANCIAL INFORMATION BY SEGMENTS
The Entity is organized into four large operating divisions comprised of sales of food and beverages in Mexico and South America
(LATAM – Argentina, Chile, Colombia and Brazil) and distribution services, all headed by the same management.
The accounting policies of the segments are the same as those of the Entity’s described in Note 3.
The Food and Beverages segments in which Alsea in Mexico, Spain and Latin America (LATAM) participates are as follows:
Fast Food: This segment has the following features: i) fixed and restricted menus, ii) food for immediate consumption, iii) strict control
over individual portions of each ingredient and finished product, and iv) individual packages, among others. This type of segment can
be easily accessed and therefore penetration is feasible at any location.
Coffee Shops: Specialized shops where coffee is the main item on the menu. The distinguishing aspects are top quality services and
competitive prices, and the image/ambiance is aimed at attracting all types of customers.
Casual Dining: This segment comprises service restaurants where orders are taken from customers and there are also to-go and home
delivery services. The image/ambiance of these restaurants is aimed at attracting all types of customers. This segment covers fast food
and gourmet restaurants. The main features of casual dining stores are i) easy access, ii) informal dress code, iii) casual atmosphere,
iv) modern ambiance, v) simple decor, vi) top quality services, and vii) reasonable prices. Alcoholic beverages are usually sold at those
establishments.
Restaurant – cafeteria - (VIPS): Is a familiar-type segment and its main characteristic is the hospitality, and be close to the client. These
restaurants have a wide variety of menus.
Fast Casual Dining: This is a combination of the fast food and casual dining segments.
The distribution and Production segment is defined as follows:
Distribuidora e Importadora Alsea, S.A. de C.V. (DIA) specializes in domestic purchase, importation, transporting, storage and distribution
of frozen, refrigerated and dry food products to supply all Domino’s Pizza, Burger King, Starbucks, Chili’s Grill & Bar, P.F. Chang’s China
Bistro, Pei Wei and Italianni’s establishments in Mexico.
Additionally, DIA is responsible for preparing and distributing pizza dough to the entire Domino’s Pizza System in Mexico.
Panadería y Alimentos para Food Service, S.A. de C.V. This plant produces sandwiches and bread that are supplied to Starbucks and the
other Alsea brands. The business model contemplates a central plant located in Lerma, in the State of Mexico, where the Pastry and
Bakery products and sandwiches are prepared.
The definition of the operating segments is based on the financial information provided by General Management and it is reported on
the same bases as those used internally by each operating segment. Likewise, the performance evaluations of the operating segments
are periodically reviewed.
Information on the segments for the years ended December 31, 2015, 2014 and 2013 is as follows: (figures in millions of pesos).
Figures in millions of pesos as of December 31, division:
Food and beverages -
Mexican segment
Food and beverages –
LATAM segment
Food and beverages –
Spain Division
Distribution and production
segment
Eliminations
Consolidated
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
Revenues
From third parties $
18,629 $
15,533 $
10,326 $
6,718 $
4,621 $
4,219 $
5,674 $
1,468 $ - $
1,235 $
1,132 $
1,130 $
32 $
34 $
23 $
32,288 $
22,788 $
15,698
Between segments
43
58
25
-
Revenues
18,672
15,591
10,351
6,718
Costs
Other operating costs
and expenses
6,244
9,683
5,078
8,397
3,371
5,417
2,132
4,103
-
1,468
-
-
5,139
6,374
3,932
5,064
3,200
4,330
(5,182)
(5,150)
(3,990)
(3,956)
(3,225)
(3,202)
-
32,288
-
22,788
-
15,698
410
-
5,344
4,218
3,615
(5,152)
(3,997)
(3,205)
10,149
7,272
854
-
668
533
461
24
139
58
17,836
12,713
-
4,621
1,563
2,790
174
104
(28)
2
16
-
4,219
1,440
2,501
178
54
(26)
18
54
-
5,674
1,581
3,358
239
94
-
-
237
139
(25)
16
116
55
30
-
-
-
-
-
-
72
4
(7)
66
227
402
119
-
-
-
-
-
-
-
-
(28)
144
55
(39)
71
(17)
97
305
29
-
90
-
50
177
1,948
1,333
69
14
(5)
12
223
-
17
61
10
(2)
-
185
-
30
117
174
53
90
28
75
68
47
21
112
(19)
(12)
711
(30)
179
(456)
(250)
(223)
1,495
28
125
32
78
43
28
(17)
490
206
155
(553)
(296)
(163)
1,033
5,221
8,437
920
241
(39)
8
910
43
285
668
(4)
(18)
527
(33)
-
976
32
365
643
(19)
(43)
1,283
1,007
300
(51)
7
1,206
304
(68)
5
868
-
-
246
960
186
682
634
156
(123)
2
894
-
201
693
Depreciation and
amortization
Interest paid
Interest earned
Other financial
expenses
Equity in results
of associated
companies
Income taxes
Results
of segments
Discontinued
operations
Non-controlling
interest
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
52
(19)
(43)
(4)
-
(18)
52
Controlling interest $
960 $
682 $
693 $
144 $
(39)$
(17)$
305 $
90 $
- $
177 $
206 $
155 $
(605)$
(272)$
(149)$
981 $
667 $
682
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Alimentosy bebidas
México
Alimentos y bebidas
latam
Alimentos y bebidas
España
Distribución y producción
Eliminaciones
Consolidado
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
$
18,205 $
12,440 $
10,585 $
2,605 $
2,524 $
2,389 $
3,437 $
3,338 $
- $
2,303 $
2,188 $
2,022 $
1,940 $
7,072 $
(4,607)$
28,490 $
27,562 $
10,389
-
-
-
-
-
-
-
-
-
-
-
-
923
830
789
923
830
789
2,072
1,644
1,031
417
493
216
476
198
-
29
76
32
446
70
(21)
3,440
2,481
1,258
Assets:
Investment in
performing
assets
(Investment
in associated
companies)
(Investment
in fixed assets
and Intangible
assets)
Total assets
$
20,277 $
14,084 $
11,616 $
3,022 $
3,017 $
2,605 $
3,913 $
3,536 $
- $
2,332 $
2,264 $
2,054 $
3,309 $
7,972 $
(3,839)$
32,853 $
30,872 $
12,436
Total liabilities$
7,270 $
8,940 $
6,449 $
2,566 $
2,535 $
2,372 $
3,805 $
3,694 $
- $
1,477 $
1,461 $
1,335 $
7,887 $
4,650 $
(2,251)$
23,005 $
21,280 $
7,905
32. FOREIGN CURRENCY POSITION
Assets and liabilities expressed in US dollars, shown in the reporting currency at December 31, 2015, 2014 and 2013, are as follows:
Assets
Liabilities
Net monetary liability position
Thousands of
dollars
2015
Thousands of
dollars
2014
1,300,457 $
(4,379,546)
1,371,033 $
(4,273,402)
Thousands of
dollars
2013
621,813
(742,732)
(3,079,089) $
(2,902,369) $
(120,919)
$
$
The exchange rate to the US dollar at December 31, 2015, 2014 and 2013 was $17.25, $14.74 and $13.05, respectively. At March 31,
2016, date of issuance of the consolidated financial statements, the exchange rate was $17.25 to the US dollar.
The exchange rates used in the different conversions to the reporting currency at December 31, 2015, 2014 and 2013 and at the date
of issuance of these consolidated financial statements are shown below:
Country of origin
2015
Argentina
Chile
Colombia
Spain
Country of origin
2014
Argentina
Chile
Colombia
España
Currency
Argentinian peso (ARP)
Chilean peso (CLP)
Colombian peso (COP)
Euro (EUR)
Currency
Argentinian peso (ARP)
Chilean peso (CLP)
Colombian peso (COP)
Euro (EUR)
Country of origin
2013
Argentina
Chile
Colombia
Currency
Argentinian peso (ARP)
Chilean peso (CLP)
Colombian peso (COP)
Closing exchange
rate
Issuance
March 31, 2016
1.3408
0.0244
0.0054
18.8344
1.1862
0.0252
0.0057
19.5332
Closing exchange
rate
Issuance
March 31, 2016
1.7235
0.0240
0.0062
17.6926
1.7108
0.0241
0.0059
16.8876
Closing exchange
rate
Issuance
March 31, 2016
2.0108
0.0248
0.0067
1.7091
0.0240
0.0065
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Annual Report 2015Encendemos el espíritu de la gente ALSEA
In converting the figures, the Entity used the following exchange rates:
Foreign transaction
Fast Food Sudamericana, S. A.
Starbucks Coffee Argentina, S. R. L.
Asian Bistro Argentina, S.R.L.
Fast Food Chile, S. A.
Asian Food Ltda,
Dominalco, S. A.
Operadora Alsea en Colombia, S. A.
Asian Bistro Colombia, S.A.S
Food Service Project S.L.
Country of
origin
Argentina
Argentina
Argentina
Chile
Chile
Colombia
Colombia
Colombia
Spain
Currency
Recording
ARP
ARP
ARP
CLP
CLP
COP
COP
COP
EUR
Functional
ARP
ARP
ARP
CLP
CLP
COP
COP
COP
EUR
Presentation
MXP
MXP
MXP
MXP
MXP
MXP
MXP
MXP
33. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments:
a. The Entity leases locales to house its stores and distribution centers, as well as certain equipment further to the lease agreements
entered into for defined periods (see Note 12).
b. The Entity has acquired several commitments with respect to the arrangements established in the agreements for purchase of the
brands.
c. In the regular course of operations, the Entity acquires commitments derived from supply agreements, which in some cases establish
contractual penalties in the event of breach of such agreements.
Contingent liabilities:
In August 2012, Italcafé received an order for an on-site official review by the tax authorities. Such visit concluded in August 2013 with
certain observations regarding income that the authorities considered had not been declared and differences in VAT paid. Italcafé is
currently in the phase for submitting additional documentation in order to clarify the aforementioned differences. The authorities have
a six-month term, that concludes in February 2014, to assess a tax debt of approximately $146 million.
On the basis of the foregoing, Alsea will file an appeal against a possible tax debt. It is important to mention that the former owners
of Italcafé will assume the economic effects arising from such tax debt in light of the terms and conditions set forth in the agreements
signed by Alsea and the sellers.
On November 3, 2014, the Entity filed a Motion for Reconsideration with the Tax Inspection Office of the Federal District against the tax
liability determined by the Finance Department of the Federal District. On February 13, 2015, the Tax Inspection Office issued a request
for additional information, which was provided on February 20 of that year. This Motion for Reconsideration is currently being studied
by the Tax Inspection Office of the Federal District. In the event of an unfavorable ruling, the Entity will file a Ruling for Annulment. The
attorneys of the vendor and Alsea consider that they have a good chance of success. During the 2 to 3 years that this legal action will
take, the tax liability will not be considered as definitive.
34. SUBSEQUENT EVENTS
On March 3, 2016, Alsea signed the contract purchase-sale of the assets of the chain of Italian restaurants Archie’s in Colombia (Archie
Colombia’s, S.A.S.). Founded in 1993, Archie’s restaurant chain is the largest in Colombia and one of the major chains that country Italian
food. Its operation includes 41 restaurants in 7 major cities in Colombia, and has presence in major shopping centers. At the date of
issuance of the consolidated financial statements, it has not carried out the closure of this operation.
35. FINANCIAL STATEMENT AUTHORIZATION
The consolidated financial statements were authorized for issuance on March 31, 2016 by Mr. Diego Gaxiola Cuevas, Administration
and Financial Director, and therefore they do not reflect any facts that might occur after that date and are subject to the approval
of the audit committee and the Entity’s stockholders, who can decide to modify them in accordance with the provisions of the
Corporations Law.
Mr. Alberto Torrado Martínez
General Director
Mr. Diego Gaxiola Cuevas
Administration and Financial Director
Mr. Alejandro Villarruel Morales
Corporate Controller
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G4-31
Investor
Information
ALSEA
Finance
Diego Gaxiola Cuevas
Director de Finanzas
+52(55) 5241-7151
Social Responsibility
Ivonne Madrid Canudas
responsabilidad-social@alsea.com.mx
+52(55) 5241-7100 ext. 7335
Investor Relations
Salvador Villaseñor Barragán
ri@alsea.com.mx
+52(55) 5241-7035
Public Relations
Selene González Serrato
rp@alsea.com.mx
+52(55) 5241-7134
Headquarters
Alsea, S.A.B. de C.V.
Av. Paseo de la Reforma #222
3er. piso, Torre 1 Corporativo,
Colonia Juárez, Del. Cuauhtémoc,
C.P. 06600, Ciudad de México
+52(55) 5241-7100
Independent Auditors
Deloitte
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Av. Paseo de la Reforma #489
6º piso, Col. Cuauhtémoc
C.P. 06500, Ciudad de México
+52(55) 5080-6000
people’s spirits
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