SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Pepsi Bottling Group Inc, et al. – ‘SC TO-T’ on 10/7/02 re: Pepsi Gemex SA de CV, et al. – EX-99.A.8

On:  Monday, 10/7/02, at 12:00pm ET   ·   Accession #:  950123-2-9455   ·   File #s:  5-46036 (SC 13E3), 5-46036

Previous ‘SC 13E3’:  None   ·   Next:  ‘SC 13E3/A’ on 10/25/02   ·   Latest:  ‘SC 13E3/A’ on 11/6/02

Find Words in Filings emoji
 
  in    Show  and   Hints

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/07/02  Pepsi Bottling Group Inc          SC TO-T               18:1.0M Pepsi Gemex SA de CV              RR Donnelley/FA
          Bottling Group LLC                                              Pepsi Gemex SA de CV
          PBG Grupo Embotellador Hispano-Mexicano, SL

Tender-Offer Statement — Third-Party Tender Offer   —   Schedule TO
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC TO-T     Tender Offer Statement                                 6     41K 
 2: EX-99.A.1   U.S. Offer to Purchase                                88    455K 
11: EX-99.A.10  Press Release                                          2     14K 
12: EX-99.A.17  Summary of the Mexican Offer to Purchase               1      8K 
 3: EX-99.A.2   Form of Gds Letter of Transmittal                     13     68K 
 4: EX-99.A.3   Form of Broker Dealer Letter                           3     21K 
 5: EX-99.A.4   Form of Client Letter                                  4     19K 
 6: EX-99.A.5   Notice of Guaranteed Delivery                          3     19K 
 7: EX-99.A.6   W-9 Guidelines                                         4±    18K 
 8: EX-99.A.7   Summary Advertisement                                  6     36K 
 9: EX-99.A.8   Audited Consolidated Financial Statements             53    296K 
10: EX-99.A.9   Gemex 6-K                                             12     36K 
13: EX-99.B.1   Senior Credit Agreement                               75    277K 
14: EX-99.C.1   Salomon Smith Barney Inc. Fairness Opinion             3     16K 
15: EX-99.C.2   Presentation to the Board of Directors              HTML     34K 
16: EX-99.D.1   Agreement to Tender                                   21     70K 
17: EX-99.D.2   Agreement to Tender                                   35    111K 
18: EX-99.D.3   Escrow Agreement                                       9     36K 


EX-99.A.8   —   Audited Consolidated Financial Statements

EX-99.A.81st Page of 53TOCTopPreviousNextBottomJust 1st
 

Exhibit (a)(8) PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES INDEX PAGE INDEPENDENT AUDITORS' REPORT F-2 CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2000 AND 2001, AND EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001: Consolidated Balance Sheets F-3 Consolidated Statements of Income F-4 Consolidated Statements of Changes in Shareholders' Equity F-6 Consolidated Statements of Changes in Financial Position F-7 Notes to Consolidated Financial Statements F-9 CONSOLIDATED FINANCIAL STATEMENTS SUPPLEMENTAL SCHEDULE: Schedule II - Valuation and qualifying accounts F-53 F-1
EX-99.A.82nd Page of 53TOC1stPreviousNextBottomJust 2nd
INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Pepsi-Gemex, S. A. de C. V.: We have audited the accompanying consolidated balance sheets of Pepsi-Gemex, S. A. de C. V. and subsidiaries (the "Company") as of December 31, 2000 and 2001, and the related consolidated statements of income, changes in shareholders' equity, changes in financial position and supplemental schedule for each of the three years in the period ended December 31, 2001, all expressed in thousands of Mexican pesos of purchasing power of December 31, 2001. These consolidated financial statements and supplemental schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Mexico and the United States of America. 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 that they are prepared in accordance 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 and supplemental schedule. 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. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pepsi-Gemex, S. A. de C. V. and subsidiaries as of December 31, 2000 and 2001, and the consolidated results of their operations, changes in their shareholders' equity and changes in their financial position for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in Mexico. Also, in our opinion, the financial statement schedule when considered in relation to the consolidated financial statements presents fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, beginning January 1, 2000, the Company changed its method of accounting for income tax, tax on assets and employee statutory profit-sharing to conform with the new Bulletin D-4 "Accounting Treatment of Income Tax, Tax on Assets and Employee Statutory Profit-Sharing". The accompanying financial statements have been translated into English for the convenience of readers. Our audits also comprehended the translation of Mexican peso amounts into U.S. dollar amounts as of and for the year ended December 31, 2001 and, in our opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts are presented solely for the convenience of users. Accounting principles generally accepted in Mexico vary in certain respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2001 and the determination of shareholders' equity at December 31, 1999, 2000 and 2001 to the extent summarized in Note 18. /s/Deloitte & Touche Deloitte & Touche Mexico City, Mexico February 26, 2002 (June 21, 2002 as to Notes 8, 14, 16 and 18) F-2
EX-99.A.83rd Page of 53TOC1stPreviousNextBottomJust 3rd
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001) -------------------------------------------------------------------------------- [Enlarge/Download Table] THOUSANDS OF U.S. DOLLARS (CONVENIENCE TRANSLATION) DECEMBER 31, DECEMBER 31, ASSETS 2000 2001 2001 CURRENT ASSETS: Cash and cash equivalents Ps. 226,775 Ps. 99,176 $ 10,827 Accounts receivable - net (Note 2) 1,014,047 980,760 107,070 Inventories (Note 3) 1,056,934 735,859 80,334 Prepaid expenses 38,195 20,653 2,255 ---------------- ---------------- -------------- Total current assets 2,335,951 1,836,448 200,486 PROPERTY, PLANT AND EQUIPMENT - Net (Note 4) 7,262,447 7,125,890 777,936 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED - Net of accumulated amortization of Ps.481,830, Ps.571,941 and $62,439 at December 31, 2000 and 2001, respectively 1,268,339 1,292,137 141,063 OTHER ASSETS (Note 5) 421,343 324,570 35,433 ---------------- ---------------- -------------- TOTAL ASSETS Ps. 11,288,080 Ps. 10,579,045 $ 1,154,918 ================ ================ ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable (Note 6) Ps. 879,754 Ps. 346,964 $ 37,878 Current portion of long-term debt (Note 7) 36,803 29,946 3,269 Trade accounts payable 587,862 562,137 61,369 Taxes payable 142,821 234,764 25,629 Accrued expenses and other liabilities 408,129 456,310 49,816 Dividend payable -- 246,931 26,958 Due to affiliates 3,529 -- -- ---------------- ---------------- -------------- Total current liabilities 2,058,898 1,877,052 204,919 LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES (Notes 7 and 8) 3,334,101 3,136,474 342,410 DEFERRED INCOME TAX AND EMPLOYEE STATUTORY PROFIT-SHARING (Note 12) 928,189 899,157 98,161 ---------------- ---------------- -------------- Total liabilities 6,321,188 5,912,683 645,490 ---------------- ---------------- -------------- COMMITMENTS AND CONTINGENCIES (Note 14) SHAREHOLDERS' EQUITY (Note 9): Capital share 878,219 878,933 95,953 Additional paid-in capital 4,798,696 4,551,834 496,925 Retained earnings 1,897,569 2,492,757 272,135 Reserves 1,045,969 1,065,014 116,268 Cumulative effect of deferred income tax and employee statutory profit-sharing (Note 1) (1,300,190) (1,300,190) (141,942) Shareholders' equity adjustment from labor obligations upon retirement -- (43,403) (4,738) Deficiency in restated shareholders' equity (2,353,371) (2,978,583) (325,173) ---------------- ---------------- -------------- Total shareholders' equity 4,966,892 4,666,362 509,428 ---------------- ---------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Ps. 11,288,080 Ps. 10,579,045 $ 1,154,918 ================ ================ ============== See accompanying notes to consolidated financial statements. F-3
EX-99.A.84th Page of 53TOC1stPreviousNextBottomJust 4th
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001, except per share information) -------------------------------------------------------------------------------- [Enlarge/Download Table] THOUSANDS OF U.S. DOLLARS EXCEPT EARN- INGS PER SHARE (CONVENIENCE TRANSLATION) YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 2000 2001 2001 REVENUES: Net sales Ps. 8,140,444 Ps. 9,572,760 Ps. 11,036,212 $ 1,204,827 Other 49,011 87,652 56,997 6,222 ------------- ------------- -------------- ----------- 8,189,455 9,660,412 11,093,209 1,211,049 ------------- ------------- -------------- ----------- COSTS AND EXPENSES (Note 11): Cost of sales (exclusive of depreciation and amortization shown separately below) 3,644,016 4,256,900 4,898,743 534,797 Selling expenses (includes amortization of bottles and cases for Ps.139,535, Ps.165,275, Ps.121,836 and $13,301 respectively) 2,832,203 3,487,790 3,969,210 433,320 General and administrative expenses 460,423 566,103 651,262 71,098 Depreciation and amortization 308,459 308,890 403,090 44,005 ------------- ------------- -------------- ----------- 7,245,101 8,619,683 9,922,305 1,083,220 ------------- ------------- -------------- ----------- OPERATING INCOME 944,354 1,040,729 1,170,904 127,829 ------------- ------------- -------------- ----------- RESTRUCTURING CHARGE (Note 1) -- 568,980 136,866 14,942 INTEGRAL (INCOME) COST OF FINANCING (Note 6): Interest income (74,454) (14,897) (5,981) (653) Interest expense 425,718 404,303 399,655 43,630 Foreign exchange loss (gain) - net (137,306) 71,295 (217,594) (23,755) Monetary position gain (348,083) (426,608) (158,625) (17,317) ------------- ------------- -------------- ----------- (134,125) 34,093 17,455 1,905 ------------- ------------- -------------- ----------- OTHER EXPENSE - Net (includes the amortization of excess of cost over fair value of net assets acquired for Ps.78,014, Ps.(4,156), Ps.90,111 and $9,837 respectively) 103,448 31,513 197,396 21,550 ------------- ------------- -------------- ----------- INCOME BEFORE PROVISIONS AND EXTRAORDINARY ITEM 975,031 406,143 819,187 89,432 ------------- ------------- -------------- ----------- PROVISIONS (BENEFIT) (Note 12): Income tax and tax on assets 338,228 (174,419) 228,846 24,985 Employee statutory profit-sharing 3,415 64,971 (4,847) (529) ------------- ------------- -------------- ----------- 341,643 (109,448) 223,999 24,456 ------------- ------------- -------------- ----------- INCOME BEFORE EXTRAORDINARY GAIN 633,388 515,591 595,188 64,976 EXTRAORDINARY GAIN (Note 12): Benefit from utilization of tax loss carryforwards and tax on assets paid in prior years 257,983 -- -- -- ------------- ------------- -------------- ----------- CONSOLIDATED NET INCOME Ps. 891,371 Ps. 515,591 Ps. 595,188 $ 64,976 ============= ============= ============== =========== (Continued) F-4
EX-99.A.85th Page of 53TOC1stPreviousNextBottomJust 5th
[Enlarge/Download Table] THOUSANDS OF U.S. DOLLARS EXCEPT EARN- INGS PER SHARE (CONVENIENCE TRANSLATION) YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 2000 2001 2001 Net income of majority interest Ps. 822,845 Ps. 482,522 Ps. 595,188 $ 64,976 Net income of minority interest 68,526 33,069 -- -- --------------- --------------- --------------- -------------- CONSOLIDATED NET INCOME Ps. 891,371 Ps. 515,591 Ps. 595,188 $ 64,976 =============== =============== =============== ============== Earnings per Series B and L share Ps. 0.61 Ps. 0.34 Ps. 0.36 $ 0.04 =============== =============== =============== ============== Weighted average Series B and L shares outstanding (in 000's) 1,020,783 1,011,445 1,129,065 ============= =============== =============== Earnings per Series D share Ps. 0.87 Ps. 0.50 Ps. 0.52 $ 0.06 =============== =============== =============== ============== Weighted average Series D shares outstanding (in 000's) 322,281 336,219 375,318 =============== =============== =============== Earnings per CPO Ps. 2.07 Ps. 1.19 Ps. 1.23 $ 0.13 =============== =============== =============== ============== Weighted average CPO's outstanding (in 000's) 322,281 336,219 375,318 =============== =============== =============== Earnings per GDS Ps. 12.40 Ps. 7.12 Ps. 7.36 $ 0.80 =============== =============== =============== ============== Weighted average GDS's outstanding (in 000's) 53,730 56,037 62,553 =============== =============== =============== (Concluded) See accompanying notes to consolidated financial statements. F-5
EX-99.A.86th Page of 53TOC1stPreviousNextBottomJust 6th
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Note 9) (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001) ------------------------------------------------------------------------------ [Enlarge/Download Table] CUMULATIVE EFFECT OF DEFERRED INCOME TAX ADDITIONAL AND EMPLOYEE CAPITAL PAID-IN RETAINED STATUTORY STOCK CAPITAL EARNINGS RESERVES PROFITSHARING BALANCE, JANUARY 1, 1999 Ps. 861,981 Ps. 4,414,863 Ps. 607,077 Ps. 1,034,273 Ps. -- Repurchase and sale of capital share - net (2,446) 393 (14,875) 5,756 -- Net comprehensive income -- -- 822,845 -- -- ----------- ------------- ------------- ------------- --- ---------- BALANCE, DECEMBER 31, 1999 859,535 4,415,256 1,415,047 1,040,029 -- Repurchase and sale of capital share - net 223 1,357 -- 5,940 -- Acquisition of subsidiaries (Note 1) -- -- -- -- -- Capital share increase 1,942 40,320 -- -- -- Acquisition of minority interest (Note 1) 16,519 341,763 -- -- -- Net comprehensive loss -- -- 482,522 -- (1,300,190) ----------- ------------- ------------- ------------- --- ---------- BALANCE, DECEMBER 31, 2000 878,219 4,798,696 1,897,569 1,045,969 (1,300,190) Repurchase and sale of capital share - net 714 69 -- 19,045 -- Dividends declared -- (246,931) -- -- -- Net comprehensive loss -- -- 595,188 -- -- ----------- ------------- ------------- ------------- --- ---------- BALANCE, DECEMBER 31, 2001 Ps. 878,933 Ps. 4,551,834 Ps. 2,492,757 Ps. 1,065,014 Ps. (1,300,190) =========== ============= ============= ============= ============== [Enlarge/Download Table] SHAREHOLDERS' EQUITY ADJUSTMENT FROM LABOR DEFICIENCY- OBLIGATIONS IN RESTATED MINORITY TOTAL UPON SHAREHOLDERS' SHAREHOLDERS' SHAREHOLDERS' RETIREMENT EQUITY EQUITY EQUITY BALANCE, JANUARY 1, 1999 Ps. -- Ps. (1,635,679) Ps. -- Ps. 5,282,515 Repurchase and sale of capital share - net -- -- -- (11,172) Net comprehensive income -- (517,565) 229,349 534,629 ----------- -------------- ------------ -------------- BALANCE, DECEMBER 31, 1999 -- (2,153,244) 229,349 5,805,972 Repurchase and sale of capital share - net -- -- -- 7,520 Acquisition of subsidiaries (Note 1) -- -- 117,172 117,172 Capital share increase -- -- -- 42,262 Acquisition of minority interest (Note 1) -- -- (358,282) -- Net comprehensive loss -- (200,127) 11,761 (1,006,034) ----------- -------------- ------------ -------------- BALANCE, DECEMBER 31, 2000 -- (2,353,371) -- 4,966,892 Repurchase and sale of capital share - net -- -- -- 19,828 Dividends declared -- -- -- (246,931) Net comprehensive loss (43,403) (625,212) -- (73,427) ----------- -------------- ------------ -------------- BALANCE, DECEMBER 31, 2001 Ps. (43,403) Ps. (2,978,583) Ps. -- Ps. 4,666,362 =========== ============== ============ ============== See accompanying notes to consolidated financial statements F-6
EX-99.A.87th Page of 53TOC1stPreviousNextBottomJust 7th
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001) -------------------------------------------------------------------------------- [Enlarge/Download Table] THOUSANDS OF U.S. DOLLARS (CONVENIENCE TRANSLATION) YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 2000 2001 2001 OPERATING ACTIVITIES: Income before extraordinary gain Ps. 633,388 Ps. 515,591 Ps. 595,188 Ps. 64,976 Items that did not require (generate) resources: Depreciation and amortization 526,008 470,009 615,036 67,144 Statutory seniority premiums 10,545 32,367 38,293 4,180 Restructuring charge -- 547,056 83,505 9,116 Equity in earnings of associated companies (included in other income-net) (1,274) -- -- -- Deferred taxes -- (288,874) (29,032) (3,169) ------------- -------------- ------------ ---------- 1,168,667 1,276,149 1,302,990 142,247 Changes in current assets and liabilities, net of effects from purchases of businesses: Accounts receivable - net (296,204) (20,834) 33,287 3,634 Inventories 106,677 (197,370) 321,075 35,052 Prepaid expenses (1,330) (2,843) 17,542 1,915 Trade accounts payable 130,137 (21,201) (25,725) (2,808) Taxes payable, accrued expenses and other liabilities (142,842) (69,954) 136,595 14,912 ------------- -------------- ------------ ---------- Resources provided by operating activities before extraordinary gain 965,105 963,947 1,785,764 194,952 Extraordinary gain 257,983 -- -- ------------- -------------- ------------ ---------- Net resources provided by operating activities 1,223,088 963,947 1,785,764 194,952 ------------- -------------- ------------ ---------- FINANCING ACTIVITIES: Net change in notes payable (103,075) (329,497) (532,790) (58,165) Increase in long-term debt 216,132 1,558,352 64,138 7,002 Payments of long-term debt (583,752) (472,467) (330,573) (36,089) Capital stock increase -- 42,262 -- -- (Repurchase) and sale of capital stock - net (11,172) 7,520 19,828 2,165 Shareholders' equity adjustment from labor obligations upon retirement -- -- (43,403) (4,738) Dividends declared -- -- (246,931) (26,958) Dividends payable -- -- 246,931 26,958 Shares issued in exchange of minority interest -- 358,282 -- -- Cumulative effect of deferred income tax and employee statutory profit-sharing: Increase in liabilities -- 1,300,190 -- -- Decrease in shareholders' equity -- (1,300,190) -- -- ------------- -------------- ------------ ---------- Net resources (used in) generated by financing activities (481,867) 1,164,452 (822,800) (89,825) ------------- -------------- ------------ ---------- (Continued) F-7
EX-99.A.88th Page of 53TOC1stPreviousNextBottomJust 8th
[Enlarge/Download Table] THOUSANDS OF U.S. DOLLARS (CONVENIENCE TRANSLATION) YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1999 2000 2001 2001 INVESTING ACTIVITIES: Acquisition and sale of property, plant and equipment - net (975,604) (1,031,819) (1,089,243) (118,913) Increase in other assets (30,039) (1,506) 112,589 12,291 Increase in goodwill -- -- (113,909) (12,435) Payment for acquisition of subsidiaries, net of cash received -- (700,942) -- -- Acquisition of minority interest -- (358,282) -- -- Loan to associated company -- (1,591) -- -- ------------- -------------- -------------- ---------- Resources used in investing activities (1,005,643) (2,094,140) (1,090,563) (119,057) ------------- -------------- -------------- ---------- (Decrease) increase in cash and cash equivalents (264,422) 34,259 (127,599) (13,930) CASH FOR CONSOLIDATING EFFECTS 51,087 -- -- -- CASH AND CASH EQUIVALENTS: Beginning of year 405,851 192,516 226,775 24,757 ------------- -------------- -------------- ---------- End of year Ps. 192,516 Ps. 226,775 Ps. 99,176 $ 10,827 ============= ============== ============== ========== (Concluded) See accompanying notes to consolidated financial statements. F-8
EX-99.A.89th Page of 53TOC1stPreviousNextBottomJust 9th
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001 (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001, except per share information) -------------------------------------------------------------------------------- 1. OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS - Pepsi-Gemex, S. A. de C. V. ("Pepsi-Gemex") and its subsidiaries (collectively, the "Company") produce and sell bottled soft drinks, mineral water and purified water under the trade names of Pepsi-Cola, Pepsi Light, Pepsi Max, Pepsi Limon, Mirinda, Seven-Up, Diet Seven-Up, Kas, Mountain Dew, Power Punch and Manzanita Sol (collectively the "Pepsi Products") and Garci-Crespo, San Lorenzo, Tehuacan Bajas Calorias, Atlantis and Electropura (the "Mineral and Purified Water Products") and others. The Company also produces and sells non-returnable plastic bottles and packaging materials used by the Company and third parties. Pepsi Products sales are principally made to retailers located in the Mexico City area, including the Federal District, the state of Hidalgo and portion of the state of Mexico (the "Mexico City Area"); the states of Guerrero, Morelos and portion of the state of Mexico, which are located in the Southwest portion of Mexico (the "Southwest Area"); the states of Campeche, Quintana Roo and Yucatan in the southeast portion of Mexico (the "Southeast Area"); the central states of Aguascalientes, Durango, Zacatecas, San Luis Potosi, and portions of the states of Guanajuato, Queretaro and Jalisco (the "North Central Area") and the states of Nuevo Leon, Coahuila, Tamaulipas, and portions of Chihuahua and Veracruz in the northeast of Mexico (the "Northeast Area"). The Company sells and distributes the mineral water products nationally, including through third party distributors not affiliated with the Company. In addition, the Company sells its full line of purified water products in each of its principal franchise territories and also sells the five-gallon jug presentation in the city of Puebla and surrounding areas. Pursuant to franchise and license agreements, the Company has the exclusive right to produce, sell and distribute a variety of soft drink products in all or a portion of the Pepsi Products franchised territories. Effective September 1, 2000, the Company commenced consolidating the financial position and results of operations of Embotelladores del Valle de Anahuac, S.A. de C.V. and subsidiaries ("Emvasa"), see Comparability below. BASIS OF PRESENTATION - CONSOLIDATION OF FINANCIAL STATEMENTS - The accompanying consolidated financial statements, which include the accounts of Pepsi-Gemex and its subsidiaries, have been prepared in accordance with accounting principles generally accepted in Mexico ("Mexican GAAP"). All material intercompany balances and transactions have been eliminated. Certain reclassifications have been made to prior period financial statements to conform to classifications adopted in 2001. TRANSLATION OF FINANCIAL STATEMENTS - The accompanying financial statements are stated in Mexican pesos, the currency of the country in which Pepsi-Gemex and its subsidiaries are incorporated and operate. Translation of Mexican peso amounts into U.S. dollar amounts are included solely for the convenience of readers and have been made at the rate of Ps.9.16 per U.S.$1.00, the interbank exchange rate reported to the Company by Centro de Analisis y Proyecciones Economicas para Mexico at December 31, 2001. Such translation should not be construed as a representation that the Mexican peso amounts shown could be converted into U.S. dollars at the above or any other rate. Principal consolidated subsidiaries as of December 31, 2000 and 2001, are as follows: F-9
EX-99.A.810th Page of 53TOC1stPreviousNextBottomJust 10th
[Enlarge/Download Table] Subsidiary Location ------------------------------------------------------------------- ----------------------------- Embotelladora Metropolitana, S. A. de C. V. Mexico, D. F. Embotelladores Internacionales de Mexico, S. de R. L. de C. V. Mexico, D. F. Embotelladores del Valle de Anahuac, S. A. de C. V. (3) Mexico, D. F. Bebidas Purificadas del Noreste, S. A. de C. V. Mexico, D. F. Tenedora del Noreste, S. A. de C. V. (1) Monterrey, N.L. Grupo Embotellador del Noreste, S. A. de C. V. (1) Mexico, D. F. Purificadora de Agua Los Reyes, S. A. de C. V. Tlalnepantla, Edo. de Mexico. Embotelladora Agral Regiomontana, S. A. de C. V. (1) and (13) Monterrey, N.L. Industria de Refrescos del Noreste, S. A. de C. V. (1) Monterrey, N.L. Embotelladora de Refrescos Mexicanos, S. A. de C. V. (3) Izcalli, Edo. de Mexico Distribuidora de Aguas, Refrescos y Bebidas Purificadas, S.A. de C. V. (3) and (4) Izcalli, Edo. de Mexico Bebidas Purificadas de Acapulco, S. A. de C. V. (9) Acapulco, Gro. Embotelladores del Bajio, S. A. de C. V (3) Leon, Guanajuato Embotelladora Moderna, S. A. de C. V. (3) Toluca, Edo. de Mexico Embotelladora Potosi, S. A. de C. V. San Luis Potosi, S. L. P. Bebidas Purificadas del Sureste, S. A. de C. V. Merida, Yuc. Bebidas Purificadas de Quintana Roo, S. A. de C. V. (2) Cancun, Q. Roo Bebidas Purificadas de Zacatecas, S. A. de C. V. (10) Zacatecas, Zac. Industria de Refrescos, S. A. de C. V. Cuernavaca, Mor. Refrescos de Iguala, S. A. de C. V. (9) Iguala, Gro. Embotelladora San Marcos, S. A. de C. V. (6) Aguascalientes, Ags. Embotelladora La Isleta, S. A. de C. V. (3) Tampico, Tamaulipas Embotelladora Campechana, S. A. de C. V. (2) Campeche, Camp. Embotelladora Garci-Crespo, S. A. de C. V. Tehuacan, Pue. Distribuidora Garci-Crespo, S. A. de C. V. Tlalnepantla, Edo. de Mexico Bebidas Veracruzanas, S. A. de C. V. (3) and (5) Poza Rica, Veracruz Embotelladora Agral de la Laguna, S. A. de C. V. (1) and (13) Durango, Dgo Bebidas Purificadas de Durango, S. A. de C. V. (7) Durango, Dgo. Industrias de Refrescos de Gomez Palacios, S. A. de C. V. (1) and (12) Durango, Dgo. Procesos Plasticos, S. A. de C. V. Tultitlan, Edo. de Mexico Equipo para Embotelladoras y Cervecerias, S. A. de C. V. Mexico, D. F. Bienes Raices Metropolitanos, S. A. de C. V. Mexico, D. F. Distribuidora de Aguas Envasadas Dek, S. A. de C. V. (8) Mexico, D. F. Servicios Administrativos Suma, S. A. de C. V. Mexico, D. F. Comercio Integral Mexicano, S. A. de C. V. (11) Mexico, D. F. Duingras Holdings B.V. The Netherlands As of December 31, 2000 and 2001, all of the subsidiaries are 100% owned by the Company. ---------- (1) As of December 31, 1999, the Company owned 50% of these companies (see Comparability below) and were consolidated pursuant to an agreement entered into with PepsiCo. because the Company exercised effective control of them. (2) During the third quarter of 2000 these companies were merged into Bebidas Purificadas del Sureste, S. A. de C. V. (3) These companies were acquired in a business combination pursuant to a cash tender offer made during the third quarter of 2000 (see Comparability below). (4) On December 31, 2000 this company was merged into Embotelladora de Refrescos Mexicanos, S. A. de C. V. (5) On December 31, 2000 this company was merged into Embotelladora La Isleta, S. A. de C. V. (6) On December 31, 2000 this company was merged into Embotelladora Potosi, S. A. de C. V. (7) On March 31, 2001 this company was merged into Industria de Refrescos Gomez Palacios, S.A. de C.V. (8) On May 31, 2001 this company was merged into Bienes Raices Metropolitanos, S.A. de C.V. (9) On November 30,2001 these companies were merged into Industria de Refrescos, S.A. de C.V. (10) On November 30, 2001 this company was merged into Embotelladora Potosi, S.A. de C.V. F-10
EX-99.A.811th Page of 53TOC1stPreviousNextBottomJust 11th
(11) On November 30, 2001 this company was merged into Bienes Raices Metropolitanos, S.A. de C.V. (12) On December 31, 2001 this company was merged into Industria de Refrescos del Noreste, S.A. de C.V. (13) On December 31, 2001 these companies were merged into Grupo Embotellador del Noreste, S.A. de C.V. EFFECTS OF INFLATION IN THE FINANCIAL STATEMENTS - The accompanying consolidated financial statements have been prepared in accordance with Bulletin B-10 "Recognition of the Effects of Inflation in Financial Information", and its amendments, issued by the Mexican Institute of Public Accountants, A. C. ("MIPA"). These documents require the restatement of all financial statements to constant Mexican pesos as of the date of the most recent balance sheet presented for the purpose of comparability. Factors derived from the National Consumer Price Index ("NCPI"), published by Banco de Mexico, are applied to restate the consolidated financial statement data to constant Mexican pesos. The accompanying consolidated financial statements have been restated and adjusted as follows: 1. The consolidated balance sheet at December 31, 2000, has been restated to reflect constant Mexican pesos of purchasing power of December 31, 2001, by applying the NCPI factor for 2000. 2. The consolidated statements of operations for all periods presented have been restated to reflect constant pesos of purchasing power of December 31, 2001, by applying the respective NCPI factor of the period when the transactions occurred (revenues and expenses). 3. The consolidated statements of changes in financial position set forth the source and application of resources representing the differences between opening and closing balance sheet balances in constant Mexican pesos of purchasing power of December 31, 2001, excluding the effects from holding nonmonetary assets. Exchange gains and losses and monetary position gains and losses are included in the amount of resources provided by or applied to operations. 4. Capital stock, paid-in capital, retained earnings, reserves and cumulative effect of deferred income tax and employee statutory profit-sharing have been restated by applying the NCPI factor from the date contributed or generated. 5. Deficiency in restated shareholders' equity primarily results from the increase in the restated values of nonmonetary assets below the increase in inflation as measured by the NCPI. 6. Monetary position gain represents the effects of inflation on the Company's net monetary liability position as measured using the NCPI. 7. The NCPI factors applied for each period are as follows: [Download Table] RATE OF YEAR ENDED INFLATION FOR NCPI DECEMBER 31, THE PERIOD FACTOR 1999 12.31% 1.1375 2000 8.96% 1.0440 2001 4.40% 1.0000 COMPREHENSIVE INCOME - In August 2000 the MIPA issued Bulletin B-4, "Comprehensive Income" ("B-4"), the application of which is mandatory for the year beginning January 1, 2001. In accordance with the regulations of B-4, the statement of changes in shareholders' equity for the year ended December 31, 2000 and 1999 were restated to present comprehensive income in comparative form with respect to 2001 (see Note 9). SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Company's accounting policies are in accordance with accounting principles generally accepted in Mexico and are summarized as follows: COMPARABILITY - The following are the most significant transactions affecting the comparability of the financial statements: F-11
EX-99.A.812th Page of 53TOC1stPreviousNextBottomJust 12th
ACQUISITION OF SUBSIDIARIES AND MINORITY INTEREST - In July 1997, Pepsi-Gemex and Pepsi-Cola Mexicana, S. A. de C. V. ("PCM") formed Tenedora del Noreste, S. A. de C. V. ("Tenedora") with each holding a 50% equity interest. Tenedora contemporaneously acquired certain companies that have the exclusive rights to produce, sell and distribute Pepsi-Cola bottled soft drinks in the northeast part of Mexico, including the cities of Monterrey, Nuevo Leon and Gomez Palacio, Durango (Tenedora and its subsidiaries are also identified as the "Northeast Bottling Group"). The cash purchase price of these acquired companies was Ps.58,323. At the time of acquisition these companies were in bankruptcy and liability payments were legally suspended. The excess of cost over fair value of net assets acquired was Ps.393,965. At the end of 1998 Tenedora purchased all the liabilities of the acquired companies which were in bankruptcy or suspension of payments as above mentioned. Effective January 1, 1999, the Company commenced consolidating Tenedora as a result of an amendment to the joint venture agreement (entered into with PepsiCo) governing the financial and operating policies with respect to the Northeast Bottling Group and the agreement entered into by Tenedora with its creditors and the expected resolution of its bankruptcy proceedings. At December 31, 2000 and 2001, all assets and liabilities of Tenedora are included in the consolidated balance sheets of the Company. The consolidated statements of income for each of the three years in the period ended December 31, 2001 include the operations of Tenedora in each individual line item. On December 19, 2001 the Court of the City of Monterrey, Nuevo Leon, where the proceedings were held, declared the final adjudication of the bankruptcy and suspension of payments of the companies that are subsidiaries of Tenedora. On September 6, 2000, the Company acquired through Embotelladores Internacionales de Mexico, S. de R. L. de C. V. and Duingras Holding B. V., 96.9% of the outstanding shares of Embotelladores del Valle de Anahuac, S. A. de C. V. and subsidiaries ("Emvasa"), through a cash tender offer. Subsequently, during the first quarter of 2001, Pepsi-Gemex acquired an additional 3.0% of the outstanding shares of Emvasa. For the remaining 0.1% that has not been acquired, Pepsi-Gemex has recorded a reserve equivalent to the purchase price set forth in the public tender offer for each of the shares, pursuant to the terms of the agreement entered into by Pepsi-Gemex and the National Banking and Securities Commission to cancel the register of Emvasa as an issuer of securities before the Mexican Stock Exchange. Emvasa has the exclusive rights to produce, sell and distribute PepsiCola bottled soft drinks in most of the state of Mexico, the north portion of the states of San Luis Potosi, Hidalgo and Veracruz, the states of Tamaulipas and Queretaro, the south part of the state of Guanajuato and the northeast portion of the state of Jalisco. The cash purchase price of these acquired companies was Ps.782,559, which includes the 3.0% acquired during the first quarter of 2001 and the reserve for the acquisition of shares not yet being owned. The excess of cost over fair value of net assets acquired was Ps.315,249. Also, on September 6, 2000, the Company acquired 2.87% of the shares outstanding of certain subsidiaries of Emvasa, which represented the shares owned by the former principal shareholder and his immediate family. The cash purchase price of these shares was Ps.9,348. The excess of fair value of net assets over cost of shares acquired of Ps.22,794, is included in the Ps.315,249 amount above. Condensed consolidated audited financial information as of the date of the acquisition, expressed in Mexican pesos of purchasing power of December 31, 2001, is as follows: [Download Table] AUGUST 31, 2000 BALANCE SHEET: Current assets Ps. 261,772 Fixed assets and other assets 910,486 Current liabilities (298,022) Long-term liabilities (280,405) Minority shareholders' equity (117,172) ---------------- Majority shareholders' equity Ps. 476,659 ================ F-12
EX-99.A.813th Page of 53TOC1stPreviousNextBottomJust 13th
[Download Table] EIGHT MONTHS ENDED AUGUST 31, 2000 STATEMENT OF INCOME: Revenues Ps. 1,269,502 Costs and expenses (1,200,684) Other income (expense) - net (650,252) Taxes 234,705 ---------------- Net loss of majority interest Ps. (346,729) ================ On December 14, 2000, the Company acquired from PCM, through Bebidas Purificadas del Noreste, S. A. de C. V. and Emvasa, the minority interest owned by PCM in Tenedora and Embotelladores Mexicanos de Pepsi-Cola, S. A. de C. V. ("Empecsa") in exchange for 47,470,002 of each of Series B, D and L shares of the Company. Such shares were contributed to a trust in order to deliver to PCM such shares in the form of CPO's. The above transaction has been accounted for as a purchase. The difference between the book value of the minority interest acquired and the market value of the shares issued has been accounted for as negative goodwill or excess of cost over fair value of net assets acquired. Such negative goodwill related to the acquisition of the minority interest in Tenedora has been recognized as other income because management considered that such subsidiary has been fully integrated into the operations of the Company. The excess of cost over fair value of net assets acquired will be amortized over a period not to exceed twenty years. During the second half of 2001, management of the Company, together with its legal and tax counsel, re-evaluated the sufficiency of the reserves recorded to cover probable tax contingencies identified during the acquisition process of Emvasa (see Note 14). Also, management of the Company re-evaluated the sufficiency of the reserves recorded to cover severance payments to the personnel and cost and expenses related to the sale of the real estate where the corporate offices of Emvasa were located. The above gave rise to an increase in the reserves of approximately Ps.99,000. Such increase has been accounted for as a prospective modification of the goodwill originally recognized. RESTRUCTURING OF OPERATIONS - During December of 2000, management of the Company initiated a restructuring program of the operations in certain of its territories. Such program's main objectives were: (i) to streamline the Company's operation as a result of the recent acquisition of Emvasa; (ii) to phase out plastic returnable bottles ("PRB") in most of the territories (including those incorporated with the acquisition of Emvasa); (iii) to continue with the commitment to increase polyethylene tereftalate ("PET") packaging in the sales mix; (iv) to increase utilized capacity at some of the plants and (v) to reduce personnel at the Company in activities that are redundant due to the acquisition of Emvasa. In order to accomplish the objectives mentioned above, the Company closed four plants in the first quarter of 2001, which are located in Mexico City and the states of Morelos, Veracruz and San Luis Potosi. Production of such plants was shifted to other locations. Also, the Company wrote-off the recorded value of all the plastic returnable bottles, except those needed during the phase-out period, together with their corresponding cases in all of its territories other than the city of Toluca in the state of Mexico. In addition, the Company identified machinery and equipment available for sale due to duplication of facilities arising from the acquisition of Emvasa and performed an analysis of impairment of fixed assets in all of the facilities. The restructuring charge includes Ps.547,056, net of salvage value, for the write down of assets included in property, plant and equipment as well as the write down of assets related to the bottling of the Company's products using PRB packaging. Estimated salvage values are based on estimates of the proceeds upon sale of certain of the affected assets. As of December 31, 2000, the effect of the restructuring amounts to Ps.568,980 (Ps.422,820, net of its corresponding tax effects). Continuing with the restructuring program that started during 2000, throughout the year 2001, certain operations were consolidated through the merger of certain of the subsidiaries (see Operations at the beginning of this Note), the continued closing of plants, the phase out of PRB bottles in the city of Toluca and the identification of additional fixed assets to be sold. An additional restructuring charge of Ps.136,866 (Ps,88,963, net of its corresponding tax effects) as a result of these efforts was recorded during the year ended December 31, 2001. F-13
EX-99.A.814th Page of 53TOC1stPreviousNextBottomJust 14th
The restructuring charges have been determined based on formal plans approved by the Company's management using the best information available at the time. The amounts the Company may ultimately incur could change as the Company integrates the acquisition of Emvasa and finishes the closure of facilities. CASH AND CASH EQUIVALENTS - The Company considers all highly-liquid temporary investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents consist primarily of bank deposits which are stated at cost plus accrued interest. INVENTORIES AND COST OF SALES - Inventories are valued at the lower of cost or market value. Inventories of raw materials, work in process and finished products are valued at average cost, which because of high inventory turnover approximates replacement value, or market value. Packaging, other materials and spare parts are recorded at acquisition cost and are restated by applying a factor derived from the NCPI. Cost of sales is stated at estimated replacement cost at the time of sale. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are initially recorded at acquisition cost and are restated by applying a price index for their country of origin. For fixed assets of foreign origin, restated acquisition cost expressed in the currency of the country of origin is converted into Mexican pesos at the market exchange rate in effect at the balance sheet date. In accordance with the Fifth Document of Amendments to Bulletin B-10 (Modified), the acquisition costs used to restate fixed assets acquired up to December 31, 1996, were those reported at that date based on net replacement values determined by expert appraisers. Returnable cases and bottles, introduced to the market free of charge, are amortized over their estimated useful life of four years. Cases and bottles representing working stock in the bottling plants are restated by applying the NCPI factor. Breakage during production and distribution are charged to operations of the year. Depreciation is computed using the straight-line method, based on the remaining useful lives of the assets, as follows: [Download Table] 2000 2001 (AVERAGE YEARS) Buildings 35 33 Leasehold improvements 22 20 Machinery and equipment 20 21 Furniture and fixtures 10 8 Vehicles 7 9 Bottles and cases 4 4 Refrigerated display cases 5 5 Net integral cost of financing related to borrowings specifically obtained for the construction and installation of property, plant and equipment are capitalized as part of the cost of these assets. In the absence of borrowings obtained specifically for the construction or installation of property, plant and equipment, net financing costs are capitalized as part of the cost of these assets based on the weighted average financing cost rate of all debt outstanding during the construction or installation period. Net integral cost of financing capitalized is restated using the NCPI. The Company did not capitalize any financing costs during the years ended December 31, 1999, 2000 and 2001. Unamortized capitalized financing costs at December 31, 2000 and 2001, were Ps.191,971 and Ps. 171,764, respectively. INVESTMENTS IN ASSOCIATED COMPANIES - Investments in associated companies in which the Company has an ownership interest between 10% and 50%, but does not have effective control, are accounted for using the equity method and are included in other assets. EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED - Excess of cost over fair value of net assets acquired is amortized using the straight-line method over 20 years and is restated using the NCPI. In accordance with practices followed by companies listed on the Mexican Stock Exchange, beginning in 2001, management of the F-14
EX-99.A.815th Page of 53TOC1stPreviousNextBottomJust 15th
Company began to include as part of other income and expense in the accompanying statements of income the amortization of the excess of cost over fair value of net assets acquired, which was previously reported as an operating cost. Accordingly, the consolidated statements of income of prior years have been reclassified in order to be consistent with the presentation utilized in 2001. LABOR OBLIGATIONS - Severance payments are charged to operations when incurred. Statutory seniority premiums are determined on the basis of independent actuarial calculations using the projected unit credit method and are recognized over estimated employees' years of service. Unrecognized prior service cost is amortized over the expected remaining service period of employees, which is 18 years. OPERATIONS IN FOREIGN CURRENCY - Foreign currency operations are recorded at the exchange rate applicable at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate at the balance sheet date. Exchange fluctuations are recorded in results of operations, except those amounts capitalized as a component of construction cost. USE OF ESTIMATES - The preparation of financial statements in accordance with accounting principles generally accepted in Mexico requires management to make estimates and assumptions which affect the amounts reported in the financial statements and the accompanying notes. Although these estimates are based on management's best knowledge of current events, actual results may differ. INCOME TAX, TAX ON ASSETS AND EMPLOYEE STATUTORY PROFIT-SHARING - The provisions for income tax ("IT") and employee statutory profit-sharing ("ESPS") are recorded in results of the year in which they are incurred. Deferred income tax assets and liabilities are recognized for temporary differences resulting from comparing the book and tax values of assets and liabilities plus any future benefits from tax loss carryforwards. Deferred ESPS is recognized for temporary differences resulting from comparing the book and tax values of assets and liabilities, only when it can be reasonably assumed that they will generate a liability or benefit, and there is no indication that this liability will not be paid or benefit will not be realized. Tax on assets paid that is expected to be recoverable is recorded as an advance payment of income tax and is presented with deferred income taxes. As of January 1, 2000, the Company implemented Bulletin D-4, "Accounting Treatment of Income Tax, Tax on Assets and Employee Statutory Profit-sharing" ("D-4"). The initial cumulative effect at that time was Ps.1,300,190, which is included in the accompanying financial statements in shareholders' equity. REVENUE RECOGNITION - Sales are recorded at the time risks and rewards related to the inventories are transferred to customers, which generally occurs when products are shipped by the Company to their customers for delivery in satisfaction of orders. CARRYING VALUE OF LONG-TERM ASSETS - The Company evaluates the carrying value of long-term assets based upon current and anticipated discounted cash flows, and recognizes an impairment when such estimated cash flows will be less than the carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between the carrying value and the fair value. EARNINGS PER SHARE, PER CPO AND PER GDS - Earnings per Series B and L share is computed by dividing consolidated net income of majority interest, after reducing it for earnings attributable to preferred shares (Series D), by the weighted average number of Series B and L shares outstanding during each period. Earnings per Series D share is computed by dividing consolidated net income attributable to Series D share (up to the tenth anniversary, as defined in the Company's bylaws, the greater of 5% of the stated value of Series D shares ("fixed preference") or 145% of earnings attributable to each Series B and L shares ("premium preference"); after the tenth anniversary the greater of the fixed preference or the per share earnings available to Series B, D or L shares after paying to the Series B and L shareholders an amount equal to the fixed preference) by the weighted average number of Series D shares outstanding during each period. F-15
EX-99.A.816th Page of 53TOC1stPreviousNextBottomJust 16th
2. ACCOUNTS RECEIVABLE [Download Table] 2000 2001 Trade Ps. 686,075 Ps. 596,339 Less allowance for doubtful accounts (67,070) (106,828) ---------------- -------------- 619,005 489,511 Due from Pepsi-Cola Mexicana, S. A. de C. V. (1) 82,650 25,502 Due from affiliates 47,560 65,924 Recoverable taxes 172,131 311,267 Other 92,701 88,556 ---------------- -------------- Ps. 1,014,047 Ps. 980,760 ================ ============== ---------- (1) A subsidiary of PepsiCo, a shareholder of Pepsi-Gemex. 3. INVENTORIES [Download Table] 2000 2001 Finished products Ps. 185,119 Ps. 158,069 Raw materials (1) 725,741 453,251 Packaging materials and spare parts 98,031 69,959 Other 48,043 54,580 ---------------- -------------- Ps. 1,056,934 Ps. 735,859 ================ ============== ---------- (1) Includes advances to affiliated companies, that are either wholly-owned or controlled by the Company's largest shareholder, at December 31, 2000 of Ps.510,231 (See note 11). 4. PROPERTY, PLANT AND EQUIPMENT [Enlarge/Download Table] 2000 2001 Land Ps. 996,541 Ps. 952,893 Buildings 1,923,318 1,951,279 Leasehold improvements 178,947 309,863 Machinery and equipment 3,280,655 2,960,062 Furniture and fixtures 201,134 260,712 Vehicles 2,140,777 2,241,825 Bottles and cases 461,617 433,026 Refrigerated display cases 915,561 941,901 ---------------- -------------- 10,098,550 10,051,561 Less accumulated depreciation 3,425,529 3,646,503 ---------------- -------------- 6,673,021 6,405,058 Machinery and equipment available for sale (see Note 1) 292,320 314,225 Construction in progress 297,106 406,607 ---------------- -------------- Ps. 7,262,447 Ps. 7,125,890 ================ ============== 5. OTHER ASSETS [Enlarge/Download Table] 2000 2001 Investments in associated companies Ps. 62,003 Ps. 62,485 Intangible assets from labor obligations upon retirement 39,844 60,795 Other 319,496 201,290 ---------------- -------------- Ps. 421,343 Ps. 324,570 ================ ============== F-16
EX-99.A.817th Page of 53TOC1stPreviousNextBottomJust 17th
6. NOTES PAYABLE [Enlarge/Download Table] 2000 2001 U.S. dollar-denominated: Unsecured lines of credit with Mexican banks at variable interest rates (8.34% and 3.46% weighted average interest rate at December 31, 2000 and 2001, respectively) Ps. 499,339 Ps. 139,984 Unsecured loans from a foreign bank, bearing interest at a rate equivalent to LIBOR plus 150 and 165 basis points, respectively, (7.90% and 3.53% weighted average interest rate at December 31, 2000 and 2001, respectively). 100,746 141,980 Mexican peso-denominated: Unsecured line of credit with a Mexican Bank, at an interest rate of 8.50% at December 31 2001. -- 65,000 Unsecured loans with a Mexican bank payable at the equivalent of Mexican pesos of the investment units borrowed ("UDIS", an investment unit adjusted for inflation in Mexico) bearing interest at a variable rate (9.69% weighted average interest rate at December 31, 2000). 279,669 -- ------------ ----------- Ps. 879,754 Ps. 346,964 ============ =========== The Company also has available line of credit arrangements with an aggregate borrowing capacity of Ps.366,400. However there can be no assurance that the Company will have available sources of borrowings at the maturity dates of existing debt. 7. LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES [Enlarge/Download Table] 2000 2001 U.S. dollar-denominated: U.S. $160 million guaranteed senior notes due 2004 Ps. 1,611,936 Ps. 1,465,600 U.S. $150 million guaranteed syndicated loan due 2003 1,511,190 1,374,000 Loans from foreign banks for acquisition of machinery and equipment at a variable interest rate of LIBOR plus 130 basis points (7.44% and 6.26% at December 31, 2000 and 2001, respectively) with maturities from 2003 to 2007, collateralized by assets with a net book value of Ps.112,178 and Ps.102,963 at December 31, 2000 and 2001, respectively 93,394 126,308 Loan from Mexican bank for the acquisition of vehicles at a variable interest rate of LIBOR plus 368 basis points (9.72% and 5.56% at December 31, 2000 and 2001, respectively), maturing in 2006 14,308 10,531 Other loans from foreign banks for acquisition of machinery and equipment at 6.0% fixed interest rate, collateralized by assets with a net book value of Ps.7,881 at December 31, 2000 12,046 -- ------------- ------------- F-17
EX-99.A.818th Page of 53TOC1stPreviousNextBottomJust 18th
[Download Table] 3,242,874 2,976,439 Less current portion of long-term debt 36,803 29,946 ------------- ------------- Long-term debt 3,206,071 2,946,493 Statutory seniority premium (Note 8) 128,030 189,981 Long-term debt and other non-current liabilities Ps. 3,334,101 Ps. 3,136,474 ============= ============= a. Annual maturities of long-term debt at December 31, 2001, are as follows: [Download Table] YEAR AMOUNT 2003 Ps. 1,403,946 2004 1,491,478 2005 25,878 2006 18,015 2007 7,176 --------------- Ps. 2,946,493 =============== b. On April 4, 1997, Pepsi-Gemex issued U.S.$160 million of 9.75% guaranteed senior notes (the "Guaranteed Notes") maturing in March 2004. Interest on the Guaranteed Notes is payable semiannually on March 30 and September 30 of each year. The Guaranteed Notes are guaranteed by all of Pepsi-Gemex's subsidiaries (the "Guarantors") except Bebidas Purificadas del Noreste, S. A. de C. V. and its subsidiaries through which the Company owns Tenedora and the Northeast Bottling Group. The Guaranteed Notes contain limitations that could restrict the payment of dividends and other payments, as well as restrict the ability of the Company to incur additional indebtedness, incur liens, issue loan guarantees, and sell fixed assets and investments in shares of subsidiaries if certain financial tests are not met. c. On September 1, 2000, Pepsi-Gemex entered into a syndicated loan agreement for an aggregate amount of U.S.$150 million (the "Syndicated Loan") maturing on February 28, 2002, which proceeds were used to pay for the purchase of Emvasa and to refinance existing indebtedness. Interest on the Syndicated Loan is payable utilizing a LIBOR rate, at the election of the Company, corresponding to periods ranging from one week and up to six months plus 175 basis points. Interest is payable at the end of the LIBOR interest period chosen by Pepsi-Gemex, or in the case of a six-month interest period, at three-month intervals. The Syndicated Loan is guaranteed by all of Pepsi-Gemex's material subsidiaries, as defined in the agreement (the "Subsidiary Guarantors"). The Company has the right to prepay the loans in whole or in part. The Syndicated Loan contains limitations that could restrict the payment of dividends and other payments, as well as restrict the ability of the Company to incur additional indebtedness, incur liens, issue loan guarantees, wind up, liquidate, merge or dissolve, sell fixed assets or make investments in shares of subsidiaries if certain financial tests are not met. d. On December 21, 2001, Pepsi-Gemex renewed the syndicated loan agreement for an aggregate amount of U.S. $150 million (the "Renewed Syndicated Loan") maturing on December 21, 2003. Interest on the Renewed Syndicated Loan is payable utilizing a LIBOR rate, at the election of the company, corresponding to periods ranging from one week and up to six months plus 162.5 basis points. Interest is payable at the end of the LIBOR interest period chosen by Pepsi-Gemex, or in the case of a six-month interest period, at three-month intervals. The Company has the right to prepay the loans in whole or in part. The limitations on certain operations agreed to in the initial Syndicated Loan were not modified. The Renewed Syndicated Loan has been irrevocably and unconditionally guaranteed by the following subsidiaries: Embotelladora Metropolitana, S. A. de C. V., Purificadora de Agua Los Reyes, S. A. de C. V., Industria de Refrescos del Noreste, S. A. de C. V. y Bebidas Purificadas del Sureste, S. A. de C. V. Additionally, the agreement establishes that any subsidiary representing more than 5% of annual consolidated revenues must guarantee the Renewed Syndicated Loan. Management believes the Company was in compliance with the covenants of its loan agreements at December 31, 2001. Also, under the most restrictive of the above limitations, Ps.1,099,620 was available at December 31, 2001 to pay dividends. F-18
EX-99.A.819th Page of 53TOC1stPreviousNextBottomJust 19th
8. STATUTORY SENIORITY PREMIUMS AND PENSION PLAN At December 31, 2000 and 2001, the liability for seniority premiums, included in long-term debt and other noncurrent liabilities, is Ps.128,030 and Ps.189,981, respectively. Net periodic cost was Ps.10,545, Ps.32,367 and Ps.38,293, for the years ended December 31, 1999, 2000 and 2001, respectively. Since other disclosures required by Mexican GAAP are not material to the consolidated financial statements, they are not included herein. During 2001, the Compensation Committee of the Company approved the adoption of a pension plan for certain of its executives; this pension plan was then ratified by the Board of Directors. The pension plan provides for defined benefits, in excess of those granted by the Mexican Social Security Institute, to the retirees or their beneficiaries. The employees are eligible for benefits if they meet certain age and years of service with the Company and are given credit for years of service prior to adoption of the pension plan. Pursuant to the bylaws of the pension plan, the pension plan will become effective January 1, 2002, subject to the filing of a notice of adoption and approval by the Ministry of Finance and Public Credit of the deductibility for income tax purposes of cash contributions to be made to the trust fund set up to manage pension plan Assets. The notice before the Ministry of Finance and Public Credit was filed on April 23, 2002. 9. SHAREHOLDERS' EQUITY a. At December 31, 2000 and 2001 majority shareholders' equity at historical and restated values consists of the following: [Enlarge/Download Table] 2000 HISTORICAL RESTATED TOTAL Capital stock Ps. 166,761 Ps. 711,458 Ps. 878,219 Additional paid-in capital 2,064,240 2,734,456 4,798,696 Retained earnings and reserves 1,061,512 1,882,026 2,943,538 Cumulative effect of deferred income tax and employee statutory profit-sharing (1,142,981) (157,209) (1,300,190) Deficiency in restated shareholders' equity -- (2,353,371) (2,353,371) -------------- -------------- -------------- Ps. 2,149,532 Ps. 2,817,360 Ps. 4,966,892 ============== ============== ============== [Enlarge/Download Table] 2001 HISTORICAL RESTATED TOTAL Capital stock Ps. 167,510 Ps. 711,423 Ps. 878,933 Additional paid-in capital 1,817,240 2,734,594 4,551,834 Retained earnings and reserves 1,675,794 1,811,977 3,557,771 Cumulative effect of deferred income tax and employee statutory profit-sharing (1,142,981) (157,209) (1,300,190) Adjustment to shareholders' equity from labor obligations upon retirement (43,403) -- (43,403) Deficiency in restated shareholders' equity -- (2,978,583) (2,978,583) -------------- -------------- -------------- Ps. 2,474,160 Ps. 2,192,202 Ps. 4,666,362 ============== ============== ============== At December 31, 2000 and 2001 the number of shares of capital stock consists of the following: [Enlarge/Download Table] 2000 SERIES B D L TOTAL Authorized 804,969,954 410,337,945 410,337,945 1,625,645,844 Unissued (18,950,264) (18,950,264) (18,950,264) (56,850,792) --------------- --------------- ---------------- --------------- Total shares issued 786,019,690 391,387,681 391,387,681 1,568,795,052 =============== =============== ================ =============== F-19
EX-99.A.820th Page of 53TOC1stPreviousNextBottomJust 20th
[Enlarge/Download Table] CPO's issued 391,387,681 391,387,681 391,387,681 1,174,163,043 Series B issued 394,632,009 - - 394,632,009 Repurchased shares (29,990,673) (18,818,673) (18,818,673) (67,628,019) --------------- --------------- ---------------- --------------- Total outstanding shares 756,029,017 372,569,008 372,569,008 1,501,167,033 =============== =============== ================ =============== [Enlarge/Download Table] 2001 SERIES B D L TOTAL Authorized 794,342,786 399,710,777 399,710,777 1,593,764,340 Unissued (8,323,096) (8,323,096) (8,323,096) (24,969,288) --------------- --------------- ---------------- --------------- Total shares issued 786,019,690 391,387,681 391,387,681 1,568,795,052 =============== =============== ================ =============== CPO's issued 391,387,681 391,387,681 391,387,681 1,174,163,043 Series B issued 394,632,009 - - 394,632,009 Repurchased shares (27,848,673) (16,676,673) (16,676,673) (61,202,019) --------------- --------------- ---------------- --------------- Total outstanding shares 758,171,017 374,711,008 374,711,008 1,507,593,033 =============== =============== ================ =============== 1. Series B shares (common, ordinary voting stock) must represent a minimum of 50% plus one share of the Company's total outstanding capital stock and may never be less than the sum of the outstanding Series D and Series L shares. Series B shares may be acquired by Mexican and foreign citizens and by Mexican and foreign enterprises under the terms provided for in Mexican foreign investment legislation. 2. Series D shares (limited voting cumulative preferred stock) may not represent more than 25% less one voting share of the Company's outstanding capital stock. Series D shares may be acquired by Mexican and foreign citizens and by Mexican and foreign enterprises. 3. Series L shares (limited voting stock) may not represent more than 25% of the Company's outstanding capital stock and can be acquired by Mexican and foreign citizens and by Mexican and foreign enterprises. The CPO's are certificates of ordinary participation. Each CPO represents one Series B share, one Series D share and one Series L share. Under Pepsi-Gemex bylaws and Mexican law, our annual net earnings, according to our annual financial statements, are applied as follows: - First, an amount equivalent to at least 5% of net earnings is segregated to build a legal reserve until such reserve is equal to 20% of our capital stock. Pepsi-Gemex commenced accumulation of this reserve in 1992 by applying 5% of our net earnings for the year ended December 31, 1991. As of December 31, 2001, Ps.175.4 million remained to be allocated to this reserve. - Second, the holders of B Shares may allocate a percentage of net profits determined at the annual meeting of shareholders to any special reserve, including a reserve for open-market purchases of our outstanding shares of capital stock. From 1992 through 2001, our shareholders approved a reserve in the total amount of Ps.870.0 million (nominal). - Third, net profits are allocated as determined by the holders of B Shares and may be distributed as dividends, subject to the restrictions referred to above and to the following rights and preferences: - During the ten-year term following the date of issuance of the D Shares, the holders of the D Shares are entitled to the following rights, in accordance with Article 113 of the General Law of Commercial Corporations: - Dividends to the holders of the B and L Shares cannot be paid unless the holders of the D Shares have previously received a dividend of Ps.0.00555555555 per share per annum (the "minimum cumulative dividend"), equivalent to five percent of the nominal value of the D Shares, or Ps.0.11111111111 per share. If dividends are not paid in any fiscal year, or if they F-20
EX-99.A.821st Page of 53TOC1stPreviousNextBottomJust 21st
are less than the mentioned amount, such dividend or the unpaid balance must be accumulated and shall be paid with the preference described herein. - Once the minimum cumulative dividend is paid to the holders of the D Shares, the shareholders may declare the payment of additional dividends on a pro rata basis, however, the holders of the D Shares shall have the right to receive a dividend in the amount of the dividend paid to holders of the B and L Shares, multiplied by 145% (deducting, for purposes of determining such dividend, the amount that corresponds to the minimum cumulative dividend). - At the end of the ten-year term, the holders of the shares will have the following rights: A. holders of D Shares will be entitled to receive any unpaid portion of the minimum cumulative dividend; B. once the minimum cumulative dividend has been paid to the holders of the D Shares, the shareholders may declare the payment of additional dividends, in which case the holders of the B and L Shares will receive the same amount that the holders of the D Shares received as a minimum cumulative dividend up to the amount such that all shareholders will have received the same amount once those dividends are paid; and C. once the dividends referred to in clause B above are paid, the shareholders may declare additional dividends on a pro rata basis. In the event of liquidation of Pepsi-Gemex, holders of Series D shares will be entitled to a liquidation preference (the "Liquidation Preference") equal to (i) the accrued but unpaid Minimum Cumulative Dividend and (ii) 5% of the stated value of Series D share. Following payment of the Liquidation Preference, holders of Series B and L shares will be entitled to receive, if available, an amount equal to the Liquidation Preference per Series D share. Following payment in full at an amount equal to the Liquidation Preference per Series D share, Series B, Series L and Series D share will share equally, on a per share basis, in any remaining amounts payable. b. In February 1999, Pepsi-Gemex adopted a revised executive stock ownership program that provides options to purchase its Series T Shares to its officers and employees. This program replaced the program that had previously been in place prior to 1996. Under the program, the officers and employees have the right to receive, based on their position in the company, the amount of T Shares specified in the program for that position, on a yearly basis, or in the case of the Chairman of the Board and the Chief Operating Officer, every two years. Only individuals who are currently employed by the Company can hold the T Shares. The program contemplates the grant of options after May 1 of each year. Under the program, the exercise price is determined by reference to the closing price of the CPOs on the Mexican Stock Exchange on the last trading day prior to May 1 of each year of the grant. The issuance of the options to be granted each year is subject to the final approval of the Compensation Committee of the Board of Directors ("Compensation Committee"). Holders of T Shares will be entitled, for every three T Shares held, to receive dividends and distributions equal to those paid by Pepsi-Gemex in respect of one B Share, one L Share and one D Share. Additionally, holders of T Shares will be entitled to convert T Shares into B Shares, L Shares and D Shares at a rate of one B Share, one L Share and one D Share, that is, one CPO, for every three T Shares converted. The holder of the T Shares must request conversion into Series B, D and L shares and in turn, into CPOs within 180 days of the delivery of the T Shares, or within such other period as our Compensation Committee may determine. T Shares have no voting rights and do not constitute capital of Pepsi-Gemex. Pepsi-Gemex has authorized 25,500,000 T Shares which have been reserved for issuance under the revised option program of which 530,712 have been converted into 176,904 B shares, 176904 D shares and 176,904 L shares. Activity for options of the T Shares during each of the years in the three-year period ended December 31, 2001, is as follows: F-21
EX-99.A.822nd Page of 53TOC1stPreviousNextBottomJust 22nd
[Download Table] 1999 2000 2001 (In thousands) Outstanding at the beginning of the year 12,686 16,006 23,054 Granted 3,320 7,048 -- Exercised -- -- -- Forfeited -- -- -- ------ ------ ------ Outstanding at the end of the year 16,006 23,054 23,054 ====== ====== ====== Weighted average remaining life (in years) 7.10 7.59 6.59 ====== ====== ====== Exercisable at the end of the year 4,963 6,382 12,686 ====== ====== ====== Weighted average remaining life (in years) 6.3 5.5 5.4 ====== ====== ====== Options granted during the years ended December 31, 1999 and 2000 have an exercise price per T share of Ps.5.38 and Ps.2.65 (nominal pesos), respectively. The weighted average exercise price of options outstanding at December 31, 1999, 2000 and 2001 was Ps.5.23, Ps.4.44 and Ps.4.44 (nominal pesos), respectively. The weighted average exercise price of options exercisable at December 31, 2001 was Ps.5.19 (nominal pesos), respectively. c. At the Shareholders' Ordinary and Extraordinary General Meetings of April 27, 2000, the following resolutions were adopted: (i) to cancel 24,969,288 shares which were deposited in treasury; (ii) to increase capital share by 216,000,000 shares in the manner decided by the Board of Directors or the executive committee through the issuance of 72,000,000 of each of the Series B, D and L shares; (iii) to increase of the legal reserve in the amount of Ps.36,167.9 (nominal) and; (iv) to rescind the previous authorization to issue Series B, D, and L shares, other than the 8,323,096 of each that were subject to conversion pursuant to the Revised Option Plan to the extent such shares are not issued and paid for before March 31, 2001. d. At the Shareholders' General Ordinary Meeting of April 30, 2001, the following resolutions were adopted: (i) to increase the legal reserve in the amount of Ps.24,693.05 (nominal); (ii) to record a special reserve of Ps.7.19 for the payment of the purchase price of the shares of Emvasa not yet owned by the Company and (iii) to maintain the reserve for the acquisition of Pepsi-Gemex own shares in the amount of Ps.870,000. e. At the shareholders' General Ordinary Meeting of December 20, 2001, the application of Ps.246,930.5 from retained earnings to pay dividends within the first six months of 2002 as follows was approved: (i) payment to holders of Series D shares the amount of Ps.0.2203736309 for each of the 374,711,008 outstanding Series D shares, this amount includes the preferred dividend corresponding to each share; (ii) payment to holders of Series B shares the amount of Ps.0.145075187 for each of the 758,171,017 outstanding Series B shares; (iii) payment to holders of Series L shares the amount of Ps.0.145075187 for each of the 374,711,008 outstanding Series L Shares; (iv) holders of CPO's issued based on one Series B share, one Series D share and one Series L share, would receive Ps.0.510526682 for each of the CPO's, this amount includes preferred dividend of Series D shares as well as Series B and Series L shares dividend included in the own CPO's. f. Reserves include a legal reserve and a reserve for the repurchase of capital stock. At December 31, 2001, the Company had repurchased 61,202,019 shares that represented 3.90% of total shares issued. The repurchased shares have been deducted from capital stock outstanding. Reserves at December 31, 2001, include a legal reserve of Ps.175,351(nominal), which may not be used to pay dividends. Under Mexican law, this reserve must be increased by 5% of annual net income until it represents 20% of capital stock. g. As of December 31, 2001, retained earnings and the deficiency in restated shareholders' equity include Ps.2,492,757 of retained earnings that have not been distributed by the subsidiaries and associates of the Company. F-22
EX-99.A.823rd Page of 53TOC1stPreviousNextBottomJust 23rd
h. Net comprehensive (loss) income presented in the accompanying consolidated statements of changes in shareholders' equity represents the Company's total activity during each year, and includes the net income of the year, plus other comprehensive items of the same period, which, in accordance with accounting principles generally accepted in Mexico, are presented directly in shareholders' equity without affecting the statement of income. In 2000 and 2001, the other comprehensive (loss) income items consist of deficiency in restated shareholders' equity. Furthermore, in 2000 and 2001 net comprehensive (loss) income includes the cumulative effect of deferred income tax and the adjustment to shareholders' equity from labor obligations upon retirement, respectively. i. Shareholders' equity, except restated paid-in capital and tax retained earnings, will be subject to a 35% dividend tax, payable by the Company, in the event of distribution. Beginning January 1, 2003, such rate will be reduced by one percentage point each year until reaching 32% in 2005. Any income tax paid on such distribution may be credited against future income tax payable by the Company in the three fiscal years following such payment. Tax balances of shareholders' equity accounts as of December 31, 2001, are as follows: [Download Table] Tax restated paid-in capital Ps. 5,416,516 Consolidated tax retained earnings 258,177 Consolidated reinvested tax retained earnings - --------------- Total Ps. 5,674,693 =============== 10. FOREIGN CURRENCY BALANCES AND TRANSACTIONS a. Monetary position in U.S. dollars at December 31, 2000 and 2001 is as follows: [Enlarge/Download Table] 2000 2001 (THOUSANDS OF MEXICAN PESO (THOUSANDS OF MEXICAN PESO U. S. DOLLARS) EQUIVALENT U.S. DOLLARS) EQUIVALENT Assets: Current $ 1,075 Ps. 10,831 $ 3,320 Ps. 30,411 -------------- ------------------ -------------- ------------------ Liabilities: Current (63,217) (636,888) (34,050) (311,893) Long-term (318,227) (3,206,012) (321,669) (2,946,493) -------------- ------------------ --------------- ------------------- Total liabilities (381,444) (3,842,900) (355,719) (3,258,386) -------------- ------------------ -------------- ------------------ Position-short $ (380,369) Ps. (3,832,069) $ (352,399) Ps. (3,227,975) ============== ================== ============== ================== b. At December 31, 2001, the Company had machinery and equipment of foreign origin with an aggregate net book value as follows: [Download Table] FOREIGN MEXICAN PESO CURRENCY EQUIVALENT U.S. dollars 73,825 Ps. 676,237 Canadian dollars 32,423 197,681 Deutsche marks 35,697 147,955 French francs 327,917 405,262 c. Foreign currency denominated transactions were as follows: F-23
EX-99.A.824th Page of 53TOC1stPreviousNextBottomJust 24th
[Enlarge/Download Table] 2000 2001 (THOUSANDS OF MEXICAN PESO (THOUSANDS OF MEXICAN PESO U. S. DOLLARS) EQUIVALENT U.S. DOLLARS) EQUIVALENT Interest expense $ 31,872 Ps. 321,096 $ 30,196 Ps. 292,410 Interest income 93 934 3 29 Resin purchases 61,830 611,544 71,410 664,625 Fixed asset sales 1,287 12,966 -- -- Fixed asset purchases 7,411 73,024 13,065 118,404 Rent expense 29,491 297,111 22,170 213,961 d. Exchange rates quoted at December 31, 2000 and 2001 and on February 26, 2002 were. Ps.9.65, Ps.9.16 and Ps.9.08 (historical values) per U.S. $1.00, respectively 11. TRANSACTIONS WITH RELATED PARTIES The Company engages in transactions with affiliated companies that are either wholly owned or controlled by the Company's largest shareholder or members of his family. In addition, the Company purchases concentrate from PCM, who together with its affiliates, constitutes the Company's second largest shareholder. According to the Company's bylaws, such transactions must be approved by a committee of the Board of Directors constituted specifically for the purpose of reviewing transactions between the Company and affiliates. The committee is responsible to determine that affiliate transactions are on terms comparable to terms at which unrelated parties would consummate such transactions. Transactions with related parties, carried out in the ordinary course of business, were as follows: [Download Table] 1999 2000 2001 Sugar purchases (1) Ps. 721,492 Ps. 798,160 Ps. 944,584 Concentrate purchases 883,515 1,052,217 1,230,220 Administrative services expense 7,317 6,100 4,704 Purchase of fixed assets 17,335 105,789 59,905 ---------- (1) In September 2001, the Federal Government expropriated the sugar mills owned by the principal shareholder of the Company, which was then a supplier to the Company, Beginning September 2001 the Company purchases this raw material from non-related parties. 12. INCOME TAX, TAX ON ASSETS, EMPLOYEE STATUTORY PROFIT-SHARING AND SUBSEQUENT EVENT - 2002 TAX REFORM Pepsi-Gemex and its subsidiaries, with the exception of Emvasa and its subsidiaries, file consolidated income tax and tax on assets returns in the proportion in which Pepsi-Gemex owns the voting stock of its subsidiaries at the balance sheet date. Emvasa and its subsidiaries file a separate consolidated income tax and tax on assets returns in the proportion in which Emvasa owns the voting stock of its subsidiaries at the balance sheet date. Beginning January 1, 2002, the proportion will be calculated based on the daily average equity maintained by Pepsi-Gemex and Emvasa of its subsidiaries during the year, and the tax results of the subsidiaries are consolidated at 60% of such proportion. Prepayments of income tax and tax on assets of both the holding company and its subsidiaries are made as if the holding company did not file a consolidated tax return. a. The provisions for income tax, tax on assets and employee statutory profit-sharing are as follows: F-24
EX-99.A.825th Page of 53TOC1stPreviousNextBottomJust 25th
[Download Table] YEAR ENDED DECEMBER 31, 1999 2000 2001 Income taxes: Current Ps. 263,610 Ps. 73,018 Ps. 149,121 Deferred (615) (247,437) 79,725 Tax on assets 75,233 - -------------- -------------- -------------- Ps. 338,228 Ps. (174,419) Ps. 228,846 ============== ============== ============== [Enlarge/Download Table] YEAR ENDED DECEMBER 31, 1999 2000 2001 Employee statutory profit-sharing: Current Ps. 3,414 Ps. 6,097 Ps. 5,878 Deferred 1 58,874 (10,725) -------------- -------------- -------------- Ps. 3,415 Ps. 64,971 Ps. (4,847) ============== ============== ============== b. The Mexican income tax rate is 35%. Beginning January 1, 2003, such rate will be reduced by one percentage point each year until reaching 32% in 2005. Reconciliation of the statutory income tax rate and effective rate as a percentage of income before provisions for the year ended December 31, 2000 and 2001 is: [Enlarge/Download Table] Statutory Tax Rate 35.0% 35.0% Carryforward of tax losses for which no deferred tax assets were previously recorded (27.6%) -- Effect arising from assessment of realization of carryforward tax losses in future years (56.0%) (8.5%) Effects of inflation (9.1%) 2.4% Effect arising from assessment of realization of tax benefits in future years from tax on assets -- (7.9%) Other permanent differences 14.8% 6.9% ---------- -------- Effective rate (42.9%) 27.9% ========== ======== c. SUBSEQUENT EVENT - Changes to the income tax law were enacted by the Mexican government on January 1, 2002, included the following: - In addition to the reduction in the income tax rate and the new procedure to determine the proportion in which the holding company owns the shares of its subsidiaries, as mentioned in preceding paragraph, the Company no longer has the option of deferring the payment of 5% of taxable income until distribution of related profits. - Any income tax paid on distributed dividends may be credited against future income tax payable by the Company in the three fiscal years following such payment. - The obligation to withhold income tax for dividends paid to individuals or nonresidents is eliminated. - Profit-sharing paid is no longer deductible against income taxes. The effects of these changes on the calculation of deferred taxes must be recorded as of January 1, 2002, using the tax rate applicable when the temporary differences are expected to reverse. The Company has not fully quantified the net effect derived from these changes. d. At December 31, the main items comprising the balance of deferred income tax and employee statutory profit-sharing are as follows: F-25
EX-99.A.826th Page of 53TOC1stPreviousNextBottomJust 26th
[Download Table] 2000 2001 Deferred income tax liabilities: Property, plant and equipment Ps. 721,288 Ps. 783,995 Inventories 377,176 348,833 Other 55,049 45,871 -------------- -------------- Total 1,153,513 1,178,699 -------------- -------------- Deferred income tax assets: Tax inventory from 1986 (or 1988) (33,193) (24,937) Allowance for doubtful accounts (26,090) (37,390) Effect of tax loss carryforwards (252,623) (115,941) Effect of recoverable tax on assets - (122,906) Other (57,008) (104,973) -------------- -------------- Total (368,914) (406,147) -------------- -------------- Net non-current liability 784,599 772,552 -------------- -------------- [Enlarge/Download Table] 2000 2001 Deferred employee statutory profit-sharing liabilities: Property, plant and equipment Ps. 100,263 Ps. 69,101 Inventories 64,016 76,446 Other 10,922 16,420 -------------- -------------- Total 175,201 161,967 -------------- -------------- Deferred employee statutory profit sharing assets: Tax inventory from 1986 (or 1988) (9,292) (6,674) Allowance for doubtful accounts (7,090) (3,895) Effect of tax loss carryforwards - (8,144) Other (15,229) (16,649) -------------- -------------- Total (31,611) 35,362 -------------- -------------- Net non-current liability 143,590 126,605 -------------- -------------- Total Ps. 928,189. Ps. 899,157 =============== ============== e. Due to an improvement in the circumstances used to assess the recovery of tax on assets paid and the benefits from tax loss carryforwards, in 2001 Ps.122,906 of allowance for recoverable tax on assets was cancelled and credited to results. f. Tax on assets for which the prepaid income tax expense has been recognized can be recovered subject to certain conditions. Restated amounts as of December 31, 2001 and expiration dates are as follows: [Download Table] YEAR OF EXPIRATION TAX ON ASSETS 2004 Ps. 4,167 2006 3,915 2008 4,913 2009 36,538 2010 62,845 2011 10,528 -------------- Ps. 122,906 ============== Also, certain subsidiaries have restated tax losses originated before tax consolidation which may only be used to offset income generated by such subsidiaries. Expiration dates and restated amounts are as follows: F-26
EX-99.A.827th Page of 53TOC1stPreviousNextBottomJust 27th
[Download Table] TAX YEAR OF LOSS EXPIRATION CARRYFORWARDS 2007 Ps. 29,220 2008 121,907 2009 32,508 2010 38,069 2011 32,112 -------------- Ps. 253,816 ============== As of December 31, 2001, certain subsidiaries have carryforward tax losses of Ps.77,445, that originated after the tax consolidation, which may only be used to offset income generated by such subsidiaries. g. For the year ended December 31, 1999, the Company amortized carryforward tax losses that resulted in a benefit of Ps.257,983, which is reflected as an extraordinary gain in the consolidated statement of income. h. For the year ended December 31, 2001 the change in deficiency in restated shareholders' equity, as shown in the consolidated statement of changes in shareholders' equity, is presented net of the effect of Ps.39,119 for the related deferred income tax. 13. FINANCIAL INSTRUMENTS The estimated fair value amounts presented below have been determined by using available market information or other valuation methodologies that require considerable judgment in interpreting market values and estimates. Consequently, the estimates presented are not necessarily indicative of the amounts the Company could realize in the market. The use of different assumptions in market values and other valuation methodologies may have a material effect on the fair values. Except for that presented in the following table, the book value of the Company's financial instruments approximates fair value, given the short-term period for settlement or payment. [Enlarge/Download Table] DECEMBER 31, -------------------------------------------------------- 2000 2001 --------------------------- ------------------------- RECORDED ESTIMATED RECORDED ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE Long-term debt -- variable interest rates Ps. 1,630,938 Ps. 1,630,938 Ps. 1,510,839 Ps.1,510,839 Long-term debt -- fixed interest rates 1,611,936 1,699,077 1,465,600 1,506,626 ------------ ------------- ------------- ------------ Ps. 3,242,874 Ps. 3,330,015 Ps. 2,976,439 Ps. 3,017,465 ============== ============= ============= ============= 14. COMMITMENTS AND CONTINGENCIES a. The Company leases certain facilities, which include bottling plants, warehouses, distribution centers and office space. In addition, the Company leases 1,439 trucks, 67,504 in-store refrigerated displays cases and other machinery and equipment. The leases are primarily operating leases and are primarily payable in U.S. dollars. At December 31, 2001, future minimum commitments under operating leases are as follows: F-27
EX-99.A.828th Page of 53TOC1stPreviousNextBottomJust 28th
[Download Table] YEAR ENDING DECEMBER 31, AMOUNT 2002 $ 151,042 2003 79,400 2004 16,800 2005 9,258 For the years ended December 31, 1999, 2000 and 2001, rent and lease expenses charged to operations were Ps.337,253, Ps.297,111 and $213,961, respectively. b. The Ministry of Finance and Public Credit has asserted that the interest payments made on the Guaranteed Notes are not eligible for reduced withholding levels under Mexico's reduced withholding rate rule based on Pepsi-Gemex's failure to make, on a timely basis, certain filings containing information relating to the issuance of the Guaranteed Notes. Pepsi-Gemex has since filed all of the required information and, accordingly, expects interest payments on the Guaranteed Notes will qualify for the reduced rate rule. The Ministry of Finance's initial assertion with respect to the September 30, 1997 interest payment only, was confirmed by the Mexican tax court. As a result, the Company is currently contesting the position of the Ministry of Finance in Mexican Federal Court. The Ministry of Finance and Public Credit is seeking approximately Ps.28.0 million (including interest but not including penalties) in respect of the September 30, 1997 initial interest payment. In 2002, the Ministry of Finance notified the Company that it was also seeking approximately Ps.120.0 million (including interest but not including penalties) in respect of interest payments made between March 30, 1998 and September 30, 2001. Although the Company has not received a notice relating to the remaining payments to be made between 2002 and 2004, the Company estimates the imposition of the higher withholding rate would result in an incremental obligation of approximately Ps.62.0 million (excluding interest and penalties) (above the amount that would be required at the reduced withholding rate). As a result of the Mexican Tax court ruling described above, Pepsi-Gemex has recorded a reserve on its balance sheet of Ps.28 million relating to its potential liability in this matter. However, based on the advice of outside tax counsel, the Company does not believe that the ultimate resolution of this dispute will have a material adverse effect on its results of operations of financial condition. However, it cannot assure that the ultimate extent of its liability for withholding obligations or associated penalties or interest will not significantly exceed its expectations or that the ultimate resolution of this dispute will not materially and adversely affect its results of operations or financial position. c. In connection with the acquisition of the Northeast Bottling Group, a company owned by Pepsi-Gemex acquired all of the outstanding indebtedness of the companies comprising the Northeast Bottling Group. Included in this indebtedness was a promissory note that had been assigned to Sharp Capital Inc., an investment advisory firm, and a related arbitration award in favor of Sharp Capital, Inc, and against the companies in the Northeast Bottling Group. The note and arbitration award were acquired by a subsidiary of Pepsi-Gemex for value in September 1998 in a transaction notarized in Mexico. Subsequent to our subsidiary's acquisition of the promissory note and arbitration award, the assets of Sharp Capital Inc. were placed under the control of a court-appointed Special Master. Some of Pepsi-Gemex subsidiaries are currently defendants in a lawsuit, pending in a U.S. federal court in Texas, brought by International Transactions Ltd., an entity claiming to be a former client of Sharp Capital Inc. International Transactions Ltd. received an assignment in February 2001of all of the Special Master's rights in Sharp Capital's arbitration award and is seeking confirmation and enforcement of that award (which totaled $11.4 million) against the companies in the Northeast Bottling Group. In addition to the award, the plaintiff is seeking post-judgment interest and costs. The Company is contesting the jurisdictional basis of this lawsuit, and intend, if necessary, to contest the substance of the lawsuit in the appropriate forum. Among other things, Pepsi-Gemex believes that purported assignment by the Special Master was ineffective because all rights to the note and the award had been sold to its subsidiary, for value, two and a half years earlier. The Company believes that the ultimate resolution of this proceeding will not have a material adverse effect on its results of operations. However, it cannot assure that the ultimate extent of its liability for the arbitration award will not significantly exceed its expectations or that the ultimate resolution of this dispute will not materially and adversely affect its results of operations or financial position. F-28
EX-99.A.829th Page of 53TOC1stPreviousNextBottomJust 29th
d. Embotelladora Moderna, S.A. de C.V. and Embotelladora de Refrescos Mexicanos, S.A. de C.V., subsidiaries of Emvasa, are parties in a lawsuit against the National Water Commission. These subsidiaries claim that they made excess payments to the National Water Commission between 1990 and 1996, which resulted in a credit balance at the Commission. As a result, from 1997 through a portion of 2001, they withheld a portion of their required payments to the Commission, expecting that the Commission would draw the payments from their credit balance. However, the commission did not recognize their excess payments. The demand of the National Water Commission is Ps.82.8 million. The Company believes it is probable that this litigation will have an adverse outcome; therefore, a contingent liability for the entire amount of the demand has been recorded on its balance sheet. e. The Company currently possesses warehouse certificates (similar to negotiable warehouse receipts in the United States) redeemable for sugar at the official warehouse for sugar which is operated by Almacenadora Mexico, S.A. The Company has presented these certificates to Almacenadora but they have refused to honor its certificates. The certificates are redeemable for approximately 14 tons of sugar, which on December 31, 2001, was worth approximately Ps.71.0 million at the then prevailing price per ton of sugar. The Company has made a formal demand for payment either in sugar or in cash and Almacenadora has not responded. The Company plans to initiate commercial and criminal proceedings against Almacenadora if they do not comply with its demand. The certificates are recorded on the Company's balance sheet at a value of Ps.71.0, their cost basis to it, as it expects to recover the entire value of the certificates, either in sugar or in cash. f. The Company and its subsidiaries are parties to certain legal proceedings incidental to its business. The Company believes that none of this proceedings is likely to have a material adverse effect on the Company. 15. NEW ACCOUNTING PRINCIPLES In December 2001, the MIPA issued new Bulletin C-9, "Liabilities, Provisions, Contingent Assets and Liabilities, and Commitments" ("C-9"), which is effective beginning January 1, 2003, although early application is encouraged. C-9 supersedes the former Bulletins C-9, "Liabilities" and C-12, "Contingencies and Commitments", and establishes additional guidelines clarifying the accounting for liabilities, provisions, and contingent assets and liabilities, and establishes new standards for the use of present value techniques to measure liabilities and accounting for the early settlement of obligations. On January 2002 the MIPA issued new Bulletin C-8, "Intangible Assets" ("C-8"), whose provisions are mandatory for fiscal years beginning January 1, 2003, although early application is encouraged. C-8 supersedes the former Bulletin C-8, "Intangibles" and establishes that project development costs should be capitalized if they fulfill the criteria established for recognition as assets. Any preoperating costs incurred after the effective date of this Bulletin should be recorded as an expense. The unamortized balance of capitalized preoperating costs under the former Bulletin C-8 will continue to be amortized. C-8 requires identifying all intangible assets to reduce as much as possible the goodwill relative to business combinations. The Company has not fully assessed the effects of adopting these two new accounting principles in its financial position and results of operations. However, as the provisions recorded and development expenses incurred are immaterial, the Company's management believes that adoption of such new principles will not have a material effect on its financial position and results of operations. 16. SUBSEQUENT EVENTS In January of 2002, the Company signed a supply agreement with Reid Mexico, S.A. de C.V., for the purchase of up to 1.8 million jugs in 2002 and 1.3 million jugs in 2003, at a fixed price per jug.. The executive share ownership program referred to in Note 9 was amended on February 27, 2002 to extend the term for the exercise period of the options from three years to seven years from the date of vesting. Therefore, under the program currently in place, options granted under the revised option program will vest three years F-29
EX-99.A.830th Page of 53TOC1stPreviousNextBottomJust 30th
after the date of grant by the Compensation Committee, and are exercisable at any time during a term of seven years thereafter. At the Shareholders' General Ordinary Meeting of April 30, 2002, it was resolved that Ps.297,594.0 of Pepsi-Gemex retained earnings will be applied to make a dividend payment to holders of its shares within the year of 2002 as follows: (i) Ps.0.25743226 for each of the 374,711,008 shares of Series D Shares outstanding (including the Series D preferred dividend); (ii) Ps.0.17753949 for each of the 758,171,017 shares of Series B Shares outstanding; and (iii) Ps.0.17753949 for each of the 374,711,008 shares of Series L Shares outstanding. Holders of CPOs will receive Ps.0.61251124 for each of their CPOs (which includes their Series D preferred dividend, their Series B dividend and their Series L dividend). In May of 2002, The Pepsi Bottling Group, Inc. ("PBG"), announced that it had entered into non-binding agreements with the Company's two largest shareholders, regarding a potential transaction to acquire the Company. Neither PBG nor either the Company's shareholders is obligated to enter or complete this transaction on the terms agreed upon. If the proposed transaction is not completed or is completed on less advantageous terms to the Company's shareholders, the market price of the Company's securities could be adversely affected. In June of 2002, the Company entered into a lease with Cocoser, S.A. de C.V., a company owned and controlled by our major shareholder's brother, for the rental of two machines to be used in the production of jugs. The term of this lease is three years and will begin to run in the second half of 2002. The value of the equipment being leased by the Company is approximately $2.2 million. The Company will bear all expenses of installing, operating and maintaining the equipment and will pay a variable rent based on the Company's level of use of the equipment. The lease provides for a minimum annual rent of $1.0 million per year, which corresponds to using the equipment at 70% of its capacity. The Company has the option to purchase the equipment at fair market value at the end of the lease. On 2002, the Compensation Committee took formal action to ratify the grant and issue 7,047,726 of the options that the Company previously committed to issue relating to the 2000 fiscal year. As required by the program, these options will vest in 2003 at an exercise price of Ps.2.6466 per T Share (or Ps.7.94 per CPO), determined by reference to the closing price of the CPOs on April 28, 2000. As a result of the amendments to the Securities Market Law, for the years 2001 and beyond, Pepsi-Gemex is no longer able to issue Series B, D and L Shares (or the CPOs that would represent them) in addition to those that were reserved for issuance prior to such amendments. Consequently, the Company will not be able to support the exercise of the options granted during 2001 and 2002 as a result of the fact that the Company does not have the Series B, D and L shares or the corresponding CPOs that would be issued to executives that request the convertion of Series T shares that such executives would receive upon the exercise of such options. The Compensation Committee is in the process of determining alternative ways to compensate Pepsi-Gemex executives in lieu thereof. 17. CONSOLIDATING CONDENSED FINANCIAL STATEMENTS The following are consolidating condensed financial statements which present, in separate columns, Pepsi-Gemex carrying its investment in subsidiaries under the equity method, the guarantors of the Guaranteed Notes on a combined basis and Bebidas Purificadas del Noreste, S.A. de C.V. and its subsidiaries ("BPN") through which the Company owns the Northeast Bottling Group, (the only subsidiaries of the Company that are not guarantors of the Guaranteed Notes), with additional columns reflecting eliminations and the consolidated totals as of and for the years ended December 31, 1999, 2000 and 2001. Pepsi-Gemex is a holding company with no independent operations other than its investments in its subsidiaries, the guarantors of the Guaranteed Notes are wholly owned and the guarantors have jointly and severally guaranteed the Guaranteed Notes on a full and unconditional basis. There are no restrictions on the Guarantors' ability to pay dividends, make loans or advances to Pepsi-Gemex. F-30
EX-99.A.831st Page of 53TOC1stPreviousNextBottomJust 31st
CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1999 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated ------------ ------------- ------------- ------------- ------------- REVENUES: Net sales Ps. 649,927 Ps. 11,316,621 Ps. 1,214,910 Ps. (5,041,014) Ps. 8,140,444 Other 14,385 55,323 19,751 (40,448) 49,011 ----------- ----------- ----------- ----------- ----------- 664,312 11,371,944 1,234,661 (5,081,462) 8,189,455 ----------- ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Cost of sales -- 6,055,986 725,958 (3,137,928) 3,644,016 Selling expenses -- 3,525,473 309,079 (1,002,349) 2,832,203 General and administrative expenses 12,046 645,365 60,182 (257,170) 460,423 Depreciation and amortization -- 278,930 33,532 (4,003) 308,459 ----------- ----------- ----------- ----------- ----------- 12,046 10,505,754 1,128,751 (4,401,450) 7,245,101 ----------- ----------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 652,266 866,190 105,910 (680,012) 944,354 ----------- ----------- ----------- ----------- ----------- INTEGRAL (INCOME) COST OF FINANCING - Net: Interest income (394,716) (178,756) (6,677) 505,695 (74,454) Interest expense 436,221 429,921 77,513 (517,937) 425,718 Foreign exchange income - net (124,896) (471) (11,939) -- (137,306) Monetary position gain (167,293) (110,395) (70,395) -- (348,083) ----------- ----------- ----------- ----------- ----------- (250,684) 140,299 (11,498) (12,242) (134,125) ----------- ----------- ----------- ----------- ----------- OTHER EXPENSE - Net (64,516) (13,498) -- (25,434) (103,448) ----------- ----------- ----------- ----------- ----------- INCOME BEFORE PROVISIONS PROVISIONS: 838,434 712,393 117,408 (693,204) 975,031 ----------- ----------- ----------- ----------- ----------- PROVISIONS: Income taxes and asset tax 15,588 20,177 8,126 36,354 80,245 Employee statutory profit-sharing -- 15,911 (7,020) (5,476) 3,415 ----------- ----------- ----------- ----------- ----------- 15,588 36,088 1,106 30,878 83,660 ----------- ----------- ----------- ----------- ----------- CONSOLIDATED NET INCOME Ps.822,846 Ps.676,305 Ps.116,302 Ps.(724,082) Ps.891,371 =========== =========== =========== =========== =========== F-31
EX-99.A.832nd Page of 53TOC1stPreviousNextBottomJust 32nd
CONSOLIDATING CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION YEAR ENDED DECEMBER 31, 1999 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated ------------ ------------- ------------- -------------- ------------- RESOURCES (USED IN) PROVIDED BY OPERATING ACTIVITIES Ps. (303,912) Ps. 1,472,573 Ps. 54,427 Ps. -- Ps. 1,223,088 ------------ ------------- ------------- -------------- ------------- FINANCING ACTIVITIES: Net change in notes payable (211,139) 108,064 -- -- (103,075) Net change in long-term debt (267,542) (58,346) (41,732) -- (367,620) Repurchase of capital stock - net 537,792 (565,142) 27,350 -- -- Dividends paid Affiliates (11,172) -- -- -- (11,172) ------------ ------------- ------------- -------------- ------------- Resources (used in) generated by financing activities 47,939 (515,424) (14,382) -- (481,867) ------------ ------------- ------------- -------------- ------------- INVESTING ACTIVITIES: Acquisition and sale of property, plant and equipment - net -- (941,141) (34,463) -- (975,604) Increase in other assets -- (30,039) -- -- (30,039) Decrease (increase) in bottles and cases -- 42,492 (42,492) -- -- Loan (to) from associated company -- (13,498) 13,498 -- -- ------------ ------------- ------------- -------------- ------------- Resources used in investing activities -- (942,186) (63,457) -- (1,005,643) ------------ ------------- ------------- -------------- ------------- Increase (decrease) in cash and cash equivalents (255,973) 14,963 (23,412) -- (264,422) CASH AND CASH EQUIVALENTS: Merging cash 150 (150) -- -- -- Cash for consolidating effects -- 51,087 -- -- 51,087 Beginning of year 288,438 66,258 51,155 -- 405,851 ------------ ------------- ------------- -------------- ------------- End of year Ps. 32,615 Ps. 132,158 Ps. 27,743 Ps. -- Ps. 192,516 ============ ============= ============= ============= ============= F-32
EX-99.A.833rd Page of 53TOC1stPreviousNextBottomJust 33rd
CONSOLIDATING CONDENSED BALANCE SHEET DECEMBER 31, 2000 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex ASSETS Parent Only Combined BPN Eliminations Consolidated -------------- -------------- -------------- -------------- -------------- CURRENT ASSETS: Cash and cash equivalents Ps. 40,614 Ps. 149,354 Ps. 36,807 Ps. -- Ps. 226,775 Accounts receivable - net 26,503 5,278,228 1,697,530 (5,988,214) 1,014,047 Affiliated companies 4,004,263 -- -- (4,004,263) -- Inventories -- 533,592 76,455 446,887 1,056,934 Prepaid expenses 26,786 27,519 10,676 (26,786) 38,195 -------------- -------------- -------------- -------------- -------------- Total current assets 4,098,166 5,988,693 1,821,468 (9,572,376) 2,335,951 DEFERRED INCOME TAX 104,228 -- -- (104,228) -- PROPERTY, PLANT AND EQUIPMENT - Net -- 6,919,860 272,067 70,520 7,262,447 INVESTMENT IN SUBSIDIARIES AND ASSOCIATED COMPANIES 5,755,949 15,552 929,786 (6,701,287) -- EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED - Net 662,574 103,167 -- 502,598 1,268,339 DEBT ISSUANCE COSTS 25,485 -- -- (25,485) -- OTHER ASSETS -- 708,171 397,804 (684,632) 421,343 -------------- -------------- -------------- -------------- -------------- TOTAL ASSETS Ps. 10,646,402 Ps. 13,735,443 Ps. 3,421,125 Ps. (16,514,890) Ps.11,288,080 ============== ============== ============= =============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable Ps. 879,754 Ps. 6,915 Ps. -- Ps. (6,915) Ps. 879,754 Current portion of long-term debt 171,322 36,803 -- (171,322) 36,803 Trade accounts payable -- 548,835 36,293 2,734 587,862 Taxes payable, accrued expenses and other liabilities -- 549,360 250,053 (248,463) 550,950 Due to affiliates 1,505,308 5,428,798 2,471,384 (9,401,961) 3,529 -------------- -------------- -------------- -------------- -------------- Total current liabilities 2,556,385 6,570,711 2,757,730 (9,825,928) 2,058,898 LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES 3,123,126 61,885 57,775 91,315 3,334,101 DEFERRED INCOME TAX AND EMPLOYEE STATUTORY PROFIT-SHARING -- 2,891,951 87,293 (2,051,055) 928,189 -------------- -------------- -------------- -------------- -------------- Total liabilities 5,679,510 9,524,547 2,902,798 (11,785,667) 6,321,188 -------------- -------------- -------------- -------------- -------------- SHAREHOLDERS' EQUITY: Capital stock 878,219 6,131,375 1,515,054 (7,646,429) 878,219 Additional paid-in capital 4,798,696 543,263 59,163 (602,426) 4,798,696 Retained earnings 1,897,569 3,603,288 (813,589) (2,789,699) 1,897,569 Reserves 1,045,969 35,473 -- (35,473) 1,045,969 Cumulative effect of deferred income tax and employee statutory profit-sharing (1,300,190) (1,701,567) (18,925) 1,720,492 (1,300,190) Deficiency in restated shareholders' equity (2,353,371) (4,400,936) (223,376) 4,624,312 (2,353,371) -------------- -------------- -------------- -------------- -------------- Total shareholders' equity 4,966,892 4,210,896 518,327 (4,729,223) 4,966,892 -------------- -------------- -------------- -------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Ps. 10,646,402 Ps. 13,735,443 Ps. 3,421,125 Ps. (16,514,890) Ps.11,288,080 ============== ============== ============== ============== ============= F-33
EX-99.A.834th Page of 53TOC1stPreviousNextBottomJust 34th
CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2000 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated ------------- ------------- -------------- ------------- ------------- REVENUES: Net sales Ps. 323,745 Ps.12,679,287 Ps. 2,423,770 Ps.(5,854,042) Ps.9,572,760 Other 55,352 69,379 12,049 (49,128) 87,652 ------------- ------------- -------------- ------------- ------------- 379,097 12,748,666 2,435,819 (5,903,170) 9,660,412 ------------- ------------- -------------- ------------- ------------- COSTS AND EXPENSES: Cost of sales -- 6,607,235 1,699,627 (4,049,962) 4,256,900 Selling expenses -- 4,065,506 493,483 (1,071,199) 3,487,790 General and administrative expenses 31,535 811,148 106,201 (382,781) 566,103 Depreciation and amortization -- 448,459 32,505 (172,074) 308,890 ------------- ------------- -------------- ------------- ------------- 31,535 11,932,348 2,331,816 (5,676,016) 8,619,683 ------------- ------------- -------------- ------------- ------------- OPERATING INCOME 347,562 816,318 104,003 (227,154) 1,040,729 ------------- ------------- -------------- ------------- ------------- RESTRUCTURING CHARGES -- 543,459 25,521 -- 568,980 INTEGRAL (INCOME) COST OF FINANCING - Net: Interest income (513,194) (226,034) (9,241) 733,572 (14,897) Interest expense 523,383 495,530 87,891 (702,501) 404,303 Foreign exchange loss - net 45,942 5,630 9,363 10,360 71,295 Monetary position gain (172,786) (68,836) (57,860) (127,126) (426,608) ------------- ------------- -------------- ------------- ------------- (116,655) 206,290 30,153 (85,695) 34,093 ------------- ------------- -------------- ------------- ------------- OTHER EXPENSES - NET (62,031) 55,532 (17,173) (7,841) (31,513) ------------- ------------- -------------- ------------- ------------- INCOME BEFORE PROVISIONS 402,187 122,101 31,156 (149,301) 406,143 ------------- ------------- -------------- ------------- ------------- PROVISIONS: Income tax and tax on assets (80,335) 183,342 55,790 (333,216) (174,419) Employee statutory profit-sharing -- 21,315 14,567 29,089 64,971 ------------- ------------- -------------- ------------- ------------- (80,335) 204,657 70,357 (304,127) (109,448) ------------- ------------- -------------- ------------- ------------- CONSOLIDATED NET INCOME Ps. 482,522 Ps. (82,556) Ps. (39,201) Ps. 154,826 Ps. 515,591 ============= ============= ============== ============= ============= F-34
EX-99.A.835th Page of 53TOC1stPreviousNextBottomJust 35th
CONSOLIDATING CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION YEAR ENDED DECEMBER 31, 2000 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated -------------- -------------- ------------- -------------- ------------- RESOURCES (USED IN) PROVIDED BY OPERATING ACTIVITIES Ps. 377,531 Ps. 2,705,650 Ps. (36,605) Ps. (2,082,629) Ps. 963,947 -------------- -------------- ------------- -------------- ------------- FINANCING ACTIVITIES: Net change in notes payable (244,128) 67,025 (146,701) (5,693) (329,497) Due from subsidiaries and associates (561,217) -- -- (561,217) -- Net change in long-term debt 1,177,941 (92,056) -- -- 1,085,885 Capital stock increase 42,262 -- -- -- 42,262 Sale of capital stock - net 7,520 -- -- -- 7,520 Shares issued in exchange of minority interest 358,282 -- -- -- 358,282 Cumulative effect of deferred income tax and employee statutory profit-sharing: Increase in liabilities 1,300,190 1,604,048 -- (1,604,048) 1,300,190 Decrease in shareholders' equity (1,300,190) (1,604,048) -- 1,604,048 (1,300,190) -------------- -------------- ------------- -------------- ------------- Resources (used in) generated by financing activities 780,660 (25,031) (146,701) 555,524 1,164,452 -------------- -------------- ------------- -------------- ------------- INVESTING ACTIVITIES: (Acquisition) and sale of property, plant and equipment - net -- (1,031,819) -- -- (1,031,819) Increase in other assets -- (1,506) -- -- (1,506) Payment for acquisition of subsidiaries, net of cash received (1,150,193) (1,628,507) 192,371 1,885,387 (700,942) Acquisition of minority interest -- -- -- (358,282) (358,282) Loan to associated company -- (1,591) -- -- (1,591) -------------- -------------- ------------- -------------- ------------- Resources used in investing activities (1,150,193) (2,663,423) 192,371 1,527,105 (2,094,140) -------------- -------------- ------------- -------------- ------------- Increase in cash and cash equivalents 7,998 17,196 9,065 -- 34,259 CASH AND CASH EQUIVALENTS: Beginning of year 32,616 132,158 27,742 -- 192,516 -------------- -------------- ------------- -------------- ------------- End of year Ps. 40,614 Ps. 149,354 Ps. 36,807 Ps. -- Ps. 226,775 ============== -------------- ------------- ============== ============= F-35
EX-99.A.836th Page of 53TOC1stPreviousNextBottomJust 36th
CONSOLIDATING CONDENSED BALANCE SHEET DECEMBER 31, 2001 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex ASSETS Parent Only Combined BPN Eliminations Consolidated -------------- -------------- -------------- --------------- -------------- CURRENT ASSETS: Cash and cash equivalents Ps. 7,421 Ps. 91,744 Ps. 11 Ps. -- Ps. 99,176 Accounts receivable - net 1,104,808 14,066,226 17,863 (14,208,137) 980,760 Inventories 4,166,612 934,734 178,052 (4,543,539) 735,859 Prepaid expenses 9,765 27,997 -- (17,109) 20,653 -------------- -------------- -------------- --------------- -------------- Total current assets 5,288,606 15,120,701 195,926 (18,768,785) 1,836,448 DEFERRED INCOME TAX 4,052 -- -- (4,052) -- PROPERTY, PLANT AND EQUIPMENT - Net -- 6,922,994 -- 202,896 7,125,890 INVESTMENT IN SUBSIDIARIES AND ASSOCIATED COMPANIES 4,572,168 643,495 658,722 (5,874,385) -- EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED - Net 603,909 359,919 -- 328,309 1,292,137 DEBT ISSUANCE COSTS 17,644 -- -- (17,644) -- OTHER ASSETS -- 426,471 -- (101,901) 324,570 -------------- -------------- -------------- --------------- -------------- TOTAL ASSETS Ps. 10,486,379 Ps. 23,473,580 Ps. 854,648 Ps. (24,235,562) Ps. 10,579,045 ============== ============== ============== =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable Ps. 344,380 Ps. 3,591 Ps. - Ps. (1,007) Ps. 346,964 Current portion of long-term debt -- 27,468 -- 2,478 29,946 Trade accounts payable -- 557,328 -- 4,809 562,137 Taxes payable, accrued expenses and other liabilities 81,913 2,388,800 8,373 (1,788,012) 691,074 Dividend payable 246,931 1,062,871 -- (1,062,871) 246,931 Due to affiliates 2,307,193 12,816,176 729,331 (15,852,700) -- -------------- -------------- -------------- --------------- -------------- Total current liabilities 2,980,417 16,856,234 737,704 (18,697,303) 1,877,052 LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES 2,839,600 196,770 -- 100,104 3,136,474 DEFERRED INCOME TAX AND EMPLOYEE STATUTORY PROFIT-SHARING -- 1,134,200 -- (235,043) 899,157 -------------- -------------- -------------- --------------- -------------- Total liabilities 5,820,017 18,187,204 737,704 (18,832,242) 5,912,683 -------------- -------------- -------------- --------------- -------------- SHAREHOLDERS' EQUITY: Capital stock 878,933 7,672,444 82 (7,672,526) 878,933 Additional paid-in capital 4,551,834 602,427 -- (602,427) 4,551,834 Retained earnings 2,492,757 1,467,178 129,466 (1,596,644) 2,492,757 Reserves 1,065,014 111,465 -- (111,465) 1,065,014 Cumulative effect of deferred income tax and employee statutory profit-sharing (1,300,190) -- 47,797 (47,797) (1,300,190) Shareholders' equity adjustment from labor obligations upon retirement (43,403) -- -- -- (43,403) Deficiency in restated shareholders' equity (2,978,583) (4,567,138) (60,401) 4,627,539 (2,978,583) -------------- -------------- -------------- --------------- -------------- Total shareholders' equity 4,666,362 5,286,376 116,944 (5,403,320) 4,666,362 -------------- -------------- -------------- --------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Ps. 10,486,379 Ps. 23,473,580 Ps. 854,648 Ps. (24,235,562) Ps. 10,579,045 ============== ============== ============== =============== ============== F-36
EX-99.A.837th Page of 53TOC1stPreviousNextBottomJust 37th
CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2001 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated ----------- ------------- ------------- ------------- ------------- REVENUES: Net sales Ps. -- Ps.17,588,252 Ps. -- Ps.(6,552,040) Ps.11,036,212 537,169 -- (19) (537,150) -- Other 14,181 443,820 207 (401,211) 56,997 ----------- ------------- ------------- ------------- ------------- 551,350 18,032,072 188 (7,490,401) 11,093,209 ----------- ------------- ------------- ------------- ------------- COSTS AND EXPENSES: Cost of sales -- 9,963,251 -- (5,064,508) 4,898,743 Selling expenses -- 4,937,474 -- (968,264) 3,969,210 General and administrative expenses 22,312 1,148,832 2 (519,884) 651,262 Depreciation and amortization 7,841 401,124 -- (5,875) 403,090 ----------- ------------- ------------- ------------- ------------- 30,153 16,450,681 2 (6,558,531) 9,922,305 ----------- ------------- ------------- ------------- ------------- OPERATING INCOME 521,197 1,581,391 186 (931,870) 1,170,904 ----------- ------------- ------------- ------------- ------------- RESTRUCTURING CHARGE -- 254,497 -- (117,631) 136,866 INTEGRAL (INCOME) COST OF FINANCING - Net: Interest income (679,221) (218,609) (28,675) 920,524 (5,981) Interest expense 524,617 646,555 109,036 (880,553) 399,655 Foreign exchange loss - net (156,394) (38,140) 943 (24,003) (217,594) Monetary position gain (61,608) (75,755) (21,268) 6 (158,625) ----------- ------------- ------------- ------------- ------------- (372,606) 314,051 60,036 15,974 17,455 ----------- ------------- ------------- ------------- ------------- OTHER (EXPENSE) INCOME - Net (71,382) (81,667) -- 350,445 197,396 ----------- ------------- ------------- ------------- ------------- INCOME BEFORE PROVISIONS 822,421 931,176 (59,850) (874,561) 819,187 ----------- ------------- ------------- ------------- ------------- PROVISIONS: Income taxes and asset tax 227,233 503,082 -- (501,469) 228,846 Employee statutory profit-sharing 11,206 -- (16,053) (4,847) ----------- ------------- ------------- ------------- ------------- CONSOLIDATED NET INCOME Ps. 595,188 Ps. 416,889 Ps. (59,850) Ps. (357,039) Ps. 595,188 =========== ============= ============= ============= ============= F-37
EX-99.A.838th Page of 53TOC1stPreviousNextBottomJust 38th
CONSOLIDATING CONDENSED STATEMENT OF CHANGES IN FINANCIAL POSITION YEAR ENDED DECEMBER 31, 2001 [Enlarge/Download Table] Pepsi-Gemex Guarantors Pepsi-Gemex Parent Only Combined BPN Eliminations Consolidated ------------- ------------- ------------- ------------ ------------- RESOURCES (USED IN) PROVIDED BY OPERATING ACTIVITIES Ps. (925,992) Ps. 2,806,155 Ps. (94,399) Ps. Ps. 1,785,764 ------------- ------------- ------------- ------------ ------------- FINANCING ACTIVITIES: Net change in notes payable (535,374) 2,584 -- -- (532,790) Net change in long-term debt (283,526) 17,091 -- -- (266,435) Loans to (from) affiliates 639,536 (733,912) 94,376 -- Capital stock increase (Repurchase) and sale of capital stock - net 19,828 -- -- -- 19,828 Shareholders' equity adjustment from labor obligations upon retirement (43,403) -- -- -- (43,403) Dividends declared (246,931) -- -- -- (246,931) Dividends payable 246,931 -- -- -- 246,931 Decrease in shareholders' equity -- 29,246 (29,246) -- -- ------------- ------------- ------------- ------------ ------------- Resources (used in) provided by financing activities (202,939) (684,991) 65,130 -- (822,800) ------------- ------------- ------------- ------------ ------------- INVESTING ACTIVITIES: (Acquisition) and sale of property, plant and equipment - net (1,089,243) (1,089,243) Increase in other assets 112,589 112,589 Increase in goodwill -- (113,909) -- -- (113,909) Payment for acquisition of subsidiaries, net of cash received 1,095,738 (1,124,955) 29,217 -- -- Acquisition of minority interest Loan to associated company ------------- ------------- ------------- ------------ ------------- Resources (used in) provided by investing activities 1,095,738 (2,215,518) 29,217 -- (1,090,563) ------------- ------------- ------------- ------------ ------------- Increase in cash and cash equivalents (33,193) (94,354) (52) -- (127,599) CASH AND CASH EQUIVALENTS: Beginning of year 40,614 186,098 63 -- 26,775 ------------- ------------- ------------- ------------ ------------- End of year Ps. 7,421 Ps. 91,744 Ps. 11 Ps. -- Ps. 99,176 ============= ============= ============= ============ ============= F-38
EX-99.A.839th Page of 53TOC1stPreviousNextBottomJust 39th
18. DIFFERENCES BETWEEN MEXICAN AND UNITED STATES OF AMERICA ACCOUNTING PRINCIPLES The Company's consolidated financial statements are prepared in accordance with Mexican GAAP, which vary in certain respects from accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Mexican GAAP consolidated financial statements include the effects of inflation as provided for under Bulletin B-10, as amended, whereas financial statements prepared under U.S. GAAP are presented on an historical cost basis. The following reconciliations to U.S. GAAP do not include the reversal of the adjustments required under Bulletin B-10, as amended, except as discussed in Note 18 (c). The application of Bulletin B-10, as amended, represents a comprehensive measure of the effects of price level changes in the Mexican economy and, as such, is considered a more meaningful presentation than historical cost-based financial reporting for both Mexican GAAP and U.S. GAAP purposes. Mexican GAAP also requires the restatement of all financial statements to constant pesos as of the date of the most recent balance sheet presented. All material differences, other than inflation accounting, between Mexican GAAP and U.S. GAAP and the effects on net income and total shareholders' equity are presented below with an explanation of the adjustments: [Enlarge/Download Table] Thousands of U.S. dollars (Convenience Translation) Year Ended December 31, Year Ended Reconciliation of net income of ---------------------------------------------- December majority interest 1999 2000 2001 31, 2001 ---------------------------------------------------- ------------- ------------- ------------- -------------- Net income of majority interest reported under Mexican GAAP Ps. 822,845 Ps. 482,522 Ps. 595,188 $ 64,976 U.S. GAAP adjustments for: Deferred income taxes (90,833) (250,375) (201,439) (21,991) Deferred employee statutory profit-sharing 30,033 11,690 18,116 1,978 Restatement of foreign sourced fixed assets (45,780) (53,067) (103,998) (11,354) Amortization of goodwill 27,865 (9,434) 27,867 3,042 Accrued vacation cost 21,480 (13,311) (12,462) (1,360) Accrued severance payments -- 16,236 (16,236) (1,772) Reversal of capitalized exchange losses and monetary position gains and related depreciation 58,216 23,329 3,315 362 Minority interest applicable to above adjustments (76,899) -- -- -- ------------- ------------- ------------- -------------- Net income under U.S. GAAP Ps. 746,927 Ps. 207,590 Ps. 310,351 $ 33,881 ============= ============= ============= ============== F-39
EX-99.A.840th Page of 53TOC1stPreviousNextBottomJust 40th
[Enlarge/Download Table] Thousands of U.S. dollars (Convenience Translation) Year Ended December 31, Year Ended Reconciliation of net income of ------------------------------------------------ December shareholders' equity 1999 2000 2001 31, 2001 ----------------------------------------------- ------------- ------------ --------------- -------------- Total shareholders' equity reported under Mexican GAAP Ps. 5,805,972 Ps.4,966,892 Ps. 4,666,362 $ 509,428 Less minority interest in consolidated subsidiary included in shareholders' equity under Mexican GAAP 229,349 -- -- -- ------------- ------------ --------------- -------------- 5,576,623 4,966,892 4,666,362 509,428 U.S. GAAP adjustments for: Effect on retained earnings from: Deferred income taxes (1,248,991) (323,938) (525,377) (57,356) Deferred employee statutory profit-sharing (167,021) (30,569) (12,453) (1,360) Restatement of foreign sourced fixed assets (88,856) (141,923) (245,921) (26,847) Goodwill (345,539) (354,973) (327,106) (35,710) Accrued vacation cost (3,751) (17,062) (29,524) (3,223) Accrued severance payments -- 16,236 -- -- Reversal of capitalized exchange losses and monetary position gains and related depreciation (70,771) (47,442) (44,127) (4,817) Effect on deficiency in restated shareholders' equity related to: Deferred income taxes 229,037 19,044 21,129 2,307 Deferred employee statutory profit-sharing 6,080 5,441 6,034 659 Restatement of foreign source fixed assets 915,605 1,061,321 1,759,142 192,046 Minority interest applicable to above adjustments (96,476) -- -- -- ------------- ------------ --------------- -------------- Shareholders' equity under U.S. GAAP Ps.4,705,940 Ps.5,153,027 Ps. 5,268,159 $ 575,127 ============= ============ =============== ============== The applicable effects of inflation on the above U.S. GAAP adjustments in the reconciliation of net income that relate to monetary assets or liabilities have been included in the corresponding adjustments. F-40
EX-99.A.841st Page of 53TOC1stPreviousNextBottomJust 41st
A summary of changes in shareholders' equity giving effect to the U.S. GAAP adjustments described above is as follows: [Enlarge/Download Table] Additional Capital Paid-in Retained Stock Capital Earnings -------------- --------------- --------------- Balance at January 1, 1999 Ps. 861,981 Ps. 4,414,863 Ps. (1,318,836) Repurchase and sale of capital stock - net (2,446) 393 (14,875) Result from holding non-monetary assets -- -- -- Net income -- -- 746,927 Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- -- -- Deferred employee statutory profit-sharing -- -- -- Restatement of foreign sourced fixed assets -- -- -- Effect of minority interest on U.S.GAAP adjustments to shareholders' equity -- -- -- -------------- --------------- --------------- Balance at December 31, 1999 859,535 4,415,256 (586,784) Repurchase and sale of common stock - net 223 1,357 -- Result from holding non-monetary assets -- -- -- Net income -- -- 207,590 Capital share increase 1,942 40,320 -- Acquisition of minority interest 16,519 341,763 -- Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- -- -- Deferred employee statutory profit-sharing -- -- -- Restatement of foreign sourced fixed assets -- -- -- Effect of minority interest on U.S.GAAP adjustments to shareholders' equity -- -- -- -------------- --------------- --------------- Balance at December 31, 2000 878,219 4,798,696 (379,194) [Enlarge/Download Table] Accumulated Other Total Comprehensive Shareholders' Reserves Income Equity --------------- --------------- --------------- Balance at January 1, 1999 Ps. 1,034,273 Ps. (999,449) Ps. 3,992,832 Repurchase and sale of capital stock - net 5,756 -- (11,172) Result from holding non-monetary assets -- (517,565) (517,565) Net income -- -- 746,927 Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- 1,954 1,954 Deferred employee statutory profit-sharing -- 559 559 Restatement of foreign sourced fixed assets -- 511,982 511,982 Effect of minority interest on U.S.GAAP adjustments to shareholders' equity -- (19,577) (19,577) --------------- --------------- --------------- Balance at December 31, 1999 1,040,029 (1,022,096) 4,705,940 Repurchase and sale of common stock - net 5,940 -- 7,520 Result from holding non-monetary assets -- (200,127) (200,127) Net income -- -- 207,590 Capital share increase -- -- 42,262 Acquisition of minority interest -- -- 358,282 Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- (209,993) (209,993) Deferred employee statutory profit-sharing -- (639) (639) Restatement of foreign sourced fixed assets -- 145,716 145,716 Effect of minority interest on U.S.GAAP adjustments to shareholders' equity -- 96,476 96,476 --------------- --------------- --------------- Balance at December 31, 2000 1,045,969 (1,190,663) 5,153,027 F-41
EX-99.A.842nd Page of 53TOC1stPreviousNextBottomJust 42nd
[Enlarge/Download Table] Additional Capital Paid - in Retained Stock Capital Earnings ----------- ------------ ------------- Sale of capital stock - net 714 69 -- Result from holding non-monetary assets -- -- -- Net income -- -- 310,351 Dividends declared -- (246,931) -- Shareholders' equity adjustment for labor obligations upon retirement -- -- -- Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- -- -- Deferred employee statutory profit-sharing -- -- -- Restatement of foreign sourced fixed assets -- -- ----------- ------------ ------------- Balance at December 31, 2001 Ps. 878,933 Ps.4,551,834 Ps. (68,843) =========== ============ ============= [Enlarge/Download Table] Accumulated Other Total Comprehensive Shareholders' Reserves Income Equity ------------ -------------- ------------- Sale of capital stock - net 19,045 -- 19,828 Result from holding non-monetary assets -- (625,212) (625,212) Net income -- -- 310,351 Dividends declared -- -- (246,931) Shareholders' equity adjustment for labor obligations upon retirement -- (43,403) (43,403) Effect on deficiency in restated shareholders' equity related to: Deferred income taxes -- 2,085 2,085 Deferred employee statutory profit-sharing -- 593 593 Restatement of foreign sourced fixed assets -- 697,821 697,821 ------------ -------------- ------------- Balance at December 31, 2001 Ps.1,065,014 Ps. (1,158,779) Ps.,5,268,159 ============ ============== ============= F-42
EX-99.A.843rd Page of 53TOC1stPreviousNextBottomJust 43rd
a) DEFERRED INCOME TAXES AND EMPLOYEE STATUTORY PROFIT-SHARING - As mentioned in Note 1 to the consolidated financial statements, beginning January 1, 2000, the Company changed its method of accounting for income tax, tax on assets and employee statutory profit-sharing under Mexican GAAP to conform with the new Bulletin D-4. D-4 requires the use of the asset and liability method of accounting for deferred income tax and employee statutory profit-sharing. Under such method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount and their respective tax bases. This method also requires the recognition of future tax benefits, such as those arising from tax loss carryforwards, to the extent the realization of such benefits is highly likely. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date. A deferred tax asset is also recognized for the unused portion of tax credits, such as tax on assets, to the extent the realization of such tax credit is highly likely. When, in accordance with accounting principles generally accepted in Mexico, items related to temporary differences are recorded directly to shareholders' equity, without affecting net income, the deferred effects of such items are also recorded directly to shareholders' equity. D-4 also requires that when there is a tax regime that recognizes totally or partially the effects of inflation and this causes the tax effect of the temporary differences to be restated, the change in deferred tax arising from the restatement for inflation should be included in the monetary result of the period. Through December 31, 1999, deferred income taxes under Mexican GAAP were provided only for identifiable, nonrecurring timing differences, which were expected to reverse over a definite period of time. For U.S. GAAP purposes, the Company applies Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred income taxes reflect the net tax effect of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (b) the benefits of operating loss and tax credit carryforwards. Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is recognized as income or expense, as the case may be, in the period that includes the enactment date. During the year ended December 31, 2001, the valuation allowance for income tax purposes associated with certain net operating losses and tax credits carryforwards increased by $249,270, because the Company believes it is more likely than not that such deferred tax asset will not be realized. The Company calculates a deferred employee statutory profit-sharing liability for U.S. GAAP purposes based on temporary differences between the financial reporting basis and the employee statutory profit-sharing basis of assets and liabilities for those subsidiaries of the Company which have employees. Through December 31, 1999, under Mexican GAAP, deferred employee statutory profit-sharing was not recognized in the financial statements; however, with the adoption of D-4, beginning January 1, 2000 the Company recognizes deferred statutory profit-sharing as described above. During the year ended December 31, 2001, the valuation allowance for deferred profit sharing assets associated with certain tax losses carryforwards increased by $45,932 because the Company believes it is more likely than not that such deferred tax asset will not be realized. Under U.S. GAAP the portion of deferred taxes and deferred employee statutory profit-sharing attributable to the excess (deficiency) in restated shareholders' equity is reflected as an adjustment to the excess (deficiency) in restated shareholders' equity. Under Mexican GAAP, employee statutory profit-sharing expense or benefit is included in provisions after operating income. Under U.S. GAAP, employee statutory profit-sharing expense or benefit is treated as a component of operating expenses. Under Mexican GAAP deferred tax assets and liabilities are of a long-term nature, whereas under U.S. GAAP they are classified based on the nature of the temporary difference. F-43
EX-99.A.844th Page of 53TOC1stPreviousNextBottomJust 44th
Under U.S. GAAP, temporary differences and the resulting deferred tax assets and liabilities at December 31, 2000 and 2001 are summarized as follows: [Enlarge/Download Table] December 31, ------------------------------- 2000 2001 ------------- -------------- Current deferred tax liabilities - Inventories Ps. (343,983) Ps. (344,344) ------------- -------------- Current deferred tax assets: Accrued expenses and reserves 52,078 103,931 Allowance for doubtful accounts 26,090 34,315 ------------- -------------- Total current deferred tax assets 78,168 138,246 ------------- -------------- Non-current deferred tax liabilities: Property, plant and equipment (1,021,252) (1,298,176) Investments in associated companies (8,920) - Other (46,129) (45,871) ------------- -------------- Total non-current deferred tax liabilities (1,076,301) (1,344,047) ------------- -------------- Non-current deferred tax assets - Net operating losses and tax credits 524,932 794,923 ------------- -------------- Valuation allowance (272,309) (521,579) ------------- -------------- Net deferred tax liability Ps.(1,089,493) Ps (1,276,801) ============= ============== The components of deferred employee statutory profit-sharing at December 31, 2000 and 2001 are summarized as follows: [Enlarge/Download Table] December 31, ------------------------------- 2000 2001 ------------- -------------- Current deferred tax liabilities - Inventories Ps. (54,724) Ps. (69,587) ------------- -------------- Current deferred tax assets: Accrued expenses and reserves 15,311 19,416 Allowance for doubtful accounts 7,090 3,896 ------------- -------------- Total current deferred tax assets 22,401 23,312 ------------- -------------- Non-current deferred tax liabilities: Property, plant and equipment (125,474) (78,471) Other 10,924 16,421 ------------- -------------- (125,474) (94,892) ------------- -------------- Non-current deferred tax assets - Net operating losses -- 54,076 ------------- -------------- Valuation allowance -- (45,932) ------------- -------------- Net deferred employee statutory profit - sharing liability Ps. (168,718) Ps. (133,023) ============= ============== b) MINORITY INTEREST - Under Mexican GAAP, the minority interest in consolidated subsidiaries is presented as a separate component within the shareholders' equity section in the consolidated balance sheet. For U.S. GAAP purposes, the minority interest is not included in shareholders' equity. c) RESTATEMENT OF FOREIGN SOURCED FIXED ASSETS - Effective January 1, 1997, the Company adopted the Fifth Amendment to Bulletin B-10 which allows foreign sourced fixed assets to be restated for inflation using either of two methodologies. Under the first methodology, foreign sourced fixed assets are restated by applying Mexican NCPI factors to the original cost of the asset, denominated in pesos. The alternate methodology, which is utilized by the Company, restates foreign sourced fixed assets by applying the inflation factor of the country of origin to the original cost, denominated in the foreign currency, and then translating such amounts into pesos at the foreign exchange rate in effect at the most recent balance sheet date. F-44
EX-99.A.845th Page of 53TOC1stPreviousNextBottomJust 45th
The alternate methodology is not consistent with Regulation S-X, Rule 3-20(e) of the Securities and Exchange Commission. Accordingly, foreign sourced fixed assets have been restated using the Mexican NCPI applied to original cost (the balance of the related assets at December 31, 1997 or historical cost if acquired subsequent to 1997), in pesos, for purposes of the U.S. GAAP reconciliation. d) GOODWILL - In 1992 and 1995, the Company recorded goodwill in connection with the acquisition of three entities under common control in accordance with Mexican GAAP. Under U.S. GAAP, such transactions would be accounted for in a manner similar to that of a pooling of interests and, accordingly, the unamortized excess of the amount paid over the net book value of net assets acquired has been recognized as a reduction to equity and the amortization expense for Mexican GAAP has been reversed for U.S. GAAP purposes. Also, in December 2000, the Company recognized in the results of operations under Mexican GAAP the negative goodwill that arose from the acquisition of a minority interest of a consolidated associated company. For U.S. GAAP purposes, the Company has reversed the negative goodwill recognized into income and has reduced the recorded value of non-current assets. As mentioned in Note 1, beginning 2001, the Company began to include as part of other income and expense in the statements of income prepared under Mexican GAAP, the amortization of the excess of cost over fair value of net assets acquired. The consolidated statements of income of prior years were reclassified in order to conform them with the presentation utilized in 2001. For U.S. GAAP purposes the amortization of goodwill should be reported as part of operating income. Accordingly, Ps.78,014, Ps.(4,156) and Ps.90,111 would have to be recorded as a decrease (increase) of operating income for the years ended December 31, 1999, 2000 and 2001, respectively. This difference does not have an effect in the net income or earnings per share reported during the years ended December 31, 1999, 2000 and 2001. e) ACCRUED VACATION - Under Mexican GAAP, the Company does not accrue liabilities related to employees' rights to receive compensation for future absences. Statement of Financial Accounting Standards No. 43, "Accounting for Compensated Absences", requires that vacation benefits be accrued. For purposes of the U.S. GAAP reconciliation, the Company has accrued such liability as of December 31, of each year presented and recognized the related expense. f) ACCRUED SEVERANCE PAYMENTS - Under Mexican GAAP, the Company has accrued severance payments to be made to certain of its employees as a consequence of the restructuring of operations initiated at the end of 2000 as described in Note 1. For U.S. GAAP purposes the Company has reversed such cost since at the date of the financial statements the Company had not communicated to the employees the type and amount of benefits they will receive upon termination. g) CAPITALIZATION OF INTEGRAL COST (INCOME) OF FINANCING - Under Mexican GAAP, total integral cost (income) of financing is subject to capitalization to assets under construction, including foreign exchange gains and losses, interest income and gains and losses from monetary position. In accordance with U.S. GAAP, foreign exchange gains and losses, interest income and monetary position gains and losses are not capitalizable. Consequently, such amounts capitalized under Mexican GAAP have been reversed and treated as income or expense, as appropriate, in the period incurred and current year depreciation has also been adjusted. h) OTHER DIFFERENCES AND SUPPLEMENTAL U.S. GAAP DISCLOSURES - 1. Extraordinary Items - Through December 31, 1999, under Mexican GAAP, the utilization of tax loss carryforwards and assets taxes paid in prior years was considered to be an extraordinary gain. Under U.S. GAAP, such amounts would be considered to be a component of income tax expense. Although this difference does not affect consolidated net income, it does affect the reported amount of income tax expense. 2. Cash flows - The Company presents its cash flow information, under Mexican GAAP, exclusive of the effects of inflation. Such information for the year ended December 31, 1999, 2000 and 2001 is presented below: F-45
EX-99.A.846th Page of 53TOC1stPreviousNextBottomJust 46th
[Enlarge/Download Table] December 31, -------------------------------------------- 1999 2000 2001 ---------- ---------- ---------- OPERATING ACTIVITIES: Consolidated net income-Mexican GAAP Ps.891,371 Ps.515,591 Ps.595,188 Effects of inflation (476,096) (259,059) (218,646) ---------- ---------- ---------- Consolidated net income exclusive of inflation- Mexican GAAP 415,275 256,532 376,542 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 435,414 428,762 602,837 Statutory seniority premiums 14,505 32,455 43,689 Restructuring charge -- 524,000 83,505 Equity in earnings of associated companies (1,120) -- -- Deferred taxes -- (263,523) (28,456) Unrealized foreign exchange (gain) loss on current and long-term debt (96,435) 56,211 (185,225) Realized foreign exchange (gain) loss on current and long-term debt (69,924) 12,079 (9,404) Changes in operating assets and liabilities: Accounts receivable - net (320,735) (95,041) (9,451) Inventories (1,956) (252,171) 276,530 Prepaid expenses (4,177) (5,374) 15,932 Trade accounts payable 144,447 59,032 (949) Taxes payable, accrued expenses and other liabilities 18,722 (23,259) 163,344 ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 534,016 729,703 1,328,894 ---------- ---------- ---------- INVESTING ACTIVITIES: Acquisition of property, plant and equipment (809,101) (941,269) (1,067,638) Loan to associated company (94,383) (1,121) -- Other assets 61,385 (29,638) 110,356 Increase in goodwill -- -- (111,650) Acquisition of subsidiaries, net of cash received -- 77,716 -- Effect on cash of consolidating Tenedora 44,910 -- -- ---------- ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (797,189) (894,312) (1,068,932) ---------- ---------- ---------- FINANCING ACTIVITIES: Payments of long-term debt (74,992) (40,760) (282,154) Proceeds from long-term debt 63,760 768,294 732,772 Payments of notes payable (556,688) (1,056,921) (1,775,772) Proceeds from notes payable 653,373 479,469 918,166 Repurchase and sale of capital stock - net (9,822) 6,861 19,427 Capital stock increase -- 40,481 -- ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 75,631 197,424 (387,561) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (187,542) 32,815 (127,599) Cash and cash equivalents at beginning of year 317,651 169,239 217,217 Effect of inflation on cash 39,130 24,721 9,558 ---------- ---------- ---------- Cash and cash equivalents at end of year Ps.169,239 Ps.226,775 Ps.99,176 ========== ========== ========== Supplemental Cash Flow Information Required by U.S. GAAP - Resources generated by operating activities in the statements of changes in financial position reflect cash payments of interest and income taxes as follows: F-46
EX-99.A.847th Page of 53TOC1stPreviousNextBottomJust 47th
[Download Table] Year Ended December 31, ------------------------------------------------- 1999 2000 2001 -------------- ------------- -------------- Interest Ps. 389,571 Ps. 399,386 Ps. 396,560 Income taxes -- -- -- In accordance with Mexican GAAP, acquisition of subsidiaries is shown net of cash received as an investing activity and the corresponding debt incurred in the acquisition is shown as a financing activity. Also, when material, acquisition of minority interest in exchange of own shares is shown as an investing and financing activity, respectively. Under U.S. GAAP, because such transactions are non-cash, it is necessary only to disclose non-cash investing and financing activities. Supplemental disclosure of non-cash investing and financing activities is as follows: [Enlarge/Download Table] Year Ended December 31, ------------------------------------------------- 1999 2000 2001 -------------- ------------- -------------- Fair value of net assets acquired Ps. -- Ps. 708,014 Ps. -- Less: liabilities incurred -- 791,907 -- -------------- ------------- -------------- Acquisition of subsidiaries, net of cash acquired Ps. -- Ps. (83,893) Ps. -- ============== ============= ============== Shares issued in exchange of minority interest Ps. -- Ps. 358,282 Ps. -- ============== ============= ============== In accordance with Mexican GAAP, unrealized exchange losses on current and long-term debt are included as a financing activity in the statement of changes in financial position. Under U.S. GAAP, unrealized exchange losses on current and long-term debt would be reflected as non-cash expenses in operating activities and not as a financing activity. Also, under Mexican GAAP dividends declared and not paid are shown as resources used in and generated by financing activities, respectively. Under U.S. GAAP dividends declared but not paid are not included in the statement of cash flows. 3. Statement of Comprehensive Income - Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", establishes standards for reporting and display of comprehensive income and its components. The Company's statements of comprehensive income for the years ended December 31, 1999, 2000 and 2001, giving effect to the U.S. GAAP adjustments described above, are set forth below: F-47
EX-99.A.848th Page of 53TOC1stPreviousNextBottomJust 48th
[Enlarge/Download Table] Thousands of U.S. dollars (Convenience December 31, Translation) --------------------------------------------- December 1999 2000 2001 31, 2001 ------------- ------------- ------------- -------------- Net income under U.S. GAAP Ps. 746,927 Ps. 207,590 Ps. 310,352 $ 33,881 Other comprehensive (loss) income: Result from holding nonmonetary assets as reported under Mexican GAAP (517,565) (200,127) (625,212) (68,255) Adjustment from labor obligations upon retirement under Mexican GAAP -- -- (43,403) (4,738) U.S. GAAP adjustments to result from holding nonmonetary assets 494,918 31,560 700,501 76,474 ------------- ------------- ------------- -------------- Total other comprehensive (loss) income (22,647) (168,567) 31,886 3,481 ------------- ------------- ------------- -------------- Comprehensive income (loss) under U.S. GAAP Ps. 724,280 Ps. 39,023 Ps. 342,238 $ 37,362 ============= ============= ============= ============== Accumulated other comprehensive loss at December 31, 1999, 2000 and 2001, giving effect to the U.S. GAAP adjustments discussed above, consists of losses from holding nonmonetary assets of Ps.(1,022,096), Ps.(1,190,663) and Ps.(1,237,344), respectively. 4. Earnings Per Share in Accordance With U.S. GAAP - Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") requires the presentation of "basic" earnings per share, which is calculated by dividing income available to common shareholders by the weighted average number of shares outstanding during the period, and diluted earnings per share giving effect to all potentially dilutive common shares outstanding during the period. At December 31, 2000, the Company has not presented diluted earnings per share because there are no potentially dilutive securities outstanding. However, as discussed in Note 9, during 1999, the Company established an executive share purchase program. Under SFAS No. 128, shares granted under this program would possibly be considered dilutive when and if granted. Earnings per share for each of the years in the three-year period ended December 31, 2001 is presented below: F-48
EX-99.A.849th Page of 53TOC1stPreviousNextBottomJust 49th
[Enlarge/Download Table] Thousands of U.S. dollars (Convenience December 31, Translation) ------------------------------------------------ December 1999 2000 2001 31, 2001 ------------- -------------- ------------- -------------- Basic earnings per share: B Shares Ps. 0.51 Ps. 0.14 Ps. 0.19 $ 0.020 CPOs 1.77 0.48 . 0.64 0.070 GDS 10.64 2.87 3.84 0.419 Weighted average shares outstanding (in 000's): Total shares 1,343,064 1,347,664 1,504,383 CPOs 322,381 336,219 375,318 GDS 53,730 56,037 62,553 5. Restructuring Charge - In accordance with U.S. GAAP the restructuring charges should be reported as part of operating income. This difference does not have an effect in the net income or earnings per share reported during the year ended December 31, 2001. 6. Impairment of long-lived assets and severance payments - In accordance with U.S. GAAP the adjustments arising from the impairment of long-lived assets and severance payments arising from restructurings or reorganizations which are included in other expenses for Mexican GAAP purposes should be reported as part of the operating income. This difference does not have an effect in the net income or earnings per share reported during the year ended December 31, 2001. 7 Stock Option Program-- In accordance with the program (see Note 9) the exercise price is determined to be the closing price on the last trading day prior to May 1 of each year for the options granted for the previous year, therefore, there was no compensation expense recognized in the financial statements, in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), for U.S. GAAP purposes. APB 25 requires that compensation expense for a stock option plan be measured using the intrinsic value method whereby compensation expense for a fixed plan is recognized in an amount equal to the excess of the market price of the underlying stock over the exercise price of the option at the grant date. Under Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," ("SFAS No. 123"), the Company presents the following additional required disclosures to the financial statements: F-49
EX-99.A.850th Page of 53TOC1stPreviousNextBottomJust 50th
Pro Forma Effect of Stock Compensation Program - SFAS No. 123 requires the disclosure of the Company's net income and net income per share, as if the Company had accounted for its employee stock option plan under the fair value method. For purposes of these pro forma disclosures, the estimated fair value of the options is amortized over the options' vesting period. Had the Company's stock option program been accounted for under SFAS No. 123, the net income for U.S. GAAP at December 31, 1999, 2000 and 2001 would have been decreased by Ps.17,087, Ps.16,708 and Ps.10,080, respectively. Earnings per share for each of the years in the three-year period ended December 31, 2001 is presented below: [Enlarge/Download Table] Thousands of U.S. dollars (Convenience December 31, Translation) ------------------------------------------------ December 1999 2000 2001 31, 2001 ------------- -------------- ------------- ------------ Basic earnings per share: B Shares Ps. 0.49 Ps. 0.13 Ps. 0.18 $ 0.020 CPOs 1.69 0.44 0.62 0.068 GDS 10.15 2.64 3.71 0.406 Weighted average shares outstanding (in 000's): Total shares 1,343,064 1,347,664 1,504,383 CPOs 322,381 336,219 375,318 GDS 53,730 56,037 62,553 The fair value of the options granted used in order to calculate the pro forma amounts above, have been estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: i) expected life of 7 years and expected volatility of 44.0%, ii) risk free rate of 5.32% and 6.36% for options granted during 1999 and 2000, respectively, and iii) no expected dividend yield. Based on these assumptions, the weighted average fair value of employee stock options granted during 1999 and 2000 was Ps.1.94 and Ps.1.55 per share (in nominal pesos), respectively, and the market price on the grant date was Ps.4.13 and Ps.2.72, respectively The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company's options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. 8. Recently Issued Accounting Standards - In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 addresses financial accounting and reporting for business combinations and requires that the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001. Under SFAS 142, goodwill and certain other intangible assets with indefinite useful lives will no longer be systematically amortized, but instead will be tested for impairment at least annually and written-down with a charge to operations when the carrying amount exceeds the estimated fair value. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company's management has not completed the initial impairment review F-50
EX-99.A.851st Page of 53TOC1stPreviousNextBottomJust 51st
required by SFAS 142. However, management believes that the adoption of SFAS 142 will reduce substantially the amortization expense of future years. In August 2001, the FASB also issued Statement of Financial Accounting Standards No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived Assets" ("SFAS 143"). SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. It requires the recognition of the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. SFAS 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. Management is currently evaluating the effects of adopting SFAS 143, but believes it will not have a material effect on the Company's results of operations and financial position. In addition, in October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144 is effective for fiscal years beginning after December 15, 2001. Management is currently evaluating the effects of adopting SFAS 144, but believes it will not have a material effect on the Company's results of operations or financial position. In April 2002, the FASB issued SFAS No 145, "Recission of FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." As a result of this statement, The Company may no longer classify gains and losses from extinguishments of debt as extraordinary items unless the debt meets the criteria of APB 30. The provisions of this statement with regard to FAS 4 will be effective for fiscal years beginning after 2002. Gains and losses from extinguishments of debt that have been classified as extraordinary in previous years that do not meet the criteria of APB 30 will be reclassified. During 2000 and 2001, the Emerging Issues Task Force ("EITF") addressed various issues related to the income statement classification of certain promotional payments. In April 2001, the EITF reached a consensus on Issue 00-14: "Accounting for Certain Sales Incentives" which addresses the recognition, measurement, and income statement classification for sales incentives offered voluntarily by a vendor without charge to customers that can be used in, or that are exercisable by a customer as a result of, a single exchange transaction. Sales incentives have various forms including discounts, coupons, rebates, and free products or services. Under the consensus, it is required that if the sales incentive is a free product delivered at the time of sale, the cost of the product or service should be classifies as an expense. However, the reduction in or refund of the selling price of the products resulting from any cash sales incentives should be classified as a reduction of revenue. EITF 00-14 should be applied for annual or interim periods beginning after December 15, 2001. In January, 2001 the EITF reached a consensus on Issue 00-22: "Accounting for "Points" and Certain Other Time-Based or Volume-Based Sales Incentive Offers for Free Products or Services to be Delivered in the Future". EITF 00-22 requires that cash rebates or refund obligations should be recognized as a reduction of revenue based on a systematic and rational allocation of the cost of honoring them. EITF 00-22 is applied for quarters ended after February 15, 2001. In April 2001, the EITF reached a consensus on Issue 00-25: "Vendor Income Statement Characterization of Consideration Paid to Reseller of the Vendor's Products". EITF 00-25 addresses the income statement classification, other than that addressed in EITF 00-14, from a vendor to a reseller or another party that purchases the vendor's products. EITF 00-25 requires that any consideration from a vendor to a reseller of its products is presumed to be a reduction of the selling price of the vendor's products and should be characterized as a reduction of revenue in the vendor's income statement. Such EITF, also establishes the conditions under which the consideration could be characterized as a cost incurred. EITF 00-25 should be applied for annual or interim periods beginning after December 15, 2001. In November of 2001, EITF codified Issues 00-14, 00-22 and 00-25 as Issue 01-9: "Accounting for a Consideration Given by a Vendor to a Reseller of the Vendor's Products". Management is currently evaluating the effects of adopting EITF 00-14 and 00-25, but believes it will not have a material effect on the Company's results of operations or financial position. Adoption of EITF 00-22 did not have a material effect in the results of operation or financial position. F-51
EX-99.A.852nd Page of 53TOC1stPreviousNextBottomJust 52nd
The adoption of Statement of Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), as amended by SFAS 138 did not have a material effect on the results of operations, financial position and cash flows of the Company on January 1, 2001, the date of adoption. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS No. 133 requires an enterprise to recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. F-52
EX-99.A.8Last Page of 53TOC1stPreviousNextBottomJust 53rd
PEPSI-GEMEX, S. A. DE C. V. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS SUPPLEMENTAL SCHEDULE VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001 (Thousands of Mexican Pesos of Purchasing Power of December 31, 2001) [Download Table] BALANCE AT BALANCE AT THE BEGINNING THE END OF DESCRIPTION OF THE PERIOD ADDITIONS DEDUCTIONS THE PERIOD Allowance for Doubtful Accounts: Year Ended December 31, 1999 30,514 18,551 7,644 41,421 Year Ended December 31, 2000 41,421 31,892 6,243 67,070 Year Ended December 31, 2001 67,070 66,501 26,743 106,828 * * * * * * F-53

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘SC TO-T’ Filing    Date First  Last      Other Filings
12/21/0318
1/1/032329
Filed on:10/7/02
6/21/022
6/15/025110-Q
4/30/0230
4/23/0219
2/28/0218
2/27/0229
2/26/02224
1/1/021925
12/31/01153
12/21/0118
12/20/0122
12/19/0112
12/15/015051
11/30/011011
9/30/0128
6/30/0150
5/31/0110
4/30/0122
3/31/011022
2/15/0151
1/1/011152
12/31/00153
12/14/0013
9/6/0012
9/1/00918
8/31/001213
4/28/0030
4/27/0022
1/1/00243
12/31/99253
1/1/99641
3/30/9828
12/31/9745
9/30/9728
4/4/9718
1/1/9744
12/31/9614
 List all Filings 
Top
Filing Submission 0000950123-02-009455   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
AboutPrivacyRedactionsHelp — Fri., Mar. 29, 6:33:43.1am ET