x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-3247759 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on which Registered |
Common Stock, $.01 Par Value per Share; Preferred Stock Purchase Rights | New York Stock Exchange |
Large accelerated filer | x | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed HereWith |
3.1 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Live Nation Entertainment, Inc. | 8-K | 001-32601 | 3.1 | 6/7/2013 | Live Nation | |
3.2 | Fifth Amended and Restated Bylaws of Live Nation Entertainment, Inc. | 8-K | 001-32601 | 3.2 | 6/7/2013 | Live Nation | |
4.1 | Rights Agreement, dated December 21, 2005, between CCE Spinco, Inc. and The Bank of New York, as Rights Agent. | 8-K | 001-32601 | 4.1 | 12/23/2005 | Live Nation | |
4.2 | First Amendment to Rights Agreement, dated February 25, 2009, between Live Nation, Inc. and The Bank of New York Mellon, as Rights Agent. | 8-K | 001-32601 | 4.1 | 3/3/2009 | Live Nation | |
4.3 | Second Amendment to Rights Agreement, effective as of September 23, 2011, entered into by and between Live Nation Entertainment, Inc. and The Bank of New York Mellon, as Rights Agent. | 8-K | 001-32601 | 4.1 | 9/28/2011 | Live Nation | |
4.4 | Third Amendment to Rights Agreement, effective as of January 11, 2013, entered into by and between Live Nation Entertainment, Inc. and Computershare Shareowner Services, LLC, as Rights Agent. | 8-K | 001-32601 | 4.1 | 1/17/2013 | Live Nation | |
4.5 | Form of Certificate of Designations of Series A Junior Participating Preferred Stock. | 8-K | 001-32601 | 4.2 | 12/23/2005 | Live Nation | |
4.6 | Form of Right Certificate. | 8-K | 001-32601 | 4.3 | 12/23/2005 | Live Nation | |
10.1 | Lockup and Registration Rights Agreement, dated May 26, 2006, among Live Nation, Inc., SAMCO Investments Ltd., Concert Productions International Inc., CPI Entertainment Rights, Inc. and the other parties set forth therein. | 8-K | 001-32601 | 4.1 | 6/2/2006 | Live Nation | |
10.2 | Stockholder Agreement, dated February 10, 2009, among Live Nation, Inc., Liberty Media Corporation, Liberty USA Holdings, LLC and Ticketmaster Entertainment, Inc. | 8-K | 001-32601 | 10.2 | 2/13/2009 | Live Nation | |
10.3 | Note, dated January 24, 2010, among Ticketmaster Entertainment, Inc., Azoff Family Trust of 1997 and Irving Azoff. | 10-K | 001-32601 | 10.17 | 2/25/2010 | Live Nation | |
10.4 | Registration Rights Agreement, dated January 25, 2010, among Live Nation, Inc., Liberty Media Corporation and Liberty Media Holdings USA, LLC. | 8-K | 001-32601 | 10.1 | 1/29/2010 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed HereWith |
10.5 | Tax Matters Agreement, dated December 21, 2005, among CCE Spinco, Inc., CCE Holdco #2, Inc. and Clear Channel Communications, Inc. | 8-K | 001-32601 | 10.2 | 12/23/2005 | Live Nation | |
10.6 | Tax Sharing Agreement, dated August 20, 2008, among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. | 8-K | 001-34064 | 10.2 | 8/25/2008 | Ticketmaster | |
10.7 | Form of Indemnification Agreement. | 10-K | 001-32601 | 10.23 | 2/25/2010 | Live Nation | |
10.8 § | Live Nation Entertainment, Inc. 2005 Stock Incentive Plan, as amended and restated as of April 15, 2011. | 8-K | 001-32601 | 10.3 | 6/20/2011 | Live Nation | |
10.9 § | Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | S-8 | 333-164507 | 10.1 | 1/26/2010 | Live Nation | |
10.10 § | Amendment No. 1 to the Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan. | 10-Q | 001-32601 | 10.1 | 11/4/2010 | Live Nation | |
10.11 § | Live Nation Entertainment, Inc. 2006 Annual Incentive Plan, as amended and restated as of April 15, 2011. | 8-K | 001-32601 | 10.2 | 6/20/2011 | Live Nation | |
10.12 § | Amended and Restated Live Nation, Inc. Stock Bonus Plan. | 8-K | 001-32601 | 10.1 | 1/25/2010 | Live Nation | |
10.13 § | Employment Agreement, dated October 21, 2009, among Live Nation, Inc., Live Nation Worldwide, Inc. and Michael Rapino. | 8-K | 001-32601 | 10.1 | 10/22/2009 | Live Nation | |
10.14 § | First Amendment to Employment Agreement, dated December 27, 2012 by and between Live Nation Entertainment, Inc. and Michael Rapino. | 10-K | 001-32601 | 10.29 | 2/26/2013 | Live Nation | |
10.15 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Michael Rowles. | 10-K | 001-32601 | 10.17 | 2/24/2014 | Live Nation | |
10.16 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Kathy Willard. | 10-K | 001-32601 | 10.19 | 2/24/2014 | Live Nation | |
10.17 § | Employment Agreement, effective December 17, 2007, between Live Nation Worldwide, Inc. and Brian Capo. | 10-Q | 001-32601 | 10.4 | 8/7/2008 | Live Nation | |
10.18 § | First Amendment to Employment Agreement, effective December 31, 2008, between Live Nation Worldwide, Inc. and Brian Capo. | 10-K | 001-32601 | 10.30 | 3/5/2009 | Live Nation | |
10.19 § | Employment Agreement, effective January 1, 2014, between Live Nation Entertainment, Inc. and Joe Berchtold. | 10-K | 001-32601 | 10.24 | 2/24/2014 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed HereWith |
10.20 | Credit Agreement entered into as of May 6, 2010, among Live Nation Entertainment, Inc., the Foreign Borrowers party thereto, the Guarantors identified therein, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Agent and J.P. Morgan Europe Limited, as London Agent. | 10-Q | 001-32601 | 10.4 | 8/5/2010 | Live Nation | |
10.21 | Amendment No. 1, to the Credit Agreement, dated as of June 29, 2012, entered into by and among Live Nation Entertainment, Inc., the relevant Credit Parties identified therein, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders. | 10-Q | 001-32601 | 10.2 | 8/7/2012 | Live Nation | |
10.22 | Amendment No. 2 to the Credit Agreement, dated as of August 16, 2013, entered into by and among Live Nation Entertainment, Inc., the Guarantors identified therein, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the Lenders, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian agent and J.P. Morgan Europe Limited, as London agent. | 10-Q | 001-32601 | 10.2 | 5/6/2014 | Live Nation | |
10.23 | Incremental Term Loan Joinder Agreement No. 1, dated August 20, 2012, by and among Live Nation Entertainment, Inc., JPMorganChase Bank, N.A., as administrative agent, each Incremental Term Loan Lender defined therein and the relevant Credit Parties identified therein. | 10-Q | 001-32601 | 10.2 | 11/5/2012 | Live Nation | |
10.24 | Indenture, dated August 20, 2012, by and among Live Nation Entertainment, Inc., the Guarantors defined therein, and the Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 11/5/2012 | Live Nation | |
10.25 | First Supplemental Indenture, entered into as of October 4, 2012, among Live Nation Entertainment, Inc., the Guarantors listed in Appendix I attached thereto, Live Nation Ushtours (USA), LLC, and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.3 | 11/5/2012 | Live Nation | |
10.26 | Second Supplemental Indenture, entered into as of August 13, 2013, among Live Nation Entertainment, Inc., the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 8-K | 001-32601 | 10.1 | 8/16/2013 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed HereWith |
10.27 | Third Supplemental Indenture, dated as of February 6, 2014 among Live Nation Entertainment, Inc., BigChampagne, LLC, the Existing Guarantors Party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 5/6/2014 | Live Nation | |
10.28 | Fourth Supplemental Indenture, dated as of May 27, 2014, among Live Nation Entertainment, Inc., Reigndeer Entertainment Corp., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.3 | 7/31/2014 | Live Nation | |
10.29 | Fifth Supplemental Indenture, dated as of August 27, 2014, among Live Nation Entertainment, Inc., Ticketstoday, LLC, the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.2 | 10/30/2014 | Live Nation | |
10.30 | Sixth Supplemental Indenture, dated as of October 31, 2014, among Live Nation Entertainment, Inc., EXMO Inc., Artist Nation Management, Inc., Guyo Entertainment, Inc., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.30 | 2/26/2015 | Live Nation | |
10.31 | Indenture, dated as of May 23, 2014, among Live Nation Entertainment, Inc., the Guarantors and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 7/31/2014 | Live Nation | |
10.32 | First Supplemental Indenture, dated as of August 27, 2014, among Live Nation Entertainment, Inc., Ticketstoday, LLC, the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-Q | 001-32601 | 10.1 | 10/30/2014 | Live Nation | |
10.33 | Second Supplemental Indenture, dated as of October 31, 2014, among Live Nation Entertainment, Inc., EXMO, Inc., Artist Nation Management, Inc., Guyo Entertainment, Inc., the Existing Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee. | 10-K | 001-32601 | 10.33 | 2/26/2015 | Live Nation | |
10.34 | Indenture, dated as of May 23, 2014, between Live Nation Entertainment, Inc., and HSBC Bank USA, National Association, as trustee. | 10-Q | 001-32601 | 10.2 | 7/31/2014 | Live Nation | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. | 10-K | 001-32601 | 12.1 | 2/26/2015 | Live Nation | |
14.1 | Code of Business Conduct and Ethics. | 10-K | 001-32601 | 14.1 | 2/26/2015 | Live Nation | |
21.1 | Subsidiaries of the Company. | 10-K | 001-32601 | 21.1 | 2/26/2015 | Live Nation | |
23.1 | Consent of Ernst & Young LLP. | 10-K | 001-32601 | 23.1 | 2/26/2015 | Live Nation |
Incorporated by Reference | |||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit No. | Filing Date | Filed By | Filed HereWith |
23.2 | Consent of PricewaterhouseCoopers S.C. | 10-K/A | 001-32601 | 23.2 | 6/30/2014 | Live Nation | |
24.1 | Power of Attorney (see signature page 111 of 10-K). | 10-K | 001-32601 | 24.1 | 2/26/2015 | Live Nation | |
31.1 | Certification of Chief Executive Officer. | X | |||||
31.2 | Certification of Chief Financial Officer. | X | |||||
32.1 | Section 1350 Certification of Chief Executive Officer. | X | |||||
32.2 | Section 1350 Certification of Chief Financial Officer. | X | |||||
99.1 | Financial statements of Venta de Boletos por Computadora, S.A. de C.V. as of and for the years ended December 31, 2014 and 2013. | X | |||||
99.2 | Financial statements of Venta de Boletos por Computadora, S.A. de C.V. as of and for the years ended December 31, 2013 and 2012. | X | |||||
101.INS | XBRL Instance Document | 10-K | 001-32601 | 101.INS | 2/26/2015 | Live Nation | |
101.SCH | XBRL Taxonomy Schema Document | 10-K | 001-32601 | 101.SCH | 2/26/2015 | Live Nation | |
101.CAL | XBRL Taxonomy Calculation Linkbase Document | 10-K | 001-32601 | 101.CAL | 2/26/2015 | Live Nation | |
101.DEF | XBRL Taxonomy Definition Linkbase Document | 10-K | 001-32601 | 101.DEF | 2/26/2015 | Live Nation | |
101.LAB | XBRL Taxonomy Label Linkbase Document | 10-K | 001-32601 | 101.LAB | 2/26/2015 | Live Nation | |
101.PRE | XBRL Taxonomy Presentation Linkbase Document | 10-K | 001-32601 | 101.PRE | 2/26/2015 | Live Nation |
§ | Management contract or compensatory plan or arrangement. |
LIVE NATION ENTERTAINMENT, INC. | |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
Date: June 30, 2015 | |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
Date: June 30, 2015 | |
By: | /s/ Kathy Willard |
Kathy Willard | |
Chief Financial Officer |
Date: June 30, 2015 | |
By: | /s/ Michael Rapino |
Michael Rapino | |
President and Chief Executive Officer |
Date: June 30, 2015 | |
By: | /s/ Kathy Willard |
Kathy Willard | |
Chief Financial Officer |
Contents | Page |
Consolidated financial statements: | |
Statements of financial position.............................................................................................................. | 3 |
Statements of comprehensive income..................................................................................................... | 4 |
Statements of changes in stockholders' equity....................................................................................... | 5 |
Statement of cash flows........................................................................................................................... | 6 |
Notes to the financial statements............................................................................................................. | 7 to 30 |
December 31, | |||||||
2014 | 2013 | ||||||
Assets | Unaudited | ||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents (Note 6) | Ps | 279,971,575 | Ps | 269,272,118 | |||
Accounts receivable (Note 7) | 67,980,595 | 59,675,774 | |||||
Related parties (Note 9) | 241,905,187 | 161,813,782 | |||||
Costs of future events | 8,119,730 | 10,768,527 | |||||
Total current assets | 597,977,087 | 501,530,201 | |||||
FURNITURE AND EQUIPMENT - Net (Note 10) | 39,677,188 | 35,396,023 | |||||
UNAMORTIZED EXPENSES AND OTHER ASSETS - Net (Note 11) | 43,750,692 | 50,120,521 | |||||
DEFERRED INCOME TAX (Note 16) | — | 17,246 | |||||
Total assets | Ps | 681,404,967 | Ps | 587,063,991 | |||
Liabilities and Stockholders’ Equity | |||||||
CURRENT LIABILITIES: | |||||||
Suppliers | Ps | 15,299,202 | Ps | 36,851,498 | |||
Accounts payable | 324,168,236 | 213,972,536 | |||||
Related parties (Note 9) | 1,632,643 | 15,373,107 | |||||
Value added tax payable | 7,660,274 | 5,573,071 | |||||
Revenue from future events | 4,653,716 | 2,999,863 | |||||
Total current liabilities | 353,414,071 | 274,770,075 | |||||
DEFERRED INCOME TAX (Note 16) | 3,349,113 | — | |||||
Total liabilities | 356,763,184 | 274,770,075 | |||||
STOCKHOLDERS’ EQUITY (Note 13): | |||||||
Capital stock | 21,854,275 | 21,854,275 | |||||
Share premium | 2,628,300 | 2,628,300 | |||||
Retained earnings | 294,410,774 | 283,940,824 | |||||
Controlling interest | 318,893,349 | 308,423,399 | |||||
Non-controlling interest | 5,748,434 | 3,870,517 | |||||
Total stockholders’ equity | 324,641,783 | 312,293,916 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 17 and 18) | |||||||
Total liabilities and stockholders’ equity | Ps | 681,404,967 | Ps | 587,063,991 | |||
The accompanying twenty notes are an integral part of these financial statements. |
Year ended | |||||||
December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Service revenue (Note 14) | Ps | 592,427,661 | Ps | 674,977,500 | |||
Cost of services (Note 15) | (183,286,331 | ) | (200,496,744 | ) | |||
Gross profit | 409,141,330 | 474,480,756 | |||||
Operating expenses (Note 15) | (147,040,661 | ) | (123,254,359 | ) | |||
Operating income | 262,100,669 | 351,226,397 | |||||
Comprehensive financing result: | |||||||
Interest income - Net | 16,921,633 | 28,322,731 | |||||
Exchange gain - Net | 17,692 | 281,878 | |||||
Comprehensive financing income - Net | 16,939,325 | 28,604,609 | |||||
Income before income taxes | 279,039,994 | 379,831,006 | |||||
Provisions for income taxes (Note 16): | |||||||
Income tax payable | (78,248,691 | ) | (113,162,504 | ) | |||
Deferred income tax | (3,366,359 | ) | 702,059 | ||||
(81,615,050 | ) | (112,460,445 | ) | ||||
Net income for the year | 197,424,944 | 267,370,561 | |||||
Other Comprehensive income | — | — | |||||
Comprehensive income | Ps | 197,424,944 | Ps | 267,370,561 | |||
Distribution of consolidated net income for the year: | |||||||
Controlling interest | Ps | 195,547,027 | Ps | 266,600,003 | |||
Non-controlling interest | 1,877,917 | 770,558 | |||||
Ps | 197,424,944 | Ps | 267,370,561 | ||||
The accompanying twenty notes are an integral part of these financial statements. |
Retained earnings | |||||||||||||||||||||||||||
Capital | Share | Non-controlling | |||||||||||||||||||||||||
stock | premium | Holding | Subsidiary | Total | interest | Total | |||||||||||||||||||||
Balances at December 31, 2012 (Unaudited) | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 260,852,273 | Ps | 103,488,548 | Ps | 364,340,821 | Ps | 3,099,959 | Ps | 391,923,355 | |||||||||||||
Dividends received | — | — | 55,499,996 | (55,499,996 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (347,000,000 | ) | — | (347,000,000 | ) | — | (347,000,000 | ) | |||||||||||||||||
Change in non-controlling interest | — | — | — | — | — | 770,558 | 770,558 | ||||||||||||||||||||
Comprehensive income for the year (Note 3p) | — | — | 195,726,404 | 70,873,599 | 266,600,003 | — | 266,600,003 | ||||||||||||||||||||
Balances at December 31, 2013 | 21,854,275 | 2,628,300 | 165,078,673 | 118,862,151 | 283,940,824 | 3,870,517 | 312,293,916 | ||||||||||||||||||||
Dividends received | — | — | 63,061,895 | (63,061,895 | ) | — | — | — | |||||||||||||||||||
Dividends paid | — | — | (185,077,077 | ) | — | (185,077,077 | ) | — | (185,077,077 | ) | |||||||||||||||||
Change in non-controlling interest | — | — | — | — | — | 1,877,917 | 1,877,917 | ||||||||||||||||||||
Comprehensive income for the year (Note 3p) | — | — | 144,983,500 | 50,563,527 | 195,547,027 | — | 195,547,027 | ||||||||||||||||||||
Balances at December 31, 2014 (Unaudited) | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 188,046,991 | Ps | 106,363,783 | Ps | 294,410,774 | Ps | 5,748,434 | Ps | 324,641,783 | |||||||||||||
The accompanying twenty notes are an integral part of these financial statements. |
Year ended | |||||||
December 31, | |||||||
Operating activities | 2014 | 2013 | |||||
Unaudited | |||||||
Income before income tax | Ps | 279,039,994 | Ps | 379,831,006 | |||
Depreciation and amortization | 25,891,930 | 25,762,961 | |||||
Interests receivable | (16,921,633 | ) | (28,322,731 | ) | |||
288,010,291 | 377,271,236 | ||||||
Increase in receivables and other | (5,685,615 | ) | (55,290,144 | ) | |||
(Increase) decrease in related parties | (92,900,475 | ) | 170,146,715 | ||||
Increase (decrease) in suppliers and other accounts payables | 91,072,930 | (109,092,780 | ) | ||||
Increase in revenue from future events | 1,653,853 | — | |||||
Income taxes paid | (79,290,423 | ) | (85,580,347 | ) | |||
Net cash flows from operating activities | 202,860,561 | 297,454,680 | |||||
Investing activities | |||||||
Investment in furniture and equipment | (20,439,182 | ) | (14,202,412 | ) | |||
Interest collected | 16,921,633 | 28,322,731 | |||||
Investment in other assets | (3,566,478 | ) | (9,978,499 | ) | |||
Net cash flows from investing activities | (7,084,027 | ) | 4,141,820 | ||||
Financing activities | |||||||
Non-controlling interest | — | 770,558 | |||||
Dividends paid | (185,077,077 | ) | (347,000,000 | ) | |||
Net cash flows from financing activities | (185,077,077 | ) | (346,229,442 | ) | |||
Net increase (decrease) in cash and cash equivalents | 10,699,457 | (44,632,942 | ) | ||||
Cash and cash equivalents at beginning of year | 269,272,118 | 313,905,060 | |||||
Cash and cash equivalents at end of year | Ps | 279,971,575 | Ps | 269,272,118 | |||
The accompanying twenty notes are an integral part of these financial statements. |
a. | Ticket sales through automated sales systems for all types of shows and telemarketing services (incoming and outgoing phone calls). |
b. | Marketing of databases generated as a result of their activities. VBC is also holder of shares. |
• | MFRS B-12 “Offsetting financial assets and financial liabilities”. Establishes standards concerning the offsetting rights to be considered in order to present a financial asset and a financial liability at their offsetting amount in the statement of the financial position, and the characteristics that must be met to offset an amount, based on the principle that a financial asset and a financial liability should always be recorded in their offsetting amount, provided that the future cash flow from collection or settlement is net. |
• | MFRS C-11 “Stockholders’ equity”. Establishes the valuation, presentation and disclosure standards for items comprising stockholders' equity in the statement of the financial position of profit entities. The main changes in relation to the previous standard are: it requires setting the price per share to be issued for advances for future equity increases and it establishes that shares cannot be repaid before they are capitalized to qualify as equity, and it includes rules for financial instruments to be identified as equity at initial recognition. |
• | MFRS C-12 “Financial instruments with features of liability and equity”. Establishes the standards for initial recognition of financial instruments with features of liability and equity in the financial statements of profit entities. The concept of subordination is incorporated. |
• | MFRS C-14 “Transfer and derecognition of financial assets”. Establishes the principle of transfer of risks and rewards of ownership of a financial asset as an underlying condition to derecognition. When entities deduct accounts or notes receivable with resources, they must not show the discount amount as a credit to accounts and notes receivable, but rather as a liability. |
• | MFRS C-5 “Prepayments”. Establishes the accounting treatment of prepayments for the purchase of items for which payment is expressed in foreign currency. It also specifies that impairment losses in the value of prepayments (and reversals thereof) must be shown as part of the net profit or loss for the period in the line item that the Company deems appropriate according to its professional judgment, rather than in the statement of income for the period under other income and expenses. |
• | Statement C-15 “Impairment in the value of long-lived assets and their disposal”. Establishes that an impairment loss, and its reversal, in the value of intangible assets with indefinite lives (including goodwill) should be presented in the statement of income for the period under depreciation costs and amortization of assets of the cash-generating unit to which such intangible assets are associated. Impairment losses must not be presented as part of the costs that have been capitalized in the value of an asset. |
• | The requirement to present certain operations under other income and expenses is removed from MFRS B-3 “Statement of comprehensive income“, MFRS B-16 “Financial statements of non-profit entities”, MFRS C-6 ““Property, Plant and Equipment”, Statement C-9 “Liabilities, provisions, contingent assets and liabilities and commitments”, and MFRS D-3 “Employee benefits”, and instead the use of that item is left to the discretion of the Company. |
December 31, | |||||
2014 | 2013 | ||||
(%) | (%) | ||||
Annual inflation rate | 4.08 | 3.97 | |||
Cumulative inflation in the last three years | 11.80 | 12.26 |
a. | Consolidation |
b. | Cash and cash equivalents |
c. | Ticket sales accounts receivable |
d. | Costs of future events |
e. | Prepayments |
f. | Furniture and equipment |
g. | Unamortized expenses |
h. | Intangible assets |
i) | Definite life: are assets whose potential to generate expected future economic benefits is limited by legal or economic conditions and which are amortized on a straight line, based on their estimated useful lives and are subject to annual impairment testing when impairment indicators are identified. |
ii) | Indefinite life: are assets that are not amortized but subject to annual impairment assessment. |
i. | Suppliers and accounts payable |
j. | Provisions |
k. | Income tax payable and deferred income tax |
l. | Revenue from future events |
m. | Revenue from commissions on ticket sales and advertising |
n. | Stockholders’ equity |
o. | Other Comprehensive income |
p. | Comprehensive income |
q. | Costs, expenses and additional line items presentation in the statement of income |
r. | Revenue recognition |
s. | Other income allowances |
t. | Exchange gain (loss) |
a. | The figures in this note are stated in U.S. dollars (Dls.), except for exchange rates. |
December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Assets | Dls. | 252,485 | Dls. | 223,508 | |||
Liabilities | (455,343 | ) | (262,317 | ) | |||
Net short position | (Dls. | 202,858) | (Dls. | 38,809) |
b. | The most significant foreign currency transactions carried out by the Company and its subsidiaries were as follows: |
Year Ended December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Sales | Dls. | 456,141 | Dls. | 553,289 | |||
Costs and operating expenses | (2,039,452 | ) | (2,499,042 | ) | |||
Royalty costs | (250,000 | ) | (250,000 | ) |
Year ended December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Cash | Ps | 2,590,599 | Ps | 166,890 | |||
Bank deposits | 18,397,976 | 4,644,228 | |||||
Demand investments | 258,983,000 | 264,461,000 | |||||
Total cash and cash equivalents | Ps | 279,971,575 | Ps | 269,272,118 |
December 31, | |||||||
2014 | 2013 | ||||||
Unadited | |||||||
Accounts receivable from sales of tickets | Ps | 28,476,792 | Ps | 24,434,401 | |||
Recoverable income tax | 39,965,575 | 36,246,031 | |||||
Other accounts receivable | 155,554 | 903,711 | |||||
68,597,921 | 61,584,143 | ||||||
Allowance for doubtful accounts | (617,326 | ) | (1,908,369 | ) | |||
Ps | 67,980,595 | Ps | 59,675,774 |
Shareholding | ||||
Percentage | ||||
Company | 2014 and 2013 | Main operations | ||
Servicios Especializados para la Venta Automatizada de Boletos, S. A. de C. V. (SEVAB) | 100% | Providing Administrative, marketing, technical, and technological services. | ||
ETK Boletos, S. A. de C. V. 1 | 72.5% | Automated ticket sales. |
1 | Acquired on April 9, 2012. |
a. | The balances receivable from and payable to related parties at December 31, 2014 and 2013 were as follows: |
December 31, | |||||||
Accounts receivable: | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Affiliates | |||||||
Operadora de Centros de Espectáculos, S. A. de C. V. | Ps | 196,946,741 | Ps | 123,494,980 | |||
Ocesa Promotora, S. A. de C. V. | 43,193,521 | 321,177 | |||||
Servicios Corporativos CIE, S. A. de C. V. | 368,251 | 335,983 | |||||
Televisa, S. A. de C. V. | 272,310 | 361,965 | |||||
Servicios Compartidos de Alta Dirección, S. A. de C. V. | 230,352 | 108,770 | |||||
Administradora Mexicana del Hipódromo, S. A. de C. V. | 197,417 | 476,509 | |||||
OCESA Presenta, S. A. de C. V. (1) | 176,568 | 36,209,674 | |||||
Cie Internacional, S. A. de C. V. | 165,573 | — | |||||
Serinem, S. A. de C. V. | 99,698 | — | |||||
Creatividad y Espectáculos, S. A. de C. V. | 75,018 | — | |||||
Fútbol del Distrito Federal, S. A. de C. V. | 64,332 | 274,726 | |||||
Make Pro, S. A. de C. V. | 54,265 | — | |||||
Car Sport Racing, S. A. de C. V. | 32,055 | — | |||||
Inmobiliaria de Centros de Espectáculos, S. A. de C. V. | 15,486 | — | |||||
Ideas Marketing, S. A. de C. V. | 13,600 | — | |||||
Other | — | 124,984 | |||||
Unimarket, S. A. de C. V. | — | 105,014 | |||||
Ps | 241,905,187 | Ps | 161,813,782 |
December 31, | |||||||
Accounts payable: | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Affiliates | |||||||
Servicios Administrativos del Entretenimiento, S. A. de C. V. | Ps | 1,145,343 | Ps | 14,168,015 | |||
Needish México, S. A. de C. V. | 480,528 | 754,456 | |||||
TicketMaster LLC CA | 3,083 | 445,716 | |||||
Servicios de Protección Privada Lobo, S. A. de C. V. | 3,689 | — | |||||
Other | — | 4,920 | |||||
Ps | 1,632,643 | Ps | 15,373,107 |
b. | During the years ended on December 31, 2014 and 2013, the Company carried out the following operations with related parties: |
Income from: | 2014 | 2013 | |||||
Unaudited | |||||||
Affiliates | |||||||
Commissions and charges from ticket sales | Ps | 30,081,063 | Ps | 45,911,289 | |||
Sponsorship income | 19,571,780 | 24,040,630 | |||||
Equipment leasing | 1,190,523 | 1,045,966 | |||||
Interest earned | 12,684,886 | 24,582,566 | |||||
Other income | 957,880 | 140,008 | |||||
Costs and expenses: | |||||||
Affiliates | |||||||
Personnel, administrative and security services | Ps | (91,587,884 | ) | Ps | (81,481,390 | ) | |
Corporate fees | (7,289,376 | ) | (6,995,765 | ) | |||
Lease of properties | (9,794,815 | ) | (9,420,446 | ) | |||
Advertising commissions | (2,052,460 | ) | (4,878,378 | ) | |||
Other expenses | (4,223,640 | ) | (3,720,898 | ) | |||
Stockholders: | |||||||
Other | (4,118,653 | ) | (3,358,465 | ) | |||
Royalties | (3,300,256 | ) | (3,184,687 | ) |
Annual | |||||||||
December 31, | depreciation | ||||||||
2014 | 2013 | or amortization | |||||||
Unaudited | rate (%) | ||||||||
Computer and peripheral equipment | Ps | 171,852,958 | Ps | 159,305,029 | 30 | ||||
Furniture and equipment | 15,165,621 | 12,997,240 | 10 | ||||||
Transportation equipment | 4,119,798 | 3,265,307 | 25 | ||||||
191,138,377 | 175,567,576 | ||||||||
Accumulated depreciation | (151,461,189 | ) | (140,171,553 | ) | |||||
Ps | 39,677,188 | Ps | 35,396,023 |
Intangible assets | 2014 | 2013 | |||||
Unaudited | |||||||
Access to properties to carry out ticket sales (“3 de Marzo” stadium, “Conciertos y Más conciertos” “Bull fighting ring” and others) | Ps | 42,212,904 | Ps | 38,646,426 | |||
EDB-Ticket Software | 6,715,900 | 6,715,900 | |||||
Amortization | (25,861,534 | ) | (16,994,773 | ) | |||
Subtotal | 23,067,270 | 28,367,553 | |||||
E- Ticket Brand | 1,900,100 | 1,900,100 | |||||
Non-compete agreement - ETK Boletos 1 | 5,600,000 | 5,600,000 | |||||
30,567,370 | 35,867,653 | ||||||
Other assets | 38,093,223 | 38,305,617 | |||||
Amortization | (24,909,901 | ) | (24,052,749 | ) | |||
Intangible assets | Ps | 43,750,692 | Ps | 50,120,521 |
(1) | The non-compete Agreement entered into with ETK - Tickets is valid for the period in which the parties maintain their status as shareholders and / or employees of ETK-Boletos, and for an additional 5 years from the date they lose either status for any cause, in the understanding that it is computed individually for each bound party. |
2014 | 2013 | ||||||
Unaudited | |||||||
Beginning balance | Ps | 23,178,580 | Ps | 19,613,233 | |||
Increases | 9,515,734 | 23,178,581 | |||||
Applications | (23,179,580 | ) | (17,207,291 | ) | |||
Cancellations | 1,000 | (2,405,942 | ) | ||||
Ending balance | Ps | 9,515,734 | Ps | 23,178,581 |
Number of | ||||||
Shares | Description | Amount | ||||
17,975 | Series "A" shares, comprising the minimum fixed capital stock without withdrawal rights | Ps | 17,975 | |||
32,025 | Series "B" shares, comprising the minimum fixed capital stock, without withdrawal rights | 32,025 | ||||
50,000 | Subtotal | 50,000 | ||||
10,529,241 | Series "A" shares, comprising the variable portion of capital stock, with an unlimited maximum | 10,529,241 | ||||
4,095,148 | Series "A-1" shares, comprising the variable portion of capital stock, with an unlimited maximum | 4,095,148 | ||||
7,179,886 | Series "B" shares, comprising the variable portion of capital stock, with an unlimited maximum | 7,179,886 | ||||
21,854,275 | Capital stock | Ps | 21,854,275 |
Revenue: | 2014 | 2013 | |||||
Unaudited | |||||||
Internal charges | Ps | 447,412,366 | Ps | 475,660,149 | |||
Credit card recovery | 65,527,146 | 76,768,584 | |||||
Entertainment guide | 35,576,708 | 58,098,889 | |||||
Advertising | 23,226,360 | 31,779,756 | |||||
Others | 15,594,238 | 25,997,094 | |||||
Import Services | 5,090,843 | 6,673,028 | |||||
Ps | 592,427,661 | Ps | 674,977,500 |
Costs: | 2014 | 2013 | |||||
Unaudited | |||||||
Commissions | Ps | (88,722,066 | ) | Ps | (99,026,297 | ) | |
Other costs | (18,439,137 | ) | (13,856,584 | ) | |||
Entertainment guide | (16,456,397 | ) | (24,831,235 | ) | |||
Administrative services | (12,906,687 | ) | (9,824,573 | ) | |||
Tickets | (9,472,212 | ) | (11,256,987 | ) | |||
Computing | (8,419,873 | ) | (8,738,649 | ) | |||
Production | (7,335,822 | ) | (7,415,151 | ) | |||
Non-capitalizable assets | (4,853,841 | ) | (6,254,009 | ) | |||
Royalties | (3,300,256 | ) | (3,188,521 | ) | |||
Lease | (2,679,646 | ) | (1,758,555 | ) | |||
Maintenance | (1,302,565 | ) | (846,404 | ) | |||
Advertising | (602,938 | ) | (1,946,142 | ) | |||
Professional services | (593,159 | ) | (2,727,745 | ) | |||
(175,084,599 | ) | (191,670,852 | ) | ||||
Amortization | (8,201,732 | ) | (8,825,892 | ) | |||
Ps | (183,286,331 | ) | Ps | (200,496,744 | ) | ||
Expenses: | |||||||
Administrative services | Ps | (83,332,289 | ) | Ps | (76,119,895 | ) | |
Other expenses | (27,737,782 | ) | (13,102,308 | ) | |||
Lease | (11,488,159 | ) | (10,713,477 | ) | |||
Corporate fees | (6,641,376 | ) | (6,363,209 | ) | |||
Computing | (150,857 | ) | (18,401 | ) | |||
(129,350,463 | ) | (106,317,290 | ) | ||||
Depreciation and amortization 1 | (17,690,198 | ) | (16,937,069 | ) | |||
Ps | (147,040,661 | ) | Ps | (123,254,359 | ) |
(1) | Includes fixed asset disposals. |
a. | New income tax law (new ITL) |
i. | It modifies the mechanics for taxing income arising from installment sales and generalizes the procedure for determining the profit on the sale of shares. |
ii. | Establishes an income tax rate for 2014 and the following years of 30%, as compared to the previous Income Tax Law, under which the rates were 30%, 29%, and 28% for 2013, 2014 and 2015, respectively. |
iii. | It establishes the procedure to determine the opening capital contributions account (CUCA for its acronym in Spanish) and CUFIN balances. |
i. | In 2014 and 2013, the Company determined a tax profit of Ps260,828,970 and Ps377,208,348, respectively. The tax result differs from the accounting result mainly due to items that accrue over time and that are deducted differently for accounting and tax purposes, to recognition of inflation effects for tax purposes, and to items only affecting either the accounting or tax result. |
ii. | The reconciliation between the statutory and the effective income tax rates is shown below: |
Year ended December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Income before income tax provisions | Ps | 279,039,994 | Ps | 379,831,006 | |||
Income tax statutory rate | 30 | % | 30 | % | |||
Income tax at statutory rate | 83,711,998 | 113,949,302 | |||||
Plus (less) effect of income tax on the following permanent items: | |||||||
Inflation | (2,823,380 | ) | (2,737,567 | ) | |||
Nondeductible expenses | 695,749 | 1,080,281 | |||||
Other items | 30,683 | 168,429 | |||||
Income tax at actual rate | Ps | 81,615,050 | Ps | 112,460,445 | |||
Effective income tax rate | 30 | % | 30 | % |
iii. | At December 31, 2014 and 2013, the principal temporary differences on which deferred income tax was recorded are as follows: |
December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Costs of future events | Ps | (8,119,731 | ) | Ps | (10,768,527 | ) | |
Unamortized expenses | (17,712,902 | ) | (19,520,034 | ) | |||
Furniture and equipment | 2,612,300 | 2,259,235 | |||||
Revenue from future events | 1,923,564 | 2,999,863 | |||||
Provisions and estimations | 9,515,734 | 23,178,581 | |||||
Allowance for doubtful accounts | 617,326 | 1,908,369 | |||||
(11,163,709 | ) | 57,487 | |||||
Applicable income tax rate | 30 | % | 30 | % | |||
Deferred income tax (liability) asset | Ps | (3,349,113 | ) | Ps | 17,246 |
b. | Flat tax |
a. | Offices: VBC signed an agreement with OCESA, an affiliated company, for the use of office space and for certain cleaning and security services at said spaces located within the premises of the “Palacio de los Deportes” in Mexico City. This agreement grants the company use of the facilities it uses as office space and its call center in that city in exchange for which the company pays OCESA a monthly fixed fee. In addition, VBC has signed a lease agreement with an individual involving a building located in Guadalajara, Jalisco, to house its offices in that city. VBC pays a fixed fee for this building lease that increases annually based on the NCPI. |
b. | Offices: Servicios Especializados para la Venta Automática de Boletos, S. A. de C. V. (SEVAB) has signed agreements with OCESA, an affiliated company, for the use of space and to render certain cleaning and security services in the areas located inside the Palacio de los Deportes, Mexico City. This agreement awards SEVAB use of the facilities to house their offices in exchange for which SEVAB pays OCESA a monthly fixed fee. |
c. | As part of its daily business activities, VBC and ETK Boletos are engaged in the distribution and sale of tickets to certain artistic events to be conducted in the immediately following year, in exchange for which it receives amounts from third parties for the purchase of tickets to said events. The Company holds those amounts in cash, so that if the events in question are not held, the amounts are returned in accordance with the applicable legal provisions. At December 31, 2014 and 2013, cash and cash equivalents included deposits received from third parties for the acquisition of tickets totaling Ps298,537,722 and Ps203,213,308 respectively. |
d. | Ticketmaster Brand Name and System. VBC entered into license agreements (expiring on March 31, 2015) with Ticketmaster Corporation for use of the TicketMaster brand names and system for which it pays a fixed royalty fee expressed in dollars. |
a. | Under the provisions of the Income Tax Law, parties carrying out operations with related parties, either resident in Mexico or abroad, are subject to tax limitations and obligations related to the determination of transfer, which must be similar to those agreed with unrelated parties in comparable transactions. |
b. | On July 24, 2012, the Procedures Department of the Mexican Better Business Bureau (PROFECO) issued a ruling sanctioning VBC for an alleged violation of article 10 of the Consumer Protection Act, as it considers that marketing and sale of the service denominated “La Guía” is an unfair practice for consumers, and therefore imposed a Ps.1,690,331 fine and instructed the Company to stop marketing “La Guía” as it has so far. A motion for review was filed against said ruling, with a second ruling issued on October 25, 2012 by the Procedures Department declaring the company's grievances unfounded. |
c. | On 22 June 2012, the Advertising and Standards Office of PROFECO required information from OCESA for its alleged role in the violation of various rules in relation to the sale of tickets to public performances through the internet portal www.ticketbis.com.mx. OCESA addressed said request on July 6, 2012, stating that the probable offender in that issue was Evandti, S. A. de C. V. The Company therefore expects to no longer be considered liable for the unlawful conduct and for a new legal process to start against the Evandti, SA de C.V. In September 21, 2012 the latter company was notified of the request for information. |
d. | VBC and its subsidiaries are regularly called by the PROFECO when consumers of their services do not consider that the conditions offered are met and complain to this office. Sometimes the PROFECO has imposed fines for alleged violations of administrative procedures or to the law, of which there are currently four complaints under reconciliation, twenty one cases are at the Federal Court of Fiscal and Administrative Justice and three appeals at other Federal courts regarding several fines or penalties between Ps.2,000 to Ps.20,000 that as a whole add up to approximately Ps.400,000. To date, the Company has not suffered any damages from those complaints and all fines have been removed. Therefore, in the opinion of the VCB advisors, these matters do not pose a material contingency, and it is very unlikely that any of those amounts will be payable, or where appropriate, that the above criteria under which VCB has never condemned to pay amounts due to these causes be reversed. |
e. | VBC filed a request with the Mexican Industrial Property Institute (MIPI) for a declaration of the infractions committed by Wal-Mart de México, S. A. B. de C. V. (“Wal-Mart”) related to improper use of the “La Guía de Entretenimiento” brand owned by VBC. In its counterclaim, Wal-Mart requested that VBC’s brand be declared invalid. The authorities declared that the claims filed by VCB were well-grounded and determined that Wal-Mart had committed the infractions in question, and imposed a fine of 2,500 days minimum salary in effect in Federal District, and dismissed Wal-Mart’s request for VCB’s brand to be declared invalid. That decision was challenged by Walmart at the Federal Court of Fiscal and Administrative Justice. On September 11, 2013, the Judges of the Federal Tax Court handed down a favorable sentence to VBC acknowledging the validity of the ruling issued by the Mexican Industrial Property Institute (MIPI), and confirmed that the “LA GUIA DE ENTRETENIMIENTO” brand is the property of VCB. Wal-Mart filed an appeal against that ruling, and a new ruling was issued on October 31, 2014 dismissing the appeal and confirming the validity of the favorable sentence handed down VBC. |
f. | VBC requested that infractions be declared against Wal-Mart for improper use of the reservation of rights to the “La Guía de Entretenimiento” publication, in the following genres: Periodic publications, qualifying as a guide, to which Wal-Mart responded by filing a request for statement of administrative action for nullity of VBC’s reservation of rights. The National Copyrights Institute (“INDAUTOR”) ruled in favor of VBC and dismissed Wal-Mart’s counterclaim. This resolution was contested by Wal-Mart at the Federal Tax Courts, which ruled in favor of VBC on September 13, 2012, recognizing the validity of the resolution issued by the INDAUTOR, confirming that the reservation of rights to exclusive use of the title LA GUÍA DE ENTRETENIMIENTO was duly granted. Dissatisfied with said resolution, Wal-Mart filed a motion for review of said sentence, to which, on May 7, 2013, VBC responded as injured third party in the review proceedings. The Collegiate Court confirmed the validity of the ruling, which means that the IMPI is empowered to declare WAL-MART’S infraction for commercial purposes, and consequently, impose a fine; additionally, the INDAUTOR could dictate a resolution invalidating and/or dictating the expiration of the reservation of rights to obtained by Wal-Mart. |
g. | On October 1, 2012, a motion for annulment was brought to the Chamber specialized in intellectual property matters of the Federal Tax and Administrative Court against the resolution issued by coordinating office C for trademark examination regarding rejection of hallmark Laguíatm.tv, requested by VBC. On April 30, 2013, the Tax Courts handed down a sentence ordering the IMPI issue the title of the brand that was issued on July 9, 2014. Dissatisfied with said resolution, Teléfonos de México, S. A. B. DE C. V. filed for constitutional protection of civil rights known as an “amparo” against granting of the Laguíatm.tv trademark, arguing that it can be mistaken for its TL trademark. VBC answered the amparo and presented arguments in the respective trial. No sentence has yet been issued in this regard. In the opinion of our advisors, it is possible the authorities will confirm the sentence and grant VBC the Laguíatm.tv trademark. |
h. | On February 20, 2014, ETK Boletos, SA de CV (ETK) filed a suit at the Civil Court in the state of Querétaro against AJL Fútbol Gulf, SA de CV, AMRH International Soccer, SA de CV, and Fútb0l Club Querétaro, in response to the request to suspend sales through the ETK channels at the “Estadio Corregidora” in the city of Queretaro, which ETK was performing under a Service agreement. In the Complaint, ETK requested, in addition to Forced Compliance with the Service agreement, payment of the agreed contractual penalty and a severance payment for moral damage repair to ETK. In light of the intervention by the federal authorities, ETK preferred to recover the investment for which purpose on February 20, 2014 it signed a transaction agreement with the defendants whereby it resolved the dispute with the payment made to ETK in the amount of Ps. 968,580 (which is almost the entirety of the agreed contractual penalty), and the return to ETK of all purchased equipment that was installed at the Stadium. |
i. | ETK Boletos , SA de CV filed an appeal at the Regional chamber for Intellectual Property against the ruling dismissing pending trademarks E TICKET, E-TICKET, E TICKET TU ACCESO… DIRECTO Y DISEÑO and the commercial notice of E TICKET TU ACCESO DIRECTO. The Company is awaiting approval of those brands together with the respective ruling. |
j. | VBC filed an appeal at the Regional Court for Intellectual Property Matters against the ruling dismissing pending brand TRAVEL TICKET. The Company is awaiting approval of that brand together with the respective ruling. |
k. | The Mexican Authors and Composers Society filed a complaint against Mr. Edgardo Sanchez Polo for violation of the Copyright Act in relation to the performance of the artist known as “Paquita la del Barrio”, as a result of which ETK Boletos, SA de CV “ETK” was summoned to submit different information. ETK submitted the information in question and was released from all responsibilities. |
l. | VBC and its subsidiaries regularly contract the services of specialists in areas such as security, cleaning, access control, production, mounting, assembling and other similar services required to conduct its business activities, and they sign multiple contracts with third parties who agree to develop activities for VBC and its subsidiaries. Under the provisions of the labor legislation and recent amendments thereto on the subject of social security, some of the subcontractors or workers of these service providers may take steps in order for VBC and its subsidiaries to be considered the beneficiary of those services or liable for possible related contingencies. |
m. | According to the agreements reached by the shareholders and subsidiaries of VCB, Corporacion Interamericana de Entretenimiento, S. A. B. de C. V. (“CIE”) is responsible for dealing with any contingency filed against the Company and its subsidiaries arising from acts prior to October 18, 2012, thus binding CIE to defend, indemnify and if necessary release the Company from all obligations (including the obligation to pay amounts related to penalties). Therefore, the Company has no records of such procedures, which are directly handled by CIE further to the agreement in question. |
I. | Differences in measurement methods |
a. | The figures of non-monetary line items at December 31, 2014 and 2013 are stated in historical Mexican pesos modified by the inflation effects up to December 31, 2007. Starting January 1, 2008, according to the provisions of MFRS B-10 “Inflation Effects”, the Company discontinued the recognition of inflation accounting as the Mexican economy is not an inflationary environment, since cumulative inflation has been below 26% (limit to define an economy as inflationary under MFRS). Under U.S. GAAP effects of inflation recognized under MFRS up to 2007 might not be recognized. The reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the SEC, it 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 U.S. GAAP. |
b. | The company provides financing to related parties, for which interest is determined by using the nominal interest rate. In accordance with ASC 470 “Debt” the borrower's periodic interest cost shall be determined by using the effective interest method considering in the determination of interest, the debt issuance costs, discounts and premium throughout the outstanding term of the loan using a constant interest rate. |
II. | Additional accounting policies under U.S. GAAP and reclassifications |
a. | Consolidation |
b. | Accounts receivables for ticket sales |
c. | Furniture and Equipment - Impairment |
d. | Intangibles |
i. | Definite-lived: are those which expected future economic benefits is limited by any legal or economic condition and are amortized on a straight line basis, based on the best estimate of their useful life and are subject to annual impairment testing when impairment indicators are identified. |
ii. | Indefinite-lived assets are not amortized but are subject to annual impairment assessment. Depending on facts and circumstances, qualitative factors may first be assessed to determine whether the existence of events and circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. If it is concluded that it is more likely than not impaired, then the Company performs a quantitative impairment test by comparing the fair value with the carrying amount. |
a. | Revenue from future events |
b. | Revenue from commissions on ticket sales |
c. | Revenue recognition for services |
a. | Fair Value Measurements Disclosures |
b. | Related-party transactions |
c. | Intangible and other assets: |
Definite-lived Intangible assets | 2014 | 2013 | |||||
Unaudited | |||||||
Ticketing contracts - Gross | Ps | 42,212,904 | Ps | 38,646,426 | |||
Accumulated amortization | (23,967,102 | ) | (15,765,370 | ) | |||
Software EDB-Ticket - Gross | 6,715,900 | 6,715,900 | |||||
Accumulated amortization | (1,894,432 | ) | (1,229,403) | ||||
Subtotal | 23,067,270 | 28,367,553 | |||||
Indefinite-lived Intangible assets | |||||||
E-Ticket Brand | 1,900,100 | 1,900,100 | |||||
Non-compete agreement - ETK boletos 1 | 5,600,000 | 5,600,000 | |||||
Total Intangible assets | 30,567,370 | 35,867,653 | |||||
Lease hold improvements - Gross | 38,093,223 | 38,305,617 | |||||
Accumulated amortization | (24,909,901 | ) | (24,052,749 | ) | |||
Total | Ps | 43,750,692 | Ps | 50,120,521 |
weighted- | |||
average | |||
lives (years) | |||
2014 | 2013 | ||
Unaudited | |||
Revenue generating contracts | — | 3 |
Amortization | |||
2015 | Ps | 6,882,724 | |
2016 | 3,638,072 | ||
2017 | 3,001,666 | ||
2018 | 2,060,833 | ||
2019 | 1,400,000 |
d. | Revenue analysis |
December 31, | |||||||
2014 | 2013 | ||||||
Unaudited | |||||||
Revenue as reported under MFRS | Ps | 592,427,661 | Ps | 674,977,500 | |||
Reclassification from Cost of Services (1) | (56,784,450 | ) | (62,510,733 | ) | |||
Revenue under US GAAP | Ps | 535,643,211 | Ps | 612,466,767 |
2014 | 2013 | ||||||
Unaudited | |||||||
Deferred taxes included within: | |||||||
Assets: | |||||||
Furniture and equipment | Ps | 783,690 | Ps | 677,771 | |||
Deferred revenue | 577,069 | 899,959 | |||||
Accruals | 2,854,720 | 6,953,574 | |||||
Allowance for doubtful accounts | 185,198 | 572,511 | |||||
Total deferred tax assets | 4,400,677 | 9,103,815 | |||||
Liabilities: | |||||||
Cost of future events | (2,435,919 | ) | (3,230,559 | ) | |||
Intangible and other assets | (5,313,871 | ) | (5,856,010 | ) | |||
Total deferred liabilities | (7,749,790 | ) | (9,086,569 | ) | |||
Net deferred income taxes | Ps | (3,349,113 | ) | Ps | 17,246 |
e. | Commitments and contingent liabilities |
Non-cancelable | |||
Operating Leases | |||
2015 | Ps | 10,159,182 | |
2016 | 10,535,071 | ||
2017 | 10,912,227 | ||
2018 | 11,302,885 | ||
2019 | 11,721,091 | ||
Total | Ps | 54,630,456 |
f. | New authoritative pronouncements |
Contents | Page |
Report of Independent Auditors.................................................................................................................. | 1 and 2 |
Financial statements: | |
Consolidated balance sheets....................................................................................................................... | 3 |
Consolidated statements of comprehensive income................................................................................... | 4 |
Consolidated statement of changes in stockholders’ equity........................................................................ | 5 |
Consolidated cash flow statements............................................................................................................. | 6 |
Notes to the consolidated financial statements........................................................................................... | 7 to 30 |
December 31, | |||||||
2013 | 2012 | ||||||
Assets | Unaudited | ||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents (Note 6) | Ps | 269,272,118 | Ps | 313,905,060 | |||
Accounts receivable for ticket sales (net of allowance for doubtful of Ps1,908,369 and Ps697,680 in 2013 and 2012) | 22,526,032 | 8,357,845 | |||||
Related parties (Note 8) | 161,813,782 | 321,829,938 | |||||
Income tax recoverable | 36,246,031 | 19,924,762 | |||||
Costs of future events | 10,768,527 | 10,790,570 | |||||
Other accounts receivable | 903,711 | 4,062,429 | |||||
Total current assets | 501,530,201 | 678,870,604 | |||||
FURNITURE AND EQUIPMENT - Net (Note 9) | 35,396,023 | 36,176,926 | |||||
EXPENSES TO AMORTIZE AND OTHER ASSETS –TO AMORTIZE - Net (Note 10) Ps41,047,522 and Ps30,178,809 in 2013 and 2012 | 50,120,521 | 51,292,934 | |||||
DEFERRED INCOME TAX (Note 15) | 17,246 | — | |||||
Total assets | Ps | 587,063,991 | Ps | 766,340,464 | |||
Liabilities and Stockholders’ Equity | |||||||
CURRENT LIABILITIES: | |||||||
Suppliers | Ps | 36,851,498 | Ps | 36,411,533 | |||
Accounts payable and accrued liabilities | 213,972,536 | 323,293,287 | |||||
Related parties (Note 8) | 15,373,107 | 5,242,549 | |||||
Value added tax payable | 5,573,071 | 5,785,064 | |||||
Revenue from future events | 2,999,863 | 2,999,863 | |||||
Total current liabilities | 274,770,075 | 373,732,296 | |||||
DEFERRED INCOME TAX (Note 15) | — | 684,813 | |||||
Total liabilities | 274,770,075 | 374,417,109 | |||||
STOCKHOLDERS’ EQUITY (Note 12): | |||||||
Capital stock | 21,854,275 | 21,854,275 | |||||
Share premium | 2,628,300 | 2,628,300 | |||||
Retained earnings | 283,940,824 | 364,340,821 | |||||
Majority stockholders’ equity | 308,423,399 | 388,823,396 | |||||
Non-participation controlling | 3,870,517 | 3,099,959 | |||||
Total stockholders’ equity | 312,293,916 | 391,923,355 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 16 and 17) | |||||||
Total liabilities and stockholders’ equity | Ps | 587,063,991 | Ps | 766,340,464 | |||
The accompanying nineteen notes are an integral part of these financial statements. |
Year ended | |||||||
December 31, | |||||||
2013 | 2012 | ||||||
Unaudited | |||||||
Service revenue (Note 13) | Ps | 674,977,500 | Ps | 647,657,909 | |||
Cost of services (Note 14) | (200,496,744 | ) | (203,185,833 | ) | |||
Gross profit | 474,480,756 | 444,472,076 | |||||
Operating expenses (Note 14) | (123,254,359 | ) | (97,343,606 | ) | |||
Operating income | 351,226,397 | 347,128,470 | |||||
Comprehensive financing result: | |||||||
Interest income - Net | 28,322,731 | 28,289,378 | |||||
Exchange gain - Net | 281,878 | 473,785 | |||||
Comprehensive financing income - Net | 28,604,609 | 28,763,163 | |||||
Income before the following provision | 379,831,006 | 375,891,633 | |||||
Provisions for (Note 15): | |||||||
Current income tax | (113,162,504 | ) | (102,330,759 | ) | |||
Deferred income tax | 702,059 | (6,390,917 | ) | ||||
(112,460,445 | ) | (108,721,676 | ) | ||||
Net income for the year | Ps | 267,370,561 | Ps | 267,169,957 | |||
Distribution net income consolidate for the year: | |||||||
Participation controlling | Ps | 266,600,003 | Ps | 266,763,073 | |||
Non participation controlling | 770,558 | 406,884 | |||||
267,370,561 | 267,169,957 | ||||||
Other Comprehensive income | — | — | |||||
Comprehensive income | Ps | 267,370,561 | Ps | 267,169,957 | |||
The accompanying nineteen notes are an integral part of these financial statements. |
Retained earnings | |||||||||||||||||||||||||||
Capital | Share | Profit of | |||||||||||||||||||||||||
stock | premium | Holding | Subsidiary | Total | no controller | Total | |||||||||||||||||||||
Balances at December 31, 2011 (Unaudited) | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 221,872,462 | Ps | 85,493,528 | 307,365,990 | Ps | — | Ps | 331,848,565 | ||||||||||||||
Dividends received | — | — | 49,999,996 | (49,999,996 | ) | — | — | — | |||||||||||||||||||
Change in minority interest | — | — | — | — | — | 3,099,959 | 3,099,959 | ||||||||||||||||||||
Comprehensive income for the year (Note 3p) | — | — | 198,768,057 | 67,995,016 | 266,763,073 | — | 266,763,073 | ||||||||||||||||||||
Dividends paid | — | — | (209,788,242 | ) | — | (209,788,242 | ) | — | (209,788,242 | ) | |||||||||||||||||
Balances at December 31, 2012 (Unaudited) | 21,854,275 | 2,628,300 | 260,852,273 | 103,488,548 | 364,340,821 | 3,099,959 | 391,923,355 | ||||||||||||||||||||
Dividends received | — | — | 55,499,996 | (55,499,996 | ) | — | — | — | |||||||||||||||||||
Change in minority interest | — | — | — | — | — | 770,558 | 770,558 | ||||||||||||||||||||
Comprehensive income for the year (Note 3p) | — | — | 195,726,404 | 70,873,599 | 266,600,003 | — | 266,600,003 | ||||||||||||||||||||
Dividends paid | — | — | (347,000,000 | ) | — | (347,000,000 | ) | — | (347,000,000 | ) | |||||||||||||||||
Balances at December 31, 2013 | Ps | 21,854,275 | Ps | 2,628,300 | Ps | 165,078,673 | Ps | 118,862,151 | Ps | 283,940,824 | Ps | 3,870,517 | Ps | 312,293,916 | |||||||||||||
The accompanying nineteen notes are an integral part of these financial statements. | |||||||||||||||||||||||||||
Year ended | |||||||
December 31, | |||||||
Operating activities | 2013 | 2012 | |||||
Unaudited | |||||||
Income before income tax | Ps | 379,831,006 | Ps | 375,891,633 | |||
Depreciation and amortization | 25,762,961 | 18,231,118 | |||||
Interests gained | (28,322,731 | ) | (28,289,378 | ) | |||
377,271,236 | 365,833,373 | ||||||
(Increase) decrease in receivables and other | (55,290,144 | ) | 35,004,201 | ||||
Decrease (increase) in related parties | 170,146,715 | (266,742,248 | ) | ||||
(Decrease) increase in suppliers and other payables | (109,092,780 | ) | 21,578,749 | ||||
Decrease in revenue from future events | — | (9,070,704 | ) | ||||
Income tax paid | (85,580,347 | ) | (119,224,222 | ) | |||
Operating activities net cash flow | 297,454,680 | 27,379,149 | |||||
Investing activities | |||||||
Investment in furniture and equipment | (14,202,412 | ) | (18,149,114 | ) | |||
Interests collected | 28,322,731 | 28,289,378 | |||||
Other related | (9,978,499 | ) | (24,428,393 | ) | |||
Investing activities net cash flow | 4,141,820 | (14,288,129 | ) | ||||
Financing activities | |||||||
Non participation controlling | 770,558 | 3,099,959 | |||||
Dividends paid | (347,000,000 | ) | (209,788,242 | ) | |||
Financing activities net cash | (346,229,442 | ) | (206,688,283 | ) | |||
Net cash decrease and temporary investment | (44,632,942 | ) | (193,597,263 | ) | |||
Cash and cash equivalents at beginning of year | 313,905,060 | 507,502,323 | |||||
Cash and cash equivalents at end of year | Ps | 269,272,118 | Ps | 313,905,060 | |||
The accompanying nineteen notes are an integral part of these financial statements | |||||||
a. | Ticket sales through automated sales systems for all types of shows, telemarketing services in and out of phone calls. |
b. | The marketing database generated by their activities. VBC is also holding company. |
December 31, | |||||
2013 | 2012 | ||||
(%) | (%) | ||||
Yearly by inflation | 3.97 | 3.57 | |||
Cumulative inflation for the last three years | 12.26 | 12.26 |
a. | The figures in this note are stated in U.S. dollars (Dls.), except for exchange rates. |
December 31, | |||||||
2013 | 2012 | ||||||
Unaudited | |||||||
Assets | Dls. | 223,508 | Dls. | 326,302 | |||
Liabilities | (262,317 | ) | (870,227 | ) | |||
Net short position | (Dls. | 38,809) | (Dls. | 543,925) |
b. | At December 31, 2013 and 2012, the exchange rate was Ps13.08 and Ps12.97 per dollar, respectively. At the date of issuance of the audited financial statements, the exchange rate was Ps13.25 per US dollar, approximately. |
c. | The most significant foreign currency transactions carried out by the company were as follows: |
Year ended | |||||||
December 31, | |||||||
2013 | 2012 | ||||||
Unaudited | |||||||
Sales | Dls. | 553,289 | Dls. | 337,519 | |||
Costs and operating expenses | (2,493,967 | ) | (2,292,285 | ) | |||
Royalties cost | (250,000 | ) | (250,000 | ) | |||
Interest income | (5,075 | ) | (1,028 | ) |
Year ended | |||||||
December 31, | |||||||
2013 | 2012 | ||||||
Unaudited | |||||||
Cash | Ps | 166,890 | Ps | 111,000 | |||
Bank deposits | 4,644,228 | 10,168,606 | |||||
Liquid investments | 264,461,000 | 303,625,454 | |||||
Total of cash and cash equivalents | Ps | 269,272,118 | Ps | 313,905,060 |
Percentage of | ||||
holding | ||||
Company | 2013 and 2012 | Main activity | ||
Servicios Especializados para la Venta | 100% | Provide Administrative, technical, | ||
Automatizada de Boletos, S. A. de C. V. (SEVAB) | marketing and technology services during the ticket sales. | |||
ETK Boletos, S. A. de C. V. 1 | 72.5% | Automated Ticket sales. | ||
1 Established on April 9. 2012. |
December 31, | |||||||
Accounts receivable: | |||||||
2013 | 2012 | ||||||
Affiliate | Unaudited | ||||||
Operadora de Centros de Espectáculos, S. A. de C. V. | Ps | 123,494,980 | Ps | 186,256,883 | |||
Solo Ele-Mentum, S. A. de C. V. | 36,209,674 | 38,004,393 | |||||
Administradora Mexicana del Hipódromo, S. A. de C. V. | 476,509 | 479,751 | |||||
Televisa, S. A. de C. V. | 361,965 | 228,134 | |||||
Servicios Corporativos CIE, S. A. de C. V. | 335,983 | 203,219 | |||||
Ocesa Promotora, S. A. de C. V. | 321,177 | 95,706,331 | |||||
Futbol del Distrito Federal, S. A. de C. V. | 274,726 | 812,185 | |||||
Servicios Compartidos de Alta Dirección, S. A. de C. V. | 108,770 | — | |||||
Unimarket, S. A. de C. V. | 105,014 | — | |||||
Others | 124,984 | 139,042 | |||||
Ps | 161,813,782 | Ps | 321,829,938 |
December 31, | |||||||
Accounts payable: | |||||||
2013 | 2012 | ||||||
Affiliate | Unaudited | ||||||
Make Pro, S. A. de C. V. 1 | Ps | — | Ps | 2,239,738 | |||
Servicios Administrativos del Entretenimiento, S. A. de C. V. | 14,168,015 | 1,947,241 | |||||
Needish México, S. A. de C. V. | 754,456 | 922,699 | |||||
TicketMaster LLC CA | 445,716 | 108,084 | |||||
Servicios Compartidos en Alta Dirección, S. A. de C. V. | — | 23,523 | |||||
CIE Servicios Profesionales, S. A. de C. V. | — | 1,264 | |||||
Others | 4,920 | — | |||||
Ps | 15,373,107 | Ps | 5,242,549 |
(1) | Represents redeem outstanding tickets |
Income from affiliated companies for: | 2013 | 2012 | |||||
Unaudited | |||||||
Commissions and charges from ticket sales | Ps | 44,701,324 | Ps | 38,561,577 | |||
Sponsorship income | 24,040,630 | 46,115,108 | |||||
Equipment leasing | 1,045,966 | 1,192,281 | |||||
Interest | 24,571,823 | 20,794,221 | |||||
Other income | 449,471 | 477,697 | |||||
Costs and expenses with affiliated companies for: | |||||||
Personnel, administrative and security services | (Ps | 81,481,390) | (Ps | 63,550,312) | |||
Corporate fees | (6,995,765 | ) | (7,011,551 | ) | |||
Lease of properties | (9,420,446 | ) | (9,095,728 | ) | |||
Advertising commissions | (4,878,378 | ) | (2,524,699 | ) | |||
Other expenses | (2,807,228 | ) | (2,072,759 | ) | |||
Network services | — | (600,638 | ) | ||||
Stockholders cost: | |||||||
Royalties | (3,184,687 | ) | (3,318,462 | ) | |||
Other | (3,358,465 | ) | (5,043,526 | ) |
Annual | |||||||||
December 31, | depreciation | ||||||||
or amortization | |||||||||
2013 | 2012 | rate (%) | |||||||
Unaudited | |||||||||
Computer and peripheral equipment | Ps | 147,591,720 | Ps | 138,507,208 | 30 | ||||
Telephone equipment | 10,970,794 | 10,970,794 | 10 | ||||||
Furniture and equipment | 12,997,240 | 10,447,002 | 10 | ||||||
Radio and communication equipment | 742,515 | 742,515 | 10 | ||||||
Transportation equipment | 3,265,307 | 3,131,898 | 25 | ||||||
175,567,576 | 163,799,417 | ||||||||
Accumulated depreciation and amortization | (140,171,553 | ) | (127,622,491 | ) | |||||
Ps | 35,396,023 | Ps | 36,176,926 |
Intangible assets | 2013 | 2012 | |||||
Unaudited | |||||||
Access to property ticket sales (stadium March 3, concerts, bullring and others | Ps | 38,646,426 | Ps | 28,950,126 | |||
Software EDB-Ticket | 6,715,900 | 6,715,900 | |||||
Amortization | (16,994,773 | ) | (7,005,078 | ) | |||
Subtotal | 28,367,553 | 28,660,948 | |||||
E-Ticket Brand | 1,900,100 | 1,900,100 | |||||
Non-compete agreement - ETK boletos 1 | 5,600,000 | 5,600,000 | |||||
35,867,653 | 36,161,048 | ||||||
Other assets | 14,252,868 | 15,131,886 | |||||
Intangible assets | Ps | 50,120,521 | Ps | 51,292,934 |
(1) | The Agreement non-compete agreement with ETK - Tickets will be valid for as long as required to maintain the quality as any shareholders and / or employees of ETK-Tickets for an additional 5 years from the date they have lost both grades for any cause, with the understanding that shall be computed individually for each bound. |
2013 | 2012 | ||||||
Unaudited | |||||||
Beginning balance | Ps | 19,613,233 | Ps | 23,952,990 | |||
Increases | 23,178,581 | 19,573,340 | |||||
Applications | (17,207,291 | ) | (23,085,870 | ) | |||
Cancellations | (2,405,942 | ) | (827,227 | ) | |||
Ending balance | Ps | 23,178,581 | Ps | 19,613,233 |
Number of | |||||||
shares | Description | Amount | |||||
17,975 | “A” shares, serial representing the minimum fixed | ||||||
capital stock, without the right to withdrawal | Ps | 17,975 | |||||
32,025 | “B” shares, serial representing the minimum fixed | ||||||
capital stock, without the right to withdrawal | 32,025 | ||||||
50,000 | Subtotal | 50,000 | |||||
10,529,241 | “A” shares, serial representing the variable portion | ||||||
of capital stock, with an unlimited maximum | 10,529,241 | ||||||
4,095,148 | Serial “A-1” share, serial representing the variable | ||||||
portion of capital stock, with an unlimited maximum | 4,095,148 | ||||||
7,179,886 | “B” shares, serial representing the variable portion | ||||||
of capital stock, with an unlimited maximum | 7,179,886 | ||||||
21,854,275 | Capital stock | Ps | 21,854,275 |
Revenue: | 2013 | 2012 | |||||
Unaudited | |||||||
Internal charges | Ps | 475,660,149 | Ps | 420,907,764 | |||
Credit card recovery | 76,768,584 | 63,925,550 | |||||
Entertainment guide | 58,098,889 | 104,421,860 | |||||
Advertising | 31,779,756 | 48,673,663 | |||||
Others | 25,997,094 | 9,729,072 | |||||
Services imports | 6,673,028 | — | |||||
Ps | 674,977,500 | Ps | 647,657,909 |
Costs: | 2013 | 2012 | ||||||
Unaudited | ||||||||
Commissions | (Ps | 99,026,297) | (Ps | 89,767,670) | ||||
Entertainment guide | (24,831,235 | ) | (38,468,155 | ) | ||||
Administrative services | (9,824,573 | ) | (11,877,803 | ) | ||||
Computing | (8,738,649 | ) | (9,567,919 | ) | ||||
Tickets | (11,256,987 | ) | (9,477,623 | ) | ||||
Other costs | (13,856,584 | ) | (12,918,288 | ) | ||||
Advertising | (1,946,142 | ) | (7,673,666 | ) | ||||
Non-capital assets | (6,254,009 | ) | (6,991,675 | ) | ||||
Professional services | (2,727,745 | ) | (4,260,955 | ) | ||||
Royalties | (3,188,521 | ) | (3,322,462 | ) | ||||
Lease | (1,758,555 | ) | (2,224,092 | ) | ||||
Maintenance | (846,404 | ) | (1,622,306 | ) | ||||
Production | (7,415,151) | (402,360) | ||||||
(191,670,852 | ) | (198,574,974 | ) | |||||
Amortization | (8,825,892) | (4,610,859 | ) | |||||
(Ps | 200,496,744) | (Ps | 203,185,833) | |||||
Expenses: | ||||||||
Administrative services | (Ps | 76,119,895) | (Ps | 55,945,736) | ||||
Lease | (10,713,477 | ) | (10,661,315 | ) | ||||
Others expenses | (13,102,308 | ) | (9,821,966 | ) | ||||
Corporative share | (6,363,209 | ) | (6,561,550 | ) | ||||
Computing | (18,401) | (732,780 | ) | |||||
(106,317,290 | ) | (83,723,347 | ) | |||||
Depreciation and amortization 1 | (16,937,069) | (13,620,259) | ||||||
(Ps | 123,254,359) | (Ps | 97,343,606) |
a. | New income tax law (new ITL) |
i. | Amendment mechanics to accumulate the income from alienation forward and generalizes the method to determine the gain on disposal of shares. |
ii. | Provides the mechanism to determine the opening balance of the capital account of contributions (CUCA by its Spanish acronym) and CUFIN and establishes a new mechanism for recovery Tax Assets (TA). |
iii. | Establishes an income tax rate for 2014 and the following years of 30%, in contrast to previous ITL establishing a rate of 30%, 29%, and 28% for 2013, 2014 and 2015, respectively. |
Year ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
Unaudited | ||||||||
Income before income tax provisions | Ps | 379,831,006 | Ps | 375,891,634 | ||||
Statutory income tax rate | 30 | % | 30 | % | ||||
Income tax at statutory rate | 113,949,301 | 112,767,490 | ||||||
Plus (less) effect of the income tax on: | ||||||||
Inflation | (2,737,567 | ) | (3,392,111 | ) | ||||
Nondeductible expenses or (taxable income) | 1,080,281 | 1,572,046 | ||||||
Other items | 168,430 | (2,225,749) | ||||||
Maximum charge to income for income tax | Ps | 112,460,445 | Ps | 108,721,676 | ||||
Effective income tax rate | 30 | % | 29 | % |
December 31, | ||||||||
2013 | 2012 | |||||||
Unaudited | ||||||||
Costs of future events | (Ps | 10,768,527) | (Ps | 10,790,570) | ||||
Expenses to amortize | (19,520,034 | ) | (17,052,821 | ) | ||||
Furniture and equipment | 2,259,235 | 2,249,904 | ||||||
Revenue of future events - Net | 2,999,863 | 2,999,863 | ||||||
Liability provisions and estimations | 23,178,581 | 19,613,233 | ||||||
Allowance for doubtful accounts | 1,908,369 | 697,680 | ||||||
57,487 | (2,282,711 | ) | ||||||
Income tax rate | 30 | % | 30 | % | ||||
Deferred income tax asset (liability) | Ps | 17,246 | (Ps | 684,813) |
b. | Flat tax |
i. | Flat Tax of the 2013 and 2012 is calculated at the 17.5% rate on the profit determined with base on the cash flows, such net income represents the difference between the total income collected by taxable activities, less the authorized tax deductions. In addition, it is also allowed to reduce this amount with the Flat tax credits, based on the procedures established in the effective law and the rate change effect of temporary differences has been recognized in previous periods. |
ii. | According with the effective tax law, the Company must pay annually the higher tax between Income tax and Flat tax. |
a. | Offices: BVC signed an agreement with OCESA, an affiliated company for the use of office space, and for providing certain cleaning and security services at said spaces located within the premises of the “Palacio de los Deportes” in Mexico City. This agreement grants the company use of the facilities it uses as office space and its call center in this city. The company pays to OCESA a monthly fixed fee. In addition, VBC has signed a lease agreement with an individual, involving a building located in the city of Guadalajara, Jalisco, to house its offices in that city. VBC pays a fixed fee for this building lease which annually increases based on the NCPI. |
b. | “Offices: Servicios Especializados para la Venta Automática de Boletos, S. A. de C. V. (SEVAB) has signed agreements with OCESA, an affiliated company, for the use of space and to the provision of certain cleaning and security services in these areas located inside the Palacio de los Deportes, Mexico City. This agreement gives SEVAB use of facilities used to their offices. OCESA SEVAB paid monthly to a fixed amount”. |
c. | As part of its daily business activities, VBC and ETK boletos are engaged in the distribution and sale of tickets to certain artistic events to be conducted in the immediately following year. In this regard, certain amounts are received from third parties for the purchase of tickets to said events. The Company holds these amounts in cash, so that if the events in question are not held, the amounts should be returned in accordance with the applicable legal provisions. At December 31, 2013 and 2012, cash and cash equivalents included deposits totaling, received from said third parties for the eventual acquisition of tickets Ps 203,213,308 and 313,692,752 respectively. |
d. | Ticketmaster Brand Name and System. BVC entered into license agreements (expiring on March 31, 2015) with Ticketmaster Corporation for use of the TicketMaster brand names and system, paying a fixed royalty fee denominated in dollars. |
a. | Under the provisions of the Income Tax Law, parties carrying out operations with related parties, either resident in Mexico or abroad, are subject to tax limitations and obligations as the determination of transfer prices concerns, which must be similar to those agreed with unrelated parties in comparable transactions. |
b. | On May 14, 2012, VBC filed a request at the Zapopan Municipal Treasury for confirmation that it is not subject to payment of the Tax on Public Entertainment regulated by the Municipal Treasury Law for the State of Jalisco, and therefore, that articles 13 (section I) and 50 of the Zapopan Jalisco Revenue Law do not apply to it with respect to fiscal year 2012, as well as article 131 Bis-A of the Municipal Treasury Law for the State of Jalisco, due to the fact that it is engaged in issuing tickets by electronic means, but not in exploitation of public entertainment events. Official communication dated July 5, 2012, issued by the Director of Revenue of the Zapopan Municipal Treasury, resolved that because they receive payment corresponding to the cost of tickets, companies handling electronic ticket sales (such as Venta de Boletos por Computadora, S. A. de C.V.) become jointly liable in terms of payment of the tax on public entertainment. The above official communication represented the first act, for Venta de Boletos por Computadora, S. A. de C. V., in terms of applying the provisions that regulate the Tax on Public Entertainment, due to which, on August 3, 2012, an appeal was filed for injunction against this law. On August 31, 2012, a motion was filed for stay of execution. Through an agreement dated September 5, 2012, the company was granted a temporary stay of execution. Through the September 26, 2012 resolution, the company was granted a definitive stay of execution to have the corresponding authorities abstain from collecting the Tax on Public Entertainment from the claimant, in accordance with articles 13 and 50 of the Revenue Law of the Municipality of Zapopan Jalisco. In addition, the precautionary measure is to take effect prior to depositing with the Municipal Treasury Department of the Municipality of Zapopan, Jalisco of the cash amount ultimately incurred by the company corresponding to the Tax on Public Entertainment, in accordance with articles 13 and 50 of the Revenue Law of the Municipality of Zapopan Jalisco, for fiscal year 2012, thus securing the tax debt. Through the sentence handed down on December 12, 2012, the District Judge determined to dismiss the injunction, considering that the company's juridical interest is not affected, until it is directly required to pay the tax. In light of the above, on December 28, 2012, an appeal was filed by the tax authorities against said court decision, and the matter was turned over to the Third Collegiate Court with file no 36/2013, which was in turn sent to the Ninth Collegiate Circuit Court of the Auxiliary Center of the First Region, located in Cuernavaca, Morelos, for resolution. The Ninth Collegiate Circuit Court of the Auxiliary Center for the First Region, located in Cuernavaca Morelos, handed down a sentence on May 3, 2013, confirming the judgment under appeal and therefore, dismissing the injunction, with which the matter is thus definitely concluded, with said resolution causing no damage to the company. |
c. | On July 24, 2012, the Procedures Department of the Mexican Better Business Bureau (PROFECO) issued a resolution, sanctioning VBC for an alleged violation of article 10 of the Consumer Protection Act, as it considers that marketing and sale of the service denominated “La Guia” consists of a an unfair practice for the consumer, imposing a Ps1,690,331 fine, in addition to obligating the company to stop marketing “La Guía” as it has so far. A motion for review was filed against said resolution, with a second resolution issued on October 25, 2012 by said Procedures Department, declaring the company's grievances unfounded. |
d. | In light of the above, on January 21, 2013, an action for annulment * was filed against the resolution that confirmed the sanction. The Eighth Regional Metropolitan Chamber of the Federal Tax and Administrative Court received the action for annulment, which is currently under analysis by the proper authorities. The Company's attorneys believe there is a high probability that the sanction imposed on the Company as a result of this procedure will be lifted. |
e. | On 22 June 2012 the Directorate of Advertising and Standards PROFECO to OCESA information required for his alleged role in the violation of various rules generated by the sale of tickets for public performances through the internet portal www.ticketbis.com.mx OCESA mx relief such request the July 6, 2012, stating that the probable cause of the offending behavior was the company Evandti, S. A. de C. V. for that reason is intended to be left to consider OCESA as likely responsible for the unlawful conduct and start a new legal process against the company Evandti, SA de C.V. In September 21, 2012 the company notified the request for information. Meanwhile OCESA and VBC facts filed complaints against PROFECO Evandti Company, S. A. de C. V. for violations of the Federal Consumer Protection, which are processed with the file number PFC.B.B.13/000065/2012, which could be accumulated with the file number PFC.B.B.13/000054/2011. In this procedure is intended to integrate more violations of the Federal Protection Consumer Law different from the violation of advertising rules. By official memorandum number SPS/DGP/0660/2013, dated on June 13, 2013, “PROFECO” determined the exclusion of OCESA respect to the procedure followed by the resale of tickets, noting that the procedure will continue only against Evandti, SA de C.V. |
f. | VBC and its subsidiaries are regularly called by the Federal Consumer when consumers of their services do not consider the conditions in which they are offered and complain to this office. Sometimes the administrative authority has brought some fines for alleged violations of administrative procedures to the law of matter, of which there are currently four process complaints in conciliation stage, twenty one cases are on the Federal Court of Fiscal and Administrative Justice and four lawsuits on other Federal courts, regarding several fines or penalties between Ps2,000 to Ps102,933 that they all together add up to approximately Ps400,000. At the date, the Company has not suffered any prejudice by these complaints and all similar processes has been release of the of the resolutions that have been imposed, so the opinion of advisors of VBC, is not a material contingency, and it is very unlikely that any of these amounts are payable, or where appropriate, that the above criteria that has never condemned VBC to pay amounts due to these causes are reversed. |
g. | VBC filed a request with the Mexican Industrial Property Institute (MIPI) for a declaration of the infractions committed by Wal-Mart de México, S. A. B. de C. V. (“Wal-Mart”), for improper use of the “La Guía de Entretenimiento” brand owned by VBC. In its counterclaim, Wal-Mart requested that VBC’s brand be declared invalid. The authorities declared VBC’s requested as well-grounded and determined that Wal-Mart had committed the infractions in question, and imposed a fine of 2,500 days minimum salary in effect in Federal District, and dismissed Wal-Mart’s request for VCB’s brand to be declared invalid. That decision was challenged by Walmart in the Federal Courte of Fiscal and Administrative Justice. On September 11, 2013, the Judges of the Federal Tax Court issued a favorable judgment to VBC recognizing the validity of the resolution issued by the Mexican Industrial Property Institute (MIPI), namely, the administrative declaration of infringement is confirmed regarding the “LA GUIA DE ENTRETENIMIENTO” brand, by the part of Walmart, is confirmed a fine of 2,500 days minimum salary, and it is confirmed that the “LA GUIA DE ENTRETENIMIENTO” brand is owned by VBC. |
h. | VBC requested that the infractions be declared against Wal-Mart, for improper use of the reservation of rights to the “La Guía de Entretenimiento” publication, in the following genres: Periodic publications, qualifying as a guide, to which Wal-Mart responded by filing a request for statement of administrative action for nullity of VBC’s reservation of rights. The National Copyrights Institute (“INDAUTOR”) ruled in favor of VBC and dismissed Wal-Mart’s counterclaim. This resolution was |
i. | On November 22, 2010, VBC contested the April 19, 2010 resolution, whereby INDAUTOR dismissed the action for renewal of the reservation of rights for exclusive use of the “La Guía de Entretenimiento” Title, in the magazine genre, against which VBC filed an appeal at the Federal Tax Courts. This proceeding is currently in the pleadings phase. In the opinion of VBC’s advisors, the authorities may possibly demand that INDAUTOR renew said registration. However, as a preventive measure, VBC has obtained a new registration for said publications, which is currently in effect. |
j. | On October 1, 2012, an action for annulment was brought to the Chamber specialized in intellectual property matters of the Federal Tax and Administrative Court against the resolution issued by coordinating office C for trademark examination regarding rejection of hallmark Laguíatm.tv, requested by VBC. On April 30, 2013, the Tax Courts handed down a sentence, ordering the IMPI to issue Title of the brand. Dissatisfied with said resolution, Teléfonos de México, S. A. B. DE C. V. filed for constitutional protection of civil rights known as an “amparo” against granting of the Laguíatm.tv trademark, arguing that it is mistaken for its TL trademark. VBC answered the amparo and presented arguments in the corresponding trial. No sentence has yet been issued in this regard. In the opinion of our advisors, it is possible the authorities will confirm the sentence and grant VBC the Laguíatm.tv hallmark. |
k. | ETK Boletos, S.A. de C.V. contested the rejection statements of the following brands in process: 1298297, 01 800 E TICKET, in class 9, No. 1272799, E-TICKET, in class 42 and No. 1276202, E TICKET TU ACCESODIRECTO Y DISEÑO, in class 9, as well as commercial notice No. 75946, E TICKET TU ACCESO DIRECTO, in class 9 at the Regional Chamber for Intellectual Property Matters, which are still to be admitted. |
l. | VBC filed an appeal against rejection of the TRAVEL TICKET brand, in process No.1303262, in class 39 at the Regional Chamber for Intellectual Property Matters. The appeal has yet to be admitted. |
m. | The Legal Representative of Trébol Beat filed a lawsuit against the promoter of the September 22, 2011 LADYTRON show at Six Flags. Although the tickets to said event were sold through the Ticket, aster system, the Public Prosecutor’s Office had VBC provide the sales report for the event, which was duly submitted. VBC's external advisors consider there is a high probability that it will be held harmless from any responsibility related to this incident. |
n. | VBC and its subsidiaries regularly contracts the services of specialists in areas such as security, cleaning, access control, production, mounting, assembling and other similar services required to conduct its business activities and held multiple contracts with third parties undertake to develop |
o. | According to the agreements of the shareholders of the Corporacion Interamericana de Entretenimiento, S. A. B. de C. V. (“CIE”), is responsible for dealing with, any contingency that is filed against the Company and its subsidiaries which has arisen from acts prior to October 18, 2012, forcing CIE to defend, indemnity and if take out harmless the Company(including the obligation to pay any amount that has to be done is payable by a penalty), so the Company has no record of such procedures, substance directly to CIE by the agreement. |
I. | Differences in measurement methods |
a. | Inflation as from December 31, 2007, inflation accounting was discontinued. The following reconciliation does not include the reversal of the adjustments to the consolidated financial statements for the effects of inflation, because, as permitted by the SEC, it 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 MFRS and U.S. GAAP. |
b. | The company provides financing to related parties and interest is determined by using the nominal interest rate as required by MFRS. In accordance with ASC 470 “Debt” the borrower's periodic interest cost shall be determined by using the effective interest method based on the estimated outstanding term of the debt. The effective interest rate used for calculating amortization under the effective interest method generally discounts contractual cash flows through the contractual life of the instrument and amortized over the contractual or expected life. |
II. | Additional accounting policies |
a. | Consolidation |
b. | Accounts receivables for ticket sales |
c. | Furniture and Equipment - Impairment |
d. | Intangibles |
i. | Definite-lived: are those which expected future economic benefits is limited by any legal or economic condition and are amortized on a straight line basis, based on the best estimate of their useful life and are subject to annual impairment testing when impairment indicators are identified. |
ii. | Indefinite-lived assets are not amortized but are subject to annual impairment assessment. Depending on facts and circumstances, qualitative factors may first be assessed to determine whether the existence of events and circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. If it is concluded that it is more likely than not impaired, then the Company performs a quantitative impairment test by comparing the fair value with the carrying amount. |
a. | Revenue from future events |
b. | Revenue from commissions on ticket sales |
c. | Revenue recognition for services |
a. | Fair Value Measurements Disclosures |
b. | Certain relationships and related-party transactions |
c. | Intangible and other assets: |
Definite-lived Intangible assets | 2013 | 2012 | |||||
Unaudited | |||||||
Ticketing contracts - Gross | Ps | 38,646,426 | Ps | 28,950,126 | |||
Accumulated amortization | (15,765,370 | ) | (7,005,078 | ) | |||
Software EDB-Ticket - Gross | 6,715,900 | 6,715,900 | |||||
Accumulated amortization | (1,229,403) | ||||||
Subtotal | 28,367,553 | 28,660,948 | |||||
Indefinite-lived Intangible assets | |||||||
E-Ticket Brand | 1,900,100 | 1,900,100 | |||||
Non-compete agreement - ETK boletos 1 | 5,600,000 | 5,600,000 | |||||
Total Intangible assets | 35,867,653 | 36,161,048 | |||||
Lease hold improvements - Gross | 38,305,617 | 38,327,483 | |||||
Accumulated amortization | (24,052,749 | ) | (23,195,597 | ) | |||
Total | Ps | 50,120,521 | Ps | 51,292,934 |
weighted- | |||
average | |||
lives (years) | |||
2013 | 2012 | ||
Unaudited | |||
Revenue generating contracts | 3 | 7 |
Amortization | |||
2014 | Ps. | 6,205,459 | |
2015 | 5,427,525 | ||
2016 | 3,461,406 | ||
2017 | 2,950,000 | ||
2018 | 2,053,333 |
d. | Revenue analysis |
December 31, | |||||||
2013 | 2012 | ||||||
Unaudited | |||||||
Gross Revenue under MFRS | |||||||
Gross Revenue as reported | Ps | 674,977,500 | Ps | 647,657,909 | |||
Reclassification to Net revenue | (76,758,584 | ) | (63,925,550 | ) | |||
Gross Revenue U.S. GAAP | 598,218,916 | 583,732,359 | |||||
Net Revenue U.S. GAAP | 14,247,851 | 575,081 | |||||
Total Revenue | Ps | 612,466,767 | Ps | 584,307,440 |
e. | Income tax |
2013 | 2012 | ||||||
Unaudited | |||||||
Deferred taxes included within: | |||||||
Assets: | |||||||
Furniture and equipment | Ps | 677,771 | Ps | 674,971 | |||
Deferred revenue | 899,959 | 899,959 | |||||
Accruals | 6,953,574 | 5,883,970 | |||||
Allowance for doubtful accounts | 572,511 | 209,304 | |||||
Total deferred tax assets | 9,103,815 | 7,668,204 | |||||
Liabilities: | |||||||
Cost of future events | (3,230,559 | ) | (3,237,171 | ) | |||
Intangible and other assets | (5,856,010 | (5,115,846 | ) | ||||
Total deferred liabilities | (9,086,569 | ) | (8,353,017 | ) | |||
Net deferred income taxes | Ps | 17,246 | (Ps | 684,813) |
f. | Commitments and contingent liabilities |
Non-cancelable | |||
Operating Leases | |||
2014 | Ps | 9,794,815 | |
2015 | 10,140,572 | ||
2016 | 10,493,463 | ||
2017 | 10,869,129 | ||
2018 | 11,258,244 | ||
Total | Ps | 52,556,223 | |
g. | New authoritative pronouncements |