20-F/A 1 d722810d20fa.htm 20-F/A 20-F/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F/A

(Amendment No. 1)

 

 

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 1-12610

 

 

Grupo Televisa, S.A.B.

(Exact name of Registrant as specified in its charter)

 

 

N/A

(Translation of Registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

Av. Vasco de Quiroga No. 2000

Colonia Santa Fe

01210 Mexico, D.F.

Mexico

(Address of principal executive offices)

Joaquín Balcárcel Santa Cruz

Grupo Televisa, S.A.B.

Av. Vasco de Quiroga No. 2000

Colonia Santa Fe

01210 Mexico, D.F.

Telephone: (011-52) (55) 5261-2433

Facsimile: (011-52) (55) 5261-2465

E-mail: jbalcarcel@televisa.com.mx

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Name of each exchange on which registered

A Shares, without par value (“A Shares”)    New York Stock Exchange (for listing purposes only)
B Shares, without par value (“B Shares”)    New York Stock Exchange (for listing purposes only)
L Shares, without par value (“L Shares”)    New York Stock Exchange (for listing purposes only)

Dividend Preferred Shares, without par value (“D Shares”)

Global Depositary Shares (“GDSs”), each representing five

Ordinary Participation Certificates

(Certificados de Participación Ordinarios) (“CPOs”)

   New York Stock Exchange (for listing purposes only)
New York Stock Exchange

CPOs, each representing twenty-five A Shares, twenty-two

B Shares, thirty-five L Shares and thirty-five D Shares

   New York Stock Exchange (for listing purposes only)

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None.

The number of outstanding shares of each of the issuer’s classes of capital

or common stock as of December 31, 2013 was:

114,197,514,865 A Shares

52,920,431,915 B Shares

84,191,538,006 L Shares

84,191,538,006 D Shares

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x   Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP   ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x    Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

 

 

 


Explanatory Note

This Amendment No. 1 on Form 20-F/A (this “Amendment No. 1”) of Grupo Televisa, S.A.B. (the “Registrant”) is being filed solely to correct a typographical error contained in Note 10, Investments in Joint Ventures and Associates, on page F-36 of the Registrant’s consolidated year-end financial statements included in the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2013, which was originally filed on April 29, 2014 (the “Form 20-F”). The Registrant has corrected the presentation of operating income/(loss) reported on page F-36 relating to its joint venture GSF.

This Amendment No. 1 consists of a cover page, this explanatory note, Item 8 and Item 18 (each of which incorporates by reference pages F-1 through F-70), Item 19, pages F-1 through F-70 (including the corrected page F-36), the signature pages and required certifications of the chief executive officer and chief financial officer of the Registrant, as well as the consent of the Registrant’s independent registered public accounting firm.

This Amendment No. 1 does not reflect any events occurring after the filing of the Form 20-F and does not modify or update the disclosure therein in any way other than as required to reflect the amendments described in this explanatory note and reflected below. No other changes have been made to the Form 20-F, and the information contained in this Amendment No. 1 is current only as of the time of the filing of the Form 20-F.

 

2


Part I

 

Item 8. Financial Information

See “Financial Statements” and pages F-1 through F-70, which are incorporated in this Item 8 by reference.

 

3


Part III

 

Item 18. Financial Statements

See pages F-1 through F-70, which are incorporated in this Item 18 by reference.

 

Item 19. Exhibits

Documents filed as exhibits to this annual report appear on the following

(a) Exhibits.

EXHIBIT INDEX

 

Exhibit

Number

     

Description of Exhibits

1.1     English translation of Amended and Restated Bylaws (Estatutos Sociales) of the Registrant, dated as of April 30, 2009 (previously filed with the Securities and Exchange Commission as Exhibit 1.1 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2008, and incorporated herein by reference).
2.1     Indenture relating to Senior Debt Securities, dated as of August 8, 2000, between the Registrant, as Issuer, and The Bank of New York, as Trustee (previously filed with the Securities and Exchange Commission as Exhibit 4.1 to the Registrant’s Registration Statement on Form F-4 (File number 333-12738), as amended, and incorporated herein by reference).
2.2     Third Supplemental Indenture relating to the 8% Senior Notes due 2011, dated as of September 13, 2001, between the Registrant, as Issuer, and The Bank of New York and Banque Internationale à Luxembourg, S.A. (previously filed with the Securities and Exchange Commission as Exhibit 4.4 to the Registrant’s Registration Statement on Form F-4 (File number 333-14200) (the “2001 Form F-4”) and incorporated herein by reference).
2.3     Fourth Supplemental Indenture relating to the 8.5% Senior Exchange Notes due 2032 between the Registrant, as Issuer, and The Bank of New York and Dexia Banque Internationale à Luxembourg (previously filed with the Securities Exchange Commission as Exhibit 4.5 to the Registrant’s Registration Statement on Form F-4 (the “2002 Form F-4”) and incorporated herein by reference).

 

4


Exhibit

Number

     

Description of Exhibits

2.4     Fifth Supplemental Indenture relating to the 8% Senior Notes due 2011 between Registrant, as Issuer, and The Bank of New York and Dexia Banque Internationale à Luxembourg (previously filed with the Securities and Exchange Commission as Exhibit 4.5 to the 2001 Form F-4 and incorporated herein by reference).
2.5     Sixth Supplemental Indenture relating to the 8.5% Senior Notes due 2032 between Registrant, as Issuer, and The Bank of New York and Dexia Banque Internationale à Luxembourg (previously filed with the Securities and Exchange Commission as Exhibit 4.7 to the 2002 Form F-4 and incorporated herein by reference).
2.6     Seventh Supplemental Indenture relating to the 6 5/8% Senior Notes due 2025 between Registrant, as Issuer, and The Bank of New York and Dexia Banque Internationale à Luxembourg, dated March 18, 2005 (previously filed with the Securities and Exchange Commission as Exhibit 2.8 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2004 (the “2004 Form 20-F”) and incorporated herein by reference).
2.7     Eighth Supplemental Indenture relating to the 6 5/8% Senior Notes due 2025 between Registrant, as Issuer, and The Bank of New York and Dexia Banque Internationale à Luxembourg, dated May 26, 2005 (previously filed with the Securities and Exchange Commission as Exhibit 2.9 to the 2004 Form 20-F and incorporated herein by reference).
2.8     Ninth Supplemental Indenture relating to the 6 5/8% Senior Notes due 2025 between Registrant, as Issuer, The Bank of New York and Dexia Banque Internationale à Luxembourg, dated September 6, 2005 (previously filed with the Securities and Exchange Commission as Exhibit 2.8 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2005 (the “2005 Form 20-F”) and incorporated herein by reference).
2.9     Tenth Supplemental Indenture related to the 8.49% Senior Notes due 2037 between Registrant, as Issuer, The Bank of New York and The Bank of New York (Luxembourg) S.A., dated as of May 9, 2007 (previously filed with the Securities and Exchange Commission as Exhibit 2.9 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2006, and incorporated herein by reference).
2.10     Eleventh Supplemental Indenture relating to the 8.49% Senior Exchange Notes due 2037 between Registrant, as Issuer, The Bank of New York and The Bank of New York (Luxembourg) S.A., dated as August 24, 2007 (previously filed with the Securities and Exchange Commission as Exhibit 4.12 to the Registrant’s Registration Statement on Form F-4 (File number 333-144460), as amended, and incorporated herein by reference).
2.11     Twelfth Supplemental Indenture related to the 6.0% Senior Notes due 2018 between Registrant, as Issuer, The Bank of New York and The Bank of New York (Luxembourg) S.A., dated as of May 12, 2008 (previously filed with the Securities and Exchange Commission as Exhibit 2.11 to the Form 20-F for the year ended December 31, 2007 (the “2007 Form 20-F”) and incorporated herein by reference).
2.12     Form of Deposit Agreement between the Registrant, The Bank of New York, as depositary and all holders and beneficial owners of the Global Depositary Shares, evidenced by Global Depositary Receipts (previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant’s Registration Statement on Form F-6 (File number 333-146130) and incorporated herein by reference).
2.13     Thirteenth Supplemental Indenture relating to the 6.0% Senior Exchange Notes due 2018 between Registrant, as Issuer, The Bank of New York Mellon and The Bank of New York (Luxembourg) S.A., dated as of August 21, 2008 (previously filed with the Securities and Exchange Commission as Exhibit 4.14 to the Registrant’s Registration Statement on Form F-4 (File number 333-144460), as amended, and incorporated herein by reference).
2.14     Fourteenth Supplemental Indenture relating to the 6.625% Senior Notes due 2040 between Registrant, as Issuer, The Bank of New York Mellon and The Bank of New York (Luxembourg) S.A., dated as of November 30, 2009 (previously filed with the Securities and Exchange Commission as Exhibit 4.15 to the Registrant’s Registration Statement on Form F-4 (File number 333-164595), as amended, and incorporated herein by reference).

 

5


Exhibit

Number

     

Description of Exhibits

2.15     Fifteenth Supplemental Indenture relating to the 6.625% Senior Exchange Notes due 2040 between Registrant, as Issuer, The Bank of New York Mellon and The Bank of New York (Luxembourg) S.A., dated as of March 22, 2010 (previously filed with the Securities and Exchange Commission as Exhibit 2.15 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2009 and incorporated herein by reference).
2.16     Sixteenth Supplemental Indenture relating to the 7.25% Peso Denominated Senior Notes due 2043 among the Registrant, The Bank of New York Mellon, as Trustee, Registrar, Paying Agent and Transfer Agent, the Bank of New York Mellon, London Branch, as London Paying Agent and the Bank of New York Mellon (Luxembourg) S.A., as Luxembourg Paying Agent and Transfer Agent, dated as of May 14, 2013 (previously filed with the Securities and Exchange Commission as Exhibit 4.1 to the Registrant’s Form 6-K filed on May 14, 2013 and incorporated herein by reference).
4.1     Form of Indemnity Agreement between the Registrant and its directors and executive officers (previously filed with the Securities and Exchange Commission as Exhibit 10.1 to the Registrant’s Registration Statement on Form F-4 (File number 33-69636), as amended, and incorporated herein by reference).
4.2     Amended and Restated Collateral Trust Agreement, dated as of June 13, 1997, as amended, among PanAmSat Corporation, Hughes Communications, Inc., Satellite Company, LLC, the Registrant and IBJ Schroder Bank and Trust Company (previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2001 and incorporated herein by reference).
4.3     Amended and Restated Bylaws (Estatutos Sociales) of Innova, S. de R.L. de C.V. (“Innova”) dated as of December 22, 1998 (previously filed with the Securities and Exchange Commission as an Exhibit to Innova’s Annual Report on Form 20-F for the year ended December 31, 2004 and incorporated herein by reference).
4.4     Administration Trust Agreement relating to Trust No. 80375, dated as of March 23, 2004, by and among Nacional Financiera, S.N.C., as trustee of Trust No. 80370, Banco Inbursa, S.A., as trustee of Trust No. F/0553, Banco Nacional de México, S.A., as trustee of Trust No. 14520-1, Nacional Financiera, S.N.C., as trustee of Trust No. 80375, Emilio Azcárraga Jean, Promotora Inbursa, S.A. de C.V., the Registrant and Grupo Televicentro, S.A. de C.V. (as previously filed with the Securities and Exchange Commission as an Exhibit to Schedules 13D or 13D/A in respect of various parties’ to the Trust Agreement (File number 005-60431) and incorporated herein by reference).
4.5     English translation of Ps.2,100.0 million credit agreement, dated as of March 10, 2006, by and among Innova, the Registrant and Banamex (previously filed with the Securities and Exchange Commission as Exhibit 4.7 to the 2005 Form 20-F and incorporated herein by reference).
4.6     English summary of Ps.1,400.0 million credit agreement, dated as of April 7, 2006, by and among Innova, the Registrant and Banco Santander Serfin, S.A. (the “April 2006 Credit Agreement”) and the April 2006 Credit Agreement (in Spanish) (previously filed with the Securities and Exchange Commission as Exhibit 4.7 to the 2005 Form 20-F and incorporated herein by reference).
4.7     Third Amended and Restated Program License Agreement, dated as of January 22, 2009, by and between Televisa, S.A. de C.V., as successor in interest to Televisa Internacional, S.A. de C.V. and Univision Communications Inc. (previously filed with the Securities and Exchange Commission on February 2, 2009 (File number 001-12610) and incorporated herein by reference).
4.8     Full-Time Transponder Service Agreement, dated as of November             , 2007, by and among Intelsat Corporation, Intelsat LLC, Corporación de Radio y Televisión del Norte de México, S. de R. L. de C.V. and SKY Brasil Serviços Ltda (previously filed with the Securities and Exchange Commission as Exhibit 4.16 to the 2007 Form 20-F and incorporated herein by reference).
4.9*     Investment Agreement, dated as of December 20, 2010 (the “Investment Agreement”), by and among the Registrant, Televisa, S.A. de C.V., Univision Communications Inc., Broadcasting Media Partners, Inc., and UCI’s direct and indirect licensee subsidiaries named therein (previously filed with the Securities and Exchange Commission as Exhibit 4.19 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).

 

6


Exhibit

Number

     

Description of Exhibits

4.10     Amendment, dated as of February 28, 2011, to the Investment Agreement, dated as of December 20, 2010, by and among Broadcasting Media Partners, Inc., BMPI Services II, LLC, Univision Communications Inc., the Registrant and Pay-TV Venture, Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.20 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.11     $1,125 million aggregate principal amount of 1.5% Convertible Debentures due 2025 issued by Broadcasting Media Partners, Inc. pursuant to the Investment Agreement, dated as of December 20, 2010 (previously filed with the Securities and Exchange Commission as Exhibit 4.21 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.12     Amended and Restated Certificate of Incorporation of Broadcasting Media Partners, Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.22 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.13     Amended and Restated Bylaws of Broadcasting Media Partners, Inc. dated as of December 20, 2010 (previously filed with the Securities and Exchange Commission as Exhibit 4.23 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.14*     Amended and Restated Stockholders Agreement, dated as of December 20, 2010, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Univision Communications Inc., and certain stockholders of Broadcasting Media Partners, Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.24 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.15     Amendment, dated as of February 28, 2011, to the Amended and Restated Stockholders Agreement, dated as of December 20, 2010, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Univision Communications Inc., and certain stockholders of Broadcasting Media Partners, Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.25 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.16*     Amended and Restated Principal Investor Agreement, dated as of December 20, 2010, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Univision Communications Inc., the Registrant and certain investors (previously filed with the Securities and Exchange Commission as Exhibit 4.26 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.17*     Amended and Restated 2011 Program License Agreement, dated as of February 28, 2011, by and among Televisa, S.A. de C.V. and Univision Communications Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.27 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.18     Amendment to International Program Rights Agreement, dated as of December 20, 2010, by and among Univision Communications Inc. and the Registrant (previously filed with the Securities and Exchange Commission as Exhibit 4.28 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.19*     Amended and Restated 2011 Mexico License Agreement, dated as of February 28, 2011, by and among Univision Communications Inc. and Videoserpel, Ltd. (previously filed with the Securities and Exchange Commission as Exhibit 4.29 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.20     Letter Agreement, dated as of February 28, 2011, by and among Televisa, S.A. de C.V., the Registrant and Univision Communications Inc. (previously filed with the Securities and Exchange Commission as Exhibit 4.30 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.21*     Purchase and Assignment and Assumption Agreement, dated as of December 20, 2010, by and among Pay-TV Venture, Inc., TuTv LLC and Univision Communications Inc., solely for purposes of Section 1.4, Televisa, S.A. de C.V., as successor to Visat, S.A. de C.V. and Televisa Internacional, S.A. de C.V., and, solely for purposes of Section 1.5, the Registrant (previously filed with the Securities and Exchange Commission as Exhibit 4.31 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).

 

7


Exhibit

Number

     

Description of Exhibits

4.22     English summary of Shareholders’ and Share Purchase Agreement, dated as of December 16, 2010 (and amended on April 7, 2011), by and among Grupo Salinas Telecom, S.A. de C.V., Mexico Media Investments, S.L., Sociedad Unipersonal, GSF Telecom Holdings, S.A.P.I. de C.V., Orilizo Holding B.V. and Grupo Iusacell, S.A. de C.V. and Assignment Agreement with respect to the Shareholders’ and Share Purchase Agreement, dated as of April 7, 2011, by and among Mexico Media Investments S.L., Sociedad Unipersonal, as assignor and Corporativo Vasco de Quiroga, S.A. de C.V., as assignee, with the consent of Grupo Salinas Telecom, S.A. de C.V., GSF Telecom Holdings, S.A.P.I. de C.V., Orilizo Holding B.V. and Grupo Iusacell, S.A. de C.V. (previously filed with the Securities and Exchange Commission as Exhibit 4.32 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.23     English summary of Irrevocable Guaranty Trust Agreement, dated as of December 16, 2010 (and amended on December 16, 2010 and April 7, 2011), by and among Grupo Salinas Telecom, S.A. de C.V., México Media Investments, S.L., GSF Telecom Holdings, S.A.P.I. de C.V. and Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero and Assignment Agreement with respect to the Irrevocable Guaranty Trust Agreement, dated as of April 7, 2011, by and among Mexico Media Investments S.L., Sociedad Unipersonal, as assignor and Corporativo Vasco de Quiroga, S.A. de C.V., as assignee, with the consent of Grupo Salinas Telecom, S.A. de C.V., GSF Telecom Holdings, S.A.P.I. de C.V. and Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero (previously filed with the Securities and Exchange Commission as Exhibit 4.33 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.24     English Summary of Amendment and Restatement of the Indenture, dated April 7, 2011, relating to the issuance of the Series 1 and Series 2 Debentures by GSF Telecom Holdings, Sociedad Anónima Promotora de Inversión de Capital Variable with the consent of Deutsche Bank México, Sociedad Anónima, Institución de Banca Múltiple, División Fiduciaria and Assignment Agreement with respect to the Series 1 and Series 2 Debentures, dated April 7, 2011, by and among Mexico Media Investments S.L., Sociedad Unipersonal, as assignor and Corporativo Vasco de Quiroga, S.A. de C.V., as assignee, with the consent of GSF Telecom Holdings, S.A.P.I. de C.V. and Deutsche Bank México, S.A., Institución de Banca Múltiple, División Fiduciaria (previously filed with the Securities and Exchange Commission as Exhibit 4.34 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.25     English summary of Ps.400 million credit agreement, dated as of March 23, 2011, between the Registrant and Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex (previously filed with the Securities and Exchange Commission as Exhibit 4.35 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.26     English summary of Ps.800 million credit agreement, dated as of March 23, 2011, between the Registrant and Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex (previously filed with the Securities and Exchange Commission as Exhibit 4.36 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.27     English summary of Ps.400 million credit agreement, dated as of March 23, 2011, between the Registrant and Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex (previously filed with the Securities and Exchange Commission as Exhibit 4.37 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.28     English summary of Ps.2,500 million credit agreement, dated as of March 30, 2011, between the Registrant and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer (previously filed with the Securities and Exchange Commission as Exhibit 4.38 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).

 

8


Exhibit

Number

     

Description of Exhibits

4.29     English summary of Ps.2,500 million credit agreement, dated as of March 28, 2011, between the Registrant and HSBC México, S.A., Institución de Banca Múltiple, Grupo Financiero HSBC (previously filed with the Securities and Exchange Commission as Exhibit 4.39 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.30     English summary of Ps.2,000 million credit agreement, dated as of March 30, 2011, between the Registrant and Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander (previously filed with the Securities and Exchange Commission as Exhibit 4.40 to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2010 and incorporated herein by reference).
4.31**     English summary of indenture, dated July 31, 2013, related to the issuance of Ps.7,000 million convertible debentures, by Tenedora Ares, S.A.P.I de C.V., together with Banco Invex, Sociedad Anónima, Institución de Banca Múltiple, Invex Grupo Financiero, Fiduciario, in its capacity as common representative for the holders of the debentures.
4.32**     English summary of call and put option agreement, dated July 31, 2013, by and among Tenedora Ares, S.A.P.I. de C.V., Thomas Stanley Heather Rodríguez, Vamole Inversiones 2013, S.L. Sociedad Unipersonal and Arretis, S.A.P.I. de C.V.
8.1**     List of Subsidiaries of Registrant.
12.1     CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2014.
12.2     CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 6, 2014.
13.1     CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2014.
13.2     CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 6, 2014.
23.1     Consent of PricewaterhouseCoopers, S.C.

 

* Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
** Previously filed.

Instruments defining the rights of holders of certain issues of long-term debt of the Registrant and its consolidated subsidiaries have not been filed as exhibits to this Form 20-F because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.

(b) Financial Statement Schedules

All financial statement schedules relating to the Registrant are omitted because they are not required or because the required information, if material, is contained in the audited year-end financial statements or notes thereto.

 

9


SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

GRUPO TELEVISA, S.A.B.
By:  

/s/ Salvi Rafael Folch Viadero

 

Name: Salvi Rafael Folch Viadero

Title: Chief Financial Officer

By:  

/s/ Jorge Lutteroth Echegoyen

 

Name: Jorge Lutteroth Echegoyen

Title: Vice President — Corporate Controller

Date: May 6, 2014

 

10


INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF

GRUPO TELEVISA, S. A. B. AND SUBSIDIARIES

 

     Page  

Report of Independent Registered Public Accounting Firm

     F-2   

Consolidated Statements of Financial Position as of December 31, 2013 and 2012

     F-3   

Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011

     F-5   

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011

     F-6   

Consolidated Statements of Changes in Equity for the Years Ended December 31, 2013, 2012 and 2011

     F-7   

Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011

     F-8   

Notes to Consolidated Financial Statements for the Years Ended December 31, 2013, 2012 and 2011

     F-10   

 

F-1


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Grupo Televisa, S.A.B.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Grupo Televisa, S.A.B (the “Company”), and subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in “Management’s Annual Report on Internal Control Over Financial Reporting” appearing in Item 15. Our responsibility is to express opinions on these financial statements and the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America) and International Standards on Auditing. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers, S.C.

/s/ C.P.C. Jorge López de Cárdenas Melgar

Audit Partner

México, D.F.

April 29, 2014

 

F-2


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2013 and 2012

(In thousands of Mexican Pesos) (Notes 1, 2 and 3)

 

     Notes    2013      2012  

ASSETS

        

Current assets:

        

Cash and cash equivalents

   6    Ps. 16,692,033       Ps. 19,063,325   

Temporary investments

   6      3,722,976         5,317,296   

Trade notes and accounts receivable, net

   7      20,734,137         18,982,277   

Other accounts and notes receivable, net

        2,405,871         2,475,533   

Derivative financial instruments

   14      3,447         2,373   

Due from affiliated companies

   19      1,353,641         1,436,892   

Transmission rights and programming

   8      4,970,603         4,462,348   

Inventories, net

        1,718,366         1,508,581   

Other current assets

        1,606,671         1,389,129   
     

 

 

    

 

 

 

Total current assets

        53,207,745         54,637,754   
     

 

 

    

 

 

 

Non-current assets:

        

Accounts receivable

        —           334,775   

Derivative financial instruments

   14      4,941         12,627   

Transmission rights and programming

   8      9,064,845         6,435,609   

Investments in financial instruments

   9      38,016,402         20,867,624   

Investments in joint ventures and associates

   10      18,250,764         22,111,315   

Property, plant and equipment, net

   11      53,476,475         48,267,322   

Intangible assets, net

   12      11,382,311         11,126,791   

Deferred income taxes

   23      10,608,778         1,100,731   

Other assets

        96,659         102,603   
     

 

 

    

 

 

 

Total non-current assets

        140,901,175         110,359,397   
     

 

 

    

 

 

 

Total assets

      Ps.  194,108,920       Ps.  164,997,151   
     

 

 

    

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2013 and 2012

(In thousands of Mexican Pesos) (Notes 1, 2 and 3)

 

     Notes    2013     2012  

LIABILITIES

       

Current liabilities:

       

Short-term debt and current portion of long-term debt

   13    Ps.   312,715      Ps.   375,000   

Current portion of finance lease obligations

   13      424,698        439,257   

Trade payables

        10,719,484        8,594,138   

Customer deposits and advances

        21,962,847        21,215,862   

Income taxes payable

        642,385        512,593   

Other taxes payable

        1,050,030        843,225   

Interest payable

        796,229        741,819   

Employee benefits

        857,903        783,459   

Due to affiliated companies

        183,285        27,463   

Derivative financial instruments

   14      —          1,176   

Other accrued liabilities

        3,333,491        2,642,619   
     

 

 

   

 

 

 

Total current liabilities

        40,283,067        36,176,611   
     

 

 

   

 

 

 

Non-current liabilities:

       

Long-term debt, net of current portion

   13      59,743,100        52,616,419   

Finance lease obligations, net of current portion

   13      4,494,549        4,531,893   

Derivative financial instruments

   14      335,336        351,586   

Customer deposits and advances

        474,011        769,301   

Income taxes payable

   23      6,800,806        372,071   

Other long-term liabilities

        3,318,808        1,605,815   

Post-employment benefits

   15      79,810        38,852   
     

 

 

   

 

 

 

Total non-current liabilities

        75,246,420        60,285,937   
     

 

 

   

 

 

 

Total liabilities

        115,529,487        96,462,548   
     

 

 

   

 

 

 

EQUITY

       

Capital stock

   16      4,978,126        4,978,126   

Additional paid-in-capital

        15,889,819        15,889,819   

Retained earnings

   17      56,897,886        51,073,399   

Accumulated other comprehensive income, net

   17      3,394,051        1,805,884   

Shares repurchased

   16      (12,848,448     (13,103,223
     

 

 

   

 

 

 

Equity attributable to stockholders of the Company

        68,311,434        60,644,005   

Non-controlling interests

   18      10,267,999        7,890,598   
     

 

 

   

 

 

 

Total equity

        78,579,433        68,534,603   
     

 

 

   

 

 

 

Total liabilities and equity

      Ps.  194,108,920      Ps.  164,997,151   
     

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Income

For the Years ended December 31, 2013, 2012 and 2011

(In thousands of Mexican Pesos, except per CPO amounts) (Notes 1, 2 and 3)

 

     Notes    2013     2012     2011  

Net sales

   25    Ps.  73,790,711      Ps.  69,290,409      Ps.  62,581,541   

Cost of sales

   20      39,602,423        36,795,944        33,486,015   

Selling expenses

   20      7,280,649        6,251,773        5,500,628   

Administrative expenses

   20      8,086,154        7,452,707        6,727,561   
     

 

 

   

 

 

   

 

 

 

Income before other expense

   25      18,821,485        18,789,985        16,867,337   

Other expense, net

   21      (83,150     (650,432     (593,661
     

 

 

   

 

 

   

 

 

 

Operating income

        18,738,335        18,139,553        16,273,676   
     

 

 

   

 

 

   

 

 

 

Finance expense

   22      (5,086,972     (4,522,185     (5,787,493

Finance income

   22      5,971,689        1,171,693        1,146,517   
     

 

 

   

 

 

   

 

 

 

Finance income (expense), net

        884,717        (3,350,492     (4,640,976
     

 

 

   

 

 

   

 

 

 

Share of loss of joint ventures and associates, net

   10      (5,659,963     (666,602     (449,318
     

 

 

   

 

 

   

 

 

 

Income before income taxes

        13,963,089        14,122,459        11,183,382   

Income taxes

   23      3,728,962        4,053,291        3,226,067   
     

 

 

   

 

 

   

 

 

 

Net income

      Ps. 10,234,127      Ps. 10,069,168      Ps. 7,957,315   
     

 

 

   

 

 

   

 

 

 

Net income attributable to:

         

Stockholders of the Company

      Ps. 7,748,279      Ps. 8,760,637      Ps. 6,665,936   

Non-controlling interests

   18      2,485,848        1,308,531        1,291,379   
     

 

 

   

 

 

   

 

 

 

Net income

      Ps. 10,234,127      Ps. 10,069,168      Ps. 7,957,315   
     

 

 

   

 

 

   

 

 

 

Basic earnings per CPO attributable to stockholders of the Company

   24    Ps. 2.71      Ps. 3.08      Ps. 2.37   
     

 

 

   

 

 

   

 

 

 

Diluted earnings per CPO attributable to stockholders of the Company

   24    Ps. 2.50      Ps. 2.83      Ps. 2.24   
     

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2013, 2012 and 2011

(In thousands of Mexican Pesos) (Notes 1, 2 and 3)

 

     Notes    2013     2012     2011  

Net income

      Ps.  10,234,127      Ps.  10,069,168      Ps.  7,957,315   
     

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

         

Items that will not be reclassified to income:

         

Remeasurement of post-employment benefit obligations

   15      133,863        (75,065     2,218   

Items that may be subsequently reclassified to income:

         

Exchange differences on translating foreign operations

        64,591        (287,343     241,725   

Equity instruments

   9      254,662        212,948        —     

Cash flow hedges

        17,025        (141,098     150,016   

1.5% Convertible debentures due 2025 issued by BMP

   9      592,810        1,202,489        545,136   

Convertible debentures issued by GSF:

         

(Loss) gain from changes in fair value

   9      —          (1,628,675     695,675   

Reclassification to other finance expense

   9      —          933,000        —     

Convertible debt instruments issued by Ares

   9      100,333        —          —     

Long-term debt instrument issued by Ares

   9      (54,184     —          —     

Available-for-sale investments

   9      987,671        377,863        (402,187

Share of other comprehensive income (loss) of joint ventures and associates

   10      105,259        50,606        (37,314
     

 

 

   

 

 

   

 

 

 

Other comprehensive income before income taxes

        2,202,030        644,725        1,195,269   

Income taxes

   23      (602,684     (183,474     (344,169
     

 

 

   

 

 

   

 

 

 

Other comprehensive income

        1,599,346        461,251        851,100   
     

 

 

   

 

 

   

 

 

 

Total comprehensive income

      Ps. 11,833,473      Ps. 10,530,419      Ps. 8,808,415   
     

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

         

Stockholders of the Company

      Ps. 9,336,446      Ps. 9,243,319      Ps. 7,442,603   

Non-controlling interests

   18      2,497,027        1,287,100        1,365,812   
     

 

 

   

 

 

   

 

 

 

Total comprehensive income

      Ps. 11,833,473      Ps. 10,530,419      Ps. 8,808,415   
     

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-6


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2013, 2012 and 2011

(In thousands of Mexican Pesos) (Notes 1, 2 and 3)

 

    Capital
Stock Issued
(Note 16)
    Additional
Paid-in
Capital
    Retained
Earnings
(Note 17)
    Accumulated
Other
Comprehensive
Income
(Note 17)
    Shares
Repurchased
(Note 16)
    Equity
Attributable to
Stockholders
of the
Company
    Non-controlling
Interests

(Note 18)
    Total Equity  

Balance at January 1, 2011

  Ps.  4,883,782      Ps. 3,844,524      Ps.  41,493,638      Ps. 546,535      Ps. (6,156,625   Ps. 44,611,854      Ps. 8,628,731      Ps. 53,240,585   

Dividends

    —          —          (1,023,012     —          —          (1,023,012     (2,202,243     (3,225,255

Shares issued

    120,787        10,379,213        —          —          —          10,500,000        (39,454     10,460,546   

Shares repurchased

    —          —          —          —          (11,442,740     (11,442,740     —          (11,442,740

Sale of shares

    —          —          (697,467     —          1,627,655        930,188        —          930,188   

Acquisition of a non-controlling interest in Cablemás (Note 3)

    36,239        1,666,082        (1,595,796     —          —          106,525        (470,076     (363,551

Stock-based compensation

    —          —          649,325        —          —          649,325        —          649,325   

Other adjustments to non-controlling interests

    —          —          —          —          —          —          31,862        31,862   

Comprehensive income

    —          —          6,665,936        776,667        —          7,442,603        1,365,812        8,808,415   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

    5,040,808        15,889,819        45,492,624        1,323,202        (15,971,710     51,774,743        7,314,632        59,089,375   

Dividends

    —          —          (1,002,692     —          —          (1,002,692     (672,988     (1,675,680

Share cancellation

    (62,682     —          (1,929,032     —          1,991,714        —          —          —     

Shares repurchased

    —          —          —          —          (533,038     (533,038     —          (533,038

Sale of shares

    —          —          (876,775     —          1,409,811        533,036        —          533,036   

Stock-based compensation

    —          —          628,637        —          —          628,637        —          628,637   

Other adjustments to non-controlling interests

    —          —          —          —          —          —          (38,146     (38,146

Comprehensive income

    —          —          8,760,637        482,682        —          9,243,319        1,287,100        10,530,419   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

    4,978,126        15,889,819        51,073,399        1,805,884        (13,103,223     60,644,005        7,890,598        68,534,603   

Dividends

    —          —          (2,168,384     —          —          (2,168,384     (118,238     (2,286,622

Adjustment for adoption of IAS 19, as amended (Note 1 (t))

    —          —          (101,814     —          —          (101,814     (1,088     (102,902

Shares repurchased

    —          —          —          —          (1,057,083     (1,057,083     —          (1,057,083

Sale of shares

    —          —          (254,775     —          1,311,858        1,057,083        —          1,057,083   

Stock-based compensation

    —          —          601,181        —          —          601,181        —          601,181   

Other adjustments to non-controlling interests

    —          —          —          —          —          —          (300     (300

Comprehensive income

    —          —          7,748,279        1,588,167        —          9,336,446        2,497,027        11,833,473   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2013

  Ps. 4,978,126      Ps.  15,889,819      Ps. 56,897,886      Ps.  3,394,051      Ps. (12,848,448   Ps. 68,311,434      Ps.  10,267,999      Ps. 78,579,433   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-7


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2013, 2012 and 2011

(In thousands of Mexican Pesos) (Notes 1, 2 and 3)

 

     2013     2012     2011  

Operating Activities:

      

Income before income taxes

   Ps. 13,963,089      Ps. 14,122,459      Ps. 11,183,382   

Adjustments to reconcile income before income taxes to net cash provided by operating activities:

      

Share of loss of joint ventures and associates

     5,659,963        666,602        449,318   

Depreciation and amortization

     9,846,366        8,474,240        7,361,552   

Write-off and other amortization of assets

     185,080        221,204        275,794   

Impairment of long-lived assets

     59,648        —          —     

Disposition of property, plant and equipment

     236,667        270,556        61,633   

Provision for doubtful accounts and write-off of receivables

     873,097        814,153        689,057   

Post-employment benefits

     143,133        183,523        93,561   

Interest income

     (192,712     (106,529     (226,769

Stock-based compensation

     601,181        628,637        649,325   

Derivative financial instruments

     (4,841,734     152,909        899,410   

Gain on disposition of investments

     —          (24,856     —     

Interest expense

     4,803,151        4,369,276        4,174,455   

Unrealized foreign exchange loss (gain), net

     128,619        (540,302     952,440   
  

 

 

   

 

 

   

 

 

 
     31,465,548        29,231,872        26,563,158   
  

 

 

   

 

 

   

 

 

 

Increase in trade notes and accounts receivable, net

     (2,604,151     (594,478     (2,097,433

Increase in transmission rights and programming

     (3,133,650     (599,758     (1,355,910

Decrease (increase) in due from affiliated companies, net

     154,301        (1,057,783     (134,595

Increase in inventories

     (238,760     (27,207     (113,275

(Increase) decrease in other accounts and notes receivable and other current assets

     (2,290,656     (761,179     1,367,361   

Increase (decrease) in trade payable

     2,159,414        711,155        (21,162

Increase in customer deposits and advances

     448,725        608,647        2,269,052   

Increase (decrease) in other liabilities, taxes payable and deferred taxes

     2,639,723        (834,293     112,785   

Increase in post-employment benefits

     404        414,230        36,235   

Income taxes paid

     (4,794,693     (4,535,143     (3,622,589
  

 

 

   

 

 

   

 

 

 
     (7,659,343     (6,675,809     (3,559,531
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     23,806,205        22,556,063        23,003,627   
  

 

 

   

 

 

   

 

 

 

Investing activities:

      

Temporary investments, net

     1,604,322        170,396        5,238,418   

Due from affiliated companies, net

     9,882        (18,140     (64,800

Held-to-maturity and available-for-sale investments

     (517,199     (274,958     (313,853

Disposition of held-to-maturity and available-for-sale investments

     263,737        308,643        580,793   

Investments in financial instruments

     (9,492,744     —          —     

Investment in convertible debentures

     —          —          (19,229,056

Equity method and other investments

     (1,588,925     (452,023     (1,907,471

Disposition of equity method and other investments

     —          12,830        66,310   

Investments in property, plant and equipment

     (14,870,672     (11,428,422     (9,668,501

Disposition of property, plant and equipment

     169,218        336,278        529,970   

Investments in intangible assets

     (824,072     (822,027     (464,156
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (25,246,453     (12,167,423     (25,232,346
  

 

 

   

 

 

   

 

 

 

 

F-8


Financing activities:

      

Long-term Mexican banks

     493,383        239,400        9,700,000   

Issuance of Senior Notes due 2043

     6,437,204        —          —     

Repayment of Senior Notes due 2011

     —          —          (898,776

Prepayment of bank loan facility (Empresas Cablevisión)

     —          —          (2,700,135

Repayment of Mexican peso debt

     (375,000     (1,020,000     (410,000

Capital lease payments

     (376,159     (645,184     (332,673

Interest paid

     (4,681,676     (4,355,869     (4,067,162

Repurchase of capital stock

     (1,057,083     (533,036     (942,740

Sale of capital stock

     1,057,083        533,036        930,188   

Dividends paid

     (2,168,384     (1,002,692     (1,023,012

Non-controlling interests

     (112,651     (672,988     (2,649,274

Derivative financial instruments

     (140,534     (90,466     (149,518
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (923,817     (7,547,799     (2,543,102
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (7,227     (53,440     105,214   
  

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (2,371,292     2,787,401        (4,666,607

Cash and cash equivalents at beginning of year

     19,063,325        16,275,924        20,942,531   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of year

     Ps. 16,692,033        Ps. 19,063,325        Ps. 16,275,924   
  

 

 

   

 

 

   

 

 

 

Non-cash transactions:

The principal non-cash transactions in 2013 included an impairment adjustment to the Group’s joint venture investment in GSF (see Note 3); a favorable change in fair value in the Group’s investment in Convertible Debentures of BMP (see Note 9); and the acquisition of assets under lease agreements recognized as finance leases (see Notes 13 and 19). The principal non-cash transactions in 2012 and 2011 included the acquisition in 2012 of property and equipment and intangible assets under lease agreements recognized as finance leases (see Notes 11, 13 and 19); and the issuance of shares of the Company in 2011 as consideration for the acquisition of a non-controlling interest in Cablemás (see Notes 3 and 16).

The accompanying notes are an integral part of these consolidated financial statements.

 

F-9


GRUPO TELEVISA, S.A.B. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2013, 2012 and 2011

(In thousands of Mexican Pesos, except per CPO, per share, par value and exchange rate amounts)

1. Corporate Information

Grupo Televisa, S.A.B. (the “Company”) is a limited liability public stock corporation (“Sociedad Anónima Bursátil” or “S.A.B.”), incorporated under the laws of Mexico. Pursuant to the terms of the Company’s bylaws (“Estatutos Sociales”) its corporate existence continues through 2106. The shares of the Company are listed and traded in the form of “Certificados de Participación Ordinarios” or “CPOs” on the Mexican Stock Exchange (“Bolsa Mexicana de Valores”) under the ticker symbol TLEVISA CPO, and in the form of Global Depositary Shares or GDSs, on the New York Stock Exchange, or NYSE, under the ticker symbol TV. The Company’s principal executive offices are located at Avenida Vasco de Quiroga 2000, Colonia Santa Fe, 01210 México, D. F., México.

Grupo Televisa, S.A.B. together with its subsidiaries (collectively, the “Group”) is the largest media company in the Spanish-speaking world based on its market capitalization and a major participant in the international entertainment business. It operates four broadcast channels in Mexico City and distributes its audiovisual content through different platforms in Mexico, produces and distributes 24 pay-TV brands for distribution in Mexico and the rest of the world, and exports its programs and formats to the United States through Univision Communications Inc. (“Univision”) and to other television networks in over 50 countries. The Group is also an active participant in Mexico’s telecommunications industry. It has a majority interest in Sky, a leading direct-to-home satellite television system operating in Mexico, the Dominican Republic and Central America, and in four telecommunications businesses: Cablevisión, Cablemás, TVI, and Bestel, which offer pay-TV, video, voice and broadband services. The Group also has interests in magazine publishing and distribution, radio production and broadcasting, professional sports and live entertainment, feature-film production and distribution, the operation of a horizontal Internet portal, and gaming. In addition, the Group has a 50% equity stake in GSF Telecom Holdings, S.A.P.I. de C.V. (“GSF”), the controlling company of Grupo Iusacell, S.A. de C.V. (“Iusacell”), Mexico’s third mobile telecom provider based on its subscribers. In the United States, the Group has equity and debentures that, upon conversion and subject to any necessary approval from the Federal Communications Commission in the United States, would represent approximately 38% on a fully-diluted, as-coverted basis of the equity capital in Broadcasting Media Partners, Inc. (“BMP”), the controlling company of Univision, the leading media company serving the United States Hispanic market.

2. Accounting Policies

The principal accounting policies followed by the Group and used in the preparation of these consolidated financial statements are summarized below.

(a) Basis of Presentation

As required by regulations issued by the Mexican Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores”) for listed companies in Mexico, beginning on January 1, 2012, the Group discontinued using Mexican Financial Reporting Standards (“Mexican FRS”) as issued by the Mexican Financial Reporting Standards Board (“Consejo Mexicano de Normas de Información Financiera” or “CINIF”) and began using International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) for financial reporting purposes. IFRSs comprise: (i) International Financial Reporting Standards (“IFRS”); (ii) International Accounting Standards (“IAS”); (iii) IFRS Interpretations Committee (“IFRIC”) Interpretations; and (iv) Standing Interpretations Committee (“SIC”) Interpretations.

The consolidated financial statements of the Group as of December 31, 2013 and 2012, and for the years ended December 31, 2013, 2012 and 2011, are presented in accordance with IFRSs as issued by the IASB. Through December 31, 2011 the consolidated financial statements of the Group were reported in accordance with Mexican FRS.

The consolidated financial statements have been prepared on a historical cost basis, except by the measurement at fair value of temporary investments, derivative financial instruments, available-for-sale financial assets, and equity financial instruments as described below.

 

F-10


The preparation of consolidated financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group accounting policies. Changes in assumptions may have a significant impact on the consolidated financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgment or complexity, or areas where estimates and assumptions are significant to the Group’s financial statements are disclosed in Note 5 to these consolidated financial statements.

These consolidated financial statements were authorized for issuance on April 8, 2014, by the Group’s Chief Financial Officer.

(b) Consolidation

The financial statements of the Group are prepared on a consolidated basis and include the assets, liabilities and results of operations of all companies in which the Company has a controlling interest (subsidiaries). All intercompany balances and transactions have been eliminated from the financial statements.

Subsidiaries

Subsidiaries are all entities over which the Company has control. The Group controls an entity when this is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether or not the Company controls another entity. The subsidiaries are consolidated from the date on which control is obtained by the Company and cease to consolidate from the date on which said control is lost.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis.

Acquisition-related costs are expensed as incurred.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in income or loss.

Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Disposal of subsidiaries

When the Company ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This means that amounts previously recognized in other comprehensive income are reclassified to income or loss.

 

F-11


At December 31, 2013, 2012 and 2011, the main subsidiaries of the Company were as follows:

 

Entity

   Company’s
Ownership
Interest (1)
    Business
Segment (2)

Grupo Telesistema, S.A. de C.V. and subsidiaries

     100   Content

Televisa, S.A. de C.V. (“Televisa”) (3)

     100   Content

G-Televisa-D, S.A. de C.V. (3)

     100   Content

Multimedia Telecom, S.A. de C.V. (4)

     100   Content

Editorial Televisa, S.A. de C.V. and subsidiaries

     100   Publishing

Innova, S. de R.L. de C.V. and subsidiaries (collectively, “Sky”) (5)

     58.7   Sky

Empresas Cablevisión, S.A.B. de C.V. and subsidiaries (collectively, “Empresas Cablevisión”) (6)

     51   Telecommunications

The subsidiaries engaged in the Cablemás business (collectively, “Cablemás”) (7)

     100   Telecommunications

Televisión Internacional, S.A. de C.V. and subsidiaries (collectively, “TVI”) (8)

     50   Telecommunications

Cablestar, S.A. de C.V. and subsidiaries (9)

     66.1   Telecommunications

Corporativo Vasco de Quiroga, S.A. de C.V. (10)

     100   Telecommunications

Consorcio Nekeas, S.A. de C.V. and subsidiaries

     100   Other Businesses

Grupo Distribuidoras Intermex, S.A. de C.V. and subsidiaries

     100   Other Businesses

Sistema Radiópolis, S.A. de C.V. and subsidiaries (11)

     50   Other Businesses

Televisa Juegos, S.A. de C.V. and subsidiaries

     100   Other Businesses

 

(1) Percentage of equity interest directly or indirectly held by the Company in the parent company of the consolidated entity.
(2) See Note 25 for a description of each of the Group’s business segments.
(3) Televisa, S.A. de C.V. and G-Televisa-D, S.A. de C.V. are direct subsidiaries of Grupo Telesistema, S.A. de C.V.
(4) Multimedia Telecom, S.A. de C.V. is a indirect subsidiary of Grupo Telesistema, S.A. de C.V. through which it owns 8% of the capital stock of BMP and maintains an investment in Convertible Debentures issued by BMP.
(5) Innova, S. de R.L. de C.V. is an indirect majority-owned subsidiary of the Company and a direct majority-owned subsidiary of Innova Holdings, S.de R.L. de C.V. Sky is a satellite television provider in Mexico, Central America and the Dominican Republic. Although the Company holds a majority of Sky’s equity and designates a majority of the members of Sky’s Board of Directors, the non-controlling interest has certain governance and veto rights in Sky, including the right to block certain transactions between the companies in the Group and Sky. These veto rights are protective in nature and do not affect decisions about the relevant activities.
(6) Empresas Cablevisión, S.A.B. de C.V. is an indirect majority-owned subsidiary of the Company and a direct majority-owned subsidiary of Editora Factum, S.A. de C.V.
(7) Cablemás, S.A. de C.V., the former holding company of the subsidiaries engaged in the Cablemás business, which includes the operation of telecommunication networks covering 50 cities of Mexico, was merged into the Company on April 29, 2011. As a result of this merger, the Company became the direct holding company of the subsidiaries engaged in the Cablemás business (see Note 3).
(8) TVI is an indirect subsidiary of the Company and a direct subsidiary of Cable TV Internacional, S.A. de C.V. The Company consolidates TVI because it appoints the majority of the members of the Board of Directors.
(9) Cablestar, S.A. de C.V. is an indirect majority-owned subsidiary of Empresas Cablevisión, S.A.B. de C.V. and a direct majority-owned subsidiary of Milar, S.A. de C.V.
(10) Corporativo Vasco de Quiroga, S.A. de C.V. is a direct subsidiary of the Company through which the Company owns 50% of the capital stock of GSF.
(11) Sistema Radiópolis, S.A. de C.V. (“Radiópolis”) is an indirect subsidiary of the Company. The Company controls Radiópolis as it has the right to appoint the majority of the members of the Board of Directors.

 

F-12


The Group’s Content, Sky and Telecommunications segments, as well as the Group’s Radio business, which is reported in the Other Businesses segment, require concessions (licenses) granted by the Mexican Federal Government for a fixed term, subject to renewal in accordance with Mexican law. Also, the Group’s Gaming business, which is reported in the Other Businesses segment, requires a permit granted by the Mexican Federal Government for a fixed term, subject to renewal in accordance with Mexican law. Additionally, the Group’s Sky businesses in Central America and the Dominican Republic require concessions (licenses) or permits granted by local regulatory authorities for a fixed term, subject to renewal in accordance with local laws. The concessions and licenses held by the Group are not subject to pricing regulations. At December 31, 2013, the expiration dates of the Group’s concessions and permits were as follows:

 

Segments

   Expiration Dates

Content

   In 2021

Sky

   Various from 2015 to 2027

Telecommunications

   Various from 2014 to 2042

Other Businesses:

  

Radio

   Various from 2015 to 2020

Gaming

   In 2030

(c) Investments in Joint Ventures and Associates

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Joint ventures are those joint arrangements where the Group exercises joint control with other stockholder or more stockholders without exercising control individually, and have rights to the net assets of the joint arrangements. Associates are those entities over which the Group has significant influence but not control, generally those entities with a shareholding of between 20% and 50% of the voting rights. Investments in joint ventures and associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the net assets of the investee after the date of acquisition.

As of December 31, 2013 and 2012, the Group had investments in joint ventures and associates, including a 50% joint interest in GSF and an 8% interest in BMP. GSF is the parent company of Iusacell, a provider of telecommunication services, primarily engaged in providing mobile services throughout Mexico; and BMP is the parent company of Univision, the premier Spanish-language media company in the United States (see Notes 3, 9 and 10).

The Group recognizes its share of losses of a joint venture or an associate up to the amount of its initial investment, subsequent capital contributions and long-term loans, or beyond that when guaranteed commitments have been made by the Group in respect of obligations incurred by investees, but not in excess of such guarantees. If a joint venture or an associate for which the Group had recognized a share of losses up to the amount of its guarantees generates net income in the future, the Group would not recognize its share of this net income until the Group first recognizes its share of previously unrecognized losses.

If the Group’s share of losses of a joint venture or an associate equals or exceeds its interest in the investee, the Group discontinues recognizing its share of further losses. The interest in a joint venture or an associate is the carrying amount of the investment in the investee under the equity method together with any other long-term investment that, in substance, form part of the Group’s net investment in the investee. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture or associate.

(d) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s executive officers (“chief operating decision makers”) who are responsible for allocating resources and assessing performance for each of the Group’s operating segments.

 

F-13


(e) Foreign Currency Translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The presentation and functional currency of the Group’s consolidated financial statements is the Mexican peso, which is used for compliance with its legal and tax obligations.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or measurement where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement as part of finance income or expense, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analyzed between exchange differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in income or loss, and other changes in carrying amount are recognized in other comprehensive income or loss.

Translation of Non-Mexican subsidiaries’ financial statements

The financial statements of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) assets and liabilities are translated at the closing rate at the date of the statement of financial position; (b) income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (c) all resulting translation differences are recognized in other comprehensive income or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Translation differences arising are recognized in other comprehensive income or loss.

Assets and liabilities of non-Mexican subsidiaries that use the Mexican Peso as a functional currency are translated into Mexican Pesos by utilizing the exchange rate of the statement of financial position date for monetary assets and liabilities, and historical exchange rates for nonmonetary items, with the related adjustment included in the consolidated statement of income as income or finance expense.

Beginning in the third quarter of 2011, the Group designated as an effective hedge of foreign exchange exposure a portion of the outstanding principal amount of its U.S. dollar denominated long-term debt in connection with its net investment in shares of common stock of BMP, which amounted to U.S.$218.9 million (Ps.2,862,147) and U.S.$197.7 million (Ps.2,539,814) as of December 31, 2013 and 2012, respectively. Consequently, any foreign exchange gain or loss attributable to this designated hedging long-term debt is credited or charged directly to other comprehensive income or loss as a cumulative result from foreign currency translation (see Notes 3, 9 and 23).

(f) Cash and Cash Equivalents and Temporary Investments

Cash and cash equivalents consist of cash on hand and all highly liquid investments with an original maturity of three months or less at the date of acquisition. Cash is stated at nominal value and cash equivalents are measured at fair value, and the changes in the fair value are recognized in the income statement.

Temporary investments consist of short-term investments in securities, including without limitation debt with a maturity of over three months and up to one year at the date of acquisition, stock and other financial instruments, or a combination thereof, as well as current maturities of noncurrent held-to-maturity securities. Temporary investments are measured at fair value with changes in fair value recognized in the income statement, except the current maturities of non-current held-to-maturity securities which are measured at amortized cost.

As of December 31, 2013 and 2012, cash equivalents and temporary investments primarily consisted of fixed short-term deposits and corporate fixed income securities denominated in U.S. dollars and Mexican pesos, with an average yield of approximately 0.12% for U.S. dollar deposits and 4.12% for Mexican peso deposits in 2013, and approximately 0.23% for U.S. dollar deposits and 4.56% for Mexican peso deposits in 2012.

 

F-14


(g) Transmission Rights and Programming

Programming is comprised of programs, literary works, production talent advances and films.

Transmission rights and literary works are valued at the lesser of acquisition cost and net realizable value. Programs and films are valued at the lesser of production cost, which consists of direct production costs and production overhead, and net realizable value. Payments for production talent advances are initially capitalized and subsequently included as direct or indirect costs of program production.

The Group’s policy is to capitalize the production costs of programs which benefit more than one annual period and amortize them over the expected period of future program revenues based on the Company’s historical revenue patterns for similar productions.

Transmission rights, programs, literary works, production talent advances and films are recorded at acquisition or production cost. Cost of sales is calculated for the month in which such transmission rights, programs, literary works, production talent advances and films are matched with related revenues.

Transmission rights are amortized over the lives of the contracts. Transmission rights in perpetuity are amortized on a straight-line basis over the period of the expected benefit as determined by past experience, but not exceeding 25 years.

(h) Inventories

Inventories of paper, magazines, materials and supplies are recorded at the lower of cost or its net realization value. The net realization value is the estimated selling price in the normal course of business, less costs estimated to conduct the sale. Cost is determined using the average cost method.

(i) Financial Assets

The Group classifies its financial assets in the following categories: loans and receivables, held-to-maturity investments, fair value through income and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest method, with changes in carrying value recognized in the income statement in the line which most appropriately reflects the nature of the item or transaction. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables are presented as “trade notes and accounts receivable” and “other accounts and notes receivable” in the consolidated statement of financial position (see Note 7).

Held-to-maturity Investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest rate method, less impairment, if any. Any gain or loss arising from these investments is included in finance income or loss in the consolidated statement of income. Held-to-maturity investments are included in investments in financial instruments, except for those with maturities less than 12 months from the end of the reporting period, which are classified as temporary investments (see Note 9).

 

F-15


Available-for-sale Financial Assets

Available-for-sale financial assets are non-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through income or loss, and include debt securities and equity instruments. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. Equity instruments in this category are those of companies in which the Group does not exercise joint control nor significant influence, but intent to hold for an indefinite term, and are neither classified as held for trading nor designated at fair value through income. After initial measurement, available-for-sale assets are measured at fair value with unrealized gains or losses recognized as other comprehensive income or loss until the investment is derecognized or the investment is determined to be impaired, at which time the cumulative gain or loss is recognized in the consolidated statement of income either in other finance income or expense (debt securities) or other income or expense (equity instruments). Interest earned whilst holding available-for-sale financial assets is reported as interest income using the effective interest rate method (see Notes 9 and 14).

Financial Assets at Fair Value through Income

Financial assets at fair value through income are financial assets held for trading. A financial assets is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

Impairment of Financial Assets

The Group assesses at each statements of financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective and other-than-temporary evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset. If it is determined that a financial asset or group of financial assets have sustained a decline other than temporary in their value a charge is recognized in income in the related period.

For financial assets classified as held-to-maturity the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

Impairment of Financial Assets Recognized at Amortized Cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets measured at amortized cost is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

(j) Property, Plant and Equipment

Property, plant and equipment are recorded at acquisition cost.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to income or loss during the financial period in which they are incurred.

Land is not depreciated. Depreciation of property, plant and equipment is based upon the carrying value of the assets in use and is computed using the straight-line method over the estimated useful lives of the asset, as follows:

 

     Estimated useful lives  

Buildings

     20-65 years   

Building improvements

     5-20 years   

Technical equipment

     3-20 years   

Satellite transponders

     15 years   

Furniture and fixtures

     3-11 years   

Transportation equipment

     4-8 years   

Computer equipment

     3-5 years   

Leasehold improvements

     2-20 years   

 

F-16


The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within other income or expense in the consolidated income statement.

(k) Intangible Assets

Intangible assets are recognized at acquisition cost. Intangible assets acquired through business combinations are recorded at fair value at the date of acquisition. Intangible assets with indefinite useful lives, which include goodwill, publishing trademarks and television network concessions, are not amortized. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives, as follows:

 

     Estimated useful lives  

Licenses

     3-14 years   

Subscriber lists

     4-10 years   

Other intangible assets

     3-20 years   

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquire.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups of CGUs, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized as an expense and may be subsequently reversed under certain circumstances.

(l) Impairment of Long-lived Assets

The Group reviews for impairment the carrying amounts of its long-lived assets, tangible and intangible, including goodwill (see Note 12), at least once a year, or whenever events or changes in business circumstances indicate that these carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. To determine whether an impairment exists, the carrying value of the reporting unit is compared with its recoverable amount. Fair value estimates are based on quoted market values in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including discounted value of estimated future cash flows, market multiples or third-party appraisal valuations.

(m) Trade Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

 

F-17


(n) Debt

Debt is recognized initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the debt using the effective interest method.

Fees paid on the establishment of debt facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

(o) Customer Deposits and Advances

Customer deposit and advance agreements for television advertising services provide that customers receive preferential prices that are fixed for the contract period for television broadcast advertising time based on rates established by the Group. Such rates vary depending on when the advertisement is aired, including the season, hour, day, rating and type of programming.

(p) Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provisions due to passage of time is recognized as interest expense.

(q) Equity

The capital stock and other equity accounts include the effect of restatement through December 31, 1997, determined by applying the change in the Mexican National Consumer Price Index between the dates capital was contributed or net results were generated and December 31, 1997, the date through which the Mexican economy was considered hyperinflationary under the guidelines of the IFRSs. The restatement represented the amount required to maintain the contributions and accumulated results in Mexican Pesos in purchasing power as of December 31, 1997.

(r) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for services provided. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimate of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The Group derives the majority of its revenues from media and entertainment-related business activities both in Mexico and internationally. Revenues are recognized when the service is provided and collection is probable. A summary of revenue recognition policies by significant activity is as follows:

 

    Advertising revenues, including deposits and advances from customers for future advertising, are recognized at the time the advertising services are rendered.

 

    Revenues from program services for network subscription and licensed and syndicated television programs are recognized when the programs are sold and become available for broadcast.

 

    Revenues from magazine subscriptions are initially deferred and recognized proportionately as products are delivered to subscribers. Revenues from the sales of magazines are recognized on the date of circulation of delivered merchandise, net of a provision for estimated returns.

 

    Revenues from publishing distribution are recognized upon distribution of the products.

 

F-18


    Sky program service revenues, including advances from customers for future direct-to-home (“DTH”) program services, are recognized at the time the service is provided.

 

    Cable television, internet and telephone subscription, and pay-per-view and installation fees are recognized in the period in which the services are rendered.

 

    Revenues from telecommunications and data services are recognized in the period in which these services are provided. Telecommunications services include long distance and local telephony, as well as leasing and maintenance of telecommunications facilities.

 

    Revenues from attendance to soccer games, including revenues from advance ticket sales for soccer games and other promotional events, are recognized on the date of the relevant event.

 

    Motion picture production and distribution revenues are recognized as the films are exhibited.

 

    Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered and amounts paid to winning patrons.

In respect to sales of multiple products or services, the Group evaluates whether it has fair value evidence for each deliverable in the transaction. For example, the Group sells cable television, internet and telephone subscription to subscribers in a bundled package at a rate lower than if the subscriber purchases each product on an individual basis. Subscription revenues received from such subscribers are allocated to each product in a pro-rata manner based on the fair value of each of the respective services.

(s) Interest Income

Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognized using the original effective interest rate.

(t) Employee Benefits

Pension and Seniority Premium Obligations

Plans exist for pensions and seniority premiums (post-employment benefits), for most of the Group’s employees funded through irrevocable trusts. Increases or decreases in the consolidated liability or asset for post-employment benefits are based upon actuarial calculations. Contributions to the trusts are determined in accordance with actuarial estimates of funding requirements. Payments of post-employment benefits are made by the trust administrators. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.

In the first quarter of 2013, the Group adopted the provisions of IAS 19, Employee Benefits, as amended, which became effective on January 1, 2013. The amended IAS 19 eliminated the corridor approach for the recognition of remeasurement of post-employment benefit obligations, and requires the calculation of finance costs on a net funding basis. Also, the amended IAS 19 requires the recognition of past service cost as an expense at the earlier of the following dates: (i) when the plan amendment or curtailment occurs; and (ii) when the entity recognizes related restructuring costs or termination benefits. As a result of the adoption of the amended IAS 19, the Group adjusted a consolidated unamortized past service cost balance and consolidated retained earnings as of January 1, 2013 in the aggregate amount of Ps.102,902 (see Note 15).

Remeasurement of post-employment benefit obligations related to experience adjustments and changes in actuarial assumptions of post-employment benefits are recognized in the period in which they are incurred as part of other comprehensive income or loss in consolidated equity.

 

F-19


Profit Sharing

The employees’ profit sharing required to be paid under certain circumstances in Mexico, is recognized as a direct benefit to employees in the consolidated statements of income in the period in which it is incurred.

Termination Benefits

Termination benefits, which mainly represent severance payments by law, are recorded in the consolidated statement of income. The Group recognizes termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring is within the scope of IAS 37 and involves the payment of termination benefits.

(u) Income Taxes

The income tax expense for the period comprises current and deferred income tax. Income tax is recognized in the consolidated statement of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the income tax is also recognized in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction (other than in a business combination) that at the time of the transaction affects neither accounting nor taxable income or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences and tax loss carryforwards can be utilized. For this purpose, the Group takes into consideration all available positive and negative evidence, including factors such as market conditions, industry analysis, projected taxable income, carryforward periods, current tax structure, potential changes or adjustments in tax structure, and future reversals of existing temporary differences.

Deferred income tax liability is provided on taxable temporary differences associated with investments in subsidiaries, joint ventures and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax asset is provided on deductible temporary differences associated with investments in subsidiaries, joint ventures and associates, to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefit of the temporary difference and it is expected to reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

(v) Derivative Financial Instruments

The Group recognizes derivative financial instruments as either assets or liabilities in the consolidated statements of financial position and measures such instruments at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on the intended use of the derivative financial instrument and the resulting designation. For a derivative financial instrument designated as a cash flow hedge, the effective portion of such derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into income when the hedged exposure affects income. The ineffective portion of the gain or loss is reported in income immediately. For a derivative financial instrument designated as a fair value hedge, the gain or loss is recognized in income in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For derivative financial instruments that are not designated as accounting hedges, changes in fair value are recognized in income in the period of change. During the years ended December 31, 2013 and 2012, certain derivative financial instruments qualified for hedge accounting (see Note 14).

 

F-20


(w) Comprehensive Income

Comprehensive income for the period includes the net income for the period presented in the consolidated statement of income plus other comprehensive income for the period reflected in the consolidated statement of comprehensive income.

(x) Stock-based Compensation

The share-based compensation expense is measured at fair value at the date the equity benefits are conditionally sold to officers and employees, and is recognized in consolidated stockholders’ equity with charge to consolidated income (administrative expense) over the vesting period (see Note 16). The Group accrued a stock-based compensation expense of Ps.601,181 and Ps.628,637 for the years ended December 31, 2013 and 2012, respectively.

(y) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys the right to use the asset.

Leases of property, plant and equipment other assets where the Group holds substantially all the risks and rewards of ownership are classified as finance leases. Finance lease assets are capitalized at the commencement of the lease term at the lower of the present value of the minimum lease payments or the fair value of the lease asset. The obligations relating to finance leases, net of finance charges in respect of future periods, are recognized as liabilities. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

Leases where a significant portion of the risks and rewards are held by the lessor are classified as operating leases. Rentals are charged to the income statement on a straight line basis over the period of the lease.

Leasehold improvements are depreciated at the lesser of its useful life or contract term.

(z) New and Amended IFRS

New and amended standards adopted by the Group

The following standards have been adopted by the Group for the first time for the financial year beginning on or after January 1, 2013. The application of the following standards did not have significant impact on the Group’s consolidated financial statements in accordance with IFRS: IAS 19 Employee Benefits (as amended in 2011); IAS 28 Investments in Associates and Joint Ventures (as amended in 2011); IFRS 10 Consolidated Financial Statements; IFRS 11 Joint Arrangements; IFRS 12 Disclosures of Interests in Other Entities and IFRS 13 Fair Value Measurement.

New and amended standards not yet adopted

Below is a list of the new and amended standards that have been issued by the IASB and are effective for annual periods starting on or after January 1, 2014. Management has evaluated the potential impact of these pronouncements and concluded that they are not expected to have a significant impact on the Group’s consolidated financial statements in accordance with IFRSs.

 

New or Amended Standard

  

Content

   Effective for
Annual Periods
Beginning On or
After

IAS 36 (amended in May 2013)

  

Recoverable Amount Disclosures for Non-Financial Assets

   January 1, 2014

IAS 39 (amended in June 2013)

  

Novation of Derivatives and Continuation of Hedge Accounting

   January 1, 2014

IFRS 9

   Financial Instruments    January 1, 2018

IFRIC 21

   Levies    January 1, 2014

Annual Improvements to IFRSs

   2010-2012 Cycle    July 1, 2014

Annual Improvements to IFRSs

   2011-2013 Cycle    July 1, 2014

IFRS 14

   Regulatory Deferral Accounts    January 1, 2016

 

F-21


IAS 36 Impairment of Assets (as amended in May 2013) removed certain disclosures of the recoverable amount of cash generating units, which had been included in IAS 36 Impairment of Assets by the issue of IFRS 13 Fair Value Measurement.

IAS 39 Financial Instruments: Recognition and Measurement (as amended in June 2013) allows hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. In this context, a novation indicates that parties to a contract agree to replace their original counterparty with a new one.

IFRS 9 Financial Instruments (“IFRS 9”) addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at amortized cost and those measured at fair value. The determination is made at initial recognition. The basis of classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. For financial liabilities, this standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. Some amendments to IFRS 9 and IFRS 7 Financial Instruments: Disclosures (“IFRS 7”) were issued in December 2011. These amendments to IFRS 9 modify the mandatory effective date of this standard and the relief from restating prior periods, and also add transition disclosures to IFRS 7 that are required to be applied when IFRS 9 is first applied.

IFRIC 21 Levies was issued in May 2013 as an interpretation of IAS 37, Provisions, contingent liabilities and contingent assets (“IAS 37”), on the accounting for levies imposed by governments. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that give rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

Annual Improvements to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011-2013 Cycle were published in December 2013 and set out amendments to certain IFRSs. These amendments result from proposals made during the IASB’s Annual Improvements process, which provides a vehicle for making non-urgent but necessary amendments to IFRSs. The IFRSs amended and the topics addressed by these amendments are as follows:

 

Annual Improvements 2010-2012 Cycle

  

Subject of Amendment

IFRS 2 Share-based Payment    Definition of vesting condition
IFRS 3 Business Combinations    Accounting for contingent consideration in a business combination
IFRS 8 Operating Segments   

Aggregation of operating segments. Reconciliation of the total of the reportable segments’ assets to the entity’s assets

IFRS 13 Fair Value Measurement    Short-term receivables and payables
IAS 16 Property, Plant and Equipment    Revaluation method – proportionate restatement of accumulated depreciation
IAS 24 Related Party Disclosures    Key management personnel
IAS 38 Intangible Assets    Revaluation method – proportionate restatement of accumulated amortization

Annual Improvements 2011-2013 Cycle

  

Subject of Amendment

IFRS 1 First-time Adoption of IFRSs    Meaning of “effective IFRSs”
IFRS 3 Business Combinations    Scope exceptions for joint ventures
IFRS 13 Fair Value Measurement    Scope of paragraph 52 (portfolio exception)
IAS 40 Investment property   

Clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property

IFRS 14 Regulatory Deferral Accounts (“IFRS 14”) enhances the comparability of financial reporting by entities that are engaged in rate-regulated activities. IFRS 14 was issued in January 2014 as an interim standard and does not provide any specific guidance for rate-regulated activities, which are subject to a comprehensive project being developed by the IASB. IFRS 14 is intended for first-time adopters of IFRSs, and an entity that already presents IFRS financial statements is not eligible to apply this standard.

 

F-22


3. Acquisitions, Investments and Dispositions

In July 2013, the Group made an investment in the amount of Ps.7,000,000 in convertible debt instruments which, subject to regulatory approvals, will allow the Group to acquire 95% of the equity interest of Tenedora Ares, S.A.P.I. de C.V. (“Ares”), owner of 51% of the equity interest of Grupo Cable TV, S.A. de C.V. (“Cablecom”), a telecommunications company that offers video, telephony, data and other telecom services in Mexico. In addition, Ares will have an option to acquire in the future, subject to regulatory approvals, the remaining 49% of the equity interest of Cablecom at a value of approximately 9.3 times earnings before interest, taxes, depreciation and amortization (“EBITDA”) of Cablecom, as defined, of the 12-month period preceding the closing of such acquisition. In addition, as part of this transaction, the Group also invested in a long-term debt instrument issued by Ares in the amount of U.S.$195 million (Ps.2,549,625) (see Notes 9, 14 and 19).

In December 2011, the Company agreed to exchange on a non-cash basis its 40.8% interest in Gestora de Inversiones Audiovisuales La Sexta, S.A. (“La Sexta”), a free-to-air television channel in Spain, for a 14.5% equity participation in Imagina Media Audiovisual, S. L. (“Imagina”), a significant provider of content and audiovisual services for the media and entertainment industry in Spain. All closing conditions applicable to this transaction were met on February 29, 2012, and the Company recognized a pre-tax gain of Ps.24,856 as a result of this transaction in the consolidated statement of income for the year ended December 31, 2012, and classified its investment in Imagina as an equity financial instrument, with changes in related fair value recognized as other comprehensive income or loss (see Notes 9 and 21).

In April 2011, the Company, Iusacell and GSF reached an agreement under which the Group made an investment intended to hold a 50% equity stake in GSF, which consisted of (i) U.S.$37.5 million (Ps.442,001) in 1.093875% of the outstanding shares of common stock of GSF, which amount was paid in cash by the Group in April 2011; and (ii) U.S.$1,565 million (Ps.19,229,056) in unsecured debentures issued by GSF that were mandatorily convertible into shares of common stock of GSF, subject to regulatory approval and other customary closing conditions. The debentures issued by GSF were divided into two tranches, the Series 1 Debentures and the Series 2 Debentures. The Series 1 Debentures were the 364,996 registered unsecured debentures of GSF, par value U.S.$1,000 each, representing in the aggregate U.S.$365 million (Ps.4,302,146), issued against the payment in cash made by the Group in April 2011. The Series 2 Debentures were the 1,200,000 registered unsecured debentures of GSF, par value U.S.$1,000 each, representing in the aggregate U.S.$1,200 million (Ps.14,926,910), issued against payments in cash made by the Group in the period from April through October 2011, in the aggregate amount of U.S.$1,200 million (Ps.14,926,910). These debentures had a conversion date on or before December 2015, with an annual interest rate of 2%, which was receivable on a quarterly basis. In addition, the Company agreed to make an additional payment of U.S.$400 million (Ps.5,230,000) to GSF if cumulative EBITDA of Iusacell, as defined, reaches U.S.$3,472 million (Ps.45,396,400) at any time between 2011 and 2015. In June 2012, (i) the Mexican Antitrust Commission approved, subject to the acceptance of certain conditions, the conversion by the Group of the debentures issued by GSF into common stock of GSF; (ii) the Group accepted the conditions established by the Mexican Antitrust Commission and converted the debentures issued by GSF into common stock of GSF; and (iii) GSF became a jointly controlled entity of the Group with a 50% interest and the Group began to share equal governance rights with the other owner of GSF. As of June 30, 2012, the Group recognized at fair value its 50% interest in GSF in the amount of Ps.18,738,057, which included related intangible assets, and began to account for this joint venture by using the equity method. Before that date, this investment was accounted for as an equity financial instrument with changes in fair value recognized in other comprehensive income or loss. In connection with the conversion of debentures into common stock of GSF, the Group reclassified a cumulative net loss in fair value of Ps.933,000 recognized in other comprehensive income or loss through June 30, 2012, to other finance expense in the consolidated statement of income for the year ended December 31, 2012. During 2013, the Group made capital contributions in connection with its 50% interest in GSF in the aggregate amount of Ps.1,587,500 (see Notes 9, 10 and 22).

On March 31, 2011, the stockholders of Cablemás approved, among other matters, a capital increase in Cablemás, by which a wholly-owned subsidiary of the Company increased its equity interest in Cablemás from 58.3% to 90.8%. On April 29, 2011, the stockholders of the Company approved, among other matters: (i) the merger of Cablemás into the Company on that date, for which regulatory approvals were obtained in the first half of 2011; and (ii) an increase in the capital stock of the Company in connection with this merger, by which the Group’s controlling interest in Cablemás increased from 90.8% to 100%. These transactions between stockholders, which were completed in October 2011, resulted in a net loss of Ps.1,595,796, which decreased retained earnings attributable to stockholders of the Company in the year ended December 31, 2011 (see Note 18).

 

F-23


On December 20, 2010, the Group, Univision, BMP and other parties affiliated with the investor groups that owned BMP entered into various agreements and completed certain transactions. As a result, the Group: (i) made an aggregate cash investment of U.S.$1,255 million in BMP in the form of a capital contribution in the amount of U.S.$130 million (Ps.1,613,892), representing 5% of the outstanding shares of common stock of BMP, and 1.5% Convertible Debentures of BMP due 2025 in the principal amount of U.S.$1,125 million (Ps.13,904,222), which are convertible at the Company’s option into additional shares equivalent to approximately 30% equity stake of BMP, subject to existing laws and regulations in the United States, and other conditions; (ii) acquired an option to purchase at fair value additional shares equivalent to a 5% equity stake of BMP, subject to existing laws and regulations in the United States, and other terms and conditions and (iii) sold to Univision its entire interest in TuTv, LLC (“TuTv”), which represented 50% of TuTv’s capital stock, for an aggregate cash amount of U.S.$55 million (Ps.681,725). In connection with this investment, (i) the Company entered into an amended Program License Agreement (“PLA”) with Univision, pursuant to which Univision has the right to broadcast certain Televisa content in the United States for a term that commenced on January 1, 2011 and ends on the later of 2025 or seven and one-half years after the Group has sold two-thirds of its initial investment in BMP, and which includes an increased percentage of royalties from Univision and (ii) the Group entered into a new program license agreement with Univision, the Mexico License Agreement (“MLA”), under which the Group has the right to broadcast certain Univision’s content in Mexico for the same term as that of the PLA. In connection with its option to purchase at fair value additional shares equivalent to a 5% equity of BMP, in the fourth quarter of 2011 and third quarter of 2012, the Group entered into agreements to buy from existing BMP stockholders additional 219,125 shares and 97,389 shares, respectively, of common stock of BMP in the aggregate cash amount of U.S.$49.1 million (Ps.669,392) and U.S.$22.5 million (Ps.301,534), respectively. As a result of these acquisitions, the Group increased its equity stake in BMP to 7.1% and 8%, respectively (see Notes 9, 10 and 22).

4. Financial Risk Management

(a) Market Risk

Market risk is the exposure to an adverse change in the value of financial instruments caused by market factors including changes in equity prices, interest rates, foreign currency exchange rates, commodity prices and inflation rates. The following information includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ from those presented.

The Group is exposed to market risks arising from changes in equity prices, interest rates, foreign currency exchange rates and inflation rates, in both the Mexican and U.S. markets. Risk management activities are monitored by the Risk Management Committee and reported to the Executive Committee.

(i) Foreign Exchange Risk

The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the U.S. dollar and the Mexican peso. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

Foreign currency exchange risk is monitored by assessing the net monetary liability position in U.S. dollars and the forecasted cash flow needs for anticipated U.S. dollar investments and servicing the Group’s U.S. dollar denominated debt.

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Group use forward contracts. In compliance with the procedures and controls established by the Risk Management Committee, in 2013 and 2012, the Group entered into certain derivative transactions with certain financial institutions in order to manage its exposure to market risks resulting from changes in interest rates, foreign currency exchange rates, and inflation rates. The objective in managing foreign currency and inflation fluctuations is to reduce earnings and cash flow volatility.

 

F-24


Foreign Currency Position

The foreign currency position of monetary items of the Group at December 31, 2013, was as follows:

 

     Foreign Currency
Amounts
(Thousands)
     Year-End
Exchange
Rate
     Mexican Pesos  

Assets:

        

U.S. Dollars

     2,242,046         Ps.  13.0750         Ps. 29,314,751   

Euros

     30,228         17.9846         543,638   

Argentinean Pesos

     225,414         2.0050         451,955   

Chilean Pesos

     4,263,954         0.0249         106,172   

Colombian Pesos

     14,139,829         0.0067         94,737   

Other currencies

     —           —           326,788   

Liabilities:

        

U.S. Dollars

     2,980,274         Ps. 13.0750         Ps. 38,967,082   

Euros

     10,974         17.9846         197,363   

Argentinean Pesos

     156,102         2.0050         312,985   

Chilean Pesos

     1,089,973         0.0249         27,140   

Colombian Pesos

     11,948,683         0.0067         80,056   

Other currencies

     —           —           83,433   

As of April 8, 2014, the exchange rate was Ps.13.0315 per U.S. dollar, which represents the interbank free market exchange rate on that date as reported by Banco Nacional de México, S.A.

The Group is also subject to the risk of foreign currency exchange rate fluctuations, resulting from the net monetary position in U.S. dollars of the Group’s Mexican operations, as follows (in millions of U.S. dollars):

 

     December 31,  
     2013     2012  

U.S. dollar-denominated monetary assets, primarily cash and cash equivalents, held-to-maturity investments, non-current investments, and convertible debentures (1)

   U.S.$ 2,231.3      U.S.$ 2,285.5   

U.S. dollar-denominated monetary liabilities, primarily trade accounts payable, Senior debt securities and other notes payable (2)

     (2,932.6     (2,745.3
  

 

 

   

 

 

 

Net liability position

   U.S.$ (701.3   U.S.$ (459.8
  

 

 

   

 

 

 

 

(1) In 2013 and 2012, include U.S. dollar equivalent amounts of U.S.$ 35.2 million and U.S.$108.4 million, respectively, related to other foreign currencies, primarily euros.
(2) In 2013 and 2012, include U.S. dollar equivalent amounts of U.S.$14.1 million and U.S.$10.5 million, respectively, related to other foreign currencies, primarily euros.

At December 31, 2013, a hypothetical 10% appreciation / depreciation in the U.S. dollar to Mexican peso exchange rate would result in a gain/loss in earnings of Ps.916,913. At December 31, 2012, a hypothetical 10% appreciation / depreciation in the U.S. dollar to Mexican peso exchange rate would result in a gain/loss in earnings of Ps.590,821.

In December 2012 and 2011, the Group entered into foreign exchange option agreements to buy U.S.$135.0 million and U.S.$337.5 million, respectively, to hedge against a Mexican peso depreciation of 30% with various maturity dates until the end of 2015 and 2014, respectively. The fair value of these option contracts was an asset of Ps.6,122 and Ps.12,419 as of December 31, 2013 and 2012, respectively.

 

F-25


(ii) Cash Flow Interest Rate Risk

The Group monitors the exposure to interest rate risk by: (i) evaluating differences between interest rates on its outstanding debt and short-term investments and market interest rates on similar financial instruments; (ii) reviewing its cash flow needs and financial ratios (indebtedness and interest coverage); (iii) assessing current and forecasted trends in the relevant markets; and (iv) evaluating peer Group and industry practices. This approach allows the Group to determine the interest rate “mix” between variable and fixed rate debt.

The Group’s interest rate risk arises from long-term debt. Debt issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Debt issued at fixed rates expose the Group to fair value interest rate risk. During recent years the Group has maintained most of its debt in fixed rate instruments.

Based on various scenarios, the Group manages its cash flow interest rate risk by using cross-currency interest rate swap agreements and floating-to-fixed interest rate swaps. Cross-currency interest rate swap agreements allow the Group to hedge against Mexican peso depreciation on the interest payments for medium-term periods. Interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

Sensitivity and Fair Value Analyses

The sensitivity analyses that follow are intended to present the hypothetical change in fair value or loss in earnings due to changes in interest rates, inflation rates, foreign currency exchange rates and debt and equity market prices as they affect the Group’s financial instruments at December 31, 2013 and 2012. These analyses address market risk only and do not take into consideration other risks that the Group faces in the ordinary course of business, including country risk and credit risk. The hypothetical changes reflect management view of changes that are reasonably possible over a one-year period. For purposes of the following sensitivity analyses, the Group has made conservative assumptions of expected near-term future changes in U.S. interest rates, Mexican interest rates, inflation rates and Mexican peso to U.S. dollar exchange rate of 10%. The results of the analyses do not purport to represent actual changes in fair value or losses in earnings that the Group will incur.

 

     Fair Value at December 31,  
     2013      2012  

Assets:

     

Temporary investments (1)

   Ps.  3,722,976       Ps. 5,317,296   

1.5% Convertible debentures due 2025 issued by BMP (2)

     7,675,036         6,990,427   

Embedded derivative BMP (3)

     14,761,677         9,611,873   

Convertible debt instruments issued by Ares (4)

     6,446,000         —     

Embedded derivative Ares (19)

     771,000         —     

Long-term debt instrument issued by Ares (5)

     2,521,999         —     

Long-term loan and interest receivable from GTAC (6)

     739,384         674,403   

Held-to-maturity investments (7)

     631,990         389,957   

Available-for-sale investments (8)

     4,015,105         2,986,933   

Shares of common stock of Imagina (17)

     1,169,002         867,581   

Derivative financial instruments (18)

     8,388         15,000   
  

 

 

    

 

 

 

Liabilities:

     

U.S. dollar-denominated debt:

     

Senior Notes due 2018 (9)

   Ps. 7,305,656       Ps. 7,565,438   

Senior Notes due 2025 (10)

     8,800,599         10,041,580   

Senior Notes due 2032 (11)

     4,890,455         5,582,657   

Senior Notes due 2040 (12)

     8,386,462         9,981,058   

Peso-denominated debt:

     

Notes due 2020 (14)

     10,391,700         10,636,900   

Senior Notes due 2037 (13)

     4,377,420         5,191,110   

Senior Notes due 2043 (15)

     5,326,893         —     

Short-term and long-term notes payable to Mexican banks (16)

     14,413,969         14,535,200   

Derivative financial instruments (18)

     335,336         352,762   
  

 

 

    

 

 

 

 

(1) At December 31, 2013, the Group´s temporary investments consisted of highly liquid securities, including without limitation debt securities (primarily Mexican peso and U.S. dollar-denominated in 2013 and 2012). Given the short-term nature of these investments, an increase in U.S. and/or Mexican interest rates would not significantly decrease the fair value of these investments.

 

F-26


(2) At December 31, 2013, these notes are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.767,504 (U.S.$58.7 million) at December 31, 2013.
(3) At December 31, 2013, these notes are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.1,476,168 (U.S.$112.9 million) at December 31, 2013.
(4) At December 31, 2013, these notes are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.644,600 (U.S.$49.3 million) at December 31, 2013.
(5) At December 31, 2013, these notes are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.252,200 (U.S.$19.3 million) at December 31, 2013.
(6) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.30,691 (U.S.$2.3 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes the fair value would exceed the carrying value by approximately Ps.104,629 (U.S.$8.0 million) at December 31, 2013.
(7) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.26 (U.S.$0.0 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.63,225 (U.S.$4.8 million) at December 31, 2013.
(8) At December 31, 2013, these investments are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.401,511 (U.S.$30.7 million) at December 31, 2013.
(9) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.768,156 (U.S.$58.8 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.1,498,722 (U.S.$114.6 million) at December 31, 2013.
(10) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.955,599 (U.S.$73.1 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.1,835,659 (U.S.$140.4 million) at December 31, 2013.
(11) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.967,955 (U.S.$74.0 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.1,457,001 (U.S.$111.4 million) at December 31, 2013.
(12) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.541,462 (U.S.$41.4 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.1,380,108 (U.S.$105.6 million) at December 31, 2013.
(13) At December 31, 2013, carrying value exceeded the fair value of these notes by Ps.122,580 (U.S.$9.4 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.315,162 (U.S.$24.1 million) at December 31, 2013.
(14) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.391,700 (U.S.$30.0 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the fair value would exceed the carrying value by approximately Ps.1,430,870 (U.S.$109.4 million) at December 31, 2013.
(15) At December 31, 2013, carrying value exceeded the fair value of these notes by Ps.1.173,107 (U.S.$89.7 million). Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the quoted market price of these notes, the carrying value would exceed the fair value by approximately Ps.640,418 (U.S.$49.0 million) at December 31, 2013.
(16) At December 31, 2013, fair value exceeded the carrying value of these notes by Ps.699,569 (U.S.$53.5 million). At December 31, 2013, a hypothetical 10% increase in Mexican interest rates of these notes, the fair value would exceed the carrying value by approximately Ps.2,140,966 (U.S.$163.7 million) at December 31, 2013.
(17) At December 31, 2013, these shares are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.116,900 (U.S.$8.9 million) at December 31, 2013.
(18) Given the nature of these derivative instruments, an increase of 10% in the interest and/or exchange rates would not have a significant impact on the fair value of these financial instruments.
(19) At December 31, 2013, these notes are recorded at fair value. Assuming an increase in the fair value of these notes of a hypothetical 10% increase in the fair value of these notes, the fair value would exceed the carrying value by approximately Ps.77,100 (U.S.$5.9 million) at December 31, 2013.

 

F-27


(b) Credit Risk

Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of “AA” in local scale for domestic institutions and “BBB” in global scale for foreign institutions are accepted. If customers are independently rated, these ratings are used. If there is no independent rating, the Group’s risk control function assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Company’s management. See Note 7 for further disclosure on credit risk.

No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by the counterparties.

The Group historically has not had significant credit losses arising from customers.

(c) Liquidity Risk

Cash flow forecasting is performed in the operating entities of the Group and aggregated by corporate management. Corporate management monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable external regulatory or legal requirements.

Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing investments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. At December 31, 2013 and 2012, the Group held cash and cash equivalents of Ps.16,692,033 and Ps.19,063,325, respectively, and temporary investments of Ps.3,722,976 and Ps.5,317,296, respectively, that are expected to readily generate cash inflows for managing liquidity risk (see Note 6).

The table below analyses the Group’s non-derivative and derivative financial liabilities as well as related contractual interest on debt and finance lease obligations into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

     Less Than 12
Months
January 1, 2014
to December 31,
2014
     12-36 Months
January 1, 2015
to December 31,
2016
     36-60 Months
January 1, 2017
to December 31,
2018
     Maturities
Subsequent to
December 31,
2018
    Total  

At December 31, 2013

             

Debt (1)

   Ps. 314,293       Ps.  9,582,515       Ps.  9,278,425       Ps.  41,689,167      Ps.  60,864,400   

Finance lease liabilities

     424,698         605,578         647,317         3,241,654        4,919,247   

Derivative financial instruments (interest rate swaps)

     —           133,184         203,614         (1,462     335,336   

Trade and other payables

     1,484,716         1,938,870         795,118         342,137        4,560,841   

Interest on debt (2)

     3,521,590         8,128,689         6,785,739         38,490,977        56,926,995   

Interest on capital lease obligations

     310,310         547,933         565,041         1,207,587        2,630,871   

 

F-28


    Less Than 12
Months
January 1, 2013
to December 31,
2013
    12-36 Months
January 1, 2014
to December 31,
2015
    36-60 Months
January 1, 2016
to December 31,
2017
    Maturities
Subsequent to
December 31,
2017
    Total  

At December 31, 2012

         

Debt (1)

  Ps. 375,000      Ps. 544,620      Ps.  10,764,780      Ps.  42,105,000      Ps.  53,789,400   

Finance lease liabilities

    439,257        579,009        555,274        3,397,610        4,971,150   

Derivative financial instruments (interest rate swaps)

    1,176        —          132,075        219,511        352,762   

Trade and other payables

    1,374,217        785,371        347,181        248,968        2,755,737   

Interest on debt (2)

    3,092,753        7,599,347        6,359,931        29,393,902        46,445,933   

Interest on capital lease obligations

    313,541        588,826        529,550        1,343,278        2,775,195   

 

(1) The amounts of debt are disclosed on a principal amount basis (see Note 13).
(2) Interest to be paid in future years on outstanding debt as of December 31, 2013 and 2012, based on contractual interest rate and exchange rates as of that date.

Certain of the Group’s derivative financial instruments (coupon swaps) are in hedge relationships and are due to settle within 12 months of the statement of financial position date. These contracts require undiscounted contractual cash inflows of U.S.$12.8 million and U.S.$19.9 million in 2014 and 2013, respectively and undiscounted contractual cash outflows of Ps.165,316 and Ps.256,073 in 2014 and 2013, respectively.

Capital Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for stockholders and benefits for other stakeholders and to maintain an optimal capital structure in order to minimize the cost of capital.

5. Critical Accounting Estimates and Assumptions

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. By definition, the resulting accounting estimates will seldom equal the related actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of consolidated assets and liabilities within the next financial year are addressed below.

(a) Accounting for Programming

The Group produces a significant portion of programming for initial broadcast over its television networks in Mexico, its primary market. Following the initial broadcast of this programming, the Group then licenses some of this programming for broadcast in secondary markets, such as Mexico, the United States, Latin America, Asia, Europe and Africa. Under IFRS, in order to properly capitalize and subsequently amortize production costs related to this programming, the Group must estimate the expected future benefit period over which a given program will generate revenues (generally, over a five-year period). The Group then amortizes the production costs related to a given program over the expected future benefit period. Under this policy, the Group generally expenses approximately 70% of the production costs related to a given program in its initial broadcast run and defers and expenses the remaining production costs over the remainder of the expected future benefit period (see Note 2 (g)).

The Group estimates the expected future benefit periods based on past historical revenue patterns for similar types of programming and any potential future events, such as new outlets through which the Group can exploit or distribute its programming, including its consolidated subsidiaries and equity investees. To the extent that a given future expected benefit period is shorter than the estimate, the Group may have to accelerate capitalized production costs sooner than anticipated. Conversely, to the extent that a given future expected benefit period is longer than the estimate, the Group may have to extend the amortization schedule for the remaining capitalized production costs.

 

F-29


The Group also purchases programming from, and enters into license arrangements with, various third party programming producers and providers, pursuant to which it receives the rights to broadcast programming produced by third parties over its television networks in Mexico. In the case of programming acquired from third parties, the Group estimates the expected future benefit period based on the anticipated number of showings in Mexico. In the case of programming licensed from third parties, the Group estimates the expected future benefit period based upon the term of the license. To the extent that a given future expected benefit period is shorter than the estimate, the Group may have to accelerate the purchase price or the license fee sooner than anticipated. Conversely, to the extent that a given future expected benefit period is longer than the estimate, the Group may have to extend the amortization schedule for the remaining portion of the purchase price or the license fee.

(b) Investments in Joint Ventures and Associates

Some of the Group’s investments are structured as investments in joint ventures and associates (see Notes 2 (c) and 10). As a result, the results of operations attributable to these investments are not consolidated with the results of the Group’s various segments for financial reporting purposes, but are reported as share of income or loss of joint ventures and associates in the consolidated statement of income (see Note 10).

In the past, the Group has made significant capital contributions and loans to its joint ventures and associates, and it may in the future make additional capital contributions and loans to at least some of its joint ventures. In the past, these ventures have generated, and they may continue to generate, operating losses and negative cash flows as they continue to build and expand their respective businesses.

The Group periodically evaluates its investments in these joint ventures and associates for impairment, taking into consideration the performance of these ventures as compared to projections related to net sales, expenditures, strategic plans and future required cash contributions, among other factors. In doing so, the Group evaluates whether any declines in value are other than temporary. The Group has taken impairment charges in the past for some of these investments. Given the dynamic environments in which these businesses operate, as well as changing macroeconomic conditions, there can be no assurance that the Group’s future evaluations will not result in recognizing additional impairment charges for these investments.

Once the carrying balance of a given investment is reduced to zero, the Group evaluates whether it should suspend the equity method of accounting, taking into consideration both quantitative and qualitative factors, such as long-term loans guarantees it has provided to these joint ventures and associates, future funding commitments and expectations as to the viability of the business. These conditions may change from year to year, and accordingly, the Group periodically evaluates whether to continue to account for its various investments under the equity method.

(c) Goodwill and Other Indefinite-lived Intangible Assets

Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment at least annually. When an impairment test is performed, the recoverable amount is assessed by reference to the higher of the net present value of the expected future cash flows (value in use) of the relevant cash generating unit and the fair value less cost to sell.

The recoverable amount of cash generating units has been determined based on value in use calculations. These calculations require the use of estimates, including management’s expectations of future revenue growth, operating costs, profit margins and operating cash flows for each cash-generating unit.

During 2013, the Group recorded impairments for goodwill and other indefinite-lived intangible assets related to its joint venture investment in capital stock of GSF, and its Publishing segment (see Notes 10 and 12).

There were no goodwill impairments recorded in 2012 and 2011.

(d) Long-lived Assets

The Group presents certain long-lived assets other than goodwill and indefinite-lived intangible assets in its consolidated statement of financial position. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may no longer be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Recoverability is analyzed based on projected cash flows. Estimates of future cash flows involve considerable management judgment. These estimates are based on historical data, future revenue growth, anticipated market conditions, management plans, and assumptions regarding projected rates of inflation and currency fluctuations, among other factors. If these assumptions are not correct, the Group would have to recognize a write-off or write-down or accelerate the amortization schedule related to the carrying value of these assets (see Notes 2 (l), 12 and 21). The Group has not recorded any significant impairment charges over the past few years.

 

F-30


(e) Deferred Income Taxes

The Group records its deferred tax assets based on the likelihood that these assets are realized in the future. This likelihood is assessed by taking into consideration the future taxable income. In the event the Group were to determine that it would be able to realize its deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Should the Group determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

(f) Financial Assets and Liabilities Measured at Fair Value

The Group has a significant amount of financial assets and liabilities which are measured at fair value on a recurring basis. The degree of management’s judgment involved in determining the fair value of a financial asset and liability varies depending upon the availability of quoted market prices. When observable quoted market prices exist, that is the fair value estimate the Group uses. To the extent such quoted market prices do not exist, management uses other means to determine fair value.

6. Cash and Cash Equivalents and Temporary Investments

Cash and cash equivalents as of December 31, 2013 and 2012, consisted of:

 

    2013     2012  

Cash and bank accounts

  Ps.  1,281,663      Ps.  1,777,349   

Short-term investments (1)

    15,410,370        17,285,976   
 

 

 

   

 

 

 

Total cash and cash equivalents

  Ps.  16,692,033      Ps.  19,063,325   
 

 

 

   

 

 

 

 

(1) Highly-liquid investments with an original maturity of three months or less at the date of acquisition.

Temporary investments as of December 31, 2013 and 2012, consisted of:

 

    2013     2012  

Short-term investments (2)

  Ps. 12,202      Ps. 43,435   

Other financial assets (3)

    3,675,632        5,153,058   

Current maturities of non-current held-to-maturity securities

    35,142        120,803   
 

 

 

   

 

 

 

Total temporary investments

  Ps.  3,722,976      Ps.  5,317,296   
 

 

 

   

 

 

 

 

(2) Short-term investments with a maturity of over three months and up to one year at the date of acquisition.
(3) Other financial assets include equity instruments held for trading and current held-to-maturity investments.

7. Trade Notes and Accounts Receivable, Net

Trade notes and accounts receivable as of December 31, 2013 and 2012, consisted of:

 

    2013     2012  

Non-interest bearing notes received from customers as deposits and advances

  Ps. 16,050,479      Ps. 14,608,137   

Trade accounts receivable

    7,176,194        6,559,863   

Allowance for doubtful accounts

    (2,492,536     (2,185,723
 

 

 

   

 

 

 
  Ps.  20,734,137      Ps.  18,982,277   
 

 

 

   

 

 

 

 

F-31


The carrying amounts of the Group’s trade notes and account receivables denominated in other than peso, currencies are as follows:

 

     2013      2012  

U.S. dollar

   Ps. 1,524,245       Ps. 1,714,614   

Other currencies

     561,990         512,573   
  

 

 

    

 

 

 

At December 31

   Ps.  2,086,235       Ps.  2,227,187   
  

 

 

    

 

 

 

Movements on the Group allowance for doubtful accounts of trade notes and account receivables are as follows:

 

     2013     2012  

At January 1

   Ps. (2,185,723   Ps. (1,781,670

Impairment provision

     (789,895     (781,949

Write–off of receivables

     457,721        377,896   

Unused amounts reversed

     25,361        —     
  

 

 

   

 

 

 

At December 31

   Ps. (2,492,536   Ps. (2,185,723
  

 

 

   

 

 

 

8. Transmission Rights and Programming

At December 31, 2013 and 2012, transmission rights and programming consisted of:

 

     2013      2012  

Transmission rights

   Ps. 8,947,399       Ps. 6,609,643   

Programming

     5,088,049         4,288,314   
  

 

 

    

 

 

 
     14,035,448         10,897,957   
  

 

 

    

 

 

 

Non-current portion of:

     

Transmission rights

     6,126,109         4,138,222   

Programming

     2,938,736         2,297,387   
  

 

 

    

 

 

 
     9,064,845         6,435,609   
  

 

 

    

 

 

 

Current portion of transmission rights and programming

   Ps. 4,970,603       Ps. 4,462,348   
  

 

 

    

 

 

 

9. Investments in Financial Instruments

At December 31, 2013 and 2012, the Group had the following investments in financial instruments:

 

     2013      2012  

Available-for-sale financial assets:

     

1.5% Convertible Debentures due 2025 issued by BMP (1)

   Ps. 7,675,036       Ps. 6,990,427   

Embedded derivative – BMP (1)

     14,761,677         9,611,873   

Convertible debt instruments issued by Ares (2)

     6,446,000         —     

Embedded derivative – Ares (2)

     771,000         —     

Long-term debt instrument issued by Ares (2)

     2,521,999         —     

Shares of common stock of Imagina (3)

     1,169,002         867,581   

Available-for-sale investments (4)

     4,015,105         2,986,933   
  

 

 

    

 

 

 
     37,359,819         20,456,814   

Held-to-maturity investments (5)

     631,964         388,504   

Other

     24,619         22,306   
  

 

 

    

 

 

 
   Ps.  38,016,402       Ps.  20,867,624   
  

 

 

    

 

 

 

 

F-32


(1) As of December 31, 2013 and 2012, the Group held an investment in 1.5% Convertible Debentures due 2025 issued by BMP in the principal amount of U.S.$1,125 million (Ps.14,709,375 and Ps.14,456,250, respectively). These Convertible Debentures are classified as available-for-sale financial assets with changes in fair value recognized in consolidated other comprehensive income or loss. The Group’s option of converting these debentures into an equity stake of BMP is accounted for as an embedded derivative with changes in fair value recognized in consolidated income (see Notes 3, 14 and 19).
(2) As of December 31, 2013, the Group held an investment in convertible debt instruments issued by Ares which, subject to regulatory approvals, will allow the Group to acquire 95% of the equity interest of Ares. These debt instruments have an initial maturity in 2018, which can be extended through 2023, with an annual interest of 4% capitalized into the principal amount on a semiannual basis. As of December 31, 2013, the Group also held an investment in a note payable due 2023 issued by Ares in the principal amount of U.S.$195 million with an annual interest of the higher of 2.5% and the six-month LIBOR plus 190 basis points, which is payable at the maturity of the note. The debt financial instruments are classified as available-for-sale financial assets with changes in fair value recognized in consolidated other comprehensive income or loss . The eventual conversion of the debt instruments into and equity stake of Ares is accounted for as an embedded derivative with changes in fair value recognized in consolidated income (see Notes 3 and 14).
(3) The Company’s investment in 14.5% of the common stock of Imagina is accounted for as an available-for-sale equity financial asset with changes in fair value recognized in consolidated other comprehensive income or loss (see Notes 3 and 21).
(4) The Group has an investment in an open ended fund that has as a primary objective to achieve capital appreciation by using a broad range of strategies through investments and transactions in telecom, media and other sectors across global markets, including Latin America and other emerging markets. Shares may be redeemed on a quarterly basis at the Net Asset Value (“NAV”) per share as of such redemption date. The fair value of this fund is determined by using the NAV per share. The NAV per share is calculated by determining the value of the fund assets and subtracting all of the fund liabilities and dividing the result by the total number of issued shares (see Note 2 (i)).
(5) Held-to-maturity investments represent corporate fixed income securities with long-term maturities. These investments are stated at amortized cost. Maturities of these investments subsequent to December 31, 2013, are as follows: Ps.342,238 in 2015, Ps.193,913 in 2016 and Ps.95,813 thereafter. Held-to-maturity financial assets as of December 31, 2013 and 2012 are denominated primarily in Mexican pesos.

A roll forward of available-for-sale financial assets for the years ended December 31, 2013 and 2012 is presented as follows:

 

     2013      2012  

At January 1

   Ps. 20,456,814       Ps. 38,946,680   

Foreign exchange differences

     350,506         (1,472,690

Acquisitions

     9,492,744         654,633   

Reclassification to investments in joint ventures

     —           (18,738,057

Interest income

     143,225         —     

Changes in other comprehensive income

     1,928,051         164,625   

Changes in other finance income

     4,988,479         901,623   
  

 

 

    

 

 

 

At December 31

   Ps.  37,359,819       Ps. 20,456,814   
  

 

 

    

 

 

 

10. Investments in Joint Ventures and Associates

At December 31, 2013 and 2012, the Group had the following investments in joint ventures and associates accounted for by the equity method:

 

     Ownership
as of
December 31,
2013
    2013      2012  

Joint ventures:

       

GSF (1)

     50   Ps.  13,828,000       Ps.  18,072,210   

GTAC (2)

     33.3     628,628         574,707   

Associates:

       

BMP (3)

     8     2,844,519         2,539,814   

Ocesa Entretenimiento, S.A. de C.V. and subsidiaries (collectively, “OCEN”) (4)

     40     878,160         842,328   

Other

       71,457         82,256   
    

 

 

    

 

 

 
     Ps. 18,250,764       Ps. 22,111,315   
    

 

 

    

 

 

 

 

F-33


(1) Effective in June 2012, the Group shares equal governance rights with the other owner of GSF, and began to account for this joint venture under the equity method. The investment in GSF includes intangible assets in the amount of Ps.5,172,851 and Ps.10,009,206 as of December 31, 2013 and 2012, respectively (see Note 3). Following the approvals of new industry regulations during 2013, and due to the lack of specific guidance, which is still being discussed by the Mexican congress, Management determined that it will take a longer period to realize the projected benefits of its investment, thus affecting its present value. As a result, the Company recorded an impairment of Ps.4,587,785 in its joint venture in the consolidated statement of income for the year ended December 31, 2013. The recoverable amount for GSF has been determined based on fair value calculations. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows for a period of time that comprise five years, as well as relevant comparable company earnings multiples for the market-based approach. The key assumptions used for fair value calculations of the recoverable amount of GSF in 2013 and 2012 were as follows:

 

     2013     2012  

Long-term growth rate

     3.00     3.00

Discount rate

     13.60     13.70

 

(2) In 2010, Grupo de Comunicaciones de Alta Capacidad, S.A.P.I. de C.V. (“GTAC”) was granted a 20-year contract for the lease of a pair of dark fiber wires held by the Mexican Federal Electricity Commission and a concession to operate a public telecommunications network in Mexico with an expiration date in 2030. GTAC is a joint venture in which a subsidiary of the Company, a subsidiary of Grupo de Telecomunicaciones Mexicanas, S.A. de C.V. and a subsidiary of Megacable, S.A. de C.V. have an equal equity participation of 33.3%. GTAC started operations in the second half of 2011 and commercial services in the first quarter of 2012. In June 2010, a subsidiary of the Company entered into a long-term credit facility agreement to provide financing to GTAC for up to Ps.688,217, with an annual interest rate of the Mexican Interbank Interest Rate (“Tasa de Interés Interbancaria de Equilibrio” or “TIIE”) plus 200 basis points. Under the terms of this agreement, principal and interest are payable at dates agreed by the parties, between 2013 and 2021. As of December 31, 2013 and 2012, GTAC had used a principal amount of Ps.618,683 and Ps.562,083, respectively, under this credit facility, with a related accrued interest receivable of Ps.114,491 and Ps.74,687, respectively. In the second half of 2013 GTAC paid interest to the Group in connection with this credit facility in the aggregate amount of Ps.84,577. In 2013, a subsidiary of the Company entered into a long-term credit facility agreement to provide additional financing to GTAC for up to U.S.$6.1 million (Ps.80,046), with an annual interest of TIIE plus 200 basis points. As of December 31, 2013, GTAC had used a principal amount of U.S.$5.9 million (Ps.77,359) under this additional credit facility, with a related accrued interest receivable of U.S.$0.3 million (Ps.3,668). The net investment in GTAC as of December 31, 2013 and 2012, included amounts receivable in connection with these credit facilities to GTAC in the aggregate amount of Ps.708,693 and Ps.648,720, respectively (see Note 14).
(3) The Group accounts for its 8% investment in common stock of BMP, the parent company of Univision, under the equity method due to the Group’s ability to exercise significant influence over BMP’s operations. The Group has determined it has the ability to exercise significant influence over the operating and financial policies of BMP because as of December 31, 2013 and 2012, the Group (i) owned 842,850 Class “C” shares of common stock of BMP, representing 8% of the outstanding total shares of BMP as of each of those dates; (ii) held 1.5% Convertible Debentures due 2025 issued by BMP with interest payable on a quarterly basis, which can be converted into additional 4,858,485 shares (subject to adjustment as provided in the debentures) of common stock of BMP equivalent to approximately 30% equity stake of BMP on a fully-diluted, as-converted basis, at the option of the Group, subject to certain conditions and regulations; (iii) owned an option to acquire at fair value additional shares of common stock of BMP representing 2% of the outstanding total shares of BMP as of each of those dates, subject to certain conditions and regulations; (iv) had three of 20 designated members of the Board of Directors of BMP; and (v) had entered into program license agreements with Univision, an indirect wholly-owned subsidiary of BMP, through the later of 2025 or seven and one-half years after the Group has sold two-thirds of its initial investment in BMP. On January 30, 2014, a group of institutional investors made a capital contribution in BMP. As a result of this transaction, the Group’s equity stake in BMP decreased from 8% to 7.8% (see Notes 3, 9, 14 and 19).
(4) OCEN is a majority-owned subsidiary of Corporación Interamericana de Entretenimiento, S.A. de C.V., and is engaged in the live entertainment business in Mexico. In 2011, OCEN paid dividends to the Group in the aggregate amount of Ps.64,960. The investment in OCEN included a goodwill of Ps.359,613 as of December 31, 2013 and 2012 (see Note 19).

 

F-34


A roll forward of investment in joint ventures and associates for the years ended December 31, 2013 and 2012 is presented as follows:

 

     2013     2012  

At January 1

   Ps. 22,111,315      Ps. 3,936,085   

Equity method for the year

     (661,569     (653,939

Equity method from prior years

     (52,825     (24,547

Impairment adjustment

     (4,587,785     —     

Amortization of GSF intangibles

     (248,570     —     

Capital contributions to GSF

     1,587,500        —     

Long-term loans to GTAC, net

     65,608        112,102   

Reclassification of GSF investment

     —          18,738,057   

Other

     37,090        3,557   
  

 

 

   

 

 

 

At December 31

   Ps.  18,250,764      Ps.  22,111,315   
  

 

 

   

 

 

 

Amounts of consolidated cash and cash equivalents, other current assets, non-current assets, debt and finance lease obligations, trade payables, other non-current liabilities and equity related to GSF as of December 31, 2013 and 2012, as well as a reconciliation of this summarized financial information to the Group’s carrying amount of its interest in this joint venture as of those dates, are set forth as follows:

 

     2013     2012  

Assets:

    

Cash and cash equivalents

   Ps. 1,011,899      Ps. 752,021   

Other current assets

     7,997,528        7,498,174   
  

 

 

   

 

 

 

Total current assets

     9,009,427        8,250,195   

Non-current assets

     26,863,439        22,091,409   
  

 

 

   

 

 

 

Total assets

   Ps.  35,872,866      Ps.  30,341,604   
  

 

 

   

 

 

 

Liabilities:

    

Short-term debt and finance lease obligations

   Ps. 2,267,161      Ps. 1,139,115   

Trade payables

     8,721,489        7,374,844   
  

 

 

   

 

 

 

Total current liabilities

     10,988,650        8,513,959   
  

 

 

   

 

 

 

Long-term debt and finance lease obligations

     6,570,140        7,474,040   

Long-term trade payables

     3,629,005        338,875   

Other non-current liabilities

     620,322        1,134,344   
  

 

 

   

 

 

 

Total non-current liabilities

     10,819,467        8,947,259   
  

 

 

   

 

 

 

Total liabilities

     21,808,117        17,461,218   
  

 

 

   

 

 

 

Equity:

    

Attributable to stockholders of GSF

     17,310,297        16,126,007   

Non-controlling interests

     (3,245,548     (3,245,621
  

 

 

   

 

 

 

Total equity

     14,064,749        12,880,386   
  

 

 

   

 

 

 

Total liabilities and equity

   Ps. 35,872,866      Ps. 30,341,604   
  

 

 

   

 

 

 

Share of equity attributable to controlling stockholders of GSF

   Ps. 8,655,149      Ps. 8,063,004   

Other concepts that are part of the investment:

    

Intangible assets

     5,172,851        10,009,206   
  

 

 

   

 

 

 

Total investment

   Ps. 13,828,000      Ps. 18,072,210   
  

 

 

   

 

 

 

 

F-35


Amounts of consolidated net sales, depreciation and amortization, operating income, interest expense, income tax expense, net income or loss, and comprehensive income or loss related to GSF for the years ended December 31, 2013 and 2012, are set forth as follows:

 

     2013     2012 (a)  

Net sales

   Ps.  19,582,451      Ps.  17,382,368   

Depreciation and amortization

     2,378,885        2,017,128   

Operating income (loss)

     (1,093,673     (1,787,456

Interest expense

     (1,149,683     (1,363,627

Income tax expense

     342,215        467,075   

Net (loss) income attributable to:

    

Controlling stockholders of GSF

     (1,991,059     (2,232,394

Non-controlling interests

     73        (79

Comprehensive (loss) income attributable to:

    

Controlling stockholders of GSF

     (1,990,710     (2,227,826

Non-controlling interests

     73        (79

 

(a) As discussed in Note 3, the Group started recognizing equity method in its investment in GSF in the second half of 2012. The net loss, other comprehensive income and comprehensive loss attributable to controlling stockholders of GSF for the six months ended December 31, 2012, amounted to Ps.(1,336,261), Ps.4,568 and Ps.(1,331,693), respectively.

Aggregate amounts of consolidated net income or loss, other comprehensive income or loss and total comprehensive income or loss related to the Group’s interests in other joint ventures and associates for the years ended December 31, 2013, 2012 and 2011, are set forth as follows:

 

     2013      2012      2011  

Net income (loss)

   Ps.  246,276       Ps. 1,505       Ps. (500,816

Other comprehensive income (loss)

     87,510         10,403         (19,316
  

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss)

   Ps. 333,786       Ps.  11,908       Ps. (520,132
  

 

 

    

 

 

    

 

 

 

The Group recognized its share of comprehensive loss of joint ventures and associates for the years ended December 31, 2013, 2012 and 2011, as follows:

 

     2013     2012     2011  

Share of loss of joint ventures and associates, net

   Ps. (5,659,963   Ps. (666,602   Ps. (449,318
  

 

 

   

 

 

   

 

 

 

Share of other comprehensive income (loss) of joint ventures and associates:

      

Foreign currency translation adjustments, net

     50,398        (291,460     292,720   

Gain on equity accounts, net

     105,259        50,606        (37,314
  

 

 

   

 

 

   

 

 

 
     155,657        (240,854     255,406   
  

 

 

   

 

 

   

 

 

 

Share of total comprehensive loss of joint ventures and associates

   Ps. (5,504,306   Ps. (907,456   Ps. (193,912
  

 

 

   

 

 

   

 

 

 

 

F-36


11. Property, Plant and Equipment, Net

The analysis of the changes in property, plant and equipment is as follows:

 

Changes

  Buildings and
Land
    Technical
Equipment
    Satellite
Transponders
    Furniture
and
Fixtures
    Transportation
Equipment
    Computer
Equipment
    Leasehold
Improvements
    Construction
in Progress
    Total  

Cost:

                 

January 1, 2012

  Ps.  14,255,102      Ps. 52,277,259      Ps. 3,593,873      Ps. 884,408      Ps. 2,136,332      Ps. 4,422,994      Ps.  1,424,386      Ps. 3,653,553      Ps. 82,647,907   

Additions

    27,776        1,825,760        —          16,287        72,751        158,635        62,352        13,631,268        15,794,829   

Retirements

    (253,085     (5,647,233     —          (106,991     (74,934     (410,043     (164,706     (1,319     (6,658,311

Transfers and reclassifications

    228,280        8,650,639        4,275,619        (51,549     88,886        82,443        113,129        (13,387,447     —     

Acquisition of subsidiaries

    —          18,384        —          1,513        1,241        752        4,872        —          26,762   

Effect of translation

    (23,495     (100,489     —          (18,921     (1,788     (5,618     (1,561     23        (151,849
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

    14,234,578        57,024,320        7,869,492        724,747        2,222,488        4,249,163        1,438,472        3,896,078        91,659,338   

Additions

    26,829        2,484,622        —          21,261        68,877        213,679        36,617        12,018,787        14,870,672   

Retirements

    (1,173,618     (1,715,313     —          (5,783     (495,244     (55,284     (186     (526,507     (3,971,935

Transfers and reclassifications

    242,804        8,580,462        —          95,456        107,199        929,427        52,999        (10,008,347     —     

Acquisition of subsidiaries

    7,873        110,987        —          7,118        5,451        7,546        1,807        —          140,782   

Effect of translation

    (24,280     23,487        —          (17,515     (1,562     (3,477     (798     —          (24,145
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

  Ps. 13,314,186      Ps. 66,508,565      Ps. 7,869,492      Ps. 825,284      Ps. 1,907,209      Ps. 5,341,054      Ps. 1,528,911      Ps. 5,380,011      Ps.  102,674,712   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation:

                 

January 1, 2012

  Ps. (4,688,112   Ps. (30,083,670   Ps. (1,962,701   Ps. (531,811   Ps. (977,116   Ps. (3,008,686   Ps. (520,925   Ps. —        Ps. (41,773,021

Depreciation of the year

    (213,347     (6,071,153     (239,201     (57,198     (222,578     (609,205     (133,220     —          (7,545,902

Write-off of the year

    —          (25,247     —          —          —          —          —          —          (25,247

Retirements

    89,953        5,178,719        —          102,268        66,965        386,262        47,210        —          5,871,377   

Transfers and reclassifications

    5,870        (250,452     —          (977     252        250,513        (5,206     —          —     

Acquisition of subsidiaries

    —          (7,379     —          (605     (267     (288     (2,036     —          (10,575

Effect of translation

    10,670        56,358        —          17,489        2,633        3,285        917        —          91,352   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

    (4,794,966     (31,202,824     (2,201,902     (470,834     (1,130,111     (2,978,119     (613,260     —          (43,392,016

Depreciation of the year

    (222,209     (7,154,847     (405,307     (48,048     (215,481     (658,067     (157,431     —          (8,861,390

Retirements

    1,156,200        1,486,930        —          5,104        445,879        53,398        8        —          3,147,519   

Acquisition of subsidiaries

    (4,478     (87,764     —          (6,176     (5,032     (5,555     (483     —          (109,488

Effect of translation

    9,653        (12,305     —          15,738        610        2,662        780        —          17,138   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

  Ps. (3,855,800   Ps. (36,970,810   Ps. (2,607,209   Ps. (504,216   Ps. (904,135   Ps. (3,585,681   Ps. (770,386   Ps. —        Ps. (49,198,237
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying value:

                 

At January 1, 2012

  Ps. 9,566,990      Ps. 22,193,589      Ps. 1,631,172      Ps. 352,597      Ps. 1,159,216      Ps. 1,414,308      Ps. 903,461      Ps. 3,653,553      Ps. 40,874,886   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2012

  Ps. 9,439,612      Ps. 25,821,496      Ps. 5,667,590      Ps. 253,913      Ps. 1,092,377      Ps. 1,271,044      Ps. 825,212      Ps. 3,896,078      Ps. 48,267,322   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2013

  Ps. 9,458,386      Ps. 29,537,755      Ps. 5,262,283      Ps. 321,068      Ps. 1,003,074      Ps. 1,755,373      Ps. 758,525      Ps. 5,380,011      Ps. 53,476,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation charges are presented in Note 20.

In March 2010, Sky reached an agreement with a subsidiary of Intelsat to lease 24 transponders on Intelsat IS-21 satellite, mainly for signal reception and retransmission services over the satellite’s estimated 15-year service life. IS-21 replaced Intelsat IS-9 as Sky’s primary transmission satellite and started service in the fourth quarter of 2012. This lease agreement contemplates monthly payments of U.S.$3.0 million to be paid by Sky beginning in the fourth quarter of 2012. In October 2012, the Group recognized this agreement as a finance lease obligation in the net amount of U.S.$326.3 million (Ps.4,192,955).

 

F-37


12. Intangible Assets, Net

The analysis of the changes in intangible assets is as follows:

 

    Intangible Assets with Indefinite Useful Lives     Intangible Assets with Finite Useful Lives        

Changes

  Goodwill     Trademarks     Concessions     Licenses     Subscriber
Lists
    Other
Intangible
Assets
    Total  

Cost:

             

January 1, 2012

  Ps. 2,621,842      Ps. 1,749,765      Ps. 3,921,603      Ps. 2,285,988      Ps. 2,785,800      Ps. 1,224,582      Ps. 14,589,580   

Additions

    —          10,000        15,432        561,867        175,261        882,662        1,645,222   

Retirements

    (310     —          —          (624,227     (281,000     (28,467     (934,004

Acquisition of subsidiaries

    —          —          —          6,534        10,386        —          16,920   

Transfers and reclassifications

    —          —          (43,856     —          —          43,856        —     

Effect of translation

    —          (509     —          (139     —          (3,515     (4,163
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

    2,621,532        1,759,256        3,893,179        2,230,023        2,690,447        2,119,118        15,313,555   

Additions

    —          —          —          942,166        36,198        407,850        1,386,214   

Retirements

    —          —          —          (756     —          (419,618     (420,374

Acquisition of subsidiaries

    100,028        —          —          —          —          —          100,028   

Impairment adjustments

    (50,130     (9,518     —          —          —          —          (59,648

Effect of translation

    —          (336     —          (748     199        843        (42
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

  Ps. 2,671,430      Ps. 1,749,402      Ps. 3,893,179      Ps. 3,170,685      Ps. 2,726,844      Ps. 2,108,193      Ps. 16,319,733   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization:

             

January 1, 2012

  Ps. (49,900   Ps. —        Ps. (270,638   Ps. (1,533,088   Ps. (1,582,533   Ps. (479,490   Ps. (3,915,649

Amortization of the year

    —          —          —          (400,265     (364,940     (163,133     (928,338

Other amortization of the year

    —          —          —          —          —          (195,957     (195,957

Retirements

    —          —          —          561,302        273,979        20,745        856,026   

Acquisition of subsidiaries

    —          —          —          (2,940     (5,193     —          (8,133

Transfers and reclassifications

    —          —          33,444        —          —          (33,444     —     

Effect of translation

    —          —          —          686        —          4,601        5,287   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

    (49,900     —          (237,194     (1,374,305     (1,678,687     (846,678     (4,186,764

Amortization of the year

    —          —          —          (453,195     (344,769     (187,012     (984,976

Other amortization of the year

    —          —          —          —          —          (185,080     (185,080

Retirements

    —          —          —          483        —          419,210        419,693   

Effect of translation

    —          —          —          522        —          (817     (295
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

  Ps. (49,900   Ps. —        Ps. (237,194   Ps. (1,826,495   Ps. (2,023,456   Ps. (800,377   Ps. (4,937,422
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying value:

             

At January 1, 2012

  Ps. 2,571,942      Ps. 1,749,765      Ps. 3,650,965      Ps. 752,900      Ps. 1,203,267      Ps. 745,092      Ps. 10,673,931   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2012

  Ps. 2,571,632      Ps. 1,759,256      Ps. 3,655,985      Ps. 855,718      Ps. 1,011,760      Ps. 1,272,440      Ps. 11,126,791   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2013

  Ps.  2,621,530      Ps.  1,749,402      Ps.  3,655,985      Ps. 1,344,190      Ps. 703,388      Ps.  1,307,816      Ps.  11,382,311   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amortization charges are presented in Note 20.

The changes in the net carrying amount of goodwill and trademarks for the year ended December 31, 2013, were as follows:

 

     Balance as of
December 31,
2012
     Acquisitions      Foreign
Currency
Translation
Adjustments
    Impairment
Adjustments
    Balance as of
December 31,
2013
 

Goodwill:

            

Content

   Ps. 241,973       Ps. —         Ps. —        Ps. —        Ps. 241,973   

Telecommunications

     1,859,048         100,028         —          —          1,959,076   

Publishing

     470,611         —           —          (50,130     420,481   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   Ps. 2,571,632       Ps.  100,028       Ps. —        Ps. (50,130   Ps. 2,621,530   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Trademarks (see Note 3):

            

Publishing

   Ps. 464,965       Ps. —         Ps. (336   Ps. (9,518   Ps. 455,111   

Telecommunications

     1,284,291         —           —          —          1,284,291   

Other

     10,000         —           —          —          10,000   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   Ps.  1,759,256       Ps. —         Ps. (336   Ps. (9,518   Ps.  1,749,402   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

F-38


During the fourth quarter of 2013, the Group monitored the market associated with its Publishing segment, which has experienced a general slow-down in Latin America. Accordingly, the Group reduced its cash flow expectations for some of its foreign operations. As a result, the Group compared the implied fair value of the goodwill and trademarks in the reporting units with the related carrying value and recorded an aggregate Ps.59,648 pre-tax impairment charge in other expense, net, in the consolidated statement of income for the year ended December 31, 2013.

The key assumptions used for fair value calculations of Goodwill and intangible assets in 2013 were as follows:

 

     Publishing     Telecommunications  
     Minimum     Maximum     Minimum     Maximum  

Long-term growth rate

     3.50     4.60     3.50     3.50

Discount rate

     14.10     22.80     11.20     13.50

The key assumptions used for fair value calculations of Goodwill and intangible assets in 2012 were as follows:

 

     Publishing     Telecommunications  
     Minimum     Maximum     Minimum     Maximum  

Long-term growth rate

     2.70     4.90     3.50     3.70

Discount rate

     11.60     20.20     10.60     12.56

13. Debt and Finance Lease Obligations

Debt and finance lease obligations outstanding as of December 31, 2013 and 2012, were as follows:

 

     2013      2012  

U.S. dollar debt:

     

6% Senior Notes due 2018 (1)

   Ps. 6,507,849       Ps. 6,388,636   

6.625% Senior Notes due 2025 (1)

     7,414,019         7,240,710   

8.50% Senior Notes due 2032 (1)

     3,890,267         3,821,000   

6.625% Senior Notes due 2040 (1)

     7,679,931         7,538,562   
  

 

 

    

 

 

 

Total U.S. dollar debt

     25,492,066         24,988,908   
  

 

 

    

 

 

 

Mexican peso debt:

     

7.38% Notes due 2020 (2)

     9,951,803         9,944,750   

8.49% Senior Notes due 2037 (1)

     4,483,022         4,482,297   

7.25% Senior Notes due 2043 (1)

     6,430,330         —     

Bank loans (3)

     8,589,233         8,586,064   

Bank loans (Sky) (4)

     3,500,000         3,500,000   

Bank loans (TVI) (5)

     1,609,361         1,489,400   
  

 

 

    

 

 

 

Total Mexican peso debt

     34,563,749         28,002,511   
  

 

 

    

 

 

 

Total debt (8)

     60,055,815         52,991,419   

Less: Short-term debt and current portion of long-term debt

     312,715         375,000   
  

 

 

    

 

 

 

Long-term debt, net of current portion

   Ps.  59,743,100       Ps.  52,616,419   
  

 

 

    

 

 

 

Finance lease obligations:

     

Satellite transponder lease obligation (6)

   Ps. 4,077,561       Ps. 4,132,365   

Other (7)

     841,686         838,785   
  

 

 

    

 

 

 

Total finance lease obligations

     4,919,247         4,971,150   

Less: Current portion

     424,698         439,257   
  

 

 

    

 

 

 

Finance lease obligations, net of current portion

   Ps. 4,494,549       Ps. 4,531,893   
  

 

 

    

 

 

 

 

F-39


(1) The Senior Notes due 2018, 2025, 2032, 2037, 2040 and 2043, in the outstanding principal amount of U.S.$500 million, U.S.$600 million, U.S.$300 million, Ps.4,500,000, U.S.$600 million and Ps.6,500,000, respectively, are unsecured obligations of the Company, rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness of the Company, and are junior in right of payment to all of the existing and future liabilities of the Company’s subsidiaries. Interest on the Senior Notes due 2018, 2025, 2032, 2037, 2040 and 2043, including additional amounts payable in respect of certain Mexican withholding taxes, is 6.31%, 6.97%, 8.94%, 8.93%, 6.97% and 7.62% per annum, respectively, and is payable semi-annually. These Senior Notes may not be redeemed prior to maturity, except (i) in the event of certain changes in law affecting the Mexican withholding tax treatment of certain payments on the securities, in which case the securities will be redeemable, as a whole but not in part, at the option of the Company; and (ii) in the event of a change of control, in which case the Company may be required to redeem the securities at 101% of their principal amount. Also, the Company may, at its own option, redeem the Senior Notes due 2018, 2025, 2037, 2040 and 2043, in whole or in part, at any time at a redemption price equal to the greater of the principal amount of these Senior Notes or the present value of future cash flows, at the redemption date, of principal and interest amounts of the Senior Notes discounted at a fixed rate of comparable U.S. or Mexican sovereign bonds. The Senior Notes due 2018, 2032, 2040 and 2043 were priced at 99.280%, 99.431%, 98.319% and 99.733%, respectively, for a yield to maturity of 6.097%, 8.553%, 6.755% and 7.27%, respectively. The Senior Notes due 2025 were issued in two aggregate principal amounts of U.S.$400 million and U.S.$200 million, and were priced at 98.081% and 98.632%, respectively, for a yield to maturity of 6.802% and 6.787%, respectively. The agreement of these Senior Notes contains covenants that limit the ability of the Company and certain restricted subsidiaries engaged in the Group’s Content segment, to incur or assume liens, perform sale and leaseback transactions, and consummate certain mergers, consolidations and similar transactions. The Senior Notes due 2018, 2025, 2032, 2037 and 2040 are registered with the U.S. Securities and Exchange Commission (“SEC”). The Senior Notes due 2043 are registered with both the U.S. SEC and the Mexican Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores”).
(2) In 2010, the Company issued 7.38% Notes (“Certificados Bursátiles”) due 2020 through the Mexican Stock Exchange (“Bolsa Mexicana de Valores”) in the aggregate principal amount of Ps.10,000,000. Interest on these Notes is payable semi-annually. The Company may, at its own option, redeem these Notes, in whole or in part, at any semi-annual interest payment date at a redemption price equal to the greater of the principal amount of the outstanding Notes and the present value of future cash flows, at the redemption date, of principal and interest amounts of the Notes discounted at a fixed rate of comparable Mexican sovereign bonds. The agreement of these Notes contains covenants that limit the ability of the Company and certain restricted subsidiaries appointed by the Company’s Board of Directors, and engaged in the Group’s Content segment, to incur or assume liens, perform sale and leaseback transactions, and consummate certain mergers, consolidations and similar transactions.
(3) In March 2011, the Company entered into long-term credit agreements with four Mexican banks in the aggregate principal amount of Ps.8,600,000, with an annual interest rate between 8.09% and 9.4%, payable on a monthly basis, and principal maturities between 2016 and 2021. The proceeds of these loans were used for general corporate purposes. Under the terms of these loan agreements, the Company is required to (a) maintain certain financial coverage ratios related to indebtedness and interest expense; and (b) comply with the restrictive covenant on spin-offs, mergers and similar transactions.
(4) Includes in 2013 and 2012, two long-term loans entered into by Sky with Mexican banks in the principal amount of Ps.1,400,000 and Ps.2,100,000, with a maturity in 2016, bearing annual interest of TIIE plus 24 basis points and 8.74%, respectively, with interest payable on a monthly basis. This Sky long-term indebtedness is guaranteed by the Company. Under the terms of these loan agreements, Sky is required to maintain (a) certain financial coverage ratios related to indebtedness and interest expense; and (b) certain restrictive covenants on indebtedness, liens, asset sales, and certain mergers and consolidations.
(5) Includes in 2013 and 2012, outstanding balances in the aggregate principal amount of Ps.1,614,400 and Ps.1,489,000, respectively, in connection with certain credit agreements entered into by TVI with Mexican banks, with maturities between 2014 and 2019, bearing interest at an annual rate in the range of TIIE plus 1.70% to TIIE plus 2.50%, with interest payable on a monthly basis.
(6) Starting from the fourth quarter of 2012, Sky is obligated to pay a monthly fee of U.S.$3.0 million under a capital lease agreement entered into with Intelsat Global Sales & Marketing Ltd. (“Intelsat”) in March 2010 for satellite signal reception and retransmission service from 24 KU-band transponders on satellite IS-21, which became operational in October 2012. The service term for IS-21 will end at the earlier of (a) the end of 15 years or (b) the date IS-21 is taken out of service. This line item also includes in 2012 the agreement to pay a monthly fee of U.S.$1.7 million under a capital lease agreement entered into with Intelsat (formerly PanAmSat Corporation) in February 1999 for satellite signal reception and retransmission service from 12 KU-band transponders on satellite IS-9, which became operational in September 2000. The agreement provided that the service term for IS-9 was to end at the earlier of (a) the end of 15 years or (b) the date IS-9 is taken out of service. In 2010, Intelsat notified Sky that IS-9 experienced certain technical anomalies in its primary propulsion system, resulting in a shortened satellite life through 2012 instead of its original estimated life through 2015. Accordingly, Sky reduced the carrying value of the corresponding asset and the present value of the minimum payments in accordance with the related agreement and based on the remaining useful life of IS-9. The obligations of Sky under the IS-9 agreement were terminated in October 2012 (see Note 11).
(7) Includes minimum lease payments of property and equipment and intangible assets under leases that qualify as capital leases. Also, includes in 2013 and 2012 a subsidiary of the Company entered a lease agreement with GTAC, a related party for the right to use certain capacity of a telecommunications network to 2029. This lease provides for annual payments to 2020 and 2021. The capital leases have terms which expire at various dates between 2014 and 2015.
(8) Total debt is presented net of unamortized finance costs as of December 31, 2013 and 2012, in the aggregate amount of Ps.808,585 and Ps.797,981, respectively.

 

F-40


Maturities of Debt and Finance Lease Obligations

Debt maturities for the years subsequent to December 31, 2013, are as follows:

 

     Nominal      Net of
Unamortized
Finance Costs
 

2014

   Ps. 314,293       Ps. 312,715   

2015

     338,660         337,513   

2016

     9,243,855         9,238,658   

2017

     1,650,925         1,650,536   

2018

     7,627,500         7,592,800   

Thereafter

     41,689,167         40,923,593   
  

 

 

    

 

 

 
   Ps.  60,864,400       Ps.  60,055,815   
  

 

 

    

 

 

 

Future minimum payments under finance lease obligations for the years subsequent to December 31, 2013, are as follows:

 

2014

   Ps. 735,008   

2015

     582,728   

2016

     570,783   

2017

     602,233   

2018

     610,125   

Thereafter

     4,449,241   
  

 

 

 
     7,550,118   

Less: Amount representing interest

     (2,630,871
  

 

 

 
   Ps. 4,919,247   
  

 

 

 

14. Financial Instruments

The Group’s financial instruments presented in the consolidated statements of financial position included cash and cash equivalents, temporary investments, accounts and notes receivable, a long-term loan receivable from GTAC, convertible debentures issued by BMP with an option to convert these debentures into common stock of BMP, convertible debt instruments issued by Ares with an option to convert these instruments into common stock of Ares, debt securities classified as held-to-maturity investments, investments in securities in the form of an open-ended fund classified as available-for-sale investments, accounts payable, debt and derivative financial instruments. For cash and cash equivalents, temporary investments, accounts receivable, accounts payable, and short-term notes payable due to banks and other financial institutions, the carrying amounts approximate fair value due to the short maturity of these instruments. The fair value of the Group’s long-term debt securities are based on quoted market prices.

The fair value of the long-term loans that the Group borrowed from leading Mexican banks (see Note 13) has been estimated using the borrowing rates currently available to the Group for bank loans with similar terms and average maturities. The fair value of held-to-maturity securities, available-for-sale investments, and currency option, interest rate swap and share put option agreements is based on quotes obtained from financial institutions.

The carrying and estimated fair values of the Group’s non-derivative financial instruments as of December 31, 2013 and 2012, were as follows:

 

     2013      2012  
     Carrying
Value
     Fair Value      Carrying
Value
     Fair Value  

Assets:

           

Temporary investments

   Ps. 3,722,976       Ps. 3,722,976       Ps. 5,317,296       Ps. 5,317,296   

Trade notes and accounts receivable, net

     20,734,137         20,734,137         18,982,277         18,982,277   

1.5% Convertible Debentures due 2025 issued by BMP (see Note 9)

     7,675,036         7,675,036         6,990,427         6,990,427   

Embedded derivative BMP

     14,761,677         14,761,677         9,611,873         9,611,873   

Long-term loan and interest receivable from GTAC (see Note 10)

     708,693         739,384         636,770         674,403   

Held-to-maturity investments (see Note 9)

     631,964         631,990         388,504         389,957   

Shares of common stock of Imagina (see Note 9)

     1,169,002         1,169,002         867,581         867,581   

 

F-41


     2013      2012  
     Carrying
Value
     Fair Value      Carrying
Value
     Fair Value  

Available-for-sale investments (see Note 9)

     4,015,105         4,015,105         2,986,933         2,986,933   

Convertible debt instruments issued by Ares (see Note 9)

     6,446,000         6,446,000         —           —     

Embedded derivative Ares (see Note 9)

     771,000         771,000         —           —     

Long-term debt instrument issued by Ares (see Note 9)

     2,521,999         2,521,999         —           —     

Liabilities:

           

Senior Notes due 2018, 2025, 2032 and 2040

   Ps.  26,150,000       Ps.  29,383,172       Ps.  25,700,000       Ps.  33,170,733   

Senior Notes due 2037 and 2043

     11,000,000         9,704,313         4,500,000         5,191,110   

Notes due 2020

     10,000,000         10,391,700         10,000,000         10,636,900   

Short-term loans and long-term notes payable to Mexican banks

     13,714,400         14,413,969         13,589,400         14,535,200   

Finance lease obligations

     4,919,247         4,830,631         4,971,150         4,886,123   

The carrying values (based on estimated fair values), notional amounts, and maturity dates of the Group’s derivative financial instruments as of December 31, 2013 and 2012, were as follows:

 

2013:                

Derivative Financial Instruments

   Carrying Value    

Notional Amount
(U.S. Dollars in
Thousands)

   Maturity Date

Assets:

       

Derivatives not recorded as accounting hedges:

       

Options (c)

     Ps. 6,122      U.S.$270,000    2014 and 2015

Derivatives recorded as accounting hedges (cash flow hedges):

       

Cross-currency interest rate swaps (a)

     2,266     

U.S.$300,000/

Ps.3,867,000

   March 2014
  

 

 

      

Total assets

     Ps. 8,388 (1)      
  

 

 

      

Liabilities:

       

Derivatives not recorded as accounting hedges:

       

Sky’s interest rate swap (b)

     Ps. 119,780      Ps.1,400,000    April 2016

TVI’s interest rate swap (e)

     11,942      Ps.1,577,700    February 2016 and April 2019

Derivatives recorded as accounting hedges (cash flow hedges):

       

Interest rate swap (d)

     203,614      Ps.2,500,000    March 2018
  

 

 

      

Total liabilities

     Ps. 335,336        
  

 

 

      

 

F-42


2012:                

Derivative Financial Instruments

   Carrying Value    

Notional Amount
(U.S. Dollars in
Thousands)

   Maturity Date

Assets:

       

Derivatives not recorded as accounting hedges:

       

Options (c)

     Ps. 12,419      U.S.$405,000    2013, 2014 and 2015

TVI’s interest rate swap (e)

     1,443      Ps.1,300,000    February 2016

Derivatives recorded as accounting hedges (cash flow hedges):

       

Cross-currency interest rate swaps (a)

     1,138     

U.S.$600,000/

Ps.7,644,600

   January 2013
  

 

 

      

Total assets

     Ps. 15,000 (1)      
  

 

 

      

Liabilities:

       

Derivatives not recorded as accounting hedges:

       

Sky’s interest rate swap (b)

     Ps. 132,075      Ps.1,400,000    April 2016

TVI’s forward (f)

     1,176     

U.S.$3,000/

Ps.39,804

   January 2013

Derivatives recorded as accounting hedges (cash flow hedges):

       

Interest rate swap (d)

     219,511      Ps.2,500,000    March 2018
  

 

 

      

Total liabilities

     Ps. 352,762        
  

 

 

      

 

(1) Includes derivative financial instruments of Ps.3,447 that were classified in current assets in the consolidated statement of financial position as of December 31, 2013.
(a) In order to reduce the adverse effects of exchange rates on the Senior Notes due 2032 and 2040, during 2013 and 2012, the Company entered into cross-currency interest rate swap agreements with various financial institutions that allow the Company to hedge against Mexican peso depreciation on interest payments to be made in 2014, and 2013. Under these transactions, the Company receives semi-annual payments based on the aggregate notional amount U.S.$300 million and U.S.$600 million as of December 31, 2013 and 2012, respectively, at an average annual rate of 8.50% and 6.6250%, respectively, and the Company makes semi-annual payments based on an aggregate notional amount of Ps.3,867,000 and Ps.7,644,600 as of December 31, 2013 and 2012, respectively, at an average annual rate of 8.5028% and 6.5896%, respectively, without an exchange of the notional amount upon which the payments are based. As a result of the change in fair value of these transactions, in the years ended December 31, 2013 and 2012, the Company recorded a (loss) gain of Ps.(5,020) and Ps.41,336, respectively, relating to the interest rate swaps not recorded as accounting hedges, in consolidated finance expense, net (other finance expense), and as of December 31, 2013 and 2012, the Company has recorded in consolidated equity, as accumulated other comprehensive income or loss attributable to stockholders of the Company, a cumulative gain for changes in fair value of Ps.2,266 and Ps.1,138, respectively, relating to interest rate swaps recorded as accounting hedges.
(b) In December 2006, Sky entered into a derivative transaction agreement from April 2009 through April 2016 to hedge the variable interest rate exposure resulting from a Mexican peso loan of a total principal amount of Ps.1,400,000. Under this transaction, Sky receives 28-day payments based on an aggregate notional amount of Ps.1,400,000 at an annual variable rate of TIIE+24 basis points and makes 28-day payments based on the same notional amount at an annual fixed rate of 8.415%. The Group recorded the change in fair value of this transaction as interest expense in consolidated other finance expense, net (see Note 13).
(c) In December 2012 and 2011, the Company entered into derivative agreements (“knock-out option calls”) with two financial institutions to reduce the adverse effect of exchange rates on the Senior Notes due 2018, 2025, 2032 and 2040, and hedge against severe Mexican peso depreciation on interest payments to be made in the second half of 2012, 2013, 2014 and 2015. Under these transactions, the Company has the option to receive in 2012 and 2011 an aggregate amount of U.S.$135.0 million in exchange for an aggregate amount of Ps.2,497,500, and U.S.$337.5 million in exchange for aggregate amount of Ps.6,041,250, respectively, at maturity dates between July 2012, November 2014 and November 2015, only if the exchange rate of the Mexican peso during each agreement period is not above a limit agreed between the parties. If the exchange rate exceeds such limit at any time during the agreement period, the option is extinguished. The Company paid in 2012 and 2011 premiums for these agreements in the aggregate amount of U.S.$0.9 million (Ps.11,489) and U.S.$2.56 million (Ps.34,812), respectively. The Company recognized the change in fair value of this transaction as well as the related premium amortization in consolidated finance expense, net (other finance expense, net).
(d) In March 2011, the Company entered into a derivative transaction agreement (interest rate swap) from March 2011 through March 2018 to hedge the variable interest rate exposure resulting from a Mexican peso loan of a total principal amount of Ps.2,500,000. Under this transaction, the Company receives 28-day payments based on an aggregate notional amount of Ps.2,500,000 through September 2016, Ps.1,875,000 through March 2017, Ps.1,250,000 through September 2017, and Ps.625,000 through March 2018, at an annual variable rate of TIIE and makes 28-day payments based on the same notional amount at an annual fixed rate of 7.4325%. The Company recognized the change in fair value of this transaction in consolidated finance expense, net (other finance expense, net).
(e) In 2013 and 2012, TVI entered into a derivative transaction agreement (interest rate swap) with two financial institutions from January 2012 through April 2019 to hedge the variable interest rate exposure resulting from a Mexican peso loan of a total principal amount of Ps.500,000 and Ps.1,300,000, respectively. Under this transaction, the Company receives 28-day payments based on an aggregate notional amount of Ps.500,000 and Ps.1,300,000 and payment based on the same notional at annual fixed rate of 5.2189% and 5.032%, respectively. As a result of the change in fair value of these transactions, in the year ended December 31, 2013 and 2012, TVI recorded a loss of Ps.23,588 and Ps.867, respectively, in consolidated other finance expense, net.
(f) At December 31, 2012, TVI had foreign currency contracts in the aggregate notional amount of U.S.$3.0 million to exchange U.S. dollars for Mexican pesos at an average rate of Ps.13.2680 per U.S. dollar in 2013.

 

F-43


Fair Value Measurement

Assets and Liabilities Measured at Fair Value on a Recurring Basis

All fair value adjustments as of December 31, 2013 and 2012 represent assets or liabilities measured at fair value on a recurring basis. In determining fair value, the Group’s financial instruments are separated into three categories: temporary investments, available-for-sale investments and derivative instruments.

Financial assets and liabilities measured at fair value as of December 31, 2013 and 2012:

 

     Balance as of
December 31,
2013
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Internal Models
with Significant
Observable
Inputs (Level 2)
     Internal Models
with Significant
Unobservable
Inputs (Level 3)
 

Assets:

           

Temporary investments

   Ps. 3,722,976       Ps. 3,722,976       Ps. —         Ps. —     

Available-for-sale financial assets:

           

Available-for-sale investments

     4,015,105         —           4,015,105         —     

1.5 % Convertible Debentures due 2025 issued by BMP

     7,675,036         —           —           7,675,036   

Embedded derivative BMP

     14,761,677         —           —           14,761,677   

Shares of Common Stock of Imagina

     1,169,002         —           —           1,169,002   

Convertible debt instruments issued by Ares

     6,446,000         —           —           6,446,000   

Embedded derivative Ares

     771,000         —           —           771,000   

Long-term debt instrument issued by Ares

     2,521,999         —           —           2,521,999   

Derivative financial instruments

     8,388         —           8,388         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Ps.  41,091,183       Ps.  3,722,976       Ps. 4,023,493       Ps.  33,344,714   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative financial instruments

   Ps. 335,336       Ps. —         Ps. 335,336       Ps. —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Ps. 335,336       Ps. —         Ps. 335,336       Ps. —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     Balance as of
December 31,
2012
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Internal Models
with Significant
Observable
Inputs (Level 2)
     Internal Models
with Significant
Unobservable
Inputs (Level 3)
 

Assets:

           

Temporary investments

   Ps. 5,317,296       Ps. 2,844,386       Ps.  2,472,910       Ps. —     

Available-for-sale financial assets:

           

Available-for-sale investments

     2,986,933         —           2,986,933         —     

1.5% Convertible Debentures due 2025 issued by BMP

     6,990,427         —           —           6,990,427   

Embedded derivative BMP

     9,611,873         —           —           9,611,873   

Shares of Common Stock of Imagina

     867,581         —           —           867,581   

Derivative financial instruments

     15,000         —           15,000         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Ps. 25,789,110       Ps. 2,844,386       Ps. 5,474,843       Ps. 17,469,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative financial instruments

   Ps. 352,762       Ps. —         Ps. 352,762       Ps. —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   Ps. 352,762       Ps. —         Ps. 352,762       Ps. —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

F-44


The table below presents the reconciliation for all assets and liabilities measured at fair value using internal models with significant unobservable inputs (Level 3) during the year ended December 31, 2013:

 

     Financial Assets  

Balance at beginning of year

   Ps.  17,469,881   

Included in finance income

     5,441,710   

Included in other comprehensive income

     940,379   

Long-term debt instrument issued by Ares

     2,492,744   

Convertible debt instrument and Embedded derivative issued by Ares

     7,000,000   
  

 

 

 

Balance at the end of year

   Ps. 33,344,714   
  

 

 

 

Temporary Investments

Temporary investments include highly liquid securities, including without limitation debt with a maturity of three months, or over, and up to one year at the consolidated statement of financial position date, stock and other financial instruments, or a combination thereof, denominated principally in U.S. dollars and Mexican pesos (see Notes 2 (f) and 6).

Temporary investments are generally valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include mostly fixed short-term deposits, equities and corporate fixed income securities denominated in U.S. dollars and Mexican pesos. Such instruments are classified in Level 1 or Level 2 depending on the observability of the significant inputs.

For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on available market evidence. Such instruments are classified in Level 2.

Available-for-Sale Financial Assets

Investments in debt securities or with readily determinable fair values, not classified as held-to-maturity are classified as “available-for-sale,” and are recorded at fair value with unrealized gains and losses included in consolidated stockholders’ equity as accumulated other comprehensive result.

Available-for-sale financial assets are generally valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Such instruments are classified in Level 1, Level 2, and Level 3 depending on the observability of the significant inputs.

Available-for-Sale Investments – Open Ended Fund

The Group has an investment in an open ended fund that has as a primary objective to achieve capital appreciation by using a broad range of strategies through investments and transactions in telecom, media and other sectors across global markets, including Latin America and other emerging markets. Shares may be redeemed on a quarterly basis at the NAV per share as of such redemption date (see Notes 4 and 9).

 

F-45


BMP Convertible Debentures due 2025

As described in Note 3, on December 20, 2010, the Company made a cash investments in the form of 1.5% Convertible Debentures due 2025 issued by BMP, the parent company of Univision, in the principal amount of U.S.$1,125 million (Ps.13,904,222), which are convertible at the Company’s option into additional shares currently equivalent to approximately 30% equity stake of BMP, subject to existing laws and regulations in the United States, and other conditions (see Notes 4 and 9).

The Group determined the fair value of the Convertible Debentures using the income approach based on post-tax discounted cash flows. The income approach requires management to make judgments and involves the use of significant estimates and assumptions. These estimates and assumptions include long-term growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates based on weighted average cost of capital within a range of 8% to 10%, among others. The Group´s estimates for market growth are based on historical data, various internal estimates and observable external sources when available, and are based on assumptions that are consistent with the strategic plans and estimates used to manage the underlying business. Since the described methodology is an internal model with significant unobservable inputs, the Convertible Debentures are classified in Level 3.

Ares Convertible and Long-term Debt Instruments

As described in Note 3, in July 2013, the Group made an investment in the amount of Ps.7,000,000 in convertible debt instruments which, subject to regulatory approvals, will allow the Group to acquire 95% of the equity interest of Ares, owner of 51% of the equity interest of Cablecom. In addition, as part of this transaction, the Group also invested in a long-term debt instrument issued by Ares in the amount of U.S.$195 million (Ps.2,549,625).

The Group determined the fair value of the convertible debt instruments using the expected present value valuation methodology based on post-tax discontinued cash flows. The expected present value methodology requires management to make judgments and involves the use of significant estimates and assumptions. These estimates and assumptions include long-term growth rates, operating margins used to calculate projected future cash flow and risk-adjusted discount rates based on weighted average cost of capital within a range of 5.5% to 6.5%, among others. The Group’s estimates for market growth are based on current conditions and reasonable forecasts, various internal estimates and observable external sources when available, and are based on assumptions that are consistent with the strategic plans and estimates used to manage the underlying business. Since the described methodology is an internal model with significant unobservable inputs, the convertible debt instruments are classified in level 3.

Derivative Financial Instruments

Derivative financial instruments include swaps, forwards and options (see Notes 2 (v), 4 and 14).

The Group’s derivative portfolio is entirely over-the-counter (“OTC”). The Group’s derivatives are valued using industry standard valuation models; projecting future cash flows discounted to present value, using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies.

When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit spreads considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. All derivatives are classified in Level 2.

 

F-46


Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The majority of the Group’s non-financial instruments, which include goodwill, intangible assets, inventories, transmission rights and programming and property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or at least annually in the fourth quarter for goodwill and indefinite-lived intangible assets) such that a non-financial instrument is required to be evaluated for impairment, a resulting asset impairment would require that the non-financial instrument be recorded at the lower of carrying amount or its fair value.

The impairment test for goodwill involves a comparison of the estimated fair value of each of the Group’s reporting units to its carrying amount, including goodwill. The Group determines the fair value of a reporting unit using a combination of a discounted cash flow analysis and a market-based approach, which utilize significant unobservable inputs (Level 3) within the fair value hierarchy. The impairment test for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. The Group determines the fair value of the intangible asset using a discounted cash flow analysis, which utilizes significant unobservable inputs (Level 3) within the fair value hierarchy. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, perpetual growth rates, the amount and timing of expected future cash flows for a period of time that comprise five years, as well as relevant comparable company earnings multiples for the market-based approach.

Once an asset has been impaired, it is not remeasured at fair value on a recurring basis; however, it is still subject to fair value measurements to test for recoverability of the carrying amount.

15. Post-employment Benefits

Certain companies in the Group have collective bargaining contracts which include defined benefit pension plans and other retirement benefits for substantially all of their employees. Additionally, the Group has defined benefit pension plans for certain eligible executives and employees. All pension benefits are based on salary and years of service rendered.

Under the provisions of the Mexican labor law, seniority premiums are payable based on salary and years of service to employees who resign or are terminated prior to reaching retirement age. Some companies in the Group have seniority premium benefits which are greater than the legal requirement. After retirement age employees are no longer eligible for seniority premiums.

Post-employment benefits are actuarially determined by using nominal assumptions and attributing the present value of all future expected benefits proportionately over each year from date of hire to age 65. The Group used a 7.0% and 7.2% discount rate and 5.0% and 5.0% salary scale for 2013 and 2012, respectively. The Group used a 7.0% and 6.5% return on assets rate for 2013 and 2012, respectively. The Group used a 3.5% inflation rate for 2013 and 2012. The Group makes voluntary contributions from time to time to trusts for the pension and seniority premium plans which are generally deductible for tax purposes. As of December 31, 2013 and 2012, plan assets were invested in a portfolio that primarily consisted of debt and equity securities, including shares of the Company. Pension and seniority premium benefits are paid when they become due.

 

F-47


The reconciliation between defined benefit obligations and post-employment benefit liability (asset) in the consolidated statements of financial position as of December 31, 2013 and 2012, is presented as follows:

 

     Pensions     Seniority
Premiums
    2013  

Vested benefit obligations

   Ps. 452,160      Ps. 230,070      Ps. 682,230   

Unvested benefit obligations

     1,341,858        71,424        1,413,282   
  

 

 

   

 

 

   

 

 

 

Defined benefit obligations

     1,794,018        301,494        2,095,512   

Fair value of plan assets

     1,466,568        549,134        2,015,702   
  

 

 

   

 

 

   

 

 

 

Underfunded (overfunded) status of the plan assets

     327,450        (247,640     79,810   
  

 

 

   

 

 

   

 

 

 

Post-employment benefit liability (asset)

   Ps. 327,450      Ps. (247,640   Ps. 79,810   
  

 

 

   

 

 

   

 

 

 
     Pensions     Seniority
Premiums
    2012  

Vested benefit obligations

   Ps. 359,664      Ps. 238,488      Ps. 598,152   

Unvested benefit obligations

     1,344,893        67,466        1,412,359   
  

 

 

   

 

 

   

 

 

 

Defined benefit obligations

     1,704,557        305,954        2,010,511   

Fair value of plan assets

     1,348,334        520,423        1,868,757   
  

 

 

   

 

 

   

 

 

 

Underfunded (overfunded) status of the plan assets

     356,223        (214,469     141,754   

Prior service (cost) benefit for plan amendments

     (104,290     1,388        (102,902
  

 

 

   

 

 

   

 

 

 

Post-employment benefit liability (asset)

   Ps. 251,933      Ps. (213,081   Ps. 38,852   
  

 

 

   

 

 

   

 

 

 

The components of net periodic pension and seniority premium cost for the years ended December 31, consisted of the following:

 

     2013     2012  

Service cost

   Ps. 129,855      Ps. 110,479   

Interest cost

     124,877        117,646   

Prior service cost for plan amendments

     3,239        (13,692

Interest of assets

     (114,838     (122,936

Loss on curtailments and settlements

     —          (332

Business acquisition

     —          356   
  

 

 

   

 

 

 

Net cost

   Ps. 143,133      Ps. 91,521   
  

 

 

   

 

 

 

The Group’s defined benefit obligations, plan assets, funded status and balances in the consolidated statements of financial position as of December 31, 2013 and 2012, associated with post-employment benefits are presented as follows:

 

     Pensions     Seniority
Premiums
    2013     2012  

Defined benefit obligations:

        

Beginning of year

   Ps.  1,704,557      Ps. 305,954      Ps.  2,010,511      Ps.  1,769,448   

Service cost

     98,803        31,052        129,855        110,479   

Interest cost

     106,219        18,658        124,877        117,646   

Benefits paid

     (58,818     (20,065     (78,883     (59,636

Remeasurement of post-employment benefit obligations

     (59,375     (34,712     (94,087     72,549   

Past service cost

     2,632        607        3,239        —     

Business acquisition

     —          —          —          25   
  

 

 

   

 

 

   

 

 

   

 

 

 

End of year

     1,794,018        301,494        2,095,512        2,010,511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fair value of plan assets:

        

Beginning of year

     1,348,334        520,423        1,868,757        1,798,158   

Remeasurement return on plan assets

     82,213        32,625        114,838        122,936   

Remeasurement of post-employment benefit obligations

     34,605        5,171        39,776        (2,516

Contributions

     39,988        3,663        43,651        400   

Benefits paid

     (38,572     (12,748     (51,320     (50,221
  

 

 

   

 

 

   

 

 

   

 

 

 

End of year

     1,466,568        549,134        2,015,702        1,868,757   
  

 

 

   

 

 

   

 

 

   

 

 

 

Underfunded (overfunded) status of the plan assets

   Ps. 327,450      Ps. (247,640   Ps. 79,810      Ps. 141,754   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

F-48


The changes in the net post-employment liability (asset) in the consolidated statements of financial position as of December 31, 2013 and 2012, are as follows:

 

     Pensions     Seniority
Premiums
    2013     2012  

Beginning net post-employment liability (asset)

   Ps.  251,933      Ps. (213,081   Ps. 38,852      Ps. (105,090

Adjustment for adoption of IAS 19, as amended (see Note 2 (t))

     104,290        (1,388     102,902        —     

Net periodic cost

     125,441        17,692        143,133        91,521   

Contributions

     (39,988     (3,663     (43,651     (400

Remeasurement of post–employment benefits

     (93,980     (39,883     (133,863     75,065   

Benefits paid

     (20,246     (7,317     (27,563     (22,244
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending net post-employment liability (asset)

   Ps. 327,450      Ps. (247,640   Ps. 79,810      Ps. 38,852   
  

 

 

   

 

 

   

 

 

   

 

 

 

The post-employment benefits as of December 31, 2013 and 2012 and remeasurements adjustments for the years ended December 31, 2013 and 2012, are summarized as follows:

 

     2013     2012  

Pensions:

    

Defined benefit obligations

   Ps.  1,794,018      Ps.  1,704,557   

Plan assets

     1,466,568        1,348,334   

Unfunded (overfunded) status of the plans

     327,450        356,223   

Remeasurements adjustments (1)

     (93,980     69,899   

Seniority premiums:

    

Defined benefit obligations

   Ps. 301,494      Ps. 305,954   

Plan assets

     549,134        520,423   

Unfunded (overfunded) status of the plans

     (247,640     (214,469

Remeasurements adjustments (1)

     (39,883     5,166   

 

(1) On defined benefit obligations and plan assets.

If the discount rate of 7.0% used by the Group in 2013 decreased by 50 basis points, the impact on defined benefit obligation would be an increase of Ps.115,535 as of December 31, 2013.

Pension and Seniority Premium Plan Assets

The plan assets are invested according to specific investment guidelines determined by the technical committees of the pension plan and seniority premiums trusts and in accordance with actuarial computations of funding requirements. These investment guidelines require a minimum investment of 30% of the plan assets in fixed rate instruments, or mutual funds comprised of fixed rate instruments. The plan assets that are invested in mutual funds are all rated “AA” or “AAA” by at least one of the main rating agencies. These mutual funds vary in liquidity characteristics ranging from one day to one month. The investment goals of the plan assets are to preserve principal, diversify the portfolio, maintain a high degree of liquidity and credit quality, and deliver competitive returns subject to prevailing market conditions. Currently, the plan assets do not engage in the use of financial derivative instruments. The Group’s target allocation in the foreseeable future is to maintain approximately 20% in equity securities and 80% in fixed rate instruments.

The weighted average asset allocation by asset category as of December 31, 2013 and 2012, was as follows:

 

     2013     2012  

Equity securities (1)

     26.1     24.4

Fixed rate instruments

     73.9     75.6
  

 

 

   

 

 

 

Total

     100.0     100.0
  

 

 

   

 

 

 

 

(1) Included within plan assets at December 31, 2013 and 2012, are shares of the Company held by the trust with a fair value of Ps.247,082 and Ps.208,749, respectively.

 

F-49


The weighted average expected long-term rate of return of plan assets of 7.0% and 7.2% were used in determining net periodic pension cost in 2013 and 2012, respectively. The rate used in 2012 reflected an estimate of long-term future returns for the plan assets. This estimate was primarily a function of the asset classes (equities versus fixed income) in which the plan assets were invested and the analysis of past performance of these asset classes over a long period of time. This analysis included expected long-term inflation and the risk premiums associated with equity investments and fixed income investments.

The following table summarizes the Group’s plan assets measured at fair value on a recurring basis as of December 31, 2013 and 2012:

 

                                           
    Balance as of
December 31,
2013
    Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    Internal Models
with Significant
Observable
Inputs
(Level 2)
    Internal Models
with Significant
Unobservable
Inputs
(Level 3)
 

Common stocks (1)

  Ps. 247,082      Ps. 247,082      Ps.  —        Ps.  —     

Mutual funds (fixed rate instruments) (2)

    881,092        881,092        —          —     

Money market securities (3)

    609,758        609,758        —          —     

Other equity securities

    277,770        277,770        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment assets

  Ps. 2,015,702      Ps. 2,015,702      Ps. —        Ps. —     
 

 

 

   

 

 

   

 

 

   

 

 

 
    Balance as of
December 31,
2012
    Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    Internal Models
with Significant
Observable
Inputs
(Level 2)
    Internal Models
with Significant
Unobservable
Inputs
(Level 3)
 

Common stocks (1)

  Ps. 208,749      Ps. 208,749      Ps. —        Ps. —     

Mutual funds (fixed rate instruments) (2)

    858,260        858,260        —          —     

Money market securities (3)

    545,533        545,533        —          —     

Other equity securities

    256,215        176,809        79,406        —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment assets

  Ps.  1,868,757      Ps.  1,789,351      Ps.  79,406      Ps. —     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Common stocks are valued at the closing price reported on the active market on which the individual securities are traded. All common stock included in this line item relate to the Company’s CPOs.
(2) Mutual funds consist of fixed rate instruments. These are valued at the net asset value provided by the administrator of the fund.
(3) Money market securities consist of government debt securities, which are valued based on observable prices from the new issue market, benchmark quotes, secondary trading and dealer quotes.

The Group does not expect to make significant contributions to its plan assets in 2014.

16. Capital Stock, Stock Purchase Plan and Long-term Retention Plan

Capital Stock

The Company has four classes of capital stock: Series “A” Shares, Series “B” Shares, Series “D” Shares and Series “L” Shares, with no par value. The Series “A” Shares and Series “B” Shares are common shares. The Series “D” Shares are limited-voting and preferred dividend shares, with a preference upon liquidation. The Series “L” Shares are limited-voting shares.

The Company’s shares are publicly traded in Mexico, primarily in the form of Ordinary Participation Certificates (“CPOs”), each CPO representing 117 shares comprised of 25 Series “A” Shares, 22 Series “B” Shares, 35 Series “D” Shares and 35 Series “L” Shares; and in the United States in the form of Global Depositary Shares (“GDS”), each GDS representing five CPOs. Non-Mexican holders of CPOs do not have voting rights with respect to the Series “A”, Series “B” and Series “D” Shares.

In April 2011, the Company’s stockholders approved, among other matters: (i) the merger of Cablemás, S.A. de C.V. into the Company, for which regulatory approvals were obtained in the first half of 2011; (ii) an increase in the capital stock of the Company in the aggregate amount of Ps.1,359,040, which consisted of 2,901.6 million shares in the form of 24.8 million CPOs, in connection with the merger of Cablemás, S.A. de C.V. into the Company , by which the Company increased its interest in the Cablemás business from 90.8% to 100% (see Note 3); and (iii) an additional issuance of 17,550 million shares of the capital stock of the Company in the form of 150 million CPOs, in the aggregate amount of Ps.10,500,000, which was paid in cash primarily by the special purpose trust of the Company’s Long-Term Retention Plan in October 2011.

 

F-50


At December 31, 2013, shares of capital stock and CPOs consisted of (in millions):

 

     Authorized and
Issued (1)
     Repurchased by
the Company (2)
     Held by a
Company’s
Trust (3)
    Outstanding  

Series “A” Shares

     123,273.9         —           (9,076.4     114,197.5   

Series “B” Shares

     58,982.9         —           (6,062.4     52,920.5   

Series “D” Shares

     90,086.5         —           (5,895.0     84,191.5   

Series “L” Shares

     90,086.5         —           (5,895.0     84,191.5   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

     362,429.8         —           (26,928.8     335,501.0   
  

 

 

    

 

 

    

 

 

   

 

 

 

Shares in the form of CPOs

     301,145.5         —           (19,706.1     281,439.4   

Shares not in the form of CPOs

     61,284.3         —           (7,222.7     54,061.6   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

     362,429.8         —           (26,928.8     335,501.0   
  

 

 

    

 

 

    

 

 

   

 

 

 

CPOs

     2,573.9         —           (168.4     2,405.5   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) As of December 31, 2013, the authorized and issued capital stock amounted to Ps.4,978,126 (nominal Ps.2,494,410).
(2) In connection with a share repurchase program that was approved by the Company’s stockholders and is exercised at the discretion of management. In April 2012, the Company’s stockholders approved the cancellation of 4,563.5 million shares of capital stock in the form of 39.0 million CPOs which were repurchased by the Company under this program.
(3) In connection with the Company’s Stock Purchase Plan and Long-Term Retention Plan described below.

A reconciliation of the number of shares and CPOs outstanding for the years ended December 31, 2013 and 2012, is presented as follows (in millions):

 

     Series “A”
Shares
    Series “B”
Shares
    Series “D”
Shares
    Series “L”
Shares
    Shares
Outstanding
    CPOs
Outstanding
 

As of January 1, 2012

     112,609.5        52,190.9        83,030.8        83,030.8        330,862.0        2,372.3   

Acquired by a Company’s trust

     (78.4     (69.0     (109.8     (109.8     (367.0     (3.1

Released by the stock plans

     1,026.2        568.3        904.2        904.2        3,402.9        25.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2012

     113,557.3        52,690.2        83,825.2        83,825.2        333,897.9        2,395.0   

Acquired by a Company’s trust

     (332.4     (292.5     (465.4     (465.4     (1,555.7     (13.3

Released by the stock plans

     972.6        522.8        831.7        831.7        3,158.8        23.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2013

     114,197.5        52,920.5        84,191.5        84,191.5        335,501.0        2,405.5</