Fomento Economico Mexicano de CV : FEMSA Presents 2018 Results under IFRS 16- “Leases”

FEMSA Presents 2018 Results under IFRS 16- "Leases"

Monterrey, Mexico, April 5, 2019 - Fomento Económico Mexicano, S.A.B. de C.V. ("FEMSA" or "The Company") (NYSE: FMX; BMV: FEMSAUBD) presents a best efforts retroactive estimation of the effect that the adoption of the International Financial Reporting Standards (IFRS) 16 - "Leases" would have had on the 2018 financial results of the Company. This exercise was performed to provide investors and other market participants an estimated base reflecting the significant effects of the IFRS in the Proximity, Health and Fuel Divisions of FEMSA Comercio. IFRS 16 has a material effect in the Financial Statements of the Company, particularly on the aforementioned divisions, due to the number of existing leases at January 1, 2019, the IFRS adoption date.

The information in this document is not audited but is based on the 2018 audited reported results, adjusted by the impact related to IFRS 16 if the Company would have adopted IFRS 16 at January 1, 2018. We used our best reasonable estimates to replicate the dispositions of the adoption, considering the conditions of 2018 during each period.

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This report may contain certain statements about the expectations with respect to the development of FEMSA and should be considered as best effort estimates made by the Company. These statements reflect the management's opinions based on current available information.

About FEMSA

FEMSA is a leading company that participates in the beverage industry through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world by volume; and in the beer industry, through its ownership of the second largest equity stake in Heineken, one of the world's leading brewers with operations in over 70 countries. In the retail industry, it participates through FEMSA Comercio, comprising a Proximity Division operating OXXO, a small-format store chain, a Health Division, which includes all drugstores and related operations, and a Fuel Division, which operates the OXXO GAS chain of retail service stations. Additionally, through its Strategic Businesses unit, FEMSA provides logistics, point-of-sale refrigeration solutions and plastics solutions to FEMSA's business units and third-party clients.

Five pages of tables are included as appendices

April 5, 2019

FEMSA

Consolidated Income Statement

Millions of Pesos

Total revenues

Cost of sales

Gross profit

Administrative expenses

Selling expenses

Other operating expenses (income), net (1)

Income from operations(2)

Other non-operating expenses (income)

Interest expense

Interest income

Interest expense, net

Foreign exchange loss (gain)

Other financial expenses (income), net.

Financing expenses, net

Income before income tax and participation in associates results Income tax

Participation in associates results(3)

Net income from continuing operations

Net income from discontinued operations

Net consolidated income

Net majority income

Net minority income

Operative Cash Flow & CAPEX

Income from operations

Depreciation

Amortization & other non-cash charges

Operative Cash Flow (EBITDA)

CAPEX

		For the twelve months of:
2018			2018
As Reported	% of rev.	Adj. (A)	IFRS 16 (A)	% of rev.
469,744	100.0		469,744	100.0
294,574	62.7	(135)	294,439	62.7	(B)
175,170	37.3	135	175,305	37.3	(B)
17,313	3.7	(53)	17,260	3.7	(B)
114,573	24.4	(2,429)	112,144	23.9	(B)
1,708	0.4		1,708	0.4
41,576	8.9	2,617	44,193	9.4	(B)
874			874
9,825		4,315	14,140		(C)
2,832			2,832
6,993		4,315	11,308		(C)
248		(14)	234		(D)
139			139
7,380		4,301	11,681		(C) (D)
33,322		(1,684)	31,638		(B) (C) (D)
10,169		(515)	9,654		(E)
6,560		-	6,560
29,713		(1,168)	28,545		(B) (C) (D) (E)
3,366		-	3,366
33,079		(1,168)	31,911
23,990		(1,098)	22,891
9,089		(70)	9,019
2018	% of rev.	Adj. (A)	2018	% of rev.
As Reported			IFRS 16
41,576	8.9	2,617	44,193	9.4	(B)
14,698	3.1	7,562	22,260	4.7	(F)
4,184	0.9		4,184	0.9
60,458	12.9	10,179	70,637	15.0	(B) (F)
24,266			24,266

(1)Other operating expenses (income), net = other operating expenses (income) +(-) equity method from operated associates.

(2)Income from operations = gross profit - administrative and selling expenses - other operating expenses (income), net.

(3)Mainly represents the equity method participation in Heineken´s results, net.

(A)Unaudited consolidated financial information.

(B)Elimination of lease payment expense, partially offset by depreciation of right-of-use asset.

(C)Interest expense related to lease liability.

(D)Foreign Exchange gains or losses from lease liabilities denominated in foreign currency.

(E)Deferred taxes due to differences between lease assets and lease liabilities throughout lease term.

(F)Depreciation of right-of-use asset.

April 5, 2019

FEMSA

Consolidated Balance Sheet

Millions of Pesos

ASSETS

Cash and cash equivalents

Investments

Accounts receivable

Inventories

Other current assets

Total current assets

Investments in shares

Property, plant and equipment, net

Right of use

Intangible assets

Other assets

TOTAL ASSETS

LIABILITIES & STOCKHOLDERS´ EQUITY

Bank loans

Current maturities of long-term debt

Interest payable

Current maturities of leases long-term debt Operating liabilities

Total current liabilities

Long-term debt

Long-term leases

Laboral obligations

Other liabilities

Total liabilities

Total stockholders' equity

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

Dic-18	Adj. (A)	Dic-18
As Reported		IFRS 16 (A)
62,047		62,047
30,924		30,924
28,164		28,164
35,686		35,686
20,786		20,786
177,607		177,607
94,315		94,315
108,602		108,602
-	51,220	51,220	(B)
145,610		145,610
50,247	515	50,762	(C)
576,381	51,735	628,116
2,436		2,436
11,238		11,238
964		964
-	5,860	5,860	(D)
86,826		86,826
101,464	5,860	107,324
108,161		108,161
-	47,056	47,056	(E)
4,699		4,699
26,515		26,515
240,839	52,916	293,755
335,542	(1,181)	334,361	(F)
576,381	51,735	628,116
-	(0)	(0)

(A)Unaudited consolidated financial information.

(B)Right-of-useasset related to leases longer than 12 months and underlying asset value greater than US$5,000.

(C)Deferred taxes due to differences between lease assets and lease liabilities throughout lease term.

(D)Long term leases maturing within 12 months.

(E)Net present value of unavoidable future lease payments.

(F)Recalculation for adjustments related to adoption of IFRS 16, mainly net income.

April 5, 2019

							FEMSA Comercio - Proximity Division
								Results of Operations
								Millions of Pesos
													For the three months of:
			1Q 2018								2Q 2018					3Q 2018					4Q 2018
	As Reported	(A)	Adj.	(B)	IFRS 16		(B)	As Reported		(A)	Adj.	(B)	IFRS 16	(B)	As Reported	Adj.	(B)	IFRS 16	(B)	As Reported	Adj.	(B)	IFRS 16	(B)
Total revenues	37,747				37,747			42,387					42,387		43,967			43,967		43,357			43,357
Cost of sales	24,286				24,286			26,279					26,279		26,917			26,917		24,446			24,446		(C)
Gross profit	13,461				13,461			16,108					16,108		17,050			17,050		18,911			18,911		(C)
Administrative expenses	845			(1)			844		885			(2)		884	1,046		(2)	1,044		810		(2)		808	(C)
Selling expenses	10,596			(397)	10,199			11,540				(410)	11,130		12,325		(422)			13,130		(431)	12,699		(C)
Other operating expenses (income), net		65					65			80				80	69				69	63				63
Income from operations	1,956			398		2,354			3,603			411	4,014		3,610		424	4,034		4,908		433	5,341		(C)
Depreciation	1,116			866		1,982			1,144			884	2,028		1,262		904	2,166		1,295		918	2,213		(D)
Amortization & other non-cash charges	112						112		129					129	126				126	154				154
Operative Cash Flow (EBITDA)	3,184		1,265			4,448			4,876		1,295		6,172		4,998	1,328		6,327		6,357	1,351		7,708		(C) (D)
CAPEX	1,476					1,476			2,394				2,394		2,654			2,654		2,917			2,917
					For the twelve months of:
							2018
	As Reported		% of rev.		Adj.	(B)		IFRS 16	(B)		% of rev.
Total revenues	167,458		100.0					167,458			100.0
Cost of sales	101,929			60.9				101,929				60.9	(C)
Gross profit	65,529			39.1				65,529				39.1	(C)
Administrative expenses	3,587			2.1			(7)		3,580			2.1	(C)
Selling expenses	47,589			28.4	(1,659)			45,930				27.4	(C)
Other operating expenses (income), net	276			0.2					276			0.2
Income from operations	14,077			8.4		1,667		15,744				9.4	(C)
Depreciation	4,817			2.9		3,572			8,389			5.0	(D)
Amortization & other non-cash charges	521			0.3					521			0.3
Operative Cash Flow (EBITDA)	19,415			11.6		5,239		24,654				14.7	(C) (D)
CAPEX	9,441								9,441

(A)1Q18 and 2Q18 adjusted to reflect change from Commercial Division to Proximity Division implemented in 3Q18.

(B)Unaudited financial information.

(C)Elimination of lease payment expense, partially offset by depreciation of right-of-use asset.

(D)Depreciation of right-of-use asset.

April 5, 2019

						FEMSA Comercio - Health Division
							Results of Operations
							Millions of Pesos
											For the three months of:
		1Q 2018							2Q 2018					3Q 2018					4Q 2018
	As Reported	Adj.	(A)	IFRS 16		(A)	As Reported		Adj.	(A)	IFRS 16	(A)	As Reported	Adj.	(A)	IFRS 16	(A)	As Reported	Adj.	(A)	IFRS 16	(A)
Total revenues	12,454			12,454			13,380				13,380		12,562			12,562		13,343			13,343
Cost of sales	8,758				8,758		9,287				9,287		8,750			8,750		9,080			9,080		(B)
Gross profit	3,696				3,696		4,093				4,093		3,812			3,812		4,263			4,263		(B)
Administrative expenses	485					485		514				514	514				514	541				541	(B)
Selling expenses	2,910		(49)		2,861		2,923			(50)	2,873		2,732		(52)	2,680		2,992		(53)	2,939		(B)
Other operating expenses (income), net	21					21		22				22	26				26	69				69
Income from operations	280		49			329		634		50		684	540		52		592	661		53		714	(B)
Depreciation	166		424			590		166		430		596	169		436		605	176		442		618	(C)
Amortization & other non-cash charges	85					85		86				86	80				80	76				76
Operative Cash Flow (EBITDA)	531		473		1,004			886		480	1,366		789		488	1,277		913		494	1,407		(B) (C)
CAPEX	351					351		229				229	376				376	206				206
				For the twelve months of:
						2018
	As Reported	% of rev.		Adj.	(A)		IFRS 16	(A)	% of rev.
Total revenues	51,739	100.0					51,739		100.0
Cost of sales	35,874		69.3				35,874			69.3	(B)
Gross profit	15,865		30.7				15,865			30.7	(B)
Administrative expenses	2,055		4.0				2,055			4.0	(B)
Selling expenses	11,557		22.3		(204)		11,353			21.9	(B)
Other operating expenses (income), net	138		0.3					138		0.3
Income from operations	2,115		4.1			204	2,319			4.5	(B)
Depreciation	676		1.3		1,732		2,408			4.7	(C)
Amortization & other non-cash charges	329		0.6					329		0.6
Operative Cash Flow (EBITDA)	3,120		6.0		1,936		5,056			9.8	(B) (C)
CAPEX	1,162						1,162

(A)Unaudited financial information.

(B)Elimination of lease payment expense, partially offset by depreciation of right-of-use asset.

(C)Depreciation of right-of-use asset.

April 5, 2019