our values
Honesty
Loyalty
Respect
Responsibility
Trust
Education
Quality and Service
Teamwork
Resources Optimization
Innovation and Creativity
gmodelo.com
actions results
2001 Annual Report
2001 An
nual repo
rt Gru
po
Mo
delo
m080_FRONT Cov_ENG 5/22/02 9:32 PM Page 1
Global Reports LLC
Grupo Modelo, founded in 1925, is the leader in the production and marketing
of beer in Mexico with 61.7% of the total (domestic and export) market
share, as of December 31st, 2001. It has eight brewing plants in the country, with
a total annual installed capacity of 46.0 million hectoliters. Currently, it brews and
distributes ten brands; Corona Extra, the number one Mexican beer sold in the
world, Modelo Especial, Victoria, Pacífico, Negra Modelo and other regional
brands. It exports five brands with presence in more than 150 countries and is the
exclusive importer of Anheuser-Busch’s products in Mexico, including the brands
Budweiser and Bud Light. Grupo Modelo trades in the Mexican Stock Exchange
since 1994 with the ticker symbol gmodeloc.
contents
Financial highlights
Letter to the shareholders
Sales
Advertising
Information technologies
Operations
The Modelo total quality
system
Board of Directors
Corporate structure
Financial summaries
Management discussion
& analysis
Financial information
Glossary
1
2
6
14
17
18
22
24
25
26
30
33
57
mission statement
Produce, distribute and sell quality beer:
• With excellent service
• At a competitive price
• Optimizing resources
• Surpassing customer expectations
• With the collaboration of employees, suppliers and
distributors, contributing to their economic, cultural and
social development
• Improving the profitability of the business
• Protecting the natural resources and
• Cooperating with the progress of the community
and the country
Investor relations
José Parés GutiérrezCommunications and
Investor Relations Director
Campos Elíseos 400 18th FloorColonia Lomas de Chapultepec
c.p. 11000, Mexico CityTel. (5255) 5283 3600Fax (5255) 5280 6718
glossary
Biogas. Gas produced during the transformation of organic
matter present in wastewater, in absence of oxygen. Its main
components are methane and is used as alternate fuel in
steam generators.
Anaerobic bio-degradation. Transformation of organic
matter present in wastewater, using microorganisms capable
of developing themselves in an oxygen depleted environment.
Fossil fuels. A natural resource with finite characteristics,
used for power generation.
Fuel oil. A derivative from petroleum refinery which is used
to produce power in steam boilers and generators.
Malt plant. Plant where under controlled procedures,
cleaned barely is transformed into malt through the steeping,
germination and kilning processes.
Brew house. Building where different equipment converts raw
materials used in the brewing process into a liquid known as wort.
Unitank. A cylindrical tank with a conical bottom where wort
is first fermented and afterwards aged.
Installed capacity. The theorical total annual capacity that a
plant can produce with its present infraestructure.
Hectoliter. Measure used in the Brewing Industry equivalent
to 100 liters.
Des
ign
: m
ilen
io3.
com
.mx
P
rin
tin
g:C
ham
pag
ne
Fin
e Pr
inti
ng
Printed on recycled paper
m080_BACK Cov_ENG 5/22/02 9:22 PM Page 1
Global Reports LLC
financial highlightsGrupo Modelo S.A. de C.V. and Subsidiaries.
Figures in millions of constant Mexican pesos as of December 31, 2001 except shipments of beer, per share data and employees.
Shipments of Beer -Million hectoliters-
Domestic Market 28.45 28.02 1.5
Export Market 9.99 8.55 16.8
Total Market 38.44 36.57 5.1
Net Sales 32,169 30,620 5.1
Operating Income 7,854 7,956 -1.3
EBITDA 9,272 9,152 1.3
Net Majority Income 3,623 3,405 6.4
Funds Provided by Operating Activities 6,359 6,627 -4.0
Capital Expenditures 3,100 3,564 -13.0
Depreciation and Amortization 1,642 1,495 9.8
Financial Situation as of December 31
Total Assets 51,778 47,296 9.5
Total Liabilities 10,525 10,393 1.3
Majority Stockholders' Equity 30,804 27,631 11.5
Outstanding Shares at Year End (million)
Common Shares 3,252 3,252 0.0
Book Value per Share 9.47 8.50 11.4
Earnings per Share 1.11 1.05 6.4
Dividend per Common Share 0.12 0.23 -47.4
Closing Stock Price 20.51 25.40 -19.3
Return on Equity 11.76% 12.32%
Number of Employees and Workers 48,445 46,890 3.3
Year ended December 2001 2000 change %
Grupo Modelo 1 2001 Annual Report
m080_Nar Eng.r1 5/22/02 9:35 PM Page 1
Global Reports LLC
Grupo Modelo 2 2001 Annual Report
On behalf of the Board of Directors, we are pleased to report
our results for 2001.
Grupo Modelo consolidated its position as leader in the
Mexican brewing industry during 2001, we did so in a year of
economic slowdown, which impacted economies in many
countries where our products are sold, including Mexico. The
solid financial position, the quality of our products and
services, as well as the commitment of our personnel, have
been the solid corporate practices that allowed us to move for-
ward.
Net sales reached $32,169 million pesos, and the total
volume of beer sales grew 5.1%, to 38.4 million hectoliters,
which was achieved as a result of domestic and export sales
increases of 1.5% and 16.9%, respectively.
The Company’s beer volume for the domestic market was
28.4 million hectoliters. This allowed us to increase market
share to 56.4%, strengthening Grupo Modelo’s leadership in
Mexico. During the year we launched the new 12 oz
aluminum can presentation of Pacífico regional beer,
available in the Northwest of Mexico. Also, the image of this
brand was reinforced through the development of new
packaging and presentations.
Regarding advertising, the Company increased its efforts to
strengthen the presence of its products in the market. For
that reason, 24 new ad campaigns were launched for our
national and regional brands.
letter to the shareholders
Dear Shareholders:
Antonino Fernández RodríguezChairman of the Board
Carlos Fernández GonzálezCEO
m080_Nar Eng.r1 5/22/02 9:35 PM Page 2
Global Reports LLC
21.5
%78
.5%
Grupo Modelo 3 2001 Annual Report
For 2001, exports represented 26.0% of the total volume, a
2.6 points increase relative to last year’s mix. United States
and Canada remain the largest markets abroad, where
Corona Extra continues being the leading brand in the
import segment. Another important result for Grupo Modelo
in 2001, is that two of its brands are among the top ten
imported beers in the US market, after Modelo Especial
climbed to tenth place.
Cervezas Internacionales, that distributes exclusively
Anheuser-Busch products in Mexico, has done an excellent
job with Budweiser, Bud Light and O’Doul’s, growing 22.6%
in volume during the year. These brands are sold mainly in
resorts and border regions of our country.
Operating income reached $7,854 million pesos, represen-
ting a 24.4% operating margin, one of the industry’s high-
est worldwide.
Investments for acquiring minority interest during the year
contributed to the 6.4% growth in majority net income,
which was $3,623 million pesos, or a $1.11 per share. On
the other hand, the net margin, expanded 20 base points,
reaching an 11.3% over net sales.
Our convenience stores, “Extra”, raised their sales in 64.5%,
and the store format reconversion project was fully completed.
Investments in fixed assets during 2001 were $3,100 million
pesos, mainly for expansion and modernization projects in
all areas of the Company.
During early June, the expansion of the third phase of
Compañía Cervecera de Zacatecas was completed, becoming
the largest brewery in Latin America. This brewery, which
started operations in 1997, increased its annual capacity from
10.0 to 15.0 million hectoliters, creating over 3,500 direct
The operating margin
reached 24.4%, one of
the highest in the
brewing industry
worldwide.
2001
2000
1999
1998
1997
Net Sales(Millions of constant Mexican pesosas of December 31, 2001)
Domestic Exports
23.3
%
22.6
%
24.0
%
24.1
%
76.7
%
77.4
%
76.0
%
75.9
%
$32,
169
$30,
621
$27,
957
$26,
347
$23,
525
m080_Nar Eng.r1 5/22/02 9:35 PM Page 3
Global Reports LLC
9.1%
Grupo Modelo 4 2001 Annual Report
jobs for the region. This expansion makes Grupo Modelo’s
annual installed capacity increase to 46.0 million hectoliters.
Our capacity utilization reached 88.4%, allowing us to meet
our production, maintenance and reconversion programs.
Grupo Modelo acquired all the shares of Envatap, S.A. de
C.V., Tapas Metálicas, S.A. de C.V., Tapas y Tapones de
Zacatecas, S.A. de C.V., Envases de Zacatecas, S.A. de C.V.
and Promotora de Servicios de Zacatecas, S.A. de C.V., to
ensure the quality and supply of aluminum cans, as well as
the crown caps for glass bottle presentation. These
acquisitions strengthen our supply-chain, guaranteeing the
supply, quality and price.
During April, Grupo Modelo paid dividends of $401 million
pesos, corresponding to $0.12 pesos per share, and repre-
senting 11.8% of the Net Majority Profits as of 2000.
Grupo Modelo is well known for its commitment with its
personnel. This year we continued contributing to intellectu-
al development through training programs, achieving 25
hours average per employee. These efforts increase the
knowledge and skills necessary in jobs where technological
changes demand constant training.
During the recent years, we have invested in ecology to meet
one of the social responsibilities of Grupo Modelo. Even
though in the short-term these investments do not create
financial benefits, they contribute to the protection of the
environment, benefiting the current and further generations.
According to the Competitive Management Model that
Grupo Modelo has promoted, in order to enhance firm
development of the Company towards the future. We
should point out, among others, the efforts towards
preserving and protecting the environment. Our Company
has started an aggressive policy of actions and results,
focused on the conservation of the country’s natural
resources. Following this guideline, our environmental man-
agement system for the breweries and service companies
complied with the ISO 14001 international standard
certificate, for pollution prevention and continuous improve-
ment. The importance of this effort is demonstrated through
the certification of seven of our breweries and four service
companies. Also, we voluntarily adhered to the “Clean
Industry” program, promoted by Mexico’s environmental
authorities (SEMARNAT), where as of now, 11 strategic
business units have been certified.
Within the activities for promoting reforestation and
ecological recovery, it is important to highlight the efforts
done by the Company at the “Iztaccihuatl – Popocateptl
National Park”, located southeast of Mexico City. This
2001
2000
1999
1998
1997
Capital Structure(Millions of constant Mexican pesosas of December 31, 2001)
Stockholders’ Equity Total Liabilities
20.3
%
22.0
%
9.3%
9.9%
79.7
%
78.0
%90.9
%
90.7
%
90.1
%
$51,
778
$47,
296
$44,
622
$40,
599
$38,
805
m080_Nar Eng.r1 5/22/02 9:35 PM Page 4
Global Reports LLC
Grupo Modelo 5 2001 Annual Report
project offsets the negative effects of illegal deforestation,
allowing greater water infiltration to the underground.
Also, in Zacatecas, we started the Modelo Environmental
Management Unit, allowing the protection and reproduc-
tion of different wildlife species, according to Wildlife Units
Conservation, Management and Sustainable Use Systems
promoted by SEMARNAT.
These are only some of the actions that Grupo Modelo has
implemented in compliance with its corporate responsibility
that has distinguished the Company throughout the years.
The community has also been a recipient of our efforts
through Filantropía Modelo, whose contributions are geared
towards education, social programs, environmental issues,
health as well as culture and arts.
Dear shareholders, the results of the actions taken during the
year in Grupo Modelo are as a consequence of the dedication
and hard work of our people. On this special occasion, we
would like to give them an special acknowledgement.
Both, new and ongoing projects for this year will provide
the strength and capability to continue being a Company
of concrete actions and excellent results.
Sincerely,
Antonino Fernández RodríguezChairman of the board
Carlos Fernández GonzálezCEO
Mexico City, April, 2002
m080_Nar Eng.r1 5/22/02 9:35 PM Page 5
Global Reports LLC
Grupo Modelo 6 2001 Annual Report
SalesIn 2001, Grupo Modelo’s total shipments of beer set a new record, reaching 38.4
million hectoliters, of which 28.4 million were for the domestic market, and 10.0
million were exports. The total beer sales posted a 5.1% increase, ahead of the
average of 3.4% of the Mexican brewing industry.
Grupo Modelo achieved an increase in total market share, reaching 61.7%.
For the year, the domestic volume grew 1.5% as compared to 2000. With this
growth, the domestic market share increased by 30 basis points, consolidating the
leadership of Grupo Modelo, getting a 56.4% of the domestic market. These
positive results reflect the consistency of the marketing strategies and the sales
efforts carried out by the Company and its personnel.
Despite of Mexico’s economic slowdown during the second half of the year, Grupo
Modelo’s volume grew in the three regions of the country, producing a favorable
performance of all the brands.
Exports maintained their positive trend, growing 16.9% relative to the previous
year and achieving an 84.4% share of the total Mexican beer exports.
Control air emissions in the
combustion equipment used
for steam generation.
action
Total Market Share
61.7
%
57.1
%
51.7
%
47.0
%
38.2
%
2001
1996
1991
1986
1977
m080_Nar Eng.r1 5/22/02 9:35 PM Page 6
Global Reports LLC
Grupo Modelo 7 2001 Annual Report
Mexico
The domestic market showed positive results, amidst the difficult economy that
tested the Company’s capability. The market share increase was possible mainly due
to the hard work of the sales force to provide better service to each and every
customer, together with a series of marketing strategies implemented during the
year, and that are expected to be successful also in the future.
The one liter and 11 oz presentations maintained a good performance. Nevertheless,
aluminum cans suffered a downturn, reflecting the economic situation, and the
consumers switch to the returnable presentations.
The Company’s strong distribution network in Mexico allows a direct contact with
the market, enabling better information and servicing, thus strengthening the
Group’s leadership in the more than 200 thousand point-of-sales served by Grupo
Modelo. The 446 agencies and sub-agencies distributed 82% of the total volume.
The off-premise represented 79.6% of the domestic volume. Grupo Modelo’s
Modelo Brewery achieved a “Phase 1 – Ozone Environmental
Contingency Plan” exemption from the Mexico City
government, being the first company to be granted
such an exemption in the metropolitan area.
result
Cervecería Modelo, one step ahead in ecology.
Domestic Market Share
56.4
%
54.8
%
50.9
%
45.7
%
38.5
%
2001
1996
1991
1986
1977
m080_Nar Eng.r1 5/22/02 9:35 PM Page 7
Global Reports LLC
Grupo Modelo 8 2001 Annual Report
action
transportation fleet is now comprised of 11,568 vehicles,
distributed among tractors, trailers, trucks, pick-ups and other
units, 240 more units relative to 2000. The service and
assistance provided to the off-premise has been the key to
grow our sales in these points of sale.
United States and CanadaGrupo Modelo is steadily going global, by being present now
in more than 150 countries. The US and Canada remain the
major markets outside Mexico, representing over 90% of the
Company’s export volumes. These markets posted a 17%
growth, while the rest of countries grew 15%.
The Company importers for the US, Barton Beers and The
Gambrinus Company, have done an excellent job, raising
volumes in a particularly difficult year, where economic
slowdown and distributor consolidation posed an additional
challenge.
Communicate the benefits of caring forthe environment, within the personnelof the organization, contractors, guidedtours at the facilities, as well as inschools and at external events.
Export Brand Portfolio.
The imported beer segment in
the US market continues
growing.
m080_Nar Eng.r1 5/22/02 9:35 PM Page 8
Global Reports LLC
Grupo Modelo 9 2001 Annual Report
Approximately 100,000 people wereintegrated into the environmental awareness programs,whose area of influence encompasses environmentalconcerns outside of the organization.
Promotion of environmentalawareness throughguided tours.
Market share for the imported beer is growing in the United
States. During the last three years, imports had been gaining
one percentage point per year, while in 2001 they earned
almost 2 percentage points. These trends encourage working
even harder to increase and consolidate Modelo’s products
leadership in that market. Import beer already represents
11.8% of the total beer industry in the US.
Corona Extra remains the leader of the import segment with a
28.4% market share, its volume growth was 16.0%. This year
was also special because another brand brewed by Modelo,
placed among the top ten imported beers. Modelo Especial
became the number tenth after growing 26.5% in 2001.
result
u.s.a. Canada u.s.a.
m080_Nar Eng.r1 5/22/02 9:35 PM Page 9
Global Reports LLC
Grupo Modelo Brand Portfolio.
Grupo Modelo 10 2001 Annual Report
The aluminum can presentation of
Corona Extra for the US market
represented an excellent alternative to
penetrate channels where glass
presentation is not allowed, such as
stadiums, swimming pool bars,
marinas, hotel minibars, etc.
Corona Light, a brand produced
exclusively for the US market, continues gaining market
share and currently holds the eleventh position of the import
segment, growing 25.7% during the last year. This brand is
second place among imported light beers in the United States.
Our distributors have promoted all the brands of Grupo
Modelo’s export portfolio, with outstanding performances
posted by Pacífico and Negra Modelo, growing their volumes
in 18.4% and 21.9% respectively.
Corona Light grew
25.7% during 2001
in the U.S.
Contributing to the preservation andreproduction of wildlife species is anongoing commitment of Grupo Modelo.Thus, Zacatecas has been incorporatedin the Wildlife Units Conservation,Management and Sustainable UseSystem (uma).
action
m080_Nar Eng.r1 5/22/02 9:36 PM Page 10
Global Reports LLC
Grupo Modelo 11 2001 Annual Report
Canada represents the Company’s second most important
export market. The two importers are The Mark Anthony
Group and Molson Breweries Ltd., for distributing our
products in the western and eastern territories, respectively.
Corona continues being the best selling import in Canada.
As in the United States, the imported beer segment is
Top Imported Beer Brands in the U.S.A. (Thousand Cases of 24 (12 Fl. Oz.) Bottles)
Brand 1999 2000 2001E Change% Mkt. Share00-01E 2001E
1. Corona Extra 64,880 73,330 85,061 16.0% 28.4%
2. Heineken 47,025 53,500 57,250 7.0% 19.1%
3. Labatt Blue 12,525 14,130 15,825 12.0% 5.3%
4. Tecate 8,945 11,025 11,580 5.0% 3.9%
5. Guinness 9,580 10,080 10,480 4.0% 3.5%
10. Modelo Especial 4,310 5,260 6,656 26.5% 2.2%
11. Corona Light 3,735 4,630 5,820 25.7% 1.9%
15. Pacífico 1,775 2,800 3,314 18.4% 1.1%
23. Negra Modelo 1,350 1,485 1,810 21.9% 0.6%
Source: Impact DatabankE: Estimates
growing its market share, and during 2001 it held an 8.0%
share of the Canadian volume.
The growth in both countries reflects the consumers’
preference for the Modelo products.
During the first year of operations, the ModeloEnvironmental ManagementUnit (uma) achieved the birthof white tail deer, and rockymountain ram.
result
The UMA keeps more than twelve endangered species.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 11
Global Reports LLC
Grupo Modelo 12 2001 Annual Report
EuropeA determining factor for our success has been the regional
presence through the representation offices in Madrid and
Brussels. Corona has consolidated its leading position in the
import segment in more and more countries, such as
Belgium, France, Iceland, Norway and Turkey. Growth in
some of these nations reached 100%.
Asia and OceaniaThe Singapore representation office supports exports to Asia
and Oceania. Corona Extra is the import leader in Thailand
and Vietnam. Another important country because of its
growth has been China, where Corona is widely accepted in
tourist areas. Corona also is the leader for the Australian
bottled import segment.
Minimize solids in sanitary landfills
by generating economically viable
and environmentally friendly
alternatives to dispose of
by-products and waste.
action
Export Market Share
84.4
%
78.4
%
67.1
%
67.1
%
1.3%
2001
1996
1991
1986
1977
Independent distributors are
supported by the offices
around the world.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 12
Global Reports LLC
Grupo Modelo 13 2001 Annual Report
Top Selling Beer Brands Worldwide (Million Hectoliters)
SHIPMENTS CHANGE
Brand Brewing Company 1996 1997 1998 1999 2000 97-98 98-99 99-00
1. Budweiser Anheuser-Busch Inc. 49.2 49.9 48.2 46.9 46.7 -3.3% -2.7% -0.5%
2. Bud Light Anheuser-Busch Inc. 24.8 27.5 31.0 34.5 38.1 12.8% 11.4% 10.5%
3. Skol American Beverage Co. 12.9 19.4 22.1 23.6 28.9 13.9% 6.9% 22.4%
4. Asahi Super Dry Asahi Breweries Ltd. 18.5 21.7 23.5 24.3 24.5 8.1% 3.5% 1.0%
5. Corona Extra Grupo Modelo 17.5 19.5 20.8 22.4 24.1 6.6% 7.9% 7.3%
6. Heineken Heineken NV 18.0 18.8 19.4 20.4 21.6 3.1% 5.5% 5.7%
7. Coors Light Coors Brewing Co. 17.1 17.6 17.8 18.9 19.6 1.3% 5.9% 3.7%
8. Brahama Chopp American Beverage Co. 24.9 21.9 20.4 19.5 19.6 -7.0% -4.6% 0.6%
9. Miller Lite Miller Brewing Co. 18.8 19.1 18.7 18.8 18.9 -2.5% 0.6% 0.6%
10.Polar Cervecería Polar CA 13.7 15.3 15.0 14.8 15.0 -1.5% -1.6% 1.6%
Total 215.3 230.6 236.8 244.1 257.0 2.7% 3.1% 5.3%
Source: Impact Databank
Latin AmericaExports to these countries grew as a result of the excellent
efforts of importers and distributors, which, supported by
the representation offices located in Costa Rica and
Argentina, helped Corona Extra to maintain the leading
position for imports in the region. This was the case of Costa
Rica, El Salvador, Guatemala, Nicaragua, Jamaica, Dominican
Republic, Trinidad and Tobago, Turks & Caicos Islands,
Curazao, Venezuela, Bolivia, Colombia and Ecuador.
Because of on-going programs for reduction, recovery,
segregation, reuse, recycling and waste commercialization,
during the past year, Grupo Modelo
avoided disposal of 732,500 tons. of
by-products and recyclable materials.
result
Environmental culture is present all across the different areas of the organization.
Colombia Puerto Rico
m080_Nar Eng.r1 5/22/02 9:36 PM Page 13
Global Reports LLC
Grupo Modelo 14 2001 Annual Report
AdvertisingAccording to the Modelo brands’ selling strategies, different
ad campaigns were launched during 2001, targeted towards
renovating and making them accessible to current and
potential consumers.
All of the products’ images were reinforced throughout
Mexico by 24 new ad campaigns that contributed to a better
positioning of the portfolio. Because of their importance in the
total mix, Corona and Victoria were the most outstanding.
In the ads for Corona, the emphasis is on the international
presence and recognition that the brand has in the countries
where is sold. With Victoria, on the other hand, special
importance is placed on the regional nature of this brand,
thus making it the first option for an objective audience.
Committed with the promotion of sport activities in Mexico,
during 2001 several major events were sponsored, including
the “Pacifico International Marathon”, held in Mazatlán.
More than 4,600 runners, both Mexican and from 13 other
Preserving water by investments in recovery, treatment and reutilization systems, supported also with awarenesscampaigns for an efficient use of thisvital resource.
action
The new ad campaigns
renovated the brand image of
the portfolio.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 14
Global Reports LLC
Grupo Modelo 15 2001 Annual Report
countries, participated in the race. Also, for this third edition
of the competition, registration was up 50% relative to the
first race.
As for soccer, more than 10 thousand players, from 320
schools, participated in the 2001 Copa Corona Universitaria.
The 448 participant teams, men and women, played a total
of more than 3,000 matches.
The Santos Laguna team of the major professional soccer
league in Mexico was this year’s summer champion, and
reached semi-finals in the Merconorte Cup. FIFA named the
Santos Laguna club number 61 in the world, based on
results. Also, the Company continued sponsoring soccer
teams in different divisions of the sport.
In Mexico’s pro baseball leagues, Modelo sponsored the
following clubs: Leones de Yucatán, Los Rojos del Aguila de
Veracruz, Cafetaleros de Cordoba, Guerreros de Oaxaca,
Venados de Mazatlán, Yaquis de Cd. Obregón, and Cañeros
de los Mochis.
Water consumption has been reduced inapproximately 30% in the productionareas of the 8 breweries, in addition toother savings in the general areas of thecompanies.
result
Continuous investments inthe water treatment plants.
Commited with the promotion
of sport activities in Mexico.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 15
Global Reports LLC
Grupo Modelo 16 2001 Annual Report
actionUse the cleanest fuels, such as
natural gas, consistent with
Modelo’s commitment to pollution
prevention.
In motor sports, speedboats and race cars, Grupo Modelo
was present during 2001. The Corona team won second
place in the Nauticopa, while in Formula 3 racing, called the
Corona Cup, the Modelo sponsored team finished first.
Modelo maintained presence in concerts by national and
international well known artists. Also, Modelo sponsored
artistic and cultural activities to promote them around
the country.
Currently, there are Mexican suppliers for the development
of promotional items, allowing us to have a broader and
more selective portfolio of products.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 16
Global Reports LLC
Cervecería Modelo, Cervecería Modelo
de Guadalajara and Cervecería Modelo
de Torreón have eliminated the emission
of particles and sulfur dioxide in
combustion gases from equipment
used for steam generation.
result
TechnologyThe Company has focused on intensifying strategies to
strengthen its telecommunications infrastructure, implement
systems for greater administrative efficiency and e-business
strategies. Grupo Modelo, aware of the importance of an infra-
structure capable of warranting business continuity, set the
Business Recovery Plan in case of contingencies.
The Company network allows and expedite, secure and eco-
nomic way of communicating among the many business units.
Regarding e-business, work has continued on e-procurement
initiatives and strengthening the demand and production
management systems.
The demand and production management system provides
timely and effective information for a proper decision making
process. Having the latest technology available allows
maintaining updated systems that integrates and strengthens
the distribution chain.
The use of point-of-sale (POS) terminals has facilitated the
automation of processes consolidating information about
consumer preferences, and the objective needs of the public
across the nation, reinforcing the quality and service that have
distinguished Grupo Modelo.
State-of-the-art brewing house.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 17
Global Reports LLC
Grupo Modelo 18 2001 Annual Report
Voluntary participation in the “CleanIndustry” certification program, by whichthe Federal Government gives an awardin recognition for total compliance withMexican Environmental Regulations.
action
Certificate of “Clean Industry”.
OperationsThe third phase of Compañía Cervecera de Zacatecas was
completed in July, 2001, thus arriving to a 15.0 million
hectoliter annual installed capacity, and becoming the Group’s,
and all of Latin America’s, largest brewery plant. With this,
Grupo Modelo had a 46.0 million hectoliter annual installed
capacity as of year-end 2001.
The construction of a malt plant in Zacatecas brewing facility
is according to schedule. The initial capacity of this project will
be 50,000 annual tons of malt, and it can be expanded based
on market conditions and the Company’s requirements. This
project features state-of-the-art technology, provided by
Seeger Industrial, a Grupo Modelo subsidiary located in Spain.
High standards guarantee the quality of Grupo Modelo’s products.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 18
Global Reports LLC
Grupo Modelo 19 2001 Annual Report
Eleven strategic units, including the 8breweries, were granted the “CleanIndustry” certificate. Earning and maintaining this certificate providesassurance to government, communityand financial markets about our environmental responsibility.
result
The investments during the year amounted to $3,100
million pesos, allocating 23.0% in the Zacatecas project,
and 33.4% in Trópico.
By 2005, once all expansion projects are completed, Grupo
Modelo’s annual installed capacity will be at 60.0 million
hectoliters.
All the expansion projects are based on the analysis made by
Grupo Modelo, of the further demand in Mexico and abroad.
The year’s capacity utilization level was
88.4%, a figure that allows the necessary
flexibility for serving the markets as well
as procurement programs.
As part of the Company’s continuous
modernization programs, approximately
one quarter of capital expenditures
were allocated to update equipment,
facilities and working areas, at the other
6 breweries.
The expansions of the fourth phase of Zacatecas are in
progress, reaching a planned annual capacity of 20.0 million
hectoliters. The economies of scale achieved at this plant have
benefited the entire organization.
Also, the expansion of Compañía Cervecera del Trópico,
located in Tuxtepec, Oaxaca, continues as scheduled. This
plant has a 7.0 million hectoliter annual installed capacity,
which is projected to be more than double by 2005, reaching
16.0 million annual hectoliters.
Capital Expenditures
3,10
0
3,56
4
3,15
3
4,53
1
2,88
6
2001
2000
1999
1998
1997
Depreciation & Amortization
1,64
2
1,49
5
1,42
6
1,33
6
1,27
2
2001
2000
1999
1998
1997
(Millions of constant Mexican pesos as of December, 31 2001)
Investment per each peso of depreciation:
1997 $2.27 1998 $3.39 1999 $2.21 2000 $2.38 2001 $1.89
m080_Nar Eng.r1 5/22/02 9:36 PM Page 19
Global Reports LLC
Grupo Modelo 20 2001 Annual Report
Maximize the use of natural resourcesincorporating the bio-gases produced during the anaerobic biodegradation from the water treatment plant into thesteam generation process.
action
The expansions, modernization and replacement of brewery
equipment were possible largely because of the excellent work
performed by Inamex de Cerveza y Malta, S.A. de C.V., a
Group subsidiary located in Texcoco, outside Mexico City.
In the distribution centers owned by the Company across
Mexico, 597 million pesos were invested to expand and
modernize the infrastructure that facilitates the merchandising
of its products in the country.
One of Grupo Modelo’s top priorities is to ensure the quality
and supply of its indirect inputs, that was the reasoning behind
the acquisition of the remaining 50% of the aluminum can
and crown cap manufacturers Envatap, Tapas Metálicas, Tapas
y Tapones de Zacatecas, Envases de Zacatecas and Promotora
de Servicios de Zacatecas.
The freight companies, Tramo and Fleza, continued sup-
porting the operations, covering more than 15 million
miles during the year, carrying raw materials and finished
products all over Mexico.
43.5
0
39.6
3
39.5
0
35.0
0
35.0
0
2001
2000
1999
1998
1997
Installed Capacity vs Utilization(Millions of hectoliters)
85.6
%
92.1
% 87.3
%
92.3
% 88.4
%
One quarter of the CAPEX was
allocated to update equipment
at the breweries.
Installed Capacity Utilization (%)
m080_Nar Eng.r1 5/22/02 9:36 PM Page 20
Global Reports LLC
Grupo Modelo 21 2001 Annual Report
There has been a reduction in fossil fuelutilization per unit of steam produced
providing diverse benefits, such as a reduction in natural gas and fuel oil consumption.
result
The biogas produced in the water treatment plants generates savings in power generation.
Grupo Modelo, always concerned about the environment,
worked throughout 2001 to meet the “Clean Industry”
government certification for all its breweries. Currently, the
eight brewing plants and other three subsidiaries have
achieved the certification.
Also a testimony of the environmental commitment, was the
distinction “Environmental Merit Award”, earned by the
subsidiary Cebadas y Maltas, that transforms barley into malt.
The award is an acknowledge from the Mexican Federal
Well-trained personneloperate the modernunitanks, where thefermentation and aging processesare done.
Government to those companies who perform important
actions in protection, preservation and improvement of the
environment, along with sustained management of natural
resources. The award was received during the celebrations of
“World Environmental Day” in Mexico.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 21
Global Reports LLC
Implement an environmental management system pursuant to ISO 14001, thus ensuring pollution prevention and the continuous improvement of the environmental performance.
action
Modelo Quality SystemIn a more competitive environment, Grupo Modelo remains
seeking and creating opportunities to improve at all levels of
the Company.
The fundamentals and basic concepts of Modelo’s Total
Quality System were incorporated in the Competitive
Management Model, which allows the organization a steady
direction into the future. Also, this model represents the
framework for assessing and measuring performance within
the Company through several key performance indicators
oriented, among others, on customers, products, services,
operations, human resources, finance, and environmental
protection and preservation.
The Modelo products reflect the new world-trend towards
high quality standards. As part of the efforts to continue
outperforming, all the companies of Grupo Modelo have
worked for the ISO 9000 certification. This international
Cía. Cervecera de Zacatecas, Latin America’s largest brewery.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 22
Global Reports LLC
Grupo Modelo 23 2001 Annual Report
As of today, seven breweriesand four service companiesare certified under ISO 14001international standard.
result
Aerial view of the recreational facility in Zacatecas, Zac.
standard pro-
motes the adop-
tion of a process
based approach
to develop and
improve quality
management systems, raising customer satisfaction through
exceeding their expectations.
World-class companies facilitate teamwork, forming and
integrating teams that share goals and responsibilities
towards meeting the Company’s mission. Aware of the
importance of developing and training its personnel, Grupo
Modelo promotes teamwork as the driver for sharing
expertise and knowledge among its people. To build up this,
the Company organized the first National Grupo Modelo
Teamwork Forum to create high performance teams within
the Organization.
On the other hand, teams from Cervecería Modelo México,
Compañía Cervecera de Zacatecas, Cervecería del Pacífico
and Inamex de Cerveza y Malta were winners in the National
Quality Control and Teamwork Circles Contest. This is the
fourth time in a row that Company representatives receive
this important award from the Mexican President.
PersonnelTotal Employees & Workers
48,4
45
46,8
90
44,0
40
42,0
97
41,1
49
50
45
40
35
30
2001
2000
1999
1998
1997
m080_Nar Eng.r1 5/22/02 9:36 PM Page 23
Global Reports LLC
Grupo Modelo 25 2001 Annual Report
corporate structure
Domestic
Support the
Operations Area
Breweries
Cía. Cervecera de Zacatecas
Cervecería Modelo
Cía. Cervecera del Trópico
Cervecería Modelo de
Guadalajara
Cervecería Modelo del
Noroeste
Cervecería Modelo de Torreón
Cervecería del Pacífico
Cervecería Yucateca
International
Spain
seginsa
Engineering
Domestic446 Agencies andSub-Agencies
Exports
operations
Service
sales
Procermex
Canacermex
Eurocermex
Iberocermex
Asiacermex
Latincermex
m080_Nar Eng.r1 5/22/02 9:36 PM Page 25
Global Reports LLC
Grupo Modelo 26 2001 Annual Report
Financial Summary - Operations
Grupo Modelo S.A. de C.V. and Subsidiaries
Figures in millions of constant Mexican pesos as of December 31, 2001 except per share data.
2001 2000 1999 1998
Shipments of Beer -Million Hectoliters-
Domestic Market 28.45 28.02 26.91 25.79
Export Market 9.99 8.55 7.55 6.46
Total Market 38.44 36.57 34.46 32.25
Net Sales 32,169 30,620 27,957 26,347
Cost of Goods Sold 14,611 13,660 13,083 12,598
Gross Profit 17,558 16,960 14,873 13,749
Operating Expenses 9,705 9,004 8,099 7,645
Operating Income 7,854 7,956 6,774 6,105
Interest (Gained) Paid -Net- -688 -883 -902 -1,597
Monetary Loss 309 563 476 922
Integral Financing Cost -379 -320 -426 -675
Other (Income) Expenses -Net- -368 -280 -266 -287
Profit before Taxes and Legal Profit Sharing 8,601 8,566 7,466 7,067
Income Tax and Assets Tax Incurred 2,891 2,778 2,394 1,821
Deferred Income Tax 8 193 -84 407
Legal Profit Sharing 689 690 582 588
Profit after Taxes and Legal Profit Sharing 5,014 4,895 4,573 4,251
Equity in Income of Associates and
non - consolidated Subsidiaries -1 -4 -1 -1
Profit before Minority Interest 5,013 4,891 4,572 4,250
Minority Interest -1,390 -1,486 -1,403 -1,349
Extraordinary Items 0 0 99 94
NET MAJORITY INCOME 3,623 3,405 3,268 2,995
PER SHARE DATA
Net Income per Share after Extraordinary Items 1.11 1.05 1.01 0.92
Cash Dividends Paid:
Total Common Stock Dividend 401 763 54 1,637
Per Share 0.12 0.23 0.02 0.50
Total Preferred Stock Dividend 0 0 0 0
Per Share 0.00 0.00 0.00 0.00
Number of Outstanding Shares (Millions)
Common Shares 3,252 3,252 3,252 3,252
Preferred Shares 0 0 0 0
Notes :1 During 1993, an extraordinary dividend of $1,825 was paid, according to the Investment Agreement with Anheuser-Busch.
This amount is included in the $1,907.
2 The number of outstanding shares was adjusted to reflect the two stock splits registered in August, 1995 and October, 1998, both of 4 for 1.
3 On December 31, 1996, PC shares were converted to B shares class II.
4 In December, 1998, an extraordinary dividend of $1,277 was paid.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 26
Global Reports LLC
Grupo Modelo 27 2001 Annual Report
1997 1996 1995 1994 1993 1992
24.96 23.66 22.22 23.14 21.66 20.31
4.99 3.72 2.89 2.08 1.7 1.63
29.95 27.38 25.11 25.22 23.36 21.94
23,526 20,639 21,635 21,624 19,270 17,989
11,617 10,233 10,832 9,316 8,699 8,717
11,909 10,406 10,803 12,308 10,571 9,273
6,590 6,131 6,624 8,130 7,577 7,047
5,318 4,275 4,179 4,178 2,994 2,226
-991 -1,477 -2,742 -1,052 -549 -542
707 1,010 2,168 380 204 269
-284 -468 -574 -672 -345 -273
-365 -350 -309 -270 -129 -466
5,968 5,093 5,062 5,120 3,468 2,964
1,148 859 1,676 1,714 1,156 889
670 669 -11 -4 109 77
561 511 592 524 370 275
3,590 3,054 2,805 2,885 1,833 1,723
-1 -2 -1 -35 -7 -1
3,589 3,052 2,804 2,850 1,826 1,722
-1,128 -909 -931 -868 -551 -539
84 47 0 50 0 0
2,544 2.190 1,873 2,033 1,275 1,183
0.78 0.67 0.58 0.63 0.42 0.44
308 252 252 187 1,907 81
0.11 0.09 0.09 0.06 0.70 0.03
176 213 235 83 0 -
0.54 0.65 0.72 0.26 0.00 -
3,252 3,252 2,927 2,927 2,715 2,715
0 0 325 325 325 0.0
m080_Nar Eng.r1 5/22/02 9:36 PM Page 27
Global Reports LLC
Grupo Modelo 28 2001 Annual Report
Financial Summary - Balance Sheet and Additional Information
Grupo Modelo S.A. de C.V. and Subsidiaries
Figures in millions of constant Mexican pesos as of December 31, 2001 except per share data.
Consolidated Balance Sheet Information
2001 2000 1999 1998
Working Capital (DEFICIT) 12,600 10,561 10,319 8,823
Current Ratio 4.9 4.5 5.0 5.1
Property, Plant and Equipment -Net- 32,871 30,698 28,679 26,855
Total Debt to Total Assets (%) 20.3% 22.0% 9.1% 9.3%
Deferred Income Taxes 6,784 6,669 1,287 1,540
Long Term Debt 0 0 0 0
Majority Stockholders’ Equity 30,804 27,631 29,920 27,066
Return on Equity 11.8% 12.3% 10.9% 11.1%
Book Value per Share 9.47 8.50 9.20 8.32
Total Assets 51,778 47,296 44,622 44,599
Additional Information
Capital Expenditures and Equity Investments 3,819 4,495 3,153 4,531
Depreciation and Amortization 1,642 1,495 1,426 1,336
EBITDA 9,272 9,152 7,885 7,164
Effective Tax Rate 41.7% 42.8% 38.7% 39.8%
Profit before Income Tax to Net Sales (%) 26.7% 27.9% 26.7% 26.8%
Price to Earnings per Share 18.4 25.3 29.3 29.1
Market Price per Share (HIGH/LOW) 26.70/18.75 27.15/18.60 27.65/18.60 24.60/14.75
Notes: 1 Grupo Modelo, S.A. de C.V.'s shares began trading in the Mexican Stock Exchange in February, 1994.
2 The number of outstanding shares was adjusted as a result of the two stock splits registered in August, 1995 and October, 1998, both of 4 for 1.
3 The capital expenditures include the equity investments of $719 in 2001 and $931 in 2000.
2001 Total Assets’ Breakdown (Total Assets=100%)
3.4%
8.7%
1.7%
16.0%
63.5%
6.7% Cash & MarketableSecurities
Accounts Receivable
Inventories
Fixed Assets (Net)
Investment in Associates
Others
Total Assets: 51,778.0 millions ofconstant Mexican pesos as ofDecember 31, 2001.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 28
Global Reports LLC
Grupo Modelo 29 2001 Annual Report
1997 1996 1995 1994 1993 1992
10,244 8,678 7,794 10,219 6,908 6.291
5.6 5.3 4.4 5.0 4.0 3.8
23,594 21,992 22,293 20,884 18,532 17,249
9.9% 8.1% 7.1% 8.3% 8.9% 8.3%
1,361 730 98 165 169 77
0 0 0 0 0 0
25,936 24,208 24,263 24,883 19,727 17,793
9.8% 9.0% 7.7% 8.2% 6.5% 6.7%
7.98 7.44 7.46 7.65 6.49 6.55
38,805 35,367 35,563 36,505 30,047 27,562
2,886 3,003 3,895 2,472 1,833 2,356
1,271 1,092 1,072 911 858 1,362
6,320 5,095 4,929 5,166 3,772 3,453
39.9% 40.0% 44.6% 43.7% 47.1% 41.9%
25.4% 24.7% 23.4% 23.7% 18.0% 16.5%
32.8 29.7 35.5 31.6 - -
19.00/10.77 12.00/7.74 9.33/4.35 5.82/3.64 - -
2001 Total Liabilities’ Breakdown (Total Liabilities=100%)
7.7%
14.7%1.3%
69.6%
6.7% Accrued Taxes
Difered Taxes
Accounts Payable
Accrued Salaries &Wages
Others
Total Liabilities: 10,525.2 millionsof constant Mexican pesos as ofDecember 31, 2001. Total Liabilitiesrepresented 20.3% of Total Assets.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 29
Global Reports LLC
Grupo Modelo 30 2001 Annual Report
Management’s Discussion and Analysis 2001
The following analysis shall be read together with the consolidated financial statements of
Grupo Modelo S.A. de C.V. and its subsidiaries, together with their respective notes.
The Group’s financial statements have been prepared according to Mexican Generally
Accepted Accounting Principles.
The figures of the financial statements and their notes, as well as the following analysis are
in constant Mexican Pesos as of December 31, 2001.
SalesTotal shipments of beer during 2001 grew 5.1%, to 38.4 million hectoliters. The growth was
the result of a 1.5% increase in the domestic market, and 16.9% in exports, that represent-
ed 26.0% of the total volume, while in 2000, it was 23.4%.
Beer shipments(million hectoliters) 2001 2000 Increase
Domestic 28.452 28.025 1.5%Export 9.994 8.549 16.9%Total 38.446 36.574 5.1%
Regional brands had an outstanding performance during the year, especially the Yucatan
and the Pacífico brands. It is important to highlight that Pacifico had great acceptance in
its new can presentation, launched in February.
Domestic Brand Portfolio
16.6%
58.3%
11.9%
8.2%
3.4%1.1% 0.5%
Corona
Modelo Especial
Victoria
Pacífico
Estrella
Negra Modelo
Yucatecas
Net SalesThe net sales for 2001 were 32,169 million pesos, a 5.1% increase compared to last year.
Net Sales 2001 2000 Increase
Domestic 21,969 21,194 3.7%Export 7,509 6,935 8.3%Other Income 2,690 2,491 8.0%Total 32,169 30,620 5.1%
Beer SalesThe growth in domestic sales reflects the price increase implemented in March and April 2001. In the previous year,
prices were adjusted in January. On the other hand, export revenues in 2001 reflect the strong Peso and its stability
relative to the dollar.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 30
Global Reports LLC
Grupo Modelo 31 2001 Annual Report
Other Normal Incomes to the ActivityThe total of other normal income grew to 2,690 million pesos, 8.0% above last year. This amount includes income
not directly generated from beer sales, such as royalties, soft drinks, wine, liquor and food sales in the convenience
stores, income from sports teams, and sales of byproducts. Also are included the sales of Anheuser-Busch products,
which are imported and distributed in Mexico by Grupo Modelo.
Cost of Goods SoldFor 2001, COGS rose to 14,611 million pesos, which represents a 7.0% increase relative to last year, reflecting the
strong growth in exports that went from representing 23.4% of total volume in 2000, to 26.0% in 2001. This
segment has an important weight on cost of sales since glass bottles are non-returnable.
Gross ProfitGross profit rose to 17,558 million pesos, 3.5% above 2000. This represents 54.6% of the net sales, a 90 base points
drop from last year.
Operating ExpensesThe operating expenses during 2001 amounted to 9,705 million pesos, 7.8% higher than the 9,004 million pesos in
2000. This increase was used to reinforce the brand image of all Modelo products, specifically through advertising
campaigns that allowed the growth in the domestic shipments.
Operating ProfitThe operating profits reached 7,854 million pesos, a 1.3% reduction as compared to 2000. The operating margin
went down 1.6 percentage points, falling to 24.4%.
The Company expects to improve its profitability in the near future by sustaining a cost control program.
Depreciation and AmortizationFor the period, the depreciation and amortization charges totaled 1,642 million pesos, a 9.8% increase versus 2000.
In spite of investments to expand capacity, depreciation has remained relatively stable as a percentage of sales. It’s
important to note that fixed assets investments have been strategically planned, and linked to market growth, to avoid
situations of unutilized capacity.
Integral Cost of FinancingFor the year 2001, the integral cost of financing (favorable for Grupo Modelo) shows an 18.7% increase, or 379
million pesos. This means that the real interest rate was higher in 2001 than in 2000, although inflation and nominal
interest rates for the current year were lower than last year.
TaxesThe effective tax rate in effect for the year went down to 41.7%, from 42.8% during 2000.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 31
Global Reports LLC
Grupo Modelo 32 2001 Annual Report
Management’s Discussion and Analysis 2001
Net IncomeAs of December 31, 2001, net income climbed to 3,623 million pesos, a 6.4% increase as compared to last year, when
it reached 3,405 million pesos. This was favored by the recent investments made by the Company and for the growth
in the integral cost of financing.
Financial SituationAt year-end 2001, current assets were 15,799 million pesos, of which cash and marketable securities totaled 8,303
million pesos, which are invested in fixed rate bonds. Also, inventories represented 28.5% of current assets, reaching
4,508 million pesos.
Grupo Modelo continued with its investment strategy during 2001. Capital expenditures were 3,100 million pesos,
allocated as follows:
Investments 2001 Integration
Trópico 1,035 33.4%
Zacatecas 713 23.0%
Breweries and other factories 781 25.2%
Sales 571 18.4%
Total 3,100 100.0%
In 2001, short-term liabilities represented 6.2% of total assets. The Company continues with its policy of having no
debt, and total liabilities were 20.3%, also from the total assets, with a slight reduction when compared to 22.0% in
2000. As in last year, long term liabilities are mainly comprised by deferred taxes, which totaled 6,784 million pesos.
DividendsAs of December 31, 1998, a proposal was made to shareholders to pay a total cash dividend equal to the greater of
(i) 15% of the consolidated net income of the period ending on December 31, 1992, which totaled 45 million pesos,
or (ii) an amount equal to the "free cash flow" of the last immediate period. For the foregoing effects, "free cash
flow" shall mean the total majority net income of Grupo Modelo, S.A. de C.V., plus depreciation and amortization;
plus / minus changes in working capital, less capital expenditures, less payment of principal in case of debt.
A dividend payment of 401 million pesos was paid during 2001. These funds were from the Net Reinvested Tax Income
Account, for an amount of 0.12 pesos per share. This dividend was paid in exchange for coupon 9 of the shares titles.
m080_Nar Eng.r1 5/22/02 9:36 PM Page 32
Global Reports LLC
Grupo Modelo 33 Annual Report 2001
Mexico City, February 15, 2002
To the Stockholders ofGrupo Modelo, S. A. de C. V.:
We have audited the consolidated balance sheets of Grupo Modelo, S. A. de C. V. and Subsidiaries, asof December 31, 2001 and 2000, and the related consolidated statements of income, changes instockholders’ equity and changes in financial position, in Mexican pesos, for the years then ended. Theseconsolidated financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in Mexico. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement, and that they are prepared in accordance withgenerally accepted accounting principles in Mexico. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Grupo Modelo, S. A. de C. V. and Subsidiaries, as ofDecember 31, 2001 and 2000, and the consolidated results of their operations, changes in theirstockholders’ equity and changes in their financial position, stated in Mexican pesos, for the years thenended, in conformity with generally accepted accounting principles in Mexico.
PricewaterhouseCoopers
Rafael Maya Urosa, P.A.
Report of Independent Accountants
m080_FIN_ENG 5/22/02 9:30 PM Page 33
Global Reports LLC
Grupo Modelo 34 Annual Report 2001
ASSETS CURRENT:Cash and marketable securities $ 8,302,552 $ 6,394,470Accounts and notes receivable (Note 3) 1,039,778 1,055,811Inventories (Note 4) 4,507,773 4,524,606Prepaid expenses and other current items 1,949,152 1,561,019Total current assets 15,799,255 13,535,906LONG-TERM ACCOUNTS AND NOTES RECEIVABLE (Note 3) 147,258 153,498INVESTMENT IN SHARES OF ASSOCIATES AND NON-CONSOLIDATED SUBSIDIARIES (Note 5) 1,766,513 2,099,647PROPERTY, PLANT AND EQUIPMENT (Note 6) 47,950,820 44,088,353Accumulated depreciation (15,079,787) (13,390,728)
32,871,033 30,697,625OTHERS ASSETS:Unamortized expenses and goodwill, net 1,000,715 639,901Labor obligations upon retirement (Note 7) 193,227 168,911
1,193,942 808,812
Total assets $ 51,778,001 $ 47,295,488
LIABILITIESSHORT-TERM:Suppliers $ 805,324 $ 682,690Employees’ profit sharing 675,801 659,333Sundry creditors and accrued liabilities 605,511 656,434Excise tax on production and services payable 601,103 576,384Income tax payable 511,190 400,390Total short-term liabilities 3,198,929 2,975,231
DEFERRED TAX (Note 10 g.) 6,784,425 6,668,794CONTINGENCIES AND COMMITMENTS (Note 7):Labor obligations upon retirement 541,895 749,224Total liabilities 10,525,249 10,393,249
STOCKHOLDERS’ EQUITYCOMMON STOCK (Note 8) 12,697,956 12,697,956PREMIUM ON SHARE SUBCRIPTION 845,656 845,656ACCUMULATED INCOME (Notes 8 and 10):Legal reserve 990,427 822,660Reserve for acquisition of own shares 534,145 534,145Retained earnings 17,264,993 14,429,269Profit for the year, according to the statement of income 3,622,783 3,404,953
22,412,348 19,191,027INITIAL EFFECT OF DEFERRED TAX (4,243,280) (4,243,280)ADJUSTMENT TO CAPITAL FOR LABOR OBLIGATIONS UPON RETIREMENT (Note 7) (515,723) (551,494)INSUFICIENCY IN RESTATEMENT OF STOCKHOLDERS’ EQUITY (392,523) (309,298)Total majority interest 30,804,434 27,630,567
MINORITY INTEREST:Anheuser-Busch Companies, Inc. 9,019,191 7,947,422Other investors 1,429,127 1,324,250Total minority interest 10,448,318 9,271,672Total stockholders’ equity 41,252,752 36,902,239
Total liabilities and stockholders’ equity $ 51,778,001 $ 47,295,488
Consolidated Balance Sheets
Grupo Modelo S.A. de C.V. and Subsidiaries
As of December 31, 2001 and 2000 (Notes 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)
2001 2000
The following notes are part of these consolidated statements.
m080_FIN_ENG 5/22/02 9:30 PM Page 34
Global Reports LLC
Grupo Modelo 35 Annual Report 2001
NET SALES FROM MAIN ACTIVITY $ 29,478,298 $ 28,129,302OTHER INCOME 2,690,284 2,491,101
32,168,582 30,620,403COST OF SALES 14,610,521 13,660,383
Gross profit 17,558,061 16,960,020
OPERATING EXPENSES:Sales and distribution 7,181,676 6,801,945Administrative 2,503,401 2,201,862Goodwill amortization 19,438
9,704,515 9,003,807Operating profit 7,853,546 7,956,213
OTHER INCOME, Net 368,127 280,020
INTEGRAL RESULT FROM FINANCING:Interest earned and paid, net 712,009 895,650Loss from monetary position (308,621) (563,237)Foreign exchange loss, net (23,894) (12,686)
379,494 319,727Profit before provisions 8,601,167 8,555,960
PROVISIONS FOR:Income tax (Note 10) 2,898,465 2,970,398Employees’ profit sharing 688,506 690,200
3,586,971 3,660,598
Profit before income of associates and non-consolidated subsidiaries 5,014,196 4,895,362
INCOME FROM ASSOCIATES AND NON-CONSOLIDATEDSUBSIDIARIES (Note 5) (1,035) (4,075)
CONSOLIDATED NET PROFIT FOR THE YEAR $ 5,013,161 $ 4,891,287
MAJORITY INTEREST $ 3,622,783 $ 3,404,953
MINORITY INTEREST:Anheuser-Busch Companies, Inc. $ 1,086,408 $ 997,868Other investors 303,970 488,466MINORITY INTEREST $ 1,390,378 $ 1,486,334
EARNINGS PER SHARE (Amounts in Mexican pesos, attributable to majority interest) $ 1.1141 $ 1.0471
Consolidated Income StatementsFor the years ended December 31, 2001 and 2000 (Notes 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)
2001 2000
The following notes are part of these consolidated statements.
m080_FIN_ENG 5/22/02 9:30 PM Page 35
Global Reports LLC
Grupo Modelo 36 Annual Report 2001
Balances at January 1, 2000, with amounts restated at Mexican pesos of December 31, 2000 purchasing power $ 12,162,386 $ 809,988 $ 636,570
Adjustment to equity from recognition of initial effect of Statement D-4,relative to Deferred Tax.
Appropriation of the profit for the year 1999, approved in the General Ordinary Stockholders´ Meeting held on April 24, 2000,
as follows:
To retained earningsTo legal reserve 143,659Dividend payment at the rate of twenty one thousand three hundred thirty
three hundredths of Mexican peso per share in circulation
Minority interest reduction arising from sale of shares and payment of dividends.
Application of restatement of prior year’s profit and cancellationof restatement on dividends paid 7,733
Comprehensive income (Note 9)
Balances at December 31, 2000, restated 12,162,386 809,988 787,962
Effects of restatement for the year 535,570 35,668 34,698
Balances at December 31, 2000, with amounts restated at Mexicanpesos of December 31, 2001 purchasing power 12,697,956 845,656 822,660
Appropriation of the profit for the year 2000, approved in the General Ordinary Stockholders´ Meeting held on April 23 2001, as follows:
To retained earningsTo legal reserve 163,067Dividend payment at the rate of twelve cents of Mexican
peso per share in circulation Reduction of minority interest from sale of shares
Application of restatement of prior year’s profit and cancellation ofrestatement on dividends paid 4,700
Comprehensive income (Note 9)
Balances at December 31, 2001, restated $ 12,697,956 $ 845,656 $ 990,427
Consolidated Statements of Changes in Stockholders’ Equity
Grupo Modelo S.A. de C.V. and Subsidiaries
For the years ended December 31, 2001 and 2000 (Note 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001, except dividends per share amount)
Commonstock
Premium onshare
subscriptionLegal
reserve
The following notes are part of these consolidated statements.
m080_FIN_ENG 5/22/02 9:30 PM Page 36
Global Reports LLC
Grupo Modelo 37 Annual Report 2001
$ 511,616 $ 11,572,510 $ 3,130,598 $ (93,352) $ (72,424) $ 10,176,053 $ 38,833,945
$ (4,064,308) (1,389,952) (5,454,260)
2,729,522 (2,729,522)(143,659)
(693,698) (693,698)
(1,015,146) (1,015,146)
212,341 (257,417) (37,343)
3,261,340 (434,881) (223,828) 1,109,659 3,712,290
511,616 13,820,675 3,261,340 (4,064,308) (528,233) (296,252) 8,880,614 35,345,788
22,529 608,594 143,613 (178,972) (23,261) (13,046) 391,058 1,556,451
534,145 14,429,269 3,404,953 (4,243,280) (551,494) (309,298) 9,271,672 36,902,239
3,098,273 (3,098,273)(163,067)
(390,211) (390,211)(206,865) (206,865)
127,662 (143,613) (11,251)
3,622,783 35,771 (83,225) 1,383,511 4,958,840
$ 534,145 $ 17,264,993 $ 3,622,783 $ (4,243,280) $ (515,723) $ (392,523) $ 10,448,318 $ 41,252,752
Reserve foracquisition of own
sharesRetainedEarnings For the year
Initialeffect of
deferred tax
Adjustement to capital for
laborobligations
upon retirement
Insufficiencyin
restatement ofstockholders’
equityMinorityinterest Total
Accumulated income
m080_FIN_ENG 5/22/02 9:30 PM Page 37
Global Reports LLC
Grupo Modelo 38 Annual Report 2001
OPERATING ACTIVITIES:Consolidated net income for the year $ 5,013,161 $ 4,891,287
ITEMS APPLIED TO INCOME NOT REQUIRING THE USE OF CASH:Depreciation and amortization for the year 1,641,838 1,494,836Increase in deferred tax 7,572 77,923Cost surplus on acquisition of shares 13,674Equity in income of associates and non-consolidated subsidiaries, net of dividends
received and initial effect of Statement D-4 (94,020) 149,521
6,568,551 6,627,241FUNDS PROVIDED BY (USED IN):Decrease in accounts and notes receivable 279,120 238,171Increase in excise tax on production and services payable 83,622 43,539Decrease (increase) in inventories 19,767 (571,242)Increase in employees’ profit sharing 11,795 113,666Increase in prepaid expenses and other current items (387,300) (36,282)(Decrease) increase in trade accounts payable, sundry creditors and accrued liabilities (216,740) 211,485
Funds provided by operations 6,358,815 6,626,578
FINANCING ACTIVITIES:Dividend payment (includes $37,343 of restatement effects; $38,987 in 2000) (401,459) (763,232)Dividend payment to minority stockholders (129,831) (111,788)Labor obligations upon retirement, net (173,670) (92,235)Acquisition of minority interest shares (77,033) (948,060)Decrease in notes payable in real terms (36,532)Net effect in liability and stockholders’ equity as per the application of the Statement D-4 (330,729)
(818,525) (2,246,044)INVESTING ACTIVITIES:Decrease (increase) in shares of associates and non-consolidated subsidiaries, net 31,209 (16,270)Decrease (increase) in unamortized expenses and goodwill 24,135 (21,023)Acquisition of property, plant an equipment, net (3,100,225) (3,564,130)Acquisition of shares of new subsidiaries incorporated to the consolidation (710,683)Increase in other assets (75,981) (211,611)
(3,831,545) (3,813,034)
Increase in cash and marketable securities 1,708,745 567,500
Balance at beginning of year 6,394,470 5,826,970Cash and marketable securities of subsidiaries incorporated to the consolidation 199,337
Balance at end of year $ 8,302,552 $ 6,394,470
2001 2000
Consolidated Statements of Changes in Financial Position
Grupo Modelo S.A. de C.V. and Subsidiaries
For the years ended December 31, 2001 and 2000 (Note 1, 2 and 13)(Amounts in thousands of constant Mexican pesos as of December 31, 2001)
The following notes are part of these consolidated statements
m080_FIN_ENG 5/22/02 9:30 PM Page 38
Global Reports LLC
Grupo Modelo 39 Annual Report 2001
Notes to the Consolidated Financial StatementsAs of December 31, 2001 and 2000(Amounts in thousands of constant Mexican pesos as of December 31, 2001)
1. Incorporation and business purpose
a) The Group is mainly engaged in the production and sale of beer, which began in 1925.
b) The main activity of the holding group is holding 76.75% of the capital stock of Diblo S.A. de C.V., whose
business purpose is holding the real estate and the investment in shares of subsidiaries involved in the production,
distribution and sale of beer in Mexico and abroad. The most important companies, on the basis of their
operations and stockholders’ equity, are as follows:
Brewers:Cervecería Modelo, S. A. de C. V. 100Compañía Cervecera de Zacatecas, S. A. de C. V. 100Compañía Cervecera del Trópico, S. A. de C. V. 100Cervecería Modelo de Guadalajara, S. A. de C. V. 100Cervecería Modelo de Torreón, S. A. de C. V. 100Cervecería Modelo del Noroeste, S. A. de C. V. 100Cervecería del Pacífico, S. A. de C. V. 100Cervecería Yucateca, S. A. de C. V. 100
Transformation of barley to malt:Cebadas y Maltas, S. A. de C. V. 100
Machinery manufacturers:Inamex de Cerveza y Malta, S. A. de C. V. 100
Manufacturer of beer cans and crowns: Promotora de Servicios de Zacatecas, S. A. de C. V. 100
Agencies distributing beer and other products:La Modelo en Monterrey, S. A. de C. V. 100Distribuidora Pacífico y Modelo de la Paz, S. A. de C. V. 100Comercial Nueva Laguna, S. A. de C. V. 100Impulsora Mercantil de San Pablo, S. A. de C. V. 100Expansión Comercial de Zumpango, S. A. de C. V. 100Las Cervezas de México en Puebla, S. A. de C. V. 100Distribuidora Pacífico y Modelo de Mazatlán, S. A. de C. V. 100La Corona de los Reyes, S. A. de C. V. 100Cerveza Corona de Zacatecas, S. A. de C. V. 100Impulsora Mercantil de la Costa, S. A. de C. V. 70La Cerveza Corona del Centro, S. A. de C. V. 62Distribuidora Modelo de Toluca, S. A. de C. V. 60
Company controlling distributors of beer and other products abroad:Procermex, Inc. (1) 100
Real-estate companies engaged in distribution of beer and other products:Inmobiliaria de Tampico, S. A. de C. V. 100Promotora del Sureste, S. A. de C. V. 100Inmobiliaria Bajacal, S. A. de C. V. 100Impulsora del Nazas, S. A. de C. V. 100Impulsora Tapatía, S. A. de C. V. 100Impulsora de la Periferia, S. A. de C. V. 100Metropolitana de Bienes Raíces, S. A. de C. V. 100Administración y Promoción de Inmuebles, S. A. de C. V. 100Impulsora Potosina, S. A. de C. V. 100Promotora e Impulsora Acapulqueña, S. A. de C. V. 80
(1) On December 31, 2000, the shareholding was 60%. In July 2001, the Group acquired the remaining 40%, whichgave rise to goodwill of $35,984 that will be amortized over a period of five years.
Percentage of shareholding
m080_FIN_ENG 5/22/02 9:30 PM Page 39
Global Reports LLC
Grupo Modelo 40 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
2. Accounting policies
The main accounting policies applied by the group in the preparation of its consolidated financial statements are
in line with generally accepted accounting principles. These accounting principles require that Group management
make estimations based on circumstances and apply certain assumptions in determining the valuation of some
items included in the consolidated financial statements. Although these could differ from actual effects, Group
management considers that the estimations and assumptions used at the date of issuance of the consolidated
financial statements are reasonable. The main policies are summarized as follows:
a) Consolidation - The Group prepares consolidated financial statements, which include the financial situation and
the results of the companies in which Diblo S.A. de C.V. has control and direct or indirect participation of more
than 50% of the capital stock; significant intercompany operations have been eliminated in consolidation.
b) Bases for preparation - The financial statements of the holding company and its subsidiaries include the effects
of inflation on the financial information, as required by Statement B-10 and the amendments thereto, issued by
the Mexican Institute of Public Accountants (MIPA).
c) Comparability - The figures in the consolidated financial statements and the notes thereto are stated uniformly
in pesos of December 31, 2001 purchasing power by applying factors derived from the National Consumer Price
Index (NCPI).
d) Conversion of the financial information of subsidiaries located abroad - The conversion to Mexican pesos
of the financial information of subsidiaries located abroad, which is the basis for consolidation, was carried out in
accordance with the provisions of Statement B-15, “Transactions in Foreign Currency and Conversion of the
Financial Statements of Foreign Operations”, issued by the MIPA, following the method of integrated foreign
operations. In converting monetary items, the free purchase exchange rate of $9.11 ($9.52 in 2000) per US dollar
was used. Nonmonetary items and the statement of income were converted to domestic currency at the rate of
exchange in effect at the date on which the underlying operations were carried out. The effects of this conversion
are shown in the integral result from financing.
e) Marketable securities - These are recorded at acquisition cost, which is similar to market value.
f) Inventories - These are valued by the last-in, first-out method, and are restated using the manufacturing or
replacement cost method. Said restatement does not exceed market value.
g) Cost of sales - Restatement is based on the restated value of inventory.
h) Investment in shares of associate and non-consolidated subsidiaries - Permanent investments in shares are
recorded at acquisition cost, and valued applying the equity method.
m080_FIN_ENG 5/22/02 9:30 PM Page 40
Global Reports LLC
Grupo Modelo 41 Annual Report 2001
i) Property, plant and equipment - These are recorded at acquisition cost, and restated by applying NCPI based
factors to the net replacement value, determined by independent experts, up to December 31, 1996, and based
on the date of acquisition, in the case of purchases made after that date.
j) Construction in progress and prepayments to suppliers - These are recorded at the value of the disbursements,
and are restated by applying NCPI based factors according to the date of payment.
k) Depreciation - This item was calculated on the restated value of property, plant and equipment, based on the
probable useful lives determined by independent appraisers. As from the 1997 acquisitions, the useful lives are
determined by the Group’s technical department.
l) Unamortized expenses and goodwill - These items are recorded at acquisition cost and restated by applying
NCPI based factors according to the date of the disbursements. Licences and permits are recorded at acquisition
value, which, at the date of the financial statements, is similar to market value.
m) Amortization - Acquisition cost and restatement of installation and organization expenses are amortized by the
straight-line method on the ending balance for each period. The rate used for accounting purposes is 10%;
goodwill is amortized over the period in which the Group considers that the investment will be recovered.
n) Foreign currency - Assets and liabilities representing rights and obligations receivable or payable in foreign
currency are converted to domestic currency at the rate of exchange in effect on the dates in which the respective
operations are entered into (see Note 12). Balances at the end of the period are valued at the exchange rate in
effect at the end of the period, and resulting differences are recorded directly in the income statement for that
period, and form part of the integral result from financing.
o) Labor obligations upon retirement - Labor obligations for projected benefits, as well as unamortized items and
the net cost for the period of seniority premiums and the employee pension plan are determined by independent
actuaries using the unit cost method. They are recorded as per the guidelines of Statement D-3, “Labor
Obligations”, issued by the MIPA. Contributions to the trusts handling plan assets are determined on the same
bases as in prior years, and correspond to pension plans approved by tax authorities.
p) Severance pay - These payments are charged to the income statement for the year in which they are made.
q) Deferred income tax and employees’ statutory profit sharing - In recognizing deferred income tax, the
holding company and its subsidiaries use the comprehensive method of assets and liabilities, which consists of
determining said tax by applying the income tax rate corresponding to temporary differences between the book
and tax value of assets and liabilities at the date of the financial statements. The accrued effect of this accounting
change as from the date on which it went into effect, which was January 1, 2000 gave rise to $4,243,280 of net
increase in the deferred tax liability, and a reduction in stockholders’ equity of the same amount.
Notes to the Consolidated Financial Statements
m080_FIN_ENG 5/22/02 9:30 PM Page 41
Global Reports LLC
Grupo Modelo 42 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
r) Restatement of stockholders’ equity - Stockholders’ equity was restated by applying NCPI based factors,
according to the date of contribution. The effects of that restatement are shown in the consolidated financial
statements in each of the underlying accounts.
s) Insufficiency in the restatement of stockholders’ equity - The balance of this account is represented by the
algebraic sum of the items “Result from holding non-monetary assets” and “Accumulated equity monetary
result” which are described below:
Results from holding nonmonetary assets - Represents the change in value of nonmonetary assets for reasons
other than inflation. It is determined only when applying the specific costs method, since these costs are compared
to restatements determined by applying NCPI based factors. If specific costs exceed indexes, there will be a gain
from said holding; otherwise, there will be a loss. The result from holding nonmonetary assets arising up to 1996
from restating fixed assets is available to the stockholders, and like other stockholders’ equity accounts, was
restated by applying NCPI based factors.
Accumulated equity monetary result - This is the result arising from the initial restatement of financial
statement amounts.
t) Result from monetary position - This represents the effect of inflation on monetary assets and liabilities, even
when they continue to have the same nominal value. When monetary assets exceed monetary liabilities, there is
a loss on monetary position, because when these assets are used, an amount equal to nominal value is available,
but with lower purchasing power. When liabilities are higher, there is a gain, since they are covered with money
of lower purchasing power. Said effects are charged or credited to the income statement, as part of the integral
result from financing.
u) Comprehensive Income - As of January 1, 2001, Statement B-4 “Comprehensive Income”, entered into effect.
This statement requires that the various items making up the stockholders’ equity gains during the year be shown
in the statement of stockholders’ equity under the item of comprehensive income.
v) Earnings per share - Earnings per share attributable to majority interest were calculated considering the average
ordinary current shares.
m080_FIN_ENG 5/22/02 9:30 PM Page 42
Global Reports LLC
Grupo Modelo 43 Annual Report 2001
Notes to the Consolidated Financial Statements
3. Accounts and notes receivable
The balance of this account is as follows:
Customers $ 1,043,195 $ 967,945Sundry debtors 67,627 76,817Sales agents 43,344 39,952
1,154,166 1,081,714Less- Allowance for doubtful accounts (171,155) (156,701)
938,011 925,013Value added tax credited and withheld 22,854 83,568Non-consolidated related companies (see Note 11) 165,688 187,065Officers and employees 15,483 13,663
1,187,036 1,209,309Less - short-term accounts and notes receivable (1,039,778) (1,055,811)
Long- term accounts and notes receivable $ 147,258 $ 153,498
4. Inventories
The balance of this account is as follows:
Finished products and production in process $ 1,035,769 $ 973,312Raw materials 930,851 898,531Containers and packaging 1,730,064 1,854,827Spare parts 529,828 483,327Advertising items 246,349 268,462Merchandise in transit 71,312 67,436
4,544,173 4,545,895Less- Allowance for slow-moving inventories (36,400) (21,289)
$ 4,507,773 $ 4,524,606
Item 2001 2000
Item 2001 2000
m080_FIN_ENG 5/22/02 9:30 PM Page 43
Global Reports LLC
Grupo Modelo 44 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
5. Investment in shares of associates and non-consolidated subsidiaries
a) The balance of this account is as follows:
Dirección de Fábricas, S. A. de C. V. (holding company of glass container
manufacturing companies) 41 $ 1,685,814 $ 1,590,725Extractos y Maltas, S. A. de C. V. 26 96,237 97,395Seeger Industrial, S. A. 81 9,490 10,184Fábrica Nacional de Malta, S. A. de C. V. 100 7,609 8,756Envatap, S. A. de C. V. 206,376Promotora de Servicios de Zacatecas, S. A. de C. V. 91,246Envases de Zacatecas, S.A de C.V. 39,169Tapas Metálicas, S. A. de C. V. 37,442Arrendadora y Promotora Deportiva
de Toluca, S. A. de C. V. 30,376Tapas y Tapones de Zacatecas, S. A. de C. V. 9,189
1,799,150 2,120,858Others 24,164 20,343
1,823,314 2,141,201Less - estimation for decrease in book value (56,801) (41,554)
$ 1,766,513 $ 2,099,647
2001 2000Percentage of shares forming
the capital stockCompanies
b) The consolidated financial statements do not include the statements of financial position of Seeger Industrial S.A.,
since the accounting policies followed by this subsidiary differ from those of the other companies comprising the
Group. Investment in this subsidiary is less than 0.01% of consolidated assets in both periods. Changes in
accounting policies and the respective adjustments are expected to be made in future years.
c) Up to March 2001 Tapas y Tapones de Zacatecas, S. A. de C. V., Envases de Zacatecas, S. A. de C. V., Promotora
de Servicios de Zacatecas, S. A. de C. V., Tapas Metálicas, S. A. de C. V. and Envatap, S. A. de C. V are considered
to be associated companies, and in April 2001, the remaining 50% of the shares of said companies was acquired.
Therefore, as of that date, they are included in the consolidation process, giving rise to goodwill of $317,757,
which will be amortized over a period of 15 years.
d) Investment in shares of associates and non-consolidated subsidiaries includes participation in the profits of those
entities, amounting to $222,634 ($294,507 in 2000). As of 2000, participation in the profits of associated
companies manufacturing items necessary for the production of beer have been shown reducing the cost of sales.
m080_FIN_ENG 5/22/02 9:30 PM Page 44
Global Reports LLC
Grupo Modelo 45 Annual Report 2001
Notes to the Consolidated Financial Statements
6. Property, plant and equipment - net
a) The balance of this account is made up as follows:
Land $ 892,091 $ 2,499,572 $ 3,391,663 $ 3,266,140Machinery and equipment 6,749,402 6,364,784 13,114,186 10,839,646Transportation equipment 1,557,360 801,091 2,358,451 2,353,068Buildings and other constructions 3,084,826 5,156,661 8,241,487 7,593,067Computer equipment 188,961 24,141 213,102 197,137Furniture and other equipment 127,513 72,068 199,581 935,245Antipollution equipment 311,205 273,071 584,276 251,750Construction in progress and
prepayments to suppliers 4,339,098 429,189 4,768,287 5,261,572
$ 17,250,456 $ 15,620,577 $ 32,871,033 $ 30,697,625
Depreciation for the period amounted to $1,587,374 ($1,469,827 in 2000).
2001 2000
Net historicalcost
Net restatement
Net totalvalue
Net totalvalue
b) Group management estimates that the completion of construction in progress and prepayments to suppliers will
require an additional investment, as shown below:
Extension to the production capacity of the following plants:- Compañía Cervecera del Trópico, S.A. de C.V. $ 2,819,851 $ 3,717,773- Compañía Cervecera de Zacatecas, S.A. de C.V. 246,175 1,341,532
Construction of warehouses, offices and acquisition andinstallation of new production lines at the plants. 404,453 559,702
$ 3,470,479 $ 5,619,007
The main part of the production line expansion for the fourth stage of Cía. Cervecera de Zacatecas will be
concluded in 2003, and Cía. Cervecera del Trópico is expected to be concluded in 2005.
Additional Investment
Description 2001 2000
Item
m080_FIN_ENG 5/22/02 9:30 PM Page 45
Global Reports LLC
Grupo Modelo 46 Annual Report 2001
7. Contingencies and commitments
a) The Group has a pension and seniority premium plan to cover obligations contained in labor contracts and in the
Federal Labor Law. These compensations are only available after employees have been with the company for a
certain number of years.
- At the date of the consolidated financial statements, accrued liabilities for labor obligations upon retirement
are composed as follows:
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
Current benefit obligations $ 2,738,687 $ 2,679,411Additional amount for projected benefits 278,891 296,750
Projected benefit obligations 3,017,578 2,976,161Plan assets (trust fund) (2,212,062) (1,943,394)
805,516 1,032,767Items to be amortized over a period of 18 to 24 years:For adjustments to variations (1,134,026) (1,120,706)For past services (34,246) (99,926)
Projected net assets (362,756) (187,865)Additional liability comprising:Intangible assets 193,227 168,911Adjustment to capital 711,424 768,178
Accrued liability $ 541,895 $ 749,224
- Intangible assets and the adjustment to capital are created by those subsidiaries for which the trust fund and
current net liability are less than current benefit obligations.
- Contributions to trusts handling plan assets for the period amounted to $352,988 ($176,132 in 2000). The
trusts made payments of $102,020 ($69,867 in 2000) to the beneficiaries in the period.
- The net cost for the period was $180,271 ($83,897 in 2000) and, like projected benefit obligations, was
determined on the basis of a real rate of estimated yields of 5% and an average rate of salary increases of 1.5%
in both periods.
Description 2001 2000
m080_FIN_ENG 5/22/02 9:30 PM Page 46
Global Reports LLC
Grupo Modelo 47 Annual Report 2001
Notes to the Consolidated Financial Statements
b) There is an unquantified liability for amounts payable to personnel in the cases contemplated in the Federal Labor
Law and in the collective labor contract. Severance payments of $49,942 ($36,315 in 2000) were paid in the
period.
c) Several lawsuits have been brought before the relevant authorities for a various matters. In the opinion of the
Group’s officers and lawyers, these lawsuits will be settled favourably. Otherwise, the result of the lawsuits will not
substantially affect the financial situation or the results of consolidated operations.
d) At the close of the period, there are commitments for the purchase of inventory, machinery and equipment
amounting to approximately one hundred and forty seven million six hundred and ninety thousand US dollars (one
hundred and fifteen million four hundred thousand US dollars in 2000).
e) At the date of these financial statements, straight leasing contracts have been signed for air transportation
equipment for obligatory terms of 7 and 10 years; and total monthly lease payments of 194,000 US dollars
m080_FIN_ENG 5/22/02 9:30 PM Page 47
Global Reports LLC
Grupo Modelo 48 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
8. Common stock and retained earnings
a) Breakdown of the restatement of certain stockholders’ equity accounts:
Capital stock $ 2,839,652 $ 9,858,304 $ 12,697,956Premium on share subscription 193,388 652,268 845,656Accumulated income:Legal reserve 673,355 317,072 990,427Reserve for acquisition of
own shares 150,000 384,145 534,145Retained earnings 10,809,536 6,455,457 17,264,993Profit for the year 3,520,391 102,392 3,622,783
$ 18,186,322 $ 17,769,638 $ 35,955,960
2001
b) As of December 31, 2001 and 2000, common stock is comprised of 3,251,759,632 shares, with no par value,
divided as follows:
Fixed portion of the capital stock:Series A class I shares - With no withdrawal rights, represented by1,459,389,728 common shares, fully subscribed and paid in; these sharesmust always represent 56.10% of total voting shares, and may only beacquired directly or indirectly by Mexican individuals or business entities(historical value). $ 785,996
Variable capital:Series B class II shares - Represented by 1,142,017,984 common votingshares, fully subscribed and paid in, which may in no case represent morethan 43.90% of total voting shares, and are subject to no subscriptionlimitations (historical value). 1,085,855
Series C class II shares - Represented by 650,351,920 common nonvotingshares, fully subscribed and paid in, which may at no time represent morethan 20% of the capital stock (historical value). 967,801
2,839,652
Effect of restatement 9,858,304
$ 12,697,956
HistoricalamountItem
Effect ofrestatement
Restatedamounts
Description Amount
m080_FIN_ENG 5/22/02 9:30 PM Page 48
Global Reports LLC
Grupo Modelo 49 Annual Report 2001
Notes to the Consolidated Financial Statements
9. Comprehensive income
The Group’s comprehensive income for 2001 is as follows:
Net income $ 5,013,161Adjustment to capital for labor obligations upon retirement 56,757Result from holding nonmonetary assets (111,078)
Comprehensive income $ 4,958,840
Comprehensive income as of December 31, 2000 was $ 3,875,761.
10. Income tax and profit restrictions
a) The distribution of retained earnings in cash or in kind is subject to Income Tax, payable by the company, and is
considered a definitive payment, on the basis of the following:
- Dividends paid are free from Income Tax if they arise from the Net Tax Income Account. Any amount paid in
excess is subject to 35% Income Tax on the result of multiplying the dividend paid by the factor 1.5385. The
respective tax is payable by the company, and may be credited against the company’s Income Tax arising in the
following three years. Dividends paid are not subject to tax withholding
- Dividends arising from the Net Reinvested Tax Income Account are subject to 5% Income Tax. The rate is 3%
for Net Reinvested Tax Income Account arising in 1999.
- At the balance sheet date, dividends have been decreed amounting to $390,211 ($693,698 in 2000) at
historical values arising from the Net Reinvested Tax Income Account, on which deferred corporate Income Tax
was paid amounting to $18,002 ($32,018 in 2000); a provision had been made for that amount in the
preceding period.
b) Grupo Modelo S.A. de C.V. is authorized to determine Income Tax as per the tax consolidation regime, together
with its direct and indirect subsidiaries, as specified in the Income Tax Law. As from January 1999, amendments
went into effect for determining the consolidated tax result, the most important of which are as follows:
- The percentage of shareholding in the subsidiaries is the amount arrived at by multiplying the real participation of
the controlling company in the controlled companies by 0.60. The unamortized tax losses of controlled companies
included in the determination of the consolidated tax result, which amortize those tax losses against tax profits
arising in the period, are considered in the percentage of shareholding held (direct or indirect). As from 2002 period,
the controlling company will also consolidate by the factor 0.60 of its individual fiscal results.
Description: Total
m080_FIN_ENG 5/22/02 9:30 PM Page 49
Global Reports LLC
Grupo Modelo 50 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
d) In 1999, the Income Tax rate was modified and the general rate of 35% was implemented, plus deferral for
reinvestment of profits, applying 30% to reinvested fiscal profits; in the period in which the latter are paid out as
dividends, the remaining 5% tax is paid. The rate applicable in 1999 to reinvested profits was 32%. Therefore,
dividends declared from the Net Reinvested Tax Income Account created in 1999 are subject to 3% Income Tax.
The aforementioned procedure was in effect up to 2001, and the deferral of tax corresponding to the balance of
the Net Reinvested Tax Income Account will be paid as dividends are paid in future years.
e) At the date of the consolidated balance sheet, there are tax losses that will affect the consolidated tax result by
$39,302 ($61,189 in 2000), and that can be amortized against future tax profits, after restatement. In this period,
$25,189 ($10,206 in 2000) of prior years’ losses at historical values, have been amortized.
f) Certain companies incurred no Income Tax, and therefore, Asset Tax is considered an account receivable by those
companies when there is certainty that said amount can be credited against Income Tax in future periods; this is
shown in the consolidated balance sheet, together with deferred tax, as provided for in Statement D-4, Revised,
amounting to $91,778 ($5,896 in 2000).
Asset Tax in excess of Income Tax incurred by controlled companies, where there is no certainty that the tax can
be recovered, was charged directly to results of the period, and amounted to $40,230 ($45,036 in 2000), at
historical value.
At the date of the consolidated financial statements, there is Asset Tax of $92,544 ($154,204 in 2000) for which
a refund can be requested in the following ten years, after restatement, provided Income Tax exceeds Asset Tax
in any of those periods.
- The concept of effective control of subsidiaries is eliminated, and companies in which the direct or indirect
participation through another controlled company does not exceed 50% may not be included in the
consolidation.
- Tax losses of the controlling or controlled companies, arising on an individual basis, may not be amortized under
current tax provisions, but must be added to the consolidated profits or subtracted from the consolidated tax
losses in the period in which the right is lost.
c) At the date of the financial statements, the balances of the net tax income account are as follows:
Item 2001 2000
Net Tax Income Account $ 8,157,704 $ 7,677,221
Net Reinvested Tax Income Account $ 4,707,561 $ 3,032,857
m080_FIN_ENG 5/22/02 9:30 PM Page 50
Global Reports LLC
Grupo Modelo 51 Annual Report 2001
Notes to the Consolidated Financial Statements
g) Deferred tax - The main temporary items giving rise to the liability for deferred tax at the date of the financial
statements are analyzed below:
Fixed assets and other assets $ 5,650,891 $ 5,552,666Inventories 1,387,864 1,395,309Labor obligations upon retirement 126,965 65,752Customers (60,553) (54,845)Liability provisions (32,026) (38,902)
Subtotal 7,073,141 6,919,980
Tax credits corresponding to:Tax losses (196,938) (245,290)Asset tax receivable (91,778) (5,896)
Total liability for deferred tax $ 6,784,425 $ 6,668,794
- As a result of the amendments to the Income Tax Law approved as from January 1, 2002, the Income Tax rate
(35%) will be reduced annually as from 2003 until it reaches the nominal rate of 32% in 2005. Therefore, the
effect of this gradual reduction in the Income Tax rate will be to increase stockholders’ equity and reduce the
deferred Income Tax liability by approximately $600,000 in 2002.
h) The Income Tax provision as of December 31 is made up as follows:
Income Tax incurred $ 2,849,584 $ 2,737,216Asset tax 41,309 49,468Deferred Income Tax 7,572 183,714
$ 2,898,465 $ 2,970,398
2001 2000
Item 2001 2000
Effect on deferred Income Tax of:
m080_FIN_ENG 5/22/02 9:30 PM Page 51
Global Reports LLC
Grupo Modelo 52 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
11. Operations with non-consolidated related companies
The main transactions entered into with non-consolidated related companies are analyzed as follows:
Purchases:Purchase of containers and packaging 3,571,937 4,347,736Purchase of raw materials 300,706 307,813Purchase of machinery 69,788 96,677
3,942,431 4,752,226
Sales:Sales of recyclable materials 91,914 50,221Sales of machinery and maintenance services 16,819 54,964Freights collected 2,676 2,991Services collected 2,662 2,578
114,071 110,754
12. Foreign currency position and operations
a) At the date of the consolidated balance sheet, the Group had the following foreign currency position:
AssetsU.S. dollars 56,734 43,628
LiabilitiesU.S. dollars 36,538 27,764
In thousands
Description 2001 2000
Description 2001 2000
m080_FIN_ENG 5/22/02 9:30 PM Page 52
Global Reports LLC
Grupo Modelo 53 Annual Report 2001
b) These currencies are valued in 2001 at the following exchange rates:
At the free-market exchange rate ($ 9.11 for assets and $ 9.18 for liabilities per U.S. dollar) $ 516,879 $ 335,518
Notes to the Consolidated Financial Statements
c) At the end of the period, there were inventories amounting to fifty six million five hundred and eighty six
thousand US dollars (forty seven million three hundred and thirty thousand US dollars in 2000), most of which
can only be acquired abroad.
d) During the year, the following US dollars operations were carried out:
Exportation of finished products $ 781,016 $ 665,785Royalties charged 107,796 91,492Exportation of packaging and others 12,821 12,854
901,633 770,131
Purchase of machinery and payment of other services 99,615 135,067Purchase of inventory 108,345 59,369Freights, advertising and others 139,343 105,558Purchase of spare parts 14,753 12,216
362,056 312,210
Net $ 539,577 $ 457,921
In thousands
b) The free peso/dollar exchange rate at the date of issuance of the consolidated financial statements (February 15,
2002) was $9.05.
Description Assets Liabilities
2001 2000Description
m080_FIN_ENG 5/22/02 9:30 PM Page 53
Global Reports LLC
Grupo Modelo 54 Annual Report 2001
Notes to the Consolidated Financial Statements
Grupo Modelo S.A. de C.V. and Subsidiaries
14. Financial instruments
Financial instruments potentially subject to risk concentration consist mainly of accounts receivable and temporary
investments. The Group places cash surpluses at prestigious credit institutions. Credit risk concentration
concerning accounts receivable is limited, due mainly to the large number of customers and their geographic
distribution. The Group considers that the estimation for doubtful accounts properly covers those that could
represent a risk of recovery, and continually monitors their behavior. When necessary, the estimation is adjusted.
15. Other events in the 2000 period
During the 2000 period, the Group invested $873,750 (at historical value) purchasing shares in the minority
interest of 64 subsidiaries forming part of Mexico’s distribution network. This operation gave rise to an excess
of book value over cost of shares amounting to $16,209, which was credited to income for the period.
Domestic $ 24,659,115 $ 4,356,437 $ 51,326,863Export 7,509,467 656,724 451,138
$ 32,168,582 $ 5,013,161 $ 51,778,001
Domestic $ 23,684,993 $ 4,113,573 $ 46,856,554Export 6,935,410 777,714 438,934
$ 30,620,403 $ 4,891,287 $ 47,295,488
13. Information by segment
Segment data is analyzed as follows:
IncomeNet profit
(estimated)
Identifiable
assets
Description 2001
2000
m080_FIN_ENG 5/22/02 9:30 PM Page 54
Global Reports LLC
Grupo Modelo 55 Annual Report 2001
Mexico City, February 15, 2002
To the Stockholders ofGrupo Modelo, S.A. de C.V.:
In my capacity as Statutory Auditor and in compliance with the provisions of Article 166 of theMexican Corporations Law and of the Company's bylaws, I hereby submit my report on theveracity, sufficiency and reasonability of the financial information presented to you by the Boardof Directors in connection with the Company's operations for the year ended December 31,2001.
I have attended the Stockholders' and Board of Directors' meetings, to which I was summoned,and I have obtained from the Company's Management all information and documentation relatedto the operations, transactions and accounting records that I considered necessary to examine.My examination was carried out in accordance with auditing standards generally accepted inMexico.
In my opinion, the accounting and financial reporting policies and criteria followed by thecompany and applied by Management in preparing the financial information presented to the Stockholders are adequate and sufficient, and were applied in a manner consistent with that ofthe previous year. Therefore, said information accurately, reasonably and sufficiently presents the financial position of Grupo Modelo, S.A. de C.V. at December 31, 2001 and the results of itsoperations, the changes in its stockholders' equity and the changes in its financial position for theyear then ended, in conformity with accounting principles generally accepted in Mexico.
Hugo Lara SilvaStatutory Auditor
Opinion of the Statutory Auditor
m080_FIN_ENG 5/22/02 9:30 PM Page 55
Global Reports LLC
Grupo Modelo 56 Annual Report 2001
Opinion of the Statutory Auditor
To the Stockholders ofGrupo Modelo, S.A. de C.V.
In my capacity as statutory auditor and in compliance with Article 166 of the MexicanCorporations Act and the bylaws of Grupo Modelo, S.A. de C.V., I am pleased to submitmy report on the consolidated finacial statements for the year ended December 31, 2001,presented to you by the Board of Directors.
Among the auditing procedures applied, I personally (or in my absence the alternatestatutory auditor) attended the Stockholders' and the Board of Directors' meetings to whichI was summoned. I reviewed, to the extent that I considered necessary in the circumstances,the unqualified report of the Company's independent auditors, dated February 15, 2002,issued as a result of their audit of the financial statements made in accordance with auditingstandards generally accepted in Mexico. Such financial statements are the responsibility ofthe Company's management.
In my opinion, based on my review and that of the independent auditors, the accounting andreporting policies and criteria observed by the Company in the preparation of theconsolidated financial statements that are being presented to the stockholders' are adequateand sufficient and were applied on a basis consistent with that of the prior year.Consequently, it is also my opinion that the above-mentioned consolidated financialstatements present fairly, in all material respects, the consolidated financial position ofGrupo Modelo, S.A. de C.V. and subsidiaries at December 31, 2001, the consolidatedresults of their operations, changes in their stockholders' equity and changes in theirfinancial position for the year then ended in conformity with accounting principles generallyaccepted in Mexico.
C.P.C. Alberto Tiburcio CelorioStatutory Auditor
Mexico City, MexicoFebruary 15, 2002
m080_FIN_ENG 5/22/02 9:30 PM Page 56
Global Reports LLC
Top Related