| MILBANK,TWEED, HADLEY&MGCLOYLLP | ||||
| 1 CHASE MANHATTAN PLAZA | ||||
| LOS A.NGELES | NEW YORK, N.Y. 10005-1413 | BEIJING | ||
| 213-892-4000 | 8610-5969-2700 | |||
| FAX: 213-629-5063 | FAX: 8610-5969-2707 | |||
| 212-530-5000 | ||||
| WASHINGTON, D.C. | HONG KONG | |||
| FAX:212-530-5219 | ||||
| 202-835-7500 | 852-2971-4888 | |||
| FAX: 202-835-7586 | FAX: 852-2840-0792 | |||
| LONDON | SINGAPORE | |||
| 44-20-7615-3000 | 65-6428-2400 | |||
| FAX:44-20-7615-3100 | FAX:65-6428-2500 | |||
| FRANKFURT | TOKYO | |||
| 49-69-7 1914-3400 | 813-5410-2801 | |||
| FAX:49-69-71914-3500 | FAX:813-5410-2891 | |||
| MUNICH | SãoPAULO | |||
| 49-89-25559-3600 | 55-11-3927-7700 | |||
| FAX: 49-89-25559-3700 | FAX: 55-11-3927-7777 | |||
August 14, 2012
VIA EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Tia L. Jenkins
Senior Assistant Chief Accountant
Re: United Breweries Company, Inc.
Form 20-F for the fiscal year ended December 31, 2011
File No.001-14906
On behalf of United Breweries Company, Inc. (Compañía Cervecerías Unidas S.A., or the “Company”), we are filing electronically on EDGAR for review by the Staff of the Securities and Exchange Commission (the “SEC”), the Company’s responses to the comments of the SEC’s Staff relating to portions of the Company’s annual report on Form 20-F for the fiscal year ended December 31, 2011 (File No. 001-14906) (the “Form 20-F”) contained in your letter to the Company dated August 1, 2012 (the “Comment Letter”).
For convenience of reference, each Staff comment contained in the Comment Letter is reprinted below in italics, numbered to correspond with paragraph numbers assigned in the Comment Letter, and is followed by the corresponding response of the Company.
All references in the Company’s response to pages and captioned sections are to the Form 20-F as originally filed. Capitalized terms used in this letter and not otherwise defined herein have the meanings ascribed to them in the Form 20-F.
Form 20-F for the Year Ended December 31, 2011
-2-
1. We note your use of EBIT and EBITDA in various sections of your Form 20-F. Please address the following:
· We note your definitions and use of EBIT and EBITDA on pages 77, F-41, F-76, F-79 – 81 do not appear consistent with Item 10(e) of Regulation S-K. As such, these measures should not be labeled as EBIT and EBITDA. Please confirm in future filings you will revise to rename these measures to clearly distinguish them from EBIT and EBITDA (e.g. Adjusted EBIT, Adjusted EBITDA). Also refer to Question 103.01 of Non-GAAP Financial Measures Compliance and Disclosure Interpretation.
The Staff’s comment is duly noted. The Company confirms that it will no longer use EBIT and EBITDA in future filings except in a manner consistent with Item 10(e) of Regulation S-K.
In future filings, the financial figure currently labeled “EBIT” will be labeled “Operating Results,” which is the total of the following IFRS performance measures: Earnings before Other Gains (Losses), Net Financial Expenses, Equity and Income of Joint Venture, Foreign Currency Exchange Differences, Results as per Adjustment Units, and Income Taxes. Consistent with paragraph 85 of IAS 1, a subtotal may be part of a company’s income statement if such subtotal is relevant to an understanding of the company’s financial performance.
With respect to pages 77, F-76 and F-79-81, in which EBITDA is referenced in connection with certain financial covenants, moving forward the Company will rename this measure “Adjusted EBITDA” to clearly distinguish it from EBITDA. The Company will also include a footnote to clarify that Adjusted EBITDA means EBITDA as calculated by the Company in accordance with particular debt instruments in order to measure such instruments’ financial covenants.
· Please reconcile for us your definitions of EBIT and EBITDA in Note 2.3 on page F-18 with those in Note 7 on page F-41.
The Staff’s comment is duly noted. As discussed above,the Company confirms that it will no longer use EBIT and EBITDA in future filings except in a manner consistent with Item 10(e) of Regulation S-K. As requested by the Staff, the following table presents the reconciliation between the EBIT and EBITDA definitions disclosed in Note 2.3, page F-18 and the EBIT and EBITDA definitions disclosed in Note 7, page F-41.
For the Year Ended December 31, 2011 |
|
|
|
ThCh$ |
|
|
|
EBIT / EBITDA (Note 2.3, page F-18) |
| 187,026,619 | 234,808,624 |
OTHER GAINS (LOSSES) | Minus | 3,010,058 | 3,010,058 |
EQUITY AND INCOME IN JOINT VENTURE | Minus | 1,069,311 | 1,069,311 |
FOREIGN CURRENCY EXCHANGE DIFFERENCES | Minus | (1,078,604) | (1,078,604) |
RESULTS AS PER ADJUSTMENT UNITS | Minus | (6,734,379) | (6,734,379) |
EBIT / EBITDA (Note 7, page F-41) |
| 190,760,233 | 238,542,238 |
|
|
|
|
NET INCOME |
| 134,802,201 | 134,802,201 |
NET FINANCIAL EXPENSES | Plus | 7,334,062 | 7,334,062 |
INCOME TAXES | Plus | 44,890,356 | 44,890,356 |
DEPRECIATION AND AMORTIZATION | Plus |
| 47,782,005 |
EBIT / EBITDA (Note 2.3, page F-18) |
| 187,026,619 | 234,808,624 |
-3-
For the Year Ended December 31, 2010 |
|
|
|
ThCh$ |
|
|
|
EBIT / EBITDA (Note 2.3, page F-18) |
| 155,880,420 | 201,081,239 |
OTHER GAINS (LOSSES) | Minus | (654,683) | (654,683) |
EQUITY AND INCOME IN JOINT VENTURE | Minus | 966,122 | 966,122 |
FOREIGN CURRENCY EXCHANGE DIFFERENCES | Minus | (1,400,700) | (1,400,700) |
RESULTS AS PER ADJUSTMENT UNITS | Minus | (5,079,737) | (5,079,737) |
EBIT / EBITDA (Note 7, page F-41) |
| 162,049,418 | 207,250,237 |
|
|
|
|
NET INCOME |
| 119,936,670 | 119,936,670 |
NET FINANCIAL EXPENSES | Plus | 8,287,701 | 8,287,701 |
INCOME TAXES | Plus | 27,656,049 | 27,656,049 |
DEPRECIATION AND AMORTIZATION | Plus |
| 45,200,819 |
EBIT / EBITDA (Note 2.3, page F-18) |
| 155,880,420 | 201,081,239 |
· Your presentation of EBIT appears to be a non-IFRS performance measure. Please confirm in future filings you will reconcile such measure to the most directly comparable IFRS measure and provide disclosures required by Item 10(e) of Regulation S-K. Please provide us with a draft of your planned disclosures.
The Staff’s comment is duly noted. Please see the Company’s response to the first bullet point above. In future filings, the financial figure currently labeled “EBIT” will be labeled “Operating Results” and therefore no reconciliation will be necessary.
The revised disclosure which will be included in all future filings is provided below:
a) 2.3 Financial information as per operating segments
The Company’s operating segments are formed by the assets and resources intended to supply products that are subject to risks and benefits different from those of other operating segments, and that normally correspond to subsidiaries that develop such business activities and which Operating Results are regularly reviewed by its respective Board of Directors of the respective subsidiaries and by the Board of Directors, in order to make decisions on the resources to be allotted to the segments and to appraise their performance (See Note 7).
The segments’ performance is appraised according to several indicators, of which Operating Results, Operating Results before Depreciation andAmortization (ORBDA), ORBDA Margin ( ORBDA´s % as compared to total income), the volume and Sales Income are the most important. Sales between segments are carried out at arm’s length and the net sales information as per geographical location is based on the producing and selling entity location.
-4-
b) Note 7 Financial Information as per operating segments
The Company respectfully refers the Staff to Annex 1, which presents a sample of the revised disclosure to be included in Note 7.
· Please confirm in future filings you will revise to remove the prominent presentation of the non-IFRS measure EBIT in your selected financial data on page 3.
The Staff’s comment is duly noted. The Company confirms that in future filings it will remove the non-IFRS measure EBIT from the presentation of selected financial data under Item 3 of Form 20-F. In future filings, the Company will instead use “Operating Results.”
* * * * *
-5-
We thank the Staff for its attention to the Company’s submission and we look forward to hearing from you regarding our response. If you have any additional questions or comments regarding the responses in this letter, please contact Ricardo Reyes at 56 (2) 427-3400 or Marcelo Mottesi of Milbank, Tweed, Hadley & McCloy LLP, at (212) 530-5602, the Company’s U.S. counsel.
Sincerely yours,
__/s/ Marcelo Mottesi___
Marcelo Mottesi
Copy: Ricardo Reyes, CFO, Compañía Cervecerías Unidas S.A.
Felipe Arancibia,Compañía Cervecerías Unidas S.A.
Renzo Corona, PricewaterhouseCoopers
August 14, 2012
VIA EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Tia L. Jenkins
Senior Assistant Chief Accountant
Re: United Breweries Company, Inc.
Form 20-F for the Year Ended December 31, 2011
File No. 001-14906
Dear Ms. Jenkins:
In connection with responding to the comment letter dated August 1, 2012 from the staff of the Securities and Exchange Commission (the “Commission”) related to United Breweries Company, Inc.’s (Compañía CerveceríasUnidas S.A., or “CCU”) Form 20-F for the year ended December 31, 2011, CCU acknowledges that:
· CCU is responsible for the adequacy and accuracy of the disclosure in the filing;
· staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
· CCU may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Sincerely yours,
__/s/ Ricardo Reyes_________
Ricardo Reyes
Chief Financial Officer
Compañía Cervecerías Unidas S.A.
Annex 1
Note 7 Financial Information as per operating segments
The Company’s operations are presented in six operating segments. The corporate expense is presented separately. The accounting policies used for each segment are the same as those used in the Consolidated Financial Statements described in Note 2.3.
|
|
Segment | Operations included in the segments |
Beer Chile | Cervecera CCU Chile Ltda. and Compañía Cervecera Kunstmann S.A. |
Beer Argentina | CCU Argentina S.A. |
Non alcoholic | Embotelladoras Chilenas Unidas S.A. , Aguas CCU-Nestlé Chile S.A. and Vending CCU Ltda. |
Wine | Viña San Pedro Tarapacá S.A. |
Spirits | Compañía Pisquera de Chile S.A. |
Others(*) | UES, UAC and Cider. |
| |
(*) UES: Strategic Service Units:: Transportes CCU Limitada, Comercial CCU S.A. and Fábrica de Envases Plásticos S.A. | |
UAC: Corporate Support Units located in the Parent Company. | |
Cider: It corresponds to the result of the period of the business of cider. | |
In addition this segment presents the elimination of transactions between segments. | |
The Company’s operations are carried out in Chile and Argentina, the latter includes exclusively segments of beers and wines. The rest of the segments operate only in Chile. For the specific case of Cider, whose operations are carried out in Argentina, this is included in the Other segment.
The Company does not have clients representing more than 10% of consolidated revenues.
The segment’s evaluations are made based on Operating Results and ORBDA (Operating Results before Depreciation and Amortization) levels. For this purpose, the Consolidated Statement of Income information showing such information by segment is included below:
Information as per operating segments for the year ended as of December 31, 2011 and 2010:
Beer Chile |
| Beer Argentina | Non alcoholic | Wines |
| Spirits |
| Others |
| Total |
| ||
2011 | 2010 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | M$ | |
Sales revenue external customers | 309,286,574 | 283,448,500 | 151,951,892 | 243,329,756 | 218,841,014 | 132,933,733 | 125,789,685 | 49,360,939 | 40,596,038 | 21,740,476 | - | 951,105,073 | 820,627,129 |
Other income | 3,208,076 | 2,924,908 | 2,227,059 | 1,226,330 | 1,152,031 | 5,390,734 | 6,483,603 | 492,143 | 1,183,682 | 4,488,202 | 3,659,915 | 18,445,598 | 17,631,198 |
Sales revenue between segments | 521,953 | 1,607,870 | 2,184,291 | 3,953,248 | 3,482,580 | 23,820 | 19,228 | 1,082,518 | 1,437,904 | (5,668,914) | (8,731,873) | - | - |
Net sales | 313,016,603 | 287,981,278 | 156,363,242 | 248,509,334 | 223,475,625 | 138,348,287 | 132,292,516 | 50,935,600 | 43,217,624 | 20,559,764 | (5,071,958) | 969,550,671 | 838,258,327 |
Cost of Sales | (122,416,520) | (113,816,292) | (66,542,994) | (126,414,761) | (108,665,906) | (89,849,938) | (83,875,956) | (29,153,030) | (22,621,716) | (5,127,999) | 11,709,998 | (450,563,274) | (383,812,866) |
Gross Margin | 190,600,083 | 174,164,986 | 89,820,248 | 122,094,573 | 114,809,719 | 48,498,349 | 48,416,560 | 21,782,570 | 20,595,908 | 15,431,765 | 6,638,040 | 518,987,397 | 454,445,461 |
Distribution costs, administrative and other expenses by function | (97,195,786) | (89,203,343) | (68,006,318) | (88,053,382) | (82,744,870) | (40,241,921) | (38,371,656) | (15,591,794) | (14,368,401) | (11,991,456) | (7,964,195) | (348,362,951) | (300,658,783) |
Other operating income (expenses) | 678,693 | 332,914 | 214,423 | 1,041,356 | 299,155 | 2,165,898 | 210,669 | 192,244 | 181,860 | 3,314,260 | 232,786 | 7,230,413 | 1,471,807 |
Operational Results before exceptional items (EI) | 94,082,990 | 85,294,557 | 22,028,353 | 35,082,547 | 32,364,004 | 10,422,326 | 10,255,573 | 6,383,020 | 6,409,367 | 6,754,569 | (1,093,369) | 177,854,859 | 155,258,485 |
Exceptional items (EI) (3) | 5,328,789 | - | - | 1,235,685 | - | 6,467,220 | - | 307,071 | - | (433,391) | 6,790,933 | 12,905,374 | 6,790,933 |
Operating Results (1) | 99,411,779 | 85,294,557 | 22,028,353 | 36,318,232 | 32,364,004 | 16,889,546 | 10,255,573 | 6,690,091 | 6,409,367 | 6,321,178 | 5,697,564 | 190,760,233 | 162,049,418 |
Other gains (losses) | - | - | - | - | - | - | - | - | - | - | - | 3,010,058 | (654,683) |
Net financial expense | - | - | - | - | - | - | - | - | - | - | - | (7,334,062) | (8,287,701) |
Equity and income of joint venture | - | - | - | - | - | - | - | - | - | - | - | 1,069,311 | 966,122 |
Foreign currency exchange differences | - | - | - | - | - | - | - | - | - | - | - | (1,078,604) | (1,400,700) |
Results as per adjustment units | - | - | - | - | - | - | - | - | - | - | - | (6,734,379) | (5,079,737) |
Income before taxes | - | - | - | - | - | - | - | - | - | - | - | 179,692,557 | 147,592,719 |
Income taxes | - | - | - | - | - | - | - | - | - | - | - | (44,890,356) | (27,656,049) |
Income of year | - | - | - | - | - | - | - | - | - | - | - | 134,802,201 | 119,936,670 |
Non-controlling interests | - | - | - | - | - | - | - | - | - | - | - | 12,050,607 | 9,237,155 |
Net income attributable to equity holders of the parent | - | - | - | - | - | - | - | - | - | - | - | 122,751,594 | 110,699,515 |
Depreciation and amortization | 16,165,010 | 15,746,565 | 4,850,511 | 10,427,300 | 9,617,800 | 6,418,774 | 6,471,661 | 1,877,002 | 1,671,960 | 7,543,793 | 6,842,322 | 47,782,005 | 45,200,819 |
Operating Results before depreciation and amortization before EI (ORBDA) (2) | 110,248,000 | 101,041,122 | 26,878,864 | 45,509,847 | 41,981,804 | 16,841,100 | 16,727,234 | 8,260,022 | 8,081,327 | 14,298,362 | 5,748,953 | 225,636,864 | 200,459,304 |
Operating Results before depreciation and amortization (ORBDA)(2) | 115,576,789 | 101,041,122 | 26,878,864 | 46,745,532 | 41,981,804 | 23,308,320 | 16,727,234 | 8,567,093 | 8,081,327 | 13,864,971 | 12,539,886 | 238,542,238 | 207,250,237 |
(1)Operating Results (For management purposes we have defined as earnings before other gains (losses), net financial expenses, equity and income of joint venture, foreign currency exchange differences, result as per adjustment units and income taxes). | |||||||||||||
(2) Operation Results plus depreciation and amortization. | |||||||||||||
(3) The Company has considered this result as a Exceptional items (EI) related to earthquake insurance compensation for an amount of ThCh$ 13,289,481 (Note 12) and restructuring charges of cider business in Argentina for an amount of ThCh$ 384,107, both figures for the year 2011 and ThCh$ 6,790,933 for the year 2010, related to the sale of land in Perú (Note 13). | |||||||||||||
