wal-mart de méxico, sab de cv prospectus on acquisition of wal

Transcription

WAL-MART DE MÉXICO, S.A.B. DE C.V.
Blvd. Manuel Ávila Camacho #647, Colonia Periodista,
Delegación Miguel Hidalgo, C.P. 11220,
México, D.F.
Tel. (52) 55 5283-0100
www.walmartmexico.com.mx
PROSPECTUS ON ACQUISITION OF WAL-MART CENTROAMÉRICA
December 8, 2009
Pursuant to article 35 and Attachment P of the General provisions applicable to securities issuers and
other players within the securities market, published in the Daily Official Gazette, dated March 19, 2003,
as amended, (hereinafter “Provisons for Issuers”), Wal-Mart de México, S.A.B de C.V. (interchangeably
known as either “Wal-Mart de México”, the “Corporation”, or the “Issuer”) informs its shareholders and
the investor public of the acquisition of Wal-Mart Centroamérica.
Brief summary of the Transaction. Wal-Mart de México plans to acquire the totality of Wal-Mart
Centroamérica operations. Consequently, the Issuer shall acquire 100% of the capital stock for TFB of
WM Maya, S. de R.L. de C.V. (“WM Maya”) to be owned by TFB Corporation, N.V., current holder of WalMart Centroamérica stock (“the Transaction”).
The Board of Directors for Wal-Mart de México has called a meeting of the Shareholders Assembly to
present the transaction to its shareholders for their approval. The proposal is that the transaction be
conducted through the merging of Wal-Mart Centroamérica into Wal-Mart de México, which will result in
the issuance of Walmex shares, as well as a cash payment.
The Audit and Corporate Practices Committees for Wal-Mart de México –whose members are exclusively
independent directors- during a meeting held on November 23rd of this year, decided to recommend that
the Board approve this transaction, taking into account all relevant factors including that the Transaction
would be beneficial for all Wal-Mart de México shareholders.
The Committees considered the participation of a related party –Wal-Mart Stores, Inc.– and concluded
there would be no opposition to recommending the Transaction and approval thereof, due to the
foreseeable benefits stemming from this transaction, the fact that the negotiations conducted and the
terms and conditions agreed were all performed under market conditions, and that the Transaction is
beneficial for the corporation and all its shareholders.
The Board of Directors for Wal-Mart de México, in a meeting held on November 23rd of this year,
approved the Transaction.
The major part of the Transaction shall be paid through the issuance of new Walmex shares, wherein said
issuance stems from the merging of both corporations. Wal-Mart Stores, Inc. and a considerable
percentage of the minority shareholders for Wal-Mart Centroamérica have agreed to receive new shares
issued by de Wal-Mart de México, whereas a lesser number of said shareholders have opted for a cash
payment.
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FREE TRANSLATION, NOT TO THE LETTER
The cash payment, which totals approximately $1.4 billion pesos, shall be paid by Wal-Mart de México
resources. In order to compensate shareholders who opted for payment in shares, some 593 million new
shares will be issued, which will not be subject to dividends, if the case, for the 2009 period. The amount
of shares exchanged will stem from valuations relative to the merging companies.
Additionally, as part of the purchase price, subsequent payments will be made in cash and shares and
therefore it is the intention of the Board to suggest to the Shareholder Assembly the issuance of a
maximum of 55 million shares that shall remain as Treasury Stock, neither subscribed nor paid, to be
delivered to current Wal-Mart Centroamérica shareholders, provided the acquired corporation meet the
requirement of achieving specified profitability levels. In achieving such profitability goals, this transaction
would produce an even greater effect for Wal-Mart de México.
Wal-Mart Centroamérica profitability shall be assessed annually, for a term that may be extended to ten
years. Upon completion of said term, all Treasury Stock stemming from this transaction, and which has
neither been subscribed nor paid, shall be cancelled.
Issuer Stock. Features before and after the Transaction. The shares representing Wal-Mart de México
capital stock are ordinary, registered, and without expressed par value. The Transaction shall not be the
cause for any change whatsoever to the characteristics and/or rights and obligations that Issuer shares
impose on its holders.
Ticker Symbol. Representative shares of Wal-Mart de México capital stock are listed with the National
Securities Registry (the “RNV”) and are traded on the Mexican Stock Exchange (the “MSE”), under ticker
symbol “Walmex V”.
THE LISTING OF WAL-MART DE MÉXICO SHARES WITH THE RNV NEED NOT IMPLY
VERIFICATION OF THE PROFITABILITY OF THE SECURITIES, ISSUER FINANCIAL SOUNDNESS,
ACCURACY OR TRUTHFULNESS OF INFORMATION CONTAINED HEREIN, NOR DOES IT
VALIDATE ACTIONS THAT, AS THE CASE MAY BE, MAY HAVE BEEN CONDUCTED IN VIOLATION
OF ANY APPLICABLE LAWS.
The prospectus herein does not constitute the offering of securities in México. Said prospectus has been
prepared and is made available to Issuer shareholders and any investors, pursuant to that set forth under
applicable legislation and Corporate bylaws. It should be noted that the Transaction entails the merging of
an entity having a specific purpose within the Corporation. Said merger must and shall be presented to
Issuer shareholders, as per Company bylaws and legislation enforce. Copies of the prospectus herein are
available for Company shareholders at the corporate offices. The e-version of said prospectus may be
viewed at the Wal-Mart de México website: walmartmexico.com.mx, and the Mexican Stock Exchange
homepage: www.bmv.com.mx
HONDURAS
GUATEMALA
EL
SALVADOR
MÉXICO
NICARAGUA
COSTA RICA
2
Page
1. GENERAL INFORMATION .....................................................................5
2. EXECUTIVE SUMMARY.........................................................................9
2.1. BRIEF DESCRIPTION OF WAL-MART DE MÉXICO ....................................................................................9
2.2. BRIEF DESCRIPTION OF WAL-MART CENTROAMÉRICA ...........................................................................9
2.3. BRIEF DESCRIPTION OF TRANSACTION ...............................................................................................10
3. DETAILED INFORMATION ON THE TRANSACTION.........................11
3.1. DETAILED DESCRIPTION OF THE TRANSACTION ...................................................................................11
3.2. TRANSACTION OBJECTIVES ...............................................................................................................12
3.3. FUNDING AND EXPENSES STEMMING FROM THE TRANSACTION ............................................................13
3.4. TRANSACTION APPROVAL DATE..........................................................................................................14
3.5. DATE FOR EXCHANGE OF SHARES .....................................................................................................14
3.6. RIGHTS OF SECURITIES BEFORE AND AFTER THE TRANSACTION ..........................................................15
3.7. ACCOUNTING TREATMENT OF THE TRANSACTION ................................................................................15
4. INFORMATION REGARDING THE RELATED PARTIES INVOLVED
IN THE TRANSACTION ........................................................................16
4.1. WAL-MART DE MÉXICO .....................................................................................................................16
4.2. WAL-MART CENTROAMÉRICA ............................................................................................................29
5. RISK FACTORS....................................................................................39
5.1. RISK FACTORS RELATED TO WAL-MART DE MÉXICO ...........................................................................39
5.2. RISK FACTORS ASSOCIATED WITH THE TRANSACTION..........................................................................40
5.3. RISK FACTORS RELATED TO WAL-MART CENTROAMÉRICA .................................................................40
6. SELECTED FINANCIAL INFORMATION .............................................42
6.1. RESULTS ..........................................................................................................................................45
6.2. FINANCIAL SITUATION, LIQUIDITY AND CAPITAL RESOURCES ...............................................................47
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7. ANALYSIS OF RESULTS AND FINANCIAL SITUATION
PROFORMA..........................................................................................48
8. PEOPLE IN CHARGE ...........................................................................49
9. ATTACHMENTS ...................................................................................50
9.1. REPORT OF INDEPENDENT AUDITORS ................................................................................................50
9.2. EXTRAORDINARY SHAREHOLDERS MEETING NOTICE, WAL-MART DE MÉXICO ......................................88
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1. GENERAL INFORMATION
For purposes of this Prospectus, capitalized terms will have the following meanings.
Said meanings will apply both in singular and plural.
“ADR”
American Depositary Receipt
“ANTAD”
Mexican National Retail Association
“Annual Report”
Annual report issued by Wal-Mart de México for the fiscal year ended on
December 31, 2008; filed before the CNBV and the MSE based on Issuing
Company Provisions. The annual report can be accessed at:
www.walmartmexico.com.mx and www.bmv.com.mx
“Associates”
Wal-Mart de México collaborators
“Bodega Aurrerá”
Austere discount stores offering basic merchandise, food, and household items
at the best prices
“Central México”
Consisting of the following states: Aguascalientes, Colima, Hidalgo, State of
México, Guanajuato, Jalisco, Michoacán, Morelos, Puebla, Querétaro, San Luis
Potosí and Tlaxcala
“CINIF”
Mexican Financial Reporting Standards Research and Development Board
“ClubCo”
Warehouse membership clubs, where members can purchase large volumes in
institutional-size packages
“CNBV”
Mexican National Banking and Securities Commission
“Despensa Familiar
and Palí”
Discount stores that offer limited assortment at very low prices
“Devaluation”
Mexican Peso devaluation against US dollar
“Distribution
Center”
Location for the receipt of goods from suppliers and store distribution
“Dollar, Dollars, or
US$”
Dollar, American legal currency
“EBITDA”
Earnings Before Interest, Taxes, Depreciation, and Amortization
“Every Day Low
Prices”
Permanent Wal-Mart de México philosophy which focuses on contributing
towards improving the quality of life for Mexican families
“GDP”
Gross Domestic Product
“Híper Paiz and
Híper Más”
Hypermarkets that operate under the premise of one-stop shopping. Located in
the periphery of, or main entrances to, large cities throughout Central America
“IETU”
Mexican flat-rate business tax
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“Indeval”
S.D. Indeval, Security Deposit Institution, S.A. de C.V.
“IPC”
Price and Quotation Index
“ISO 9001:2000
Quality Standard”
Certification awarded a Company or any area of a Company that has
implemented a system to ensure its products or services meet international
quality standards as established by the International Standards Organization
(ISO)
“ISR”
Income Tax
“ISSSTE Stores”
Social Security and Services Institute for Government Employees stores
“Issuer provisions”
General dispositions regarding applicable securities issuing companies and
other securities market participants published in the Official Gazette on March
19, 2003 and amended by resolutions published on October 7, 2003;
September 6, 2004; September 22, 2006; September 19, 2008; January 27,
2009; and July 22, 2009 issued by the CNBV
“IVA”
Value Added Tax
“LGSM”
General Corporation and Partnership Law
“LGTOC”
Law of Negotiable Instruments and Credit Operations
“LMV”
Securities Market Law
“MaxiBodegas”
Warehouse type stores, which are a different style of discount stores, larger in
size and with a wider assortment, at equally competitive prices
“Metropolitan
Area”
Consisting of the following: México City and the Metropolitan Area
“México”
United Mexican States
“Minority
Shareholders of the
Region”
Those shareholders who, prior to conducting the Transaction described herein,
together hold the remaining 49% of Wal-Mart Centroamérica capital stock.
“MSE”
Mexican Stock Exchange
“Net sales”
Income stemming from goods sold in Wal-Mart de México stores
“NIF”
Mexican Financial Reporting Standards issued by the CINIF.
“NCPI”
National Consumer Price Index
“North”
Consisting of the following states: Coahuila, Chihuahua, Durango and
Zacatecas
“Northeast”
Consisting of the following states: Nuevo León and Tamaulipas
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“Northwest”
Consisting of the following states: Baja California Norte, Baja California Sur,
Nayarit, Sinaloa and Sonora
“Paiz, La despensa
de Don Juan, La
Unión and Más x
Menos”
Supermarkets focused on customer service in large urban centers, or the
surrounding areas
“Pesos, pesos or
$”
Pesos, Mexican legal currency
“Prospectus”
Information statement regarding the corporate restructuring which was prepared
by Wal-Mart de México pursuant to article 35 and Attachment P of the Issuing
Company Provisions
“PTU”
Employee Profit Sharing
“Related Parties, or
Related People”
According to Article 2, section XIX of the LMV these are: (i) people controlling or
having an influence on a Company which is part of the business group to which
the issuing Company belongs, including directors, managers, and other relevant
officers from said business group; (ii) people with a position of power within a
Company that is part of the business group to which the issuing Company
belongs; (iii) spouse, common law spouse, or a relative by blood or marriage
(fourth degree) or by affinity (third degree) with individuals who are defined
under sections (i) and (ii) hereinabove, or the partners or joint owner of the
individuals mentioned in said sections and with whom there is a business
relationship; (iv) companies that are part of the business group to which the
issuing Company belongs; (v) companies over which any of the persons and/or
entities outlined under sections (i) to (iii) have significant control or influence.
“RNV”
CNBV’s Securities Registry
“Sales Floor”
Surface area set aside for merchandise retail
“Sam’s Club”
Membership warehouse clubs aimed at businesses and consumers who seek
the best possible prices
“SEC”
US Securities and Exchange Commission
“SEDI”
Electronic system to send and convey information to MSE
“SKU”
Stock-keeping units
“Southeast”
Consisting of the following states: Campeche, Quintana Roo, Tabasco,
Veracruz and Yucatán
“Southwest”
Consisting of the following states: Guerrero, Chiapas and Oaxaca
“Suburbia”
Apparel stores offering the best in fashion for the whole family at the best
possible price
“Superama”
Supermarkets located in residential areas
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“Transaction”
Corporate restructuring described in the Prospectus herein
“TFB” or “TFB
Corporation N.V.”
Entity shall own 100% of Wal-Mart Centroamérica shares, and which shall
become a subsidiary of WM Maya prior to completing the Transaction
“Total Revenues”
Net sales plus other income
“UNAM Stores”
National Autonomous University of México stores
“United States”
United States of America
“Vips”
Leading restaurant chain in the restaurant-cafeteria segment. It includes
Mexican cuisine as represented by El Portón
“Wal-Mart
Centroamérica”
The group of corporations comprising Wal-Mart Centroamérica, currently
controlled by TFB and to be owned by WM Maya, who in turn shall be merged
with Wal-Mart de México as a result of the Transaction.
“Wal-Mart de
México”
Wal-Mart de México, S.A.B. de C.V.
“Wal-Mart de
México Bank”
Banco Wal-Mart de México Adelante, S.A., Institución de Banca Múltiple
“Wal-Mart Stores”
Wal-Mart Stores Inc., a retail chain in the United States
“WM Maya”
The corporation shall own TFB and therefore Wal-Mart Centroamérica, and to
be merger with Wal-Mart de México
“Walmart”
Hypermarkets providing the widest assortment of goods from groceries and
fresh, to apparel and general merchandise
“Walmex”
Ticker symbol for Wal-Mart de México, S.A.B. de C.V.
“Working Day”
Any day the Mexican Stock Exchange is open for business
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2. EXECUTIVE SUMMARY
The following summary includes a brief description of the most relevant aspects of the
transaction and in no way does it intend to completely detail all the information that could
be of relevance for the corporate restructuring described herein. The information
included herein will be supplemented with more detailed information and the financial
information included in the other sections of this Prospectus, as well as in the Annual
Report for Wal-Mart de México filed with the CNBV and the MSE, which are available at
the Company’s website www.walmartmexico.com.mx and on the MSE website
www.bmv.com.mx.
2.1. Brief description of Wal-Mart de México
Wal-Mart de México is one of the most important retail chains in Mexico. As of
November 30, 2009, it operates 1,398 units, including self-service stores, membership
warehouse clubs, apparel stores, and restaurants as well as 119 bank branches. It has
presence in 256 cities throughout the 32 states of México.
During the first 11 months of 2009, the Company opened 169 Bodegas Aurrerá, 15
Walmarts, 7 Sam’s Clubs, 3 Superamas and 3 Suburbias, thereby achieving a historical
record of grand openings: 270 units, 18 more than what was planned at the beginning of
the year.
Wal-Mart de México (WALMEX) is listed with the MSE since 1977. It is one of the most
important companies on the IPC. Its capitalization value as of November 30, 2009 was
of $444.1 billion pesos, represented by 8,382 million outstanding shares.
2.2. Brief description of Wal-Mart Centroamérica
Wal-Mart Centroamérica dates back to September 2005, when Wal-Mart Stores Inc.
(leading retailer in the world, which began its operations in 1960) acquired 33% of the
shares of Central American Retail Holding Company (CARHCO) from the Dutch retailer
Royal Ahold N.V.
Wal-Mart Stores Inc., thus began its business relations with the three operating
companies that formed part of the original Company: La Fragua, founded in Guatemala
in 1928, by Carlos Paiz Ayala; CSU, founded in Costa Rica in 1960, by Enrique Uribe
Pagés; and Corporación de Compañías Agroindustriales (CCA), a supplier of fresh meat,
vegetable and bakery goods and private label products sold in its stores.
In March of 2006, Wal-Mart Stores increased its holdings to 51%, and the CARHCO
name was replaced with Wal-Mart Centroamérica.
The results achieved for Wal-Mart Centroamérica in 2008 were the highest in its history.
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Wal-Mart Centroamérica is the leading retailer in the region. By November 30, 2009, it
has 519 units in operation –including discount stores, austere warehouse stores,
supermarkets, hypermarkets, and membership warehouse clubs -distributed throughout
5 countries: Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica.
2.3. Brief description of Transaction
The current holdings in Wal-Mart Centroamérica are as follows:
Wal-Mart Stores:
51%
Minority shareholders in the region:
49%
Total
100%
Through a merger process, Wal-Mart de México would be acquiring 100% of Wal-Mart
Centroamérica capital. In exchange it would issue up to 593 million new shares and pay
approximately $1.4 billion pesos in cash, to be distributed among the current
shareholders: Wal-Mart Stores and the minority shareholders in the region.
Additionally, as part of the purchase price, subsequent payments will be made in cash
and shares and therefore it is the intention of the Board to suggest to the Shareholder
Assembly the issuance of a maximum of 55 million shares that shall remain as Treasury
Stock, neither subscribed nor paid, to be delivered to current Wal-Mart Centroamérica
shareholders, provided the acquired corporation meet the requirement of achieving
specified profitability levels. Upon achieving such profitability goals, this Transaction
would produce even better effects for Wal-Mart de México.
It should be noted that this transaction will not cause Wal-Mart de México to incur in any
interest-bearing debt.
Therefore, 100% of the capital stock for Wal-Mart Centroamérica will be owned by WalMart de México, whose capital shall be integrated as follows:
•
68.5% owned by Wal-Mart Stores
•
31.5% will continue trading on the MSE
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3. DETAILED INFORMATION ON THE TRANSACTION
3.1. Detailed description of the Transaction
The Transaction includes the indirect acquisition of Wal-Mart Centroamérica, by
purchasing 100% (one hundred percent) of WM Maya capital stock, through a merger,
who shall own TFB, who in turn, shall own 100% (one hundred percent) capital stock of
the subsidiary, Wal-Mart Centroamérica.
The Transaction will be conducted through two corporate transactions, including:
1. TFB shares held by Wal-Mart de Centroamérica shareholders (the “Sellers”) shall
be transferred to a recently incorporated limited liability Company -known as WM
Maya, S. de R.L. de C.V. (“WM Maya”)- which shall act as a Mexican instrument
to conduct the Transaction. The Sellers will receive partnership interest at WM
Maya as consideration for TFB shares, at market value. Furthermore, the Minority
Shareholders of the Region shall receive promissory notes for their partnership
interest in WM Maya. The Sellers thereof have entered into a Purchase
Agreement, which is subject to certain conditions, such as the approval of the
Transaction by Wal-Mart de México Shareholders and the corresponding
government authorities.
Minority Shareholders
of the Region
CARCROFT
49%
51%
WM Maya
TFB
2. Once the Sellers have transferred all of their TFB shares to WM Maya, Wal-Mart
de México and WM Maya will have merged with the surviving corporation, WalMart de México -the acquiring corporation- and WM Maya -the acquired
corporation- will have disappeared.
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If the merger between Wal-Mart de México and WM Maya is approved, it would have the
following effects:
•
The extinction of WM Maya
•
The increase in the number of shares representing Wal-Mart de México capital
stock, with the understanding that new Wal-Mart de México shares issued will be
delivered to WM Maya partners in exchange for the merger. Said new shares
shall not be subject to dividends for results achieved in 2009, if the case.
•
The strengthening of Wal-Mart operations in Latin America
Pursuant to that stipulated in Article 224 and following the LGSM, the merger shall be
enforced three months after the merger agreements have been submitted and filed with
the Public Commercial Registry that corresponds to the corporation’s legal domicile; or
when submitted providing payment for all merging corporations debts has been
negotiated; or if the amount corresponding all the debts has been deposited at a credit
institution; or by agreement of all creditors.
Shareholders are being asked to approve the merger for this Transaction, which would
then be enforced once the merger agreements have been filed with the Public
Commercial Registry. Term debts shall be considered as due, for this purpose. The
merger shall be enforced after the agreements are filed with the Public Commercial
Registry in México City, given that Wal-Mart de México and WM Maya agreed to the
payment of the debt to whomever requires, if the case.
Pursuant to the LGSM, the corporations involved in the merger will publish the merger
agreements as well as WM Maya and Wal-Mart de México general balance sheets in the
Official Daily Gazette.
3.2. Transaction Objectives
The primary objective of the Transaction consists of increasing the value for Wal-Mart de
México shareholders through the acquisition via the merging of a leading retail Company
in the Central American region, one which has great potential for growth, operating
synergies and best practices.
Should the Transaction take place, Wal-Mart de México would increase outstanding
shares by 7%, obtaining the following growth under the major profit and loss line items 1 :
1
Sales:
17.3%
EBITDA:
11.6%
Pro form, nine-month period on September 30, 2009
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In addition to the aforementioned financial parameters, the operating environment for
Wal-Mart Centroamérica is quite similar to that of Wal-Mart de México:
•
Leading companies in their respective markets:
o Multiformat
o Suppliers in common
•
A price-conscious consumer
•
The same language and similar cultures
•
A young and growing population
•
A broad informal sector
It should also be noted that for the first time in its history, Wal-Mart Stores is entrusting
another Company with both the opportunity and responsibility of operating one of its
businesses in another region.
Wal-Mart de México would become an international Company, thus considerably
broadening its horizon for its growth and expansion.
This transaction is equally important for the Minority Shareholders of Wal-Mart de
México; without the need for any additional investment on their behalf, they shall reap
the incremental benefits of a profitable transaction above and beyond the existing
operation.
3.3. Funding and expenses stemming from the Transaction
3.3.1. Funding
Wal-Mart de México shall assume the corresponding payments, related to the
implementation of the Transaction, through the use of own resources and the
exchange of new Issuer shares. Therefore, there will be no financing sources such
as third-party credits who are not involved in the Transaction.
3.3.2. Expenses stemming from the Transaction
Regarding the Transaction, and during its implementation, Wal-Mart de México
shall incur expenses and fees of different origin, including: (a) legal, with the hiring
of legal consultants to participate in drafting and negotiating documents,
agreements, and other instruments related to the Transaction; (b) administrative,
with the preparation of reports, projections and internal analysis for the
Transaction; and/or (c) corporate, including payments of duties required by the
Public Commercial Registry, among others.
Transaction expenses would amount to some $5.0 million dollars.
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3.4. Transaction approval date
3.4.1. Audit and Corporate Practices Committees
Pursuant to paragraph III(b) under article 28 of the LMV, the Transaction is
considered one between Related Parties and therefore received a favorable
opinion from the Corporate Practices Committee and the Audit Committee for WalMart de México.
The Audit and Corporate Practices Committees, exclusively formed by
independent directors, met on November 23, 2009, and resolved to recommend
the Board to approve this Transaction, considering all relevant factors, including
the fact that the Transaction is beneficial for all Wal-Mart de México shareholders.
The Committee considered the participation of a related party –Wal-Mart Stores,
Inc.– and concluded that, given the benefits foreseen in the Transaction, the
negotiations were carried out and the terms and conditions of the Transaction were
stipulated based on market conditions; thus, the Transaction is beneficial for the
corporation and all its shareholders; there is no impediment to recommend the
Transaction and should be executed.
3.4.2. Board of Directors
Moreover, and in keeping with the provisions set forth under paragraph III(c) of
Article 28 of the LMV, and paragraph III of Article 40 of the same Law, the
Transaction was presented for approval by the Board of Directors of Wal-Mart de
México.
On November 23, 2009, the Board of Directors for Wal-Mart de México authorized
the Transaction and the conducting of all corporate procedures necessary with the
purpose of presenting the Transaction for approval by Wal-Mart de México
Shareholders.
3.4.3. Extraordinary Shareholders Meeting
Upon obtaining the aforementioned corporate authorizations on December 7, 2009,
there was a call to an Extraordinary Shareholders Meeting for Wal-Mart de México
with the purpose of approving the Transaction. Said call to meeting was published
in “Reforma”, a nationwide newspaper. The Extraordinary Shareholders Meeting
shall be held on December 22, 2009, at 9:30 AM, at Wal-Mart de México corporate
offices. A copy of the call to said meeting is attached hereto as Annex 9.2.
3.5. Date for Exchange of Shares
Upon approval during the Extraordinary Shareholders Meeting and execution of the
Transaction, deemed to occur no later than March 31, 2010, the exchange of
14
partnership interest of WM Maya for shares Class “2”, Series “V” of the Issuer, shall
take place.
3.6. Rights of Securities before and after the Transaction
The Transaction shall not imply any change whatsoever to corporate or economic
rights of Wal-Mart de México shareholders.
3.7. Accounting treatment of the Transaction
For accounting purposes, this transaction is classified as a business acquisition, as it
shall take place at market value, and pursuant to NIF B-7 revised and enforced as of
January 1, 2009. Said transaction shall therefore be subsequently recorded under
the “purchase method”.
The consideration to be paid by Wal-Mart de México consists of cash as well as the
issuance of own shares of common stock, which pursuant to NIF B-7 shall be priced
at fair value on the date on which control of the acquired corporation is final.
Moreover, there shall be fixed annual payments for a period of 5 years, as well as a
contingent payment that hinges on the accomplishing of certain financial objectives in
the future, to be posted as a liability priced at fair value; in other words, at present
value on the acquisition date. Any and all expenses related to the acquisition do not
constitute part of the consideration and shall be posted to profits and losses on the
date incurred.
In accordance with NIF B-7, the totality of all identifiable assets (including
intangibles) and all liabilities for the acquired corporation are posted at fair value on
the date of acquisition. The goodwill is recognized when the sum for the
consideration priced at its fair value –as mentioned in the paragraph herein above- is
greater than the net assets for the acquired business.
NIF B-7 sets forth that the Company shall have one year as of the acquisition date to
establish the value of the net assets at fair value.
The identified goodwill shall not be amortized, but shall be subject, however, to
impairment tests at least once a year. For impairment computation shall be
determined pursuant to the guidelines set forth in NIF C-8 “Intangible Assets” which
establishes how to assign goodwill for the tests of impairment, pursuant to Bulletin
C-15 “Impairment in long-lived assets”. Moreover, that set forth in NIF B-15 “Foreign
Currency Translation” must be taken into account for the purpose of foreign currency
stemming from fair values of acquired net assets, as well as from the goodwill in the
consolidated financial statements.
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4. INFORMATION REGARDING THE RELATED PARTIES INVOLVED IN
THE TRANSACTION
4.1. Wal-Mart de México
4.1.1. Name of the Issuer
4.1.2. Business Description
Wal-Mart de México is one of the most important retail chains in our country. It
operates 1,398 units, including self-service stores, membership warehouse clubs,
apparel stores, and restaurants as well as 119 bank branches as of November 30,
2009. It has presence in 256 cities throughout the 32 states of México.
Despite the unfavorable economic environment experienced in 2009, Wal-Mart de
México has obtained very positive results, once again achieving the best results in
its history.
Wal-Mart de México
Financial Data
(12-month period ended in September)
Million of pesos
2009
2008*
Growth
%
Results
Net sales
261,826
Other income
238,445
9.8
988
857
15.3
262,814
239,302
9.8
Gross profit
57,140
51,876
10.1
General Expenses
35,498
32,486
9.3
Operating income
21,642
19,390
11.6
EBITDA
26,121
23,449
11.4
Income before income tax
21,686
20,230
7.2
Net income
15,990
14,461
10.6
Cash
13,511
7,408
82.4
Inventories
20,749
19,970
3.9
Total revenues
FINANCIAL POSITION (September)
Other assets
3,682
3,819
(3.6)
Fixed assets
82,441
76,505
7.8
Total assets
120,383
107,702
11.8
Suppliers
24,038
22,526
6.7
Other liabilities
18,110
15,137
19.6
Shareholders’ equity
78,235
70,039
11.7
120,383
107,702
11.8
Total liabilities and shareholders’ equity
* Historial values for the 4th Quarter of 2007 were considered for comparison purposes.
16
Total revenues generated in the last 12 months amounted to $262.8 billion pesos,
once again establishing a new record for the Company. Sales growth was recorded
at 9.8% total units and 2.9% comp units.
A new record high was also set in customer count: 1,174 million customers, thus
representing a growth rate of 12.9%, in the last 12 months at September 2008.
Wal-Mart de México has a sound financial position. After investments made with
own resources -that is, $6.1 billion pesos in modernizing and expanding our
installed capacity, and the payment of dividends for $5.0 billion pesos- the
Company has $13.5 billion pesos in cash and the balance has no debt, or any
derivatives, as of September 30, 2009.
All business formats are growing, each one meeting the unique needs of their
specific target markets. During the first 11 months of 2009, there were
169 Bodegas Aurrerá, 15 Walmarts, 7 Sam’s Clubs, 3 Superamas and 3 Suburbias
stores. Therefore, by November 30, 2009, there were 1,398 operating units, all of
which are located in 256 cities throughout the 32 states of México.
Number of Units
December
Grand
Closes
November
2008
Openings
Bodega Aurrerá
442
169
Walmart
153
15
168
Sam’s Club
91
7
98
2009
1
610
Superama
67
3
1
69
Total self-service
753
194
2
945
Suburbia
84
3
1
86
Vips
367
TOTAL
367
1,204
197
3
1,398
Wal-Mart de México is committed to its country, leveraging the huge opportunities
for a self-service Company. This is made clear by the fact that by the end of 2009,
Wal-Mart de México will reach a historical record of openings: 270 units, 18 more
than what was considered at the beginning of the year.
Wal-Mart de México (WALMEX) is listed with the Mexican Stock Exchange since
1977. It is one of the most important companies on the IPC. Its capitalization value
as of November 30, 2009 was $ 444.1 billion pesos, represented by 8,382 million
outstanding shares.
17
Top Ten Companies in the MSE
Ticker Symbol
1
América Móvil
AMX
2
Wal-Mart de México
WALMEX
Million pesos
Capitalization
Total Revenues
30-Nov-09
12 months sep 09
Employees
Sep-09
1,013,026
382,027
54,140
444,099
262,814
174,486
3
Grupo México
GMEXICO
236,742
62,573
18,271
4
Grupo Modelo
GMODELO
218,543
80,366
36,971
5
Teléfonos de México
TELMEX
211,979
120,321
53,116
6
FEMSA
FEMSA
208,022
191,748
122,205
7
Carso Global Telecom
TELECOM
186,657
204,150
78,665
8
Telmex Internacional
TELINT
179,233
86,289
28,160
9
Grupo Televisa
TLEVISA
149,993
51,661
22,377
10
Grupo Elektra
ELEKTRA
139,164
42,790
35,483
Source: Mexican Stock Exchange (MSE) and Bloomberg
a) Multiple Format Operation
Note: % of total sales, sales, SKU and number of associates are figures as of the end of 2008.
Square meters of sales floor, number of units and cities with presence are of November 30, 2009.
Austere discount stores offering
basic merchandise, food and
household items at the best price.
There are three new prototypes to
better serve its customers, as per
the size of the community: Bodega
Aurrerá,
Mi
Bodega Aurrerá,
Bodega Aurrerá Express.
Value proposition: price
Hypermarkets providing the widest
assortment of goods from groceries
and fresh, to apparel and general
merchandise.
Value
proposition:
price
and
assortment
Membership
warehouse
clubs
focused
on
businesses
and
consumers who seek the best
possible prices.
Value proposition: price leader,
volume,
new
and
unique
merchandise
Supermarkets located in residential
areas.
Value
proposition:
quality,
convenience and service
18
33.7% total sales
$ 82.3 billion pesos in sales
610 units
16,273,229 sq. ft. of sales area
45,000 SKUs
60,038 associates
235 cities nationwide
169 grand openings during 2009
28.2% total sales
168 units
14,678,375 sq. ft. of sales floor
90,000 SKUs
47,060 associates
27.0% total sales
98 units
4,500 SKUs
23,039 associates
5.1% total sales
69 units
30,000 SKU
9,618 associates
Apparel stores offering the best in
fashion for the whole family at the
best possible price.
Value proposition: fashion with the
best value, price-quality ratio
Leading restaurant chain in the
restaurant-cafeteria segment. It
includes
Mexican
cuisine
as
represented by El Portón.
Value proposition: convenience,
flavor and quality
Universal banking institution aimed
at Wal-Mart México customers, with
an initial offering of basic banking
and financial products and services.
Value proposition: convenience,
simplicity and price
3.6% of total sales
86 units
8,848 associates
2.4% total sales
367 units
83,810 seats
20,315 associates
none grand openings during 2009
119 Bank Branches
115,000 customers
1,096 associates
As of November 30, 2009, the Company had presence in 256 cities nationwide,
distributed by geographical area as follows:
Presence by Geographical Region
Total
Metropolitan
area
Center
Bodega Aurrerá
610
229
203
53
30
33
23
39
Walmart
168
42
44
17
19
18
22
6
Sam’s Club
98
20
27
15
9
8
12
7
Superama
69
44
21
4
Total self-service
945
335
295
89
58
59
57
52
Suburbia
86
40
23
10
6
3
1
3
Vips
367
179
80
43
18
15
17
15
1,398
554
398
142
82
77
75
70
TOTAL
Southeast Northeast
19
North
Northwest Southwest
NORTH
NORTHEAST
NORTHWEST
SOUTHEAST
CENTER
METROPOLITAN AREA
SOUTHWEST
b) Cyclical Performance
The demand for goods and services increases significantly during the last few
months of each year as a result of the holiday season. In 2008, the fourth quarter
represented 29.7% of the year’s total revenues, as well as 33.9% of operating
income.
Revenues by Quarter
TOTAL REVENUES 2008
CONTRIBUTION
(Billion pesos)
%
1st Quarter
57.2
23.3
2nd Quarter
57.4
23.4
3rd Quarter
57.7
23.6
4th Quarter
72.7
29.7
244.9
100.0
TOTAL
Vacation periods and official holidays also have a significant impact on sales
performance.
c) Distribution Channels
As of November 30, 2009, Wal-Mart de México had 13 distribution centers with an
installed capacity of more than 18.4 million square feet, allowing to transport 3.6
million cases to stores, clubs and restaurants each day.
20
Distribution Centers
City
México
Name
Service
Cuautitlán
Dry goods
La Naranja
Apparel distribution for Suburbia
San Martín Obispo (2)
Dry goods / Perishables
Comisariato
Distribution for Vips
Santa Bárbara
Dry goods
Chalco
Dry goods
Dry
Dry goods
Perishables
Produce
Dry
Dry goods
Perishables
Produce
Villahermosa
Dry / Perishables
Dry goods / Perishables
Culiacán
Dry
Dry goods
Monterrey
Guadalajara
d) Patents, Permits, Brands and Other Agreements
All commercial brands for the different business formats (Walmart, Sam’s Club,
Superama, Bodega Aurrerá, Mi Bodega Aurrerá, Bodega Aurrerá Express, Prichos,
Suburbia, Vips, El Portón, Ragazzi, El Malecón, La Finca, San Remo Café and
Banco Wal-Mart de México Adelante), as well as the products bearing the private
labels (Great Value, Equate, Members Mark, GRX, Weekend, MC Metropolis
Company, Non Stop, Gianfranco Duna, etc.), are registered trademarks belonging
to Wal-Mart Stores, Inc. and Wal-Mart de México, S.A.B. de C.V. Said trademarks
are used by the operating companies under license agreements and/or sub-license
agreements for an indefinite term. The Company also uses brands registered to
third parties through license agreements, usually for an indefinite period of time,
with guarantees on use and compliance with all applicable legislation.
The legal use and preservation of the rights of private labels is of great importance
to the issuer, because they are considered part of the Company’s value, and the
consumer identifies the quality of the products under said brands, together with the
service provided by the operating companies, as part of the prestige of the
Corporation.
“Vips” is one of the main brands of the group under which several restaurants
operate. Seven franchises have been granted to operate restaurants in five
different cities nationwide (Mérida, Oaxaca, Tuxtla Gutiérrez, Veracruz and Xalapa),
which expire between 2010 and 2013, and without the execution of an industrial
agreement.
“Banco Wal-Mart de México Adelante”, which operates a low cost bank in order to
serve better our customers, is also part of the brands.
21
e) Primary Customers
Wal-Mart de México’s primary consumer is the general public. Throughout 2008,
we served 1,073 million customers.
México is a country with great diversity, differing demographics, preferences and
income levels. The Company’s multiple-format strategy allows sufficient flexibility to
efficiently meet the needs of the different population sectors.
(%)
of total
sales
33.7
E
Low: 60.3%
D
Middle: 32.2%
D+
C
C+
High: 7 .5 %
B/A
BUSINESS
MEMBERS
Bodega Aurrera
28.2
Walmart
27.0
Sam’s Club
5.1
Superama
3.6
Suburbia
2.4
Vips
Walmart Bank
Population breakdown by income level
f) Applicable Legislation and Tax Situation
Wal-Mart de México, S.A.B de C.V., is a corporation established under Mexican
law that complies with all legal provisions for the construction and operation of its
units, with special emphasis on: environmental and ecological construction, urban
development, operation, hygiene, the sale of alcoholic beverages, animal and pest
control, and advertisements, pursuant to all applicable federal, state and municipal
regulations.
Furthermore, Wal-Mart de México complies with basic principles of trade governing
the relationship between suppliers and consumers established by the Federal
Consumer Protection Law.
Wal-Mart de México is registered with the Ministry of Finance and Public Credit
under the regime for large taxpayers, with its results consolidated for tax proposes,
with the exception of the bank. The Company complies with all the tax provision
regarding the development of the Corporation.
The primary laws governing Wal-Mart de México are: the Securities Market Law,
General Corporation and Partnership Law, Income Tax Law, Value-Added Tax Law,
Tax on Cash Deposit Law, Special Production and Services Tax Law, Intellectual
Property Law, Federal Consumer Protection Law, Federal Anti-Trust Law, Foreign
Investment Law, Banking Law and the Flat-rate Business Tax Law.
22
g) Human Resources
Talent development is one of Wal-Mart de México strategic priorities and a core
part of the business. During 2008, the Company created 12,582 new direct jobs,
thus taking our associate headcount to 170,014, and ratifying the Company as one
of the largest private-sector employers in the country. More importantly, the jobs
created constitute development and growth opportunities for new associates, in an
atmosphere of respect and equality.
During 2008, the Company invested some 9.6 million man-hours in training, of
which an ever growing amount of 2.7 million was done through distance learning.
Because of the Company’s new e-learning system, training and corporate
programs have been facilitated by taking it straight to the units where our
associates work, with considerable savings in time and energy by eliminating the
need for traveling to a training center. As a result of these business practices and
the continuous motivation of our associates, 23,879 were promoted throughout the
year, and 6,278 were transferred to work centers closer to their homes.
Gender Equality
Female
53%
Male
47%
h) Environmental Performance
Wal-Mart de México wants to ensure that its daily operations guarantee
environmental care and conservation. Therefore, it is constantly promoting
sustainability among customers, associates and suppliers.
– In order for the Company to achieve the objective of reducing energy use per
square meter, a series of initiatives were launched including the replacement
of lighting with efficient lamps and installing energy control devices, the
incorporation of high-efficiency electrical equipment in all new projects and
remodels. Reducing 1.5% in energy use in 2008 represented almost 11,000
tons less of CO2, equivalent to removing some 2,000 motor vehicles from the
roads for a full year.
– Aware of the Company’s commitment to products that help protect the
environment and save customers money, the Company continues working
with suppliers to identify and develop green products, that is, organic, recycled
or biodegradable, and energy and water saving products.
– The Company promotes more austere sizes and packaging with suppliers,
using less cardboard, which prevents tree felling and allows for the
transportation of a greater number of products in fewer trips and with less
23
toxic emissions into the air. It also results in a lower product costs, thereby
benefiting the customer.
i) Market Information
Wal-Mart de México is a retail Company that operates self-service stores,
membership wholesale clubs, apparel stores, restaurants and bank throughout the
country.
The market it competes in is formed by:
– Establishments with a sales area of more than 600 square meters, three or
more exit lanes and scanning technology, as well as independent self-service
stores with one or two exit lanes an a sales area no greater than 600 square
meters, such as: Soriana, Comercial Mexicana, Chedraui, Casa Ley,
Futurama, San Francisco de Asis, HEB, Almacenes Zaragoza, Casa Chapa,
Central Detallista, Comercial V.H., among others.
– Convenience stores, opened 15 or more hours a day, such as: Oxxo, 7 Eleven,
Extra, Super 7, Mode, Super Rapiditos, Bip-Bip, Mercados Mexicali, Super
Flash, Super K, Super Deli, Supers del Río, Super Tiendas del Hogar, Super
Fiesta, Círculo K, Super Dos, Comextra, JV, Matador, On the Run, Super Tip,
etc.
– Apparel and specialized stores, such as: Coppel, El Palacio de Hierro, El
Puerto de Liverpool, Sears Roebuck, Sanborns Hermanos, Famsa, Elektra,
Home Depot, Office Max, Office Depot, Zara, Radio Shack, Singer, Deportes
Martí and Best Buy.
– Membership warehouse clubs, such as: Costco, City Club and Chesuma,
among others.
– Establishments operated by public agencies, such as: ISSSTE, UNAM, etc
As of December 2008, ANTAD membership included 99 retail chains with 17,024
stores, of which 2,815 are self-service, 1,362 are apparel and 12,847 specialized
chains. Its installed capacity reached 17.3 million square meters and through out
2008 posted sales for $747 billion pesos 2 .
Nevertheless, a major part of the population in our country customarily shops in
traditional establishments, such as municipal markets, open-air markets, grocery
stores and mom-and-pop businesses, or through the informal sector of the
economy. Both maintain a high market share since they are able to supply
populations that, due to mere numbers, cannot access other establishments.
Growth, systems, logistics and distribution investments are focused on increasing
and modernizing our installed capacity and distribution. This leads to a more
efficient operation, with lower costs, allowing us to serve our customers better
2
Source: ANTAD. Media Report 2009
24
every day. Wal-Mart de Mexico maintains its position within the industry by
maintaining the competitive advantages.
j) Corporate Structure
Wal-Mart de México S.A.B. de C.V., is listed in the Mexican Stock Exchange
whose major shareholder is Wal-Mart Stores, Inc., through Intersalt, S. de R.L. de
C.V., holding 69.1% of the shares by December 31, 2008. The remaining 30.9%
are held by the market.
As of November 30, 2009, the Company’s market value totaled $444.1 billion
pesos.
WALMEX has a 99.9% equity interest in the following groups of companies:
Wal-Mart de México
GROUP
LINE OF BUSINESS
Nueva Wal-Mart
Operation of 610 (442 in 2008) Bodega Aurrera, discount stores, 98 (91 in 2008) Sam's
Club membership self-service wholesale stores, 168 (153 in 2008) Walmart hypermarkets
and 69 (67 in 2008) Superama supermarkets
Suburbia
Operation of 86 (84 in 2008) Suburbia stores with apparel and accessories for the entire
family.
Vips
Operation of 267 Vips restaurants serving international cuisine, 93 restaurants El Porton
restaurants serving Mexican food and 7 restaurants specializing in Italian food, during both
years.
Comercializadora
México Americana
Real estate
Import of goods for sale.
Real estate developments and management of real estate companies.
Services companies
Rendering of professional services to Group companies, not-for-profit services to the
community at large and shareholding.
Banco Wal-Mart de
México Adelante
Rendering banking services through 119 bank branches.
As of november 2009 and december 2008
k) Description of Main Assets
As of September 30, 2009, Company assets are represented mainly by cash
($13.5 billion pesos), goods for sale inventories ($20.7 billion pesos) and fixed
assets represented by real estate, stores, restaurants, distribution centers, fixtures
and equipment ($82.4 billion pesos). We must point out that cash represents
11.2% of assets, and is wisely and carefully invested following highly conservative
standards, and always based on security, liquidity, and yield criteria established by
the Finance Committee, in that order of importance.
Some of the units are owned and others are leased.
25
Fixed assets are formed by business units, as described:
Description by Business Format
Format
Bodega Aurrerá
Walmart
Sam's Club
Superama
Suburbia
Vips
Banco Wal-Mart
Description
Austere discount stores
Supercenters
Membership warehouse clubs
Supermarkets
Apparel stores
Restaurant chains. This division
includes Vips, el Porton, and
Ragazzi restaurants.
Bank branches
Units
Sales area (sq ft)
610
168
98
69
86
16,273,229
14,678,375
7,841,265
1,219,691
3,839,584
367
83,810*
119
N/A
* Seats
In addition, the Company has 13 distribution centers with an installed capacity of
18.4 million square feet, as shown in section 4.1.2 (c) Distribution Channels of this
report.
l) Growth Plan
México is a country offering considerable growth opportunities and it has over 107
million inhabitants, 43% of which are under the age of 21, and 31% under 15 years
of age 3 .
Wal-Mart de México multiple format operation enables us to serve practically all
income levels in our country and meet their different buying needs, either for use at
home or outside the home. Going one step further, we have developed different
prototypes within the existing formats, thus allowing us to efficiently serve different
types of communities. As of November 30, 2009, 371 cities have been identified
with potential for one or several units of any of the business formats. 115 of them
still have no presence.
The Company will continue investing in growth and productivity. Growth plan for
2009 considers the opening of 270 operating units, 18 more than originally
announced at the beginning of the year. The increase in installed capacity is
estimated at 10%, with an investment of over $11.8 billion pesos.
Based on the foregoing, we developed a prototype for a smaller store “Bodega
Aurrerá Express”. This new prototype combines the concept of a discount store
with that of a convenience store. The target market is D and E income levels. It will
offer the most sought after items from Groceries, Fresh and Consumables at
Bodega Aurrerá prices.
3
Source: National Population Council (CONAPO) – Population Forecast in México 2000-2050
26
m) Litigation, Administrative Actions or Arbitration
As of the date of this Prospectus, there are no legally litigation or affair that could
affect substantially the operation of the Company.
n) Representative Shares of Capital Stock
Wal-Mart de México stock is listed in the Mexican Stock Exchange under the
Ticker Symbol WALMEX.
Stock Structure
As of December 31, 2008
Million of shares
Serie
"V"
Number of shares
%
8,435
100
Free subscription common shares
The Company has an ADR-sponsored program on its “V” Series shares. The
depositary bank is The Bank of New York.
Stock Performance in the Stock Market 4
Relevant Stock Indicators
2009*
2008
2007
2006
2005
Maximum Price
54.51
47.38
49.36
47.56
31.18
Minimum Price
27.63
28.55
34.31
26.23
18.92
Closing Price
52.98
37.00
37.69
47.56
29.51
Volume (millions)
2,352
3,047
3,224
2,213
2,424
* As of November 30
Relevant Stock Indicators 2008
Quarter
1st
2nd
3rd
4th
Maximum Price
45.06
47.38
41.50
37.54
Minimum Price
34.90
40.30
35.98
28.55
Closing Price
45.06
40.88
37.61
37.00
881
655
622
889
Volume (millions)
Relevant Stock Indicators 2009
Quarter
1st
2nd
3rd
4th*
Maximum Price
37.97
40.23
49.60
54.51
Minimum Price
27.63
33.88
37.94
45.59
Closing Price
33.07
38.96
46.94
52.98
868
614
503
367
Volume (millions)
* As of November 30
4
For comparison reason, values presented were adjusted by the split on February 9, 2006
27
o) Dividends
During recent years, the Company decreed dividend payments in stock or in cash,
to be decided by each shareholder. As a result of earning obtained in 2008,
dividend payment was granted $5.0 billion pesos paid in cash in 2009.
Dividend Payments
Decided by each shareholder
Cash
In stock
(1 for each)
2009
0.61
--
2008
0.59
77.12
2007
0.51
89.37
2006
0.38
80.05
The Company intends to continue paying yearly dividends, the amount of which will
depend upon growth opportunities, the economic situation, and the competitive
environment, among other factors.
The shares issued as a result of the acquisition of the Wal-Mart Centroamérica
operations shall not be subject to dividend payments for results achieved in 2009, if
the case.
4.1.3. Evolution and Recent Events
WALMEX total sales for the first nine months of the year totaled $189.4 billion
pesos, that is, $17.8 billion pesos more than in the same period last year, which
represented a 10.4% increase in total units, and a 3.2% increase in comp units.
Continuous efforts to translate price efficiencies into lower prices meant a 13.4%
increase in the number of served customers.
Gross margin was 21.5%, which is the same percentage than last year. In
monetary terms, gross income grew by 10%.
Wal-Mart de México continues its tight expense control and is seeking increased
operative efficiencies. Operating expenses grew 8%, 220 basis points below sales
growth. In view of the foregoing, operating income grew 14% representing 7.9% of
the Company’s income, 30 basis points above the same period last year.
EBITDA grew 14%, thus representing 9.7% of the Company’s income.
Consolidated net income totaled $11.1 billion pesos, that is, 14% above the same
period last year.
The 2009 expansion program will be more aggressive than originally planned.
Some 270 units will open, or 18 more than announced in the beginning of the year.
During the first nine months of the year 127 units were opened: 15 Bodegas
Aurrerá, 17 Mi Bodegas Aurrerá, 77 Bodegas Aurrerá Express, 9 Walmarts, 6
28
Sam’s Clubs, 2 Superamas and 1 Suburbia store. With these openings, the
Company now has operations in 21 new cities where it didn’t have presence in the
past. Wal-Mart de México now has 1,329 units in 245 cities nationwide.
As of September 30, 2009, Wal-Mart de México has a sound financial position:
cash position amounted to $13.5 billion pesos, $6.1 billion pesos more than the
same period last year, although during the first nine months of the year Wal-Mart
de México invested $6.1 billion pesos in fixed assets, $1.6 billion pesos in the
repurchase of 41 million shares, and paid a dividend of $5.0 billion pesos. The
balance has no interest-bearing debt.
4.1.4. Structure of Capital
At September 30, 2009, paid capital stock for Wal-Mart de México is as follows:
Capital Stock
Serie
V
Nominal value
$
Coupon
None value
48
Total
Number of shares
Fixed Portion
Variable Portion
Freely subscribed
1,075,006,074
1,075,006,074
7,318,671,149
7,318,671,149
8,393,677,223
8,393,677,223
Capital Stock
Fixed
Variable
1,844,173
1,844,173
12,555,179
12,555,179
At September 30, 2009, share last price Series “V” was of 46.94 (forty six pesos
94/100).
4.1.5. Significant changes to Issuer’s Financial Statements since the last
Annual Report
From the date of Wal-Mart de México Annual Report to the date of the prospectus
herein, there have been no significant changes to accounting policies, critical
accounting estimates, and provisions. Thus the information as of September 30,
2009, and for the nine months ending on September 30, 2009, is consistent with
the information included in the Annual Report.
4.2. Wal-Mart Centroamérica
4.2.1. Name of the Company
WM Maya, S. de R.L. de C.V., shall own 100% of TFB Corporation, N.V.
4.2.2. Business Description
Wal-Mart Centroamérica is the leading retailer in the region. By November 30,
2009, it has 519 units in operation –including discount stores, warehouse,
supermarkets, hypermarkets, and clubs- distributed throughout 5 countries:
Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. Almost 30,000
associates work in the region.
29
The results posted for Wal-Mart Centroamérica in 2008 were the highest in its
history:
Wal-Mart Centroamérica
Financial Data
(US GAAP)
Million of dollars
Year Ended December 31
2008
Growth
2007
%
Results
Net sales
3,347
2,882
16.1
26
22
18.2
3,373
2,904
16.2
Gross profit
812
702
15.7
General Expenses
622
540
15.2
Operating income
190
162
17.3
EBITDA
243
207
17.4
182
154
18.2
Income tax
58
49
18.4
Net income
121
101
19.8
Cash
139
157
(11.5)
Inventories
263
252
4.4
Other assets
159
126
26.2
Fixed assets
514
479
7.3
Total assets
1,075
1,014
6.0
Suppliers
358
391
(8.4)
Other liabilities
270
245
10.2
447
378
18.3
1,075
1,014
6.0
Other income
Total revenues
FINANCIAL POSITION
Total liabilities and shareholders’ equity
Throughout the region, Wal-Mart Centroamérica serves the communities where it
is present, through five different formats. In other words, there are five distinct
concepts that were devised to meet the differing needs of its customers, under the
principle of “the best quality, at the lowest possible prices”.
a) Multiple Format Operation
Supermarkets that focus on
customer service in large urban
centers, or the surrounding areas.
30
92 units
Presence in: Guatemala
and Honduras
Hypermarkets that operate under
the premise of one-stop shopping.
Located in the periphery of, or main
entrances to large cities throughout
Central America. The product
offering includes a wide assortment
in products and brands, in addition
to supplementary services such as
gas stations, vision centers, bank
branches, etc.
16 units
Presence in: Guatemala,
El Salvador, and
Honduras
Discount stores that offer limted
assortment at very low prices.
Located within or near pedestrian
markets, in urban and/or rural
areas, as well as suburban
communities.
377 units
El Salvador and Honduras
Warehouse type stores, they are a
different style of discount stores,
larger in size and with a wider
assortment, at equally competitive
prices. They are located in urban
areas and have successfully
opened –with considerable
acceptance from their customer
base- new units in shopping centers
in the countryside of the Central
American countries where they
operate.
32 units
Honduras and Costa Rica
Warehouse membership clubs,
where members can purchase large
volumes in instructional-size
packages. They are located close to
the entryways of the capital city.
2 units
Presence in: Guatemala
b) Distribution Channels
Wal-Mart Centroamérica operates 11 Distribution Centers to better serve all units
located throughout the five countries of the region:
Honduras
Guatemala
El Salvador
Costa Rica
Nicaragua
TOTAL
3
3
2
2
1
11
The introduction of the cross-dock system is currently underway, so as to increase
the speed of product delivery, at lower costs.
31
The distribution channel has a high performance team of 2,000 associates and
quality equipment.
Moreover, there are opportunities for greater centralization regarding general
merchandise, textiles, and certain food categories.
c) The Agroindustrial Division
Wal-Mart Centroamérica has an Agroindustrial Division consisting of a portfolio of
companies specializing in supplying, processing and distributing fresh products,
and developing private label grocery and consumer items.
Their mission is to be “a competitive advantage for Wal-Mart Centroamérica,
allowing our customers to save money and live better.”
The role of agroindustrial development is to:
– Act regionally, taking into account interaction among the markets
– Ensure a unique competitive advantage for the retail operation
– Strike a balance between supply and prices throughout the region
– Optimize regional and international supply
– Standardize product processing through centralization
– Maintain positive relations with governments and different associations
– Quality assurance and environmental protection
Wal-Mart Centroamérica enjoys different benefits by operating with this division:
– Competitiveness with important competitors for each format
– Organization dedicated to retail operations
– Freshness guarantee
– Daily distribution and high fill-rate
– Elimination of processes at store level
– Greater capacity for new product development
– Quality standards for all food items
– Environmental responsibility
– Control over supply chain
d) Patents, Permits, Brands and Other Agreements
All the banners for the different retail formats (Despensas Familiar, Pali, la
Despensa de Don Juan, La Unión, Paiz, Más x Menos, Maxi Bodega, Híper Más,
and Híper Paiz and ClubCo), as well as the different private labels (Great Value,
Equate, SAM’s Choice, George & Design, SABEMAS, SuperMax, Suli, etc.), are
registered trademarks owned by Wal-Mart Stores, Inc., Broadstreet Global
32
Activities Ltd. Liab. Co., Ahold Retail Services Ag, and different subsidiaries of TFB
Corporation N.V., that operates throughout Central America.
The legal use and conservation of rights to the different private labels are of
paramount importance to the issuer as they constitute part of the net worth, in
addition to the fact that the consumer public identifies with the quality of products
sold under the brands, together with the services rendered by the operating
companies, thus involving the prestige of said issuer.
Included among the distinct banners of the Group are the various brands owned by
the subsidiaries of the Agroindustrial Division, an operation that was created with
the purpose of supporting the Wal-Mart Centroamérica retail operations, through
the supply, distribution and sale of fresh products and, separately, the development
of private label grocery and consumer products.
e) Primary Customers
The primary consumer for Wal-Mart Centroamérica is the general public, serving
some 312 million customers annually throughout Guatemala, Honduras, El
Salvador, Nicaragua, and Costa Rica.
These countries represent a population of over 38 million inhabitants and a retail
market of $44 billion dollars, each with different demographic characteristics,
preferences and income levels. The multiformat strategy of Wal-Mart
Centroamérica provides the flexibility needed to efficiently serve the needs of the
different population sectors throughout the region.
The Wal-Mart Centroamérica customer is the general public; the majority, however,
pertain to “C” level income groups.
Socioeconomic sectors
10 % A-B
13 % C
23 % D
54 % E
33
The diversity in demographic characteristics and income levels in each of the
countries are best served by the multiformat approach, wherein the needs of all
customers are more efficiently met.
Format
Target Sector
Discount stores
Mid-low / Low
Supermarkets
High / Mid-high
Hypermarkets
Mid-high / Mid-low
Warehouses
Medium / Low
Clubs
Medium / Low
f) Applicable Legislation and Tax System
The operation known as Wal-Mart Centroamérica is consolidated under TFB
Corporation, N.V., an indirect subsidiary of Wal-Mart Stores, Inc. (the majority
shareholder). TFB Corporation, N.V., was incorporated on September 20, 2005,
with the purpose of serving as the holding Company for a number of subsidiaries
that operate stores and run agroindustrial operations, and incorporated in
Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica. All companies
comply with each and every legal provision under administrative law, to build and
operate its different units, in full compliance with the following types of legislation:
construction, environmental and ecological, road and urban development,
operations, health, the sale of alcoholic beverages, plant health, and signage, both
at federal and local levels, pursuant to the different jurisdictions of the differing
federal, state, and municipal authorities in the respective countries.
Likewise, there is full compliance with the basic principles of commercial relations
between suppliers and established consumers in each of the countries served.
34
Regarding the tax position of TFB Corporation, N.V. and its operating subsidiaries
are subject to each country Fiscal Bylaws and are registered in their Tax ID and in
compliance with any and all tax requirements related to the development of their
respective businesses operation.
g) Human Resources
Wal-Mart Centroamérica culture centers on three basic beliefs: Respect for the
Individual, Customer Service, the Pursuit for Excellence, principles which were the
source of inspiration for the Company founders and which today are shared
throughout the organization at all levels.
At the close of November 30, 2009 the Company operated 519 self-service stores,
11 distribution centers, and 16 production plants. Wal-Mart Centroamérica is one of
the primary employers in the region, with almost 30,000 associates currently
working.
Many of the executives and managers of the Company began their careers at entry
levels, and therefore talent development is clearly one of the strategic priorities for
Wal-Mart Centroamérica, a core element of the business. Some 700 new direct
jobs are expected to be created by close of 2009, with over 780,000 man-hours
invested in training.
Gender Equity
Female
42%
Male
58%
h) Environmental Performance
Wal-Mart Centroamérica is committed to being a Company that sustainably
manages each aspect of the business –from the products it sells to the energy it
saves.
With this in mind, Wal-Mart Centroamérica has a Sustainability Advisory Board,
whose purpose is to serve as a consultant for the sustainability program that the
organization operates throughout the region.
The objectives for Wal-Mart Centroamérica, as a Company committed to the
environment, are quite simple and transparent: reach 100% renewable energy
supply, generate zero wastes, and sell products that not only save resources, but
that are also environment-friendly. These goals serve as the framework for all
actions undertaken by the Company, both throughout the region as well as
worldwide. Key accomplishments to date include:
35
Energy
During 2008 and 2007, the retail operations for Wal-Mart Centroamérica achieved
22,401,976 kw/hour in savings, equivalent to the annual use of electricity for 7,468
Central American families.
Recycling Programs
In 2008, through its recycling program, Wal-Mart Centroamérica was able to
prevent the cutting down of over 225,000 trees as well as reducing the purchase of
barrels of oil by 16,000 for the region.
Emission Reduction
Also in 2008, Wal-Mart Centroamérica had an emission of 102,654 tons of CO2,
equivalent to 102 kg./m2, primarily from the use of electricity (63%) and coolants
used (29%). These indicators place the region among all Walmart operations as
the lowest emission rates/square meter.
Reduction in the Use of Plastic Bags
In its aim to help the planet, in late 2008 Wal-Mart Centroamérica committed to
reducing the volume of plastic bags used by 33% within a five-year period, which is
equivalent to 9 billion of plastic bags.
i) Market Information
Wal-Mart Centroamérica is a retail chain, which primarily operates self-service
units throughout five countries in the region.
The market where it competes is described as follows:
– Supermarkets with over 1,300 square meters of sales floor, with three or more
lines of cash registers, developed scanning technology, as well as minisupermarkets, which are independent self-service units with one or two lines
of cash registers, and a maximum of 370 square meters of sales floor. Among
them are retail chains such as La Torre (Guatemala), La Colonia (Honduras),
Súper Selectos (El Salvador), La Colonia (Nicaragua), Perimercados, Auto
Mercados, Súper Compro, Jumbo (Costa Rica), and Price Smart (clubs in
Costa Rica, Guatemala, El Salvador, Honduras, and Nicaragua), among
others.
– Department and specialty stores such as Carrion, Siman, Cemaco, EPA,
Monolit, ACE, Grupo M, Elektra, Curacao, Bullock’s and Pequeño Mundo.
The formal market in the five countries where Wal-Mart Centroamérica operates is
estimated at having 6,000 supermarkets and mini-supermarkets, 8,900 pharmacies,
1,000 general merchandise stores and large category killers, and 15,000 smallsized stores. According to estimates, the formal market represents 34% of the total
retail market.
36
The region has a strong informal market that represents 66% of the retail market.
This market includes traditional establishments such as municipal markets, flea
markets, grocery stores, second-hand clothing, and general merchandise, in
addition to a large number of street vendors. Both sectors have considerable
market share as they are able to supply communities that, due to mere size,
restrict the entry of other establishments.
The investment made by Wal-Mart Centroamérica in growth, systems, logistics and
distribution are meant to increase and modernize both installed capacity and
distribution, thus resulting in a more efficient operation, reduced costs and ever
improving service for its customers.
j) Description of Main Assets
At September 30, 2009, Company’s assets are primarily represented by its cash
flow ($80.1 million dollars), days-on-hand of merchandise for sale in stores ($240.4
million dollars) and fixed assets represented by property, stores, restaurants,
distribution centers, furniture and equipment ($505.9 million dollars, net, including
capital leasing). It should be noted that the cash represents 8.1 %.
The Company operates fully owned units as well as leased ones.
The fixed assets are comprised by the business formats, as described below:
Description by Business Format
Format
Description
Number of units
Despensa Familiar
Discount stores
202
Pali
Discount stores
175
Más x Menos
Supermarkets
25
La Unión
Supermarkets
7
Paiz
Supermarkets
35
La Despensa de Don Juan
Supermarkets
25
Híper Paiz
Supercenters
10
Híper Más
Supercenters
6
Maxi Bodega
Warehouse
32
ClubCo
Clubs
2
Total
519
k) Litigation, Administrative Actions or Arbitrations
As of the date of this Prospectus there is no legally litigation or affair that could
affect substantially the operation of the Company.
l) Shares representing Capital Stock
TFB Corporation, N.V., 6,000,000 shares, with par value of $1.00 dollar each.
37
4.2.3. Evolution and Recent Events
There are no relevant events to mention.
4.2.4. Capital Structure
Wal-Mart Stores, Inc. currently holds 51% of Wal-Mart Centroamérica shares. The
remaining 49% belongs to minority shareholders in the region.
After the Transaction, Wal-Mart de México will hold the 100% equity interest in
Wal-Mart Centroamérica.
4.2.5. Significant changes to Issuer Financial Statements since the last
Annual Report
As of the date of TFB Corporation N.V. audited report at December 31, 2008, to
the date of this Prospectus, there have been no significant changes in accounting
policies, critical accounting estimates and provisions. As a consequence, interring
information at September 30, 2009 and for the 9 months that ended, is consistent
with the annual information presented in the audited report.
38
5. RISK FACTORS
The Company has identified the following risk factors which are related to Company’s
operations and may have an impact on performance and profitability, thus influencing
the price of the representative capital stock of Wal-Mart de México. Also, it should be
noted that the operation or the issuing Company may be affected by other risks of which
the Company is not aware, or not deemed significant at this moment.
5.1. Risk factors related to Wal-Mart de México
Wal-Mart de México is exposed to events that may have a negative impact on the
purchasing capacity and/or shopping habits of its consumers. These events may be of
an economic, political, or social nature. The most important are:
•
Employment and salaries. A positive or negative variance in employment levels
and/or salaries in real terms may impact per capita income, thus affecting
Company’s sales performance.
•
Interest rates, exchange rates, and inflation figures. Historically, Wal-Mart de
México has generated cash surplus, which has enabled the Company to increase
financial income. An interest rate decrease may result in lower income and affect
profit growth. The Company, however, estimates that interest rate decreases
have a positive effect in the medium and long-terms as they contribute towards
improving purchasing power. On the other hand, exchange rate fluctuations exert
pressure on expectations regarding inflation and purchasing power; hence, they
may affect Company’s sales negatively. It is important to mention that the
Company does not have interest-bearing debt, Mexican or foreign currency, with
the exception of real estate and equipment leasing capitalization, pursuant to
Mexican Financial Reporting Standards.
In compliance with corporate governance regulations, the Company does not
trade with financial instruments (derivatives).
•
Competition. In the last few years the retail sector has become increasingly
competitive. This has forced retailers to search for differentiating factors.
Wal-Mart de México believes that volume is not the only differentiator capable of
producing competitive advantages, but rather a defined strategy with a long-term
vision, which is clearly customer-oriented, together with a significant value
proposition.
All of the above, plus investments in technology and distribution centers, allows
the Company to offer our customers low-cost and efficient products.
39
5.2. Risk factors associated with the Transaction
5.2.1. Creditor Opposition
Pursuant to that stipulated under the LGSM, creditors for merging corporations
have the right to legally oppose said transaction, through summary action. The
consequences of said opposition may cause the suspension of the transaction until
such time when a ruling is handed down that declares the opposition groundless,
thus making said ruling final and conclusive and immediately available for
execution. The parties to the transaction are unable to guarantee that no supplier
will oppose the merger transaction within the legally applicable term.
5.2.2. Transaction Funding
There is no risk whatsoever regarding transaction funding as it will be conducted
through the issuing of stock and with cash owned by the Company itself.
5.3. Risk Factors Related to Wal-Mart Centroamérica
5.3.1. Economic, Social and Political Conditions in Central America
Wal-Mart Centroamérica is exposed to events that could affect the purchasing
power and/or shopping habits of its consumers. Said events may be economic,
political or social in nature. Many Latin American countries have faced economic,
political and social crisis, natural disasters and major weather conditions in the past
and these same events could reoccur in the future. It could be affected by several
factors, including, among others, the following:
– Significant government interference in local economies;
– Economic slowdowns;
– High inflation levels;
– Wage and price controls;
– Changes in economic or tax policies enforced by the government;
– Natural disasters and severe climate conditions;
– Imposed trade barriers;
– Unexpected regulatory changes; and
– Overall political, social and economic instability.
Adverse events and conditions in Central America may inhibit demand and create
uncertainly in the operations, which in turn could have material impacts on
Wal-Mart de México.
40
5.3.2. Inflation
Central America has historically experienced high inflation levels. Elevated inflation
rates could undermine the financial atmosphere for the Company and its results.
This would produce a direct impact on customer purchasing power, and on the
demand for products and services.
41
6. SELECTED FINANCIAL INFORMATION
BALANCE SHEET
As of December 31, 2008
(Million of mexican pesos)
PRE OPERATION
$
POST OPERATION
(PROFORMA)
$
Assets
Current assets:
Cash and cash equivalents
11,350
11,838
4,488
5,027
22,808
26,599
531
607
Total current assets
39,177
44,071
Property and equipment, net
79,287
87,034
Other assets
-
32,121
Total assets
118,464
163,226
27,005
31,314
Other accounts payable
8,072
9,890
Total current liabilities
35,077
41,204
-
322
Long-term other liabilities
3,526
11,318
Deferred income tax
5,516
5,576
69
662
44,188
59,082
Capital stock
23,591
52,060
Legal reserve
4,421
4,421
47,535
47,535
2,275
2,275
(3,546)
(3,546)
-
1,399
74,276
104,144
118,464
163,226
Accounts receivable, net
Inventories, net
Prepaid expenses
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable to suppliers
Long-term debt
Labor obligations
Total liabilities
Retained earnings
Premium on sale of shares
Employee stock option plan fund
Cumulative transalation adjustment
Total shareholders’ equity
Total liabilities and shareholders' equity
42
STATEMENT OF INCOME
Year ended on December 31, 2008
PRE OPERATION
POST OPERATION
(PROFORMA)
$
$
244,029
281,407
888
894
Total revenues
244,917
282,301
Cost of sales
191,633
220,246
Gross profit
53,284
62,055
General expenses
33,533
39,845
Operative income
19,751
22,210
369
630
(475)
(342)
19,857
21,922
-
39
Income tax
5,184
5,839
Net income
14,673
16,044
EBITDA
23,887
26,973
Net sales
Other income
Other expenses, net
Comprehensive financing result
Income before income tax and minority interest
Minority interest
43
BALANCE SHEET
As of September 30, 2009
Non-audit figures
PRE OPERATION
$
POST OPERATION
(PROFORMA)
$
Assets
Current assets:
13,511
13,169
3,187
3,706
20,749
24,185
495
581
37,942
41,641
Property and equipment, net
82,441
89,877
Other assets
-
31,325
Total assets
120,383
162,843
24,038
27,418
8,866
10,295
32,904
37,713
-
286
Long-term other liabilities
3,898
11,575
Deferred income tax
5,252
5,247
94
670
42,148
55,491
Capital stock
23,476
51,945
Legal reserve
4,718
4,718
51,761
51,761
2,245
2,245
(3,965)
(3,965)
-
648
78,235
107,352
120,383
162,843
Accounts receivable, net
Inventories, net
Prepaid expenses
Long-term debt
Labor obligations
Total liabilities
Retained earnings
44
STATEMENT OF INCOME
Nine-month period ended on September 30, 2009
Non-audit figures
PRE OPERATION
$
Net sales
POST OPERATION
(PROFORMA)
$
189,393
222,116
753
758
Total revenues
190,146
222,874
Cost of sales
149,259
174,873
Gross profit
40,887
48,001
General expenses
25,938
31,528
Operative income
14,949
16,473
23
185
(449)
(339)
15,375
16,627
-
13
Income tax
4,305
4,700
Net income
11,070
11,914
EBITDA
18,368
20,495
Other income
Other expenses, net
Minority interest
6.1. Results
Comparison analysis of the base and pro forma Financial Statements at December 31,
2008 and September 30, 2009.
Total Revenues
Total revenues would have increased 15.3% and 17.2% as a result of the incorporation
of $37.4 billion pesos and $32.7 billion pesos generated by Wal-Mart Centroamérica
operations for the year ending on December 31, 2008 and corresponding to the first nine
months of 2009.
45
Operating Income
By incorporating Wal-Mart Centroamérica operating income, the Company’s income
would have increased by $22.2 billion pesos and $16.5 billion pesos, for the period
ending on December 31, 2008 and the first nine months of 2009. That is, 12.4% and
10.2% over Wal-Mart de México without the acquisition. Furthermore, the percentage of
total revenues on operating income of the Company would have been of 7.9% and 7.4%,
20 basis points and 47 basis points below that reported in 2008 and 2009, respectively.
The drop is mainly due to greater amount of expenses as a percentage of Wal-Mart
Centroamérica sales.
Comprehensive Financing Result
In 2008 and 2009, the reduction results from the incorporation of Wal-Mart
Centroamérica financial expenses totaling $133 and $110, respectively, mainly due to
interests from bank loans and difference between present value and future value of the
contingent payment.
Income before Income Tax and Minority Interest
As a result of incorporating Wal-Mart Centroamérica results, there is an increase in
earnings before taxes and minority interest for $2.1 billion pesos and $1.3 billion pesos,
respectively, in the proforma profit and loss statement corresponding to December 2008
and September 2009, and showing a 10.4% and 8.1% growth, respectively.
Income Tax
The increase in the income tax by 0.5 percentage points and 0.3 percentage points at
December 31, 2008 and September 30, 2009, respectively, is originated by a higher tax
rate in Wal-Mart Centroamérica.
Net Income
By incorporating Wal-Mart Centroamérica results, net income in the proforma
statements at December 31, 2008 would have been $16.0 billion pesos, increasing 9.3%
vs. Wal-Mart de México scenario without the acquisition. Net profit would have recorded
a reduction of 0.3 percentage points, to close at 5.7% of total revenues.
At September 30, 2009, net income would have totaled $11.9 billion pesos, 7.6%
greater than the base years. As a percentage of total revenues, it would have been
placed at 5.3%, 0.5 percentage points under that recorded by the Company in that
period.
These reductions are explained by the incorporation of a higher level expense structure
belonging to Wal-Mart Centroamérica.
46
6.2. Financial Situation, Liquidity and Capital Resources
Comparison analysis of the base General Balance and proforma at December 31, 2008
and September 30, 2009.
Cash and Cash Equivalents
Includes the cash payment of this Transaction.
Other Assets
The increase in this line item mainly corresponds to the incorporation of goodwill and
intangible assets, generated by the Transaction.
Long-Term Other Liabilities
The increase by 221% and 197% as of December 31, 2008 and September 30, 2009,
respectively, is originated from the recording of contingent consideration, after
achievement of the results in Centroamérica.
Labor Obligations
The increase in this line item corresponds to labor liabilities by Wal-Mart Centroamérica.
Capital Stock
The variation is explained by the issuance of Wal-Mart de México common stock to pay
the consideration generated by the Transaction.
Cumulative Translation Adjustment
This adjustment results from recognizing goodwill valued in foreign currency and whose
value in pesos varies each period.
47
7. ANALYSIS OF RESULTS AND FINANCIAL SITUATION PROFORMA
The following table, exemplifying in comparison columns amounts with the highest
significance for the Transaction, for a better analysis and interpretation of proforma
relevant financial information at September 30, 2009.
Selected Financial Information
Nine-month period ended on September 30, 2009
Non-audit figures
BASE FIGURES
$
PROFORMA ADJUSTMENT
% Sales
$
% Sales
$
GROWTH
% Sales
Net Sales
189,393
Total Revenues
190,146
100.0
32,728
100.0
222,874
100.0
17
Gross Profit
40,887
21.5
7,114
21.7
48,001
21.5
17
Operative income
14,949
7.9
1,524
4.7
16,473
7.4
10
Income Before Income Tax
15,375
8.1
1,252
3.8
16,627
7.5
8
Net Income
11,070
5.8
844
2.6
11,914
5.3
8
EBITDA
18,368
9.7
2,127
6.5
20,495
9.2
12
Assets
120,383
42,460
162,843
35
Liabilities
42,148
13,343
55,491
32
Shareholders´Equity
78,235
29,117
107,352
37
Current Assets/Current Liabilities
1.15
0.77
1.10
Total Liabilities / Shareholders´Equity
0.54
0.46
0.52
1.315
-
1.322
Earnings Per Share (9-month basis)
32,723
PROFORMA FIGURES
222,116
48
17
8. PEOPLE IN CHARGE
The undersigned hereby declare under affirmation, within the realm of our respective
duties, that we so prepared the information relative to the Issuer contained herein, which
to the best of our knowledge and belief reasonably reflects Issuer’s situation. Likewise
we declare that we know of no relevant information that has been willfully omitted or
misstated herein, nor that the Prospectus presented herein contains any information that
could mislead the investor public.
Eduardo Solórzano Morales
Executive President and CEO
José Luis Rodríguezmacedo Rivera
Rafael Matute Labrador
Senior Vice President, Legal
and Regulatory Compliance
Executive Vice President
and CFO
THIS PROSPECTUS INCLUDES REPRESENTATIONS, STATEMENTS AND PROJECTIONS OF
FUTURE PERFORMANCE THAT DEPEND ON FACTS AND CIRCUMSTANCES NOT CONTROLLED
BY WAL-MART DE MÉXICO. THEREFORE, WAL-MART DE MÉXICO CANNOT ENSURE THAT SAID
REPRESENTATIONS, STATEMENTS AND PROJECTIONS WILL OCCUR, NOR THE EFFECT THEY
MAY HAVE ON THE OPERATION OR FINANCIAL SITUATION.
49
9. ATTACHMENTS
9.1. Report of Independent Auditors
To the Shareholders of
We have audited the accompanying consolidated balance sheets of Wal-Mart de
México, S.A.B. de C.V. and Subsidiaries as of December 31, 2008 and 2007, and the
related consolidated statements of income and changes in shareholders’ equity for
the years then ended and cash flows for the year ended December 31, 2008 and
statement of changes in financial position for the year ended December 31, 2007.
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in México. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement and are prepared in conformity with Mexican Financial
Reporting Standards. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the financial reportin g standards used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wal-Mart de
México, S.A.B. de C.V. and Subsidiaries at December 31, 2008 and 2007, and the
consolidated results of their operations and changes in their shareholders’ equity for
the years then ended and consolidated cash flows for the year ended December 31,
2008 and consolidated changes in financial position for the year ended December
31, 2007, in conformity with Mexican Financial Reporting Standards.
As explained in Note 18, the financial stat ements shown in the columns identified as
proforma, include the effect of the transaction described in the following paragraph
as though it had occurred on December 31, 2007.
On December 5, 2009, Wal-Mart de México, S.A.B. de C.V. entered into an
agreement that determined the purchase of the shares of TFB Corporation N.V. and
subsidiaries through a related party. Through this transaction, Wal-Mart , S.A.B. de
C.V. shall acquire the assets and assume the liabilities of TFB Corporation N.V. and
subsidiaries and as of the date on which the acquisition is effective, it shall carry out
business activities in the Central American region.
50
In conformity with Mexican Financial Reporting Standard B-7, Business Acquisitions,
the total price paid must be assigned to the different tangible and intangible assets
and assumed liabilities, based on their fair value, which must be determined during
the vesting period; that is, during the year immediately subsequent to the
acquisition. For the purposes of the proforma financial information, the book values
of the acquiree had been used. Such values may be subsequently modified once the
fair values have been determined.
In our opinion, the effect of the subsequent event described above has been
quantified and included correctly in the proforma consolidated financial
statements.
Our audit opinion and the accompanying financial statements and footnotes have
been translated room original Spanish version into English for convenience purposes
only.
Mancera, S.C.
A Member Practice of
Ernst & Young Global
Enrique García
Mexico City, January 30, 2009, except for Note 19 regarding the final approval of
the financial statements, dated February 11, 2009, and Notes 17 and 18
regarding the subsequent event, dated December 5, 2009.
51
WAL-MART DE MEXICO, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Notes 1, 2, 3, 17 and 18)
Thousands of Mexican pesos for 2008 and thousands of Mexican pesos with purchasing power at December 31, 2007 for 2007
Base figures
2008
Assets
Current assets:
Accounts receivable, net (note 4)
Inventories, net
Prepaid expenses
Ps.
Property and equipment, net (note 5)
Other assets
Total assets
Accounts payable to suppliers (note 7)
Other accounts payable (Notes 7, 8, 10 & 12)
Ps.
79,286,447
-
8,983,817
4,700,237
20,883,131
655,189
35,222,374
Ps.
71,521,998
-
488,671
539,683
3,790,788
74,676
4,893,818
Ps.
7,746,593
32,121,320
294,227
400,397
2,746,779
48,109
3,489,512
2008
Ps.
5,787,588
26,149,264
Proforma adjustments
2007
11,838,469
5,027,479
26,598,731
606,609
44,071,288
Ps.
87,033,040
32,121,320
9,278,044
5,100,634
23,629,910
703,298
38,711,886
77,309,586
26,149,264
Ps.
118,463,917
Ps.
106,744,372
Ps.
44,761,731
Ps.
35,426,364
Ps.
163,225,648
Ps.
142,170,736
Ps.
27,005,122
8,071,532
Ps.
25,380,996
6,854,382
Ps.
4,308,826
1,818,191
Ps.
3,659,416
1,393,791
Ps.
31,313,948
9,889,723
Ps.
29,040,412
8,248,173
Long-term debt
Long-term other liabilities (note 10)
Deferred income tax (note 11)
Labor obligations (note 12)
Total liabilities
Shareholders’ equity (note 13):
Capital stock
Legal reserve
Retained earnings
Accumulated result of restatement
11,349,798
4,487,796
22,807,943
531,933
39,177,470
2008
2007
2007
35,076,654
32,235,378
6,127,017
5,053,207
41,203,671
37,288,585
3,526,022
5,516,357
68,690
2,822,618
5,446,048
56,323
322,421
7,791,717
59,876
593,584
53,052
7,534,643
129,086
410,662
322,421
11,317,739
5,576,233
662,274
53,052
10,357,261
5,575,134
466,985
44,187,723
40,560,367
14,894,615
13,180,650
59,082,338
53,741,017
23,590,996
4,421,048
47,535,428
2,274,854
( 3,546,132)
22,105,239
4,068,913
53,313,827
( 12,515,273)
2,302,669
( 3,091,370)
28,468,746
1,398,370
-
28,468,746
(6,223,032)
-
74,276,194
Ps.
118,463,917
66,184,005
Ps.
106,744,372
29,867,116
Ps.
44,761,731
The accompanyning notes are integral part of these financial statements.
52
52,059,742
4,421,048
47,535,428
1,398,370
2,274,854
( 3,546,132)
22,245,714
Ps.
35,426,364
50,573,985
4,068,913
53,313,827
( 12,515,273)
( 6,223,032)
2,302,669
( 3,091,370)
104,143,310
Ps.
163,225,648
88,429,719
Ps.
142,170,736
CONSOLIDATED STATEMENTS OF INCOME
(Notes 1, 2, 3, 17 and 18)
Base figures
2008
Net sales
Other income
2007
244,029,030
887,980
Ps.
Total revenues
Ps.
2008
224,172,613
803,768
Ps.
2007
37,377,839
6,355
Ps.
31,484,500
4,726
2008
Ps.
2007
281,406,869
894,335
Ps.
255,657,113
808,494
(
244,917,010
191,632,968)
(
224,976,381
176,267,005)
(
37,384,194
28,612,676)
(
31,489,226
24,172,244)
(
282,301,204
220,245,644)
(
256,465,607
200,439,249)
General expenses
Operating income
(
53,284,042
33,532,968)
(
48,709,376
30,038,499)
(
8,771,518
6,312,427)
(
7,316,982
5,480,035)
(
62,055,560
39,845,395)
(
56,026,358
35,518,534)
Other expenses, net
(
Cost of sales
Gross profit
19,751,074
Comprehensive financing result (note 14)
18,670,877
368,871)
474,447
(
19,856,650
Minority interest
Income tax (note 11)
(
2,459,091
258,891)
1,495,271
(
(
19,907,257
5,183,822)
(
Ps.
14,672,828
Ps.
14,229,006
Earnings per share (in Mexican pesos)
Ps.
1.732
Ps.
1.666
260,813)
133,565)
(
(
2,064,713
5,678,251)
Net income
1,836,947
(
(
Ps.
53
129,720)
147,731)
(
1,559,496
39,103)
654,364)
1,371,246
22,210,165
(
(
Ps.
629,684)
340,882
(
21,921,363
51,144)
493,555)
1,014,797
20,507,824
(
(
388,611)
1,347,540
21,466,753
39,103)
5,838,186)
(
(
51,144)
6,171,806)
Ps.
16,044,074
Ps.
15,243,803
Ps.
1.770
Ps.
1.669
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Notes 1, 2, 3, 17 and 18)
Legal reserve
Capital stock
Balance at December 31, 2006
Ps.
20,367,261
Ps.
3,622,478
Retained earnings
Ps.
49,775,672
Cumulative
translation
adjustment
Accumulated result
of restatement
Ps.
(11,770,373)
Ps.
Premium on sale of
shares
-
Ps.
Movements in employee stock option plan
fund
(
Increase in legal reserve
446,435
Repurchase of shares
(
Dividends capitalized and paid
Proforma adjustment
(
( 5,844,245)
29,271)
(2,594,396)
(
Ps.
496,974)
61,732,582
(
2,104,402
( 4,400,171)
-
(
2,099)
( 2,297,868)
( 6,223,032)
50,573,985
14,229,006
(742,801)
53,313,827
(12,515,273)
(12,535,877)
12,535,877
4,068,913
526,245)
( 6,210,669)
28,468,746
Ps.
Total
446,435)
366,424)
Comprehensive income
22,245,714
13,486,205
( 6,223,032)
2,302,669
(3,091,370)
88,429,719
-
Reclassification of the accumulated result of
restatement to retained earnings
-
Movements in employee stock option plan
fund
(
Increase in legal reserve
352,135
(
Dividends capitalized and paid
(
27,815)
(
454,762)
(
352,135)
208,151)
( 2,661,168)
1,693,908
( 4,902,047)
-
( 3,208,139)
7,621,402
Comprehensive income
14,672,828
Ps.
52,059,742
Ps.
4,421,048
Ps.
47,535,428
482,577)
( 2,869,319)
Proforma adjustment
2,331,940
Employee stock
option plan fund
7,621,402
(20,604)
Ps.
-
54
14,652,224
Ps.
1,398,370
Ps.
2,274,854
Ps.
(3,546,132)
Ps.
104,143,310
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Notes 1, 2, 3, 17 and 18)
Base figures
2008
Operating activities
Ps.
2008
2007
2007
19,856,650
Ps.
19,907,257
2,064,713
Ps.
2008
2007
1,559,496
Ps.
21,921,363
Ps.
21,466,753
Ps.
Items related to investing activities:
Depreciation
4,136,073
3,727,361
223,631
271,428
596,055
494,803
4,732,128
4,222,164
223,631
271,428
9,784)
31,534
91,453
35,635
Loss from retirement of property and equipment
Stock option compensation expense
Items related to financing activities:
Interest payable under capital leases
Gross cash flows
91,453
-
-
(9,784)
31,534
-
-
35,635
169,179
148,254
24,476,986
24,089,935
-
(
-
2,650,984
2,085,833
169,179
148,254
27,127,970
26,175,768
(1,058,641)
Variances in:
962,872
(1,017,877)
1,363
(
40,764)
964,235
(1,924,812)
(2,923,488)
(
130,646)
(
699,551)
(2,055,458)
123,256
(102,603)
(
221,787)
(
2,621)
1,624,126
(540,193)
(
368,773)
729,807
1,255,353
2,036,770
402,469
144,027
198,096
2,180,797
600,565
(6,713,351)
(5,087,568)
46,933
58,262
(6,666,418)
(5,029,306)
19,420
50,968
16,195
-
35,615
50,968
20,605,267
14,871,643
2,138,296
2,329,062
22,743,563
17,200,705
(11,315,980)
(11,097,440)
(1,300,117)
(1,466,386)
(12,616,097)
(12,563,826)
4,423
3,921
Accounts receivable
Inventories
Prepaid expenses
Income tax
Labor obligations
(
98,531)
(3,623,039)
(
105,224)
189,614
Net cash flows provided by operating activities
Investing activities
Purchase of property and equipment
Proceeds from the sale of property and
equipment
Employee stock option plan fund, net
Net cash flows used in investing activities
105,045
94,100
(574,030)
(561,880)
(11,784,965)
(11,565,220)
(1,295,694)
(1,462,465)
(13,080,659)
(13,027,685)
8,820,302
3,306,423
842,602
866,597
9,662,904
4,173,020
-
-
109,468
(
574,030)
98,021
(
561,880)
Cash surplus to be applied to financing activities
55
Financing activities
Dividends paid
(3,208,139)
(2,297,868)
(
337,678)
(
273,998)
(3,545,817)
87,522
(
98,338)
87,522
(98,338)
(1,417,795)
(1,417,796)
(1,417,795)
(2,869,319)
(6,210,669)
Loans and financial activities
-
Pro form adjustment
-
(2,869,319)
(1,417,796)
(6,210,669)
-
-
(2,571,866)
Payments for property and equipment under
(
capital leases
Net cash flow used in financing activities
376,863)
(
355,553)
(
97,764)
(6,454,321)
(8,864,090)
2,365,981
(5,557,667)
(
923,114)
(1,006,922)
(
300,237)
(
20,382)
(474,627)
(375,935)
(1,810,513)
(8,220,037)
(10,674,603)
(
943,916)
1,442,867
(6,501,583)
(
460,892)
(300,237)
(1,467,814)
(1,765,716)
Net increase (decrease) in cash and cash
equivalents
Adjustment to cash flows for changes in the rate
-
of inflation and exchange rate
Cash and cash equivalents at beginning
of year
Cash and cash equivalents at end of year
8,983,817
Ps.
11,349,798
15,548,406
8,983,817
Ps.
1,712,022
Ps.
488,671
56
1,699,035
Ps.
294,227
17,247,441
10,695,839
Ps.
11,838,469
Ps.
9,278,044
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 2008 AND 2007
Thousands of Mexican pesos for 2008 and thousands of Mexican pesos with purchasing
power at December 31, 2007 for 2007, unless otherwise indicated
NOTE 1 - DESCRIPTION OF THE BUSINESS:
Wal-Mart de Mexico, S.A.B. de C.V. (WALMEX or “the Company”) is a Company
incorporated under the laws of Mexico and listed on the Mexican Stock Exchange.
The
principal
shareholder
of
WALMEX
is
Wal-Mart
Stores,
Inc.,
a
U.S.
corporation, through Intersalt, S. de R.L. de C.V., a Mexican Company.
WALMEX has a 99.9% equity interest in the following groups of companies:
Group
Line of Business
Nueva Wal-Mart
Operation of 442 (313 in 2007) Bodega Aurrerá
discount stores, 91 (83 in 2007) Sam’s Club
membership self-service wholesale stores, 153 (136 in
2007) Walmart hypermarkets and 67 (64 in 2007)
Superama supermarkets.
Suburbia
Operation of 84 (76 in 2007) Suburbia stores with
apparel and accessories for the entire family.
Vips
Operation of 267 (256 in 2007) Vips restaurants
serving international cuisine, 93 (92 in 2007) El
Portón restaurants serving Mexican food, and 7
restaurants specializing in Italian food during both
years.
Comercializadora
Mexico Americana
Import of goods for sale.
Real estate
Real estate developments and management of real
estate companies.
Services companies
Rendering
of
professional
services
to
Group
companies, not-for-profit services to the community at
large and shareholding.
Banco
Wal-Mart
Mexico Adelante
de
Rendering banking services through 38 (16 in 2007)
customer and member services modules.
57
On October 1st. 2007, the Mexican National Banking and Securities Commission
(CNBV) authorized WALMEX to operate Banco Wal-Mart de Mexico Adelante,
S.A., Institución de Banca Múltiple (Bank), which opened its doors to the general
public on November 7, 2007.
NOTE 2 - NEW FINANCIAL REPORTING STANDARDS:
In 2007, the Mexican Financial Reporting Standards Research and Development
Board (Consejo Mexicano para la Investigación y Desarrollo de Normas de
Información Financiera, A.C. or CINIF) issued five new Mexican Financial
Reporting Standards (Mexican FRS) that came into effect as of January 1st. 2008.
Mexican FRS B-10, Effects of Inflation, establishes the conditions for recognizing
the effects of inflation on financial information based on the cumulative rate of
inflation over the last three years.
Cumulative inflation over 2006, 2007 and 2008 is less than 26% and therefore, in
conformity with Mexican FRS B-10, Mexico’s current economic environment is
considered non-inflationary and so the Company’s financial information for 2008
was prepared without recognizing the effects of inflation.
The Interpretation of Mexican FRS 9 establishes that comparative financial
statements for years prior to 2008 must be expressed in Mexican pesos with
purchasing power at December 31, 2007, which was the last date on which the
effects of inflation were recognized.
For a more accurate evaluation of the Company’s business performance, the
consolidated statements of income for 2008 and 2007 are presented in the next
page in nominal Mexican pesos for both years.
58
Year ended December 31
%
2008
2007
Growth
Ps. 244,029,030
Ps. 219,713,915
11
887,980
786,826
13
244,917,010
220,500,741
11
53,284,042
47,750,910
12
General expenses
( 33,532,968)
( 29,427,560)
14
Operating income
19,751,074
18,323,350
8
Net sales
Other income
Total revenues
Gross profit
Other expenses, net
(
368,871)
Income tax
Net income
255,335)
4 7 4 ,447
1,467,945
19,856,650
19,535,960
(
Ps.
(
5,183,822)
14,672,828
(
Ps.
5,574,287)
13,961,673
44
(68)
2
(7)
5
Mexican FRS B-2, Statement of Cash Flows, establishes that the statement of
changes in financial position will be substituted by a statement of cash flows as
part of the basic financial statements. For comparative purposes, the statement of
changes in financial position for the year ended at December 31, 2007 was
changed to a statement of cash flows.
As required by Mexican FRS B-2, the Company’s statement of changes in financial
position is presented in the next page in thousands of Mexican pesos with
purchasing power at December 31, 2007.
59
Year ended
December 31, 2007
Net income
Ps. 14,229,006
Items not requiring the use of resources:
3,332,496
17,561,502
Resources used in operating activities
( 4,110,769)
Resources provided by operating activities
13,450,733
Resources used in financing activities
( 7,995,327)
Resources used in investing activities
(12,019,995)
Net decrease in cash and cash equivalents
( 6,564,589)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
15,548,406
Ps.
8,983,817
The adoption of Mexican FRS B-15, Foreign Currency Translation, Mexican FRS
D-3, Employee Benefits, and Mexican FRS D-4, Taxes on Profits, did not have a
material effect on the Company's financial information.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies and practices observed by the Company in the
preparation of the consolidated financial statements, in conformity with Mexican
FRS, are described below. Mexican FRS are understood to encompass the new
standards issued by the CINIF and the bulletins issued by the Accounting
Principles Board of the Mexican Institute of Public Accountants that have not been
modified, replaced or abolished by Mexican FRS and that were transferred to the
CINIF.
As such, any of the documents comprising Mexican FRS will hereinafter
be referred to by their original name or rather, either as “Mexican FRS” or as
“accounting Bulletin”, as the case may be.
60
a.
The accompanying consolidated financial statements include the statements
of WALMEX and those of its subsidiaries, which are grouped as described in
Note 1. All related party balances and transactions were eliminated in the
consolidation.
b.
As required by Mexican FRS B-10, Effects of Inflation, the Company’s 2008
financial information is shown in thousands of nominal Mexican pesos
because the cumulative inflation rate over the last three years was 15.01%
and so Mexico’s current economic environment is considered non-inflationary.
The accumulated result of restatement at December 31, 2007 was reclassified
to the retained earnings caption in the balance sheet.
c.
In order to provide a better understanding of the Company’s business
performance, the consolidated statements of income were prepared on a
functional basis, which allows for the disclosure of the cost of sales
separately from other costs and expenses and of operating income as well, as
established under Mexican FRS B-3, Statements of Income.
d.
The Bank’s financial statements, which are included in the Company’s
consolidated financial statements, were prepared based on the accounting
criteria established by the CNBV, as issued as part of the General Provisions
for Credit Institutions, and on the Mexican FRS issued by the CINIF. At date,
there are no differences between these two sets of standards.
e.
The preparation of financial statements in conformity with Mexican FRS
requires the use of estimates in some items. Actual results might differ from
these estimates.
f.
Cash and cash equivalents consist basically of bank deposits and highly liquid
investments. Such investments are stated at acquisition cost plus accrued
interest, not in excess of market value.
The Company has no transactions with derivative financial instruments.
61
g.
The balance of the Bank’s receivables portfolio is represented by amounts
actually given to borrowers, plus uncollected earned interest. The preventive
allowance for credit risks is presented net of the portfolio balances.
h.
WALMEX recognizes bad debt reserves at the time the legal collection
process begins in conformity with its internal procedures.
i.
Inventories are stated at average cost, determined largely using the retail
method. Due to the rapid turnover of inventories, the cost so determined is
considered to be similar to replacement cost at the balance sheet date, not in
excess of market value.
The buying allowances are charged to operations based on the turnover of
inventories that gave rise to them.
j.
Property and equipment are recorded initially at acquisition cost.
Fixed asset depreciation is computed using the straight-line method, at annual
rates ranging from 3% to 33%.
k.
The Company classifies its operating and capital leases for the rental of
property following the guidelines established in accounting Bulletin D-5,
Leases.
l.
In
conformity
with
accounting
Bulletin
C-15,
the
Company
determines
impairment in the value of its long-lived assets using the present value
method, considering each of the Company's stores or restaurants as a
minimum cash generating unit to determine the value in use of its long-lived
assets.
m. Foreign currency denominated monetary assets and liabilities are translated
to Mexican pesos at the prevailing exchange rate as of the balance sheet
date. Exchange differences determined are charged or credited to income, as
required by Mexican FRS B-15, Foreign Currency Translation.
62
n.
Liabilities for traditional deposits of the Bank are comprised of demand
deposits in debit card accounts. These liabilities are recorded at either
deposit or placement cost, plus accrued interest.
o.
Liability
provisions
are
recognized
whenever
the
Company
has
current
obligations derived from past events that can be reasonably estimated and
that will most likely give rise to a future cash disbursement for their
settlement.
p.
Deferred income tax is determined using the asset and liability method.
Under this method, deferred income tax is recognized on all temporary
differences
in
balance
sheet
accounts
for
financial
and
tax
reporting
purposes, using the enacted income tax rate that will be in effect at the time
the temporary differences giving rise to deferred tax assets and liabilities are
expected to be recovered or settled, in conformity with Mexican FRS D-4,
Taxes on Profits.
Deferred tax assets are evaluated periodically in order to determine their
recoverability.
q.
Seniority premiums accruing to employees under the Mexican Labor Law and
termination payments made at the end of employment, except when resulting
from corporate restructuring, are recognized as a cost of the years in which
services
are
rendered,
based
on
actuarial
computations
made
by
an
independent expert, using the projected unit-credit method, in conformity with
Mexican FRS D-3, Employee Benefits.
Actuarial gains and losses are amortized based on the expected remaining
working life of the Company’s employees.
All other payments accruing to employees or their beneficiaries in the event of
separation or death, in terms of the Mexican Labor Law, are expensed as
incurred.
63
In conformity with Mexican FRS D-3, employee profit sharing is recognized in
the Other expenses, net caption and represents a liability due and payable in
less than one year.
r.
In conformity with the Mexican Corporations Act, the Company is required to
appropriate at least 5% of the net income of each year to increase the legal
reserve. This practice must be continued until the legal reserve reaches 20%
of capital stock.
s.
The employee stock option plan fund is comprised of WALMEX shares
presented at acquisition cost. The plan is designed to grant stock options to
executives of the companies in the Group, as approved by the CNBV.
t.
The premium on the sale of shares represents the difference between the cost
of the shares, restated through December 31, 2007 based on the Mexican
National Consumer Price Index (NCPI), and the value at which such shares
were
assigned
to
executives
of
companies
in
the
Group,
net
of
the
corresponding income tax.
u.
Comprehensive income consists of the current year net income plus the
current year restatement.
v.
Sales revenues are recognized at the time the customer takes ownership of
the products, in conformity with International Accounting Standard No. 18,
issued by the International Accounting Standards Committee, applied on a
supplementary basis.
Sam’s Club membership revenues are deferred over the twelve-month term of
the membership, in conformity with the requirements of Staff Accounting
Bulletin No. 104, Revenue Recognition in Financial Statements, issued by the
U.S. Securities and Exchange Commission, applied on a supplementary basis.
Such revenues are presented in the other income caption in the statement of
income.
64
The Bank’s interest income is recognized in the Other Income caption in the
statement of income.
w.
The Company determined earnings per share by dividing the net income by
the average weighted number of shares outstanding.
x.
Segment financial information has been prepared using the management
approach established in accounting Bulletin B-5, which is based on the
information used by Company management to make business decisions and
monitor the Company’s performance.
65
NOTE 4 - ACCOUNTS RECEIVABLE, NET:
An analysis of accounts receivable is as follows:
December 31
2008
Recoverable taxes
Ps.
2,374,815
Trade receivables
Ps.
1,905,647
2,754,901
324,477
284,021
(
Total
Ps.
1,860,273
Other accounts receivable
Allowance for bad debts
2007
71,769)
4,487,796
66
(
Ps.
244,332)
4,700,237
NOTE 5 - PROPERTY AND EQUIPMENT, NET:
An analysis of property and equipment is as follows:
December 31
2008
2007
Investments subject to depreciation:
B u i ld ings
Ps.
Facilities and leasehold
improvements
2 7 ,99 9 ,26 5
Ps.
2 5 ,42 6 ,05 2
21,035,129
17,999,691
49,034,394
43,425,743
Accumulated depreciation
(13,424,189)
( 11,864,717)
Property, net
35,610,205
31,561,026
Fixtures and equipment
27,930,767
25,165,660
( 13,691,512)
( 12,197,804)
14,239,255
12,967,856
4,369,203
3,427,307
855,073
992,735
5,224,276
4,420,042
( 1,210,417)
( 1,128,301)
4,013,859
3,291,741
Less:
Less:
Fixtures and equipment, net
Capital lease:
Property
Fixtures and equipment
Less:
Capital lease, net
Investments subject to depreciation,
net
Ps.
53,863,319
67
Ps.
47,820,623
December 31
2008
2007
Ps. 22,750,274
Ps. 21,961,456
2,672,854
1,739,919
Investments not subject to
depreciation.
Ps. 25,423,128
Ps. 23,701,375
Total
Ps. 79,286,447
Ps. 71,521,998
Investments not subject to depreciation:
Land
Construction in progress
NOTE 6 - FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES:
An analysis of the balances in fore ign currency is as follows:
December 31
2008
2007
Thousands of U.S. dollars
Current assets
$
36,934
$
111,962
Current liabilities
$
176,211
$
208,733
The Company had the following U.S. dollar denominated transactions (excluding
property and equipment):
December 31
2008
2007
Thousands of U.S. dollars
Imported merchandise for sale
Technical
royalties
assistance,
services
$
1,043,656
$
1,148,411
$
125,582
$
117,264
and
68
The exchange rate at December 31, 2008 used to translate U.S. dollars
denominated balances was Ps. 13.6944 (Ps. 10.9088 at December 31, 2007)
pesos per U.S. dollar. At the date of these financial statements, the exchange rate
was Ps. 14.1783 pesos per U.S. dollar.
NOTE 7 - RELATED PARTY BALANCES AND TRANSACTIONS:
Accounts payable to suppliers and other accounts payable include the following
balances due to related parties:
December 31
2008
2007
Accounts payable to suppliers:
C.M.A. – U.S.A., L.L.C. (affiliated Company)
Ps.
715,474
Global George, L.T.D. (affiliated Company)
Ps.
784,902
5,290
-
Ps.
720,764
Ps.
784,902
Ps.
352,223
Ps.
312,458
Other accounts payable:
Wal-Mart Stores, Inc. (holding Company)
The Company carried out the following transactions with related parties under
similar-to-market conditions:
December 31
2008
2007
Imported merchandise for sale
Ps. 3,930,879
Ps. 4,812,824
Technical assistance, services and royalties
Ps. 1,350,920
Ps. 1,226,543
69
During the year ended December 31, 2008, the Company paid its primary officers
compensations
aggregating
Ps.
418,185
(Ps.
406,690
in
2007).
Such
compensation is primarily comprised of direct short-term benefits as defined in
Mexican FRS D-3.
N O T E 8 - O T H ER AC C O U N T S PA Y A B L E :
An ana lys is o f o ther acc oun ts pa yab le is as fo llows :
December 31
Accrued liabilities and others
2008
2007
Ps. 7,364,774
Ps. 5,362,633
74,728
67,675
632,030
1,424,074
Ps. 8,071,532
Ps. 6,854,382
Labor obligations
Taxes payable
Total
NOTE 9 – COMMITMENTS:
At Dece mb er 31 , 2 00 8 , the Co mp an y has e n ter ed in to co mmitmen ts fo r the
p urch ase of in ve n tor y, pr ope r ty an d eq uipme n t an d main te nanc e se r vic es for Ps .
4 ,709 ,435 ( Ps . 4 ,675 ,1 88 in 2 007 ).
NOTE 10 – LEASES:
T he C omp an y has e n te red in to op era tin g leas es with th ir d par ties for c ompu lso ry
ter ms r anging from 2 to 15 ye ars . Re n t pa id und er cap i ta l leas es ma y e i the r be
f i x ed or var ia bl e , base d on a perc en ta ge o f s a les .
The Company has entered into capital leases for the rental of real estate.
Such
leases are recorded at the lesser of either the present value of minimum rental
70
payments or the market value of the property under lease and are amortized over
the useful life of each property (up to 33 years).
The Company has also entered into capital leases for the rental of residual water
treatment plants used to meet environmental protection standards. The term of
payment ranges from 4.25 to 10 years.
Future rental payments are as follows:
Year
Operating
Capital
Lease
Lease
(Compulsory term)
(Minimum payments)
2009
Ps.
174,849
Ps.
222,720
2010
Ps.
150,554
Ps.
210,298
2011
Ps.
141,792
Ps.
216,801
2012
Ps.
134,959
Ps.
227,009
2013
Ps.
134,566
Ps.
206,893
2014 and thereafter
Ps.
480,840
Ps. 2,665,021
Total rent under operating leases charged to results of operations for the years
ended December 31, 2008 and 2007 was Ps. 1,801,929 and Ps. 1,593,026,
respectively.
NOTE 11 – INCOME TAX:
The Company and its subsidiaries, except for the Bank, have been authorized by
the Ministry of Finance and Public Credit to determine their tax results on a
consolidated basis.
An analysis of taxes charged to results of operations of the years ended
December 31, 2008 and 2007 is as follows:
71
December 31
Current year income tax
2008
2007
Ps. 5,365,353
Ps. 6,140,437
Deferred income tax
(
Subtotal
181,531)
(
5,183,822
Monetary position (gain) on initial effect
and non-monetary items loss of deferred
income tax, net
Total
498,394)
5,642,043
Ps. 5,183,822
36,208
Ps. 5,678,251
An analysis of the deferred tax liabilities (assets) derived from temporary
differences is as follows:
December 31
2008
2007
Ps. 5,889,508
Ps. 5,183,075
Inventories
636,300
1,286,101
Recoverable asset tax
-
(
323,898)
Property and equipment
Unamortized tax loss for the Bank
(
230,042)
(
64,733)
Other items, net
(
779,409)
(
634,497)
Total
Ps. 5,516,357
Ps. 5,446,048
The effective tax rate of WALMEX is lower than the 28% corporate income tax rate
established in the Income Tax Law, since the effects of inflation on monetary and
non-monetary items are no longer recognized in accounting as of January 1, 2008.
The lower effective tax rate is also due to the Company’s enjoying the tax benefit
for the correct and timely filing of income tax prepayments offered by the tax
authority under Section X, Article 16 of the Federal Revenues Act for 2007.
72
On October 1, 2007, the new Flat-Rate Business Tax (IETU) Law was published in
the Official Gazette, which came into force on January 1, 2008, and abrogated
the Asset Tax Law.
Based on its forecast, the Company will continue generating income tax in
subsequent years.
The Company’s 2008 income tax includes the partial taxation of the inventory held
at December 31, 2004, since the Company opted to consider such inventories as
taxable over a number of years, for purposes of deducting cost of sales. The last
year of taxation of the inventories will be 2012.
The Bank has tax losses from prior years which, in conformity with the current
Mexican Income Tax Law, may be carried forward against taxable income
generated in the next ten years. An analysis of the available tax loss carryforward
at December 31, 2008 is as follows:
Year of
expiration
Amount
2016
Ps.
23,291
2017
232,545
2018
565,743
Ps. 821,579
As a result of changes in Mexican Tax Law, the Company's recoverable asset tax
at December 31, 2008 may be recovered through 2017.
73
NOTE 12 – LABOR OBLIGATIONS:
The Company has set up a defined benefits trust fund to cover seniority premiums
accruing to employees. Workers make no contributions to this fund. The Company
also recognizes the liability for employee termination payments.
Both these
obligations are computed using the projected unit credit method.
The Company’s assets, liabilities and costs related to seniority premiums and
employee termination payments for reasons other than corporate restructuring are
as follows:
Employee termination
payments
Seniority premiums
2008
2007
2008
2007
Vested benefit
obligation
Ps.
155,538
Ps. 174,871
Ps.
59,211
Ps.
96,677
Defined benefit
obligation
Ps.
382,977
Ps. 347,421
Ps. 108,543
Ps.
99,378
( 367,145)
(319,792)
Plan assets
Unamortized items
-
-
11,438
(
3,009)
7,605
-
Net projected liability
Ps.
27,270
Ps.
24,620
Ps. 116,148
Ps.
99,378
Labor cost for current
service
Ps.
57,124
Ps.
46,375
Ps.
Ps.
7,040
Financial cost
Return on plan assets
(
Actuarial loss (gain)
Net period cost
Ps.
28,337
13,405
25,989)
( 12,510)
3,952
144
63,424
Ps.
47,414
74
8,679
8,338
3,842
(
Ps.
408)
16,609
41,689
Ps.
52,571
Benefits paid from the trust for seniority premiums for the year ended December
31, 2008 aggregated Ps. 25,040 (Ps. 18,365 in 2007), while contributions made to
the trust during the year aggregated Ps. 60,761 (Ps. 49,017 in 2007).
At December 31, 2008, the plan assets have been invested through the trust as
follows: 83% in the money market, 14% in the capital market and 3% in mutual
funds.
At December 31, 2008 the nominal discount rate used to calculate the present
value of labor obligations is 9.25% (4.75% real rate in 2007). The nominal salary
increase rate is 5.0% (1.0% real rate in 2007) and the nominal return rate for the
plan assets was 9.25% (4.75% real rate in 2007).
At December 31, 2008, the current other accounts payable caption includes the
balance of labor obligations for seniority premiums of Ps. 14,755 (Ps. 13,604 in
2007) and employee termination payment for reasons other than corporate
restructuring of Ps. 59,973 (Ps. 54,071 in 2007).
75
The following is an analysis at December 31 of the Company’s assets and
liabilities that make up its labor obligations related to seniority premiums and
employee termination payments for reasons other than corporate restructuring:
Employee termination
payments
Seniority premiums
Year
Defined
benefit
obligation
2008
Ps. 382,977
Ps.(367,145) Ps. 15,832
Ps. 11,438
Ps.108,543
Ps. 7,605
2007
Ps. 347,421
Ps.(319,792) Ps. 27,629
Ps.(
3,009)
Ps. 99,378
-
2006 1
Ps. 298,380
Ps.(279,399) Ps. 18,981
Ps.
6,349
Ps. 42,600
-
2005 1
Ps. 261,673
Ps.(246,614) Ps. 15,059
Ps. 11,336
-
-
2004 1
Ps. 222,040
Ps.(212,998)
Ps. 18,671
-
-
Plan assets
Plan status
Unamortized
items
Defined
benefit
obligation
Unamortize
d items
Ps. 9,042
The Company computed deferred employee profit sharing for the years ended
December 31, 2008 and 2007 using the asset and liability method, as required by
Mexican FRS D-3. The result of the computation is that the Company had no
deferred employee profit sharing in such years.
(1)
Figures in thousands of Mexican pesos with purchasing power at December 31,
2007
76
NOTE 13 – SHAREHOLDERS’ EQUITY:
a.
The resolutions adopted and amounts approved at general shareholders’
meetings held on March 12, 2008 and March 6, 2007 are as follows:
Agreements
2008
2007
Ps.8,000,000
Ps.8,000,000
2. Cancellation
of
Series
“V”
shares
resulting from the repurchase of shares
152,018,400
158,368,900
3. Increase in the legal reserve, charged to
retained earnings (nominal)
Ps. 352,135
Ps. 434,632
Ps.0.59
Ps.0.51
April 18
April 20
5. Increase in the variable portion of capital
stock (nominal) for up to:
Ps.4,991,590
Ps.4,369,383
The above capital increase will be
covered by issuing common ordinary
shares to be used solely for payment of
the stock dividend. Maximum number of
shares to be issued:
178,271,066
109,234,586
1. Approval of the maximum amount the
Company will use to repurchase its own
shares (nominal)
4. A
declared
dividend,
for
which
shareholders may receive payment either
in cash or in Company shares at an
exchange factor determined based on
both the closing market price of the
Company's shares on April 2, 2008
(March 28, 2008) and the cash dividend
(nominal peso)
Date of dividend payment
Those shares that are not subscribed and delivered to the shareholders shall
be
cancelled
and
the
proposed
capital
increase
proportionally.
77
shall
be
reduced
The shareholders' deadline for deciding on whether to accept the cash
dividend or the stock dividend expired on April 15, 2008 (April 17, 2007). An
analysis of this caption is in the next page.
2008
2007
37,228,737
44,921,618
Ps.1,693,908
Ps. 2,047,527
141,042,329
64,312,968
Ps.3,297,682
Ps. 2,321,856
Number of shares Series “V” delivered to
shareholders
Amount
of
the
shares
shareholders (nominal)
delivered
to
Number of cancelled shares
Decrease in
cancellation
(nominal)
capital stock due
of
unsubscribed
to the
shares
Based on the preceding paragraph and as required by Article 112 of the
Mexican Corporations Act that establishes that all of an entity’s shares must
have the same theoretical value, the Company recomputed its capital stock by
determining a fixed minimum amount of Ps. 1,844,173 for 2008 and Ps.
1,631,224 for 2007 (nominal).
b. The Company’s capital stock is comprised of unlimited registered shares with
no par value.
At December 31, unrestated capital and the number of shares are as follows:
Capital stock
2008
Fixed
Variable
Ps.
1,844,173
12,625,520
Total
Ps.
1 4 ,469,693
78
2007
Ps.
-
1,631,224
11,270,607
Ps. 12,901,831
Number of freely subscribed
common series “V” shares
2008
2007
.
Fixed (Class 1)
1,075,006,074
1,071,307,452
Variable (Class 2)
7,359,674,349
7,401,977,734
Total
8,434,680,423
8,473,285,186
Capital stock at December 31, 2008 and 2007 includes capitalized earnings of
Ps. 11,451,328 and Ps. 9,757,420 (nominal), respectively, and Ps. 899,636
(nominal) in both years in capitalized restatement accounts.
During the year ended December 31, 2008, WALMEX repurchased 75,833,500
(144,005,000 in 2007) of its own shares, of which 12,963,400 (4,950,000 in
2007) were cancelled as per the resolution adopted at the shareholders’
meeting held on March 12, 2008 (March 6, 2007).
As a result of the share
repurchases, historical capital stock was reduced by Ps. 126,046 (Ps. 210,884
in 2007). The difference between the theoretical restated value and the
repurchase cost of the shares acquired was applied against retained earnings.
c. Distributed earnings and capital reductions in excess of the balance of the net
tax profit account (CUFIN) and the restated contributed capital account
(CUCA) will be subject to taxation in terms of Articles 11 and 89 of the
Mexican Income Tax Law.
At December 31, 2008 and 2007, the total balance of the aforesaid tax
accounts is Ps. 66,246,839 and Ps. 58,822,330, respectively.
d. The employee stock option plan fund consists of 136,131,446 WALMEX
shares, of which 127,564,266 shares have been placed in a trust created for
such purpose.
All employee stock options are granted to executives of
subsidiary companies at a value that is no less than the market value on the
date of grant.
In accordance with current policies, WALMEX executives may exercise their
option to acquire the shares in equal parts over five years. The right to
79
exercise an employee stock option expires in a period of ten years from the
date the option is granted, or within sixty days following the executive’s
retirement from the Company.
Compensation from stock options is determined using the Black-Scholes
financial valuation technique, in conformity with the guidelines of International
Financial Reporting Standard 2, issued by the International Accounting
Standards Board, applied on a supplementary basis. The amount charged to
results of operations for this item aggregates Ps. 91,453 in 2008 and Ps.
35,635 in 2007, which represents no cash disbursement.
An analysis of movements in the Company's employee stock option plan is as
follows:
Number of shares
Weighted
average price
per share
(nominal pesos)
125,264,275
17.96
19,490,736
43.09
Exercised
( 14,765,841)
15.26
Cancelled
(
22.86
124,157,538
22.00
25,402,584
38.70
Exercised
( 13,113,293)
17.19
Cancelled
(
3,050,172)
35.51
133,396,657
25.34
Granted
Granted
5,831,632)
Shares available for option grant:
December 31, 2008
December 31, 2007
2,734,789
5,387,201
At December 31, 2008, the employee stock options granted and exercisable
and included in the employee stock option plan fund were as shown in the
next page.
80
Granted
Range of
exercise price
(nominal
pesos)
Number of
shares
Exercisable
Average
remaining
life (in
years)
Weighted
average
price per
share
(nominal
pesos)
Weighted
average
price per
share
(nominal
pesos)
Number of
shares
9.96 – 11.41
8,567,180
2.0
11.12
8,567,180
11.12
10.73 – 12.64
9,742,411
3.2
12.54
9,742,411
12.54
11.55 – 13.75
14,970,534
4.2
12.55
14,970,534
12.55
16.90 – 18.18
17,928,613
5.2
16.93
12,752,428
16.94
19.80
20,981,816
6.2
19.80
10,489,090
19.80
28.79 - 30.03
19,089,864
7.2
28.81
5,785,609
28.81
43.09
17,376,487
8.2
43.09
3,625,143
43.09
38.70
24,739,752
9.2
38.70
-
-
133,396,657
6.3
25.34
65,932,395
17.47
NOTE 14 – COMPREHENSIVE FINANCING RESULT:
An analysis of comprehensive financing result is as follows:
December 31
2008
Financial income, net
Ps. 783,214
Exchange (loss) gain, net
( 308,767)
Monetary position gain
-
Total
Ps. 474,447
81
2007
Ps. 817,611
13,375
664,285
Ps.1,495,271
NOTE 15 – SEGMENT INFORMATION:
The Company’s segment information was prepared based on a managerial
approach and the criteria established in accounting Bulletin B-5. The “Other”
segment consists of department stores, restaurants, real estate transactions with
third parties and financial services.
An analysis of segment information at December 31, 2008 and 2007 is as follows:
Segment
Total revenues
2008
Self service
2007
Ps. 230,312,982
Ps. 209,652,627
14,604,028
15,323,754
Ps. 244,917,010
Ps. 224,976,381
Other
Consolidated
2008
Ps.
Other
Consolidated
2008
Ps.
Ps.
8,455,595
1,362,847
Ps.
11,315,980
Ps.
19,751,074
11,097,440
82
16,257,811
2,413,066
Ps.
18,670,877
Depreciation
2008
Ps.
2,641,845
Ps.
Ps.
1,431,512
2007
9,953,133
2007
18,319,562
Purchase of property and
equipment
Segment
Self service
Operating income
3,421,219
2007
Ps.
714,854
Ps
4,136,073
3,141,578
585,783
Ps.
3,727,361
Segment
Total assets
Self service
Ps.
Other
2008
2007
2008
95,730,567 Ps.
87,887,201 Ps.
31,523,608
13,996,423
13,623,834
2,256,645
2,066,068
8,736,927
5,233,337
1,296,401
1,885,436
Unassignable items
Consolidated
Current liabilities
Ps. 118,463,917 Ps. 106,744,372 Ps.
2007
35,076,654
Ps.
Ps.
28,353,874
32,235,378
Unassignable items refer primarily to reserve land, cash and cash equivalents of
the parent and real estate companies, as well as income tax payable.
The Company operates in Mexico and makes sales to the general public.
NOTE 16 - NEW ACCOUNTING PRONOUNCEMENTS:
On November 11, 2008, the CNBV issued a press release announcing its decision
to require companies listed on the Mexican Stock Exchange to adopt the
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB). In conj unction with the CINIF, the CNBV will
work on developing an IFRS adoption process for issuers in Mexico and will also
make the regulatory changes necessary for this implementation.
Such changes
will include the requirement that issuers prepare and disclose their financial
information based on IFRS as of 2012 and will also include the option of early
adoption of IFRS reporting in 2008, 2009, 2010 and 2011. The Company is
evaluating what effect the observance of these standards will have on the
Company’s financial statements.
On
December 19,
Acquisitions;
2008,
Mexican
the CINIF
FRS
B-8,
approved
Mexican FRS B-7, Business
Consolidated
83
and
Combined
Financial
Statements; Mexican FRS C-7, Investments in Associated Companies and Other
Permanent Investments; Mexican FRS C-8, Intangible Assets; and Mexican FRS
D-8, Share Based Payments, which came into force as of January 1, 2009. The
application of these new standards will have no material effect on the Company’s
financial statements.
NOTE 17 - SUBSEQUENT EVENT:
On December 5, 2009, the Company entered into an agreement to determine the
purchase of the shares of TFB Corporation N.V. and subsidiaries (Wal-Mart
Centroamérica) through a related party. Through this transaction, the Company
shall acquire the assets and assume the liabilities of TFB Corporation N.V. and
subsidiaries, and as of the date on which the acquisition is effective, the Company
shall carry out business activities in the Central American region.
NOTE 18 – PROFORMA FINANCIAL STATEMENTS:
a. Basis of preparation
The consolidated financial information shown in the columns “Base Figures”
includes the Company’s financial information.
The preparation of the financial information in conformity with Mexican Financial
Reporting Standards requires management to make estimates and assumptions in
certain areas, which affect the amounts reported in the financial information and
the disclosures in the accompanying notes. Although such estimates are based on
management’s knowledge of present situations and conditions, actual results
could differ from these estimates.
84
b. Proforma consolidated financial information
The Company’s proforma consolidated financial information for the presented
years has been prepared for the sole purpose of presenting the Company’s
financial information, the results of its operations, the changes in its shareholders’
equity and its cash flows with the effects of the transaction as though it had
occurred at the dates of these financial statements, as follows:
•
Proforma balance sheet at December 31, 2008 and 2007- As though the
transaction had occurred at December 31, 2007.
•
Proforma results of operations for the years ended December 31, 2008 and
2007 - As though the transaction had occurred at January 1, 2007.
•
Proforma statement of changes in shareholders’ equity for the years ended
December 31, 2008 and 2007 - As though the transaction had occurred at January
1, 2007.
•
Proforma statement of cash flows for the years ended December 31, 2008
and 2007 - As though the transaction had occurred at January 1, 2007.
Under terms of the acquisition agreement, the Company shall pay a portion of the
consideration in cash and the remainder through the issuance of ordinary shares
to the current shareholders of Wal-Mart Centroamérica. The transaction is subject
to the usual closing conditions, including approval by the shareholders of the
Company and Wal-Mart Centroamérica.
For book purposes, this transaction shall be recorded as a business acquisition in
conformity with Mexican Financial Reporting Standard (Mexican FRS) B-7, revised
and effective as of January 1st, 2009. In accordance with this Mexican FRS, this
transaction must be accounted for using the purchase method, which requires the
consideration delivered, as well as the identifiable assets and assumed liabilities
resulting from the acquisition be valued at their fair value at the acquisition date.
The difference between these two values shall be the amount of goodwill.
85
Proforma
adjustments
–
These
correspond
to
the
assumptions
used
by
Management for the preliminary distribution of the estimated purchase price
(consideration) to the tangible and intangible assets that will be acquired and the
liabilities that will be assumed, based on the preliminary estimates of their fair
values at September 30, 2009, as described below:
Purchase price
-
Consideration - A cash payment of approximately Ps. 1,400 million will be
made, and 593 million Company shares, which will be issued at the signing
of the corresponding agreements, will be delivered. The final amount will
be adjusted at the date the transaction is concluded and may differ as a
result of (1) changes in the net assets of Wal-Mart Centroamérica that
occur prior to the final conclusion of the transaction and could affect the
purchase price and (2) the exchange rate used at the time of the
transaction, since the transaction will be agreed in U.S. dollars. The
exchange rate used for this transaction was Ps. 13.1833 per dollar.
-
Contingent consideration – As part of the acquisition price, subsequent
payments will be made in cash and in shares. The cash payments will
consist of a fixed portion and a variable portion. For the payment in shares,
at the shareholders’ meeting, the Board will propose the issuance of
approximately 55 million shares, which shall remain as treasury shares not
subscribed or paid in, to be delivered to the current shareholders of WalMart Centroamérica in the case that the acquired Company achieves a preestablished level of profitability in a term of no longer than 10 years. Such
payments shall be determined at their present value and may differ as a
result of (1) circumstances that could indicate that the results will not be
achieved as per projections and (2) the exchange rate used at the time of
the transaction, since it was agreed in U.S. dollars.
Fair value of the identifiable assets and assumed liabilities as a result of the
purchase.
86
The
distribution
of
the
purchase
price
shall
remain
preliminary
until
the
Company’s Board determines the fair values of the assets acquired and liabilities
assumed, for which it has one year as of the acquisition date.
The book values of the current assets and liabilities are similar to their fair value.
The fair value of property and equipment, as well as of intangible assets, was
determined based on the estimated values of such assets acquired and liabilities
assumed, which could subsequently be modified at the time the fair values are
determined.
Goodwill is recognized when the amount of the consideration valued at its fair
value, as described in the preceding paragraphs, exceeds the amount of the net
assets acquired at their fair value. For purposes of these proforma financial
statements, goodwill is presented as part of the caption "Other assets" and is
considered to be part of the acquired business; therefore, the value in pesos is
different in each period presented and the variance is recorded in the caption
"Cumulative translations adjustment” in shareholders' equity, in conformity with
Mexican FRS B-15.
Operating costs include fees payable for bank investment services, legal services,
accounting services and other advisory services. These costs are recognized as
an expense as they are incurred and are reflected as a decrease in the retained
earnings.
Resulting proforma figures – These correspond to the Company’s consolidated
financial information after recognizing the aforementioned proforma adjustment
figures.
NOTE 19 – ISSUANCE OF THE FINANCIAL STATEMENTS:
The accompanying financial statements and notes at December 31, 2008 and
2007 were approved by the Company’s Board of Directors at a meeting held on
February 11, 2009. In addition, with regard to Notes 17 and 18, the financial
statements were authorized for their issuance on December 5, 2009 by the
Executive Vice President and Chief Financial Officer.
87
9.2.
Extraordinary Shareholders Meeting Notice, Wal-Mart de México
88

wal-mart de méxico, sab de cv prospectus on acquisition of wal

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