Prospectus Supplement
Table of Contents

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-188624

 

The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED JUNE 7, 2013

PRELIMINARY PROSPECTUS SUPPLEMENT

(To Prospectus dated May 15, 2013)

 

LOGO

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.

82,608,696 Series B shares directly or

in the form of American Depositary Shares

 

 

The selling shareholder named in this prospectus supplement is offering 82,608,696 of our Series B shares, with no par value (“Series B shares”), directly or in the form of American Depositary Shares (“ADSs”), each representing eight Series B shares. The ADSs are evidenced by American Depositary Receipts. In this offering, the selling shareholder named herein will offer 82,608,696 Series B shares (directly or in the form of ADSs) in a combined offering consisting of (i) an international offering of             Series B shares (directly or in the form of ADSs) in the United States or other countries outside the United States or the United Mexican States (“Mexico”) through the international underwriters named in this prospectus supplement, which we refer to as the international offering, and (ii) a concurrent public offering of             Series B shares in Mexico authorized by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, or “CNBV”) through the Mexican underwriters named in this prospectus supplement, which we refer to as the Mexican offering. The Series B shares (directly or in the form of ADSs) being offered in the international and Mexican offerings may be reallocated between the international and Mexican offerings, depending upon the demand existing in the United States, Mexico and other countries outside the United States and Mexico and other related factors. The closings of the international and Mexican offerings are conditioned upon each other. We will not receive any proceeds from any Series B shares or ADSs sold in this offering.

Our Series B shares are currently listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.) under the symbol “OMA”. Our ADSs are currently listed on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “OMAB”. On June 7, 2013, the last reported sale price of our Series B shares on the Mexican Stock Exchange was Ps. 43.82 per share (U.S.$ 3.55 per Series B share at an exchange rate of Ps. 12.35 per U.S. dollar) and the last reported sale price of our ADSs on NASDAQ was U.S.$ 27.55 per ADS.

 

 

Investing in our Series B shares and ADSs involves risks. Before buying our securities, you should refer to the risk factors included in our periodic reports and in other information that we file with the U.S. Securities and Exchange Commission (the “SEC”). See “Risk Factors” beginning on page 13 of our annual report on Form 20-F for the year ended December 31, 2012, incorporated by reference herein, as well as “Risk Factors” beginning on page S-13 hereof.

 

     Per ADS      Per Series B Share      Total  

Public offering price

   U.S.$         U.S.$         U.S.$     

Underwriting discount

   U.S.$         U.S.$         U.S.$     

Proceeds, before expenses, to the selling shareholder(1)

   U.S.$         U.S.$         U.S.$     

 

  (1) The selling shareholder has agreed to reimburse the international underwriters for certain expenses in connection with this offering. See “Underwriting (Conflicts of Interest).”

The selling shareholder has granted to the international underwriters and the Mexican underwriters independent options to purchase up to 12,391,304 additional Series B shares, directly or in the form of ADSs within 30 days from the date of this prospectus supplement.

Our Series B shares are registered with the Mexican National Securities Registry (Registro Nacional de Valores, or “RNV”) maintained by the CNBV. Registration of our Series B shares with the RNV does not imply any certification as to the investment quality of the securities referred to in this prospectus supplement, our solvency, liquidity or credit quality, or the accuracy or completeness of the information contained in this prospectus supplement nor does such registration validate actions or omissions undertaken in contravention of applicable law. The information contained in this prospectus supplement is exclusively our responsibility and has not been reviewed or authorized by the CNBV.

Neither the SEC, the CNBV nor any state securities commission has approved or disapproved of the Series B shares or ADSs, or determined if this prospectus supplement or the accompanying prospectus are truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The international underwriters expect that delivery will be made to investors on or about                     , 2013 in book-entry form, through S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V. (“Indeval”), the Mexican clearing system, in the case of Series B shares, and The Depository Trust Company (“DTC”), in the case of ADSs.

 

Global Coordinator and
Joint Bookrunner
   Joint Bookrunner    Joint Bookrunner
BofA Merrill Lynch    BBVA    Santander
Joint Bookrunner           Joint Bookrunner
Barclays           Morgan Stanley

 

 

, 2013


Table of Contents

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein. We are responsible for the information contained in this prospectus supplement, the accompanying prospectus and any free writing prospectus prepared by or on behalf of us to which we have referred you. Neither we, the selling shareholder nor the international underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus supplement, the accompanying prospectus or any free writing prospectus filed with the SEC, and we take no responsibility for any other information that others may give you. The selling shareholder is offering to sell, and seeking offers to buy, Series B shares (directly or in the form of ADSs) only in jurisdictions where offers and sales are permitted. The information contained in this prospectus supplement is accurate only as of the date of this prospectus supplement, regardless of the time of delivery of this prospectus supplement or of any sale of our Series B shares (directly or in the form of ADSs). Our business, operating results and financial condition may have changed since such date.

 

 

Table of Contents

PROSPECTUS SUPPLEMENT

 

     Page  

About this Prospectus Supplement

     S-1   

Summary

     S-2   

Risk Factors

     S-13   

Use of Proceeds

     S-14   

Exchange Rates

     S-15   

Capitalization

     S-16   

Share Price Information

     S-17   

Selected Consolidated Financial and Operating Information

     S-19   

Results of Operations for the Three Months Ended March 31, 2012 and 2013

     S-23   

Recent Developments

     S-28   

Selling Shareholder

     S-29   

Underwriting (Conflicts of interest)

     S-30   

Expenses Relating to the Offering

     S-37   

Legal Matters

     S-38   

Index to Unaudited Condensed Consolidated Interim Financial Statements

     F-1   

PROSPECTUS

 

     Page  

About this Prospectus

     2   

Enforceability of Civil Liabilities

     3   

Where You Can Find More Information

     4   

Incorporation of Certain Documents by Reference

     4   

Risk Factors

     5   

Forward-Looking Statements

     6   

Our Company

     8   

Use of Proceeds

     9   

Selling Shareholder

     10   

Description of Our Capital Stock

     11   

Description of the American Depositary Shares

     23   

Taxation

     29   

Plan of Distribution

     32   

Expenses

     34   

Validity of Securities

     35   

Experts

     36   


Table of Contents

ABOUT THIS PROSPECTUS SUPPLEMENT

This document is in two parts. The first part, this prospectus supplement, describes the terms of this offering of Series B shares, directly or in the form of ADSs, and also adds to, updates and changes information contained in, the accompanying prospectus and the documents incorporated by reference herein and therein. The second part, the accompanying prospectus dated May 15, 2013, provides more general information about us and our capital stock, some of which may not apply to this offering. Generally, when we refer to this prospectus, we are referring to both parts of this document combined. To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus or in any document incorporated by reference herein and therein that was filed with the SEC before the date of this prospectus supplement, on the other hand, you should rely on the information in this prospectus supplement.

You should read this prospectus supplement, the accompanying prospectus, the documents incorporated by reference herein and therein and any free writing prospectus that we have authorized for use in connection with this offering when making your investment decision. You should also read and consider the information in the documents to which we have referred in the sections of the accompanying prospectus entitled “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”

As used in this prospectus supplement, “GACN,” “we,” “our,” “us” and the “company” refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified. References in this prospectus supplement to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States of America. References in this prospectus supplement to “pesos” or “Ps.” are to the lawful currency of Mexico. This prospectus supplement contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, U.S. dollar amounts in this prospectus supplement have been translated from pesos at an exchange rate of Ps. 12.35 to U.S.$ 1.00, the exchange rate determined by reference to the interbank selling rate as reported by Banamex on March 31, 2013.

This prospectus supplement contains references to “workload units,” which are units measuring an airport’s passenger traffic volume and cargo volume. A workload unit currently is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.

We have not taken any action to permit the possession or distribution of this prospectus supplement outside the United States. Persons outside the United States who come into possession of this prospectus supplement must inform themselves about, and observe restrictions relating to, the offering of the securities described herein and the distribution of this prospectus supplement outside of the United States.

 

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SUMMARY

This summary highlights selected information contained in, or incorporated by reference in, this prospectus supplement or the accompanying prospectus, but may not contain all of the information that is important to you. This prospectus supplement and our most recent annual report on Form 20-F, incorporated by reference herein, include specific terms of the securities that we are offering, as well as other information regarding our business. You should read the entire prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein and therein, carefully, including the risk factors and financial statements.

Our Company

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or GACN, was incorporated in Mexico in 1998 as part of the Mexican government’s program for the opening of the country’s airports to private-sector investment. We have been a public company since November 2006 and are listed on the Mexican Stock Exchange and NASDAQ. We hold concessions, each with a term of 50 years beginning on November 1, 1998, to operate, maintain and develop 13 airports in Mexico concentrated in the country’s central and northern regions. We operate the airports located in Acapulco, Ciudad Juárez, Culiacán, Chihuahua, Durango, Mazatlán, Monterrey, Reynosa, San Luis Potosí, Tampico, Torreón, Zacatecas and Zihuatanejo. Our operations principally include the provision of aeronautical services, but we also provide other commercial, real estate or complementary services related to our airport operations. In addition, in 2008, as part of our non-aeronautical activities, we entered into a joint investment with a Mexican subsidiary of international hotel operator NH Hoteles, S.A., to develop and operate a hotel and commercial space inside Terminal 2 of the Mexico City International Airport under a lease agreement with the airport that expires in 2029. The following map shows the locations of the 13 airports that we operate, as well as our Terminal 2 NH Hotel:

 

LOGO

 

 

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As operator of 13 airports, we derive aeronautical revenues by charging fees to airlines, passengers and other users for the use of the airports’ facilities. We also derive non-aeronautical revenues from rental and other fees charged for commercial activities conducted at our airports, such as the leasing of space to restaurants and retailers, car parking, advertising, cargo logistics and other services.

In November 2012, we entered into a strategic alliance with VYNMSA Desarrollo Inmobiliario, S.A. de C.V. (“VYNMSA”), to construct and operate a 28-hectare industrial park within the perimeter of the Monterrey airport. Other activities generating non-aeronautical revenues include cargo logistics and the leasing of commercial real estate at our airports.

In 2012, we recorded revenues of Ps. 3,141.3 million (U.S.$ 254.4 million), consolidated net income of Ps. 819.1 million (U.S.$ 66.3 million) and consolidated comprehensive income of Ps. 811.2 million (U.S.$ 65.7 million), and the sum of our aeronautical and non-aeronautical revenues was Ps. 2,819.6 million (U.S.$ 228.3 million). In 2011, we recorded revenues of Ps. 2,789.7 million (U.S.$ 225.8 million) and consolidated net and comprehensive income of Ps. 616.1 million (U.S.$ 49.9 million). For the three months ended March 31, 2013, we recorded revenues of Ps. 787.7 million (U.S.$ 63.8 million), consolidated net income of Ps. 226.0 million (U.S.$ 18.3 million) and consolidated comprehensive income of Ps. 225.6 million (U.S.$ 18.3 million), and the sum of our aeronautical and non-aeronautical revenues was Ps. 700.9 million (U.S.$ 56.8 million).

In 2012, our airports served approximately 12.6 million terminal passengers (excluding transit passengers), an increase of 7.0% with respect to the 11.8 million terminal passengers handled in 2011. In 2012, of our total passengers, 85.5% were passengers on domestic flights and 14.5% were passengers on international flights, as compared to 84.8% and 15.2%, respectively, in 2011. For the three months ended March 31, 2013, total passenger traffic increased by 4.6% as compared to the three months ended March 31, 2012. We believe that the increase in the percentage of passengers on domestic flights was principally due to the growth of the Mexican economy during the last three years. Since 1991, total air traffic in Mexico has increased by an average of 4.4% per year, according to data published by the Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes).

The following tables set forth the passenger volume and air traffic movements for each of our airports during the periods indicated:

Terminal Passenger Traffic by Airport(1)

 

     Year Ended
December 31,
     % Change     Three Months Ended
March 31,
     % Change  
     2010      2011      2012            2012      2013         

Acapulco

     736,878         596,326         546,951         (8.3 %)      152,668         162,469         6.4

Ciudad Juárez

     633,919         673,364         699,394         3.9     163,594         151,167         (7.6 %) 

Culiacán

     1,059,904         1,070,706         1,168,380         9.1     262,977         279,768         6.4

Chihuahua

     828,123         782,133         855,129         9.3     186,540         191,277         2.5

Durango

     217,230         227,131         241,946         6.5     57,739         52,484         (9.1 %) 

Mazatlán

     756,122         722,492         669,407         (7.3 )%      192,991         196,280         1.7

Monterrey

     5,380,412         5,582,794         6,105,910         9.4     1,288,815         1,404,122         8.9

Reynosa

     198,138         216,599         302,934         39.9     60,221         86,052         42.9

San Luis Potosí

     222,854         248,645         271,107         9.0     64,924         58,812         (9.4 %) 

Tampico

     451,005         548,083         594,797         8.5     139,362         135,240         (3.0 %) 

Torreón

     338,003         375,669         415,244         10.5     94,561         96,944         2.5

Zacatecas

     268,577         248,029         265,264         6.9     64,455         55,784         (13.5 %) 

Zihuatanejo

     496,523         480,613         457,906         (4.7 %)      166,848         158,991         (4.7 %) 
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     11,587,688         11,772,584         12,594,369         7.0     2,895,695         3,029,390         4.6
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(1) Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). Excludes transit passengers who arrive at our airports but generally depart without changing aircraft.

 

 

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Aeronautical Revenues

The majority of our revenues are derived from providing aeronautical services and are related principally to the following charges: passenger charges for the usage of our airports (tarifa de uso de aeropuerto), aircraft landing charges, aircraft parking, boarding and unloading charges, charges for the use of passenger walkways and charges for the provision of airport security services. Our revenues from aeronautical services are principally dependent on passenger traffic volume, the number of air traffic movements, the weight of each aircraft, the duration of each aircraft’s stay at the airport, the time of day each aircraft operates at the airport and the specific prices charged for the service. In 2012, aeronautical services revenues represented 67.8% of our total revenues and 75.6% of the sum of our aeronautical and non-aeronautical revenues. For the three months ended March 31, 2013, aeronautical revenues were Ps. 517.1 million, a 7.5% increase from Ps. 481.2 million for the three months ended March 31, 2012.

Historically, the principal source of our aeronautical services revenues has been passenger charges. Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals that we operate and are automatically included by airlines in the cost of a passenger’s ticket. We issue invoices for these charges to each airline on a bi-weekly basis. In 2010, 2011 and 2012, passenger charges represented 50.1%, 54.4% and 55.8%, respectively, of our total revenues and 60.1%, 61.7% and 62.1%, respectively, of the sum of our aeronautical and non-aeronautical revenues.

Our revenues from aeronautical services are also affected by the maximum rates that we are allowed to charge under the price regulation system established by the Ministry of Communications and Transportation. This price regulation system establishes a “maximum rate” for each airport for every year over a five-year period and is negotiated with the Ministry of Communications and Transportation every five years through its agency, the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil). The maximum rate for any particular airport is the maximum annual amount of revenues per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from services subject to price regulation. Our maximum rates are adjusted periodically for inflation (determined by reference to the Mexican Producer Price Index (Índice Nacional de Precios Productor), excluding fuel) and annually based on an efficiency factor determined by the Ministry of Communications and Transportation.

We are entitled to adjust our prices relating to the aeronautical services we provide once every six months for inflation (or earlier upon a cumulative increase of 5.0% in the Mexican Producer Price Index, excluding fuel), except for prices relating to complementary services and the leasing of space to airlines, for each of our airports as long as the combined revenues from regulated services at an airport does not exceed the maximum rate per workload unit at that airport on an annual basis.

In 2012, our revenues from aeronautical services subject to maximum rate regulation represented approximately 99.2% of the amounts we were entitled to earn under the maximum rates for all of our airports.

 

 

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Current Maximum Rates(1)

 

     Year Ended December 31,  
         2011              2012               2013(2)              2014              2015      
     (in pesos per terminal passenger)  

Acapulco

     195.26         193.90         200.68         199.28         197.88   

Ciudad Juárez

     152.76         151.69         154.78         153.70         152.62   

Culiacán

     162.97         161.83         165.22         164.07         162.91   

Chihuahua

     155.75         154.66         158.40         157.29         156.19   

Durango

     186.60         185.29         187.28         185.97         184.67   

Mazatlán

     181.51         180.24         184.40         183.11         181.83   

Monterrey

     152.24         151.18         152.96         151.89         150.83   

Reynosa

     176.42         175.19         177.22         175.98         174.75   

San Luis Potosí

     131.40         130.49         131.68         130.76         129.84   

Tampico

     177.26         176.02         177.93         176.68         175.44   

Torreón

     185.26         183.96         185.76         184.46         183.18   

Zacatecas

     197.67         196.28         198.28         196.89         195.51   

Zihuatanejo

     196.96         195.58         200.64         199.24         197.85   

 

(1) Expressed in constant pesos as of December 31, 2012, as required by the maximum rate regulation. The maximum rate for each succeeding year from 2012 is reduced by the efficiency factor of 0.70% per year.
(2) Increases to maximum rates for 2013 were negotiated with the Mexican Bureau of Civil Aviation to take into account the maintenance costs of baggage-screening systems in all of our airports required by mandatory circular CO SA-17.2/10 R1. See “Item 5. Operating and Financial Review and Prospects—Recent Developments—Increases in Maximum Rates Associated with Baggage-Screening Services” in our most recent annual report on Form 20-F, incorporated by reference herein.

Non-Aeronautical Revenues

In 2012, non-aeronautical services represented 21.9% of our total revenues and 24.4% of the sum of our aeronautical and non-aeronautical revenues. Of our non-aeronautical revenues generated in 2012, 53.8% were derived from commercial activities, 28.0% were derived from diversification activities, and 13.4% were derived from complementary activities. For the three months ended March 31, 2013, non-aeronautical revenues were Ps. 183.8 million, a 20.9% increase from Ps. 152.1 million for the three months ended March 31, 2012.

Revenues from commercial activities consist of fees charged for operating parking facilities, rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as advertising, retail and duty-free operators, food and beverage providers, car rental companies, time-share sales and promotions service providers, and fees collected from other miscellaneous sources, such as financial services providers, telecommunications providers and other passenger services providers.

Revenues from diversification activities include revenues earned by providing hotel services, air cargo logistics services (provided by our subsidiary, OMA Carga) and real estate services related to the industrial park at the Monterrey airport.

Complementary activities principally include the revenues from the operation of baggage-screening services through our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V. (operating since March 1, 2012), the leasing of space to airlines and complementary service providers of first-class/VIP lounges and other similar activities that are not directly related to airport operations and not subject to price regulation under our maximum rates.

 

 

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Our revenues from non-aeronautical activities are not subject to price regulation under our maximum rates. Thus, our non-aeronautical revenues are affected by the mix of commercial services offered at our airports, the contracts that we have with the providers of those commercial services, our ability to increase the fees that we charge to those service providers and the passenger volume at our airports.

Construction Services and Total Revenues

In accordance with International Financial Reporting Interpretations Committee (“IFRIC”) 12, we also record revenues related to construction services, which are equal to the amount of capital expenditures that we make to improve our concessioned assets. Revenues from construction services represented 10.2% of our total revenues in 2012 and 11.0% of our total revenues for the three months ended March 31, 2013.

The following table sets forth our revenues for aeronautical services, non-aeronautical services and construction services for the periods indicated:

 

     Year Ended December 31,      Three Months Ended March 31,  
     2010      2011      2012      2012      2012      2013  
     (in thousands of pesos)      (in thousands
of dollars)(1)
     (in thousands of pesos)      (in thousands
of dollars)(1)
 
            (unaudited)  

Revenues:

                    

Aeronautical services

     1,652,626         1,870,177         2,130,663         172,523         481,247         517,117         41,872   

Non-aeronautical services

     491,797         588,671         688,957         55,786         152,109         183,829         14,885   

Construction services

     430,029         330,863         321,718         26,050         71,145         86,706         7,021   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     2,574,452         2,789,711         3,141,338         254,359         704,501         787,652         63,778   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Translated into dollars at the rate of Ps. 12.35 per U.S.$ 1.00, the interbank selling rate as reported by Banamex on March 31, 2013.

Our Strengths

We believe that our unique market position and strengths have enabled us to achieve consistent growth despite macroeconomic and aeronautical industry difficulties. The following is a summary of the competitive strengths that distinguish us:

 

   

Leading Mexican airport platform with airports strategically located throughout Mexico. Our 13 airport concessions are grouped into segments according to their location: metropolitan (Monterrey), regional (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas), tourist (Acapulco, Mazatlán and Zihuatanejo) and border (Ciudad Juárez and Reynosa). We believe that our airports located in metropolitan, regional and border locations with significant commercial and industrial activity enable us to take advantage of the dynamic growth of the Mexican economy. Historically, there has been a direct positive correlation between the growth of the Mexican economy and air traffic in such cities. In 2010, 2011 and 2012, Mexican gross domestic product (“GDP”) increased by 5.5%, 3.9% and 3.9%, respectively, according to the Mexican Central Bank (Banco de México), and terminal passenger traffic at our metropolitan, regional and border airports increased by 2.2%, 3.9% and 9.5%, respectively. In addition, we believe that our presence in tourist destinations enable us to benefit from traffic increases resulting from the increase in disposable income of the Mexican population due to the growth of the Mexican economy, the growth of the Mexican population and, more generally, global economic growth.

 

 

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In addition, we believe that the Monterrey airport, which was the fourth busiest airport in Mexico based on passenger volume in 2012, has strong potential to become an important hub for the northern region of Mexico due to its location and terminal capacity, as well as to growing foreign investment in the state of Nuevo León, which has helped spur economic growth and, in turn, increased passenger traffic to and from Monterrey. We may from time to time consider acquiring additional airports in Mexico or internationally.

 

   

Diversified business model and a successful implementation of commercial and diversification strategies. Since our inception, we have substantially increased our revenue from commercial activities through the implementation of several successful strategies, such as remodeling our airport terminals with the objective of maximizing the space reserved for commercial activities; improving the mix of offered products and services by introducing nationally and internationally recognized brands; increasing the quantity and quality of our passenger services; and providing more attractive space for third-party advertising, including large-scale advertising, in our airport terminals. In addition, we have focused on diversifying our non-aeronautical revenues by developing new businesses, such as the Terminal 2 NH Hotel of the Mexico City International Airport and, through our strategic alliance with VYNMSA, the industrial park at the Monterrey airport, which began construction in 2013. We expect to continue this diversification through the construction of similar facilities in 2013. Our revenues from non-aeronautical activities are not subject to price regulation; thus, fees charged for non-aeronautical services can be increased or decreased at our discretion. Non-aeronautical revenues as a percentage of the sum of aeronautical and non-aeronautical revenues have increased from 11.8% in 2001 to 24.4% and 26.2% in 2012 and for the three months ended March 31, 2013, respectively. Furthermore, our non-aeronautical revenues per terminal passenger have increased from Ps. 14.8 in 2001 to Ps. 54.7 and Ps. 60.7 in 2012 and for the three months ended March 31, 2013, respectively.

 

   

Uniquely positioned to take advantage of Mexico’s robust macro-fundamentals. We are in a position to benefit from the economic growth of Mexico and the economic performance of its principal trading partners. We believe that the global economic recovery, coupled with the strength of the macroeconomic indicators in Mexico, will contribute to the increase in direct foreign investment and to the growth of commercial activities and services. We believe that such activities will have a positive impact on air traffic, increasing demand principally in our airports located in commercial and industrial cities. The Mexican states in which our airports are located collectively contributed 29.9% and 29.6% to Mexican manufacturing GDP in 2010 and 2011, respectively, according to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía). In 2012, the states of Nuevo León and Chihuahua were ranked third and fourth, respectively, among Mexican states for attracting foreign direct investment, according to data from the Mexican Ministry of Economy (Secretaría de Economía).

Similarly, we anticipate that the expected continuing growth of Mexican GDP and the Mexican population will positively impact local demand. We believe there is potential for growth in the aeronautical industry in Mexico due to the following factors: (i) expected aircraft fleet growth for Mexico-based carriers, with pending orders of more than 180 units as of December 31, 2012 and (ii) 44.6% and 19.0% growth in passenger traffic on a country-wide basis reported by the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil) in 2011 and 2012, respectively.

We have made major capital expenditures in our 13 airports that position us to have sufficient operations capacity to accommodate and serve a greater number of passengers. In recent years, we have completed two significant projects for our two most important airports. In 2007, as part of its expansion plans for the future, the Monterrey airport began to acquire land adjacent to it, which totaled approximately 777 hectares. In 2010, the Monterrey airport commenced operations for its 21,000–square meter (226,049–square foot) Terminal B facility, and in 2012, it completed the 3,420–square meter (35,812–square foot) expansion of its Terminal C. In 2008, the Culiacán airport acquired 32.5 hectares as a strategic land reserve, which we believe positions the airport well for future expansion as

 

 

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contemplated by our long-term master development programs. In 2012, the Culiacán airport completed a 3,000–square meter (32,292–square foot) expansion of its terminal.

The following table sets forth our actual capital expenditures by category across all of our airports from 2010 to 2012:

 

     Year Ended December 31,  
     2010      2011      2012  
     (in thousands of pesos)  

Capital expenditures:

        

Terminals

   Ps.  150,818       Ps.  85,270       Ps.  175,648   

Runways and aprons

     45,569         0         29,716   

Machinery and equipment

     58,763         8,845         77,638   

Land

     90,906         12,141         378   

Documented baggage screening system – investments

     163,013         220,066         6,789   

New businesses

     0         17,306         4,292   

Other

     47,718         41,404         97,669   
  

 

 

    

 

 

    

 

 

 

Total

   Ps.  556,787       Ps.  385,032       Ps.  392,130   
  

 

 

    

 

 

    

 

 

 

 

   

Experienced management team with a track record of operating and financial performance, high corporate governance standards and a history of achievement and recognition. We have an experienced management team that is skilled and trained in the different areas in which we operate. The members of our management team have worked with the company for an average of nine years. Our Chief Executive Officer (“CEO”), Porfirio González Álvarez, has been with us since our incorporation in 1998 and was appointed CEO in 2011. Our Chief Financial Officer, José Luis Guerrero Cortés, has been with us since 2009.

Governance of the company is vested in our Board of Directors, which consists of 11 directors, of which five are independent, and one alternate director. Guided by our Board of Directors and our experienced management team, we have maintained sustained levels of growth and profitability over the years, even amid various headwinds that have affected the aeronautical industry and Mexico in general. Since 2006, we have complied with the requirements of the Sarbanes-Oxley Act, which has enabled us to maintain world-class corporate governance standards. On March 6, 2013, Euromoney published its ranking of the Best Managed Companies in Latin America for 2013, in which we were ranked third in the Transportation/Shipping/Logistics category. Furthermore, for the third consecutive year in 2012, we were recognized as one of the 100 best companies to work for in Mexico by “Great Place to Work.”

Our business strategy is based on sustainable development, for which we have received recognition from various organizations. We are currently included in the Sustainable Price and Quotation Index of the Mexican Stock Exchange (Índice de Precios y Cotizaciones (IPC) Sustentable de la Bolsa Mexicana de Valores) through January 31, 2014. On December 9, 2012, we received an ISO 9001:2008 qualification for the 2012–2015 period, with no instances of non-compliance for the ninth consecutive year, according to a report issued by Lloyd’s Register Quality Assurance, the certifying agency. On February 14, 2012, the Mazatlán airport was named the Best Regional Airport in 2011 in Latin America and the Caribbean by Airports Council International. On March 13, 2012, we were awarded for the fifth consecutive year the Socially Responsible Business Distinction (Distintivo de Empresa Socialmente Responsible) by the Mexican Center for Philanthropy (Centro Mexicano para la Filantropía). Finally, on August 15, 2012, we received a multisite ISO 14001:2007 certification for our 13 airports and corporate offices, which is valid through August 14, 2014.

 

 

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Our Business Strategy

We intend to generate value and maximize shareholder profit by capitalizing on our strengths and focusing on the following strategies:

 

   

Increase the passenger volume in our 13 airports. Given that our principal and most important business is derived from aeronautical services, and our main source of revenue is passenger charges, our growth strategy is based on the development of passenger traffic in our 13 airports by increasing the frequency of flights, adding new routes and encouraging operations with larger planes to increase the number of offered seats. We plan to achieve this growth strategy by coordinating with local, state and federal governments and tourism offices, as well as by working with hotel associations to promote the destinations where our airports are located.

 

   

Diversify sources of revenue through new businesses and the development of land reserves. Currently, in addition to the commercial services that we offer in our airports, our objective is to diversify our sources of revenue through the development of new business lines, such as hotel, cargo and real estate services, among others. We plan to develop industrial, commercial or logistics projects that are directly or indirectly related to our airports’ activities in areas of our airports that are not necessary for aeronautical operations, with the view of strengthening the role of these areas for the development of the cities in which they are located. In 2013, in a partnership with VYNMSA, we began work for the development of an industrial park of approximately 28 hectares within the perimeter of the Monterrey airport. Given the success of our Terminal 2 NH Hotel in the Mexico City International Airport, we are also evaluating opportunities to develop other complementary lines of business across our airport network.

 

   

Improve the customer experience by continuing to develop our business and improve our services. Passenger traffic is the vital element of any airport. Our mission is to provide passengers a pleasant stay at all our airports. Our business development and operations teams work jointly with the airlines and terminal commercial tenants to provide excellent customer service and identify the appropriate service, product and price mix to offer at each airport in order to make air travel a pleasurable experience for all of our passengers. We are dedicated to making the travel experience for every one of our passengers as enjoyable and stress-free as possible, since a relaxed passenger is typically inclined to spend more in our terminal restaurants and shops. According to our customer satisfaction surveys, in 2012, approximately 85.7% of passengers surveyed were satisfied with their travel experience at our airports.

 

   

Improve the efficiency of our business. We plan to further improve the efficiency of our business by developing projects that generate cost-efficiencies through the sustainable and efficient use of our resources. In October 2012, our Zacatecas airport began the operation of a solar park, which uses monocrystalline silicon panels and photovoltaic parabolic concentrators to generate approximately 50% of the total energy used by the airport, which translates into energy savings for the airport and a reduction in carbon dioxide emissions. We intend to replicate this type of project in our other airports with the objective of reducing costs and caring for the environment.

 

   

Evaluate and expand into new markets. We evaluate new investment opportunities in airports abroad as they arise, principally in Latin America. We are opportunity-driven and will not limit ourselves geographically if an attractive project with upside potential is identified.

We are a publicly-traded variable-capital corporation (sociedad anónima bursátil de capital variable) incorporated under the laws of Mexico. Our principal executive offices are located at Torre Latitud, L501, Piso 5, Av. Lázaro Cárdenas 2225, Col. Valle Oriente, San Pedro Garza García, Nuevo León, Mexico, and our telephone number is +52 81 8625 4300.

 

 

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Summary of the Offering

 

Issuer

   Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.

Selling shareholder

   Aeroinvest, S.A. de C.V. (“Aeroinvest”)

Offering price per Series B share

   Ps.

Offering price per ADS

   U.S.$

ADSs

   Each ADS represents eight Series B shares. See “Description of the American Depositary Shares” in the accompanying prospectus for further information.

International offering

   The selling shareholder is offering Series                B shares, directly or in the form of ADSs, through the international underwriters in the United States and in other countries outside of the United States and Mexico. The Series B shares purchased by any investor outside Mexico will be settled in Mexico and paid for in pesos.

Mexican offering

   Concurrently with the international offering, the selling shareholder is offering Series                B shares through the Mexican underwriters in a public offering in Mexico authorized by the CNBV made to investors residing in Mexico, by means of a prospectus in Spanish, satisfying the requirements of Mexican law and reviewed by the CNBV, containing information substantially similar to that included in this prospectus.

Global offering

   The global offering consists of the international offering and the Mexican offering, totaling 82,608,696 Series B shares, directly or in the form of ADSs. The closings of the international and Mexican offerings are conditioned upon each other.

Reallocations

   The number of Series B shares being offered in the global offering, directly or in the form of ADSs (including any Series B shares offered pursuant to the option to purchase additional shares), may be reallocated between the international offering and the Mexican offering, depending upon demand and other related factors in the Mexican and international markets.

Option to purchase additional shares

  

 

The selling shareholder has granted to the international underwriters and to the Mexican underwriters independent options to purchase up to 12,391,304 additional Series B shares, directly or in the form of ADSs within 30 days from the date of this prospectus supplement.

Use of proceeds

  

The selling shareholder will receive all of the net proceeds from the sale of Series B shares, directly or in the form of ADSs, in this offering. The selling shareholder is expecting to prepay a bridge loan facility for U.S.$ 125.0 million with Merrill Lynch, Pierce, Fenner & Smith Incorporated with the net proceeds from this offering. The selling shareholder may also use the net proceeds of the offering to repay other outstanding indebtedness, including indebtedness owed to affiliates of the international underwriters and the Mexican underwriters. See “Underwriting (Conflicts of Interest).”

 

We will not receive any proceeds from the sale of Series B shares, directly or in the form of ADSs, by the selling shareholder.

 

 

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Listing

  

The Series B shares are listed on the Mexican Stock Exchange under the symbol “OMA”.

 

The ADSs are listed on NASDAQ under the symbol “OMAB”.

ADS Depositary

   JPMorgan Chase Bank, N.A.

Settlement

   Settlement of the ADSs will be made through DTC. Settlement of Series B shares will be made through Indeval.

Lock-up agreements

   We, the selling shareholder and our executive officers and directors have agreed that, for a period of 90 days from the date of this prospectus supplement, we and they will not, subject to certain exceptions, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, directly or indirectly, sell, dispose of or hedge any Series B shares or ADSs or any securities convertible into or exchangeable for Series B shares or ADSs. See “Underwriting” for more information.

Authorized and outstanding capital stock of the issuer

  

 

400,000,000 ordinary shares, consisting of 341,200,000 Series B shares and 58,800,000 Series BB shares.

Voting rights

   Holders of our ordinary shares are entitled to one vote per share; however, holders of our Series BB shares have certain special voting rights. Subject to Mexican law and the terms of the deposit agreement, holders of ADSs will have the right to instruct the depositary how to vote the number of Series B shares represented by their ADSs. See “Description of our Capital Stock” and “Description of the American Depositary Shares” in the accompanying prospectus.

 

 

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Dividends

  

Our current dividend policy has a fixed and a variable component paid annually in equal quarterly installments. The fixed component is Ps. 325.0 million per year. The variable component will be based on the funds available for distribution in excess of the fixed component.

 

Our current dividend policy presupposes that the declaration and amount of dividends, both fixed and variable, paid are subject to (and determined by) the following factors:

 

•    dividends are subject to the approval of our shareholders, based on the recommendation of our Board of Directors;

 

•    compliance with applicable law regarding the declaration and payment of dividends with respect to any year, including the establishment of the annual statutory legal reserve fund of 5%;

 

•    the payment of dividends are subject to our financial position and dependent upon there being no adverse financial changes; and

 

•    the payment of dividends must be tax-efficient.

 

The holders of ADSs will be entitled to receive dividends to the same extent as the owners of our Series B shares, subject to deduction of any fees and charges of the depositary. See “Dividends” in our most recent annual report on Form 20-F, incorporated by reference herein.

Taxation

  

Under the current Mexican income tax law, dividends, either in cash or in kind, paid to holders of Series B shares or ADSs who are not residents of Mexico for tax purposes are not subject to any Mexican withholding taxes payable on behalf of the holders.

 

Gain on the sale of ADSs by a holder who is not a resident of Mexico for tax purposes will generally not be subject to any Mexican tax. Gain on the sale of Series B shares by a such a non-resident holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange or a securities market approved by the Mexican Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público), among other requirements. See “Taxation” in the accompanying prospectus and “Additional Information—Taxation” in our most recent annual report on Form 20-F incorporated by reference herein.

Risk factors

   See “Risk Factors” beginning on page S-13 as well as on page 8 of our most recent annual report on Form 20-F incorporated by reference herein for a discussion of certain risk factors relating to us, our business and an investment in the Series B shares and ADSs.

 

 

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RISK FACTORS

We have set forth risk factors in our most recent annual report on Form 20-F incorporated herein by reference. We have also set forth below an additional risk factor related to our Series B shares and ADSs. We may include further risk factors in subsequent reports on Form 6-K incorporated by reference in the accompanying prospectus, of which this prospectus supplement forms a part. You should carefully consider all these risk factors in addition to the other information contained or incorporated by reference in this prospectus supplement and accompanying prospectus before making an investment decision regarding the Series B shares and ADSs.

Risks Relating to Our Series B Shares and ADSs

The market price of our Series B shares and ADSs may fluctuate significantly, and you could lose all or part of your investment.

Volatility in the market price of our Series B shares and ADSs may prevent you from being able to sell your Series B shares or ADSs at or above the price you paid for them. The market price and liquidity of the market for our Series B shares and ADSs may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, among others:

 

   

actual or anticipated changes in our results of operations, or failure to meet expectations of financial market analysts and investors;

 

   

high volatility in the market price of the shares of companies in the sectors in which we participate that are not necessarily related to our performance;

 

   

investor perceptions of our prospects or our industry;

 

   

operating performance of companies comparable to us and increased competition in our industry;

 

   

new laws or regulations or new interpretations of laws and regulations applicable to our business;

 

   

general economic trends in Mexico, Latin America, the United States and in other countries and regions;

 

   

catastrophic events, such as hurricanes, earthquakes and other natural disasters and terrorist attacks; and

 

   

developments and perceptions of risks in Mexico and in other countries.

Future sales of shares by us and our shareholders may depress the price of our Series B shares and ADSs.

Future sales of substantial amounts of our capital stock or the perception that such future sales may occur, may depress the price of our Series B shares or ADSs. We cannot assure you that the price of our Series B shares and ADSs would recover from any such decline in value.

 

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USE OF PROCEEDS

The selling shareholder will receive all of the net proceeds from the sale of Series B shares, directly or in the form of ADSs, in this offering. The selling shareholder is expecting to prepay a bridge loan facility for U.S.$ 125.0 million with Merrill Lynch, Pierce, Fenner & Smith Incorporated with the net proceeds from this offering. The selling shareholder may also use the net proceeds of the offering to repay other outstanding indebtedness, including indebtedness owed to affiliates of the international underwriters and the Mexican underwriters. See “Underwriting (Conflicts of Interest).”

We will not receive any proceeds from the sale of Series B shares, directly or in the form of ADSs, by the selling shareholder.

 

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EXCHANGE RATES

The following table sets forth, for the periods indicated, the high, low, average and period-end free-market exchange rate expressed in pesos per U.S. dollar. The average annual rates presented in the following table were calculated using the average of the exchange rates on the last day of each month during the relevant period. The data provided in this table is based on noon buying rates published by the U.S. Federal Reserve for cable transfers in Mexican pesos. The Federal Reserve Bank of New York discontinued the publication of foreign exchange rates on December 31, 2008, and therefore the data provided for the periods beginning January 1, 2009 are based on the rates published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates. All amounts are stated in pesos and have not been restated in constant currency units. We make no representation that the Mexican peso amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all.

 

     Exchange Rate  

Year Ended December 31,

       High              Low              Period End               Average(1)      

2008

     13.94         9.92         13.83         11.14   

2009

     15.41         12.63         13.06         13.50   

2010

     13.19         12.16         12.38         12.62   

2011

     14.25         11.51         13.95         12.43   

2012

     14.37         12.63         12.96         13.15   

2013:

           

January

     12.79         12.59         12.73         12.70   

February

     12.88         12.64         12.78         12.72   

March

     12.80         12.32         12.32         12.50   

April

     12.34         12.07         12.13         12.21   

May

     12.78         11.98         12.78         12.30   

(1) Average of month-end rates or daily rates, as applicable.

Sources:   Federal Reserve Bank of New York and the U.S. Federal Reserve Board.

Except for the period from September through December 1982, during a liquidity crisis, the Mexican Central Bank has consistently made foreign currency available to Mexican private-sector entities (such as us) to meet their foreign currency obligations. Nevertheless, in the event of renewed shortages of foreign currency, there can be no assurance that foreign currency would continue to be available to private-sector companies or that foreign currency needed by us to service foreign currency obligations or to import goods could be purchased in the open market without substantial additional cost.

Fluctuations in the exchange rate between the peso and the U.S. dollar will affect the U.S. dollar value of securities traded on the Mexican Stock Exchange, and, as a result, will likely affect the market price of the ADSs. Such fluctuations will also affect the U.S. dollar conversion by the depositary of any cash dividends paid in pesos.

On December 31, 2012, the U.S. Federal Reserve noon buying rate was Ps. 12.96 per U.S.$ 1.00. On May 31, 2013, the U.S. Federal Reserve noon buying rate was Ps. 12.78 per U.S.$ 1.00.

For a discussion of the effects of fluctuations in the exchange rates between the peso and the U.S. dollar, see “Item 10. Additional Information—Exchange Controls” in our most recent annual report on Form 20-F, which is incorporated by reference herein.

 

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CAPITALIZATION

The following table sets forth our unaudited consolidated capitalization as of March 31, 2013. This table should be read together with our audited consolidated financial statements and the other financial information in our most recent annual report on Form 20-F, which is incorporated by reference herein, and our unaudited condensed consolidated interim financial statements included herein.

 

     As of March 31, 2013  
   (in thousands
of pesos)
    (in thousands
of dollars)(1)
 

Short-term debt(2)

   Ps.  604,677      U.S.$ 48,962   

Current portion of long-term debt(3)

     31,762        2,572   
  

 

 

   

 

 

 

Total short-term debt

     636,439        51,534   

Peso-denominated long-term debt

     2,788,886        225,821   

Dollar-denominated long-term debt

     194,001        15,709   
  

 

 

   

 

 

 

Total long-term debt

     2,982,887        241,530   
  

 

 

   

 

 

 

Total debt

     3,619,326        293,064   

Shareholders’ equity:

    

Capital stock

     3,897,168        315,560   

Premium on share issuance

     29,786        2,412   

Retained earnings

     2,309,268        186,985   

Reserves for the repurchase of shares

     404,774        32,775   

Other comprehensive income

     (8,354     (676

Non-controlling interest

     8,900        721   
  

 

 

   

 

 

 

Total shareholders’ equity

     6,641,542        537,777   
  

 

 

   

 

 

 

Total capitalization

   Ps.  10,260,868      U.S.$  830,841   
  

 

 

   

 

 

 

(1)    Translation to U.S. dollar amounts at an exchange rate of Ps. 12.35 per U.S.$ 1.00, the exchange rate determined by reference to the interbank selling rate as reported by Banamex on March 31, 2013, solely for the convenience of the reader.

          

(2)    Includes bank debt and debt securities.

       

(3)    Current portion of long-term debt corresponds to current portion of dollar-denominated long-term debt.

        

 

 

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SHARE PRICE INFORMATION

The information set forth in the tables below reflects actual historical amounts at the trade dates and has not been restated in constant pesos. Each ADS represents eight Series B shares.

The following table sets forth, for the five most recent full financial years, the annual high and low market prices for our Series B shares on the Mexican Stock Exchange in pesos and for our ADSs on NASDAQ in U.S. dollars.

 

     NASDAQ      Mexican Stock Exchange  
   U.S. dollars per ADS      Pesos per Series B Share  
       Low              High              Low              High      

2008

     7.06         23.98         12.29         34.20   

2009

     7.37         14.02         12.53         22.98   

2010

     11.51         16.27         18.71         24.98   

2011

     12.25         18.85         20.08         27.40   

2012

     13.05         23.81         21.85         37.86   
Sources:   Mexican Stock Exchange and NASDAQ.   

The following table sets forth, for the periods indicated, the reported high and low market prices for our Series B shares on the Mexican Stock Exchange in pesos and for our ADSs on NASDAQ in U.S. dollars.

 

     NASDAQ      Mexican Stock Exchange  
   U.S. dollars per ADS      Pesos per Series B Share  
       Low              High              Low              High      

2011

           

First quarter

     13.96         15.98         21.03         24.01   

Second quarter

     15.32         18.15         22.52         26.93   

Third quarter

     12.46         18.85         20.08         27.40   

Fourth quarter

     12.25         14.15         21.60         24.99   

2012

           

First quarter

     13.05         16.79         21.85         27.00   

Second quarter

     13.45         16.62         23.60         27.65   

Third quarter

     16.05         18.10         27.00         29.83   

Fourth quarter

     17.88         23.81         28.69         37.86   

2013

           

First quarter

     22.47         33.40         35.99         49.85   

Second quarter (through June 7, 2013)

     26.55         34.35         43.06         52.51   
Sources:   Mexican Stock Exchange and NASDAQ.   

 

 

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The following table sets forth, for each of the most recent six months and for the current month, the reported high and low market prices for our Series B shares on the Mexican Stock Exchange in pesos and for our ADSs on NASDAQ in U.S. dollars.

 

     NASDAQ      Mexican Stock Exchange  
         Low              High              Low              High      
     (U.S. dollars per ADS)      (Pesos per Series B share)  

November 2012

     17.88         20.48         29.49         32.78   

December 2012

     23.81         20.45         33.15         37.86   

January 2013

     22.47         26.62         35.02         42.45   

February 2013

     26.35         28.27         42.40         44.67   

March 2013

     27.84         33.40         44.00         49.85   

April 2013

     29.41         34.35         44.71         52.51   

May 2013

     27.65         32.52         43.06         49.33   

June 2013 (through June 7, 2013)

     26.55         27.84         43.82         44.49   
Sources:   Mexican Stock Exchange and NASDAQ.   

 

 

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The following tables present a summary of our consolidated financial and operating information for the periods indicated. This information should be read in conjunction with, and is qualified in its entirety by reference to, our audited and unaudited financial statements, including the notes thereto. Our audited annual consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), and our unaudited condensed consolidated financial statements are presented in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting.

Information as of and for the three months ended March 31, 2012 and 2013 has been derived from, should be read in conjunction with and is qualified in its entirety by reference to, our unaudited condensed consolidated interim financial statements as of March 31, 2013 and for the three-month periods ended March 31, 2012 and 2013, included herein, and the notes thereto. The unaudited financial information presented below has been prepared on the same basis as our audited annual consolidated financial statements, and, in our opinion, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operation as of the dates and for the periods indicated. Results for the three months ended March 31, 2013 are not, however, necessarily indicative of results to be expected for the full year 2013.

 

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     Year Ended December 31,     Three Months Ended March 31,  
     2010     2011     2012     2012     2012     2013  
     (in thousands of pesos)     (in thousands
of dollars)(1)
    (in thousands
of pesos)
    (in thousands
of dollars)(1)
 
           (unaudited)  

Statements of Comprehensive Income data:

              

Revenues:

              

Aeronautical services(2)

     1,652,626        1,870,177        2,130,663        172,523        481,247        517,117        41,872   

Non-aeronautical services(3)

     491,797        588,671        688,957        55,786        152,109        183,829        14,885   

Construction services

     430,029        330,863        321,718        26,050        71,145        86,706        7,021   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,574,452        2,789,711        3,141,338        254,359        704,501        787,652        63,778   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs:

              

Costs of services

     688,381        606,091        661,749        53,583        141,766        154,830        12,537   

Major maintenance provision

     64,274        165,683        164,208        13,296        41,052        41,052        3,324   

Cost of construction

     430,029        330,863        321,718        26,050        71,145        86,706        7,021   

Administrative expenses

     380,474        432,340        452,217        36,617        100,465        105,770        8,564   

Concession taxes(4)

     103,067        115,979        137,028        11,095        30,472        33,230        2,691   

Technical assistance fees(5)

     47,567        55,150        67,365        5,455        15,429        17,045        1,380   

Depreciation and amortization

     149,232        165,088        186,803        15,126        44,898        49,366        3,997   

Other (expenses) income, net

     (9,090     (751     (9,924     (804     (5,196     (2,626     (213
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs

     1,853,934        1,870,443        1,981,164        160,418        440,031        485,373        39,301   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     720,518        919,268        1,160,174        93,941        264,470        302,279        24,477   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest income

     15,791        16,079        27,764        2,248        5,362        14,629        1,185   

Interest expense

     (87,088     (98,431     (103,846     (8,409     (22,322     (35,193     (2,850

Exchange gain (loss), net

     1,562        (38,766     23,168        1,876        25,369        9,399        761   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     650,783        798,150        1,107,260        89,657        272,879        291,114        23,573   

Income tax expense

     (8,796     182,070        288,172        23,334        88,989        65,097        5,271   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income

     659,579        616,080        819,088        66,323        183,890        226,017        18,302   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Actuarial losses from defined benefit plan

     0        0        (11,313     (916     —          (599     (50

Deferred tax effects

     0        0        3,390        274        —          168        14   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated comprehensive income

     659,579        616,080        811,165        65,681        183,890        225,586        18,266   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings per share(6)

     1.6532        1.5439        2.0327        0.1646        0.4609        0.5652        0.0458   

Basic and diluted earnings per American Depositary Share (“ADS”)(6)

     13.2256        12.3512        16.2616        1.3167        3.6872        4.5216        0.5496   

Other operating data:

              

Total terminal passengers (thousands of passengers)(7)

     11,588        11,773        12,594        —          2,896        3,029        —     

Total air traffic movements (thousands of movements)

     345        336        332        —          83        79        —     

Aeronautical + non-aeronautical revenues per terminal passenger(8)

     185        209        224        —          219        231        —     

 

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    As of December 31,     As of March 31,  
    2010     2011     2012     2012     2013  
    (in thousands of pesos)     (in thousands
of dollars)(1)
    (in thousands
of pesos)
    (in thousands
of dollars)(1)
 
                            (unaudited)  

Condensed Statements of Financial Position data:

           

Cash and cash equivalents

    312,838        523,634        1,152,433        93,314        2,892,630        234,221   

Total current assets

    897,009        1,163,381        1,696,415        137,362        3,403,742        275,606   

Land, buildings, machinery and equipment (net)

    2,093,160        2,118,450        2,150,327        174,116        2,155,737        174,554   

Investments in airport concessions

    5,561,881        5,769,688        5,942,989        481,214        5,988,375        484,889   

Total assets

    8,703,959        9,295,154        10,010,410        810,560        11,769,945        953,032   

Current liabilities

    1,108,101        824,945        1,216,881        98,533        1,282,429        103,840   

Total liabilities

    2,827,949        3,210,653        3,594,459        291,049        5,128,403        415,255   

Total shareholders’ equity

    5,876,010        6,084,501        6,415,956        519,511        6,641,542        537,777   
    Year Ended December 31,     Three Months Ended March 31,  
    2010     2011     2012     2012     2013  
    (in thousands of pesos)     (in thousands
of dollars)(1)
    (in thousands
of pesos)
    (in thousands
of dollars)(1)
 
                            (unaudited)  

Condensed Statements of Cash Flow data:

           

Net cash flows from operating activities

    482,501        749,144        1,260,413        102,058        279,218        22,608   

Net cash flows used in investing activities

    (399,091     (454,475     (393,884     (31,893     (49,727     (4,026

Net cash flows provided by (used in) financing activities

    (38,306     (83,873     (237,730     (19,249     1,510,706        122,325   

Increase in cash and cash equivalents

    45,104        210,796        628,799        50,915        1,740,197        140,907   

 

(1) Translated into dollars at the rate of Ps. 12.35 per U.S.$ 1.00, the interbank selling rate as reported by Banamex on March 31, 2013. Per share dollar amounts are expressed in dollars (not thousands of dollars). Operating data is expressed in units indicated.
(2) Revenues from aeronautical services principally consist of a fee for each departing passenger, aircraft landing fees based on the aircraft’s weight and arrival time, an aircraft parking fee, a fee for the transfer of passengers from the aircraft to the terminal building, a security charge for each departing passenger and other sources of revenues subject to regulation under our maximum rates.
(3) Revenues from non-aeronautical services represent sources of revenues not subject to regulation under our maximum rates and consist of revenues from hotel services, car parking charges, advertising, leasing of commercial space to tenants, food and beverage services, retail, car rentals, revenues from OMA Carga, revenues from our checked baggage-screening services and other miscellaneous sources of revenues. Pursuant to our concessions and to the Mexican Airport Law (Ley de Aeropuertos) and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Ministry of Communications and Transportation could decide to regulate such rates, and such rates may be regulated by other authorities.
(4) Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law (Ley Federal de Derechos) for the use of public domain assets pursuant to the terms of its concession. The concession tax is currently equal to 5% of each concession holder’s gross annual revenues.

 

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(5) We pay Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”), a technical assistance fee under the Technical Assistance Agreement entered into in connection with SETA’s purchase of its Series BB shares. This fee is described in our 2012 annual report on Form 20-F, filed on April 29, 2013 (SEC File No. 1-33168), under “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements with SETA.”
(6) Based on 398,967,758 weighted average common shares in 2010, 399,039,231 weighted average common shares in 2011, 399,060,153 weighted average common shares in 2012, 398,930,724 weighted average common shares for the three months ended March 31, 2012 and 399,127,527 weighted average common shares for the three months ended March 31, 2013. Earnings per ADS are based on the ratio of eight Series B shares per ADS.
(7) Arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).
(8) Aeronautical plus non-aeronautical revenues divided by terminal passengers for the period. Expressed in pesos (not thousands of pesos).

 

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2013

The following discussion should be read in conjunction with, and is entirely qualified by reference to, our unaudited condensed consolidated interim financial statements as of March 31, 2013 and for the three-month periods ended March 31, 2012 and 2013, included herein, and the notes thereto. Our unaudited condensed consolidated interim financial statements have been prepared in accordance with IFRS and presented in accordance with IAS 34, Interim Financial Reporting. Our results of operations for the three-month period ended March 31, 2013 are not necessarily indicative of results to be expected for the entire fiscal year. The following discussion should also be read in conjunction with “Item 5. Operating and Financial Review and Prospects” in our 2012 annual report on Form 20-F, filed on April 29, 2013 (SEC File No. 1-33168).

Passenger Traffic

For the three months ended March 31, 2013, total passenger traffic increased by 4.6% as compared to the three months ended March 31, 2012. Domestic passenger traffic increased by 5.1%, due primarily to an 8.2% increase at the Monterrey airport because of increased traffic on the Veracruz and Cancún routes, a 5.7% increase at the Culiacán airport because of increased traffic on the Tijuana and San José del Cabo routes, a 7.8% increase at the Mazatlán airport because of increased traffic on the Monterrey route, a 9.0% increase at the Acapulco airport because of increased traffic on the Mexico City route and a 43.0% increase at the Reynosa airport because of increased traffic on the Mexico City route. International passenger traffic increased by 2.6%, due primarily to a 13.1% increase at the Monterrey airport because of increased traffic on the Dallas and Chicago routes and a 63.4% increase at the Culiacán airport because of increased traffic on the Los Angeles route.

Terminal Passenger Traffic by Airport (1)

 

     For the Three Months
Ended March 31,
        

Airport

   2012      2013      % Change  

Acapulco

     152,668         162,469         6.4

Ciudad Juárez

     163,594         151,167         (7.6 %) 

Culiacán

     262,977         279,769         6.4

Chihuahua

     186,540         191,277         2.5

Durango

     57,739         52,484         (9.1 %) 

Mazatlán

     192,991         196,280         1.7

Monterrey

     1,288,815         1,404,122         8.9

Reynosa

     60,221         86,052         42.9

San Luis Potosí

     64,924         58,812         (9.4 %) 

Tampico

     139,362         135,240         (3.0 %) 

Torreón

     94,561         96,944         2.5

Zacatecas

     64,455         55,784         (13.5 %) 

Zihuatanejo

     166,848         158,991         (4.7 %) 
  

 

 

    

 

 

    

 

 

 

Total

     2,895,695         3,029,390         4.6
  

 

 

    

 

 

    

 

 

 

 

  (1) Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). Excludes transit passengers who arrive at our airports but generally depart without changing aircraft.

 

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Consolidated Operating Results

Revenues

The following table sets forth our revenues for the periods indicated:

 

     For the Three Months Ended March 31,  
         2012              2013              % Change      
     (in thousands of pesos)  

Revenues:

        

Aeronautical revenues

   Ps.  481,247         Ps. 517,117         7.5

Non-aeronautical revenues

     152,109         183,829         20.9
  

 

 

    

 

 

    

 

 

 

Total aeronautical + non-aeronautical revenues

     633,356         700,946         10.7

Construction revenues

     71,145         86,706         21.9
  

 

 

    

 

 

    

 

 

 

Total revenues

   Ps. 704,501         Ps. 787,652         11.8
  

 

 

    

 

 

    

 

 

 

Total revenues for the three months ended March 31, 2013 were Ps. 787,652 thousand, 11.8% higher than the Ps. 704,501 thousand recorded for the three months ended March 31, 2012, primarily as a result of an increase in both aeronautical and non-aeronautical revenues. The sum of aeronautical and non-aeronautical revenues for the three months ended March 31, 2013 increased by 10.7% as compared to for the three months ended March 31, 2012.

Aeronautical Revenues

Aeronautical revenues increased by 7.5% to Ps. 517,117 thousand for the three months ended March 31, 2013 from Ps. 481,247 thousand for the three months ended March 31, 2012, due primarily to a 7.1% increase in revenues from passenger charges from Ps. 393,484 thousand for the three months ended March 31, 2012 to Ps. 421,242 thousand for the three months ended March 31, 2013. This increase in passenger charges was attributable to a 4.6% increase in passenger traffic from 2.9 million for the three months ended March 31, 2012 to 3.0 million for the three months ended March 31, 2013. Aeronautical revenues per workload unit for the three months ended March 31, 2013 were Ps. 160.0 compared to Ps. 154.6 for the three months ended March 31, 2013, an increase of 3.5%.

Non-Aeronautical Revenues

Non-aeronautical revenues increased by 20.9% to Ps. 183,829 thousand for the three months ended March 31, 2013 from Ps. 152,109 thousand for the three months ended March 31, 2012, due primarily to revenues from checked-baggage screening, our cargo logistics services subsidiary OMA Carga, the Terminal 2 NH Hotel at the Mexico City International Airport and advertising at our airports. Non-aeronautical revenues per terminal passenger increased by 15.5%, from Ps. 52.5 for the three months ended March 31, 2012 to Ps. 60.7 for the three months ended March 31, 2013. Non-aeronautical revenues per passenger, excluding revenues from the Terminal 2 NH Hotel, increased by 20.5% to Ps. 47.4 for the three months ended March 31, 2013 from Ps. 39.3 for the three months ended March 31, 2012.

Construction Revenues

Revenues from construction services for the three months ended March 31, 2013 were Ps. 86,706 thousand, an increase of 21.9% from Ps. 71,145 thousand for the three months ended March 31, 2012, as a result of an increase in investments in improvements to concession assets, including renovation of terminal buildings, purchase and maintenance of machinery and equipment and maintenance of runways and aprons. Construction revenues represent a noncash item that is fully offset by a corresponding construction expense line item.

 

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Operating Costs

Our operating costs have been, and we believe that they will continue to be, funded entirely from our results of operations. The following table sets forth our operating costs and certain other related information for the periods indicated:

 

     For the Three Months Ended March 31,  
         2012             2013         % Change  
     (in thousands of pesos)        

Operating Costs:

      

Cost of services:

      

Employee costs

   Ps.  33,677      Ps.  37,531        11.4

Maintenance

     11,597        17,302        49.2

Safety, security and insurance

     28,491        34,972        22.7

Utilities

     29,739        29,936        0.7

Real estate leases

     8,714        7,262        (16.7 %) 

Allowance for doubtful accounts

     —          (2,956     —     

Hotel services costs

     16,148        16,770        3.9

Other

     13,400        14,013        4.6
  

 

 

   

 

 

   

 

 

 

Total cost of services

     141,766        154,830        9.2

Maintenance provision

     41,052        41,052        (0.0 %) 

Construction costs

     71,145        86,706        21.9

Administrative expenses

     100,465        105,770        5.3

Concession taxes

     30,472        33,230        9.0

Technical assistance fees

     15,429        17,045        10.5

Depreciation and amortization(1)

     44,898        49,366        9.9

Other expenses (income), net

     (5,196     (2,626     (49.5 %) 
  

 

 

   

 

 

   

 

 

 

Total operating costs

   Ps.  440,031      Ps.  485,373        10.3
  

 

 

   

 

 

   

 

 

 

 

  (1) Depreciation reflects depreciation of fixed assets, and amortization reflects amortization of our concessions and rights to use airport facilities.

Cost of Services

Our cost of services consists primarily of employee, maintenance, safety, security and insurance costs, utilities (a portion of which we recover from our commercial tenants) and other miscellaneous expenses. Our cost of services for the three months ended March 31, 2013 increased by 9.2% as compared to the three months ended March 31, 2012, principally as a result of increases in costs for operating checked-baggage screening, maintenance, payroll and insurance, all due to the start of our checked-baggage screening operations, which became effective for all airlines operating at our airports in December 2012.

Construction Costs

We invest in additions and upgrades to our concession assets in accordance with our master development programs. Construction costs for the three months ended March 31, 2013 increased by 21.9% as compared to the three months ended March 31, 2012, as a result of an increase in investments in improvements to concession assets. However, as our construction costs are equal to our revenues from construction services, such increase in construction costs is offset by a corresponding increase in construction revenues.

 

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Administrative Expenses

Our administrative expenses consist primarily of personnel expenses, fees and expenses paid to consultants and other providers of professional services and other administrative overhead expenses. Administrative expenses for the three months ended March 31, 2013 increased by 5.3% as compared to the three months ended March 31, 2012, principally as a result of increases in the bonus provision as compared to the corresponding period.

Operating Margin

Our consolidated operating margin increased to 38.4% for the three months ended March 31, 2013 from 37.5% for the three months ended March 31, 2012, due primarily to an 11.8% increase in total revenues that outpaced a 10.3% increase in total operating costs.

Income from Operations

On a consolidated basis, our operating income for the three months ended March 31, 2013 was Ps. 302,279 thousand, an increase of 14.3% from Ps. 264,470 thousand for the three months ended March 31, 2012, as a result of the foregoing factors.

Exchange Gain

We had a net exchange gain for the three months ended March 31, 2013 of Ps. 9,399 thousand, a decrease of 63.0% from Ps. 25,369 thousand for the three months ended March 31, 2012, due primarily to the appreciation of the peso relative to the dollar.

Net Interest Expense

Our net interest expense for the three months ended March 31, 2013 was Ps. 20,564 thousand, an increase of 21.3% from Ps. 16,960 thousand for the three months ended March 31, 2012, due primarily to increased total debt.

Income Tax Expense

Our income tax expense for the three months ended March 31, 2013 was Ps. 65,097 thousand, a decrease of 26.8% from Ps. 88,989 thousand for the three months ended March 31, 2012, due primarily to a reduction in our deferred income tax and Business Flat Tax (Impuesto Empresarial a Tasa Única) of Ps. 29,673 thousand, primarily as a result of reductions in accrued expenses and provisions due to payments made during 2013.

Consolidated Net Income

Our consolidated net income for the three months ended March 31, 2013 was Ps. 226,017 thousand, an increase of 22.9% from Ps. 183,890 thousand for the three months ended March 31, 2012. Earnings per share were Ps. 0.57 and earnings per ADS were U.S.$ 0.37 for the three months ended March 31, 2013. This compares to earnings of Ps. 0.46 per share and U.S.$ 0.30 per ADS for the three months ended March 31, 2012.

Consolidated Statements of Financial Position Data

As of March 31, 2013, investments in airport concessions represented 50.9% of our total assets, with current assets representing 28.9%.

 

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Cash and cash equivalents as of March 31, 2013 were Ps. 2,892,630 thousand, an increase of 151.0% from Ps. 1,152,433 thousand as of December 31, 2012, due primarily to the issuance of Ps. 1,500,000 thousand in 10-year peso-denominated notes (certificados bursátiles) in the Mexican capital markets in March 2013.

As of March 31, 2013, total shareholders’ equity was Ps. 6,641,542 thousand and total liabilities were Ps. 5,128,403 thousand, representing 56.4% and 43.6%, respectively, of total assets.

Expenditures Pursuant to Master Development Programs and Capital Expenditures

For the three months ended March 31, 2013, our expenditures pursuant to our master development programs were Ps. 169,286 thousand, of which Ps. 66,278 thousand corresponded to major maintenance, which is a component of our master development programs and was a charge against the maintenance provision, thereby reducing this non-current liability. Our capital expenditures pursuant to our master development programs were Ps. 86,706, and other capital expenditures, which relate to expenditures subject to capitalization outside of the scope of our master development programs, were Ps. 14,004.

Liquidity and Capital Resources

For the three months ended March 31, 2013, we generated Ps. 279,218 thousand in net cash flows from operating activities as a result of higher operating income and improved working capital management.

Net cash flows used in investing activities was Ps. 49,727 thousand as a result of improvements to our concession assets and investments in fixed assets.

Net cash flows received from financing activities was Ps. 1,510,706 thousand as a result of our issuance of Ps. 1,500,000 thousand in 10-year peso-denominated notes (certificados bursátiles), to be used to repay short-term debt and to finance capital expenditures, and Ps. 100,000 thousand in 28-day commercial paper, to be used for working capital needs and general corporate purposes, in the Mexican capital markets.

Our total bank debt and long-term securities (including the current portion thereof) debt as of March 31, 2013 was Ps. 3,619,326 thousand.

 

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RECENT DEVELOPMENTS

Payment of first installment of capital stock reimbursement to shareholders

On May 23, 2013, we made a payment of Ps. 400,000 thousand, or Ps. 1.00 per share, as the first installment of a Ps. 1,200,000 thousand capital stock reimbursement to shareholders approved by our Annual General Shareholders’ Meeting on April 16, 2013. The record date for this payment was May 20, 2013. We expect that the remaining Ps. 800,000 thousand of the capital stock reimbursement will be paid in four quarterly installments of Ps. 200,000 thousand, or Ps. 0.50 per share, on or before the following dates: July 31, 2013, October 31, 2013, January 31, 2014 and April 30, 2014.

 

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SELLING SHAREHOLDER

The following table sets forth certain information regarding our Series B shares, including shares represented by ADSs, held by the selling shareholder as of June 7, 2013 and as adjusted to show the effects of the offering. Percentage of beneficial ownership is based on a total of 400,000,000 ordinary nominal Class I shares authorized as of June 7, 2013, without par value, which are fully subscribed and paid, of which 341,200,000 are Series B shares and 58,800,000 are Series BB shares.

 

Name and Address

of the Selling Shareholder

   Series B Shares
Beneficially Owned as
of June 7, 2013
   Series B Shares
Being Registered
for Resale
   Series B Shares Beneficially Owned After
the Resale
   Number    %    Number    Number    %    Number    %
                    Before exercise of
independent options
   After exercise of
independent options

Aeroinvest(1)

    Blvd. Manuel Ávila Camacho 36, Piso 15
Col. Lomas de Chapultepec
Del. Miguel Hidalgo
11000 Mexico City, Mexico

   167,702,700    41.9%    82,608,696    85,094,004    21.3%    72,702,700    18.2%

 

(1) In addition to the Series B shares it directly owns, Aeroinvest may be deemed to beneficially own all of the 8,000,000 Series B shares and 58,800,000 Series BB shares owned by Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”), as of June 7, 2013 by virtue of Aeroinvest’s ownership of 74.5% of SETA’s outstanding capital stock. Aeroinvest is an indirect wholly owned subsidiary of Empresas ICA, S.A.B. de C.V.

 

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UNDERWRITING (CONFLICTS OF INTEREST)

Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as global coordinator, joint bookrunner and representative of each of the international underwriters named below. Banco Bilbao Vizcaya Argentaria, S.A., Santander Investment Securities Inc., Barclays Capital Inc. and Morgan Stanley & Co. LLC are acting as joint bookrunners for the international offering. The selling shareholder is offering the Series B shares and ADSs described in this prospectus supplement and the accompanying prospectus through the international underwriters named below. In this offering, the selling shareholder will offer                  Series B shares (directly or in the form of ADS) internationally and                  Series B shares in a concurrent offering in Mexico, subject to reallocation. Subject to the terms and conditions of the underwriting agreement dated as of the date of this prospectus supplement, the selling shareholder has agreed to sell to the international underwriters, and each of the international underwriters have agreed to purchase, severally and not jointly, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus supplement, the number of Series B shares, directly or in the form of ADSs, listed next to its name in the following table:

 

International Underwriter

   Number of
Series B shares

Merrill Lynch, Pierce, Fenner & Smith
                    Incorporated

  

Banco Bilbao Vizcaya Argentaria, S.A.

  

Santander Investment Securities Inc.

  

Barclays Capital Inc.

  

Morgan Stanley & Co. LLC

  
  

 

Total

  
  

 

Subject to the terms and conditions of the Mexican underwriting agreement dated as of the date of this prospectus supplement, the selling shareholder has agreed to sell to each of the Mexican underwriters named below, and the Mexican underwriters have agreed to purchase, severally and not jointly, the number of Series B shares listed next to its name in the following table:

 

Mexican Underwriter

   Number of
Series B shares

Merrill Lynch México, S.A. de C.V., Casa de Bolsa.

  

Casa de Bolsa BBVA Bancomer, S.A. de C.V., Grupo Financiero BBVA Bancomer

  

Casa de Bolsa Santander, S.A. de C.V., Grupo Financiero Santander México

  
  

 

Total

  
  

 

The international and Mexican underwriting agreements provide that the obligations of the international and Mexican underwriters are subject to certain conditions precedent, including the absence of any material adverse change in our business and the receipt of certain certificates, opinions and letters from us, our and the selling shareholder’s counsel and our independent auditors. The international and Mexican underwriters are obligated to purchase all the Series B shares and ADSs offered by the selling shareholder if they purchase any Series B shares and ADSs (other than those covered by the underwriters’ option to purchase additional shares described below).

The selling shareholder has granted to the international underwriters and the Mexican underwriters independent options to purchase up to 12,391,304 additional Series B shares, directly or in the form of ADSs. The underwriters have 30 days from the date of this prospectus supplement to exercise, in whole or in part, this option. If any additional Series B shares and ADSs are purchased, the underwriters will offer the additional Series B shares and ADSs on the same terms as those on which the shares are being offered hereby.

 

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The representative has advised us and the selling shareholder that the international underwriters propose to offer the Series B shares and ADSs directly to the public at the public offering price set forth on the cover page of this prospectus supplement and to certain dealers at that price less a concession not in excess of U.S.$         per ADS, or U.S.$         per Series B share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to U.S.$         per ADS, or U.S.$         per Series B share, from the public offering price. After the initial offering, the public offering price and other selling terms may be changed by the international underwriters.

The following table shows the public offering price, underwriting discount and proceeds before expenses to the selling shareholder. The information assumes either no exercise or full exercise by the international underwriters of their option to purchase additional Series B shares, directly or in the form of ADSs.

 

    Per
Series B Share
    Total
Series B Shares
(Without Option)
    Total
Series B Shares
(With Option)
    Per ADS     Total ADSs
(Without Option)
    Total ADSs
(With Option)
 

Public offering price

  U.S.$        U.S.$        U.S.$        U.S.$        U.S.$        U.S.$     

Underwriting discount

  U.S.$        U.S.$        U.S.$        U.S.$        U.S.$        U.S.$     

Proceeds, before expenses, to the selling shareholder

  U.S.$        U.S.$        U.S.$        U.S.$        U.S.$        U.S.$     

The selling shareholder estimates that its total expenses for the offering, not including the underwriting discount, will be approximately U.S.$ 1,514,764. All of our expenses related to this offering will be borne by the selling shareholder.

The selling shareholder has agreed to reimburse the international underwriters for their expenses in an amount of up to U.S.$ 5,000, which may be incurred in connection with the review by Financial Industry Regulatory Authority Inc. of the terms of the Series B shares and ADSs offered hereby.

A prospectus in electronic format may be made available on the web sites maintained by the international underwriters, or selling group members, if any, participating in the offering. The international underwriters may agree to allocate a number of Series B shares and ADSs to international underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to international underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We, the selling shareholder and our executive officers and directors have agreed with the international underwriters prior to the commencement of this offering that we and they, for a period of 90 days after the date of this prospectus supplement, may not, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated:

 

   

offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, or cause to be filed with the SEC a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or with the CNBV a prospectus under Mexican securities laws relating to, any shares of any class of our capital stock (including in the form of Series B shares or ADSs) or any securities convertible into or exercisable or exchangeable for any shares of our capital stock (including in the form of Series B shares or ADSs) (including without limitation, such other securities that may be deemed to be beneficially owned by the selling shareholder in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or publicly disclose the intention to make any offer, sale, pledge, disposition or filing; or

 

   

enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any shares of our capital stock (including in the form of Series B shares

 

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or ADSs) or any securities convertible into or exercisable or exchangeable for any of our shares of our capital stock (including in the form of Series B shares or ADSs),

whether any such transaction described in the bullet points above is to be settled by delivery of any shares of our capital stock (including in the form of Series B shares or ADSs) or any securities convertible into or exercisable or exchangeable for any of our shares of our capital stock (including in the form of Series B shares or ADSs) or such other securities, in cash or otherwise. In addition, in the event that either (1) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the “lockup” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, then in either case the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable. These restrictions do not apply to the sales of Series B shares or ADSs to the underwriters.

We and the selling shareholder have agreed to indemnify the international and Mexican underwriters against certain liabilities, including liabilities under the Securities Act.

Our Series B shares are listed on the Mexican Stock Exchange under the symbol “OMA”. Our ADSs are listed on NASDAQ under the symbol “OMAB”.

In connection with the offering, the international underwriters may engage in stabilizing transactions outside of Mexico, which involves making bids for, purchasing and selling ADSs in the open market for the purpose of preventing or retarding a decline in the market price the ADSs while this offering is in progress. These stabilizing transactions may include making short sales of the ADSs, which involves the sale by the international underwriters of a greater number of ADSs than the number of ADSs that they are required to purchase in this offering, and purchasing ADSs on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the international underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The international underwriters may close out any covered short position either by exercising its option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the international underwriters will consider, among other things, the price of ADSs available for purchase in the open market compared to the price at which the international underwriters may purchase ADSs through the option to purchase additional shares. A naked short position is more likely to be created if the international underwriters are concerned that there may be downward pressure on the price of the Series B shares or ADSs in the open market that could adversely affect investors who purchase in this offering. To the extent that the international underwriters create a naked short position, they will purchase ADSs in the open market to cover the position.

The international underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the ADSs, including the imposition of penalty bids. This means that if the international underwriters purchase ADSs in the open market in stabilizing transactions or to cover short sales, the international underwriters may be required to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the Series B shares or the ADSs or preventing or retarding a decline in the market price of the Series B shares or the ADSs, and, as a result, the price of the Series B shares or the ADSs may be higher than the price that otherwise might exist in the open market. If the representative commences these activities, it may discontinue them at any time. The international underwriters may carry out these transactions on NASDAQ, in the over-the-counter market or otherwise; provided that no stabilization activities may be conducted in Mexico.

 

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The international and Mexican underwriters and their affiliates have provided in the past to us and our affiliates and to the selling shareholder and its affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us, the selling shareholder and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In particular, on June 6, 2013, Aeroinvest, our controlling shareholder, entered into a bridge loan facility for U.S.$ 125.0 million with Merrill Lynch, Pierce, Fenner & Smith Incorporated. The bridge loan facility is expected to be prepaid by Aeroinvest with the net proceeds from its offering and sale of our Series B shares, directly or in the form of ADSs. The selling shareholder may also use the net proceeds of the offering to repay other outstanding indebtedness, including indebtedness owed to affiliates of the international underwriters and the Mexican underwriters. In addition, from time to time, the international and Mexican underwriters and their affiliates may effect transactions for its own account or the account of customers, and hold on behalf of itself or its customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

This prospectus supplement and the accompanying prospectus do not constitute an offer or an invitation by or on behalf of our company, the selling shareholder or the underwriters to subscribe for or purchase any Series B shares, directly or in the form of ADSs, in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in that jurisdiction. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the Series B shares, directly or in the form of ADSs, in certain jurisdictions may be restricted by law. We, the selling shareholder and the underwriters require persons into whose possession this prospectus supplement and the accompanying prospectus come to inform themselves about and to observe any such restrictions.

Notices to Prospective Investors

Notice to Prospective Investors in Brazil

For purposes of Brazilian law, this offer of securities is addressed to you personally, upon your request and for your sole benefit, and is not to be transmitted to anyone else, to be relied upon elsewhere or for any other purpose either quoted or referred to in any other public or private document or to be filed with anyone without our prior, express and written consent.

This offering has not been and will not be registered under Brazilian Federal Law No. 6385/76 or under any other Brazilian securities law. Accordingly, our Series B shares and the offering have not been and will not be registered with the Brazilian Securities Commission (Comissão de Valores Mobilários).

Therefore, as this prospectus does not constitute or form part of any public offering to sell or solicitation of a public offering to buy any shares or assets, the offering and THE SHARES OFFERED HEREBY HAVE NOT BEEN, AND WILL NOT BE, AND MAY NOT BE OFFERED FOR SALE OR SOLD IN BRAZIL EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE A PUBLIC OFFERING OR DISTRIBUTION UNDER BRAZILIAN LAWS AND REGULATIONS. DOCUMENTS RELATING TO THE SHARES, AS WELL AS THE INFORMATION CONTAINED THEREIN, MAY NOT BE SUPPLIED TO THE PUBLIC AS A PUBLIC OFFERING IN BRAZIL OR BE USED IN CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OR SALE OF THE SHARES TO THE PUBLIC IN BRAZIL.

Notice to Prospective Investors in Chile

Our Series B shares are not registered in the Chilean Securities Registry (Registro de Valores) or subject to the control of the Chilean Securities and Insurance Supervisor (Superintendencia de Valores y Seguros). This prospectus and other offering materials relating to the offer of the shares of our Series B shares do not constitute a public offer of, or an invitation to subscribe for or purchase, Series B shares in Chile, other than to individually identified purchasers pursuant to a private offering within the meaning of Article 4 of the Chilean Securities Market Law (Ley del Mercado de Valores) (an offer that is not “addressed to the public at large or to a certain sector or specific group of the public”).

 

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Notice to Prospective Investors in the Dubai International Financial Centre

This prospectus supplement relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus supplement is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for the prospectus supplement. The shares to which this prospectus supplement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus supplement you should consult an authorized financial advisor.

Notice to Prospective Investors in the European Economic Area

In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), no offer of shares may be made to the public in that Relevant Member State other than:

A. to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

  (a) (in the case of Relevant Member States that have not implemented the 2010 PD Amending Directive), legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities, or any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; and

 

  (b) (in the case of Relevant Member States that have implemented the 2010 PD Amending Directive), persons or entities that are described in points (1) to (4) of Section I of Annex II to Directive 2004/39/EC, and those who are treated on request as professional clients in accordance with Annex II to Directive 2004/39/EC, or recognized as eligible counterparties in accordance with Article 24 of Directive 2004/39/EC unless they have requested that they be treated as non-professional clients; or

B. to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representative; or

C. in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares shall require the company or the representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive, and (B) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, or in circumstances in which the prior consent of the

 

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representative has been given to the offer or resale. In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representative has been obtained to each such proposed offer or resale.

The company, the representative and their affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

This prospectus has been prepared on the basis that any offer of shares in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the company nor the underwriters have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for the company or the underwriters to publish a prospectus for such offer.

For the purpose of the above provisions, the expression “an offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Notice to Prospective Investors in the United Kingdom

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the

 

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“Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

The address for the global coordinator for the offering is Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, 21st Floor, New York, New York 10036. The addresses for the joint bookrunners are BBVA Bancomer, Montes Urales 620, Piso 2, Col. Lomas de Chapultepec, 11000 Mexico City, Mexico; Santander Investment Securities Inc., 45 East 53rd Street, New York, NY 10022; Barclays, 745 Seventh Avenue, New York, NY 10019; and Morgan Stanley, 1585 Broadway, New York, NY 10036.

 

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EXPENSES RELATING TO THE OFFERING

The following table sets forth the costs and expenses, other than underwriting discounts and commission, that we expect to incur in connection with the filing of this prospectus supplement.

 

Legal fees and expenses

   U.S.$ 682,500   

Accounting fees and expenses

     125,000   

Miscellaneous

     707,264   
  

 

 

 

Total

   U.S.$  1,514,764   
  

 

 

 

 

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LEGAL MATTERS

Certain legal matters in connection with this offering with respect to New York law will be passed upon for GACN and the selling shareholder by Cleary Gottlieb Steen & Hamilton LLP and for the international underwriters by Paul Hastings LLP. Certain legal matters in connection with this offering with respect to Mexican law will be passed upon for GACN and the selling shareholder by Ritch Mueller, S.C., and for the international underwriters by Raz Guzmán, S.C.

 

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INDEX TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

Unaudited Condensed Consolidated Interim Financial Statements as of March  31, 2013 and for the Three Months Ended March 31, 2013 and 2012

     F-2   

Unaudited Condensed Consolidated Statements of Financial Position

     F-3   

Unaudited Condensed Consolidated Statements of Comprehensive Income

     F-4   

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

     F-5   

Unaudited Condensed Consolidated Statements of Cash Flows

     F-6   

Notes to Unaudited Condensed Consolidated Interim Financial Statements

     F-7   

 

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Grupo Aeroportuario del Centro

Norte, S. A. B. de C. V. and

Subsidiaries

(Subsidiary of Aeroinvest, S. A. de C. V.)

Unaudited Condensed

Consolidated Interim Financial

Statements for the Three Months

Ended March 31, 2013 and 2012

 

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Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Financial Position

At March 31, 2013 and December 31, 2012

(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.)

 

     Notes      March 31,
2013
(Convenience
translation
Note 3c)
    March 31, 2013     December 31,
2012
 

Assets

         

Current Assets:

         

Cash and cash equivalents

      $ 234,221      Ps. 2,892,630      Ps. 1,152,433   

Trade accounts receivable – net

        24,299        300,089        287,808   

Recoverable taxes

        11,024        136,151        202,947   

Other accounts receivable

        6,062        74,872        53,227   
     

 

 

   

 

 

   

 

 

 

Total current assets

        275,606        3,403,742        1,696,415   

Land, buildings, machinery and equipment – net

        174,554        2,155,737        2,150,327   

Investment in airport concessions – net

     5         484,889        5,988,375        5,942,989   

Other assets – net

        2,075        25,632        25,556   

Deferred taxes

        15,908        196,459        195,123   
     

 

 

   

 

 

   

 

 

 

Total

      $ 953,032      Ps. 11,769,945      Ps. 10,010,410   
     

 

 

   

 

 

   

 

 

 

Liabilities and shareholders’ equity

         

Current Liabilities:

         

Short-term debt

      $ 48,962      Ps. 604,677      Ps. 550,000   

Current portion of long-term debt

     7         2,572        31,762        33,068   

Current portion of major maintenance provision

        10,614        131,079        145,577   

Trade accounts payable

        17,876        220,787        163,303   

Taxes and accrued expenses

        12,200        150,666        185,954   

Accounts payable to related parties

     6         11,616        143,458        138,979   
     

 

 

   

 

 

   

 

 

 

Total current liabilities

        103,840        1,282,429        1,216,881   

Long-term debt

     7         241,529        2,982,887        1,505,141   

Major maintenance provision

        32,956        407,001        417,729   

Security deposits

        2,786        34,407        33,090   

Retirement labor obligations

        5,910        72,992        70,321   

Deferred taxes

        28,234        348,687        351,292   
     

 

 

   

 

 

   

 

 

 

Total liabilities

        415,255        5,128,403        3,594,454   
     

 

 

   

 

 

   

 

 

 

Contingencies

     8          

Shareholders’ equity:

         

Capital stock

        315,560        3,897,168        3,897,168   

Premium on share issuance

        2,412        29,786        29,786   

Retained earnings

        186,985        2,309,268        2,083,582   

Share repurchase reserve

        32,775        404,774        404,774   

Other comprehensive income

        (676     (8,354     (7,923
     

 

 

   

 

 

   

 

 

 

Total controlling interest

        537,056        6,632,642        6,407,387   

Non-controlling interest

        721        8,900        8,569   
     

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

        537,777        6,641,542        6,415,956   
     

 

 

   

 

 

   

 

 

 

Total

      $ 953,032      Ps. 11,769,945      Ps. 10,010,410   
     

 

 

   

 

 

   

 

 

 

The accompanying notes are part of these condensed consolidated financial statements.

 

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Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the three months ended on March 31, 2013 and 2012

(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.), except share and per share data)

 

    

March 31,

2013
(Convenience
translation
Note 3c)

   

March 31,

2013

   

March 31,

2012

 

Revenues:

      

Aeronautical services

   $ 41,872      Ps. 517,117      Ps. 481,247   

Non-aeronautical services

     14,885        183,829        152,109   

Construction services

     7,021        86,706        71,145   
  

 

 

   

 

 

   

 

 

 

Total revenues

     63,778        787,652        704,501   
  

 

 

   

 

 

   

 

 

 

Administrative costs and expenses:

      

Cost of services

     12,537        154,830        141,766   

Major maintenance provision

     3,324        41,052        41,052   

Cost of construction

     7,021        86,706        71,145   

Administrative expenses

     8,564        105,770        100,465   

Concession taxes

     2,691        33,230        30,472   

Technical assistance fees

     1,380        17,045        15,429   

Depreciation and amortization

     3,997        49,366        44,898   

Other (income) expenses, net

     (213     (2,626     (5,196
  

 

 

   

 

 

   

 

 

 

Total administrative costs and expenses

     39,301        485,373        440,031   
  

 

 

   

 

 

   

 

 

 

Income from operations

     24,477        302,279        264,470   
  

 

 

   

 

 

   

 

 

 

Interest income

     1,185        14,629        5,362   

Interest expense

     (2,850     (35,193     (22,322

Exchange gain (loss) – net

     761        9,399        25,369   
  

 

 

   

 

 

   

 

 

 
     (904     (11,165     8,409   
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     23,573        291,114        272,879   

Income tax expense

     5,271        65,097        88,989   
  

 

 

   

 

 

   

 

 

 

Consolidated net income

     18,302        226,017        183,890   
  

 

 

   

 

 

   

 

 

 

Attributable to controlling interest

     18,275        225,686        184,280   

Attributable to non-controlling interest

     27        331        (390
  

 

 

   

 

 

   

 

 

 

Consolidated net income

     18,302        226,017        183,890   

Other comprehensive income:

      

Actuarial losses

     (50     (599     —     

Deferred tax effect

     14        168        —     
  

 

 

   

 

 

   

 

 

 

Consolidated comprehensive income

   $ 18,266      Ps. 225,586      Ps. 183,890   
  

 

 

   

 

 

   

 

 

 

Attributable to controlling interest

   $ 18,239      Ps. 225,255      Ps. 184,280   

Attributable to non-controlling interest

     27        331        (390
  

 

 

   

 

 

   

 

 

 

Consolidated comprehensive income

   $ 18,266      Ps. 225,586      Ps. 183,890   
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

     399,127,527        399,127,527        398,930,724   
  

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.0458      Ps. 0.5652      Ps. 0.4609   
  

 

 

   

 

 

   

 

 

 

The accompanying notes are part of these condensed consolidated financial statements.

 

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Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended on March 31, 2013 and 2012

(In thousands of Mexican pesos (Ps.), except share and data per share)

 

    Number of
Shares
   

Capital

stock

    Premium
on share
issuance
    Retained
earnings
    Share
repurchase
reserve
    Other
comprehensive
income
    Total
controlling
interest
   

Non-

controlling
interest

    Total
shareholders’
equity
 

Balance as of January 1, 2012

    398,848,700      Ps. 4,394,444      Ps. 29,786      Ps. 1,255,137      Ps. 397,557      Ps. —        Ps. 6,076,924      Ps. 7,577      Ps. 6,084,501   

Sale of treasury shares, net

    114,100        1,251        —          —          1,597        —          2,848        —          2,848   

Consolidated comprehensive net income

    —          —          —          184,280        —          —          184,280        (390     183,890   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2012

    398,962,800      Ps. 4,395,695      Ps. 29,786      Ps. 1,439,417      Ps. 399,154      Ps. —        Ps. 6,264,052      Ps. 7,187      Ps. 6,271,239   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Number of
Shares
   

Capital

stock

    Premium
on share
issuance
    Retained
earnings
    Share
repurchase
reserve
    Other
comprehensive
income
    Total
controlling
interest
   

Non-

controlling
interest

    Total
shareholders’
equity
 

Balance as of January 1, 2013

    399,127,527      Ps. 3,897,168      Ps. 29,786      Ps. 2,083,582      Ps. 404,774      Ps. (7,923   Ps. 6,407,387      Ps. 8,569      Ps. 6,415,956   

Consolidated comprehensive net income

    —          —          —          225,686        —          (431     225,255        331        225,586   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2013

    399,127,527      Ps. 3,897,168      Ps. 29,786      Ps. 2,309,268      Ps. 404,774      Ps. (8,354   Ps. 6,632,642      Ps. 8,900      Ps. 6,641,542   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Number of
Shares
   

Capital

stock

    Premium
on share
issuance
    Retained
earnings
    Share
repurchase
reserve
    Other
comprehensive
income
    Total
controlling
interest
   

Non-

controlling
interest

    Total
shareholders’
equity
 

Balance as of January 1, 2013 (Convenience translation, Note 3c)

    399,127,527      $ 315,560      $ 2,412      $ 168,710      $ 32,775      $ (640   $ 518,817      $ 694      $ 519,511   

Consolidated comprehensive net income

    —          —           —           18,275        —           (36     18,239        27        18,266   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2013 (Convenience translation, Note 3c)

    399,127,527      $ 315,560      $ 2,412      $ 186,985      $ 32,775      $ (676   $ 537,056      $ 721      $ 537,777   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are part of these condensed consolidated financial statements.

 

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Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

For the three months ended on March 31, 2013 and 2012

(In thousands of Mexican pesos (Ps.))

 

     March 31, 2013
(Convenience
translation
Note 3c)
    March 31, 2013     March 31, 2012  

Operating activities:

      

Consolidated net income

   $ 18,302      Ps. 226,017      Ps. 183,890   

Adjustment for:

      

Income tax

     5,271        65,097        88,989   

Depreciation and amortization

     3,997        49,366        44,898   

Provision for major maintenance

     3,324        41,052        41,052   

Allowance for doubtful accounts

     (239     (2,956     —     

Interest income

     (1,185     (14,629     (5,362

Interest expense

     2,850        35,193        22,322   

Unrealized exchange rate fluctuations

     (752     (9,283     (18,592
  

 

 

   

 

 

   

 

 

 
     31,568        389,857        357,197   

Changes in working capital:

      

Trade accounts receivable

     (755     (9,325     49,799   

Recoverable taxes

     5,409        66,796        37,578   

Other accounts receivable

     (1,754     (21,645     (57,573

Trade accounts payable

     1,749        21,602        51,679   

Accrued expenses and taxes

     (6,048     (74,691     (63,717

Accounts from related parties

     363        4,479        (31,510

Major maintenance provision

     (5,367     (66,278     (73,454

Other long-term liabilities

     274        3,389        3,464   

Income taxes paid

     (2,831     (34,966     (23,290
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     22,608        279,218        250,173   
  

 

 

   

 

 

   

 

 

 

Investing activities:

      

Land, buildings, machinery and equipment

     (1,433     (17,699     (7,682

Investment in airport concessions

     (3,763     (46,473     (109,759

Other investing activities

     (15     (184     —     

Interest received

     1,185        14,629        5,362   
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (4,026     (49,727     (112,079
  

 

 

   

 

 

   

 

 

 

Financing activities:

      

Proceeds of short and long term-debt

     153,820        1,899,677        250,000   

Payments of short and long term-debt

     (29,091     (359,277     (17,040

Interest paid

     (2,404     (29,694     (22,378

Dividends paid

     —          —          (41,087

Sale of shares

     —          —          2,848   
  

 

 

   

 

 

   

 

 

 

Net cash received from financing activities

     122,325        1,510,706        172,343   
  

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     140,907        1,740,197        310,437   

Cash and cash equivalents at beginning of year

     93,314        1,152,433        523,634   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 234,221      Ps. 2,892,630      Ps. 834,071   
  

 

 

   

 

 

   

 

 

 

Financing activities and investing activities which are not reflected in the condensed consolidated statements of cash flows:

 

Land, buildings, machinery and equipment

   $     672         Ps.8,304         Ps.—     

Investment in airport concessions

     5,041         62,261         29,331   

The accompanying notes are part of these condensed consolidated financial statements.

 

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Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

For the three months ended on March 31, 2013 and 2012

(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps., except share and per share data))

 

1. Activities

Grupo Aeroportuario del Centro Norte, S. A. B. de C. V., (GACN or collectively with its subsidiaries, the Company), a direct subsidiary of Aeroinvest, S. A. de C. V. (Aeroinvest), and Empresas ICA, S. A. B. de C. V. (EMICA), the ultimate parent company, is a holding company, whose subsidiaries are engaged in the administration, operation, and use of 13 airports under a concession granted by the Mexican Government through the Ministry of Communications and Transportation (SCT). The airports are located in the following cities: Monterrey, Acapulco, Mazatlán, Zihuatanejo, Ciudad Juárez, Reynosa, Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón, and Zacatecas. The Company recognizes revenue for hotel business services provided by NH T2 Hotel located in Terminal 2 of the Mexico City International Airport (AICM). The address of the Company’s corporate office is Lázaro Cárdenas #2225 5th Floor, Valle Oriente, San Pedro Garza García, Nuevo León, Zip Code 66269.

 

2. Significant events

 

  a. On March 26, 2013, GACN issued 10-year long-term debt securities of Ps.1,500,000 under the program registered in the Mexican Stock Exchange. It bears semi-annual interest at an annual fixed rate of 6.47%. The total amount of the principal is due at the maturity date on March 14, 2023. The resources obtained will be used to pay short-term loans, financing of capital investments included in the master develop plan (MDP) of the Company’s 13 airports, and for strategic capital investments. The issuance is guaranteed by the airports in Acapulco, Ciudad Juárez, Culiacán, Chihuahua, Mazatlán, Monterrey, Tampico, Torreón, and Zihuatanejo.

 

  b. The Company registered in the Mexican Stock Exchange, a short-term debt security program of Ps.200,000 of which on March 22, 2013, 28-day commercial paper of Ps.100,000 was issued at an interest rate of 4.17%. The resources from this issuance were used for working capital and corporate purposes in general. The Company plans to continue to use this program on a revolving basis to meet its short-term cash flow needs as necessary.

 

  c. On March 25, 2013, the Company prepaid Ps.100,000 and on March 26, 2013, the Company prepaid the remaining Ps.150,000 of its outstanding short-term debt with Banamex.

 

3. Basis of presentation and consolidation

 

  a. Statement of compliance – The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) No.34, Interim Financial Statements, issued by the International Accounting Standards Board (IASB).

 

  b. Basis of measurement The condensed consolidated financial statements have been prepared on the historical cost basis except for the Company’s financial instruments measured at fair value or amortized cost. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The consolidated financial statements are prepared in pesos, functional currency of the Company and legal currency of the United Mexican States, and are presented in thousands, except where noted.

The accompanying condensed consolidated interim financial statements as of March 31, 2013 and for the three months ended March 31, 2013 and 2012 have not been audited. In the opinion of the Company’s management, all adjustments (consisting mainly of ordinary, recurring adjustments)

 

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Table of Contents

necessary for a fair presentation of the accompanying condensed consolidated interim financial statements are included. The results of the interim periods are not necessarily indicative of the projected results for the full year. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company and their respective notes for the year ended December 31, 2012.

The accounting policies applied in the recognition and measurement of assets, liabilities, revenues and expenses in the accompanying unaudited condensed consolidated financial statements are consistent with those used in the consolidated financial statements for the year ended December 31, 2012, except as it relates to the new and revised accounting pronouncements adopted by the Company as of January 1, 2013, as disclosed in Note 3g.

 

  c. Convenience translation – Solely for convenience of readers, Mexican peso amounts included in the condensed consolidated financial statements as of March 31, 2013 and for the three months then ended, have been translated into U.S. dollar amounts at the rate of 12.35 pesos per U.S. dollar, according to the interbank exchange rate reported by Banco Nacional de México, S. A. (Banamex) on March 31, 2013. Such translation should not be construed as a representation that the Mexican peso amounts have been, could have been or could, in the future, be converted into U.S. dollars at such rate or any other rate.

 

  d. Translation into English – The accompanying consolidated financial statements have been translated from Spanish into English for use outside of Mexico.

 

  e. Consolidation basis – The consolidated financial statements incorporate the financial statements of GACN and the subsidiaries controlled by the Company. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee. The Company maintained the same ownership interest and voting power over its subsidiaries as of and for the three month period March 31, 2013, as disclosed in its December 31, 2012 consolidated financial statements.

All intercompany transactions, balances, income and expenses, are eliminated in the consolidation.

 

  f. Seasonality – The results of the Company are subject to seasonal fluctuations. In general, demand for air travel is typically higher during the summer months and during the winter holiday season, particularly in international markets, because there is more vacation travel during these periods. The results of operations generally reflect this seasonality but have also been impacted by numerous other factors that are not necessarily seasonal, including economic conditions, war or threat of war, weather, air traffic control delays and general economic conditions. As a result, the operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results. For purposes of comparing the three month periods ended March 31, 2013 and 2012, there was no significant impact on the Company’s results of operations arising from seasonality factors.

 

  g. Adoption of new and revised accounting pronouncements – The Company adopted the following new and revised accounting pronouncements, that are applicable to its operations and which became effective as of January 1, 2013.

IFRS 10 Consolidated Financial Statements

IFRS 13 Measurement at Fair Value

IAS 19 (as revised in 2011) Employee Benefits

The objective of IFRS 10, Consolidated Financial Statements, is to set out principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The standard requires a parent company to present consolidated financial statements, amends the definition of the principle of control and sets out such definition as the base for consolidation; sets out how to apply the principle of control to identify whether the investment should

 

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Table of Contents

be consolidated; it also sets out the accounting requirements for the preparation of consolidated financial statements. The standard supersedes IAS 27, Consolidated and Separate Financial Statements, and SIC 12, Consolidation of Special Purpose Entities. The adoption of this standard did not impact the Company’s results of operations or financial position as there was no change in the determination of whether it controlled its subsidiaries resulting from the new guidance in IFRS 10.

The objective of IFRS 13, Fair Value Measurement, is to define fair value and set out in one sole standard, a conceptual framework for measuring such fair value and the disclosure requirements about those measurements. This standard applies when another IFRS requires or permits fair value measurements. The adoption of this standard did not impact the Company’s results of operations or financial position.

The improvements to IAS 19, Employee Benefits, provide for changes in the presentation of other comprehensive income items with respect to pensions (and similar benefits) eliminating the use of the corridor approach, which tends to defer the actuarial gains/losses. All the remaining long-term benefits should be measured similarly even though the changes in the recognized amount are completely reflected through earnings. Additionally, it includes improvements to the disclosures of defined benefit plans, amends the accounting for benefits from termination, including the distinction between the benefits offered in an exchange in service and those that provide for the employment termination and affect their recognition and measurement of the benefits from termination. The standard also clarifies the classification of the employee benefits, actual estimates of mortality rates, tax and administrative costs as well as risks and conditional indexed characteristics. The adoption of this standard did not have a significant impact on the Company’s results of operations or financial position given that its defined benefit obligation is not significant and additionally it already reflected all actuarial gains and losses as a component of other comprehensive income with its previous accounting policy.

 

  h. New and revised accounting pronouncements in issue but not yet effective – The Company has not applied the following new IFRS that has been issued but is not yet effective:

IFRS 9 Financial Instruments 1

  1 

Effective for fiscal years beginning on January 1, 2015, with early adoption permitted.

IFRS 9 issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9 are described as follows:

IFRS 9 requires all recognized financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and Measurement to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is presented in profit or loss. This standard is effective for periods beginning on January 1, 2015 and early adoption is permitted. The Company is in the process of assessing the potential impacts related to the adoption of IFRS 9.

 

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Table of Contents
4. Financial instruments

Categories of financial instruments:

The carrying amount of the financial instruments is as follows:

 

     March 31,
2013
     December 31,
2012
 

Cash and cash equivalents (1)

   Ps. 2,892,630       Ps. 1,152,433   

Accounts receivable (1)

     374,961         341,035   

Accounts payable (1)

     364,245         302,282   

Short-term debt (1)

     604,677         550,000   

Long-term debt securities (2)

     2,788,886         1,294,892   

Other long-term debt (3)

     225,763         243,317   

 

(1) The carrying amount of these financial instruments approximate their fair value, as they mature in the short term.
(2) To determine the fair value of the loan for long-term debt securities, quoted market prices are used. As of March 31, 2013 and as of December 31, 2012, the fair value was Ps.2,802,860 and Ps.1,304,208, respectively.
(3) To determine the fair value of long-term equipment loans, discounted cash flow models were used. The difference from the carrying amount is not significant.

 

5. Investment in airport concessions

The Company has concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in central and northern regions of the country. Each concession is for 50 years from November 1, 1998. The term of each of the Company’s concessions may be extended by the SCT under certain circumstances for a period not exceeding 50 years. As operators of thirteen airports the Company earns revenues from airlines, passengers, and other users for using the airport facilities. The Company also earns revenues for commercial activities carried out at the airports, such as leasing of space to restaurants and other shops.

Investment in airport concessions include: improvements in concessioned assets, rights to use airport facilities, and airport concessions. The total cost of the concession was assigned proportionally to rights to use airport facilities on the basis of the fair value of the assets determined by an independent appraiser. At any airport concession where the cost exceeded the fair value, the excess was recognized within the airport concessions line item.

The amortization of the investment in airport concessions is calculated according to straight-line method from the month following the date of acquisition, for the term of the concession which is 50 years, or from the capitalization date of an intangible asset, taking into consideration the remaining term of the concession.

As of March 31, 2013 and as of December 31, 2012 the net values of the airport concessions, the right to use airport facilities and improvements on concessioned assets are as follows:

 

     March 31,
2013
    December 31,
2012
 

Airport concessions:

    

Airport concessions

   Ps. 605,643      Ps. 605,643   

Right to use airport facilities

     3,356,762        3,356,761   

Improvements on concessioned assets

     3,376,240        3,291,983   

Accumulated amortization

     (1,350,270     (1,311,398
  

 

 

   

 

 

 

Total investment in airport concessions

   Ps. 5,988,375      Ps. 5,942,989   
  

 

 

   

 

 

 

 

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Table of Contents

An analysis of the investment in airport concessions is as follows:

 

     March 31,
2013
    December 31,
2012
 

Investment in airport concessions

    

Beginning balance

   Ps. 7,254,387      Ps. 6,932,669   

Additions

     84,258        321,718   
  

 

 

   

 

 

 

Ending balance

     7,338,645        7,254,387   

Amortization of airport concessions

    

Beginning balance

     (1,311,398     (1,162,980

Increase

     (38,872     (148,418
  

 

 

   

 

 

 

Ending balance

     (1,350,270     (1,311,398
  

 

 

   

 

 

 

Net investment in airport concessions

   Ps. 5,988,375      Ps. 5,942,989   
  

 

 

   

 

 

 

MDP – The Company has the obligation to make maintenance and improvements on concessioned assets and on fixed assets, as specified in the MDP. The MDP for the beginning of the five year period 2011-2015 is Ps.2,745,214 at current value as of December 31, 2009 (which is the date when it was determined) and Ps.3,163,874 adjusted for inflation as of March 31, 2013 using the National Producer Price Index (NPPI), excluding oil, as defined in the concession contract. The amount to be incurred to comply with the MDP by the Company as of March 31, 2013 is Ps.1,995,285. This amount must be invested as follows:

 

Year    Amount  

2013

   Ps. 832,549   

2014

     787,252   

2015

     375,484   
  

 

 

 
   Ps. 1,995,285   
  

 

 

 

During 2012, The Company’s management submitted to the Mexican Civil Aviation Authority (DGAC) a proposal to recover lands acquired by the Company of Ps.1,159,613 at current value as of December 31, 2009. Based on such proposal, on December 4, 2012, the DGAC authorized part of the recovery through the replacement of the investments corresponding to MDP from 2013 through 2015 of Ps.386,538 at current value as of December 31, 2009, and Ps.445,487 at restated value as of March 31 , 2013. In addition, during the MDP 2011 review, the recovery of Ps.77,306 at a current value, was authorized through an extraordinary review of the maximum rate. Currently, management is reviewing with the DGAC different scenarios to recover the other lands of Ps.695,769; therefore, on December 31, 2012, land of Ps.1,082,307 is part of the Company’s fixed assets until concluding the negotiations with the DGAC.

The substitution of the MDP authorized by the DGAC will be performed according to the following schedule:

 

Year    Amount  

2013

   Ps. 140,261   

2014

     159,606   

2015

     145,620   
  

 

 

 
   Ps. 445,487   
  

 

 

 

Assets held as guarantees

The Company has placed screening baggage equipment as a guarantee for bank loans that the Company has with Private Export Funding Corporation, with a carrying value of Ps.406,620 as of March 31, 2013. The Company is not authorized to use this equipment as a guarantee for other loans, nor sell them to another entity.

 

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6. Balances and transactions with related parties

Balance with related parties as of March 31, 2013 and December 31, 2012, are:

 

     March 31,
2013
     December 31,
2012
 

Payables to:

     

Empresas ICA, S. A. B. de C. V. (EMICA) (1)(3)

   Ps. 59,440       Ps. 51,387   

Servicios de Tecnología Aeroportuaria, S. A. de C. V. (SETA) (1)(4)

     45,045         45,547   

Nacional Hispana Hoteles, S. de R. L. de C. V. (2)(5)

     28,678         29,340   

Ingenieros Civiles Asociados, S. A. de C. V. (2)(6)

     10,296         12,705   
  

 

 

    

 

 

 
   Ps. 143,458       Ps. 138,979   
  

 

 

    

 

 

 

Related party transactions made in the ordinary course of business were as follows:

 

     March 31,
2013
     March 31,
2012
 

Expenses:

     

Payments for technical assistance and travel expenses (1)

     Ps.17,045         Ps.15,429   

Major maintenance and improvements on concessioned assets by ICA:

     

Major maintenance – Platform

     5,081         25,555   

Major maintenance – Runway

     10,840         13,419   

 

(1) Holding company.
(2) Affiliated company.
(3) Balances with EMICA represent the current income tax payable associated with the fiscal consolidation.
(4) Balances payable to SETA include technical assistance fees and acquisition of transport equipment.
(5) Loan received from NH Hoteles for payment to related contractors for construction of Hotel NH T2 located in Terminal 2 of AICM.
(6) The Company entered into an agreement with Ingenieros Civiles y Asociados, S. A. de C. V. for the purpose of conducting rehabilitation work and pavement construction on operational areas of the Company’s airports, foreseen in the Master Development Plan for the 2011-2015 period, in the understanding that for each specific project, a construction agreement shall be set forth at per unit prices or at a lump sum price.

The Company uses the services of an independent expert to supervise and ensure that the construction services are provided at current market rates for similar services.

Employee benefits – Benefits granted to key management personnel of the Company were direct short-term benefits of Ps.8,955 and Ps.8,069 for the three months ended on March 31, 2013 and 2012, respectively.

 

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7. Long term debt

Debt with credit entities and long-term debenture issuance as of March 31, 2013 and December 31, 2012, are:

 

     March 31,
2013
    December 31,
2012
 
Debt certificates issued at Mexican market on July 15, 2011, of Ps.1,300,000, in a 5-year term maturing on July 8, 2016, bearing interest at a variable 28-day TIIE rate plus 70 basis points, payable every 28 days. As of March 31, 2013 and December 31, 2012, the interest rate is 5.52% and 5.55%, respectively. The amount of debt is presented net of issuance expenses of Ps.4,752 in 2013 and Ps.5,108 in 2012, which are amortized according to the effective interest rate.    Ps. 1,295,248      Ps. 1,294,892   
On March 26, 2013, the Company finalized the issuance of debt securities in the Mexican Stock Exchange for Ps.1,500,000 in a 10-years term maturing on March 14, 2023 and bearing interest at a fixed rate of 6.47% payable every 180 days. The amount of debt is presented net of issuance expenses of Ps.6,362, which are amortized according to the effective interest rate.      1,493,638        —     
Unsecured lines of credit at Private Export Funding Corporation (PEFCO) in 2012 and UPS Capital Business Credit in 2011 (supported by Ex-Im Bank) of $20,385 thousands of U.S. dollars, effective to December 21, 2021. The Company is required to make quarterly even payments of principal. As of March 31, 2013 and December 31, 2012, the balance of the loan is $15,811 thousands of U.S. dollars and $16,299 thousands of U.S. dollars, respectively. The loan bears interest at a 3-month Libor rate plus 1.25 percentage points, payable quarterly. As of March 31, 2013 and December 31, 2012, the interest rate is 1.54% and 1.61%, respectively. The loan guarantee is the check-in-baggage review equipment acquired.      195,314        209,622   
Unsecured line of credit at UPS Capital Business Credit (supported by Ex-Im Bank) of $4,463 thousands of U.S. dollars, of which only $2,775 thousands of U.S. dollars were exercised, maturing on August 1, 2017. The Company is required to make quarterly even payments of principal. As of March 31, 2013 and December 31, 2012, the balance of the loan is $2,465 thousands of U.S. dollars and $2,620 thousands of U.S. dollars, respectively. The loan bears interest at a 3-month Libor rate plus 0.95 percentage points, payable quarterly. As of March 31, 2013 and December 31, 2012, the interest rate is 1.25% and 1.31%, respectively. The loan guarantee is the new security equipment, and the heck-in-baggage review equipment previously acquired.      30,449        33,695   
  

 

 

   

 

 

 

Total debt

     3,014,649        1,538,209   

Less – Current portion

     (31,762     (33,068
  

 

 

   

 

 

 
   Ps. 2,982,887      Ps. 1,505,141   
  

 

 

   

 

 

 

 

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Maturities of portion of long-term loans as of March 31, 2013, are:

 

2014

   Ps. 31,762   

2015

     31,762   

2016

     1,326,815   

2017

     24,101   

2018

     24,101   

Post-2018

     1,544,346   
  

 

 

 
   Ps. 2,982,887   
  

 

 

 

The Company’s long-term bank loans include certain restrictive covenants, which place certain limits regarding the issuance of new loans by its subsidiaries, provide guarantees, restrict the sales of assets; as well as require it to comply with its obligations to pay taxes. As of March 31, 2013, the Company was in compliance with its covenants.

In addition, the controlling shareholder of the Company, Aeroinvest and its affiliates, have entered into certain agreements that contain covenants requiring Aeroinvest to, among other things, (i) cause the Company to maintain of a debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio below 3.50:1; (ii) cause the Company to continue listing its common shares on the Mexican Stock Exchange; (iii) prohibit the Company from granting loans or transferring funds to third parties outside the normal course of its operations other than dividend distributions and other distributions to shareholders and loans to employees; and (iv) prohibit the Company from entering into any agreement that may limit its ability to pay dividends, fees, interest or any other cash distribution to its shareholders. As of March 31, 2013, the Company was in compliance with these covenants.

 

8. Contingencies

As of March 31, 2013, certain subsidiaries of the Company have the following pending lawsuits to be resolved:

 

  a. Lawsuit filed against the Ciudad Juárez airport on November 15, 1995 to reclaim the 240 hectares of land on which the Ciudad Juárez airport is located, alleging that it was improperly transferred to the Mexican government. The claimant has sought monetary damages of $120,000 since the airport prevents the land from being returned to the claimant.

During the trial, the Company has contested the plaintiff’s claims based on the legitimacy of the land possession derived from the concession granted by the Ministry of Communications and Transportation.

In addition, the Ministry of Communications and Transportation was called as a party to the trial in defense of the interests of the Federal Government. As a result of the Ministry of Communications and Transportation’s appearance in 2011, it was determined that a Federal Circuit Court should rule on the matter. However, when the Federal Circuit Court ruled that it did not have jurisdiction over the matter, it created a jurisdictional conflict that was resolved by the Federal Circuit Court on January 13, 2013, by determining that the Federal District Court is the competent court to resolve this dispute, not the Federal Circuit Court. The final resolution of this dispute remains pending.

As of the date of the financial statements, this contingency remains, as the trial is still pending due to the fact that there has been no final resolution since the Ministry of Communications and Transportation became a party. In the event that the trial’s resolution is not resolved favorably for the Company, the economic penalties of the judgment are to be determined by the Federal Government as is established in the concession, so the Company has not recorded any provision relating to the claim as it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

 

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  b. In December 2011, the Local Tax Audit Administration of the Tax Administration Service in Acapulco conducted an audit of the Acapulco airport and determined a tax liability of Ps.27,876 for the year 2006 for taxable income based on profit sharing and the application of a 10% tax on the amount of profit sharing. An appeal decision upheld this determination and established a new tax liability of Ps.15,946 based on income tax, as well as Ps.2,787 for profit sharing taxes. The Company filed an action of annulment with the Federal Tax and Administrative Court of Justice against the latter decision, and the claim is still pending. The Company believes that it has sufficient evidence to obtain a favorable decision given that the disputed decision lacks foundation and rationale to establish the disputed claims. The Company has not recorded any provision relating to the claim as it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

 

  c. On February 9, 2012, the Apodaca Office of the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social, or IMSS) determined a tax credit for the Monterrey airport for the period from January 1, 2007 to December 31, 2010 for Ps.28,300 for alleged omissions in labor management fees. The Monterrey airport submitted an appeal to this determination before the IMSS, which, in a resolution dated May 23, 2012, confirmed the tax credit. The Monterrey airport filed an administrative appeal with the Federal Tax and Administrative Court of Justice on August 20, 2012. The administrative appeal is pending resolution, and the tax credit was guaranteed through the provision of a bond to the IMSS. The Company believes that it has sufficient evidence to obtain a favorable decision given that the disputed decision lacks foundation and rationale to establish the disputed claims and as a result it has not recorded any provision as it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

 

  d. The Reynosa airport filed an administrative appeal with the Federal Tax and Administrative Court of Justice against the resolution that confirmed the Ps.1,217 tax liability from income taxes in 2007 and accessories as well as Ps.195 for profit sharing. The administrative appeal is pending resolution, and the tax credit was guaranteed before the Mexican Tax Authorities. The Company believes that the Reynosa airport has sufficient evidence to obtain a favorable decision given that the disputed decision lacks foundation and rationale to establish the disputed claims and as a result it has not recorded any provision as it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

 

  e. Property tax. There are various trials and/or proceedings initiated against various subsidiaries for the lack of tax payments that have been resolved favorably for the Company, mainly due to the fact that the relevant real estate is public property and is therefore exempt from taxes. However, as of the date of this report, the following claims are still pending:

 

  1. Ciudad Juárez Airport – There is a pending administrative appeal challenging the property tax claim of Ps.5,823 for the period of May-June 1998 through October 2012. In an agreement dated as of February 28, 2013, the court hearing the administrative appeal dismissed the trial after the municipality of Ciudad Juárez withdrew its property tax claim. Since a January 18, 2012 agreement annulled the aforementioned claim, this matter is concluded.

 

  2. Reynosa Airport – There is a pending administrative appeal challenging the property tax claim of Ps.117,654 that does not specify the period of the debt. The administrative appeal against said claim has yet to be resolved.

In November 2011 and August 2012, the municipality of Reynosa once again requested tax payments from the Reynosa airport in the amounts of Ps.127,312 and Ps.1,119, respectively. Administrative appeals were filed against both claims, and both remain pending.

 

  3. Zihuatanejo Airport – In October 2012, the municipality of Zihuatanejo de Azueta requested payment from the Zihuatanejo airport in the amount of Ps.2,718, for property taxes, fines and enforcement costs for the period from 2004 through 2005.

 

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An administrative appeal was presented before the Tax Tribunal of the State of Guerrero against that payment requirement. In October 2012, the municipal finance coordinator of Zihuatanejo of Azueta, Guerrero, determined and required the payment of Ps.2,855 from the Zihuatanejo airport again based on municipal tax, surcharges and execution expenses, for the period from the first two-month period of 2007 to the fifth two-month period of 2012 and a fine for the alleged failure to pay the municipal tax from the first two-month period of 2007 to the fifth two-month period of 2012, for Ps.865, as well as Ps.57 based on execution costs. A new administrative appeal was filed against this payment requirement before the Tax Tribunal of the State of Guerrero.

As of the date of the financial statements, this contingency remains due to the fact that the trial is ongoing and pending resolution, and there is a precedent of an unfavorable ruling on April 17, 1997, when the Mexican Airport and Auxiliary Services Agency was managing the airport. The Company is hopeful that the court will change its criteria or that the applicable legislation will be modified, however a provision has been recognized.

 

  f. On April 5, 2013, the city of Torreón ordered the closure of ten retail stores in the commercial area of the Torreón airport and removed all interior and exterior billboards at the airport, citing an alleged lack of municipal operating licenses. On April 8, 2013, the Torreón airport filed an injunction against the order on the grounds that the city lacks the authority and power to close airport premises as the Mexican Airport Law grants the Ministry of Communications and Transportation full discretion over airport premises. In the same injunction, the Torreón airport requested that the closing order be suspended while the injunction is pending.

On April 11, 2013, the District Court where the injunction was filed denied the airport’s request to provisionally suspend city of Torreón’s order. Against this resolution, the Torreón airport filed a complaint with the Federal Circuit Court, and on April 15, 2013 and the provisional suspension was granted.

On April 17, 2013, the Third District Judge permanently suspended the city’s order, pending a resolution of whether the city of Torreón has the authority and power to inspect the commercial and advertising areas within the Torreón airport. As of the date of this report, the injunction remains pending. The Company is in the process of determining the potential impact of this development on its financial position and results of operations.

 

  g. Purchase of land – Ordinary civil trial against the Monterrey airport (as purchaser), DIAV, S.A. de C.V. (as seller) and civil servants that took part in the legal act of purchasing and selling land, in which a third party purports to be the owner of a piece of property acquired by the Monterrey airport. The third party is seeking a declaration that the documents of sale to the Monterrey airport are null and void based on the absence of a sale deed for the property and the restitution of the property to the third party, together with the corresponding improvements and property rights.

 

       The contingency is not quantified in the suit. As of the date of the financial statements, the contingency is maintained due to the fact that the trial is still ongoing since there is still no final resolution of this case in which the company that sold this land appeared. In the event that the resolution of the trial does not result favorably for the Monterrey airport, the Company believes that the economic liability of the trial will be the responsibility of the seller of the land (DIAV, S.A. de C.V.), so the Monterrey airport has not recorded any provision relating to this suit.

 

  h. The subsidiaries of the Company that have employees determine the profit sharing amounts in accordance with part I of article 10 of the Income Tax Law. Nevertheless, the Tax Authority and/or the workers may not agree with this criterion; and should this occur, the Company will provide the necessary evidentiary support to continue applying the calculation of the profit sharing in this manner.

 

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9. Information by segment

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. As a result, the Company’s reportable segments under IFRS present its airports and the hotel individually and the information about the holding company and the services companies, has been combined and disclosed in the ‘Others’ column as they have similar economic characteristics and are similar in respect of the nature of the services they provide to their customers:

Summary of certain information by segment:

 

March 31, 2013   Aeronautical
revenues
   

Non-

aeronautical
revenues

    Construction
services
revenues
    Interest
income
    Depreciation and
amortization
    Maintenance
provision
    Allowance for
doubtful
accounts
    Income from
operations
    Interest
expense
    Income tax     Capital
investments
 

Metropolitan

                     

Monterrey

  Ps. 225,697      Ps. 70,176      Ps. 29,227      Ps. 753      Ps. 17,464      Ps. 14,571      Ps. (1,883   Ps. 49,170      Ps. (5,128   Ps. 15,978      Ps. 36,535   

Tourist

                     

Acapulco

    29,838        5,224        18,019        4,747        3,692        2,572        (581     5,627        (157     (1,562     19,110   

Mazatlán

    36,887        8,845        4,083        5,978        2,788        1,646        —          7,647        (157     769        4,147   

Zihuatanejo

    31,914        4,939        1,991        54        3,158        1,590        78        6,068        (370     (113     1,991   

Regional

                     

Chihuahua

    32,221        6,573        3,786        2,848        2,483        3,339        —          6,196        (144     (594     4,716   

Culiacán

    47,650        8,035        5,177        120        3,105        1,890        (590     8,863        (964     437        5,401   

Durango

    10,080        1,641        10,000        57        1,019        1,788        —          1,886        (379     (194     10,000   

San Luis Potosí

    14,027        3,375        8,248        260        879        1,855        160        2,895        (12     748        7,735   

Tampico

    23,702        3,503        1,065        89        1,352        2,117        (47     4,349        (615     (404     1,169   

Torreón

    18,118        3,325        205        298        1,799        3,480        7        3,419        (29     1,764        83   

Zacatecas

    11,012        1,569        505        66        1,239        1,482        (101     2,011        (721     1,310        869   

Border

                     

Ciudad Juárez

    23,978        4,764        —          197        2,098        3,175        —          4,590        (57     1,576        78   

Reynosa

    15,034        2,141        4,400        67        1,040        1,547        1        2,743        (882     710        4,628   

Hotel services

    —          40,345        —          418        5,108        —          —          11,025        (7,956     36        3,574   

Others (1)

    —          19,626        —          24,206        2,142        —          —          185,790        (43,151     44,636        674   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    520,158        184,081        86,706        40,158      <