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ANNUAL REPORT OF
GRUPO BIMBO, S.A.B. DE C.V.
Annual Report filed pursuant to the general provisions applicable to securities issuers and other participants
in the securities’ market (disposiciones de carácter general aplicables a las emisoras de valores y a otros
participantes del mercado de valores) for the fiscal year ended on December 31, 2010.
Name of the issuer: Grupo Bimbo, S.A.B. de C.V.
Domicile: Prolongación Paseo de la Reforma No. 1000, Colonia Peña Blanca Santa Fe, C.P. 01210,
México, D.F. The address of Grupo Bimbo, S.A.B. de C.V. in the Internet is www.grupobimbo.com, provided,
however, that the information contained therein is not part of this Annual Report.
Outstanding shares: the authorized capital stock of Grupo Bimbo, S.A. de C.V. consists of Series “A”
common shares, ordinary, nominative, without expression of nominal value, registered on the National
Securities Registry and listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.)
Ticker Symbol: “BIMBO”.
The registration in the National Securities Registry does not constitute a certification as to the investment
quality of the securities, the solvency of the issuer, or the accuracy or veracity of the information contained
in this Annual Report, nor does it validate the acts, if any, that were performed in violation of the laws.
Mexico City, Federal District, June 28, 2011
RELEVANT INFORMATION WITH RESPECT TO THE CERTIFICADOS BURSATILES ISSUED
BY GRUPO BIMBO, S.A.B. DE C.V.
Ticker Symbol BIMBO 02-2 BIMBO 09 BIMBO 09-2 BIMBO 09U
Amount
$750,000,000
$5,000,000,000 $2,000,000,000 706,302,200 UDIS
Number of series in
which the issuance
is divided
N.A.
N.A. N.A. N.A.
Issuance Date May 17, 2002 June 5, 2009 June 5, 2009 June 5, 2009
Maturity Date May 3, 2012 June 9, 2014 June 6, 2016 June 6, 2016
Issuance Period 3,639 days 1,820 days 2,548 days 2,548 days
Interest rate
Fixed gross annual interest
on their face value at an
interest rate of 10.15%
Gross annual interest
on their face value
which shall be
calculated by adding
1.55 percentage points
to the 28 day term
Interbank Equilibrium
Interest Rate (Tasa de
Interés Interbancaria
de Equilibrio)
Fixed gross annual
interest on their face
value at an interest rate
of 10.60%
Fixed gross annual
interest on their face
value at an interest
rate of 6.05%.
Periodicity in
payment of interest
Aproximately every six
months, beggining on
November 14, 2002
Every 28 days
beggining on July 13,
2009
Every 182 days
beggining on
December 14, 2009
Every 182 days
beggining on
December 14, 2009
Place and manner
of payment of
principal and
Interest
The principal and interest
due will be paid in cash at
the relevant maturity date,
and on each of the interest
payment dates
respectively, by electronic
funds transfer, at the
registered office of S.D.
Indeval, S.A. de C.V.,
Institución para el
Depósito de Valores, upon
delivery of the certificate
issued by the depositary or,
as the case may be, at the
Company’s offices.
The principal and interest due will be paid on their maturity date, by
electronic funds transfer, at the registered office of S.D. Indeval
Institución para el Depósito de Valores, S.A. de C.v., or at the registered
office of the Issuer.
Subordination of
the certificates N.A. Lien limitations / Pari Passu status
Amortization and
prepayment.
The amortization of the
Certificados Bursátiles
shall be in a single
payment on the maturity
date, upon delivery of the
certificate or evidence
issued by S.D. Indeval,
S.A. de C.V., Institución
A single payment on
the relevant maturity
date.
A single payment on the relevant maturity
date. The Company shall have the right to
prepay, all (but not less) than all of the
Certificados Bursátiles on any date, before the
Maturity Date, as defined in the Supplement
(Make-Whole).
Ticker Symbol BIMBO 02-2 BIMBO 09 BIMBO 09-2 BIMBO 09U
para el Depósito de
Valores.
Guarantee
The Certificados
Bursátiles are unsecured;
therefore they do not have
any specific guarantee. On
June 5, 2009, Grupo
Bimbo and its subsidiaries
Bimbo, S.A. de C.V.,
Barcel, S.A. de C.V.,
Bimbo Bakeries USA, Inc.
and Bimbo Foods, Inc.,
entered into an agreement
(Estipulación a Favor de
Terceros) whereby they
agreed to guarantee, jointly
and severally,
unconditionally and
irrevocably (except if the
consent of the majority of
the holders of the
Certificados Bursatiles
present in terms of the
relevant certificate and the
applicable law is met) the
full and punctual payment
of any principal or interest
payable under the
Certificados Bursátiles.
See “Recent Events”
following described in this
Annual Report.
The Certificados Bursátiles are unsecured and shall be guaranteed
(avalados) by the following subsidiaries Bimbo, S.A. de C.V., Barcel,
S.A. de C.V., Bimbo Bakeries USA, Inc. and Bimbo Foods, Inc. The
Certificados Bursátiles must be guaranteed (avalados) by Subsidiaries
of Grupo Bimbo that, individually or jointly, reach the Minimum
Guarantors Requirement. At any time during the effectiveness of the
Certificados Bursátiles and without the consent of the Holders of the
Certificados Bursátiles or the Common Representative, Grupo Bimbo
may release any Guarantor of its payment obligations pursuant to the
Certificados Bursátiles, as well as substitute any Guarantor or include
new Guarantors, as long as after such release, addition or substitution,
the Minimum Guarantors Requirement is met, based on the most recent
available audited annual consolidated financial statements.
For purposes of the above, “Minimum Guarantors Requirement” means,
as of the last day of each fiscal year, that the Guarantor’s EBITDA
represents at least seventy five percent (75%) of Grupo Bimbo´s
Consolidated EBITDA for such fiscal year. The abovementioned will be
calculated based on the most recent available audited annual
consolidated financial statements of Grupo Bimbo.
Trustee N.A.
Rating
Standard & Poor’s, S.A. de
C.V. “mxAA+”
Fitch México, S.A. de C.V.
“AA+(mex)”
Standard & Poor’s, S.A. de C.V. “mxAA+”
Fitch México, S.A. de C.V. “AA+(mex)”
Moody´s de México, S.A. de C.V. “Aa1.mx”
Common
Representative
Scotia Inverlat Casa de
Bolsa, S.A. de C.V., Grupo
Financiero Scotia Inverlat
Banco INVEX, S.A., Institución de Banca Múltiple, INVEX
Depositary S.D. Indeval Institución para el Depósito de Valores S.A. de C.V.
Tax treatment
The withholding rate of the
income tax applicable with
respect to the interests paid
in accordance with the
Certificados Bursatiles is
subject to, for individuals
and entities considered as
residents of Mexico for tax
purposes in: (i) Mexico,
article second transitory,
paragraph LXXII, and
article 160 of the Income
Tax Law (Ley del Impuesto
Sobre la Renta); and (ii)
abroad, article 195 of the
The withholding rate of the income tax applicable, as of the date of the
Supplement, to the interest paid in accordance with the Certificados
Bursatiles is subject to: (i) for individuals and entities considered as
residents of Mexico for tax purposes, to the provisions of articles 58,
160 and other applicable provisions of the Income Tax Law (Ley del
Impuesto Sobre la Renta) in effect; and (ii) for individuals and entities
considered as non-Mexican residents for tax purposes, to the provisions
of articles 179, 195 and other applicable provisions of the Income Tax
Law in effect. Potential investors shall consult their tax advisors with
respect to the tax consequences of their investment in the Certificados
Bursatiles, including the application of specific rules applicable to their
particular situation. The current fiscal regime may be amended during
the term of the Program and while the Issuance is in effect.
Ticker Symbol BIMBO 02-2 BIMBO 09 BIMBO 09-2 BIMBO 09U
Income Tax Law.
TABLE OF CONTENTS
Página
1) GENERAL INFORMATION
a) Summary of Terms and Definitions……………………………………….…….
b) Executive Summary…………………………………………………………………
c) Risk Factors…………………………………………………………………
d) Other Securities…………………………………………………………………..…
e) Relevant Changes to the Security Rights Registered in the RNV…...…
f) Use of Proceeds…………...…………………………………………………
g) Public Documents…………………………………………………
1
5
11
18
21
22
22
2) THE COMPANY
a) Company’s History and Development……………………………………………….
b) Business Description……………………………………………………………
i) Principal Activity………………………...………………………………
ii) Distribution Channels.…………………………………………...……..
iii) Patents, Trademarks, Licenses and other Contracts ………………………..
iv) Main Customers………………………..……………..……………….
v) Applicable Legislation and Tax Situation……………………………
vi) Human Resources………………………..……………………………
vii) Environmental Performance……….………………………………...…
viii) Market Information…………………..……………………………..
ix) Corporate Structure……………………………………………………
x) Main Assets Description.……………………………………………….
xi) Judicial, Administrative or Arbitration Processes……………………….
xii) Shares Representing the Capital Stock………… ……………………
xiii) Dividends………………………………………………………………….
23
33
33
54
56
57
57
63
64
66
72
72
77
78
78
3) FINANCIAL INFORMATION
a) Selected Financial Information…………………………………………….
b) Financial Information per Business, Geographic Zone and Exportation
Sales………………………………………………………………………….
c) Report on Significant Debt…………………………………………….…….
d) Management’s Discussion and Analysis of the Company’s Financial Conditions and
Results of Operations………………………………..
i) Results of Operation……………………………………………..
ii) Financial Position, Liquidity and Capital Resources………………...
iii) Internal Control……………………………………………………………..
e) Critical Accounting Policies…………………………
80
88
88
90
90
95
98
98
4) ADMINISTRATION
a) Independent Auditors………………………………………………………………
b) Transactions with Related Persons and Conflicts of Interests…………….
c) Administrators and Shareholders…………………………………………………….
102
102
103
TABLE OF CONTENTS
Página
d) Corporate Bylaws and Other Agreements……………………………………………
114
5) CAPITAL MARKET
a) Share Holding Structure………………………………………………………………
b) Share Behavior in the Securities Market…………………………...
c) Market Maker............................................................................................
119
119
120
6) RESPONSIBLE PERSONS
Responsible Persons...…………………………………………………………...………
121
7) SCHEDULES
a) Audited Committee Opinion with respect to the General Director’s Report
corresponding to the year ended as of December 31, 2009
b) Financial Audited Statements for the years ended as of December 31, 2009 and
2008.......................................................................................................
c) Audited Committee Report corresponding to the year ended as of December 31, 2009
No underwriter, person appointed as an attorney-in-fact to carry out operations with the public, or
any other person, has been authorized to disclose any information or make any representation that is
not contained in this Annual Report. As a consequence of the above, any information or
representation that is not contained in this Annual Report must be understood as not authorized by
Grupo Bimbo, S.A.B. de C.V.
In addition, unless otherwise indicated, the Company’s information contained herein is reported as
of December 31, 2010.
1) GENERAL INFORMATION
a) SUMMARY OF TERMS AND DEFINITIONS
Unless otherwise indicated by the context, for purposes of this Annual Report, the following terms shall
have the meaning attributed thereto as follows, which shall be applicable both to singular and plural:
Terms Definitions
“Principal Shareholders” Group of shareholders holding the majority of BIMBO’S capital stock shares,
which are Normaciel, S.A. de C.V., Promociones Monser, S.A. de C.V., Banco
Nacional de Mexico, S.A. as trustee, Philae, S.A. de C.V., Distribuidora Comercial
Senda, S.A. de C.V., and Marlupag, S.A. de C.V.
“AIB” American Institute of Baking.
“BASC” Business Anti-Smuggling Coalition.
“BBU” BBU, Inc., (Bimbo Bakeries USA), subsidiary of Grupo Bimbo that consolidates
transactions in the United States of America.
“BIMBO”, “Company”,
“Issuer”, “Group” or “Grupo
Bimbo”
Grupo Bimbo, S.A.B. de C.V., and, when the context so requires, together with its
consolidated subsidiaries.
“Bimbo Foods” Bimbo Foods, Inc.
“BMB Foods” BMB Foods, LLC
“BIMBO XXI” Project for the implementation of a rationalization of resources system ERP
(Enterprise Resource Planning), data base and support systems.
“BMV” Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.)
“Bushel” English capacity measure for grains and other solid products.
“Notes” / “Certificados
Bursatiles”
Negotiable instruments issued by the Company in accordance with the Securities
Market Law, under the Notes Program (Programa de Certificados Bursátiles) and
which are outstanding.
“CETES” or “Cetes” Federal Treasury Certificates.
“CFC” Federal Antitrust Commission.
“China” Popular Republic of China.
“CIF” or “Integral financial
result”
Integral Financing Cost.
“CINIF” Consejo Mexicano para la Investigación y Desarrollo de Normas de Información
Financiera, A.C. Body responsible for the operation and in charge of issuing the
NIF.
“CNBV” National Banking and Securities Commission (Comisión Nacional Bancaria y de
Valores).
“fast food” Food ready to be eaten.
“Board of Directors” or
“Board”
Board of Directors of BIMBO.
“Datamonitor” An independent corporation engaged in the analysis of information and markets.
2
Terms Definitions
“DNV” Det Norske Veritas.
“Dollars” or “dollars” Currency legal tender in the USA
“USA” United States of America.
“El Globo” Gastronomía Avanzada Pastelerías, S.A. de C.V.
“ERP” Enterprise Resource Planning.
“Audited Financial
Statements”
The Company’s consolidated financial statements, audited as of December 31,
2010 and 2009, which were prepared in accordance with the Financial Reporting
Standards, including its notes, which are attached to this Annual Report.
“Corporate Bylaws” Corporate Bylaws of BIMBO as amended from time to time.
“Europe” Countries of the European Union where BIMBO carries out transactions.
“FDA” Food and Drug Administration, a USA governmental agency.
“George Weston” George Weston Bakeries, Inc., Entenmann’s Products Inc., Entenmann’s, Inc. an
Entenmann’s Sales Company, Inc. (TSX: WN)
“GFTC” Guelph Food Technology Centre.
“GMP” Good Manufacturing Practices.
“GYRU” Galaz, Yamazaki, Ruiz Urquiza, S.C., member of Deloitte Touche Tohmatsu, the
Company’s Independent Auditors.
“HACCP” Hazard Analysis and Critical Control Point.
“IETU” Unique Rate Corporate Tax (Impuesto Empresarial a Tasa Única).
“IFC” International Finance Corporation.
“IMNC” Instituto Mexicano de Normalización y Certificación, A.C.
“IMPI” Instituto Mexicano de la Propiedad Industrial
“Indeval” S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V.
“INPC” National Consumer Price Index (Índice Nacional de Precios al Consumidor).
“ISO” International Organization for Standardization.
“ISR” Income Tax (Impuesto sobre la Renta).
“IVA” Value Added Tax (Impuesto al Valor Agregado).
“Latin America” Central and South America; comprises the countries of this geographical area
where BIMBO carries out transactions.
“Libor” London Interbank Offered Rate.
“LMV” Securities Market Law (Ley del Mercado de Valores).
“m2” Square meters.
“Mexico” United Mexican States.
“MFRS” Financial Reporting Standards (Normas de Información Financiera) issued by
CINIF.
3
Terms Definitions
“NOM” Mexican Official Standard (Norma Oficial Mexicana).
“OLA” Organización Latinoamérica, division in charge of coordinating the Group’s
transactions in Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Uruguay and
Venezuela.
“WHO” World Health Organizaiton.
“packaged bread” Sliced and packed bread.
“cake” Cake in individual presentation.
“Pesos”, “pesos” or “$” Currency of legal tender in Mexico.
“GDP” Gross Domestic Product.
“PROFEPA” Federal Environment Protection Advocate (Procuraduría Federal de Protección al
Ambiente).
“PTU” Employee Profit Sharing (Participación de los Trabajadores en las Utilidades).
“Annual Report” This Issuer’s Annual Report, prepared in accordance with the general provisions
applicable to securities issuers and other participants in the securities’ market
(disposiciones de carácter general aplicables a las emisoras de valores y a otros
participantes del mercado de valores) issued by CNBV.
“RNV” National Securities Registry (Registro Nacional de Valores).
“TIIE” Interbanking Equilibrium Interest Rate (Tasa de Interés Interbancaria de
Equilibrio).
“NAFTA” North America Free Trade Agreement.
“EBITDA” EBITDA represents income after general expenses plus depreciation and
amortization. The Company’s management uses this measure as an indicator of our
operating results and financial condition; however it shall not be taken into
consideration in isolation, as an alternative to net income, as an indicator of the
operating performance or as a substitute for analysis of the results as reported
under MFRS, since, among others: (i) it does not reflect our cash expenditures, or
future requirements for capital expenditures or contractual commitments; (ii) it
does not reflect changes in, or cash requirements for, the working capital needs;
(iii) it does not reflect our interest expense; and (iv) it does not reflect the cash
income taxes we may be required to pay;
Because of the above, the EBITDA measure should not be considered a measure of
discretionary cash available to invest in the growth of the Company’s business or
as a measure of cash that will be available to us to meet the Company’s
obligations. EBITDA is not a recognized financial measure under MFRS and it
may not be comparable to similar titled measures presented by other companies in
our industry because not all companies use the same definition. As a result, it shall
be relied primarily on the MFRS results and use EBITDA only as a supplement.
“USDA” Food Safety and Inspection Service of the Department of Agriculture, a
governmental agency of the USA
“WFI” Weston Foods, Inc., bakery business in the USA that was owned by George
Weston Limited and which BIMBO acquired on January 21, 2009.
“WGC” Whole Grains Council, an organization that helps consumers to identify foods
4
Terms Definitions
prepared with whole grains and their benefits.
5
Unless otherwise specified, the financial information contained in this document is expressed in million
Mexican pesos and was prepared in accordance with MFRS in Mexico.
b) EXECUTIVE SUMMARY This chapter contains a brief summary of the information provided for in this Annual Report. Since it is a
summary, it is not intended to contain all relevant information contained in this Report. 1. The Company Grupo Bimbo is one of the largest bakery companies in the world and one of the largest food companies in
the American continent, with a diversified portfolio of over 7,000 products and more than 150 renowned
brands, including Bimbo, Thomas’, Barcel, Arnold, Marinela, Entemann’s, and Nutrella.
The Company is engaged in the production, distribution and commercialization of sliced and packaged
bread, sweet bread, home-made type cakes, cookies, cereal bars, candies, chocolates, sweet and salted
snacks, wheat tortillas, tostadas, goat milk caramel “cajeta” and fast food, among others. Likewise, the
Company has one of the world’s most extensive distribution networks, with more than 41,000 routes and a
workforce exceeded 108,000 collaborators.
Through the development of brands, fresh and quality products and continuous innovations, the Group has
obtained a leading participation in the bakery products market in the USA, Mexico and the majority of the
Latin America countries in which it operates. As indicated by Datamonitor y and the Groups internal
market surveys. By the end of 2010, the Group was ranked first or second in its main markets (USA,
Mexico and Latin America) in all its categories: sliced and packaged bread, sweet bread, cakes, cookies,
salted snacks, confectionery goods, tostadas and wheat tortillas. As of December 31, 2010, Grupo Bimbo,
through Barcel, occupied second place in the candy market in Mexico, which mainly includes chewing
gum, chocolate and sweets.
The Group operates in 17 countries, including USA, Mexico, Latin America and, to a lesser extent, China.
As of December 31, 2010, the Group operated 103 production plants worldwide, with capacity to produce
commercial amounts of a variety of products in its principal markets. In order to ensure the freshness and
quality of its products, the Group has developed an extensive direct distribution network that has one of the
largest distribution fleets in the American continent. As of December 31, 2010, the Group’s direct
distribution network included more than 41,000 distribution routes, spread in more than 1,000 distribution
centers and that reached more than 1.8 million sale points. The Group considers that this distribution
network is one of its principal competitive advantages.
The following table shows certain lines of the audited consolidated financial statements of Grupo Bimbo
upon closing of each of the years indicated:
As of December 31,
2010 2009 2008
Net Sales 117,163 116,353 82,317
Profit after General Expenses 11,393 12,054 7,328
EBITDA 15,468 15,837 9,829
Majority Net Profit 5,395 5,956 4,320
Note: Figures in million pesos.
The Group’s general strategy is based on its corporate mission, that is, the development of its brands’ value,
and fundamentally, in the commitment to be a highly productive company and fully human, as well as
innovative, competitive, oriented to its clients’ and consumers’ satisfaction, leader at an international level
in the bakery industry and with a long term vision. See “The Company – Business Description” below.
6
Since 1980, Grupo Bimbo shares are traded in the BMV under the ticker symbol “BIMBO”.
2. Financial Information
The Audited Financial Statements have been prepared in accordance with MFRS in Mexico. Unless
otherwise indicated, all information contained in the Audited Financial Statements included in this Annual
Report has been expressed in million pesos.
Figures corresponding to 2010 and 2009 are shown in nominal pesos of the date when generated, except for
figures of some countries the inflation of which in the preceding three years was considered as hyper-
inflationary and that, consequently, require to be re-stated at the closing currency and exchange rate. The
updating of this figures effects are not relevant on the Audited Financial Statements or on the information
shown in this Annual Report.
For a better comprehension, the summary on financial information shown herein below shall be reviewed
together with the Audited Financial Statements and the Audited Financial Statements and the notes thereof.
Likewise, such summary shall be reviewed with all the explanations provided by the Group’s
Administration in the section “Financial Information” of this Annual Report especially in the section
“Management’s Discussion and Analysis of the Company’s Financial Condition and Results of Operation”.
7
Consolidated Statement of Income
As of December 31 of: 2010 2009 2008
Net sales (1) 117,163 116,353 82,317
Cost of Sales 55,317 54,933 40,293
Gross Profit 61,846 61,420 42,024
0 0
Distribution and Selling Expenses 42,933 41,724 29,621
Administrative Expenses 7,520 7,642 5,075
General Expenses 50,453 49,366 34,696
Income After General Expenses 11,393 12,054 7,328
0 0
Other Income (Expenses) Net (297) (613) (8)
Employee Profit Sharing 653 563 467
Other Total Income and (Expenses) Net (950) (1,176) (475)
Net Interests (2,574) (2,318) (461)
Exchange (Loss) Income (94) 207 (153)
Monetary Position Gain 45 99 75
Consolidated Financial Statement (2,623) (2,012) (539)
0 0
Equity in Income of Associated Companies 87 42 24
Income befote Income Taxes 7,907 8,908 6,338
0
Income Tax 2,309 4,041 2,099
Deferred Income Tax 54 (1,214) (205)
Provisions 2,363 2,827 1,894
0
Income before Discontinued Operations 5,544 6,081 4,444
0
Net Income 5,544 6,081 4,444
0 0
Controlling Stockholders 5,395 5,956 4,320
Non Controlling Stockholders 149 125 124
Basic Earnings per Common Shares 4.59 5. 5.07 3.6 3.67
Dividend per Share 0.50 5. 0.46 3 0.46
Income before Financing, Interests, Depreciation
and Amortization
15,468 15,837 9,829
(1) During 2010, 2009 and 2008, the net sales of Bimbo, S.A. de C.V., and Barcel, S.A. de C.V., in Mexico represented approximately
47%, 45% and 63%, respectively, of the consolidated net sales (see Note 2 of the Audited Financial Statements)
8
Consolidated Balance Sheet
As of December 31 of: 2010 2009 2008
Cash and Cash Equivalents 3,325 4,981 7,339
Accounts and Notes Receivable – Net 13,118 12,430 8,557
Inventory, Net 3,149 2,969 2,573
Payments in Advance 440 499 431
Derivative Financial Instruments 180 146 225
Total Current Assets 20,212 21,025 19,125
Notes receivable from independent operators 2,140 1,940 451
Property, Plant and Net Equipment 32,028 32,763 26,039
Stock Investments in Associated Companies and Liabilities 1,553 1,479 1,416
Derivative Financial Instruments 393 159 -
Deferred Income Taxes 1,539 635 1,417
Goodwill - Net 19,884 20,394 6,313
Intangible Assets, Net 19,372 19,602 4,951
Intangible Assets for Employees Retirement Benefits
Other Assets Net 1,948 1,669 498
Total Assets 99,069 99,666 60,210
Payable Accounts to Suppliers 5,954 5,341 4,881
Short Term Debt and Current Outstanding Portion of Long
Term Debt
1,624 4,656 2,054
Other Accounts Payable and Accrued Liabilities 6,302 6,228 1,499
Payable Accounts to Related Parties 802 238 584
Income Tax 624 3,272 3,624
Employee Profit Sharing 709 637 524
Derivative Financial Instruments - 74 17
Total Outstanding Debt 16,015 20,446 13,183
Long Term Debt (1) 31,586 32,084 9,079
Derivative Financial Instruments 231 54 51
Employees Benefits and Social Security 4,621 4,644 982
Employee Profit Sharing Deferred 249 290 351
Deferred Income Taxes (2) 622 266 1,257
Other Long Term Debt 1,208 925 333
Total Liabilities 54,532 58,709 25,236
Controlling Stockholders 43,710 40,104 34,264
Non – Controlling Stockholders 827 853 710
Total Capital Stock 44,537 40,957 34,974
Consolidated Balance Sheet Notes
See effects of the reclassifications for 2009 and 2008 in the notes of the Audited Financial Statements.
9
(1) Some financial institutions or stock market debt provides certain restrictions and obligations to the Company’s financial
structure (see Note 11 of the Audited Financial Statements). (2) See Note 17 of the Audited Financial Statements.
As of December 31 of: 2010 2009 2008
Depreciation and Amortization 3,729 3,783 2,501
Resources Generated by Operating Activities - - -
Resources Used in Financing Activities - - -
Resources Used in Investment Activities - - -
Balance at the End of the Year - - -
Net Cash Flows from Operating Activities 11,375 13,449 8,850
Net Cash Flows from Investment Activities (5,974) (38,398) (7,160)
Net Cash Flows from Financing Activities 6,983 22,606 1,734
Cash and Cash Equivalents at the End of Period 3,325 4,981 7,339
Margin After General Expenses 9.7% 10.4% 8.9%
EBITDA Margin 13.2% 13.6% 11.9%
Net Margin 4.7% 5.2% 5.2%
Assets Return 5.6% 6.3% 7.6%
Return on Invested Capital 11.6% 12.0% 12.0%
EBITDA 15,468 15,837 9,829
Total Debt / EBITDA 2.15 2.32 1.13
Net Debt / EBITDA 1.93 2.01 0.39
EBITDA / Interest Expense 4.94 5.58 13.14
3. Capital Markets
The authorized capital stock of Grupo Bimbo consists of Series “A” common shares, nominative, without
expression of nominal value, registered on the RNV. Such shares were publicly traded in the BMV on
February 1980, when the Company carried out its initial public offering. Since February 1, 1999 BIMBO is
part of the Price and Quotation Index (Índice de Precios y Cotizaciones) of the Mexican Stock Exchange
(BMV).
As of the date of this Annual Report, BIMBO share is classified as high trading volume, in accordance with
the Trading Activity Index published by the Mexican Stock Exchange (BMV).
The following table shows the maximum, minimum and closing adjusted quoting prices in pesos, as well as
the operation volume of BIMBO’S Series “A” shares in the BMV, during the indicated periods.
10
Year ended on
December 31
Pesos per share Serie “A” Operation volume of
Series “A” shares Maximum Minimum Closing
2006 13.75 7.61 13.50 2,833,017,600
2007 20.42 11.38 16.26 1,853,529,600
2008 18.00 12.45 14.58 1,844,708,800
2009 22.99 9.98 21.64 2,286,329,600
2010 27.41 20.56 26.36 2,424,625,600
Source: Bloomberg. Figures adjusted from the 4:1 split carried out on April 29, 2011.
4. Corporate Structure
The following table shows the principal subsidiaries that form the corporate structure of the Group:
11
c) RISK FACTORS
The risks factors following described may adversely affect the development, financial condition and/or
results of operations of the Company, as well as affect the price of any securities of the Company.
Risks Related to the Company’s Business and Industry
Increases in prices and shortages of raw materials, fuels and utilities could cause costs of the Group to
increase.
Raw materials, including, among others, wheat flour, sugar, plastics used to package the Group’s products
and edible oils and fats, are subject to substantial price and supply fluctuations. The prices for raw materials
are influenced by a number of factors, including the weather, crop production, transportation and
processing costs, government regulation and policies and worldwide market supply and demand for raw
materials. The prices of many commodities have recently been at record levels, and commodity markets
are experiencing unprecedented volatility. Any substantial increase in the prices of raw materials that is not
reflected as an increase of the price of the Company’s products may adversely affect the Group’s financial
condition, results of operations and cash flows. Any reduction in sales revenue as a result of competitive
pressures would negatively affect profit margins and, if the Group’s sales volumes fail to grow sufficiently
to offset any reduction in margins, the Group’s results of operations will suffer.
In addition, the Group’s also relies on utilities to operate its business. For example, the Group’s bakeries
and other facilities use natural gas, liquefied petroleum gas and electricity to operate and the Company’s
distribution operations use gasoline and diesel fuel to deliver our products. For these reasons, substantial
future increases in prices for, or shortages of, these fuels or electricity could adversely affect the Group’s
financial condition, results of operations and cash flows.
The Group enters into wheat, natural gas and other hedging arrangements to cover its exposure from
increases in prices. Notwithstanding the foregoing, and depending on their market ratings, such contracts
could cause the Group to pay higher prices for raw materials than those available in the spot markets.
Competition could adversely affect our results of operations.
The baked goods industry is highly competitive and increased competition could reduce the market share or
force the Group to reduce prices or increase promotional spending in response to competitive pressures, all
of which would adversely affect the results of operations of the Company. Competitive pressures may also
restrict the Group’s ability to increase prices, including in response to commodity and other cost increases.
Competition is based on product quality, price, customer service, brand recognition and loyalty, effective
promotional activities, access to retail outlets and sufficient shelf space and the ability to identify and
satisfy consumer preferences.
The Group competes with large national and transnational companies, local traditional bakeries, smaller
regional operators, small family owned bakeries, supermarket chains with their own bakeries, grocery
stores with in-store bakery departments or with private label products and diversified food companies. To
varying degrees, the Group’s competitors may have strengths in particular product lines and regions as well
as greater financial resources. The Group expects that it will continue to face strong competition in all of
the Group’s markets and anticipate that existing or new competitors may broaden their product lines and
extend their geographic scope.
In particular, from time to time, the Group experiences price pressure in certain of its markets as a result of
the competitors’ promotional pricing practices, which could be exacerbated by excess industry capacity. As
a result, the Group may need to reduce the prices for some of its products to respond to competitive and
customer pressures and to maintain market share. Such pressures also may restrict the ability to increase
prices in response to raw material and other cost increases. The Group’s competitors may also improve
their competitive position by introducing new products or products that can be substituted for the Group’s
products, improving manufacturing processes or expanding the capacity of manufacturing facilities. If the
Group is unable to maintain its pricing structure and keep pace with its competitors’ product and
manufacturing process initiatives, the results of operations and financial condition could be materially
adversely affected.
12
The reputation of the brands and intellectual property rights are key to the Group’s business.
The substantial majority of the Group’s net sales derive from sales of products under brands that the Group
owns. The brand names are a key asset of the Group business. Maintaining the reputation of the brands is
essential to our ability to attract and retain retailers, consumers and associates and is critical to the Group’s
future success. Failure to maintain the reputation of the brands could have a material adverse effect on the
Group’s business, results of operations and financial condition. If we fail, or appear to fail, to deal with
various issues that may give rise to reputational risk, it could harm the business prospects. These issues
include, but are not limited to, appropriately dealing with potential conflicts of interest, legal and regulatory
requirements, safety conditions in operations, ethical issues, money-laundering, privacy, record-keeping,
sales and trading practices and the proper identification of the legal, reputational, credit, liquidity and
market risks inherent in the Group’s business.
The principal trademarks are registered in the countries in which the Group uses such trademarks. While
the Group intends to enforce its trademark rights against infringement by third parties, the actions to
establish and protect the Group’s trademark rights may not be adequate to prevent imitation of its products
by others or to prevent others from seeking to block sales of the Company’s products on grounds that the
Group’s products violate their trademarks and proprietary rights. If a competitor were to infringe on the
Group’s trademarks, enforcing our rights would likely be costly and would divert resources that would
otherwise be used to operate and develop the Group’s business. Although we intend to actively defend the
brands and trademark rights, the Group may not be successful in enforcing our intellectual property rights.
See “The Company – Business Description – Patents, Licenses, Brands and Other Contracts.”
The Group relies on retailers and if they perform poorly or give preference to competing products, the
financial performance of the Group could be negatively affected.
The Group derives significant operating revenues from sales to retailers. The Group sells its products to
non-traditional retailers, such as supermarkets and hypermarkets, and to traditional retailers, such as small
family-owned stores. These retailers, in turn, sell the Group’s products to consumers. Any significant
deterioration in the business performance of the major customers could adversely affect the sale of
products. Retailers also carry products that directly compete with the Group’s products for retail space and
consumer purchases. There is a risk that retailers may give higher priority to products of, or form alliances
with, the Group’s competitors or their own private labels other than with respect to the Group’s products. If
retailers fail to purchase the Group’s products, or provide the Group’s products with promotional support,
our financial performance could be adversely affected.
Inability to anticipate changes in consumer preferences may result in decreased demand for products.
Our success depends in part on our ability to anticipate the tastes and dietary habits of consumers and to
offer products that appeal to their preferences. Changes in consumer preferences combined with our failure
to anticipate, identify or react to these changes could result in reduced demand for our products, which
could in turn adversely affect our financial condition, results of operations and cash flows. In particular,
demand for our products could be impacted by the popularity of trends such as low carbohydrate diets and
by concerns regarding the health effects of fats, sugar content and processed wheat.
In addition, the Group’s success depends in part on its ability to enhance product portfolio by adding
innovative new products in fast growing, profitable categories as well as increasing market share in the
existing product categories.
Introduction of new products and product extensions requires significant research and development as well
as marketing initiatives. If the Group’s new products fail to meet consumers’ preferences, then the return on
that investment will be less than anticipated and the Group’s strategy to grow net sales and profits may not
be successful.
Further consolidation in the retail food industry may adversely impact profitability.
As supermarket chains continue to consolidate and as mass merchants gain scale, the Group’s larger
customers may seek more favorable terms for their purchases of our products, including increased spending
13
on promotional programs. Sales to the Group’s larger customers on terms less favorable than the current
terms could adversely affect the Group’s financial condition, results of operations and cash flows.
Health and product liability risks related to the food industry could adversely affect the Group’s
business, results of operation and financial condition.
We are subject to risks affecting the food industry generally, including risks posed by contamination or
food spoilage, evolving nutritional and health-related concerns, consumer product liability claims, product
tampering, the availability and expense of liability insurance and the potential cost and disruption of
product recalls. We may also become involved in lawsuits and legal proceedings if it is alleged that the
consumption of any of the Group’s products causes injury, illness or death. A product recall or a result
adverse to the Group in any such litigation could adversely affect the Group’s financial condition, results of
operations and cash flows.
Any actual or perceived health risks associated with the Group’s products, including any adverse publicity
concerning these risks, could cause customers to lose confidence in the safety and quality of the Group’s
products. Even if the products are not affected by contamination, the industry may face adverse publicity if
the products of other producers become contaminated, which could result in reduced consumer demand for
the Group’s products in the affected category. In addition adverse publicity about the safety and quality of
certain food products, such as the publicity about foods containing genetically modified ingredients,
whether or not valid, may discourage consumers from buying the Group’s products or cause production and
delivery disruptions.
We maintain systems designed to monitor food safety risks throughout all stages of the production process.
However, the Group’s systems and internal policies may not be fully effective in mitigating risks related to
food safety. Any product contamination could have a material adverse impact on the Group’s business,
results of operations and financial condition.
Changes in health-related regulations could have a negative impact on the Group’s business.
The Group’s U.S. products and packaging materials are regulated by the U.S. Food and Drug
Administration, or FDA, or, for products containing meat or poultry, the Food Safety and Inspection
Service of the U.S. Department of Agriculture, or USDA. These agencies enact and enforce regulations
relating to the manufacturing, distribution and labeling of food products. In addition, various states regulate
the Group’s U.S. operations by licensing plants, enforcing federal and state standards for selected food
products, grading food products, inspecting plants and warehouses, regulating trade practices related to the
sale of food products and imposing their own labeling requirements on food products.
The Group’s operations in Mexico are subject to extensive laws, rules, regulations and standards of hygiene
and quality regulation and oversight by designated authorities such as the Secretary of Health (Secretaría
de Salud), the Secretary of Agriculture, Farming, Rural Growth, Fish and Food (Secretaría de Agricultura,
Ganadería, Desarrollo Rural, Pesca y Alimentos), the Federal Commission for Protection from Sanitary
Risks (Comisión Federal para la Protección contra Riesgos Sanitarios) and the Secretary of the Economy
(Secretaría de Economía) and other authorities regarding the processing, packaging, labeling, storage,
distribution and advertising of the Group’s products.
The Group is subject to comparable hygiene and quality local laws and regulations in other countries in
which we operate. Government policies and regulations in the United States, Mexico and the Group’s other
markets may adversely affect the supply of, demand for, and prices of, our products, restrict our ability to
do business in existing and target local and export markets and could adversely affect the Group’s results of
operations and financial condition. In addition, if the Group is required to comply with future material
changes in food safety or health-related regulations, the Group could be subject to material increases in
operating costs and also be required to implement regulatory changes on schedules that cannot be met
without interruptions in the Group’s operations. Increased governmental regulation of the food industry,
such as proposed requirements designed to enhance food safety, impose health-related requirements or to
regulate imported ingredients, could increase the Group’s costs and adversely affect the profitability.
14
The Group may not achieve the targeted cost savings and efficiencies from cost reduction initiatives.
The Group’s success depends in part on its ability to be an efficient producer in a highly competitive
industry. The Group periodically makes investments in its operations to improve the production facilities
and reduce operating costs.
The Group may experience operational issues when carrying out major production, procurement, or
logistical changes and these, as well as any failure by us to achieve the planned cost savings and
efficiencies, could have a material adverse effect on the Group’s business and consolidated financial
position and on the consolidated results of the Group’s operations and profitability.
Disruption of the Group’s supply chain and distribution network could adversely affect operations.
The Group’s operations depend on the continuous operation of the supply chain and distribution network.
Damage or disruption to manufacturing or distribution capabilities due to weather, natural disaster, fire,
electricity shortages, terrorism, pandemics, strikes, disputes with, or the financial and/or operational
instability of, key suppliers, distributors, warehousing and transportation providers, or other reasons could
impair the Group’s ability to manufacture or distribute its products.
To the extent that the Group is unable, or it is not financially feasible, to mitigate interruptions in its supply
chain, whether through insurance arrangements or otherwise, or their potential consequences, there could
be an adverse effect on the Group’s business and results of operations, and additional resources could be
required to restore the supply chain.
The Group may be subject to unknown or contingent liabilities related to recent and future acquisitions.
The Group’s recent and future acquisitions of assets and entities, including, among others, the acquisition
of Weston Foods Inc., or WFI, in 2009, may be subject to unknown or contingent liabilities for which the
Group may have no recourse, or only limited recourse, against the former owners. Although in some of the
Group’s acquisitions the former owners agreed, or may agree, to indemnify the Group for certain breaches
of their representations and warranties, such indemnification obligations in some cases may be subject to
various materiality thresholds, and in some cases such obligations may have expired. As a result, the Group
may not recover any amounts with respect to losses due to breaches by the sellers of their representations
and warranties. In addition, the total amount of costs and expenses that may be incurred with respect to
liabilities associated with the acquired assets and entities may exceed the Group’s expectations, plus the
Group may experience other unanticipated adverse effects, all of which may adversely affect the business,
results of operations and financial condition.
The Group’s future growth opportunities through mergers, acquisitions or joint ventures may be
impacted by antitrust laws, access to capital resources and other challenges in integrating significant
acquisitions.
The Group may pursue further acquisitions in the future. The Group does not know if it will be able to
successfully complete any acquisitions or whether we will be able to successfully integrate any acquired
business into its business or retain key personnel, suppliers or distributors. The Group’s ability to
successfully grow through acquisitions depends upon its ability to identify, negotiate, complete and
integrate suitable acquisitions and to obtain any necessary financing. These efforts could be expensive and
time consuming, disrupt the ongoing business and distract management. If the Group is unable to integrate
any acquired businesses effectively, including WFI, the Group’s business, financial condition and results of
operations will be materially adversely affected.
The Group may be unable to successfully expand operations into new markets.
If the opportunity arises, the Group may expand its operations into new markets. Each of the risks
applicable to the Group’s ability to successfully operate in the Group’s current markets is also applicable to
the Group’s ability to successfully operate in new markets. In addition to these risks, the Group may not
possess the same level of familiarity with the dynamics and market conditions of any new markets that the
Group may enter, which could adversely affect its ability to expand into or operate in those markets. The
Group may be unable to create similar demand for the products and business, which could adversely affect
the Group’s profitability. If the Group is unsuccessful in expanding its operations into new markets, it could
adversely affect its business, financial condition and results of operations.
15
The current global economic crisis may adversely affect the Group’s business and financial
performance.
The global economic slowdown and its lingering effects could negatively affect the Group’s business,
results of operations or financial condition. When general economic conditions deteriorate, the demand for
the Group’s products may experience declines, and we may suffer reductions in its sales and profitability.
In addition, the financial stability of our customers and suppliers may be affected, which could result in
decreased, delayed or canceled purchases of the Group’s products, increases in uncollectible accounts
receivable or non-performance by suppliers. The Group may also find it more costly or difficult to obtain
financing to fund operations or investment or acquisition opportunities, or to refinance its debt in the future.
The global economic slowdown has also negatively affected local credit markets and resulted in an
increased cost of capital, which may negatively impact the ability of companies, including the Group’s
customers, to meet their financial requirements. If the global economy continues to deteriorate, the Group’s
business and financial performance may be adversely affected.
The Group’s business and financial performance may be adversely affected by risks inherent in
international operations.
The Group currently maintains production facilities and operations in the United States, Mexico, Argentina,
Brazil, Colombia, Costa Rica, Chile, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay,
Peru, Uruguay, Venezuela and China. The Group’s ability to conduct and expand its business and its
financial performance is subject to the risks inherent in international operations. The Group’s liquidity,
results of operations and financial condition may be adversely affected by trade barriers, currency
fluctuations and exchange controls, political unrest, high levels of inflation and increases in duties, taxes
and governmental royalties, as well as changes in local laws and policies of the countries in which the
Group conducts business, including changes to environmental laws that could affect its manufacturing
facilities or to health safety laws that could affect the Group’s products. The governments of the countries
in which the Group operates, or may operate in the future, could take actions that materially adversely
affect it, including the taking, expropriation or condemnation of the Group’s assets or subsidiaries.
The Group may be subject to interruptions or failures in information technology systems.
The Group relies on sophisticated information technology systems and infrastructure to support its
business, including process control technology. Any of these systems may be susceptible to outages due to
fire, floods, power loss, telecommunications failures and similar events. The failure of any of the Group’s
information technology systems may cause disruptions in its operations, adversely affecting its net sales
and profitability. The Group has business continuity plans in place to reduce the negative impact of
information technology system failures on its operations, but these plans may not be effective.
Failure to maintain the relationships with labor unions may have an adverse effect on financial results.
The majority of the Group’s workforce is represented by labor unions. While we have enjoyed satisfactory
relationships with all of the labor organizations that represent the Group’s associates and the Group
believes its relationships with labor organizations will continue to be satisfactory, labor-related disputes
may still arise. Labor disputes that result in strikes or other disruptions could also cause increases in
operating costs, which could damage the Group’s relationships with its customers and adversely affect its
business and financial results.
In addition, the Group’s results may be materially and adversely impacted as a result of increases in labor
costs. A shortage in the labor pool or other general inflationary pressures or changes in applicable laws and
regulations could increase labor cost, which could have a material adverse effect on the Group’s
consolidated operating results or financial condition.
The Group’s labor costs include the cost of providing benefits for employees. We sponsor a number of
defined benefit plans for employees in the United States and Mexico, including pension, retiree health and
welfare, active health care, severance and other post employment benefits. We also participate in a number
of multiemployer pension plans for certain of our manufacturing locations. The annual cost of benefits can
16
vary significantly from year to year and is materially affected by such factors as changes in the assumed or
actual rate of return on major plan assets, a change in the weighted-average discount rate used to measure
obligations, the rate or trend of health care cost inflation, and the outcome of collectively-bargained wage
and benefit agreements.
The Group depends on the expertise of senior management and skilled personnel, and the Group’s
business may be disrupted if it loses their services.
The Group’s senior management team possesses extensive operating experience and industry knowledge.
The Group depends on its senior management to set its strategic direction and manage its business and
believes that their involvement in the Group is crucial to the Group’s success. Furthermore, the Group’s
continued success also depends upon its ability to attract and retain experienced professionals. The loss of
the services of its senior management or its inability to recruit, train or retain a sufficient number of
experienced personnel could have an adverse effect on the Group’s operations and profitability. The Group
does not maintain any key person insurance on any of its senior management or associates. The Group’s
ability to retain senior management as well as experienced personnel will in part depend on having in place
appropriate staff remuneration and incentive schemes. The remuneration and incentive schemes the Group
has in place may not be sufficient in retaining the services of its experienced personnel.
Political events in the markets in which the Group operates may result in disruptions to its business
operations and decreases in sales and revenues.
The governments of the markets in which the Group operates exercise significant influence over many
aspects of the economy of such markets. As a result, government action concerning the economy of such
markets and the regulation of certain industries could have a significant effect on private segment entities,
including the Group, and on market conditions, prices of and returns on securities from such markets.
The government of a market in which the Group operates may implement significant changes in laws,
public policy and/or regulations that could affect such market’s political and economic situation, which
could adversely affect the Group’s business. Social and political instability in such markets or other adverse
social or political developments in or affecting such markets could affect the Group and its ability to obtain
financing. It is also possible that political uncertainty in territories in which the Group operates may
adversely affect financial markets.
Future political developments in the markets in which the Group operates, over which it has no control,
may have an unfavorable impact on its financial position or results of operations.
Compliance with environmental and other governmental laws and regulations could result in added
expenditures or liabilities.
The Group’s operations in the United States, Mexico and other markets are subject to federal, state and
municipal laws, regulations and official standards, relating to the protection of the environment and natural
resources.
In the United States, the Group is subject to federal, state and local laws and regulations relating to the
protection of the environment. These laws and regulations include the Clean Air Act, the Clean Water Act
and the Resource Conservation and Recovery Act and Superfund, which imposes joint and several liability
on the responsible persons.
In Mexico, the Group is subject to various Mexican federal, state and municipal environmental laws and
regulations that govern the discharges into the environment, as well as the handling and disposal of
hazardous substances and wastes. Environmental laws impose liability and clean-up responsibility for
releases of hazardous substances into the environment. The Group is subject to regulation by, among other
agencies, the Secretaría de Medio Ambiente y Recursos Naturales, or the Mexican Environmental and
National Resources Ministry, the Secretaría del Trabajo y Previsión Social, or the Mexican Labor and
Social Security Ministry, the Procuraduría Federal de Protección al Ambiente, the Federal Environmental
Protection Bureau and the National Water Commission, the Comisión Nacional del Agua. These agencies
may initiate administrative proceedings for violations of environmental and safety ordinances and impose
economic penalties on violators. The Mexican government has recently imposed strict environmental and
safety regulations.
17
Modifications of existing environmental laws and regulations or the adoption of more stringent
environmental laws and regulations may result in the need for investments that are not currently provided
for in the Group’s capital expenditures program and may otherwise result in a material adverse effect on the
Group’s business, results of operations or financial condition.
Developments in other countries may result in decreases in the price of the Group’s securities.
The market value of securities of Mexican companies is, to varying degrees, affected by economic and
market conditions in other emerging market countries. Although economic conditions in these countries
may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any
of these other countries may have an adverse effect on the market value of securities of Mexican issuers. In
recent years, for example, prices of both Mexican debt securities and Mexican equity securities dropped
substantially as a result of developments in Russia, Asia, Brazil and Greece.
In addition, the direct correlation between economic conditions in Mexico and the United States has
sharpened in recent years as a result of the North American Free Trade Agreement, or NAFTA, and
increased economic activity between the two countries. As a result of the slowing economy in the United
States and the uncertainty it could have on the general economic conditions in Mexico and the United
States, our financial condition and results of operations could be adversely affected. In addition, due to
recent developments in the international credit markets, capital availability and cost could be significantly
affected and could restrict the Group’s ability to obtain financing or refinance its existing indebtedness on
favorable terms, if at all.
The Group’s international operations exposes to risk of fluctuations in currency exchange rates.
The Group generates significant revenues and incurs operating expenses and indebtedness primarily in
Mexican pesos, and to a lesser extent in other local currencies in the countries in which we operate. As of
December 31, 2010 and 2009, the portion of the Group’s revenues denominated in Mexican pesos was Ps.
57,475 million and Ps. 54,803 million, respectively, while the portion of the Group’s revenues generated in
currencies other than the Mexican peso was Ps.62,477 million and Ps.64,041 million, respectively.
Moreover, as of December 31, 2010 and 2009, our indebtedness denominated in Mexican Pesos was
Ps.18,794 million and Ps.22,709 million, respectively, while the Group’s indebtedness denominated in
currencies other than the Mexican peso was approximately Ps.14,416 million and approximately Ps.14,031
million, respectively. However, the amount of the Group’s revenues denominated in a particular currency
in a particular country typically varies from the amount of expenses or indebtedness incurred by the
Group’s operations in that country given that certain costs may be incurred in a currency different from the
local currency of that country (i.e. the U.S. dollar). This situation exposes the Group to potential losses
resulting from currency fluctuations.
An impairment in the carrying value of goodwill or other acquired intangibles could negatively affect
our consolidated operating results and net worth.
The carrying value of goodwill represents the fair value of acquired businesses in excess of identifiable
assets and liabilities as of the acquisition date. The carrying value of other intangibles represents the fair
value of trademarks, trade names, and other acquired intangibles as of the acquisition date. Goodwill and
other acquired intangibles expected to contribute indefinitely to the Group’s cash flows are not amortized,
but must be evaluated by management at least annually for impairment. If carrying value exceeds current
fair value, the intangible is considered impaired and is reduced to fair value via a charge to earnings. Events
and conditions which could result in an impairment include changes in the industries in which we operate,
including competition and advances in technology; a significant product liability or intellectual property
claim; or other factors leading to reduction in expected sales or profitability. Should the value of one or
more of the acquired intangibles become impaired, the Group’s consolidated earnings and net worth may be
materially adversely affected.
The Group may incur additional indebtedness in the future that could adversely affect its financial
health and its ability to generate sufficient cash to satisfy the Group’s outstanding debt obligations.
After the offering of the notes, the Group may incur additional indebtedness that may have the following
direct or indirect effects:
• limit the Group’s ability to satisfy its obligations under the notes and other debt;
18
• increase the Group’s vulnerability to adverse general economic and industry conditions;
• require the Group to dedicate a portion of its cash flow from operations to servicing and repaying its
indebtedness which may place the Group at a competitive disadvantage to its competitors with less
debt;
• limit the Group’s flexibility in planning for or reacting to changes in its business and the industry in
which operates;
• limit, along with the financial and other restrictive covenants of the Group’s indebtedness, among other
things, its ability to borrow additional funds, and
• increase the cost of additional financing.
The Group’s ability to generate sufficient cash to satisfy its outstanding and future debt obligations will
depend upon its future operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, many of which the Group does not control. If the Group is unable
to service its indebtedness, it will be forced to adopt an alternative strategy that may include actions such as
reducing or delaying capital expenditure, selling assets, restructuring or refinancing its indebtedness, or
seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all.
In addition, certain of the Group’s financing arrangements impose operating and financial restrictions on its
business. These provisions may negatively affect its ability to react to changes in market conditions, take
advantage of business opportunities we believe to be desirable, obtain future financing, fund needed capital
expenditures, or withstand a continuing or future downturn in its business.
In the future, the Group may from time to time incur substantial additional indebtedness. If the Group or its
subsidiaries incur additional debt, the risks that it faces as a result of its existing indebtedness could further
intensify.
Corporate Structure.
The Group is a holding company which principal assets consist of shares held in its subsidiaries. In
addition, it is the owner of the main trademarks of the Group. Pursuant to the above, the Group’s income
depends upon the dividends and interests paid by its subsidiaries, as well as the profits regarding any
trademark license agreement entered into by the Group.
With respect to the payment of dividends, regardless that as of today all subsidiaries have no contractual
limitations for the payments of dividends to the Group, any financial agreement or any other agreement that
impose a future restriction to its subsidiaries for the payment of dividends or the payment of any other
amounts to the Group, may adversely affect the liquidity, financial situation and operation results of the
Group.
Issues regarding Competition
As of December 31, 2010, the Group has not been subject of any disputes before the CFC or any other
similar organism in the countries in which the Group operates which have resulted in any sanctions against
the Company. In any case, the commercial practices of the Group have not been subject to suspension,
correction or any relevant fines by the CFC or any other antitrust authorities in other countries in which the
Group operates.
Notwithstanding the above, the Group cannot guarantee that the CFC or any other authority will condition
or limit in the future, the Group’s expansion by means of acquisitions or compels to suspend, correct or
remove any of its commercial practices or future acquisitions, which, in such case, may adversely affect its
business, financial situation and operation results.
d) OTHER SECURITIES
The following securities are registered by Grupo Bimbo in the RNV.
19
a. Authorized capital stock Series “A” common shares, ordinary, nominative, without expression of
nominal value, listed in the BMV since 1980 under ticker symbol “BIMBO”.
b. Certificados Bursátiles:
- Bimbo 09 – Issued on June 15, 2009 in the aggregate amount of Ps.5,000,000,000 (Five thousand million
pesos) maturing on June, 2014.
- Bimbo 09-2- Issued on June 15, 2009 in the aggregate amount of Ps.2,000,000,000 (Two thousand million
pesos) maturing on June, 2016.
- Bimbo 09U- Issued on June 15, 2009 in the aggregate amount of 706,302,200 Investment Units (UDIs or
Unidades de Inversión), maturing on June 2016.
- Bimbo 02-2- Issued on May 17, 2002 in the aggregate amount of Ps.750,000,000, (Seven hundred and
fifty million pesos) maturing on May, 2012.
The following securities are registered by Grupo Bimbo in the Irish Stock Exchange:
- International Bond – Issued on June 30, 2010, according to Rule 144A and Regulation S, in the aggregate
amount of $800,000,000 (eight hundred million dollars) maturing on June 2020.
The Company has been complying on time with all of its obligations to disclose any relevant events as well
as the legal and financial information required by the applicable laws.
I. Annual Information:
(a) The third business day following the date of the annual shareholders’ meeting that
approves its annual results, which must take place during the first four months of each
year,
1. Report given by the board of directors to the shareholders’ meeting referred to
above, certified by the secretary of the board, which in addition includes the
report referred to by article 14 Bis 3, paragraph V, subparagraph a) of the
Securities Market Law, making reference to the most important accounting
politics adopted to elaborate the Company’s financial statements, as well as the
terms in which such politics were analyzed and adopted by the Company.
2. Examiner’s report as provided in article 166 of the General Corporations Law,
regarding the veracity, sufficiency and reasonability of the information filed by
the board of directors to the shareholders meeting.
A summary of the resolutions adopted at the shareholder’s meeting held pursuant to article 181 of
the General
3. The annual financial statements together with the respective external audit
opinion, as well as the audited annual financial statements of the associated
entities, that contribute more than 10% the Company’s earnings or consolidated
assets,
4. Letter subscribed by the secretary of the board of directors, stating the current
status of the shareholder’s minutes meetings registry book, minutes of the board
of directors book, share registry book and in the event of limited liability of
variable capital corporations (sociedades anónimas de capital variable) the
capital increase and capital decrease registry book. The aforementioned is not
applicable to debt instruments.
20
5. The independence letter of the external auditor of the Company pursuant to
article 84 of the General Provisions.
(b) No later than June 30 of every year:
1. The annual report corresponding to the fiscal year immediately ended, prepared
in accordance with the General Provisions.
2. Report corresponding to the fiscal year immediately ended, regarding the level
of adherence to the Best Corporate Practices Code, pursuant to the General
Provisions.
II. Quarterly Information:
Within the 20 business days following the end of the first three calendar quarters and within the 40
business days following the end of the fourth calendar quarter of each fiscal year, the Company must
report its financial statements and the economic, accounting and administrative information required
by the corresponding electronic formats, comparing, at a minimum, the results for the relevant
quarter against the results for the same quarter for the previous fiscal year and an update of the
annual report regarding the operating and financial discussions and analysis of the Company’s
business.
In addition, the Company shall deliver to the Commission a certificate subscribed by the General
Director or the Finance Director, or any other person with a holding a similar title, stating, under
oath, that, in the competence of their authority, they prepared the relevant information of the
Company contained in the quarterly report, which, as of their knowledge, reflects in a reasonable
manner the situation of the Company. Likewise, they should state that they are not aware of any
relevant information that is missing in such quarterly report or that the report contains information
that could confuse an investor.
III. Legal Information:
(a) On the date of their publication, the calls for shareholder’s meetings and the calls of the
holders of the Certificados Bursatiles. Such calls must contain, each and all of the items
of the agenda to be discussed during the relevant meeting.
(b) On the business day immediately following the date on which the relevant meeting is
held:
1. A summary of the resolutions adopted at the shareholder’s meeting held
pursuant to article 181 of the General Corporations Law, including the
application of profits and, as the case may be, the payment of dividends, number
of cupon o cupons against which payment will be made, as well as place and
date of payment.
2. A summary of the resolutions adopted at the shareholder’s meetings other than
the meetings mentioned above, as well as the resolutions adopted by the
meetings held by the holders of other securities.
(c) Within the 5 business days following the date of the shareholder’s meeting or of the
holders of other securities meetings, as applicable:
21
1. A copy, certified by the secretary of the board of directors of the Company or
any person authorized thereto, of the shareholder’s meetings minutes, together
with the attendance list signed by the examiners appointed for such purposes,
stating the number of shares that correspond to each shareholder and, as the case
may be, on behalf of whom is acting, as well as the total number of shares
represented at the meeting.
2. A copy, certified by the president of the meeting, of the holder’s of the securities
minutes meetings, together with the attendance list signed by the holders of the
securities or their representatives and by the examiners appointed for such
purposes, stating the number of securities that correspond to each holder of the
securities, as well as the total number of the securities represented at the
meeting.
3. A copy, certified by the secretary of the board of directors, of the by-laws of the
Company, in the event that any amendments have been approved in the relevant
meeting.
(d) On the date on which the Company agrees to, as the case may be, depending on the type
of security:
1. Notice to the shareholders for the exercise of any rights of first offer derived
from capital increases and the subsequent issuance of shares, which amount is
required to be paid in cash.
2. Notice for the delivery or exchange of shares or other securities.
3. Notice for the payment of dividends, which must incluye the corresponding
amount and the proportion of such dividends or, as the case may be, the payment
of interests.
4. Any other notice addressed to the shareholders, holders of other securities or the
general public.
(e) Every 5 years, on June 30, the notarization of the shareholder’s meeting by means of
which a restatement (compulsa) of the Company’s by-laws has been approved, including
the registration information in the Public Registry of Commerce.
IV. Repurchase of the Company’s shares:
The Company is required to disclose to the BMV, no latter than the next business day following
the consummation of any transactions involving the repurchase of the Company’s shares.
V. Relevant events:
The Company is required to disclose to the BMV, all material events pursuant to the provisions set
forth in the General Provisions Applicable to Issuers of Securities and Other Participants in the
Securities’ Market.
e) RELEVANT CHANGES TO THE SECURITY RIGHTS REGISTERED IN THE RNV
On April 28, 2011, BIMBO splitted the shares representing its capital stock, by circulating the 2011-1
Issuance, the capital stock of the Company was not modified and still represents 4,703,200,000 shares.
22
f) USE OF PROCEEDS
The totality of the net proceeds obtained from the three offerings of the Certificados Bursatiles issued by
the Company, during 2009, were used to pay short term financial debt used to finance the acquisition of
WFI, according to the description in the relevant supplements of such offerings.
The total net proceeds obtained from the issue of the international bond, completed by the Company during
2010, were used for the refinancing of existing debt and for general corporate purposes.
g) PUBLIC DOCUMENTS
In order to request copies of this Annual Report:
Grupo Bimbo, S.A.B. de C.V.
Prolongación Paseo de la Reforma No. 1000
Col. Peña Blanca Santa Fe
México, D.F.
C.P. 01210
www.grupobimbo.com
Investment Relations
Armando Giner Chávez
Telephone: (5255) 5268-6924
Facsimile: (5255) 5268-6697
Azul Argüelles Rojas
Telephone: (5255) 5268-6962
Facsimile: (5255) 5268-6697
In connection with the public information that has been delivered to the BMV, please consult the following
electronic addresses:
http://ir.grupobimbo.com
www.bmv.com.mx
The information available in such addresses is not a part of this Annual Report.
23
2) THE COMPANY
a) COMPANY’S HISTORY AND DEVELOPMENT
1. Legal backgrounds
Incorporation
The Company was incorporated by public deed number 10670, dated June 15, 1966, granted before Tomás
O’Gorman, Public Notary number 96 of the Federal District, the first official transcript of which was filed
in the Public Registry of Commerce of the Federal District, in the Commerce section, under number 299,
pages 377, volume 636, 3rd
book.
Corporate Name
The Company was originally incorporated under the corporate name of Promoción de Negocios, S.A. In
1978 it changed its corporate name to Grupo Industrial Bimbo, S.A. and in 1981 it adopted the modality as
sociedad anónima de capital variable. On August 24, 1999, the Company changed its corporate name to
Grupo Bimbo, S.A. de C.V., and on November 14, 2006, by public deed number 30053, granted before Ana
de Jesús Jiménez Montañez, Public Notary number 146 of the Federal District, the first official transcript of
which was filed in the Public Registry of Commerce of the Federal District in mercantile folio number
9506, on December 6, 2006, the Company adopted the modality of sociedad anónima bursátil de capital
variable.
Duration
The Company’s duration is indefinite.
Domicile and Telephone Numbers
The Company’s headquarters are located in Prolongación Paseo de la Reforma 1000, Colonia Peña Blanca
Santa Fe, C.P. 01210, Mexico, D.F. The telephone number is 5268-6600 and the fax number is 5268-6697.
The Company’s web site is: www.grupobimbo.com, in the understanding that the information contained
therein is not part of this Annual Report.
2. History
All figures shown in this section correspond to historical values on the dates indicated.
1945 Taking advantage of their experience in the bakery industry, Don Lorenzo Servitje Sendra and
Don Jaime Sendra Grimau decided to create an American style packaged bread factory, to which
they invited Don Alfonso Velasco, as well as Don Jaime Jorba Sendra and Don José T. Mata to
participate as industrial partners. Another founder was Don Roberto Servitje Sendra, who
collaborated since the inception as sales supervisor. Even though he did not participate as partner
at the Company’s inception, little by little Don Roberto Servitje acquired grater responsibilities
and likewise participated in the decision making process. Later on he purchased BIMBO shares
and, subsequently, he became General Director, position he left in 1994, when he was appointed
chairman of the Board of Directors, in substitution of Don Lorenzo Servitje, who held such
position since its foundation.
For the creation of the packaged bread factory, the founding partners mainly took care of the
needs posted by the market at that time; that is, a periodical and quality attention to the clients,
and product freshness. To satisfy such needs, the products to be manufactured and the
characteristics of the packing thereof were determined, in addition to putting in place direct
distribution systems and the substitution of unsold products every two days. On December 2,
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1945 Panificación Bimbo was formally founded in Mexico City.
1947-
1952
In 1947 the outside distribution to some cities in the states of Veracruz, Morelos, Hidalgo and
Puebla was initiated. By 1952, four plants were already installed in Mexico City and the rolls
category was already integrated within the Company’s products. Likewise, the distribution had
extended to some of Mexico’s central and northern states.
1956 In May, 1956 the corporation Pasteles y Bizcochos, S.A. was incorporated, currently known as
Productos Marinela, S.A., with which the Group ventured in the cake area. As of this date the
establishment of plants outside Mexico City began. The first of them were Bimbo de Occidente,
S.A. (Guadalajara) and Bimbo del Norte, S.A. (Monterrey), broadening both the distribution
geographical coverage and the variety of products offered by the Company.
1963-
1978
The period comprised between 1963 and 1978 was characterized by a great expansion and
diversification. In addition to opening eight more plants in different states of the Mexican
Republic, the existing plants were enlarged and other additional cake lines were integrated to
those offered by Productos Marinela, S.A. Moreover, it ventured in the candies and chocolates
industry, with the establishment of the first Ricolino plant, and in the salted snack market, with
what is currently known as Barcel. At that time practically all the states of the country were
covered through the Company’s direct distribution system.
In such period, with the inauguration of the first jam plant, also the Group’s vertical integration
initiated. Not only the other Group’s companies were supplied with these products, but also the
line of products offered to the consumers was diversified.
In connection with the pastries products, in the seventies decade, BIMBO launched the Suandy
line into the market, whose products were prepared based on butter. This line was importantly
enlarged in 1981.
1979 In 1979, Tia Rosa was introduced as a house-made bakery image in the domestic market and was
rapidly developed with automated systems in some of its production lines.
1983 By this time, the Group already manufactured some equipment and parts thereof, which were
used in its plants, therefore, in 1983 the inauguration of the Maquindal, S.A. plant took place,
which merged in January 2001 with the corporation Moldes y Exhibidores, S.A. de C.V.
1984 In 1984, BIMBO ventured in the exportation market with the distribution of Marinela products
into the USA.
1986-
1990
In 1986, after the crisis faced by Mexico during almost five years, BIMBO acquired Continental
de Alimentos, S.A. de C.V., company which produced and commercialized the Wonder brand,
until then BIMBO’S direct competitor in bread and cakes. As of 1989, the Group experienced an
important expansion through other acquisition and the establishment of plants in the lines both of
final consumer products and raw materials, material and equipment for internal consumption.
1992-
1996
Regarding the transactions at an international level, in 1990 the Company acquired a bread and
cake producer plant in Guatemala, which marked the beginning of the coverage that the Group
has in Latin America. In 1992, BIMBO initiated the acquisition of productive plants in other
countries of the region with the acquisition in 1992 of Alesa, S.A. and Cena (currently Ideal,
S.A.) in Chile. Afterwards, it extended to Venezuela with the acquisition of Industrias Marinela,
C.A. and Panificadora Holsum de Venezuela, C.A. in 1993, merged in 1999 under the name of
Bimbo Venezuela C.A. At the same time, productive plants were installed in Argentina,
Colombia, Costa Rica, El Salvador and Peru, as well as distribution companies in Honduras and
Nicaragua.
Additionally, the Company importantly expanded in the USA with the establishment and
25
acquisition of several productive plants in different states in the border with Mexico. The
following companies were acquired: Orbit Finer Foods, Inc., in 1993; Fabila Foods, Inc. and La
Fronteriza, Inc., in 1994; C&C Bakery, Inc. and La Tapatía Tortillería, Inc., in 1995; and Pacific
Pride Bakeries, with two plants (Suandy Foods Inc. and Proalsa Trading Co.), in 1996.
In 1992, the Company acquired the factory Galletas Lara, which allowed the formal entrance to
the traditional cookie market, with “marías” kind and crackers, in which it did not participate
with the Marinela trademark.
1998 An important level of investments characterized 1998. In this year the Mrs. Baird’s planning
company, sector leader in the state of Texas, USA, was acquired, and in Mexico operations were
initiated in the Bimbo plant in La Paz, Baja California. Likewise, BIMBO’S expansion reached
the European continent with the establishment in Germany of the confectionery goods
distribution company, Park Lane Confectionery. Also that year, in order to focus on its main
businesses, BIMBO carried out divestments in the preparation and distribution of ice-creams in
Mexico and salted snacks in Chile.
1999 In February, 1999, BIMBO carried out a strategic alliance with the company Dayhoff, in the
USA, engaged in the distribution of candies, through an equity interest of 50%. In 2002,
BIMBO’S interest increased to 70% and in 2004 it acquired 100% of the shares.
In March, 1999, BIMBO associated with Grupo Mac’Ma by acquiring a 51% interest in the
companies engaged in pastries manufacturing. In the state of California, USA, it acquired the
bakery company Four-S.
In 1999, a new bread producing plant was built and began operations in the city of Tijuana, Baja
California, with the following production lines: white, integral and sweet bread, rolls, wheat
tortillas and tostadas, among others.
In July, 1999, BIMBO reinforced its presence in Colombia through the acquisition of assets in
the city of Cali. In September of the same year, the Company completed an agreement with the
McDonald’s restaurant chain, through which it became the unique supplier of all rolls for this
restaurant chain in Venezuela, Colombia and Peru. The unique concession of its rolls contributed
to consolidate the Company’s position in Latin America. Further, this exclusivity strengthens the
relationship which both companies have since 1985, year when McDonald's was installed in
Mexico.
In October, 1999, BIMBO completed negotiations with the company Panacea, S.A., located in
San Jose, Costa Rica. Such negotiations allowed BIMBO to acquire some of the assets owned by
the Costa Rican company and the right to use Tulipán, its leading brand in that country.
For an amount of $140.6 million dollars, in December, 1999, BIMBO carried out the sale of its
six wheat mills and of the fresh and processed fruits and vegetables business to a group of
investors represented by Mr. Roberto Servitje Achútegui.
In accordance with the synergies use and operative consolidation strategy, BIMBO initiated in
1999 the administrative and operative merger of its companies in the USA, being consolidated as
follows: Mrs. Baird’s Bakeries Business Trust, in the Texas market, and Bimbo Bakeries USA,
Inc., in the California market.
2000 In March 2000, BIMBO, Oracle de Mexico, Sun Microsystems and Cap Gemini Ernst & Young
agreed the development of the computer program BIMBO XXI.
In April 2000, the Company, through Ricolino, inaugurated two plants in the European Union,
one in Vienna, Austria, and the other one in Ostrava, Czech Republic see “The Company –
Business Description – Principal Activity”.
26
Additionally, in November 2000, BIMBO acquired Pan Pyc, the second most important bakery
company of Peru, with which its leadership in that country was consolidated. In December it
acquired the Guatemalan bakery company La Mejor, with which it reinforced its presence in the
Guatemala, El Salvador and Honduras markets.
2001 2001 highlighted the intense activity to consolidate the Group’s presence in the regions where it
participated and to make its operations more efficient. In March of that year, BIMBO acquired
100% of the capital stock of Plus Vita, Ltda., one of the largest bakery companies of Brazil,
which produced packaged bread, sweet bread, cakes, rolls and toasted bread under brands
considered among the most traditional and with the highest prestige in the Brazilian market, such
as Pullman, Plus Vita, Ana María, Muffs and Van Mill, among others. Plus Vita operated three
plants, located in Sao Paulo, Rio de Janeiro and Recife see “The Company– Business Description
– Principal Activity”.
Strategy and Strengths”.
On the other hand, and in order to add value to BIMBO’S shareholders equity holding, in August
2001 a public offer to repurchase shares was completed, which achieved the expected purpose of
granting to its shareholders the possibility to choose among obtaining immediate liquidity with a
premium or keep their investment and participate in the Group’s future results. Finally,
238,803,031 Series “A”, ordinary, nominative, without expression of nominal value shares,
representing its capital stock were acquired, at a price of $17.25 per share.
In October of that same year, the Company concluded the sale process of its shares in the
companies Pastas Cora, S.A. de C.V. and Pastas Cora de la Laguna, S.A. de C.V. to Grupo La
Moderna, S.A. de C.V. The companies sold were owned by Grupo Bimbo and Grupo Mac’Ma,
S.A. de C.V. and, therefore, the negotiation with La Moderna was jointly carried out. Through
this transaction, La Moderna acquired 100% of the shares of Pastas Cora, S.A. de C.V. and
Pastas Cora de la Laguna S.A. de C.V., and delivered as payment 4,500,000 shares representing
5.8% of its capital stock, from which 57.4% corresponds to Grupo Bimbo.
In November 2001, the Company acquired certain productive assets pertaining to Gruma, S.A. de
C.V., related with bread manufacturing and distribution. This acquisition included the fresh bread
and frozen bread businesses in Costa Rica, as well as the equipment from the plant which Gruma
closed in Escobedo, Nuevo Leon.
2002 As of January 1, 2002 the merger of all operating companies of the Group in Mexico into two big
companies: Bimbo, S.A. de C.V. and Barcel, S.A. de C.V became effective. The first one
consolidates all the bakery operations, while the second one embraces the salted snacks,
confectionery goods and goat milk caramel “cajeta” divisions. The purpose of such merger was
to optimize the operations and make its installed capacity and distribution force more effective.
On March 4, 2002, the Company acquired, through its subsidiary in the USA, the bakery
operations in the USA west region pertaining to the company George Weston Limited. This
transaction, with a total price of $610 million dollars, provided Grupo Bimbo with access to
leading brands and products in the United States market, such as Oroweat bread, Entenmann’s
cakes, English muffin bread type and the Thomas’ bagels, as well as Boboli pizza basis.
In accordance with the terms of the agreement, Grupo Bimbo acquired, among other assets, the
Oroweat bread trademark; five plants distributed in the states of Texas, Colorado, California and
Oregon, and an efficient direct distribution system, with approximately 1,300 routes.
Additionally, the Company obtained in the same region the rights related with the Entenmann’s
brand products, as well as the distribution rights of the Thomas’ and Boboli brands.
This acquisition responded to BIMBO’S strategy to build a leading bakery business in the USA.
With that, the Group’s position in core markets, such as the states of California and Texas, has
27
become stronger.
On December 11, 2002, BIMBO’S General Extraordinary Shareholder’s Meeting agreed the
merger of the Company with its subsidiary company Central Impulsora, S.A. de C.V. By virtue
of such merger, the Company became holder of the Group’s main trademarks.
2003 In January 2003, BIMBO completed a strategic alliance with Wrigley Sales Company
(“Wrigley”), to distribute its products. With this agreement, the Company, through its subsidiary
Barcel, S.A. de C.V., became the exclusive distributor in Mexico of the Wrigley chewing gum
brands. This transaction incorporated a line of products of the highest quality to the Group’s
confectionery goods platform and granted the Company the opportunity to offer Doublemint,
Juicy Fruit, Orbit, Spearmint and Winterfresh, the most successful United States chewing gum
brands in the industry.
In June 2003, the Company, together with its partner Grupo Arteva, S. de R.L., carried out the
sale of the company Novacel, S.A. de C.V., engaged in the manufacture of flexible packaging, to
Pechiney Plastic Packaging, a subsidiary of the Canadian company Alcan, world leader in
package manufacturing. Prior to this sale, BIMBO held an interest of 41.8% in the capital stock,
while its partner owned the rest. In this transaction, Grupo Bimbo executed a supplier agreement
in commercial terms and conditions in accordance with the industry’s general practices.
In July 2003, the Company informed about its participation as minority partner in a consortium
headed by the Mexican businessman Fernando Chico Pardo. Such entity acquired certain
ownership and debt rights of Compañía de Alimentos Fargo, S.A., of Argentina, and will procure
its financial and operative restructuring.
2004 On March 18, 2004, Grupo Bimbo informed that it reached an agreement to acquire the
confectionery goods companies Joyco de Mexico, S.A. de C.V., Alimentos Duval, S.A. de C.V.
and Lolimen, S.A. de C.V., owned by a group of Mexican shareholders and the Spanish company
Corporación Agrolimen, S.A. After having obtained all the necessary approvals, the purchase
and sale transaction of the confectionery goods companies concluded on May 2004.
Grupo Bimbo invested $290, from which approximately $27 were used for the payment of
financial liabilities. Through this investment, settled with its own funds, Grupo Bimbo acquired
two production plants and rights on leading trademarks and products in the confectionery goods
industry in Mexico, such as Duvalín, Bocadín and Lunetas. These companies registered annual
sales near to $500.
2005 On June 9, 2005, BIMBO announced the acquisition of certain assets and trademarks owned by
Empresas Chocolates La Corona, S.A. de C.V. and its subsidiaries (“La Corona”), in a
transaction that amounted $471, that were settled with the Company’s own funds. La Corona has
presence in the Mexican candies market, mainly in the chocolate segment. After the regulatory
approval, this transaction was completed on July 29, 2005.
On July 20, 2005, the Company announced the acquisition, through a cash transaction that
amounted $1,350, of Controladora y Administradora de Pastelerías, S.A. de C.V., pastries
operator “El Globo”. Controladora y Administradora de Pastelerías, through El Globo, produces
and commercializes fine pastries products. With this acquisition, Grupo Bimbo for the first time
ventured in the retail commercialization of fine pastries products. After the relevant regulatory
approval, the transaction was completed on September 23, 2005.
On September 30, 2005, the Company executed a distribution agreement with Arcor, S.A.I.C.
(“Arcor”), of Argentina. With this agreement, BIMBO, through its subsidiary Barcel, S.A. de
C.V., became the exclusive distributor in Mexico of the “Bon o Bon” candy. This product was
incorporated to the Company’s existing candies platform as a line renowned for its high quality.
The appearing parties also committed to carry out a joint investment to build in Mexico a plant to
28
produce the Arcor and Barcel candies.
On January 30, 2006, BIMBO returns to the bakery market in Uruguay with the acquisition of
the Uruguayan companies Walter M. Doldán y Cía. S.A. and Los Sorchantes S.A., positioning
itself as the market leader. This transaction amounted $7 million dollars, from which $5.5 million
were used for the purchase of 100% of the shares and the rest was used for the payment of
financial liabilities. These companies are engaged in the production and commercialization of
bakery products, mainly through Los Sorchantes and Kaiser trademarks.
2006 On March 24, 2006, BIMBO initiated operations in Asia with the agreement to acquire the
company Beijing Panrico Food Processing Center, subsidiary of the Spanish company Panrico,
S.A., located in China, in a transaction that amounted 9.2 million Euros for 98% of the shares,
additionally assuming a net indebtedness of 1.3 million Euros. With this transaction, the
Company acquired a company that had 800 collaborators, a production plant and a distribution
network with an extended portfolio of bakery products, designed and developed for the local
market, which have allowed it to achieve an important presence and acknowledgement in the
cities of Beijing and Tianjin.
On June 19, 2006, BIMBO announced that it reached an agreement to acquire certain assets and
trademarks of the “El Molino” pastries, in a transaction that amounted $42, that were settled with
the Company’s own funds. El Molino is one of the oldest and most traditional bakeries in
Mexico. In the fiscal year ended as of December 2005, its sales amounted $45.
This transaction, supplementary with the acquisition of “El Globo” pastries, carried out in July
2005, intended to strengthen the presence of Grupo Bimbo in the retail commercialization of high
end pastry products.
2007 On July 31, 2007, BIMBO carried out the purchase of 100% of the share package of Maestro
Cubano Florentino Sande S.A. for a sum that amounted $93. The company is located in Uruguay,
is the owner of industrial premises engaged in the production and commercialization of cookies,
grissines and breadcrumbs.
On October 2, 2007, BIMBO announced the acquisition of Temis for a sum that amounted $17.
With this acquisition, BIMBO entered into the Paraguay market.
On November 5, 2007, Grupo Bimbo announced that, as included in a judicial request dated
November 2, 2007, filed by the investment group The Yucaipa Companies, LLC (“Yucaipa”)
before the Bankruptcy Court in the West District of Missouri, in Kansas City (the “Court”),
Yucaipa, together with BBU, Inc. (“BBU”), subsidiary of Grupo Bimbo, and The International
Brotherhood of Teamsters (the “Teamsters”), intended to file a collective proposal for the
reorganization of Interstate Bakeries Corporation (“IBC”).
IBC is one of the largest bakeries and fresh bread and sweet bread distributor companies of the
United States. Among its main trademarks are Wonder®, Merita®, Home Pride®, Baker’s Inn®,
Hostess®, Drake's®, and Dolly Madison®. IBC operates more than 40 plants, 650 distribution
centers, 6,400 routes and employs near to 25,000 collaborators.
It was expected that the Court considers Yucaipa’s request in a hearing foreseen for November 7.
In case the Court instructed IBC to grant to Yucaipa and BBU the access required to initiate a
purchase audit, Yucaipa and BBU expected to carry out their review expeditiously in order to
determine IBC’S status and, if so determined they would submit, together with the Teamsters, the
terms and conditions of IBC’S reorganization plan.
Grupo Bimbo intended to use such audit to evaluate if IBC represented a feasible opportunity to
strengthen and impel its position in the bakery industry in the United States, consolidating at the
same time its leadership position in the bakery global industry.
29
Any subsequent decision which implied to continue advancing in this process would require a
series of additional steps, including the satisfactory completion of the above mentioned audit, as
well as the approval of the reorganization plan by the Court and IBC’S creditors.
However, on December 13, 2007, Grupo Bimbo announced that after the audit process carried
out to IBC it was not in a position to submit a proposal to acquire IBC.
On November 29, 2007, Grupo Bimbo informed that on November 28, Compañía de Alimentos
Fargo, S.A. (“Fargo”), Argentinean company in which Grupo Bimbo holds an indirect 30%
equity interest, executed an agreement for its reorganization with its main creditors, which
represent the majority of the verified indebtedness, the investment funds Rainbow Global High
Yield, The Argo Capital Investors Fund SPC, Argo Global Special Situations Fund Segregated
Portfolio and The Argo Fund Limited (the “Bond Holders”).
The agreement included the payment of 33.81% of the verified unsecured indebtedness amount.
Likewise, the Bond Holders committed to collaborate in order for Fargo to attain the culmination
of the Meeting of Creditors (Concurso Preventivo) in which it is since June de 2002, as well as
not to carry out any legal actions against it.
2008 On January 2, 2008, BIMBO announced the acquisition of Laura, company located in Brazil, for
a sum that amounted $202. This way, BIMBO entered into the panettone category and enlarged
the cookies portfolio through the wafers line.
On February 21, 2008, BIMBO announced the acquisition of Firenze, also in Brazil, for a sum
that amounted $185. The integration with Firenze allowed taking advantage of the strength in the
light segment and continuing its development through the increase of the physical distribution of
Firenze and Plus Vita trademarks.
On April 1, 2008, the Company announced the acquisition of Plucky, company located in
Uruguay, for a sum that amounted $123. The company produces and commercializes
confectionery goods products. With this acquisition, for the first time Bimbo ventures in Latin
America in such market.
On May 7, 2008, Grupo Bimbo announced that it reached an agreement to acquire 75% of the
shares of the Brazilian bakery company Nutrella Alimentos, S.A. (“Nutrella”). This acquisition
allowed Grupo Bimbo to place itself as the leader of industrialized bread in Brazil, increasing its
geographic scale and presence.
Nutrella is a company founded in 1972 that produces and commercializes packaged bread, rolls
and cakes, through two production units in the states of Sao Paulo and Rio Grande do Sul. With
the trademarks “Nutrella”, “Nhamy” and “Nutrellinhas”, among others, it is positioned as leader
in Brazil’s South Region. In 2007, Nutrella, with more than 1,600 collaborators, registered sales
for R$150 million and a EBITDA* for R$21 million.
This investment responded to Grupo Bimbo’s strategy of consolidating its transactions in the
countries where it participates and gave it a stronger position to continue developing a profitable
business in Brazil, by complementing its current operation. Likewise, it gave access to one of the
regions with more economic activity in the country, with more than 25 million inhabitants.
2009 On January 21 2009, Grupo Bimbo announced that it completed the acquisition of the bakery
business in the United States of Weston Foods, Inc. (WFI), owned by Dunedin Holdings S.à r.l.,
a subsidiary of George Weston Limited (TSX: WN), located in Toronto, as well as the
acquisition of the related financial assets, having obtained the relevant regulatory approvals and
permits. Such transactions were appraised in $2,380 and $125 million dollars, respectively. The
aggregate payment of $2,505 million dollars was made through a financing of $2,300 million
30
dollars, as well as with the Company’s own funds. The consolidated operation in the United
States, known as Bimbo Bakeries USA (BBU), became one of the largest bakery companies in
the country, with a leading position in the bread, rolls, sweet bread and cake categories. The
portfolio includes premium trademarks such as ARNOLD®, BIMBO®, BOBOLI®,
BROWNBERRY®, ENTENMANN’S®, FRANCISCO®, FREIHOFER’S®, MARINELA®,
MRS BAIRD’S®, OROWEAT®, STROEHMANN®, THOMAS’® and TIA ROSA®. The new
operation provides employment to more than 15,000 collaborators, operates 35 plants and
distributes its products through more than 7,000 routes. Grupo Bimbo’s consolidated results
reflect the integration of WFI transactions as of January 21, 2009.
On November 18, 2009, the assets related to the production, distribution and sale of corn
products under the trademark Sanissimo were acquired.
2010 At the end of 2010, Dulces Vero was acquired. Dulces Vero is the principal producer, distributor,
and marketer of lollipops, hard candies, and marshmallows, most of them covered in chile, in
Mexico.
Vero, founded in 1952, produces a wide range of candies and jams, including hard candy
lollipops, gummies and marshmallows, among others. The company has broad experience and
technology for the production of hard candies and products made with chile. Vero has 1,500
collaborators and in 2009 generated sales of approximately Ps. 1,100 million, and an EBITDA of
Ps. 220 million.
The acquisition of these assets strengthened Grupo Bimbo’s position in the Mexican candy
market through its subsidiary Barcel and supported the Company’s strategy to reach all socio-
demographic sectors. Together with the synergy of sales and costs, the strength of Vero in
wholesale chains combined with Barcel’s extensive retail sales distribution network, will provide
a solid platform for continued growth. In addition, Vero’s products complement Barcel’s
portfoloio in the Hispanic market in the United States and represent an opportunity to increase
the presence of the company in that country.
On November 9, 2010, Grupo Bimbo announced that it reached an agreement to acquire the
North American business of Sara Lee’s Fresh Bakery, the closing of which is expected to take
place at the end of the first semester of 2011. The acquisition will significantly strengthen and
expand business in the United States.
The acquisition includes a perpetual license to Sara Lee ® brand, free of royalties, for its use in
baked goods in America, Asia, Africa and the countries of Eastern and Central Europe, as well as
a range of regional trademarks with high recognition in its local markets. Sara Lee NAFB
operates 41 plants, around 4,800 distribution routes, and employs approximately 13,000
collaborators. During the last 12 months concluding on October 2, 2010, Sara Lee NAFB
generated sales of 2 thousand million dollars and an adjusted EBITDA of 108 million dollars.
This transaction will allow BBU to construct a more efficient and lower-cost platform in order to
serve clients and consumers across the United States. The acquisition is highly complementary
in all product lines, plants, and geographic zones. Sara Lee NAFB’s brands and product ranges
provide a solid business in fundamental geographic zones and categories where BBU does not
currently have an important presence.
The combined business will provide employment to more than 28,000 collaboraters, will operate
75 plants, and will distribute its products through more than 13,000 routes, with pro forma sales
estimated at 5,805 million dollars in 2010. It is expected that the integration of Sara Lee NAFB
with the current operations of BBU will generate annual synergyies in a range of approximately
150 to 200 million dollars for 2013.
Grupo Bimbo announced the beginning of construction of “Piedra Larga”, the larges wind park
31
in the food industry worldwide, which will generate almost 100% of the electrical energy used by
Grupo Bimbo in Mexico.
With an installed power capacity of 90 mega watts, the park will be able to supply the electric
consumption of 65 instalations (production plants and other operation centers) of the company.
Grupo Bimbo invited Grupo Calidra, Frialsa Frigoríficos and the museum Papalote Museo del
Niño to participate in this project.
Grupo Bimbo has focused its attention on the implementation of wind energy, in order to fulfill
its permanent commitment to the environment and to the wellbeing of future generations.
32
The table below is a summary of the sales of the acquisitions carried out by the Company in the last 3 years
(figures are expressed in million pesos):
Date Company Country Amount
2009
2010
December 3 Dulces Vero Mexico $1,285
May 5 JinHongWei China |63
May 1 BMFoods USA 383
2009
January 21 Weston Foods, Inc. (WFI) USA $31,699
Others Other businesses and assets Others 320
2008
May 1 “Galletas Gabi” Assets and Trademarks Mexico $349
May 6 Nutrella Alimentos S.A. Brazil 924
April 2 Plucky, S.A. Uruguay 107
March 25 Lido Pozuelo, S.A. Honduras 203
February 21 “Firenze” Assets and Trademarks Brazil 209
January 2 Panificio Laura, Ltda. Brazil 259
3. Recent Events
Below are the relevant events after December 31, 2010:
Grupo Bimbo announces the hiring of Accival as market maker.
On March 7, 2011, Grupo Bimbo announced the hiring of Acciones y Valores Banamex, S.A. de C.V.,
Casa de Bolsa, as market maker in order to operate the Company’s shares listed on the Mexican Stock
Exchange under the ticker symbol BIMBO. This initiative strengthened the Grupo Bimbo’s commitment to
promote the liquidity of its securities in the capital market.
Grupo Bimbo contacted a syndicated loan for $1,300 million dollars
On April 26, 2011, Grupo Bimbo contracted a syndicated loan for five years for an amount of $1,3000
millon dollars, with an interest rate of Libor + 110pb, with a group of 10 participant leading financial
institutions. The proceeds obtained by this transaction will be used to refinance certain existing liabilities
under better terms and to partially fund the acquisition of Sara Lee, the closing of which is planned for the
middle of the year, subject to the relevant approvals.
The loan, which will be paid in four semestral payments beginning in month 42, increases the exchange
rate composition with respect to U.S. dollars, maintaining a natural economic coverage and accounting. In
addition, the transaction improves the profile of the liabilities of the Company with the increase of the
average term from 4.9 to 5.5 years and the decrease of the financial holding cost from 5.7% to 3.9%.
Grupo Bimbo issues a 4:1 split of its shares
On April 29, Grupo Bimbo made effective a 4:1 stock split. The split is intended to improve the liquidity
of the shares in the best interests of the shareholders.
33
b) BUSINESS DESCRIPTION
i) Principal Activity
4. Strategy and Strengths
The Group’s general strategy is based on its corporate mission, this is, the development of the value of its
brands and essentially, its compromise of being a highly productive and entirely human Company, as well
as innovative, competitive and aimed at total customer and consumers satisfaction, being an international
leader in the baked goods industry and with a long term vision. Likewise, the Company, through its general
strategy is aimed at increasing its value, which is reflected in an increased shareholders value.
To strengthen the Group’s vision and strategy, the Company follows particular strategies, which include the
following elements:
Develop Innovative New Products. BIMBO has successfully developed and introduced new
products that have increased sales and satisfied consumers and the Company strives to ensure that
its products suit the tastes and budget of its consumers according to the customs, needs and trends,
as well as providing nutritional value. BIMBO intends to continue to invest in research and
development to innovate across its product lines and new product categories, driving consumer
demand and incremental revenue opportunities. BIMBO is a global Company that strives to
maintain a local character through a constant pipeline of new products that seek to address its
diverse customers’ needs and desires and enhance its customer and consumer base. For example,
the Company developed a process to add functional ingredients to certain of its products to
improve the health of its consumers by lowering cholesterol or enhancing mineral absorption. In
addition, it is also one of the first consumer products companies in Latin America to introduce
biodegradable packaging technology. the Company believes that the strength of its brands and its
low-cost manufacturing base provides it an opportunity for continued expansion of its product
Continued Development of the Company’s Brands. BIMBO has had a strong track record of
creating, nurturing and managing successful brands, which it believes reflects a deep
understanding of consumer preferences and the rigor of its ongoing market research and testing
programs. In most of its product categories, the Company’s brands have an extraordinary “top of
mind awareness” in the market based on its market research. The Company’s packaged bread is
found in virtually every household in Mexico. The Company believes that this experience provides
a platform for it to develop new product lines under its existing brands as well as entirely new
categories. As it expands into new markets, the Company expects to increase the recognition of its
existing brands in those markets (including our Bimbo brand in the United States) and strengthen
its brand portfolio with new brands targeted to those markets.
Increase Market Penetration. To meet the needs of each of its customer segments, the Company
uses a range of analytical tools to divide regions by distribution channel, size, brand and products
and continuously develop new channels. The Company’s recent market penetration efforts have
resulted in customer base growth in almost every segment in Mexico, increased penetration of the
United States convenience store channel and significant growth of its Central and South American
customer base. The Company intends to continue its efforts to increase market penetration expand
its product base and enhance its brand recognition in the markets in which the Company has
gained entrance. Building on this success, the Company believes that the strength of its brands and
the reach of its distribution network provide a major opportunity for increased market penetration,
including into the market for baked goods in the United States and Central and South America.
Increase Efficiencies throughout the Company’s Business. BIMBO´s growth has generated
valuable economies of scale in production, distribution and marketing as well as dissemination of
best practices and innovation. The Company remains focused on driving additional efficiencies
34
and improved profitability in its business. In particular, the Company aims for constant
improvement in the use of its production and distribution resources and in periodically reinvesting
in its plants and equipment and it strives to maintain a low-cost operation with a focus on effective
cost controls. For example, redesigning packaging that is lighter to reduce unit cost and the careful
calibration of the use of its distribution network. In addition, the Company frequently evaluates the
data generated by its sales force and its data mining techniques to improve execution at the point
of sale and refine its inventory management. The Company also monitors its pricing structure in
light of raw-material costs and inflationary pressure to maintain the optimal balance.
Continued Growth. The Company believes that it has benefited from its acquisition and
integration of new brands and products and its expansion into new markets. BIMBO seeks to
continue to expand its geographic reach through organic growth and to pursue selective strategic
acquisitions in regions and categories that provide a platform for growth and acquisition of strong
brands that complement its existing portfolio and increase the penetration of its brands. Given the
fragmented nature of the food industry, BIMBO will continue to evaluate its expansion through
organic growth as well as acquisition opportunities. The Company believes its presence in various
markets around the world will provide it a platform for it to identify selective growth
opportunities.
Social Strategy. The Group has been dedicated to become a fully human Company. The Company
has insisted and will continue to insist on an integration of managers and employees guided by the
mission to fully feed, delite, and serve the client. Also, the Company has led and will continue to
develop in the future, a work environment that facilitates the integration and personal
identification with the Company. Its objective in this matter is that the worker starts developing in
the Company and thereby conducive a productive performance and personal satisfaction. This is
how the Group seeks to match it’s commitment for responsibility both externally and internally,
not only in the economical but also in a social manner. According to the surveys conducted by the
Mexican magazine “Expansion”, BIMBO has been pointed out as one of the most admired
companies. See “Business Description – Principal Activity – Human Resources.”
Regardless that the Company’s management considers that the administration of the strategies described
herein is the most convenient, it cannot guaranty that the strategies will have the expected effects on
BIMBO’s operations or that the same strategies will be maintained in the future, since the management
reviews periodically the orientation and impact of said strategies.
Strengths
The Group has grown rapidly over the last five years and believes its business strengths will allow it to
continue to grow and successfully fulfill its strategy:
• Leading Market Position. BIMBO is one of the largest baked goods companies in the world
and one of the largest food companies in the Americas, with a diversified portfolio of
approximately 7,000 products and more than 150 renowned brands, which allows the Company
to reach all market categories in most of the countries in which it operates. BIMBO is the
number-one or number-two market participant in its primary markets (the United States,
Mexico and Central and South America) in all its categories: bread and rolls, cakes and
pastries, cookies, salted snacks, confectionery goods, tostadas and wheat tortillas. The other
product lines are also top players in their respective markets. As an example, in the United
States, its packaged bread is purchased by approximately 50% of the households and Thomas’
is a highly recognized brand in the English muffins subcategory. In Mexico, Marinela is the
market leader in the cakes and pastries category, and Barcel and Ricolino are the number-two
market participants in the salted snacks and fragmented confectionery market, respectively.
35
• Strong Brand Recognition. The Company’s brands are leaders in market recognition in the
United States, Mexico and Central and South America. The Company believes its
understanding of the need and preferences of its consumers allows it to offer them superior
quality products at competitive prices. They believe their strong brands give them a
competitive advantage and allow them to more effectively leverage its new product launches in
the markets in which they operate. Through the acquisition of WFI significantly strengthened
the brand portfolio in the United States with brands including Thomas’, Arnold and
Entenmann’s. Each of the Company’s brands is targeted to a specific audience and supported
by a comprehensive marketing plan. Some of the brand symbols, such as the Bimbo bear, the
Gansito goose and the Paleta Payaso clown have developed iconic status and are immediately
recognizable to millions of consumers.
• Extensive Direct-Distribution Network. The Company has developed an extensive direct-
distribution network, which fields one of the largest sales fleets in the Americas and represents
a major competitive advantage. its network allows it to distribute products from its 98 plants,
distribution centers and warehouses to more than 1.8 million points of sale every day to ensure
the freshness and quality of its products and to meet the needs of every type of customer from
hypermarkets to small convenience stores. The Company also maintains a highly efficient and
sophisticated logistics operation to address distribution requirements across the markets it
serves. Through the acquisition of WFI, the Company significantly extended its United States
distribution network into the Northeast. BIMBO has also developed strong relationships with
its customers that enable it to tailor its approach and response to their diverse and changing
needs, including with respect to frequency of delivery, in a cost-effective manner. BIMBO
believes this result in strong customer loyalty.
• Market Intelligence and Consumer Satisfaction. BIMBO offers its consumers, through its
different brands, a wide variety of baked goods spanning a broad range of product types,
pricing levels, flavors and sizes. The Company frequently expands and creates innovative
product lines to address specific needs and desires of consumers, based on a unique
understanding of their needs and preferences in the markets in which the Company operates.
BIMBO has gained this unique understanding by continuously conducting market research and
retrieving and analyzing key information from its consumers, including through the use of
sophisticated technology by its sales force its market intelligence allows it to target the right
products to each point of sale at the right time. BIMBO believes it is the leading innovator
within its product categories and has consistently introduced new products that have been well
received by consumers.
• Experienced Management Team. The strong management team of the Company has broad
industry expertise and has successfully developed and consolidated its market leadership by
focusing on its baked goods business and by their effective and rapid response to the constantly
changing consumer demands and competitive environment in the markets in which it operates.
They have completed and integrated various acquisitions in recent years and disseminated
innovative ideas and best practices in manufacturing and distribution across Grupo Bimbo.
• Strong Corporate Culture. BIMBO places great emphasis on its relationship with its associates
and seek to align their interests with its corporate goals and customer satisfaction policies.
BIMBO is committed to the safety and health of its associates and consumers and practices a
preventive approach to well-being. The Company believes that a high level of workforce
satisfaction leads to a more productive business environment as well as customer and consumer
loyalty.
36
5. Main Operations
Grupo Bimbo is one of the largest baked goods companies in the world and one of the largest food
companies in the Americas. The Company produces, distributes and markets a wide variety of baked goods,
sweet and salted snacks, wheat tortillas, tostadas, cookies, confectionary goods, chocolates, goat milk
caramel “cajeta,” confectionery goods, fast food and packaged foods it also carries renowned brands such
as: Bimbo, Marinela, Tía Rosa, Lara, El Globo, Thomas’, Arnold, Stroehmann, Freihofer, Dutch Country,
Maier’s, D’Italiano, Brownberry, Oroweat, Mrs. Baird’s, Entenmann’s, Thomas, Francisco, Old Country
Barcel, Ricolino, Dulces Vero, Coronado, La Corona, Milpa Real, Del Hogar, Ideal, Plus Vita, Pullman,
Holsum, Nutrella, Firenze, Laura, Europa y Monarca, among many others. BIMBO has manufacturing
operations in México, the United States, Argentina, Brasil, Chile, Colombia, Costa Rica, El Salvador,
Honduras, Guatemala, Panamá, Paraguay, Perú, Uruguay, Venezuela y China, and a distribution center in
Nicaragua.
Grupo Bimbo is organized in six divisions within the industry of baked goods, and sweet and salted snacks.
Bimbo, S.A. de C.V., which includes brands such as Bimbo Marinela, among others; BBU, which
incorporates the operative companies in the United States; OLA, which includes all the operations in Latin
America; El Globo, with more than 250 bakeries; Barcel which incorporates the sweet and salted snacks
operation; and Bimbo China in charge of operations in Asia since March 2006, when the Company
ventured in the Asian market through the acquisition of Beijing Panrico Food Processing Center in China.
The Company operates in three principal regions: México, the United States, and Latin America. The
Company sells its products in 17 countries: the United States, México, Argentina, Brazil, Chile, Colombia,
Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua, Panama, Paraguay, Peru, Uruguay, Venezuela,
and China.
The following tables reflect the net sales of the Company in each one of the principal markets in which the
Company operates, as well as production plants, distribution routes, and points of sale that the Company
had in each of said markets on December 31 of 2010, 2009, and 2008:
Region
Net sales for the periods ending on December
31 of,
2010 2009 2008
(in millions of pesos)
United States 47,875 49,850 18,049
México (1)
57,870 55,388 54,845
Central and South
America
14,207 13,606 11,346
Consolidated**(3)
117,163 116,353 82,317
Region Production
Plants
Distribution
Routes
Points of
Sale
United States 34 9,000 90,000
México (1)
44 27,000 1,461,000
Central and South
America
25 6,000 342,000
(1)
Includes operations in Europe and Asia. (2)
Approximate figures (3)
The consolidated figures exclude the operations between the regions.
37
a. Baked Goods Division
This sector comprises the following business units:
Bimbo, S.A. de C.V.
This Company produces all the baked goods in México and its main brands are Bimbo and Marinela.
Bimbo. Dedicated to the production, distribution and marketing of packaged bread, sweet bread, cereal
bars, packaged wheat tortillas, tostadas and fast food. Regarding packaged bread, historically, Bimbo has
managed to grow above the population and GDP index, due to a growing a major change in the preference
and needs of consumers, in the sense of acquiring packaged bread, whose duration is greater than the
traditional bread. Additionally this division has been very active in the introduction of new products with
features that have managed to meet consumer’s needs. Regarding to sweet bread, Bimbo has not only
pursued a strategy of production, distribution and marketing of traditional Mexican bakery but also has
sought to differentiate itself by offering new options that meet different consumption moments. These
products, sold in different varieties and presentations, represent, like the packaged bread, an excellent
choice for consumers. We must emphasize the consolidation of the Company in the category of cereal bars,
such as, Bran Frut, Multigrano and Doble Fibra.
With respect to wheat tortilla and tostadas division, in the recent years it has experienced a significant
annual growth. As a result of the above on 2009, Bimbo acquired the Company Sanissimo, which
strengthened its position on the modern tostadas and tortilla chips market.
The main brands under which Bimbo commercializes its products are:
* Licensed use of trademark in México.
Marinela. This brand was founded in 1965 in Mexico City with the production of snack cakes on
individual portions. In 1992 the Company acquired Galletas y Pastas Lara, S.A. de C.V., which allowed
Marinela to approach in an important manner the traditional cookie sectors such as “marías”, salad crackers
and popular cookies. In 2008 the Company acquired Galletas Gabi, which strengthen its position in the
luxury cookies segment on the modern market.
Currently, Marinela is dedicated to the production, distribution and marketing of various pastries, pies and
cookies, mainly under the following brands:
Product Line Brands
Bakery Marinela, Wonder
Cookies Marinela, Lara, Suandy, Tia Rosa, Gabi
Together with Bimbo, Marinela has a preferential place on the counters of most of Mexico’s small
businesses and convenience stores.
Product Line Brands
Packaged bread (white, wheat bread,
specialized)
Bimbo, Sunbeam*, Wonder, Oroweat, Breddy
Bread rolls Bimbo, Wonder
Sweet bread Bimbo, Tia Rosa
Flour Tortillas Tia Rosa, Del Hogar, Wonder
Tostadas and Totopos Milpa Real, Del Hogar, Kodyz, Sanissimo
Cereal Bars Bran Frut, Doble Fibra, Multigrano
Fast Food Lonchibón
38
Milk beverages. In 2008 the Company ventured in the category of milk beverages in Mexico with Leche
Negrito for its sale in the retail channel. The purpose is to participate in new categories using the
Company’s top brands in order to increase value.
Prepared foods. This category offers ready-to-eatfood products at the point of sale. The principal brand is
Lonchibón with products market segment of sandwiches, burritos, croissants, hamburgers, etc. The Group
has 3 centers of production in Toluca, Monterrey and Tijuana and an area annexed to the Chihuahua plant.
El Globo. A pastry company founded in 1884 and acquired by Grupo Bimbo in September 2005 that is
recognized as a leader company and one of the most traditional, with a history of 125 years in the field of
high-end pastries and artisanal bread in México. The Company keeps control of all the stages of the
business: procurement, production, distribution and marketing, through over a net of 250 points of sale with
different formats, traditional stores, coffee houses and carts.
The products consists high-end pastries and artisanal bread and is aimed to the market’s superior levels.
The principal categories of products are cakes, sweet and salted bread, yellows, canapés, cookies,
chocolates, ice cream, pastas, prepared foods, and coffee-sandwich, these products are commercialized
under the following brands:
Product Line Brands
High-end pastries, artisanal bread, yellow,
cookies, pastas, canapés, chocolates, ice
cream y prepared foods, cafes, drinks
El Globo
French high-end pastries, artisanal bread La Balance
Specialized bread Delibrot
Sandwich-coffee Breadhaus
Cakes, bread and cookies El Molino
BBU, Inc.
BBU is headquartered in Horsham, Pennsylvania and is the company which controls the operations of the
Group and consolidates the operations of Bimbo Bakeries and Bimbo Foods in the United States. Such
operations consist mainly in the manufacture, distribution and marketing of packaged bread and sweet
bread to minority and institutional clients, including the distribution of products imported from Mexico,
principally focused on the Hispanic community. BBU holds a 21% market participation in packaged bread
and sweet bread in the United States, a total market sum of $17,000 million dollars. Currently, BBU has 33
production plants in the U.S. and more than 8,000 distribution routes. Approximately 58% of the
distribution network is operated by third parties that have a contract with the Company.
BIMBO has implemented an aggressive expansion strategy in the United States, through several major
acquisitions including the acquisition on January 21, 2009, of the United States bakery company of Weston
Foods, Inc. (WFI) for $2,380 million dollars, and the acquisition of related financial assets. On November
2010, Grupo Bimbo announced the agreement to acquire the North American Fresh Bakery business of
Sara Lee for $959 million dollars. Currently the agreement is under revision by the U.S. Departmetn of
Justice and it is expected that the acquisition will be completed by mid-2011.
The North American Fresh Bakery business of Sara Lee markets a wide range of baked goods including
bread, bread rools, muffins and bagels. Among its principal brands are: Sara Lee, Earth Grains, Colonial,
Rainbo, Holsum, Sunbeam and Heiner’s, some of which operate under license agreements. Sara Lee has
11.6% of participation in the market of packaged bread in dollars, such market is worth approximately
$11,000 million dollars.
39
These acquisitions have helped consolidate the Group’s presence in the United States, and have permitted
the Group to expand its presence amongst the Anglo-Saxon population. Additionally, they have allowed for
the consolidation of the Group’s operations with Mexican brands that are prestigious in the United States,
where the Hispanic population has grown significantly over the last few years.
All of this has strengthened Grupo Bimbo, as a significant part of the Company’s assets are outside the
Mexican territory and the contribution of these operations to BIMBO´s sales is important, thereby reducing
the risks posed by exchange rate fluctuations. See “The Company – Business Description – Principal
Activity – Strengths and Strategy” and see “General Information – Risk Factors”.
Main brand under which BBU commercializes its products:
Product Line Brands
Packaged Bread Arnold, Brownberry, Oroweat, Thomas’,
Stroehmann, Mrs. Baird’s, Bimbo, Freihofer,
Maier’s, D’Italiano, Francisco, Old Country,
Sweet bread, cakes and cookies. Entenmann’s, Marinela, Bimbo, Mrs. Baird’s,
Freihofer
Tortillas and pizza bases Tia Rosa, Boboli, Sahara
In certain parts of the United States, BBU commercializes products under license agreements.
The following table shows the principal trademarks in the United States:
BBU Brands
Latinamerica
Organization in charged of coordinating all the operations of Grupo BIMBO in Latin America.
These operations started through the Company’s construction of its own plants of production, strategic
associations and acquisitions on certain countries. As of December 31, 2010, Latinamerica operated 25
plants in 14 countries, including Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, Panamá, Paraguay, Peru, Uruguay and Venezuela. These countries represent a
potential market of more than 360 millions of consumers.
40
In this contrast BIMBO has devolved particular distribution systems for each country’s market attending to
their social, geographical, policyal, labor and economical conditions of each country.
The main Brands under which Latinamerica comercializes it’s products are:
Product Line Brands
Packaged Bread and pastries Bimbo, Bontrigo, Breddy, Cena, Europa, Firenze,
Fuch’s, Holsum, Ideal, La Mejor, Los Sorchantes,
Maestro Panadero, Monarca, Morán, Nutrella, Pan
Todos, Pullman, Plus Vita, Pyc, Tradiçao, Trigoro,
Tulipán, Wonder, Mamá Inés, Guadalupe
Sweet bread Bimbo, Ideal, Laura, Pullman, Plus Vita
Cookies and cakes Ana María, Lagos del Sur, Maestro Cubano,
Marinela, Marisela, Agua de Piedra
Confectionary goods Ricard, Ricolino
BIMBO decided to participate in the Latin American markets due to the great growth potential that they
represent in the consumption relation between traditional bread and packaged bread, also because of the
consumption tendencies observed in the last years. See “The Company – Business Description – Principal
Activity”.
The next table shows the share of packaged bread and traditional bread in some of the countries in the
region:
2010
Argentina Brazil Chile Colombia Peru Uruguay Venezuela
Traditional bread 91.4% 80.5% 95.0% 66.9% 92.5% 93.4% 89.1%
Packaged bread 8.6% 19.5% 5.0% 33.1% 7.5% 9.6% 10.9%
Source: Datamonitor. Includes the categories of Industrial Bread & Rolls, Artisan Bread & Rolls,
Industrial cakes & pastries, and Artisan cakes & pastries.
The following table shows the main trademarks in Latin America:
OLA Brands
China.
Coordinates the operations of Grupo BIMBO in Asia. Mainly, it concentrates the operation of the Beijing
Panrico Food Processing Center, which was acquired in March 2006 and today is called Bimbo Beijing
Food Company. Bimbo Beijing is dedicated to the manufacture, distribution and marketing of packaged
bread, sweet bread, cakes and confectionary goods under the brand: BIMBO. Through the acquisition of the
brand Million Land in 2009, and JinHongWei in 2010; it also markets ready-to-eat foods and Chinese
baked goods.
The Company has developed new products with local flavor, such as bread rolls with sweet beans and
bread filled with local salty ingredients, in order to adapt to the Asian market and satisfy region-specific
tastes and to develop a consistent demand for bread and similar products.
The Company operates two production plants and 11 distributions centers, of which six are located in
Beijing and five in the surrounding cities. It has a portfolio of over 100 products, which are distributed and
commercialized through a distribution network of over 180 routes and 7,300 points of sale. Our fresh
products are distrubted in 27 cities, including Beijing and the surrounding cities in a 1000 km radius.
The principal markets are the cities of Beijing, Tianjin, Langfang, Baoding, Shijiazhuang, Taiyuan, Jinan,
Shanghai and in Northeast China, such as Shenyan, Harbin and ChangChun. It is worth noting that the
leverage of distributors and the long life products has permitted that the products have reached Chinese
provinces such as: Inner Mongolia, Guandong, and Xinjiang.
The table below sets forth the main brands of the Group in China:
42
Bimbo Beijing Brands
b. Salted Snacks and Confectionary Division.
Barcel, S.A. de C.V.
Barcel concentrates all the salted snacks, confectionary goods, chocolates, and chewing gum in México and
its main brands are Barcel, Ricolino, Coronado, La Corona, Chick’s, Star Gum and Dulces Vero.
Barcel. Its operations started with the acquisition of a snack factory in the City of Querétaro in 1977, this
gave birth to Productos Nubar, S.A. de C.V. Subsequently, two plants for production and
commercialization of salted snacks were constructed in México, in Gómez Palacio, Durango and Lerma,
Mexico State. In 2004 the Barcel Yucatán plant was built in Mérida, Yucatán, afterwards Barcel took
control of the operations of the tortillas and corn tostadas in Atitalaquia, Hidalgo, which was formerly
operated by Bimbo, S.A. de C.V. Likewise, new lines of production were installed in Hermosillo, Sonora in
order to meet the increased demand for Barcel´s products. In 2010, a new plant for Barcel plant opened in
Mexicali, with a line of corn products, focused primarily on covering the market of the western United
States.
Today, Barcel exports products to the United States, achieving a very good acceptance with consumers of
both origins, Anglo-Saxon and Hispanic.
The main brands under which Barcel commercializes its products are:
Product Line Brands
Chips Chips, Ondas, Toreadas and Papatinas
Wheat Takis, Runners, Chipotles, Tostachos and Tortilla
Nachos.
Extruded Valentones, Spirrones, Big Mix
Peanuts Hot Nuts, Golden Nuts, Kiyakis
Popcorn Karameladas pop
Ricolino. Produces, distributes and sells chocolates, marshmellows covered in chocolate, confectionary
goods, gum and gummy candies, acidulated tablets, caramels, lolly-pops, chewing gum, marshmallows,
milk modifiers, traditional candies and goat milk caramel “cajeta”, through six plants of production and
four collection centers, all of them located in México. Likewise, Ricolino has important operations in the
United States, Central and South America.
In February 1999 Barcel, S.A. de C.V. associated with the Dayhoff, in the United States, by acquiring an
initial participation of 50%. In 2002 its participation increased to 70% of the capital stock and in 2004
Barcel acquired the totality of the shares. With this acquisition, Barcel, S.A. de C.V. obtained distribution
channels and well known brands which allows Barcel to manufacture and distribute products with and
important added value.
In virtue of the agreement reached in January 2003 between Wrigley Sales Company and Ricolino, the later
became the exclusive distributor of Wrigley’s gum products such as, Winterfresh, Orbit, Spearmint, Juicy
Fruit and Doblemint. See “The Company – History and Development of the Company – History”. This
agreement terminated in April 2008.
43
In 2004, Ricolino became the exclusive distributor of Bon o Bon de Arcor, leading Company of
confectionery goods in Latin America. Also in May of the same year, Barcel, S.A. de C.V. acquired Joyco
de México, owner of the brands Duvalín, Bocadín, Lunetas and Duvaletas.
In 2005, Ricolino acquired Chocolates La Corona; this Company commercializes brands like Paletón La
Corona, Huevitos, Canasta and Chutazo. With this acquisition, the brand Ricolino established itself as one
of the leading companies in the chocolate sector in México.
In 2006, the Mundo Dulce plant in the City of Toluca was inaugurated, this plant operates as a Joint
Venture with Arcor. In this plant lolly-pops, caramels and chewing gums of both companies are produced.
The main brands under which Ricolino commercializes its products are:
Product Line Brand
Goat Milk Caramel “Cajeta”,
hard candies, lollipops, taffies
and wafers filled with cajeta
(obleas)
Coronado, Yopi Coronado, Duvaletas, and
Coroletas
Chocolates and figures La Corona, Chutazo, Jimador, Canasta,
Chocosorpresa, Barra Payaso, Bon-o-bon
Candied Chocolates Lunetas, Chocoretas, Almendras
Marshmallow Chocolates Paleta Payaso, Bubulubu, Paletón La Corona
Chocolate covering Kranky, Pasitas
Chocolate cookies Bocadin
Chocolates spread Duvalín
Gum Chick’s, Chiclub, Star Gum, Mas K
Gummies Panditas, Moritas, Dulcigomas, Gomilocas, Just
Fruttie, Park Lane, Dayhoff, Frutigomas
Acidulated tablets Pecositas
Milk Modifiers Choco Kiwi
Dulces Vero. At the end of 2010, Grupo Bimbo acquired Dules Vero, the principal producer, distributor
and marketer of lollipops, hard candies and marshmallows, the majority covered in chile, in México.
Founded in the 1950s and located in Guadalajara, Jalisco, with 2 distribution centers and 5 manufacturing
plants, 1,500 collaborators, sales achieved in 2010 around 102 MM U.S. dollars and exports to the United
states, Israel, Colombia and Venezuela among others, the principal wholesale national distributor and
seller.
Currently, the consolidation of the two manufacturing plants has been achieved, and there are now 2
distribution centers and 2 manufacturing plants in Tlajomulco and Guadalajara.
Product Line Brand
Fluffy marshmallow Trencitas, Redondo, Coloretes
Gummy candies Picagoma, Sandigoma
Hard candies Rellerindo, Cojín de menta
Lollipops Tarrido, Cupido, Bomba Chile, Mango con chile,
Elote chile
6. Products
As of December 31, 2010, BIMBO produced more than 7,000 products under 150 renowned brands, whose
main product lines are described above. See: “The Company – Business Description – Main Operations.”
44
As part of its marketing program and to enhance its brand recognition and market penetration, its various
brands have distinctly different packages designed to cater to the desires and expectations of consumers in
each market according to our market research. The most popular are the individual packages, followed by
the family packages, packages for the institutional customers, breadboxes for price clubs, and boxes of
cookies for wholesale.
a. Development of new products.
The innovation of products is highly important to the Company; therefore the Company continues to search
for alternate ingredients, processes, packaging, and technologies that contribute to a better choice for the
consumers. Innovation provides an informed consumer a choice of alternative products, particularly those
that should be included in a healthy diet where bread has a predominant place.
The Company has innovated in order to satisfy the tastes of consumers, and at the same time, as part of our
social responsibily to those consumers, to improve the nutiritional value of our portfolio of products.
Therefore, in 2008, the Company became a member of the IFBA (International Food and Beverage
Alliance) in order to implement the Global Strategy of the WHO on Diet, Physical Activity and Health,
with five fundamental commitments:
• Developing of products: improving the nutritional value of current products, introducing new
products with healthier nutritional values, controlled portions, and improving guidelines in the countries in
which the Company operates
• Adopting responsible publicity and marketing for children under the age of 12 years.
• Providing nutritional information to consumers through clear and user-friendly labeling.
• Promoting physical activity and healthy life styles.
• Making alliances with health organizations and public and private institutions.
Among the most significant activities in this area, the elimination of fats in 99.5% of the portfolio of
products particularly stands out. In addition, in 2010, a plan to reduce by up to 50% of the saturated fat
content in some of the notable products in the Mexican market was implemented by the Group, such as
Marinela cookies (Canelitas, Rocko, Príncipe, etc) and Barcel snacks (Takis and Chips).
Since 2009, the Group has committed to reduce the salt content in some of the important categories, such as
breads and snacks. Currently, the Group has achieved a reduction in salt between 20% and 30% in breads
of various leading brands in countries such as the United States, México, Perú, Chile, and Brazil. As of
today, brands like Oroweat, Mrs. Baird’s, and Arnold in the United States; Bimbo and Wonder in México;
and Bimbo Nutrella, Pullman and Ideal in South America have decreased the salt content in their productos
and heve maintained the preference of the consumers.
In addition, as of August of 2010, Grupo Bimbo signed 6 new commitments regarding publicity and
children’s advertising, following the recommendations of the WHO. These commitments include 17
countries in which the Group has a presence and they apply to all of the products.
Grupo Bimbo will only advertise its products to children by means of print media, television programs,
radio and on the internet, when such advertisements comply with nutritional profiles based on scientific
evidence and global standards.
Through various innovative processes, in 2010 the Group continued to implement and consolidate
strategies focused on diversifying its brands and categories of products, applying always the knowledged
gained through consumer preferences, as well as new technologies. In this way, the Group has developed
products with functional ingredients, such as whole grains, reduced portions and kilocalories, and lower fat,
salt and sugar contents, in order to respond to the needs of the health-minded consumer.
45
In order to promote the competitiveness of the Company’s products in an international and domestic level,
Grupo Bimbo participates constantly and works together with the Consejo Nacional de Ciencia y
Tecnología in Mexico and with strategic alliances in innovation with universities and research centers.
On the other hand, the Group continues to improve its programs and agreements with strategic suppliers,
institutes, research centers and universities participating together in the developments of research projects.
The Group has also formed specialized groups for the development of new products and has opened six
innovation and nutrition institutes; two in Mexico, three in the United States and one in Brazil, focused on
nutrition, innovation, and sustainability. Additionally, the Company has laboratories and facilities engaged
in the production of prototypes and the testing and validation of new ingredients, as well as conducting
functionality and stability studies and evaluating new manufacturing processes and technologies, etc.
Newly developed products are approved by committees and evaluated through market testing. Significant
results from our innovation and nutrition centers include: (i) the launch of biodegradable packaging
technology which, unlike normal polyethylene, is degraded in five years instead of 100 years; (ii) the
development of products with whole grains, receiving recognition from the WGC for introducing into the
market the greatest number of whole grain products (more than 300); and (iii) the improvement of the
nutritional value in certain product lines and the reduction of trans fats, fats, salt and/or sugar and the
improvement in fat profiles.
Regarding the task of consumer education, the Company has continued to provide information regarding
nutrition and healthy diet through printed publications, radio, television and the Internet, promoting
physical activity in our advertisements, as well as promoting sporting events and distributing free brochures
that encourage a balanced diet and a physical activity, thereby promoting a healthy life style.
In order that consumers learn the nutritional value and composition of the Group’s products, all of the
Group’s products have their energy content by portion (kcal) displayed on the front of their packaging.
Beginning in 2010, the Group began to implement a second phase in its front-labellling proposal, which
consists in placing Guideline Daily Amounts (GDAs) of the nutrients with the greatest public health
impact, and the incorporation of the WGC Whole Grains seal.
Accordingly, the consumer may make an informed decision between a great variety of products that could
be included in his or her diet, of which the product sof the Group form an important part.
b. Seasonality
In most of the categories the products of the Company show a seasonal behavior, with larger levels of
consumption in holiday seasons, rain season, and low temperature seasons. The low levels are presented
during summer due to school vacations, and in high temperature seasons. In order to stabilize the demand
for its products BIMBO has developed various promotions and advertising campaigns and new products,
which launches during the periods of lower consumption in the different operations, which do not coincide
due to the geographical coverage of Grupo BIMBO. See “The Company – Business Description- Principal
Activity – Promotion and Publicity”.
7. Production Process a. Production Process
The Group’s plants use state-of-the-art technology and equipment. The Group has adopted and
implemented modern automated production processes for each of its lines of business and maintain strict
operation and control systems, resulting in efficiencies throughout its production processes within a
competitive cost structure. Some of its manufacturing plants may be programmed to manufacture a variety
of products also contributing to production efficiencies. The bakery production process of the Group’s
products has slight variations between locations, but generally includes the mixing of ingredients, baking,
slicing, packaging and distribution of the products.
46
As part of its strategy to respond to the changing needs of the market, the Group has implemented and
continuously updates innovative systems to increase the capacity, quality, and production potential of its
manufacturing lines. To that end, the Group has redesigned its current facilities and incorporated new
technology (either developed by us or acquired from third parties), significantly increasing capacity and
reducing production costs.
As a result of productivity improvements, and to take advantage of the resources of its production plants,
each plant carries out its own analysis of its production processes and, together with the corporate support
areas, the Group implements the appropriate improvements.
The below chart, is an example of some process lines of packaged bread, sweet bread, frozen bread, and
salted snacks. Its worth mentioning that the diagrams correspond to the main productive processes, which
means that the production of other foods such as tortillas, chocolates, peanuts, goat milk caramel “cajeta”
etc. are different.
47
PACKAGED BREAD
Sweet Bread
Frozen Bread
Start
Raw material Reception
Raw material Wharehouse
Ingredients Mixture
Molding and Division
Molds Placement
Fermentation and Bakery
Cooling and Slizing
Distribution and Sale Client
End
Packaging Process
Raw material Reception
Raw material Wharehouse
Dough preparation
Paste Molding and Division
Decorative Process
Cooling and Slizing
Packaging Process
Distribution and Sale
Client
Start
End
Start
Raw material Reception
Raw material Wharehouse
Ingredients Mixture
Molding and Division
Frozing
Delivery at sale Points
Bakig and Cooling
Distribution and Sale
Client
End
Packaging Process
48
SALTED SNACKS
.
b. Raw Materials
The raw materials used in the production are a determining factor in the quality and freshness of the
Group’s products. For this reason, the Group has adopted rigorous supply policies, including specifications
for each input and packaging material, receipt of a certificate of quality (issued by each supplier), analysis
of the materials in internal and/or external laboratories, and a system of auditing of the suppliers.
The Group has long-standing relationships with suppliers who adhere to its extremely high quality
standards. The Group seeks to maintain low supply costs, but without sacrificing quality of raw materials.
Wheat flour is its main raw material. Wheat is generally traded in U.S. dollars and subject to price
fluctuations depending upon factors such as weather, crop production and worldwide market supply and
demand. BIMBO routinely reviews and revises its relationship with its wheat flour suppliers and the
Company continuously enters into hedging arrangements to manage its exposure to price fluctuations of its
key raw materials. See “Risk Factors – Increases in prices and shortages of raw materials, fuels and utilities
could increase the Group’s production costs.”
Other important raw materials for the Group’s lines of business are sweeteners, edible oils and butters and
eggs, as well as plastics used to package its products.
The next table shows four of the most important raw materials and its major supplier in the markets they
operate:
Raw
Material
Mexico
USA
Central and South America
Wheat Flour Grupo Altex
Harinera La Espiga
Harinera de Irapuato Horizon Milling (Cargill)
Molinera del Valle
Molinera de México
Archer Daniels Midland
Cereal Food Processors
Processor Inc. Conagra Inc.
Okeene Milling Co.
Horizon Milling, LLC
Molino La Estampa
Bunge Alimentos
Molinos Santa Marta Cooperativa Agraria Agroindustrial
Anaconda Indl e Agricola de Cereais
Cargill
Raw material Reception
Raw material Wharehouse
Mixing and Cutting
Formed and Expanded Through Heat
Baked And fried
Flavored and Packaged Process
Flavored and Packaged Process
Cutting, Frying and Baking
Washing and Peeling Process
Cleaned and Stored Process
Raw material Reception Sales and
Distribution
Client
End
Start
Start
49
Raw
Material
Mexico
USA
Central and South America
Sugar Beta San Miguel
Cargill de México Quimper
Química Industrail Neumann
Domino Sugar Inc.
Sweetener Products Co. Archer Daniels Midland Co.
Amalgamated Sugar Company LLC
Indiana Sugar Inc. United Sugars Co.
Imperial Sugar
Copersucar Coop Prod A Alc Est SP
Riopaila Castilla S.A. Iansagro SA
Cosan Alimentos
Sucden Perú ED & F Man Chile SA
Lodiser S.A.
Cosan S/A Azucar e Alcohol
Raw Material
Mexico
USA
Central and South America
Edible Oils and
Fats
Aarhuskarlshamn
Cargill de México Industrializadora Oleofinos
Ragasa Industrias
Proteínas y Oléicos Industrial Aceitera
Cargill Inc.
Soybean Oil Division Bunge Foods Co.
Archer Daniels Midland Co.
Perdue Farms Inc. Stratas Foods LLC
Cargill Agrícola S/A
Bunge Alimentos S/A Team Foods Colombia SA
Crista Industrial e Comercio Ltda.
Alicorp SAA Grasas SA
Umaco y Cia
Camilo Ferron Chile S.A.
Liquid and
Powdered Eggs
Ovoplus Alimentos de la Granja
Granjas Orespi
Michael Foods Procesadora de Alimentos Mex
Alimentos Mexicanos Bachoco
Debell General Mills
Michael Foods Inc.
Primera Foods Inc. Pearson Sales Co.
Sonstegard Foods Co. BCW Food Products Inc.
DMR Distribuidora Productos Alimenticios Santa Reyes SA
Comercial Agricovial SA
Ovo productos del Sur SA Avícola Triple A SAS
Solar Comercio e Agroindustria Ltda.
The Group holds minority interests in some of its major suppliers of wheat flour, eggs and sugar. In
addition to these raw materials, the Group also purchases plastic packaging from a number of suppliers.
The Group currently is not dependent on any single supplier in any market in which it operates.
The Group is not aware of any price controls in effect by any governmental authority with respect to any of
its raw materials.
The raw materials are managed using the first-in first-out method to preserve the freshness of its products.
Due to the nature of its products, its inventories of raw materials, mainly perishable products, have a high
turnover rate. The Group receives most of its supplies on a continuous basis, in some cases, with daily
deliveries. Its corporate offices lead the negotiations of our main raw materials with its suppliers while its
inventories are directly managed by each plant and storage facility. Local plants and storage facilities also
manage and directly place orders of raw materials that may be obtained locally.
c. Energy Consumption
The main energetic that the Group consumes is electric energy, natural gas, liquefied petroleum gas (LP),
gasoline and diesel.
In most of the productive installations, the Company has a generator of alternate electric energy for
emergencies, in order to ensure the energy supply. In this way, it guarantees the security of its workers and
its equipment, as a consequence of this, it minimizes the impact of any problem in the energy supply that
the plant may have in the clients and consumers services.
Grupo Bimbo has focused its attention on the implementation of wind energy, in order to compy with its
permanent commitment to the environment and the wellbeing of future generations. During 2010, the
Group announced the construction of the “Piedra Larga” park, the largest wind park in the food industry
worldwide, which generates almost 100% of the electrical energy used by Grupo Bimbo in México. The
construction of this park is the cornerstone of our search to continue growing with the force of nature, and it
gives us the distinction of being the business that makes the greatest change with respect to renewable
50
engery within the food industry; it also represents an unprecedented effort in the exploitation of renewable
energy, clean and virtually inexhaustible.
The wind park will be located in Union Hidalgo in the State of Oaxaca and it was made possible thanks to a
strategic alliance driven by the Government, private iniciative and financial institutions. Accordingly, the
operation of the park will be achieved thanks to the partnership of Grupo Bimbo with Desarrollos Eólicos
Mexicanos (DEMEX), a subsidiary of Renovalia Energy, S.A., which is a company from Spain who will
invest approximately 200 million dollars in the project.
Grupo Bimbo is constantly working to reduce its environmental footprint, under the highest standards of
effort. This is an effort that we have been making for 10 years, and each time we take a major relevant
decision in our 5 central tenants of environmental sustainability: energy conservation; water conservation;
reduction of emissions; management of waste materials and conservation and improvement of the
environment.
According to the Company’s vehicle replacement program, every year the most efficient delivery and
transportation units are incorporated to the fleet. In case of requiring the transportation services of another
supplier, the Company verifies that the supplier satisfies the standards established by the Group.
With respect to diesel and gasoline, used by the fleet of transportation and distribution, the Group has gas
stations in its installations which are supplied regularly. Also, BIMBO has a number of vehicles which run
with LP gas and diesel instead of gasoline which are used in the large cities, in order to help the
environment.
In spite of having a large number of installations and vehicles working in a continued way, the energetic
consumption does not represent a considerable expenditure in relation to the Company’s costs, due to the
high grade of efficiency in the design of the distribution routes and the control of the operation.
d. Inventory
Raw materials
According to Grupo Bimbo’s policy of keeping its products fresh in the market and considering that these
are perishable, BIMBO manages at an operative level the totality of its inventories using the last-in-first-out
method to assign costs to inventory.
Because of the nature of the products that BIMBO produces, it maintains high inventory turnover rates of
production input, primarily those perishable products to a greater extent, as the necessary inputs, for the
development of packaged bread, sweet bread, cakes and cookies. In this case most of the inventories are
managed by the provider and are supply to BIMBO on a recurring basis, even with a daily delivery rate.
The inventory administration of the inventories of production inputs is done through the classification of
each inventory according to its logistics:
Local. Those inventories whose negotiation is realized in a corporative manner, but request and its
storage are directly managed by each plant.
Centralized and imported. Those inventories whose negotiation and orders are handled in a
corporative manner and only the storage is realized in each plant.
Finished Products
The Group has strategically located production plants and distribution centers, which allows it to
consolidate its operations in each region and to efficiently distribute its products. In addition, the Group has
successfully implemented an interconnected system that allows it to synchronize its production capabilities
51
with consumer demands, resulting in optimal levels of customer order management and thus, very low
inventories of its finished products.
Once finished, the baked goods are immediately shipped to the the Group’s distribution centers and points
of sale. Inventories of salted snacks and confectionery goods have an average turnover rate of three days.
Inventories of dried products, such as toasted bread and breadcrumbs, cookies, candies and chocolates,
have a longer turnover rate, due to the nature of the products and the use of certain preservation
technologies. The Group’s high inventory turnover rate is driven by its customers needs based on daily
orders and consumer behaviors.
e. Quality Control System
Quality is essential for the Group. The Group has implemented a quality control system tailored to its
individual needs and has adopted the highest international standards, driven by our commitment to ensure
the satisfaction of its customers and consumers. This system involves quality control assurance and food
safety, providing enhanced customer service, promoting and preserving a healthy labor environment and
respecting the environment to contribute to the overall development of the community. Given the
importance of food quality and safety, one part of its quality control system is aimed at controlling and
continuously improving the quality of consumables, processes and finished products. With the
implementation of its quality system the Group has won several awards, including the Premio Nacional de
Calidad in 2007.
The Group has earned the loyalty of its customers and consumers by its adherence to the most rigorous
international standards in the food industry, certified by independent organizations and agencies with a
recognized international reputation. For example, in Mexico as of December, 2010, 3 of the Group’s plants
has ISO 9001-2000 certification, or ISO 9001-2000, 3 of its plants had Hazard Analysis & Critical Control
Points certification, or HACCP, 8 had Business Alliance for Secure Commerce certification, or BASC, 6
plants had C-TPAT certification, 27 plants were certified by BRC, 5 plants were certified in AIB, 2 plants
certified in Excelencia Ambiental México (Environmental Excellence México), and 34 plants were certified
as an Industria Limpia México (Mexican Clean Industry). ISO 9001-2000 is a series of international
standards that provide guidelines for a quality management system and HACCP is a management system in
which food safety is addressed through the analysis and control of biological, chemical, and physical
hazards from raw material production, procurement and handling, to manufacturing, distribution and
consumption of finished products. BASC certification addresses and seeks to prevent the risks associated
with narcotics, terrorism and merchandise smuggling, by controlling operating processes, personnel, access,
infrastructure, suppliers, and even customers.
f. Productivity
As part of the Group’s strategy to respond to the changing needs of the market, it has implemented and
continuously updated innovative systems to increase the capacity, quality, and production potential of the
various manufacturing lines. To that end, the Group has redesigned its current facilities or incorporated new
technology (either developed by the Group or acquired from third parties), resulting in a significant
increase in the installed capacity of the plants as well as important reductions in the costs of production.
As a result of productivity improvements, and in order to take maximum advantage of the resources of the
production plants, each plant carries out its own analysis of its production processes and, together with the
corporate support areas, implements the applicable improvements.
8. Prices
The Company’s general policies regarding the prices of its products is based primarily in the general
conditions of the market and in the input costs of production.
BIMBO works to maintain low prices and offering their consumers and clients more competitive prices
according to the Company’s system for optimization of the processes.
52
The rise of the prices in the Group is not only because of the eventual costs rise. Other factors are taken into
account such as, market and competition, product sensibility and its market, a general research of the
environment (mainly economical) and the no repercussion of inefficiencies by BIMBO in the consumer
price. In this manner the Company estimates a system of prices that allows it to locate itself as one of the
leaders in the industry.
Its worth mentioning that practically none of BIMBO´s products is under any price controls in effect by any
governmental authority of the countries where the Company operates. See “Risk Factor- Increases in prices
and shortages of raw materials, fuels and utilities could cause the Group’s costs to increase”.
9. Publicity and Promotion
Through the calendar year, the Company carries out diverse publicity and promotion campaigns aimed at:
(i) maintaining the image and growth of its leader products (ii) supporting the new products that have been
launched to the market (iii) supporting specific products whose demand has decreased. BIMBO uses
publicity agencies and independent media centers to develop and broadcast its advertising campaigns.
Television is the form of media most used by the Group, but the Group also uses other such as external
advertising, radio and magazines as well as mobile publicity (labeling various vehicles where their products
are transported). Additionally, in recent years the Group has placed special emphasis on attention at points
of sale, using graphic materials, exhibitions, etc.
As a part of the Group’s policy, the image portrayed to the audience must be mainly family-oriented and
promoting physical activity. Accordingly, BIMBO seeks to be present in the television programmes that are
consistent with these policies, as well as in sports and entertainment programmes.
On August 16, 2010, Grupo Bimbo announced its commitment with the WHO to only advertise in the mass
media to children under 12 years old, products that comply with global standards of nutrition. Grupo
Bimbo has a policy of self-regualtion in order to have an advertising strategy that complies with the ethical
values and morals of truthfulness, honesty, legality, decency, dignity, respect, fair competition, and health
and wellbeing.
Each line of products establishes its own advertising budget according to its needs, which is determined by
a fixed percentage over their particular sales.
10. Technology and information systems
a. Technology
Trough its own line of investigation and development, the Company focuses itself to the applied technology
that specialized groups of baked goods, salted snacks and confectionary goods, use. Some of their most
important research areas are: Langer life for products on the shelf, new products development, extensions
of various products, healthy and ethnic products, improving quality of the products, developing new
ingredients and the optimization in the use of these, research for the improving of agricultural products,
quality assurance, process changes, processes automatization, lines of production analysis and packages
changes.
Due to the every day increase in demanding markets and consumers, the used technologies have had to
evolution continuously to gain the improvements in the processes and in the produced products. This is
why functional ingredients such as fiber, whole grains, trans fatty acids, the inclusion of vitamins,
prebiotics, inclusion on the products which has represented a technological challenger which had to be
overcome in the various markets.
Generally the productive processes of baked goods are not paid by royalties or bonuses for technical
assistance or Technologies transferences. The contracts in relation to these aspects are fundamentally
agreements with several universities and research institutions and centers as well as the development with
providers. The agreements referent to the extent, compromises, technology property, confidentiality,
53
Publications, and responsibilities are determined through specified and particular agreements. All of the
above is realized with the finality of finding innovative and vanguard technologies on the baked goods,
tortillas, and other type of foods, types.
Regarding the machinery supply, BIMBO has very selective providers policy. Various criteria are
contemplated in order to acquire new machinery, such as, specialization, sophistication, fabricants
technique, top technology, labor conditions, and special emphasis on their security levels, their technical
services supplied after the acquisition, price and payment conditions. Said criteria are aimed to guarantee
the rigorous levels of efficiency, productivity and environment friendly policies, as well as the high levels
of quality in all BIMBO products.
The Company develops many designs of the related technology and automatisms; moreover regarding the
fabrication of the machinery the Company uses third parties. In this case with the purpose of protecting the
property of the created design the Company signs confidentiality agreements with the providers. BIMBO´s
technological developments are patented before the IMPI. See “The Company – Business Description -
Patents, Licenses, Brands and Other Contracts”.
BIMBO considers that the Company does not depend exclusively on any of its technology providers or
technical assistance, due to the existence of various providers in these services.
b. Information Systems
BIMBO uses automatized information systems for both, operative levels as well as management levels,
which have been developed in various stages. The operational information systems link their processes
from the reception of production input up to the sale process, this has resulted in more control and
efficiency.
On the other hand, the manager information systems have a synthesis of the operative information that has
been concentrated from the various plants, distribution centers, and agencies in all the business sectors.
One of the principal purposes of the integration of both information systems mentioned above, is that inside
the organizational structure of Grupo Bimbo it may be as much delegation as possible in each of its
members, including all levels of the organization chart. In this manner the Company can count with a
decentralized system for the decision making. See “The Company- Business Description- Human
Resources”.
Since 2001, BIMBO operates a business solution integrated by an ERP system, over a data base with the
capacity to manage large volumes of information.
This has allowed BIMBO to have a standardized and centralized business model which simplifies the
information, installed on a modern and robust technology infrastructure that enables the integration into all
operations of the Company.
As of December 31, 2008, the ERP system had been installed and it has been operating throughout the
Group. The acquisitions have also been integrated into the Company’s process and systems platform.
During September, 2010, the western region of WFI was integrated into Grupo Bimbo’s ERP platform.
China’s operation works under the concept of on-demand services through a system of outsourcing, for
both, infrastructure and applications. ERP services in China are attended from Austin, Texas, and
functional support is received from Mexico.
Barcel’s wholesale channel operates under the concept of “Software as a Service”. On the other hand, the
El Globo stores operate under a new retail system.
54
ii) Distribution Channels
1. Distribution and Sales Process
Among the Group’s strategies, direct distribution to points of sales has been one of the key factors of its
success; this is why in the commercial area more than 54,000 people are employed. The Company has
developed one of the largest fleets in the American continent with more than 41,000 owned units, over
33,000 in delivery, over 6,000 in transportation and around 1,300 supervision units, in addition to the
outsourced distribution route units and/or independent operators, both in the United States and in Central
and South America.
Every day, the sales department is in charged of visiting more than 1.8 million points of sale. The Company
has more than 1,000 distribution agencies, each one of which depends for its operations on one or more
plants, even when such plants are not located close to the agency.
The delivery vehicles fleet consists mainly in small and efficient units, as well as large sized units
(rabones), for distribution to institutional customers. The primarily transportation; the fabric or agency
transportation, is performed through loaded semi-trailers, which can be single or double, depending on the
applicable laws of each country. As of December 2010, the vehicles used by Grupo Bimbo all around the
world were distributed according to the following:
Vehicles Distribution
Agencies Delivery Transporta
tion Supervision Total
33,769 6,059 1,312 41,140 1,056
The fleet has an average age of 6 years, and new units are been incorporated annually, whether due to
replacement or expansion, in order to improve the Group’s services to its customers and to optimize the
operation costs.
2. Transportation
Orders to the production area are placed by the Group’s sales force a week in advance of the delivery of the
product to the agencies or distribution centers, and may be adjusted three to five days prior, depending on
the product line and the availability of the product in question. The Company’s finished products are
delivered to the dispatch area, whose managers supervise the compliance with the standards established by
the group, in order to make a cross-docking for their delivery to the distribution centers (where the load is
consolidated), or to organize the orders according to the amount requested by each agency. The crates or
tubs are loaded into trailers belonging to the Group or third parties, which daily make their programmed
journeys for the transportation and delivery of the product.
In the distribution agencies, the fresh products are unloaded from the trailers and grouped in the assigned
area for their receipt and control, in order to later distribute them in the sales trucks according to the request
of each route.
At the same time, the trailer that retruns to the factory or distribution center is loaded with the empty
equipment (crates and vats) and/or returned products, from the day before. The empty equipment is
delivered to the production area for its cleaning and reuse.
55
3. Sales
The sales force distributes the Company’s products to its customers from distribution centers according to
predetermined itineraries. Currently, 100% of the routes have hand held, where the client has control of the
products placed and removed at each visit. Proudcts that are removed because they were not sold are
replaced by fresh products without cost to the client. It is worth clarifying that even if the products are still
fit for consumption, on the date in which they are picked up they are no longer classified as “very fresh.”
The destinations of the returned products may one of the following; (i) sale in “yesterday’s bread” stores,
where the returned product is displayed again for two to four days for sale at a lower price (these stores
may be corporate, affiliates, or third parties); (ii) reprocessing, for the purpose of obtaining another product
that is placed in sale again; or (iii) sale by the kilo, to be used as cattle feed.
Each product is displayed for sale in accordance with its shelf life, which varies from seven days, in the
case of bread, to several months, in the case of chocolates, cookies, candies and snacks.
Each of the Group’s salespersons visit an average between 30 or 45 customers of the traditional channel, in
the case of larger customers the daily average visits are between 4 and 8 customers. Based on its production
and sale levels, visits to each customer may be daily, every three days, two times a week or weekly. The
Group classifies its customers according to their purchase volume, type of distribution channel and by
individual characteristics. The Group’s customers include supermarkets, convenience stores, institutional
customers, fast food chains, schools, customers with vending machines and traditional customers (general
stores, grocery stores, etc.). For example, this last category represents approximately 70% of the total sales
volume in México. See “The Company – Business Description- Main Customers”
In the United States, due to the markets characteristics regarding type of clients and distances covered,
between 15 and 20 clients are visited daily, on average.
56
While the Group directly operates all of its routes in Mexico, over 50% of the routes in the United States
and a majority of our routes in Central and South America are operated by independent operators.
Generally, the Group enters into longterm contracts with such independent operators, pursuant to which the
operators agreed to exclusively sell the Group’s products. The terms of these contracts detail which
territories should be covered by the independent operators, as well as their compensation based on ales
performance. The Group maintains strict control over the brand management, marketing strategies and
pricing and a right to buy contracts from each of the independent operators under certain limited
circumstances. The Group uses independent operators in order to reduce distribution costs and increase
flexibility, in order to efficiently add points of sale while maintaining the quality of its services.
BIMBO´s sales are made principally with cash, although credit schemes exist for the clients in the
traditional channel. The credit and discounts given to medium and large clients vary according to the
product and the client or supermarket chain.
iii) Patents, Trademarks, Licenses and other Contracts.
4. Brands and Logos
The Company’s most important brands, slogans and logos are protected by trademarks in the countries in
which BIMBO operates and in many other countries. It manufactures and/or commercializes more than
5,000 products under well-known brands, including, among others, Bimbo, Barcel, Marinela, Tía Rosa,
Lara, El Globo, Oroweat, Mrs Baird’s, Lonchibón, Ricolino, Coronado, La Corona, Milpa Real, Del
Hogar, Suandy, Ideal, Plus Vita, Pullman, Monarca, Entenmann’s, Thomas’ and Boboli, among others,
BIMBO is holder of the in México and in the rest of the world. Said brands are relevant because their
products or group of profucts represent and important sales volume.
Currently, BIMBO has approximately 5,355 brand files and registries in Mexico and more than 9,000
abroad. The Company has brands registries in every continent. Some exceptions exists, however; for
example, the trademarks Bimbo in Chile and Marinela in El Salvador, Honduras, and Colombia, are
registered by local producers. Therefore, the Company’s products in those countries are marketed under
the brands Ideal and Marisela, respectively. Nevertheless, the Company uses its own designs and packages
in those countries. In addition to the foregoing, on a global level, the Company also has various registered
domain names of websites related to the most important brands of the Company.
Grupo Bimbo uses its brands in the national market through its subsidiaries (Bimbo, S.A. de C.V. y Barcel,
S.A. de C.V., among others), and abroad through its subsidiaries in each country where BIMBO operates.
Therefore the most important brands of the Company are registered to each of the subsidiaries through its
respective contracts. As well, some of the subsidiaries of the Company abroad have their own brands which
they use in a direct manner.
5. Patents and Copyright
Patents
The protection of the Company’s inventions through patents is of paramount importance to it. BIMBO
operates primarily with machinery developed with state-of-the-art technology and its Research and
Development Department regularly requests patent protection in Mexico and abroad for new technology.
As of May 17, 2011, the Company has 106 requested/been granted 157 patents and/or industrial designs in
Mexico and 172 abroad, mainly in the United States, Argentina, Chile, China, Colombia, Korea, Costa
Rica, El Salvador, the Philippines, Guatemala, India, Peru, the Czech Republic, Taiwan, Turkey, Venezuela
and the European Union.
57
Copyright
The major characters, publications, computer systems, logos and package designs used by the Company in
its operations are protected by copyrights in Mexico and abroad.
Legal Proceedings
As of December 2010, BIMBO was not a party, in México or abroad, to any judicial, administrative or
arbitral proceeding relating to the intellectual property outside of the ordinary course of business, or that
could have a significant adverse impact on our operations. See “The Company – Business Description –
Judicial, Administrative or Arbitration Processes”.
6. Contracts
BIMBO enters into commercial tranactions within the ordinary course of its business, such as software
licenses, supply of raw materials, (wheat, flour, cocoa, fats, packaging, etc.), production, buying or leasing
of machinery, production, distribution and marketing contracts; which can be short, medium or long term,
depending on the necessities and strategies of the operation.
Additionally, BIMBO executes the necessary agreements for the ordinary course of it business.
iv) Main Customers
BIMBO has more than 1.8 million points of sales in its operations. The Company has strong relationships
with its customers and strives to understand and meet their specific needs. It has a diverse client base
among and within the countries in which it operates that range from large institutional customers to small
family-owned businesses.
In the United States, more than half of its customers are supermarket chains, followed by price clubs,
restaurant chains, institutional customers and convenience stores. Among its main customers in the United
States are Basha’s, Denny’s, H.E.B., Kroger, Costco, Publix, Raley’s, Safeway, Sam’s, Supervalu, Target,
Wal-Mart, Wegmans, 7 Eleven and the U.S. Army.
In Mexico, most of its customers are small family-owned convenience stores, but the Company also has a
solid base of large institutional customers, including large retail stores, supermarkets, warehouses, price
clubs, convenience stores and government-owned supermarkets, such as Al Super, Calimax, Casa Ley,
Chedraui, Comercial Mexicana, Extra, HEB, Oxxo, 7 Eleven, Soriana, Smart and Wal-Mart. We also serve
large fast food chains and other large institutional customers, such as Burger King, McDonald’s, Sistema
Integral para el Desarrollo Integral de la Familia and hospitals belonging to the Mexican Social Security
Institute (Instituto Mexicano del Seguro Social).
In South America, more than half of its sales are to supermarket chains and hypermarkets. Among its main
customers in the region are Carrefour, Cativen, CBD, Cencosud, Central, Disco, Éxito Coto, Olímpica,
Santa Isabel, Selectos, Supermercados Peruanos, and Wal-Mart.
None of these clients represents over 10% of the Company’s sales; therefore BIMBO does not depend on
any of them.
v) Applicable Legislation and Tax Situation
The development of the Group’s business is regulated by several laws, rules and regulations, and general
government regulations, which regulate the correct performance. The rules relating to the environment,
health, advertising and intellectual property are particularly relevant to the results of the Company.
58
In México some of the main applicable laws to BIMBO and its operations are the commerce, corporative
government and environmental regulation such as Commerce Code (Código de Comercio), General
Corporations Law (Ley General de Sociedades Mercantiles), Securities Market Law (Ley del Mercado de
Valores), General Law of Ecological Equilibrium and Environmental Protection (Ley General del
Equilibrio Ecológico y Protección al Ambiente), the National Water Law (Ley de Aguas Nacionales) and
the General Law on the Prevention and Integrated Water Management (Ley General para la Prevención y
Gestión Integral de los Residuos). Also, the following laws: General Health Law (Ley General de Salud),
Federal Law of Consumer Protection (Ley Federal de Protección al Consumidor), Federal Law on
Metrology and Standardization (Ley Federal sobre Metrología y Normalización), Federal Labor Law (Ley
Federal del Trabajo), Social Security Law (Ley del Seguro Social), Federal Rights Law (Ley Federal de
Derechos), Customs Law (Ley Aduanera) and Industrial Property Law (Ley de la Propiedad Industrial).
In the same way, the Company is obligated to take the necessary actions to abide the following regulations
and NOMs: Regulation of the General Law of Ecological Equilibrium and Environmental Protection in the
Field of Evaluation of Environmental Impact (Reglamento de la Ley General de Equilibrio Ecológico y
Protección al Ambiente en Materia de Evaluación del Impacto Ambiental); Regulation of the General Law
of Ecological Equilibrium and Environmental Protection on Prevention and Control of Air Pollution
(Reglamento de la Ley General del Equilibrio Ecológico y Protección al Ambiente en Materia de
Prevención y Control de la Contaminación de la Atmósfera); Regulation of the General Law of Balance
Ecological Environmental Protection in the Register of Emissions and Pollutant Transfer (Reglamento de la
Ley General del Equilibrio Ecológico y la Protección del Ambiente en Registro de Emisiones y
Transferencias de Contaminantes); Regulation of the General Law on the Prevention and Integral
Management of Wastes (Reglamento de la Ley General para la Prevención y Gestión Integral de los
Residuos); Regulation of the National Waters Act (Reglamento de la Ley de Aguas Nacionales);
Regulations for the Protection of the Environment against Pollution caused by Noise Emissions
(Reglamento para la Protección del Ambiente contra la Contaminación originada por la Emisión de
Ruido); Regulation of Sanitary Control of Products and Services General Law (Reglamento de la Ley
General de Salud en Materia de Publicidad); Rules of the Federal Comission For Protection Against
Health Risks (Reglamento de Control Sanitario de Productos y Servicios de la Ley General de Salud);
Rules of the Federal Commission for Protection Against Health Risks (Reglamento de la Comisión Federal
para la Protección contra Riesgos Sanitarios); Rules of the General Health Law Sanitary Control in the
Field of Activities (Reglamento de la Ley General de Salud en Materia de Control Sanitario de
Actividades), Establishments, Products and Services; Rules of Procedure of the Ministry of Health
(Reglamento Interior de la Secretaría de Salud);NOM-030-SCFI-2006, Commercial Information-
declaration of quantity on the label-specifications (Información comercial- Declaración de cantidad en la
etiqueta) NOM-050-SCFI-2004, Commercial Information - Products general labeling (Información
comercial- Etiquetado general de productos); 051-SCFI/SSA1-2010 – General Requirements for food-
labeling and pre-packaged soft-drinks (Especificaciones generales de etiquetado para alimentos y bebidas
no alcohólicas preenvasados); Commerical and Santitary Information; NOM-186-SSA1/SCFI-2002,
Products and derivates, Cocoa products and derivates I. Cacao. II Chocolate. III Derivates, Health
Specifications Trade Name (Productos y servicios: Cacao, productos y derivados, I. Cacao. II Chocolate.
III Derivados, Especificaciones Sanitarias Denominación comercial); NOM-015-SCFI-2007, Commercial
Information Labaling of Toys (Información comercial- Etiquetado para juguetes); NOM-247-SSA1-2008,
Products and Services. Cereals and their Products. Cereals, cereal flour, meal or semolina, Based Foods,
grains, edible seeds, flour, meal or semolina or mixtures thereof. Bakery Products. Provisions and Sanitary
and nutritional specifications (Productos y servicios. Cereales y sus productos. Cereales, harinas de
cereales, sémolas o semolinas. Alimentos a base de: cereales, semillas comestibles, de harinas, sémolas o
semolinas o sus mezclas. Productos de panificación. Disposiciones y especificaciones sanitarias y
nutrimentales. Test Methods, NOM-028-SCFI-2007, Commercial Practices information elements
collectable promotions and/or promotions through sweepstakes and contests (Prácticas comerciales-
Elementos de información en las promociones coleccionables y/o promociones por medio de sorteos y
concursos) among others.
59
Regarding environmental regulation, the Company has to fulfill the following regulation: operating license
manifest, hazardous waste generating firm, clear delivery, transportation and disposal of hazardous waste,
risk assessment study for high-risk activities and, in the case of new plants or expansions, environmental
impact study and risk analysis, land use permits, permits for wastewater discharges, concession titles for the
use and exploitation of national water, among others.
Furthermore, the following regulations are also applicable to the operations of Grupo BIMBO: The
Customs Law (Ley Aduanera), The Law for the Institute of the National Housing Fund For Workers (Ley
del Instituto del Fondo Nacional de la Vivienda para los Trabajadores), The Law of Roads, Bridges and
Federal Motor Carriers Act (Ley de Caminos, Puentes y Autotransporte Federal) The Mexican Social
Security Institute Law (Ley del Instituto Mexicano del Seguro Social), The Federal Tax Code (Código
Fiscal de la Federación),the Public Service Act Power and their respective rules (Ley del Servicio Público
de Energía Eléctrica y sus respectivos reglamentos) as well as provisions of state and municipal orders.
In the United States, the Company must stand by the following regulations the Clean Water Act, the Storm
Water Act; the Safe Drinking Water Act; the Clean Air Act, for which the Company has to install oxidative
catalytic converters in the factories that require it; Toxic Substances, Control Act, Toxic Release Inventory
RCRA Hazardous Waste, Occupational Safety and Health Act, regulated by the Occupational Safety and
Health Administration (OSHA), and Bioterrorism Act among others.
In Latin America, Grupo BIMBO has to stand by the following environmental regulation: operating license
or a certificate of environmental qualifications, land use certificate, registration of potentially polluting
activities, precursor chemical and controlled substances, noise emission, environmental impact statement,
licensess for water discharge, certificate of water exploitation, environmental licensing in the case of new
plants or expansions (Colombia), COA (cédula de operación annual), inventory of emission into the
atmosphere, control of air emissions and installations of sampling ports and platforms, management of
special waste, hazardous and hospital. In Brazil, among other legislations, the Company must comply with
Decree number 4,680, regarding information of food ingredients.
Grupo BIMBO´s plants satisfy all the rules, regulations and procedures established. Due to the variations of
the law, the Company establishes actualizations with respect to the normative changes, and adequates to
applicable laws in different countries, states, and municipalities where the Company’s plants are located. It
should be noted that BIMBO´s internal policy covers a series of additional requirements.
BIMBO´s operations are also held to specific technical regulations; the following are the most relevant:
NOM-001-SEMARNAT-1996. Maximum permissible limits of pollutants in wastewater
discharges of national assets.
NOM-002-SEMARNAT1996. Maximum permissible limits of pollutants to urban or municipal
sewage Systems.
NOM-052-SEMARNAT-2005. Establishing the characteristics, identification procedures,
classification and lists of hazardous waste.
NOM 085- SEMARNAT-1994. Atmospheric Contamination – Stationary Sources – For stationary
sources that use fossil fuels, solid, liquid or gaseous, or any combination thereof, this establishes
maximum permissible levels of emissions to the atmosphere of smoke, particularly suspended toal,
sulfur dioxide and nitrogen oxcide and requisites and conditions for the operation of indirect
heating equipments for combustion, as well as maximum permissible levels of sulfur dioxide
emission in direct heating equipment for combustion.
NOM 043–SEMARNAT-1993. Sets the maximum permissible levels of emissions, to the
atmosphere of particulate matter from stationary sources.
NOM-002-STPS-2000. Safety, Prevention and Protection and Fire-Fighting policies in the
workplace.
NOM-015-SCFI-2007. Commercial Information- ¨Labeling for Toys.
60
NOM-050-SCFI-2004, Commercial Information Products general labeling
NOM-052-SCFI/SSA1-2010 – General labeling specifications for food and pre-packaged, non-
alcoholic drinks – Commercial and Sanitary Information.
NOM-051-SCFI-1994. General Requirements for food-labeling and pre-packaged soft-drinks
NOM-247-SSA1-2008, Products and Services. Cereals and their Products. Cereals, cereal flour,
meal or semolina, Based Foods, grains, edible seeds, flour, meal or semolina or mixtures thereof.
Bakery Products. Provisions and Sanitary and nutritional specifications Test Methods
NOM-186-SSA1/SCFI-2002. Services and Products. Cacao, Products and derivates, I. Cocoa, II.
Chocolate, III. Derivatives, Sanitary Specifications, Commercial Denominaition.
NOM-012-SCT-2-2008. On the weight and maximum dimensions that can move the motor carrier
vehicles that travel trough the general means of communication of the federal jurisdiction.
NOM-043-SSA2-2005. Basic health services, promotion and health education in relation to food.
Criteria for counseling.
Tax Situation
Grupo Bimbo and its subsidiaries companies are taxpayers and legal entities which are bound to comply
with the tax provisions of each of the countries where they are established.
Income Taxes in México.
The Company is subject to ISR and IETU.
ISR – The rate is 30% for 2010 to 2012, 29% for 2013, and 28% for 2014 and thereafter. The Company
pays ISR, together with its subsidiaries on a consolidated basis.
IETU – Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each
fiscal year. The IETU rate is 17.5% as of 2010. The Asset Tax Law was repealed upon enactment of the
IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which
ISR is paid, may be recovered, according to the terms of the law. In addition, as opposed to ISR, the parent
and its subsidiaries will incur IETU on an individual basis. Income tax incurred will be the higher of ISR
and IETU.
Based on its financial projections, the Company determined that some of its Mexican subsidiaries will pay
ISR in certain fiscal years, while in others, will pay IETU. Accordingly, the Company calculated both
deferred ISR and deferred IETU and recognized the larger of the two liabilities in each subsidiary.
In its other subsidiaries, based on its financial projections the Company determined that they will basically
pay only ISR. Therefore, the enactment of IETU did not have any effects on the financial information for
these subsidiaries, since they continue to recognize deferred ISR.
Due to changes in the tax law with respect to tax consolidation, the Company elected to deconsolidate for
tax purposes beginning in 2010, recognizing the effects in the financial information of 2009 of such
deconsolidation, applying some of the effects against retained earnings in accordance with the rules of INIF
18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes. The effect of tax deconsolidation
in the results of 2009 is minimal considering the effects on deferred taxes that result from the tax
deconsolidation.
Income taxes in other countries
The foreign subsidiaries calculate income taxes on their individual results, in accordance with the
regulations of each country. The subsidiaries in the United States have authorization to file a consolidated
income tax return.
The tax rates applicable in other countries where the Company operates and the period in which tax losses
may be applied, are as follows:
61
Statutory Income Tax Rate (%) Period of
2010 2009 Expiration
Argentina 35.0 35.0 (a) 5
Austria 25.0 25.0 (b)
Brazil 34.0 34.0 (c)
Colombia 33.0 33.0 (d)
Costa Rica 30.0 30.0 3
Chile (e) 17.0 17.0 (f)
China 25.0 25.0 5
El Salvador 25.0 25.0 (f)
Spain 30.0 30.0 15
EUA (h) 35.0 (h) 35.0 20
Guatemala (i) 31.0 (i) 31.0 (g)
Holland 25.5 25.5 9
Honduras (j) 25.5 (j) 25.5 3
Hungary 19.0 16.0 (f)
Luxemburg 21.0 21.0 (f)
Nicaragua 30.0 30.0 3
Panama 27.5 30.0 5
Paraguay 10.0 10.0 (g)
Peru 30.0 30.0 (k)
Czech Republic 19.0 20.0 (l)
Uruguay 25.0 25.0 (m)
Venezuela 34.0 34.0 (n)
(a) Tax losses from sale of share or other equity investments, can only be offset against income of the
same nature. Same for the loss of derivatives. Foreign source tax losses can only be amortized with
income from foreign sources.
(b) Losses generated after 1990 can be depreciated indefinitely but can only be offset in each year up to
75% of the net tax utility of that year.
(c) Tax losses may be applied indefinitely, but may only be offset each year up to an amount equivalent
to 30% of the net taxable profit for the year.
(d) Tax losses generated in 2003, 2004, 2005 and 2006 may be amortized within the following 8 years,
but can only be up to 25% of the income tax of each year. Since 2007, tax losses may be amortized
on an unlimited basis with no limit on the value and unlimited in time.
(e) The tax rate will be 20% in 2011, 18.5% in 2012 and in 2013 it will return to the rate of 17%.
(f) No expiration date.
(g) Operating losses cannot be amortized.
(h) Should add a percentage of state tax to this percentage, which varies in each state of the U.S. The
weighted average statutory rate for 2010 and 2009 was 39.6% and 38.3%, respectively.
(i) The general scheme is 5% but the tax base is calculated as follows: Total gross income less Non
taxable income. The optional scheme has a rate of 31% but the tax basis is different: Net income less
Nontaxable income plus Nondeductible expenses less Other deductions.
(j) In case of a taxable income greater than 1 million Lempiras an additional 10% Temporary Joint and
Several Contribution must be paid.
(k) There are two alternatives allowed for tax loss amortization: 1) 4 years or 2) unlimited amortization
up to 50% of the value of each year. Once made, an election cannot be changed, until the
accumulated losses of previous years are applied.
(l) Tax losses generated since 2004 can be amortized in the following 5 years.
(m) Tax losses generated after 2007 can be amortized in the following 5 years. Prior to 2007 only over
the following 3 years.
(n) The amortization period can change based on their nature: 1) Operating losses, over the following 3
years, 2) Losses from the adjustment for inflation tax, 1 year; 3) Overseas, which can only be
62
amortized to earnings from abroad, over the following 3 years and 4) Losses from jurisdictions with
preferential tax regulations only applied to profits in such jurisdictions, on the following 3 years.
Operations in Argentina, Colombia, Guatemala and Nicaragua are subject to minimum payments of income
tax or tax based on assets.
Operations in Brazil and Venezuela are subject to profit sharing payments according to certain rules based
on accounting income. During 2010 and 2009, there were no profit sharing payments in that country.
Detail of provisions, effective rate and deferred effects
a. Consolidated taxes on income are as follows:
2010 2009
ISR:
Current $ 2,308 $ 3,964
Differed _____________27 (1,203)
$__________2,335 $ 2,761
IETU:
Current $ 1 $ 77
Differed _____________27 (11)
$____________28 $ 66
$__________2,363 $ 2,827
b. The reconciliation of the statutory and effective ISR rates expressed as a percentage of income before taxes on income for the years ended December 31, 2010 and 2009 is as follows:
2010 2009
Statutory rate in Mexico ............................................................................................. 30.0 28.0
Inflationary effects in the monetary balance
sheet accounts ........................................................................................................
6.3 5.3
Nondeductible expenses, nontaxable revenues
and other ................................................................................................................
0.1 1.6
Difference in tax rates and currency of
subsidiaries in different tax jurisdictions ...............................................................
2.2
5.5
Inflationary tax effect of fixed assets .......................................................................... (1.2) (1.9)
IETU ........................................................................................................................... 0.3 0.7
Reversal of allowance of deferred taxes ..................................................................... (7.8) (7.4)
Effects of increase in Mexican income tax rate
in deferred taxes .....................................................................................................
-
(0.1) Effective rate .............................................................................................................. 29.9 31.7 The main items originating a deferred ISR asset on December 31 2010 and 2009 are the following:
2010 2009
Advances from customers ........................................................................... $ (3) $ (8)
Allowance for doubtful accounts ................................................................. (109) (89)
Inventories ................................................................................................... 9 52
Property, plant and equipment ..................................................................... 2,358 2,894
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2010 2009
Intangible assets .......................................................................................... 3,812 3,803
Other reserves .............................................................................................. (3,254) (3,342)
Current and deferred PTU ........................................................................... (287) (278)
Tax loss carryforwards ................................................................................ (3,502) (4,602)
Valuation allowance of tax loss carryforwards ........................................... 173 788
IETU ............................................................................................................ 205 190
Effect of translation ..................................................................................... (260) (262)
Other items .................................................................................................. (59) (39)
Total asset, net ................................................................................... (917) $ (369)
The net deferred income tax asset has not been offset in the acCompanying consolidated balance sheet as
they result from different taxable entities and tax authorities. Gross amounts are as follows:
2010 2009
Deferred income tax asset ....................................................................... $ (1,539) $ (635)
Deferred income tax liability ................................................................... 622 266
Total asset, net ............................................................................... $ 917 $ (369)
c. Since the Company’s tax losses are mainly derived from its transactions with the USA and some countries of OLA, certain tax losses will not be recoverable before their expiration date. Consequently, the Company has recognized a valuation allowance for a portion of such losses. d. Tax loss carry forwards for which the deferred ISR asset has been recorded may be recovered subject to certain conditions. Tax losses generated in countries and expiration dates are:
Years
Amount
2011 ....................................................................................................................................... $ 4,958
2012 ....................................................................................................................................... 28
2013 ....................................................................................................................................... 125
2014 ....................................................................................................................................... 96
2015 ....................................................................................................................................... 28
2016 and thereafter ................................................................................................................ 5,100
10,355
Tax losses included in the valuation allowance ..................................................................... (576)
Total ....................................................................................................................................... $ 9,759
vi) Human Resources
From its foundation BIMBO has a personnel policy aimed to harmonize the Company’s interest with those
of its workers; this has led to the consolidation of a good working relationship. This situation has been
recognized not jus be coworkers but also by the business and academic community. The Company has
sought to extend this philosophy to the companies that start integrating Grupo Bimbo. This has been
endorsed with BIMBO´s recognition as one of the top five leading companies in México, according to the
surveys conducted by HayGroup and the magazine, “Gestión de Negocios”.
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The participation of the employees in the decisions concerning the operation of the Company has been a
key factor for successful development. This has been achieved through the creation of a climate of trust,
management by objectives, team organization, and training and development of leaders at all levels.
The Company pays special attention on the selection of its staff, which the Company seeks to keep
informed about the financial and operational situation of the Group. BIMBO also makes periodic
assessments of performance, directs and channels the concerns of its partners, promotes training (inter alia,
through programs to support education at all levels of schooling) and promotes a full and integral
development within the Company.
The following table shows the number of Group employees, unionized and nonunionized, at the close of the
last three years:
As of December 31
2010 2009 2008
Unionized 74,367 71,885 76,898
Nonunionized 33,697 30,501 21,286
Total 108,064 102,386 98,184
BIMBO attends a series of guidelines that allow it to maintain a positive relationship with unionized staff.
Most of the Group’s companies have a collective bargaining agreement, which is reviewed annually in
relation to the tab of wages and every two years for the rest of its content.
It should be noted that since its inception, the Group has been marked to promote and preserve a healthy
work environment. Therefore, BIMBO has earned several times Company recognition as an admirable
Company by the Confederation of Workers of Mexico (CTM) and the Mexican labor authority itself.
The majority union group has a record, as authorized by the Ministry of Labour and Social Welfare (STPS),
as an External Enabler Agent, which endorses his guidance and interest in designing courses and training to
their members.
The main trade unions with which BIMBO maintains employment in Mexico are:
• National Union of Flour, Bakers, Transport and Allied of Mexico (CTM).
• National Union of Food Industry and Allied of Mexico (CTM).
Of the total BIMBO unionized workers, 75% are affiliated with the unions.
Internationally, it should be noted that the relations in the countries where BIMBO operates have pursued
the same policies of cooperation. In some countries, including the Company's labor model has served as a
role model.
vii) Environmental Performance
The Company recognizes the natural resource management as one of its priorities to achieve its social and
economic purposes. That is why since 1995, Grupo Bimbo has shown its concern and interest in efforts for
the environment, through its Environmental Management System which is committed to working in a
responsible manner by identifying and controlling the factors that affect the environment, compliance with
legal requirements and the Company’s, always looking to improve their environmental performance.
November 16, 2007, Grupo BIMBO´s project began with "Committed to the environment" in order to
strengthen environmental actions in each of the areas of the organization to carry and implementation
throughout the Company. This project focuses on five action lines: 1) energy saving, 2) integrated waste
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management, 3) sustainability of water, 4) reducing emissions, and 5) environmental conservation and
improvement. In each of this, the Company, has the following objectives: 1) implement the use of
alternative energies to the Group's operations and the standardization of energy saving programs, 2)
ensuring water treatment systems to achieve discharge zero in all the group's plants, 3) the maximum reuse
of treated water, 4) reduce water consumption in plants, 5) reduce emissions to the atmosphere, 6) reduce,
reuse and / or recycle the waste of its products and services, 7) create an ecological culture in people, and 8)
replicate the best practices of environmental stewardship to all floors
Said lines of action have been implemented in both production facilities and in the distribution fleet.
Currently, the Group has various certifications, including certificates in Mexico’s "Clean Industry" in
thirty-three of its facilities, as well as two awards for Environmental Excellence issued by PROFEPA,
decentralized agency of the Ministry of Environment and Natural Resources (SEMARNAT), who gives this
certificate to the companies that demonstrate compliance with all applicable rules concerning
environmental protection.
Some of the results obtained in 2010 are:
In 2010, the gauged consumption of electric energy, in the Grupo Bimbo plants was reduced by
1.84% with respect to the previous year, expressed in kilowatts/hour for each ton of production
[kWh/Ton], a percentage that represents a little more than 11 million kWh.
With respect to the gauged thermal energy regarding the past year, in our plants, we achieved a
reduction of 5%, expressed in Gigacalories per ton of production [Gcal/Ton].
In México the combustile efficiency in 2010 was 4.81 km/lt. On eof the factors that contributed to
this was the change from gasoline and LP gas to Diesel.
These tasks have permitted us in 2010, in our plants in México – Bimbo and Barcel, to reduce by
14% of our waste generated per unit of production and to recycle more than 32,000 tons of waste
generated.
In addition to the implementation of technology to make biodegradable packaging, in Grupo Bimbo we
have focused our efforts in order to reduce the quantity of material used in our packages, maintaining the
quality and safety of the products. Throughout 2010 several projects were completed with the purpose of
achieving a reduction in the thickness of our packaging, as well as reducing its dimentions.
With these reductions the Group could potentially stop producing close to 394 thousand kilograms of
packaging annually, of which 97% are plastics; this would be equivalent to no longer producing around 704
tons of greenhouse gases.
The results of the reporting period of water conservation in the Grupo Bimbo plants are; a reduction of
229,400 m3 in drinking water consumption, equivalent to 6% less in 2009.
Additionally, to help improve the environment, Grupo Bimbo has developed programs for the conservation
and maintenance of protected areas, reforestation, with the foundation of Reforestamos Mexico, AC which
mission is to preserve and restore the trees and forest ecosystems of Mexico, through the promotion of
sustainable forest management, environmental culture and the participation of all sectors of society, the
benefit of the people and the environment through five lines of action: conservation of natural areas,
reforestation of areas that have lost its forest cover, community forestry, promotion of forestry education
and combating climate change. During 2010, Reforestamos México participated in the forming of the
ECOFORCE Alliance (Alianza de Ejidos y Comunidades Forestales Certificadas de México), which has a
total surface of 246,557 hectares under sustainable forest Management (a surface comparable to the area of
the state of Hidalgo), of which 149,633 are certified according to the standards of the Forest Stewardship
Council.
Grupo Bimbo believes that its operations do not impose a significant environmental risk.
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viii) Market Information
Unless otherwise stated, references to market size, consumption, market shares and other references in the
next section, are based on information from Datamonitor, which the Company believes are reasonable.
In most product lines, the Company holds a significant market because it maintains competitive
advantages; among others, the most extensive distribution network in the country, costs and competitive
pricing, comprehensive customer service, more points sales, operating efficiency, image and sound
leadership position and market growth.
Should also be mentioned that although there is a strong competition and, in some cases, direct competition
between the same business group, this is not a negative aspect. The Company believes that, at all times, this
situation has been a healthy competition and at the same time, each organization has led the best results,
both in operations and sales, provided under a scheme of mutual respect between product lines and between
organizations belonging to the Company.
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1. Bakery’s Industry General Overview
Mexico
Bread industry in Mexico comprises, in first place, the traditional bread, which receives several names
depending on the relevant geographical region. This industry produces a great variety of bread
manufactured in approximately 40 thousand traditional bakeries in Mexico. In this same sector, during the
last years, a great number of supermarket chains have integrated their own in-store bakery departments.
In second place, the bakery industry includes the cookie segment. In 2010, this sector reached a value of
$2,513 million dollars. BIMBO has a strong recognition in this category, through its Marinela, Lara, Gabi,
Tía Rosa and Suandy brands. There are several competitors in this market, but the main one is Gamesa, a
company pertaining to PepsiCo, which has a market penetration of more than 52%, while BIMBO is
second-ranked, with 35%.
The bakery industry in Mexico, including bread, cakes and cookies, has a market value of $14,807 million
dollars, while the per capita consumption amounts 53.4 kilos per year and the expense used for this concept
is $131.6 dollars.
Traditionally, white bread has been the most popular type of packaged bread in Mexico, with a strong
penetration in low-income households. However, consumers’ adoption of more healthy diets is hindering
growth as sales of other substitute products such as multigrain bread increase
Given that the packaged bread manufactured by BIMBO has more than 60 years of existence in the market,
it has achieved to penetrate in the households of practically all Mexican families. It should be added to the
foregoing that it is foreseen that the demand of this kind of product will continue increasing due to the
growing incursion of women in the labor market.
The country’s rural areas are not distant from this way of life therefore, thanks to the enlargement of the
road network BIMBO can arrive to a great number of homes in the countryside, thus, collaborating with the
feeding of this population sector.
Currently there are several competitors in the packaged bread market, whose brands have a local presence,
such as: Dulcipán, S.A. de C.V., which prepares products under the Don Toño brand in Mexico City, and El
Panqué, S.A. de C.V., with El Panqué brand, in central Mexico specially in the state of Durango.
Additionally, in the cities of Mexico and Mérida, through self service stores, the competitors are: Pan Filler,
S.A. de C.V. which produces, under the Pan Filler brand, specialties bread (black, rye and German bread);
Industrializadora de Alimentos del Sureste, S.A., with the packaged bread Boni Bon brand, and Panadería
El Cometa, S.A. de C.V., with the packaged bread Don Rico brand, there is also La Superior brand
competing in the state of San Luis Potosí. In 2009 Walmart introduced nationally its own brand of
packaged bread and rolls under the trademark Great Value. In Sinaloa there is Pan Panama and in the
country’s northern border there are the following brands which import packaged bread and rolls: Nature’s
Own and Butter Krust, produced by Flowers Foods, Inc. and Hill Country produced by the supermarket
chain H.E.B. Likewise, in the border of Baja California Norte there is packaged bread under the Bontri,
Pantry Select and Sara Lee brands, mainly. In the case of Ciudad Juarez, there is competence from Flowers
Foods with products imported from the USA
BIMBO holds a share in the bakery market (which includes traditional bread, cakes, cookies, and packaged
bread) of approximately 26%. The foregoing allows supposing that the Company has a broad growth
potential.
In the bars category with less than a development decade, competence has been strong, seeking for
alternatives to provide the consumers that wish to have a healthier feeding. In 2010, Bimbo kept its
leadership in this category through innovation. Its main competitors in this segment are Kellogg’s, Quaker
and other importation bars.
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It is important to highlight, however, that the main competence faced by Bimbo in respect to its bakery
lines is integrated with nearly 40 thousand traditional bakeries and in the considerable presence of bakeries
in the supermarket chains, which during 2009 and 2010 gave a special impulse to their private label
packaged bread.
United States
BIMBO participates in United States market through BBU, which produces, distributes and commercializes
packaged bread and sweet bread to minority and institutional clients. The main brands include: Arnold,
Brownberry, Oroweat, Thomas’, Stroehmann, Mrs. Baird’s, D’Italiano, Maier’s, Entenmann’s, Bimbo and
Marinela. BBU is one of the most important players in the industry in that country. Some of its
competitors include: Flower Foods, Hostess Brands and Pepperidge Farm, as well as in-store brands. The
packaged bread industry in the U.S. is much more competitive than in Central and South American market
and consumers have a higher interest in low-carbohydrate diets and wholewheat baked products. It is a
mature market with established brands. Thus, differentiated products, solid cost controls and distribution
density and efficiency are key performance drivers in this market.
The United States represents the second largest baked goods market globally in terms of industry and
production according to IBIS World. In 2010, according to Datamonitor, in the United States the aggregate
market value of the bread industry, including bread, sweet bread, and cookies, was approximately $41,300
million dollars, the equivalent of a per capita consumption of 29 kg. per year, in contrast to a global average
consumption of 23 kg per year. The bakery industry in the United States is highly fragmented, with the top
four producers accounting for approximately 50% of sales.
Earlier in this decade, the industry was impacted by a consumer trend towards low-carbohydrate diets.
However, the industry has adapted well to the trend and bread sales have recovered, attracting consumers to
value-added breads and healthy alternatives. The bread market has regained traction, supported by
campaigns such as “Grains for Life” by the American Bakers Association and the American Millers
Association. The Company has introduced a variety of whole-grain products and a sophisticated array of
healthy products. BBU offers products under the Oroweat, Arnold and Brownberry brands, which share
common formulas with a strong presence in the wide-pan healthy bread sector. Other brands owned by
BBU such as Thomas’, Boboli and D’Italiano are highly differentiated unique products with limited
private-label competition.
The private-label segment, especially in the white-bread category, is a key segment that has continued to
grow against basic, low-price brands. BBU’s mainstream regional brands are more affected by this trend;
however, as each of the mainstream brands is a strong regional favorite, they are less likely to be affected
than smaller, secondary local brands.
In recent years the United States consumers have shown a strong preference for large retail chains, as a
result of which the mix of sales channels has changed significantly. The traditional supermarket chains
have been challenged by large retailers like Walmart, Sam’s Club, and Target.
The inflation in raw materials has been the greatest challenge for the bakery industry in the United States,
especially the increase in costs of wheat, fuels, and healthcare costs. The industry experienced a period of
hyperinflation in 2007 and 2008 when the costs of wheat flour were above 10 dollars per bushel (compared
to the historical average of 5 dollars per bushel). The costs of wheat flower dropped to a range of between 5
and 6 dollars during 2009 and 2010; however, it is expected that they will reach 10 dollars during the
course of 2011.
Latin America
The Group actively participates in Latin America, where the consumers’ behavior and preferences are very
similar to those observed in Mexico. The Latin American countries where the Company operates are:
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Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama,
Paraguay, Peru, Uruguay and Venezuela. In the case of Nicaragua, even though it has no factories, it
distributes its products through strategically located agencies.
Herein below is the Company’s market participation in the bakery industry in Latin America in 2010, as
well as the most important competitors in each country of the region where it operates:
Total Bakery 2010(1)
Argentina 1%
Some competitors: La Salteña and in-store brands
Brazil 1.2%
Some competitors: Panco, Seven Boys and Wickbold
Chile 1.1%
Some competitors: Pierre and Castaño
Colombia 2.2%
Some competitors: Comapan, Guadalupe and Ramo
Costa Rica 4.8%
Some competitors: Girasol, Konig and Ruiseñor
El Salvador 34.3%
Some competitors: Aladino and Lido
Guatemala 4.2%
Some competitors: Americana and Victorias
Honduras 8.1%
Some competitors: Bambino, Hawitt , La Popular and Tabora
Nicaragua 21.6%
Some competitors: Aurora, Puropan and Corazón de Oro
Panama 44.8%
Some competitors: Tasty Choice and Rimith
Paraguay ND
Some competitors: Bimbi, Fargo and My friend
Peru 1.0%
Some competitors: Unión and Grupo Once
Uruguay 1.8%
Some competitors: own brands
Venezuela 4.3%
Some competitors: Croipan and Venepan
(1) Source: Datamonitor. Includes the category of artensal and industrial Bread & Rolls
(2) Source: Nielson
Asia
After a long investigation and analysis period, in 2006, Grupo Bimbo initiated operations in the Asian
continent. China was selected as the country which offers the best economic and potential growth
conditions in the region, therefore, through the acquisition of a bakery company with a strong presence in
the city of Beijing, BIMBO ventured in this market.
2. Tortilla Industry General Overview
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BIMBO participates in the wheat tortilla market, which it commercializes under the Tortillinas Tia Rosa,
Wonder and Del Hogar brands, among others.
The main competitor in this sector is Maseca, with the Paninas, Tortiricas and Misión brands, in wheat
tortillas. In the country’s northern region there are a great number of competitors, which prepare home-
made tortillas to satisfy the local tastes and that represent a small market percentage.
In USA, the packaged tortilla market reports one of the highest growths within the food sector in that
country. Both wheat and corn tortillas, present more varieties, sizes and amounts than in the Mexican
market. Additionally, it is foreseen that, at a medium term, the Hispanic population will be the largest
foreign community in the USA. That added to the GDP generated by such community (calculated in 35
million persons), which is equal to the GDP generated in Mexico, make the tortilla a line of business with a
growing potential in that country.
In this market, the corn and wheat tortillas produced and commercialized under Tia Rosa brand have an
important presence in the western and southwest regions in the USA and are oriented both to the Hispanic
and the Anglo-Saxon market. In this field, Tia Rosa faces the Gruma Corp. competence, as well as of a
great number of small producers.
3. Snack Industry General Overview
At the end of 2010, the snack industry in Mexico, including the peanut category, had an estimated market
value of $3,036 million dollars, representing a 10% increase compared with the preceding year.
It is calculated that 90% of people have consumed snacks (corn, potato and extruded) in the preceding
month, and 50% have consumed peanuts during that period. Consumers of snacks snack 2 to 3 times a
week and the most frequent snackers are young people.
The majority of consumers of snacks do not just snack in one place and consume as much in the home as
outside of the home.
The most bought presentation is the individual sized bag bought mostly in grocery stores, while the distinct
presentations of the traditional bad as well as large presentations are mainly bought in supermarkets.
The snack market in general terms is mainly composed of people who are loyal to the brand and collection.
Barcel occupies the second place in the Mexican salted snack market with 19% participation in the market,
after Sabritas, a business belonging to Pepsico, that has 72% participation. Barcel is also in second place
with regard to peanuts. Taking into account that BIMBO began its participation in these sectors in 1977, it
has achieved a very good position within these markets, thanks to the fact that it has constructed a strong
brand image through differentiated products.
Barcel has 33 years of history in the salted snack market in Mexico and as part of the Group, is a 100%
Mexican business with international presence. Its products are distributed nationwide, and also have a
presence in the U.S. with brands like Takis, Churritos, Tostachos, Chipotles, Toreadas, Chicahrrones, Hot
Nuts and Barcel Peanuts.
It is important to mention that at the close of 2010 regional, low cost branks considerably increased their
participation during the past year. For example, Bokados, a snack business that operates primarily in
Mexico, had a growth of 25%, while Encanto, a Mexican snack industry that operates primarily in the north
of the country, had a growth of 15%. This growth is primarily driven by the peanut sector.
4. Confectionery Goods Industry General Overview
The confectionery industry in Mexico is highly diversified and competitive, since it is conformed of more
than 1,200 players, which comprise both small companies and large world-wide competitors. This market is
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comprised on three large segments: (i) chewing gums (21% of the total volume), which includes the sugar
and sugar-less chewing gums segment; (ii) chocolates (21% of the total volume), which includes, mainly,
national and imported bar chocolate, marshmallow covered with chocolate, surprise, spread and fine filled
chocolates; and (iii) candies (58% of the total volume), which includes hard candy lollipops, gummies,
wrapped hard candies and covered candies.
The estimated value of this sector in Mexico is of $4,230 million dollars. Additionally, it is estimated that
13% of the sales corresponds to small “home-made” manufacturers, that produce and distribute no-brand
products and in very concentrated regions, mainly in northern and central Mexico. The per capita
consumption of confectionery goods products in Mexico is of three kilos per year, lower than in countries
such as Argentina, Brazil, USA and, specially, Europe, where the annual average exceeds 8 kilos.
The sugar candy segment is fragmented into 18 categories, including chewing gum, hard candy lollipops,
tablets and gummies. The chocolate category is divided into ten different segments.
It is important to mention that 60% of the candies and chocolates distribution in Mexico is made through
the whole sale channel and 40% is made in the modern and detail channel.
The great diversity of products in this market is due to a strong and constant innovation and new short-life
products. One main characteristic of the confectionery goods products is that they are based in “fashion”
and in a mainly child and youth market, which has dramatically changed its preferences in the last years,
primarily due to the new restrictions and legislation regarding the obesity problem.
Organización Barcel = Ricolino + Dulces Vero, participates in all the confectionery goods segments and
as a whole occupy the second place in the market. The main competitors faced by Organización Barcel are:
Adams, Canels, Ferrero, Mars, Hershey’s, De la Rosa, Nestlé, Sonric’s, EFFEM and Turin.
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ix) Corporate Structure
BIMBO is a holding company which, as of December 31, 2010 was a direct or indirect owner of shares in
101 subsidiaries and associates. The table shown below lists the most important corporations, their main
activity and the equity holding percentage held by BIMBO in each of them.
Subsidiary Companies Main Activity Holding
Bimbo, S.A. de C.V. Bakery 97%
Barcel, S.A. de C.V. Candies and snacks 97%
Bimbo Bakeries USA, Inc. Bakery 100%
Bimbo do Brasil, Ltda. Bakery 100%
x) Main Assets Description
7. Premises
a. Productive Premises
As of December 31, 2010, BIMBO had 103 manufacturing premises in Mexico, Argentina, Brazil, Chile,
Colombia, Costa Rica, El Salvador, Honduras Guatemala, Panama, Paraguay, Peru, Uruguay and
Venezuela, in respect to Latin America; regarding the United States of America it has productive plants in
the states of California, Colorado, Oregon, Texas, Wisconsin, North Carolina, Indiana, Florida,
Pennsylvania, New York, Maryland; and Beijing in China. The premises include lines of packaged and
sweet bread, rolls, wheat and corn packaged tortillas, tostadas, cakes, cookies, fast food, chewing gum,
confectionery goods, snacks and other akin manufactures. Together, the plants have a construction area of
1,446,620 m2, on a total surface of 3,556,470 m
2, in addition to having a land reserve of 619,820 m
2. It is
worth to mention that, from the above mentioned total assets, approximately 95% is owned by BIMBO and
the rest corresponds to premises leased from third parties. See “Business Description – Principal Activity –
Production Process”.
Historically, including during 2010, the Company has made capital investments equal to the depreciation
amount shown in its financial statements. In 2010, the Company made capital investments for
approximately US$ 288 million dollars, which were financed with own funds and with loans from third
parties. Such capital investments will mainly consist in the construction of new production plants.
The location of the Company’s main assets per geographic area is shown below.
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MEXICO
METROPOLITAN MEXICO CITY
74
USA
CENTRAL AMERICA
75
SOUTHAMERICA
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The following table shows the utilization percentage of the major capital investment lines’ installed
capacity as of December 31, 2010:
Organization and kind of product Bimbo, S.A. de C.V.
Bread, rolls, doughnuts, sponge cakes, toasted, cookies, cakes,
suavicremas, wheat tortillas
52%
BBU
Bread, rolls, doughnuts, sponge cakes, pies, tortillas, tostadas and chips 61%
OLA
Bread, rolls, doughnuts, sponge cakes, toasted, cakes, cookies, Swiss
roll, puff pastry and tortillas 41%
Asia
Bread, sweet, rolls, doughnuts, puff pastry and cakes 31%
Barcel, S.A. de C.V.
Snack and confectionery goods 61%
(1)
Includes operations in Europe.
ASIA EUROPA
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The utilized capacities were calculated based on 150 productive hours per week. Hours are used as
measuring parameter because the mixture of the different products of each line implies the utilization of
different volumes and weight, which impedes the direct comparison of all products and lines capacities.
b. Agencies
As an important part of its distribution process, the Company has more than 1,000 distribution agencies,
each of which operatively depends on a specific plant, even though it is not located nearby.
8. Asset Maintenance
In order for BIMBO’S operations no to be suddenly affected, there is a policy to have preventive predictive
maintenance programs, applied to all its assets, including several equipment and vehicular fleet. The
purpose is that all the Group’s premises and equipment present optimal operation and appearance
conditions, and that they not only comply with the governmental rules and regulations, but that, in first
instance, they maintain a welfare and safety environment for the personnel.
When the situation so requires, the corrective maintenance is used. However, such situation occurs
eventually and, therefore, it does not represent a habit in the Company.
In this regard, the Company allocates approximately 2% of the net sales to preventive, predictive and
corrective maintenance previously described. Likewise, it is important to mention that during the last two
years, the Company has allocated between 1.5 and 2.5 additional percent points in investments to support
the growth, equipment modernization and productivity of its lines. All these resources have been financed
with the Company’s own funds.
9. Guaranties on Assets
On the date of this Annual Report, the Company has not created liens on its important assets.
10. Insurance
Aligned with the industry’s standards, BIMBO has formal insurance policies that adequately cover its
properties in case of fire, explosion, earthquake, flood and hurricanes, among other risks.
In the case of the vehicular plant, BIMBO’s policy is not to resort to a conventional insurance therefore, it
created a “self-insurance” program, based both on the available cash flows and on its vehicle maintenance
and handling policy. On the other hand, for some operations abroad civil liability insurances have been
purchased. Likewise, the Company has workshops to carry out the vehicles repairs. In accordance with a
research, such repairs result more economic than paying an insurance policy, considering the proportion
they represent in connection with the total amount invested in a vehicular fleet.
It is worth to mention that the Company’s road accident index is very low in comparison with the number
of transportation and distribution vehicles comprised in the fleet.
xi) Judicial, Administrative or Arbitration Processes
BIMBO and some of its subsidiaries face certain judicial processes as a consequence of their ordinary
course of business. As of December 31, 2010, there was no knowledge that the Group or its subsidiaries, its
directors, principal shareholders or key officers are involved in judicial, administrative or arbitration
processes that have had or might have a material adverse effect on the Company’s or its subsidiaries’
operation results and financial condition.
Under the provisions set forth in “Annex N” of the General Provisions applicable to Securities Issuers and
other Participants in the Securities Market, as of the date of this Annual Report, the Company does not fit
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any of the hypothesis established in Articles 9 and 10 of the Bankruptcy Law (Ley de Concursos
Mercantiles) and has not been rendered nor may be render bankrupt.
xii) Shares Representing the Capital Stock
As of the date of this Annual Report, BIMBO’S capital stock at nominal value amounts $1,902, represented
by 4,703,200,000 outstanding Series “A” common nominative shares, without expression nominal value,
fully subscribed and paid, all of them representing the minimum fixed portion without right of withdrawal
of the capital stock. See Note 14 to the Audited Financial Statements.
BIMBO was incorporated on June 15, 1966 with a minimum fixed capital stock of $50,000,000.00 nominal
pesos, represented by 50,000 shares, with a nominal value of $1,000.00 each.
Since its incorporation, BIMBO has had several modifications to its capital stock structure. As of 1998, the
modifications were as follows:
In accordance with the Corporate Bylaws, the capital stock is variable. The capital stock shall be
represented with Series “A” common nominative without nominal value expression shares. Additionally,
the Company may issue non-voting and/or limited-voting, nominative, without nominal value expression
shares, which shall be denominated with the series name determined by the Meeting which approves the
issuance thereof. In no case shall the non-voting and/or limited-voting shares may represent more than
twenty five percent (25%) of the total capital stock placed among the investing public or of the total shares
placed therein. However, the National Banking and Securities Commission (CNBV) or, otherwise, the
competent authority, may extend the above mentioned limit up to an additional twenty five percent (25%),
provided that this percentage is represented by non-voting shares, with the limitation of another corporate
rights, or by restricted voting shares, which shall be convertible into common shares within a term not
exceeding five (5) years, computed as of their placement see “Administration – Corporate Bylaws and
Other Agreements”).
On April 28, 2011, BIMBO issued a stock split of the shares representing its capital stock, circulating the
Issuance 2011-1, the capital stock of the Company was not modified and remains represented by 4,703,
200,000 shares.
xiii) Dividends
The information set forth herein below refers to the Company’s outstanding shares as of the date of this
Annual Report (see 2) b) xii) “Shares Representing the Capital Stock”).
The decree, amount and payment of dividends to the holders of BIMBO’S Series “A” shares is proposed by
the Board of Directors and approved by the General Shareholders’ Meeting.
Dividends paid during 2011, 2010 and 2009 amounted:
Year
Number of outstanding
Series “A” shares
(thousand)
Dividend per Series
“A”
share
Total amount of
dividends paid
(million pesos)
2008 (April) 1,175,800 0.46 $541
2009 (April) 1,175,800 0.46 $541
2010 (April) 1,175,800 0.50 $588
2011 (April) 1,175,800 0.55 $647
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Historically, the Company has paid dividends derived from profits generated during each period. The
Company’ administration considers that this situation will continue in the future, however, it cannot be
guaranteed that this will happen.
Retained profits include the legal reserve. In accordance with the General Corporation and Partnership
Law, from the fiscal year net profits minimum 5% shall be separated to form the legal reserve, unit the
amount thereof represents 20% of the capital stock at nominal value. The legal reserve may be capitalized,
but it shall not be distributed unless the company is dissolved, and shall be reconstituted when it decreases
due to any reason.
The net worth distribution, except for the updated amounts of corporate capital stock contributed and of the
retained taxable profits, shall cause the income tax on dividends to be discharged by the Company at the
rate in effect upon the distribution. Taxes paid for such distribution may be credited against the income tax
of the fiscal year in which the tax on dividends is paid and in the two immediately subsequent fiscal years,
against the fiscal year tax and the provisional tax payments thereof.
The net worth fiscal accounts balances as of December 31 are:
2010 2009
Contribution capital account $ 24,473 $ 8,132
Net tax profit account 18,253 32,830
Total $_________42,726 $ 40,962
Dividends on shares that are held through Indeval shall be distributed by BIMBO also through Indeval.
Dividends on shares represented by certificates or physical certificates shall be paid upon presentation of
the relevant coupon. In case provisional certificates exist at the time when the dividend is decreed, and if
such provisional certificates have no coupons attached, the dividend shall be paid against the relevant
receipt.
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3) FINANCIAL INFORMATION
a) SELECTED FINANCIAL INFORMATION
The attached audited Financial Statements comply with the NIF. Their preparation requires that the
Company’s administration carries out some estimates and uses certain hypothesis to asses some of the
financial statements entries and in order to effectuate the disclosures required therein. However, the actual
results might differ from such estimates. The Company’s administration, applying the professional
judgment, considers that the estimates and hypothesis used were adequate given the circumstances. The
main accounting policies followed by the Company are the following ones:
a. Accounting changes
As of January 1, 2010, the Company adopted the following new MFRS and new NIF:
NIF C-1, Cash and cash equivalents. – Requires the presentation of cash and cash equivalents, restricted by
the cash and cash equivalents item, unlike Bulletin C-1, which requires its separate presentation; substitutes
the term temporary available investments for ready available investments and considers as a characteristic
of this type of investment the maturity at three months after the date of acquisition.
Improvements to the NIF 2010. The main improvements generating accounting changes are:
NIF B-1, Accounting changes and correction of errors. – Requires further disclosures when a company
applies a particular standard for the first time.
NIF B-2, Statement of cash flows. – Requires recognition, in an specific line, denominated effects for
changes in the value of cash, the effects on the salaries of changes in the value of cash and cash equivalents
resulting from fluctuations in exchange rates and in its fair value, in addition to the effects from conversion
to the currency of reference of the salaries and cash flows of foreign operations and the effects of inflation
associated with the salaries and cash flows of any of the entities which are part of such entitity and that are
in an inflationary economic environment.
NIF B-7, Business acquisitions. – Requires that, when intangible assets or provisions exist because the
acquired business has a contract whose terms and conditions are favorable or unfavorable with respect to
market, such intangibles can only be recognized when the acquired business is the lessee in an operating
lease. This accounting change should be recognized beginning January 1, 2010.
NIF C-7, Investments in associated companies and other permanent investments. –Modifies how the effects
derived from increases in equity percentages in an associated company are determined. It also establishes
that the effects due to an increase or decrease in equity percentages in associated companies should be
recognized under equity in income (loss) of associated companies, rather than in the non-ordinary line item
within the statement of income.
NIF C-13. Related parties. – Requires that, if the direct or ultimate controlling entity of the reporting entity
does not issue financial statements available for public use, the reporting entity should disclose the name of
the closest, direct / indirect, controlling entity that issues financial statements available for public use.
b. Recognition of inflation effects – Accumulated inflation in Mexico of the three preceding fiscal years
is lower than 26% consequently, the economic environment qualifies as non inflationary. As of January 1,
2008 the Company suspended the recognition of the inflation effects on the consolidated financial
statements, except for those that correspond to the subsidiaries that operate in inflationary environments;
however, assets, liabilities and net worth as of December 31, 2010 and 2009 include the restatement effects
recognized in all the transactions until December 31, 2007.
Inflation accumulated in themajority of the countries in which the Company operates, excluding Mexico,
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for the| three preceding fiscal years is also less than 26% for those countries that are classified as non-
inflationary. However, there are countries in which the Company operates that have an environment that is
classified as inflationary, whose inflation in the three preceding fiscal years and as a result of this they
recognized the effects of inflation in 2010 and 2009, which are the following:
2010 2009
Argentina 26% 28%
Costa Rica 31% 38%
Venezuela 100% 87%
Nicaragua 34% 49%
And the inflation in these countries in the preceding three fiscal years that their environment was classified
as inflationary in 2009 and for which there are recognized effects of inflation only in 2009, are the
following:
2009
Uruguay 26%
Guatemala 26%
Honduras 27%
Paraguay 28%
Until December 31, 2007 in all the operations and as of January 1, 2008 only for those under inflationary
environment, the recognition of the effects of inflation mainly resulted in gains or losses due to inflation on
non monetary and monetary entries, which are shown in the financial statements under the following rubric:
Result per monetary position – Represents the erosion of the purchasing power of the monetary
entries originated by the inflation; it is calculated using factors derived from the inflation indeces
of each country to the monthly net monetary position. Gain is originated from maintaining a net
passive monetary position.
c. Cash and cash equivalents – Mainly consist in bank deposits in check accounts and investments in
short term securities, of great liquidity, easily convertible into cash, with a maturity of up to three months
after the date of acquisition and subject to little significant change of value risks. Cash is shown at nominal
value and the cash equivalents are mainly represented by investments in government debt instruments with
daily maturity.
d. Inventories and sales cost – Inventories of entities that operate in non-inflationary economic
environments are assessed at the lowest between their cost or realization value. In those subsidiaries that
operate in inflationary economic environments, inventories were assessed at average costs that were similar
to their replacement value without exceeding their realization value, and the sale cost at the last actual
production cost, that was similar to the replacement cost at the time of its sale.
e. Real estate properties, machinery and equipment – Are recorded at the acquisition cost in the
entities under non inflationary economic environments. Balances derived from acquisitions carried out until
December 31, 2007 in all the operations, and actually of those derived from the subsidiaries that operate in
inflationary economic environments, were updated using factors derived from the inflationary indeces of
each country until that date. Depreciation is calculated under the straight line method based on the useful
lives of the following assets:
Buildings 5
Manufacturing equipment 8, 10 and 35
Vehicles 10 and 25
Office equipment 10
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Computer equipment 30
Investment in affiliates shares and others – permanent investments – The permanent investments in the
entities in which a significant influence is exercised, are initially recognized based on the net fair value of
the entity’s identifiable assets and liabilities as of the acquisition date. Such value is adjusted after the
initial recognition by the relevant portion both of the affiliate’s integral profits or losses and the profit
distribution or capital reimbursements thereof. When the fair value of the consideration paid is greater than
the value of the investment in the affiliate, the difference shall correspond to goodwill, which is presented
as part of the same investment. When the fair value of the consideration paid is lower than the investment
value, the latter shall adjust to the fair value of the consideration paid. In case any impairment of the
investments in affiliates appear the same shall be subject to impairment tests.
Permanent investments made by the Company in entities in which it does not have joint control, nor
significant influence shall be registered at the acquisition cost and dividends received are recognized in the
period’s results unless if derived from profits of periods prior to the acquisition, in which case they are
decreased from the permanent investment.
f. Impairment of long-lived assets in use - The Company reviews the carrying amounts of long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of such amounts. The impairment indicators considered for these purposes are, among others, the operating losses or negative cash flows in the period if they are combined with a history of losses or projected future losses, depreciations and amortization charges to results, which in percentage terms in relation to revenues are substantially higher than in previous fiscal years, obsolesce effects, reduction in the demand for the products manufactured, competition and other legal and economic factors. During 2009 the Company recognized impairment in the operation of the Czech Republic for $56. This operation was sold in January 2010 and the disinvestment amount is not representative for Grupo Bimbo. In 2010 the Company recognized deterioration in certain marks. g. Financial risks management policy – The Company, within the framework of its daily operations is exposed to inherent risks to several financial variables, as well as to variations in the price of some raw material quoted in international formal markets. As a result, the Company uses derivative financial instruments to mitigate the possible impact of fluctuations in such variables and prices on its results. The Company considers that such instruments provide flexibility which results in more stable income and better visibility and certainty regarding future costs and expenses. The design and implementation of the derivative financial instruments contracting strategy formally falls on two bodies: 1) The Financial Risk Committee, in charge of the interest rate and exchange rate risk management and, 2) The Raw Materials Market Risk Sub-Committee, in charge of managing raw materials risk. Both bodies continuously report their activities to the Business Risks Corporate Committee, which is in charge of issuing the general guidelines of the Company’s risk management strategy, as well as of establishing the limits and restrictions to the transactions which they may carry out. The Business Risks Corporate Committee, reports the Company’s risk positions to the Audit Committee and to the Directive Committee. The Company’s policy on entering derivative financial instruments is that there are only for hedging purposes. That is, the eventual entering into derivative financial instrument shall necessarily be associated to a primary position representing some risk. Consequently, the notional amounts of one of all the derivative financial instruments entered into for hedging certain risk will be consistent with the amounts of the primary positions that represent a risk position. The Company does not carry out transactions in which the intended benefit or purpose aimed to are premium earnings. If the Company decides to carry out a hedging strategy in which options are combined, the net payment of the associated premiums shall represent a disbursement by the Company.
83
h. Derivative financial instruments - The Company records all derivatives at fair value on the balance, regardless of the purpose for the holding thereof. If such instruments are not traded, the fair value is determined by applying recognized valuation techniques accepted in the financial environment. Hedging derivatives recognize valuation changes in accordance with the relevant hedging kind: (1) for fair value hedges, changes in the derivative instrument and the hedged item are recognized in current earnings; (2) for cash flow hedges, changes in the effective portion are temporarily recognized in other comprehensive income and reclassified to current earnings when affected by the hedged item; the ineffective portion is immediately recognized in current earnings; (3) for hedges of an investment in a foreign subsidiary, the effective portion is recognized in other comprehensive income as part of the cumulative translation adjustment; the ineffective portion of the gain or loss on the hedging instrument is recognized in current earnings, if it is a derivative financial instrument and if not, it is recognized in other comprehensive income until the investment is sold or transferred. To manage its exposure to interest rate and foreign currency fluctuations, the Company principally uses interest swaps and foreign currency forward contracts; as well as futures and options contracts to fix the purchase price of raw materials or inputs used in production. The derivatives are contracted for the purspoes of covering risks and complying with all of the coverage requirements, which is why their designation is documented at the beginning of the coverage operation, describing the objective, strategy, characteristics, accounting recognition, and how the measurement of their effectiveness will be determined. The negotiation with derivate instruments is only carried out by institutions of recognized solvency and limits have been established for each institution. Hedging derivative financial instruments are recorded as an asset or liability without setting them off with the hedged item. i. Goodwill- Is recorded at acquisition cost, in the local currency of origin and is updated until the 31 of December of 2007, applying the inflation index of each country. In the subsidiaries operating in inflationary economic environments, the Company will continue to update, applying the corresponding inflation index. Goodwill is not amortized but is subject, at least once every year, to impairment tests. j. Intangible assets – Is primarily comprised of trademarks, rights of use and costumer-relationships. Are recorded at acquisition cost, in the currency of origina and updated until December 31, 2007, applying the inflation index of each country. In the subsidiaries operating in inflationary economic environments, they continue updating applying the corresponding inflation index. This caption mainly derives from the acquisition of the business in the USA and certain trademarks in South America. Trademarks and rights of use are not amortized; however, the carrying values are subject to impairment tests at least annually. On December 31, 2010, the Company recognized an impairment in certain trademarks for $19. Costumer-relationships have an estimated useful life of 18 years and are amortized on a straight-line basis based on their useful life. As of December 31, 2010 and 2009, the amortization recorded for the year related to intangible assets with finite lives was $258 and $257, respectively. k. Provisions – Are recognized when there is a present obligation as the result of a past event that is likely to result in the use of economic resources that can be reliably estimated. l. Direct employee benefits – Are calculated based on the services rendered by employees, considering their current salaries and liability is recognized as it accrues. These benefits include mainly accrued employee profit sharing (“PTU”), compensated absences, such as vacations and vacation premiums, and incentives and are shown in Other accounts payable and accrued liabilities caption. m. Employee benefits from to termination, retirement and social prevision – The liability for seniority premiums, pensions and termination benefits is recorded as accrued and is calculated by independent actuaries based on the projected unit credit method using nominal interest rates. The social prevision liability covers medical costs of eligible employees in the U.S. incurred after retirement. Such liability for this program is recorded based on the Company’s historical information in accordance with actuarial calculations.
84
n. Employee profit sharing – Employee profit sharing (“PTU”) is recorded in the year results in which it is incurred and presented under other expenses caption in the attached statements of income. Deferred PTU generated by the subsidiaries in México is determined from the temporary differences that result from comparing the accounting and tax basis of assets and liabilities. o. Tax on profits – The income tax (“ISR”) in each country and the flat rate business tax (“IETU”) in México, if greater than the income tax, are recorded in the results of the year when accrued. In order to recognize deferred taxes on the operations in México, it is determined if, based on financial projections, the Company will incur ISR or IETU taxes and recognizes the deferred tax corresponding to the tax to be essentially paid. Deferred tax is recognized by applying the rate corresponding to the temporary differences resulting comparing the accounting and tax basis of assets and liabilities and, as the case may be, the benefits from tax losses to be amortized and from certain fiscal credits are included. The active deferred tax is recorded only when a high probability exists that it may be recovered.
p. Tax on assets – The tax on assets (“IMPAC”) incurred through December 31, 2007 that is
expected to, which is expected to be recovered, is recorded as a tax credit and is shown in the balance sheet
under deferred taxes.
q. Foreign currency transactions – Foreign currency transactions are recorded at the applicable
exchange rate in effect on the transaction date. Monetary assets and liabilities denominated in foreign
currency are translated into Mexican currency at the exchange rate in effect on the balance sheet date.
Exchange fluctuations are recorded in the results, except for those transactions which have been designated
as foreign investment hedge.
r. Revenue recognition – Revenues for sales are recognized at the time in which the products risks and
benefits are transferred to the customers who acquire them, which generally occurs when these products are
delivered to the customer and the latter assumes the responsibility thereon. The Company deducts from
sales commercialization expenses such as promotional expenses for products .
s. Earnings per share – Basic earnings per common share are calculated by dividing net majority
income by the weighted average number of shares outstanding during the fiscal year.
For a better comprehension, the financial information summary shall be reviewed together with the
financial statements and their respective notes.
Likewise, such summary shall be reviewed with all the explanations provided by the Group’s
Administration throughout chapter 3) “Financial Information”, specially in the section “Administration
Comments and Analysis on the Company’s Operative Results and Financial Status”.
Consolidated Statement of Income
As of December 31 of: 2010 2009 2008
Net sales (1) 117,163 116,353 82,317
Cost of Sales 55,317 54,933 40,293
Gross Profit 61,846 61,420 42,024
0 0
Distribution and Selling Expenses 42,933 41,724 29,621
Administrative Expenses 7,520 7,642 5,075
General Expenses 50,453 49,366 34,696
Income After General Expenses 11,393 12,054 7,328
0 0
Other Income (Expenses) Net (297) (613) (8)
Employee Profit Sharing 653 563 467
Other Total Income and (Expenses) Net (950) (1,176) (475)
Net Interests (2,574) (2,318) (461)
Exchange (Loss) Income (94) 207 (153)
Monetary Position Gain 45 99 75
Consolidated Financial Statement (2,623) (2,012) (539)
0 0
Equity in Income of Associated Companies 87 42 24
Income befote Income Taxes 7,907 8,908 6,338
0
Income Tax 2,309 4,041 2,099
Deferred Income Tax 54 (1,214) (205)
Provisions 2,363 2,827 1,894
0
Income before Discontinued Operations 5,544 6,081 4,444
0
Net Income 5,544 6,081 4,444
0 0
Controlling Stockholders 5,395 5,956 4,320
Non Controlling Stockholders 149 125 124
Basic Earnings per Common Shares 4.59 5. 5.07 3.6 3.67
Dividend per Share 0.50 5. 0.46 3 0.46
Income before Financing, Interests, Depreciation
and Amortization
15,468 15,837 9,829
(1) During 2010, 2009 and 2008, the net sales of Bimbo, S.A. de C.CV., and Barcel, S.A. de C.V., in Mexico represented
approximately 45%, 63% and 64%, respectively, of the consolidated net sales (see Note 2 of the Audited Financial Statements).
Consolidated Balance Sheet
As of December 31 of: 2010 2009 2008
Cash and Cash Equivalents 3,325 4,981 7,339
Accounts and Notes Receivable – Net 13,118 12,430 8,557
Inventory, Net 3,149 2,969 2,573
Payments in Advance 440 499 431
Derivative Financial Instruments 180 146 225
Total Current Assets 20,212 21,025 19,125
Notes receivable from independent operators 2,140 1,940 451
Property, Plant and Net Equipment 32,028 32,763 26,039
Stock Investments in Associated Companies and Liabilities 1,553 1,479 1,416
Derivative Financial Instruments 393 159 -
Deferred Income Taxes 1,539 635 1,417
Goodwill - Net 19,884 20,394 6,313
Intangible Assets, Net 19,372 19,602 4,951
Intangible Assets for Employees Retirement Benefits
Other Assets Net 1,948 1,669 498
Total Assets 99,069 99,666 60,210
Payable Accounts to Suppliers 5,954 5,341 4,881
Short Term Debt and Current Outstanding Portion of Long
Term Debt
1,624 4,656 2,054
Other Accounts Payable and Accrued Liabilities 6,302 6,228 1,499
Payable Accounts to Related Parties 802 238 584
Income Tax 624 3,272 3,624
Employee Profit Sharing 709 637 524
Derivative Financial Instruments - 74 17
Total Outstanding Debt 16,015 20,446 13,183
Long Term Debt (1) 31,586 32,084 9,079
Derivative Financial Instruments 231 54 51
Employees Benefits and Social Security 4,621 4,644 982
Statutory employee profit sharing in Deferred Income 249 290 351
Deferred Income Taxes (2) 622 266 1,257
Other Long Term Debt 1,208 925 333
Total Liabilities 54,532 58,709 23,236
Controlling Stockholders 43,710 40,104 34,264
Non – Controlling Stockholders 827 853 710
Total Capital Stock 44,537 40,957 34,974
Consolidated Balance Sheet Notes
87
(3) Some financial institutions debt provides certain restrictions and obligations to the Company’s financial structure (see Note
11 of the Audited Financial Statements). (4) See Note 17 of the Audited Financial Statements.
Other Financial Data
As of December 31 of: 2010 2009 2008
Depreciation and Amortization 3,729 3,783 2,501
Resources Generated by Operating Activities - - -
Resources Used in Financing Activities - - -
Resources Used in Investment Activities - - -
Balance at the End of the Year - - -
Net Cash Flows from Operating Activities 11,375 13,449 8,850
Net Cash Flows from Investment Activities (5,974) (38,398) (7,160)
Net Cash Flows from Financing Activities (6,983) 22,606 1,734
Cash and Cash Equivalents at the End of Period 3,325 4,981 7,339
Margin After General Expenses 9.7% 10.4% 8.9%
EBITDA Margin 13.2% 13.6% 11.9%
Net Margin 4.7% 5.2% 5.2%
Assets Return 5.6% 6.3% 7.6%
Return on Invested Capital 11.6% 12.0% 12.0%
EBITDA 15,468 15,837 9,829
Total Debt / EBITDA 2.15 2.32 1.13
Net Debt / EBITDA 1.93 2.01 0.39
EBITDA / Interest Expense 4.94 5.58 13.14
88
b) FINANCIAL INFORMATION PER BUSINESS, GEOGRAPHIC ZONE AND EXPORTATION
SALES
Grupo Bimbo, through its main subsidiaries, is mainly engaged in the production, distribution and
commercialization of packaged bread, sweet bread, home-made type cakes, cookies, cereal bars, candies,
chocolates, sweet and salted snacks, packaged wheat tortillas, tostadas, goat milk caramel “cajeta” and fast
food. The Company manufactures more than 7,000 products. The sale of such products constitutes Grupo
Bimbo’s only line of business. The division between bakery products, and salted snacks and confectionery
goods referred to in this Annual Report is an organizational division the only purpose of which is to achieve
administrative efficiencies and which derives from historical reasons. In some cases, such division is shown
exclusively in order to differentiate the market for such products. On one hand, Grupo Bimbo has no
significant export sales.
The following table shows certain financial information of Grupo Bimbo per geographic zone for the three
preceding fiscal years:
As of December 31, (1)
2919 2009 2008
Net Sales
Mexico (1)
57,870 55,388 54,845
USA 47,875 49,850 18,049
Latin America 14,207 13,606 11,346
Profit After General Expenses
Mexico (1)
8,013 7,499
6,854
USA 3,738 4,261 124
Latin America (340) 301 431
EBITDA
Mexico (1)
9.628 9,166
8,504
USA 5,196 5,727 539
Latin America 662 951 867
Total Assets
Mexico (1)
36,121 36,709
36,529
USA 49,380 53,361 14,221
Latin America 16,045 13,563 11,360 (1)
Includes transactions in Asia.
c) REPORT ON SIGNIFICANT DEBT
The Company’s relevant loans are described herein below, that is, those which represent 10% or more of its
total liabilities.
As of the date of this Annual Report, the Group is current in the payment of principal and interests of all its
relevant loans.
89
The loan agreements establish certain covenants and also require that the Company maintain determined
financial ratios based on consolidated financial statements. At December 31, 2010, the Company has
complied with all the obligations established in the loan agreements.
1. Notes (Certificados Bursátiles)
The Company issued notes (certificados bursátiles) (payable upon maturity) to refinance short-term debt
contracted for the acquisition of certain assets in the USA, such issues are structured as follows:
- Bimbo 09- Issued on June 15, 2009 for $5,000,000,000 (Five thousand million pesos) maturing on June
2014 with an interest rate applicable to such issue of 28-day TIIE plus 1.55 percent points. This issue is
secured by Grupo Bimbo’s four main operative subsidiaries.
- Bimbo 09-2- Issued on June 15, 2009 for $2,000,000,000 (Two thousand million pesos) maturing on June
2016 with an interest rate of 10.60%. This issue is secured by Grupo Bimbo’s four main operative
subsidiaries.
- Bimbo 09U- Issued on June 15, 2009 for 706,302,200 Investment Units (UDIS) maturing on June 2016,
earning a 6.05% fixed interest rate of. The UDI value as of December 31, 2010 is $4.5263 per UDI. This
issue is secured by Grupo Bimbo’s four main operative subsidiaries.
- Bimbo 02-2- Issued on May 17, 2002 for $750,000,000 (Seven hundred fifty million pesos) maturing on
May 2012, with a 10.15% fixed interest rate. As of June 5, 2009 this issue is secured by Grupo Bimbo’s
four main operative subsidiaries.
The Company issued debt securities (payable upon maturity) to refinance existing debt and for general
corporate purposes.
- International Bond- Issued on June 30, 2010 under Rule 144A and Regulation S for $800 million Dollars
payable on June 30, 2020. Such financing, accrues interests at a fixed rate of 4.875% to be paid on a semi-
annually basis. The proceeds of this offering were used to refinance existing indebtedness and for general
corporate purposes. The notes are guaranteed by the principal subsidiaries of the Company.
2. Committed Revolving Multicurrency Line-of-Credit
On July 20, 2005, the Company entered into an amendment agreement to the committed revolving line-of-
credit agreement dated May 21, 2004 in an original amount of $250 million dollars, maturing on May 2008.
The line’s amount after having executed such amendment agreement is of $600 million dollars, up to 50%
being available in Mexican currency. The term of the line-of-credit was 5 years, thus, its maturity date was
July 2010.
The applicable financial conditions were: for draw-downs in U.S. dollars, the Company was to pay Libor
plus 0.40% until the third anniversary and Libor plus 0.45% during the remaining period, while, in the case
of the Mexican currency draw-downs, it was to pay| pay TIIE 0.35% until the third anniversary and TIIE
0.40% as of such anniversary and until maturity.
During the term of the loan, payments were made for the total amount of the loan, therefore, at its maturity,
the loan was fully liquidated.
3. Bank loan
On January 15, 2009 the Company contracted a long-term bank loan in an amount equal to 1,700 million
US dollars, in which BBVA Bancomer S.A. Institución de Banca Múltiple, Grupo Financiero BBVA
Bancomer participates as leading agent and a bank syndicate as of this date comprised of fifteen
institutions. The loan was comprised of two tranches, the first one maturing on January 2012 (Tranche A)
and the second one maturing semi-annually from July 2012 until January 2014 (Tranche B).
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During the month of July, 2010, the Company used the proceeds from the International Bond to liquidate
Tranche A.
Currently, the Company must pay an over rate of TIIE +1% for the tranche denominated in Mexican pesos
and LIBOR + 1.25% for the tranche denominated in U.S. dollars. Of the outstanding amount, 869 million
dollars, 68% is denominated in Mexican pesos and the remaining 32% is denominated in U.S. dollars.
This line of credit is secured or guaranteed by the Company’s principal subsidiaries.
The total amount of funds obtained through this financing, in addition to those obtained in the
multicurrency bridge loan were used by Grupo Bimbo to partially pay for the acquisition of WFI.
4. Other Loans
Some of the Group’s subsidiaries have contracted direct loans mainly to cover their working capital needs;
none of such loans represents more than 10% of the Company’s consolidated liabilities.
d) MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE COMPANY’S FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the Audited Financial Statements,
including the notes thereto, contained elsewhere in this annual report. Unless otherwise stated, all amounts
herein are expressed in Mexican Pesos and were prepared according to MFRS. Consolidated figures
include the effects of intercompany eliminations.
i) Results of Operations
Comparitive analysis for the fiscal years ended on December 31, 2010 and 2009.
Net Sales
Net sales for 2010 were $117,163 million, which represented an increase of 0.7% with respect to 2009.
Such increase was primarily driven by the increase in volumes in all regions throughout the year, despite
the fact that the recuperation in consumption was delayed. The exchange rate was significantly lower, and
the increase in the price of raw materials could not offset the growth in volume of sales.
Net Sales 2010 2009 % Change
Mexico 57,870 55,388 4.5
USA 47,875 49,850 (4.0)
Latin America 14,207 13,606 4.4
Consolidated 117,163 116,353 0.7
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In Mexico, sales grew by 4.5%, to $57,870 million, as a result of the increase in volume of sales in all
categories of snacks, sweet bread, and packaged bread, among others.
In the United States, despite the fact that the year registered a growth in volume of sales, net sales
decreased by 4.0% to $47,875, as a result of the lower average prices of the products and the impact on the
exchange range. In dollar terms, the sales increased by 2.0% thanks to the growth in the categories of
premium bread and the national launch of Bimbo Bread and Sandwich Thins, among other products.
In Latin America, the net sales showed an increase of 4.4% for a total of $14,207, as a result of the increase
in volumes, which is due to the launch of new products, the incorporation of new clients, and the continued
expansion of the distribution network. Brazil, Chile and Colombia showed the strongest performance.
Gross Margin
The gross margin remained unchanged with respect to the previous year staying at 52.8%, despite the fact
that the price of raw materials began to increase during the second semester of the preivous year, the
revaluation of the peso strengthened performance in México during such year, which was sufficient to
offset the negative impact of the increase in costs of raw materials and the decrease in the average prices of
the products in the United States.
By region, the gross margin in México increased by 0.9 percentage points to 56.0%, which reflects the
decrease in the costs of raw materials during most part of the year, together with the aforementioned
revaluation of the peso. Both factors were sufficient to offset the increase in costs in the last quarter.
In the United States, a margin of 49.5% was reported, which represents a decrease of 1.0 percentage points,
the combined effect of the increase in the raw materials prices and the decrease in the average prices of the
products was not able to be offset the increase in volume of sales.
In Latin America, the gross margin was 40.5%, 1.8 percentage points less than in 2009. This was mainly
due to the increase in labor costs in some operations of the Company in the region, as well as the pressure
of certain raw materials.
General Expenses
The general costs represented 43.1% of net sales, 0.7 percentage points more than the registered costs for
the previous year. This was primarily due to i) a higher level of investment in publiclity and advertising,
encouraging consumption and increasing volumes of sale; ii) the incorporation of new distritubion routes,
mainly in Latin America; iii) an extraordinary non-monetary cost of $346 for legal contingencies in Brazil,
a point that is focused more conservatively on the creation of a reserve for the expected costs of open
demands, in contrast to the previous practice of registering the real payments paid out each year; and iv) a
cost to the controlling company of $222 related to the acquisitions, which have usually been considered as
part of the acquisition costs, but that, according to the change in the NIF, were recognized in totality at the
level of the parent company.
Income after General Expenses
On a consolidated basis, income after general expenses decreased by 5.5% in 2010 to $11,393 million, with
a margin of 9.7%, which is equivalent to a decrease in 0.7 percentage points in relation to 2009. A better
absorption of the fixed costs in all regions helped to offset the pressure on the gross margin due to the
increase in the price of raw materials.
Income After General
Expenses
2010 2009 % Change
Mexico 8,013 7,499 6.9
USA 3,738 4,261 (12.3)
Latin America (340) 301 (213)
Consolidated 11,393 12,054 (5.5)
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In Mexico, the income after general expenses totaled $8,013, which representes an increase of 6.9% with
respect to 2009. The margin after general costs increased 0.3 percentage points, for a total of 13.8%, as a
result of the increase in income and the improvement in the gross margin. Excluding the extraordinary cost
at the parent company level related to the acquisitions, the margin after general expenses would have
increased by 0.7 percentage points to 14.2%.
In the United States, the income after general expenses was $3,738, a decrease of 12.3% with a reduction in
the margin of 0.7 percentage points, to 7.8%. This is due to the aforementioned pressure on the gross
margin, combined with a planned increase in distribution in order to increase the penetration of the
Company´s brands; these factors were in some measure offset by administrative efficiencies in operation.
Finally, Latin America, the pressure on the gross margin, a greater investment in new routes, and the
extraordinary cost in Brazil resulted in a loss after general costs of $340 in 2010. Excluding the
extraordinary cost, the income after general expenses would have been slightly greater than the point of
equilibrium, situated at 0.1%.
Other Costs
The line dropped by $950 million, due to the recognition in 2009 of total labor of liabilities accumulated in
previous fiscal years.
Income Taxes
The effective income tax rate for 2010 was 29.9%, less than the 31.7% in 2009, due to the benfit of the
creation of differentiated taxes for losses in previous periods.
Net Income of Controlling Stockholders
In the year, the net income of controlling shareholders decreased 9.4% to $5,395, while the margin
contracted by 50 base point, to 4.6%. This result is explained by the pressure on the gross margin and the
margin after the general expenses, as well as the increase in the integral financing cost.
Income after General Expenses less Depreciation and Amortization (EBITDA)
The EBITDA totaled $15,468, a decrease in 2.3% relative to 2009. The EBITDA margin was 13.2%,
equivalent to 40 base points less than in 2009.
EBITDA 2010 2009 % Change
Mexico 9,628 9,166 5.0
USA 5,196 5,727 9.3
Latin America 662 951 (30.4)
Consolidated 15,468 15,837 (2.3)
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Financial Structure
As of December 31, 2010, cash and cash equivalents of the Company were $3,325, as compared to $4,981
in 2009 due, among other things, to the acquisition of Dulces Vero and the $300 million dollars of cash
proceeds used to pay indebtedness during such year.
The total debt on December 31, 2010 increased to $33,210, as compared to $36,740 in the previous fiscal
year. This was due to the payments on debt liabilities throughout the year. The short term debt represented
only 5% of the total debt. With respecto to currency mix, 49% was Mexican pesos.
The solid debt profile of the Company was supported by the Issuance of debt on June in the international
market in an aggregate amount of $800 million dollars, with a maturity of 10 years. The Company’s first
global issuance was strongly subscribed by United States and European investors, and the proceeds were
used to refinance the liabilities and to extend the average life of the debt by more than five years.
The solid cash flow generation resulted in a reduction in the net debt position, from $31,759 in 2009 to
$29,885 in December of 2010.
Comparative analysis of the fiscal years ending on December 31 of 2009 and 2008
Net Sales
Net sales for 2009 increased to $116,353 million, which represented an increase in 41.3% in relation to
2008. The increase in net sales was primarily a result of the integration of BBU East and, to a lesser extent,
by a two-digit increase in sales in Latin America.
In Mexico, net sales grew by 1.0% to $.55,388 million, mainly as a result of new product launches, which
offset a weak consumption environment. By category, snacks had an outstanding performance as well as
sales in modern channels.
In the United States, net sales increased 176.2% in terms of pesos, to $49,850 million, which sales in
dollars were $3,693 million, or 128% higher than recorded net sales in 2008. The foregoing is primarily as
a result of the integration of BBU East, healthy volume performance, the successful launching of new
products and the initiation of national distribution for certain brands that were originally only regional
brands.
In Latin America, net sales increased 19.9% with respect to 2008 to $13,606 million. This was primarily a
result of volume growth generated by the continued expansion of our distribution network. In 2009, our
customer base increased by approximately 76,000 new customers primarily through the traditional
channels. The most solid results were registered in Brazil and Colombia.
Net Sales 2009 2008 % Change
Mexico 55,388 54,845 1.0
USA 49,850 18,049 176.2
Latin America 13,606 11,346 19.9
Consolidated 116,353 82,317 41.3
Gross Margin
The gross margin for 2009 increased by 1.7 percentage points to 52.8%, as a result of a reduction in raw
materials costs compared compared to the peak commodity prices in 2008, as well as more stable exchange
rates, and the cost-saving programs implemented during the year, which resulted in lower indirect
production costs.
In Mexico, gross margin for 2009 increased by 1.7 percentage points to 55.1%, mainly as a result of a
reduction in raw material costs, a more stable Mexican Peso to U.S. dollar exchange rate and the
implementation in 2009 of cost saving programs that lowered indirect production costs.
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In the United States, a margin of 50.6% was reported, which represents an increase of 6.5 percentage
points. The foregoing was a result of a series of factors, including: i) the incorporation of BBU East and its
more efficient cost structure, ii) lower raw material and energy prices as compared to 2008, iii) greater
manufacturing productivity in BBU West, including the benefit of a plant closure, and iv) improved
absorption of fixed expenses resulting from higher sales volumes.
In Latin America, the gross margin remained unchanged at 42.2%, due in large part to the more favorable
raw material cost environment. This was offset by an increase in labor costs in some of the Company’s
operations in the region.
General Expenses
Costs of operation for 2009 represented 42.4% of net sales, 0.3 percerntage points less than the registered
costs in the previous year. This was primarily due to: i) lower absorption of fixed expenses in Mexico, ii)
higher distribution expenses in Latin America resulting from the Company’s efforts to increase the
penetration of packaged bread in that region, and iii) a non-cash charge of approximately US$20 million for
the amortization of certain intangible assets included in the acquisition of BBU East.
The foregoing factors more than offset the benefits of a more efficient distribution structure in Mexico and
better results in the United States related to: i) the integration of BBU East and its more efficient expense
structure, ii) ongoing initiatives at BBU West, such as route consolidation, iii) and a better expense
absorption derived from higher sales volume.
Income after General Expenses
On a consolidated basis, income after general expenses for 2009 increased by 64.5% to $12,054 million,
which represents a record margin of 10.4%. This is equivalent to an increase of 1.5 percentage points as
compared to 2008.
Income After General
Expenses
2009 2008 % Change
Mexico 7,499 6,854 9.4
USA 4,261 124 3,336.3
Latin America 301 431 (30.2)
Consolidated 12,504 7,328 64.5
In Mexico, margin increased 1.0% with respect to the previous year, at 13.5%. Despite the minor increase
of sales, less absorption of fixed expenses and promotional and publicity efforts to increase consumption.
In the United States, income after general expenses was Ps.4,261 million from Ps.124 million for 2008,
while gross margin increased from 0.7% in 2008 to 8.5% in 2009. The foregoing was the result of: i) the
improvement in gross margin, ii) the integration of BBU East, iii) the benefits of ongoing productivity
initiatives at BBU West, including the optimization of assets, routes and administrative expenses; and iv)
sharing best practices between regions.
In Latin America, the margin contracted 1.6 percentage points as compared to 2008, to 2.2%. This
contraction is mainly explained by the higher sales and distribution expenses associated with the efforts to
increase market penetration of packaged bread in the region, as well as higher labor costs. It is important to
mention that although the operational performance in several countries resulted in positive results during
2009, mainly in Brazil, such improvement was offset by the significant deterioration of the results of
operations of Venezuela.
Comprehensive Financing Costs
Comprehensive financing costs increased to $2,012, that is, $1,473 more than in 2008. This increase is
fundamentally the result of the higher interest expense accrued on the debt incurred in January 2009 to
finance our acquisition of BBU East.
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Net Income of Controlling Stockholders
Net income of controlling stockholders was $5,956 million, 37.9% greater than 2008. The gross margin
was 5.1% a similar level to that recorded in 2008. The foregoing is due to: i) an increase in other expenses,
ii) an increase in comprehensive financing costs, and iii) a net tax impact derived from the Company’s
decision to deconsolidate for tax purposes in Mexico. Such factors more than offset the increase in the
margin afte general expenses during 2009.
Income after General Expenses less Depreciation and Amortization (EBITDA)
Consisted in a performance of $15,837 million, that is, 61.1% greater than 2008, while gross margin was
13.6%, that is 1.7 percentage points higher than 2008. The difference between the increase in EBITDA
margin and the increase of gross margin after general expenses is due to the amortization charge in the
United States, which was reincorporated into EBITDA.
EBITDA 2009 2008 % Change
Mexico 9,166 8,504 7.8
USA 5,727 539 962.5
Latin America 951 867 9.7
Consolidated 15,837 9,829 61.1
Financial Structure
As of the close of 2009, cash and cash equivalents of the Company were $4,981 million, as compared to
$7,339 million in 2008. Such decrease was fundamentally due to the prepayment of US$300 million
corresponding to the revolving line due in July 2010, which reflects the solid cash generation of the United
States operations as well as the continued strength of the flows of the Mexican operations.
As a result of the financing of the Company in the local debt markets in June of 2009, coupled with a solid
cash flow generation, net debt at the end of 2009 totalled $36,740 million, with an average maturity of 3.2
years; short-term debt represented only 13% of total debt, while long-term debt represented 87% of total
debt. With respect to currency mix, 62% was Mexican Pesos and 38% was US dollars.
In 2009, net debt was $31,759 million, as compared to $3,739 in 2008. This increase was due to debt
incurred to finance the acquisition of BBU East in January 2009, which resulted in major changes to the
company’s balance sheet.
The Company’s decision to proceed with the deconsolidation for tax purposes in Mexico, announced on
January 8, 2010, had no material consequences in its financial position.
ii) Financial Position, Liquidity and Capital Resources
a. Internal and External Liquidity Sources
BIMBO depends of traditional internal and external liquidity sources. The Company’s liquidity is based in
its operations and, historically has had sufficient levels of capital. The Company has had access to bank
financings and to the domestic capital market.
Likewise, BIMBO has several lines of credit from several financial institutions which, in the majority of
cases, have remained unused. Notwithstanding the foregoing, the Company cannot assure that it will have
access to the sources of capital mentioned above. BIMBO has not had any cyclical credit requirements.
b. Debt Levels
The table of Selected Financial Information contains information of the Company’s debt at the end of the
last three fiscal years. See “Selected Financial Information”. There is no cyclicality in the Company’s
credit requirements.
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Significant Indebtedness
Certificados Bursátiles
During 2009 the Company issued medium-term notes (certificados bursátiles) to refinance short-term debt
incurred at the beginning of 2009 to acquire BFI, which offerings were added to the offerings during 2002.
See “Financial Information – Report on Significant Debt”.
New Dual-Currency Committed Revolving Facility
On April 26, 2010, the Company obtained a new dual-currency revolving credit line for an amount of up to
750 million U.S. dollars. The maturity date of this line is July 31, 2012. See “Financial Information –
Report on Relevant Loans”.
New Mexican Peso Committed Revolving Facility
On October 24, 2010, the Company obtained from Banco Inburso, a new revolving credit line in Mexican
pesos for an amount of up to 5,200 million. The maturity date of this line is April, 2012. See “Financial
Information – Report on Relevant Loans”.
Bank Loan
On January 15, 2009, the Company contacted a long-term bank loan for an amount equivalent to US$1.7
billion. The loan consists of two tranches, the first maturing in January 2012 (Tranche A) and the second
with semiannual maturities from July of 2012 to January of 2014 (Tranche B).
During July, the Company used the proceeds from the International Bond offering to liquidate Tranche A.
Of the outstanding amount, 869 billion U.S. dollars, 68% was denominated in Mexican pesos and the
remaining 32% was denominated in U.S. dollars.
Other Loans
Some of the Group’s subsidiaries have contracted loans to finance their own working capital needs.
Liquidity
Liquidity represents the ability of the Group to generate sufficient cash flows from operating activities to
meet its obligations as well as its ability to obtain appropriate financing. Therefore, liquidity cannot be
considered separately from capital resources that consist primarily of current and potentially available
funds for use in achieving its objectives.
Currently, the Group’s liquidity needs arise primarily from working capital requirements, debt payments,
capital expenditures and dividends. In order to satisfy its liquidity and capital requirements, the Group
primarily relies on its own capital, including cash generated from operations, and committed credit
facilities. The Group believes that its cash from operations, its existing credit facilities, and its long-term
financing will provide sufficient liquidity to meet its working capital needs, planned capital expenditures,
future contractual obligations and payment of dividends.
As of December 31, the Company had a multi-currency revolving line-of-credit of $750 million dollars
maturing in July 30, 2013 and another line for $5,200 million pesos maturing on April 27, 2012.
Commitments
At December 31, 2010, the Company and certain of its subsidiaries have guaranteed, through letters of
credit, commercial obligations and contingent risks related to the labor obligations of certain subsidiaries.
The value of such letters of credit rose to 98.2 million dollars, of which a liability of 113 million dollars has
already been recorded for employment benefits in the United States (see note 19 to the Audited Financial
Statements).
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Likewise, the Company has guaranteed certain contingent obligations of associated companies for the
amount of US$1.2 million at December 31, 2010. Similarly, the Company has issued guarantees for third-
party obligations derived from the sale of assets in prior years, for the amount of US$14 million (see note
19 to the Audited Financial Statements).
c. Treasury Policies
The Company maintains treasury policies consistent with its financial obligations and operating
requirements and maintains its financial resources invested in highly-liquid, non-speculative and low-risk
instruments. The Company maintains several currencies in its treasury, specially currencies of such
countries in which the Company operates.
d. Material Committed Capital Expenditures
As of the date of this Annual Report, the Company did not have any material committed capital
expenditures.
e. Changes in the Balance Sheet
Below is information on the cash flows generated by the operations, investments and financing activities
during 2010, 2009 and 2008. The table in “Selected Financial Information” includes certain financial ratios
that show changes in the financial condition of the Company during such years.
Cash Flows from Operating Activities
Fiscal years ended December 31, 2010 and 2009
For the fiscal year ended on December 31, 2010, net cash flows from operating activities decreased by
$2,074 Pesos to $11,375 Pesos in comparison with $13,449 Pesos in 2009, primarily as a result of the fall
in operating utility in the United States.
Fiscal years ended December 31, 2009 and 2008
For the fiscal year ended December 31, 2009, net cash flows from operating activities increased by
Ps.5,062 million to Ps.13,912 million in 2009 as compared to Ps.8,850 million in 2008, primarily as a result
of improvements in the operations in the United States.
Net Cash Flows from Investing Activities
Fiscal years ended December 31, 2010 and 2009
For the fiscal year ended December 31, 2010, the net cash flow used in investing activities decreased by
$32,424 Pesos to $5,974 Pesos in comparison with $38,398 Pesos in 2009, principally as a result of the
reduced application of resources to the acquisition of businesses, in comparison with the previous year
when Grupo Bimbo acquired WFI.
Fiscal years ended December 31, 2009 and 2008
For the fiscal year ended December 31, 2009, net cash used in investing activities increased by Ps.31,238
million to Ps.38,398 million as compared to Ps.7,160 million in 2008, primarily as a result of the resources
used for the acquisition of WFI during 2009.
Net Cash Flows from Financing Activities
Fiscal years ended December 31, 2010 and 2009
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For the fiscal year ended December 31, 2010, net cash from financing activities decreased by $(6,983)
Pesos to $(29,589) Pesos compared to $22,606 Pesos in 2009, primarily as a result of less income obtained
from loans compared to the previous year.
During 2010, a dividend of $0.50 Pesos per share was payed, totaling $588 million Pesos.
Fiscal years ended December 31, 2009 and 2008
For the fiscal year ended December 31, 2009, net cash from financing activities increased by Ps.20,409
million to Ps.22,143 million as compared to Ps.1,734 million in 2008, primarily as a result cash obtained
under the credit facilities secured to finance the acquisition of WFI.
During 2009, the Company paid a dividend of Ps.0.46 per share totaling Ps.541 million.
f. Off-Balance Sheet Transactions
As of December 31, 2010, the Company had no significant transaction that was not recorded in the Audited
Financial Statements.
iii) Internal Control
The Company has an Audit Committee that performs the activities set forth in the LMV, as well as such
other corporate practices activities set forth therein and by the Company’s board of directors. The Audit
Committee is comprised by 3 independent members appointed by the board of directors or the shareholders
meeting. The chairman of the committee is appointed by the shareholders meeting.
Likewise, the Company has a Corporate Practices Committee that performs the activities set forth in the
LMV, except for those attributed to the Audit Committee or any other committee by the board of directors
of the Company. The Corporate Practices Committee is comprised by 3 independent members appointed
by the board of directors or the shareholders meeting. The chairman of the committee is appointed by the
shareholders meeting.
e) CRITICAL ACCOUNTING POLICIES
The Audited Financial Statements that form a part of this Annual Report comply with MFRS. Their
preparation requires that management make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from such estimates. The Company’s management
believes that such estimates and assumptions were adequate considering the circumstances under which
they were made.
The notes to the Audited Financial Statements contain a description of the most significant accounting
policies of the Company, including the following:
1. Cash and cash equivalents – Consists maily of bank deposits in checking accounts and readily
available daily investments of cash surpluses, easily convertible into cash, with maturity of less than three
months after its acquisition date and subject to insignificant risk of change in value. The cash has nominal
value and the cash equivalents are primarily represented by investments in government debt with daily
maturity.
2. Inventories and cost of sales – Inventories are stated at the lower of average cost or net realizable value
for those entities operating in noninflationary economic environments. For those subsidiaries operating in
inflationary economic environments, inventories are stated at average cost which is similar to their
replacement value at year end, without exceeding net realizable value, and cost of sales is stated at latest
production cost which is similar to replacement cost at the time goods are sold.
3. Property, plant and equipment – Property, plant and equipment are recorded at acquisition cost for
those entities operating in noninflationary economic environments. Balances from acquisitions made
through December 31, 2007 for all entities were restated for the effects of inflation by applying factors
derived from the NCPI through that date. Balances that arise from operations operating in an inflationary
environment continue to restate their balances by applying the inflation indeces of the country.
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Depreciation rates are calculated using the straight-line method based on the remaining useful lives of the
related assets, as follows:
Buildings 5
Manufacturing equipment 8, 10 and 35
Vehicles 10 and 25
Office furniture and fixtures 10
Computers 30
4. Investment in shares of associated companies and other permanent investments – The permanent
investments in entities in which the Company has significant influence are initially recognized based on the
reasonable net fair value of the entities’ identifiable assets and liabilities as of the date of acquisition. Such
value is subsequently adjusted for the portion related both to comprehensive income (loss) of the associated
company and the distribution of earnings or capital reimbursements thereof. When the fair value of the
consideration paid is greater than the value of the investment in the associated company, the difference
represents goodwill, which is presented as part of the same investment. Otherwise, the value of the
investment is adjusted to the fair value of the consideration paid. If impairment indicators are present,
investment in shares of associated companies is subject to impairment testing.
Permanent investments made by the Company in entities where it has no control, joint control, or
significant influence, are initially recorded at acquisition cost, and any dividends received are recognized in
current earnings, except when they are taken from earnings of periods prior to the acquisition, in which
case, they are deducted from the permanent investment.
Impairment of long-lived assets in use – The Company reviews the carrying amounts of long-lived assets
in use when an impairment indicator suggests that such amounts might not be recoverable, considering the
greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is
recorded when the carrying amounts exceed the greater of the amounts mentioned above. Impairment
indicators considered for these purposes are, among others, operating losses or negative cash flows in the
period if they are combined with a history or projection of losses, depreciation and amortization charged to
results, which in percentage terms in relation to revenues are substantially higher than that of previous
years, obsolescence, reduction in the demand for the products manufactured, competition and other legal
and economic factors. During 2009 the Company recognized animpairment in the Czech Republic
subsidiary for $56. This subsidiary was sold in 2010 and the sale price is not representative for Grupo
Bimbo. In 2010, the Cmpany recognized impairment in certain trademarks for $19.
5. Financial risk management policy – The daily activities carried out by the Company expose it to a
number of inherent risks from different variables of a financial nature, as well as variations in the price of
certain materials traded in international markets. Fur such reason, the Company uses derivative financial
instruments to mitigate the potential impact of fluctuations in such variables and prices on its financial
results. The Company believes that these instruments provide flexibility that allows greater stability of
income and better visibility and certainty with regard to costs and expenses to which it will be exposed in
the future.
The design and implementation of the strategy of derivative financial instruments is formally supervised by
two committees: 1) The Financial Risk Committee, responsible for risk management of interest and
exchange rates and 2) the Subcommittee of Risk Commodity Markets, which supervises commodity risk.
Both committees continuously report their activities to the Corporate Business Risk Committee, who is
responsible for issuing general guidelines for the risk management strategy of the Company, and for
establishing limits and restrictions on the operations they can perform. Likewise, the Corporate Business
Risk Committee reports the risk positions of the Company to the Audit and Executive Committees of the
Board of Directors.
The Company’s policy is to enter into derivative financial instruments only for hedging purposes.
Therefore, entering into a contract of a derivative financial instrument must necessarily be associated with a
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primary position that represents a certain risk. Consequently, the notional amounts of one or all derivative
financial instruments contracted to hedge a certain risk will be consistent with the amounts of the primary
positions that represent the risk position.
The Company does not enter into derivatives for speculative purposes. If the Company decides to undertake
a hedging strategy where options are combined, the net payment of premiums associated must represent an
expense for the Company.
6. Derivative financial instruments – The Company states all derivatives at fair value in the balance
sheet, regardless of the purpose for holding them. Fair value is determined using prices quoted on
recognized markets. If such instruments are not traded, fair value is determined by applying recognized
valuation techniques.
Changes in the fair value of derivative instruments designated as hedges are recognized as follows; (1) for
fair value hedges, changes in both the derivative instrument and the hedged item are recognized in current
earnings; (2) for cash flow hedges, changes in fair value of the effective portion are temporarily recognized
as a component of other comprehensive income and then reclassified to current earnings when affected by
the hedged item; the ineffective portion is immediately recognized within results; (3) for hedges of an
investment in a foreign subsidiary, the effective portion is recognized as a component of other
comprehensive income as part of the cumulative translation adjustment. The ineffective portion of the gain
or loss on the hedging instrument is recognized in current earnings, if it is a derivative financial instrument.
If not, it is recognized as a component of other comprehensive income until the investment is sold or
transferred.
To manage its exposure to interest rate and foreign currency fluctuations, the Company principally uses
interest rate swaps and foreign currency forward contracts, as well as futures to fix the purchase price of
raw materials or inputs used in production. The derivatives are obtained for the purpose of covering risks
and complying with all of the coverage requirements; accordingly, their designation is documented at the
beginning of the coverage operation, describing the objective, strategy, characteristics, accounting
recognition, and how the effectiveness of the derivative will be measured, as applicable to that operation.
Derivative trading is performed only with institutions of recognized solvency, and limits have been
established for each institution.
The hedging derivative instruments are recorded as assets or liabilities without offsetting them against the
hedged items.
7. Goodwill. Goodwill is recorded at acquisition cost, in the local currency of origin and is updated up
until December 31, 2007, applying the inflation index of each country. In those entities operating in
inflationary economic environments, goodwill will continue to be updated applying the corresponding
inflation index. Goodwill is not amortized and, at least once a year, is subject to impairment tests.
8. Intangible assets. These are primarily comprised of trademarks, rights of use and customer
relationships and are recorded at acquisition cost, in the local currency and updated until December 31 of
2007, applying the inflation index of each country. In those entities operating in inflationary economic
environments, intangible assets will continue to be updated applying the applicable inflation index. . They
are derived mainly from the acquisition of the business in the United States of America and certain
trademarks in South America. Trademarks and rights of use are not amortized; however, the carrying
values are subject to impairment tests at least annually. On December 31, 2010, the Company recognized
an impairment on certain trademarks for $19. Customer relationships have an estimated useful life of 18
years and are amortized on a straight-line basis based on such useful life. As of December 31, 2010, the
amortization recorded for the year related to intangible assets with finite lives was $258 and $257,
respectively.
9. Provisions – Provisions are recognized when there is a present obligation as the result of a past event
that is likely to result in the use of economic resources and that can be reliably estimated.
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10. Direct employee benefits – Direct employee benefits are calculated based on the services rendered
by employees, considering their current salaries. The liability is recognized as it accrues. These benefits
include mainly statutory employee profit sharing (“PTU”) to be paid, compensated absences, such as
vacation and vacation premiums, and incentives and are presented in the other accounts payable and
accrued liabilities caption.
11. Employee benefits from termination, retirement and other – The liability for seniority premiums,
pensions and termination benefits is recorded as accrued and is calculated by independent actuaries using
the projected unit credit method using nominal interest rates.
The social security liability covers the medical costs of eligible employees in the U.S. which they incur
after their retirement. Said liability for such program is determined using the Company’s historical data
according to actuarial calculations.
10. Statutory employee profit sharing – The PTU is recorded in the results of the year in which it is
incurred and presented under other expenses in the accompanying consolidated statements of income.
Deferred PTU that is generated in the subsidiaries in México is derived from temporary differences that in
2009 and in 2008 resulted from comparing the accounting and tax basis of assets and liabilities and in 2007
resulted from comparing the accounting result and income for PTU purposes.
13. Income taxes. The income tax (“ISR”) in each country and the business flat tax rate (“IETU”) in
México, if greater than the ISR, are recorded in the results of the year in which they are incurred. To
recognize deferred income taxes of the Mexican operations, based on their financial projections, the
Company determines whether it expects to incur ISR or IETU and accordingly recognizes deferred taxes
based on that expectation. Deferred taxes are calculated by applying the corresponding tax rate to the
applicable temporary differences resulting from comparing the accounting and tax bases of assets and
liabilities and including, if any, future benefits from tax loss carry forwards and certain tax credits.
Deferred tax assets are recorded only when there is a high probability of recovery.
14. Tax on assets. The tax on assets (“IMPAC”) incurred through December 31, 2007 that is expected to
be recovered is recorded as a tax credit and is presented in the balance sheet under deferred taxes.
15. Foreign currency transactions. Foreign currency transactions are recorded at the applicable exchange
rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are
translated into Mexican pesos at the applicable exchange rate in effect at the balance sheet date. Exchange
fluctuations are recorded as a component of results of the period, except for those transactions that have
been designated as a hedge of a foreign investment.
16. Revenue recognition. Revenues are recognized in the period in which the risks and rewards of the
products are transferred to the customers who purchased them, which generally occurs when these products
are delivered to the customer. The Company deducts certain discounts and promotional expenses from
sales.
17. Earnings per share. Basic earnings per share is calculated by dividing consolidated net majority
income of controlling stockholders by the weighted average number of shares outstanding during the year.
See Audited Financial Statements and their notes, which accompany this Annual Report.
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4) ADMINISTRATION
a) INDEPENDENT AUDITORS
The external auditor selection is entrusted to the Audit Committee, the retaining of which is recommended
to the Board of Directors. The Board of Directors is the body that approves the retaining of the corporation
that shall provide the external audit services and, as the case may be, of services additional or
supplementary to the external audit services.
The Audit Committee carries out a bid of the external audit services every 5 years, regardless of
considering the possibility of doing it within a shorter periodicity. The Committee selects among the firms
which due to their backgrounds, reputation, partners, international coverage, methodology and technology,
better cover the expectations and needs of the Board of Directors, the Committee and the Company’s
Administration.
In some cases, given the results on the services evaluation of the selected firm, the Audit Committee may
consider sufficient to change the partner of the relevant firm, for which it requests a slate of three
candidates and chooses the one that will be in charge of auditing the Company’s Financial Statements, in
which case the relevant bidding process will not be carried out.
As of 2002, the firm GYRU, which firm is member of Deloitte Touche Tohmatsu, has been in charge of
auditing the Company’s Consolidated Financial Statements. Until 2007, it supported its opinion, through
other independent auditors’ report. Likewise, as of 2008, GYRU carried out the Financial Statements audit
without being based in other firms’ opinions.
In the different reviews and reports which have been periodically made to the Group’s Financial
Statements, such auditors firm has issued no opinion with a qualification or a negative opinion, nor has it
refrain from issuing an opinion in connection thereto.
During 2008, the GYRU firm rendered to the Company services other than audit, consisting in surveys on
transfer prices, preparation of statements for the VAT return and tax advisory services. For the rendering of
such services, the Company paid $16 to GYRU, amount that represented 57% of the total disbursements
made to such firm in Mexico.
b) TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF INTERESTS
In the ordinary course of its activities, BIMBO carries out commercial transactions with some associate or
affiliate corporations. BIMBO contemplates to continue carrying out transactions with its associate and
affiliate companies in the future. Transactions with related companies are entered into on an arm’s length
basis therefore the Group considers that the terms are not less favorable than those which may be obtained
in a comparable transaction with an unrelated company (see Note 16 of the Audited Financial Statements).
a. The operations with related parties performed in the Group’s ordinary course of business were the
following ones:
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2010 2009 2008
Income for:
Interests collected $77 $76 --
2010 2009 2008
Disbursements for:
Purchase of raw materials $4,705 $4,403 $5,158
Terminated products $1,099 $575 $769
Office supplies, uniforms and others $467 $312 $473
b. Net balances payable to related parties are:
2010 2009 2008
Beta San Miguel, S.A. de C.V. 295 89 74
Efform, S.A. de C.V. 27 18 23
Frexport, S.A. de C.V. 80 14 41
Grupo Altex, S.A. de C.V. 159 29 229
Industrial Molinera Montserrat, S.A. de C.V: 20 14 32
Industrial Molinera San Vicente de Paul, S.A. de C.V. - - 19
Makymat, S.A. de C.V. 6 5 8
Ovoplus del Centro, S.A. de C.V. 48 13 30
Pan-Glo de Mexico, S. De R.L. de C.V. 4 1 4
Paniplus, S.A. de C.V. 24 21 27
Proarce, S.A. de C.V. 35 22 36
Fábrica de Galletas La Moderna, S.A. de C.V. 21 4 11
Mundo Dulce, S.A. de C.V. 64 5 39
Uniformes y Equipo Industrial, S.A. de C.V. 19 3 11
Total $ 802 $ 238 $ 584
On May 28, 2010, Bimbo Foods repurchased the exclusive distribution rights in Florida, Georgia and
Alabama for products sold under the Bimbo, Marinela and Tia Rosa brand names. Bimbo Foods, who had
previously granted to BMB Foods exclusive distribution rights for such brands pursuant to a distribution
agreement, exercised its buy-out right under such distribution agreement. The purchase price paid by
Bimbo Foods was approximately $34 million Dollars. Also, as part of the transaction, an affiliate of Bimbo
Foods, Orograin Bakeries Sales, Inc., assumed two facility leases, one in Dorazille, Georgia and another in
Lakeland, Florida, from BMB Foods. The distribution agreement between BMB Foods and Bimbo Foods
was terminated effective as of the closing date. Lorenzo Servitje Montull, brother of Grupo Bimbo’s Chief
Executive Officer, holds approximately 10% of the outstanding shares of BMB Foods.
c) ADMINISTRATORS AND SHAREHOLDERS
Board of Directors
In accordance with the Corporate Bylaws, the Company’s administration is in charge of a Board of
Directors and a General Director (Chief Executive Officer) that shall perform the duties established by the
Securities Market Law. The Board of Directors shall be comprised of minimum (5) and maximum twenty
one (21) regular directors, from which at least twenty five percent (25%) shall be independent directors. For
each regular director the respective alternate director may be appointed, it being understood that the
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alternate Directors of the independent Directors shall have this same nature. The members of the Board of
Directors may be shareholders or persons outside the Company.
Independent Directors shall be those persons which are not impeded to perform their duties free from
conflicts of interest and that satisfy the requirements set forth in the Securities Market Law to be considered
as such, the provisions derived there from, and in the jurisdiction laws and regulations and stock exchanges
or markets in which the Company’s securities are traded, as the case may be.
The Board of Directors appointed and ratified during the General Ordinary Shareholders Meeting held on
April 15, 2011, shall be comprised of eighteen (18) regular directors, which shall remain in their positions
until the persons appointed to substitute them take possession. The following table shows the names of the
members of the Board of Directors and the period during which they have acted as directors:
Regular Directors Seniority in
the Board Position
Roberto Servitje Sendra 35 Director / Chairman
Henry Davis Signoret 11 Director
José Antonio Fernández Carbajal 11 Director
Arturo Fernández Pérez 3 Director
Ricardo Guajardo Touché 7 Director
Agustín Irurita Pérez 6 Director
Luis Jorba Servitje 3 Director
Mauricio Jorba Servitje 16 Director
Fernando Lerdo de Tejada Luna - Director
Nicolás Mariscal Servitje |
José Ignacio Mariscal Torroella 23 Director
María Isabel Mata Torrallardona 4 Director
Raúl Obregón del Corral 15 Director
Javier de Pedro Espínola - Director
Ignacio Pérez Lizaur - -
Alexis E. Rovzar de la Torre 10 Director
Lorenzo Sendra Mata 31 Director
Daniel Servitje Montull 18 Director / Alternate
Chairman
Luis Miguel Briola Clement(1)
5 Secretary
(1) The Secretary and alternate Secretary of BIMBO are not part of the Board of Directors.
Daniel Servitje Montull is nephew of Don Roberto Servitje Sendra and cousin of Luis and Mauricio Jorba
Servitje. The latter are sons of Don Jaime Jorba Sendra (RIP). Lorenzo Sendra Mata is cousin of Don
Roberto Servitje Sendra.
Herein below are the companies where the Directors are working as key executives or as members of
boards of directors:
Roberto Servitje Sendra is member of the Board of Directors of Chrysler de Mexico, Fomento Económico
Mexicano (FEMSA), Grupo Altex, Escuela Bancaria y Comercial, Memorial Hermannn International
Advisory Board (Houston, Texas) and Grupo Aeropuertario del Sureste.
Henry Davis Signoret is the President of Promotora DAC. Is member of the Board of Directors of Grupo
Financiero IXE, Grupo Aeropuertuario del Pacífico, Kansas City Southern and Telefónica Móviles Mexico.
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José Antonio Fernández Carbajal is Chairman of the Board of Directors and Chief Executive Officer of
Fomento Económico Mexicano (FEMSA), Chairman of the Board of Coca-Cola FEMSA, Vice-Chairman
of the Board of Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and Co-Chairman of
the Board of Woodrow Wilson Center Mexico Institute. Is a member of the Board of Directors of Grupo
Financiero BBVA Bancomer, Industrias Peñoles, Grupo Televisa, Volaris and Xignux.
Arturo Manuel Fernández Pérez is the Dean of Instituto Tecnológico Autónomo de Mexico (ITAM) and
member of the Board of Directors of Crédito Afianzador; Fomento Económico Mexicano (FEMSA);
Fresnillo, Grupo Financiero BBVA Bancomer; Grupo Nacional Provincial; Grupo Palacio de Hierro;
Industrias Peñoles; and Valores Mexicanos, Casa de Bolsa.
Ricardo Guajardo Touché is member of the Board of Directors of Instituto Tecnológico y de Estudios
Superiores de Monterrey (ITESM), Fomento Económico Mexicano (FEMSA), Coca-Cola FEMSA, Grupo
Financiero BBVA Bancomer, Grupo Industrial Alfa, El Puerto de Liverpool, Grupo Aeroportuario del
Sureste (ASUR), Grupo Coppel y Nacional Monte de Piedad. Is President of BBVA Holding U.S.A.,
SOLFI and Chairman of Fondo para la Paz.
Agustín Irurita Pérez is member of the Board of Directors of Grupo ADO. Is for life member of the Board
of Directors of the Cámara Nacional de Autotransporte de Pasaje y Turismo, as well as member of the
Board of Directors of Afianzadora Aserta, Fincomún Servicios Financieros Comunitarios, Grupo
Comercial Chedraui and national director and member of the Executive Commission of the Confederación
Patronal de la República Mexicana.
Luis Jorba Servitje is Chief Executive Officer of Frialsa Frigoríficos, Chairman of the Board of Directors
of Efform and member of the Board of Directors of Texas Mexico Frozen Food Council, of International
Association of Refrigerated Warehouses and of the World Food Logistics Organization.
Mauricio Jorba Servitje is Chief Executive Officer of Operación Europa and member of the Board of
Directors of VIDAX.
Fernando Lerdo de Tejada Luna is currently President and General Director of Asesoría Estrategia Total,
S.C. and member of the Board of Directors of Consultoría Estratégica Primer Círculo, S.C., Get Digital,
S.A. de C.V., Fundación Mexicana para el Desarrollo Rural, A.C., and Club de Golf de Chapultepec, S.A.
Nicolás Mariscal Servitje is Chief Executive Officer of Grupo Marhnos. Is Vice-Chairman of Comité
Empresarial Mexico-Guatemala - COMCE and member of the Board of Directors of Fundación Mexicana
para el Desarrollo Rural.
José Ignacio Mariscal Torroella is President of Grupo Marhnos, Chairman of UNIAPAC Internacional, of
Comité por Una Sola Economía del Consejo Coordinador Empresarial, Vice-Chairman of Fincomún
Servicios Financieros Comunitarios. Is member of the Board of Directors of Sociedad de Inversión de
Capital de Posadas de MéxicoGrupo Calidra, Aserta and of the Executive Commission of Confederación
USEM.
María Isabel Mata Torrallardona is General Director of Fundación José T. Mata and member of the Board
of Directors of Tepeyac.
Raúl Obregón del Corral is Managing Partner of Alianzas, Estrategia y Gobierno Corporativo, and the
Managing Partner of Proxy Gobernanza Corporativa. Is member of the Board of Directors of Industrias
Peñoles; Grupo Palacio de Hierro, Envases y Laminados, Invermat, Altamira Unión de Crédito y
Comercializadora Círculo CCK. Is an independent member of the sub-committee on evaluation and
financing of Fondo Nacional de Infraestructura and member of the Government Board of Instituto
Autónomo de Mexico.
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Javier de Pedro Espínola is currently the Manager and Finance Director of MXO Trade S.A. de C.V. and is
the President of the Board of Directors of Test Rite Mexico, S.A. de C.V. He is a member of the board of
directors of Industrias Rampe, MXO Trade, S.A. de C.V. and Fundacion Jose T. Mata.
Ignacio Pérez Lizaur is currently a partner of Consultores Pérez Lizaur, S.C. and is a member of the board
of directors of Financiera Labor, S.A.P.I. DE C.V. and Chairman (Latin America) of Gold Buyers Inc.
Alexis E. Rovzar de la Torre is member of Latin American Practice of White & Case based in New York,
USA and member of the Board of Directors of Coca-Cola FEMSA, Fomento Económico Mexicano
(FEMSA), The Bank of Nova Scotia, Grupo Acir, Grupo Comex, Endeavor Mexico, Appleseed Mexico,
Provivah, Council of the Americas, Procura and Qualitas of Life Foundation.
Lorenzo Sendra Mata is Chairman of the Board of Directors of Proarce. Is member of the Board of
Directors of Fundación Ronald McDonald, Fomento de Nutrición y Salud, Fundación Mexicana para el
Desarrollo Rural and of Financiera Promotora para el Desarrollo Rural.
Daniel Servitje Montull is member of the Board of Directors of Grupo Financiero Banamex, Coca-Cola
FEMSA and Grocery Manufacturers of America (USA).
In the ordinary course of business, the Company has entered into transaction with some of the companies in
which the members of its Board of Directors work or in which its relevant officers work. Such transactions
have been entered into on an arm’s length basis and the Company considers that none of them is relevant.
Board of Directors Powers
El Board of Directors is the Company’s legal representative, and has the broadest powers for the
administration of the Company’s businesses, with general power of attorney for lawsuits and collections,
administrate properties and exercise acts of ownership, without any limitation, in order to appoint and
remove the General Director, directors, managers, officers and attorneys-in-fact, and to determine their
attributions, work conditions, compensations and guaranties and, particularly, to grant powers to managers,
officers, attorneys and any other persons in charge of the Company’s labor relationships.
Likewise, the Board of Directors has the power to approve the Company’s budgets and any amendments to
the budget taking into account the results being reported, as well as to authorize extraordinary entries.
The Company’s Board of Directors has also powers to approve any transfer of the Company’s shares, when
such transfer implies more than 3% of the voting shares.
Likewise, for the performance of its duties, the Board of Directors shall be aided by an Audit Committee, a
Corporate Practices Committee, an Evaluation of Results Committee and a Finance and Planning
Committee, the duties and integration of which are described herein below. See “Administration–
Intermediate Administration Bodies”.
Key Executive Officers
The following table shows the names of the Group’s key executive officers as of the date of this Annual
Report, their current position and their seniority in the Company:
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Name Position Age
Years in
the
Group
Roberto Servitje Sendra Chairman of the Board of Directors 83 66
Daniel Servitje Montull Chief Executive Officer Grupo Bimbo 52 33
Guillermo Quiroz Abed Chief Financial and Administration Officer 58 12
Reynaldo Reyna Rodríguez Vice President of Strategic Analysis and Information 56 10
Javier Millán Dehesa Chief Human Relations Officer 63 34
Luis Rene Martínez S. Director Corporate Affairs 45 4
Guillermo Sánchez Arrieta Director of Auditing 57 33
Javier A. González Franco President of Bimbo, S.A. de C.V. 56 34
Miguel Angel Espinoza Commercial Manager of Bimbo, S.A. de C.V. 54 30
José Rosalío Rodríguez Rosas Director of Production Systems and Operations of
Bimbo, S.A. de C.V.
58 35
Ricardo Padilla Anguiano Admin. and Services Director of Bimbo, S.A. de C.V. 58 35
Gary Prince President of BBU 59 2
Alfred Penny Executive Vice President BBU 55 2
Pablo Elizondo Huerta Assistant Chief Executive Officer Grupo Bimbo 58 34
Alberto Díaz Rodríguez General Manager of OLA 55 31
Alejandro Pintado López Assistant General Manager of OLA 44 22
Gabino Gómez Carbajal President of Barcel, S.A. de C.V. 52 30
José Manuel González Guzmán General Director of El Globo 45 19
Jorge Zarate Lupercio Organization Director Asia 46 24
Esteban Giraldo Organization Director Central America and Colombia 58 7
Roberto Servitje Sendra is Chairman of the Board of Directors of BIMBO since 1994. He joined the
Company in 1945. He is an officer in the Group since 1956, serving as Bimbo’s General Manager in
Guadalajara, Monterrey and Mexico City; and Bimbo Vice President during nine years.
Daniel Servitje Montull serves as BIMBO’S Chief Executive Officer since 1997. He holds a degree in
Business Administration from Universidad Iberoamericana, in Mexico. In 1987 he obtained the Master of
Business Administration degree from Stanford University, in California, USA. He is an officer of the
Group since 1978, serving positions such as Executive Officer of Organización Bimbo, Chief Executive
Officer of Organización Marinela and Vice-President of BIMBO.
Guillermo Quiroz Abed is in charge of the Financial, Comptroller and Legal departments of BIMBO, since
February 1999. He obtained a degree in Actuarial Studies from Universidad Anáhuac, in Mexico, and an
MBA degree from IPADE. He is a member of the Board of Directors of Grupo Altex.
Reynaldo Reyna Rodríguez serves as Vice President of Strategic Analysis and Information since January
2010. He studied Industrial and Systems Engineering in ITESM and holds a masters degree in Operations,
Analysis and Finance from Wharton, in the University of Pennsylvania, USA. In May 2001 he joined the
Group and served as Corporate General Manager, BBU’S General Manager and Executive Vice-President
of BBU West.
Javier Millán Dehesa serves as BIMBO’S Chief Human Relations Officer since 1979. He holds a degree in
Philosophy and Business Administration from Universidad Iberoamericana, in Mexico. He holds an MBA
degree from IPADE. He is a member of the Board of Directors of Asociación Mexicana en Dirección de
Recursos Humanos. He is the Chairman of Reforestamos Mexico, created by the Group in 2002. He has
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served in several positions in the Company, such as: Chief Development Officer, Personnel Manager in
Productos Marinela and Development Corporate Manager.
Luis Rene Martínez Souvervielle Gorozpe is Corporate Affairs Director since September 2007. He holds a
law degree from Escuela Libre de Derecho in Mexico and a specialization in Political Theory and Analysis.
Guillermo Sánchez Arrieta serves as Director of Auditing since 1998. He holds a degree in Accounting
from Universidad Autónoma de Hidalgo and studied an MBA in IPADE. He joined the Group in 1978, and
among his main positions are the following ones: Productos Marinela Comptroller, Corporate Comptroller
of Organización Bimbo and Barcel, and General Manager of Ricolino and Barcel Mexico.
Javier Augusto González Franco serves as President of Bimbo, S. A. de C.V. since January 2008. He holds
a degree in Chemical Engineering from UNAM and an MBA from Universidad Diego Portales, in Chile.
He joined the Group in 1977 and has served different positions, such as Assistant General Manager of
OLA, Assistant General Manager of Organización Bimbo and president of Barcel, S.A. de C.V.
Miguel Ángel Espinoza Ramírez is Commercial Director of Bimbo, S.A. de C.V. since January 2002. He
holds a degree in Industrial Engineering from Instituto Tecnológico de Chihuahua, he studied the D-1
Business Administration program in IPADE and the Advanced Management Program in the University of
Harvard. He joined the Group in 1981 and has served positions such as General Manager of Dulces y
Chocolates Ricolino, General Manager of Barcel del Norte, Chief Administrative Officer of Organización
Barcel and Chief Executive Officer of the same corporation.
José Rosalío Rodríguez Rosas is Director of Productions Systems and Operations at Bimbo, S.A. de C.V.,
since March, 2010. He holds a degree in Biochemical Engineering from the Instituto Politécnico Nacional
in México. He has taken courses in Business Administration at Harvard Business School in the USA, in the
IMD in Switzerland, and in the IPADE in México, and has diplomas in Marketing from Kellogg’s
University, and in Administration and Financial Decisions from the Instituto de Estudios Superiores in
Monterrey, and a course in the Science and Technology of Baking from the American Institute of Baking in
Manhattan, Kansas. He joined Grupo Bimbo in 1976. During the years 2008 and 2009, he was elected
General Comercial Director of Bimbo S.A. He has been Director of Organization Operations of Bimbo
México and Central America. He has occupied various positions in the Corporate Department and in the
plants such as Manager of Research and Development, Production Manager, Training.
Ricardo Padilla Anguiano is Services Director of Bimbo, S.A. de C.V. since December 2001. He holds a
degree in Accounting from Universidad de Guadalajara and an MBA from IPADE. He joined the Group in
1981 and has served several positions such as: General Manager of Bimbo Noroeste, Bimbo Golfo and
Bimbo San Luis.
Gary Prince serves as President of Bimbo Bakeries USA since January 2009. Gary Prince joined George
Weston Limited in July 1974. He served as President of Stroehman Bakeries, L.C. in USA until July 2001.
He was appointed President of Weston Foods and George Weston Bakeries that year, after the acquisition
made by such company of Best Foods Baking Company from Unilever. In January 2009, when Grupo
Bimbo acquired Weston Foods Inc., he was appointed President of BBU.
Fred Penny is Executive Vice-President of BBU since March 2010. From 1987 to 1997 he was part of
Kraft Baking serving as Comptroller in North East USA, Strategic Planning and Productivity Manager, as
well as General Manager of the Intermountain region. In 1997 he was appointed Vice-President and Chief
Executive Officer of Entenmann’s, Inc. In 2007, he was appointed Executive Vice-President of George
Weston Bakeries Inc. In January 2009, when Grupo BIMBO acquired Weston Foods Inc., he was appointed
Executive Vice-President of BBU.
Pablo Elizondo Huerta serves as Assistant Chief Executive officer of Grupo Bimbo since January 2008. He
holds a degree in Chemical Engineering from Universidad Nacional Autónoma de Mexico (UNAM). He
joined the Group in 1977 and served several positions such as General Manager of Wonder in Mexico City,
General Manager of Bimbo in Hermosillo, Director of Organización Latinoamérica, General Central
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Corporate Manager, General Corporate Manager of Bimbo, S.A. de C.V. and General Director of Bimbo,
S.A. de C.V.
Alberto Díaz Rodríguez serves as President of Organización Latinoamérica since January 2004. He holds a
degree in Industrial Engineering and obtained a Master in Management from the University of Miami. He
joined the Group in 1999 and has served as General Manager of Bimbo de Venezuela and Assistant
Director of Organización Latinoamérica.
Alejandro Pintado López serves as Assistant Director of Organización Latinoamérica. He holds a degree in
Business Administration from ITESM and holds a post-graduate degree in ADL School of Management
(Boston College). He joined the Group in 1989. He was founder and General Manager of Bimbo de Perú,
as well as Sales Director in Mexico.
Gabino Gómez Carbajal serves as President of Barcel, S.A. de C.V. since January 2008. He holds a degree
in Marketing from ITESM, and MBA from IPADE and the University of Miami. He joined the Group in
1981, and among his previous positions are: Vice-President of the Business Development Division,
Assistant General Manager of Organización Bimbo, General Manager of OLA and General Manager of
Bimbo, S.A. de C.V.
José Manuel González Guzmán serves as General Director of El Globo since June 2010. He has degrees in
Administration and Finance, as well as specialities in Advertising and Publicity from the Universidad
Panamerica. He took a D1 at IPADE, as well as seminars on strategy and new trends in the market (CIES).
He joined Bimbo in June of 1991, and has served in various positions such as Executive, Trademarks
Manager, and Advertising Director. In the Area of Sales he held all positions until reaching Regional
Commercial Director in Bajío, and prior to that, in Centro Sur.
Jorge Zarate Lupercio serves as Director of Organización Asia since October 2006. He holds a degree in
Biochemical Engineering from ITESM, Mexico; he holds a degree in Baking Science & Technology from
AIP, USA, an MBA from IAE, Argentina; and a post-graduate degree in Strategic Marketing from UCA,
Argentina. He joined the Group in 1987 and has served positions such as Manufacturing Manager in Bimbo
del Noroeste, Operations Manager in Bimbo and Marinela, Planning Corporate Manager and General
Manager of Bimbo in Argentina.
Jorge Esteban Giraldo Arango serves as General Director of Organization for Central America and
Colombia since July 2010. He holds a degree in Electrical Engineering. He took Courses in Upper-Level
Management at the University of Chicago (London), Instituto de Empresa-IE (Madrid), and Inalde
(Bogotá). He joined Grupo Bimbo in June 2004 as General Manager of Bimbo of Colombia.
The following is an organization chart of the Group’s key officers, in effect as of the date of this Annual
Report:
110
Compensation
Compensation to the Directors and members of the Company’s Committees is determined by the General
Ordinary Shareholders’ Meeting. Such compensation, as of the General Ordinary Shareholders Meeting
held on April 15, 2011, is as follows: Directors receive $42,000 per meeting attended. The members of the
Corporate Practices, Finance and Planning, and Evaluation and Results Committees receive $26,000 per
meeting attended. Members of the Audit Committee receive 52,000. The Company’s officers who are also
Directors and/or members of any of the Committees shall not be entitled to receive any compensation. In
2010, the total amount corresponding to the compensation mentioned in this paragraph amounted
approximately $4.5.
Compensations paid to key officers for the fiscal year ended as of December 31, 2010 amounted
approximately $210 million, which represented 0.42% of the Company’s total consolidated general
expenses. Such amount includes payments for salaries, vacation bonus, legal year-end bonus, bonus for
goal achievement and annual results bonus. Bonuses paid by the Company are determined based on the
individual performance of its collaborators, while the annual results bonus also contemplates a factor which
is determined by the financial results achieved by the Company. The above mentioned amount includes the
allocation of BIMBO shares made to the main officers for achieving the financial goal of the Economic
Added Value.
Likewise, the amount accrued by the Company and its subsidiaries for the key officers’ pension plans
amounts the sum of $243.
DANIEL SERVITJE
Chief Executive Officer of Grupo Bimbo
GUILLERMO QUIROZ Chief Financial and
Administration Officer
GUILLERMO SANCHEZ
Director of Auditing
JAVIER MILLAN Chief Human Relations
Officer
REYNALDO REYNA Vice President of Strategic
Analysis and Information
LUIS RENE MARTINEZ Director of Corporate
Affairs
PABLO ELIZONDO
Assistant Chief Executive Officer
GARY PRINCE President of BBU
JAVIER GONZALEZ General Manager of Bimbo
MIGUEL ANGEL ESPINOZA Commercial Manager
(Canales y Marcas)
ROSALIO RODRIGUEZ Director of Production Systems
and Operations
RICARDO PADILLA Administration and Services
Director
FRED PENNY Executive Vice President of
Bimbo Bakeries USA
ALBERTO DIAZ RODRIGUEZ General Manager of
Organización Latinoamérica
GABINO GOMEZ President of Barcel
JORGE ZARATE Director of Organization for Asia
JOSE MANUEL GONZALEZ General Manager
El Globo
ESTEBAN GIRALDO Director of Organization for
Centroamérica y Colombia
ALEJANDRO PINTADO Assistant General Manager of
Organización Latinoamérica
ROBERTO SERVITJE SENDRA
Chairman of the Board of Directors
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Executives and Directors Share Plan
As of 2004, the Share Plan (“Plan Acciones por VEAB (Valor Económico Agregado BIMBO”)) for
executive officers and directive officers is in effect. Based on this plan, an annual allocation of Grupo
Bimbo shares is granted, which may fluctuate from 40 to 240 base salary-days of the executive officer or
directive officer, depending on the position in the Company. Shares are acquired at their market value and
remain deposited in a trust during 30 months and are released for their full disposal upon the expiration of
such term. The allocation amount, which is made at market value, depends on the Company’s financial
results.
Intermediate Administration Bodies
The Company has the following committees, which are in charge of assisting the Board of Directors in the
Company’s administration:
Audit Committee
El Audit Committee is comprised of a minimum of three independent directors appointed by the Board of
Directors or the Shareholders’ Meeting. The chairman of the Audit Committee shall be appointed and/or
removed from his position, exclusively, by the General Shareholders’ Meeting.
The Audit Committee performs the audit activities established by the Securities Market Law, as well as
those corporate practices activities established by the same law and determined by the Board of Directors.
The Audit Committee performs, among others, the following activities: a) provide an opinion to the Board
of Directors on matters of its competence under the Securities Market Law; b) evaluate the performance of
the corporation that renders the external audit services, as well as to analyze the report, opinions and
information prepared and subscribed by the external auditor; c) discuss the Company’s Financial
Statements with the persons responsible for the preparation and review thereof, and based thereon,
recommend or not the approval thereof to the Board of Directors; d) inform the Board of Directors the
status of the Company’s internal control and external audit or those of the corporations controlled by the
Company; e) prepare the opinion referred to in Article 28, paragraph IV, clause c) of the Securities Market
Law and submit it to the consideration of the Board of Directors for its subsequent presentation to the
Shareholders’ Meeting; f) support the Board of Directors in the preparation of the reports referred to in
Article 28, paragraph IV, clauses d) and e) of the Securities Market Law; g) overview that the transactions
referred to in Articles 28, paragraph III and 47 of the Securities Market Law, are carried out in accordance
with the provisions set forth to that effect in such articles, as well as to the policies derived therefrom; h)
request the opinion from independent experts in the cases it deems it convenient, for the adequate
performance of its duties or when requested under the law; i) request from the Company’s key officers and
other employees or from the corporations controlled thereby, reports regarding the preparation of financial
information and of any other kind which it deems necessary for the performance of its duties; j) investigate
the possible defaults of which it is aware, to the transactions, guidelines and operation policies, internal
control system and internal audit and accounting recording, whether of the same Company or of the
corporations controlled thereby; k) receive opinions from the shareholders, directors, key officers,
employees and, generally, from any third party, in respect to the matters referred to in the preceding clause,
as well as to carry out the actions deemed admissible at its judgment, in connection with such opinions; l)
request periodical meetings with the relevant officers, as well as the delivery of any kind of information in
connection with the Company’s internal control and internal audit or of the corporations controlled by the
Company; m) inform the Board of Directors of the relevant irregularities detected when performing its
duties and, as the case may be, of the corrective actions adopted or to propose those to be applied; n) call
Shareholders’ Meetings and request that the items deemed pertinent are included in such meetings’ agenda;
o) overview that the General Director complies the resolutions of the Company’s Shareholders’ Meetings
and Board of Directors’ Meetings, in conformity with the instructions which, as the case may be, are issued
by the relevant meeting; and p) overview that mechanisms and internal controls which allow to verify the
Company’s actions and transaction and those of the corporations controlled thereby established are aligned
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to the applicable regulations, as well as to put in place methodologies which allow to review the fulfillment
of the above mentioned.
The General Ordinary Shareholders Meeting held on April 15, 2011, ratified the following persons as
members of the Audit Committee: Arturo Fernández Pérez, Agustín Irurita Pérez, Alexis E. Rovzar de la
Torre, and Henry Davis Signoret as chairman. In this Meeting, Ignacio Pérez Lizaur was also appointed as
a member of such Committee.
Based on the professional profiles of the members of the Audit Committee, the Company considers that
such members can be deemed financial experts.
Corporate Practices Committee
El Corporate Practices Committee is comprised of a minimum of three independent directors appointed by
the Board of Directors or the Shareholders’ Meeting. The chairman of the Corporate Practices Committee
shall be appointed and/or removed from his position, exclusively, by the General Shareholders’ Meeting.
El Corporate Practices Committee performs the corporate practices activities set forth in the Securities
Market Law, except for the corporate practices activities which the Board of Directors grants to the Audit
Committee or to the other committees that satisfy the requirements and obligations provided for in the
Securities Market Law for the committees that perform duties regarding corporate practices. The Corporate
Practices Committee performs, among others, the following activities: a) provide the Board of Directors
with an opinion in connection with the matters of its competence under the Securities Market Law; b) grant
waiver in order for a Director, relevant officer or person with command power, to take advantage of
business opportunities for such person or in favor of third parties, that correspond to the Company or to its
subsidiaries or in which such person has a significant influence, for transactions the amount of which does
not exceed five percent (5%) of the Company’s consolidated assets; c) support the Board of Directors when
preparing the report on accounting policies and criteria, and the report on the activities and transactions in
which the Board of Directors participated, in accordance with the provisions set forth in the Securities
Market Law; d) request the independent experts’ opinion in the cases it deems convenient, for the adequate
performance of its duties or when requested under the Securities Market Law or under general provisions;
e) request from the Company’s or its subsidiaries’ relevant officers and other collaborators, reports
regarding the preparation of financial information and of any other kind which is deemed necessary for the
performance of its duties; and f) call Shareholders’ Meetings and request that the items deemed pertinent
are included in such meetings’ agenda.
The General Ordinary Shareholders Meeting held on April 15, 2011 ratified the following persons as
members of the Corporate Practices Committee: Henry Davis Signoret, José Antonio Fernández Carbajal,
and Ricardo Guajardo Touché as chairman.
Based on the professional profiles of the members of the Corporate Practices Committee, the Company
considers that several of such members may be deemed as financial experts.
Evaluation and Results Committee
The Evaluation and Results Committee is comprised by members of the Board of Directors, who are
appointed by the Board of Directors or the Shareholders’ Meeting. This Committee is in charge of: a)
analyzing and approving the structure and any form of compensation made to all the Company’s and its
subsidiaries’ officers and collaborators, as well as the general compensation policies for the Company’s
and its subsidiaries’ officers and collaborators, including increases, reductions or modifications to
compensations, whether general or individual, except for the one corresponding to the General Director and
its relevant directive officers, powers which are entrusted to the Board of Directors, with the Corporate
Practices Committee’s prior opinion; b) evaluating the Company’s and its subsidiaries’ results, as well as
the repercussion thereof in the compensation to the Company’s officers and collaborators; c) analyzing
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and, as the case may be, issue an opinion in connection with wages tables applicable to the Company’s and
its subsidiaries’ officers and collaborators, including annual compensation and promotion plans, and criteria
for the pension plans; d) requesting the independent experts’ opinion in the cases it deems it convenient, for
the adequate performance of its duties; e) requesting to the Company’s or its subsidiaries’ relevant directive
officers and other collaborators, any kind of report deemed necessary for the performance of its duties; f)
acting as consultation body for the Board of Directors in connection with everything pertaining to the
Company’s and its subsidiaries’ personnel; and g) coordinating activities related to the Company’s other
committees, when the case so requires.
Through a Board of Directors meeting held on April 22, 2010 the following persons were ratified as
members of the Evaluation and Results Committee and are currently serving in their positions: Roberto
Servitje Sendra, Javier de Pedro Espínola, José Antonio Fernández Carbajal, Daniel Servitje Montull, and
Raúl Obregón del Corral as chairman.
Based on the professional profiles of the members of the Evaluation and Results Committee, the Company
considers that several of such members may be deemed as financial experts.
Finance and Planning Committee
The Finance and Planning Committee is comprised of members of the Board of Directors, who are
appointed by the Board of Directors or by the Shareholders’ Meeting. The Finance and Planning
Committee has the following powers: a) to analyze and submit to the Board of Directors’ approval the
evaluation of the long-term and budget strategies, as well as the Company’s main investment and finance
policies; b) by the Board of Directors’ express delegation, it may approve: (i) transactions which imply the
acquisition or conveyance of properties with a value equal to or lower than three percent of the Company’s
consolidated assets; (ii) the granting of guaranties or the assumption of liabilities in an amount equal to or
lower than three percent of the Company’s consolidated assets; (iii) investments in debt securities or in
banking instruments, exceeding three percent of the Company’s consolidated assets, provided however that
the same are made in conformity with the policies approved to that effect by the Board; c) propose and, as
the case may be, evaluate and periodically review policies for the handling of the Company’s and its
subsidiaries’ treasury; d) request the opinion from independent experts in the cases it deems it convenient,
for the adequate performance of its duties; e) request to the Company’s or its subsidiaries’ relevant
directive officers and other collaborators, reports regarding the preparation of the financial information and
of any other kind deemed necessary for the performance of its duties; f) act as consultation body for the
Board of Directors in everything pertaining to the above mentioned duties, including financial matters, as
well as in connection with the review and recommendation of investment projects and/or diversification of
the Company and its subsidiaries, observing their congruence and profitability. Likewise, it shall coordinate
activities related to the Company’s other committees, when the case so requires.
Through a Board of Directors meeting held on April 22, 2010, the following persons were ratified as
members of the Finance and Planning Committee: Ricardo Guajardo Touché, Mauricio Jorba Servitje, Raúl
Obregón del Corral, Guillermo Quiroz Abed, Lorenzo Sendra Mata, Daniel Servitje Montull, and José
Ignacio Mariscal Torroella as chairman.
Based on the professional profiles of the members of the Finance and Planning Committee, the Company
considers that several of such members may be deemed as financial experts.
Principal Shareholders
As of the date of this Annual Report 4,703,200,000 Series “A”, ordinary, nominative, without expression of
nominal value shares, representing the capital stock are authorized, and registered in the RNV (National
Securities Registry) and listed on the BMV (Mexican Stock Exchange) since 1980 under the ticker symbol
“BIMBO”.
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Except for Mr. Roberto Servitje Sendra, none of the Company’s shareholders or relevant directive officers
has an individual direct interest in BIMBO’S capital stock exceeding 1%.
The companies mentioned herein below hold an interest of approximately 67% in BIMBO’S capital stock.
The following table shows the information referring to the Principal Shareholders’ interest, in accordance
with the Company’s Stock Transfer Book as of April 28, 2011:
Name No. of shares Capital stock %
Normaciel, S.A. de C.V.
(a) 1,756,513,140 37.3
Promociones Monser, S.A. de C.V. (b)
540,418,544 11.5
Banco Nacional de Mexico, S.A. as trustee 263,280,212 5.6
Philae, S.A. de C.V. 232,692,104 5.0
Distribuidora Comercial Senda, S.A. de C.V. 174,960,000 3.7
Marlupag, S.A. de C.V. 161,213,536 3.4
Others 1,574,122,464 33.5%
Total 4,793,200,000 100%
a. Without being independently verified, to BIMBO’S knowledge this is a company
controlled by Mr. Daniel Servitje Montull, Chief Executive Officer of Grupo Bimbo,
and his family members.
b. Without being independently verified, to BIMBO’S knowledge this is a company
controlled by the Jorba Servitje family.
To BIMBO’S knowledge and based in the foregoing information, no person exercises control, significant
influence or command power (as such concepts are defined in the Securities Market Law) in BIMBO,
except for Roberto Servitje Sendra, Chairman of the Board of Directors, and Daniel Servitje Montull, Chief
Executive Officer.
d) CORPORATE BYLAWS AND OTHER AGREEMENTS
As of December 30, 2005 the new Securities Market Law was published in the Official Gazette of the
Federation (Diario Oficial de la Federación), which became effective on June 28, 2006, and in accordance
with which BIMBO’S Corporate Bylaws were amended by virtue of an Extraordinary Shareholders’
Meeting held on November 14, 2006. Among other thing, in such meeting the total amendment to the
Corporate Bylaws was approved, which was notarized by public deed No. 30,053 dated November 16,
2006, granted before Ana de Jesús Jiménez Montañez, Public Notary number 146 of the Federal District,
and filed in the Public Registry of Commerce of this city under mercantile folio No. 9506, dated December
6, 2006. With the amendment to the Corporate Bylaws, the Company adjusted to the securities law in
effect.
Among the most relevant amendments are the ones regarding the creation of a regime applicable to the
sociedades anónimas bursátiles (the shares of which are traded in the BMV) to improve their organization
and functioning, as well as their responsibilities regime.
1. Rights Granted by Shares
Holders of Series “A” shares are entitled to one vote in the General Ordinary and Extraordinary
Shareholders’ Meetings. Without any shares of this kind existing as of this date, the Company may issue,
under the Securities Market Law, non-voting and/or limited voting shares. As the case may be, holders of
Series “A” shares may not attend the Special Meetings held by the holders of non-voting and/or limited
voting shares and neither have they voting rights in the Special Meetings held by the holders of non-voting
and/or limited voting shares.
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As the case may be, the holders of limited voting shares, shall be entitled to attend and vote at a rate of one
vote per each share, only and exclusively in the Special Meetings held by the holder of such shares and in
the General Extraordinary Shareholders’ Meetings held to discuss any of the following matters: a)
transformation of the Company; b) merger with another company or companies, when the Company is the
merged party; c) cancellation of the limited voting shares filing in the RNV and in domestic and foreign
stock exchanges in which the same are registered, except in quoting systems or other markets not organized
as stock exchanges; and d) any other provided for in the Securities Market Law.
As the case may be, holders of limited voting shares may not attend General Ordinary Meetings, except in
the events expressly provided for in the Securities Market Law. Neither may they attend the General
Extraordinary Shareholders’ Meetings held to discuss matters in which they have no voting rights.
Additionally, shareholders holding limited or restricted voting shares, which individually or collectively
hold ten percent (10%) of the Company’s capital stock shall have the rights conferred in the Corporate
Bylaws and the General Corporation and Partnership Law.
Shareholders holding non-voting shares shall have the rights granted by the Securities Market Law.
2. Pre-emptive Rights and Capital Stock Increases
In capital stock increases, the Company’s shareholders shall have, in proportion to the number of shares
owned by such shareholders of a series in respect to the total number of shares issued and subscribed of
such series prior to the increase, a pre-emptive right to subscribe a number of shares sufficient in order to
keep their equity holding, except for: (i) share issues made under Article 53 of the Securities Market Law;
(ii) own shares acquired which become treasury shares and are placed among the investing public under
such Law; (iii) those resulting from the conversion of debentures or any other debt instruments, capital
instruments or which have features of both issued by the Company in shares, with the General
Extraordinary Shareholders’ Meetings prior approval; (iv) the Company’ merger; and (v) the event of any
capital stock increase due to subscription and payment in cash or in kind or due to the capitalization of
liabilities, in which the Company shall not be required to obtain that the shares or any series or kind, or any
foreign securities which represent them, are registered before other than the securities authorities of the
United Mexican States and, in that regard, the Company shall not be required to accept the subscription and
payment made by shareholders if such acceptance results in any obligation to be discharged by the
Company under the indicated terms.
The pre-emptive right set forth in the preceding paragraph shall be exercised by the shareholders within a
period not than 15 calendar days following the date when the Meeting’s resolution which decrees the
capital stock increase is published in the Official Gazette of the Federation (Diario Oficial de la
Federación) and any other daily newspaper of major circulation in the corporate domicile. This pre-
emptive right shall be exercised in accordance with the provisions established to that effect by the Board of
Directors.
The Company may not issue new shares until the preceding ones have not been fully paid, without
prejudice of the provisions applicable to the issuance of shares which are not subscribed, and unless the
previously issued shares are to be used, in terms of a resolution of the Meeting which approved the issuance
thereof, to satisfy any obligations to be discharged by the Company and approved by the Shareholders.
The Board of Directors is empowered to offer for subscription and payment to third parties shares which
are not subscribed by the Shareholders after the expiration of the term set forth in the preceding paragraphs
in order to exercise the pre-emptive right, in the capital stock increases decreed, it being understood that the
Price at which such shares will be offered may not be lower than the one at which they have been offered to
the Company’ Shareholders for their subscription and payment.
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3. Shareholders’ Meetings and Voting Rights
In terms of the Corporate Bylaws, the Shareholders’ Meetings may be Extraordinary, Ordinary and Special.
The General Extraordinary Shareholders’ Meetings are those held to discuss any of the matters referred to
in Article 182 of the General Corporation and Partnership Law or those held to discuss the cancellation of
the Company’s shares filing in the RNV and in other domestic or foreign stock exchanges in which they are
quoted, except quoting systems or other markets not organized as stock exchanges. General Ordinary
Meetings are all those held to discuss matters which are not of the General Extraordinary Meetings’
competence and specifically those held to discuss the matters referred to in Articles 180 and 181 of the
General Corporation and Partnership Law. Special Meetings are those held to discuss matters which might
affect the rights of one single share series and shall be subject to the provisions applicable to the General
Extraordinary Meetings. General Ordinary Meetings, as well as, as the case may be, Special Shareholders
meetings regarding limited voting shares, shall be held at least once annually, and in the case of Special
Meetings, they shall be held prior to holding the Annual General Ordinary Shareholders’ Meeting. General
Extraordinary Meetings shall be held whenever it is necessary to discuss any of the subject matters of such
Meetings.
In terms of the provisions set forth in the Corporate Bylaws and in the Mexican law, in order for a Ordinary
Shareholders Meeting to be deemed as legally held upon first call, at least fifty percent (50%) of the
ordinary shares shall be represented in the Meeting and resolutions thereof shall be valid if adopted by the
majority vote of the shares represented in the Meeting. In case of second or subsequent call, the General
Ordinary Shareholders’ Meetings may be validly held regardless of the number of ordinary shares
represented in the Meeting and resolutions shall be valid when adopted by the majority vote of the shares
represented in the Meeting.
In order for General Extraordinary Shareholders’ Meetings held to discuss matters in which limited voting
shares have no voting rights, to be validly held upon first call, at least seventy five percent (75%) of the
ordinary shares shall be represented therein and resolutions shall be valid if adopted by the affirmative vote
of shares representing at least fifty percent (50%) of the Company’s ordinary shares. In case of second or
subsequent call, Extraordinary Shareholders’ Meetings held to discuss matters in which the limited voting
shares have no voting rights, may be validly held if at least fifty percent (50%) of the Company’s ordinary
shares is represented therein and resolutions shall be valid when adopted by the affirmative vote of the
shares representing, at least, fifty percent (50%) of the Company’ ordinary shares.
In order for, as the case may be, a Special Meeting called to discuss matters concerning to limited voting
shares to be deemed legally held upon first call, at least seventy five percent (75%) of the limited voting
shares shall be represented therein, and resolutions shall be valid when adopted by the affirmative vote of
shares representing fifty percent (50%) of the limited voting shares. In case of second or subsequent call,
Special Shareholders’ Meetings may be validly held if at least fifty percent (50%) of the limited voting
shares is represented, and resolutions shall be valid when adopted by the affirmative vote of shares
representing, at least fifty percent (50%) of the limited voting shares.
Calls to the Shareholders’ Meetings shall be made by the Chairman of the Board of Directors or of the
committees performing duties regarding corporate practices and audit, or by the Secretary of the Board of
Directors or the substitute thereof. However, holders of shares with voting rights, even limited or restricted
voting rights, representing at least ten percent (10%) of the capital stock may request that a General
Shareholders’ Meeting is called under the terms set forth in Article 50 of the Securities Market Law. Any
shareholder or share owner shall have the right to request in writing to the Board of Directors or to the
chairmen of the committees that carry out audit and corporate practices duties, to call a General
Shareholders’ Meeting in any of the events referred to in Article 185 of the General Corporation and
Partnership Law. If the call is not made within 15 days following the request, such call shall be made by a
competent judge of the Company’s domicile, having previously notified the relevant request to the Board of
Directors.
The Shareholders or their representatives who, at least forty eight (48) hours prior to the date and time set
for the Meeting, computed in business days, show their share certificates and/or evidences on the share
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certificates deposited in a duly authorized institution for the deposit of securities, in terms of the Securities
Market Law shall be admitted in the Meetings. Such evidences shall be exchanged for a certificate issued
by the Company in which the name and number of shares represented by the Shareholder shall be indicated.
Such certificates shall serve as admission cards for the Meetings. Members of the Board of Directors, the
general director and the individual appointed by the corporation providing external audit services, may
attend the Company’s Shareholders’ Meetings.
The Company’s Shareholders may be represented in the Shareholders’ Meetings by persons evidencing
their legal capacity through the proxy forms prepared by the Company and made available through the
securities market intermediaries or in the same the Company, at least fifteen (15) calendar days prior to
each Meeting. Such forms shall satisfy all the requirements determined by the Securities Market Law and
the supplementary provisions thereof.
4. Minority Shareholders’ Rights
All minority holders shall have the rights which, as such, are conferred by the General Corporation and
Partnership Law, the Securities Market Law and the Corporate Bylaws.
Shareholders holding voting right shares, even limited or restricted voting rights, which individually or
collectively own ten percent (10%) of the Company’ capital stock shall be entitled to: a) appoint one
director in a General Shareholders’ Meeting and the respective alternate director thereof. Such appointment
may only be revoked by the other Shareholders when at the same time the appointment of all other
Directors is revoked, in which case the substituted persons may not be appointed with such capacity during
twelve months subsequent to the revocation date; b) require the Chairman of the Board or of one of the
committees carrying out the duties regarding corporate practices and audit, at any time, to call a General
Shareholders’ Meeting, without the percentage set forth in Article 184 of the General Corporation and
Partnership Law being applicable, c) request to adjourn the voting for three (3) calendar days of any matter
in respect to which they are not sufficiently informed, observing the terms and conditions set forth in
Article 50 of the Securities Market Law.
5. Limitation to acquire shares
The corporations controlled by BIMBO, in terms of the Securities Market Law, may not directly or
indirectly acquire shares representing the Company’s capital stock to which they are linked or negotiable
instruments representing those shares.
6. Repurchase by BIMBO of its own shares
Under its Corporate Bylaws, BIMBO may acquire shares representing its own capital stock through the
stock Exchange, at the current market price, in terms of Article 56 of the Securities Market Law.
Own shares owned by the Company or, as the case may be, treasury shares, without prejudice of the
provisions set forth in the General Corporation and Partnership Law, may be placed among the investing
public, in this last case, without the capital stock increase corresponding to the Shareholders’ Meeting
requiring a resolution of any kind, nor a resolution of the Board of Directors, regarding the placement
thereof.
7. Cancellation of Shares Filing
Cancellation of the Company’s shares filing in the RNV, whether request by the same Company or by
resolution adopted by the CNBV, shall be carried out under the terms set forth in the Securities Market Law
and the supplementary provisions thereof.
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8. Administration Intermediate Bodies
Under the Corporate Bylaws, the Company has four different administration intermediate bodies, which
support the Board of Directors in the Company’s administration. Such bodies are: the Audit Committee, the
Corporate Practices Committee, the Finance and Planning Committee, and the Evaluation and Results
Committee see “Administration – Administrators and Shareholders”.
9. Other Contracts and Agreements
In accordance with the Company’s Corporate Bylaws, any transfer of shares representing three percent
(3%) or more of voting shares issued by the Company intended to be carried out by a shareholder or in
addition to previous transactions, or by a group of shareholders linked among them, may only be carried
out with the Board of Directors’ prior approval. In case the Board of Directors denies such approval, it shall
designate one or more purchasers for the shares, which shall pay to the interested party the price recorded
in the BMV. In case the shares are not filed in the RNV, the price to be paid shall be determined in
conformity with the market current price, in accordance with the General Corporation and Partnership Law
.
On April 9, 2008 the Company informed the investing public that it received a notice from its shareholders
Normaciel, S.A. de C.V., Marlupag, S.A. de C.V., Promociones Monser, S.A. de C.V., Distribuidora
Comercial Senda, S.A. de C.V., and Philae, S.A. de C.V., owners of approximately 61% of the Company’s
shares outstanding, reporting that Shareholders Agreements have been executed, through which the
reciprocally grant to each other, during the subsequent seven years, the right of first refusal for the
acquisition of Grupo Bimbo shares which they own. Likewise, Normaciel, S.A. de C.V., grants to the other
above mentioned companies, the joint sale right, in the event of selling its shares to a third party.
As of the date of this Annual Report among the shareholders there are no other agreements the effect of
which is to delay, prevent, differ or making the Company’s change of control more onerous, or agreements
such as those set forth in Article 16, paragraph VI of the Securities Market Law, nor limiting the corporate
rights conferred by the shares.
Likewise, as of the date of this Annual Report, there are no corporate bylaws clauses or agreements among
shareholders limiting or restricting the Company’s Board of Directors or its shareholders.
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5) CAPITAL MARKET
a) SHARE HOLDING STRUCTURE
As of the date of this Annual Report, shares representing the Company’s capital stock are Series “A”
common, ordinary, nominative, without expression of nominal value shares, which are filed in the RNV.
Such shares began being quoted in the BMV in February 1980, when the Company carried out its initial
public offer. Since February 1, 1999 BIMBO is part of the Price and Quotation Index (Índice de Precios y
Cotizaciones) of the Mexican Stock Exchange (BMV).
As of the date of this Annual Report, BIMBO share is classified as high trading volume, in accordance with
the Trading Activity Index published by the Mexican Stock Exchange (BMV).
b) SHARE BEHAVIOR IN THE SECURITIES MARKET
The following tables show the maximum, minimum and closing adjusted quoting prices of BIMBO’S
Series “A” shares in the BMV, during the indicated periods.
Annual Pesos per Series “A” share Volume of Series “A”
shares traded Maximum Minimum Closing
2008 18.00 12.45 14.58 461,177,200
2009 22.99 9.98 21.64 571,582,400
2010 27.41 20.56 26.36 606,156,400
Quarterly Pesos per Series “A” share Volume of Series “A”
shares traded Maximum Minimum Closing
1T08 16.88 13.80 16.00 104,418,400
2T08 18.00 15.75 16.80 123,115,200
3T08 17.88 15.25 17.18 78,271,200
4T08 17.20 12.45 14.58 155,372,400
1T09 15.03 9.98 13.15 221,587,600
2T09 18.11 13.00 17.49 203,339,600
3T09 19.41 16.00 18.76 186,764,800
4T09 22.99 18.22 21.64 228,156,000
1T10 27.20 20.56 27.20 198,866,400
2T10 27.41 22.20 22.99 212,834,00
3T10 25.19 22.40 23.08 176,609,600
4T10 27.01 23.04 26.36 286,156,800
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Monthly Pesos per Series “A” share Volume of Series “A”
shares traded Maximum Minimum Closing
December 2009 22.99 21.25 21.64 70,733,600
January 2010 22.87 20.56 20.56 66,915,200
February 2010 23.75 21.43 23.31 60,851,200
March 2010 27.20 23.88 27.20 71,100,000
April 2010 27.41 24.60 24.60 68,573,600
May 2010 24.95 22.52 22.97 81,436,400
June 2010 25.04 22.20 22.99 62,824,00
July 2010 25.19 22.71 23.84 62,430,000
August 2010 23.68 22.40 22.64 67,637,600
September 2010 23.53 22.77 23.08 46,542,000
October 2010 24.51 23.04 23.80 118,868,400
November 2010 25.48 23.47 25.41 84,328,000
December 2010 27.01 25.85 26.36 82,960,400
Source: Bloomberg. Figures adjusted for the 4:1 stock split carried out on April 20, 2011.
c) MARKET MAKER
Beginning on March 2, 2011, Acciones y Valores S.A. de C.V., Casa de Bolsa operates as market maker
with respecto to the shares under ticker symbol BIMBO, series A, code ISIN MXP495211262 listed on the
Mexican Stock Exchange. The term of the agreement will be for six months beginning on the date of
initiation of operations.
The Market Maker agrees to maintain a continuing operative presence over the shares of BIMBO for the
purpose of promoting the stability and continuity of their prices in the market.
As of June 27, 2011, the Market Maker is in compliance with the terms established in the agreement.
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6) ATTACHMENTS
Attached to this Annual Report below please find the following documents:
a) Opinion of the Audit Committee of the Report of the General Director regarding the fiscal year ended on
December 31, 2010.
b) Audited Financial Statemetns for the fiscal years ending on December 31, 2010 and 2009.
c) Report of the Audit Committee regarding the fiscal year ending on December 31, 2010.
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Mexico City, March 17, 2011
To the Board of Directors of
Grupo Bimbo, S.A.B. de C.V.
In my capacity as Chairman of the Audit Committee (the “Committee”) of Grupo Bimbo, S.A.B. de C.V. (the
“Company”), and in accordance with point 3, section II of article 42 of the Securities Market Act, I hereby
present to you the Committee’s opinion on the content of the Chief Executive Officer’s report on the
financial position and results of the Company for the year ended December 31, 2010.
In the opinion of the Committee, the accounting and information policies and standards followed by the
Company and considered in the preparation of the consolidated financial information are appropriate and
sufficient, and accordingly with Mexican financial reporting standards. Therefore, the consolidated financial
information presented by the Chief Executive Officer reasonably reflects the financial position and results of
the Company for the year ended December 31, 2010.
Sincerely,
Henry Davis Signoret
Chairman of the Audit Committee
Of Grupo Bimbo, S.A.B. de C.V.
124
Grupo Bimbo, S. A. B. de C. V. and
Subsidiaries
Consolidated Financial Statements for the Years
Ended December 31, 2010 and 2009, and
Independent Auditors’ Report Dated March 14,
2011
125
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Independent Auditors’ Report and Consolidated
Financial Statements for 2010 and 2009
Table of contents Page
Independent Auditors’ Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Stockholders’ Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
126
Independent Auditors’ Report to the Board
of Directors and Stockholders of Grupo
Bimbo, S. A. B. de C. V.
We have audited the accompanying consolidated balance sheets of Grupo Bimbo, S. A. B. de C.
V. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related
consolidated statements of income, changes in stockholders’ equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Mexico.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and that they are prepared in
accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the financial reporting standards used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of
Grupo Bimbo, S. A. B. de C. V. and subsidiaries as of December 31, 2010 and 2009, and the results of their
operations, changes in their stockholders’ equity and their cash flows for the years then ended in conformity with
Mexican Financial Reporting Standards.
The accompanying consolidated financial statements have been translated into English for the
convenience of users.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited C. P. C. Jorge Alamillo Sotomayor March 14, 2011
2
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Consolidated Balance Sheets As of December 31, 2010 and 2009
(In millions of Mexican pesos)
Assets 2010 2009
Current assets: Cash and cash equivalents $ 3,325 $ 4,981 Accounts and notes receivable- net 13,118 12,430 Inventories- net 3,149 2,969 Prepaid expenses 440 499 Derivative financial instruments 180 146
Total current assets 20,212 21,025 Notes receivable from independent operators 2,140 1,940 Property, plant and equipment- net 32,028 32,763 Investment in shares of associated companies and
other permanent investments 1,553 1,479 Derivative financial instruments 393 159 Deferred income taxes 1,539 635 Intangible assets- net 19,372 19,602 Goodwill 19,884 20,394 Other assets- net 1,948 1,669 Total $ 99,069 $ 99,666
Liabilities and stockholders’ equity
Current liabilities: Current portion of long-term debt $ 1,624 $ 4,656 Trade accounts payable 5,954 5,341 Other accounts payable and accrued liabilities 6,302 6,228 Due to related parties 802 238 Income taxes 624 3,272 Statutory employee profit sharing 709 637 Derivative financial instruments - 74
Total current liabilities 16,015 20,446
Long-term debt 31,586 32,084 Derivative financial instruments 231 54 Employee labor obligations and workers’ compensation 4,621 4,644 Deferred statutory employee profit sharing 249 290 Deferred income taxes 622 266 Other liabilities 1,208 925
Total liabilities 54,532 58,709 Stockholders’ equity:
Capital stock 8,006 8,006 Reserve for repurchase of shares 759 759 Retained earnings 35,505 30,698 Accumulated translation effects of foreign
subsidiaries (541) 675 Valuation of financial instruments (19) (34)
Controlling stockholders’ equity 43,710 40,104 Noncontrolling interest in consolidated
subsidiaries 827 853 Total stockholders’ equity 44,537 40,957
Total $ 99,069 $ 99,666
3
See accompanying notes to consolidated financial statements.
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Consolidated Statements of Income For the years ended December 31, 2010 and 2009
(In millions of Mexican pesos, except basic earnings per common share)
2010 2009
Net sales $ 117,163 $ 116,353
Cost of sales 55,317 54,933
Gross profit 61,846 61,420
General expenses:
Distribution and selling 42,933 41,724
Administrative 7,520 7,642
50,453 49,366
Income after general expenses 11,393 12,054
Other expenses, net 950 1,176
Net comprehensive financing cost:
Interest expense, net 2,574 2,318
Exchange loss (gain), net 94 (207)
Monetary position gain (45) (99)
2,623 2,012
Equity in income of associated companies 87 42
Income before income taxes 7,907 8,908
Income tax expense 2,363 2,827
Consolidated net income for the year $ 5,544 $ 6,081
Net income of controlling stockholders $ 5,395 $ 5,956
Net income of noncontrolling stockholders $ 149 $ 125
Basic earnings per common share $ 4.59 $ 5.07
Weighted average number of shares outstanding (000’s) 1,175,800 1,175,800
See accompanying notes to consolidated financial statements.
4
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2010 and 2009
(In millions of Mexican pesos)
Reserve Noncontrolling
for Accumulated Valuation of Controlling interest in Total
Capital repurchase Retained translation financial stockholders’ consolidated stockholders’
stock of shares earnings effect instruments equity subsidiaries equity
Balances, January 1, 2009 $ 8,006 $ 759 $ 24,473 $ 1,189 $ (163) $ 34,264 $ 710 $ 34,974
Increase of capital stock of noncontrolling interest - - - - - - 99 99
Dividends declared - - (541) - - (541) (78) (619)
Balances before comprehensive income 8,006 759 23,932 1,189 (163) 33,723 731 34,454
Consolidated net income for the year - - 5,956 - - 5,956 125 6,081
Effect of valuation of financial instruments - - - - 129 129 - 129
Translation effects of foreign subsidiaries - - - (514) - (514) (3) (517)
Income tax effect due to 2010 tax reform on tax consolidation - - 810 - - 810 - 810
Comprehensive income - - 6,766 (514) 129 6,381 122 6,503
Balances, December 31, 2009 8,006 759 30,698 675 (34) 40,104 853 40,957
Dividends declared - - (588) - - (588) (126) (714)
Balances before comprehensive income 8,006 759 30,110 675 (34) 39,516 727 40,243
Consolidated net income for the year - - 5,395 - - 5,395 149 5,544
Effect of valuation of financial instruments - - - - 15 15 - 15
Translation effects of foreign subsidiaries - - - (1,216) - (1,216) (49) (1,265)
Comprehensive income - - 5,395 (1,216) 15 4,194 100 4,294
Balances, December 31, 2010 $ 8,006 $ 759 $ 35,505 $ (541) $ (19) $ 43,710 $ 827 $ 44,537
See accompanying notes to consolidated financial statements.
5
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Consolidated Statements of Cash Flows For the years ended December 31, 2010 and 2009
(In millions of Mexican pesos) 2010 2009
Operating activities: Income before income taxes $ 7,907 $ 8,908 Items related to investing activities:
Depreciation and amortization 3,729 3,783 Loss on sale of property, plant and equipment 175 183 Equity in income of associated companies (87) (42) Impairment of long-lived assets 19 56
Items related to financing activities: Interest expense 3,558 3,269 Interest income (559) (371) Unrealized exchange loss on long-term debt - 198
Changes in current assets and liabilities: Accounts and notes receivable (1,195) (188) Inventories (183) 39 Prepaid expenses 4 (68) Trade accounts payable 914 (361) Other accounts payable and accrued liabilities 878 (619) Due to related parties 564 134 Income tax paid (4,415) (2,350) Derivative financial instruments (143) 155 Statutory employee profit sharing 31 52 Employee labor obligations and workers’ compensation 178 671
Net cash flows from operating activities 11,375 13,449 Investing activities:
Acquisition of property, plant and equipment (4,091) (3,613) Proceeds from sale of property, plant and equipment 116 457 Acquisition of trademarks and other assets - (83) Dividends received 16 10 Investments in shares of associated companies (3) (29) Acquisition of business (2,012) (35,140)
Net cash flows used in investing activities (5,974) (38,398)
Excess cash to apply to (to be obtained from) financing activities 5,401 (24,949)
Financing activities: Proceeds from long-term debt 11,625 42,397 Payment of long-term debt (14,826) (16,262) Interest paid (2,675) (2,682) Payments of interest rate swaps (853) (523) Interest collected 460 295 Dividends paid (714) (619)
Net cash flows from (used in) financing activities (6,983) 22,606
Adjustments to cash flows due to exchange rate fluctuations and inflationary effects
(74) (15)
Net decrease in cash and cash equivalents (1,656) (2,358) Cash and cash equivalents at the beginning of the year 4,981 7,339
Cash and cash equivalents at the end of the year $ 3,325 4,981 See accompanying notes to consolidated financial statements.
Grupo Bimbo, S. A. B. de C. V. and Subsidiaries
Notes to Consolidated Financial Statements For the years ended December 31, 2010 and 2009
(In millions of Mexican pesos)
1. The Company
Grupo Bimbo, S. A. B. de C. V. and subsidiaries (“Grupo Bimbo” or the “Company”) are engaged in the manufacture, distribution and sale of bread, cookies, cakes, candies, chocolates, snacks, tortillas and processed foods. The Company operates in the following geographical areas: Mexico, the United States of America (“USA”), Central and South America (“OLA”), Europe and China. Due to its insignificance, the financial information of the European and Chinese regions is aggregated with Mexico in the
disclosures that follow. In 2009, a significant business acquisition was made in the USA as detailed in Note 2.
2. Basis of presentation Explanation for translation into English - The accompanying consolidated financial statements have been translated from Spanish into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial Reporting Standards (“MFRS”), with individual standards referred to as Normas de Información Financiera (“NIF”). Certain accounting practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted in the country of use. Monetary unit of the financial statements - The financial statements and notes as of December 31, 2010 and 2009 and for the years then ended include balances and transactions denominated in Mexican pesos of different purchasing power. Consolidation of financial statements - At December 31, 2010 and 2009, the consolidated financial statements include those of Grupo Bimbo, S. A. B. de C. V. and its subsidiaries, of which the more significant subsidiaries are shown below:
Subsidiary
Ownership
percentage Principal business
Bimbo, S. A. de C. V. 97 Bakery
Bimbo Bakeries USA, Inc. (“BBU”) 100 Bakery
Barcel, S. A. de C. V. 97 Candies and snacks
Bimbo do Brasil, Ltda. 100 Bakery
All significant intercompany balances and transactions have been eliminated in these consolidated financial statements.
During 2010 and 2009, net sales of Bimbo, S. A. de C. V. and Barcel, S. A. de C. V. in Mexico represented approximately 47% and 45%, respectively, of consolidated net sales. Net sales of BBU in the USA during 2010 and 2009 represented 40% and 42%, respectively, of consolidated net sales.
Acquisitions - During 2010 and 2009, the Company acquired the following businesses:
Company Country Acquisition cost Date
2010:
Various businesses
Mexico
and
China $ 2,012 Various
Business acquisitions On December 2, 2010, Grupo Bimbo acquired the main operating assets of
the business called "Dulces Vero". The acquisition of these assets strengthens
the position of the Company in the confectionery market in Mexico through
its subsidiary Barcel and supports the Company’s strategy to reach all socio-
demographic segments. As of December 31, 2010, the valuation of assets
acquired and liabilities assumed is in process and will be completed in 2011.
In 2010, the Company also acquired a business in China which is focused on
package bread, pastries, cookies, sweet bread and ready-to-eat food, which
expands its product portfolio in that country. Sara Lee On November 9, 2010, the Company announced an agreement to acquire the bakery business of Sara Lee Corporation in the USA (“North American Fresh Bakery”) for US$959 million. The closing of the transaction is subject to the resolution of regulatory approvals. If the transaction is not closed within one year, the Company could be exposed to a transaction cancellation fee up to US$100 million. The acquisition agreement includes the use of the license of the brand Sara Lee, free of royalties, for its use in bakery products in America, Asia, Africa and Eastern and Central Europe, as well as a list of regional brands with high recognition in their respective local markets.
Company Country Acquisition cost Date
2009:
Bimbo Foods, Inc. (previously
Weston Foods, Inc. (“WFI”)) USA $ 35,014 January 21
Other businesses and
trademarks Various 188 Various
$ 35,202 Acquisition of Bimbo Foods, Inc. On December 10, 2008, Grupo Bimbo entered into an agreement with Dunedin Holdings, S. A. R. L., Glendock Finance Company, and other legal entities, all subsidiaries of George Weston Limited, in which Grupo Bimbo agreed to acquire the common shares of WFI, as well as other assets, including trademarks and trade receivables related to the operations of WFI, which is a group of companies engaged in the production and distribution of bread in the eastern USA. The contract was settled on January 21, 2009, after
complying with certain requirements included therein. This transaction is aligned with Grupo Bimbo’s growth strategy to consolidate its global platform and its vision of becoming a global leader in the bakery segment and a relevant company in the global food segment. Goodwill generated by the acquisition, which has no income tax effects, amounted to $13,775 and is attributable to synergies that are expected to be obtained by combining WFI with Grupo Bimbo’s existing business in the USA. The agreement establishes certain indemnifications for both the buyer and the seller. Among those are a net working capital adjustment final settlement paid by the buyer to the seller for US$29 million and an indemnification from the seller to the buyer for up to US$42.5 million if certain contingencies materialize, of which a substantial amount of approximately US$15.5 million did not materialize and therefore has no effect on the Company. The purchase price of the shares and certain assets of WFI amounted to US$2,505 million. Sources of Financing For this acquisition, the Company obtained financing in the amount of US$2,300 million, which was structured with a one-year bridge loan for the equivalent of US$600 million that was paid in June 2009 with the proceeds from the issuance of local bonds on the Mexican Stock Exchange, and a long-term loan for the equivalent of US$1,700 million, comprised of US$900 and US$800 million that mature in three and five years, respectively (see Note 11, Long-term debt). The remainder of the purchase price of US$205 million was paid with available funds. The various contracts that formally document the financing include certain limitations on the incurrence of additional liabilities and other financial restrictions; additionally, the repayment obligations of Grupo Bimbo under such contracts are secured by the pledge of certain assets of its subsidiaries.
Accounting for the Transaction
The acquisition was recorded in conformity with NIF B-7, Business Acquisitions. The fair value determination of net assets acquired was concluded as of December 31, 2009, and incorporated in the consolidated financial statements ended on that date.
Management of the Company engaged independent specialists to assist with the identification of intangible assets with finite and indefinite lives, as well as to determine the useful lives and fair values of acquired assets, considering the valuation rules of MFRS.
Given that the acquisition of Bimbo Foods, Inc., was completed on January 21, 2009, Management believes that the financial statements are comparable in both years, as the 21 days not consolidated in 2009 are not considered material.
Translation of financial statements of foreign subsidiaries - To consolidate the financial statements of foreign subsidiaries (located principally in the USA and other Latin American countries, which represent 52% and 55% of consolidated net sales and 64% and 65% of consolidated total assets in 2010 and 2009, respectively), the accounting policies of the foreign entities are converted to MFRS using the currency in which transactions are recorded, except for the application of NIF B-10
when the foreign entity operates in an inflationary environment. The financial statements are subsequently translated to Mexican pesos considering the following methodologies: Foreign operations that operate in a non-inflationary environment whose functional currency
is the same as the currency in which transactions are recorded translate their financial statements using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet date for assets and liabilities; 2) historical exchange rates for stockholders’ equity and 3) the rate on the date of accrual of revenues, costs and expenses. Translation effects are recorded in stockholders’ equity.
Foreign operations that operate in an inflationary environment whose functional currency is
the same as the currency in which transactions are recorded first restate their financial
statements in currency of purchasing power as of the date of the balance sheet, using the price index of their country for the functional currency, and subsequently translate those amounts to Mexican pesos using the closing exchange rate in effect at the balance sheet date for all items. Translation effects are recorded in stockholders’ equity.
The activity in the accumulated translation effect caption within stockholders’ equity and on the related income tax effects for the years ended December 31, 2010 and 2009 are as follows:
2 0 1 0
Amount Income taxes Net amount
Beginning balance $ 937 $ (262) $ 675 Translation effect for the period (3,214) 965 (2,249) Translation effect for hedge of
net investment 1,476 (443) 1,033 Ending balance $ (801) $ 260 $ (541)
2 0 0 9
Amount Income taxes Net amount
Beginning balance $ 1,699 $ (510) $ 1,189 Translation effect for the period (1,754) 546 (1,208) Translation effect for hedge of
net investment 992 (298) 694 Ending balance $ 937 $ (262) $ 675
The Company’s functional currency is the Mexican peso. Since the Company has investments in foreign subsidiaries whose functional currencies are other than the Mexican peso, the Company is exposed to foreign currency translation risk. In addition, the Company has monetary assets and liabilities denominated in foreign currencies, mainly in US dollars; therefore, the Company is also exposed to foreign exchange risks arising from transactions entered into over the normal course of business. The Company’s risk management policy regarding exchange risks consists of hedging expected cash flows, principally those associated with future purchases of raw materials. Those future purchases of raw materials meet the requirements to be considered exposures associated with “highly probable” forecasted transactions for purposes of hedge accounting. When the future purchase is made, the Company adjusts the amount of the non-financial element that was hedged. Hedging the exposure to this foreign currency translation risk is mitigated by designating one or more loans denominated in these non-functional currencies as exchange rate hedges, according to the hedge accounting model for net investments
in foreign subsidiaries. Comprehensive income - Comprehensive income presented in the accompanying statements of changes in stockholders’ equity represents the changes in stockholders’ equity during the year for items that are not distributions or movements of contributed capital and includes consolidated net income for the year plus other items that represent a gain or loss for the same period, which, in conformity with MFRS, are recorded directly in stockholders’ equity without affecting the results of operations. The items of other comprehensive income consist of the unrealized accrued effects of derivative instruments and the translation and restatement effects of foreign subsidiaries in 2010 and 2009, and the impact of tax effects related to the tax reform applicable to tax consolidation in 2009. When assets and liabilities included in other comprehensive income are realized, those amounts are reclassified to net income, except for the translation effect of the net investments. Classification of costs and expenses - Costs and expenses presented in the consolidated statements of income were classified according to their function because this is the practice of the sector to which the Company belongs. Income after general expenses - Income after general expenses is the result of subtracting cost of sales and general expenses from net sales. While NIF B-3, Statement of Income, does not require inclusion of this line item in the consolidated statements of income, it has been included for a better understanding of the Company’s economic and financial performance. Reclassifications - Certain amounts in the consolidated financial statements as of and for the year ended December 31, 2009 have been reclassified to conform to the presentation of the 2010 consolidated financial statements. The only relevant reclassification is as follows: through December 31, 2009, the Company offset the majority of recoverable taxes with accrued taxes payable; however, beginning in 2010 the Company determined that in some cases, due to the different nature of the taxes and/or the inability to compensate one against the other, the balances will be independently paid and recovered, and accordingly in 2010 recoverable taxes and accrued taxes are presented separately. The effects of such reclassification were applied retroactively in the accompanying consolidated balance sheets as of December 31, 2009. The effects of the above-mentioned reclassifications is $2,825, increasing recoverable taxes within accounts receivable and other accounts payable and accrued expenses by the same amount.
3. Summary of significant accounting policies The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon applying professional judgment, considers that the estimates made and assumptions used were adequate under the circumstances. The significant accounting policies of the Company are as follows:
c. Accounting changes
Beginning January 1, 2010, the Company adopted the following new NIFs: NIF C-1, Cash and Cash Equivalents - This standard requires presentation of cash and restricted cash equivalents together within the caption “cash and cash equivalents”, as
opposed to Bulletin C-1, which required restricted cash to be presented separately. This standard also replaces the concept “temporary investments payable on demand” with “readily available investments” and permits their classification as cash equivalents only when they have a maturity within three months from the date of acquisition. Improvements to NIF 2010 - The main improvements that generate accounting changes are as follows:
NIF B-1, Accounting Changes and Correction of Errors - This improvement requires expanded disclosures when the Company applies a new standard.
NIF B-2, Statement of Cash Flows - This improvement requires that the impact of changes in value of cash and cash equivalents resulting from exchange rate fluctuations be presented separately within the caption “Effects from exchange rate changes on cash”, presented below financing activities. In addition, this caption includes the effects of converting the cash flows and balances of foreign operations to the reporting currency as well as the effects of inflation associated with the cash flows and balances of any entities within the consolidated group that operate in an inflationary economic environment.
NIF B-7, Business Acquisitions - This improvement permits the recognition of intangible assets or provisions stemming from above- or below-market leases in a business acquisition only when the acquired business is the lessee of an operating lease . This accounting change may be recognized retroactively beginning January 1, 2010.
NIF C-7, Investments in Associated Companies and Other Permanent Investments - This improvement modifies the manner in which the effects of increases in an investment in an associated company are determined. It also requires that the effects of increases or decreases in an investment in an associated company be recognized in equity in income (loss) of associated companies, instead of under non-ordinary items in the statement of income.
NIF C-13, Related Parties - This improvement requires that if the direct parent company or the ultimate parent company of the reporting entity does not issue financial statements for public use, the reporting entity should disclose the name of the direct parent company or the closest indirect parent company that does issue financial statements available for public use.
d. Recognition of the effects of inflation - The cumulative inflation in Mexico
for the three fiscal years preceding 2010 and 2009 was less than 26%, and accordingly the economic environment is considered non-inflationary under MFRS. Effective January 1, 2008, the Company discontinued recognition of the effects of inflation in its financial statements, except for those foreign entities operating in inflationary economic environments; however, assets, liabilities and stockholders’ equity as of December 31, 2010 and 2009, include the restatement effects recognized through December 31, 2007 for all entities. The cumulative inflation in most countries where the Company operates other than Mexico for the three year preceding 2010 and 2009 is also lower than 26% and accordingly qualify as non-inflationary; however, there are countries in which the Company operates whose economic environments qualify as inflationary, for which the cumulative inflation rates of the three preceding years were as follows and for which inflationary effects were recognized in 2010 and 2009:
2010 2009
Argentina 26% 28%
Costa Rica 31% 38% Venezuela 100% 87% Nicaragua 34% 49%
The cumulative inflation for the three preceding fiscal years for those foreign entities operating in inflationary economic environments and which recognized the effects of inflation only in 2009 were as follows:
2009
Uruguay 26% Guatemala 26% Honduras 27% Paraguay 28%
Through December 31, 2007 for all entities and in 2010 and 2009 only for those foreign entities operating in inflationary economic environments, recognition of the effects of inflation resulted mainly in inflationary gains or losses on nonmonetary and monetary items. These effects are principally presented in the consolidated financial statements under the following line item: Monetary position result - Monetary position result, which represents
the erosion of purchasing power of monetary items caused by inflation, is calculated by applying National Consumer Price Index (NCPI) factors to monthly net monetary position. Gains (losses) result from maintaining a net monetary liability (asset) position.
e. Cash and cash equivalents - Cash and cash equivalents consist mainly of
bank deposits in checking accounts and readily available daily investments of cash surpluses, maturing within three months as of their acquisition date with minimal risk of value fluctuation. Cash is stated at nominal value and cash equivalents are stated at fair value. Fluctuations in carrying value are recognized in comprehensive financing cost (“CFC”) as they accrue. Cash equivalents are primarily represented by investments in sovereign debt with daily maturities.
f. Inventories and cost of sales - Inventories are stated at the lower of average cost or realizable value for those entities operating in non-inflationary economic environments. For those foreign entities operating in inflationary economic environments, inventories are stated at average cost which is similar to their replacement value at year end, without exceeding net realizable value, and cost of sales is stated at the latest production cost, which is similar to replacement cost at the time goods are sold.
g. Property, plant and equipment - Property, plant and equipment are recorded at acquisition cost for those entities operating in non-inflationary economic environments. Balances from acquisitions made through December 31, 2007 for all entities were restated for the effects of inflation by applying factors derived from the NCPI through that date. Subsidiaries operating in an inflationary environment continue to restate their balances by applying the NCPI. Depreciation rates are calculated using the straight-line method based on the useful lives of the related assets, as follows:
Buildings 5 Manufacturing equipment 8, 10 and 35 Vehicles 10 and 25 Office furniture and fixtures 10 Computers 30
h. Investment in shares of associated companies and other permanent
investments - Permanent investments in entities where significant influence exists are initially recognized based on the net fair value of the entities’ identifiable assets and liabilities as of the date of acquisition. Such value is subsequently adjusted for the portion related both to comprehensive income (loss) of the associated company and the distribution of earnings or capital reimbursements thereof. When the fair value of the consideration paid is greater than the value of the investment in the associated company, the difference represents goodwill, which is presented as part of the same investment. When the fair value of the consideration paid is less than the value of the investment, the latter is adjusted to the fair value of the consideration paid. If impairment indicators are present, investment in shares of associated companies is subject to impairment testing. Permanent investments made by the Company in entities where it has no control, joint control, or significant influence, are initially recorded at acquisition cost, and any dividends received are recognized in current earnings, except when they are taken from earnings of periods prior to the acquisition, in which case they are deducted from the permanent investment.
i. Impairment of long-lived assets in use - The Company reviews the carrying
amounts of long-lived assets in use when an impairment indicator suggests
that such amounts might not be recoverable, considering the greater of the
present value of future net cash flows or the net sales price upon disposal.
Impairment is recorded when the carrying amounts exceed the greater of the
amounts mentioned above. Impairment indicators considered for these
purposes are, among others, operating losses or negative cash flows in the
period if they are combined with a history or projection of losses,
depreciation and amortization charged to results, which in percentage terms in
relation to revenues are substantially higher than that of previous years,
obsolescence, reduction in the demand for the Company’s products,
competition and other legal and economic factors. During 2009, an
impairment loss of $56 was recognized in the Czech Republic subsidiary.
This subsidiary was sold in January 2010 and is not material to the Company
as a whole. In 2010, an impairment loss of $19 on certain trademarks was
also recognized.
j. Financial risk management policy - The daily activities carried out by the
Company expose it to a number of inherent risks of different variables of a
financial nature, as well as variations in the price of certain materials traded
in formal international markets. For such reason, the Company uses
derivative financial instruments to mitigate the potential impact of
fluctuations in such variables and prices on its financial results. The Company
believes that these instruments provide flexibility that allows greater stability
of income and better visibility and certainty with regard to costs and expenses
to which it will be exposed in the future.
The design and implementation of the strategy of derivative financial
instruments is formally supervised by two committees: 1) The Financial Risk
Committee, responsible for risk management of interest and exchange rates
and 2) the Subcommittee of Risk Commodity Markets that supervises
commodity risk. Both committees continuously report their activities to the
Corporate Business Risk Committee, who is responsible for issuing general
guidelines for the risk management strategy of the Company and for
establishing limits and restrictions on the operations they can perform. The
Corporate Business Risk Committee in turn reports the risk positions of the
Company to the Audit and Executive Committees of the Board of Directors.
The Company’s policy is to enter into derivative financial instruments only
for hedging purposes. Therefore, entering into a contract of a derivative
financial instrument must necessarily be associated with a primary position
that represents a specific risk. Consequently, the notional amounts of one or
all derivative financial instruments contracted to hedge a specific risk will be
consistent with the amounts of the primary positions that represent the risk
position.
The Company does not enter into transactions for which the objective is to
benefit from premium income. If the Company decides to undertake a
hedging strategy where options are combined, the net payment of associated
premiums must represent an expenditure for the Company.
k. Derivative financial instruments - The Company states all derivatives at fair
value in the balance sheet, regardless of the purpose for holding them. Fair
value is determined using prices quoted on recognized markets. If such
instruments are not traded, fair value is determined by applying recognized
valuation techniques.
Changes in the fair value of derivative instruments designated as hedges are
recognized as follows; (1) for fair value hedges, both the derivative
instrument and the hedged item are stated at fair value and changes are
recognized in current earnings: (2) for cash flow hedges, changes in the
effective portion are temporarily recognized as a component of other
comprehensive income and then reclassified to current earnings when
affected by the hedged item; the ineffective portion is immediately
recognized in current earnings; (3) for hedges of an investment in a foreign
subsidiary, the effective portion is recognized as a component of other
comprehensive income as part of the accumulated translation effect; the
ineffective portion of the gain or loss on the hedging instrument is recognized
in current earnings, if it is a derivative financial instrument. If not, it is
recognized as a component of other comprehensive income until the
investment is sold or transferred.
To manage its exposure to interest rate and foreign currency fluctuations, the
Company principally uses interest rate swaps and foreign currency forward
contracts, as well as futures to fix the purchase price of raw materials. The
Company formally documents all hedging relationships at the beginning of
the transaction, including their objectives and risk management strategies to
carry out derivative transactions. Derivative trading is performed only with
institutions of recognized solvency, and limits have been established for each
institution.
The hedging derivative instruments are recorded as assets or liabilities
without offsetting them against the hedged items.
l. Goodwill - Goodwill is recorded at acquisition cost in originating local
currency and through December 31, 2007, was restated for the effects of
inflation using the NCPI of the respective country. For subsidiaries operating
in inflationary economic environments, goodwill continues to be restated
using the applicable inflation rate. Goodwill is not amortized and, at least
once a year, is subject to impairment tests.
m. Intangible assets - These are primarily comprised of trademarks, rights of use
and customer relationships and are recorded at acquisition cost and were
restated through December 31, 2007 using the inflation rate of each country.
For subsidiaries operating in inflationary economic environments, goodwill
continues to be restated using the applicable inflation rate. They are derived
mainly from the acquisition of the business in the USA and certain
trademarks in South America. Trademarks and rights of use are not
amortized; however, the carrying values are subject to impairment tests at
least annually. As of December 31, 2010, the Company recognized
impairment loss on certain trademarks of $19. Customer relationships have
an estimated useful life of 18 years and are amortized on a straight-line basis
based on such useful life. For the years ended December 31, 2010 and 2009,
the amortization recorded for intangible assets with finite lives was $258 and
$257, respectively.
n. Provisions - Provisions are recognized when there is a present obligation as
the result of a past event that is probable to result in the use of economic
resources and that can be reliably estimated.
o. Direct employee benefits - Direct employee benefits are calculated based on
the services rendered by employees, considering their current salaries. The
liability is recognized as it accrues. These benefits include mainly accrued
statutory employee profit sharing, compensated absences, such as vacation
and vacation premiums, and incentives and are presented in other accounts
payable and accrued liabilities.
p. Employee benefits from termination, retirement and other - The liability for
seniority premiums, pensions and termination benefits is recorded as accrued
and is calculated by independent actuaries based on the projected unit credit
method using nominal interest rates.
Other employee benefits relate to medical expenses for eligible employees in
the USA incurred after retirement. Such liability is determined using the
Company’s historical data according to actuarial calculations.
q. Statutory employee profit sharing - Statutory employee profit sharing
(“PTU”) is recorded in the results of the year in which it is incurred and
presented in other expenses in the accompanying consolidated statements of
income. Deferred PTU arising from Mexican subsidiaries is derived from
temporary differences resulting from comparing the accounting and tax basis
of assets and liabilities.
r. Income taxes - Income taxes (“ISR”) of each country and the Business Flat
Tax (“IETU”) in Mexico, if higher than ISR, are recorded in the results of the
year in which they are incurred. To recognize deferred income taxes, based
on its financial projections, the Company determines whether it expects to
incur ISR or IETU and accordingly recognizes deferred taxes based on the tax
it expects to pay. Deferred taxes are calculated by applying the corresponding
tax rate to the applicable temporary differences resulting from comparing the
accounting and tax bases of assets and liabilities and including, if any, future
benefits from tax loss carryforwards and certain tax credits. Deferred tax
assets are recorded only when there is a high probability of recovery.
s. Tax on assets - The tax on assets (“IMPAC”) generated in Mexico through
2007 that is expected to be recovered is recorded as a tax credit and is
presented in the balance sheet under deferred taxes. t. Foreign currency transactions - Foreign currency transactions are recorded
at the applicable exchange rate in effect at the transaction date. Monetary
assets and liabilities denominated in foreign currency are translated into
Mexican pesos at the applicable exchange rate in effect at the balance sheet
date. Exchange fluctuations are recorded as a component of results of the
period, except for those transactions that have been designated as a hedge of a
foreign investment. u. Revenue recognition - Revenues are recognized in the period in which the
risks and rewards of the products are transferred to the customers who
purchased them, which generally occurs when these products are delivered to
the customer. The Company deducts certain discounts and promotional
expenses from sales. v. Earnings per share - Basic earnings per share are calculated by dividing net
income attributable to the controlling interest by the weighted average
number of shares outstanding during the year.
4. Accounts and notes receivable
2010 2009
Customers and agencies $ 7,249 $ 7,059
Allowance for doubtful accounts (310) (290)
6,939 6,769
Notes receivable 601 513
Income, value-added and other recoverable taxes 4,021 3,434
Sundry debtors 338 393
Sanalp 2005, S. L., related party 1,092 1,178
Madera, L. L. C., related party 127 143
$ 13,118 $ 12,430
5. Inventories
2010 2009
Finished products $ 1,095 $ 768
Orders in-process 94 75
Raw materials, containers and wrapping 1,735 1,725
Other 47 102
Allowance for slow-moving inventories (1) (3)
2,970 2,667
Advances to suppliers 17 41
Raw materials in-transit 162 261
$ 3,149 $ 2,969
6. Long-term notes receivable from independent operators The Company has sold certain equipment and distribution rights in the USA to former employees
and certain third parties (collectively, the “independent operators”). The Company finances 90% of the distribution rights sold to certain independent operators. The
notes bear an annual interest rate ranging from 9.75% to 10.75% and are payable in 120 monthly
installments.
7. Property, plant and equipment 2010 2009
Buildings $ 11,221 $ 12,893
Manufacturing equipment 29,488 28,915
Vehicles 8,430 8,070
Office furniture and fixtures 638 593
Computers 2,044 1,815
51,821 52,286
Less- Accumulated depreciation (25,298) (23,411)
26,523 28,875
Land 3,550 2,717
Construction in-progress and machinery in-
transit 1,955 1,171
$ 32,028 $ 32,763
8. Investment in shares of associated companies and other permanent
investments
At December 31, 2010 and 2009, the investment in shares of associated companies and other
permanent investments are as follows:
Associated companies
% of
ownership 2010 2009
Beta San Miguel, S. A. de C. V. 8 $ 378 $ 327
Mundo Dulce, S. A. de C. V. 50 291 320
Fábricas de Galletas La Moderna, S. A.
de C. V.
50 255 261
Grupo La Moderna, S. A. de C. V. 3 156 140
Congelación y Almacenaje del Centro,
S. A.
de C. V. 15 83 79
Fin Común, S. A. de C. V. 30 79 71
Productos Rich, S. A. de C. V. 18 78 72
Grupo Altex, S. A. de C. V. 11 70 70
Ovoplus, S. A. de C. V. 25 52 54
Innovación en Alimentos, S. A. de C. V. 50 28 25
Pierre, L. L. C. 30 14 15
Other Various 69 45
$ 1,553 $ 1,479
9. Intangible assets
The following is an analysis of the balance of intangible assets by geographical
area:
2010 2009
Mexico $ 2,016 $ 1,039
United States of America 16,349 17,532
OLA 1,007 1,031
$ 19,372 $ 19,602
At December 31, 2010 and 2009, the breakdown of intangible assets is as follows:
Average life 2010 2009
Trademarks Undefined $ 15,779 $ 15,533
Rights of use Undefined 36 38
15,815 15,571
Customer relationships 18 years 3,794 4,009
Licensing agreements and
software 8 and 2 years 247 261
Non-compete agreements 5 years 17 18
4,058 4,288
Accumulated amortization (501) (257)
3,557 4,031
$ 19,372 $ 19,602
During 2010 and 2009, changes in trademarks were as follows:
2010 2009
Balance as of January 1 $ 15,533 $ 4,762
Acquisitions 1,001 10,668
Impairments (19) -
Disposals - (6)
Adjustments due to variations in exchange rates (736) 109
Balance as of December 31 $ 15,779 $ 15,533
10. Goodwill
The following is an analysis of the balance of goodwill by geographical area:
2010 2009
Mexico $ 1,258 $ 753
United States of America 16,919 17,871
OLA 1,707 1,770
$ 19,884 $ 20,394
During 2010 and 2009, the changes in goodwill were as follows:
2010 2009
Balance as of January 1 $ 20,394 $ 6,488
Acquisitions 517 13,775
Adjustments due to variations in exchange rates (1,027) 131
Balance as of December 31 $ 19,884 $ 20,394
11. Long-term debt
2010 2009
Committed Revolving (Multi-currency) Line-of-Credit - On July 20, 2005, the Company entered into an agreement to amend its committed revolving line-of-credit dated May 21, 2004, increasing the line-of-credit up to the amount of US$600 million. The term of the debt was for five years with a maturity date July 2010; the balance due was paid in full as of December 31, 2010. $ - $ 3,918
Local bonds - In addition to the local bonds issued in 2002, during 2009 the Company issued local bonds to refinance short-term liabilities contracted early in 2009 to acquire BFI. As of December 31, 2010, such bonds are as follows:
Bimbo 09- Issued June 15, 2009, maturing in June 2014, with interest at the 28-day Mexican Interbank Equilibrium Offered rate (“TIIE”) plus 1.55%. 5,000 5,000
Bimbo 09-2- Issued June 15, 2009, maturing in June 2016, with a fixed interest rate of 10.60%. 2,000 2,000
Bimbo 09U- Issued June 15, 2009 in the amount of 706,302,200 Investment Units (“UDIs”), maturing in June 2016, with a fixed interest rate of 6.05%. The UDI value at December 31, 2010 and 2009 was $4.5263and $4.3401 Mexican pesos per UDI, respectively. 3,197 3,066
Bimbo 02-2- Issued in May 17, 2002, maturing in May 2012, with a fixed interest rate of 10.15%. 750 750
International bond - On June 30, 2010, the
Company issued a bond under U.S. Securities and Exchange Commission Rule 144 Regulation S for US$800 million maturing on June 30, 2020. Such bond pays a fixed interest rate of 4.875% with semiannual payments. The proceeds from this issuance were used to the refinance Company debt, extending the average term of such debt. 9,886 -
Bank loan - On January 15, 2009, the Company 10,736 21,250
entered into a long-term bank loan in the amount of the equivalent of US$1,700 million, in which BBVA Bancomer, S. A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer as lead agent, and a syndicate bank comprised of 8 institutions participate. The loan consists of two tranches, the first maturing in January 2012 (Tranche A) and the second with semiannual maturities from July 2012 to January 2014 (Tranche B). During the month of July 2010, the Company used the proceeds from the issuance of the International Bond, to settle Tranche A in full. The Company pays interest at the TIIE rate plus 1.00% for the portion denominated in Mexican pesos and the London Interbank Offered rate (“LIBOR”) plus 1.25% for the portion denominated in U.S. dollars. Up to 68% of the unpaid balance is denominated in Mexican pesos for the amount of $7,300 and 32% of the unpaid balance is denominated in U.S. dollars for the amount of $3,436. All proceeds obtained from this financing, plus those obtained from the multicurrency bridge loan, were used by Grupo Bimbo to partially pay for the acquisition of BFI.
2010 2009
Other - Certain subsidiaries have entered into other direct loans maturing from 2011 to 2012, at various interest rates. 1,641 756
33,210 36,740 Less - Current portion of long-term debt (1,624) (4,656) Long-term debt $ 31,586 $ 32,084
At December 31, 2010, long-term debt matures as follows:
Year Amount
2012 $ 3,451 2013 5,368 2014 7,684 2016 5,197 2020 9,886
$ 31,586
The local bonds, international bond and the committed revolving line-of-credit are
guaranteed by certain of the principal assets of the subsidiaries of Grupo Bimbo.
The loan agreements establish certain covenants and also require that the Company
maintain determined financial ratios based on consolidated financial statements. At
December 31, 2010 and 2009, the Company has complied with all the obligations
established in the loan agreements.
12. Derivative financial instruments
As of December 31, derivative financial instruments were comprised as follows:
2010 2009
Assets: Forwards $ 6 $ 2 Future contracts
Fair value of wheat and soybean oil 131 6 Fair value of natural gas and diesel 8 58 Forwards and options - 11
Total value of financial instruments 145 77 Warranty account 35 69
Total current portion $ 180 $ 146 Long-term swaps $ 393 $ 159 Liabilities:
Swaps $ - $ (37)
Future contracts Fair value of wheat and natural gas - (37)
Total current portion $ - $ (74)
Swaps $ (230) $ (54) Forwards (1) -
Total long-term portion $ (231) $ (54)
2010 2009
Stockholders´ Equity: Total value of cash flow hedges $ (11) $ 108 Closed contracts for unused futures (8) (149)
(19) (41) Deferred income taxes, net - 7
Cumulative other comprehensive income $ (19) $ (34)
Swaps - The Company entered into swaps to modify its debt profile in Mexico. The derivatives were designated as cash flow hedges and since their inception were assumed to have no ineffectiveness. As of December 31, 2010, the operating characteristics and the fair value of the hedging instruments were as follows:
Amounts as of December 31, 2010
Date of Notional
amount
Interest rate Fair
Commencement Maturity Paid Collected Value
Swaps that convert debt from Mexican pesos to U.S. dollars and modifies the interest rate of the Bimbo 02-2 and Bimbo 09-2
local bonds:
September 15, 2010 May 3, 2012 58.6 (*) 5.70% (U.S. dollars)
10.15%
(Mexican pesos) 38
September 13, 2010 June 6, 2016 155.5 (*) 6.35% (U.S. dollars)
10.60%
(Mexican pesos) 105
Swaps that modify the Bimbo 09U local bond currency and interest rate:
June 10, 2009 June 6, 2016 $1,000
10.54%
(Mexican pesos) 6.05% (UDI) 85 June 24, 2009 June 6, 2016 $2,000 10.60% 6.05% (UDI) 165
(Mexican pesos)
Total long-term assets $ 393
Swaps that fix the Bimbo 09 local bond rate:
June 26, 2009 June 9, 2014 $2,000 7.43% 4.87% (TIIE) (87)
Swaps that fix the rate of the long-term bank loan in U.S. dollars:
May 27, 2009 January 15, 2014 150 (*) 2.33% (LIBOR) 0.26% (LIBOR) (59)
May 29, 2009 January 13, 2012 25 (*) 1.66% (LIBOR) 0.26% (LIBOR) (3)
May 29, 2009 January 13, 2012 100 (*) 1.63% (LIBOR) 0.26% (LIBOR) (12)
Swaps that fix the rate of the long-term bank loan in Mexican pesos:
June 5, 2009 January 13, 2012 $1,500 6.51% (TIIE) 4.87% (TIIE) (23) June 5, 2009 January 15, 2014 $1,500 7.01% (TIIE) 4.87% (TIIE) (46)
Total long-term liabilities $ (230) (*) Amounts in millions of U.S. dollars In connection with the issuance of the Bimbo 02-2 and the Bimbo 09-2 local bonds, in September 2010 the Company entered into a foreign currency swap and an interest rate swap for $750 and $2,000, respectively, which convert the debt from Mexican pesos to US dollars and modify the related interest rates. The applicable exchange rates were 12.79 and 12.88, and the interest rates to be paid are 5.70% and 6.35%, respectively. In connection with the issuance of the Bimbo 09U local bonds, between June 10 and 24, 2009, the Company entered into two foreign currency swaps for $1,000 and $2,000 that together cover the entire Bimbo 09U issue and convert the debt from UDIs to Mexican pesos at fixed rates of 10.54% and 10.60%, respectively. To cover the interest rate risk on the issuance of the Bimbo 09 local bonds, on June 26, 2009 the Company entered into an interest rate swap for $2,000 that converts the variable rate to a fixed rate of 7.43% effective July 13, 2009. To cover the interest rate risk on the dollar portion of Tranche A of the Bank Loan, between May 27 and 29, 2009, the Company entered into three swaps that totaled US$300 million and fix the one-month LIBOR to an average rate of 1.64%. On August 25, 2010 the Company prepaid US$175 million of Tranche A of the Bank Loan, so the remaining balance of the hedging instrument of US$125 million was assigned as hedge of the Tranche B Bank Loan. Additionally, to cover the interest rate risk on the U.S. dollar portion of Tranche B of the Bank Loan, on May 27, 2009, the Company entered into a swap for US$150 million that fixes the one-month LIBOR rate at 2.33%. To cover the interest rate risk on the Mexican peso portion of Tranche A of the Bank Loan, on June 5, 2009, the Company entered into a swap for $1,500 that fixes the 28-day TIIE rate at 6.51%. Since the Company prepaid the portion of Tranche A on August 25, 2010, the related hedge was transferred to the Tranche B Bank Loan. Additionally, to cover the interest rate risk on the Mexican peso portion of Tranche B of the Bank Loan, on June 5, 2009, the Company entered into a swap for $1,500 that fixes the 28-day TIIE rate at 7.01%.
As of December 31, 2009, the operating characteristics and the fair value of the
above hedging instruments were as follows: Amounts as of December 31, 2009
Date of Notional
amount
Interest rate Fair
Commencement Maturity Paid Collected value
Swaps that fix the revolving credit line rate in U.S. dollars:
July 23, 2008 July 23, 2010 125 (*) 3.82% 0.95% $ (37)
Swaps that modify local bond currency and interest rates:
June 26, 2009 June 9, 2014 $ 2,000 7.43% 4.90% (8)
June 10, 2009 June 6, 2016 $ 1,000 10.54% 6.05% 55 June 24, 2009 June 6, 2016 $ 2,000 10.60% 6.05% 104
Swaps that fix the rate of the long-term bank loan in U.S. dollars:
May 27, 2009 January 13, 2012 100 (*) 1.63% 0.23% (6)
May 29, 2009 January 13, 2012 100 (*) 1.66% 0.23% (7)
May 29, 2009 January 13, 2012 100 (*) 1.63% 0.23% (6) May 27, 2008 January 15, 2014 150 (*) 2.33% 0.23% (10)
Swaps that fix the rate of the long-term bank loan in Mexican pesos:
June 5, 2009 January 13, 2012 $ 1,500 6.51% 4.87% (8)
June 5, 2009 January 15, 2014 $ 1,500 7.01% 4.87% (9)
Net fair value $ 68
Total long-term assets $ 159
Total current liabilities $ (37)
Total long-term liabilities $ (54) (*) Amounts in millions of U.S. dollars Cross currency “Forwards” - As of December 31, 2010 and 2009, the Company had contracted forwards to hedge the cash flows of operating and financial liabilities denominated in foreign currency. These instruments cover a notional amount of 24.0 and 25.3 million Euros as of December 31, 2010 and 2009, respectively, which fix the exchange rate for the purchase of foreign currency at an average of $16.3261 and $18.6680 Mexican pesos per Euro, respectively. Their fair value is $6 and $2 at December 31, 2010 and 2009, respectively. Hedges of wheat, natural gas prices and other commodities - The Company enters into wheat, natural gas and other commodities futures contracts to minimize the risk of variation in international prices of both consumables. Wheat, which is the primary component of flour and is the main input used by the Company, together with natural gas are used in the manufacture of its products. The transactions are carried out in recognized commodity markets, and through their formal documentation are designated as cash flow hedges of forecasted transactions. The other comprehensive income at December 31, 2010 and 2009 includes closed contracts that have not been transferred to cost of sales due to the fact that the wheat under these contracts has not been used for flour consumption. As of December 31, 2010 and 2009, the characteristics of these hedging instruments and their fair value at the contract date were as follows:
Amounts as of December 31, 2010
Date of commencement Position
Contracts Fair
value Number Maturity Region
Futures contracts to fix the purchase price of wheat and soybean oil:
November 2010 Long 1,132 March 2011 Mexico $ 48
November 2010 Long 1,160 March 2011 USA 75
November 2010 Long 14 March 2011 OLA 1 Various (soybean oil) Long 138 March and May 2010 USA 7
Total current assets $ 131
Futures contracts to fix the purchase price of natural gas:
August through December 2010
Long 524 Between June 2011 and December 2012 Mexico $ 8
August through October
2010
Long 315 Between March and
December 2011 USA -
Total current assets $ 8
Amounts as of December 31, 2009
Date of
commencement Position
Contracts Fair
value Number Maturity Region
Futures contracts to fix the purchase price of wheat and soybean oil:
August through November
2009 Long 814
Between March and
May 2010 Mexico
$ (11)
June through September 2009
Long 1,196 March 2010 USA (24)
July through November
2009 Long 170 March to July 2010 OLA
(1) Various (Soybean oil) Long 135 Various USA 6
Net fair value $ (30)
Total current assets $ 6
Total current liabilities $ (36) Futures contracts to fix the purchase price of natural gas and diesel:
Various (Natural gas) Long 170 Various Mexico $ 8 Various (Diesel) Long 128 Various USA 50
Various (Natural gas) Long 193 Various USA (1) Net fair value $ 57 Total current assets $ 58 Total current liabilities $ (1)
Hedges of currency “Forwards” for purchase of wheat - During 2010 and 2009,
the Company entered into exchange rate call options, which were designated as
hedges of possible exchange rate fluctuations of the U.S. dollar, the foreign
currency in which the majority of purchases of wheat flour are made. The covered
purchases in 2010 are from January and April of 2011 and in 2009 were from
January to March of 2010.
Amounts as of December 31, 2010
Date of
Commencement Maturity Amounts in
U.S. dollars
Contracted
exchange rate Amount Fair value
(Mexican pesos)
October through November
2010
Between January and April
2011 60,000,000
Between 12.3217
and 12.6117 $ 745 $ (1)
Amounts as of December 31, 2009
Date of
Commencement Maturity Amount in
U.S. dollars
Contracted
exchange rate Amount Fair value
(Mexican pesos) August through December
2009
Between January and
March 2010 50,000,000
Between 12.8295
and 13.2695 $ 647 $ 11
Embedded derivative instruments - At December 31, 2010 and 2009, the Company
does not have any contracts with embedded derivatives.
13. Long-term employee benefits Long-term net projected liabilities of employee and welfare benefits plan, by
geographical area, are as follows:
2010 2009
Net projected liability in Mexico:
Retirement $ 1,008 $ 745
Termination 113 56 $ 1,121 $ 801 Net projected liability in USA and OLA:
Retirement $ 2,216 $ 2,584
Termination 200 220 Workers’ compensation in USA 1,084 1,039
$ 3,500 $ 3,843
a. Mexico The Company has a defined benefit pension and seniority premium plan; it is also subject to termination benefit obligations. The funding policy of the Company is to make discretionary contributions. During 2010 the Company did not make contributions, and during 2009 the Company made contributions of $200. Seniority premiums consist of a one-time payment of 12 days for each year worked based on the final salary, not exceeding double the minimum wage established by law for all its personnel, as stipulated in the respective employment contracts. Such benefits vest for employees with 15 or more years of service. Employment termination benefits primarily include the estimate for settlement payments equivalent to three months of salary per year of service worked, which are paid to all workers that are involuntarily terminated. The related liability and annual benefits costs are calculated by an independent actuary in conformity with the bases defined in the plans, using the projected unit credit method. The following table presents the amounts recognized for the pension, seniority and termination premium plans, as well as the status of the fund shown in the balance sheet at December 31, 2010 and 2009:
2010 2009
Vested benefit obligation $ 579 $ 514 Defined benefit obligation 6,154 5,504 Less- Plan assets (funds in trust) 4,561 4,360
Underfunded status 1,593 1,144 Items to be amortized:
Actuarial gain (550) (451) Transition liability 13 19 Past service costs and changes to the plan 65 89
Total items to be amortized (472) (343) Net projected liability $ 1,121 $ 801
Net period costs are as follows: 2010 2009
Cost of services for the year $ 346 $ 329
Amortization of transition asset (6) (6) Amortization of past services and changes to
the plan (21) (12) Actuarial gain (54) (87) Cost of financing for the year 443 408 Less - yield on fund assets (373) (321)
Net cost of the period $ 335 $ 311
The nominal rates used in the actuarial calculations are:
2010 2009
Discount of projected benefit obligation at present value 7.64% 8.16%
Wage increases 4.54% 5.05% Yield on plan assets 8.67% 8.67%
The unamortized amounts of retirement obligations for the transition asset are
applied to results over a period of five years and for past services and
actuarial (gains) and losses are applied to results over the remaining labor life
of employees expected to receive plan benefits. Changes in present value of the defined benefit obligation:
2010 2009
Present value of the defined benefit obligation
as of January 1 $ 5,504 $ 5,069
Service cost 346 329
Interest cost 443 408
Actuarial loss (gain) on the obligation 52 (111)
Benefits paid (191) (191)
Present value of the defined benefit obligation
as of December 31 $ 6,154 $ 5,504 Changes in fair value of plan assets:
2010 2009
Plan assets at fair value as of January 1 $ 4,360 $ 3,753
Expected yield 373 321
Actuarial gain 4 240
Company contributions - 200
Benefits paid (176) (154)
Plan assets at fair value as of December 31 $ 4,561 $ 4,360 Categories of plan assets:
Expected
yield
Actual
yield
Equity instruments 9.6% 17.6%
Debt instruments 6.1% 8.0%
Amounts of the current and previous four years:
2010 2009 2008 2007 2006
Defined benefit obligation 6,154 5,504 5,069 4,810 4,495 Less- Fair value of plan
assets 4,561 4,360 3,753 4,256 4,192 Underfunded status 1,593 1,144 1,316 554 303 Actuarial (gain) loss for
estimation of defined benefit obligation 52 (111) (248) (27) 120
Actuarial gain (loss) for
estimation of fund 4 240 (723) (72) 147
b. USA - The Company has established a defined benefit pension plan that
covers eligible employees. Effective January 1, 2009, the benefits of the plan
were frozen. The Company’s funding policy is to make discretionary
contributions. During 2010 and 2009, the Company made contributions to
such plan of $471 in both years. The following table sets forth the amounts recognized for the pension plan
and the status of the fund in the consolidated balance sheets, as well as the
liability for workers’ compensation, as of December 31, 2010 and 2009:
2010 2009
Vested benefit obligation $ 3,052 $ 3,043
Defined benefit obligation $ 7,546 $ 7,528
Less- Plan assets 4,286 4,183
Unfunded status 3,260 3,345
Items to be amortized:
Actuarial gain (1,058) (770)
Past service costs and plan modifications 14 9
Total items to be amortized (1,044) (761)
Net projected liability $ 2,216 $ 2,584 Net pension cost includes the following components:
2010 2009
Cost of services for the year $ 132 $ 139
Financing cost of the year 392 403
Less- Return on plan assets (287) (259)
Amortization of past services and plan modifications 16 45
Effect on anticipated severance obligations - (84)
Net cost of the period $ 253 $ 244 The nominal interest rates used in the actuarial calculations are:
2010 2009
Weighted average discount rates 5.85% 5.75% Rates of increase in compensation levels 3.75% 3.75% Expected long-term rate of return on plan assets 7.50% 7.50%
Changes in present value of the defined benefit obligation:
2010 2009
Present value of the defined benefit obligation
as of January 1 $ 7,528 $ 2,248
Cost of services for the year 132 139
Financing cost 392 403
Actuarial loss (gain) on the obligation 346 (46)
Past services for plan modifications (5) (3)
Business acquisition - 5,184
Changes in exchange rates (405) -
Benefits paid (442) (397)
Present value of the defined benefit obligation
as of December 31 $ 7,546 $ 7,528
Changes in fair value of plan assets:
2010 2009
Plan assets at fair value as of January 1 $ 4,183 $ 1,154
Expected yield 287 259
Actuarial gain 1 490
Company contributions 471 471
Business acquisition - 2,206
Changes in exchange rates (214) -
Benefits paid (442) (397)
Plan assets at fair value as of December 31 $ 4,286 $ 4,183
Categories of plan assets:
Expected
yield
Actual
yield
Equity instruments 8.4% 13.6%
Debt instruments 5.0% 9.2%
Amounts of the current and previous four years:
2010 2009 2008 2007 2006
Defined benefit obligations 7,546 7,528 2,248 1,631 1,640
Less- Fair value of plan
assets 4,286 4,183 1,154 1,254 1,191
Underfunded status 3,260 3,345 1,094 377 449
Actuarial (gain) loss for
estimation of defined
benefit obligation 346 (46) 570 - (64)
Actuarial gain (loss) for
estimation of fund 1 490 (189) 10 (33)
Postretirement welfare benefit plans USA The Company maintains a postretirement welfare benefit plan that covers certain eligible employees’ postretirement medical expenses. As of December 31, 2010 and 2009, these
liabilities were $1,402 and $1,293 respectively, of which the following amounts are classified as long term:
2010 2009
Welfare benefit plans $ 1,084 $ 1,039
c. OLA - The Company has liabilities for termination benefits in accordance with the local legislation of each country. The related liability and annual cost of the benefits is calculated by an independent actuary using the projected unit credit method. As of December 31, 2010 and 2009, the recorded liabilities are $200 and $220, respectively. Other disclosures required by MFRS were considered not significant in this geographical segment.
14. Stockholders’ equity
a. At December 31, 2010, stockholders’ equity consists of the following:
Number of shares Par value
Restatement /
translation effect Total
Fixed capital-
Series “A”
1,175,800,0
00 $ 1,902 $ 6,104 $ 8,006
Reserve for repurchase
of shares 600 159 759
Retained earnings 27,630 7,876 35,505
Accumulated
translation effect - (541) (541)
Financial instruments (19) - (19)
Noncontrolling interest
in consolidated
subsidiaries 693 134 827
Total $ 30,806 $ 13,731 $ 44,537 Capital stock is fully subscribed and paid-in and represents fixed capital. Variable capital cannot exceed 10 times the amount of minimum fixed capital without right of withdrawal and
must be represented by Series “B”, ordinary, nominative, no-par shares and/or limited voting, nominative, no-par shares of the Series to be named when they are issued. Limited voting shares cannot represent more than 25% of non-voting capital stock.
b. Dividends declared in 2010 and 2009 were:
Mexican pesos per Value at
Approved at the stockholders’ meeting of: share December 31, 2010
April 15, 2010 $ 0.50 $ 588 April 9, 2009 $ 0.46 $ 541
During 2010 and 2009, the dividends paid to non-controlling shareholders were $126 and $78, respectively.
c. Retained earnings include the statutory legal reserve. Mexican General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical Mexican pesos). The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve
must be replenished if it is reduced for any reason. At December 31, 2010 and 2009, the legal reserve, in historical Mexican pesos, was $500.
d. Stockholders’ equity, except restated paid-in capital and tax retained earnings, will be subject
to income taxes payable by the Company at the rate in effect upon distribution. Any tax paid
on such distribution may be credited against annual and estimated income taxes of the year in
which the tax on dividends is paid and the following two fiscal years.
e. In a stockholders’ meeting held on August 19, 2010, the merger of the nearly wholly-owned
subsidiary Tecebim, S. A. de C. V. with the Company was approved. As a result of the
merger, the tax paid-in capital account increased substantially. Also, as a result of the tax
deconsolidation effective in January 2010, the net after tax income account decreased
substantially. Both effects are shown in paragraph f) below.
f. The balances in the stockholders’ equity tax accounts at December 31 are:
2010 2009
Paid-in capital $ 24,473 $ 8,132
Net after-tax income 18,253 32,830
Total $ 42,726 $ 40,962
15. Foreign currency balances and transactions
a. At December 31, 2010 and 2009, the foreign currency monetary position in
millions of U.S. dollars, for the Mexican entities only, is as follows:
2010 2009
Current assets 77 67
Liabilities-
Short-term (53) (342)
Long-term (1,076) (745)
Total liabilities (1,129) (1,087)
Liability position, net (1,052) (1,020) Mexican pesos equivalent $ (13,000) $ (13,320)
b. The Company has significant operations in the USA and OLA as indicated in
Note 21. c. The transactions in millions of U.S. dollars, for the Mexican entities only,
after elimination of the transactions between consolidated subsidiaries, were
as follows:
2010 2009
Export sales 6 12 Import purchases of raw materials 87 46 Purchases of fixed assets from foreign
countries 21 27
d. The exchange rates in effect at the dates of the balance sheets and of issuance
of these consolidated financial statements were as follows:
December 31, March 14,
2010 2009 2011
Mexican pesos per one U.S.
dollar $ 12.3571 $ 13.0587 $ 11.9441
16. Transactions and balances with related parties a. Transactions with related parties, carried out in the ordinary course of
business, were as follows:
2010 2009
Interest income $ 77 $ 76
Expenses on purchases of:
Raw materials $ 4,705 $ 4,403 Finished products $ 1,099 $ 575 Supplies, uniforms and other $ 467 $ 312
b. The net balances due to related parties are:
2010 2009
Beta San Miguel, S. A. de C. V. $ 295 $ 89 Efform, S. A. de C. V. 27 18 Fábrica de Galletas La Moderna, S. A. de C. V. 21 4 Frexport, S. A. de C. V. 80 14 Grupo Altex, S. A. de C. V. 159 29 Industrial Molinera Montserrat, S. A. de C. V. 20 14 Makymat, S. A. de C. V. 6 5 Mundo Dulce, S. A. de C. V. 64 5 Ovoplus del Centro, S. A. de C. V. 48 13 Pan-Glo de México, S. de R. L. de C. V. 4 1 Paniplus, S. A. de C. V. 24 21 Proarce, S. A. de C. V. 35 22 Uniformes y Equipo Industrial, S. A. de C. V. 19 3 $ 802 $ 238
c. Employee benefits granted to Company key management were as follows:
2010 2009
Short and long-term direct benefits $ 305 $ 290 Cash payments for purchase of shares 45 71 Severance benefits 408 368
17. Tax environment Income taxes in Mexico The Company is subject to ISR and IETU. ISR - The ISR rate is 30% for 2010 through 2012 and was 28% in 2009; it will be 29% for 2013 and 28% for 2014. The entity is subject to ISR on an individual basis. Until 2009, the Company paid ISR, together with subsidiaries on a consolidated basis. IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year. Beginning in 2010, the IETU rate is 17.5%, and it was 17% in 2009. The IMPAC Law was repealed upon enactment of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid may be recovered, according to the terms of the law. Income tax expense is the larger of ISR and IETU. Based on its financial projections, the Company determined that some of its
Mexican subsidiaries will pay ISR in certain fiscal years, while in others they will
pay IETU. Accordingly, the Company calculated both deferred ISR and deferred
IETU and recognized the larger of the two liabilities in each subsidiary. In its other
subsidiaries, based on its financial projections the Company determined that they
will basically pay only ISR. Therefore, the enactment of IETU did not have any
effects on the financial information for those subsidiaries, since they continue to
recognize deferred ISR. Due to changes in the tax law with respect to tax consolidation, the Company elected to deconsolidate for tax purposes beginning in 2010, recognizing the effects on the financial information of 2009 of such deconsolidation, applying some of the effects against retained earnings in accordance with the rules of Interpretations to Financial Information Standards (“INIF”) 18, Recognition of the Effects of the 2010 Tax Reform on Income Taxes. The effect of tax deconsolidation in the results of 2009 is minimal considering the effects on deferred taxes that result from the tax deconsolidation. Income taxes in other countries The foreign subsidiaries calculate income taxes on their individual results, in accordance with the regulations of each country. The subsidiaries in the USA have authorization to file a consolidated income tax return. The tax rates applicable in other countries where the Company operates and the period in which tax losses may be applied, are as follows:
Statutory income tax rate (%) Period of
2010 2009 expiration
Argentina 35.0 35.0 (a) 5 Austria 25.0 25.0 (b) Brazil 34.0 34.0 (c) Colombia 33.0 33.0 (d) Costa Rica 30.0 30.0 3 Chile (e) 17.0 17.0 (f) China 25.0 25.0 5 El Salvador 25.0 25.0 (g) Spain 30.0 30.0 15 USA (h) 35.0 (h) 35.0 20 Guatemala (i) 31.0 (i) 31.0 (g) Netherlands 25.5 25.5 9 Honduras (j) 25.0 (j) 25.0 3 Hungary 19.0 16.0 (f) Luxembourg 21.0 21.0 (f) Nicaragua 30.0 30.0 3 Panama 27.5 30.0 5 Paraguay 10.0 10.0 (g) Peru 30.0 30.0 (k) Czech Republic 19.0 20.0 (l) Uruguay 25.0 25.0 (m) Venezuela 34.0 34.0 (n)
(a) Tax losses from sale of shares or other equity investments may only be offset
against income of the same nature. The same applies for the losses on
derivatives. Foreign source tax losses may only be amortized with income
from foreign sources.
(b) Losses generated after 1990 may be applied indefinitely but may only be
offset each year up to an amount equal to 75% of the net taxable profit for the
year.
(c) Tax losses may be applied indefinitely, but may only be offset each year up to
an amount equivalent to 30% of the net taxable profit for the year.
(d) Tax losses generated in 2003, 2004, 2005 and 2006 may be amortized within
the following eight years, but may only be up to 25% of the income tax of
each year. Beginning 2007, tax losses may be amortized without limitation on
the value or period.
(e) Income tax rate will be 20% in 2011 and 18.5% in 2012 and in 2013, will
return to 17%.
(f) No expiration date.
(g) Operating losses are not amortizable.
(h) A state tax should be added to this percentage, which varies in each state of
the USA. The weighted average combined statutory rate for 2010 and 2009
was 39.6% and 38.3%, respectively.
(i) The general tax rate is 5% but the tax base is calculated as follows: Total
gross revenues less non- taxable revenues. The optional tax rate is 31% but
the tax basis is different: Net income plus nondeductible expenses, less non-
taxable revenues and other deductions.
(j) In the case of a taxable income greater than 1 million Lempiras, an additional
10% must be paid as temporary solidarity tax.
(k) There are two alternatives allowed for tax loss amortization: 1) four years or
2) unlimited amortization up to 50% of the net taxable profit of each year.
Once made, an election may not be changed, until the accumulated losses of
previous years are applied.
(l) Tax losses generated since 2004 may be amortized in the following five
years. Tax losses prior to 2004 in the following seven years.
(m) Tax losses generated after 2007 may be amortized in the following five years.
(n) Based on their nature the amortization period can change: 1) Operating losses
over the following three years, 2) Losses from the adjustment for inflation
tax, one year; 3) Overseas, which can only be amortized against earnings
from abroad, over the following three years and 4) Losses from jurisdictions
with preferential tax regulations only applied to profits in such jurisdictions,
over the following three years.
Operations in Argentina, Colombia, Guatemala and Nicaragua are subject to
minimum payments of income tax or tax based on assets.
Operations in Brazil and Venezuela are subject to profit sharing payments
according to certain rules based on accounting income. During 2010 and 2009,
there were no profit sharing payments in those countries.
Detail of provisions, effective rate and deferred effects
a. Consolidated taxes on income are as follows:
2010 2009
ISR:
Current $ 2,308 $ 3,964
Deferred 27 (1,203)
$ 2,335 $ 2,761
IETU:
Current $ 1 $ 77
Deferred 27 (11)
28 66
$ 2,363 $ 2,827
b. The reconciliation of the statutory and effective ISR rates expressed as a percentage of
income before taxes on income for the years ended December 31, 2010 and 2009 is:
% %
2010 2009
Statutory rate in Mexico 30.0 28.0
Inflationary effects in the monetary
balance sheet accounts for Mexican
subsidiaries 6.3 5.3
Nondeductible expenses, nontaxable revenues
and other 0.1 1.6
Difference in tax rates and currency of
subsidiaries in different tax jurisdictions 2.2 5.5
Inflationary tax effect of fixed assets (1.2) (1.9)
IETU 0.3 0.7
Reversal of allowance of deferred taxes (7.8) (7.4)
Effects of increase in Mexican income tax rate
in deferred taxes - (0.1)
Effective rate 29.9 31.7
The main items originating a deferred ISR asset are:
2010 2009
Advances from customers $ (3) $ (8)
Allowance for doubtful accounts (109) (89)
Inventories 9 52
Property, plant and equipment 2,358 2,894
Intangible assets 3,812 3,803
Other reserves (3,254) (3,342)
Current and deferred PTU (287) (278)
Tax loss carryforwards (3,502) (4,602)
Valuation allowance of tax loss carryforwards 173 788
Changes in exchange rate (260) 262
Other items (59) (39)
Deferred IETU 205 190
Total asset, net $ (917) $ (369)
The net deferred income tax asset and liability has not been offset in the
accompanying consolidated balance sheet as they result from different taxable
entities and tax authorities. Gross amounts are as follows:
2010 2009
Deferred income tax asset $ (1,539) $ (635)
Deferred income tax liability 622 266
Total asset, net $ (917) $ (369)
c. Certain tax losses will not be recoverable before their expiration date. Consequently, the
Company has recognized a valuation allowance for a portion of such losses.
d. Tax loss carryforwards for which the deferred ISR asset has been recorded may be recovered
subject to certain conditions. Tax losses generated in countries and expiration dates are:
Years Amount
2011 $ 4,958
2012 28
2013 125
2014 96
2015 28
2016 and thereafter 5,100
10,335
Tax losses included in the valuation allowance (576)
Total $ 9,759
18. Other expenses, net
a. Other expenses are comprised as follows:
2010 2009
PTU $ 653 $ 563
Prior year labor cost - 150
Tax incentives (47) (46)
Loss on sale of fixed assets 175 183
Other 169 326
$ 950 $ 1,176
b. PTU is comprised as follows:
2010 2009
Current $ 694 $ 624
Deferred (41) (61)
$ 653 $ 563
19. Commitments
Guarantees and/or guarantors
a. At December 31, 2010, Grupo Bimbo, S. A. B. de C. V. and certain subsidiary companies
have guaranteed bonded issued letters of credit to guarantee commercial obligations and
contingent risks related to the labor obligations of certain subsidiaries. The value of such
letters of credit totals US$98.2 million, of which a liability of US$113 million has already
been recorded for employment benefits in the USA.
b. The Company has guaranteed certain contingent obligations of associated companies for the
amount of US$1.2 million at December 31, 2010. Similarly, the Company has issued
guarantees for third-party obligations derived from the sale of assets in prior years, for the
amount of US$14 million.
Lease commitments
a. The Company has long-term commitments under operating leases, principally for the
facilities used to produce, distribute and sell its products. These commitments vary from
three to 14 years, with a renewal option of between one and five years. Certain leases require
the Company to pay all related expenses, such as taxes, maintenance and insurance for the
term of the contracts. Rental expense was $1,209 in 2010 and $1,500 in 2009. The total
amount of lease commitments is as follows:
Year Amount
2011 1,333
2012 962
2013 747
2014 599
2015 495
2016 and thereafter 947
Total $ 5,083
20. Contingencies
Several significant contingencies exist, of varying nature, that have arisen in the
normal course of business of the Company, for which management has evaluated
the likelihood of loss as remote, probable or possible. Based on such evaluation,
for those contingencies for which the Company believes it is probable it will be
required to use future resources to settle its obligations, the Company has accrued
the following amounts within long-term liabilities:
Type Amount
Civil $ 171
Criminal 22
Labor 100
Tax 426
Total $ 719
Those contingencies for which management does not expect a material adverse
effect are not accrued until other information becomes available to support the
recognition of a liability.
21. Information by geographical area
The following is the principal data by geographical area in which the Company operates for the years
ended December 31, 2010 and 2009:
2 0 1 0
Consolidation
Mexico USA OLA eliminations Total
Net sales $ 57,870 $ 47,875 $ 14,207 $ (2,789) $ 117,163 Income after general expenses $ 8,013 $ 3,738 $ (340) $ (18) $ 11,393 Net income of controlling stockholders $ 3,518 $ 2,576 $ (531) $ (168) $ 5,395 Depreciation, amortization and other $ 1,615 $ 1,458 $ 1,002 $ - $ 4,075 Income after general expenses, plus depreciation,
amortization and other (“EBITDA”) $ 9,628 $ 5,196 $ 662 $ (18) $ 15,468
Total assets $ 36,121 $ 49,380 $ 16,045 $ (2,477) $ 99,069 Total liabilities $ 44,080 $ 8,295 $ 5,679 $ (3,522) $ 54,532
2 0 0 9
Consolidation
Mexico USA OLA eliminations Total
Net sales $ 55,388 $ 49,850 $ 13,606 $ (2,491) $ 116,353 Income after general expenses $ 7,499 $ 4,261 $ 301 $ (7) $ 12,054 Net income of controlling stockholders $ 2,184 $ 3,889 $ (59) $ (58) $ 5,956 Depreciation and amortization $ 1,667 $ 1,466 $ 650 $ - $ 3,783 Income after general expenses, plus depreciation and
amortization (“EBITDA”) $ 9,166 $ 5,727 $ 951 $ (7) $ 15,837
Total assets $ 36,709 $ 53,361 $ 13,563 $ (3,967) $ 99,666 Total liabilities $ 50,515 $ 10,069 $ 3,259 $ (5,134) $ 58,709
New accounting principles As part of its efforts to converge Mexican standards with international standards, in 2009 and 2010
the Mexican Board for Research and Development of Financial Information Standards (“CINIF”)
issued the following NIFs, INIFs and improvements to NIFs, which become effective as follows:
a. For fiscal years beginning January 1, 2011:
B-5, Financial Segment Information
B-9, Interim Financial Information
C-4, Inventories
C-5, Advance Payments and Other Assets
C-6, Property, Plant and Equipment (certain paragraphs become effective beginning in 2012)
C-18, Obligations Associated with the Retirement of Property, Plant and Equipment
Improvements to Mexican Financial Reporting Standards 2011
Some of the most important changes established by these standards are:
NIF B-5, Financial Segment Information - This standard establishes a management approach
to identifying and disclosing segment information, as opposed to Bulletin B-5, which,
considered a management approach but also required segment disclosures to be classified by
economic segments, geographical areas or homogeneous groups of customers. This standard
also differs from the previous bulletin in that it does not require that business areas be subject
to different risks in order to separate them into different segments. Additionally, a
component in the development or pre-operational stage may be classified as a segment. This
standard also requires the separate disclosure of interest income, interest expense and
liabilities, as well as disclosure of entity-wide information, including products, services,
geographical areas, and major customers and suppliers. Similar to Bulletin B-5, this standard
is only mandatory for public companies or entities in process of becoming public.
NIF B-9, Interim Financial Information - Unlike Bulletin B-9, this standard requires the
presentation of a condensed statement of changes in stockholders’ equity and statement of
cash flows as part of interim financial information. The standard also requires, for
comparative purposes, information presented at the close of an interim period be presented
together with information of the corresponding period in the previous year, and in the case of
the balance sheet, presentation of the closing balance sheet of the immediately preceding
year.
NIF C-4, Inventories - This standard eliminates direct costing as a permitted method of
costing and eliminates the last-in first-out method as a technique for the measurement of cost.
The standard also amended inventory valuation to be the lower of cost or market where
market value is represented by net realizable value. This standard also sets rules for valuing
inventory of service providers. This standard clarifies that, for inventory acquisitions in
installments, the difference between the cost of inventory under normal credit terms and the
actual amount paid, be recognized as a financial cost during the financing period. The
standard also permits the reversal previous inventory impairment losses against current
earnings of the period in which the change in estimate is determined. It also requires
disclosure of the amount of inventories recognized in results of the period when cost of sales
includes other elements, when a portion of cost of sales is included within discontinued
operations, or when the statement of income is classified according to the nature of revenues
and expenses, such that a cost of sales line item is not presented. The standard also requires
disclosure of the amount of impairment losses on inventories recognized as a cost of the
period. It also requires that any change in the cost allocation method be treated as an
accounting change. Additionally, it requires that advances to suppliers be recognized as
inventories on upon the time when the risks and benefits of ownership are transferred to the
Company.
NIF C-5, Advance Payments and Other Assets - This standard establishes that a basic feature
of advance payments is the fact that they do not transfer the risks and rewards of the
ownership of goods and services to the Company. Therefore, advances for the purchase of
inventories or property, plant and equipment, among others, must be presented separately
from inventory or property, plant and equipment if the risks and rewards of ownership of
those goods have not transferred to the Company. The standard requires that advance
payments be impaired when they lose their ability to generate future economic benefits. This
standard also requires classification of advance payments as current or noncurrent, depending
on their nature.
NIF C-6, Property, Plant and Equipment - This standard included within its scope property,
plant and equipment used to develop or maintain biological assets as well as those of
extractive industries. The standard also includes guidance with respect to the treatment of
non-monetary exchanges with economic substance. The standard includes the basis for
determining the residual value of a component, that being the amount that could be obtained
currently from the disposal of the asset, assuming it is of the age and in the condition
expected at the end of its useful life. The standard eliminates the requirement to record, at an
appraised value, property, plant and equipment which was acquired at no cost or at a minimal
cost that does not adequately represent the economic significance of the asset. The standard
also establishes the obligation to separately depreciate significant components of an item of
property, plant and equipment. This provision of the standard will be effective beginning
January 1, 2012. Finally, the standard establishes a requirement to continue depreciating a
component when it is not in use, except when depreciation methods are based on usage.
NIF C-18, Obligations Associated with the Retirement of Property, Plant and Equipment -
This standard establishes specific guidance for the initial and subsequent recognition of
provisions related to obligations associated with the retirement of components of property,
plant and equipment and consequently eliminates the requirement to apply International
Financial Reporting Interpretations Committee No. 1, Changes in Existing Decommissioning,
Restoration and Similar Liabilities, on a supplemental basis.
Improvements to Mexican Financial Reporting Standards 2011:
NIF B-1, Accounting Changes and Error Corrections - The improvement to this standard requires that if the entity has implemented an accounting change or corrected an error, it should present a statement of financial position at the beginning of the earliest period for which comparative financial information is required, retroactively presenting the accounting change or error correction. The improvement also requires that each affected line item in the statement of changes in stockholders’ equity shows: a) initial balances previously reported, b) the related adjustment, segregating the effects of accounting changes and corrections of errors, and c) the retroactively adjusted beginning balances.
NIF B-2, Statement of Cash Flows - The improvement to this standard eliminates the
requirement to present a total, between investing activities and financing activities, of
the excess cash to be applied in or obtained from financing activities. Presentation of
this total is now only a recommendation.
Bulletin C-3, Accounts Receivable - The improvement to this Bulletin includes
standards for the recognition of interest income on accounts receivable, and clarifies
that recognition of accrued interest income on receivables whose collection is doubtful
is prohibited.
NIF C-10, Derivative Financial Instruments and Hedging Activities -
The improvement to this standard establishes specific criteria in order to
exclude certain components of a derivative financial instrument from
the determination of hedge effectiveness. The standard also requires
that for valuation of options and currency forwards, certain components
be excluded for purposes of determining effectiveness, thus resulting in
the following recognition, presentation and related disclosure
requirements: a) valuation of derivative financial instruments such as
an option or a combination of options: changes in fair value attributable
to changes in the intrinsic value of the options may be separated from
changes attributable to their extrinsic value; only the change attributable
to the option’s intrinsic value, and not the extrinsic component, may be
designated as effective hedging; and b) valuation of currency exchange
forwards: separation of the change in fair value attributable to
differences between interest rates of the currencies to be exchanged
from the change in fair value attributable to changes in the spot prices
of the currencies involved is permitted; the effect attributable to the
component that was excluded from the cash flow hedge may be
recognized directly in current earnings. Hedge accounting is limited
when a transaction is carried out with related parties who have different
functional currencies. The standard requires that when a hedged
position is a portion of a portfolio of financial assets or liabilities, the
effect of the hedged risk relating to variances in the interest rate of the
portion of such portfolio be presented as a supplement of the primary
position, in a separate line item. It also states that contribution or
margin accounts received, associated with transactions for trading or
hedging with derivative financial instruments, be presented as a
financial liability separately from the financial instruments line item
when cash or marketable securities are received; additionally, only their
fair value should be disclosed if securities in deposit or qualifying
financial warranties are received that will not become the property of
the entity. The standard also states that a proportion of the total amount
of the hedging instrument, such as a percentage of its notional amount,
may be designated as hedging instrument in a hedging relationship.
However, a hedging relationship cannot be designated for only a
portion of the term in which the instrument intended to be used as
hedge is in effect.
NIF C-13, Related Parties - The improvement to this standard
incorporates a close family member within the definition of a related
party.
Bulletin D-5, Leases - The improvement to this Bulletin removes the
obligation to determine the incremental interest rate when the implicit
rate is too low; consequently, it establishes that the discount rate to be
used by the lessor to determine the present value of minimum lease
payment should be the implicit interest rate of the lease agreement, if it
can be easily determined. If the implicit rate cannot be easily
determined, then the incremental interest rate should be used. The
improvement also requires more detailed disclosures by both lessors
and lessees. As well, the improvement requires that when a gain or loss
on the sale in a sale and leaseback transaction is deferred, it should be
amortized over the term of the agreement and not in proportion to the
depreciation of the leased asset. The gain or loss on the sale in a sale
and leaseback transaction involving an operating lease should be
recognized in results at the time of sale, provided that the transaction is
established at fair value. If the sale price is below the carrying value of
the asset, the result should be recognized immediately in current
earnings, unless the loss is offset by future payments that are below the
market price of the lease, in which case the loss should be deferred and
amortized over the term of the agreement. If the sale price is greater
than the carrying value of the asset, the excess should be deferred and
amortized over the term of agreement.
b. For fiscal years beginning January 1, 2012:
The provisions of standard NIF C-6, Property, plant and equipment that
generate changes from the segregation of components of items of property,
plant and equipment with different useful lives, will become effective on
January 1, 2012.
At the date of issuance of these consolidated financial statements, the Company has not fully
assessed the effects on its financial information of adopting these new standards.
22. International Financial Reporting Standards
In January 2009, the Mexican National Banking and Securities Commission published changes to the Issuers Official Bulletin to establish that beginning in 2012 all listed companies in Mexico will have to file their financial information under International Financial Reporting Standards, with early adoption allowed.
23. Financial statement issuance authorization
The issuance of the consolidated financial statements was authorized by Lic. Daniel Servitje
Montull, Chief Executive Officer, and the Board of Directors of the Company on March 14, 2011.
These consolidated financial statements are subject to shareholder’s approval at the General
Stockholders’ meeting, who may modify the financial statements, based on provisions set forth by
Mexican General Corporate Law.
* * * * * *
Mexico City, March 17, 2011. To the Board of Directors of Grupo Bimbo, S.A.B. de C.V. In compliance with the provisions of the Securities Market Law, the bylaws of the Company and the Regulations of the Audit Committee, I hereby inform you of the activities undertaken by the Audit Committee during the year ended December 31, 2009. In carrying out our work, we have taken into consideration the recommendations established by the Code of Best Corporate Practices. The Committee in full met on five sessions during the year and, as per our work plan, undertook the following activities: EXTERNAL AUDIT As part of the negotiation that took place in 2008, the external auditor contracted to perform the audit of the financial statements for 2009 remains the same and is the only firm for all the operations and countries in which Grupo Bimbo has a presence. We verify and confirm that the contracted firm has maintained its independence. We also analyze their approach, work program and areas of interaction with Grupo Bimbo’s Internal Audit department. On an ongoing basis we maintained direct communication with the external auditors and they kept us informed periodically on the progress of their work and any observations they had; we took note of their comments on the quarterly and annual financial statements. We were informed in a timely manner about their conclusions and reports on the annual financial statements. After analyzing the time and fees incurred, we authorized payment to the external auditors for auditing and other approved services. We are assured that their independence from the Company was not compromised. INTERNAL AUDIT We reviewed and approved the annual work plan and budgeted activities for the year. We received and approved the periodic reports on the state of progress of the approved work plan. We followed up on the comments and suggestions made, as well as on their implementation. We verified that there was an annual training program in place and verified that it was effective. FINANCIAL INFORMATION AND ACCOUNTING POLICIES We reviewed the quarterly and annual financial statements of the Company with the personnel responsible for their preparation, recommended their approval by the Board of Directors, and authorized their publication. Throughout the process we took the opinions and comments issued by the external auditors into consideration. With the support of the internal and external auditors, in issuing our opinion on the financial statements we verified that the accounting policies and criteria and the information utilized by
management in the preparation of the financial statements was appropriate and sufficient and had been applied in a manner that was consistent with the prior year. As a result, the information presented by management fairly reflects the financial position, results of operations and cash flows of the Company. We approved the adoption of the new accounting procedures and standards that went into effect in 2009 which were issued by the organization responsible for accounting standards in Mexico. INTERNAL CONTROLS We verified that management has established general guidelines for internal control, as well as the necessary procedures to implement and comply therewith. In addition, we followed up on the comments and observations made by the external and internal auditors in this regard during the course of their work. COMPLIANCE WITH APPLICABLE REGULATORY STANDARDS AND LAWS; CONTINGENCIES With the support of the internal and external auditors, we confirmed the existence and reliability of the controls established by the Company to assure compliance with the various legal statutes to which it is subject, and assured that there was adequate disclosure in the financial information. We periodically reviewed the Company’s numerous tax, legal and labor contingencies and confirmed that appropriate procedures were in place to identify and address such contingencies. CODE OF ETHICS With the support of those responsible at the Company, we verified the existence of the Code of Ethics for associates as well as the instructions to be reviewed by everyone prior to signing their agreement to the document annually. In addition, we suggested to management that establishment of a communication or whistle-blower line for Grupo Bimbo’s associates, which will be implemented next year. COMPLIANCE WITH OTHER OBLIGATIONS We held meetings with executives and officers as considered necessary to remain informed about the progress of the Company and any relevant or unusual activities and events. We obtained information about significant matters that could involve possible non-compliance with operating policies, the internal control system and policies on accounting records, and we were also informed of corrective measures taken in each such instance and found them satisfactory.
We did not deem it necessary to request advice or opinions from independent experts, because the issues addressed in each meeting were duly supported by the necessary relevant information; as such the conclusions we reached were satisfactory to Committee members. In my capacity as Chairman of the Audit Committee, I reported quarterly to the Board of Directors on the activities conducted within the Committee. The work that we conducted was duly documented in minutes prepared for each meeting, which were reviewed and approved at the time by the members of the Committee.
Sincerely, Henry Davis Chairman of the Audit Committee Grupo Bimbo, S.A.B. de C.V.
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