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Section 1: 6-K (FORM 6-K)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20546

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of March, 2019

 

Commission File Number: 333-221916

 

 

 

Corporación América Airports S.A.

(Name of Registrant)

 

4, rue de la Grêve
L-1643, Luxembourg
Tel: +35226258274
Fax: +35226259776

(Address of Principal Executive Office)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x     Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

   

 

 

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

 

Our subsidiary in Argentina, Aeropuertos Argentina 2000 S.A. (“AA2000”), files quarterly financial statements (both on a consolidated and individual basis) in accordance with the accounting framework established by the Comision Nacional de Valores (“CNV”) and other periodic reports and notices in Spanish with the CNV in Argentina because certain of its debt securities are subject to the public offering regime in Argentina. All such reports and notices are available at the website of the CNV (http://www.cnv.gob.ar). AA2000 also files quarterly consolidated and individual financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (“IASB”) in English to the Luxembourg Stock Exchange on which these debt securities are listed and to the trustee under the indenture governing these debt securities. We are furnishing the information under cover of this Form 6-K to make this information available to the holders of our common shares.

 

This Form 6-K contains a free translation into English of the stand-alone consolidated financial statements for the fiscal year ended December 31, 2018 of AA2000 (the “AA2000 Consolidated Financial Statements”) as well as the stand-alone condensed individual financial statements for the fiscal year ended December 31, 2018 of AA2000 (the “AA2000 Individual Financial Statements” and jointly with the AA2000 Consolidated Financial Statements, the “AA2000 Financial Statements”) that have been made publicly available in Argentina in Spanish. The AA2000 Financial Statements have been prepared in accordance with the accounting framework established by the CNV, which is based on the application of the International Financial Reporting Standards (“IFRS”). We have determined that, as of July 1, 2018, the Argentine economy qualifies as a hyperinflationary economy according to the guidelines of the International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS 29”), since the total cumulative inflation in Argentina in the 36 months prior to July 1, 2018, as measured by the wholesale price index published by the INDEC, exceeded 100%. Accordingly, IAS 29 guidance is applicable to our financial statements for periods ending after July 1, 2018. IAS 29 requires the financial information of an entity whose functional currency is a currency of a hyperinflationary economy to be adjusted by applying a general price index and expressed in the measuring unit at the end of the reporting period and then such financial information to be translated into the presentation currency at the prevailing exchange rate. As of July 1, 2018, the peso qualifies as a currency of a hyperinflationary economy, and we are required to apply inflationary adjustments to AA2000 Financial Statements. These AA2000 Financial Statements are presented in Argentine pesos and were audited in accordance with International Standards on Auditing as approved by the International Auditing and Assurance Standards Board (IAASB).

 

   

 

  

There are certain differences between the AA2000 Consolidated Financial Statements and the consolidating information for the Argentine segment included in the consolidated financial statements of Corporación América Airports S.A. (“CAAP”), such as AA2000’s own transition date to IFRS and its reporting currency, among others.

 

As a result, the AA2000 Financial Statements contained in this Form 6-K are for informational purposes only and not comparable to the financial information included in the Argentine segment in the consolidated financial statements of CAAP to be included in our annual report on Form 20-F and that will consolidate the results of operations and financial condition of all our subsidiaries. Furthermore, neither the AA2000 Consolidated Financial Statements nor the AA2000 Individual Financial Statements should be construed as any indication of how our Argentina segment information will be presented in the consolidated financial statements of CAAP.

 

   

 

 

Exhibits

 

Exhibit No.   Description
99.1   Free translation into English of AA2000 Condensed Consolidated Interim Financial Statements for the fiscal year ended December 31, 2018.
99.2   Free translation into English of AA2000 Condensed Individual Interim Financial Statements for the fiscal year ended December 31, 2018.

 

   

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: March 11, 2019

 

  Corporación America Airports S.A.

 

  By: /s/ Andres Zenarruza

  Name: Andres Zenarruza
  Title: Legal Manager

 

  By: /s/ Raúl Guillermo Francos

  Name: Raúl Guillermo Francos
  Title: Chief Financial Officer

 

   

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

Aeropuertos Argentina 2000 S.A.

 

Consolidated Financial Statements

At December 31, 2018 presented in comparative format 

 

   

 

 

Aeropuertos Argentina 2000 S.A.

 

Consolidated Financial Statements

At December 31, 2018 presented in comparative form

 

Index

 

Consolidated Statements of Comprehensive Income 2
Consolidated Statements of Financial Position 3
Consolidated Statements of Changes in Equity 4
Consolidated Statements of Cash Flow 5

Notes to the Consolidated Financial Statements

6
Summary of Information requested by Resolution N° 368/01 Of the National Securities Commission 52
Report of Independent Auditors 61
Report of the Supervisory Committee 64

 

     $ = Argentine Peso

US$ = US Dollar 

 

   

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

 


Legal address:
Suipacha 268 - Piso 12º - Autonomous City of Buenos Aires
   
Principal activity: Exploitation, administration and operation of airports

 

Consolidated Financial Statements

At December 31, 2018 presented in comparative format

 

DATE OF REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE:

Of the By-laws: February 18, 1998
Of the last modification of the By-laws: October 11, 2016
Registration number with the Public Registry: 1645890
Expiration date of the company: February 17, 2053
Parent Company: Corporación América S.A.
Legal address: Honduras 5673 -
  Autonomous City of Buenos Aires
Principal activity: Investments and financing
Participation of the Parent Company  
in common stock and total votes: 45.90%

 

CAPITAL STOCK (Note 15)  
   Subscribed   Paid-in 
   $ 
Issued          
79,105,489 Class “A” common shares of AR$ 1 par value and 1 vote each   79,105,489    79,105,489 
79,105,489 Class “B” common shares of AR$ 1 par value and 1 vote each   79,105,489    79,105,489 
61,526,492 Class “C” common shares of AR$ 1 par value and 1 vote each   61,526,492    61,526,492 
38,779,829 Class “D” common shares of AR$ 1 par value and 1 vote each   38,779,829    38,779,829 
629,252,640 Preferred shares of AR$ 1 par value with no voting rights   629,252,640    629,252,640 
    887,769,939    887,769,939 

 

 

  1 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

Consolidated Statements of Comprehensive Income

For the years ended at December 31, 2018 and 2017

 

   12.31.18   12.31.17 
   $ 
Continuous Operations          
Revenue (Note 4)   24,166,856,168    20,667,533,587 
IFRIC 12 - paragraph 14 Credit (Note 5)   6,492,605,431    5,908,435,787 
Cost of services (Note 10)   (14,448,879,839)   (12,260,541,144)
IFRIC 12 - paragraph 14 Debit   (6,486,250,815)   (5,903,519,328)
Gross Profit   9,724,330,945    8,411,908,902 
Distribution and selling expenses (Note 10)   (1,678,299,712)   (1,386,488,473)
Administrative expenses (Note 10)   (1,126,507,319)   (1,193,163,215)
Other income and expenses, net (Note 4)   539,266,286    448,718,128 
Operating profit   7,458,790,200    6,280,975,342 
           
Financial Income (Note 4)   1,411,800,264    391,318,906 
Financial Costs (Note 4)   (5,244,882,256)   (776,555,140)
Inflation ajustement   (1,341,819,337)   (271,619,068)
Income before income tax   2,283,888,871    5,624,120,040 
Income tax (Note 4)   (1,258,742,589)   (2,155,360,862)
Income for the year for continuous operations   1,025,146,282    3,468,759,178 
Net Income for the year   1,025,146,282    3,468,759,178 
Other comprehensive income   -    - 
Comprehensive Income for the year   1,025,146,282    3,468,759,178 
           
Income attributable to:          
Majority Shareholders   1,023,716,997    3,467,098,400 
Non –Controlling Interest   1,429,285    1,660,778 
           
Earnings per share basic and diluted attributable to shareholders of the Company during the period (shown in $ per share ) from continuous operations   3.9168    13.3518 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

  2 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

Consolidated Statements of Financial Position

At December 31, 2018 and 2017

 

   12.31.18   12.31.17 
   $ 
Assets          
Non- Current Assets          
Property, plant and equipment (Note 12)   57,175,250    68,078,502 
Intangible Assets (Note 5)   35,621,002,767    31,936,110,878 
Deferred tax assets   639,200    738,638 
Other receivables (Note 4)   4,050,132,292    3,764,742,012 
Total Non-Current Assets   39,728,949,509    35,769,670,030 
Current Assets          
Other receivables (Note 4)   1,054,371,350    498,694,329 
Trade receivables, net (Note 4)   2,329,965,335    1,559,765,126 
Other Assets   7,425,766    4,707,210 
Investments (Note 4)   186,520,275    - 
Cash and cash equivalents (Note 4)   3,945,355,362    3,425,015,372 
Total Current Assets   7,523,638,088    5,488,182,037 
Total Assets   47,252,587,597    41,257,852,067 
           
Shareholders’ Equity and Liabilities          
Equity attributable to majority Shareholders:          
Common shares   258,517,299    258,517,299 
Preferred shares   629,252,640    616,914,353 
Share Premium   137,280,595    137,280,595 
Capital adjustment   7,117,811,651    7,113,070,288 
Legal and facultative reserve   5,404,916,672    4,948,087,183 
Retained earnings   9,184,749,554    8,555,133,185 
Subtotal   22,732,528,411    21,629,002,903 
Non-Controlling Interest   15,556,518    14,127,233 
Total Shareholders’ Equity   22,748,084,929    21,643,130,136 
           
Liabilities          
Non-Current Liabilities          
Accounts payable and others (Note 4)   87,994,610    189,366,280 
Borrowings (Note 6)   13,603,356,026    10,927,488,606 
Deferred tax liability   5,163,711,340    4,173,479,030 
Provisions and other charges (Note 9)   133,654,307    159,849,412 
Total Non-Current liabilities   18,988,716,283    15,450,183,328 
Current Liabilities          
Fee payable to the Argentine National Government (Note 7)   325,205,217    260,729,552 
Accounts payable and others (Note 4)   3,095,365,451    2,596,666,461 
Income tax, net of prepayments   8,045,156    315,772,484 
Borrowings (Note 6)   1,683,497,126    221,433,127 
Provisions and other charges (Note 9)   403,673,435    769,936,979 
Total Current Liabilities   5,515,786,385    4,164,538,603 
Total Liabilities   24,504,502,668    19,614,721,931 
Total Shareholders’ Equity and Liabilities   47,252,587,597    41,257,852,067 

 

The accompanying notes are an integral part of these Consolidated Financial Statements. 

 

  3 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

Consolidated Statements of Changes in Equity

For the years ended at December 31, 2018 and 2017

 

   Attributable to equity holders of the Company 
 

Capital Stock
Common
Shares

  

Capital Stock

Preferred
Shares

   Share Premium  

 Capital
adjustment

  

Legal

Reserve

   Facultative
Reserve
   Retained
Earnings
   Total   Non-
Controlling
Interest
  

Total

Shareholders’

Equity

 
   $ 
Balance at 01.01.18   258,517,299    616,914,353    137,280,595    7,113,070,288    311,389,032    4,636,698,151    8,555,133,185    21,629,002,903    14,127,233    21,643,130,136 
IFRS Adjustment (Note 3.20)   -    -    -    -    -    -    79,808,511    79,808,511    -    79,808,511 
Balance at 01.01.18 modified   258,517,299    616,914,353    137,280,595    7,113,070,288    311,389,032    4,636,698,151    8,634,941,696    21,708,811,414    14,127,233    21,722,938,647 
Resolutions of the Shareholders’ Meeting dated April 9, 2018 (Note 19):                                                  
Capitalization of dividends of preferred shares   -    12,338,287    -    4,741,363    -    -    (17,079,650)   -    -    - 
Legal reserve   -    -    -    -    3,348,951    -    (3,348,951)   -    -    - 
Facultative reserve   -    -    -    -    -    3,695,651,436    (3,695,651,436)   -    -      
Comprehensive Income for the year   -    -    -    -    -    -    1,023,716,997    1,023,716,997    1,429,285    1,025,146,282 
Balance at 12.31.18   258,517,299    629,252,640    137,280,595    7,117,811,651    314,737,983    8,332,349,587    5,942,578,656    22,732,528,411    15,556,518    22,748,084,929 
                                                   
Balance at  01.01.17   258,517,299    604,817,993    137,280,595    7,104,169,309    201,443,675    3,328,470,909    8,522,503,617    20,157,203,397    12,466,455    20,169,669,852 
Resolutions of the Shareholders’ Meeting dated April 26, 2017 (Note 19):                                                  
Capitalization of dividends of preferred shares   -    12,096,360    -    8,900,979    -    -    (20,997,339)   -    -    - 
Distribution of dividends of common shares   -    -    -    -    -    -    (1,995,298,894)   (1,995,298,894)   -    (1,995,298,894)
Legal and Facultative reserve   -    -    -    -    109,945,357    1,308,227,242    (1,418,172,599)   -    -    - 
Comprehensive Income for the year   -    -    -         -    -    3,467,098,400    3,467,098,400    1,660,778    3,468,759,178 
Balance at 12.31.17   258,517,299    616,914,353    137,280,595    7,113,070,288    311,389,032    4,636,698,151    8,555,133,185    21,629,002,903    14,127,233    21,643,130,136 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

  4 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

Consolidated Statements of Cash Flow

For the years ended at December 31, 2018 presented in comparative form

 

      12.31.18   12.31.17 (*) 
  NOTES  $ 
Cash Flow from operating activities       
Net income for the year      1,025,146,282    3,468,759,178 
Adjustment for:             
Amortization of intangible assets  5   2,807,713,542    2,250,508,633 
Specific allocation of accrued and unpaid income  7   325,205,217    260,729,552 
Depreciation of equipment, property and plant  12   10,977,403    10,889,346 
Deductions of Intangible Assets  5   -    968,852 
Bad debts provision  8   125,618,730    130,633,947 
Income Tax  13   1,258,742,589    2,155,360,862 
Accrued and unpaid borrowing interest costs  6   1,034,838,965    1,268,804,358 
Accrued deferred revenues and additional consideration  9   (256,201,525)   (187,565,602)
Accrued and unpaid Exchange differences      3,283,863,079    (139,151,119)
Contingencies provision  9   26,868,453    41,803,847 
Adjustment for inflation effect      391,586,402    (667,483,221)
Changes in operating assets and liabilities:             
Changes in trade receivables      (1,292,747,581)   (302,922,841)
Changes in other receivables      (2,216,888,549)   (1,404,282,142)
Changes in other assets      (2,718,557)   1,075,708 
Changes in accounts payable and others      1,293,065,195    419,384,833 
Changes in liabilities for current income tax      265,937,830    (204,449,837)
Changes in provisions and other charges      331,302,121    80,782,466 
Changes in fee payable to the Argentine National Government      (176,591,493)   (147,629,066)
Increase of intangible assets      (6,470,263,994)   (5,864,654,169)
Income tax paid      (701,959,915)   (2,509,571,654)
Net cash generated in / (flow used in) operating activities      1,063,494,194    (1,338,008,069)
Cash Flow for investing activities             
Addition of investments      (271,018,069)   - 
Collection of investments      130,382,394    - 
Addition / (Deduction) of property, plant and equipment  12   (74,151)   13,462,955 
Net cash (flow used in) / generated in investing activities      (140,709,826)   13,462,955 
Cash Flow from financing activities             
New Borrowings  6   -    11,203,722,270 
Borrowings paid- principal  6   (84,721,383)   (5,513,277,479)
Borrowings paid- interests  6   (881,773,041)   (1,100,376,184)
Restricted cash flow release      -    903,893,446 
Dividends paid  9   (303,515,602)   (1,380,486,267)
Net cash (flow used in) / generated in financing activities      (1,270,010,026)   4,113,475,786 
Net (Decrease) / Increase in cash and cash equivalents      (347,225,658)   2,788,930,672 
Changes in cash and cash equivalents             
Cash and cash equivalents at the beginning of the year (**)      3,425,015,372    1,436,716,779 
Net (Decrease) / Increase in cash and cash equivalents      (347,225,658)   2,788,930,672 
Inflation effect generated by cash and cash equivalents      207,889,696    (415,080,731)
Foreign Exchange differences      659,675,952    (385,551,348)
Cash and cash equivalents at the end of the year      3,945,355,362    3,425,015,372 
Transactions that do not represent changes in cash and cash equivalents:             
Acquisition of intangible assets through liabilities for financial leasing  6   22,341,436    43,781,618 
Dividends on preferred shares      12,585,053    12,338,287 

 

(*) See Note 3.1 (Comparative Information) for more details about modification.

(**) Does not include restricted cash at January 1, 2017 for $ 903,893,446.

The accompanying notes are an integral part of these Consolidated Financial Statements. 

 

  5 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format

 

NOTE 1 - COMPANY ACTIVITIES

 

Aeropuertos Argentina 2000 S.A. (“AA2000” or the “Company”) was incorporated in 1998, after the consortium of companies won the national and international bid for the concession rights for the use, management and operation of the “A Group” of the Argentine National Airport System “A Group” includes 33 airports, which operate in Argentina (the “Concession”).

 

The Concession was granted pursuant to the concession agreement the Company entered into with the Argentine National Government on February 9, 1998, as subsequently amended and supplemented by the memorandum of agreement we entered into with the Argentine National Government on April 3, 2007 (the “Memorandum of Agreement”). We refer to the concession agreement as amended and supplemented by the Memorandum of Agreement as the “Concession Agreement”.

 

The Concession is for an initial period of 30 years through February 13, 2028. The Government may extend the term of the Concession for an additional period of up to 10 years. The Company has made a formal request to the National Airports Regulatory Organization (“ORSNA”, for the acronym in Spanish) to extend the term of the Concession for the additional 10-year period ending February 13, 2038. The Company can provide no assurance that the Argentine National Government will grant our request or on what conditions.

 

In addition, under the terms of the Concession Agreement, the Argentine National Government has the right to buyout our Concession as of February 13, 2018, and if such right is exercised, it is required to pay the Company a compensation.

 

As from July 24, 2012 The Company has become responsible for the management of the operation of Termas de Rio Hondo airport. On March 21, 2013, the National Executive Branch through Decree N° 303/2013, ratified the incorporation of the airport to the National Airport System, its inclusion into the “A” Group at December 31, 2017 is still pending.

 

Likewise, and in order to be able to continue with the policies related to the expansion of the aviation market, the National State issued Decree No. 1092/17 on December 22, 2017 by which it incorporated the Palomar Airport, located in the Province of Buenos Aires. Aires, to the National Airport System.

 

In order to incorporate the mentioned Airport into "Group A", on December 27, 2017 the National Government issued Decree No. 1107/17.

 

As a result, as of such date, the Company is responsible for the exploitation, administration and operation of Palomar Airport under the terms set forth in the Concession Contract approved by Decree No. 163/97 and the Adjustment Agreement Act. of the Concession Contract approved by Decree No. 1799/07.

 

Main terms and conditions of the Concession Agreement:

 

  6 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 1 - COMPANY ACTIVITIES (Contd.)

 

1.1. Consideration payable to the Argentine National Government

 

Under the terms of the Concession Agreement, the Company is required to, on a monthly basis; allocate an amount equal to 15% of the revenues derived from the Concession, as follows:

 

-11.25% of total revenues to a trust for funding infrastructure works of the National Airport Systems. 30 % of such funds will be contributed directly to the National Social Security Administration (ANSES). The Secretary of Transportation, with previous authorization from the ORSNA, will determine the works in any airport of the country whether at airports under the concession agreement or not. The Company could present the ORSNA proposed works projects which, together with ORSNA´s proposals will be presented to the Secretary of Transportation who will decide upon the use of the trust funds
-1.25% of total revenues to a trust fund to study, control and regulate the Concession, which is to be administered and managed by the ORSNA.
-2.5% of total revenues to a trust for funding of infrastructure works for the “A” Group of the National Airports System.

 

The Company may settle trust payment obligations through the assignment of credits arising from the rendering of aeronautical and/or airport services under the concession prior intervention of the Secretary of Transport and authorization of the ORSNA.

 

1.2. Tariff schedule

 

The Concession Agreement establishes the maximum rates that the Company may charge to aircraft operators and passengers for aeronautical services that principally consist of passenger use fees for the use of the airports, which are charged to each passenger and vary depending on whether the passenger’s flight is an international, regional or domestic flight, and aircraft charges, which are charged for aircraft landing and aircraft parking and vary depending on whether the flight is international or domestic, among other factors.

 

Under the Concession Agreement, the ORSNA must annually review the financial projection of income and expenses in order to verify and preserve the equilibrium of the variables on which it was originally based. The main factors that determine economic equilibrium are the payments to the Argentine National Government, the fees charges to Airlines and passengers for aeronautical services, commercial revenues, investments the Company is required to make under the concession. The ORSNA determines the adjustment to be made to these factors to achieve economic equilibrium through the term of the concession. The only factor that has been adjusted in the past has been the fees the Company charges for aeronautical services and additional investment commitments.

 

As of 2012, the ORSNA has reviewed the Financial Projection of Income and Expenses through Resolution 115/12, dated November 7, 2012, Resolution 44/14 dated March 31, 2014, Resolution 167/15 dated November 20, 2015 and Resolution 100/2016 dated November 25, 2016. Pursuant to each of those Resolutions, the ORSNA has approved increases to the aeronautical fees.

 

  7 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 1 - COMPANY ACTIVITIES (Contd.)

 

1.2. Tariff schedule (Contd.)

 

Pursuant to Resolution No. 100/2016, the ORSNA retroactively approved the Financial Projection of Income and Expenses for the period of 2015, according to the following rules:

 

(i) To re-establish the economic equilibrium of the Financial Projection of Income and Expenses through an adjustment in aeronautical fees; and

 

(ii) To maintain the benefit airlines paying on time are entitled to under to Resolution 10/09, dated January 28, 2009, pursuant to which such airlines pay rates equivalent to 30% discount of the international aeronautical charges set forth in Annex II of the Memorandum of Agreement, instead of paying the rates established by ORSNA Resolution 100/16.

 

In addition, by means of Resolution No. 101/2016, the ORSNA approved a 14% decrease to the rate of the international passenger use fees and a 150% increase to the rate of the domestic passenger use fees.

 

We filed a claim with the ORSNA regarding the adjustments to the rates approved by Resolution No. 101/2016 and against Resolution 100/16.

 

In November 2012, together with the increase of tariffs granted by the National Government a “New Trust for Works-Portfolio of Projects” was created as per article 7 E) of the Trust Agreement for the Strengthening aimed at financing Works of “Portfolio of Works 2012”.

 

Following the increase of tariffs granted by the National Government in 2014, a new account was created “Trust Account for the Reinforcement of Investments of Group A”.

 

The Company has requested the write- off of the two new trust accounts previously mentioned, still pending resolution.

 

1.3. Investments

 

Under the terms of the Concession Agreement, the Company is required to make capital expenditures in accordance with our investment plan submitted with the Memorandum of Agreement, which sets forth our required investment commitments for the period from 2006 through the end of the Concession Agreement in 2028. Under the Concession Agreement, our total required investment commitments from January 2006 until 2028 are $2,158.4 million (calculated in December 2005 values). As of December 31, 2018, we have invested $2,205.8 million (calculated in December 2005 values) under their investment plan.

 

  8 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 1 - COMPANY ACTIVITIES (Contd.)

 

1.3. Investments (Contd.)

 

Compliance with the investment plan was evaluated after the first five-year period following the effective date of the Memorandum of Agreement. The first five-year period ran from December 13, 2007 until December 31, 2012, while the second five-year period overlaps with the first five-year period and ran from January 1, 2011 to December 31, 2015. The Company is allowed to compute the amounts invested in overlaps periods in each five-year period. For the period from January 1, 2016 through the end of the Concession Agreement, the investment plan will be revised and approved by the ORSNA every five years, notwithstanding other adjustments that the ORSNA may apply within its annual review of the economic equilibrium. The investments contemplated in the five-year plans submitted to the ORSNA will be directed, in all cases, to cover operating needs and capacity and demand increases, as well as the fulfillment of international quality and safety standards within our airports.

 

Under the Concession Agreement, the ORSNA may revise the timing of the works contemplated in the applicable investment plan and may also modify the investment plan to require additional works, provided that such modifications may not require investment commitments in excess of those already contemplated for the relevant annual period.

 

In August 2011, the Asociación de Superficiarios de la Patagonia (ASSUPA) started a civil action against the Company in a federal court in the Autonomous City of Buenos Aires according to Environmental Law N° 25,675, requesting the remediation of liabilities that eventually caused environmental damage in airports concessioned. To date, the Court has appointed as expert the Argentine Centre of Engineers to conduct the research related to the remedial Works requested. ASSUPA obtained a precautionary measure to guarantee the execution of works for $97.420.000. Such works do not constitute a contingency, in case of execution they should be considered as included in the contract investments plan.

 

Works performed in accordance with the investment plan are entered in an investment registry maintained by the ORSNA, which catalogues both the physical progress and economic investments made under the investment plan. The Company is required to provide all the necessary documentation and any other data or reports requested by the ORSNA with respect to the investment registry.

 

In order to guarantee performance of the works under the investment plan, the Company is required to enter into a guarantee with a value equal to 50% of the works planned for the year before March 31 of each year. The Company has granted a surety bond in the amount of $ 1,465,586,500.

 

1.4. Transfer of assets used to provide the services

 

At the end of the Concession, AA2000 shall transfer to the Government, free of charge, all assets in use until that date for the provision of services to ensure continuity of the rendering of services either by the Government or a future concessionaire under the same conditions, and with the same quality standards.

 

  9 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 1 - COMPANY ACTIVITIES (Contd.)

 

1.5. Guarantee for fulfillment of the Concession Contract

 

It was agreed that a guarantee might be offered, to the satisfaction of ORSNA consisting in the pledge of securities, property and/or real estate mortgages, as well as surety bonds.

 

In order to comply with this clause, the Company has set up a surety bond for $528,888,889.

 

1.6. Insurances

 

Additionally, the Company shall enter into a civil liability insurance policy for a minimum amount of $ 300,000,000.

 

The company has contracted insurance for U$S 500,000,000.

 

1.7. Limitations to the transfer of shares

 

The shares in AA2000 could not be pledged without prior authorization of the ORSNA. The shareholders of AA2000 could only change their stake ownership or sell their shares with the prior authorization of the ORSNA.

 

Under the Concession Agreement, the Company is required to maintain, at all times, a technical expert. Under the Concession Agreement, any shareholder who has held at least 10.0% of the capital stock for a minimum of five years is considered a technical expert.

 

It is established that the Company cannot merge or spin off during the term of the Concession Agreement.

 

1.8. Dismissal and Compensation of Claims

 

Through the approval of the Agreement, the Argentine National Government and the Company agreed upon a process for the settlement of such mutual claims.

 

The Company has withdrawn all claims and appeals previously filed against the Argentine National Government. In turn, the Regulating Agency of the National Airport System (ORSNA) agreed to dismiss the summary proceedings initiated against The Company because of the failure to pay the fee.

 

Regarding mutual claims at the time of the Agreement there was a balance favorable to the Argentine National Government that the Company cancelled in full.

 

  10 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 1 - COMPANY ACTIVITIES (Contd.)

 

1.8. Dismissal and Compensation of Claims (Contd.)

 

To cancel part of the debt, AA 2000 issued preferred shares in favor of the Argentine National Government. Such preferred shares, originally issued for $ 496,16 million accrue a fixed annual dividend equivalent to 2% payable in preferred shares capitalized up to the year 2019 (Note 17). Additionally, as from 2020, the Argentine National Government can convert the preferred shares into common shares, to the extent Aeropuertos Argentina 2000 S.A. has not redeemed them prior to that date, up to a 12.5% per year of the initial preferred shares amount. The redeemable preferred shares at the option of the issuer result in its classification within shareholders´ equity, to the extent the option has not been exercised or cannot be duly exercised.

 

NOTE 2 - BASIS FOR CONSOLIDATION

 

The consolidated financial statements include the assets, liabilities and results of the following subsidiaries (hereafter the Group):

 

Controlled (1)  Number of
common shares
   Participation in
capital and
possible votes
   Book entry
value at
12.31.18
   Net
Shareholders
‘equity at
closing
   Income for the
year
 
           $ 
Servicios y Tecnología Aeroportuarios S.A. (2)   14,398,848    99.30%   37,130,585    37,391,186    (2,724,464)
Cargo & Logistics SA.   5,566,259    98.63%   1,614,687    1,637,115    (4,257,130)
Paoletti América S.A.   6,000    50.00%   15,525    31,050    (7,397)
Texelrío S.A. (3)   84,000    70.00%   58,016,400    73,269,702    3,573,330 
Villalonga Furlong S.A (4)   123,700    1.46%   56,852    3,893,996    (79,546)

 

(1)Companies based in the Argentine Republic.
(2)Includes adjustments under IFRS for the preparation and presentation of the corresponding financial statements.
(3)Shareholders Equity includes 4,000,000 of preferred shares.
(4)The Company directly and indirectly owns 98.42% of the capital stock and votes of this entity.

 

The accounting policies of the subsidiaries have been modified, where necessary, to ensure consistent application with the Company´s accounting policies.

 

AA2000 holds 99.3% of the shares of Servicios y Tecnología Aeroportuarios S.A. (Sertear), which purpose is to manage and develop activities related to duty-free zones, import and export operations, exploit and manage airport-related services, provide transportation services (both passenger and cargo), and warehouse usage services.

 

  11 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 2 - BASIS FOR CONSOLIDATION (Contd.)

 

AA2000 owns 98.63% of the capital stock of Cargo y Logística S.A., holder of 98.42% of the shares of Villalonga Furlong S.A. Villalonga Furlong S.A. is the holder of Class “B” shares of Empresa de Cargas Aéreas del Atlántico Sud S.A., under liquidation, representing 45% of its capital stock. The remaining 55% of the capital stock, (the Class “A” shares) are owned by the Argentine National Government - Ministry of Defense. Empresa de Cargas Aéreas del Atlántico Sud S.A. (which, as of the date of these consolidated financial statements, is under liquid proceedings as a result of the application of the provisions of Section 94 subsection 2 of Commercial Law 19,550) was the concessionaire of the exploitation and provision of international air cargo storage, stowage and warehouse services until June 30, 2009. As from that date the services in charge of Empresa de Cargas Aéreas del Atlántico Sud S.A. are performed by AA2000 in accordance with the Bidding Terms and Conditions of the AA2000 concession agreement.

 

The Company holds 50% of the capital stock and votes of Paoletti América S.A. Pursuant to shareholder agreements, AA2000 is in charge of the administration of Paoletti America S.A, and also appoints the Chairman of the Board of Directors, who, in accordance with the corporate by-laws, has a double vote in case of a tie voting. Therefore, the Company has consolidated the assets, liabilities and results of Paoletti América S.A.

 

In addition, the Company holds 70% of the capital and votes of Texelrio S.A. whose corporate purpose is, among others, to develop, operate and manage all types of services related to park and airport maintenance.

 

NOTE 3 - ACCOUNTING POLICIES

 

The Consolidated Financial Statements are presented in Argentine Pesos, except when it specifically indicates otherwise. These statements were approved by the Board of Directors of the Company on March 7, 2019.

 

The National Security Commission (“CNV” for the acronym in Spanish), through Technical Resolutions N° 562/09 and 576/10, has established the application of Technical Resolutions N° 29 and 43 of the Argentine Federation of Professional Council in Economic Sciences (“FACPCE” for the acronym in Spanish) which adopts the application of IFRS (International Financial Reporting Standards) issued by the IASB (International Accounting Standards Board), for those entities under the public offering regime Law N° 17,811, whether due to capital stock or corporate bonds or because they have requested authorization to list for trading on stock exchanges.

 

Application of those standards is mandatory for the Company as from the fiscal year beginning on January 1 2012. Therefore, the transition date, as established in the IFRS 1 “First Time Adoption of the IFRS” was January 1, 2011.

 

The Consolidated Financial Statements of AA2000 have been prepared in accordance with IFRS and IFRIC (International Financial Reporting Interpretations Committee).

 

These accounting policies have been consistently applied to all the years presented. Unless otherwise stated.

 

  12 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

1) Comparative Information

 

The information included in these financial statements was extracted from the Financial Statements of AA2000 as of December 31, 2017, timely approved by the Company’s Board and Shareholders and restated at the closing currency at December 31, 2018, based on the application of IAS 19 (see Note 3.19)

 

Certain transactions have been reclassified in the Statement of Cash Flow that were exposed as of December 31, 2017 within the operating activities (Release of the restricted cash and certain interests) that were reclassified to financing activities.

 

2) Controlled

 

The Company controls an entity when the group is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The subsidiaries are consolidated as from the date control is transferred to the Company. They are deconsolidated from the date that control ceases. (See Note 2).

 

Inter-company transactions, balances and unrealized gains or transactions between Group companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.

 

3) Segment Information

 

The Company is managed as a single unit, considering all airports as a whole. It does not evaluate the performance of the airports on a standalone basis. Therefore, for the purposes of segment information, there is only one business segment.

 

The Argentine National Government granted the Company the concession of the “A” Group airports of the National Airports System under the basis of “cross-subsidies”: i.e., the income and funds generated by some of the airports should subsidize the liabilities and investments of the remaining airports, in order for all airports to be compliant with international standards as explained below.

 

All airports must comply with measures of operative efficiency that are independent from the revenues and funds they generate. All works performed must follow international standards established by the respective agencies (IATA, OACI, etc.).

 

Revenues of AA2000 comprised commercial revenues and aeronautical revenues; the latter being the tariffs determined by the ORSNA and regulated on the basis of the review of the Financial Projection of Income and Expenses in order to verify and preserve the "equilibrium" of the variables on which it was originally based.

 

The investment decisions are assessed and made with the ORSNA based on the master plans of the airports considering the needs of each airport based on expected passenger flow and air traffic, in the framework of the standards previously mentioned.

 

  13 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

4) Property, plant and equipment

 

Property, plant and equipment is stated at their historical cost, restated at closing currency, net of depreciations and impairment, if any. The historical cost includes expenses directly attributable to the acquisition of such assets.

 

Subsequent costs are included in the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Company and the cost is reliably measured. The carrying value of replaced parts is derecognized. All other maintenance and repair expenses are expensed when incurred. No significant components are observed within this category.

 

Land is not depreciated. Depreciation on other assets is calculated using a straight-line method over its estimated useful life as follows:

Buildings: 30 years

Vehicles: 60 months

Machinery: 120 months

Installations: 60 months

Furniture and office equipment: 60 months

Data Processing: 36 months

 

The residual value of the assets and their useful life are reviewed, and adjusted if appropriate, at the end of each year. Changes in the criteria, if any, are recognized as a change in estimate.

 

The carrying value of the assets is written down immediately to its recoverable value if the assets carrying amount exceeds its estimated recoverable value.

 

5) Intangible Assets

 

The Company has recognized an intangible asset that represents the right (license) to charge users for the service of airport concession. Such intangible asset is registered at cost restated at closing currency minus the accumulated amortization which is amortized in a straight line during the term of the concession.

 

Our Concession Agreement is accounted for in accordance with IFRS based on the principles outlined in IFRIC 12 “Service Concession Arrangements.” Under IFRIC 12, our Concession Agreement is a “build-operate- transfer” arrangement, under which we develop infrastructure to provide public services and, for a specific period, operate and maintain such infrastructure. Infrastructure is not recognized as property, plant or equipment (PPE), because we have the right to charge fees for services provided to users during the period of the Concession Agreement. 

 

The assets subject to amortization are reviewed for depreciation when the events or changes in the circumstances indicate that the book value cannot be recovered. The loss for depreciation is recognized for the amount by which the accounting value of the asset exceeds its recovery value. For the purpose of depreciation testing, the assets are grouped at the lowest level for which there are identified cash flows.

 

  14 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

6) Sales receivables and other receivables

 

Sales receivables and other receivables are recognized at face value; net the provision for devaluation losses if there are no significant differences with the interest method. The implicit interest is disaggregated and recognized as financial income as interest is accrued.

 

7) Other assets

 

Other assets are deferred charges that are valued at historical cost, net of accumulated depreciation.

 

8) Investments

 

The investments consist mainly of investments in public debt instruments and time deposits, with an original maturity of more than three months from the date of acquisition.

 

All purchases and sales of investments are recognized on the settlement date, which does not differ significantly from the contracting date, date in which the Company agrees to buy or sell the investment.

 

The results from financial investments, both for quotation differences and foreign exchange differences, are recognized in the "Financial income" in the Statement of Comprehensive Income.

 

The fair value of listed investments is based on current offer prices. If the market for a financial investment is not active or the securities are not quoted, the Company estimates the fair value according to standard valuation techniques.

 

9) Cash and cash equivalents

 

In the Consolidated Statements of Cash Flow, cash and cash equivalents include cash in hand, time deposits in financial entities, other short-term highly liquid investments with an original maturity of three months or less and bank overdrafts. In the consolidated statements of financial position, bank overdrafts, if any, are shown within borrowings in current liabilities.

 

10) Capital Stock

 

The capital stock is represented by ordinary, registered, non-endorsable shares of $ 1 par value and preferred shares of $ 1 par value. The adjustment that arises from the restatement to the closing currency, is exposed as "Capital adjustment".

 

11) Accounts payable and others

 

Accounts payable and others are obligations to pay for goods and services that have been acquired in the ordinary course of business. Accounts payable are classified in current liabilities if payment is due within one year or less.

 

  15 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

11) Accounts payable and others (Contd.)

 

Accounts payable are initially recognized at fair value and subsequently measured at their amortized cost using the effective interest method.

 

Unpaid salaries, vacations and bonuses, and social contributions, as well as employee termination payments and restructuring costs are recognized at fair value.

 

12) Borrowings

 

Borrowings and other financial liabilities are initially recognized at fair value, net of direct transaction costs incurred. Subsequently, borrowings are carried at amortized cost using the effective interest method. Borrowings are classified under current liabilities if payment is expected within a year.

 

13) Financial expense

 

General and specific borrowing costs, attributable to the acquisition, construction or production of assets that necessarily take a substantial period to get ready for their intended use or sale are added to the cost of such assets until the assets are substantially ready to be used or sold.

 

14) Leases

 

Leases are classified as financial leases when substantially all risks and rewards of ownership are transferred to the lessee. When those conditions are not met, leases are classified as operating leases.

 

Assets acquired under financial leases are classified as non-current assets and are valued at the lease commencement at the lower of the present value of the minimum lease payments or at the fair value of the asset acquired. A liability is recognized for the corresponding obligation with the lessor. Financial cost is accrued using the effective interest method and it is included under financial expenses.

 

Operating leases under fixed rent are expensed on a straight-line basis during the term of the lease. Any variable or contingent rent, including the inflation adjustment of fixed rent contracts, is recognized as expense of the period in which payment is probable.

 

15) Current and deferred income tax

 

Income tax expense for the year comprises current and deferred income tax and is recognized in the Consolidated Statement of Comprehensive Income.

 

  16 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

15) Current and deferred income tax (Contd.)

 

Deferred income tax is recognized using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Main temporary differences correspond to differences between the book and tax value of property, plant and equipment and intangible assets, mainly due to different depreciation and amortization criteria, and differences from capitalization of interest during construction. Deferred assets and liabilities are measured at the tax rate expected to apply in the period in which the asset is realized or the liability settled, based on the tax laws enacted or substantially enacted at the end of the year. Under IFRS, the deferred tax assets (liabilities) are classified as non-current assets (liabilities). Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilized.

 

Deferred income tax is provided on temporary differences derived from the investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in a foreseeable future.

 

16) Provisions

 

Provisions are recognized in the consolidated financial statements when:

a)The Group has a present obligation (legal or constructive) because of past events,
b)It is probable that an outflow of resources will be required to settle such obligation and
c)The amount can be reliably estimated

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation considering the best available information at the time of the preparation of the consolidated financial statements and are reassessed at each closing date. The discount rate used to determine present value reflects current market assessment, at statements financial position date, of the time value of money, and the risks specific to the obligation.

 

17) Revenues

 

The Company generates revenues from the following activities:

 

a)Aeronautical services provided to users and aeronautical operators in the airports. Main aeronautical services include passenger use fees, aircraft landing fees and aircraft parking fees;

 

b)Commercial revenues mainly obtained from commercial activities within the airports. Main commercial revenues include warehouse usage, use of space, car parking, etc.

 

Revenues for use of space by retail stores can be either contracted as a fixed and/or variable amount.

 

  17 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

17) Revenues (Contd.)

 

Revenue for contracts with clients is measured at the fair value of the consideration received or receivable and represents the amounts receivable for the sale of services, stated net of discounts and value added taxes. The Group recognizes revenues in the period the services are rendered, when the amounts can be reliably measured, when it is likely that future economic benefits will flow to the entity and when the specific criteria for each of the activities has been met, as previously mentioned.

 

The Group performs construction activities as part of the obligations derived from the investment plan established in the Concession Agreement mentioned in Note 1. In accordance with IFRIC 12 paragraph 14, the Group recognizes construction revenues and costs during the construction period.

 

18) Distribution of dividends

 

The distribution of dividends to the Company shareholders is recognized as a liability in the financial statements in the year the dividends are approved by the shareholders.

 

19) Other income and expenses

 

It mainly includes the revenues from the Strengthening Trust that arise as consideration for having the concession of the "A" Group of airports of the National Airport System for which the Company assigns to the Government 15% of the total revenues of the concession, being that 2.5% of said income is used to finance the investment commitments of AA2000 corresponding to the investment plan under the concession contract through a trust in which AA2000 is the trustor; Banco de la Nación Argentina, the trustee; and the beneficiaries are AA2000 and builders of the works of the airports. The funds in the trust are used to pay the creditors of certain infrastructure works in the airports of Group A. According to IAS 20, the benefit received by the Company qualifies as an income subsidy, which is recognized on a monthly basis at a. reasonable value since there is certainty that this benefit will be received.

 

20) Changes in accounting policies and disclosures

 

New accounting standards and interpretations issued by the IASB that are effective at January 1, 2018 and have been adopted by the Group

 

IFRS 9, "Financial Instruments"

 

On July 2014, the IASB amended IFRS 9 “Financial Instruments” and establishes new requirements for the classification and measurement of financial assets and liabilities, which are applicable to financial statements for fiscal years beginning January 1, 2018.

 

The new impairment model requires the recognition of provisions for impairment based on the expected credit losses, instead of credit losses incurred under IAS 39.

 

  18 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

20) Changes in accounting policies and disclosures

 

IFRS 9, "Financial Instruments" (Contd.)

 

The accounting policies were modified to comply with IFRS 9 issued by the IASB in July 2014.

 

IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities; decreases in financial instrument accounts; impairment of financial assets and hedge accounting. IFRS 9 also significantly modifies other standards related to financial instruments such as IFRS 7 Financial Instruments: Disclosures

 

As permitted by the transitional provisions of IFRS 9, the Company has chosen not to change the comparative figures.

 

The total impact on the accumulated results of the Company due to the classification and measurement of financial instruments as of January 1, 2018 is as follows:

 

Accumulated results as of December 31, 2017 - IAS 39   8,555,133,184 
Decrease in the allowance for bad debts, net   79,808,511 
Accumulated results as of January 1, 2018 - IFRS 9   8,634,941,695 

 

IFRS 15 “Revenue from contracts with customers”

 

In May 2014, the IASB issued IFRS 15 “Revenue from contracts with customers”, that is effective to annual periods as from January 1, 2018, allowing for its early adoption.

 

The objective of IFRS 15 is to establish the principles that an entity shall apply to report to users of financial information about the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers.

 

The core principle is that an entity will recognize revenue to depict the transfer of control of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

Management evaluated the effects of the application of the new standard and has not identified that the application of IFRS 15 affects the timing of recognition of future income.

 

IAS 29 "Financial information in hyperinflationary economies"

 

IAS 29 "Financial information in hyperinflationary economies" requires that the financial statements of an entity whose functional currency is that of a hyperinflationary economy be expressed in terms of the current unit of measurement at the year-end date. As of July 1, 2018, the Company's Management understands that there is sufficient evidence to conclude that Argentina is a hyperinflationary economy under the terms of IAS 29, resulting in the application of the aforementioned standard. (See Note 3.21).

 

  19 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

20) Changes in accounting policies and disclosures (Contd.)

 

IAS 29 "Financial information in hyperinflationary economies" (Contd.)

 

There were no other additional changes in the accounting policies of the Group based on the effective application standards as of January 1, 2018 described above.

 

New accounting standards and interpretations issued by the IASB that are effective as of January 1, 2019 and have not been applied in advance by the Company:

 

IFRS 16 “Leases”

 

In January 2016, the IASB issued IFRS 16 "Leases", which establishes new principles for the recognition, measurement, presentation and presentation of lease contracts, highlighting the elimination of the operational and financial classification established by IAS 17 and the adoption, in its replacement of a treatment similar to that provided to financiers under said rule, for all lease agreements. These contracts must be disclosed as leased assets (assets with a right to use) or within fixed assets at the present value of the lease payments. If the Company makes periodic payments, it must additionally recognize a financial liability that represents the obligation to make future payments for the lease. IFRS 16 does not require the lessee to recognize assets and liabilities in the case of short-term leases or leases of low-value assets. The application of these new requirements will result in an increase in lease assets and financial liabilities recognized in this type of transaction. This standard is applicable to annual periods beginning on or after January 1, 2019, allowing early application if IFRS 15 is applied.

 

The Group has revised its leases and expects an estimated impact due to the adoption of the new standard on January 1, 2019 of 185 million pesos, which will be reflected as a greater asset and a greater liability.

 

At the date of issuance of these financial statements there are no other standards, changes or interpretations issued by the IASB and IFRIC that are not yet effective and are expected to have a significant effect on the Company.

 

21) Estimates

 

The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise its judgment in the process of applying the Group accounting policies.

 

In the preparation of these Consolidated Financial Statements the significant areas of judgement by management in the application of the Group accounting policies and the main areas of assumptions and estimates are consistently as those applied in the Consolidated Financial Statements for the year ended December 31, 2017 and are mentioned in Note 22.

 

  20 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

22) Foreign currency translation

 

Functional and presentation currency

 

The figures included in the financial statements were measured using its functional currency, that is, the currency of the primary economic environment in which the Company operates. The functional currency of the Company is the Argentine peso, which is coincident with the presentation currency of the financial statements.

 

IAS 29 "Financial information in hyperinflationary economies" requires that the financial statements of an entity whose functional currency is that of a hyperinflationary economy be expressed in terms of the current unit of measurement at the reporting date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. For this, in general terms, inflation produced from the date of acquisition or from the revaluation date, as applicable, must be computed in the non-monetary items. These requirements also correspond to the comparative information of these Consolidated financial statements.

 

In order to conclude on whether an economy is categorized as hyperinflationary under the terms of IAS 29, the standard details a series of factors to be considered, including the existence of a cumulative inflation rate in three years that approximates or exceed 100%. Taking into account a significant increase in inflation during 2018, which in addition to the accumulated inflation rate of the last three years exceeds 100% and the rest of the indicators do not contradict the conclusion that Argentina should be considered as a hyperinflationary economy for accounting purposes, the Company Management understands that there is sufficient evidence to conclude that Argentina is a hyperinflationary economy under the terms of IAS 29, as of July 1, 2018. It is for this reason that, in accordance with the NIC 29, these Consolidated Financial Statements are restated reflecting the effects of inflation in accordance with the provisions of the standard.

 

In turn, Law No. 27,468 (BO 04/12/2018) amended Article 10 of Law No. 23,928 and its amendments, establishing that the repeal of all legal norms or regulations that establish or authorize indexation by prices, monetary update, variation of costs or any other form of repowering of debts, taxes, prices or rates of goods, works or services, does not include financial statements, in respect of which the provisions of the article 62 in fine of the General Law of Companies No. 19,550 (TO 1984) and its amendments will be applied. Also, the aforementioned legal body ordered the repeal of Decree No. 1269/2002 of July 16, 2002 and its amendments and delegated to the National Executive Power (PEN), through its controlling entities, to establish the date from the which the provisions cited in relation to the financial statements presented will have effect. Therefore, through its General Resolution 777/2018 (BO 28/12/2018), CNV established that issuers subject to its control should apply to the annual financial statements, for interim and special periods, that close as of December 31, 2018 inclusive, the method of restating financial statements in a homogeneous currency as established by IAS 29.

 

In accordance with IAS 29, the financial statements of an entity reporting in the currency of a high inflation economy must be reported in terms of the unit of measurement in effect at the date of the financial statements. All amounts in the statement of financial position that are not indicated in terms of the current unit of measurement as of the date of the financial statements should be updated by applying a general price index.

 

  21 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

22) Foreign currency translation (Contd.)

 

Functional and presentation currency (Contd.)

 

All the components of the income statement should be indicated in terms of the unit of measure updated as of the date of the financial statements, applying the change in the general price index that has occurred since the date on which the income and expenses were originally recognized in the financial statements.

 

The adjustment for inflation in the initial balances was calculated considering the indexes established by the FACPCE based on the price indexes published by the National Institute of Statistics and Censuses (“INDEC” for the acronym in Spanish). The interannual index for the year ended December 31, 2018 was 1.4765.

 

Inflation adjustment

 

In an inflationary period, any entity that maintains an excess of monetary assets over monetary liabilities will lose purchasing power, and any entity that maintains an excess of monetary liabilities over monetary assets will gain purchasing power, provided that such items are not subject to a mechanism of adjustment.

 

Briefly, the re-expression mechanism of IAS 29 establishes that monetary assets and liabilities will not be restated since they are already expressed in the current unit of measurement at the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements will be adjusted in accordance with such agreements.

 

The non-monetary items measured at their current values at the end of the reporting period, such as the net realization value or others, do not need to be re-expressed. The remaining non-monetary assets and liabilities will be re-expressed by a general price index. The loss or gain from the net monetary position will be included in the comprehensive net result of the reporting period, revealing this information in a separate line item.

 

The following is a summary of the methodology used for the preparation of these Consolidated Financial Statements:

 

-Non-monetary assets and liabilities: non-monetary assets and liabilities (property, plant and equipment, intangible assets, deferred profits and additional allowances) have been updated by the conversion factors as of December 31, 2018 at the date of acquisition or origin of each of them, as applicable. The income tax derived has been calculated based on the restated value of these assets and liabilities;

 

  22 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

22) Foreign currency translation (Contd.)

 

Inflation adjustment (Contd.)

 

-Monetary assets and liabilities, and monetary position result: monetary assets and liabilities, including balances in foreign currency, by their nature, are presented in terms of purchasing power as of December 31, 2018. The financial result generated by the net monetary position reflects the loss or gain that is obtained by maintaining an active or passive net monetary position in an inflationary period, respectively and is exposed in the line of "Inflation adjustment" in the Statements of Comprehensive Income;

 

-Equity: the net equity accounts are expressed in constant currency as of December 31, 2018, based on conversion factors corresponding at their dates of contribution or origin;

 

-Results: the items of the Individual Financial Statements have been restated based on the date on which they accrued or were incurred, with the exception of those associated with non-monetary items (depreciation and amortization expenses), which are presented as a function of the update of the non-monetary items to which they are associated, expressed in constant currency as of December 31, 2018, through the application of the relevant conversion factors.

 

The comparative figures have been adjusted for inflation following the same procedure explained in the preceding points.

 

In the initial application of the adjustment for inflation, the equity accounts were restated as follows:

 

-The capital was restated from the date of subscription or from the date of the last adjustment for accounting inflation, whichever happened later. The resulting amount was incorporated into the "Capital adjustment" account;

 

-The other result reserves were not restated in the initial application.

 

With respect to the evolution notes of non-monetary items for the year, the balance at the beginning includes the adjustment for inflation derived from expressing the initial balance to the currency of current purchasing power.

 

Transactions and balances

 

Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the transaction dates (or valuation where items are re-measured).

 

Foreign exchange gains and losses and losses resulting from the settlement of such transactions and from the translation at year-end of the assets and liabilities denominated in foreign currency are recognized in the statement of comprehensive income.

 

  23 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 3 - ACCOUNTING POLICIES (Contd.)

 

22) Foreign currency translation (Contd.)

 

Inflation adjustment (Contd.)

 

Foreign exchange gains and losses are shown in “Financial Income” and/or “Financial Expense” of the comprehensive statement of income.

 

Exchange rates used are the following: buying rate for monetary assets and selling rate for monetary liabilities, applicable at year-end according to Banco Nación, and at the foreign currency exchange rate applicable at the transaction date.

 

  24 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 4 -BREAKDOWN OF CERTAIN ITEMS OF THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

   12.31.18   12.31.17 
   $ 
Cash and cash equivalents          
Cash and funds in custody   71,468,140    34,563,773 
Banks   2,932,003,641    2,980,084,414 
Checks not deposited yet   24,563,044    33,754,803 
Time deposits   917,320,537    376,612,382 
    3,945,355,362    3,425,015,372 
Investments          
Time deposits   186,520,275    - 
    186,520,275    - 
Trade receivables          
Trade receivables   2,570,363,477    1,733,360,982 
Related parties (Note 7)   46,792,562    6,737,782 
Checks-postdated checks   34,095,511    48,189,207 
Provision for bad debts (Note 8)   (321,286,215)   (228,522,845)
    2,329,965,335    1,559,765,126 
Other current receivables          
Expenses to be recovered   21,736,503    2,318,117 
Guarantees granted   5,520,910    8,058,304 
Related parties (Note 7)   6,418,575    - 
Tax credits   988,119,127    456,851,866 
Prepaid Insurance   27,959,494    25,602,894 
Others   4,616,741    5,863,148 
    1,054,371,350    498,694,329 
           
Other non-current receivables          
Tax credits   754,216    1,102,429 
Trust fund   4,049,378,076    3,763,639,583 
    4,050,132,292    3,764,742,012 

 

  25 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 4 -BREAKDOWN OF CERTAIN ITEMS OF THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Contd.)

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Contd.)

 

   12.31.18   12.31.17 
   $ 
Current Accounts payable and other          
Obligations payable   41,523,571    657,322,995 
Suppliers   1,872,526,738    973,704,202 
Foreign suppliers   71,421,492    65,082,861 
Related Parties (Note 7)   141,199,541    128,108,623 
Salaries and social security liabilities   821,343,169    623,716,735 
Other fiscal liabilities   147,350,940    148,731,045 
    3,095,365,451    2,596,666,461 
           
Non-current Accounts payable and other          
Tax liabilities   87,994,610    189,366,280 
    87,994,610    189,366,280 
  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INVOME
           
Revenues          
Aeronautical revenues   14,064,118,872    11,525,520,939 
Commercial revenues   10,102,737,296    9,142,012,648 
    24,166,856,168    20,667,533,587 
           
As of December 31, 2018 and 2017, "over the time" income from contracts with customers was $ 20,391,421,860 and $ 17,104,340,877, respectively. 
           
Other net incomes and expenses          
Trust fund (Note 1.1)   597,694,865    513,029,538 
Other   (58,428,579)   (64,311,410)
    539,266,286    448,718,128 
           
Financial Income          
Interest   893,866,296    984,572,417 
Foreign Exchange differences   517,933,968    (593,253,511)
    1,411,800,264    391,318,906 

 

  26 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 4 -BREAKDOWN OF CERTAIN ITEMS OF THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Contd.)

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INVOME (Contd.)

 

   12.31.18   12.31.17 
   $ 
Financial Expenses          
Interest   (1,119,218,930)   (1,308,986,812)
Foreign Exchange differences   (4,125,663,326)   532,431,672 
    (5,244,882,256)   (776,555,140)
    (3,833,081,992)   (385,236,234)
Income Tax          
Current   (284,660,299)   (1,818,975,801)
Deferred   (974,082,290)   (336,385,061)
    (1,258,742,589)   (2,155,360,862)

 

NOTE 5 - INTANGIBLE ASSETS

 

   12.31.18   12.31.17 
   $ 
Original Values          
Balance at January 1   43,353,796,835    37,446,329,900 
Acquisition   6,492,605,431    5,908,435,787 
Impairment (*)   -    (968,852)
Balance at December 31   49,846,402,266    43,353,796,835 
           
Accumulated Amortization          
Balance at January 1   (11,417,685,957)   (9,167,177,324)
Amortization of the year (Note 10)   (2,807,713,542)   (2,250,508,633)
Balance at December 31   (14,225,399,499)   (11,417,685,957)
Total Net Balance at December 31   35,621,002,767    31,936,110,878 

 

(*) Corresponds to the impairment of goodwill for the purchase of Texelrío S.A.

 

  27 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 6 - BORROWINGS

 

   12.31.18   12.31.17 
   $ 
Non-current          
Negotiable Obligations   13,666,250,000    11,013,770,437 
Financial leasing liabilities   16,092,726    58,322,465 
Cost of issuance of Negotiable Obligations   (78,986,700)   (144,604,296)
Total Non-Current   13,603,356,026    10,927,488,606 
Current          
Bank borrowings   -    26,378,002 
Negotiable Obligations   1,634,955,542    141,926,591 
Financial leasing liabilities   48,541,584    53,128,534 
Cost of issuance of Negotiable Obligations   -    - 
Total Current   1,683,497,126    221,433,127 
Total   15,286,853,152    11,148,921,733 

 

Changes in borrowings:

 

   2018   2017 
   $ 
Balance at January 1   11,148,921,733    5,740,018,356 
New borrowings   22,341,436    11,247,503,888 
Payments of borrowings   (966,494,424)   (6,613,653,663)
Accrued interests   1,034,838,965    1,268,804,358 
Foreign Exchange differences   4,047,956,145    (524,702,465)
Inflation adjustment   (710,703)   30,951,259 
Balance at December 31   15,286,853,152    11,148,921,733 

 

The carrying amounts and fair value of borrowings are as follows:

 

  

Carrying

amount

  

Fair

Value (*)

  

Carrying

Amount

  

Fair

Value (*)

 
   12.31.18   12.31.17 
   $ 
Bank borrowings   -    -    26,378,002    26,378,002 
Negotiable Obligations   15,222,218,842    14,927,823,425    11,011,092,732    11,081,917,335 
Financial leasing liabilities   64,634,310    64,634,310    111,450,999    111,450,999 
Total   15,286,853,152    14,992,457,735    11,148,921,733    11,219,746,336 

 

(*) Valuation at quotation prices (not adjusted) in active markets for identical assets or liabilities Fair Value level 2 under IFRS 13 hierarchy.

 

There are no financial instruments measured at fair value.

 

  28 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 6 - BORROWINGS (Contd.)

 

On February 6, 2017, the Company issued negotiable obligations for US$400,000,000 with maturity on February 1, 2027, with an interest rate of 6.875% and an issue price of 99.888% par value. Payment of principal will have a quarterly amortization in 32 quarters, identical and consecutive, payable from May 1, 2019.

 

These negotiable obligations are guaranteed by a Trust under the Argentine Law, by which the Company has transferred and assigned use fees of international and regional airports and the Concession Indemnification Rights. This guarantee has been approved by the ORSNA on January 17, 2017, through Resolution Nº 1/2017, that resolved to “authorize the Concession (…) a collateral assignment of up to US$ 400,000,000 (…)”.

 

According to the Offering Memorandum of Negotiable Obligations, dated January 19, 2017 and later modified on January 23, 2017 the Company will use the proceeds of the offering notes in compliance with Article 36 of the Negotiable Obligations Law to (i) refinance the liabilities of the Company including (a) the total payment of negotiable obligations issued on December 22, 2010; and (b) negotiable obligations Class “A” and Class “C”, issued by the Company in Argentina on April 21, 2010, plus accrued and unpaid interest to the date of redemption and the applicable prepayment premiums as long as they have not been redeemed before issue date and maturity with the Company’s funds and (ii) the remainder will be applied to finance infrastructure works in the airports of Group A of the Company. On January 23, 2017, the negotiable obligations issued in April 2010 were redeemed in full with the Company’s own funds, so the amount equivalent to the mentioned redemption will be aimed at infrastructure works in the airports of the Company belonging to Group “A” of the National System of Airports.

 

On March 13, 2017 it made an early and whole redemption of the remaining value of negotiable obligations issued in December 2010 for the amount of principal of US$ 157,500,000.

 

At December 31, 2017 the item Cash and Cash Equivalents of the statements of Financial Position included $ 903,893,446 to guarantee the payment of negotiable obligations valid at that date and early redeemed during the year. At December 31, 2018 the reasonable value of negotiable obligations issued in February 2017 is of $14,927,823,425. Such method of valuation is classified according to IFRS 13 as hierarchy of reasonable value Level 2 (quotation prices (not adjusted) in active markets for identical assets or liabilities).

 

  29 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 7 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES

 

Balances with other related companies at December 31, 2018 and 2017 are as follows:

 

   12.31.18   12.31.17 
   $ 
Trade receivables net- Current          
Other related companies   46,792,562    6,737,782 
    46,792,562    6,737,782 
           
Other current receivables          
Other related companies   6,418,575    - 
    6,418,575    - 
           
Accounts payable and other- Current          
Other related companies   141,199,541    128,108,623 
    141,199,541    128,108,623 
           
Provisions and other charges          
Other related companies   426,249    629,338 
Shareholders   -    361,731,696 
    426,249    362,361,034 

 

During the years ended December 31, 2018 and 2017, the Company has accrued to the cost $118,105,582 and $134,816,381 respectively with Proden SA for management control services, financial assistance, internal audit, systems outsourcing and technology and rent and maintenance of offices. During the years ended December 31, 2018 and 2017, the Company has accrued with Helport S.A. to intangible assets $382,106,993 (including the works of Ezeiza track refurbishment, Tucumán track extension, Palomar terminal remodeling, among others) and $1,153,073,373 respectively and at cost for the years ended on December 31, 2018 and 2017 $277,764,358 and $80,265,655 respectively. Likewise, AA2000 has accrued intangible assets at December 31, 2018 and 2017 for $18,020,882 and $11,147,660 respectively, corresponding to the work of Mendoza carried out by Jose Cartellone - Helport - UTE.

 

During the year, $303,515,602 of dividends have been paid to the shareholders according to their shareholding.

 

At December 31, 2018 and 2017 the Company owed the Argentine National Government $325,205,217 and $260,729,552 respectively, corresponding to the specific allocation of revenues of each year (see Note 10) and has recorded a receivable for $4,049,378,076 and $3,763,639,583 respectively corresponding to the Development Trust to fund the infrastructure works of AA2000.

 

Furthermore, short-term compensation to key management was $55,057,714 and $82,165,190 for the years ended at December 31, 2018 and 2017 respectively.

 

  30 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 7 - BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Contd.)

 

In connection with foreign exchange transactions related to the technical and administrative assistance agreements with Corporación América Sudamericana and Ogden Corporation, on November 23, 2012 The Company was notified of a foreign exchange summon initiated by the Banco Central de la República Argentina (Central Bank of the República Argentina or BCRA) regarding compliance with the existing legislation. On February 4, 2013, AA2000 presented defense procedures to the BCRA rejecting the allegations of such entity. In July 2016, sentence was passed favorable to the Company, non-appealable at the time of presentation of these financial statements.

 

In June 2016, the Company received a determination from the Federal Administration of Public Revenue (AFIP) was objecting the abovementioned items corresponding to the fiscal years 2009 to 2012 resulting in a claim for unpaid income tax based on considering those foreign exchange transactions as undocumented payments. On August 3, 2016, the Company appealed the mentioned determinations to the Argentine Tax Court.

 

Although the Company considers it has solid arguments to demonstrate the authenticity of the management and administrative services provided by Corporación América Sudamericana S.A., it decided to enter the Extraordinary Tax Law to regularize tax obligations established by Law Nº 27,260. According to the Law, benefits of adhesion consist in the suspension of ongoing tax actions, extinction of the criminal tax action, remission of fines and other penalties non executable at the time of adhesion and reduction of interest. The corresponding debt for this item is registered in commercial accounts payable and others, current and non-current.

 

Corporación America S.A. is the direct owner of 45.90% of the common shares of the Company, and an indirect owner through Corporación America Sudamericana S.A of 29.75% of the common shares of the Company, therefore is the immediate controlling entity of the Company.

 

Corporación America S.A is controlled by Cedicor S.A, which is the owner of the 95.37% of its capital stock. Cedicor S.A is 100% controlled by American International Airports LLC and at the same time it is controlled a 100% by Corporación America Airport S.A.

 

The ultimate beneficiary of the Company is Southern Cone Foundation. Its purpose is to manage its assets through decisions adopted by its independent Board of Directors. The potential beneficiaries are members of the Eurnekian family and religious, charitable and educational institutions.

 

  31 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 8 - BAD DEBT PROVISIONS

 

   2018   2017 
   $ 
Initial balance at January 1   228,522,845    129,875,148 
IFRS 9 adjustments at the beginning   (106,411,348)   - 
Balance at January 1   122,111,497    129,875,148 
Increases (*)   192,774,864    130,633,947 
Inflation adjustment   6,399,854    (31,986,250)
Final Balance at December 31   321,286,215    228,522,845 

  

(*) As of December 31, 2018 and 2017 includes $125,618,730 and $130,633,947 respectively in Distribution and Commercialization Expenses (Note 10) and $67,156,134 in Exchange Differences (Note 3).

 

NOTE 9 - PROVISIONS AND OTHER CHARGES

 

   Litigation
(note
23)
   Related
Parties
(Note 7)
   Deferred
Income
   Guarantees
Received
   Upfront
fees from
Concessionaires
   Trust for
works-
Portfolio of
Projects
2012/2014
(Note 1.2)
   Customer
prepay-
ments
   Dividends to be
paid
(Note 7)
   Other   Total 
   $ 
At January 1, 2018   86,087,645    629,338    161,538,225    45,924,818    163,119,902    110,754,764    -    361,731,699    -    929,786,391 
Increases   26,868,453    -    198,041,744    15,262,924    5,527,307    1,515,638,410    -    -    -    1,761,338,838 
Decreases   (18,563,807)   -    -    (6,838,127)   -    (1,427,740,017)   -    (303,515,602)   -    (1,756,657,553)
Inflation adjustment   (27,815,637)   (203,089)   -    (5,951,725)   -    (48,751,861)   -    (58,216,097)   -    (140,938,409)
Accruals   -    -    (218,273,025)   -    (37,928,500)   -    -    -    -    (256,201,525)
At December 31, 2018   66,576,654    426,249    141,306,944    48,397,890    130,718,709    149,901,296    -    -    -    537,327,742 
                                                   
At January 1, 2017   61,060,322    785,386    158,206,850    45,969,524    166,691,131    105,300,914    158,603,701    -    43,628    696,661,456 
Increases   41,803,847    -    147,791,763    32,659,431    39,533,985    1,388,340,711    -    1,995,298,894    -    3,645,428,631 
Decreases   (3,550,368)   -    -    (22,570,887)   -    (1,360,368,670)   (141,014,138)   (1,380,486,267)   (38,790)   (2,908,029,120)
Inflation adjustment   (13,226,156)   (156,048)   -    (10,133,250)   -    (22,518,191)   (17,589,563)   (253,080,928)   (4,838)   (316,708,974)
Accruals   -    -    (144,460,388)   -    (43,105,214)   -    -    -    -    (187,565,602)
At December 31, 2017   86,087,645    629,338    161,538,225    45,924,818    163,119,902    110,754,764    -    361,731,699    -    929,786,391 

 

  32 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 10 - COSTS OF SERVICES, ADMINISTRATIVE, DISTRIBUTION, AND SELLING EXPENSES

 

Item  Cost of services   Administrative
expenses
   Distribution and
selling expenses
   Total 
   $ 
Year ended at 12.31.18                    
Specific allocation of revenues   3,586,169,192    -    -    3,586,169,192 
Airport services and maintenance   3,435,704,325    45,541,532    20,506,843    3,501,752,700 
Intangible assets amortization   2,771,202,771    33,203,254    3,307,517    2,807,713,542 
Property, plant and equipment depreciation   10,977,403    -    -    10,977,403 
Salaries and social security contributions   3,317,822,910    390,060,461    80,699,887    3,788,583,258 
Fees for services   177,742,807    103,490,037    8,302,623    289,535,467 
Public services and contributions   539,117,137    2,689,540    3,592,910    545,399,587 
Taxes   117,010,640    203,757,623    1,267,950,872    1,588,719,135 
Office expenses   342,511,978    321,398,250    17,521,260    681,431,488 
Insurance   137,491,572    2,522,558    -    140,014,130 
Advertising expenses   -    -    150,693,110    150,693,110 
Bad debts charges   -    -    125,618,730    125,618,730 
Board of Directors and Supervisory Committee fees   -    22,095,790    -    22,095,790 
Other   13,129,104    1,748,274    105,960    14,983,338 
Total at 12.31.18   14,448,879,839    1,126,507,319    1,678,299,712    17,253,686,870 
                     
Year ended at 12.31.17                    
Specific allocation of revenues   3,078,177,220    -    -    3,078,177,220 
Airport services and maintenance   2,942,896,837    40,825,905    19,000,289    3,002,723,031 
Intangible assets amortization   2,222,429,452    23,738,719    4,340,462    2,250,508,633 
Property, plant and equipment depreciation   10,889,346    -    -    10,889,346 
Salaries and social security contributions   2,995,368,652    402,021,431    72,736,574    3,470,126,657 
Fees for services   83,888,546    145,386,884    16,529,531    245,804,961 
Public services and contributions   398,202,977    3,560,669    3,413,587    405,177,233 
Taxes   91,554,524    254,664,934    1,076,510,662    1,422,730,120 
Office expenses   283,913,812    291,668,540    9,957,012    585,539,364 
Insurance   141,150,474    5,073,649    -    146,224,123 
Advertising expenses   -    -    31,048,297    31,048,297 
Bad debts charges   -    -    130,633,947    130,633,947 
Board of Directors and Supervisory Committee fees   -    22,494,093    -    22,494,093 
Other   12,069,304    3,728,391    22,318,112    38,115,807 
Total at 12.31.17   12,260,541,144    1,193,163,215    1,386,488,473    14,840,192,832 

 

  33 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 11 - FOREIGN CURRENCY ASSETS AND LIABILITIES

 

Item  Foreign currency type
and amount at 12.31.18
   Foreign
exchange
rates
   Amount in local
currency at
12.31.18
   Amount in local
currency at
12.31.17
 
             $ 
ASSSETS                    
CURRENT ASSETS                    
Cash and cash equivalents  US$78,690,073    37.50    2,950,877,741    2,361,869,690 
Investments  US$4,973,874    37.50    186,520,275    - 
Trade receivables  US$49,683,120    37.50    1,863,117,013    1,162,999,847 
Total current assets             5,000,515,029    3,524,869,537 
Total assets             5,000,515,029    3,524,869,537 
                     
LIABILITIES                    
CURRENT LIABILITIES                    
Commercial accounts payable and others  US$9,682,302    37.70    365,022,778    133,616,397 
   Euros1,653,987    43.16    71,390,555    24,590,345 
Borrowings  US$42,836,831    37.70    1,614,948,521    150,058,658 
Total current liabilities             2,051,361,854    308,265,400 
NON-CURRENT LIABILITIES                    
Borrowings  US$362,548,216    37.70    13,668,067,742    11,036,503,437 
Total non- current liabilities             13,668,067,742    11,036,503,437 
Total liabilities             15,719,429,596    11,344,768,837 
Net liability position             10,718,914,567    7,819.899,300 

 

NOTE 12 – PROPERTY, PLANT AND EQUIPMENT

 

   Land and
buildings
   Vehicles and
machinery
   Installations   Furniture
and office
equipment
   Construction
in progress
   Total 
   $ 
Year ended December 31, 2018                              
Net book value at January 1, 2018   23,560,460    39,691,461    91,158    18,278    4,717,145    68,078,502 
Addition / (Deduction)   -    -    -    -    74,151    74,151 
Transfers   -    -    -    -    -    - 
Depreciation   (2,874,602)   (8,068,625)   (27,662)   (6,514)   -    (10,977,403)
Net book value at December 31, 2018   20,685,858    31,622,836    63,496    11,764    4,791,296    57,175,250 
Year ended December 31, 2017                              
Net book value at January 1, 2017   24,288,466    63,693,492    118,821    27,066    4,302,958    92,430,803 
Addition / (Deduction)   -    (13,877,142)   -    -    414,187    (13,462,955)
Transfers   -    -    -    -    -    - 
Depreciation   (728,006)   (10,124,889)   (27,663)   (8,788)   -    (10,889,346)
Net book value at December 31, 2017   23,560,460    39,691,461    91,158    18,278    4,717,145    68,078,502 

 

  34 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 13 - INCOME TAX

 

On December 29, 2017, the National Executive Office issued Law 27,430 - Income Tax. This law has introduced several changes in the treatment of income tax whose key components are the following:

 

Income Tax Rate: The Income Tax rate for Argentine companies will be gradually reduced from 35% to 30% for fiscal years starting from January 1, 2018 until December 31, 2019 and to 25% for fiscal years beginning on or after January 1, 2020, inclusive.

 

Tax on dividends: A tax is introduced on dividends or profits distributed, among others, by Argentine companies or permanent establishments to: human persons, undivided estates or beneficiaries abroad, with the following considerations: (i) the dividends derived from the profits generated during fiscal years beginning on January 1, 2018 and until December 31, 2019 will be subject to a 7% withholding; and (ii) Dividends originated from gains obtained for years beginning on or after January 1, 2020 will be subject to a 13% withholding tax.

 

Dividends arising from benefits obtained up to the year prior to that commenced on or after January 1, 2018 will continue to be subject, for all beneficiaries of the same, to the 35% withholding on the amount that exceeds the distributable tax-free profits (transition period of the equalization tax).

 

Updates of deductions: Acquisitions or investments made in fiscal years beginning on or after January 1, 2018, will be updated, based on the percentage variations of the Internal Consumer Price Index (“IPC” for the acronym in Spanish) provided by INDEC, situation that will increase the deductible amortization and its cost accrued in case of sale.

 

The following is a reconciliation between the income tax charged to income and that, which would result from applying the tax rate in force in Argentina on income before taxes for the years ended on December 31, 2018 and 2017:

 

   12.31.18   12.31.17 
   $ 
Income before income tax   2,283,888,871    5,624,120,040 
Tax calculated at applicable tax rate (*)   685,166,661    1,743,477,212 
Tax effects of:          
Differences at applicable tax rate (**)   573,575,928    411,883,650 
Income Tax Expense   1,258,742,589    2,155,360,862 

 

(*) The current tax rate at December 31, 2018 and 2017 is 30% and 35% respectively.

 

The applicable effective tax rate was 55.11% and 38.32% as of December 31, 2018 and 2017, respectively.

 

(**) Corresponds to the effect of applying to the deferred tax assets and liabilities the changes in the income tax rates in accordance with the tax reform based on the expected year of realization thereof.

 

  35 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 13 - INCOME TAX (Contd.)

 

The movements during the year in the assets and liabilities for deferred tax, not considering the compensation of balances referred to the same fiscal authority have been the following:

 

Deferred tax assets:

Item

  Trade
receivable nets
   Related
 parties
   Provisions and
other charges
   Borrowings   Tax loss carry-
forwards
   Total 
Balance at 12.31.16   45,456,296    231,865    103,502,680    7,521,559    -    156,712,400 
Movement for the year                              
Charge to income   21,232,673    (53,084)   (20,871,049)   2,722,481    1,798,472    4,829,493 
Variation of the Prevision   -    -    -    -    (1,798,472)   (1,798,472)
Inflation adjustment   (9,031,698)   (46,069)   2,074,999    (6,032,602)   -    (13,035,370)
Balance at 12.31.17   57,657,271    132,712    84,706,630    4,211,438    -    146,708,051 
Adjustment IFRS 16   (26,602,837)                       (26,602,837)
Balance at 12.31.2016 modified   31,054,434    132,712    84,706,630    4,211,438    -    120,105,214 
Movement for the year   -    -    -    -    -    - 
Charge to income   59,288,457    -    (19,521,289)   11,247,636    (284,747)   50,730,057 
Variation of the Prevision   -    -    -    -    284,747    284,747 
Inflation adjustment   (10,021,341)   (42,827)   17,551,625    (1,359,041)   -    6,128,416 
Balance at 12.31.18   80,321,550    89,885    82,736,966    14,100,033    -    177,248,434 

 

Deferred tax liabilities:

Item

  Intangible
Assets and
property, plant
and equipment
   Borrowings   Accounts
payable
           Total 
Balance at 12.31.16   3,966,939,919    14,763,413    1,575,378    -    -    3,983,278,710 
Movement for the year                              
Charge to income   339,416,082    -    -    -    -    339,416,082 
Inflation adjustment   -    (2,933,338)   (313,011)             (3,246,349)
Balance at 12.31.17   4306,356,001    11,830,075    1,262,367    -    -    4,319,448,443 
Movement for the year                              
Charge to income   1,025,097,094    -    -    -    -    1,025,097,094 
Inflation adjustment   -    (3,817,594)   (407,369)             (4,224,963)
Balance at 12.31.18   5,331,453,095    8,012,481    854,998    -    -    5,340,320,574 
Net balance at 12.31.16                            (3,826,566,310)
Net balance at 12.31.17                            (4,172,740,392)
Charge to income 2017                            (336,385,061)
Net balance at 12.31.18                            (5,163,072,140)
Charge to income 2018                            (974,082,290)

 

The assets for deferred tax due to negative taxable basis pending compensation are recognized as long as the corresponding fiscal benefit could occur through future fiscal benefits.

 

At December 31, 2018 and 2017, the Company has not recognized $1,917,062 and $1,798,472, of fiscal loss, respectively.

 

NOTE 14 - OTHER RESTRICTED ASSETS

 

Other than what is mentioned in Notes 1 and 6, Other Receivables in Current assets at December 31, 2018 and 2017 include $5,520,910 and $8,058,304 corresponding to guarantees granted to third parties in connection with lease agreements.

 

  36 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 15 - CAPITAL STOCK

 

At December 31, 2018 capital stock is as follows:

 

   Par Value 
   $ 
Paid-in and subscribed   887,769,939 
Registered with the Public Registry of Commerce   887,769,939 

 

The Company’s capital stock is comprised of 258,517,299 common shares of $1 par value and one vote each and 629,252,640 preferred non-voting shares of $1 par value. Preferred shares will have voting rights on the following matters: i) partial or total capital reimbursement; ii) during the period benefits of preferred shareholders are granted but not yet received iii) the appointment of a full and an alternate director and a full and an alternate syndic; and iv) in the remaining cases established by Corporate Law No. 19,550.

 

Furthermore, according to the requirements of General Resolution 629 issued by the CNV, the books and accounting records of the Company are located in the fiscal address located in Honduras 5673, Autonomous City of de Buenos Aires. In addition, AA2000 has certain supporting accounting and operating documentation in the warehouses of Bank S.A. in the Province of Buenos Aires Garín (Ruta Panamericana km. 37,5), Pacheco (Ruta Panamericana km. 31,5), Munro (Av Fleming 2190) and Avellaneda (General Rivadavia 401).

 

NOTE 16 - CAPITAL STOCK AND SHARE PREMIUM

 

As stated in Note 15, the Company’ s capital stock comprises 258,517,299 common shares of $1 par value and one vote each and 629,252,640 preferred non-voting shares of $1par value each.

 

Under the provisions of the Memorandum Agreement, the Concession Contract Adaptation in the Shareholders’ Extraordinary and Special meeting for Class A, B and C of March 6, 2008 and approved by the ORSNA the April 25, 2008 decided to amend the bylaws to incorporate the following decisions, the increase of capital stock from $100,000,000 to $219,737,470 through the capitalization of the “capital adjustment” account and the increase of the capital stock up to $715,898,883, through the issuance of 496,161,413 preferred shares of $1 par value with no voting rights, fully subscribed by the Argentine National Government.

 

Furthermore, the Shareholders’ Extraordinary and Special meeting held on August 7, 2008 decided, among other things, reforming the social status, subject to the approval of ORSNA, based on the following amendments: Increase in the company’s capital stock for up to $65,000,000. Creation of subclasses “R” and “L” shares and issuance of up to 65,000,000 ordinary book entry class A, B, C and subclass L shares. Admission to the public offering of shares regime. Subclass “L” shares of one peso ($1) par value and one (1) vote each will be placed for public offering, subject to the prior authorization from the ORSNA.

 

The shareholder’s meeting dated April 29, 2011 decided that due to the existence of certain topics regarding the admission to the public offering of shares and the increase of capital stock which were being analyzed by the Board, the admission to the public offering regime, the increase in capital stock and the statute reform would be held in a further Meeting summoned once such topics had been defined.

 

  37 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 16 - CAPITAL STOCK AND SHARE PREMIUM (Contd.)

 

On June 9, 2011, the National Government notified the company of its intention to convert all the negotiable obligations that had been duly issued by virtue of the withdrawal and compensation of mutual claims between the Company and the National State (see Note 1.8) in ordinary class D shares of the company. At the Board meeting held on December 27, 2011, 38,779,829 Class D ordinary, book-entry shares with a par value of $ 1 and entitled to one vote per share were issued. Through the Assembly of December 29, 2011, it was resolved to reform the corporate bylaws in order to reflect the conversion of negotiable obligations. The mentioned conversion generated an issue premium of $137,280,595.

 

At December 31, 2018 the capital stock is represented by: (i) 79,105,489 class A subclass R common book entry shares; (ii) 79,105,489 class B subclass R common book entry shares; (iii) 61,526,492 class C subclass R common book entry shares; (iv) 38,779,829 class D common book entry shares; (v) 629,252,640 preferred shares of $1 par value without right to vote; and (vi) subclass L ordinary book entry shares issued in the public offering regime.

 

The administration of the company is managed by a board of eight members acting for a year end the same number of alternates. Each of the classes A, B and C has the right to choose two full directors and two alternates and class D has the right to appoint a full director and an alternate. The National Government as holder of preferred shares has the right to appoint an additional full director and an alternate.

 

On June 30, 2011 the Company was notified that the Società per Azioni Esercici Aeroportuali S.E.A. transferred to Cedicor S.A., direct controller of Corporación America S.A., 21,973,747 common, registered non-endorsable Class A shares of $ 1 par value and one vote each, representing 8.5% of the capital stock and votes of AA2000. To be conducted, such transference needs to be authorized by the ORSNA according to the regulations that are to be applied for the changes in capital stock of AA2000.

 

On July 13, 2011 the company was notified that Riva S.A.I.I.C.F.A. transferred to Cedicor S.A., direct controller of Corporación America S.A. 2,197,375 ordinary book entry class B shares of AR $ 1par value and one vote each, representing 0.85% of the capital stock and votes of AA2000. To be conducted, such transference needs to be authorized by the ORSNA according to the regulations that are to be applied for the changes in capital stock of AA2000.

 

NOTE 17 - DIVIDENDS ON PREFERRED SHARES

 

Preferred shares in favor of the Argentine National Government (see Note 1), whose issuance were approved by the Shareholders Meeting of the Company on March 6, 2008 shall accrue a preferential dividend receivable of 2% of their nominal value, payable in preferred shares, which shall be cumulative in case that the Company does not generate liquid and realized profits.

 

The Shareholders’ General Ordinary Meetings held annually resolved to pay Shareholders of preferred shares dividends through the issuance of preferred shares of AR$1 par value each under the same terms of the preferred shares issued in favor of the Argentine National Government approved by the Shareholders’ General Ordinary and Special Meeting of class “A” “B” and “C” held on March 6, 2008. Preferred shares were fully subscribed by the Argentine National Government according to the following detail:

 

  38 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 17 - DIVIDENDS ON PREFERRED SHARES (Contd.)

 

-Shareholders’ General Ordinary, Extraordinary and Special Meeting held on April 24, 2009: 30.369.048 preferred shares
-Shareholders’ General Ordinary and Special Meeting held on March 19, 2010: 10.530.609 preferred shares
-Shareholders’ General Ordinary, Extraordinary and Special Meeting of Class A, B and C held on December 29, 2011: 10.741.221 preferred shares
-Shareholders’ General Ordinary , Extraordinary and Special Meeting of Class A, B, C and D and special of preferred shares held on May 2, 2012: 10.956.046 preferred shares
-Shareholders’ General Ordinary, and Special of Class A, B, C and D and special of preferred shares held on April 11, 2013: 11.175.167 preferred shares
-Shareholders’ General Ordinary Meeting special of Class A, B, C and D and special of preferred shares held on April 21, 2014: 11.398.670 preferred shares
-Shareholders’ General Ordinary Meeting special of Class A, B, C and D and special of preferred shares held on April 28, 2015: 11.626.643 preferred shares
-Shareholders’ General Ordinary Meeting special of class A, B, C and D and special of preferred shares held on April 25, 2016: 11.859.176 preferred shares
-Shareholders’ General Ordinary Meeting special of class A, B, C and D and special of preferred shares held on April 26, 2017: 12,096,360 preferred shares
-Shareholders’ General Ordinary Meeting special of class A, B, C and D and special of preferred shares held on April 9, 2018: 12,338,287 preferred shares

 

The preferential dividend accrued for the year ended December 31, 2018 is $ 12,585,053 and will be recorded at the time of its approval by the Shareholders' Meeting.

 

NOTE 18 - DIVIDENDS ON ORDINARY SHARES

 

The ordinary general meeting, special classes A, B, C and D and special preferred shares held on April 9, 2018 resolved not to distribute dividends to ordinary shares. Once the legal reserve was constituted and the dividends of the preferred shares were distributed, the rest was resolved with the constitution of an optional reserve for the execution of future works plans.

 

NOTE 19 - RESOLUTIONS OF SHAREHOLDERS’ ORDINARY AND SPECIAL MEETINGS OF CLASS A, B, C AND D SPECIAL OF PREFERRED SHARES OF AEROPUERTOS ARGENTINA 2000 S.A. HELD ON APRIL 26, 2017 AND APRIL 9, 2018

 

The general ordinary and special meeting of class A, B, C and D and special of preferred shares held on April 26, 2017 decides among other issues:

 

  39 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 19 - RESOLUTIONS OF SHAREHOLDERS’ ORDINARY AND SPECIAL MEETINGS OF CLASS A, B, C AND D SPECIAL OF PREFERRED SHARES OF AEROPUERTOS ARGENTINA 2000 S.A. HELD ON APRIL 26, 2017 AND APRIL 9, 2018 (Contd.)

 

-That the income of the year ended at December 31, 2016 has the following destination:

 

(i)$63,338,434 for the constitution of the legal reserve;
(ii)$12,096,360 to the distribution of dividends corresponding to the preferred shares subscribed by the Argentine National Government according to the resolutions of the general extraordinary meeting of the Company´s Shareholders held on March 6, 2008 and clause 14 and attachment VII of The Memorandum of Understanding for the Restatement of the Concession Agreement, payable in preferred shares;
(iii)the remaining of $1,933,656,787: (a) $1,180,000,000 to the distribution of dividends in cash among shareholders of class A, B, C and D of shares, according to their subscription; and (b) $753,656,787, together with the facultative reserve for compliance of works for the year 2016, to the total amount of $963,656,787, to guarantee payment of future dividends.

 

-issue 12,096,360 preferred shares of $1 par value under the same terms of the preferred shares issued in favor of the Argentine National Government as per class A, B and C Shareholders General Extraordinary and Special Meeting held on March 6, 2008;

 

-increase the capital stock from $863,335,292 to $875,431,652, i.e., in the amount of $12,096,360, through the issuance of 12,096,360 preferred shares of $ 1 par value, with no vote;

 

-that the preferred shares are subscribed fully by the Argentine National Government;

 

-delegate in the Board of Directors the registry in the Shareholders’ Registry of the capital stock increase decided; and

 

-delegate in the Board of Directors the time and opportunity of distribution of dividends to the shareholders of ordinary shares class A, B, C and D, according to cash flow, based on their subscription. To that purpose, it will be considered the request of the National Government to apply an equivalent amount to the dividends distributed to the Works of infrastructure additional to the contract commitments and any other commitment undertaken by the Company in the National System of Airports.

 

The general ordinary and special meeting of class A, B, C and D and special of preferred shares held on April 9, 2018 decides among other issues:

 

-That the income of the year ended at December 31, 2017 has the following destination:

 

(i)$2,419,272 for the constitution of the legal reserve;

 

  40 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 19 - RESOLUTIONS OF SHAREHOLDERS’ ORDINARY AND SPECIAL MEETINGS OF CLASS A, B, C AND D SPECIAL OF PREFERRED SHARES OF AEROPUERTOS ARGENTINA 2000 S.A. HELD ON APRIL 26, 2017 AND APRIL 9, 2018 (Contd.)

 

(ii)$12,338,287 to the distribution of dividends corresponding to the preferred shares subscribed by the Argentine National Government according to the resolutions of the general extraordinary meeting of the Company´s Shareholders held on March 6, 2008 and clause 14 and attachment VII of The Memorandum of Understanding for the Restatement of the Concession Agreement, payable in preferred shares;
(iii)the remaining of $2,669,727,436 to the facultative reserve for compliance of works for future plans.

 

-issue 12,338,287 preferred shares of $1 par value under the same terms of the preferred shares issued in favor of the Argentine National Government as per class A, B and C Shareholders General Extraordinary and Special Meeting held on March 6, 2008;

 

-increase the capital stock from $875,431,652 to $887,769,939, i.e., in the amount of $12,338,287, through the issuance of 12,338,287 preferred shares of $ 1 par value, with no vote;

 

-that the preferred shares are subscribed fully by the Argentine National Government;

 

-delegate in the Board of Directors the registry in the Shareholders’ Registry of the capital stock increase decided.

 

NOTE 20 - EARNINGS PER SHARE

 

The Shareholders’ General Extraordinary Meeting held on March 6, 2008, approved by the ORSNA on April 25, 2008, earnings per share is calculated as net income for the year less accrued preferred shares dividends for the year, divided by the number of common shares.

 

   12.31.2018   12.31.2017 
Income for the year, net dividends accrued   1,012,561,229    3,451,679,529 
Amount of ordinary shares   258,517,299    258,517,299 
Earnings from shares   3.9168    13.3518 

 

  41 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 21 - FINANCIAL RISK MANAGEMENT

 

Risk of exchange rate

 

A substantial portion of the revenues of the Group are in American dollars or are related to billing in American dollars, such being the case of the fees collected to the non-aeronautical concessionaries (these being calculated on a the billing percentage of the respective concessionaries in this currency) and a lower percentage in pesos.

 

Our operational incomes are affected by the fluctuation of the exchange rate of the argentine peso and the other currencies. A key factor in the determination of our financial and net holding incomes is the registry of the incomes for exchange differences on the assets and liabilities in foreign currencies and the registry of the current value of the long-term liabilities.

 

Our debt for borrowings in foreign currency at December 31, 2018 and 2017 was an equivalent of $15,283,016,263 and $11,186,562,095 of a total debt of $24,504,502,668 and $19,614,721,931 respectively. The Company does not use derived financial instruments to cover such exposures, as an important percentage of our revenues is in American dollars or related to the American dollar as previously mentioned.

 

Based on the composition of our situational balance at December 31, 2018 and 2017 a variation in the exchange rate of $ 0.10 against the American dollar would translate in an increase of $13,334,707 and $12,870,697 in the assets and $41,506,735 and $41,112,818 in the respective liabilities.

 

Price risk

 

As set forth in the Agreement, the ORSNA should annually revise the financial projections of the Company for the period between January 1, 2006 and February 13, 2028 (expressed in amounts at December 31, 2005) in relationship with, among other items, aeronautical and commercial revenues, costs of operation and investment obligations and could conduct adjustments to the specific allocation of revenues and/or aeronautical service rates and/or investment obligations of the Company to preserve the Economic. Financial balance of the Concession Agreement, as established per Attachment V of the Agreement and parameters established by the ORSNA for the Procedure of Revision of the Financial Projections of income and expenses. See Note 1.2 of the present financial statements.

 

Credit Risk

 

The financial instruments that could be subject to credit risk concentration consist of cash, cash equivalents, accounts receivable and short term investments.

 

The Group places its cash and cash equivalents, investments and other financial instruments in several first rate credit entities, reducing in this way the credit exposure to only one entity. The Group has not had significate losses in such accounts.

 

  42 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 21 - FINANCIAL RISK MANAGEMENT (Contd.)

 

Credit Risk (Contd.)

 

The commercial credits of the Group originate mainly from aeronautical revenues pending to be collected with airlines and the fee to be charged to concessionaries. The Group has a strong dependence on two of its airports (Ezeiza and Aeroparque) and could be affected by any condition that affects the airports. Furthermore, the Group depends on key clients, as Aerolineas Argentinas SA, VRG Linhas Aereas SA and LAN Airlines SA. The Group has not had significate losses because of the non-execution of any counterpart of the permits granted by the concessionaries.

 

The ORSNA resolved to conduct discounts on the international aeronautical rates, so the tariff is equivalent to the one to be obtained if a 30% discount is applied on the amounts established in the Attachment II of the Agreement for those airlines that have a regular payment condition. Since this norm is in force, most of the airlines are complying regularly with their payments.

 

Liquidity risk

 

The financial condition, the liquidity of the Group and the need for cash are influenced by different factors, included; its capacity to generate cash flow of its operations; the level of indebtedness and the interests and amortizations on capital stock, that have impact on its net financial expenses, the interest rates in force in the local and international markets and its investments commitments in the framework of the investments plan, the master plans, the additional investments in capital goods and the needs of working capital.

 

The following table shows an analysis of the non derived financial liabilities of the Group settled by a net amount, grouped, according to their due dates considering the remaining period in the balance sheet date up to its contractual due date, the contractual flows are not shown discounted.

 

In thousands of $  Total   1st Quarter
2019
   2nd Quarter
2019
   3rd Quarter
2019
   4th Quarter
2019
   2019   2020   2021-2028 
Long- term liabilities (*)   22,829,365    3,468,075    735,905    721,083    713,192    5,638,255    2,778,657    14,412,453 
Leases   64,634    12,135    12,135    12,135    12,135    48,540    15,075    1,019 
Purchase obligations (**)   7,146,014,094    1,755,587,200    1,562,056,822    1,749,400,998    1,404,418,587    6,471,463,607    674,550,487    - 
Other obligations   149,895    149,895    -    -    -    149,895    -    - 
Total Contractual Obligations   7,169,057,988    1,759,217,305    1,562,804,862    1,750,134,216    1,405,143,914    6,477,300,297    677,344,219    14,413,472 

 

(*) Includes Fees payable to the Argentine National Government, Accounts Payable, Negotiable obligations (Capital and Interests) and local borrowings.

(**) Includes pending payable purchase obligations at 12/31/2018.

 

Risk of interest rate

 

The interest rate risk of the Group arises from its financial debt. The new borrowings taken at variable rate expose the Company to the increase of interest expenses in the case of increase of interest rates in the market, while the borrowings taken at a fixed rate expose the Group to a change in its fair value. The Group analyzes the exposure to the interest rates in a dynamic way, being the general policy of the Group to maintain most of its financing at a fixed rate.

 

  43 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 21 - FINANCIAL RISK MANAGEMENT (Contd.)

 

Risk of interest rate (Contd.)

 

The weighted average of the nominal variable interest rate in argentine pesos for the debt instruments at this type of rate is 37.94% and 24.83% for the year ended at December 31, 2018 and 2017, respectively.

 

The total debt of the Company at a variable rate is of $31,702,304 and $90,317,864 (0.21% and 0.81% of total borrowings, respectively) at December 31, 2018 and 2017, respectively.

 

Capital Management

 

The objectives of the Group for capital management are to safeguard its capacity to continue doing business and be able to provide yield to owners as well as benefits to holders of instruments of shareholder’s equity and maintain an optimum capital structure to reduce capital cost.

 

The negotiable obligations issued in the year 2017 establish certain commitments for the Group. At the date of the current Financial Statements AA2000 has complied with all obligations assumed.

 

Aligned with the sector, the Group makes a follow up of the capital based on the indebtedness index. This index is calculated as the net debt divided among the total capital. The net debt is calculated as the total borrowings (including “current and non-current borrowings” as shown in the financial statements) less the cash and cash equivalents. The total capital is calculated as the “shareholder’s equity” of the financial statements plus the net debt.

 

   12.31.18   12.31.17 
   $ 
Total borrowings   15,286,853,152    11,148,921,733 
Less: Cash and cash equivalents   (3,945,355,362)   (3,425,015,372)
Net liability   11,341,497,790    7,723,906,361 
Total shareholder’s equity   22,748,084,929    21,643,130,136 
Index of indebtedness   49.86%   35.69%

 

The financial assets are within the category of other collectibles and the financial liabilities within other financial liabilities amortized.

 

Financial instruments by category

 

IFRS 13 requires for financial instruments that are measured in the statement of financial position at fair value, a disclosure of fair value measurements by level in accordance with the following hierarchy of fair value measurement:

 

  44 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 21 - FINANCIAL RISK MANAGEMENT (Contd.)

 

Financial instruments by category (Contd.)

 

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: data other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, prices) or indirectly (that is, derived from prices).

• Level 3: data on assets or liabilities that are not based on observable data in the market (ie, unobservable information).

 

The following table presents the Group's financial instruments:

 

   12.31.2018   12.31.2017 
ASSETS          
Financial assets at amortized cost          
Trade receivables   2,651,251,550    1,788,287,971 
Inversion   3,867,268,114    3,779,876,917 
Other receivables   186,520,275    - 
Cash and cash equivalents   3,945,355,362    3,425,015,372 
Total   10,650,395,301    8,993,180,260 
           
   12.31.2018    12.31.2017 
LIABILITIES          
Financial liabilities at amortized cost          
Borrowings   14,992,457,735    11,219,746,336 
Trade accounts payable   2,948,014,511    2,447,935416 
Provisions and other charges   470,751,088    843,698,746 
Total   18,411,223,334    14,511,380,498 

 

NOTE 22 - ACCOUNTING ESTIMATES AND JUDGMENTS

 

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the corresponding actual results. The estimates and judgments that have a significant risk to causing a material adjustment to the carrying value of the assets and liabilities within the next financial year are addressed below.

 

Income Taxes:

 

The Group is subject to income tax. A high level of judgment is required to determine the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the current and deferred income tax in the year in which such determination is made.

 

Bad debts:

 

For the sales receivables, the Company applied the simplified approach to estimate the expected credit losses according to the provisions of the standard, which requires the use of the loss provision criterion throughout the life of the receivables. The determination of the expected loss to be recognized is calculated based on a percentage of uncollectibility determined in accordance with the maturity ranges of receivable, as well as the result of the analysis of specific cases that require specific treatment.

 

  45 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 22 - ACCOUNTING ESTIMATES AND JUDGMENTS (Contd,)

 

Bad debts (Contd.):

 

To measure the expected credit loss, the sales receivables have been grouped according to their characteristics in terms of shared credit risk and the time that has elapsed as overdue receivables. The expected loss rates are based on the payment profiles of sales in a period of 36 months before December 31, 2018, and the corresponding historical credit losses experienced within this period. Historical loss rates are adjusted to reflect the current and prospective information of macroeconomic factors that affect the ability of clients to settle accounts receivable.

 

On this basis, the provision for losses on sales receivables as of December 31, 2018 was calculated by applying the following expected loss ratios: 0.66% on unexpired receivables 3.60% on receivables due between 1 and 30 days, 7.90% for the range of expired between 31 and 60 days; 14.16% for the expired range between 61 and 90 days, 21.13% for expired receivables between 91 and 180 days and 35.36% for those overdue for more than 181 days.

 

Contingencies:

 

Finally, estimates related to contingencies and other risks are analyzed based on likelihood of occurrence and estimated amount considering the opinion of the legal advisors of the Group.

 

Application of IFRIC 12:

 

The Group has carried out an integral implementation of the standards applicable to the accounting treatment of its concession and has determined that, among others, IFRIC 12 is applicable to the Group. It deals with its investments related to improvements and updates that will be made in relation to the obligation of the concession contract under the intangible assets model established by IFRIC 12. Consequently, all the amounts invested under the concession agreement have a direct correlation with the amount of the rates that the Group may charge each passenger or cargo service provider, and therefore, a direct correlation with the amount of income that the Group may generate. As a result, the Group defines all the disbursements associated with the investments required under the concession contract as income generating activities since they ultimately provide future benefits, so that improvements and subsequent updates made to the concession are recognized as intangible assets with based on the principles of IFRIC 12. In addition, compliance with the investments committed by the Master Plans of Work are mandatory, as well as compliance with the maximum rate and, therefore, in case of breach of any of these obligations, the Group could be subject to sanctions and the concession could be revoked.

 

  46 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 23 - CREDIT QUALITY OF FINANCIAL ASSETS

 

The credit quality of the financial assets that are neither past due nor impaired can be assessed based on external credit ratings granted to the Society by external entities or through the historical information about counterparty default rates:

 

   2018   2017 
   $ 
Clients          
Group 1   13,816,072    - 
Group 2   1,691,690,980    1,305,308,805 
Group 3   624,458,283    254,456,321 
Total unimpaired trade receivables   2,329,965,335    1,559,765,126 

 

Group 1 – New customers / related parties (less than 6 months)

Group 2 – Existing customers / related parties (more than 6 months) with no defaults in the past.

Group 3 – Existing customers / related parties (more than 6 months) with some defaults in the past. All defaults were fully recovered.

 

Note: None of the borrowings to related parties is past due nor impaired.

 

Breakdown of financial assets date is as follows:

 

       Due dates   Without
established
     
Item  Past due   1st. Q   2nd. Q   3rd.Q   4th Q   Beyond 4th Q   term   Total 
   $ 
Trade receivables   1,220,352,730    1,100,815,281    6,858,510    1,454,112    484,702    -    -    2,329,965,335 

 

NOTE 24 - CONTINGENCIES

 

The Group has contingent liabilities for litigations in respect of legal claims arising in the ordinary course of business.

 

It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for:

 

a) Legal actions for airport fees

 

Section 2 of Decree 577/2002 states that “all airport fees for international flights, including neighboring countries, included in the Tariff Schedules are expressed in US dollars…”. Emergency Decree 1910/2002, published in the Official Gazette on October 1, 2002, ratified Decree 577/2002. Decree 1799/07 guaranteed that the tariff schedule would remain effective.

 

Different aircraft operators and some consumer associations filed motions in court challenging the application of the abovementioned regime.

 

  47 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 24 - CONTINGENCIES (Contd.)

 

a) Legal actions for airport fees (Contd.)

 

On August 26, 2008, the Argentine Supreme Court ruled on the case “Mexicana de Aviación v. Government et al” [Mexicana de Aviación c/ EN y otros] and confirmed the validity of the provisions that prescribed that domestic airport fees are denominated in local currency and international airport fees are denominated in US dollars (Decrees 577/02, 1910/02 and 1799/07), the criteria that was followed in the lower instances. The matter is completely settled as of the date of these financial statements.

 

b) Tax claims

 

Claims on Stamp taxes

 

The province of Río Negro has made claims for unpaid stamp tax and notified the Company of the assessed amounts of unpaid stamp taxes applicable to the Concession Agreement. Below is a summary of the status of each claim:

 

·Province of Río Negro

 

On April 25, 2000, AA2000 received a claim for $508,586.44 corresponding to unpaid stamp tax due to (i) alleged incorrect calculation of stamp tax, as it was calculated based on the present value of the fee instead of its nominal value, (ii) the assumption that the guarantees agreed with the Argentine National Government should have been included and (iii) considering late payment of the tax. The Company answered the demand, claimed its nullity and challenged the calculation made.

 

On December 14, 2000, AA2000 was notified by the provincial Tax Authorities of a claim for AR$ 956,344 including interest as of December 29, 2000. On January 8, 2001, AA2000 rejected the assessment made. On June 10, 2003 the amount claimed was $1,346,810. The Company appealed the assessment

 

On August 9, 2004 Resolution No. 812 issued by the General Tax Authorities rejected the appeal. On August 24, 2004 the Company filed an administrative appeal which was rejected by Resolution No. 758 of the Treasury Department on May 17, 2005. On Jun 16, 2005, a new appeal was presented with no resolution to date.

 

  48 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 24 - CONTINGENCIES (Contd.)

 

b) Tax claims (Contd.)

 

Province of Cordoba

 

• Main File Nº 2629962/36: The General Revenue Service of Córdoba initiated a tax execution in real estate tax concept (Periods 2009/50, 2010/10/20/30/40/50, 2011/10/20/30/40/50, 2012 / 10/20/30/40/50, 2013/10/20/30/40/50), for $ 6,090,377.45 (capital: $ 3,455,810.66 and surcharges: $ 6,090,377.45). The General Revenue Service requested the embargoes to cover the sum claimed. The fiscal execution was answered, citing the ORSNA and the National State as third parties and the surety bond was offered to replace the blocked measure and this was accepted. The citation of third parties and the request for suspension of the main proceedings, which were processed under separate files to the principal, were rejected as well as their successive appeals and appeals lodged. Regarding the main file, the Court of First Instance ordered the fiscal execution. The General Revenue Service requested the execution of the sentence and made liquidation for a total amount of $ 12,111,450.27 (including capital, interest, regulated fees and contributions), which was processed under a Separate Body with File No. 2918169/36. The liquidation was challenged and an extension of the bond insurance previously provided was offered. The liquidation was approved and then appealed by AA2000, and processed under File No. 6196915. The Appeals Chamber has not yet resolved the appeal to the liquidation. On 10/11/2017 we were notified of the decision of the Appeals Chamber corresponding to the rejection of the AA2000 appeal on the merits of the matter. Against it, a cassation appeal was lodged with the Supreme Court of Justice, which is processed under File No. 5916677, and has not yet been resolved. It is necessary to indicate that the DGR, according to local procedural legislation is in a position to execute the debt. The appeal was denied, and on April 17, a direct complaint was lodged. On June 5, 2018, the payment of the settlement was credited in the amount of $ 12,111,450.27. On November 9, 2018, the fees of the attorney-in-fact were regulated for their intervention with respect to the appeal of Cassation, in the amount of $ 298,428.49 plus VAT.

 

  49 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 24 - CONTINGENCIES (Contd.)

 

b) Tax claims (Contd.)

 

·Main File No. 6174715: The General Revenue Service of Córdoba initiated a tax execution against AA2000 for property tax (FP 2014/10/20/30/40/50, 2015/10/20/30/40/50, 2016/10) for $ 7,405,302.36. The claim was answered opposing exceptions and citing the National State and the ORSNA as third parties. Under File No. 2895251/36, The General Revenue Service requested the embargoes. AA2000 offered a surety insurance to replace the blocked measure. Both the citation of third parties and the substitution of the embargo were rejected by the court, for which reason such resolutions were appealed, and have not yet been resolved. On August 6, 2018, we were notified of the rejection of the appeal for restitution filed against the rejection of subpoenas from third parties, and the request was made to the House to resolve the appeal filed in the subsidy, and the appeal against the rejection of substitution of the embargo. The seized embargo is for the sum of $ 9,626,893.07.

 

·Main File No. 6426848: Claim for real estate taxes 20, 30, 40 and 50/2016, corresponding to real estate item No. 1101800000020. Amount claimed: $ 3,346,121.61 corresponding to - Capital: $ 2,610,221.43, and - Surcharges (calculated on 06/22/2017) in the amount of $ 735,900.18. On December 11, 2017, AA2000 was notified of the tax execution demand for the real estate tax. On February 1, 2018, the claim was answered and exceptions were filed. On June 26, 2018, the request for substitution of attachment was rejected, which was appealed and submitted to the Chamber. The embargo is blocked for the amount of $ 4,381,372.12. The fees of the tax attorney were regulated in this first instance in the amount of $ 160,513.45.

 

·Main File No. 6426849: Real Estate Tax claim 10 and 20/2017, corresponding to the real estate item No. 1101800000020. Amount claimed: $ 2,206,561.28 corresponding to - Capital: $ 2,003,233.12 and - Surcharges (calculated at 06/21/06) / 2017): $ 203,328.16. On December 20, 2017, AA2000 was notified of the tax execution claim for the real estate tax. On February 1, 2018, demand was answered and exceptions were filed. On June 26, 2018, the request for substitution of attachment was rejected, which was appealed and submitted to the Chamber. The embargo is for the sum of $ 2,868,529.66. The fees of the tax attorney were regulated in this first instance in the amount of $ 111,012.07.

 

Main File No. 7223470: Real Estate Tax Claim, corresponding to fiscal periods 30/2017, 40/2017, 10/2018 and 20/2018. Amount claimed: $ 5,189,313. The embargo order was for the sum of $ 6,746,106.90 (amount that includes amounts budgeted to respond for interest and costs of the process). On July 2, 2018, the tax execution request was notified, which was answered. On August 9, 2018 it was decided to reject the citation of third parties, which will be appealed. It was also ordered to move the appeal on the substitution of embargo.

 

Other tax proceedings

 

The Company received claims from certain municipal districts in connection with local fees and taxes which, according to its legal advisors are unlikely to be successful.

 

  50 

 

  

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendence of Corporations: 1645890

Notes to the Consolidated Financial Statements

At December 31, 2018 presented in comparative format (Contd.)

 

NOTE 25 - CASH FLOW INFORMATION

 

Reconciliation of net debt:

 

According to the IAS 7, the movements in the net debt of the year that impact on the cash flow as part of the financing activities are detailed below:

 

   Liabilities for
financial leases at 1
year
   Financial lease
liabilities after 1
year
   1-year bank
borrowings
   Negotiable
obligations at
1 year
   Negotiable
obligations after
1 year
   Total 
Balances at the beginning   53,128,534    58,322,465    26,378,002    141,926,591    10,869,166,141    11,148,921,733 
Cash flow   (62,743,747)   -    (25,081,693)   (878,668,984)   -    (966,494,424)
Exchange difference   13,153,482    -    -    905,253,064    3,129,549,599    4,047,956,145 
Inflation adjustment   (747,060)   (18,820,801)   (3,063,310)   (961,423,653)   983,344,121    (710,703)
Other movements without cash   45,750,375    (23,408,938)   1,767,001    2,427,868,524    (1,394,796,561)   1,057,180,401 
Net debt as of December 31, 2018   48,541,584    16,092,726    -    1,634,955,542    13,587,263,300    15,286,853,152 

 

NOTE 26 - SUBSECUENTS EVENTS AFTER THE CLOSING OF THE YEAR

 

After the end of the year, there have not been events and / or transactions that could significantly affect the financial and patrimonial situation of the Company.

 

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Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

Presentation base

 

The information contained in this Summary has been prepared in accordance with Resolution No. 368/01 of the CNV and should be read in conjunction with the consolidated financial statements as of December 31, 2018 presented in comparative form. Prepared in accordance with IFRS standards.

 

1. General considerations

 

International Financial Reporting Standards (IFRS)

 

The CNV, through General Resolutions No. 562/09 and 576/10, has established the application of Technical Resolutions No. 26 and 29 of the FACPCE, which they adopt IFRS, issued by the International Accounting Standards Board (IASB), for entities included in the public offering regime of Law No. 17,811, either for their capital or for their negotiable obligations, or who have requested authorization to be included in the aforementioned regime.

 

The application of such standards is mandatory for the Company as of the fiscal year beginning on January 1, 2012.

 

·Seasonality

 

The Company's revenues are highly influenced by the seasonality of air traffic in Argentina. The traffic of planes and passengers and, consequently, the income of the Company are higher during the summer and winter months (December - February and July - August), basically because they are holiday periods.

 

The main works carried out during the year 2018 are detailed in the Annual Report of the Individual Financial Statements:

 

 

  52 

 

 

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

2. Equity structure

 

In order to appreciate the evolution of the Company's activities, the comparative consolidated equity structure of the financial statements as of December 31, 2018, 2017, 2016, 2015 and 2014, respectively, is presented.

 

   12.31.18   12.31.17   12.31.16 (*)   12.31.15 (*)   12.31.14 (*) 
   Thousands $ 
Current Asset   7,523,638    5,488,182    2,320,479    1,237,245    992,731 
Non-current Assets   39,728,949    35,769,670    8,655,237    6,352,075    5,185,865 
Total Assets   47,252,587    41,257,852    10,975,716    7,589,320    6,178,596 
                          
Current liabilities   5,515,786    4,164,539    3,508,859    1,900,804    1,521,184 
Non- Current Liabilities   18,988,716    15,450,183    2,533,043    2,766,984    2,193,954 
Total Liabilities   24,504,502    19,614,722    6,041,902    4,667,788    3,715,138 
                          
Net equity attributable to majority shareholders   22,732,528    21,629,003    4,925,482    2,916,391    2,460,174 
Non-controlling interest   15,557    14,127    8,332    5,141    3,284 
Net Equity   22,748,085    21,643,130    4,933,814    2,921,532    2,463,458 
Total   47,252,587    41,257,852    10,975,716    7,589,320    6,178,596 

 

(*) Amounts not restated per inflation as per General Resolution 777/2018.

 

  53 

 

 

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

3. Results structure

 

The following is a summary of the evolution of the consolidated statements of comprehensive income for the years ended December 31, 2018, 2017, 2016, 2015 and 2014.

 

   12.31.18   12.31.17   12.31.16 (*)   12.31.15 (*)   12.31.14 (*) 
   Miles $ 
Gross Profit   9,724,331    8,411,909    5,016,856    2,629,661    2,067,114 
Administrative and distribution and marketing expenses   (2,804,807)   (2,579,652)   (1,246,706)   (808,670)   (548,899)
Other net income and expenses   539,266    448,718    230,804    138,507    115,998 
Operating profit   7,458,790    6,280,975    4,000,954    1,959,498    1,634,213 
Income and financial costs   (3,833,082)   (385,236)   (783,962)   (1,259,043)   (790,693)
Result by exposure to changes in the acquisition power of currency   (1,341,819)   (271,619)   -    -    - 
Result of investments accounted for using the equity method   -    -    -    -    (532)
Income before tax   2,283,889    5,624,120    3,216,992    700,455    842,988 
Income tax   (1,258,743)   (2,155,361)   (1,204,710)   (242,381)   (295,813)
Result of the year   1,025,146    3,468,759    2,012,282    458,074    547,175 
Other comprehensive incomes   -    -    -    -    - 
Comprehensive income for the year   1,025,146    3,468,759    2,012,282    458,074    547,175 
Result attributable to majority shareholders   1,023,717    3,467,098    2,009,091    456,216    546,733 
Non-controlling interest   1,429    1,661    3,191    1,858    442 

 

(*) Amounts not restated per inflation as per General Resolution 777/2018.

 

  54 

 

 

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

4. Cash flow structure

 

   12.31.18   12.31.17   12.31.16 (*)   12.31.15 (*)   12.31.14 (*) 
   Miles $ 
Cash Flow generated by / (used in) operating activities   1,063,494    (1,338,008)   1,695,500    437,379    476,936 
Cash Flow (used in) / generated by investing activities   (140,710)   13,463    (15,203)   (6,046)   (433)
Cash Flow (used in) / generated by financing activities   (1,270,010)   4,113,476    (1,178,802)   (592,374)   (394,927)
Net Cash Flow generated by / (used in) the year   (347,226)   2,788,931    501,495    (161,041)   81,576 

 

(*) Amounts not restated per inflation as per General Resolution 777/2018.

 

5. Analysis of operations for the years ended at December 31, 2018 and 2017

 

Results of operations

 

·Income

 

The following table shows the composition of consolidated revenues for the years ended December 31, 2018 and 2017:

 

Revenues  12.31.18  

%

revenues

   12.31.17  

%

revenues

 
   Thousands $       Thousands $     
Aeronautical revenues   14,064,119    58.20%   11,525,521    55.77%
Commercial revenues   10,102,737    41.80%   9,142,013    44.23%
Total   24,166,856    100.00%   20,667,534    100.00%

 

  55 

 

  

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

5. Analysis of operations in the years ended December 31, 2018 and 2017 (Cont.)

 

The following table shows the composition of the aeronautical revenues for the years ended December 31, 2018 and 2017:

 

Aeronautical revenues  12.31.18  

%

revenues

   12.31.17  

%

revenues

 
   Thousands $       Thousands $     
Landing fee   1,328,331    9.44%   1,029,340    8.93%
Parking fee   538,050    3.83%   459,929    3.99%
Air station use rate   12,197,738    86.73%   10,036,252    87.08%
Total   14,064,119    100.00%   11,525,521    100.00%

 

Costs of services

 

The cost of services had the following variation:

 

   Thousands $ 
Costs of services for the year ended at 12.31.18   14,448,880 
Costs of services for the year ended at 12.31.17   12,260,541 
Variation   2,188,339 

 

Administrative Expenses

 

The administrative expenses had the following variation:

 

   Thousands $ 
Administrative expenses for the year ended at 12.31.18   1,126,507 
Administrative expenses for the year ended at 12.31.17   1,193,163 
Variation   (66,656)

 

  56 

 

  

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

5. Analysis of operations in the years ended December 31, 2018 and 2017 (Cont.)

 

Distribution and marketing expenses

 

The distribution and marketing expenses had the following variation:

 

   Thousands
$
 
Distribution and commercial expenses for the year ended at 12.31.18   1,678,300 
Distribution and commercial expenses for the year ended at 12.31.17   1,386,488 
Variation   291,812 

 

Income and financial costs

 

Net financial income and costs totaled a loss of $3,833,082 thousand during the year ended December 31, 2018 with respect to thousands of $ 385,236 loss during the previous year.

 

The variation is mainly due to losses arising from exposure to foreign currency.

 

Other incomes and expenditures

 

The other net income and expense item recorded an income of approximately $539,266 thousand during the year ended December 31, 2018 with respect to an income of $448,718 thousand in the previous year.

 

Liquidity and Capital Resources

 

Capitalization

 

The total capitalization of the Company as of December 31, 2018 amounted to $38,034,938 thousand composed of thousands of $15,286,853 of borrowings and a net equity worth of $22,748,085 thousand, while the total capitalization of the Company at December 31, 2017 amounted to thousands of $ 32,792,052 comprised of thousands of $11,148,922 of borrowings and a net equity worth of thousands of $21,643,130.

 

The debt as a percentage of total capitalization amounted to approximately 40.19% as of December 31, 2018 and 34.63% as of December 31, 2017.

 

Financing

 

See in detail Note 6 to these Consolidated Financial Statements.

 

  57 

 

  

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

6. Index

 

The information refers to the years ended December 31, 2018, 2017, 2016, 2015 and 2014:

 

   12.31.18   12.31.17   12.31.16(**)   12.31.15(**)   12.31.14(**) 
Liquidity (*)   1.39    1.36    0.67    0.66    0.64 
Solvency (*)   0.93    1.12    0.83    0.64    0.65 
Immobilization of capital   0.84    0.87    0.79    0.84    0.84 
Cost effectiveness   0.05    0.16    0.51    0.17    0.25 

 

(*) Current liabilities and non-current liabilities do not include deferred profits.

(**) Indexes not calculated on amounts not restated per inflation.

 

7. Statistical data

 

The information detailed below is based on extra-budgetary statistics compiled by the Company. Number of passengers (in thousands) for the years ended December 31, 2018, 2017, 2016, 2015 and 2014:

 

Airport  12.31.18   12.31.17   12.31.16   12.31.15   12.31.14 
   In thousands 
Aeroparque   13,474    13,921    11,662    11,053    10,256 
Ezeiza   10,299    9,878    9,831    9,128    8,601 
Córdoba   3,398    2,846    2,213    1,948    1,673 
Mendoza   2,023    1,762    1,086    1,352    1,308 
Bariloche   1,576    1,297    1,187    1,039    919 
Salta   1,122    1,129    972    856    750 
Iguazú   1,112    999    894    863    797 
Tucumán   957    560    670    601    523 
C. Rivadavia   680    624    574    577    518 
El Palomar   676    -    -    -    - 
Río Gallegos   241    262    269    303    259 
Total   35,558    33,278    29,358    27,720    25,604 
Overall total   38,350    35,936    31,467    29,578    27,207 
Variation   6.7%   14.2%   6.4%   8.7%   5.4%

 

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Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

7. Statistical data (Contd.)

 

Amount of movement of aircraft for the years ended on December 31, 2018, 2017, 2016, 2015 and 2014 of the eleven airports that represent more than 80% of the total movements of the airport system:

 

Airport  12.31.18   12.31.17   12.31.16   12.31.15   12.31.14 
Aeroparque   130,242    134,532    121,882    120,492    116,219 
Ezeiza   75,234    66,916    68,839    66,834    66,329 
San Fernando   40,910    39,000    38,188    40,327    43,943 
Córdoba   33,481    28,659    23,526    21,783    20,284 
Mendoza   21,354    19,274    12,644    15,700    16,183 
Bariloche   14,098    12,338    10,954    10,084    9,433 
Salta   11,449    13,367    11,386    11,780    11,267 
C. Rivadavia   10,232    9,171    8,251    9,155    10,366 
Iguazú   9,807    9,065    8,721    8,361    8,230 
Tucumán   9,778    5,826    7,479    6,838    5,538 
El Palomar   5,954    -    -    -    - 
Total   362,539    338,148    311,870    311,354    307,792 
Overall total   429,466    404,181    374,978    376,490    371,906 
Variation   6.3%   7.79%   (0.4)%   1.2%   (2.5)%

 

  59 

 

  

Aeropuertos Argentina 2000 S.A.

Consolidate Financial Statements

at December 31, 2018 presented in comparative format

Summary of Information required by Resolution N ° 368/01

of the National Securities Commission

 

Perspectives for 2019

 

In 2018, the passenger traffic of the company has had a very good evolution reaching 38.5 million, of which 23.7 million were domestic passengers, 13.4 million international passengers and 1.3 million passengers in transit, with growths of 11.7% in the domestic ones and a lower decrease of 1.4% in the international ones compared with the previous year. In total, passenger traffic grew 6.7% compared to 2017.

 

This evolution is part of the National Government's plans to favor the increase in passenger traffic, consolidating the recovery of foreign tourists, reaching record levels.

 

The outstanding evolution of passengers was also accompanied by a significant growth in investments in infrastructure works both on runways and terminals at airports in the interior of the country and also in the metropolitan area of Buenos Aires. During the year 2018, the Company presented investments to ORSNA for $4,918 million. To this amount it must be added the payments to the trusts of specific affectation for works for $1,427.7 million.

 

It should be noted that, after the jump in the exchange rate that occurred in June 2018, international traffic began to decline, while domestic traffic accelerated the growth that had been evident in the first months of the year. The prospects for the evolution of domestic passenger traffic are positive due to the opening of new routes and the start of operations of several low-cost companies.

 

With regard to the execution of investments in infrastructure, we refer to what is expressed in the Infrastructure section of the Memory.

  

  60 

 

 

“Free translation from de original in Spanish for publication in Argentina”

 

INDEPENDENTS AUDITORS' REPORT

 

To the Shareholders, President and Directors of

Aeropuertos Argentina 2000 S.A.

Legal address: Suipacha 268 - 12th Floor

City of Buenos Aires

Tax Code No. 30-69617058-0

 

Report on financial statements

 

We have audited the accompanying consolidated financial statements of Aeropuertos Argentina 2000 S.A. and its subsidiaries, including the consolidated statement of financial position at December 31, 2018, the consolidated statements of comprehensive income, of changes in equity and of cash flows for the year then ended, and a summary of the significant accounting policies and other explanatory notes.

 

The balances and other information corresponding to the fiscal year 2017 are an integral part of the audited financial statements mentioned above; therefore, they must be considered in connection with these financial statements.

 

Responsibility of Direction

 

The Board of Directors of the Company is responsible for the preparation and presentation of these consolidated financial statements under the International Financial Reporting Standards (IFRS) adopted as Argentine professional accounting standards by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) and incorporated into the regulations of the National Securities Commission (CNV), as approved by the International Accounting Standards Board (IASB). Further, the Board of Directors is responsible for the existence of adequate internal control to prepare the consolidated financial statements free of any significant distortions due to misstatements or irregularities.

 

Responsibility of auditors

 

Our responsibility is to express an opinion on the attached consolidated financial statements, based on our audit. We performed our audit in accordance with International Standards on Auditing (ISAs), as were adopted in Argentina by the FACPCE, through Technical Pronouncement No. 32 and their respective adoption ‘circulars. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatements.

 

An audit involves performing procedures to obtain audit evidence about the amounts and other information disclosed in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the consolidated financial statements due to fraud or error. In making those risk assessments, the auditor must consider internal control relevant to the Company’s preparation and reasonable presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant estimates made by the Company's management, as well as evaluating the overall presentation of the consolidated financial statements. 

 

  61 

 

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the consolidated financial statements mentioned in the first paragraph, present fairly, in all material respects, the consolidated financial position of Aeropuertos Argentina 2000 S.A. and its subsidiaries at December 31, 2018, and the consolidated comprehensive income and cash flows for the fiscal year then ended, in accordance with International Financial Reporting Standards.

 

Report on compliance with current regulations

 

In accordance with current regulations, we report that, in connection with Aeropuertos Argentina 2000 S.A.:

 

a)the consolidated financial statements of Aeropuertos Argentina 2000 S.A. are transcribed into the “Inventory and Balance Sheet” book and as regards those matters that are within our competence, they are in compliance with the provisions of the Commercial Companies Law and pertinent resolutions of the National Securities Commission;

 

b)the separate individual financial statements of Aeropuestos Argentina 2000 S.A. arise from accounting records kept in all formal respects in conformity with legal regulations, which maintain the security and integrity conditions based on which they were authorized by the National Securities Commission;

 

c)we have read the summary of activity, on which, as regards those matters that are within our competence, we have no observations to make;

 

d)At December 31, 2018 the debt accrued by Aeropuertos Argentina 2000 S.A. in favor of the Argentine Integrated Social Security System according to the Company's accounting records amounted to $88.925.202, none of which was claimable at that date.

 

e)In accordance with article 21, paragraph b), Chapter III, Section IV, Title II of the regulation of the National Securities Commission, we report that total fees for auditing and related services billed to the Company during the fiscal year ended December 31, 2018 account for:

 

e.1)48% of the total fees for services billed to the Company for all items during that fiscal year;

 

e.2)89% of the total fees for services for auditing and related services billed to the Company, its parent companies, subsidiaries and related companies during that year;

 

e.3)44% of the total fees for services billed to the Company, its parent companies, subsidiaries and related companies for all items during that year;

 

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f)We have applied money laundering abatement and anti-terrorist financing procedures for Aeropuertos Argentina 2000 S.A. foreseen in the professional standards issued by the Professional Council in Economic Sciences of the Autonomous City of Buenos Aires.

 

Autonomous City of Buenos Aires, March 7, 2019

 

PRICE WATERHOUSE & CO. S.R.L.

 

by (Partner)  
  Miguel A. Urus  

  

  63 

 

 

SURVEILLANCE COMMITTEE REPORT

 

To the shareholders of

AEROPUERTOS ARGENTINA 2000 S.A.

 

In accordance with the requirements of the article 294 subsection 5º of Law 19,550 and the article 62 subsection c) of the BYMA Regulations (Argentine Stock and Market), we have conducted the review described in the third paragraph regarding the consolidated financial statements of Aeropuertos Argentina 2000 S.A. and its subsidiaries, including the consolidated statement of financial position as of December 31, 2018, the consolidated statements of comprehensive income, of changes in equity and of cash flows for the period previously referred and an overview of significant accounting policies and other explanatory notes.

 

The Company’s Board of Directors is responsible for the preparation and issuance of said financial statements, in exercise of its specific functions.

 

Our review was conducted in accordance with the supervisory existing standards. These standards require the verification of the consistency of the revised documents with the information on the corporate decisions established in the minutes and the adequacy of those decisions to the law and the by-laws regarding its formal and documentary aspects. In order to carry out our professional work, we have taken into account the report of the external auditor, Miguel A. Urus (partner of Price Waterhouse & Co. SRL), dated March 7, 2019, who states that it has been issued in accordance with the International Standards on Auditing (ISAs), which were adopted as review standards in Argentina by Technical Pronouncement No. 32 and the respective adoption circulars of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE).

 

According to the item “Responsibility of Direction” included in the report of the external auditor, the Company's Board of Directors is responsible for the preparation and presentation of the abovementioned financial statements, in accordance with International Financial Reporting Standards (IFRS), adopted by the FACPCE as professional accounting standards in Argentina and incorporated by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB).

 

We have not carried out any management control and, therefore, we have not evaluated the criteria and business decisions of administration, financing, marketing or production, since these issues are the sole responsibility of the board of directors.

 

In accordance with the provisions set forth in the article 4º, section III, chapter I, title XII of CNV’s regulation, we consider appropriate the quality of the accounting and auditing policies of the issuer and the degree of objectivity and independence of the external auditor in exercise of his functions, based on the items listed hereunder:

 

(i) the consolidated financial statements were issued in accordance with the accounting principles generally accepted by the FACPCE and the CNV. Consequently, the quality of the accounting and auditing policies is satisfactory insofar as it conforms to those principles; and

 

  64 

 

  

(ii) Price Waterhouse & Co. S.R.L. is an international and locally recognized firm which provides auditing services to numerous companies, including those that carry out activities for which their auditors must have been previously approved by regulatory agencies, such as financial entities or the Central Bank of the Argentine Republic. Taking into consideration such circumstances, we consider that the firm of auditors has the degree of objectivity and independence required for the exercise of its work.

 

Based on our review, with the scope described above, we hereby inform that the consolidated financial statements of Aeropuertos Argentina 2000 S.A. as of December 31, 2018 consider all significant events and circumstances that are known to us, and regarding said documents we have no observations to make.

 

Additionally, in accordance with existing legal provisions we inform that:

 

a) the consolidated financial statements of the company arise from the accounting records taken in their formal aspects in accordance with legal regulations, maintain the conditions of security and integrity on the basis of which they were authorized by the CNV; and they are copied in the Inventory and Balance Book; and

 

b) in exercise of our legal supervision duties, during the period under review, we performed the procedures set forth in Article 294 of Law 19,550 that we consider necessary in accordance with the circumstances, and in this respect, we have no observations to make.

 

Autonomous City of Buenos Aires, March 7th, 2019.

 

     
  Patricio A. Martin  
  By Surveillance Committee  

 

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(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2 

 

Aeropuertos Argentina 2000 S.A.

 

Separated Individual Financial Statements and Annual Report

At December 31, 2018 presented in comparative format

 

 

 

 

Aeropuertos Argentina 2000 S.A.

Registration number with the Superintendency of Corporations: 1645890

 

Individual Financial Statements

At December 31, 2018 presented in comparative format

 

Index

 

Annual Report 1
Individual Statements of Comprehensive Income 52
Individual Statements of Financial Position 53
Individual Statements of Changes in Equity 54
Individual Statements of Cash Flow 55
Notes to the Individual Financial Statements 56
Supplementary information required by Art. 12. Chapter III, Title IV of the National Securities Commission 104
Report of Independent Auditors 111
Report of the Supervisory Committee 114

 

$ = Argentine Peso

US$ = US Dollar

 

 

 

 

AEROPUERTOS ARGENTINA 2000 S.A.

 

ANNUAL REPORT

 

PRESIDENT´S LETTER

 

As every year, we present the performance and the main actions implemented in the year by Aeropuertos Argentina 2000 S.A. (hereafter the “Company” or “AA2000”) to the people, institutions, companies and organizations with which the Company has a link.

 

In a national and international context where the private sector increasingly takes a more relevant role in the sustainable development of communities, our business is each year more significant for the transport of passengers and cargo within the country. The Annual Report of the Company will be prepared to show in a single document the integral management of our business with a view on the economic, social and environmental impacts. Thus, to the information reported every year in the Report, we add the actions carried out with a view to sustainability, and the social and environmental value generated by our management.

 

In this way, the Annual Report accounts cross-sectionally of our contribution to the development of the country with financial and non-financial information that strengthens the profitability, the brand, the passenger’s experience, labor relations and society in general.

 

Thus, in compliance with the legal and statutory provisions we submit to the consideration of the Shareholders this Report, the Inventory, the statement of comprehensive income, financial situation, changes in equity, cash flow, the respective notes that they are complemented by the consolidated statements of comprehensive income, financial position, changes in equity, cash flow, the respective notes that supplement them, the Reports of the Auditors and the Reports of the Supervisory Committee for Fiscal Year No. 21 Completed on December 31, 2018.

 

MARTÍN EURNEKIAN

President of Aeropuertos Argentina 2000

 

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SCOPE OF THE ANNUAL REPORT

 

The 2018 Annual Report of the Company accounts for financial and economic performance, and the generation of social and environmental impact of the company from January 1 to December 31, 2018. It has a direct focus on shareholders and investors, as well as all its key publics: employees, unions, shareholders, airlines, contractors and providers, passengers, customers, community, media, chambers, public sector, civil society and intervening bodies.

 

In this way, in the same document, it consolidates financial and non-financial information, accounting for the importance of sustainable development in the strategy of the business.

 

OUR AMBITION AND PROPOSAL

 

AMBITION
 
To be leaders and referents of the industry, loved by our clients, employees and stakeholders, to be sustainable in the long term.
 
Exceed the expectations of our customers. Lead the construction of a virtuous ecosystem. Operate with simple and agile processes. Strengthen a culture of innovation, service and commitment
COURAGE TO INNOVATE-SERVICE ATTITUDE-COMMITMENT
PURPOSE
Facilitate the connection of people, goods and cultures to contribute to a better world.

 

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Impact Indicators  2017   2018 
Financial capital          
Investment  $5,908,435,787   $6,492,605,431 
EBITDA   8,500,387,977   $10,272,114,501 
Income for the year  $3,467,098,400   $1,023,716,997 
Industrial capital          
Passengers traffic   35,935,768    38,350,466 
Cargo Traffic (tn)   230,276    238,902 
Aircraft traffic   404,181    429,466 
Active Airlines   61    65 
Airports   34    35 
Intellectual capital          
Training hours   41,528    45,832 
Average hours per employee   18,22    18,72 
Human capital          
Quantity of employees   2,279    2,448 
People from vulnerable groups included   6    6 
Percentage of employees under collective agreement   68%   67%
Social and reputational capital          
Private social investment  $15,615,650   $16,663,673 
Beneficiaries of Centro Pescar-AA2000   24    24 
Number of students favored with scholarships   100    120 
Families with access to water   28    95 
Presentations of the Airport Orchestras   41    41 

 

OVERALL CONTEXT OF THE COMPANY

 

In 1998, the Company began operating some of the 33 airports that make up the concession of Group A of the National Airport System of the Argentine Republic.

 

In April 2008, the Company took possession of the last of the airports that had been originally concessioned (the Gobernador Horacio Guzmán airport located in San Salvador de Jujuy).

 

On the other hand, since July 2012, the Company has been responsible for the administration, working and operation of the Termas de Río Hondo airport. In March 2013, the National Executive Power issued Decree No. 303/2013, through which the incorporation of the Airport into the National Airport System was arranged, and as of December 31, 2018, its inclusion in "Group A" was pending.

 

At the end of December 2017 and in order to continue with the policies related to the expansion of the commercial market, the National Government issued Decree No. 1092/17 by which it incorporated the Palomar Airport, located in the Province of Buenos Aires, to the National Airport System. Likewise, in order to incorporate the aforementioned Airport into "Group A", on December 27, 2017, the National Government issued Decree No. 1107/17.

 

Because of this, as of that date, the Company is responsible for the working, administration and operation of the Palomar Airport.

 

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During 2018, through the process of strategic planning, the management team defined the business strategy focused on the passenger. To this end it defined the purpose, ambition and strategic axes to achieve it, which are listed below:

 

Purpose

 

Facilitate the connection of people, goods and cultures to contribute to a better world.

 

Ambition

 

To be leaders and referents of the industry, loved by our clients, employees and stakeholders, to be sustainable in the long term.

 

Strategic axes

 

Exceed the expectations of our customers.

Lead the construction of a virtuous ecosystem.

Operate with simple and agile processes.

Strengthen a culture of innovation, service and commitment.

 

Declaration of sustainability

 

At AA2000 we have an eye on the people and the environment where we live. We focus on the management based on the satisfaction of our passengers, companions and collaborators to guarantee a quality service, cutting-edge infrastructure, security, accessibility; with the aim that we all live a pleasant experience within our terminals.

 

In addition, we develop programs in partnership with key stakeholders to respond comprehensively to the demands of the communities where our airports are located; promoting education, art and culture as a tool for social growth, and taking care of the environment with a strategy focused on the carbon footprint and the responsible management of natural resources.

 

Thus, from our business, we connect millions of people, assuming our role as a key player in our country and commitment to sustainable development.

 

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MEMBERS OF MANAGEMENT

 

Board of Directors

 

POSITION
HELD [1]
  NAME   AGE
GROUP
  INDEPENDENC
Y STATUS
  FIRST
APPOINTMENT
President   Martín Francisco Antranik Eurnekian   30-50   Executive   26/04/2017
Vice-President   Antonio Matías Patanian   30-50   Executive   21/04/2014
Director   Máximo Luis Bomchil   +50   Non-independent   24/04/2009
Director   Orlando J. Ferreres   +50   Independent   25/04/2016
Director   Jorge González Galé   +50   Independent   25/04/2016
Director   Raúl Francos   +50   Non-independent   22/03/2013
Director   Luis Ramón Freixas Pinto   +50   Independent   25/04/2016
Director   Eduardo Pablo Braun   +50   Independent   25/04/2016
Alternate Director   Gustavo Pablo Lupetti   +50   Executive   29/05/2008

 

[1] All members of the Board of Directors are Argentine.

 

The Supervisory Commission is made up of regular Syndics: Patricio Alberto Martin, Tomás Miguel Araya and Rodrigo Sebastián Miguel. Alternate Syndics: Francisco Martín Gutiérrez, Alejandro Esteban Messineo and Javier Rodrigo Siñeriz.

 

ETHICS AND TRANSPARENCY

 

The Company has different tools and channels of dialogue that allow to guarantee the transparency, clarity and seriousness of our processes.

 

1.Creation of the Compliance and Internal Control Department and the Integrity area.

 

During 2018, the Compliance and Internal Control Department was created, reporting to the General Manager of the Company and on which depends the Integrity Department and their respective managers in charge of the development, implementation and monitoring of the AA2000 Integrity Program that is detailed below:

 

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2.Code of Conduct

 

The Company has redefined the existing AA2000 Code of Conduct. Its purpose is to establish guidelines governing the ethical behavior of all members of the Company (directors, trustees, committee members and employees) and ensure that they are observed effectively in order to maintain a highly professional behavior and integrity, not only within the Company but also in relations with clients, permit holders, suppliers, subcontractors, agents, consultants, public authorities, the business community, regulatory agencies and society in general.

 

3.Whistleblower Policy

 

The Company has approved the Whistleblowing Policy that establishes the procedure and the guarantees for carrying out and handling complaints in cases of breaches of the Code of Conduct and related policies. Applies to AA2000 and all board members, trustees, committee members, employees and interns (the "collaborators") as well as suppliers, commercial agents, representatives, contractors, subcontractors, clients, permit holders and other stakeholders (the "business partners"). This policy establishes the protocol for the treatment and investigation of the cases received through the complaints channels, its pillars being confidentiality, the option of anonymity and zero tolerance for reprisals.

 

4.Gifts Policy

 

The Society approved this policy that aims to regulate the granting and reception of gifts and services in the workplace, as well as the performance of donations and charitable contributions in a transparent manner, without obtaining advantages or exercising undue influence, to ensure the construction of relationships intact. It covers both the Collaborators and their Commercial Partners and establishes the procedure for the declaration and approvals applicable to each case, as well as limits, prohibitions, cases in which prior authorization is required, declaration forms and self-assessment questions.

 

5.Policy for the Prevention of Misuse of Privileged Information

 

The Company approved this policy whose purpose is to establish the guidelines that will help employees, and anyone who for his work, profession or function is in privileged information (as defined in the policy) to meet their obligations according to the legislation and regulations on Securities in force in Argentina and in the jurisdictions in which the Securities of the Company and its related companies are issued or marketed.

 

6.Relationship with Third Parties: Due Diligence

 

The Company has developed a third party integrity control plan in order to comply with the processes of knowledge of business partners, personnel to be hired and any third party with whom some type of commercial operation is carried out, rendering representation services or plan to advance in some agreement.

 

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7.Relationship with Related Parties: Control

 

The Company identifies transactions with related parties and has internal regulations for its treatment in the audit committee. Additionally, it adheres to the procedure of its controlling party to identify them in a timely manner and ensure the arm's length conditions of the transaction.

 

8.Communications

 

The Integrity Department has developed a communications plan through which it generates information about policies, guidelines and Integrity initiatives in a clear, direct and transparent way for all employees. A regulatory system has been developed where not only the integrity norms are concentrated, but also the rest of the policies, authorization manuals and company procedures.

 

9.Trainings

 

The Company has a training plan on Ethics and Integrity based on various training formats about the AA2000 Integrity Program, such as face-to-face classes, e-learnings, etc. During the month of November 2017, the first stage of training on the Integrity Program, Code of Conduct and Related Policies was initiated, which was addressed to board members, executive directors, managers and airport managers in five days of enriching exchanges that included studies cases, debates and conclusions.

 

10.Channels of claims before the Regulatory Body of the National Airport System (ORSNA)

 

Through a web page and a toll-free telephone line, the regulatory entity receives and manages the complaints and suggestions that users and the general public of the airports send, raising possible disagreements or suggestions regarding the service.

 

11.Confidentiality in data management

 

The Company has standards and processes that establish a prohibition to use for personal benefit and disclose information related to any aspect of the Company's commercial activity, except when required to perform the functions. Likewise, every employee must observe the confidential use of information obtained from third parties.

 

ECONOMIC PERFORMANCE

 

Closing this economic year, we can once again conclude that we have generated record figures. Revenues of $ 24,695,278,967 implied an increase of 16.4% compared to the previous year. The net result for the year ended December 31, 2018 was $ 1,023,716,997 and net equity at that date reached $ 22,732,528,411.

 

On the other hand, the number of passengers that passed through our terminals has increased by 6.7% over last year.

 

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Accompanying and fostering this growth, the Company continues to develop the airport infrastructure of the country and improving the experience of its users. This year another milestone has also been marked in the investments made.

 

In February 2017, the Company issued negotiable obligations for an amount of US $ 400,000,000 maturing on February 1, 2027, at an interest rate of 6.875%. The capital of the negotiable obligations will be amortized in 32 quarterlies, equal and consecutive installments payable as of May 1, 2019.

 

INFRASTRUCTURE

 

During 2018 the Company developed projects and finished works, achieving goals, aims and internal and external commitments.

 

The projects and works of the year included the construction, expansion and renovation of buildings, parking lots, tracks, taxiways and platforms and were developed to expand capacity, modernize and / or rehabilitate existing facilities, update flows, increase security and incorporate new operations, and all other actions tending to a continuous improvement in the airport infrastructure.

 

The works are carried out in stages so as not to affect the airport activity considering the highest international safety, technological and comfort standards for the passenger. Likewise, prior to the execution all works are approved by the ORSNA.

 

From the beginning of the development of each project, the Society incorporates criteria of sustainability in the architecture of these, consulting with specialists in each field. The necessary guidelines were integrated so that the constructions are considered sustainable, minimizing significantly the negative environmental and social impacts, and applying fundamental mitigation measures to avoid and diminish the possible impacts or alterations on the environment and the community.

 

During the design and construction process, elements, decisions and materials were chosen, prioritized and incorporated for the implementation of the greatest possible number of aspects that care for and benefit the environment, in general, and that promote the LEED qualification, in particular (the certification system for sustainable buildings).

 

We perform environmental audits, waste management, liquid effluent management, environmental and social impact studies. All works require an environmental study that is delivered to the Regulatory Body of the National Airport System (ORSNA) at each stage of development where we account for compliance and respect for the above-mentioned aspects, and for our contribution to sustainable development and social welfare.

 

During fiscal year 2018, projects and works have been carried out in the different airports concessioned, among which stand out:

 

In the International Airport of Ezeiza, the following: expansion of the baggage reclaim hall of Terminal A (international arrivals), the construction of a new medium voltage substation Chivatos, the rehabilitation of header 29, filming at header 35 stage 1 (crossing) (includes Beacon), Zulu platform and lighting.

 

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Also in Ezeiza, the following works continue to be carried out:

 

-New Control Tower;
-Beacon ring and main electrical substation;
-Lighting in Access to Waste Area;
-Departures Building - Hall B. The excavation work, foundations and Reinforced Concrete and covered metal structure are in execution;
-Metal structure, glass and BHS corresponding to the facilities inside the departures building (Zeppelin);
-Remodeling of pre-boarding of the upper floor terminal “A” to stage 2; and
-Multilevel parking.

 

Jorge Newbery Airport had works in Building IV, namely: expansion of the check-in hall; new vertical circulation core; retrofitting ARSA offices; as well as the installation of a telescopic bridge in fixed bridge.

 

On the other hand, also in Aeroparque the following works are in execution: demolition of Terminal C; new beacon substations and control systems; South platform Stage 1; and expansion of the industrial platform, improvements in sidewalks, landscaping and coastal filling.

 

At the Comodoro Rivadavia Airport, the new passenger terminal and the new parking lot are under construction.

 

At the Córdoba Airport, track 18-36 was rehabilitated and the airport entrance station was renovated.

 

At the Formosa Airport, the work of turning docks on the runway was executed.

 

The remodeling and expansion of the passenger terminal, the construction of a new parking lot, the beaconing and resurfacing of the runway, the rehabilitation of taxiways, as well as the expansion of the commercial platform are underway at the Iguazú Airport.

 

On the other hand, El Palomar Airport completed the refurbishment of the Terminal and the Fire Extinguishing Service building, the reconditioning of the surface and demarcation of the runway, taxiway, beacon and commercial platform, as well as the leveling of the security band. Likewise, a new office building for State Organizations was built, a satellite pre-boarding area and the extension of the arrivals sector was made.

 

At the Bariloche Airport, the pre-shipment and domestic and international arrivals areas were refurbished and the construction of a new sewage treatment plant was carried out.

 

At the Tucumán Airport, a project is underway to refurbish the passenger terminal.

 

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At the San Fernando Airport works are underway to improve the rain water and sewage infrastructure. On the other hand, work continues on the development of projects for the new passenger terminal, hangars and new station of the fire extinguishing system.

 

At the Santa Rosa Airport, the installation of PAPIs and the perimeter fence were completed.

 

At the San Juan Airport, the remodeling work on the passenger terminal is being carried out and the work on the new parking lot has been completed.

 

At the Airport of Jujuy, work is underway to complete the comprehensive remodeling of the passenger terminal, new parking, roads and a new control tower. On the other hand, the construction of the new technical building is finished.

 

At the Esquel Airport, work is underway on the complete remodeling of the passenger terminal, the execution of a new parking and control tower. On the other hand, during the current fiscal year, the construction of the new technical building was completed.

 

At the Salta Airport, the main and secondary tracks are resurfaced; as well as the re-adaptation of the taxiway and expansion of the commercial platform. Likewise, the work of the vertical circulation core for domestic and international arrivals was completed.

 

Master Plans:

 

The Master Plans of the Airports have been delivered, completing all of AA2000 Airports. The inclusion of observations made by the ORSNA for approval by the Board is pending

 

Airport security

 

In addition to the preventive and reactive controls routinely applied by Aeropuertos Argentina 2000 within the scope of its responsibilities in terms of protection against crime, acts of unlawful interference, fires, and emergency neutralization measures (within the framework of ongoing collaboration with police authorities, and in response to the most demanding standards - ICAO, ANAC, NFPA, IRAM, etc.-) during 2018, the activities and coordination specifically associated with the historic Meeting of G20 Leaderships that took place in the City of Buenos Aires were outstanding. These actions enabled the development, as expected, of all the operational issues that were required by the different agencies and security forces -local and foreign- involved in the meeting at several airports affected by the organization of the event, and which made it possible for said Summit to develop successfully and without setbacks.

 

Operational safety

 

In this aspect, Aeropuertos Argentina 2000 also continued to apply during 2018 the preventative control premises that systemically promote the appropriate conditions in each of the concessioned airports for the development of air operations in a safe manner. In addition to this, a joint process was started with ANAC for the certification of aerodromes as of next year.

 

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Cargo Terminal

 

Through the Cargo Terminal, the Company offers storage and integral logistics services to foreign trade agents who import and export by air, to general cargo operators and to private clients in the international airports of Ezeiza, Aeroparque, Mar del Plata, Córdoba, Mendoza and Tucumán,

 

In relation to the Cargo Terminal, during 2018 there was a movement of cargo (Import and Export) of 236,623 tons, representing an increase over the previous year of 4.72%. The average annual stay remained stable in relation to the previous year.

 

It is important to highlight the works carried out in our Ezeiza fiscal deposit related to refrigerated cargo services. In this regard, a chamber was built for the import airfield of 750 m2 and 920 positions and an expansion of the 600 m2 export chamber and 940 stowage positions. This last sector has been configured with a semi-mechanized aeronautical pallet transport system. These works have contributed to a substantial improvement in the service of storage and temperature control of the cargo received, allowing compliance with international standards.

 

Staff at the end of the year totaled 573 people among management, administrative and operative personnel.

 

CUSTOMERS

 

The Company has its focus on the client, understanding this is not only to passengers or airlines but also to all the people who work and transit in their airports. In this way, it develops improvement plans in the attention and contact with the key publics to improve the decision making in the airports and to approach the answers to the needs of our users in a more agile and efficient way.

 

Passenger Traffic  2018   2017 
Domestic   23,680,104    21,197,296 
International   13,414,260    13,604,508 
Transit   1,256,102    1,133,964 
TOTAL   38,350,466    35,935,768 

 

Cargo Traffic (tn)  2018   2017 
Domestic   7,335    7,852 
International   222,626    212,592 
Post Mail   8,941    9,832 
TOTAL   238,902    230,276 

 

Aircraft Traffic  2018   2017 
Passenger Aircrafts   327,314    298,704 
Cargo Aircraft   4,257    4,419 
Others   97,895    101,058 
TOTAL   429,466    404,181 

 

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During the year 2018 there was an increase of 6.7%, with respect to the previous year, in the total number of passengers, reaching a total of 38.3 million passengers.

 

In the domestic sphere, the increase was 11.7%, while in the international level there was a slight decrease of 1.4%,

 

In relation to the volume of international passengers, Ezeiza registered an increase of 4.6%; On the other hand, there were also significant increases in the airports of Córdoba, Mendoza, Tucumán and Bariloche, the latter with seasonal flights.

 

In February 2018, the domestic operation of El Palomar Airport began, to which later on the closing of the year, international operations were added.

 

As of May 2018 the process of de regionalization of Aeroparque Jorge Newbery began, which implies that during 2018 50% of Aeroparque's regional flights (except Uruguay) were transferred to Ezeiza. In May 2019 the transfer of 50% of remaining flights will be completed.

 

1. Marketing

 

In 2018, the campaign "Where your emotions take flight" was launched, in which all those stories that happen at our airports were revealed. The main idea was to capitalize the emotions of reunions, farewells, celebrations, tears, etc. to produce a strong identification with our customers and thus position AA2000 as a brand that sees those stories, lives them as their own and wants to share them. The campaign showed real stories that took place in the airports of Ezeiza, Mendoza and Córdoba and two competitions were launched, one external and massive and the other internal exclusive of employees, in which two new stories were selected and the winners had the possibility of bringing a loved one back to the country.

 

2. Service channels

 

Leveraged in innovation and new technologies, applications and programs were developed to continue improving service channels, services and airport facilities with the aim of improving the customer experience.

 

In 2018, Customer Service was incorporated into the Twitter social network, providing a 24-hour user response service every day. The Customer Service staff of Aeropuertos Argentina 2000 is the one who answers the messages of this network and through the Social Network Facebook.

 

Improvements were implemented in favor of the customer experience, for this, a contingency protocol was established, in order to minimize the impact of passenger events, which was applied in different airports in which the operation was affected (meteorology, strikes, excessive delays).

 

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3. Business improvements

 

The main objective of the management is that the passengers, companions and customers of the Company live a good experience.

 

In this framework, the Ezeiza International Airport launched a program called "Ezeiza Experience", consisting of a series of commercial actions aimed at improving the passenger experience.

 

Within this program, the most outstanding points were: