Operating income

Transcription

Operating income

Financial highlights
Our commitment
Established in the early 1990s, CIE is today the leading live entertainment company
Financial Information
in Latin America. Through a vertically integrated structure, CIE offers a unique
(Thousands of pesos as of December 1998, except for number of employees)
product in this region in order to:
•
•
1997
Increase
Sales
1,679,017
877,511
91%
Operating income
349,166
191,289
83%
EBITDA•
408,315
217,405
88%
Net income
148,021
127,312
16%
Number of employees
3,693
2,011
84%
Total assets
3,559,920
1,508,471
136%
Total liabilities
1,780,541
656,851
171%
Stockholders' equity
1,779,379
851,620
109%
Satisfy the demands for various leisure activities towards the end
of the 20th century.
•
1998
Provide top-level national and international live entertainment.
Strengthen and expand the industry in the Mexican market, as well as in the
• Operating income before interest, taxes, depreciation and amortization.
Spanish and Portuguese-speaking markets in America, and the Iberian Peninsula.
•
Maintain its subsidiaries as leaders in each of their businesses.
Sales
Operating income
(Thousands of pesos as of December 1998)
Table of contents
1,679,017
*
Financial highlights
1
*
91%
1998
1997
877,511
Message to our shareholders
2
6
A solid course: 1990-1998
8
1998: Another year of successful operations
10
Strategic business model
22
Board of directors and executive officers
26
Stockholders’ equity
1,779,379
3,559,920
*
1,508,471
28
1998
1997
191,289
Total assets
Management’s discussion & analysis of financial
condition and results of operations
83%
* % Increase
* % Increase
An integrated view of entertainment
349,166
* % Increase
*
136%
851,620
1998
1997
109%
1998
1997
* % Increase
1
To our shareholders:
CIE-R&P, an association between CIE and Rock & Pop,
Number of employees
at year end 1998
the largest live show promoter in Argentina and Chile.
For the third consecutive year, Corporación Inter-
3,693
americana de Entretenimiento (CIE) has achieved very
During 1998, Grupo Mágico Internacional took a very
important breakthroughs in all areas of our business.
important step towards the consolidation of its
These were made possible by the support and
presence in Colombia by obtaining the concession to
confidence of our shareholders, as well as by the
operate the Parque El Salitre amusement park in
professionalism and contributions of all of the people
Santa Fe de Bogota. Grupo Mágico will thus develop
*
84%
2,011
1998
1997
* % Increase
*Proceeding mainly
at our Company; people who have, over time, formed
the largest entertainment complex in Colombia,
an extraordinary team work that is committed to the
including an entertainment venue for shows, forming
successful performance of the Group. Due to the
a pillar for CIE’s operations in that country.
support of its people, CIE was able to opportunely and
from new operations.
Alejandro Soberón Kuri
Chairman of the Board and CEO
adequately react to the difficult financial markets’
In Mexico, we fully integrated RAC Producciones into
competitions. It also established its foundations for
situation during 1998. Thus, the Company was able to
develop our capacity to adapt to challenging economic
the Group, consolidating us as the leaders in the
1999 growth by completing negotiations for several
strengthen formerly-implemented expense controls, as
situations, and still reach record increases for our
promotion and production of Latin American and
sporting events, including soccer matches, the most
well as generate significant economies of scale and
operations as well as high organic growth.
family musicals. Ocesa Deportes also began opera-
popular recreational activity in Mexico, and the Beach
tions with such activities as Monster Trucks, the
Volleyball Open Championship World Tour in Acapulco.
efficiencies from joint operations with new companies
that were incorporated during the year.
Sales grew 91% to 1,679 million pesos, compared
Gymnastics Cup ‘98 and international wrestling
with sales of 878 million pesos registered in 1997. Our
This year, CIE integrated Publitop into its operations.
One of the most important breakthroughs during
operating margin stood at 21%, in line with 1997
Publitop is one of the most, synergetic and lucrative
1998 was the expansion of our operations in the
figures, and we added approximately 1,700 new
businesses in the area of outdoor advertising and has
Southern Cone of Latin America, where we tested our
employees, mainly coming from the new operations.
ability to enter new markets, replicating our successful
Today, the Group employs approximately 3,700
breakthroughs during 1998 was
providing free pedestrian footbridges in exchange for
business formula as developed in Mexico. This
people, mostly in Mexico and South America.
the expansion of our operations
advertising concessions.
contributed to the development of various cities,
in the Southern Cone of Latin
strategy, added to an increased volume and diversity
of events during the year, at prices that fit most
One of the most important
International sales represented 28% of CIE’s consoli-
America, where we tested our
In addition to all of this, CIE began the development of
ability to enter new markets,
2
demographic segments, has helped us to protect the
dated sales, which are the equivalent of the sales
business from economic fluctuations in the markets in
registered by the Group back in 1996, in US Dollar
which we operate. Thus, this also enabled us to
terms; and included in 1998 the incorporation of
replicating our successful business
formula as developed in Mexico.
the Centro de Entretenimiento Familiar y Cultural de
las Américas, (The Family and Cultural Entertainment
Center of the Americas) in Mexico City. Operations are
3
Sales grew 91%
stockholders’ equity in the form of Series “L” non-
opportunities that emerge, and we are certain that
During 1999, Brazil
to $1,679 million pesos,
voting shares, in the Mexican Stock Exchange,
these opportunities will continue to arise in the future.
is key in our
through which we received aproximately US$60
During 1999, we will also continue focusing all our
million. Most of the proceeds of these funds were
efforts on being the leading live entertainment
invested in projects that were key to our expansion,
company in Mexico and expanding our presence into
such as: the acquisition of an additional 50% in the
the Spanish-speaking markets within the Americas, as
operation of the Buenos Aires Zoo and the acquisition
well as in Spain.
compared with sales
consolidation as the
leading group in the live
of $877 million pesos
registered in 1997.
entertainment industry
in Latin America.
of the Opera Theatre also in Buenos Aires; the develop-
expected to begin during the second half of 1999
ment of the Centro de Entretenimiento Familiar y Cultural
Our outlook for 1999 is highly encouraging. Brazil,
We will also continue our penetration into Spain, as
de las Américas in Mexico City; and the Parque El
which is undoubtedly key in our consolidation as
well as the Latino market in the U.S., which consists of
Salitre amusement park in Bogota, Colombia. We
industry leaders in Latin America, has currently no
over 30 million Spanish-speakers.
expect that most of these investments will generate
vertically-integrated group like CIE. During the first
stronger cash flows during 1999 and 2000.
months of 1999 we initiated operations in that
We are grateful to our shareholders for your confidence,
important market, through the formation of strategic
which jointly with everyone’s effort at CIE, has made of
with the horse racetrack and a sportsbook. Also,
beginning in 2000, we expect to inaugurate a cultural
We are confident that we have positioned ourselves to
alliances with local partners that will contribute
us today a leading Mexican company with an inter-
entertainment center and shopping walk at this
continue the rate of controlled growth, through a
experience and market knowledge in the various
national presence, based on the professionalism of our
location with restaurants and various entertainment
deeper management team, focused on maximizing on
entertainment businesses in the region.
staff, coupled with a clear and strategic business vision.
choices. This would also include the first exhibition
and convention center of this type in Mexico City,
together with a luxury hotel. In order to ensure the
success of this ambitious project, CIE will count on the
Sincerely,
participation of national and international development and/or operations experts in each of the various
businesses to be included in the complex.
During 1998 we successfully
increased the Company’s equity
held in the form of Series “L”
Due to the confidence of our shareholders in CIE’s
non-voting shares, in the Mexican
Stock Exchange, through which
present and future performance, jointly with the many
participants in the Mexican Stock Exchange, during
we received aproximately
US$60 million.
Chairman of the Board
1998 we successfully increased the Company’s
4
5
An integrated view of entertainment
The Group brings together three interdependent
products and services of over 150 Triple-A advertisers
business divisions: Entertainment, Commercial and
that are currently managed by CIE. This is via the sale
Services.
of event sponsorships and signage space at venues
and footbridges, as well as the sale of food, beverages
Entertainment Division
and promotional items at the Company’s venues
The Entertainment Division, which contributed 67%
and/or related events. It also does this via the sale of
of CIE’s sales in 1998, is dedicated to the negotiation,
rotational advertising space on the side line barriers of
promotion and production of various musical
soccer fields during televised soccer matches, as well
concerts, theatrical and family shows, sporting events
as by the promotion and organization of trade fairs
and other types of live entertainment in Mexico and in
and exhibitions.
other major markets of Latin America, Spain and the
Sales by the Entertainment
Spanish-speaking United States. Through this division,
Services Division
CIE also operates numerous venues, such as
Finally, the Company’s Service Division, which con-
auditoriums, arenas, theaters and stadiums in Mexico,
tributed 17% of CIE’s sales in 1998, carries out com-
Colombia, Chile, Argentina and Brazil as well as
puterized ticket sales for various Company and third-
amusement parks in Mexico and Colombia.
party entertainment events, in Mexico and throughout Latin America. The Group has also utilized its
Division grew 117%
to Ps. 1,125 million;
Commercial Division
technology and expertise for the sale of tickets, to
CIE’s Commercial Division, which contributed 16% of
develop and offer telemarketing and value-added
CIE’s sales in 1998, offers consumers the various
teleservices.
Commercial Division sales
grew 119% to Ps. 269 million;
Revenue participation
(By division, in millions of pesos as of December 1998)
and Services Division sales
67%
1998
16% 17% 1,679
grew 20% to Ps. 285 million.
1997
59%
14% 27%
878
*
91%
* % Increase
Entertainment
Commercial
Services
7
A solid course: 1990-1998
During it’s nine years of existence,
CIE has accomplished diverse
strategies to consolidate
the Group as the Latin America
leader in live entertainment.
CIE’s headquarters
at Mexico City.
9
1998: Another year of successful operations
In the theater area, CIE successfully
Entertainment
During 1998, a combined 5.4 million people
attended 1,061 events promoted and/or produced by
concluded the presentation of Walt
Disney’s “Beauty and the Beast,” at
the Orfeón Theater in Mexico City,
CIE in Mexico, South America and Spain, among
which drew over 70,000 spectators
which the following concerts stand out:
with a total of 420 performances.
International Artists
Latin Artists
Andrea Bocelli
Chicago
Garbage
Iron Maiden
James Taylor
The Rolling Stones
The Smashing Pumpkins
Yes
Alejandro Fernández
Alejandro Sanz
El Reencuentro de Menudo
El Tri
Eugenia León and Ramón Vargas
Grupo Límite
Ricardo Arjona
Sentidos Opuestos
Timbiriche
The Rolling Stones concert in the Foro Sol was rated as
one of the most popular concerts in North America
during 1998 in terms of ticket sales by the U.S.
magazine POLLSTAR, published in December 1998.
CIE presented in co-production with the Instituto
During 1998,
Nacional de Bellas Artes, at the Palacio de Bellas
Artes in Mexico City, the Vienna Boys’ Choir, the
a combined 5.4 million
Philadelphia Orchestra, the soprano Jesse Norman
and the soloist Veneti.
people attended 1,061 events
Among the most important events which CIE
promoted and/or produced
by CIE in Mexico,
South America
and Spain.
participated in, organized and/or produced, are the
following:
• Teletón
• Medieval Times
• Ringling Brothers and Barnum & Bailey Circus
• Disney On Ice with the production of Hércules
• The first "Live Latin Music Festival" at the Foro
Sol: two days of Latin rock groups and artists
• The Gymnastics Cup ‘98
at the Palacio de los Deportes
• Monster Trucks and Motocross
11
In the theater area, CIE successfully concluded the
Commercial
presentation of Walt Disney’s “Beauty and the Beast,”
During the year, the number of advertisers managed
at the Orfeón Theater in Mexico City, which drew over
by the Group increased significantly to over 150 and,
70,000 spectators with a total of 420 performances.
as a result, the Group remained very active as a seller
Continuing its tour of Latin America, this show kicked
of sponsorships and advertising space at venues; as
off at the recently remodeled Opera Theater in the
well as in the sales of food, beverages and pro-
heart of Buenos Aires, with 45 performances by the
motional items at the Company’s venues and/or
Several fairs
end of the year, and it is expected to continue for
events. The sales of rotational advertising at soccer
and exhibitions
games, as well as the promotion and organization of
were organized
more months in 1999.
Grupo Mágico was
rated the 7th largest
amusement park operator
In addition to this, the following theatrical works were
in the world.
staged: Confesiones de Mujeres de 30, Tres Mujeres
Among some of the most important sponsors, the
following stand out:
Altas, and Nosotras que nos Queremos Tanto, in
Mexico City, and “Master Class” and “Antigone in
American Express
Bacardi
Banamex
Bancomer
Banorte
Bardahl
Bimbo
Cemex
Coca-Cola
Cruz Azul
Domecq
Femsa
New York”.
In the amusement park area, Grupo Mágico was rated
This increase in attendance was stimulated by the
the 7th largest amusement park operator in the world,
following:
by the U.S. magazine, Amusement Business, in
December 1998, based on the number of attendees.
during the year.
trade fairs and exhibitions were also significant.
Johnson y Johnson
Levis Strauss
Liverpool
Master Card
Modelo
Nestlé
Pascual
Pepsico
Philip Morris
Procter & Gamble
Telmex
Unilever
In the area of rotating advertising on the side line
barriers of soccer games, at the end of 1998 CIE held
the rights to 8 of the 18 soccer teams in Mexico’s First
*
Division , as well as those for 2 teams in the First
Division “A” , which captured big audiences and ratings.
• The inauguration of the Dinosaur-theme park
17 trade fairs and exhibitions were organized in Mexico
at the Parque El Salitre in Bogota, Colombia.
City and in other cities in Mexico, of which the
following stand out:
• The inauguration of Space Mountain at the
Mexico City amusement park.
• Auto Expo Mundial '98 at the Mexico City
World Trade Center
• Expo Médica Hospital
• Panamerican Congress
of Architects, Mexico 2000
• Metal Engineering Expo and Environmental
Manufacturing in Guadalajara, Jalisco
• Women's Expo in León, Guanajuato
• Let's go on Vacation and Auto Expo Mundial
in Monterrey, Nuevo León
• The inauguration of the largest ferris wheel in
Latin America, 50 meters high, at the Parque
Selva Mágica in Guadalajara, Jalisco.
• The inauguration of Dolphin Experience, a swimming
with dolphins activity and Sky Coaster at the CiCi
Water Park in Acapulco, Guerrero.
12
*
and 17 out of the 18 soccer teams at edition deadline.
13
Services
Entertainment has no Barriers
In the computerized ticket sales area for entertain-
The world markets’ globalization process, jointly with
ment events, the Company registered strong results,
NAFTA and other trade treaties, has forced Mexican
driven mainly by sales for the various events men-
companies to increase their international presence,
tioned earlier, as well as the other activities deve-
thus enabling them to enlarge the size of their target
loped at venues affiliated to the TicketMaster system.
market and diversify their risk .
During 1998, the Rolling Stones
concert, organized
by Rock & Pop in the
TicketMaster On Line, the new web site for Internet
CIE-R&P
ticket sales, launched during the second quarter of
After identifying a potential market in the Southern
1998, experienced strong demand, with a significant
Cone of Latin America, CIE commenced operations
number of hits during the year: over 1.4 million as of
through CIE-R&P, a successful joint venture with Rock
as #1 worldwide in terms
December 1998.
& Pop, the largest promoter of live entertainment in
of ticket sales.
River Plate Stadium in
Buenos Aires, was rated by
U.S. magazine, Amusement Business,
Argentina and Chile. This new association, in which CIE
*
In addition, 24 venues joined the TicketMaster system,
holds a 70% stake , contributed 24% to the Group’s
Beast”. This production included an extraordinary local
consolidated sales in 1998.
cast, and finalized the year with 45 performances. At
the same time, and as one of the Company’s initial
among the ones in Mexico City were the Sala
Nezahualcóyotl, the Poliforum Cultural Siqueiros, 3
As a result of this association, CIE-R&P acquired and
steps into Europe, CIE-R&P organized performances
theaters and the Diablos Baseball Club. Outside of
remodeled the Buenos Aires Opera Theater in the
for David Copperfield in Madrid and Barcelona.
Mexico City, the Hard Rock Live and Tres de Marzo
heart of the city, which opened in November with the
football stadium in Guadalajara; the Plaza Sésamo
staging of Walt Disney’s musical, “Beauty and the
Another move into the entertainment business in
(Sesame Street) amusement park in Monterrey; and 5
Argentina was the two-stage, 100% concession
large bullrings in Monterrey, Aguascalientes, Tijuana,
acquisition of the Buenos Aires Zoo. In order to
Puebla and Guadalajara also became affiliates.
increase revenue from this operation, CIE-R&P ini-
TicketMaster
tiated a strategy of direct sponsorship, whereby
On Line experienced
a strong demand
Regarding telemarketing, the Company continued
animal habitats are sponsored by private companies.
with 1.4 million
working with several clients in Mexico City and
The first companies participating in the sponsorships
hits as of
Monterrey, as well as in Bogota, Colombia. Among
are Grupo Industrial Bimbo, a large Mexican com-
them, Banco Santander’s 24-hours a day, 7-days-a-
pany, and Banco Hipotecario de Buenos Aires, an
week service stands out.
Argentine bank.
December 1998.
14
*
100% at edition deadline
15
In the Commercial Division, the two CIE-R&P radio
The complex will include:
• A multiple auditorium with 20,000-person capacity
stations are perfect synergies with the event promotion
• An electro-mechanical dinosaur-theme park, un-
for various musical and cultural events, which had
and production businesses:
doubtedly a new and unique attraction for both young
been previously held at soccer stadiums. This
and old. This park already began operating in
auditorium will add Bogota to CIE’s Latin American
December 1998.
event circuit.
• An expanded amusement park, with several me-
• A water park in a city surrounded by mountains and
credibility, due to the popularity of its musical style
chanical attractions to be developed and/or renovated,
with suitable weather conditions.
and market niche, featuring various local and
in line with the best parks in South America.
• Rock & Pop 95.9.
Cutting-edge expression of
Rock & Pop
Argentine radio, Rock & Pop is considered the
offices in
leading FM station in terms of listeners and
international musical talent.
Argentina.
Colombia: Parque El Salitre in Bogota
• Bogota’s first zoo, in a city with a school-age popu-
In 1968, the Mayor of Bogota decided to build a
lation of 3 million.
• Splendid Talk Radio. This station uses a slightly dif-
children’s amusement park in the geographical center
ferent programming format instead of a special con-
of the city. In 1994, more than two decades after it
cept for radio, where the audience participates in the
was born, efforts began to expand this park, including
program, discussing a variety of topics with experts,
an ambitious project with various entertainment
including psychologists, businessmen, and economists.
options for the population.
Grupo Mágico, in association with Reforestación y
Parques de Colombia received, in 1998, an 18-year
Spain
concession from the city government to develop a
unique, 30 hectare entertainment complex in a
Mexico
city with over 7 million inhabitants.
Colombia
During 1998, Grupo Mágico,
in association with Reforestación
y Parques de Colombia,
received an 18 year concession
CIE’s
World
Brazil*
Chile
Presence.
*at edition deadline
to develop a unique
entertainment complex.
16
Argentina
17
CIE will invite strategic
world-acclaimed trade fairs and exhibitions, many of
partners who will contribute
with their experience,
operation, capital and/or
which have not been able to come to Mexico due to
lack of suitable facilities.
special technologies.
• A cultural entertainment center, where folkloric and
regional events and shows will be presented, flanked
1998: a year of expansion
by a wide variety of restaurants.
in the Mexican market
• A luxury hotel aimed at serving both the Hipódromo
Publitop
and the Northwest area of Mexico City, where many of
Aiming to maximize on the opportunities from
the most important business centers are situated.
sponsorship contracts and billboard advertising, in
Towards new entertainment concepts:
• Horse racing. Managed efficiently and transparently,
Centro de Entretenimiento Cultural
and using state-of-the-art technologies and the
y Familiar de las Américas
experience of the best operators in the world, the
In order to penetrate and become leaders in new
Hipódromo de las Américas will be the main center
entertainment areas, through a vertically integrated
in Mexico for legal horse-race betting.
June 1998, CIE acquired 75% of Publitop, S.A. de C.V.,
In order to carry out such project, CIE aims to in-
a leader company in the sale of advertising space on
vite strategic partners who will contribute with their
pedestrian footbridges.
structure, in 1998, Administradora Mexicana de
Hipódromos, a recently-formed company and 100%
• Sportsbooks for national and international sporting
CIE-owned subsidiary, obtained permits and a
events, including horse racing at the Hipódromo de las
renewable 25-year concession to operate a racetrack
Américas. These sportsbooks will be also operated in
and betting books at the Hipódromo de las Américas.
conjunction with world experts in the area, and will be
experience, operations, capital and/or special technologies.
Created in 1995, Publitop’s business strategy is based
on a combined effort between the Company and
public government, via which footbridges are built and
In addition, another concession was obtained for the
located throughout Mexico; the most important of
Managed efficiently and transparently,
them being situated in the heart of the Hipódromo.
the Hipódromo de las Américas
will be the main center in Mexico
development of an entertainment center, an exhibition and convention center, and a hotel sharing the
• An entertainment walk for families, which will include
grounds of the race track. This concession is for 50
a mall housing cinemas, thematic restaurants and
years, and is renewable for the same period.
other entertainement choices, as well as attractions
for legal horse-race betting.
financed through the commercial use of advertising
space, providing a significant urban and social benefit
at the same time.
The “Publitops” are advertisements with a typically
high visual impact, that are located on the main
for children.
thoroughfares with heavy vehicle traffic in Monterrey,
Situated in a Land Mark of 52 hectares right in the heart
and the State of Mexico.
of Mexico City, the development of this ambitious
• An exhibition and convention center for the organiza-
project includes various entertainment areas:
tion of social events and businesses, as well as for
This method of advertising is considered very effective by
clients, since they are located in very highly-visible areas.
18
19
RAC Producciones: a successful
This new service, which is highly successfull in the
100% integration
United States, adds a further method of ticket sales for
In October 1997, CIE added another key dimension to
TicketMaster in Mexico, where telephone centers and
its live entertainment business, through the acqui-
sales points have been the traditional forms used in
sition of 51% of RAC Producciones, a leader for
Mexico City and Monterrey.
booking and representing national artists in Mexico, as
well as promoting and presenting Latin artists and
In less than a year of operation, TicketMaster On Line
first-class family shows, such as the Ringling Brothers
has achieved impressive growth in the number of hits,
and Barnum & Bailey Circus and Disney on Ice.
rising to 1.4 million by December 1998 , which also
*
resulted in a significant increase in the number of
tickets sold this way.
A year later, in October 1998, CIE acquired the
remaining 49% in RAC Producciones. This will allow
the Company to generate important economies of
scale and internal efficiencies, as well as providing
greater depth to its management team by incorporating executives with great industry experience and
knowledge. RAC’s full integration will make it possible
to strengthen the promotion of Latin events, not only
in Mexico where great flexibility is given in receding
stages, but outside Mexico, particularly in the Spanishspeaking market of the United States, a market
containing over 30 million Spanish speakers.
TicketMaster On Line:
RAC Producciones
Internet ticket sales
is leader in
In order to provide the public with the advantage of
booking and
accessing, quickly and efficiently, the best entertain-
managing of
ment available, TicketMaster On Line was created in
Latin artists.
April 1998. The system makes it possible to purchase
tickets to events over the Internet.
20
*
and 4.2 million hits at edition deadline.
Strategic business model
As a live entertainment company, CIE’s business
theater works, and many live forms of entertainment
vision has been based on a vertically integrated
which are in high demand from the various demographic
model, which has allowed the Company to take max-
segments of the market.
imum advantage of the opportunities for collateral
business synergies, themselves becoming sources
The promotion and integral production of shows has
of revenue.
therefore generated the basis for the business model,
which is composed of the following key elements:
The core of this constitutes what is a fundamental
element: the promotion and production of live entertainment events, including popular music concerts,
both international and Latin, classical music, popular
dance, special family presentations - such as circuses,
• Market research for events
• Negotiating and booking the event
• Promotion and production
• Computarized and OnLine ticketing
• Operation and management of venues
ice shows, shows involving special skills - sports events,
The core of CIE
In any case, the operation of venues benefits from the
economies of scale derived from the simultaneous
constitutes what is
a fundamental element:
management of these, where each of the distinct
venues share a series of resources, technologies and
experience. These venues include the following:
the promotion and
production of live
entertainment events.
• Amphitheaters
• Auditoriums
• Pavilions
for trade fairs
• Theaters
• Arenas
and stadiums
• Exhibition centers
• Amusement parks
• Zoos
23
By operating these venues, CIE has had the opportunity
to integrate into its model the following related
businesses:
Using this model, CIE
• Sale of rotating billboard advertising at
combines artists and their
soccer stadiums.
audiences, consumers and
• Sale of advertising on footbridges.
their favorite brands and
• Sale of concessions and exclusive rights at the sites
• The sale of sponsorships and marketing opportunities
sellers with their buyers.
operated by the Group.
associated with the events and the sites operated by
the Group.
• Sale of food, beverage and souvenirs during events.
Using this model, CIE combines artists and their
audiences, consumers and their favorite brands and
makes CIE unique and competitive, as its vertical
sellers with their buyers. At the same time, this model
integration and synergic structure become the
Finally, this structure has enabled and favored the
strength of its strategy and a mode of execution
creation of business synergies, which complement the
that has taken years to develop and is therefore
model, such as:
not easily replicated by potential competitors.
• Telemarketing, both in and out bounds calls.
• Creation, promotion, operation and sale of trade fairs
and exhibitions.
Entertainment
Business
Contents
Market
Research
Negotiating
and Booking
Promotion and
Production
Ticketing and
Distribution
Consumer
Venue
Operation
Souvenirs
Food and
Beverages
Sponsorships
Related
Businesses
25
Board
of Directors
Associated Subsidiaries
Chairman of the Board
Francisco López Riestra
Director
Gabriel Jaramillo Sanint
Director
Emilio Icaza Chávez
Director
Rodrigo González Calvillo
Director
Federico González Compeán
Director
José Manuel Alavez González
Director
Eduardo Pérez-Vázquez
Secretary
Executive Officers*
Chief Executive Officer
Rodrigo González Calvillo
Chief Operating Officer
Roberto Diez de Sollano Díaz
Chief Financial Officer
Marcela Gómez Zalce
Corporate Director of Public and Government Relations
Ricardo Herrera Estrella
Corporate Director of Internal Auditing
Rafael Moreno Turrent
Corporate Director of Business Development
Alejandro R. Garza Díaz
Corporate Director of the Entertainment Division
Arturo Langdon Lagarrigue
Corporate Director of the Commercial Division
Gabriel Lecumberri Pando
Corporate Director of the Services Division
Alejandro Rodríguez Maurice
General Counsel
René Aziz Checa
President, Grupo Mágico Internacional, S.A. de C.V.
Francisco Alonso Olivares
General Director of Publitop, S.A. de C.V.
Subsidiaries
José Manuel Alavez González
General Director of Administradora Mexicana de Hipódromo, S.A. de C.V.
Federico González Compeán
General Director of MAT Theatrical & Entertainment Ltd.
Daniel E. Grinbank
President, CIE-R&P, S.A., Argentina
George González
Regional Director for Argentina, Brazil and Chile
Bruce E. Moran
President, Ocesa Presents, Inc., New York
Federico Alamán González
General Director of Ocesa Presenta, S.A. de C.V.
Sergio Alamán González
General Director of Concesiones de Artículos Promocionales, S.A. de C.V.
Pablo Cañedo White
General Director of Ocesa Deportes, S.A. de C.V.
Mauricio Eichner Podgursky
General Director of Teleservicios de Valor Agregado, S.A. de C.V.
Alejandro García del Castillo
General Director of Venta de Boletos por Computadora, S.A. de C.V.
Manuel Pérez Díaz
General Director of Make Pro, S.A. de C.V.
Carlos Petersen Yvom Vauer
General Director of Sitel de México, S.A. de C.V.
René Reyes Espinoza
General Director of RAC Producciones, S.A. de C.V.
Mario Villa Vera
General Director of Ocesa, S.A. de C.V.
26
*
27
At edition deadline
Management’s discussion and
incorporation of CIE-R&P, S.A. (CIE-R&P) during 1998, a joint
in Mexico, the Internet ticketing service launched during the
the year. Operating margin for 1998 was 20.8%, as
analysis of financial condition
venture between CIE and Rock & Pop, S.R.L. (R&P), the
third quarter of 1998, recorded important increases in both,
compared to a 21.8% operating margin recorded during
and results of operations
largest live rock entertainment promoter in Argentina and
the number of hits and ticket sales.
1997, resulting from a Ps. 234 increase in operating ex-
(All figures are expressed in millions of Pesos as of December 31,
Chile. This joint venture, of which CIE owns 70%, accounted
1998, unless otherwise specified, and are prepared in accordance
for 24% of CIE’s consolidated revenues in 1998; (ii) the
Gross income increased 129%, to Ps. 695, which compares
attributable to the operating expenses of the Company’s
with Mexican GAAP. Certain amounts may differ due to rounding)
revenue contributions of Grupo Mágico and RAC Produc-
favorably to the Ps. 304 achieved during 1997. For the year,
new subsidiaries. As a general explanation, it is worth men-
ciones during 1998 were significantly higher than reported
CIE recorded a 41.4% gross margin, which represents a 640
tioning that when compared to 1997, the integration of a
during 1997, as both companies were consolidated in CIE’s
basis points increase as compared to the 34.6% gross
different mix of costs and expenses of CIE’s subsidiaries
financial statements until December of that year, and
margin recorded during 1997. The gross margin increase
during 1998, in particular those that were recently acquired,
therefore, only a certain number of their revenue days were
was mainly the result of a lower percentage of costs, as
resulted also in material variations in both, the gross and
recorded in CIE’s financial statements at year end 1997.
various efficiencies and economies of scale were achieved
operating income.
Sales
penses. This increase in operating expenses were mainly
1,679,017
*
91%
877,511
between CIE’s workforce and the newly established
1998
1997
* % Increase
The 117% revenue increase in the commercial division of
subsidiaries during the joint production and promotion of
Ps. 146 was due to (i) a higher volume of rotational adverti-
several events.
EBITDA
sing on soccer fields, the promotion and organization of more
trade fairs and exhibitions, as well as an increased selling of
Operating income for 1998 increased 83%, to Ps. 349, as
Revenues for 1998 increased 91%, to Ps. 1,679, compared
event sponsorships, advertisement spaces and merchandising
compared with an operating income of Ps. 191 recorded in
with total revenues of Ps. 878, recorded during 1997.
in Mexico and abroad, in particular Argentina; (ii) to the
1997, which is the result of the 91% revenue growth during
Revenues by division were as follows: the entertainment
addition of Publitop, S.A. de C.V’s, (Publitop) operations during
408,315
*
88%
217,405
1998
1997
* % Increase
division increased by 117% to Ps. 1,125, the commercial
1998, in which CIE has a 75% stake, and which markets
division increased by 119% to Ps. 269, and the service
billboard advertising on pedestrian overpasses.
Operating income
division increased 20% to Ps. 285.
Operating cash flow (earnings before interest, taxes,
Finally, the 20% revenue increase in the services division of
The 117% revenue increase in the entertainment division of
Ps. 49 was mainly due to a growth in computerized ticketing
Ps. 607 was mainly due to a higher volume and a greater
revenues through the Ticketmaster System. This was a result
depreciation and amortization “EBITDA”) increased 88%, to
349,166
Ps. 408, as compared to Ps. 217 reported during 1997. This
increase is mainly due to the operating income increase
*
83%
diversity of events produced in Mexico and abroad, including
28
of a higher number of events during the year, jointly with
various musical concerts, several cultural, sports and family
important ticket-advertising revenues and new venues and
events, and new theater productions, as described later in
events that became affiliated with the system. In addition, it
the report. In particular, it is important to mention (i) the
is worth mentioning that the TicketMaster On-Line operation
previously mentioned, in conjunction with a 126% increase
191,289
* % Increase
1998
1997
in depreciation and amortization during 1998, to Ps. 59,
resulting from the incorporation of R&P, Publitop and Grupo
Mágico’s fixed assets during the year.
29
Debt Profile
Horse
gain during the year, as compared to a Ps. 8 loss recorded
recorded in property, plant and equipment, which mainly
Racetrack in Mexico City and
during 1997, as the 18.6% inflation rate for the year affected
reflects the incorporation of CIE-R&P, Publitop and Grupo
the El Salitre amusement park
the Company’s net-liability domestic monetary position.
Mágico’s fixed assets during the year, jointly with the first
of
Pesos
Short-term
41%
35%
The
Americas
stages of the revamping and construction of the horse
in Bogota, among others.
The Company recorded Ps. 47 in taxes during 1998, as
Dollars
& F.C.*
Long-term
racetrack and related facilities.
In addition, it is worth men-
compared with Ps. 16 in taxes during 1997, consisting
tioning that some of these
mainly of provisions for income tax, reflecting an increase in
Other important increase of Ps. 336 was recorded in trade
projects are not expected to
the taxable income of the Group’s subsidiaries. The
receivables, reflecting the Company’s organic and acquisi-
generate significant cash-
Company does not consolidate the results of its subsidiaries
tion-driven growth during the year.
flows until 1999-2000, and
for fiscal purposes.
59%
65%
* Foreign Currency
For 1998, Integral Cost of Financing (ICF) increased 153%,
therefore, did not contributed to EBITDA’s income dur-
to a cost of Ps. 82. The principal reason for this increase
ing 1998.
Minority interest for the year was Ps. 18, as compared to Ps. 6
Total liability
was a higher interest expense, which increased by
recorded during 1997. This important increase is mainly due
164%. Accrued interest during the year was affected by a
To a lesser extent, ICF was also affected by a Ps. 13 decrease
to the incorporation of the previously mentioned operations
Ps. 480 higher average debt during the year, to Ps. 647,
in interest income, as a result of a higher portion of US
during 1998, where the Company has minority partners.
1,780,541
*
coupled with higher Peso interest rates. During 1998,
Dollar-denominated cash balances, which are invested at
interest rates in Mexico averaged 26.89% (TIIE), which
much lower interest rates.
from Ps. 127 million reported during 1997, driven by the
compared unfavorably with the average interest rates of
1998
1997
* % Increase
Offsetting these effects, during 1998 the Company recorded
important revenue and operating income increases as
a Ps. 60 exchange currency gain. Just for the fourth quarter of
explained earlier, which were partially offset by a higher ICF
The increase in the Company’s debt is the result of CIE’s
1998, CIE recorded an exchange currency gain of Ps. 45,
and by the profit sharing to minority partners, as mentioned
Total liabilities at December 31, 1998 were Ps. 1,781, a
strategy to finance its working capital needs through a mix of
mainly driven by an accounting adjustment made by the
in the past paragraph.
171% increase as compared with total liabilities at
debt coupled with the issuance of equity in the capital
Company’s auditors in connection with CIE’s local exchange
markets, in order to support its organic and new-operations
currency position during the second half of the year. To a
Balance sheet
Ps. 830 increase in short-term and long-term bank loans, as
growth. The use of proceeds of this debt was reflected in
lesser extent, a volatile exchange rate during the year, which
CIE’s total assets at December 31, 1998 were Ps. 3,560,
a result of the Company’s strategy to finance its working
material increases in fixed and deferred assets, including
went from 8.07/US Dollar at December 31, 1997 to 9.94/US
136% higher as compared with total assets of Ps. 1,508 at
capital needs through debt and the issuance of equity as
pre-operational investments, from which it is important to
Dollar at December 31, 1998, positively affected the
December 31, 1997. As a result of the Company’s use of
mentioned above. During the fourth quarter of 1998, the
highlight the 70% acquisition of R&P including The Buenos
Company’s average domestic US dollar net asset position.
proceeds in connection to its debt and equity issuances as
Company raised a Dollar-denominated long-term loan of
Aires Zoo and the Teatro Opera, coupled with the development
In addition, CIE’s result in monetary position was a Ps. 11
previously explained, a Ps. 447 increase in assets was
US$ 50 million (equivalent to Ps. approximately Ps. 500).
21.89% during 1997.
30
656,851
Net income for the year increased 16% to Ps. 148 million,
171%
December 31, 1997. This increase was primarily due to a
31
The Company’s stockholders’ equity increased by 109%
Financial Statements
Stockholders’ equity
to Ps. 1,779 at December 31, 1998, as compared to
stockholders’ equity recorded during 1997. This important
1,779,379
increase was mainly due to (i) the Ps. 148 net income for
*
109%
the year; and (ii) a Ps. 554 increase in “premium on issu851,620
ance of capital stock”, recorded after the public offering of “L”
non-voting shares in the Mexican Stock Exchange, through
1998
1997
* % Increase
CORPORACION INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES
which the Company raised approximately US$ 60 million.
Consolidated Financial Statements
December 31, 1998
(With comparative balances for 1997)
Contents
32
Statutory and independent auditors’ report
34
Consolidated financial statements
36
Notes to the consolidated financial statements
41
Alejandro Torres Hernández
Certified Public Accountant
To the General Shareholders Meeting of
Corporación Interamericana de Entretenimiento, S.A. de C.V.
I, the undersigned, as statutory auditor and in compliance with the dispositions of Article 166 of the Ley General de Sociedades Mercantiles (General
Business Corporations Act) and Corporación Interamericana de Entretenimiento, S.A. de C.V., Bylaw, hereby submit to you my opinion on the
truthfulness, sufficiency and reasonability of the information the Board of Directors has presented to you related to this Corporation´s operation during
the year ended on December 31, 1998.
The Board of Directors and Stockholders
Corporación Interamericana de Entretenimiento, S. A. de C. V.:
(Mexican pesos of constant purchasing
power as of December 31, 1998)
The attached financial statements have been prepared under the laws and regulations applicable to the corporation as an independent legal entity:
therefore investment in subsidiaries´ capital stock has been valued following the equity method. Separated are presented the consolidated financial
statements wich, on the same date, have an accountant’s report without exception.
We have examined the accompanying consolidated balance sheet of Corporación Interamericana de Entretenimiento, S. A. de C. V. and Subsidiaries as
of December 31, 1998, and the related consolidated statements of income, stockholders’ equity and changes in financial position for the year then
ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of certain consolidated subsidiary companies were audited by other independent auditors.
The financial statements of these subsidiaries reflect total assets and total revenues constituting 8% and 36% as of December 31, 1998 of the related
consolidated totals. The parent company´s investment in these subsidiaries amounts to $264,487,163 as of December 31, 1998 and its share in their
net income is $82,312,694 for the year then ended. Our opinion expressed herein, insofar as it relates to the amounts included for such subsidiaries,
is based solely upon the reports of the other auditors. The consolidated financial statements as of December 31, 1997 were audited by other
independent auditors, who issued an unqualified opinion dated March 31, 1998.
In my opinion, the accounting and reporting criteria and policies applied by the Corporation and considered by managers in preparing the reports
presented by them to this Meeting, are both adequate and sufficient and have been applied consistently with the prior fiscal year. Therefore, such
financial information reflect in a truthful sufficient and reasonable way the financial situation of Corporación Interamericana de Entretenimiento,
S.A. de C.V., as of December 31, 1998, the results of its operations, the changes on the stockholders’ equity and changes in financial position for the
year then ended, in accordance with the accounting principles generally accepted in Mexico.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit consists of examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
I have attended the Shareholders Meeting and Board of Directors Meeting to which I have been duly convened, and obtained from both director and
managers the operation information, documents and records I considered necessary to review. My revision has been made in accordance with the
generally accepted audit standards in Mexico.
ALEJANDRO TORRES HERNANDEZ C.P.A.
STATUTORY AUDITOR
In our opinion, based upon our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Corporación Interamericana de Entretenimiento, S. A. de C. V. and Subsidiaries as of December 31, 1998,
and the results of their operations, the changes in their stockholders’ equity, and the changes in their financial position for the year then ended, in
conformity with generally accepted accounting principles in Mexico.
KPMG CARDENAS DOSAL, S. C.
Mexico, D.F.
April 25, 1999
Mario Fernández Dávalos
April 25, 1999.
34
35
Corporación Interamericana de Entretenimiento, S.A. de C.V. and Subsidiaries
Consolidated Balance Sheet December 31, 1998
Consolidated Statement of Income
(Mexican pesos of constant purchasing power as of December 31, 1998)
Year ended December 31, 1998
Assets
Current assets:
Cash and temporary investments
Accounts receivable, net (note 4)
Accounts receivable, net (note 4)
Inventories (note 6)
Prepaid expenses
Deferred costs
Total current assets
Property, machinery and equipment,
net (note 7)
Deferred charges:
Rights, patents and trade mark,
less Accumulated amortization
of $1,338,050 in 1998 and
$1,117,363 in 1997
Deposits
Other, net (note 8)
Crédito mercantil, neto (nota 9)
Concession Administradora
Mexicana de Hipódromo,
S.A. de C.V. (note 15)
1998
1997
$ 233,371,096
584,340,160
227,391,160
10,286,445
13,930,060
309,003,656
______________
169,518,663
218,272,494
–
6,662,202
–
217,204,985
______________
1,378,322,577
______________
611,658,344
______________
1,069,737,552
______________
622,674,202
______________
Liabilities and stockholders' Equity
Current liabilities:
Bank loans (note 10)
Current maturates of long-term
debt (note 10)
Accounts payable
Other payables
Advances from customers
Other taxes payable
Income tax payable
Employees' statutory profit
sharing payable
Accounts payable to related
parties (note 5)
Deferred revenue
Total current liabilities
1998
1997
$ 340,730,031
80,725,178
49,166,000
191,136,823
232,203,567
850,687
49,583,152
–
9,156,617
75,089,016
59,801,225
_
33,148,814
11,254,368
663,009
79,530
21,562,015
113,835,962
______________
999,731,246
–
55,027,811
______________
324,282,559
1998
Service revenue
Cost of services
877,511,411
573,882,459
__________________
695,108,475
303,628,952
Operating income
345,942,378
____________________
112,339,936
__________________
349,166,097
____________________
191,289,016
__________________
Comprehensive financing income (cost):
Interest income
Interest expense
Foreign exchange gain (loss), net
Bank commissions
Monetary position gain (loss)
37,536,752
(186,187,770)
60,286,318
(4,279,608)
10,532,044
50,367,819
(69,416,506)
(2,600,383)
(2,849,798)
(7,980,749)
Comprehensive financing cost, net
(82,112,264)
____________________
(32,479,617)
__________________
Other income (expenses):
1,141,931
59,236,539
445,692,063
605,789,436
1,214,708
4,982,585
267,795,509
145,348
–
______________
1,111,859,969
–
______________
274,138,150
Long-term debt, net of current
maturities (note 10)
Other payables
Total liabilities
Negative goodwill (note 9)
Stockholders' equity (note 12):
Majority interest:
Capital stock
Additional paid-in capital
Convertible debt (note 11)
Retained earnings
Total majority interest
Minority interest
Total stockholders' equity
733,585,362
47,224,263
______________
207,290,383
125,277,968
______________
Gain on sale of stock of subsidiary companies (note 14)
1,780,540,871
______________
656,850,910
______________
Loss on marketable securities, net
3,465,889
______________
–
______________
______________ ______________
$3,559,920,098 1,508,470,696
______________
______________ ______________
______________
Other expenses, net
Income before taxes, employees' statutory profit
sharing, extraordinary items and minority interest
11,026,525
800,872,329
314,422,810
377,169,031
______________
9,950,000
246,750,229
314,775,359
229,148,516
______________
1,503,490,695
272,422,643
______________
800,624,104
50,995,682
______________
1,775,913,338
851,619,786
Commitments and contingencies
(notes 17 and 18)
Income tax (note 13)
Tax on assets (note 13)
Employees' statutory profit sharing (note 13)
The accompanying notes are an integral part of these consolidated statements.
16,220,257
(30,508,697)
Extraordinary items:
Benefit from tax loss carryforwards (note 13)
Other
Minority interest
Net income
–
(12,011,702)
__________________
(54,168,225)
____________________
54,201,414
__________________
212,885,608
____________________
213,010,813
__________________
71,701,932
182,813
663,009
____________________
15,870,024
79,530
75,897
__________________
72,547,754
____________________
16,025,451
__________________
140,337,854
196,985,362
25,202,288
–
____________________
Income before minority interest
______________ ______________
$3,559,920,098 1,508,470,696
______________
______________ ______________
______________
66,213,116
(39,879,785)
____________________
Income before extraordinary items and minority interest
Earnings per share (note 16):
Basic
Diluted
36
1,679,017,263
983,908,788
____________________
$
Gross profit
Operating expenses
1997
165,540,142
(17,519,627)
____________________
$
148,020,515
____________________
____________________
–
(64,118,807)
__________________
132,866,555
(5,554,065)
__________________
127,312,490
__________________
__________________
1.02
0.98
1.12
____________________
____________________
1.01
__________________
__________________
$
37
Statement of Stockholders' Equity
Common stock
Issued
Balances at December 31, 1996
$
Unpaid
10,165,563
Additional
paid-in capital
Total
(409,462)
Convertible
debt
Total
majority
interest
Retained
earnings
Total
stockholders’
equity
Minority
interest
9,756,101
237,955,899
–
101,836,026
349,548,026
23,407,944
372,955,970
Payment of common stock (note 12)
–
193,899
193,899
8,794,330
–
–
8,988,229
–
8,988,229
Convertible debt (note 11)
–
–
–
–
314,775,359
–
314,775,359
–
314,775,359
Inflation adjustement of investments and other transactions
relating to minority interest
–
–
–
–
–
–
–
22,033,673
22,033,673
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
127,312,490
––––––––––––––
127,312,490
––––––––––––––
5,554,065
––––––––––––––
132,866,555
––––––––––––––
9,950,000
246,750,229
314,775,359
229,148,516
800,624,104
50,995,682
851,619,786
210,305
210,305
5,947,947
–
–
6,158,252
–
6,158,252
5,258
–
–
–
–
–
–
–
865,339
547,822,485
–
–
548,687,824
–
548,687,824
–
–
–
–
Net income
10,165,563
Payment of common stock (note 12)
–
Decrease in common stock (note 12)
(5,258)
Increase in common stock (note 12)
938,184
Conversion debt (note 11)
(215,563)
(72,845)
881
–
881
351,668
–
–
–
–
–
–
–
203,907,334
203,907,334
Net income
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
–
––––––––––––––
148,020,515
––––––––––––––
148,020,515
––––––––––––––
17,519,627
––––––––––––––
165,540,142
––––––––––––––
$
11,099,370
––––––––––––––
––––––––––––––
(72,845)
––––––––––––––
––––––––––––––
11,026,525
––––––––––––––
––––––––––––––
800,872,329
––––––––––––––
––––––––––––––
314,422,810
––––––––––––––
––––––––––––––
377,169,031
––––––––––––––
––––––––––––––
1,503,490,695
––––––––––––––
––––––––––––––
272,422,643
––––––––––––––
––––––––––––––
1,775,913,338
––––––––––––––
––––––––––––––
Inflation adjustment of investing and other transactions
relating to minority interest
(352,549)
38
39
Consolidated Statements of Changes in Financial Position
Notes to Consolidated Financial Statements
December 31, 1998
1998
Operating activities:
Income before extraordinary items, net of minority interest
Interest not requiring resources:
Depreciation and amortization
Amortization of goodwill
Minority interest
Funds provided by operations
1997
Funds (used in) provided by operating activities, before
extraordinary items
Extraordinary items
Funds (used in) provided by operating activities
Financing activities:
Bank loans
Increase in common stock
Capital contribution
Additional paid-in capital
Minority interest
Convertible debt
Funds provided by financing activities
Investing activities:
Acquisition of property, machinery and equipment, net
Rights, patents and trademark
Deposits
Other assets, net
Goodwill
Negative goodwill
Funds provided by financing activities
Increase in cash and temporary investments
Corporación Interamericana de Entretenimiento, S.A. de C.V. (CIE, or the
122,818,227
191,431,297
59,148,686
6,087,415
17,519,627
____________________
26,115,931
390,235
5,554,065
__________________
organization and acquisition of Mexican and foreign companies, through
205,573,955
223,491,528
Entertainment – Production and promotion of live entertainment and
$
Company) is a holding company engaged in the incorporation,
which it performs the following activities:
In 1997, the Company acquired 50% of the shares of Grupo
Mantenimiento de Giros Comerciales Internacional, S.A. de C.V., a
company that operates amusement parks.
Also in 1997, the Company sold 49% of its interest in Grupo Sitel de
México, S.A. de C.V. (formerly Grupo de Comercialización Integrada, S.A.
de C.V.) to Sitel Corporation, in order to benefit from Sitel Corporation’s
experience in the industry.
activities, including: concerts, theater productions, sports and other
Net changes in operating assets and liabilities:
Accounts receivable
Related parties, net
Inventories
Prepaid expenses
Deferred costs
Accounts payables
Other payables
Advances from customers
Other taxes payable, net
Income tax payable
Employees' statutory profit sharing
Deferred revenue
(1) Description of business and salient events:
(366,067,666)
(205,829,145)
(3,624,243)
(13,930,060)
(91,798,671)
116,047,807
94,348,637
850,687
16,434,338
(11,254,368)
583,479
58,808,151
____________________
(199,857,099)
(28,503,207)
–
(5,506,752)
(122,231,063)
–
36,714,124
101,589,340
(34,311)
(29,873,211)
16,018,971
79,530
(3,880,886)
__________________
187,864,063
25,202,288
____________________
(64,118,807)
__________________
(174,654,811)
____________________
123,745,256
__________________
826,309,215
1,075,644
–
553,770,432
203,907,334
–
____________________
221,498,453
–
193,899
8,794,330
22,033,673
314,775,359
__________________
1,585,062,625
____________________
567,295,714
__________________
(505,991,349)
(147,910)
(54,253,954)
(177,896,554)
(611,731,503)
3,465,889
____________________
(298,731,766)
216,366
(402,418)
(236,905,298)
–
–
__________________
(1,346,555,381)
____________________
(535,823,116)
__________________
events in Mexico and Latin America.
(2) Significant accounting policies:
Commercial – Commercialization, arrangements with event sponsors,
Significant accounting policies and practices used by the Company and
its subsidiaries in the preparation of the accompanying financial
statements are described below:
sales of advertising signs, sales of use rights in advertising media,
promotion and organization of fairs and expositions, sales of food,
beverages and promotional goods at events.
Services – Ticket sales through automated reservation systems and
telemarketing services for telephone transactions.
Horse Racetrack – Operation of horse racetrack and related gambling
activities at the Hipódromo de las Américas, using the system "Libro
155,217,854
At beginning of year
169,518,663
____________________
14,300,809
__________________
At end of year
$
233,371,096
____________________
____________________
169,518,663
__________________
__________________
Cash:
The National Consumer Price Index (NCPI) used to recognize the
effects of inflation on the financial information was as follows:
Foráneo" (Foreign Book); installation and operation of supplementary
facilities, including hotel, convention center and entertainment complex.
CIE’s administrative, financial and advertising services are provided
December 31
NCPI Index
Inflation %
1998
275.038
18.61
through its subsidiary Servicios Corporativos CIE, S.A. de C.V. and
1997
231.886
15.72
subsidiaries.
1996
200.388
27.70
During 1998, the Company acquired a majority ownership in the
following companies:
-
63,852,433
a. Financial statement presentation – The accompanying financial
statements include the recognition of the effects of inflation on the
financial information and are expressed in Mexican pesos of constant
purchasing power as of the most recent balance sheet date.
Clemente Lococo, S.A., which operates the Teatro Opera in Buenos
Aires, and Jardín Zoológico de la Ciudad de Buenos Aires, S. A., which
operates the zoo of Buenos Aires.
b. Principles of consolidation – The consolidated financial statements
include the assets, liabilities and results of operations of the Company
and those subsidiaries in which the Company owns more than 50%
of the capital stock and/or has control.
and presentation of Latin artists in Mexico.
All significant intercompany balances and transactions have been
eliminated in consolidation. The consolidation was based on the
audited financial statements of the issuing companies, which have
been prepared in accordance with uniform accounting policies.
-
Publitop, S.A. de C.V., engaged in advertising in public walk bridges.
The following are the principal subsidiaries:
-
Servicios de Alimentos y Bebidas Especializados, S.A. de C.V.,
-
Rac Producciones, S.A. de C.V., which main activity is the promotion
engaged in the sale of food and beverages.
Also, during 1998 the Company received a concession from the Federal
government to operate the Hipódromo de las Américas, a horse
racetrack (see note 15). Operations are expected to start in late 1999.
Sub-holdings:
CIE Internacional, S. A. de C. V.
Operadora de Centros de Espectáculos, S. A. de C. V.
Servicios Corporativos CIE, S. A. de C. V.
Grupo Sitel de México, S. A. de C. V.
40
41
Entertainment division:
Mexico
Ocesa Anfiteatro, S.A. de C.V.
Inmobiliaria de Centros de Espectáculos, S.A. de C.V.
Rac Producciones, S.A. de C.V.
Ocesa Deportes, S.A. de C.V.
Nuvisión, S. A. de C. V.
Grupo Mantenimiento de Giros Comerciales Internacional, S.A. de C.V.
Show Off, S.A. de C.V.
Ocesa Presenta, S.A. de C.V..
Promodeportes, S.A. (1)
Genera Music, S.A. de C.V..
Grupo TVP, S.A. de C.V. (1)
Ocesa Films, S.A. de C.V.
Cerem, S.A. de C.V.
Operadora Nacional de Parques Recreativos, S.A. de C.V.
Promotodo México, S.A. de C.V. (1)
Grupo CIE Argentina, S.A. de C.V.
Argentina
CIE R & P, S.A.
Ezeiza Flora y Fauna, S.A.
Clemente Lococo, S.A.
A. L. N., S.A.
Jardín Zoológico de la Ciudad de Buenos Aires, S.A.
Empresa Gastronómica Argentina, S.A.
Radiodifusora de Buenos Aires, S.A.
D.G. Producciones, S.A.
Commercial division:
Mexico
Concesiones de Artículos Promocionales, S.A. de C.V.
Make Pro, S.A. de C.V.
Unimarket, S.A. de C.V. (1)
Reed Exhibition Companies, S.A. de C.V.
Reed Services Company, S.A. de C.V.
Publitop, S.A. de C.V.
(formerly Impulsora Mexicana de Servicios Comerciales, S.A. de C.V.)
Stáctika, S.A. de C.V.
Autoexpo, Asociación en Participación
Servicios de Alimentos y Bebidas Expecializados, S.A. de C.V.
Corporación de Medios Integrales, S.A. de C.V. (1)
Horse track división:
(1)
(1)
These companies had no operations in 1998.
c. Foreign currency transactions and translation of foreign subsidiaries –
Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing on the dates of their execution or
settlement. Foreign currency assets and liabilities are translated at the
exchange rates in force at the balance sheet date. Exchange
differences resulting from assets and liabilities denominated in foreign
currencies are carried to operations for the year as a part of the
comprehensive financing income or cost.
(1)
Other countries
Ocesa Presents, Inc.
North of Border, Inc.
Mat Theatrical Entertainment
Reforestación y Parques, S.A.
Castle of Stone, LLC
In 1998, the financial statements of foreign subsidiaries were
translated into Mexican pesos substantially using the exchange rates
in force at the balance sheet date for assets and liabilities, and the
exchange rates in force as of the date of the individual transactions
for income and expenses. Through 1997, the Company held an
insignificant investment in the United States.
Services division:
d. Cash and temporary investments – Cash and temporary investments
include fixed income marketable securities investments with original
maturities of three months or less. Investments in marketable
securities are stated at the lower of cost plus accrued interest or net
realizable value. Gains or losses resulting from changes in market
values and the effects of inflation are included in the accompanying
statements of income as part of the comprehensive financing income
or cost.
Mexico
Venta de Boletos por Computadora, S.A. de C.V.
Serinem México, S.A. de C.V.
e. Inventories and costs of sales – Inventories are stated at the lower of
cost or market value. Cost is based on average cost updated for
inflation based on NCPI indices.
42
Cost of sales is updated for inflation based on NCPI indices, which
are applied to the original cost at the time of the sale.
f. Deferred costs – Deferred costs include payments and deposits,
advertising costs and other costs related to future events. These
costs are expensed when the events take place.
g. Property, machinery and equipment – Property, machinery and
equipment identified as sourced abroad are updated using
inflationary indices and the rates of exchange of the related countries.
Those sourced domestically are updated using the inflation factor for
the year derived from the NCPI.
Other
Sitel de Colombia, S.A.
Administradora Mexicana de Hipódromo, S.A. de C.V.
Chile
Interocesa, S.A.
Servicios Gastrochile, S.A.(1)
Anfiteatros Chilenos, S.A. (1)
Radiodifusora Chile, S.A. (1)
D. G. Medios y Producciones, S.A.
Seres, Ltda. (1)
CIE R & P Chile, S.A. (1)
Servicios Generales Chile, S.A. (1)
Music Show, S.A. (1)
ALN Chilena, S.A. (1)
Incodep, Ltda. (1)
Segeped, Ltda. (1)
Brazil
CIE R & P Brasil, S.A. (1)
D. G. Producciones Brazil, Ltda. (1)
Operadora de Inmuebles Paulista, Ltda.
Servicios Compartidos en Factor Humano, S.A. de C.V.
Servicios Corporativos CIE, S.A. de C.V.
Grupo Sitel de México, S.A. de C.V.
(formerly Grupo de Comercialización Integrada, S.A. de C.V.)
Servicios Compartidos en Factor Humano Hipódromo, S.A. de C.V.
Teleservicios de Valor Agregado, S.A. de C.V.
Net comprehensive financing cost and pre-operating costs related to
fixed assets under construction are capitalized as part of the cost of
such assets. The comprehensive financing costs were determined
using the weighted average interest rate on outstanding loans. The
amounts capitalized are updated based on NCPI inflationary indices.
The Company has capitalized comprehensive financing costs
(income) aggregating ($2,896,770) and $4,000,000 as of
December 31, 1998 and 1997, respectively.
Depreciation of property, machinery and equipment is calculated
using the straight-line method, based on the estimated useful lives of
the related assets as determined by the Company. See note 7 for
annual depreciation rates.
h. Rights, patents and trademarks – Rights, patents and trademarks are
updated based on indexes derived from the NCPI. They are
amortized on a straight-line basis over the life of the related contracts.
i. Preoperating expenses – Preoperating expenses are updated based
on indices derived from the NCPI. They are amortized on a straightline basis over the related concession period, beginning when the
related companies commence operations (see note 8).
j. Other assets – Other assets are updated based on indexes derived
from the NCPI and will be amortized straight-line beginning in 1999,
over 20 years (see note 8).
k. Goodwill and negative goodwill – Represent the excess of the
purchase price over the book value of the acquired shares of the
subsidiary companies as of the date of acquisition and vice-versa,
respectively. These items are updated based on indices derived from
the NCPI. Debit balances are amortized straight-line over twenty
years, beginning in the year following that in which they arise, while
credit balances are amortized over five years (see note 9).
l. Concession – The concession represents the right to operate the
horse races and the related gambling operations at the Hipódromo
de las Américas, as well as the use of the property for commercial
activities. The concession will be amortized using the straight-line
method over 25 years for the horse track operations and 50 years for
the property, and amortization will begin in the year in which
operations start (see note 15).
m. Income tax (IT) and employees’ statutory profit sharing (ESPS) – IT
and ESPS expenses include the amounts payable and, in addition,
recognize the effects on IT and ESPS of significant timing differences
between book and taxable income on which it may reasonably be
estimated that a tax benefit or liability will arise over a defined period.
Other differences are recognized when realized.
n. Deferred revenue – Deferred revenue represents income on events
which will be recognized on the date of the events. Revenues on
advance ticket sales are recorded as deferred revenue until the date
of the event. Other revenue not related to a specific event is
recorded as deferred revenue and amortized straight-line over the life
of the related contract.
o. Seniority premiums and severance payments – Seniority premiums
to which employees may be entitled upon retirement after fifteen or
more years of service, in accordance with the Mexican Labor Law,
have not been recognized as costs of the years in which services are
rendered. The related liability is not significant based on
management’s estimates.
Other compensation to which employees may be entitled, in the
event of dismissal, disability or death are expensed when paid.
p. Effects of inflation on capital stock, convertible debt, additional paidin capital and retained earnings – Capital stock, convertible debt,
additional paid-in capital and retained earnings are adjusted using the
NCPI, which measures the cumulative inflation from the dates on
which the capital stock and convertible debt was issued and from the
dates retained earnings arose through the most recent balance sheet
date. The resulting amounts express stockholders’ equity in constant
purchasing power.
q. Monetary position gain or loss – Monetary position gain or loss is
computed based on the net difference between monetary assets and
liabilities at the beginning of each month by applying the NCPI to
determine the monetary gain or loss for the period derived from
inflation. The net results obtained using this method represent the
gain or loss on the monetary position for the year as a result of
inflation.
r. Use of estimates – The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
s. Reclassifications – Certain line items in the 1997 financial statements
were reclassified to make them comparable to the presentation
adopted in 1998.
43
(3) Foreign currency exposure:
(4) Accounts receivable:
The assets and liabilities denominated in foreign currency as of December 31, 1998 and 1997 were as follows:
Accounts receivable consist of the following:
Thousands
Liabilities
Current
assets
1998
U.S. dollars
Argentinean pesos
Colombian pesos
Chilean pesos
23,118
78,531
19,111,455
947,670
1997
U.S. dollars
3,342
Current
11,545
27,145
5,369,818
444,075
Assets
(liabilities)
net
Long-term
50,000
14,546
3,703,746
–
6,140
–
(38,427)
36,840
10,037,891
503,595
U.S. dollars
Argentinean pesos
Colombian pesos
Chilean pesos
9.9395
9.9395
0.0064
0.0210
1997
9.9836
9.9836
0.0063
0.0200
Thousands of U.S. dollars
Total
$
1,549
3,887
288
10
–
250
–
–
1,549
4,137
288
10
$
5,734
250
5,984
The following is a summary of transactions entered into with companies in foreign countries, excluding machinery and equipment imports, for the years
ended December 31, 1998 and 1997:
Imports
Exports
44
Thousands of U.S. dollars
Other currencies in
thousands of U.S. dollars
1998
1998
1,055
1,021
1997
7,754
–
46,573
36,508
Carried forward
Brought Forward
Ticket Master Colombia
Grupo de Mantenimiento de Giros
Comerciales Internacional, S.A. de C.V.
Venta de Boletos por
Computadora, S.A. de C.V.
Promotodo, S.A. de C.V.
Interocesa, S.A.
Mat Theatrical Entertainment
Other
Country of origin of machinery and equipment:
England
United States
Germany
Italy
123,186,865
–
33,335,423
1,307,898
60,442,308
588,030,728
218,272,494
3,690,568
–
584,340,160
218,272,494
1998
Receivable
Publisport, S.A. de C.V.
Grupo TVP, S.A. de C.V.
CIE R & P, S.A.
Ticket Master Corp.
Ticket Master Argentina
Additionally, as of December 31, 1998, the Company had the following foreign, non-monetary assets whose replacement cost can only be determined
using foreign currencies.
Foreign
228,354,789
26,953,617
44,327,699
1,102,696
287,291,927
Balances receivable from and payable to related parties as of December 31, 1998 are as follows:
As of December 31, 1998, the Company did not have any foreign exchange risk hedging instruments.
Mexico
$
1997
(5) Related party balances and transactions:
1999
8.0681
8.0681
0.0067
0.0217
$
Less allowance for
doubtful accounts
(2,798)
The exchange rates as of December 31, 1998 and 1997, and as of April 25, 1999 are as follows:
1998
Customers
Recoverable income tax
Recoverable value added tax
Recoverable value tax on assets
Other receivables
1998
Payable
Grupo Mágico Internacional, S.A. de C.V.
RAC Producciones, S.A. de C.V.
Other
$
51,750,000
24,469,268
89,394,080
11,678,100
22,453,803
$
199,745,251
$
199,745,251
7,820,291
11,500,000
4,596,918
2,147,620
1,075,724
487,036
18,320
$
227,391,160
$
13,915,069
7,350,000
71,608
225,338
$
21,562,015
1997
–
–
45
(8) Other assets:
Segment information
Net sales
Operating income
Total assets
Other assets consist of the following:
1998
Commercial
Entertainment
Services
$
Eliminations
Consolidated total
$
1997
1998
1997
331,066,480
1,282,803,607
506,574,430
243,977,310
495,979,545
329,745,840
79,852,637
177,851,940
91,461,520
52,504,320
107,088,373
31,696,323
375,286,586
10,109,417,717
561,802,236
2,120,444,517
(441,427,254)
1,069,702,695
(192,191,284)
349,166,097
–
191,289,016
–
11,046,506,539
(7,486,586,441)
349,166,097
191,289,016
3,559,920,098
1,679,017,263
877,511,411
1998
Preoperating expenses
Capitalized costs
Prepaid expenses
Prepaid interest
Estimated future tax
penalties
Other
1997
253,840,800
138,488,133
35,856,624
147,466
–
77,105,066
–
–
–
17,359,040
2,447,510
188,242,933
$ 445,692,063
267,795,509
$
(6) Inventories:
Inventories consist of the following:
1998
Promotional materials
Food and beverage
Office supplies
Maintenance supplies
Marketing supplies
Souvenirs and prizes
Tickets
Other
$
$
1997
1,766,165
1,829,994
1,849,719
1,401,171
378,473
1,331,816
220,576
1,508,531
1,528,697
–
483,327
1,501,046
–
–
207,140
2,941,992
10,286,445
6,662,202
(9) Goodwill and negative goodwill:
As of December 31, 1998 and 1997, goodwill and negative goodwill are summarized as follows:
1998
(7) Property, machinery and equipment:
The investment in property, machinery and equipment is as follows:
1998
Land
Buildings
Leasehold improvements
Games, rides and attractions
Amusement park equipment
$
1997
55,880,805
178,598,852
475,206,550
131,240,858
5,847,085
–
135,420,726
295,970,942
–
–
Carried forward
$
846,774,150
431,391,668
Brought forward
$
846,774,150
431,391,668
178,898,907
86,063,818
19,547,318
3,343,436
11,455,531
32,526,180
130,904
15,317,517
182,375,607
39,292,638
20,788,383
–
8,772,109
–
1,236,600
419,652
1,194,057,761
684,276,657
124,320,209
61,602,455
$ 1,069,737,552
622,674,202
Annual
depreciation rate
–
5%
5%
2.5%
10%
Grupo Mantenimiento de Giros
Comerciales Internacional,
S.A. de C.V.
Operadora de Centros de
Espectáculos, S.A. de C.V.
Servicios de Alimentos y Bebidas
Especializadas, S.A. de C.V.
Rac Producciones, S.A. de C.V.
Grupo TVP, S.A. de C.V.
Clemente Lococo y Jardín
Zoológico de la Ciudad
de Buenos Aires
$
Less accumulated
amortization
$
Machinery and office equipment
Computer equipment and peripherals
Radio and communication equipment
Billboard and related structural equipment
Transportation equipment
Construction in progress
Other
Advances to suppliers
Less accumulated depreciation
46
10%
25% and 30%
10%
14% to 33%
20% and 25%
1997
78,197,744
–
–
1,167,343
8,695,071
31,736,839
27,555,821
58,180,577
–
–
–
–
407,365,451
–
611,731,503
1,167,343
5,942,067
1,021,995
605,789,436
145,348
Negative goodwill:
1998
Grupo Mágico Internacional, S.A. de C.V.
$
3,465,889
1997
–
47
(10) Bank loans:
(11) Convertible debt:
Short-term debt is summarized by currency as follows:
On June 6, 1997, the Company issued 2,500,000 notes compulsory
convertible into series "L" shares with a par value of $$100 per share for
a total value of $314,775,359 ($250,000,000 historical). Since the
notes will be converted into equity, the principal received for these notes
was included in stockholders’ equity.
U.S. dollars
$
Mexican pesos
Colombian pesos
$
1998
1997
33,614,000
80,725,178
291,202,031
–
15,914,000
–
340,730,031
80,725,178
b. At the Ordinary Stockholders’ meeting held on February 27, 1998, the
shareholders agreed to reduce issued capital in the amount of
$5,258 by cancelling 30,000 treasury shares.
In order to perform all of the necessary functions to convert the debt and
to provide an irrevocable offer to convert the debt, the Company is
obligated to deposit 7,150,000 series "L" treasury shares with S.D.
Indeval, S. A. de C. V., as trustee.
Rights of creditors:
Long-term debt is summarized as follows:
Average
1998
Unsecured bank loans, 1999 to 2001
$
Note payable, 1997 to 2000
– For each note, the creditor will have the right to receive 2.5 series "L"
shares.
Average
Mexican
interest
Foreign
interest
currency
rate
currency
rate
Total
21,185,000
TIEE+4
514,156,000
LIBOR+9
535,341,000
150,000,000
TIEE+2
59,637,000
LIBOR+3
209,637,000
Unsecured South American bank loans,
1998 to 2001
–
–
14,693,362
DTF+2.5
14,693,362
–
–
23,080,000
DTF+2.5
23,080,000
Mortgage South American bank loan,
1999 to 2000
171,185,000
611,566,362
782,751,362
5,176,000
43,990,000
49,166,000
$ 166,009,000
567,576,362
733,585,362
Less current maturities
– Beginning June 6, 1998, creditors can request the conversion of their
shares on a quarterly basis.
– Beginning December 1997, interest will be paid semi-annually at an
annual rate of 12%, before taxes.
– If, upon maturity, the value of the series "B" shares is less than $40,
an additional $4 premium per share will be paid in cash.
The convertible notes mature on June 6, 1999.
During 1998, 2,800 notes were converted into 16,940 series "L" shares.
Long-term debt
(12) Stockholders’ equity:
1997
Unsecured bank loans, 1999 to 2001
$
Notes payable due in, 2000
38,533,284
40%
–
177,913,716
TIEE+2
–
–
–
38,533,284
The principal characteristics of stockholders’ equity accounts are
as follows:
At the Extraordinary Stockholders’ meeting held on February 27,
1998, the shareholders agreed to split the Company’s outstanding
shares using a ratio of 2.42 to 1.
During 1998, $210,305 ($199,998 historical) of unpaid capital as of
December 31, 1997 were paid, including additional paid-in capital of
$5,947,947 ($5,339,901 historical).
At the Ordinary and Extraordinary Stockholders’ meeting held on April
24, 1998, the shareholders agreed to issue an additional 17,670,374
shares of common stock. The issuance of stock increased common
stock outstanding by $938,184 ($730,181 historical) and additional
paid-in capital by $547,822,485 ($502,101,110 historical).
At the same Stockholders’ meeting, the shareholders agreed to issue
2,000,000 series "L" shares which will be recorded as treasury shares
and whose ultimate use will be for the Employee Stock Option Plan
(the "Plan"). At December 31, 1998, 237,180 series "L" shares had
been assigned to employees, under the Plan, and the related amount
is included within the total of the previous paragraph.
In 1997, a trust was established for the purpose of creating a
mechanism to issue, directly or on behalf its members, common
stock in favor of various people who perform services for the
Company or its subsidiaries as an incentive to retain them.
During 1997, the shareholders of the Company agreed to pay
common stock in the amount of $193,899 ($163,477 historical),
with additional paid-in capital of $8,794,330 ($7,414,456 historical),
which represented 1,634,762 outstanding shares.
177,913,716
a. Stockholders’ equity consists of the following accounts:
Less current maturities
216,447,000
–
216,447,000
9,156,617
–
9,156,617
Original
pesos
December 31, 1998
Long-term debt
$ 207,290,383
–
The maturities of long-term debt as of December 31, 1998 are as follows:
2000
currency
currency
Total
155,176,000
553,758,362
708,934,362
2001
5,176,000
13,517,000
18,693,000
2002
5,657,000
301,000
5,958,000
166,009,000
567,576,362
733,585,362
$
$
48
Foreign
Constant
pesos
207,290,383
Common stock
Additional paid-in-capital
Convertible debt
Retained earnings
Mexican
Inflation
adjustement
6,242,189
659,632,407
249,720,000
289,349,961
4,784,336
141,239,922
64,702,810
87,819,070
11,026,525
800,872,329
314,422,810
377,169,031
$ 1,204,944,557
298,546,138
1,503,490,695
$
5,344,144
150,909,138
250,000,000
179,387,196
4,605,856
95,841,091
64,775,359
49,761,320
9,950,000
246,750,229
314,775,359
229,148,516
$
585,640,478
214,983,626
800,624,104
$
December 31, 1997
Common stock
Additional paid-in-capital
Convertible debt
Retained earnings
49
c. After the above activity, the common stock as of December 31, 1998
consists of 153,240,643 common registered shares, with no par
value, divided into two series as follows:
Issued
Series "B" representing the minimum
Class I fixed capital
Series "B" representing Class II
variable capital
Series "L" representing non-voting
variable capital
Number of shares
17,012,819
118,303,330
19,687,314
Issued but not outstanding
Serie "B" representing Class II
variable capital
Taxable income differs from book income due to various permanent
differences (book effects of inflation and other items). Mexican Income
Tax Law allows the deduction of purchases in excess of cost of sales and,
for tax purposes, includes inflationary gain and loss as taxable and
deductible items, respectively. The tax resulting from the Company’s
subsidiaries filing on a stand alone basis was $71,701,932 and
$15,870,024 of income tax in 1998 and 1997, respectively, and
$182,813 and $79,530 of tax on assets in 1998 and 1997, respectively.
As of December 31, 1998, the Company had tax on assets credits of
$364,622.
(1,762,820)
In accordance with Mexican Income Tax Law, tax losses can be carried
forward ten years to offset future taxable income. Additionally, these
losses can be updated for inflation during the periods subsequent to the
loss year. From the tax losses sustained by some subsidiaries in prior
years, $74,124,377 was used to offset taxable income in 1998, resulting
in a tax benefit of $25,202,288, which is reported as an extraordinary
item in the consolidated statement of income. At December 31, 1998,
tax loss carryforwards and the years in which they expire are as follows:
In 1997, 49% of the shares of Grupo Sitel de México, S. A. de C. V.
(formerly Grupo de Comercialización Integrada, S. A. de C. V.) were sold.
This transaction resulted in a gain of $66,213,116, which was recorded
in 1997
(15) Concession (unaudited):
On July 17, 1998, the Federal Government of Mexico granted a
subsidiary of CIE two concessions, one to operate the Hipódromo de la
Ciudad de México and the second one to use the related areas, for the
purpose of conducting horse races and other activities, such as operating
a hotel, a convention center, and an event venue. The concessions have
lives of 25 and 50 years, respectively, which can be extended by the
Company.
On December 29, 1998, an external appraisal was obtained, which gave
a value for the concession of $1,241,066,000. This amount represents
the estimated operating cash flows for the next 25 years.
153,240,643
d. The principal restrictions on stockholders’ equity are as follows:
Stockholders’ contributions, additional paid-in capital and retained
earnings, on which income tax has already been paid, adjusted for
inflation, may be refunded or distributed tax-free to stockholders.
Other refunds or distributions in excess of these amounts, pursuant
to the Mexican Tax Law, are subject to income tax at the rate of 35%,
with stockholders receiving the remaining 65%. Beginning January 1,
1999, dividends paid from retained earnings to individuals and
foreigners will be subject to an additional withholding tax of 5%.
(13) Income tax (IT), tax on assets (TA), employees’ statutory
profit sharing (ESPS) and tax loss carryforwards:
In accordance with tax law, companies pay the greater of IT and TA. Both
of these taxes recognize the effects of inflation, computed on a basis
other than generally accepted accounting principles in Mexico.
The Company and its subsidiaries do not consolidate for tax purposes,
and, therefore, they file their taxes on a stand alone basis.
Amount
Update for
inflation through
Original
December 31, 1998
Arising
in
1995
1996
1997
1998
3,077,968
6,744,603
51,895,052
57,197,782
5,986,343
10,011,421
64,357,607
62,053,873
$ 118,915,405
142,409,244
$
In Colombia, the Company calculates its income tax provision based on
estimated taxable income, which is based on gross equity, at a rate of
35%. In addition, certain book accruals have been considered
nondeductible in the calculation.
ESPS is calculated practically on the same basis as IT, but without
recognizing the effects of inflation and considering only realized foreign
exchange gains and losses. In 1998 and 1997, ESPS expense amounted
to $663,009 and $75,897, respectively.
The TA law establishes a 1.8% tax on assets, updated for the effects of
inflation, net of certain liabilities. TA payable in excess of IT for the year
may be recovered in the ten succeeding years, updated for inflation,
provided that in any such years IT exceeds TA.
50
Expiring
in
2005
2006
2007
2008
Basic earnings per share is calculated by dividing income before minority
interest by the weighted average number of shares outstanding during
the year. The weighted average number of shares outstanding used to
calculate basic earnings per share was 144,675,348 and 130,230,049
in 1998 and 1997, respectively.
Diluted earnings per share is calculated by adding the comprehensive
financing cost for the convertible debt, net of taxes, to income before
minority interest, and dividing the result by the weighted average
common shares outstanding during the year plus shares potentially
issuable for convertible debt. The weighted average shares outstanding
used in the calculation of diluted earnings per share was 168,348,703
and 145,355,049 in 1998 and 1997, respectively,
Other information related to consolidated earnings per share is as
follows:
1998
$
$
b. Foro Sol (Mexico City) – the Mexico City government granted OCESA
the right to operate a stadium in the Autódromo Hermanos Rodríguez
to hold large events, such as concerts and auto and motorcycle races.
OCESA’s right to operate this stadium lasts 15 years and expires in
2012.
c. Teatro Metropólitan (Mexico City) – OCESA has a contract that expires
November 30, 2000 for the commercial use of this building.
d. Auditorio Coca Cola – Fundidora (Monterrey, N.L.) – In 1994, the
government of the State of Nuevo León granted OCESA the right to
use 7 hectares of land in the Parque Fundidora de Monterrey for 50
years, in order to construct and operate an open air theater to hold
public entertainment events.
(16) Earnings per share:
At December 31, 1998, there are timing differences aggregating
$202,093,571, on which $70,732,750 of deferred taxes have not been
recognized, since they did not meet the requirements established by
generally accepted accounting principles in Mexico. These differences
may increase the tax basis of future years, and are summarized below:
Allowance for doubtful accounts
Inventories
Deferred revenue
Deferred cost
a. Palacio de los Deportes (Mexico City) – In 1999, the Mexico City
government granted OCESA a contract extension of 5 years for the
use of this facility. This contract will now expire April 15, 2004.
OCESA has no guaranty that at the end of the life of this contract they
will be able to obtain another extension or that the new terms would
be the same.
3,360,568
(10,286,445)
113,835,962
(309,003,656)
1997
In 1998, 50% of the shares of Show Off, S. A. de C. V. were sold.
This transaction resulted in a gain of $16,220,257, which was
recorded in 1998.
Rental expense for the year ended December 31, 1998 amounted to
$11,544,051.
The future minimum lease payments related to this agreement are
as follows:
1999
2000
2001
2002
$
13,398,000
13,398,000
13,398,000
11,165,000
(18) Contingencies:
a. There is a contingent liability related to the labor obligations
mentioned in note 2p.
Basic earnings per share:
Before extraordinary items,
less minority interest
Extraordinary items
$
$
0.85
0.17
1.47
(0.49)
Diluted earnings per share:
Before extraordinary items,
less minority interest
Extraordinary items
$
$
0.97
0.15
1.45
(0.44)
(202,093,571)
(14) Sale of shares of subsidiary companies:
e. OCESA entered into a lease agreement in October 1997 for its
offices in Mexico City, with a lease term of 5 years. The monthly
rental is $111,650 U.S. dollars and is updated annually for inflation
using the U. S. Consumer Price Index.
(17) Commitments:
b. Beginning January 1, 1997, according to reforms to the Mexican
Income Tax Law, companies carrying out transactions with related
parties, either domestic or foreign, are subject to significant
requirements as to the determination of prices, since such prices
must be equivalent to those that would be used in arm’s-length
transactions.
In the event the tax authorities examine the transactions and reject
the related party prices, the Company may be imposed additional
taxes updated for the effects of inflation, interest and penalties of up
to 100% of the tax due.
Operadora de Centros de Espectáculos, S. A. de C. V. (OCESA), a
subsidiary of CIE, is an operator of event venues and has the following
rights related to various operating contracts and building use grants:
51
c. In December 1997, the Company initiated a program in order to
address the effects of Year 2000. The program covers the impact of
Year 2000 on the Company’s computer systems that affect its
operations, its transactions with third parties and its financial
information. Notwithstanding the steps taken by the Company,
undetected internal problems or problems of third parties with which
the Company does business could exist, the effects of which cannot
be determined or quantified as of this date. The Company does not
have the necessary information to determine the cost of the program
for the year ended December 31, 1998 nor the total cost of the
project.
d. In accordance with the terms of the concession for operating the
Hipódromo de las Américas and the related rights, the Company will
have to make a payment to the Mexican government. The Secretaría
de Hacienda y Crédito Público has the right to set the amount of this
payment, which as of December 31, 1998 has not been determined.
Since the amount of this future payment is not estimable, no related
liability has been accrued. The Company has begun developing the
horse race track and related property for its intended use, but
operations have not yet begun.
Corporación Interamericana de Entretenimiento, S.A. de C.V.
Paseo de las Palmas 1005
Col. Lomas de Chapultepec
C.P. 11000 Mexico D.F.
www.cie-mexico.com.mx
Contacts in Mexico City
Investor Relations
Tel: (52) 5201 9441
5201 9358
Contacts in New York
Thomson Investor Relations
52
Design:
Tel: (212) 509 5100
The trademarks appearing in this 1998
Annual Report do not imply other reasons
than providing information.

Operating income

Transcription

Similar documents

Poster - Taller de creación literaria

“El Blanco Licor de la diosa Mayahuel” (The White Liquor of

TEPOZTLÁN, MEXICO

Grupo Sports World, S.A.B. de C.V.

Presentación de PowerPoint

GL sPectis 1.0

ITESM Tecnológico de Monterrey, Campus Estado de México

MEDIA KIT

los güeros contact information form document information family

Ventura Entertainment`s creation press release