Organización Soriana S.A. de C.V. y Subsidiarias. Informe Anual AnnualReport. Estados Financieros. Financial Statements

Transcription

1 Organización Soriana S.A. de C.V. y Subsidiarias Informe Anual AnnualReport Estados Financieros Financial Statements 19

2 ÍNDICE INDEX Informe del Comisario Report of Shareholder Examiner 22 Informe de los Auditores Independientes Report of Independent Auditors 23 Balances Generales Consolidados Consolidated Balance Sheets 24 Estados Consolidados de Resultados Consolidated Statements of Income 25 Estados Consolidados de Inversión de los Accionistas Consolidated Statements of Stockholders Equity 26 Estados Consolidados de Cambios en la Situación Financiera Consolidated Statements of Changes in Financial Position 28 Notas a los Estados Financieros Consolidados Notes to Consolidated Financial Statements 29 20

3 CONSOLIDATED FINANCIAL STATEMENTS as of December 31, 2000 and 1999 TOGETHER WITH AUDITORS' REPORT 21

4 (Translation of a report originally issued in Spanish) REPORT OF SHAREHOLDER EXAMINER C.P. ERNESTO GONZÁLEZ DÁVILA CONTADOR PÚBLICO BOSQUE DE DURAZNOS MEXICO, D.F. February 26, 2001 To the Stockholders of ORGANIZACIÓN SORIANA, S.A. DE C.V. As shareholder examiner and in compliance with Article 166 of the Mexican Corporate Law and bylaws of ORGANIZACION SORIANA, S.A. DE C.V., I submit my opinion regarding the accuracy, sufficiency and fairness of the financial information presented to you by the Board of Directors concerning the Company s operations for the year ended December 31, I have obtained from the directors and management all of the information relative to the operations, documents and records that I deemed necessary. My audit was performed in accordance with the auditing standards generally accepted in Mexico. I have also audited the individual and consolidated balance sheets of the Company as of December 31, 2000, and the related statements of income, stockholders equity and changes in financial position for the year then ended, which are hereby submitted for your information and approval. In submitting this report, I have also relied upon the report issued on such financial statements by Ruiz Urquiza y Cía., S.C. (Arthur Andersen), independent auditors of the Company, whom in their opinion developed that, beginning in 2000, the Company adopted the new procedures for the recognition of deferred income taxes as prescribed by recently revised Bulletin D-4, Accounting for Income Taxes, Tax on Assets and Employee Profit Sharing. In my opinion, the accounting and reporting polices and criteria followed by the Company and considered by management to prepare and present the financial information are appropriate and sufficient and were applied on a basis consistent with that of the preceding year; therefore, the financial information presented by management accurately, sufficiently and fairly presents the individual and consolidated financial positions of ORGANIZACIÓN SORIANA, S.A. DE C.V., as of December 31, 2000, and the results of their operations, the changes in their stockholders equity and the changes in their financial position for the year then ended, in accordance with the accounting principles generally accepted in Mexico. C.P. Ernesto González Dávila Shareholder Examiner 22

5 (Translation of a report originally issued in Spanish) REPORT OF INDEPENDENT AUDITORS To the Stockholders of ORGANIZACIÓN SORIANA, S.A. DE C.V: We have audited the accompanying consolidated balance sheets of ORGANIZACION SORIANA, S.A. DE C.V. AND SUBSIDIARIES as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders equity and changes in financial position for the years then ended. These consolidated financial statements are the responsibility of the Company and subsidiaries management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they are prepared in conformity with accounting principles generally accepted in Mexico. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As mentioned in Note 3 a) to the consolidated financial statements, the Company and subsidiaries adopted the regulations of the new Bulletin D-4, Accounting for Income and Asset Taxes and Employee Profit Sharing, effective January 1, The effects of this change in accounting are described in the above-mentioned Note. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Organización Soriana, S.A. de C.V. and Subsidiaries as of December 31, 2000 and 1999, and the results of their operations, the changes in their stockholders equity and the changes in their financial position for the years then ended, in conformity with accounting principles generally accepted in Mexico. February 26,

6 CONSOLIDATED BALANCE SHEETS at December 31, 2000 and 1999 (Amounts expressed in thousands of Mexican pesos with purchasing power as of December 31, 2000) ASSETS Current Assets: Cash and cash equivalents $ 1,476,369 $ 1,164,067 Trade 257, ,308 Other accounts receivable 398, ,574 Prepaid expenses 91, ,668 Inventories 3,041,166 2,753,193 Total Current Assets 5,264,626 4,904,810 Property and equipment, net 12,095,296 10,917,658 Other assets 4,463 5,150 TOTAL ASSETS $ 17,364,385 $ 15,827,618 LIABILITIES AND STOCKHOLDERS' EQUITY Current Libialities: Suppliers $ 4,623,486 $ 4,199,614 Other accounts payable and accrued liabilities 429, ,309 Total Current Liabilities 5,052,785 4,752,923 Long-Term Liabilities: Other liabilities 49,242 38,846 Deferred income tax 2,662,328 - Total Liabilities 7,764,355 4,791,769 Stockholders' Equity: Capital stock 1,535,126 1,535,597 Additional paid-in capital 1,194,824 1,194,824 Reserve for repurchase of shares 404, ,661 Premium on sale of repurchased shares 16,210 16,210 Accumulated earnings from prior years 8,517,742 9,214,343 Net consolidated income for the year 1,546,508 1,809,758 Cumulative result from holding nonmonetary assets (3,615,100) (3,143,544) Total Stockholders' Equity 9,600,030 11,035,849 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,364,385 $ 15,827, The accompanying notes are an integral part of these consolidated balance sheets.

7 CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2000 and 1999 (Amounts expressed in thousands of Mexican pesos with purchasing power as of December 31, 2000) Net sales $ 24,659,319 $ 21,987,186 Other operating income 701, ,202 25,360,971 22,504,388 Cost of sales 19,703,846 17,498,244 Gross profit 5,657,125 5,006,144 Operating expenses 3,893,055 3,239,323 Operating income 1,764,070 1,766,821 Integral result of financing: Interest income, net 111, ,533 Exchange loss, net (2,010) (12,716) Gain on monetary position 439, , , ,306 Other expenses, net 95,656 94,263 Income before tax provisions 2,217,076 2,002,864 Tax provisions 670, ,106 Net consolidated income for the year $ 1,546,508 $ 1,809,758 Earnings per share (Mexican pesos per share) $ 2.58 $ 3.02 The accompanying notes are an integral part of these consolidated statements. 25

8 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY For the years ended December 31, 2000 and 1999 (Amounts expressed in thousands of Mexican pesos with purchasing power as of December 31, 2000) Additional Reserve for Capital Paid-in Repurchase Stock Capital of Shares Balances at December 31, 1998 $ 1,533,478 $ 1,194,824 $ 384,572 Transfer of prior year income Sale of repurchased shares 2,119-24,089 Premium on sale of repurchased shares Balances before comprehensive income 1,535,597 1,194, ,661 Comprehensive income: Net consolidated income for the year Result from holding nonmonetary assets Total comprehensive income Balances at December 31, 1999 $ 1,535,597 $ 1,194,824 $ 408,661 Transfer of prior year income Repurchase of shares (471) - (3,941) Deferred income tax Dividends declared Balances before comprehensive income 1,535,126 1,194, ,720 Comprehensive income: Net consolidated income for the year Result from holding nonmonetary assets - - Total comprehensive income Balances at December 31, 2000 $ 1,535,126 $ 1,194,824 $ 404, The accompanying notes are an integral part of these consolidated statements.

9 Premium on Cumulative Result Sale of Accumulated Net Consolidated from Holding Total Repurchased Earnings from Income Nonmonetary Stockholders' Shares Prior Years For the Year Assets Equity $ 10,995 $ 7,546,606 $ 1,667,737 $ (2,656,065) $ 9,682,147-1,667,737 (1,667,737) ,208 5, ,215 16,210 9,214,343 - (2,656,065) 9,713, ,809,758-1,809, (487,479) (487,479) 1,322,279 $ 16,210 $ 9,214,343 $ 1,809,758 $ (3,143,544) $ 11,035,849-1,809,758 (1,809,758) (4,412) (2,369,154) (2,369,154) (137,205) (137,205) 16,210 8,517,742 - (3,143,544) 8,525, ,546,508-1,546, (471,556) (471,556) 1,074,952 $ 16,210 $ 8,517,742 $ 1,546,508 $ (3,615,100) $ 9,600,030 27

10 CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (Amounts expressed in thousands of Mexican pesos with purchasing power as of December 31, 2000) For the years ended December 31, 2000 and 1999 OPERATIONS: Net consolidated income for the year $ 1,546,508 $ 1,809,758 Add- Items not affecting resources Depreciation 409, ,575 Provision of deferred income tax 381,387-2,337,418 2,178,333 Changes in working capital: Accounts receivable 240,459 (372,445) Inventories (516,162) (748,249) Accounts payable 299,862 1,093,539 Net resources generated by operations 2,361,577 2,151,178 FINANCING ACTIVITIES: Dividends declared (137,205) - Premium on sale of repurchased shares - 5,215 Repurchase and sale of own shares (4,412) 26,208 Defered income tax effect (264,338) - Net resources (used in) generated by financing activities (405,955) 31,423 INVESTING ACTIVITIES: Property and equipment (1,654,403) (2,126,034) Other assets 11,083 8,828 Net resources used in investing activities (1,643,320) (2,117,206) Net increase in cash and cash equivalents 312,302 65,395 Cash and cash equivalents at the beginning of the year 1,164,067 1,098,672 Cash and cash equivalents at the end of the year $ 1,476,369 $ 1,164, The accompanying notes are an integral part of these consolidated statements.

11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2000 and 1999 (Amounts expressed in thousands of Mexican pesos with purchasing power as of December 31, 2000) EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH: The accompanying consolidated statements have been translated into English for use outside of Mexico. These consolidated financial statements are presented on the basis of accounting principles generally accepted in Mexico. Certain accounting practices applied by Organización Soriana, S.A. de C.V. and subsidiaries ( the Companies ) that conform with accounting principles generally accepted in Mexico may not conform with generally accepted accounting principles in the country of use. 1. ACTIVITIES: Organización Soriana, S.A. de C.V. (SORIANA) is the majority shareholder of a group of companies that operate a chain of self-service stores for the sale of clothing, general and supermarket merchandise. During 2000, SORIANA invested $1,654,403, net, in the construction and remodeling of stores. At December 31, 2000, SORIANA has in operation one hundred stores. For the year 2001, the investment plans are estimated at approximately $1,900, BASIS OF CONSOLIDATION: The accompanying consolidated financial statements include the financial statements of SORIANA and those of its subsidiaries in which it is the majority stockholder and/or exercises administrative control. The principal subsidiaries of the SORIANA are: Tiendas Soriana, S.A. de C.V. Centros Comerciales Soriana, S.A. de C.V. Various service companies. Various real state companies. All significant intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements. 3 SIGNIFICANT ACCOUNTING POLICIES: The accounting policies followed by the Companies are in conformity with the accounting principles generally accepted in Mexico, which require that management make certain estimates and use certain assumptions to determine the valuation of some of the items included in the financial statements and make the required disclosures therein. While the estimates and assumptions used may differ from their final effect, management believes that they were adequate under the circumstances. a) Changes in accounting policies- During 2000, the Companies adopted the regulations of the new Bulletin D-4 Accounting for Income and Asset Taxes and Employee Profit Sharing. The initial effect of the adoption of this bulletin was to record deferred income and asset taxes, based on the cumulative effect of temporary items as of January 1, 2000, as a long-term liability of $2,369,154, directly affecting stockholders' equity. The provision for income and asset taxes for the year 2000 increased by $381,387, and a credit to the result from holding nonmonetary assets of $97,936 was recorded for the portion of deferred taxes applicable to the items that were recorded therein. b) Recognition of the effects of inflation in the financial information- The Companies restate all of their financial statements in terms of the purchasing power of the Mexican peso as of the end of the latest period, thereby comprehensively recognizing the effects of inflation. Consequently, all consolidated financial statement amounts are comparable, both for the current and the prior year, since all are stated in terms of Mexican pesos of the same purchasing power. Accordingly, the consolidated financial statements of the prior year have been restated in terms of Mexican pesos of the latest period. The prior year amounts presented herein differ from those originally reported in terms of Mexican pesos of the corresponding year. 29

12 To recognize the effects of inflation in terms of Mexican pesos with purchasing power as of the most recent yearend, the procedures were as follows: Balance sheet: Inventories are restated to replacement cost, which does not exceed their realizable value. Property and equipment of domestic origin are restated using factors derived from the National Consumer Price Index (NCPI) and equipment of foreign origin is restated based on the devaluation and inflation of the country of origin. Depreciation is determined based on the estimated useful life of each asset. The depreciation of assets begins in the following month in which they are placed in service. Stockholders equity and other nonmonetary assets are restated using factors derived from the NCPI, cumulative from the date of contribution or generation, and is comprised as follows: Historical Restatement Total Capital stock $ 83,714 $ 1,451,412 $ 1,535,126 Additional paid-in capital $ 82,766 $ 1,112,058 $ 1,194,824 Reserve for repurchase of shares $ 108,706 $ 296,014 $ 404,720 Premium on sales of repurchased shares $ 14,089 $ 2,121 $ 16,210 Accumulated earnings of prior years $ 5,793,586 $ 2,724,156 $ 8,517,742 Net consolidated income for the year $ 1,479,882 $ 66,626 $ 1,546,508 Statement of income- Revenues and expenses that are associated with monetary items are restated from the month in which they arise through yearend, based on factors derived from the NCPI. Costs and expenses associated with nonmonetary items were restated through yearend using NCPI factors, as a function of the restatement of the nonmonetary asset which was being consumed or sold. As indicated above, property and equipment depreciation expense charged to the results of operations is determined based on the factor derived from the variation in the exchange rate and inflation rate of the country of origin, as appropriate. The gain on monetary position, which represents the effect of the inflation in the purchasing power of monetary items, is determined by applying to net monetary assets or liabilities at the beginning of each month the inflation factor derived from the NCPI, and is restated through yearend with the corresponding factor. Other statements- The consolidated statement of changes in financial position presents the changes in constant Mexican pesos, based on the financial position as of the beginning of the year, restated to Mexican pesos as of the most recent yearend. The cumulative result from holding nonmonetary assets shown in the consolidated statements of changes in stockholders equity represents the change in the specific price level of such assets and its effect on the results of operations in relation to the NCPI. 30

13 c) Cash and cash equivalents- Cash and cash equivalents are mainly represented by short-term investments and bank deposits valued at market (cost plus accrued interest). d) Income and asset taxes- Deferred income and asset taxes are determined by means of the liability method, which requires the recognition of deferred tax assets and liabilities for all temporary differences between the accounting and tax basis of assets and liabilities. The deferred tax provision for the year to be included in the results of operations is determined by comparing the deferred tax balance at beginning of the year to the balance at the end of the year, excluding from both balances the temporary differences that are registered directly in stockholders' equity. The deferred tax related to the temporary differences registered directly in stockholders' equity is recorded in the stockholders equity account that originated it. The initial effect of the application of this new bulletin was recorded in stockholders equity within accumulated earnings (see Note 8). e) Employee benefits- Under Mexican labor law, the Companies are liable for separation payments and seniority premiums payable to employees terminating under certain circumstances. The Companies record the liabilities from seniority premiums, pensions and retirement payments using actuarial calculations based on the projected unit credit method based on real interest rates. Projected benefit obligation (PBO) $ (23,388) $ (23,726) Plan assets at fair value 60,422 46,729 Excess of plan assets over PBO 37,034 23,003 Transitional asset to be amortized (11,353) (13,114) Variances in assumptions to be amortized (12,570) (672) Projected net asset $ 13,111 $ 9,217 The income from employee benefits is as follows: Service cost $ 1,633 $ 1,957 Amortization of the transitional asset (1,762) (1,770) Amortization of assumptions to be amortized (730) (46) Financing cost for the year ,081 Less- Return on fund assets (4,007) (3,061) Net Income $ (3,894) $ (1,980) 31

14 The following actuarial assumptions were used: Return on assets 7.00% 7.00% Interest rate 4.50% 4.50% Salary increase rate 1.50% 1.00% The changes in the net projected asset were as follows: Beginning balance $ 9,217 $ 7,237 Net income for the year 3,894 1,980 Ending balance $ 13,111 $ 9,217 Indemnity payments to involuntarily terminated employees are charged to results in the period in which they are made. f) Integral result of financing- The integral result of financing includes all financial revenues and expenses, such as interest income, exchange gains and losses from monetary position, as they occur or accrue. Transactions denominated in foreign currencies are recorded at the exchange rate at the date on which they occur. The assets and liabilities denominated in foreign currencies are valued at the exchange rate in effect at the balance sheet date. The resulting exchange fluctuations are credited or charged to income as part of the integral result of financing. g) Earnings per share- This represents the consolidated net income for the year divided by the weighted average number of shares of the Company outstanding during the year, in accordance with Bulletin B-14 Earnings per share. h) Comprehensive income- Comprehensive income is comprised of the consolidated net income for theyear plus any gains or losses that according to specific regulations are presented directly in stockholders equity, such as the result from holding nonmonetary assets. 4. FOREIGN CURRENCY POSITION AND TRANSACTIONS: At December 31, 2000 and 1999, the Companies had the following assets and liabilities denominated in foreign currency: Millions of U.S. dollars Current assets $ 4.62 $ 1.63 Current liabilities (42.46) (15.23) Net liability position in foreign currency $ (37.84) $ (13.60) Equivalent in thousands of Mexican pesos $ (363,253) $ (129,181) 32

15 The Companies' principal transactions denominated in foreign currency are as follows: Purchases in millions of U.S. dollars $ $ Equivalent in thousands of Mexican pesos $ 262,290 $ 1,259,033 At December 31, 2000 and 1999, the exchange rate was $ and $ Mexican pesos per U.S. dollar, respectively. At February 26, 2001, the unaudited foreign currency position has not significantly changed and the exchange rate is $ INVENTORIES: General merchandise $ 1,047,107 $ 1,072,552 Supermarket 1,218, ,666 Apparel 551, ,389 Other 296, ,192 3,114,429 2,828,799 Less- Allowance for shrinkage (73,263) (75,606) Net inventories $ 3,041,166 $ 2,753, PROPERTY AND EQUIPMENT: Buildings and installations $ 6,331,353 $ 5,641,634 Furniture and equipment 4,214,430 3,745,794 10,545,783 9,387,428 Less- Accumulated depreciation (2,578,888) (2,215,694) Net value to be depreciated $ 7,966,895 $ 7,171,734 Land 4,083,870 3,725,773 Construction-in-progress 44,531 20,151 Net book value $ 12,095,296 $ 10,917,658 Depreciation of property and equipment has been calculated based on the estimated economic useful lives of the assets. The average annual depreciation rates applied were as follows: Buildings and installations 2% 2% Furniture and equipment 6.7% to 20% 6.7% to 20% 33

16 7. TRANSACTIONS WITH RELATED PARTIES: The Companies had significant transactions with related parties, as follows: Purchases $ 262,290 $ 1,425,523 Operating expenses $ 1,963 $ TAX ENVIRONMENT: Income and asset tax regulations- The companies are subject to income and asset taxes. Income taxes are computed by taking into consideration the taxable and deductible effects of inflation, such as depreciation calculated on restated asset values and the deduction of purchases in lieu of cost of sales, which permit the deduction of current costs, and taxable income is increased or reduced by the effects of inflation on certain monetary assets and liabilities through the inflationary component, which is similar to the result on monetary position. Beginning in 1999, the income tax rate increased from 34% to 35%, with the obligation to pay this tax each year at a rate of 30% (transitorily 32% in 1999), with the remainder payable upon distribution of earnings. Asset taxes are computed at an annual rate of 1.8% on the average of the majority of restated assets less certain liabilities and the tax is paid only to the extent that it exceeds the income taxes for the year. Any required payment of asset tax is creditable against the excess of income taxes over asset taxes of the preceding three and following ten years. Employee profit sharing- The income for purposes of employee profit sharing does not consider the inflationary component. Depreciation is based on historical rather than restated values. Income taxes, asset taxes and employee profit sharing are calculated in terms of the Mexican peso on the date that the transactions occurred and not in terms of the Mexican peso at yearend. Taxes have been determined based on the individual results of each company and not on a consolidated basis. Deferred tax- The tax effect of temporary differences that generated deferred income tax liabilities is as follows: 2000 Initial cumulative effect Inventories $ 1,064,408 $ 928,394 Property and equipment 1,586,309 1,395,105 Other 11,611 45,655 Deferred income tax $ 2,662,328 $ 2,369,154 34

17 The deferred income tax activity for the year is as follows: 2000 Initial cumulative effect $ 2,369,154 Provision for the year 381,387 Result from holding nonmonetary assets (97,936) Result from monetary position 9,723 Deferred income tax liability $ 2,662,328 Tax provisions- The provision for the year is comprised as follows: Income and asset taxes $ 287,469 $ 250,863 Deferred tax 381,387 - Asset tax (171) (10,511) Unamortized tax loss carryforwards (15,313) (54,259) Employee profit sharing 17,196 7,013 Total tax provision $ 670,568 $ 193,106 Tax loss carryforwards and recoverable asset taxes- At December 31, 2000, the companies have tax loss carryforwards and recoverable asset taxes, which will be indexed for inflation through the year in which they are applied or recovered, as follows: Expiration Tax Loss Recoverable Carryforwards Asset Taxes 2001 $ - $ , and next 9,855 1,386 Total $ 10,343 $ 5, STOCKHOLDERS EQUITY: At an ordinary stockholder meeting held on April 26, 2000, the stockholders approved a cash dividend to be distributed from accumulated earnings for an amount of $137,205. At December 31, 2000, the capital stock of SORIANA is represented by 600,000,000 Series B common shares, without par value, fully subscribed and paid, which represent the minimum fixed capital without withdrawal rights. 35

18 Dividends paid from accumulated "net taxable income" will not be subject to tax. Dividends paid in excess of this amount will be subject to 35% income tax. Capital reductions will be subject to taxes on the excess of the reduction over the price-level adjusted paid-in capital, in accordance with the formula prescribed by the income tax law. As of 1999, dividends paid to individuals or foreign residents will be subject to income tax withholding at an effective rate ranging from 7.5% to 7.7%, depending on the year in which the earnings were generated. In addition, if earnings for which no corporate tax has been paid are distributed, the tax must be paid upon distribution of the dividends. The Companies' net income for the year is subject to the legal requirement that 5% thereof be transferred to a legal reserve each year until the reserve equals 20% of capital stock. This reserve may not be distributed to stockholders during the existence of the companies, except in the form of a stock dividend. 10. TEMPORARY STOCK REPURCHASES: Temporary stock repurchases of SORIANA s own shares have taken place with the objective to strengthen the supply and demand of SORIANA S shares in the stock market. As of December 31, 2000 and 1999 shares repurchased amounted to $4,412 and $26,208, respectively. 11.COMMITMENTS:: The Companies have operating leases on real estate for an average term of 15 years and the total amount of rent is $72,694 for 2000 and $ 75,083 for