UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
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REGISTRATION STATEMENT PERSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 2007
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TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM
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TO
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SHELL COMPANY REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report
COMMISSION FILE NUMBER: 1-10905
Vitro, S.A.B. de C.V.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrants name into English)
United Mexican States
(Jurisdiction of incorporation or organization)
Ave. Ricardo Margáin Zozaya 400, Col. Valle del Campestre,
San Pedro Garza García, Nuevo León, 66265 México
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Shares of Series A common stock, no par value
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New York Stock Exchange*
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Ordinary Participation Certificate, each representing
one share of Series A common stock
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New York Stock Exchange*
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American Depositary Shares, evidenced by American
Depositary Receipts, each representing three
Ordinary Participation Certificates
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New York Stock Exchange
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*
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Not for trading, but only in connection with the registration of American Depositary Shares,
pursuant to the requirements of the Securities and Exchange Commission.
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Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
11.75% Senior Notes due 2013
8.625% Senior Notes due 2012
9.125% Senior Notes due 2017
The number of outstanding shares of each of the issuers classes of capital stock
as of December 31, 2007:
358,504,974 shares of Series A common stock, no par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act
Yes
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No
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If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Yes
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No
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes
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No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:
U.S. GAAP
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International Financial Reporting Standards as issued by the International
Accounting Standards Board
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Other
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If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the Registrant has elected to follow:
Item 17
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Item 18
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If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes
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No
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TABLE OF CONTENTS
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i
PRESENTATION OF CERTAIN INFORMATION
Vitro, S.A.B. de C.V., formerly Vitro, S.A. de C.V., is a corporation (
sociedad anónima
bursátil de capital variable
) organized under the laws of Mexico, and is a holding company that
conducts substantially all of its operations through its subsidiaries. In this annual report,
except when indicated or the context otherwise requires, (a) the words Vitro and our holding
company refer to Vitro, S.A.B. de C.V., and not its consolidated subsidiaries and (b) the words
the Company, we, us, our and ours refer to Vitro, S.A.B. de C.V., together with its
consolidated subsidiaries. References in this annual report to business units are to combinations
of various consolidated entities that have been grouped together for management and presentation
purposes.
References in this annual report to pesos or Ps. are to the lawful currency of the United
Mexican States, which we refer to as Mexico. References to U.S. dollars, dollars or $ are
to dollars of the United States of America, which we refer to as the United States or U.S.
Our consolidated financial statements are prepared in accordance with Mexican Financial
Reporting Standards (Mexican FRS) issued by the Mexican Board for Research and Development of
Financial Reporting Standards (the CINIF), which differs in certain significant respects from
accounting principles generally accepted in the United States, which we refer to as U.S. GAAP.
See note 24 to our consolidated financial statements as of December 31, 2007 and for each of the
three years in the period ended December 31, 2007 which provides a description of the principal
differences between Mexican FRS and U.S. GAAP as they relate to us.
On August 29, 2007, Viméxico, S.A. de C.V. (Viméxico), the holding company for our Flat
Glass business unit, acquired 55% of the outstanding shares of Productos de Valor Agregado en
Cristal, S.A. de C.V. (PVA), a company dedicated to the installation of value-added glass
products.
On July 24, 2007, Viméxico exercised its option to acquire the 50% equity interest of Vitro
AFG, S.A. de C.V. (Vitro AFG) of its joint venture partner AFG Industries (AFG), a subsidiary
of Asahi Glass Co. Limited (a Japanese company), and Vitro AFG became a wholly-owned subsidiary of
Viméxico.
In April 2006, Empresas Comegua, S.A. (Comegua) acquired Vidrios Panameños, S.A. (Vipasa),
a glass container company located in Panama for a purchase price of Ps. 218 million ($20 million).
See Item 4. Information on the CompanyBusinessAcquisitions.
On February 1, 2007, Vitro completed an offering, of $1.0 billion of senior guaranteed notes
(the Initial Notes) principally to refinance existing third-party debt at the Vitro holding
company level, substantially all of the third-party debt at its subsidiary Vitro Envases
Norteamérica, S.A. de C.V. (VENA) and certain third-party debt at subsidiaries of Viméxico. As a
result of this transaction, as of December 31, 2006, Ps. 4,378 million ($403 million) of short-term
borrowings and current maturities were reclassified as long-term debt. In connection with that
offering, we entered into a registration rights agreement with the initial purchasers of the
Initial Notes in which we agreed, among other things, to complete an exchange offer. This exchange
offer was intended to satisfy our obligations under this registration rights agreement. The
holders of the Initial Notes were entitled to exchange in the exchange offer their Initial Notes
for new notes (the Exchange Notes or Notes) which were identical in all material respects to
the Initial Notes except that (i) the Exchange Notes have been registered under the Securities Act.
The Notes are guaranteed by VENA (wholly-owned subsidiary) and its wholly-owned subsidiaries and
by Viméxico (our 91.8% owned subsidiary) and its wholly-owned subsidiaries, and accordingly, as a
non-wholly-owned subsidiary, separate consolidated financial statements of Viméxico and its
subsidiaries set forth in this annual report. (See note 24 to our consolidated financial
statements for supplemental information regarding our guarantor and non-guarantor subsidiaries).
On June 16, 2006, we completed the sale of our 51% equity ownership interest in Vitrocrisa
Holding, S. de R.L. de C.V. and its subsidiaries Crisa Libbey, S.A. de C.V. and Crisa Industrial,
LLC (together, Vitrocrisa) to Libbey, Inc. (Libbey), the owner of the remaining 49% equity
interest. See Item 4. Information on the CompanyBusinessStrategic Sale of Non-Core Businesses
and Assets. Vitrocrisa, which was previously presented as one of our reportable segments is
presented as a discontinued operation. Accordingly, all financial and operating information
relating to Vitrocrisa in this annual report is
presented as a discontinued operation. In addition, the discussion of our indebtedness in this
annual report does not include the indebtedness of Vitrocrisa, which is presented on our
consolidated balance sheets as a part of total liabilities from discontinued operations for
fiscal years 2003, 2004 and 2005.
iii
Certain of our subsidiaries have been classified as discontinued operations as they meet the
definition of held for sale for U.S. GAAP purposes. These subsidiaries did not meet the definition
of discontinued operations for Mexican FRS purposes as they do not constitute the sale of a
significant portion of our business. See note 24 k) to our consolidated financial statements for a
description of those subsidiaries.
This annual report contains translations of certain constant peso amounts into U.S. dollars at
specified rates solely for the convenience of the reader. These convenience translations should not
be construed as representations that the constant peso amounts actually represent such U.S. dollar
amounts or could be converted into U.S. dollars at the specified rate indicated or at all. The
exchange rate used in preparing our consolidated financial statements and in preparing convenience
translations of such information into U.S. dollars is the exchange rate calculated and published by
the Banco de México, or the Mexican Central Bank, in the
Diario Oficial de la Federación
, Mexicos
Daily Official Gazette of the Federal Government, for the conversion of U.S. dollar-denominated
amounts into pesos, which we refer to as the Free Exchange Rate. As of December 31, 2007, the
Free Exchange Rate was 10.8662 pesos per U.S. dollar.
Our consolidated financial statements contained in this annual report are expressed in
constant Mexican pesos as of December 31, 2007. As of January 1, 2008 our financial information
will be presented in nominal pesos in accordance with Mexican FRS. All peso amounts pertaining to
fiscal year 2007 and earlier that are contained in this annual report are restated in constant
pesos as of December 31, 2007, except where otherwise indicated. As of January 1, 2008, our
financial information will be presented in nominal pesos in accordance with Mexican FRS. See Item
5. Operating and Financial Review and ProspectsAccounting ConsiderationsNew Accounting
Pronouncements.
For purposes of this annual report, we consider our export sales to be (a) sales of products
produced by our Mexican subsidiaries to third parties outside Mexico and to our foreign
subsidiaries that do not act as our distributors and (b) sales of products by our foreign
distributor subsidiaries. For purposes of determining the amount of our export sales to be
disclosed, we consider sales to be made at the time of sale to third parties outside Mexico and to
our foreign subsidiaries that do not act as our distributors (principally Vitro America, Inc.,
which we refer to as Vitro America), and at the time of sale of the product by our foreign
subsidiaries that act as our distributors (principally Vitro Packaging, Inc., which we refer to as
Vitro Packaging) to third parties outside Mexico.
Under Mexican corporate law, ordinary shares of our Series A common stock held by our Stock
Option Trust (17,464,614 shares as of April 17, 2008) are considered issued and outstanding and
therefore are entitled to receive dividends and vote on matters on which our other shares are
entitled to vote. However, for accounting purposes, our ordinary shares held by our Stock Option
Trust are considered treasury stock and therefore not outstanding. Thus, for purposes of
calculating net income (loss) from continuing operations per share, net income (loss) from
discontinued operations per share, the cumulative effect of change in accounting principles per
share and diluted and basic net income (loss) per share, as well as for purposes of determining
shareholders equity, we considered our ordinary shares held by our Stock Option Trust as treasury
stock and not outstanding. As of April 17, 2008, 47,541,076 ordinary shares were held by our
Pension Plan Trust. Those ordinary shares are treated as outstanding for all purposes.
We use the term joint venture to refer to companies which are not our wholly-owned
subsidiaries and in which we, directly or indirectly, either have management control or share
management control with other parties. We believe that our use of the term joint venture is
consistent with international business practices. However, our joint ventures are not necessarily
Joint Ventures as defined in International Financial Reporting Standards (IFRS).
Certain amounts included in this annual report may not sum due to rounding.
iv
FORWARD-LOOKING STATEMENTS
This annual report includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate to our future prospects,
developments and business strategies.
These forward-looking statements are identified by our use of terms and phrases such as
anticipate, believe, could, estimate, expect, intend, may, plan, predict,
project, goals, target, strategy and similar terms and phrases, and may include references
to assumptions. These statements are contained in the sections entitled Item 3. Key
InformationRisk Factors, Item 4. Information on the Company, and Item 5. Operating and
Financial Review and Prospects and other sections of this annual report.
These forward-looking statements reflect our best assessment at the time and thus involve
uncertainty and risk. Therefore, these forward-looking statements are qualified by reference to the
cautionary statements set forth in this annual report. It is possible that our future financial
performance may differ materially from our expectations because of a variety of factors, some of
which include, without limitation, the following:
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cost and availability of energy;
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transportation costs and availability;
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consolidation among competitors and customers;
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the general political, economic and competitive conditions in markets and countries
where we have operations, including competitive pricing pressures, inflation or
deflation and changes in tax rates;
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foreign currency exchange fluctuations relative to the U.S. dollar against the
Mexican peso;
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changes in capital availability or cost, including interest rate or foreign
currency exchange rate fluctuations;
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liquidity, debt repayment and access to credit;
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fluctuations in the price of raw materials and labor costs;
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capacity utilization of our facilities;
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availability of raw materials;
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the ability to integrate operations of acquired businesses;
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consumer preferences for forms of packaging that are alternatives to glass
containers;
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the ability to hire and retain experienced management;
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the performance by customers of their obligations under purchase agreements;
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lifting of trade barriers and enforcement of measures against unfair trade
practices;
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the enactment of stricter environmental laws; and
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the timing and occurrence of events which are beyond our control.
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Any forward-looking statements in this annual report are based on certain assumptions and
analysis made by us in light of our experience and perception of historical trends, current
conditions, expected future developments and other factors we believe are appropriate under the
current circumstances. Forward-looking statements are not a guarantee of future performance and
actual results or developments may differ materially from expectations. You are therefore
cautioned not to place undue reliance on such forward-looking statements. While we continually
review trends and uncertainties affecting our results of operations and financial position, we do
not intend to update any particular forward-looking statements contained in this document.
v
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
RECENT DEVELOPMENTS
New Perspectives
Strategic Focus
Commencing in 2001, we began a corporate restructuring and recapitalization program to
strengthen our financial condition and improve our operating results. The program focused on the
sale of our non-core assets and other assets not aligned with the long-term strategy of our core
businesses, Glass Containers and Flat Glass, and stronger financial results from our core business
units.
From 2001 through 2006, we sold our equity interests in a number of non-core businesses,
including the sale of Vitrocrisa, and our interests in real estate parcels, generating aggregate
gross proceeds of approximately $560 million. These transactions provided a source of cash that was
used primarily to reduce our level of debt.
Over the past 5 years, we also improved the profitability of our core business units, and from
2003 to 2007, our operating income increased from Ps. 1,977 million ($182 million) to Ps. 2,704
million ($249 million), an increase of 37%.
In addition, in October 2006, we completed a rights offering of our common stock, which
further strengthened our balance sheet by increasing the variable portion of our common stock by
Ps. 550 million (nominal) ($50 million).
Debt Refinancing
In February 2007, based upon the success of implementing our strategic program, we completed
the sale of $1.0 billion senior notes, comprised of $300 million 8.625% Senior Notes due 2012 (the
2012 Senior Notes) and $700 million 9.125% Senior Notes due 2017 (the 2017 Senior Notes). In
our Senior Notes offering, we achieved more favorable terms and conditions in our overall debt,
including lengthening the average maturity of our debt and reducing interest rates, which lowered
our cost of capital, improved cash flows and established a path for solid growth of our businesses.
Substantially all of the net proceeds from the offering were used to refinance our outstanding
short-term indebtedness and substantially all of our long-term debt, other than our 11.75% Senior
Notes due 2013 (the 2013 Senior Notes). As a result of this transaction, as of December 31, 2006,
Ps. 4,378 million ($403 million) of short-term borrowings and current maturities were reclassified
as long-term debt and the average life of our indebtedness was extended from 3.3 years to 7.9
years.
Strategic Growth
Starting in 2006, we sought to expand our businesses by increasing our production capacity and
by completing small growth opportunities. Our capital expenditures in 2006 were Ps. 1,252 million
($115 million), which we further increased in 2007 to Ps. 2,695 million ($248 million). These
capital expenditures were used primarily for deferred maintenance and improvements of our major
furnaces as well as for expansion of our capacity to satisfy organic growth from the increased
volume of demand for our Glass Containers products.
From 2006 to May 2008, we completed a number of small acquisitions, for approximately Ps. 550
million ($51 million), most significantly, Vipasa in Central America, the minority interests in
Vitro Flex and Vitro AFG from our former joint venture partners, a 55% equity interest in PVA, and
a business in France through our subsidiary Vitro Cristalglass S.L. (Vitro Cristalglass).
1
Genesis Project
We are still in the process of transforming our management, operational and reporting
processes through the implementation of an enterprise wide process model, which we refer to as the
Genesis Project. The objective of the Genesis Project is to transform Vitros global operating
model
to a results-oriented, client-focused model.
As part of the Genesis Project, we are implementing a fully integrated enterprise resource
planning, or ERP, system using software from SAP AG, or (SAP).
We believe the main strategic benefits of the Genesis Project will be to:
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Standardize and optimize our operating and administrative processes,
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Facilitate the integration of our operations globally,
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Improve and maintain compliance with regulatory requirements regarding effective
internal control over financial reporting,
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Standardize management and operational information across our subsidiaries in Mexico
and abroad, enhancing also its availability for decision making at all levels of the Vitro
organization,
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Establish, integrate and apply best practices standards in our operations, and
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Continue our strategy of pursuing consistent and integrated growth globally.
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As part of this project we are implementing a shared service center in Monterrey, Mexico,
which we believe will allow us to centralize certain standard operations of our businesses and
realize cost savings through economies of scale by the standardization of similar processes within
our businesses. With this shared service center we believe we can accomplish or surpass the
expectations of internal and external customers in a timely manner and improve the services we have
provided in the past.
The Genesis Project, which started in 2006, is being implemented throughout all the Companys
businesses and will be completed in two phases. Through the end of 2007, we have invested
approximately Ps. 423 million ($39 million) in this project.
See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital
ResourcesGenesis Project for a detail of the costs of implementing this Project.
2
RISK FACTORS
You should carefully consider the following risk factors, as well as all of the other
information presented in this annual report, including our consolidated financial statements and
the notes thereto. In general, investing in the securities of issuers in emerging market countries
such as Mexico involves certain risks not typically associated with investing in securities of U.S.
companies.
The risks and uncertainties described below are not the only risks and uncertainties affecting
us. Additional risks and uncertainties that we do not know about or that we currently think are
immaterial also may impair our business operations or our ability to make payments under our
existing indebtedness.
For purposes of this section, when we state that a risk, uncertainty or problem may, could or
would have an adverse effect on us, we mean that the risk, uncertainty or problem may, could or
would have an adverse effect on our business, financial condition, liquidity, results of operations
or prospects, except as otherwise indicated or as the context may otherwise require.
RISK FACTORS RELATING TO US
We have high interest payment requirements.
On February 1, 2007, we completed a major refinancing program by virtue of which we refinanced
substantially all of our indebtedness under improved terms and conditions. See Item 3. Key
Information Recent DevelopmentsNew Perspectives and Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesFinancing Transactions. Although the refinancing program
reduced our interest expense and extended our debt maturities, we continue to have high interest
payment requirements. As of December 31, 2007, our total consolidated indebtedness was Ps. 14,918
million ($1,373 million) and our consolidated off-balance sheet financings, related to our
receivable securitization and sale of receivable transactions, were Ps. 1,509 million ($139
million). Our interest expense on debt for the year ended December 31, 2007 was Ps. 1,696 million
($156 million), while our operating income was Ps. 2,704 million ($249 million). After the
refinancing program, our average interest rate was reduced.
Our ability to make scheduled interest payments when due depends on, and is subject to,
several factors, including our financial and operating performance, which is subject to prevailing
economic conditions and financial, business and other factors.
The amount of our interest payment requirements could adversely affect our business in a
number of ways, including but not limited to, the following:
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we may have less cash available to expand and improve our business, since we
are required to dedicate a significant portion of our cash flow from operations to the
payment of interest on our debt;
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our ability to obtain additional debt financing may be limited and the terms on
which such financing is obtained may be negatively affected; and
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our ability to compete effectively against better-capitalized competitors and
to withstand downturns in our business may be affected since a significant portion of
our cash flow from operations is required to be dedicated to making interest payments.
As a result, we may lose market share and experience lower sales, which, in turn, could
result in a material adverse effect on our financial condition, results of operations
and liquidity.
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Our indentures contain certain restrictive covenants.
Our current indentures that govern the terms of our indebtedness contain certain restrictive
covenants that are customary for similar indebtedness. Such covenants include restrictions on our
ability to (i) incur additional indebtedness unless, at the time of incurrence, we satisfy certain
conditions, (ii) pay dividends above a certain permitted amount or make other restricted payments,
(iii) grant certain liens on our assets, (iv) make certain investments, and (v) take part in
certain merger, consolidation, and asset sale transactions.
3
As of December 31, 2007, under the covenants of our current indentures, we are prohibited from
incurring additional debt (other than certain permitted exceptions) and from making certain
investments (other than certain permitted investments).
The restrictions in our indentures could limit our flexibility to adjust to changes in our
business and the industries in which we operate and/or limit our ability to fund future operations,
acquisitions or meet extraordinary capital needs.
We have to pay interest and principal on our dollar-denominated debt with revenues generated in
pesos or other currencies, as we do not generate sufficient revenue in dollars from our operations.
As of March 31, 2008, 96% of our outstanding debt was denominated in dollars. This debt must
be serviced by funds generated from sales by our subsidiaries. We do not generate sufficient
revenues in dollars from our operations to service our entire dollar denominated debt.
Consequently, we have to use revenues generated in pesos or other currencies to service our dollar
denominated debt. A devaluation of the peso against the dollar could adversely affect our ability
to service our debt.
As of March 31, 2008, we have entered into swap arrangements under which all interest
payments, until 2012, on $500 million principal amount of our outstanding debt were swapped from a
fixed dollar rate to a variable peso rate and interest payments on another $500 million principal
amount of our outstanding debt were swapped from a fixed dollar rate to a fixed peso rate. In the
ordinary course of business, we also enter into currency swap and option agreements to hedge our
exposure to foreign currency exchange rate variations.
We cannot assure that in the future these instruments will be available on favorable terms to
us, if at all, to fully hedge our exposure. See Item 11. Quantitative and Qualitative Disclosures
About Market Risk.
We have experienced rising operating costs in our businesses.
Some of the components of our cost of goods sold are subject to market price variations. For
instance, our total energy cost represented 15% of our consolidated cost of goods sold in 2007.
Such cost is directly linked to the price of natural gas which has experienced significant
increases in recent years due to, among other things, the effects of hurricanes in the production
area of the Gulf of Mexico. NYMEX natural gas prices have increased from an average price of $3.22
per million British Thermal Units (MMBTU), during 2003 to an average price of $7.12 per MMBTU
during 2007, representing an increase of 120%. Since the price of natural gas in Mexico is tied to
the price of natural gas in Southern Texas, which in turn is fully exposed to market factors such
as demand in the United States or the amount of available natural gas reserves, we are exposed to
such price variations. Other potential sources of significant variations in our costs are packaging
and freight costs.
Our cost of goods sold is sensitive to the price of natural gas. Every dollar fluctuation per
MMBTU has had an annual impact of approximately $20 million on our cost of goods sold based on our
average historical consumption of approximately 1.7 million MMBTUs per month. The closing price of
natural gas on the New York Mercantile Exchange (NYMEX) as of June 23, 2008 was $13.20 per MMBTU.
We have not been able to raise the prices of our products to fully reflect the increases in our
operating costs and therefore our results of operations could be adversely affected by continued
high prices of natural gas.
In the ordinary course of business, we enter into forwards and other derivatives agreements to
hedge our exposure to natural gas price variations. However, we cannot assure you that these
instruments will be available on favorable terms to us, if at all, to fully hedge our exposure to
such variations. See Item 11. Quantitative and Qualitative Disclosures About Market Risk.
We continue to experience competition from our global competitors and vertically integrated
customers.
Historically, aggressive investment by our global competitors such as Compagnie de Saint
Gobain (Saint Gobain) and Guardian Industries Corporation (Guardian), and vertically integrated
customers with glass manufacturing facilities in Mexico, coupled with the increased imports of
low-cost competitive products into several of our important markets, has resulted in an increase in
capacity that has brought significant pricing pressure on our products, particularly in our Flat
Glass construction market where the industry is faced with over-capacity. Similarly, our
competitors may make new investments in Mexico in the glass containers market. Loss of existing or
future market share to competitors or customers in any of our business units may adversely affect
our performance and, to the extent that one or more of our competitors becomes more successful than
us with respect to any key competitive factor, our results of operations, financial position and
liquidity may be adversely affected.
4
Difficult market conditions in the automotive industry may affect our operating margins and results
of operations.
The North American automotive industry continues to face difficult market conditions. North
American automobile manufacturers have experienced slower demand and increased pricing pressures on
their products. These difficult market conditions in the automotive industry may continue to lead
to additional pricing pressure on our products and may lead to loss of sales volume, either of
which may have an adverse effect on us. In addition, the automotive industry has experienced
pressures due to increased oil prices which could decrease of our original equipment manufacturers
(OEMs) business sales, as the U.S. demand in the automobile sector has declined.
Certain of our flat glass products sold to OEMs in the automotive industry are sold under
global purchase agreements, which are entered into after completion of a bidding process. Such
automotive OEMs have significant buying power which, coupled with substantial competition, puts
pressure on prices and margins relating to products supplied under the global purchase agreements.
As a result, even if we were awarded the right to sell to an automotive OEM under a global purchase
agreement, we may sell at operating margins that are lower than margins generally achievable from
sales to other flat glass customers. The automotive OEM business line represented 8% of our
consolidated net sales for the year ended December 31, 2006 and 9% for the year ended December 31,
2007.
We have customers that are significant to us and the loss of all or a portion of their business
would have an adverse effect on us.
Because of the relative importance of our largest customers, our business is exposed to a
certain degree of risk related to customer concentration. Although no single customer accounted for
more than 8% of our consolidated net sales in 2007, we have customers that are significant to our
business units. Our three largest customers, who serve different markets, accounted for an
aggregate of 14% of our consolidated net sales in 2007. Given that our profitability depends on our
maintenance of a high capacity utilization rate, the loss of all or a portion of the sales volume
from a significant customer would have an adverse effect on us. Among our most significant
customers are automotive OEMs and beer and soft-drink bottlers. One of our main customers has
vertically integrated operations and therefore, a capacity increase in its glass production could
adversely affect our results of operations.
Downturns in the economies in which we operate may negatively affect the demand for our products
and our results of operations.
Demand for our flat glass and glass containers products is affected by general economic
conditions in the markets in which we operate, principally Mexico, the United States and Europe. As
a result, demand for our products and, consequently, our results of operations have been and may be
negatively affected by the downturn in the economies in which we operate.
A downturn in the Mexican economy, from which we derived 43% and 44% of our consolidated net
sales for the year ended December 31, 2006 and 2007, respectively, would reduce the demand for our
products and negatively impact our results of operations. Similarly, a prolonged economic downturn
in the United States, from which we derived 43% and 37% of our consolidated net sales in 2006 and
2007, respectively, would have an adverse impact on the export and foreign subsidiary sales of our
Flat Glass and Glass Containers business units. Furthermore, in recent years, economic conditions
in Mexico have become increasingly correlated to economic conditions in the United States.
Therefore, adverse economic conditions in the United States could have a significant adverse effect
on the Mexican economy. Also, in the past, economic crises in Asia, Russia, Brazil, Argentina and
other countries have adversely affected the Mexican economy and therefore our results of
operations.
Economic downturns in Mexico and the United States may also subject us to increased foreign
currency exchange rate and interest rate risks and impair our results of operations and our ability
to raise capital or service our debt.
5
Inflation fluctuations may have an adverse effect on our total comprehensive financing result.
Our total comprehensive financing results includes net interest expense, the net effect of
inflation on our monetary assets and liabilities (which, as discussed below, applies only for
inflationary environments beginning on January 1, 2008 according to the new Mexican FRS B-10,
Effects of Inflation), the net effect of changes in nominal foreign currency exchange rates on
monetary assets and liabilities denominated in foreign currencies and gains or losses related to
some of our derivative transactions.
Inflation has historically affected our total comprehensive financing result. During periods
of inflation, the principal amount of our monetary debt will generally be reduced in real terms by
the rate of inflation. The amount of such reduction will result in a gain from monetary position.
This gain is offset by the reduction in real terms in the value of the monetary assets we held
during such period. Historically, our monetary liabilities have exceeded our monetary assets and,
thus, we have tended to experience monetary gains during periods of inflation. Declining levels of
inflation in recent years have resulted in lower monetary gains.
The new Mexican FRS B-10, which became effective for fiscal years beginning on January 1,
2008, provides that, in non-inflationary environments (when cumulative inflation of the three
preceding years is less than 26%), no inflationary effects should be recognized in a companys
financial statements. Given the cumulative inflation in Mexico for the three years ended December
31, 2007, the Mexican economic environment will not qualify as inflationary in 2008, thereby
eliminating inflationary accounting in our consolidated financial statements. See Item 5.
Operating and Financial Review and ProspectsOperating ResultsTrend InformationInflation and
Foreign Currency Exchange Rate Fluctuations and New Accounting Pronouncements.
Foreign currency exchange rate fluctuations may have an adverse effect on our total comprehensive
financial result.
Our total comprehensive financing result is impacted by changes in the nominal value of the
peso relative to the U.S. dollar. Foreign currency exchange gains or losses included in our total
financing cost result primarily from the impact of nominal changes in the U.S. dollar-peso exchange
rate on our Mexican subsidiaries U.S. dollar-denominated monetary liabilities (such as U.S.
dollar-denominated debt and accounts payable arising from imports of raw materials and equipment)
and assets (such as U.S. dollar-denominated cash, cash equivalents and accounts receivable).
Because our U.S. dollar-denominated monetary liabilities have historically been significantly in
excess of our U.S. dollar-denominated monetary assets, the nominal devaluation or appreciation of
the peso relative to the U.S. dollar has historically resulted in foreign currency exchange losses
and gains, respectively. Accordingly, in 2003, 2006 and 2007, the nominal devaluation of the peso
relative to the U.S. dollar during the year resulted in foreign currency exchange losses. The
nominal appreciation of the peso relative to the U.S. dollar resulted in a foreign currency
exchange gain in 2004 and 2005. In May 2004, with the unwinding of certain currency exchange swaps
we recorded a net exchange loss.
As of March 31, 2008, we have entered into swap arrangements under which all interest
payments, until 2012, on $500 million principal amount of our outstanding debt were swapped from a
fixed dollar rate to a variable peso rate and interest payments on another $500 million principal
amount of our outstanding debt were swapped from a fixed dollar rate to a fixed peso rate. In the
ordinary course of business, we also enter into currency swap and option agreements to hedge our
exposure to foreign currency exchange rate variations.
We cannot assure you that these instruments or other currency swap and option agreements will
be available at favorable terms to us, if at all, to fully hedge our exposure. See Item 11.
Quantitative and Qualitative Disclosures About Market Risk.
Changes in the value of the peso to the U.S. dollar and the Euro may have an adverse effect on us.
Changes in the value of the peso to the U.S. dollar have an effect on our results of
operations. In general, as described more fully in the following paragraphs, a real devaluation of
the peso will likely result in an increase of our operating margins and a real appreciation of the
peso will likely result in a decrease in our operating margins, in each case, when measured in
pesos. This is so because the aggregate amount of our consolidated net sales denominated in or
linked to U.S. dollars exceeds the aggregate amount of our
costs of goods sold and our general, administrative and selling expenses denominated in or
linked to U.S. dollars.
6
A substantial portion of the sales generated by our Mexican and U.S. subsidiaries are either
denominated in or linked to the value of the U.S. dollar. The prices of a significant number of the
products we sell in Mexico, in particular those of flat glass for automotive uses, capital goods
and packaging products are linked to the U.S. dollar. In addition, substantially all of our export
sales are invoiced in U.S. dollars and subsequently translated into pesos using the exchange rate
in effect at the time of the transaction.
Further, a strong peso relative to the U.S. dollar makes the Mexican market more attractive
for importers and competitors that might not otherwise sell in the Mexican market. A strong peso
relative to the U.S. dollar also makes those of our products whose prices are denominated in or are
linked to the value of the U.S. dollar less competitive or profitable. When the peso appreciates in
real terms, with respect to such products, we must either increase our prices in U.S. dollars,
which make our products less price-competitive, or bear reduced operating margins when measured in
pesos. Given the competitive nature of the industries in which we operate, in the past we have had
to reduce our operating margins for such products in response to appreciation of the peso relative
to the U.S. dollar.
The sales generated by our Spanish subsidiary in our European operations are either
denominated in or linked to the value of the Euro, while its cost of goods sold is denominated in
or linked to U.S. dollars. Changes in the value of the U.S. dollar to the Euro may have an adverse
effect on us in a similar fashion to those described with respect to the value of the peso above.
We may be adversely affected by increases in interest rates.
Interest rate risk exists primarily with respect to our floating-rate peso and
dollar-denominated debt, which generally bear interest based on the Mexican equilibrium interbank
interest rate, which we refer to as the TIIE, or the London interbank offered rate, which we
refer to as LIBOR. If the TIIE or LIBOR rates increase significantly, our ability to service our
debt will be adversely affected.
As of December 31, 2007, our floating-rate peso and dollar-denominated debt amounted to Ps.
366 million and $34 million. As of March 31, 2008, we entered into swap arrangements under which
all interest payments, until 2012, on $500 million principal amount of our outstanding debt were
swapped from a fixed dollar rate to a variable peso rate.
We cannot assure you that these instruments will continue to be favorable to us or if other
instruments will be available at favorable terms to us, if at all, to fully hedge our exposure. See
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
The costs of complying with environmental protection and health and safety laws, and any
liabilities arising thereunder, may increase and adversely affect our business, results of
operations, cash flows or financial condition.
We are subject to various environmental protection, health and safety laws and regulations
governing, among other things, the generation, storage, handling, use, remediation, disposal and
transportation of hazardous materials, the emission and discharge of hazardous materials into the
ground, air or water, and the health and safety of our employees.
We are also required to obtain permits from governmental authorities for certain operations.
We cannot assure you that we have been or will be at all times in complete compliance with such
laws, regulations and permits. If we violate or fail to comply with these laws, regulations or
permits, we could be fined or otherwise sanctioned by regulators. We could also be held liable for
any and all consequences arising out of human exposure to hazardous substances or other
environmental damage.
Since 1998, we have been participating in a voluntary audit program at our Mexican facilities.
As a result of audits by and implementation of certain measures suggested by the
Procuraduría
Federal de Protección al Ambiente
(PROFEPA), action plans are entered into, and costs are
incurred, to make environmental investments and improvements required for PROFEPA Clean Industry
certification.
7
Environmental laws are complex, change frequently and have tended to become more stringent
over time. While we have budgeted for future capital and operating expenditures to maintain
compliance with
environmental laws, we cannot assure you that environmental laws will not change or become
more stringent in the future. Therefore, we cannot assure you that our costs of complying with
current and future environmental, health and safety laws, and our liabilities arising from past or
future releases of, or exposure to, hazardous substances will not adversely affect our business,
results of operations, cash flow or financial condition. See Item 4. Information on the
CompanyBusinessEnvironmental Matters.
Substitution trends in the glass container industry may continue to adversely affect our business.
Glass containers have been, and continue to be, subject to competition from alternate forms of
packaging, including plastic containers, aluminum cans and laminated paper containers. In mature
glass containers markets, such as in the United States, demand for glass containers began a
sustained long-term decline in the 1970s (although such decline has substantially diminished in
recent years). In connection with such decline, the glass containers industry experienced a
reduction in capacity and consolidation among glass container producers. The remaining glass
containers producers in mature markets have faced, and may continue to face, pricing pressures as a
result of competition from other forms of packaging. Mexico is becoming a mature market, with
increased competition from alternate forms of packaging, particularly plastic, aluminum cans and
laminated paper containers. Such products have adversely affected, and may continue to adversely
affect, our prices and operating margins, principally with respect to glass containers for the
beer, soft drinks and food industries. Our Glass Containers business unit represented 51% of our
consolidated net sales in 2007.
If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results or prevent fraud.
We are focused on improving and maintaining an effective internal control structure. During
2005, 2006 and 2007 we implemented new controls and procedures related to the preparation, review
and presentation of our financial information. These measures include the following modifications
to our internal controls:
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reinforcement of personnel knowledge base regarding technical accounting
matters;
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hiring a professional service firm to assist our accounting staff with the
implementation of superior processes and new internal controls; and
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Genesis Project implementation, including the ERP conversion, across Vitros
global operating model. See Item 3. Key InformationRecent DevelopmentsGenesis
Project and Item 15. Controls and Procedures.
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There can be no assurance that the implementation of our new internal controls, including the ERP,
will be completed without unforeseen challenges or significant additional expenditures. In
addition, any unremediated internal control deficiencies may reduce our ability to provide accurate
financial information to our investors.
8
We have a disagreement with our partner in our Flat Glass business unit about the merger of Vitro
Plan into Viméxico, which may affect the value of the guaranty of the 2012 Senior Notes, 2017
Senior Notes, and 2013 Senior Notes by our Flat Glass business unit.
On December 11, 2006 the shareholders of Vitro Plan concluded the extraordinary meeting upon a
second call to approve the merger of Vitro Plan into Viméxico. Viméxico, a subsidiary of Vitro,
held a $135 million loan receivable from Vitro Plan. At the meeting, resolutions were adopted
approving (a) the merger of Vitro Plan into Viméxico based on financial information as of October
31, 2006, with Viméxico as the surviving entity, and (b) the cancellation upon delivery of existing
Vitro Plan stock certificates in exchange for Viméxico stock certificates, using a ratio of
7.19319816 shares of Viméxico common stock per share of Vitro Plan common stock.
Prior to the merger, Vitro Plan was a direct 65%-owned subsidiary of Vitro, and the company
through which Vitro conducted its Flat Glass business. As a result of the merger, Viméxico is a
direct 91.8%-owned subsidiary of Vitro. Prior to the merger, Pilkington Plc, which we refer to as
Pilkington, owned a 35% equity interest in Vitro Plan and, as a result of the merger, owns an
8.2% equity interest in Viméxico. Pilkington voted against the adoption of the shareholder
resolutions approving the merger. Under the merger, the outstanding $135 million intercompany
indebtedness owed by Vitro Plan was cancelled, reducing the debt of Viméxico, as the surviving
party to the merger to a level that could more readily be supported by its cash flow from
operations.
On January 16, 2007, Pilkington commenced litigation, challenging and opposing, among other
claims, the resolutions adopted at the December 11, 2006 extraordinary meeting approving the
merger. On February 28, 2008, the court denied all of Pilkingtons claims and declared the merger
valid. Pilkington has filed an appeal of this decision which on
June 26, 2008 was resolved by the Appeals Court confirming the
denial of all claims by Pilkington and ratifying in all aspects the
decision issued by the lower court, including, as a consequence, the
validity of the Merger and the obligation to pay litigation costs and
attorneys fees. However, Pilkington still has on last
opportunity to challenge such rulings through an Amparo
procedure (which is a constitutional challenge held before a federal
court).
Additionally, on December 6, 2007, Pilkington commenced another litigation, alleging, among
other claims, that the December 11, 2006 extraordinary meeting was invalid and, therefore, the
resolutions adopted at such meeting and the merger agreement are invalid. This litigation is at an
early stage and we do not expect any decision by the courts during 2008.
In the event these proceedings ultimately result in the merger being declared not effective,
the guarantee by Viméxico of the 2012 Senior Notes, the 2017 Senior Notes and the 2013 Senior
Notes, could not include any of the assets owned by Vitro Plan. It is also possible that such
determination could include a determination that the guarantees provided by the subsidiaries of
Vitro Plan are also ineffective. Vitro believes, based on the advice of Rivera, Gaxiola y
Asociados, S.C., our Mexican special litigation counsel, that the merger of Vitro Plan into
Viméxico complied with all applicable legal requirements, specifically the by-laws of Vitro Plan
and the Mexican General Law of Mercantile Corporations and, as a result, that the risk that the
merger between Vitro Plan and Viméxico is reversed, nullified, voided or set aside is minimal. Even
if the shareholder resolutions approving the merger were to be set aside and the guarantee by Vitro
Plan determined to be ineffective, such Mexican special litigation counsel has advised us that it
believes that it is likely that substantially all of the guarantees of the 2012 Senior Notes, the
2017 Senior Notes and the 2013 Senior Notes granted by the subsidiaries of Vitro Plan would
nonetheless remain in effect.
If any of the guarantees referred to above were to be determined to be ineffective or avoided,
the 2012 Senior Notes, the 2017 Senior Notes, and the 2013 Senior Notes would be effectively junior
to all liabilities of Vitro Plan and any of its subsidiaries whose guarantee was thereby avoided.
RISK FACTORS RELATING TO ECONOMIES IN WHICH WE PARTICIPATE
Economic developments in Mexico and the United States affect our business.
The year 2007 was characterized by a slowdown in global economic activity compared to 2006.
After three years of solid and generalized growth, the world economy decelerated. Global GDP grew
3.3% in 2007, below the 3.9% growth rate in 2006, according to International Monetary Fund
research. The main cause of this economic slowdown is attributed to the United States economy, due
to the growth decline
from 3.3% in 2006 to 2.2% in 2007. This deceleration is expected to continue in 2008 in the
United States mainly due to the weakening of the real estate sector.
9
The real estate and construction market in the United States is now being seriously affected
by the sub-prime mortgage crisis, which is also affecting the economy overall. The growth in
housing sales and construction financed by credit played a large role in the economys expansion by
lifting other sectors of the economy. Losses on subprime mortgages have negatively affected not
only the housing and construction markets but other sectors and the availability of credit
generally. Increased foreclosures could generate increased inventory on the housing market which
could affect our residential and commercial construction sales. See Item 5. Operating and
Financial Review and ProspectsOperating ResultsTrend Information.
In Mexico, GDP growth reached 3.3%, below the 4.7% growth rate in 2006. For 2008 additional
economic uncertainties are anticipated due to, among other factors, the economic deceleration in
the United States.
Over the past few years, Mexicos rate of inflation has remained low, amounting to 4.1% in
2006 and 3.8% in 2007.
The majority of our manufacturing facilities are located in Mexico. For each of the years
ended December 31, 2005, 2006 and 2007, 41%, 43% and 44%, respectively, of our consolidated net
sales resulted from sales to parties located within Mexico. In the past, inflation has led to high
interest rates on peso-denominated obligations and devaluations of the peso.
While helping the country to maintain low levels of inflation and a manageable deficit, the
Mexican governments continued fiscal and monetary policy has not provided the flexibility
necessary to support Mexicos economic improvement. As a result, new investment and growth in
aggregate purchasing power have been marginal. Several factors could affect the growth of Mexicos
economy and its industrial sector. These factors include the extent of the U.S. economic growth and
the participation of Mexicos industrial sector in such growth; the Mexican governments approval
and implementation of fiscal and other structural reforms such as the evolution of energy prices,
particularly natural gas; and the current political environment.
Future economic development in or affecting Mexico or the United States could adversely affect
us and our ability to obtain financing.
Developments in other countries may adversely affect our business or the market price of our
securities.
The market price of securities of Mexican companies is, to varying degrees, affected by
economic and market conditions in other countries. Although economic conditions in such countries
may differ significantly from economic conditions in Mexico, investors reactions to developments
in such countries may have an adverse effect on the market price of securities of Mexican
companies, including ours.
If foreign currency exchange controls and restrictions are imposed, we may not be able to service
our debt in U.S. dollars, which exposes investors to foreign currency exchange risk.
In the past, the Mexican economy has experienced balance of payments deficits, shortages in
foreign currency reserves and other problems that have affected the availability of foreign
currencies in Mexico. The Mexican government does not currently restrict or regulate the ability of
persons or entities to convert pesos into U.S. dollars. However, it has done so in the past and
could do so again in the future. We cannot assure you that the Mexican government will not
institute a restrictive currency exchange control policy in the future. Any such restrictive
foreign currency exchange control policy could prevent or restrict access to U.S. dollars and limit
our ability to service our U.S. dollar-denominated debt.
Political events in Mexico could affect Mexican economic policy and adversely affect us.
The Mexican government has exercised, and continues to exercise, significant influence over
the Mexican economy. Mexican governmental actions concerning the economy could have a significant
impact on Mexican private sector entities in general, as well as on market conditions and prices
and returns on Mexican securities, including our securities.
10
The current legislature and Mr. Felipe Calderon Hinojosa, President of Mexico, may bring
significant changes in laws, public policies and/or regulations that could adversely affect
Mexicos political and economic situation, which could adversely affect our business. Social and
political instability in Mexico or other adverse social or political developments in or affecting
Mexico could adversely affect us and our ability to obtain financing. It is also possible that
political uncertainty may adversely affect Mexican financial markets.
Mr. Calderon recently presented to the Mexican Congress an energy reform proposal. This energy
reform proposal intends to provide PEMEX sufficient administrative and financial autonomy, through
several mechanisms, in order to strengthen its financial position and preserve PEMEXs future
operations.
We cannot provide any assurance that future political developments in Mexico, over which we
have no control, will not have an unfavorable impact on Mexican private sector entities in general,
as well as on market conditions and prices and returns on Mexican securities, including our
securities.
Social Instability in Mexico could affect Mexican economic policy and adversely affect us
In 2007, some incidents occurred at certain PEMEX gas pipelines located in Salamanca,
Guanajuato and other counties in Veracruz, Mexico. Such incidents disrupted the natural gas supply
to companies in Mexico. As a consequence, several companies including us and some of our clients
and suppliers suffered a temporary shut-down in operations. The possibility of having similar
incidents in the future could adversely affect our business and operations.
Our financial statements may not give you the same information as financial statements prepared
under United States accounting principles.
Mexican companies listed on the Bolsa Mexicana de Valores, which we refer to as the Mexican
Stock Exchange, including us, must prepare their financial statements in accordance with Mexican
FRS. Mexican FRS differs in certain significant respects from the U.S. GAAP as it relates to our
consolidated financial statements, including among others the treatment of minority interests,
workers profit sharing; accounting for the effects of deferred income taxes and consolidation of
subsidiaries. For these and other reasons, the presentation of financial statements and reported
earnings prepared in accordance with Mexican FRS may differ materially from the presentation of
financial statements and reported earnings prepared in accordance with U.S. GAAP. See note 24 to
our audited consolidated financial statements included elsewhere in this annual report for a
description of the principal differences between Mexican FRS and U.S. GAAP.
11
EXCHANGE RATES
The following table sets forth, for each year in the five year period ended December 31, 2007,
the high, low, average and annual period-end Noon Buying Rates, all expressed in pesos per U.S.
dollar. No representation is made that the peso or U.S. dollar amounts referred to in this annual
report could have been or could be converted into U.S. dollars or pesos, as the case may be, at the
rates indicated, at any particular rate or at all.
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Noon Buying Rate
(1)
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Year ended December 31,
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High
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Low
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Average
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Period-End
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2003
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Ps.
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11.41
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Ps.
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10.11
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Ps.
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10.80
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Ps.
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11.24
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2004
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11.64
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10.81
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11.29
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11.15
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2005
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11.41
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10.41
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10.89
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10.63
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2006
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11.46
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10.43
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10.91
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10.80
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2007
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11.27
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10.67
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10.93
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10.92
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(1)
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Source: Federal Reserve Bank of New York
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The following table sets forth, for each month in the six-month period ended on May 31, 2008
and the first 23 days of June, the high and low Noon Buying Rates, all expressed in pesos per U.S.
dollar.
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Noon Buying Rate
(1)
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High
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Low
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December 2007
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Ps.
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10.92
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Ps.
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10.80
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January 2008
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10.97
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10.82
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February
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10.82
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10.67
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March
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10.85
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10.63
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April
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10.60
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10.44
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May
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10.57
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10.31
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|
June (through June 23, 2008)
|
|
|
10.44
|
|
|
|
10.27
|
|
|
|
|
(1)
|
|
Source: Federal Reserve Bank of New York
|
12
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected consolidated financial information and other data for
each of the periods presented. This information and data should be read in conjunction with, and is
qualified in its entirety by reference to, our consolidated financial statements and the notes
thereto included elsewhere in this annual report and the information under the section entitled
Item 5. Operating and Financial Review and Prospects as it relates to 2005, 2006 and 2007. The
years ended December 31, 2003 and 2004 are derived from our audited financial statements not
included in this annual report. Our consolidated financial statements are prepared in accordance
with Mexican FRS, which differs in certain significant respects from U.S. GAAP. note 24 to our
consolidated financial statements for the year ended December 31, 2007 provides a description of
the principal differences between Mexican FRS and U.S. GAAP as they relate to us.
Financial data expressed in pesos and set forth in the following table for each year in the
five year period ended December 31, 2007 has been restated in millions of constant pesos as of
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
(Ps. millions)
(1)
|
|
|
($ millions)
(1)(2)
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
26,521
|
|
|
Ps.
|
26,385
|
|
|
Ps.
|
26,567
|
|
|
Ps.
|
27,876
|
|
|
Ps.
|
28,591
|
|
|
$
|
2,631
|
|
Cost of sales
|
|
|
18,920
|
|
|
|
19,109
|
|
|
|
19,198
|
|
|
|
20,230
|
|
|
|
20,187
|
|
|
|
1,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
7,602
|
|
|
|
7,276
|
|
|
|
7,369
|
|
|
|
7,646
|
|
|
|
8,404
|
|
|
|
773
|
|
Selling, general and administrative expenses
|
|
|
5,625
|
|
|
|
5,643
|
|
|
|
5,530
|
|
|
|
5,529
|
|
|
|
5,700
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,977
|
|
|
|
1,632
|
|
|
|
1,839
|
|
|
|
2,117
|
|
|
|
2,704
|
|
|
|
249
|
|
Financing result:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
2,025
|
|
|
|
2,204
|
|
|
|
2,355
|
|
|
|
2,155
|
|
|
|
1,836
|
|
|
|
169
|
|
Derivative financial instruments
|
|
|
0
|
|
|
|
0
|
|
|
|
17
|
|
|
|
337
|
|
|
|
201
|
|
|
|
18
|
|
Exchange loss (gain), net
|
|
|
844
|
|
|
|
90
|
|
|
|
(417
|
)
|
|
|
224
|
|
|
|
94
|
|
|
|
9
|
|
Gain from monetary position
(3)
|
|
|
(633
|
)
|
|
|
(776
|
)
|
|
|
(455
|
)
|
|
|
(440
|
)
|
|
|
(471
|
)
|
|
|
(43
|
)
|
Total comprehensive financing result
|
|
|
2,235
|
|
|
|
1,518
|
|
|
|
1,500
|
|
|
|
2,276
|
|
|
|
1,660
|
|
|
|
153
|
|
Other expenses (income), net
(4)
|
|
|
208
|
|
|
|
279
|
|
|
|
494
|
|
|
|
(229
|
)
|
|
|
869
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income and asset taxes
|
|
|
(466
|
)
|
|
|
(165
|
)
|
|
|
(155
|
)
|
|
|
70
|
|
|
|
175
|
|
|
|
16
|
|
Income and asset tax expense (benefit)
|
|
|
47
|
|
|
|
(9
|
)
|
|
|
(519
|
)
|
|
|
228
|
|
|
|
44
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations before changes
in accounting principles
|
|
|
(513
|
)
|
|
|
(156
|
)
|
|
|
364
|
|
|
|
(158
|
)
|
|
|
131
|
|
|
|
12
|
|
Net income (loss) from discontinued operations
(5)
|
|
|
64
|
|
|
|
97
|
|
|
|
3
|
|
|
|
(31
|
)
|
|
|
0
|
|
|
|
0
|
|
Gain on sale of discontinued operations
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
480
|
|
|
|
0
|
|
|
|
0
|
|
Cumulative effect of changes in accounting
principles
(11)
|
|
|
0
|
|
|
|
0
|
|
|
|
(124
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Net income (loss)
(5)
|
|
|
(449
|
)
|
|
|
(59
|
)
|
|
|
243
|
|
|
|
291
|
|
|
|
131
|
|
|
|
12
|
|
Net income (loss) of majority interest
(5)
|
|
|
(672
|
)
|
|
|
(308
|
)
|
|
|
63
|
|
|
|
401
|
|
|
|
(13
|
)
|
|
|
(1
|
)
|
Net income (loss) from continuing operations per share
|
|
|
(1.86
|
)
|
|
|
(0.57
|
)
|
|
|
1.33
|
|
|
|
(0.54
|
)
|
|
|
0.38
|
|
|
|
0.04
|
|
Net income (loss) from discontinued operations per
share
(5)
|
|
|
0.23
|
|
|
|
0.36
|
|
|
|
0.01
|
|
|
|
1.55
|
|
|
|
0
|
|
|
|
0
|
|
Diluted and basic net income (loss) of majority interest
per share
(5)
|
|
|
(2.44
|
)
|
|
|
(1.13
|
)
|
|
|
0.23
|
|
|
|
1.39
|
|
|
|
(0.04
|
)
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
(6)(11)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
23,300
|
|
|
Ps.
|
23,891
|
|
|
Ps.
|
24,292
|
|
|
Ps.
|
25,655
|
|
|
Ps.
|
26,159
|
|
|
$
|
2,407
|
|
Operating income
|
|
|
1,110
|
|
|
|
723
|
|
|
|
831
|
|
|
|
1,436
|
|
|
|
2,524
|
|
|
|
232
|
|
Net income (loss) from continuing
operations
(5)(11)
|
|
|
(1,077
|
)
|
|
|
(873
|
)
|
|
|
(183
|
)
|
|
|
(554
|
)
|
|
|
469
|
|
|
|
43
|
|
Net income (loss)
(5)(11)
|
|
|
(839
|
)
|
|
|
(248
|
)
|
|
|
(287
|
)
|
|
|
(74
|
)
|
|
|
469
|
|
|
|
43
|
|
Net income (loss) from continuing operations per
share
(5)(11)
|
|
|
(3.91
|
)
|
|
|
(3.21
|
)
|
|
|
(0.66
|
)
|
|
|
(1.92
|
)
|
|
|
1.37
|
|
|
|
0.13
|
|
Net income (loss) from discontinued operations
per
share
(5)(11)
|
|
|
0.87
|
|
|
|
2.30
|
|
|
|
(0.38
|
)
|
|
|
1.66
|
|
|
|
0
|
|
|
|
0
|
|
Diluted and basic net income (loss) per
share
(5)(11)
|
|
|
(3.05
|
)
|
|
|
(0.91
|
)
|
|
|
(1.04
|
)
|
|
|
(0.26
|
)
|
|
|
1.37
|
|
|
|
0.13
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year ended December 31,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
(Ps. millions)
(1)
|
|
|
($ millions)
(1)(2)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,146
|
|
|
|
2,838
|
|
|
|
1,441
|
|
|
|
1,222
|
|
|
|
1,638
|
|
|
|
151
|
|
Current assets
|
|
|
9,260
|
|
|
|
10,704
|
|
|
|
9,863
|
|
|
|
9,175
|
|
|
|
11,136
|
|
|
|
1,025
|
|
|
Total assets from discontinued operations
(5)
|
|
|
2,585
|
|
|
|
2,180
|
|
|
|
2,021
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total assets
|
|
|
36,045
|
|
|
|
34,692
|
|
|
|
32,937
|
|
|
|
28,695
|
|
|
|
32,187
|
|
|
|
2,962
|
|
Current liabilities
|
|
|
9,276
|
|
|
|
8,200
|
|
|
|
8,675
|
|
|
|
4,835
|
|
|
|
7,140
|
|
|
|
657
|
|
Total debt
|
|
|
17,658
|
|
|
|
17,926
|
|
|
|
15,959
|
|
|
|
12,826
|
|
|
|
14,918
|
|
|
|
1,373
|
|
Total liabilities from discontinued
operations
(5)
|
|
|
1,995
|
|
|
|
1,647
|
|
|
|
1,398
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total liabilities
|
|
|
26,058
|
|
|
|
25,715
|
|
|
|
23,704
|
|
|
|
19,329
|
|
|
|
22,801
|
|
|
|
2,098
|
|
Stockholders equity
(5)
|
|
|
9.987
|
|
|
|
8,977
|
|
|
|
9,234
|
|
|
|
9,366
|
|
|
|
9,386
|
|
|
|
864
|
|
Minority interest in consolidated
subsidiaries
(5)
|
|
|
3,360
|
|
|
|
3,114
|
|
|
|
3,198
|
|
|
|
1,892
|
|
|
|
1,960
|
|
|
|
180
|
|
Majority stockholders equity
(5)
|
|
|
6,627
|
|
|
|
5,863
|
|
|
|
6,036
|
|
|
|
7,474
|
|
|
|
7,426
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP
(5)(11)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
34,541
|
|
|
Ps.
|
33,736
|
|
|
Ps.
|
30,579
|
|
|
Ps.
|
26,097
|
|
|
Ps.
|
29,985
|
|
|
$
|
2,759
|
|
Total liabilities
|
|
|
25,874
|
|
|
|
25,895
|
|
|
|
23,178
|
|
|
|
19,272
|
|
|
|
22,923
|
|
|
|
2,110
|
|
Net assets
|
|
|
8,667
|
|
|
|
7,841
|
|
|
|
7,402
|
|
|
|
6,826
|
|
|
|
7,062
|
|
|
|
650
|
|
Capital stock
|
|
|
7,566
|
|
|
|
7,566
|
|
|
|
7,566
|
|
|
|
7,632
|
|
|
|
7,632
|
|
|
|
702
|
|
Stockholders equity
|
|
|
6,188
|
|
|
|
5,375
|
|
|
|
4,913
|
|
|
|
5,710
|
|
|
|
5,850
|
|
|
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
1,968
|
|
|
|
1,505
|
|
|
|
1,107
|
|
|
|
1,252
|
|
|
|
2,695
|
|
|
|
248
|
|
Depreciation and amortization
|
|
|
2,035
|
|
|
|
2,283
|
|
|
|
1,854
|
|
|
|
1,795
|
|
|
|
1,414
|
|
|
|
130
|
|
Total shares issued at end of
period
(6)
|
|
|
324
|
|
|
|
324
|
|
|
|
324
|
|
|
|
386.9
|
|
|
|
386.9
|
|
|
|
|
|
Total shares held in Stock Option Trust at end of
period
(6)
|
|
|
24.7
|
|
|
|
22.8
|
|
|
|
22.3
|
|
|
|
17.6
|
|
|
|
17.5
|
|
|
|
|
|
Total shares held as treasury stock at end of
period
(6)
|
|
|
28.2
|
|
|
|
28.2
|
|
|
|
28.2
|
|
|
|
28.3
|
|
|
|
28.3
|
|
|
|
|
|
Total shares issued and outstanding at end of
period
(6)
|
|
|
271.1
|
|
|
|
273.1
|
|
|
|
273.5
|
|
|
|
341.0
|
|
|
|
341.0
|
|
|
|
|
|
Average total shares outstanding during
period
(6)
|
|
|
275.2
|
|
|
|
271.8
|
|
|
|
273.1
|
|
|
|
289.6
|
|
|
|
341.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inflation and Foreign Currency Exchange Rate Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of change in INPC
(7)
|
|
|
4.0
|
%
|
|
|
5.2
|
%
|
|
|
3.3
|
%
|
|
|
4.1
|
%
|
|
|
3.8
|
%
|
|
|
|
|
Peso/dollar exchange rate at the end of
period
(8)
|
|
|
11.2372
|
|
|
|
11.1495
|
|
|
|
10.6344
|
|
|
|
10.8116
|
|
|
|
10.8662
|
|
|
|
|
|
Average exchange rate
(9)
|
|
|
10.8251
|
|
|
|
11.3091
|
|
|
|
10.8786
|
|
|
|
10.9034
|
|
|
|
10.9371
|
|
|
|
|
|
|
|
|
(1)
|
|
Except per share amounts, number of shares and inflation and foreign currency
exchange rate data.
|
|
(2)
|
|
Peso amounts have been translated into U.S. dollars, solely for the convenience of
the reader, at the rate of 10.8662 pesos per one U.S. dollar, the Free Exchange Rate on
December 31, 2007.
|
14
|
|
|
(3)
|
|
The gain from monetary position reflects the result of holding monetary assets and
liabilities during periods of inflation. Values stated in current monetary units decrease in
purchasing power over time. This means that losses are incurred by holding monetary assets
over time, whereas gains are realized by maintaining monetary liabilities. See Item 5.
Operating and Financial Review and Prospects.
|
|
(4)
|
|
Other expenses (income), net, includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
(millions)
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Restructuring charges (i)
|
|
Ps.
|
99
|
|
|
Ps.
|
267
|
|
|
Ps.
|
332
|
|
|
Ps.
|
61
|
|
|
Ps.
|
7
|
|
Impairment of long-lived assets
|
|
|
143
|
|
|
|
352
|
|
|
|
385
|
|
|
|
393
|
|
|
|
122
|
|
Loss (gain) from sale of long-lived assets
|
|
|
5
|
|
|
|
10
|
|
|
|
6
|
|
|
|
(795
|
)
|
|
|
47
|
|
Loss (gain) from sale of subsidiaries
|
|
|
(41
|
)
|
|
|
(545
|
)
|
|
|
137
|
|
|
|
(68
|
)
|
|
|
11
|
|
Assignment of Vitro Club Trust (ii)
|
|
|
|
|
|
|
|
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
Early extinguishment of employee
retirement obligations
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
8
|
|
|
|
97
|
|
Fees and costs for extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
Statutory employee profit sharing
|
|
|
44
|
|
|
|
129
|
|
|
|
51
|
|
|
|
55
|
|
|
|
54
|
|
Other
|
|
|
(42
|
)
|
|
|
66
|
|
|
|
23
|
|
|
|
117
|
|
|
|
43
|
|
|
|
Ps.
|
208
|
|
|
Ps.
|
279
|
|
|
Ps.
|
494
|
|
|
Ps.
|
(229
|
)
|
|
Ps.
|
869
|
|
|
(i)
|
|
The restructuring charges relate to the downsizing and streamlining of our
corporate functions and organization at some of our business units and are part of an
ongoing benefit arrangement.
|
|
|
(ii)
|
|
The Vitro Club holds land and facilities for our employees recreational
activities, which are held in a trust (the Trust). The Trust can only be assigned if
all of the participants name one entity as the sole beneficiary. In 2005, all the
participants named the Company as the sole beneficiary, and therefore the Company has
the right to take control of the Trust. The Company recorded the fair value of the
assets and recognized other income of Ps. 458 million.
|
|
|
|
(5)
|
|
On June 16, 2006, we completed the sale of our 51% equity ownership interest in
Vitrocrisa to Libbey, the owner of the remaining 49% equity interest. See Item 4. Information
on the Company BusinessStrategic Sales of Non-Core Businesses and Assets. All financial and
operating information relating to Vitrocrisa in this annual report, which was previously
presented as one of our reportable segments is now presented as a discontinued operation. In
addition, the discussion of our indebtedness in this annual report does not include the
indebtedness of Vitrocrisa, which is presented under Mexican FRS in our consolidated balance
sheets as a part of Total liabilities of discontinued operations.
|
15
|
|
|
(6)
|
|
Millions of shares.
|
|
(7)
|
|
Calculated using year-end INPC of the most recent year divided by the year-end INPC
of the previous year.
|
|
(8)
|
|
Based on the Free Exchange Rate at the end of the period.
|
|
(9)
|
|
Calculated using the average of Free Exchange Rates on the last day of each month
during the period.
|
|
(10)
|
|
Effective January 1, 2005, the Company adopted the provisions of Bulletin C-10,
Derivative Financial Instruments and Hedging Activities, which requires that all derivative
instruments be recognized at fair value, sets the rules to recognize hedging activities and
requires separation, if practical, of embedded derivative instruments. Through December 31,
2004, according to prior accounting standards (Bulletin C-2, Financial Instruments), the
Company did not recognize the effect of hedging derivatives under financial expenses until
the flow exchanges mentioned in the swap contract were actually executed. The effect of
adopting Bulletin C-10 was a charge to cumulative effect of changes in accounting principles
of Ps. 124 million, net of tax.
|
|
(11)
|
|
Certain of our subsidiaries have been classified as discontinued operations in our
U.S. GAAP consolidated financial information as they meet the definition of held for sale for
U.S. GAAP purposes. These subsidiaries did not meet the definition of discontinued operations
for Mexican FRS purposes as they do not constitute the sale of a significant portion of our
business. See note 24 k to our consolidated financial statements for a description of those
subsidiaries.
|
16
Dividends per Share
The following table sets forth, for each year in the five year period ended December 31, 2007,
the dividends and dividends per share Vitro declared and paid with respect to such year, expressed
in pesos and U.S. dollars. All peso amounts contained in the table below are stated in nominal
pesos.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year With
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respect to Which
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Was
|
|
Month Dividend
|
|
Total Dividend
|
|
|
Dividends per
|
|
|
Dividend per
|
|
|
Month Dividend
|
Declared
|
|
Was Declared
|
|
Amount
(1)
|
|
|
Share
|
|
|
Share
(2)
|
|
|
Was Paid
|
|
|
|
|
(Ps. millions)
|
|
|
(Pesos)
|
|
|
(Dollars)
|
|
|
|
2003
|
|
March 2004
|
|
|
89
|
|
|
|
0.30
|
|
|
|
0.0267
|
|
|
April 2004
|
2004
|
|
March 2005
|
|
|
90
|
|
|
|
0.30
|
|
|
|
0.0268
|
|
|
April 2005
|
2005
|
|
April 2006
|
|
|
89
|
|
|
|
0.30
|
|
|
|
0.0270
|
|
|
May 2006
|
2006
|
|
March 2007
|
|
|
133
|
|
|
|
0.37
|
|
|
|
0.0334
|
|
|
April 2007
|
2007
|
|
April 2008
|
|
|
143
|
|
|
|
0.40
|
|
|
|
0.0372
|
|
|
May 2008
|
|
|
|
(1)
|
|
Under Mexican corporate law, our shares held by the Stock Option Trust are
considered issued and outstanding and therefore are entitled to receive dividends.
|
|
(2)
|
|
For purposes of calculating the dividends paid in U.S. dollars per share, we divided
the dividends paid in Mexican peso per share by the Free Exchange Rate as of the date on which
such dividend was declared.
|
17
Item 4. Information on the Company
ORGANIZATIONAL STRUCTURE
The following chart presents the organizational structure of our business units, our principal
subsidiaries and our direct or indirect percentage equity ownership in such subsidiaries as of June
23, 2008.
18
BUSINESS
Business Overview
Vitro, S.A.B. de C.V. is a corporation with variable capital (
sociedad anónima bursátil de
capital variable
) organized under the laws of Mexico and is a holding company that conducts
substantially all of its operations through subsidiaries. We were incorporated in Mexico in 1909
and, based on our consolidated net sales in 2007, we believe that we are the largest manufacturer
of glass containers and flat glass in Mexico. Our principal executive offices are located at Ave.
Ricardo Margáin 400, Col. Valle del Campestre, San Pedro Garza García, Nuevo León, 66265 Mexico,
telephone number (52-81) 8863-1200. Our agent for service of process, exclusively for actions
brought by the Securities and Exchange Commission, which we refer to as the SEC, pursuant to the
requirements of the U.S. federal securities laws, is CT Corporation System, 111 Eighth Avenue, New
York, New York 10011.
Our consolidated net sales for the year ended December 31, 2007 totaled Ps. 28,591 million
($2,631 million). In 2007, 44% and 37% of our consolidated net sales were sales made in Mexico and
the United States, respectively. Our operations are organized into two operating business units:
the Glass Containers business unit (representing approximately 51% of our consolidated net sales in
2007) and the Flat Glass business unit (representing approximately 48% of our consolidated net
sales in 2007).
As of December 31, 2007, our total assets were Ps. 32,187 million ($2,962 million). We have
manufacturing facilities in ten countries, distribution centers throughout the Americas and Europe
and export our products to over 50 countries.
Our Glass Containers business unit manufactures and distributes glass containers for the soft
drink, beer, food, liquor and wine, pharmaceutical and cosmetics industries, as well as raw
materials, machinery and molds for the glass industry, and, based on its net sales of Ps.
14,676 million ($1,351 million) in 2007, we believe the Glass Containers business unit is the
largest glass container producer in Mexico and Central America and among the largest in the world.
The principal operating subsidiaries of the Glass Containers business unit are: (i) Compañía
Vidriera, S.A. de C.V. (Covisa), which conducts a substantial majority of our glass containers
operations in Mexico, (ii) Comegua, our joint venture with London Overseas and Golden Beer which,
based on Comeguas net sales of Ps. 2,127 million ($196 million) in 2007, we believe is the largest
glass containers producer in Central America (London Overseas and Golden Beer each hold 25.15% of
Comeguas outstanding shares), (iii) Vitro Packaging, our glass containers distribution subsidiary
in the United States, (iv) Vidrio Lux, S.A. (Vilux), which is engaged in the manufacturing and
distribution of glass containers in Bolivia and neighboring countries, (v) Industria del Álcali,
S.A. de C.V. (Alcali), which is engaged in the manufacturing and distribution of soda ash, sodium
bicarbonate, calcium chloride and salt, the main raw materials used in the manufacturing of glass
containers and (vi) Fabricación de Máquinas, S.A. de C.V. (Fama), which is engaged in the
manufacturing of capital goods such as glass forming machines and molds.
Our Flat Glass business unit focuses on the manufacturing, processing and distribution of flat
glass for the construction and the automotive industry. Based on the Flat Glass business units net
sales of Ps. 13,605 million ($1,252 million) in 2007, we believe the business unit is the largest
flat glass producer in Mexico, the second largest in Latin America, one of the largest distributors
of flat glass products in the United States and a leading provider of insulated flat glass products
in Spain and Portugal.
The principal operating subsidiaries of our Flat Glass business unit are: (i) Vitro Vidrio y
Cristal, S.A. de C.V. and Vidrio y Cristal del Noroeste, S.A. de C.V which manufacture and
distribute our raw (float) flat glass products for the Mexican construction industry and to
automotive safety glass manufacturers as raw material, (ii) Vitro Automotriz, S.A. de C.V. (VAU),
and Vitro Flex, S.A. de C.V., which manufacture our flat glass products for the Mexican and the
United States automotive industry, for the Original Equipment Manufacturers (OEM), and for the
Automotive Glass Replacement (AGR) markets, (iii) Vitrocar, S.A. de C.V. and Cristales
Automotrices, S.A. de C.V., our joint venture with a group of individual investors that own a 49%
interest in this entity, which conduct our automotive replacement glass installation business
throughout Mexico, (iv) Vitro America, which conducts a substantial majority of our flat glass
operations in the United States, (v) Vitro Cristalglass S.L., our joint venture with a group of
individual investors that own a 40% interest in this entity which is engaged in the manufacturing
and distribution of flat glass products for the Spanish, French and Portuguese construction
industry,
19
(vi) Vitro Chaves Industria de Vidrio, S.A. (Vitro Chaves), a joint venture of Vitro
Cristalglass with a group of individual investors that own a 40% interest in this entity which is
engaged in the manufacturing and distribution of flat glass products for the Portuguese
construction industry, (vii) Vitro Cristalglass France SAS, a Vitro Cristalglass subsidiary, which
is engaged in the production and distribution of value-added glass products in the French
residential and commercial construction market, and (viii) Vitro Colombia, S.A., which conducts our
Colombian flat glass operations and is engaged in the manufacture and distribution of flat glass
products for the automotive and construction market.
Acquisitions
In April 2008 the Company, through its subsidiary Vitro Cristalglass, completed the
acquisition of the operations of Verres et Glaces dEpinay, a Paris-based value-added flat glass
company, for an equivalent of Ps. 41 million ($4 million). This acquisition is in line with the
Companys strategic plan to broaden its geographic coverage in Europe and strengthen its position
in the value-added products and services market. The new operations have been incorporated into our
subsidiary Vitro Cristalglass France, which is now engaged in the production and distribution of
value-added glass products to the French residential and commercial construction market.
In August 2007, Vidrio y Cristal acquired 55% of the outstanding shares of PVA, a company
engaged in the installation of value-added glass products; for an equivalent of Ps. 110 million
($10 million).
In July 2007, Viméxico exercised its option to acquire the other 50% of the outstanding shares
of Vitro AFG (now Vidrio y Cristal del Noroeste, S.A. de C.V.) from its joint venture partner AFG
for Ps. 67 million ($6 million) in cash. This companys primary operations are the manufacture,
processing and distribution of flat glass.
In April 2006, our subsidiary Comegua acquired Vipasa, a glass container company located in
Panama for Ps. 218 million ($20 million). We believe Vipasa is the largest glass container
manufacturer for the beverage, liquor, food and pharmaceutical industries in Panama with a dominant
market share and exports to more than 10 countries in the Americas.
In September 2006, Viméxico, Vitros flat glass division, and Visteon ended their joint
venture agreement in Vitro Flex through a reimbursement and cancellation of Visteons capital
investment. Viméxico is now the sole owner of Vitro Flex. Vitro Flex primarily manufactures
tempered and laminated glass for use in Ford vehicles. Fairlane Holdings (a Visteon affiliate)
received Ps. 109 million ($10 million) for its 38% stake in Vitro Flex. An initial payment of $2
million was made in September 2006, which is being followed by four annual payments of $1.85
million, which started in September 2007. The transaction is being funded by Vitro Flex with cash
from operations. Vitro Flex together with VAU, now directly manages its relationship with Ford and
serves all of Vitros automotive customers. Under the prior structure, contractual restrictions
limited Vitro Flexs ability to use excess capacity for non Ford volumes.
Strategic Sales of Non-Core Businesses and Assets
Commencing in 2001, we began a corporate restructuring and recapitalization program focused
primarily on the sale of non-productive assets and assets no longer integral to the long-term
strategy of our business, with the aim of reducing our overall debt levels. During the period from
2001 through 2006, we concentrated our divestiture efforts on rightsizing our two core businesses,
Glass Containers and Flat Glass.
In June 2006, we completed the sale of our 51% ownership interest in Vitrocrisa to Libbey, the
owner of the remaining 49% equity interest. We received proceeds of $119 million from this
divestiture, comprised of $80 million in cash from the sale of our equity interest, $28 million
from the payment of intercompany receivables and $11 million from the repayment of intercompany
debt. As a part of this transaction, all of the liabilities of Vitrocrisa were assumed by Libbey,
including bank debt of $62 million as of May 31, 2006.
20
In March 2006, we sold our 51% interest in Química M, our subsidiary engaged in the
manufacture and distribution of polyvinyl butyral, which is an inner layer of plastic film used in
the manufacture of clear and shaded windshields, to Solutia Inc., the other shareholder in
Química M, for $20 million in cash.
In April 2005, we sold our 100% interest in Plásticos Bosco, S.A. de C.V. (Bosco), which
consisted of two subsidiaries engaged in the manufacture and distribution of plastic tubes and
disposable thermofoldware and industrial products, to Grupo Convermex, S.A. de C.V., for
Ps. 107 million ($10 million) in cash. In 2004, Bosco had consolidated net sales of Ps. 471 million
($43 million) and a consolidated operating loss of Ps. 9 million ($1 million). The consolidated net
sales and operating loss of Bosco were Ps. 112 million ($10 million) and Ps. 7 million
($0.6 million), respectively, during the period from January 1, 2005, to April 1, 2005. We recorded
a loss upon the sale of Bosco of Ps. 137 million ($13 million).
In September 2004, we sold our 50% interest in Vancan, S.A. de C.V. (Vancan), our joint
venture with Rexam, Inc. engaged in the manufacture and distribution of aluminum containers, to
Rexam, Inc. for $22.6 million in cash after certain price adjustments. In 2003, our 50% interest in
Vancan had consolidated net sales of Ps. 473 million ($43 million) and a consolidated operating
income of Ps. 54 million ($5 million). The consolidated net sales and operating income of our 50%
interest in Vancan were Ps. 348 million ($32 million) and Ps. 35 million ($3 million),
respectively, during the period from January 1, 2004 to September 30, 2004.
In April 2004, we sold our 60% interest in Vitro OCF, S.A. de C.V. (Vitro OCF), our joint
venture with Owens Corning engaged in the manufacture and distribution of fiberglass and fiberglass
products, to Owens Corning for $71.5 million in cash. Pursuant to the terms of the sale, we paid
Vitro OCFs and its subsidiaries bank debt (which was reflected on our consolidated balance sheet)
of $22 million immediately prior to the sale. The consolidated net sales and operating income of
Vitro OCF were Ps. 225 million ($21 million) and Ps. 52 million ($5 million), respectively, during
the period from January 1, 2004, to April 2, 2004. In 2003, Vitro OCF had consolidated net sales
and operating income of Ps. 817 million ($75 million) and Ps. 200 million ($18 million),
respectively. The gain on our sale of this interest was Ps. 454 million ($42 million). This
business was previously included in our Flat Glass reportable segment.
In March 2004, Vitro America closed all of its distribution and production facilities and
operations in the northwestern United States. The closing plan included operation of the facilities
through June 30, 2004. As of December 31, 2004, all operations at these facilities had ceased.
Vitro America conducts a substantial majority of our flat glass operations in the United States and
is a subsidiary of Viméxico, which is included in our Flat Glass reportable segment.
During 2004, we also closed two small facilities in Mexico dedicated to the manufacture of
architectural value-added products. The amount incurred for these closures was Ps. 22 million
($2 million). This business was previously included in our Flat Glass reportable segment.
In September 2003, we sold 100% of the outstanding shares of ECSA, one of our subsidiaries
engaged in the manufacture and distribution of plastic products, to a subsidiary of Phoenix Capital
Limited for $18 million, $15 million of which we received at closing and the remainder of which was
paid in May 2005. The net sales and operating income of ECSA were Ps. 164 million ($15 million) and
Ps. 10 million ($1 million), respectively, during the period from January 1, 2003, to September 10,
2003. The gain on sale of this component was Ps. 42 million ($4 million). This business was
previously included in our Glass Containers reportable segment.
Our Operating Business Units
Our organizational structure, comprised of the Glass Containers and Flat Glass business units,
allows us to focus on the needs of the distinct end markets we serve, which results in a
diversified revenue base, and enables us to take advantage of our expertise in the efficient
production and distribution of high quality glass products.
21
Business Segment Data
The following table sets forth the business segment data for the three years ended December
31, 2007 in millions of constant pesos.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass
|
|
|
Flat
|
|
|
Corporate &
|
|
|
|
|
|
|
|
|
|
Containers
|
|
|
Glass
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
$ million
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
Ps.
|
14,639
|
|
|
Ps.
|
13,591
|
|
|
Ps.
|
361
|
|
|
Ps.
|
28,591
|
|
|
$
|
2,631
|
|
Operating income
|
|
|
2,054
|
|
|
|
782
|
|
|
|
(132
|
)
|
|
|
2,704
|
|
|
|
249
|
|
Total assets
|
|
|
17,040
|
|
|
|
12,835
|
|
|
|
2,312
|
|
|
|
32,187
|
|
|
|
2,962
|
|
Capital expenditures
|
|
|
2,328
|
|
|
|
324
|
|
|
|
43
|
|
|
|
2,695
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
Ps.
|
13,982
|
|
|
Ps.
|
13,461
|
|
|
Ps.
|
433
|
|
|
Ps.
|
27,876
|
|
|
$
|
2,565
|
|
Operating income
|
|
|
1,853
|
|
|
|
418
|
|
|
|
(154
|
)
|
|
|
2,117
|
|
|
|
195
|
|
Total assets
|
|
|
13,937
|
|
|
|
11,401
|
|
|
|
3,357
|
|
|
|
28,695
|
|
|
|
2,641
|
|
Capital expenditures
|
|
|
894
|
|
|
|
338
|
|
|
|
20
|
|
|
|
1,252
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
Ps.
|
12,349
|
|
|
Ps.
|
13,701
|
|
|
Ps.
|
517
|
|
|
Ps.
|
26,567
|
|
|
$
|
2,445
|
|
Operating income
|
|
|
1,327
|
|
|
|
514
|
|
|
|
(2
|
)
|
|
|
1,839
|
|
|
|
169
|
|
Total assets
|
|
|
14,668
|
|
|
|
13,949
|
|
|
|
4,775
|
|
|
|
32,937
|
|
|
|
3,031
|
|
Capital expenditures
|
|
|
622
|
|
|
|
468
|
|
|
|
17
|
|
|
|
1,107
|
|
|
|
102
|
|
The following table sets forth the business segment data as a percentage of consolidated data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass
|
|
|
Flat
|
|
|
Corporate &
|
|
|
|
|
|
|
Containers
|
|
|
Glass
|
|
|
Eliminations
|
|
|
Consolidated
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
|
51
|
%
|
|
|
48
|
%
|
|
|
1
|
%
|
|
|
100
|
%
|
Operating income
|
|
|
76
|
%
|
|
|
29
|
%
|
|
|
(5
|
%)
|
|
|
100
|
%
|
Total assets
|
|
|
53
|
%
|
|
|
40
|
%
|
|
|
7
|
%
|
|
|
100
|
%
|
Capital expenditures
|
|
|
86
|
%
|
|
|
12
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
|
50
|
%
|
|
|
48
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
Operating income
|
|
|
88
|
%
|
|
|
20
|
%
|
|
|
(8
|
%)
|
|
|
100
|
%
|
Total assets
|
|
|
49
|
%
|
|
|
40
|
%
|
|
|
11
|
%
|
|
|
100
|
%
|
Capital expenditures
|
|
|
71
|
%
|
|
|
27
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
|
46
|
%
|
|
|
52
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
Operating income
|
|
|
72
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
100
|
%
|
Total assets
|
|
|
45
|
%
|
|
|
42
|
%
|
|
|
13
|
%
|
|
|
100
|
%
|
Capital expenditures
|
|
|
56
|
%
|
|
|
42
|
%
|
|
|
2
|
%
|
|
|
100
|
%
|
22
Glass Containers
The principal operating subsidiaries of our Glass Containers business unit are:
|
|
|
Covisa, which conducts a substantial majority of our glass containers
operations in Mexico;
|
|
|
|
|
Comegua, our joint venture with London Overseas and Golden Beer, which we
believe is the largest glass containers producer in Central America (London Overseas
and Golden Beer each hold 25.15% of Comeguas outstanding shares);
|
|
|
|
|
Vitro Packaging, our glass containers distribution subsidiary in the United
States;
|
|
|
|
|
Vilux, which is engaged in the manufacture and distribution of glass containers
in Bolivia and neighboring countries;
|
|
|
|
|
Álcali, which is engaged in the manufacture and distribution of soda ash,
sodium bicarbonate, calcium chloride and salt, which are the main raw materials used in
the manufacture of glass products; and
|
|
|
|
|
Fama, which is engaged in the manufacture of capital goods such as glass
forming machines and molds.
|
Based on the Glass Containers business units net sales of Ps. 14,676 million ($1,351 million)
in 2007, we believe it is the largest glass container producer in Mexico and Central America and
among the largest in the world. In 2007, this business unit accounted for 51% of our consolidated
net sales. During the same period, 28% of the net sales of the Glass Containers business unit came
from exports and 15% came from sales by our foreign subsidiaries that are part of the business
unit.
The Glass Containers business unit produces glass containers for the soft drink, beer, food,
liquor and wine, pharmaceuticals and cosmetics industries. Its customers include leading companies
such as Avon, Bacardi, Campbells, Coty, Diageo, Encore Glass, Estee Lauder, Gerber, Grupo Cuervo,
Grupo Domecq, Grupo Modelo, Herdez McCormick, Jafra, Jeyes, Jugos del Valle, Jumex, Nestle, Pepsi
Cola, Procter & Gamble, Sauza, Tamazula, and The Coca-Cola Company. In addition, our Glass
Containers business unit manufactures and distributes:
|
|
|
soda ash, sodium bicarbonate, calcium chloride and salt, which are the main raw
materials used in the manufacture of glass products, and
|
|
|
|
|
capital goods such as glass forming machines and molds.
|
The Glass Containers business unit operates eight manufacturing facilities in Mexico, three in
Central America and one in Bolivia, and has two recycling plants in Mexico. The Glass Containers
business unit, which exports to the United States mainly through our subsidiary Vitro Packaging,
has five sales offices, four design centers and one distribution center in the United States.
In April 2006, Comegua acquired Vipasa, a glass container company located in Panama for a
purchase price of Ps. 218 million ($20 million). We believe Vipasa is the largest glass container
manufacturer for the beverages, liquor, food and pharmaceuticals industries in Panama with a
dominant market share and exports to more than 10 countries in the Americas.
Flat Glass
The Flat Glass business unit is owned 91.8% by Vitro and is comprised of three main
businesses: Float Glass manufacturing, Automotive Safety Glass manufacturing and distribution and
our International Division, which is primarily focused on the distribution and manufacturing of
flat glass products for the construction and architectural industries. The majority of our Flat
Glass business units operations (approximately 65%) are dedicated to the building products
industry, while the remainig (approximately 35%) of the units operations is concentrated in the
automotive industry. In 2007, 24% of our Flat Glass business units sales derived from Mexico, 19%
derived from exports, and 57% derived from foreign subsidiaries. Sales done by Vitro America, our
foreign subsidiary in the United States, represented 37% of the Flat Glass business units sales.
Based on the Flat Glass business units net sales of Ps. 13,605 million ($1,252 million) in
2007, we believe the business unit is the largest flat glass producer in Mexico, the second-largest
in Latin America, one of the largest distributors of flat glass products in the United States and a
leading provider of insulated
flat glass products in Spain and Portugal. In 2007, this business unit accounted for 48% of
Vitros consolidated net sales.
23
In July, 2007, Viméxico exercised its option to acquire the other 50% of the outstanding
shares of Vitro AFG (now Vidrio y Cristal del Noroeste, S.A. de C.V.) from its joint venture
partner AFG for Ps. 67 million ($6 million) in cash. With the termination of this joint venture,
Viméxico became the sole owner of this entity, whose primary operations include the manufacture,
processing and distribution of flat glass.
Our Float Glass manufacturing business is conducted through:
|
|
|
Vidrio y Cristal and Vidrio y Cristal del Noroeste, (formerly Vitro AFG) which
manufacture and distribute a majority of our raw (float) flat glass products for the
Mexican construction industry and to automotive safety glass manufacturers as raw
material.
|
Vidrio y Cristal and Vidrio y Cristal del Noroeste focus on the manufacture, processing and
distribution of float glass used as raw material for the construction and automotive industries.
In 2007, the Float Glass manufacturing business represented 17% of our Flat Glass business
units total sales to third parties. A substantial portion is supplied to the building industry and
to a lower extent is supplied to the automotive safety glass industry, as well as furniture and
home appliance manufacturers. We believe we are the leading float glass manufacturing business in
Mexico on the basis of sales, with a 43% market share in Mexico as of December 31, 2007. As of
December 31, 2007, the Float Glass manufacturing business owned four float glass furnaces of which
one in Mexico City has been shut down since March 2006 (fully written-down for accounting purposes
as a result of an impairment charge recorded in 2006).
Our Automotive Safety Glass manufacturing and distribution business is conducted through the
following subsidiaries:
|
|
|
VAU and Vitro Flex, our subsidiaries that manufacture and distribute our flat glass
products for the Mexican and the United States automotive industry for the OEM and
AGR markets;
|
|
|
|
|
Vitrocar, which is engaged in our AGR installation business in Mexico through
distribution and installation centers strategically located throughout Mexico; and
|
|
|
|
|
Cristales Automotrices, our joint venture with a group of individual investors that
owns a 49% equity interest in this business and operates a part of our AGR
installation business, in Mexico City and its surrounding states.
|
In 2007, the Automotive Safety Glass manufacturing and distribution business represented 35%
of our Flat Glass business units total sales, with sales primarily derived from the automotive OEM
market in North America. On the basis of volume in pieces, we estimate we are the third-largest
automotive safety glass manufacturing and distribution business in North America, with a 13.4%
market share as of December 31, 2007. The total amount of required float glass used as a row
material for the manufacturing of automotive safety glass is sourced internally by Vidrio y
Cristal.
Based on the number of molding furnaces the business unit currently operates in Mexico, we
believe the Automotive Safety Glass manufacturing and distribution business is also a major
manufacturer of safety glass products for the automotive OEM and AGR markets in Mexico. Our
Automotive Safety Glass manufacturing and distribution business customer base includes General
Motors, Ford Motor Co., DaimlerChrysler, Volkswagen and Nissan.
Our International Division operates through the following subsidiaries:
|
|
|
Vitro America, which performs a substantial majority of our flat glass
operations in the United States and derives 85% of its sales from the distribution of
construction glass and 15% from the distribution and installation of auto glass;
|
|
|
|
|
Vitro Cristalglass, our joint venture with a group of individual investors that
owns a 40% equity interest in this business, and is engaged in the manufacture and
distribution of value-added flat glass products for the Spanish, French and Portuguese
construction industries, with specialties in value-added glass products and glass for
landmark construction projects;
|
24
|
|
|
Vitro Cristalglass France, which conducts our flat glass business operations in
France and is engaged in the production and distribution of value-added glass products
in the French residential and commercial construction market- see Item 4. Information
on the Company Business Acquisitions;
|
|
|
|
|
Vitro Chaves, a joint venture of Vitro Cristalglass with a group of individual
investors that owns a 40% equity interest in this business, and is engaged in the
manufacture and distribution of glass and glazing products for the Portuguese
construction industry; and
|
|
|
|
|
Vitro Colombia, which conducts our Colombian flat glass operations and is
engaged in the manufacture and distribution of flat glass products for the automotive
and construction markets.
|
Vitro America processes, distributes and installs flat glass products for the construction and
automotive markets in the United States. It operates in 23 states in the U.S. through 9 fabrication
centers, 26 distribution centers and 98 installation centers. A portion of the glass processed by
Vitro America is produced by the business unit in Mexico, and the balance is purchased from
unaffiliated third parties. In 2007, a majority of Vitro Americas glass purchases in terms of
volume were supplied from our Flat Glass Mexican subsidiaries.
In Europe, Vitro Cristalglass currently has seven processing facilities throughout Spain and
two distribution centers in Barcelona, Spain. Vitro Chaves currently has one processing facility
and one distribution center in Lisbon, Portugal. Vitro Cristalglass also controls our recently
acquired processing facility in Villetaneuse, France.
25
Our Products
The following table sets forth our principal products, customers and end-users, sales regions
and joint venture partners by business line within each of our two business units.
Glass Containers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers and
|
|
|
|
|
Business Line
|
|
Products
|
|
End-Users
|
|
Sales Regions
|
|
Joint Venture Partners
|
|
|
|
|
|
|
|
|
|
Glass Containers
|
|
Glass containers
|
|
Soft drink, beer,
food, wine &
liquor,
pharmaceutical and
cosmetics
industries
|
|
Mexico, the United
States, the
Caribbean, Central
and South America,
Europe, and Asia
|
|
London Overseas and
Golden Beer in
Comegua
|
|
|
|
|
|
|
|
|
|
Raw Materials
|
|
Soda ash, sodium
bicarbonate,
calcium chloride
and salt
|
|
Glass manufacturers
and detergent
producers
|
|
Mexico, the United
States and South
America
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and Molds
|
|
Glass forming
machines, castings
for glass molds,
machinery parts and
electronic controls
|
|
Flat Glass business
unit, Glass
Containers business
unit, glass
manufacturers and
other third-party
manufacturers
|
|
Mexico, the United
States and Central
and South America
|
|
|
Flat Glass:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers and
|
|
|
|
|
Business Line
|
|
Products
|
|
End-Users
|
|
Sales Regions
|
|
Joint Venture Partners
|
|
|
|
|
|
|
|
|
|
Float Glass
|
|
Float glass,
architectural
tempered safety
glass, insulated
glass units,
laminated, table
tops
|
|
Construction
industry,
distributors,
retailers and
installers, and
furniture and home
appliances
manufacturers.
Automotive Safety
Glass
manufacturers.
|
|
Mexico, the United
States, Canada,
Europe and Central
and South America
|
|
Pilkington in
Viméxico/ Individual
investors in Vitro
Cristalglass and in
Vitro Chaves
|
|
|
|
|
|
|
|
|
|
Automotive Glass
|
|
Windshields, side
laminated glass,
rear and side
tempered glass
|
|
Automotive OEMs,
automotive glass
replacement (AGR)
market,
distributors and
installers
|
|
Mexico, the United
States, Canada and
Central and South
America
|
|
Pilkington in
Viméxico/ Individual
investors in
Cristales
Automotrices
|
See Item 5. Operating and Financial Review and ProspectsResults of Operations, Item 8.
Financial InformationExport Sales and note 21 to our consolidated financial statements included
elsewhere in this annual report for a breakdown of our consolidated net sales by business unit and
geographic market for each year in the three year period ended December 31, 2007.
26
Our Operations
Glass Containers Business Unit
Our Glass Containers business unit, which accounted for 51% of our consolidated net sales in
2007, manufactures and distributes glass containers for the food, beverage, pharmaceutical and
cosmetics industries, as well as raw materials, machinery and molds for the glass industry, and,
based on its net sales of Ps. 14,676 million ($1,351 million) in 2007, we believe the Glass
Containers business unit is the largest glass container producer in Mexico and Central America and
among the largest in the world.
As of December 31, 2007, our Glass Containers business units total assets were
Ps. 17,040 million ($1,568 million). The business unit owns eight manufacturing facilities in
Mexico, three in Central America and one in Bolivia. In 2007, we believe our Glass Containers
business units sales represented approximately 74% of the non-captive glass container market in
Mexico and approximately 3% of the glass container market in the United States, in each case in
terms of units. We define a non-captive market to exclude buyers (such as beverage and beer
bottlers) that are supplied glass containers by their affiliates. In Mexico, the Glass Containers
business unit has four design centers, one of which specializes in the cosmetics and
pharmaceuticals market.
The Glass Containers business units strategy is to:
|
|
|
focus on current operations to maximize organic growth and to take advantage of
future opportunities by adding capacity when refurbishing existing furnaces;
|
|
|
|
|
consolidate its competitive position by defending share and margins in the
domestic market;
|
|
|
|
|
use our growing position in niche markets and focus on value added products to
enhance profitability;
|
|
|
|
|
continue the promotion of innovative new product development;
|
|
|
|
|
reduce costs and enhance operating efficiencies; and
|
|
|
|
|
maximize cash flow through growth in sales and margins while optimizing the use
of capital expenditures and assets.
|
Among the business units key competitive strengths are its productivity, quality levels, wide
variety of glass colors and decorative alternatives, its versatile production processes and its
vertical integration with respect to raw materials, machinery and molds. The business units high
levels of productivity and quality, as well as its ability to rapidly meet changes in demand,
allows it to aggressively compete with other container technologies in Mexico and offer value-added
products at attractive prices in the United States and other export markets. The versatility and
flexibility of the business units production processes are reflected in the business units
ability to offer customers special glass colors and fast turnarounds on small production runs on a
cost-efficient basis, as well as decorating and labeling processes, including ultraviolet organic
paints, plastishield, adhered ceramic labels and heat transfer labels. In addition, we believe
that the location of the business units facilities is a competitive strength that has helped us
implement our business strategy. The business units capacity to produce cost efficient short runs
with a wide variety of colors, shapes and decorations, its innovative designs and its one-stop
shop concept, which provides its customers with a complete packaging solution, including glass
containers, closures, carriers, labels and boxes, also enables it to compete effectively in
value-added markets.
Our Glass Containers business unit manufactures glass containers for both high-volume markets
and value-added markets. We refer to markets that demand high volumes of standard products at
competitive prices as high-volume markets, and we refer to markets that require shorter production
runs of highly designed products and involve premium pricing as value-added markets. The business
units business strategy has emphasized the introduction of products into value-added markets, in
addition to retaining our market share in the Mexican high-volume markets. The specialty nature of
the products sold in value-added markets allows the business unit to charge higher per unit prices
for these products, resulting in higher margins.
One of our Glass Containers business units competitive advantages is its time to market on
the product development cycle for glass containers where we have a response time of three weeks for
a prototype, which we believe is shorter than the response time of some of the other world-class
producers of
glass containers. Similarly, the business units technological expertise permits the
introduction of new products with innovative customized images in order to meet the design
requirements of its customers.
27
Additionally, in January 2007 our Glass Containers business unit signed a three year
take-or-pay contract with Grupo Modelo which includes pre-established volumes and a price
adjustment formula. Vitro has been designated Grupo Modelos preferred third party supplier.
Traditionally, the Glass Containers business unit has had access to technology that we believe
is state-of-the-art in the glass containers industry. For the production of glass bottles, the
Glass Containers business unit utilizes its own technology, some of which has been patented, and
technology provided by Owens-Illinois pursuant to a series of technical assistance agreements that
began in 1964 and expired in September 1999. We currently have the right to use the technology
provided to us by Owens-Illinois under these technical assistance agreements. Our glass containers
labeling capability includes state-of-the-art technology in organic paints. This process, which is
called ultraviolet cure, was developed to further our continuous efforts to grow in high-margin
niche markets by providing value-added products. We hold the patent for this type of paint, which
is more environmentally friendly than similar products in the market due to its organic nature. We
have supplied this type of decoration for several years to customers such as The Coca-Cola Company.
Sales of the Glass Containers business unit in the beer and soft drinks business lines in
Mexico are seasonal, with hot weather positively affecting our sales. As a result, second and third
quarter sales are typically higher than sales in the first and fourth quarters. Accordingly, the
Glass Containers business unit generally builds its inventory of glass containers during the fourth
and first quarters in anticipation of seasonal demand.
In Mexico, the business unit has 23 furnaces in six glass container manufacturing facilities
(Vidriera Monterrey, Vitro Cosmos, Vidriera los Reyes, Vidriera Querétaro, Vidriera Guadalajara and
Vidriera Toluca), each located near a major customer. We estimate that in 2007 the business units
manufacturing facilities produced approximately 41% of the glass tonnage melting capacity in
Mexico, and that we sold 74% of the glass container units on the Mexican non-captive market in
2007.
In the United States, the business units distributor, Vitro Packaging, has four design
centers, five sales offices and one distribution center, all strategically located to serve its
target markets. In 2007, we believe the business units imports into the United States represented
approximately 22% of all sales of imported glass containers into the United States, which would
make it the largest glass container importer into the United States in terms of sales.
In Central America, Comegua owns three manufacturing facilities, one located in Guatemala, one
in Costa Rica and one in Panama. Comegua also has a design center located in Guatemala. In Bolivia,
the business unit owns and operates one manufacturing facility.
In April 2006, Comegua acquired Vipasa, a glass container company located in Panama for a
purchase price of Ps. 218 million ($20 million)- see Item 4. Information on the Company Business
Acquisitions.
Mexican Operations
We believe that the Glass Containers business unit is the largest glass containers producer in
Mexico based on the business units net sales in 2007. In 2007 the Glass Containers business units
sales to the Mexican market were Ps. 8,371 million ($770 million). The Glass Containers business
unit produces glass containers, raw materials, machinery and molds at eight manufacturing
facilities located throughout Mexico. The business units facilities are located in close proximity
to major customers, ensuring heightened responsiveness to customer design and production
requirements and optimizing transportation costs. All of the Glass Containers business units
facilities in Mexico have obtained the Hazard Analysis and Critical Control Points (HACCP)
certification, except for Fama and Álcali, and have recertified the ISO 9000:2000 certification.
During 2007, the glass facilities were operating at approximately 97% of their capacity. We also
own two cullet-processing plants, which supplies us the cullet. In the cullet processing plants,
scrap or broken glass is gathered for re-melting and mixed with virgin raw materials in order to
obtain cost reductions in the production process without affecting the quality of the products.
Although there are currently no mandatory recycling laws in Mexico similar to those in force in the
United States or in other countries, we conduct campaigns throughout Mexico to collect glass
containers.
28
The Glass Containers business units customers include leading companies such as Avon,
Bacardí, Coty, Estee Lauder, Gerber, Grupo Domecq, Grupo Modelo, Jugos del Valle, Nestle, Procter &
Gamble and The Coca-Cola Company. In Mexico, the Glass Containers business unit relies primarily on
its own sales and marketing force, utilizing outside sales representatives to service customers
with smaller volume demand. The business unit has implemented an online system for sharing
information with customers. From their respective offices, the business units customers can access
product information, place orders, check inventories, trace shipments and consult account
statements. Our one-stop shop concept, which provides our customers with a complete packaging
solution, including containers, closures, carriers, labels and boxes, enables us to compete
effectively in value-added markets. We have selectively implemented this concept within Mexico, the
United States and Central America.
Exports and U.S. Operations
Total export sales of the Glass Containers business unit, which do not include the sales of
our Central and South American operations, amounted to $364 million (nominal dollars) in 2007. The
large majority of the export sales of the business unit are made to the United States, principally
through our distribution subsidiary in the United States, Vitro Packaging, which also sources a
small amount of the glass containers it sells from third parties. The Glass Containers business
unit increased export sales into the United States by offering value-added specialty products,
particularly to the cosmetics market and to wine and liquor bottlers in the United States. The
business unit also produces special promotional containers for soft drink bottlers in the United
States. The exports represented 28% of the Glass Containers business units net sales in 2007.
Central and South American Operations
Comegua, a joint venture in which we hold a controlling 49.7% interest, is a Panamanian
holding company that operates manufacturing facilities in Guatemala, Costa Rica, and Panama and
supplies glass containers to the soft drink, food, beer and wine markets throughout Central America
and the Caribbean. Comeguas consolidated net sales in 2007 were Ps. 2,127 million ($196 million).
In April 2006, Comegua acquired Vipasa, a glass container company located in Panama for a
purchase price of Ps. 218 million ($20 million) see Item 4. Information on the Company Business
Acquisitions.
We also own 100% of the common stock of Vilux, a company that owns and operates the only glass
container manufacturing facility in Bolivia. Viluxs net sales in 2007 were Ps. 113 million
($10 million).Vilux distributes glass containers for the soft drinks, food, beer, wine and liquor
industries throughout Bolivia, southern Peru and Chile.
Raw Materials, Machinery and Molds
Our raw materials operations are carried out by our subsidiary Álcali. Álcalis net sales in
2007 were Ps. 1,252 million ($115 million). Álcalis principal products are soda ash, sodium
bicarbonate, calcium chloride and salt for industrial and commercial consumption. Most of Álcalis
soda ash production, which is used in the manufacture of glass, detergents and tripolyphosphates,
is sold to third parties. Álcali competes in the soda ash sector with the American Natural Soda Ash
Corporation (Ansac), a United States exporter of natural soda ash. Álcali maintains a separate
sales and marketing force for its products, which are distributed directly to its customers.
Our machinery and molds operations are conducted through our subsidiary Fama. Fama was founded
in 1943 to source our needs for molds and machinery for our glass manufacturing operations. It had
net sales of Ps. 695 million ($64 million) for the year ended December 31, 2007. Fama produces
state-of-the-art glass-forming machines for our internal use. In addition, Fama produces castings
of special alloys for glass molds and for different types of machinery and parts for machinery used
in the oil industry. Fama also produces mold equipment for the glass industry and ancillary
equipment for the glass, packaging and other industries, as well as electronic controls for
machinery operating and process controls for glass-forming machines. Finally, Fama manufactures
annealing lehrs, which are ovens used to anneal glass, for the float and hollow glass industries.
Famas products are mainly sold to us. Fama generally competes with major international
manufacturers of machinery and equipment for the glass industry.
29
Competition
Although based on the business units net sales in 2007 of Ps. 14,676 million ($1,351 million)
we believe the Glass Containers business unit is the principal supplier of glass containers in
Mexico, it competes with various smaller domestic manufacturers as well as with the glass
containers operations of the two major Mexican beer producers who produce bottles for their own
consumption. The Glass Containers business unit in Mexico also competes with alternative forms of
packaging, including metal, plastic, paper and aseptic containers. In the soft drinks industry, the
Glass Containers business unit has faced increasing competition from polyethylene therephtalate
containers (PET), as well as, to a lesser extent, from aluminum cans. In particular, since 1993
the shift of soft drinks and food containers from glass to PET has continued, albeit at a slower
rate in recent years. In response to the trend in soft drinks and food containers from glass to
PET, we continue to implement measures to offset the effect of PET substitution, including
improving operating efficiencies, new product presentations and customer service. In 2007, for the
third consecutive year, the returnable soft drinks glass industry increased versus the previous
year, and our overall sales in the Mexican soft drinks market experienced a 1% compound annual
growth rate from 2004 to 2007.
In Mexico, the business unit competes for customers primarily on the basis of service
(focusing on on-time deliveries and design), quality (including the ability to conform to a wide
variety of specifications) and scale (including the ability to assure customers of the capacity
necessary to support their growth).
The Glass Containers business unit faces greater competition in the United States than in
Mexico, mainly from Saint Gobain and Owens-Illinois. However, the business unit has utilized its
competitive advantage to supply a variety of higher margin, value-added products, including
specialty food, beverage, cosmetics, wine and liquor glass containers, and to increase its
production expertise and flexibility, thereby allowing it to realize higher operating margins
relative to traditional products. The business units ability to offer cost-effective short
production runs, quick new product turn-around, an extensive glass color selection, diverse
labeling capabilities and unique container designs are all examples of the application of its
competitive strengths. The Glass Containers business unit competes primarily on quality, design and
price in the United States. In Central America, the Glass Containers business unit competes with a
number of smaller regional manufacturers.
Flat Glass Business Unit
Flat Glass accounted for 48% of our consolidated net sales in 2007. In 2007, the Flat Glass
business units net sales were Ps. 13,605 million ($1,252 million) and its export sales were
$237 million (nominal dollars). During 2007, 20% of the business units net sales were derived from
export sales and 56% were derived from its foreign subsidiaries.
The Flat Glass business units holding company is Viméxico. The Flat Glass business unit began
operations in Mexico in 1936. Since 1965 and prior to the merger of Vitro Plan with Viméxico, Vitro
Plan was jointly owned by Vitro (65%) and Pilkington (35%). On December 11, 2006, Vitro Plan was
merged with Viméxico, and as a result, the surviving entity is now jointly owned by Vitro
(91.8%) and Pilkington (8.2%).
The business units customer base includes several large distributors and installers in the
construction industry in Mexico and abroad, several automotive manufacturers such as General
Motors, Ford Motor Co., DaimlerChrysler, Volkswagen and Nissan, and distributors and installers in
the automotive replacement industry.
As of December 31, 2007, the Flat Glass business units total assets were Ps. 12,835 million
($1,181 million). The business unit owns over 250 operating centers, including four float glass
furnaces and four automotive safety glass processing facilities in Mexico, nine fabrication
facilities in the United States, seven processing facilities in Spain and one in Portugal. We
believe our float glass capacity represented 57% of the float glass produced in Mexico and 3% of
the total installed capacity in the NAFTA region.
30
The Flat Glass business units strategy is to:
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reduce costs and enhance operating efficiencies;
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improve cash flow and optimize asset use;
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protect and increase our market share in the Mexican market for construction
glass, reducing our reliance on the export market;
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maintain our leading position and growth trend in the OEM glass business
through increasing participation with the Asian car manufacturers;
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consolidate and grow North American leadership of laminated window products for
the OEMs and other value-added products;
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diversify client portfolio;
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increase fabrication of value-added products in the United States and Mexico;
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increase European presence through Vitro Cristalglass; and
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leverage the Vitro brand name.
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For the construction market, we rely on a preferred client network, Vitromart, which consists
of 216 of the business units largest distributors of flat glass for the construction industry.
Additionally our Flat Glass business units strategy has emphasized production-retail integration
for the Mexican auto glass replacement market. Vitrocar and Cristales Automotrices, are the biggest
automotive glass-replacement installation chain in Mexico. Vitrocar and Cristales Automotrices
operate 186 installation centers throughout Mexico, of which 66 are owned by these two companies
and 120 are franchised. Both companies have agreements with the main insurance companies operating
in Mexico in order to provide a complete service to such companies clients.
Mexican Operations
We believe that the Flat Glass business unit is the largest flat glass producer in Mexico
based on the business units net sales in Mexico in 2007. The business unit maintains
seven distribution centers throughout Mexico where construction customers or automotive customers
can access information about the availability of products on a real-time basis. 44% of Flat Glass
sales are from the Mexican operations out of which Ps. 3,974 million ($366 million) are done in
Mexico and $237 million (nominal dollars) are exports. The majority of these export sales are made
to automotive OEMs in the United States. The principal product that Vidrio y Cristal and Vidrio y
Cristal del Noroeste produce and distribute is float glass for the construction industry,
principally for commercial and residential uses, as well as raw material for the automotive safety
glass producers. Vidrio y Cristal also produces tabletops and coated glass. For the Mexican
automotive industry, VAU and Vitro Flex produce safety glass products such as windshields, side and
back lights, rear quarters and sunroofs.
Vidrio y Cristal operates two float glass furnaces near Monterrey, Mexico and Vidrio y Cristal
del Noroeste operates one in Mexicali, Mexico. Products at these facilities are manufactured using
the float method, which involves pouring molten glass over a molten tin bath. During 2007, the
float glass facilities were operating at 94% of their capacity. See Item 4. Information on the
CompanyBusinessOur Property, Plant and Equipment. All but one of Vidrio y Cristals and Vidrio y
Cristal del Noroestes facilities have obtained ISO 9001 Certification.
Vidrio y Cristal and Vidrio y Cristal del Noroeste, now operating together, sell raw glass to
builders, glass installers and distributors in the construction segment and a small proportion to
the automotive safety glass producers as raw material. The sales force markets its construction
products to a large number of distributors and is supported by a technical support department that
offers technical advice to construction glass installers. These subsidiaries have designated
commercial executives to serve as individualized customer service representatives for the business
units principal purchasers of construction products.
31
For the production of automotive safety glass, VAU and Vitro Flex, now operating together,
operate four processing facilities in Mexico for the automotive OEM market and the AGR market.
Sales are made directly to automotive OEMs in Mexico and the United States, while the AGR market is
serviced through
the business units distribution centers throughout Mexico, independent distributors and
installers and Vitrocars and Cristales Automotrices stores. Ford Motor Co. is the largest end
customer of the business units automotive safety glass products, which purchases these products
for use in Ford Motor Co.s assembly plants in Mexico and the United States and to serve the AGR
market through the Carlite brand. In addition, VAU and Vitro Flex sell automotive safety glass
products to automobile manufacturers in Mexico, United States and other markets; main clients
include GM, Ford, Chrysler, Nissan and Freightliner.
In order to better serve their customers, VAU and Vitro Flex have established account plans
for automotive OEMs. OEM account plans consist of staff whose time is exclusively dedicated to
major OEMs and who provide specialized assistance in the areas of engineering, service and sales.
United States Operations
The United States operations of the Flat Glass business unit are conducted through Vitro
America, which, based on its consolidated net sales in 2007, is one of the largest distributors of
flat glass products in the United States. In 2007, Vitro America had consolidated net sales of
$451 million, of which 85% were to the construction industry and 15% were to the automotive
replacement market.
Vitro America purchases flat glass as raw material from our Mexican subsidiaries and from
United States manufacturers and uses it to process tempered, spandrel, insulated, laminated,
mirrors and other products. In 2007, our Mexican subsidiaries supplied 46% of all flat glass
purchased by Vitro America, which purchases include coated and other proprietary products that
Vitro could not supply. These products are sold directly to distributors as well as to end-buyers
through Vitro Americas own distribution centers and retail shops. Vitro America also distributes
and sells to furniture manufacturers in the United States a significant number of custom-made glass
tabletops produced by the Flat Glass business units manufacturing plants in Mexico. Additionally,
Vitro America engages in the design, manufacture and installation of custom skylights in the United
States and several other countries. Vitro America also distributes to the United States automotive
replacement market a full line of automotive glass products, including windshields and side and
back windows for American and foreign cars and trucks.
Vitro America operates 9 fabrication facilities, 26 distribution centers and 98 installation
centers in the United States. Vitro America sells its construction products to builders and glass
installers, who use its products in industrial and commercial projects such as skyscrapers and
other buildings, through its own distribution network and retail stores. Vitro America sells its
automotive products to the replacement market through its own distribution network and retail
stores.
European Operations
The Flat Glass business unit competes in the European flat glass construction market through
Vitro Cristalglass and Vitro Chaves, mainly with value added products. Vitro Cristalglass processes
and distributes double glass, laminated glass and tempered glass mainly for the Spanish, French and
Portuguese market. Vitro Cristalglass operates with seven insulated glass manufacturing centers and
two distribution centers, located in Barcelona. Additionally, Vitro Cristalglass has the biggest
semi-finished manufacturing process center of Spain located in Ponferrada. Vitro Chaves
manufactures and distributes insulated and laminated glass products in Portugal with their main
facility located in Chaves (north of Portugal) and a distribution center located in Lisbon. In
2007, Vitro Cristalglass and Vitro Chaves had consolidated net sales of Ps. 2,462 million
($227 million) and Ps. 392 million ($36 million), respectively. Most of the sales of Vitro
Cristalglass are of insulated glass windows, a value-added product, which are distributed to
builders and distributors by Vitro Cristalglass own sales force. Vitro Chaves main products are
insulated and laminated glass for the construction industry, which are distributed through its own
and Vitro Cristalglass distribution network.
In April 2008, Vitro Cristalglass acquired certain assets from Verres et Glaces DEpinay
(located in Villetaneuse, France), the most significant being an Isolated Glass (IG) fabrication
facility, which serves the commercial and residential market in Northern France.
32
Central and South American Operations
Through its Colombian subsidiary, Vitro Colombia, and, to a lesser extent, through its
subsidiaries in Venezuela, Ecuador and Panama, the Flat Glass business unit processes tempered and
laminated glass for the automotive replacement, construction and specialty markets in Central and
South America. Vitro
Colombia has one processing facility which is located in Colombia. In 2007, Vitro Colombia and
its subsidiaries had consolidated net sales of Ps. 422 million ($39 million). Vitro Colombia is
expanding into the OEM automotive glass market in Colombia and other Andean Pact nations as well as
into the automotive replacement market in South America. Vitro Colombia markets its products
through a network of independent distributors to small- and medium-sized builders.
Competition
In Mexico, Vidrio y Cristal and Vidrio y Cristal del Noroeste face competition in the
construction industry mainly from Saint Gobain, Guardian, and from imports of glass products.
Guardian, which since 1999 has competed with our Flat Glass business unit as an importer of raw
flat glass products, completed the construction of a float glass furnace in Queretaro in 2004,
which is estimated to produce 200,000 tons of float glass per year. The local competition of Vidrio
y Cristal and Vidrio y Cristal del Noroeste compete primarily on price, service and quality. See
Item 3. Key InformationRisk FactorsRisk Factors Relating to UsWe continue to experience
competition from our global competitors and vertically integrated customers.
With respect to automotive safety glass, the business units principal competition includes
Saint Gobain, PPG Industries, Asahi, Pilkington, Visteon and imports of low-volume automotive glass
products that are being utilized in new automotive designs produced in Mexico. Saint Gobain
operates an automotive glass manufacturing facility located in Cuautla, Mexico.
Vitro America faces competition in the United States from a variety of flat glass
manufacturers in the United States, as well as from a large number of medium- and small-sized
producers and distributors of flat glass products. Vitro America competes in the United States
primarily on the basis of breadth of geographic distribution capabilities, service (on a full line
of products) price and quality.
In Europe, Vitro Cristalglass, as an Insulated Glass Manufacturer, faces competition with
regional competitors and integrated competitors like Saint Gobain. In Central and South America,
Vitro Colombia main competitors are Guardian, Pilkington and Saint Gobain.
Our Raw Materials
Soda Ash, Sand and Feldspar
The most important raw materials we utilize are soda ash, which we largely purchase from
Ansac, silica sand and feldspar. In 2005, we entered into a five-year supply agreement with Unimin
Corporation (Unimin), whereby we have committed to purchase, and certain of Unimins subsidiaries
are committed to sell, our requirements of silica sand and feldspar at the current market prices.
Álcali has, to a large extent, the production capacity to supply the soda ash required by our glass
making operations in Mexico. To the extent that any of our Mexican subsidiaries require silica sand
or soda ash of a different grade than that produced by Unimin or by Ansac and Álcali, such
companies may acquire such silica sand or soda ash from various suppliers in the United States. We
are not dependent on any single supplier for any of the raw materials utilized in our operations.
Energy
Certain of our subsidiaries agreed to purchase, in the aggregate, 90 megawatts of electrical
power and 1.3 million tons of steam per year pursuant to a 15-year take-or-pay power purchase
agreement with Tractebel Energía, S. de R.L. de C.V. (Tractebel Energia). This contract began in
April 2003 and the price at which we are required to purchase electrical power and steam is based
on variables such as inflation, the peso/U.S. dollar exchange rate and the price of natural gas,
whose future value is uncertain.
33
Fuel
The percentage of estimated fuel consumption hedged can vary from 10% to 100%. The percentage
of consumption hedged and the hedged prices change constantly according to market conditions based
on the Companys needs and to the use of alternative fuels within its production processes. As of
December 31, 2007, the Company had hedges for approximately 20% of estimated natural gas
consumption for 2008.
As of June 23, 2008, the closing price of natural gas on the New York Mercantile Exchange was
$13.20 per MMBTU. See Item 11. Quantitative and Qualitative Disclosures About Market Risk -
Natural Gas Price Risk.
Our Capital Expenditures
Our capital expenditures program is currently focused on new investments in technological
upgrades and maintenance of our manufacturing facilities, as well as expansion of our production
capacity. Our capital expenditures program also contemplates the purchase and maintenance of
environmental protection equipment required to meet applicable environmental laws and regulations,
as such may be in effect from time to time. The following table sets forth, for the periods
presented, our capital expenditures by business unit.
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Year ended December 31,
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2005
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2006
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2007
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Business Unit
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(Ps. millions)
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Glass Containers
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Ps.
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622
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Ps.
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894
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Ps.
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2,328
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Flat Glass
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468
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338
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324
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Corporate and other
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17
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20
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43
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Total
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Ps.
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1,107
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Ps.
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1,252
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Ps.
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2,695
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During 2008, we expect to make capital expenditures in the range of Ps. 2,695 million ($248
million) as follows:
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Our Glass Containers Business Unit expects to make capital expenditures of Ps.
2,065 million ($190 million), of which Ps. 1,282 million ($118 million) will be used
to provide maintenance to certain of our furnaces and to the relocation of our
Vidriera Mexico operation to the Vidriera Toluca facility. The remaining Ps. 783
million ($72 million) will be applied to expand production capacity. The production
capacity expansion would take place within the Vidriera Monterrey, Vidriera Mexico (in
its new location at the Vidriera Toluca premises), and Vidriera Los Reyes facilities.
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Our Flat Glass Business Unit expects to make capital expenditures of Ps. 598
million ($55 million), of which Ps. 348 million ($32 million) will be used by its
Mexican subsidiaries, highlighted by the purchase of a new furnace for the Companys
automotive glass operations and the other Ps. 250 million ($23 million) will be used
by its foreign subsidiaries.
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Our corporate entities expect to make capital expenditures of approximately Ps. 32
million ($3 million).
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The
capital expenditures are expected to be financed with cash flows
generated by our operations and with current cash on hand. Should we
be unable to fund the total amount of our capital expenditures with
cash flows from operations, we might defer a portion of such
expenditures to future periods.
See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources,
for a discussion of our principal capital expenditures during the last three full fiscal years.
Genesis Project
Through the end of 2007, we have invested approximately Ps. 423 million ($39 million) related
to the implementation of the Genesis Project. During 2008, we expect to invest approximately Ps.
163 million ($15 million) for the continued implementation of the Genesis Project. The majority of
the cost of the Genesis Project is being capitalized and will be amortized over the expected useful
life of the asset. See Item 3. Key InformationRecent DevelopmentsGenesis Project.
34
Our Property, Plant and Equipment
All of our assets and property are located in Mexico, the United States, Central and South
America and Europe. On December 31, 2007, the net book value of land and buildings, machinery and
equipment and construction in progress was Ps. 17,841 million ($1,642 million), of which Ps. 14,960
million ($1,377 million) represented assets located in Mexico; Ps. 337 million ($31 million)
represented assets located in the United States; Ps. 1,923 million ($177 million) represented
assets located in Central and South America; and Ps. 621 million ($57 million) represented assets
located in Europe.
Our principal executive offices are located in the Monterrey, Mexico area. We own and operate
37 manufacturing facilities worldwide, of which our float glass furnaces are our largest
facilities. Our subsidiary Comegua has granted a lien on one of its furnaces, and our subsidiary
Vitro Cristalglass has granted a lien on one of its facilities.
The following table sets forth, for the periods presented, the average capacity utilization
and location of each of our business units principal manufacturing facilities.
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Average Capacity
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Average Capacity
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Utilization
(1)
as of
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Utilization
(2)
as of
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Number of Facilities
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Business Unit
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December 31, 2006
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December 31, 2007
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by City or Country
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Glass Containers
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98
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%
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97
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%
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Monterrey(3)
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Guadalajara
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Mexico City(2)
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Queretaro
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Toluca
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Costa Rica
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Guatemala
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Panama
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Bolivia
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Flat Glass
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Float
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94
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%
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99
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%
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Monterrey(4)
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Furnaces
(3)
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Mexico City(2)
(4)
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Mexicali
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United States(9)
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Automotive
Facilities
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79
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%
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77
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%
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Colombia
Spain(7)
Portugal
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(1)
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Average for the twelve-month period ended December 31, 2006.
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(2)
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Average for the twelve-month period ended December 31, 2007.
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(3)
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Capacity utilization may sometimes be greater than 100% because pulling capacity is
calculated based on a certain number of changes in glass color and thickness, determined by
historical averages.
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(4)
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Does not include a furnace in Mexico City that has been shut down since 2006.
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We also maintain over 60 sales offices and warehouses in Mexico and over 165 warehouses, sales
offices and retail shops in the United States, most of which are leased.
We believe that all our facilities are adequate for our present needs and suitable for their
intended purpose and that our manufacturing facilities are generally capable of being utilized at a
higher capacity to support increases in demand.
See Item 4. Information on the CompanyOur Capital Expenditures and Item 5. Operating and
Financial Review and ProspectsLiquidity and Capital ResourcesCapital Expenditures for a
discussion of our capital expenditures.
35
Environmental Matters
Our Mexican operations are subject to Mexican federal, state and municipal laws and
regulations relating to the protection of the environment. The primary federal environmental law is
the
Ley General de Equilibrio Ecológico y la Protección al Ambiente
(LGEEPA or the General
Ecological and Environmental Protection Law) pursuant to which regulations have been promulgated
concerning air pollution, noise pollution, environmental impact assessments, environmental audits
and hazardous wastes and substances. LGEEPA sets forth the legal framework applicable to the
generation and handling of hazardous wastes and substances, the release of contaminants into the
air, soil and water, as well as the environmental impact assessment procedure. The
Ley de Aguas
Nacionales
(National Water Law) and regulations thereunder govern the prevention and control of
water pollution.
The
Ley General para la Prevención y Gestión Integral de los Residuos
(General Law for the
Prevention and Integrated Management of Waste) regulates the generation, handling, transportation,
storage and final disposal of hazardous waste, as well as the import and export of hazardous
materials and hazardous wastes. The Mexican federal government has established a public registry
where federally regulated emission sources report their air and water emissions, as well as
information on the generation, handling, transportation and disposal of hazardous substances.
In addition to the foregoing,
Normas Oficiales Mexicanas
(Mexican Official Standards), which
are technical standards issued by regulatory authorities pursuant to the
Ley General de Metrología
y Normalización
(General Law of Metrology and Normalization) and other laws that include the
aforementioned environmental laws, establish standards relating to air emissions (including air
emissions for glass manufacturing operations), waste water discharges, the generation, handling and
disposal of hazardous wastes and noise control, among others.
The Mexican federal authority in charge of overseeing compliance with the federal
environmental laws is the
Secretaria del Medio Ambiente y Recursos Naturales
(Secretary of
Environment and Natural Resources), which we refer to as SEMARNAT. An agency of SEMARNAT, the
Procuraduria Federal de Protección al Ambiente
(Federal Environmental Protection Agency), which we
refer to as PROFEPA, has the authority to enforce the Mexican federal environmental laws. As part
of its enforcement powers, PROFEPA can bring administrative, civil and criminal proceedings against
companies and individuals that violate environmental laws, regulations and Mexican Official
Standards and has the authority to impose a variety of sanctions. These sanctions may include,
among others, monetary fines, revocation of authorizations, concessions, licenses, permits or
registries, administrative arrests, seizure of contaminating equipment, and in certain cases,
temporary or permanent closure of facilities.
Additionally, as part of its inspection authority, PROFEPA is entitled to periodically inspect
the facilities of companies whose activities are regulated by the Mexican environmental legislation
and verify compliance therewith. Furthermore, in special situations or certain areas where federal
jurisdiction is not applicable or appropriate, the state and municipal authorities can administer
and enforce certain environmental regulations of their respective jurisdictions.
In 1998, our subsidiaries initiated a voluntary environmental auditing program implemented by
PROFEPA. This program entails PROFEPA-approved auditors conducting environmental audits of the
relevant facilities to determine if such facilities comply with applicable Mexican environmental
laws. Once an audit is completed, the auditor issues a report of findings and recommendations,
which must be delivered to PROFEPA. The audited facility thereafter enters into an agreement with
PROFEPA on an action plan to be undertaken, pursuant to which, after being implemented to PROFEPAs
satisfaction, the audited entity receives the
Industria Limpia
(Clean Industry) certificate. The
Clean Industry certificate is valid for two years and may be extended at the request of the audited
entity, provided that an auditor reaudits and certifies that the relevant facility operates
pursuant to the Clean Industry certificate that was previously granted. Obtaining this certificate
implies that the audited facility is in compliance with applicable Mexican environmental laws at
the time of receipt of the certificate.
36
A PROFEPA-approved independent auditor has completed environmental audits at all 15 of our
facilities in Mexico. All of these facilities have already obtained the Clean Industry certificate.
Our foreign operations are subject to federal, state and local laws relating to the protection
of the environment of the country in which such operations are conducted. From time to time, we
conduct environmental assessments of our foreign operations, some of which are currently underway,
to determine whether we are in compliance with applicable foreign environmental laws. We expect to
spend approximately $1 million in capital expenditures over the next two years to comply with these
and other environmental regulations as they become effective or are modified. We may, however,
incur amounts greater than currently estimated due to changes in law and other factors beyond our
control. Although there can be no assurance, we do not believe that continued compliance with
Mexican and foreign environmental laws applicable to our operations will have a material adverse
effect on our financial position or results of operations.
Item 4A. Unresolved Staff Comments
Not applicable
37
Item 5. Operating and Financial Review and Prospects
You should read this discussion in conjunction with, and this discussion is qualified in its
entirety by reference to, our consolidated financial statements and notes thereto and other
financial information included elsewhere in this annual report. Our consolidated financial
statements are prepared in accordance with Mexican FRS, which differs in certain significant
respects from U.S. GAAP. Note 24 to our consolidated financial statements for the year ended
December 31, 2007 provides a description of the principal differences between Mexican FRS and U.S.
GAAP as they relate to us. This section contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including without limitation those set forth in Item 3.
Key InformationRisk Factors and the other matters set forth in this annual report. See
Forward-Looking Statements.
OPERATING RESULTS
Factors Affecting Our Results of Operations
Our statement of operations is affected by, among other factors, (i) the level of demand for
our products in the countries in which we operate, (ii) our costs of production, which principally
consist of costs of raw materials, labor, energy and depreciation, (iii) the relationship between
the peso and the U.S. dollar, (iv) financing costs, which are incurred in both pesos and U.S.
dollars and (v) increased competition in our domestic market and abroad. See Item 3. Key
InformationRisk FactorsRisk Factors Relating to UsDifficult market conditions in the
automotive industry may affect our operating margins and results of operations, Item 3. Key
InformationRisk FactorsRisk Factors Relating to UsWe have customers that are significant to
us and the loss of all or a portion of their business would have an adverse effect on us, Item 3.
Key InformationRisk FactorsRisk Factors Relating to UsDownturns in the economies in which we
operate may negatively affect the demand for our products and our results of operations, Item 3.
Key InformationRisk FactorsRisk Factors Relating to UsChanges in the relative value of the
peso to the U.S. dollar and the Euro may have an adverse effect on us, Item 3. Key Information
Risk FactorsRisk Factors Relating to UsInflation fluctuations may have an adverse effect on our
total comprehensive financing result, Item 3. Key Information Risk FactorsRisk Factors
Relating to UsForeign exchange rate fluctuations may have an adverse effect on our total
comprehensive financing result, Item 3. Key InformationRisk FactorsRisk Factors Relating to
UsWe may be adversely affected by increases in interest rates, and Item 3. Key
InformationRisk FactorsRisk Factors Relating to UsSubstitution trends in the glass container
industry may continue to adversely affect our business.
Trend Information
The Mexican glass container market has shown an upward trend during the past years. The
continued popularity of glass as a packaging option given its high quality image, its endless
possibilities of innovation and its environmental friendly aspects when compared to other container
products has helped this positive trend. In fact, some products that years ago migrated to other
types of packaging are returning to glass due to consumer preferences. Looking forward, one of the
main growth drivers in the Mexican glass container market is expected to be the migration from
returnable to non-returnable glass containers in the beer segment. Regarding the United States
market, the Glass Containers business unit has focused its strategy in value-added niche markets
where it has been able to capture the demand growth and estimates it will continue to show the same
trend in the future. This particular business unit is not expected to be affected by the economic
recession, as history has proved that there is no correlation between glass containers consumption
and GDP growth.
The long term fundamentals of the different markets where the Flat Glass business unit
participates are also strong. The Mexican flat glass construction market has experienced growth in
recent years and it is expected to grow in the future due to: strong demand, the current housing
deficit and the positive interest rate conditions prevailing in Mexico. The automotive OEM business
has experienced increasing pressures in different geographic markets. We are heavily dependent on
the big three US car manufactures which are currently experiencing difficult times. High gasoline
prices are also affecting sales of the OEM business, specially the ones related to Sport Utility
Vehicles (SUVs), which represent an important percentage of our auto glass volume.
38
The Flat Glass business unit continues to diversify its customer base
to Japanese Manufacturers and to attract new automotive platform contracts. Despite the automotive
industrys pressures, our automotive business has benefited from the growth and the strong
fundamentals of the Mexican AGR market. The Spanish residential construction market is experiencing
a slowdown. Vitro Cristalglass has been able to partially offset this situation through its
geographic diversification and the access to other European markets. One example of the steps taken
by Vitro Cristalglass to achieve a broader geographic diversification is the acquisition of Vitro
Cristalglass France, which is now engaged in the production and distribution of value-added glass
products to the French residential and commercial construction market. Longer term, the Spanish
construction market is expected to recover its growth momentum. Despite the positive results in
2007, Vitro America, our flat glass subsidiary in the United States, is facing a challenging
environment derived from the economic recession and the sub-prime mortgage crisis in the United
States. The real estate and construction market in the U.S. is now being seriously affected by the
effects of the sub-prime mortgage market, which is also affecting the economy overall. Credit
induced housing has played a very large role in the economys expansion that has lifted other
sectors of the economy and is in reverse now. Increased foreclosures could generate increased
inventory on the housing market which could affect our residential and commercial construction
sales, which as of today is still not clear when it will recover. See Item 3. Key
InformationRisk FactorsRisk Factors Relating to UsDownturns in the economies in which we
operate may negatively affect the demand for our products and our results of operations and Item
3. Key Information Risk FactorsRisk Factors Relating to Economies in Which We
ParticipateEconomic developments in Mexico and the United States affect our business.
Substantially all of our export sales and most of our domestic sales in Mexico are denominated
in or affected by the US dollar, and accordingly, the following discussion of the trends of our
business units is based upon a US dollar presentation.
Our Glass Containers business unit performed extremely well in 2007, with a record year in
terms of sales, despite constraints on our production from interruptions in the supply of natural
gas during July and September 2007. Domestic sales have been driven by increased volumes coupled
with a better product mix at most of our business lines. Higher sales in the food and wine & liquor
lines compensated for marginal lower sales in the remaining business lines. Export sales continued
to benefit from an increase in volumes in food and wine & liquor as well as a better product mix at
cosmetics, fragrances and toiletries (CFT), soft drinks and wine & liquor business lines.
Our Flat Glass Business unit also performed very well, with increased sales across all our
business lines, other than sales from the construction market in the United States. In the
automotive business line higher volumes to the AGR market more than offset a reduction in volumes
to the OEMs.
The increase in the price of certain of our raw materials, in particular natural gas,
continues to negatively affect our cost of goods sold. The average NYMEX natural gas price during
2007 was $7.12 per MMBTU and even though it decreased 2% compared to 2006, it has increased 120%
compared with 2003.
Our cost of goods sold is sensitive to the price of natural gas. In recent years, every dollar
fluctuation per MMBTU has had an annual impact of approximately $20 million on our cost of goods
sold based on our average historical consumption of approximately 1.7 million MMBTUs per month. The
NYMEX closing price of natural gas as of June 23, 2008 was $13.20 per MMBTU. We have not been able
to raise the prices of our products to fully reflect the increases in our operating costs and
therefore our results of operations could be adversely affected. See Item 3. Key Information
Risk FactorsRisk Factors Relating to Us We have experienced rising operating costs in our
businesses.
Economic Developments in Mexico and the United States Affect our Business
A substantial portion of our operations are in Mexico and a substantial majority of our
consolidated net sales are made in Mexico and the United States. Therefore, economic conditions in
Mexico and the United States have a significant effect on our business, results of operations and
financial position.
2007 was a year of moderate global economic growth. The economies of Mexico and the United
States, our two biggest markets, recorded actual GDP growth in 2007 of 3.3% and 2.2%, respectively,
compared with growth of 4.7% and 3.3%, respectively, in 2006. Mexicos economic growth rate was
mainly driven by the increase in oil prices. Analysts, however, continue to view the pace of growth
as weak, as economic uncertainties are anticipated due to, among other factors, the economic
deceleration in
the United States. Over the past few years, Mexicos rate of inflation has remained low,
amounting to 4.1% in 2006 and 3.8% in 2007.
39
The majority of our manufacturing facilities are located in Mexico. For each of the years
ended December 31, 2005, 2006 and 2007, 41%, 43%, and 44%, respectively, of our consolidated net
sales resulted from sales to parties located within Mexico.
While helping the country to maintain low levels of inflation and a manageable deficit, the
Mexican governments continued fiscal and monetary policy does not provide the flexibility
necessary to support Mexicos economic improvement. As a result, new investment and growth in
aggregate purchasing power have been marginal. Several factors could affect the growth of Mexicos
economy and its industrial sector. These factors include (i) the extent of the U.S. economic
recovery and the participation of Mexicos industrial sector in that recovery and (ii) the Mexican
governments approval and implementation of fiscal and other structural reforms such as the
evolution of energy prices, particularly natural gas. In spite of these political and economic
dynamics, we will continue to focus on the factors within our control and position ourselves to
take full advantage of new market opportunities.
Inflation and Foreign Currency Exchange Rate Fluctuations
The following table sets forth, for the periods presented, certain information relating to
inflation and foreign currency exchange rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Nominal peso devaluation (appreciation) relative to the U.S.
dollar
(1)
|
|
|
(4.6%)
|
|
|
|
1.7%
|
|
|
|
0.5%
|
|
Mexican inflation (based on changes in INPC)
(1)
|
|
|
3.3%
|
|
|
|
4.1%
|
|
|
|
3.8%
|
|
U.S. inflation (based on changes in Consumer Price Index)
(2)
|
|
|
3.5%
|
|
|
|
2.5%
|
|
|
|
4.1%
|
|
Inflation differential (Mexican vs. U.S.)
(1)(2)(3)
|
|
|
(0.2%)
|
|
|
|
1.6%
|
|
|
|
(0.3%)
|
|
Real peso devaluation (appreciation) relative to the U.S. dollar
(4)
|
|
|
(4.5%)
|
|
|
|
0.1%
|
|
|
|
0.8%
|
|
Free Exchange Rate as of year end
(1)
|
|
Ps.
|
10.6344
|
|
|
Ps.
|
10.8116
|
|
|
Ps.
|
10.8662
|
|
Mexican GDP growth rate
(5)
|
|
|
3.0%
|
|
|
|
4.7%
|
|
|
|
3.3%
|
|
Exchange rate of euro per pesos as of year end
(6)
|
|
Ps.
|
12.5932
|
|
|
Ps.
|
14.2680
|
|
|
Ps.
|
15.9526
|
|
|
|
|
(1)
|
|
Source: Banco de México.
|
|
(2)
|
|
Source: U.S. Bureau of Labor Statistics.
|
|
(3)
|
|
Compounded.
|
|
(4)
|
|
Peso devaluation (appreciation) in real terms = -((Nominal peso devaluation +1) / (Inflation
differential + 1))-1.
|
|
(5)
|
|
Source:
Instituto Nacional de Estadística, Geografía e Informática.
|
|
(6)
|
|
Source: Federal Reserve Bank of New YorkNoon Buying Rates as to euro-to-dollar exchange
rate and Banco de México as to dollar-to-peso exchange rate.
|
Effects of Inflation and Foreign Currency Exchange Rate Fluctuations on Operating Margins
Changes in the relative value of the peso to the U.S. dollar have an effect on our results of
operations. In general, as described more fully in the following paragraphs, a real devaluation of
the peso will likely result in an increase in our operating margins and a real appreciation of the
peso will likely result in a decrease in our operating margins, in each case, when measured in
pesos. This is because the aggregate amount of our consolidated net sales denominated in or
affected by U.S. dollars exceeds the aggregate amount of our cost of goods sold and our selling,
general and administrative expenses denominated in or affected by U.S. dollars.
A substantial portion of the sales generated by our Mexican and U.S. subsidiaries are either
denominated in or affected by the value of the U.S. dollar. The prices of a significant number of
the products we sell in Mexico, in particular those of flat glass for automotive uses and capital
goods are linked to the U.S. dollar. In addition, substantially all of our export sales are
invoiced in U.S. dollars and subsequently translated into pesos using the exchange rate in effect
at the time of the transaction. The translated U.S. dollar sales of our Mexican subsidiaries are
then restated into constant pesos using INPC, as of the date of the most recent balance sheet
included in those financial statements.
40
As a result, when the peso devalues in real terms against
the U.S. dollar, as was the case in 2003, 2006 and 2007, the same level of U.S. dollar sales as in a prior period will result in higher constant peso revenues in the
more recent period. Conversely, when the peso appreciates in real terms against the U.S. dollar, as
was the case in 2004 and 2005, the same level of U.S. dollar sales as in a prior period will result
in lower constant peso revenues in the more recent period. Moreover, because a material portion of
our cost of goods sold, including labor costs, and selling, general and administrative expenses are
invoiced in pesos and are not directly affected by the relative value of the peso to the U.S.
dollar, the real appreciation or devaluation of the peso relative to the U.S. dollar has a
significant effect on our operating margins, at least in the short term.
Further, a strong peso relative to the U.S. dollar makes the Mexican market more attractive
for importers and competitors that might not otherwise sell in the Mexican market. A strong peso
relative to the U.S. dollar also makes those of our products whose prices are denominated in or are
affected by the value of the U.S. dollar less competitive or profitable. When the peso appreciates
in real terms, with respect to such products, we must either increase our prices in U.S. dollars,
which make our products less price-competitive, or bear reduced operating margins when measured in
pesos. Given the competitive nature of the industries in which we operate, in the past we have
chosen to reduce our operating margins for such products in response to appreciation of the peso
relative to the U.S. dollar. For the year ended December 31, 2005, the appreciation of the peso in
real terms had an adverse effect on our operating margins and, while the peso did not appreciate in
the years ended December 31, 2006 and 2007, it may appreciate again in the future, potentially
resulting in an adverse effect on our operating margins. Sales of products manufactured, processed
or sold by us outside Mexico (principally by Vitro America, Vitro Packaging, Comegua, and Vitro
Cristalglass), as well as such subsidiaries expenses, are restated during a financial reporting
period by adjusting such amount for the inflation observed in the country in which the subsidiary
operates and then translated into pesos at the exchange rate in effect at the end of the period.
Since such subsidiaries revenues and expenses are generally both earned and incurred in the same
currency, the devaluation or appreciation of the peso has a much more limited effect on the
operating margins of such subsidiaries. However, profits, as reported in real peso terms, are
substantially impacted by the devaluation or appreciation of the peso relative to the appropriate
currency.
Effect of Inflation and Foreign Currency Exchange Rate Fluctuations on Total Comprehensive
Financing Result
Our total comprehensive financing result includes (i) net interest expense, (ii) the net
effect of inflation on our monetary assets and liabilities, (iii) the net effect of changes in
nominal foreign currency exchange rates on monetary assets and liabilities denominated in foreign
currencies and (iv) since 2005, due to the implementation of Bulletin C-10, Derivative Financial
Instruments and Hedging Activities, gains or losses related to hedging transactions. Net interest
expense is calculated as the nominal amount of interest expense incurred by us with respect to our
short- and long-term debt and off-balance sheet financings, minus the nominal amount of interest
income generated by us with respect to our monetary assets.
Inflation affects our total comprehensive financing result. During periods of inflation, the
principal amount of our monetary debt will generally be reduced in real terms by the rate of
inflation. The amount of such reduction will result in a gain from monetary position. This gain is
offset by the reduction in real terms in the value of the monetary assets we held during such
period. Historically, our monetary liabilities have exceeded our monetary assets and, thus, we have
tended to experience monetary gains during periods of inflation. Declining levels of inflation in
recent years have resulted in lower monetary gains.
Our total comprehensive financing result is also impacted by changes in the nominal value of
the peso relative to the U.S. dollar. Foreign currency exchange gains or losses included in total
financing cost result primarily from the impact of nominal changes in the U.S. dollar-peso exchange
rate on our and our Mexican subsidiaries U.S. dollar-denominated monetary liabilities (such as
dollar-denominated debt and accounts payable arising from imports of raw materials and equipment)
and assets (such as dollar-denominated cash and cash equivalents and accounts receivable from
exports). Because our U.S. dollar-denominated liabilities have historically been significantly in
excess of our dollar-denominated monetary assets, the devaluation or appreciation of the peso
resulted in exchange losses and gains, respectively. Accordingly, in 2006 and 2007, the nominal
devaluation of the peso relative to the U.S. dollar resulted in foreign currency exchange losses.
The nominal appreciation of the peso relative to the U.S. dollar resulted in a foreign currency
exchange gain in 2005.
41
Results of Operations
On June 16, 2006, we completed the sale of our 51% equity ownership interest in Vitrocrisa to
Libbey, the owner of the remaining 49% equity interest. Vitrocrisa, which was previously presented
as one of our reportable segments is presented as discontinued operation as its disposition
represents the end of a significant activity of the Company. Accordingly, all financial and
operating information relating to Vitrocrisa in this annual report are presented as a discontinued
operation.
The following table sets forth, for the periods presented, selected items of our consolidated
statement of operations calculated as a percentage of our consolidated net sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of goods sold
|
|
|
72.3
|
|
|
|
72.6
|
|
|
|
70.6
|
|
Gross profit
|
|
|
27.7
|
|
|
|
27.4
|
|
|
|
29.4
|
|
General, administrative and selling expenses
|
|
|
20.8
|
|
|
|
19.8
|
|
|
|
19.9
|
|
Operating income
|
|
|
6.9
|
|
|
|
7.6
|
|
|
|
9.5
|
|
Total comprehensive financing result
|
|
|
5.6
|
|
|
|
8.2
|
|
|
|
5.8
|
|
Net income
|
|
|
0.9
|
|
|
|
1.0
|
|
|
|
0.5
|
|
The following table sets forth, for the periods presented, the consolidated net sales, export
sales and operating income (before corporate and other eliminations) of each of our business units,
as well as the contribution to our consolidated results of operations, in percentage terms, of the
consolidated net sales, export sales and operating income (after corporate and other eliminations,
and reflecting export sales in U.S. dollars) of each of our business units. The following table
does not include the results of discontinued operations. Peso amounts set forth in the following
table have been restated in millions of constant pesos as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
|
(Ps. millions, except for percentages)
|
|
|
($ millions)
(1)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass Containers
|
|
Ps.
|
12,488
|
|
|
|
47
|
%
|
|
Ps.
|
14,068
|
|
|
|
51
|
%
|
|
Ps.
|
14,676
|
|
|
|
51
|
%
|
|
$
|
1,351
|
|
Flat Glass
|
|
|
13,704
|
|
|
|
52
|
%
|
|
|
13,462
|
|
|
|
48
|
%
|
|
|
13,605
|
|
|
|
48
|
%
|
|
|
1,252
|
|
Corporate and other eliminations
|
|
|
375
|
|
|
|
1
|
%
|
|
|
346
|
|
|
|
1
|
%
|
|
|
310
|
|
|
|
1
|
%
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
Ps.
|
26,567
|
|
|
|
100
|
%
|
|
Ps.
|
27,876
|
|
|
|
100
|
%
|
|
Ps.
|
28,591
|
|
|
|
100
|
%
|
|
$
|
2,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Ps. millions, except for percentages)
|
|
|
($ millions)
(1)
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
Ps.
|
10,919
|
|
|
|
41
|
%
|
|
Ps.
|
11,875
|
|
|
|
43
|
%
|
|
Ps.
|
12,707
|
|
|
|
44
|
%
|
|
$
|
1,169
|
|
Exports
|
|
|
6,987
|
|
|
|
26
|
%
|
|
|
6,384
|
|
|
|
23
|
%
|
|
|
6,674
|
|
|
|
23
|
%
|
|
|
614
|
|
Foreign Subsidiaries
|
|
|
8,662
|
|
|
|
33
|
%
|
|
|
9,617
|
|
|
|
34
|
%
|
|
|
9,210
|
|
|
|
32
|
%
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
26,567
|
|
|
|
100
|
%
|
|
Ps.
|
27,876
|
|
|
|
100
|
%
|
|
Ps.
|
28,591
|
|
|
|
100
|
%
|
|
$
|
2,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($millions
(2)
, except for percentages)
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
916
|
|
|
|
41
|
%
|
|
$
|
1,028
|
|
|
|
43
|
%
|
|
$
|
1,145
|
|
|
|
45
|
%
|
|
|
|
|
Exports
|
|
|
588
|
|
|
|
27
|
%
|
|
|
556
|
|
|
|
23
|
%
|
|
|
601
|
|
|
|
23
|
%
|
|
|
|
|
Foreign Subsidiaries
|
|
|
708
|
|
|
|
32
|
%
|
|
|
817
|
|
|
|
34
|
%
|
|
|
814
|
|
|
|
32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,212
|
|
|
|
100
|
%
|
|
$
|
2,401
|
|
|
|
100
|
%
|
|
$
|
2,560
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($millions
(2)
, except for percentages)
|
|
|
|
|
Export sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass Containers
|
|
$
|
290
|
|
|
|
49
|
%
|
|
$
|
344
|
|
|
|
62
|
%
|
|
$
|
364
|
|
|
|
61
|
%
|
|
|
|
|
Flat Glass
|
|
|
298
|
|
|
|
51
|
%
|
|
|
212
|
|
|
|
38
|
%
|
|
|
237
|
|
|
|
39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated export sales
|
|
$
|
588
|
|
|
|
100
|
%
|
|
$
|
556
|
|
|
|
100
|
%
|
|
$
|
601
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Ps. millions, except for percentages)
|
|
|
($ millions)
(1)
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glass Containers
|
|
Ps.
|
1,327
|
|
|
|
72
|
%
|
|
Ps.
|
1,853
|
|
|
|
87
|
%
|
|
Ps.
|
2,054
|
|
|
|
76
|
%
|
|
$
|
189
|
|
Flat Glass
|
|
|
514
|
|
|
|
28
|
%
|
|
|
418
|
|
|
|
20
|
%
|
|
|
782
|
|
|
|
29
|
%
|
|
|
72
|
|
Corporate and other eliminations
|
|
|
(2
|
)
|
|
|
0
|
%
|
|
|
(154
|
)
|
|
|
(7
|
)%
|
|
|
(132
|
)
|
|
|
(5
|
)%
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
Ps.
|
1,839
|
|
|
|
100
|
%
|
|
Ps.
|
2,117
|
|
|
|
100
|
%
|
|
Ps.
|
2,704
|
|
|
|
100
|
%
|
|
$
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These amounts have been translated into U.S. dollars, solely for the convenience
of the reader, at the rate of 10.8662 pesos per one U.S. dollar, the Free Exchange Rate on
December 31, 2007.
|
|
(2)
|
|
Dollar figures reported herein are in nominal dollars resulting from dividing each
months nominal pesos by that months ending exchange rate published by Banco de México.
|
42
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Net Sales
Our consolidated net sales increased 2.6% to Ps. 28,591 million ($2,631 million) for the year
ended December 31, 2007 from Ps. 27,876 million ($2,565 million) for the year ended December 31,
2006. During the year ended December 31, 2007, domestic, foreign subsidiaries, and export sales
grew 1.1%, 3.0% and 4.5%, respectively, year-over-year.
Domestic and foreign subsidiary sales increased as a result of improved sales volumes at the
Glass Containers and Flat Glass business units. Export sales increased to Ps. 6,674 ($614 million),
from Ps. 6,384 ($588 million) mainly due to higher float glass business volumes at the Flat Glass
business unit and to higher volumes in the food and wine & liquor business lines at the Glass
Containers business unit. Our export sales represented 23.3% of our consolidated net sales for the
year ended December 31, 2007.
Glass Containers Business Unit
Net sales of our Glass Containers business unit increased 4.7% to Ps. 14,676 million ($1,351
million) for the year ended December 31, 2007 from Ps. 14,068 million ($1,295 million) for the year
ended December 31, 2006. The main drivers of this sales increase were strong volumes in the food
and wine & liquor business lines, coupled with an improved overall product mix, in the domestic
market. This increase in sales was achieved despite the constraints on production from
interruptions in the supply of natural gas during July and September 2007.
Export sales grew 2.7% year-over-year due to higher volumes at the food and wine & liquor
business lines, reflecting continued strong demand, coupled with a better product mix at the CFT,
soft drinks and wine & liquor business lines.
Flat Glass Business Unit
Net sales of our Flat Glass business unit were Ps. 13,605 million ($1,252 million) for the
year ended December 31, 2007, an increase of 1.1% when compared to Ps. 13,462 million ($1,239
million) for the year ended December 31, 2006. A decrease in domestic sales of 0.7% year-over-year
was mainly driven by lower float glass volumes, which was partially offset by higher automotive
sales due to a better product mix coupled with higher volumes.
Export sales increased 7.4% year-over-year mainly due to higher float glass volumes, in line
with the companys strategy of temporarily exporting the additional capacity gained by the purchase
of AFGs 50% stake in Vidrio y Cristal del Noroeste (previously Vitro AFG, the float glass
manufacturing facility located in Mexicali, Baja California, México). In addition, AGR related
sales increased 33% due to higher volumes, which offset a decrease in the OEM market. The available
capacity that resulted from the reduction in the OEM export sales was used to supply the AGR
market.
Sales from foreign subsidiaries increased 4.5% year-over-year to $677 million from $648
million. Sales at Vitro Cristalglass rose 33%, driven by the stronger demand of more value added
products (improved product mix) from the construction market, the appreciation of the euro, and to
the new furnace in the La Rozada facility that started operating during the first quarter of 2007.
In addition, sales at Vitro Colombia rose 33% due to a better product mix and higher volumes linked
to the strong demand from the Venezuelan and Ecuadorian markets. Sales at Vitro America were
adversely affected by the anticipated slowdown in demand from the U.S. residential construction
market.
Operating Income
Our consolidated operating income increased 14.9% to Ps. 2,704 million ($249 million) for the
year ended December 31, 2007 from Ps. 2,117 million ($195 million) for the year ended December 31,
2006, mainly due to increased production volumes that contributed to better fixed cost absorption,
which paired with higher productivity and operating efficiencies and lower depreciation due to the
increase of the estimated remaining useful lives of certain fixed assets.
43
Glass Containers Business Unit
Operating income of our Glass Containers business unit increased 10.8% to Ps. 2,054 million
($189 million) for the year ended December 31, 2007 from Ps. 1,853 million ($171 million) for the
year ended December 31, 2006. This increase was driven by higher sales, improved production
efficiencies which optimized fixed costs absorption, better product mix and lower depreciation,
which more than offset the temporary constraints on production at certain glass containers
facilities in Mexico due to the interruption in natural gas supply caused by incidents that
occurred at certain PEMEX gas pipelines.
Flat Glass Business Unit
Operating income of our Flat Glass business unit was Ps. 782 million ($72 million) for the
year ended December 31, 2007, an increase of 87.1% when compared to Ps. 418 million ($38 million)
for the year ended December 31, 2006. This increase was due to a better product mix, improved
production efficiencies and enhanced fixed-cost absorption as well as the fact that 2006 included
significant expenses related to furnace repair and the temporary shut-down of one of our furnaces.
Total Comprehensive Financing Result
Our total comprehensive financing result decreased 27.1% from Ps. 2,276 million ($210 million)
for the year ended December 31, 2006 to Ps. 1,660 million ($153 million) for the year ended
December 31, 2007. This decrease was primarily due to a non-cash foreign-exchange loss of Ps. 94
million ($9 million) during the year ended December 31, 2007 compared to a non-cash
foreign-exchange loss of Ps. 224 million ($21 million) in the year ended December 31, 2006,
resulting from a lower depreciation of the Mexican peso during the year ended December 31, 2007,
and more favorable values in our derivative instrument transactions of Ps. 201 million ($19
million) for the year ended December 31, 2007 compared to Ps. 337 million ($31 million) for the
year ended December 31, 2006, and a decrease of 7.6% in interest expense to Ps. 1,694 million ($156
million) for the year ended December 31, 2007 from Ps. 1,834 million ($169 million) for the year
ended December 31, 2006.
Other Expenses (Income), Net
Other expenses (income), net, changed by Ps. 1,098 million ($101 million) to a loss of Ps. 869
million ($80 million) for the year ended December 31, 2007 from a gain of Ps. 229 million ($21
million) for the year ended December 31, 2006, mainly due to (i) a gain from the sale of long-lived
assets of Ps. 795 million ($73million) in 2006 compared to a loss of Ps. 47 million ($4 million) in
2007; (ii) a gain from the sale of subsidiaries of Ps. 68 million ($6 million) in 2006 compared to
a loss of Ps. 11 million ($1 million) in 2007; and (iii) fees and costs of Ps. 488 incurred for the
extinguishment of debt associated with our debt restructuring completed during 2007.
Income and Asset Taxes
Income tax and tax on assets for the year ended December 31, 2007 represented an expense of
Ps. 44 million ($4 million) compared with an expense of Ps. 228 million ($21 million) for the year
ended December 31, 2006. The difference was derived mainly from the cancellation of a valuation
allowance on a deferred tax asset of Ps. 206 million ($19 million) in 2007, as management believes
that it is highly probable that such amount will be recoverable.
Net Income
For the year ended December 31, 2007, we generated consolidated net income of Ps. 131 million
($12 million) compared to a net income of Ps. 291 million ($27 million) for the year ended December
31, 2006. This decrease was mainly due to a gain on sale of discontinued operations of Ps. 480
million ($44 million) in 2006, which compensated for the net loss from continuing operations of Ps.
158 million ($15 million) in the same year, resulting in a net income of Ps. 291 million ($27
million) in 2006. The net income from continuing operations for the year ended December 31, 2007
was Ps. 131 million ($12 million) compared to a net loss from continuing operations of Ps. 158
million ($15 million) for the year ended December 31, 2006. This resulted primarily from higher
sales, an increase in operating income and a lower total comprehensive financing result which
allowed us to offset higher other expenses of Ps. 869 million ($80 million).
44
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Net Sales
Our consolidated net sales increased 5.0% to Ps. 27,876 million ($2,565 million) for the year
ended December 31, 2006 from Ps. 26,567 million ($2,445 million) for the year ended December 31,
2005. During the year ended December 31, 2006, domestic and foreign subsidiaries sales grew 8.7%
and 11.1%, respectively year-over-year, as a result of strong sales volumes at the Flat Glass and
Glass Containers business units.
For the year ended December 31, 2006, our consolidated export sales were $556 million (Ps.
6,384 million), a decrease of 5.4% when compared to $588 million (Ps. 6,987 million) for the year
ended December 31, 2005. The decrease in exports is mainly due to lower AGR and
construction-related sales, as we plan to temporarily exit this export market. Our export sales
represented 23.1% of our consolidated net sales for the year ended December 31, 2006.
Glass Containers Business Unit
Net sales of our Glass Containers business unit increased 12.6% to Ps. 14,068 million ($1,295
million) for the year ended December 31, 2006 from Ps. 12,488 million ($1,149 million) for the year
ended December 31, 2005. Strong volumes across all business lines in the domestic market continued
to be the main driver behind the 7.9% increase year-over-year. In particular, sales volume of
beverage containers including beer, wine, liquor and CFT were the largest contributors to the
increase.
Export sales grew 18.3% year-over-year due to a strong rise in sales volumes at the CFT
business line as a result of increased demand in the South American and European markets and larger
volumes coupled with an improved price mix at the wine & liquor business line.
Flat Glass Business Unit
Net sales of our Flat Glass business unit were Ps. 13,462 million ($1,239 million) for the
year ended December 31, 2006, a decrease of 1.8% when compared to Ps. 13,704 million ($1,261
million) for the year ended December 31, 2005, due primarily to a decrease in export sales. This
decrease was partially offset by an increase in domestic sales of 14.4% year-over-year, mainly as a
result of higher automotive and construction-related sales. In addition, construction-related sales
volume increased 12% year-over-year.
Export sales decreased 30.3% year-over-year due to lower AGR and construction-related sales,
as we plan to temporarily exit this lower margin export market and focus our efforts on domestic
sales. The reduction in AGR export sales was driven by a decrease in volume as capacity was used to
supply the OEM market, although this effect was partially offset by an improved product mix.
Construction-related export sales decreased as we continued to focus on the Mexican market.
Automotive sales decreased 2.1% year-over-year, driven by lower sales volume in the AGR market.
This effect was partially offset by the success of current OEM platforms.
Sales from foreign subsidiaries continued an upward trend, increasing 9.8% year-over-year to
$648 million from $590 million. Sales at Vitro America rose 2.8% as a result of increased
construction-related volumes. Sales at Vitro Colombia rose 1.2% while Vitro Cristalglass sales
rose 8.3% driven by incremental large-scale contracts coupled with an improved product mix.
Operating Income
Our consolidated operating income increased 15.1% to Ps. 2,117 million ($195 million) for the
year ended December 31, 2006 from Ps. 1,839 million ($169 million) for the year ended December 31,
2005, mainly due to increased sales and production efficiencies in our Glass Containers business
unit.
Glass Containers Business Unit
Operating income of our Glass Containers business unit increased 39.5% to Ps. 1,853 million
($171 million) for the year ended December 31, 2006 from Ps. 1,327 million ($122 million) for the
year ended December 31, 2005. Growth in operating income was driven by higher sales volume, a
better product mix due to unseasonably high demand for glass containers and improved production
efficiencies which optimized fixed cost absorption. These factors more than offset higher
maintenance costs associated with the utilization of all our furnaces to meet this demand, as well
as higher energy costs. Additionally, all furnaces were ignited in the first quarter of 2006,
compared to the second quarter of 2005. This had a positive effect on our operating income.
45
Flat Glass Business Unit
Operating income of our Flat Glass business unit was Ps. 418 million ($38 million) for the
year ended December 31, 2006, a decrease of 18.7% when compared to Ps. 514 million ($47 million)
for the year ended December 31, 2005. This decrease was due to the temporary shutdown of the
furnace located in Mexico City. Higher volumes in domestic construction and value-added automotive
OEM products helped offset the decrease. Vitro America and Vitro Cristalglass also continued to
generate strong operating income, with increases 36.3% and 53.2%, respectively.
Total Comprehensive Financing Result
Our total comprehensive financing result increased 52% from Ps. 1,500 million ($138 million)
for the year ended December 31, 2005 to Ps. 2,276 million ($210 million) for the year ended
December 31, 2006. This increase was primarily due to a non-cash foreign-exchange loss of Ps. 224
million ($21 million) during the year ended December 31, 2006 compared to a non-cash
foreign-exchange gain of Ps. 417 million ($38 million) in the year ended December 31, 2005,
resulting from a depreciation of the peso by 1.7% during the year ended December 31, 2006, compared
with a 4.6% appreciation in the year ended December 31, 2005. Additionally, an increase in other
financial expenses driven mainly by the negative effect of derivative transactions, which increased
from a charge of Ps. 17 million ($2 million) for the year ended December 31, 2005 to Ps. 337
million ($31 million) for the year ended December 31, 2006, which more than offset a 9.4% reduction
in interest expense.
Other (Income) Expenses, Net
Other expenses, net decreased Ps. 723 million ($67 million) to a gain of Ps. 229 million ($21
million) for the year ended December 31, 2006 from a loss of Ps. 494 million ($46 million) for the
year ended December 31, 2005, mainly due to (i) the gain from sale of long-lived assets of Ps. 795
million ($73 million); (ii) the gain from sale of other subsidiaries of Ps. (68) million ($(6)
million) (see Item 4. Information on the CompanyBusinessStrategic Sale of Non-Core Businesses
and Assets.), compared to a loss of Ps. 137 million ($13 million) in 2005; and (iii) restructuring
charges of Ps. 61 million ($6 million) in 2006 compared to Ps. 332 million ($31 million) in 2005.
In 2005, we recorded a gain of Ps. (458) million ($42 million) resulting from the designation of
Vitro as the sole beneficiary of the Vitro Club assets held in trust. See note 16 of our
consolidated financial statements.
Income Tax and Tax on Assets
Income tax, tax on assets and workers profit sharing for the year ended December 31, 2006
represented an expense of Ps. 228 million ($21 million) compared with a benefit of Ps. (519)
million ($(48) million) for the year ended December 31, 2005. The difference was derived mainly
from the recognition of a deferred tax benefit of Ps. 923 million ($85 million) in 2005 resulting
from the recognition of the tax basis of the intangible assets of certain foreign subsidiaries
subject to repatriation, which was partially offset by the tax effects of a higher foreign-exchange
loss in 2006. Additionally, during the second quarter of 2006, a tax loss carryforward was
generated by the sale of Vitrocrisas shares, which resulted in a deferred tax benefit.
Net Income
For the year ended December 31, 2006, we generated consolidated net income of Ps. 291 million
($27 million) compared to a net income of Ps. 243 million ($22 million) for the year ended December
31, 2005. This resulted primarily from a gain on sale of Ps. 480 million ($44 million) in
connection with the sale of our stake in Vitrocrisa in June 2006, other income of Ps. 863 million
($79 million) related to a gain from the sale of subsidiaries and long-lived assets. The effect of
these transactions was partially offset by an increase in financing costs due to higher non-cash
foreign-exchange losses and by the negative effect of derivative transactions, in addition to an
expense of Ps. 283 million ($26 million) related to income tax, tax on assets and workers profit
sharing for the year ended December 31, 2006 compared to a benefit of Ps. 468 million ($43 million)
for the year ended December 31, 2005.
46
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2007, we had cash and cash equivalents totaling Ps. 1,638 million ($151
million). Our policy is to invest available cash in short-term instruments issued by Mexican and
international banks and securities issued by the governments of Mexico and the United States.
Over the past three years, the principal source of our liquidity has generally been cash
generated from operations in each of our business units and the sale of certain assets. Our
principal uses of cash have generally been for capital expenditure programs, interest payments,
debt repayment and dividend payments. The following is a summary of the principal sources and uses
of cash for the three years ended December 31, 2007:
Principal Sources and Uses of Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(in millions of constant pesos)
|
|
Sources:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by operating activities
|
|
Ps.
|
2,085
|
|
|
Ps.
|
1,081
|
|
|
Ps.
|
1,803
|
|
Issuance of capital stock
|
|
|
|
|
|
|
578
|
|
|
|
|
|
Debt issuance
|
|
|
8,968
|
|
|
|
6,374
|
|
|
|
16,939
|
|
Sale of assets
|
|
|
201
|
|
|
|
2,907
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
1,107
|
|
|
|
1,252
|
|
|
|
2,695
|
|
Debt repayments
|
|
|
10,780
|
|
|
|
9,508
|
|
|
|
14,868
|
|
Dividends declared and paid
|
|
|
195
|
|
|
|
161
|
|
|
|
215
|
|
Changes in Working Capital
Our working capital decreased Ps. 157 million ($14 million) during the year ended December 31,
2007. This decrease was principally due to an increase in trade receivables and inventories, which
were more than offset by an increase in trade payables and a change in other current assets and
liabilities.
Capital Expenditures
We operate in capital-intensive industries and require ongoing investments to update our
assets and technology. In prior years, funds for those investments and for working capital needs,
joint venture transactions, acquisitions and dividends have been provided by a combination of cash
generated from operations, short- and long-term debt and, to a lesser extent, divestitures.
Our capital expenditures program is currently focused on new investments in, technological
upgrades to and maintenance of, our manufacturing facilities, as well as expansion of our
production capacity. Our capital expenditures program also contemplates the purchase and
maintenance of environmental protection equipment required to meet applicable environmental laws
and regulations, as such may be in effect from time to time.
During the year ended December 31, 2007, we made aggregate capital expenditures of Ps. 2,695
million ($248 million) compared to aggregate capital expenditures of Ps. 1,252 million ($115
million) in the same period in 2006, primarily consisting of capital expenditures for furnace
repairs and general maintenance.
47
During 2008, we expect to make capital expenditures of approximately Ps. 2,695 million ($248
million) as follows:
|
|
|
Our Glass Containers Business Unit expects to make capital expenditures of Ps.
2,065 million ($190 million), of which Ps. 1,282 million ($118 million) will be used to
provide needed maintenance to certain of our furnaces and to the relocation of the
Vidriera Mexico operations
to the Vidriera Toluca facility. The remaining Ps. 783 million ($72 million) will be
applied to expand production capacity. The production capacity expansion would take
place within the Vidriera Monterrey, Vidriera Mexico (in its new location at the
Vidriera Toluca premises) and Vidriera Los Reyes facilities.
|
|
|
|
|
Our Flat Glass Business Unit expects to make capital expenditures of Ps. 598
million ($55 million), of which Ps. 348 million ($32 million) will be used by its
Mexican subsidiaries, highlighted by the purchase of a new furnace for the Companys
automotive glass operations and the other Ps. 250 million ($23 million) will be used by
its foreign subsidiaries.
|
|
|
|
|
Our corporate entities expect to make capital expenditures of approximately Ps. 32
million ($3 million).
|
The
capital expenditures are expected to be financed with cash flows
generated by our operations and with current cash on hand. Should we
be unable to fund the total amount of our capital expenditures with
cash flows from operations, we might defer a portion of such
expenditures to future periods.
For the year ended December 31, 2007, our capital expenditures totaled Ps. 2,695 million ($248
million). Our Glass Containers business unit accounted for 86% of our capital expenditures, which
were primarily used for maintenance to certain of our furnaces, for the relocation of our Vidriera
Mexico operation to the Vidriera Toluca facility, and for production capacity expansion. The
remaining 14% of our capital expenditures for the year ended December 31, 2007 were incurred by our
Flat Glass business unit, mainly for major furnace repairs and production capacity expansion.
For the year ended December 31, 2006, our capital expenditures totaled Ps. 1,252 million ($115
million), an increase of 13% compared with the capital expenditures for the same period in 2005.
Capital expenditures during 2006 were made primarily in our Glass Containers and Flat Glass
business units. Our Glass Containers business unit accounted for 72% of our total capital
expenditures, which were primarily related to major furnace repairs, maintenance and investment in
a new glass production line. 28% of our capital expenditures for the year ended December 31, 2006
were incurred by our Flat Glass business unit, mainly for the refurbishment of one of our furnaces
in Monterrey, Mexico and other major furnace repairs.
For the year ended December 31, 2005, our capital expenditures totaled Ps. 1,107 million ($102
million). Capital expenditures during 2005 were incurred primarily in our Glass Containers and Flat
Glass business units. Our Glass containers business unit accounted 56% of out total capital
expenditures, which primarily related to the maintenance in both its Mexican and Central American
facilities and a partial investment for a major furnace repair initiated towards the end of 2005.
Approximately 42% of our capital expenditures for the year ended December 31, 2005 were incurred by
our Flat Glass business unit, which primarily related to the refurbishment of one of our furnaces
in Monterrey, Mexico (finished in mid-May 2006), as well as the acquisition of tools and equipment
to serve the new platform for the OEM auto-glass business line.
Genesis Project
Through the end of 2007, we have invested approximately Ps. 423 million ($39 million) related
to the implementation of the Genesis Project. During 2008, we expect to invest approximately Ps.
163 million ($15 million). The majority of the cost of the Genesis Project is being capitalized and
will be amortized over the expected useful life of the asset. See Item 3. Key InformationRecent
DevelopmentsGenesis Project.
Financing Transactions
During the year ended December 31, 2007, we refinanced substantially all of our consolidated
indebtedness. The refinancing transformed the Companys capital structure by concentrating the
indebtedness at a single entity and eliminating structural subordination. Additionally the
refinancing reduced the cost of debt and extended debt maturities to an average life of debt of
nearly eight years. See Item 3. Key InformationRecent DevelopmentsNew Perspectives.
48
Indebtedness
The following table sets forth the aggregate amounts of our outstanding short-term and
long-term debt as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
|
(Ps. millions)
|
|
|
($ millions)
(1)
|
|
Short-term debt
(2)(3)
|
|
Ps.
|
943
|
|
|
$
|
87
|
|
Long-term debt
(4)(5)
|
|
|
13,975
|
|
|
|
1,286
|
|
|
|
|
(1)
|
|
Peso amounts have been translated into U.S. dollars, solely for the convenience of the
reader, at a rate of 10.8662 pesos per U.S. dollar, the Free Exchange Rate on December 31,
2007.
|
|
(2)
|
|
Includes the current portion of our long-term debt, which was Ps. 545 million ($50 million)
as of December 31, 2007.
|
|
(3)
|
|
58% and 24% of the aggregate amount of our short-term debt as of December 31, 2007 was
denominated in U.S. dollars and euros, respectively. Includes the current portion of our
long-term debt.
|
|
(4)
|
|
Excludes the current portion of our long-term debt. If the current portion of our long-term
debt were included, the aggregate amount of outstanding long-term debt as of December 31, 2007
would be Ps. 14,520 million ($1,336 million).
|
|
(5)
|
|
99% and 1% of the aggregate amount of our long-term debt as of December 31, 2007 was
denominated in U.S. dollars and pesos, respectively. Excludes the current portion of our
long-term debt. As of March 31, 2008, we have entered into swap arrangements under which all
interest payments, until 2012, on $500 million principal amount of our outstanding debt were
swapped from a fixed dollar rate to a variable peso rate and interest payments on another $500
million principal amount of our outstanding debt were swapped from a fixed dollar rate to a
fixed peso rate. In the ordinary course of business, we also enter into currency swap and
option agreements to hedge our exposure to foreign currency exchange rate variations.
|
Short-Term Debt
Our short-term debt consists primarily of unsecured and secured borrowing arrangements with
foreign banks denominated in U.S. dollars and euros. We engage, from time to time, in the ordinary
course of business, in a number and variety of short-term loan arrangements with a number of
Mexican and foreign banks. Such loans generally have a maturity ranging from 30 to 180 days and
have interest rates ranging from 1.5% to 2.0% above LIBOR, for the U.S. dollar-denominated loans,
from 0.5% to 2% above Euribor for our euro-denominated loans, and 2.05% above TIIE and floating
market rates for the peso-denominated loans.
Long-Term Debt
As of December 31, 2007, we had Ps. 14,520 million ($1,336 million) of long-term debt,
including the current portion of long-term debt.
49
The following is a brief summary of our significant long-term indebtedness outstanding as of
December 31, 2007. For further description of our long-term indebtedness, refer to note 10 to our
annual consolidated financial statements included elsewhere in this annual report:
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
|
|
|
Principal
|
|
|
|
Final
|
|
|
Amount as of
|
|
|
|
Amortization/
|
Facility
|
|
December 31, 2007
|
|
Interest Rate and Payment Dates
|
|
Maturity
|
|
2012 Senior Notes
|
|
|
|
|
|
|
Issuer:
Vitro
|
|
$300.0 million
|
|
Interest Rate:
8.625% per
|
|
February 1, 2012
|
|
|
|
|
annum.
|
|
|
|
|
|
|
|
|
|
Guarantors: Wholly owned
|
|
|
|
Interest Payment Dates:
|
|
|
subsidiaries of Vitro,
|
|
|
|
Semiannually on August 1 and
|
|
|
VENA and Viméxico
|
|
|
|
February 1 of each year.
|
|
|
|
|
|
|
|
|
|
2017 Senior Notes
|
|
|
|
|
|
|
Issuer:
Vitro
|
|
$700.0 million
|
|
Interest Rate:
9.125% per
|
|
February 1, 2017
|
|
|
|
|
annum.
|
|
|
|
|
|
|
|
|
|
Guarantors: Wholly owned
|
|
|
|
Interest Payment Dates:
|
|
|
subsidiaries of Vitro,
|
|
|
|
Semiannually on August 1 and
|
|
|
VENA and Viméxico
|
|
|
|
February 1 of each year.
|
|
|
|
|
|
|
|
|
|
2013 Senior Notes
|
|
|
|
|
|
|
Issuer:
Vitro
|
|
$225 million
|
|
Interest Rate:
11.75% per
|
|
November 1, 2013
|
|
|
|
|
annum.
|
|
|
|
|
|
|
|
|
|
Guarantors: Wholly owned
|
|
|
|
Interest Payment Dates:
|
|
|
subsidiaries of Vitro,
|
|
|
|
Semiannually on May 1 and
|
|
|
VENA and Viméxico
|
|
|
|
November 1 of each year.
|
|
|
|
|
|
|
|
|
|
Certificados Bursatiles
|
|
Tranche A:
|
|
Interest Rate
: Cetes + 3.25%
|
|
Tranche A:
|
Issuer:
Vitro
|
|
Ps. 10 million
|
|
Interest Payment Dates
: Every
|
|
October 2, 2008
|
|
|
($0.9 million)
|
|
28
th
day from October 7, 2004
|
|
Tranche B:
|
|
|
Tranche B:
|
|
(Tranche A), from November 1,
|
|
December 22, 2008
|
|
|
Ps. 206 million
|
|
2004 (Tranche B), and from
|
|
Tranche C:
|
|
|
($18.9 million)
|
|
October 21, 2004 (Tranche C).
|
|
February 5, 2009
|
|
|
Tranche C:
|
|
|
|
|
|
|
Ps. 150 million
|
|
|
|
|
|
|
($13.8 million)
|
|
|
|
|
50
Below is a summary of the terms of the foregoing facilities or securities.
2012 Senior Notes and 2017 Senior Notes.
On February 1, 2007 we completed the offering of $1.0
billion of Senior Notes, comprised of $300 million of 2012 Senior Notes and $700 million of 2017
Senior Notes. The 2012 Senior Notes and the 2017 Senior Notes are general unsecured obligations of
Vitro. The indenture governing the 2012 Senior Notes and the 2017 Senior Notes contains certain
customary restrictive covenants, including restrictions on the ability of Vitro and certain of its
subsidiaries to (i) incur additional indebtedness, (ii) pay dividends and make other restricted
payments, (iii) grant certain liens on assets, (iv) make certain investments, (v) engage in
transactions with affiliates and (vi) take part in certain merger, consolidation and asset sale
activities. Through the issuance of the 2012 Senior Notes and the 2017 Senior Notes,
we achieved more favorable terms and conditions in our overall debt, including
reduced interest rates, longer average maturity, long-term funds and a lower cost of capital. The
2012 Senior Notes and the 2017 Senior Notes will pay interest semiannually and are guaranteed by
VENA and its wholly-owned subsidiaries and Viméxico and its wholly-owned subsidiaries. The Notes
offering was made originally to qualified institutional buyers in the United States in reliance on
Rule 144A under the Securities Act of 1933, as amended and to non-U.S. persons outside the United
States in accordance with Regulation S under the Securities Act of 1933.
On August 6, 2007, the SEC declared effective the registration of the offer to exchange the
2012 Senior Notes and the 2017 Senior Notes for an issue of SEC-registered notes with terms
substantially identical to the 2012 Senior Notes and the 2017 Senior Notes, as applicable (except
that the exchange notes are not subject to transfer restrictions).
2013 Senior Notes
. On October 22, 2003, Vitro completed an offering of $225 million
aggregate principal amount of 2013 Senior Notes. The 2013 Senior Notes are general unsecured
obligations of Vitro. The indenture governing the 2013 Senior Notes contains certain customary
restrictive covenants, including restrictions on the ability of Vitro and certain of its
subsidiaries to (i) incur additional indebtedness, (ii) pay dividends and make other restricted
payments, (iii) grant certain liens on assets, (iv) make certain investments, (v) engage in
transactions with affiliates and (vi) take part in certain merger, consolidation and asset sale
activities. Upon issuance of the 2012 Senior Notes and 2017 Senior Notes mentioned above, the
holders of the 2013 Senior Notes have been extended the benefit of to a guarantee by the subsidiary
guarantors substantially similar to the guarantee provided with respect to the 2012 Senior Notes
and the 2017 Senior Notes.
Certificados Bursátiles
. On October 10, 2002, we issued
Certificados Bursátiles
or
medium-term notes program under which we were able to issue up to an aggregate principal amount of
Ps. 2.5 billion. The
Certificados Bursátiles
bear an annual floating interest rate of 3.25% over
the 182-day CETES. The
Certificados Bursátiles
are senior unsecured obligations of Vitro and do not
impose restrictive covenants on us. As of December 31, 2007, the total amount outstanding for this
program was Ps. 366 million ($34 million).
Other Restrictions on Dividend Payments
Pursuant to article 20 of the
Mexican Ley General de Sociedades Mercantiles
(the Mexican
General Law of Corporations), 5% of the annual net income of Mexican corporations must be set
aside to create or increase a mandatory legal reserve until such reserve amounts to not less than
20% of such corporations outstanding equity capital. Thereafter, a majority of our shares present
at such annual general ordinary shareholders meeting may allocate all or a portion of the
remainder of our net income to a reserve fund for the purchase of our shares or other reserve
funds.
Certain of the instruments governing our indebtedness, under certain circumstances, restrict
our ability to pay dividends. See Item 5. Operating and Financial Review and ProspectsLiquidity
and Capital ResourcesIndebtedness.
In addition to the foregoing restriction, our joint venture in Comegua requires the consent of
our joint venture partners for the payment of dividends.
Strategic Sales of Non-Core Assets
From 2001 to 2006, we have received aggregate gross proceeds in U.S. dollars of approximately
$560 million from divestitures and asset sales (without including debt transferred to the
acquirers). See Item 4. Information on the CompanyBusinessStrategic Sales of Non-Core
Businesses and Assets for a description of certain of these transactions. These transactions
provided a source of cash that were used primarily to reduce our level of debt.
Share Repurchases and Sales
As of December 31, 2007, 28,352,169 of our shares are held as treasury stock.
51
PBGC Matter
As part of the disposal of Anchor Glass Container Corp. (Anchor) in August 1996, in a
transaction approved by the U.S. Bankruptcy Court, we entered into a term sheet which contemplated
an agreement pursuant to which we would provide to the Pension Benefit Guaranty Corporation (the
PBGC), a United States governmental agency that guarantees pensions, a limited guaranty of
Anchors unfunded pension liability. No payments would be made under such a guaranty unless the
PBGC terminated any of the covered pension plans, and the guaranty would be payable only to the
extent the PBGC could not otherwise recover the unfunded liabilities from the entity that purchased
Anchors assets, which we refer to as New Anchor. The amount of the guaranty was originally
limited to $70 million. Under the guaranty, payments would not begin until August 1, 2002, and
would then generally be payable in equal semi-annual installments over the following 10 years.
Payments would not bear interest. The amount and the term of the guaranty would be proportionately
reduced if the pension plans were terminated after January 31, 2002. Beginning February 2002, the
guaranty would be reduced by $7 million semiannually until August 1, 2006, when the guaranty would
expire if the plans did not terminate.
On April 15, 2002, New Anchor filed a pre-negotiated plan of reorganization under Chapter 11
of the U.S. Bankruptcy Code. On August 8, 2002, an amended plan of reorganization was confirmed,
pursuant to which the plan resulting from the merger of the covered pension plans was terminated
and the obligations thereunder were assumed by the PBGC in exchange for cash, securities and a
commitment of reorganized New Anchor to make certain future payments.
On June 20, 2003, the PBGC wrote to us, asserting that the plan had been terminated effective
as of July 31, 2002, with an estimated unfunded liability of $219 million. The PBGC stated that the
value of the recovery from New Anchor and reorganized New Anchor amounts to no more than $122.25
million; it alleged that the recovery that it secured in the bankruptcy was insufficient and that
an underfunding in excess of our limited guaranty had occurred. Accordingly, in its letter, the
PBGC demanded payments pursuant to the term sheet of $7 million on or before August 1, 2003 and of
$3.5 million semiannually through August 1, 2011. We intend to contest this liability. There are
various issues concerning such demand and certain defenses that may be asserted by us. Management
is currently evaluating these issues and defenses. At this point, it is not possible to reasonably
estimate the amounts that will ultimately be payable in response to such demand. When management is
able to reasonably estimate those amounts, we will establish an appropriate accounting reserve. As
of this date, we have not established any reserves in connection with such potential liability.
Energy
Certain of our subsidiaries agreed to purchase, in the aggregate, 90 megawatts of electrical
power and 1.3 million tons of steam per year pursuant to a 15-year take-or-pay power purchase
agreement with Tractebel Energía. This contract began in April 2003 and the price at which we are
required to purchase electrical power and steam is based on variables such as inflation, the
peso/U.S. dollar exchange rate and the price of natural gas, whose future value is uncertain.
Call/Put on Shares of Vitro Cristalglass
A group of individual investors owns a 40% interest in Vitro Cristalglass. The Company has the
option of purchasing the 40% minority interest, which can be exercised beginning May 1, 2005 for
fair value as calculated by independent appraisers and cannot be less than 28.9 million euros
($42.4 million as of December 31, 2007). Additionally, the minority interest has a put option
pursuant to which they may require the Company to purchase all or part of their 40% interest in
Vitro Cristalglass, which can be exercised beginning on May 1, 2003 for 28.4 million euros ($41.8
million as of December 31, 2007), as adjusted to reflect inflation in Spain from 2003 through the
time the put is exercised. As of December 31, 2007, the estimated fair value of the 40% interest is
higher than the option price held by Vitro.
52
OFF-BALANCE SHEET ARRANGEMENTS
Sales of receivables
Vitro Cristalglass, a subsidiary of the Company, has entered into revolving factoring program
agreements to sell trade accounts receivable with several financial institutions. In accordance
with the terms of some of these agreements, the Company has the obligation to reimburse for
uncollected receivables in the case of non-payment of customers. As of December 31, 2006 and 2007
the maximum capacity available under these programs was $35 million and $45 million, respectively.
At such dates Vitro Cristalglass had sold approximately $21 million and $16 million of trade
receivables, respectively.
Securitization of trade receivables
Securitization of VENA trade receivables: On March 31, 2005, Compañía Vidriera, S.A. de C.V.,
Industria del Álcali, S.A. de C.V. and Comercializadora Álcali, S. de R.L. de C.V., all
subsidiaries of VENA, closed a five-year revolving accounts receivable facility, through which such
companies obtained approximately Ps. 550 million (nominal amount) and $19 million. The VENA
subsidiaries entered into an agreement to sell all of their trade accounts receivable, on a
revolving basis, to a trust (the Trust, a qualifying special purpose entity) that was formed
prior to the execution of this agreement for the sole purpose of buying and selling accounts
receivable and is designed to be bankruptcy remote. The Ps. 550 million (nominal amount) was
obtained through the issuance of certified preferred securities (
certificados bursátiles
preferentes
) that trade on the Mexican Stock Exchange (BMV) issued by the Trust, and $19 million
in subordinated notes issued in United States of America, which are guaranteed by the Company. The
interest payments and eventual principal reimbursement on the
certificados bursátiles preferentes
and the subordinated notes are payable from the collection of the receivables originated by the
VENA subsidiaries and sold to the Trust. At December 31, 2006 and 2007 the gross receivables sold
to the Trust totaled Ps. 1,074 million and Ps. 1,075 million, respectively, and are reflected as a
reduction of trade accounts receivable. The estimated fair value of the retained undivided
interests in securitized receivables at December 31, 2006 and 2007 was Ps. 529 million and Ps. 312
million, respectively.
Securitization of Viméxico (formerly Vitro Plan) trade receivables: On August 22, 2005,
Dinavisa VFC, Vidrio y Cristal and VAU, all subsidiaries of Viméxico, closed a five year revolving
accounts receivable facility through which such companies obtained $21.5 million. The Viméxico
subsidiaries entered into an agreement to sell all of their trade accounts receivable, on a
revolving basis, to a Mexican trust that was formed prior to the execution of this agreement for
the sole purpose of buying and selling accounts receivable and is designed to be bankruptcy remote.
The $21.5 million was obtained through a private issuance of notes in the United States at an
interest rate of 6.46%. The interest payments and eventual principal reimbursement will be provided
from the collection of the receivables originated by such subsidiaries. At December 31, 2006 and
2007, the gross receivables sold to the trust totaled Ps. 574 million and Ps. 580 million,
respectively, and are reflected as a reduction of trade accounts receivable. The estimated fair
value of the retained undivided interests in securitized receivables at December 31, 2006 and 2007
was Ps. 332 million and Ps. 346 million, respectively.
During 2004, Vitro America closed a contract for selling all its accounts receivable, on a
revolving basis, to VVP Funding, a wholly-owned subsidiary of Vitro America. VVP Funding is a
special-purpose entity that was formed prior to the execution of this agreement for the sole
purpose of buying and selling accounts receivable and is designed to be bankruptcy remote. VVP
Funding entered an agreement with an unrelated major financial institution whereby VVP Funding
sells, on a revolving basis and subject to the maintenance of certain financial and
receivables-based ratios, an undivided percentage ownership in all eligible accounts receivable, as
defined, for consideration composed of cash up to a maximum account of $40 million and retained
undivided interests in securitized receivables. The transfer of undivided ownership interests from
VVP Funding to the unrelated major financial institution for cash consideration is accounted for as
a sale of receivables. Effective as of April 16, 2007, the new agreement was signed and amended to
increase the maximum selling amount from $40 million to $50 million. The agreement was renewed in
April 17, 2008 and will expire in April 13, 2013. As of December 31, 2006 and 2007, the gross
receivables sold totaled approximately $78 million and $76 million, respectively and are reflected
as a reduction of trade accounts receivable. The estimated fair value of the retained undivided
interests in securitized receivables at December 31, 2006 and 2007 was $32 million and $29 million,
respectively.
53
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The following table sets forth a summary of our contractual obligations and commercial
commitments, in millions of constant pesos as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5
years
|
|
|
|
(Ps. millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short- and long-term debt
(1)(2) (3)
|
|
Ps.
|
23,706
|
|
|
Ps.
|
2,320
|
|
|
Ps.
|
2,972
|
|
|
Ps.
|
5,382
|
|
|
Ps.
|
13,031
|
|
Operating leases
(4)
|
|
|
1,383
|
|
|
|
365
|
|
|
|
600
|
|
|
|
286
|
|
|
|
132
|
|
Unconditional purchase obligations
(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Other long-term obligations
(6)
|
|
|
2,641
|
|
|
|
298
|
|
|
|
621
|
|
|
|
511
|
|
|
|
1,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
Ps.
|
27,730
|
|
|
Ps.
|
2,983
|
|
|
Ps.
|
4,193
|
|
|
Ps.
|
6,179
|
|
|
Ps.
|
14,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For a description of our most recent financing transactions, see Item 3. Key
InformationRecent DevelopmentsNew Perspectives and Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital ResourcesIndebtedness.
|
|
(2)
|
|
Includes scheduled interest payments with fixed and variable rates. For our variable
interest rate debt, we utilized the rates in effect as of December 31, 2007, as disclosed in
note 10 of our consolidated financial statements when estimating the scheduled interest payments.
|
|
(3)
|
|
Includes Ps. 91 million of capital lease obligations.
|
|
(4)
|
|
The amounts set forth above under Operating leases include mainly payments that
will be made under leases relating to two airplanes, warehouses, forklifts and computer equipment.
|
|
(5)
|
|
Certain of our subsidiaries agreed to purchase, in the aggregate, 90 megawatts of
electrical power and 1.3 million tons of steam per year pursuant to a 15-year take-or-pay
power purchase agreement with Tractebel Energía. This contract began in April 2003 and the
price at which we are required to purchase electrical power and steam is based on variables
such as inflation, the peso/U.S. dollar exchange rate and the price of natural gas, whose
future value is uncertain.
|
|
(6)
|
|
Expected benefit payments regarding the company pension plans, seniority premium and
severance indemnities.
|
54
ACCOUNTING CONSIDERATIONS
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with Mexican FRS. As such, we
are required to make certain estimates, judgments and assumptions that we believe are reasonable
based on the available information. These estimates and assumptions affect the reported amounts of
assets and liabilities at the date of the financial statements, the reported amounts of revenues
and expenses during the periods presented and the related disclosures. The significant accounting
policies that we believe are the most sensitive to such estimates and relevant to aid you in fully
understanding and evaluating our reported financial statements are the following:
Trade Receivables
We perform ongoing credit evaluations of our customers and adjust credit limits based upon
payment history and the customers current creditworthiness, as determined by our review of their
current credit information. We continually monitor collections and payments from customers and
maintain an allowance for doubtful accounts based upon our historical experience and any specific
customer collection issues that we have identified. While such credit losses have historically been
within our expectations and the provisions established, we cannot guarantee that we will continue
to experience the same credit loss rates that we have in the past. A significant change in our
experience of credit losses could have a material adverse impact on our consolidated results of
operations and financial position.
Contingencies
Contingencies, by their nature, relate to uncertainties that require management to exercise
judgment both in assessing the likelihood that a liability has been incurred as well as in
estimating the amount of potential loss. Provisions are recognized for current obligations that (i)
result from a past event, (ii) are probable to result in the use of economic resources, and (iii)
can be reasonably estimated. We believe the amounts recorded or disclosed in our financial
statements are based on the best estimates and judgments of management. However, actual outcomes
could differ from our estimates. See Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesPBGC Matter.
Financial Instruments
Effective January 1, 2005, the Company adopted the provisions of Bulletin C-10, Derivative
Financial Instruments and Hedging Activities, of Mexican FRS, which requires that all derivative
instruments be recognized at fair value, sets the rules to recognize hedging activities and
requires separation, if practical, of embedded derivative instruments. With respect to cash flow
hedging, Bulletin C-10 establishes that the effective portion be recognized temporarily in other
comprehensive income within stockholders equity, with subsequent reclassification to current
earnings at the time it is affected by the hedged item. The ineffective portion should be
immediately recognized in current earnings. Through December 31, 2004, according to accounting
standards effective at that moment (Bulletin C-2, Financial Instruments of Mexican FRS), the
Company did not recognize the effect of hedging derivatives under financial expenses until the flow
exchanges mentioned in the swap contract were actually executed. Prior to the implementation of
Bulletin C-10, financial instruments for hedging purposes were valued using the same criteria of
valuation of the underlying assets or liabilities hedged, and the effect of such valuation is
recognized in net income, net of costs, expenses or income from the assets or liabilities whose
risks are being hedged.
Fair values of financial instruments are estimated using available market information or other
appropriate valuation methodologies that require considerable judgment in interpreting and
developing estimates. The use of different market assumptions and/or estimation methodologies may
have a material adverse effect on the estimated fair value amounts. See Item 11. Quantitative and
Qualitative Disclosures About Market Risk.
Seniority Premiums and Pension Plans
Seniority premiums and pension plans for all personnel are considered as costs in the periods
in which the related services are rendered. Periodic costs are calculated in accordance with
Bulletin D-3, Labor Obligations, of Mexican FRS and the actuarial computations are made by an
independent actuary,
based on estimates of future compensation increases, inflation, investment returns, mortality,
turnover and expected discount rates well into the future. While we have made such estimates based
on published tables and current market conditions, significant variance in actual experience
compared to our estimates could have a material adverse effect on our consolidated results of
operations and financial condition.
55
The table below presents the impact of a one-percentage-point increase and a
one-percentage-point decrease in the assumed discount rate and expected rate of return on plan
assets on the net periodic pension cost and on the net pension liability for the year ended
December 31, 2007:
|
|
|
|
|
|
|
For the
|
|
|
|
Year Ended
|
|
|
|
December 31, 2007
|
|
|
|
(Ps. millions)
|
|
One-percentage-point increase in assumed discount rate
|
|
|
|
|
+ Effect on total net periodic cost
|
|
Ps.
|
4
|
|
+ Effect on net pension liability
|
|
|
(218
|
)
|
One-percentage-point decrease in assumed discount rate
|
|
|
|
|
+ Effect on total net periodic cost
|
|
|
(1
|
)
|
+ Effect on net pension liability
|
|
|
259
|
|
One-percentage-point increase in expected rate of
return on plan assets
|
|
|
|
|
+ Effect on total net periodic cost
|
|
|
(12
|
)
|
+ Effect on net pension liability
|
|
|
|
|
One-percentage-point decrease in expected rate of
return on plan assets
|
|
|
|
|
+ Effect on total net periodic cost
|
|
|
12
|
|
+ Effect on net pension liability
|
|
|
|
|
Environmental Obligations
Our operations are subject to the environmental laws and regulations of the jurisdictions in
which we conduct our operations. An environmental reserve is recorded to cover the costs of
expected environmental obligations when we become aware that an expenditure may be required. We
estimate the cost for the environmental obligations based on historical experience, results of
monitoring and the known extent of exposure. We do not believe that continued compliance with these
environmental laws will have a material adverse effect on our financial condition or results of
operations. However, a significant change in laws, the discovery of previously unknown
contamination and other factors beyond our control could result in expenditures that are materially
greater than currently estimated or the reserves we have recorded.
Impairment of Long-Lived Assets
Long-lived assets, which include property, goodwill, intangible assets and certain other
assets, comprise a significant portion of our total assets. We make judgments and estimate the
carrying value of these assets, including amounts to be capitalized, depreciation and amortization
methods and useful lives. Additionally, the carrying values of these assets are periodically
reviewed for impairment or whenever events or circumstances indicate that the carrying amounts may
not be recoverable. An impairment loss is recorded in the period in which it is determined that the
carrying amount is not recoverable. This requires us to make long-term forecasts of our future
revenues and costs relating to the assets under review. These forecasts require assumptions about
demand for our products, future market conditions and technological developments. Significant and
unanticipated changes to these assumptions could result in a determination that the value of these
long-lived assets has been impaired in a future period.
Certain material events or circumstances may indicate that carrying amounts of our long-lived
assets may not be recoverable. Our policy is to review the carrying amounts of long-lived assets in
use when an impairment indicator suggests that such amounts might not be recoverable. The
impairment indicators considered for these purposes are, among others, as follows: operating losses
or negative cash flows in the period if they are combined with a projection of losses, reduction in
the demand for the products manufactured, competition, capacity utilization reduction, obsolescence
or technological changes, decrease of market value of assets and other legal and economic factors.
56
Recoverability of Deferred Tax Assets
In assessing the realizability of deferred tax assets, management considers whether it is
highly probable that some portion of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income of the
appropriate character. Management considers the scheduled reversal of taxable temporary
differences, projected future taxable income, and tax planning strategies that we believe will
generate sufficient taxable income in future years that will allow us to recover our deferred tax
assets.
Beginning in October 2007, based on our financial projections, we are required to determine
whether our subsidiaries will essentially incur income tax (ISR) or the new Business Flat Tax
(IETU) and, accordingly, recognize deferred taxes based on the tax we will pay. Deferred taxes
are calculated by applying the corresponding tax rate to the applicable temporary differences
resulting from comparing the accounting and tax bases of assets and liabilities and including, if
any, future benefits from tax loss carryforwards and certain tax credits.
New Accounting Pronouncements
Mexican FRS
For a discussion of the new accounting pronouncements under Mexican FRS please refer to note
22 to our consolidated financial statements.
In addition, subsequent to the issuance of our Mexican FRS financial statements the following
Mexican FRS Interpretation of Financial Reporting Standards (INIF) was issued:
INIF 9,
Presentation of Comparative Financial Statements Prepared under NIF B-10
- INIF 9
states that financial data for 2008 must be presented in nominal pesos while previous periods must
be expressed in constant pesos as of December 31, 2007. As a result, financial data for the year
ended December 31, 2008 will be a combination of nominal pesos (for the twelve months of 2008) and
constant pesos as of December 31, 2007.
U.S. GAAP
For a discussion of the new accounting pronouncements under U.S. GAAP please refer to note 24
q) 15 to our consolidated financial statements.
57
RESEARCH AND DEVELOPMENT
In 1998, we formed a technology council to coordinate Vitros research and development
strategy with the goal of creating synergies between our business units and create Vitros
proprietary technology for use by our business units.
In addition, in 2001 we incorporated several of our Mexican subsidiaries owning some of the
intellectual property used by our Flat Glass and Glass Containers business units in Switzerland.
These Swiss subsidiaries also conduct research and development jointly with our Mexican
subsidiaries and our technology council license technology to our Mexican operating subsidiaries.
In January 2008, the intellectual property of Flat Glass and Glass Containers from Switzerland was
returned to the corresponding Mexican subsidiaries, and the only intellectual property that our
business units used in common remains in Switzerland.
Our Flat Glass business unit uses both its own technology, some of which has been patented,
and also benefits significantly from the technology and technical information acquired from certain
of our joint venture partners through technology licensing arrangements with them, which have since
expired. In particular, the expired technology license agreement with Pilkington provided us with
state-of-the-art float glass technology. We have negotiated an extended patent license for the
remaining life of the patents we use from Pilkington. As we notified Pilkington in September 2005,
the Automotive Technical Assistance Agreement was terminated effective as of September 2006.
Our Glass Containers business unit also uses both its own technology, some of which has been
patented, and also technology provided by Owens-Illinois pursuant to a series of technical
assistance agreements, which have since expired. These technical assistance agreements were
effective from 1964 to September 1999. Under the terms of these technical assistance agreements, we
continue to have the right to free use of the technology provided to us by Owens-Illinois during
the effective period of these agreements. We have an extended patent license for the remaining life
of the patents we use from Owens. However, we do not currently have any rights to the technology
developed by Owens-Illinois after September 1999.
We own a number of trademarks and patents which, in the aggregate, are important to the
conduct of our business. Except for our Vitro trademark, none of these trademarks and patents is
individually material to our business as a whole.
We did not have any material expenditures related to research activities since 2004 up to the
second quarter of 2006. Beginning in April 2006 to date, expenditures have been made for research
and development of key technologies for common use of our business units, resulting in new process
and machinery concepts which have given rise to new intellectual property for the benefit of our
business units.
One of our subsidiaries conducted a portion of its business through joint ventures or
technology alliances with non-Mexican partners, which also licensed technology, trademarks and
trade names to our subsidiaries for use in the manufacture and sale of various flat glass products,
under the believe that these joint ventures, alliances and license arrangements could provide us
with important competitive advantages. However, such alliance terminated in July 2007 and we cannot
be certain that these ex-partners will not choose to conduct business directly in Mexico because of
the termination of their relationship with us. In addition, there can be no assurance that we will
be successful in renewing any joint venture, technical assistance, license or other agreements or
arrangements upon their expiration, in renewing these agreements on terms as favorable as the
present ones, in forming similar alliances with other partners or in developing equivalent
technologies independently. See Item 4. Information on the CompanyBusinessOur Operating
Business Units.
58
Item 6. Directors, Senior Management and Employees
DIRECTORS AND SENIOR MANAGEMENT
Unless the context otherwise requires, in the sections entitled Directors and Senior
Management, Board Practices and Share of Ownership of this Item 6, the words we, us, our
and ours refer to Vitro, S.A.B. de C.V. and not its consolidated subsidiaries.
Directors
The following information relates to our directors (
consejeros
). There are no arrangements or
understandings with major shareholders, customers, suppliers or others pursuant to which any of
them was elected as a director.
Our Board of Directors is responsible for the management of our business. Our by-laws provide
that our Board of Directors will consist of the number of directors determined by our shareholders
at the annual general ordinary shareholders meeting, up to a maximum of 21 members, and that each
member of our Board of Directors shall be elected at such shareholders meeting for a renewable
term of one year. Each director shall serve until his or her successor is duly elected and takes
office. At our general ordinary shareholders meeting held on April 17, 2008, our shareholders
resolved that our Board of Directors would consist of 16 directors. We have no alternate directors.
A list of our current directors, their principal occupations and directorships, the year they
first became a director and the year of their birth are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
|
|
|
|
Became
|
|
Year of
|
Name
|
|
Principal Occupation
|
|
a Director
|
|
Birth
|
Adrián Sada Treviño
|
|
Director and Honorary Chairman of the Board of Directors of Vitro,
S.A.B. de C.V.
|
|
|
1969
|
|
|
|
1920
|
|
|
|
|
|
|
|
|
|
|
|
|
Adrián Sada González
|
|
Chairman of the Board of Directors of Vitro, S.A.B. de C.V.
|
|
|
1984
|
|
|
|
1944
|
|
|
|
|
|
|
|
|
|
|
|
|
Federico Sada González
|
|
President and Chief Executive Officer of Vitro, S.A.B. de C.V.
|
|
|
1982
|
|
|
|
1949
|
|
|
|
|
|
|
|
|
|
|
|
|
Tomás González Sada
|
|
Chairman of the Board, President and Chief Executive Officer of
Cydsa, S.A.B. de C.V.
|
|
|
1980
|
|
|
|
1943
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrés Yarte Cantú
|
|
Chief Executive Officer of Distribuidora de Productos Cerámicos, S.A.
|
|
|
1991
|
|
|
|
1941
|
|
|
|
|
|
|
|
|
|
|
|
|
Gustavo Madero Muñoz*
|
|
Federal Congressman (Senator), Mexican Congress
|
|
|
1996
|
|
|
|
1955
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Eduardo Represas
de Almeida*
|
|
Chairman of the Board of Directors of Nestlé México S.A. de C.V.
|
|
|
1998
|
|
|
|
1945
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaime Serra Puche*
|
|
Founder, SAI-Consultores, S.C.
|
|
|
1998
|
|
|
|
1951
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Muñoz Olea*
|
|
Private Investor
|
|
|
2000
|
|
|
|
1955
|
|
|
|
|
|
|
|
|
|
|
|
|
Joaquín Vargas Guajardo*
|
|
Chairman of the Board of Directors of Grupo MVS Comunicaciones, S.A.
de C.V.
|
|
|
2000
|
|
|
|
1954
|
|
|
|
|
|
|
|
|
|
|
|
|
Alejandro Garza Lagüera*
|
|
President of Desarrollo Inmobiliario Omega, S.A. de C.V.
|
|
|
2001
|
|
|
|
1926
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaime Rico Garza
|
|
President and Chief Executive Officer of Vitro Europa, Ltd.
|
|
|
2008
|
|
|
|
1957
|
|
|
|
|
|
|
|
|
|
|
|
|
Manuel Güemez de la Vega*
|
|
Chairman of the Board of Regio Empresas and Grupo PREZ
|
|
|
2006
|
|
|
|
1942
|
|
|
|
|
|
|
|
|
|
|
|
|
Julio Escamez Ferreiro
|
|
Member of the Board of Directors of Consorcio Industrial de
Manufacturas, S.A.
|
|
|
2006
|
|
|
|
1934
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Bremer Gutierrez*
|
|
President and CEO of Value Grupo Financiero, S.A. de C.V.
|
|
|
2007
|
|
|
|
1960
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo Martin Bringas*
|
|
President and CEO of Organización Soriana
|
|
|
2007
|
|
|
|
1960
|
|
|
|
|
*
|
|
Independent non-management directors.
|
59
The directors listed above were elected by our shareholders at the general ordinary
shareholders meeting held April 17, 2008. Mexican securities law requires that at least 25% of the
members of the Board of Directors be independent. Vitros Board of Directors is comprised of
approximately 56.2% independent directors as of April 17, 2008. The directors receive directors
fees of three
Centenarios
, which are 37.5-gram gold coins, or its equivalent monetary value, per
each meeting of our Board of Directors they attend and three
Centenarios
, or its equivalent
monetary value, per each meeting of a committee of our Board of Directors they attend, except for
the members of the Audit Committee who receive five
Centenarios
, or its equivalent monetary value,
per each meeting of such committee they attend plus a monthly fee of Ps. 15,000.
The following are brief descriptions of the current occupations and biographical information
of each of our directors:
Adrián Sada Treviño, Member and Honorary Chairman of the Board of Directors of Vitro, S.A.B. de
C.V.:
Mr. Sada is Chairman of the Board of Directors of the Fundación Martínez Sada.
Adrián Sada González, Chairman of the Board of Directors of Vitro:
Mr. Sada is a member of the Boards of Directors of Alfa, S.A.B. de C.V., Gruma, S.A.B. de
C.V., Cydsa, S.A.B. de C.V., Regio Empresas, S.A. de C.V., the Latin American Executive Board for
the Wharton School of Finance, the Mexican Businessmen Council and the Consejo de Industriales de
Nuevo León. Mr. Sada is also President of our Finance and Planning Committee.
Federico Sada González, President and Chief Executive Officer of Vitro:
Mr. Sada is currently a member of the Boards of Directors of the Instituto Tecnológico y de
Estudios Superiores de Monterrey, Regio Empresas, S.A. de C.V. and The University of Texas, MD
Anderson Cancer Center. Mr. Sada is the former Chairman of the Mexican Council for Foreign Trade.
He serves as the Chairman of the Council of the National Museum of History and as the Chairman of
the Board of Trustees of Chipinque Ecological Park Foundation. Mr. Sada is also a member of
International Business Council of the World Economic Forum.
Tomás González Sada, Chairman of the Board, President and Chief Executive Officer of Cydsa, S.A.B.
de C.V.:
Mr. González is the Vice-President of the Mexican Institute of Competitiveness, the Treasurer
of the Fundación Martínez Sada, a member of the Boards of Directors of Regio Empresas, S.A. de C.V.
and the Mexican Businessmen Council and Honorary Consul-General of Japan in Monterrey, Mexico.
Andrés Yarte Cantú, Chief Executive Officer of Distribuidora de Productos Cerámicos, S.A.:
Mr. Yarte is Chairman of the Boards of Directors and Chief Executive Officer of Distribuidora
de Productos Cerámicos, S.A. and K-Inver, S.A.
Gustavo Madero Muñoz, Federal Congressman (Senator), Mexican Congress:
Mr. Madero serves as a Representative in the Mexican Congress and is the Chairman of the Tax
and Finance Committee of the Mexican Congress. He is also Chairman of the Board of Directors of
Hermanos Madero. Mr. Madero is also the President of our Audit Committee.
Carlos Eduardo Represas de Almeida, Chairman of the Board of Directors of Nestlé México S.A. de
C.V.:
Mr. Represas is Chairman of the Board of Directors of Nestlé México, S.A. de C.V., a member of
the Boards of Directors of Dreyers Grand Ice Cream Holdings, Inc. and Bombardier, Inc., a member
of the Advisory Council of the Global Business Policy Council and Chairman of the Board of Trustees
of the National Institute of Genomic Medicine of Mexico. He is also President of the Mexico Chapter
of the Latin American Chamber of Commerce in Switzerland, member of the Boards of the Mexican
Health Foundation
and the Latin America Business Council (CEAL), Executive Vice President (Vevey, Switzerland)
and President of the Americas of Nestlé, S.A. (1994-2004).
60
Jaime Serra Puche, Founder, SAI-Consultores, S.C.:
Mr. Serra is President of SAI-Consultores, S.C.; founder of Aklara (Electronic auctions),
Centro de Arbitraje de Mexico (CAM), and Mexico NAFTA Fund (Private Capital Fund); Member of the
Boards of Chiquita Brands International, Fondo México, Tenarias and Grupo Modelo; Mexicos
Secretary of Finance (1994), Secretary of Trade and Industry (1988-1994), and Undersecretary of
Revenue in the Ministry of Finance (1986-1988); Co-chair of the Presidents Council on
International Activities of Yale University; and Member of the Trilateral Commission and the
US-Mexico Bilateral Council.
Carlos Muñoz Olea, Private Investor:
Mr. Muñoz is Vice-President of Fomento Bursátil, Super Mart and Holding Fibsa. In addition, he
is a member of the Board of Directors of Instituto Tecnológico y de Estudios Superiores de
Monterrey, Chihuahua Campus and Banco Nacional de México (Banamex) (northern zone).
Joaquín Vargas Guajardo, Chairman of the Board of Directors of Grupo MVS Comunicaciones, S.A. de
C.V.:
Mr. Vargas is Chairman of the Board of Directors of Corporación Mexicana de Restaurantes, S.A.
de C.V. In addition, he is a member of the Boards of Directors of Grupo Costamex, S.A. de C.V.,
Grupo Posadas and Médica Sur; and is a member of the Mexican Businessman Council.
Alejandro Garza Lagüera, Member of the Executive Committee of Desarrollo Inmobiliario Omega:
Mr. Garza is President of Desarrollo Inmobiliario Omega and a member of the Board of Directors
of Cydsa, S.A.B. de C.V., Instituto Tecnológico y de Estudios Superiores de Monterrey and the
Centro de Estudios de Economía y Educación. In addition, he is a member of the Latin American Board
of the Wharton School of the University of Pennsylvania and the Joseph H. Lauder Institute of the
University of Pennsylvania.
Jaime Rico, President and CEO of Vitro Europa, Ltd.:
Mr. Rico has been Chairman of the Board of IP Vidrio y Cristal, Ltd. and Vitro Global, Ltd.
and member of the Board of Directors of Vitro Cristalglass, S.L. Mr. Rico is the President and CEO
of Vitro Europa, Ltd.
Manuel Güemez de la Vega, Chairman of the Board of Regio Empresas and Grupo PREZ:
Mr. Güemez is Chairman of the Board of Regio Empresas, S.A. de C.V. and Grupo PREZ and member
of the Board of Directors of Grupo de Seguridad Integral and alternate director of Gruma. Mr.
Güemez is also President of our Corporate Practices Committee.
Julio Escamez Ferreiro, Member of the Board of Directors of Consorcio Industrial de Manufacturas,
S.A.:
Mr. Escamez is a member of the board of directors of Consorcio Industrial de Manufacturas,
S.A.
Carlos Bremer Gutierrez, President and CEO of Value Grupo Financiero:
Mr. Bremer is the Chief Executive Officer and Member of the Board of Directors of Value Grupo
Financiero, S.A. de C.V. and its subsidiaries, on which he has served for over 13 years. Mr. Bremer
served as Director of Operations and Marketing at Abaco Casa de Bolsa, S.A. de C.V., as Director of
Operations and Marketing at Operadora de Bolsa, S. A. de C.V. and as Director of Operations at Casa
de Bolsa Banpaís, S.A.
Ricardo Martin Bringas, CEO of Organización Soriana:
Mr. Martin has held executive positions in the management and finance departments of several
companies, such as Organización Soriana, S.A.B. de C.V., La Ciudad de París and Restaurantes
Martins.
Mr. Martin is currently the Chief Executive Officer of Organización Soriana and member of the
Board of Directors of HSBC México, S.A. de C.V., Grupo Financiero Banamex, S.A. de C.V., Grupo
Financiero Banorte, S.A. de C.V., Banco Mercantil del Norte, S.A. de C.V., Asociación Nacional de
Tiendas de Autoservicio y Departamentales (ANTAD), Instituto Tecnológico y de Estudios Superiores
de Monterrey, Consejo Mexicano de Hombres de Negocios, Grupo de Empresarios de Nuevo León and
Teléfonos de México, S.A.B. de C.V.
61
Secretary and Surveillance
On April 17, 2008, our shareholders at the General Ordinary Shareholders Meeting reelected
our General Counsel Alejandro Sánchez Mújica as the Secretary of our Board of Directors. According
to the
Ley del Mercado de Valores
, which we refer to as the Mexican Law of the Securities Market
our Secretary is not a member of the Board of Directors.
The Board of Directors, through the Audit and Corporate Practices Committees as well as the
external auditor, conducts surveillance of Vitro and of the subsidiaries controlled by Vitro,
taking into consideration the financial, administrative and legal circumstances of each entity.
Senior Management
The following table sets forth certain information with respect to our senior managers
(
directores generales
). There are no arrangements or understandings with major shareholders,
customers, suppliers or others pursuant to which any of them was selected as a member of the senior
management.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Position
|
|
Year of
|
Name
|
|
Title
|
|
Held Since
|
|
Birth
|
Federico Sada González
|
|
President and Chief Executive Officer
|
|
|
1995
|
|
|
|
1949
|
|
Alejandro Sánchez Mújica
|
|
General Counsel
|
|
|
2005
|
|
|
|
1954
|
|
Claudio Del Valle Cabello
|
|
Chief Administrative Officer
|
|
|
2003
|
|
|
|
1960
|
|
Enrique Osorio López
|
|
Chief Financial Officer
|
|
|
2007
|
|
|
|
1951
|
|
Hugo Lara García
|
|
President of the Flat Glass business unit
|
|
|
2006
|
|
|
|
1965
|
|
David González Morales
|
|
President of the Glass Containers business unit
|
|
|
2007
|
|
|
|
1955
|
|
Roberto Rubio Barnes
|
|
President of Diverse Industries and Central
Technology
|
|
|
2007
|
|
|
|
1955
|
|
The following are brief biographies of each of our senior managers:
Federico Sada González, President and Chief Executive Officer:
Mr. Sada received a Bachelor of Science in Business Administration from the Instituto
Tecnológico y de Estudios Superiores de Monterrey and a Master of Business Administration from IMD
in Lausanne, Switzerland. He also attended Harvard Universitys Advanced Management Program. Mr.
Sada joined us in 1974. He became Planning and Finance Director of the Glass Containers business
unit in 1978. In 1985, he was named President of the North American Glass Containers unit, our
largest single business at that time. This business included the operations of the Glass Containers
business unit in Mexico and our investments in North, Central and South America.
On January 1, 1995, Mr. Sada was named our President and Chief Executive Officer. He is a
member of the Boards of Directors of Vitro, S.A.B. de C.V., the Instituto Tecnológico y de Estudios
Superiores de Monterrey, Regio Empresas, S.A. de C.V. and The University of Texas, MD Anderson
Cancer Center.
In addition to his responsibilities at Vitro, Mr. Sada is the Chairman of the Council of the
National Museum of History and the Chairman of the Board of Trustees of Chipinque Ecological Park
Foundation. He is a member of the International Business Council of the World Economic Forum.
Alejandro Sánchez Mújica, General Counsel:
Mr. Sánchez earned a law degree from the Escuela Libre de Derecho in Mexico City, where he
graduated in 1978. In addition, he earned a Master of Comparative Jurisprudence degree from The
University of Texas at Austin, School of Law in 1979 and a Master of Arts (Economics and
Administration) also from the University of Texas at Austin in 1980. In 1983, he worked at the
Secretaría de Programación y Presupuesto, as advisor to the Undersecretary of Regional Development.
In 1983, Mr. Sánchez also joined the Instituto para el Depósito de Valores (INDEVAL) as Legal
Manager. In 1985 he joined DESC, Sociedad de Fomento Industrial (currently known as Grupo KUO,
S.A.B. de C.V.), as Legal Manager of Industrias Negromex, S.A. de C.V. and later of Novum, S.A. de
C.V., afterward becoming Executive Legal Director. In 1992, he became the Corporate Legal Director
of Pulsar Internacional, S.A. de C.V. In 2003 he joined the law firm of Thompson & Knight, where he
was made Senior Partner. In 2005, Mr. Sánchez joined us as our Executive Legal Vice-President and
General Counsel.
62
Claudio Del Valle Cabello, Chief Administrative Officer:
Mr. Del Valle earned a Bachelor in Public Accounting at the Universidad Regiomontana in
Monterrey, Mexico. In 1978, Mr. Del Valle began working for Gómez Morfín Meljem and Asoc. (now
Galaz, Yamazaki, Ruiz Urquiza S.C., Member of Deloitte Touche Tohmatsu) as a Junior Auditor and
later became Senior Supervisor. In 1985, Mr. Del Valle joined us as Chief of Special Studies for
our former raw materials business. In 1986, he became our Tax Consolidation Manager. In 1992, Mr.
Del Valle was appointed Vice President for Administration of Vitro Corporativo, S.A. de C.V. and in
1995 was appointed Vice President of Finance and Controller of Anchor Glass Container Corp. In
1996, Mr. Del Valle was appointed our Vice President of Treasury and Administration. In 2002, Mr.
Del Valle was appointed our Chief Financial Officer and, in August 2003, he was named our Chief
Administrative Officer.
Mr. Del Valle is a member of the Accounting Institute of the State of Nuevo León, Mexico.
Also, in 2001 Mr. Del Valle was appointed Vice President of the Tax Committee of the Mexican Stock
Exchange. Mr. Del Valle was the President of the Issuers Committee of the Mexican Stock Exchange
and as of today acts as Vice President Tax of the Issuers Committee of the Mexican Stock Exchange
and is currently a member of the Board of Directors of Universidad Regiomontana and Gas Industrial.
Enrique Osorio López, Chief Financial Officer:
Mr. Osorio has served as President of the Board in several financial funds including Vector
Divisas, S.A. de C.V. and Xella Mexicana, a German-Mexican co investment; Member of the Board of
Desarrollos Comerciales y Habitacionales de Vallarta, S. de R.L., among others. In 1980, Mr. Osorio
joined Grupo Alfa, S.A.B. de C.V., where he worked significantly on debt restructurings, within the
Financing and Investors Relations departments. In 1990, Mr. Osorio joined Interacciones Casa de
Bolsa, where he was appointed as Corporate Finance Advisor. In 1994, he joined Cigarrera La
Moderna, where he was appointed as Treasurer. Mr. Osorio served as Chief Financial Officer of
Savia, S.A. de C.V. and Seminis Inc. (in California) until 2007. Mr. Osorio joined us in 2007 as
our Chief Financial Officer.
Hugo Lara García, President of the Flat Glass business unit:
Mr. Lara received a Bachelor in Chemical Engineering at La Salle University in Mexico City.
Later, Mr. Lara received a Master in Business Administration, an International Business Diploma and
a Master in International Business at the ITESM, Campus Estado de México. In 1987, Mr. Lara joined
Christianson Group, where he held several positions such as National Sales Manager, Account
Manager, Research and Development Quality Assurance. In 1992, he joined Ceras Johnson, S.A. de
C.V., where he held several positions such as Account Manager, Business Development Manager of
Latin America and Group Manager. In 1999, Mr. Lara was appointed as Sales Manager and General
Manager at Parmalat de México, S.A. de C.V. Mr. Lara joined us in 2004 as Glass Containers business
units Commercial Director and Vidrio y Cristals Vice President and in 2006 was appointed
President of the Flat Glass business unit.
David González Morales, President of the Glass Containers business unit:
Mr. González received a Bachelor degree in Economics at the Universidad de Monterrey. Later,
Mr. González received a Master degree in Science at the University of Missouri. In 1976 Mr.
González joined Grupo Alfa, S.A.B. de C.V., as an Economics Analyst. Mr. González joined us in 1980
as Chief of Industrial Economics for our Glass Containers business unit and then held different
managerial positions such as Price Manager, Administration Manager, North Zone Sales Manager,
Strategic and Economics Planning Manager, and Business Development Manager. In 1994, he was
appointed Vice President of Development Administration for our former Diverse Industries business
and in 1999 was appointed as Vice President of Enbosa, S.A. de C.V. In 2002, he was appointed as
International Vice President for our Glass
Containers business unit. In 2003, Mr. González was appointed as Vice President of our Value
Added Business and then in 2004 as President of Vitro Cristalglass, both of which are part of our
Flat Glass business unit. In 2006, he was appointed Co-President of Glass Containers business unit
and, in 2007, subsequent to Mr. Alfonso Gómez Palacioss retirement, he was appointed President of
the Glass Containers business unit.
63
Roberto Rubio Barnes
Mr. Rubio earned a Bachelor in Mechanical and Electrical Engineering from the Universidad de
Anáhuac in Mexico City in 1977. In 1980, Mr. Rubio received a Master of Science in Industrial
Engineering at North Carolina State University and, in 1990, a Master Degree in Management at the
Massachusetts Institute of Technology.
Mr. Rubio began working in 1980 for Vitro Flex and, in 1981, became manager of manufacturing
engineering. He held several executive positions from 1981 until 1989, when he was appointed
General Manager of Vitro Flex. In 1995, Mr. Rubio was promoted to Vice President for Administration
for the glass businesses of the Glassware business unit and in 1996 he was appointed President of
the Glassware business unit. At that time, he was also given the responsibility of managing
technology at Vitro. In 1999, Mr. Rubio was appointed President of the Glass Containers business
unit. In July 2001, he was appointed President of the Flat Glass business unit and, in October
2002, he was appointed Director of Operations for the Glass Containers and Glassware business
units. In May 2003, he was appointed President of the Glassware business unit and, in 2006 he was
appointed President of Diverse Industries and Central Technology.
Family Relationship of Directors and Senior Management
Eight of our 22 directors and senior managers are related by blood (including first cousins)
or marriage to another member of this same group. Mr. Adrián Sada Treviño is the father of Messrs.
Adrián Sada González and Federico Sada González. Mr. Tomás González Sada is a cousin of Messrs.
Adrián Sada González and Federico Sada González and a nephew of Mr. Adrián Sada Treviño. Mr. Andrés
Yarte Cantú is Mr. Adrián Sada Treviños son-in-law and Messrs. Adrián Sada Gonzálezs and Federico
Sada Gonzálezs brother-in-law, as well as a cousin by marriage of Mr. Tomás González Sada. Mr.
Jaime Rico Garza is a nephew-in-law of Mr. Adrián Sada González and Federico Sada González. Mr.
Julio Escamez is cousin-by-marriage of Mr. Adrián Sada Treviño. Mr. Gustavo Madero Muñoz is a
cousin of Mr. Carlos Muñoz.
Use of Certain Assets and Services
Certain of our directors and senior managers use certain of our non-material and non-operating
assets for personal purposes, and received personal services performed by certain of our personnel,
a number of whom are exclusively dedicated to performing such services. The personal use of such
properties and receipt of personal services was done in accordance with our
Política de Uso de
Activos Restringidos
, our use of restricted assets policy, and our
Política de Uso Especial de
Servicios Corporativos y de Seguridad
, our corporate and security services policy, approved by our
Board of Directors with the prior favorable opinions of the Audit Committee and of the Corporate
Practices Committee. The aggregate amount of compensation set forth in Item 6. Directors, Senior
Management and EmployeesDirectors and Senior ManagementsCompensation includes the cost of
granting the use of assets and providing such services.
Compensation
For the year ended December 31, 2007, the aggregate compensation we paid to our directors and
senior managers was approximately Ps. 182 million ($16.7 million). This amount includes directors
fees, salaries, the use of certain assets and services, as described above, and variable
compensation.
During 2007, we accrued amounts relating to pension and retirement benefits for our senior
managers. Our independent directors were not entitled to pension or retirement benefits from us
during 2007. In accordance with actuarial practices in Mexico, reserves for seniority premiums and
pensions are determined in the aggregate for each one of our subsidiaries using average amounts for
variables such as turnover, age and life expectancy. We therefore cannot determine the amount
reserved for pension or retirement benefits for any individual employee, including our senior
managers. The aggregate amount of compensation set forth in the previous paragraph does not include
the cost of pension and retirement
benefits for our senior managers. See Item 6. Directors, Senior Management and
EmployeesDirectors and Senior ManagementCompensationPension Benefits.
64
Directors Compensation
Pursuant to the Mexican General Law of Corporations, our shareholders, at our annual general
ordinary shareholders meeting held on April 17, 2008, agreed to compensate our directors with
three Centenarios, or its equivalent monetary value, per each meeting of the Board of Directors
they attend. Likewise, at such annual general ordinary shareholders meeting, the shareholders
resolved that the members of each of our Board of Directors committees, other than the Audit
Committees members, shall receive three Centenarios, or its equivalent monetary value, per each
committee meeting they attend. In consideration of the Audit Committees members expanded
responsibilities pursuant to recently enacted legislation, the members of such committee receive
five Centenarios, or its equivalent monetary value, per each meeting they attend plus a monthly fee
of Ps. 15,000. The aggregate amount of compensation set forth in Item 6. Directors, Senior
Management and EmployeesDirectors and Senior Management Compensation includes fees paid to our
directors.
Variable Compensation
In 2005, we modified our variable compensation plan established in 2001 in order to
standardize and integrate our foreign subsidiaries to this scheme. This plan aligns the objectives
of our employees with our business strategy and its purpose is to: (i) recognize the extraordinary
performance of our employees, (ii) align the interests and incentives of our employees with those
of our shareholders, (iii) focus on key priorities and (iv) attract and retain talented employees.
This plan is based on the improvement of (i) cash flow from operations, (ii) compliance with the
capital expenditures budget and (iii) individual performance. Depending on the results of such
metrics, our employees are eligible to receive a bonus equal to an amount ranging between 1.2 and
6.0 times their monthly base salary. For the year ended December 31, 2007, we paid Ps. 161 million
($15 million) to our employees under our variable compensation plan mentioned above.
In 2006, we created a long term incentive plan for certain key executives. This plan aligns
the objectives of our key executives with our business strategy and its purpose is to: (i) achieve
financial value for the medium and long term, (ii) achieve a sustainable yield, (iii) focus on
Vitros results, (iv) complement our executives compensation and (v) attract and retain talented
employees. This plan is based on the improvement of economic value added of the Company (an
internal performance measure). Compensation related to this plan was paid for the first time in
2007 and amounted to Ps. 45 million ($4 million).
Employee Stock Option Plan
We maintain an Employee Stock Option Plan established in March 1998 (the Plan). The Plan
specifies the amount of shares, time and initial exercise price, which is equal to the average
closing price on the BMV of the common shares on the 20 days prior to the grant date, except for
options issued during 2000, 2001 and 2002, which were Ps. 11.00, Ps. 8.27 and Ps. 7.53,
respectively. The vesting period of the options is 5 years and the life of such options is 10
years.
We have not granted any stock options for the last five years. Please refer to note 14 of our
Consolidated Financial Statements.
The following table sets forth, for each of the periods presented, the number of options
granted during such period and certain other information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
1998
|
|
|
1999
|
|
|
2000
|
|
|
2001
|
|
|
1998*
|
|
|
2002
|
|
|
outstanding
|
|
Options granted
|
|
|
2,813,300
|
|
|
|
2,893,000
|
|
|
|
4,851,900
|
|
|
|
3,204,800
|
|
|
|
940,950
|
|
|
|
3,941,950
|
|
|
|
|
|
Options cancelled or
exercised at December
31, 2007
|
|
|
2,350,000
|
|
|
|
1,059,500
|
|
|
|
3,986,950
|
|
|
|
2,827,950
|
|
|
|
478,050
|
|
|
|
3,208,150
|
|
|
|
|
|
Options outstanding
December 31, 2007
|
|
|
463,300
|
|
|
|
1,833,500
|
|
|
|
864,950
|
|
|
|
376,850
|
|
|
|
462,900
|
|
|
|
733,800
|
|
|
|
4,735,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Exercise Price
|
|
Ps.
|
31.31
|
|
|
Ps.
|
14.88
|
|
|
Ps.
|
11.00
|
|
|
Ps.
|
8.27
|
|
|
Ps.
|
13.00
|
|
|
Ps.
|
7.53
|
|
|
|
|
|
Adjusted Exercise
Price at December 31,
2007
|
|
Ps.
|
79.90
|
|
|
Ps.
|
45.78
|
|
|
Ps.
|
11.00
|
|
|
Ps.
|
8.27
|
|
|
Ps.
|
13.00
|
|
|
Ps.
|
7.53
|
|
|
|
|
|
|
|
|
*
|
|
In 2001, we repriced 940,950 options granted in 1998 to Ps. 13.00 per option.
|
65
Compensation cost charged against income for the Plan was Ps. 4 million, Ps. 1 million and Ps.
1 million, for 2005, 2006 and 2007, respectively. The aggregate amount of compensation set forth in
Item 6. Directors, Senior Management and EmployeesDirectors and Senior ManagementCompensation
includes fees paid to our directors. does not include the cost of the grant of options under the
Plan.
Pension Benefits
Our pension benefit obligations and the related costs are calculated using actuarial models
and assumptions applicable in the countries where the plans are located, principally in the United
States and Mexico. Two critical assumptions, discount rate and expected return on assets, are
important elements of plan expense and/or liability measurement. We evaluate these critical
assumptions at least annually. Other assumptions involve demographic factors such as retirement,
mortality and turnover rates, as well as the rate of increases in compensation. These assumptions
are evaluated periodically and are updated to reflect our experience. Actual results in any given
year will often differ from actuarial assumptions because of economic and other factors. The
discount rate enables us to state expected future cash flows at a present value on the measurement
date. We have little latitude in selecting this rate since it is determined jointly between us and
the pension plans actuary and is required to represent the market rate for high-quality fixed
income investments. A lower discount rate increases the present value of benefit obligations and
increases pension expense. Our weighted-average discount rate was 5.75% for 2005, 5.50% for 2006,
and 5.00% for 2007 as we consider that reflects market interest rate conditions. To determine the
expected long-term rate of return on pension plan assets, we consider the current and expected
asset allocations, as well as historical and expected returns on various categories of plan assets.
We assumed that the weighted-average of long-term returns on our pension plans were 7.0% for 2005,
2006, and 2007. With respect to the pension plans in the United States, as of December 31, 2007,
the assets set aside to satisfy the estimated obligations under such pension plans were sufficient
to meet the estimated obligations as they come due. With respect to the pension plans in Mexico, as
of December 31, 2007, the assets set aside to satisfy the estimated obligations under such pension
plans were Ps. 1,548 million while the related estimated obligations were Ps. 2,653 million. Our
aggregate pension expense in 2007 was approximately Ps. 358 million. Further information on our
principal pension plans, including the assumptions used in calculating the referenced obligations,
is provided in notes 11 and note 24 to our consolidated financial statements for the years ended
December 31, 2006 and 2007.
The assets of our pension plans include 47,541,076 Vitro shares. See Item 7. Major
Shareholders and Related Party TransactionsMajor Shareholders.
Severance Benefits
All
of our senior managers, executives who are members of the Board of
Directors and siblings of Directors and senior managers working for Vitro, are entitled to a
severance payment equal to up to three times of their annual compensation, net of tax, if they cease to be
employed by us in connection with a change of control of Vitro, S.A.B. de C.V. This severance
benefit is in addition to any severance payment due to such persons under Mexican law.
Two of our senior managers are employed by us pursuant to a three-year guaranteed employment
contract, one ending in August 2008 and the other in April 2010.
66
BOARD PRACTICES
According to our by-laws, our shareholders determine the number of directors that will
constitute our Board of Directors at a general ordinary shareholders meeting. Our Board of
Directors may consist of up to a maximum of 21 members and each member of our Board of Directors is
elected at a general ordinary shareholders meeting for a renewable term of one year. If at the end
of the one-year term of office any of our directors is not reelected at a general ordinary
shareholders meeting or if a director resigns and there is no designation of a substitute director
or the substitute director has not taken office, then such director will continue to serve for a
maximum term of up to 30 calendar days. Thereafter, the Board of Directors may appoint provisional
directors who will be ratified or substituted at the next general ordinary shareholders meeting.
At the general ordinary shareholders meeting held on April 17, 2008, our shareholders resolved that
our Board of Directors would consist of 16 directors, 9 of whom are independent directors, which
means that 56.2% of our directors are independent, notwithstanding that the Mexican Law of the
Securities Market only requires that a minimum of 25% of directors must be independent. We have
no alternate directors. We have not entered into a service contract with any of our directors to
provide benefits to such director upon expiration of such directors term of office.
Pursuant to our by-laws, our Board of Directors must meet at least four times per calendar
year and must dedicate one such meeting to the analysis of our medium- and long-term strategies.
Board meetings usually take place at our principal executive offices however, Board meetings may be
held anywhere within or outside of Mexico. For a quorum to exist at a Board meeting, a majority of
the directors must be in attendance. The affirmative vote of a majority of the directors present at
a duly called Board meeting is required for the adoption of any resolution. Minutes must be
prepared after every Board meeting to reflect the resolutions adopted and any relevant discussions
that took place. Such minutes must be signed by the Chairman and the Secretary of the Board.
Resolutions adopted at Board meetings not conducted in person have the same force and effect as
those adopted at Board meetings conducted in person as long as such resolutions are unanimously
adopted and confirmed in writing.
Our Board of Directors is authorized to create as many committees as it deems appropriate for
the discharge of its duties, in addition to the Corporate Practices Committee and the Audit
Committee. To that effect, the Board of Directors has also constituted the Finance and Planning
Committee, notwithstanding that this is not a Mexican or a US requirement for foreign issuers. On
April 27, 2007 the Board of Directors enacted the charters for each of these Committees, all of
which took effect on May 1, 2007.
The Corporate Practices Committee and the Audit Committee must be comprised in their entirety
by independent directors proposed by the Chairman of the Board and elected by the Board of
Directors, whereas the Finance and Planning Committee may be comprised of any directors that the
Board of Directors freely determines. The committees meet as often as necessary, but at least 4
times a year and must provide a report of their activities and findings to our Board of Directors
either upon the Boards request or at any time the committee deems appropriate, in addition to the
annual report of activities of each committee that must be submitted to the Board of Directors,
which is subsequently presented to the general ordinary shareholders meeting that reviews the
results at the end of every fiscal year.
Consistent with our corporate by-laws, the Mexican Law of the Securities Market and the board
and governance practices mandated by the Sarbanes-Oxley Act of 2002, we have established an Audit
Committee that is exclusively comprised of members of our Board of Directors who are deem to be
independent (as such term is defined under the Mexican Law of the Securities Market, as well as the
U.S. federal securities laws and the applicable rules and regulations thereunder and the corporate
governance rules of the NYSE). The independent qualification is determined at our Shareholders
Meeting and may be questioned within the next 30 days by the
Comisión Nacional Bancaria y de
Valores (CNBV)
. Our Audit Committee is responsible for among other matters, verifying that our
management is in compliance with its obligations regarding internal controls and the preparation of
financial statements. In addition, our Audit Committee is responsible for the appointment,
compensation and oversight of our independent external auditors. Our Audit Committee meets
regularly with our management and our independent external auditors.
67
The members of our Audit Committee are Messrs. Gustavo Madero, Jaime Serra Puche, Joaquín
Vargas and Manuel Güemez de la Vega. Mr. Gustavo Madero is the President of our Audit Committee.
Although none of the members of our audit committee qualifies as an audit committee financial
expert, as such term is defined under Item 401(e) of Regulation S-K,, the Audit Committee and its
members are in compliance with Mexicos rules and practice for this type of committee, which
includes, among other requirements knowledge of generally accepted accounting principles, the
ability to evaluate the application of such principles, knowledge and experience in the
preparation, audit, evaluation, and/or analysis of financial statements and knowledge of the
internal controls involved in the preparation of financial reports. See Item 16A. Audit Committee
Financial Expert. Additionally the Board of Directors has retained Mr. Alfonso Gonzalez Migoya to
serve as a financial expert to the Audit Committee.
The charter of the Audit Committee provides that: (i) the members of the committee (except for
its president) must be elected by our Board of Directors, as proposed by the Chairman of the Board
of Directors, (ii) the committee must be comprised of at least three independent directors, (iii)
the president of the committee must be appointed and can only be removed by shareholders
resolution at a general shareholders meeting, (iv) any two members of the committee may call a
meeting through written notice given to the other members of the committee at least five days
before such meeting, (v) the committee must meet at least three times per year, (vi) the committee
must provide an annual report on its activities to our Board of Directors and to the general
ordinary shareholders meeting that reviews the results at the end of every fiscal year, (vii) the
attendance of at least a majority of the committees members is required to constitute a quorum and
resolutions shall be adopted by the vote of at least the majority of committee members present at
the relevant meeting at which a quorum exists, (viii) resolutions may be adopted without a meeting,
provided such resolutions are approved unanimously and confirmed in writing and (ix) the committee
must perform such duties as required by law and by our Board of Directors. The charter also
provides that the Audit Committee must verify that external audit duties are duly performed and
must confirm our compliance with all laws and regulations regarding the reliability, sufficiency
and transparency of Vitros financial statements.
Our Audit Committee has the authority to, among other things: (i) give opinions to the Board
of Directors on the following matters, in addition to any other matters the Audit Committee is
required to review pursuant to the Mexican Law of Securities Market or which the Board of Directors
from time to time may request: a) unusual or sporadic transactions or transactions exceeding
certain amounts specified by law, b) guidelines regarding the internal control and internal audit
functions of Vitro and the companies controlled by Vitro, c) accounting policies of Vitro, to
assure conformity with the accounting principles issued or recognized by the CNBV, through its
general dispositions, d) Vitros financial statements and e) engagement of Vitros external auditor
and additional or supplemental related services; (ii) evaluate the performance of the external
auditor and analyze opinions (including opinion regarding the sufficiency on our internal control),
or reports prepared and issued by the external auditor and supervise the outcome of the
disagreements, if any, between Vitros administration and the external auditor; (iii) discuss
Vitros financial statements with those responsible for preparing or reviewing the financial
statements and advise the Board of Directors on its approval, as well as analyze the financial
information that is annually rendered to the SEC in the Annual Report on Form 20-F; (iv) inform the
Board of Directors of the status of Vitros internal control and internal audit system, and that of
the companies controlled by Vitro, including the identification of irregularities, if any; (v)
draft the opinion that the Board of Directors renders regarding the Chief Executive Officers
Annual Report and submit it to the consideration of the Board of Directors for its subsequent
presentation to the shareholders meeting, based upon, among other elements, in the opinion of the
external auditor; (vi) support the Board of Directors in the preparation of the reports referred to
in the Article 28, section IV, paragraphs d) and e) of the Mexican Law of the Securities Market;
(vii) supervise the operations referred to in articles 28, section III, and 47 of the Mexican Law
of the Securities Market; (viii) request the opinion of independent experts in the cases it deems
convenient, or when required pursuant to the Mexican Law of the Securities Market; (ix) request
from management and employees of Vitro and of the companies controlled by Vitro, reports regarding
the preparation of financial statements or any other as it deems necessary for the fulfillment of
its functions; (x) investigate any potential violation that comes to its knowledge on the
operations, guidelines and operational policies, internal controls, internal audit and accounting
records of Vitro or the companies controlled by Vitro; (xi) receive comments from shareholders,
directors, management, employees and in general by any third party regarding the subject matters
referred to in (x) above, as well as take the actions that it deems necessary regarding those
comments; (xii) supervise that procedures are adequate to receive, process and resolve complaints
regarding accounting, internal control or audit, including proceedings for confidential and
anonymous complaints of employees; (xiii) report to the Board of Directors any relevant
irregularity detected in the course of the fulfillment of its functions and, in its case, of the
68
corrective
measures or, proposed measures which must be applied; (xiv) call shareholders meetings and request agenda items to be analyzed by the
same, as it deems necessary; (xv) supervise that the Chief Executive Officer executes the
resolutions adopted by the shareholders and the Board of Directors at their respective meetings;
(xvi) supervise the mechanisms and internal controls that allow the verification of the acts and
operations of Vitro and of the companies controlled by Vitro to ensure compliance with applicable
law, as well as apply methodologies that allow supervision of such compliance; (xvii) follow up on
relevant risks that Vitro and the companies controlled by Vitro are exposed to, based upon
information provided to it by the Corporate Practices Committee, the Finance and Planning Committee
and any additional committees that may be created by the Board of Directors, the Chief Executive
Officer and Vitros external auditor, as well as to the accounting systems, internal control and
internal audit, registry, archive or information of the above; and (xviii) verify that each of the
members of the Audit Committee complies at all times with the requirements for director
independence.
Our Finance and Planning Committee is currently formed by seven members of the Board: Messrs.
Adrián Sada González, Carlos Eduardo Represas de Almeida, Tomás González Sada, Federico Sada
González, Jaime Serra Puche, Andrés A. Yarte Cantú and Carlos Bremer Gutiérrez. Mr. Adrián Sada
González is the President of our Finance and Planning Committee. Not all of the members of this
Committee are independent directors. The Finance and Planning Committee in accordance with its
charter has to perform the following activities: i) Follow up on the compliance of Vitros budget;
ii) follow up on Vitros Strategic Plan; (iii) analyze periodically the results of the investments
made on projects previously approved by the Board of Directors, comparing their return against
budgeted returns previously submitted to the Board of Directors; iv) support the Board of Directors
in the supervision of compliance with investment and financing policies and in the review of
financial projections; and (v) render an opinion to the Board of Directors on such matters as the
Board of Directors and the Chief Executive Officer may request provided they do not relate to a
matters that the Audit Committee or the Corporate Practices Committee must render an opinion,
pursuant to the Mexican Law of the Securities Market or its regulations.
Pursuant to the Mexican Law of Securities Market, we have established a Corporate Practices
Committee. In accordance with its charter, this committee has to perform the following activities:
(i) render an opinion to the Board of Directors about the following matters, in addition to any
other matters the Corporate Practices Committee is required to review pursuant to the Mexican Law
of the Securities Market or which the Board of Directors from time to time may request: a)
determine the policies and guidelines for the use of assets owned by Vitro and the companies
controlled by Vitro, b) related party transactions with Vitro and the companies controlled by
Vitro, except those which do not require the prior approval of the Board of Directors pursuant to
policies and guidelines previously approved by the Board of Directors and those established
pursuant to the Mexican Law of the Securities Market, c) the appointment, election and dismissal of
the Chief Executive Officer and determination of his or her total compensation, as well as the
remuneration of the Chairman of the Board of Directors, d) the establishment of policies for the
appointment and total compensation of key management (other than the CEO and the Chairman), e)
waiver for a Director, manager or an officer, to engage any business opportunity for their own
benefit or that of third parties, which involves Vitro or any companies controlled by Vitro or in
which Vitro has a substantial influence, when the amount of the business opportunity is greater
than 5% (five percent) of the consolidated assets of Vitro, based upon the figures of the
immediately preceding quarter, f) mandatory public offerings of securities for percentages below
those determined in section III of article 98 of the Mexican Law of the Securities Market, g) the
execution of agreements related to mandatory public offerings with negative and affirmative
covenants that benefit the issuer of such offer or Vitro, pursuant to article 100 of the Mexican
Law of Securities Market, h) failure to execute mandatory public offerings if Vitros economic
viability is at risk pursuant to section III of article 102 of the Mexican Law of the Securities
Market, and i) the determination of the tender price for Vitros shares, due to the cancellation of
the registry of Vitros securities before the National Registry of Securities
(Registro Nacional de
Valores)
, (RNV), pursuant to article 108 of the Mexican Law of the Securities Market;
additionally, in the event the Board of Directors adopts any resolutions regarding any of the
foregoing matters that are not in accordance with the opinions rendered by the Corporate Practices
Committee, this Committee, through its President, shall instruct the Chief Executive Officer to
disclose such circumstances; (ii) support the Board of Directors in the preparation of the annual
report, which pursuant to paragraph b), article 172 of the Mexican General Law of Corporations must
disclose the main accounting and information policies, their rationale and the criteria used in the
preparation of the financial information; (iii) support the Board of Directors in the preparation
of the annual report that must be submitted at the general shareholder meeting relating to the
operations and activities in which the Board of
69
Directors
participated during the corresponding fiscal year; (iv) render an opinion on the annual report prepared by the Board
of Directors about the performance of key management; (v) approve the general increases in the
wages and salaries of the employees and personnel of Vitro and of the companies controlled by
Vitro; (vi) supervise the size and configuration of the Board of Directors to ensure that decision
making is effective and in compliance with applicable legal provisions mandating that at least 25%
of its members are independent and that its number shall not be greater than 21 members; (vii)
supervise the compliance of Vitros social responsibility policies and the disclosure of such
compliance, including endowment policies; (viii) review and approve responses to the Questionnaire
Regarding Compliance with Recommendations for Better Corporate Practices and informing the Board of
Directors of its timely filing; (ix) supervise the application of Vitros Code of Ethics and
propose any amendments it deems necessary; (x) periodically review Vitros corporate policies and
the charters of the Committees to ensure that all of them are consistent and, if necessary, resolve
any matter or conflict or inconsistency between any of them; (xi) support the Board of Directors in
the development of policies regarding the distribution and communication of information to
shareholders and the public markets, as well as the directors and managers of Vitro, that comply
with the Mexican Law of the Securities Market; and (xii) coordinate and supervise, together with
the support of the Chief Executive Officer, the training of newly-appointed directors to ensure
they are provided with all information regarding the background and operations of Vitro, as well as
an understanding of the legal and regulatory framework to which the Directors are subject, with a
particular emphasis on his or her fiduciary duties of loyalty, diligence and confidentiality.
The Corporate Practices Committee is currently comprised of four independent directors, Mr. Manuel
Güemez de la Vega, who was appointed as President of the Committee in a resolution adopted by our
shareholders at the general ordinary shareholders meeting held on April 17, 2008, and Messrs.
Ricardo Martín Bringas, Carlos Muñoz Olea and Alejandro Garza Lagüera. Pursuant to the Mexican Law
of the Securities Market and our corporate by-laws, this committee must be comprised of at least
three independent directors appointed by the Board of Directors, except for its president who can
only be appointed and removed by a shareholders resolution.
70
SHARE OWNERSHIP
The following table sets forth information regarding the beneficial ownership of our shares by
each of our directors and senior managers as of April 17, 2008, the date of our most recent general
ordinary shareholders meeting. The voting power exercisable by our directors and senior managers
may be greater than the percentage of our shares held by them. See Item 7. Major Shareholders and
Related Party TransactionsMajor Shareholders.
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|
Percentage of
|
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|
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|
Exercise
|
|
|
Adjusted
|
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|
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|
Number of
|
|
|
Shares
|
|
|
Granted
|
|
|
Outstanding
|
|
|
Price on
|
|
|
Exercise
|
|
|
Expiration
|
Name
|
|
Shares Owned
|
|
|
Outstanding
(4)
|
|
|
Options
(5)
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|
Options
(5)(6)
|
|
|
Grant Date
|
|
|
Price
|
|
|
Date
|
Adrián Sada Treviño
|
|
|
17,664,652
|
(1)
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|
|
4.93
|
%
|
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|
90,400
|
|
|
|
90,400
|
|
|
|
13.00
|
|
|
|
N/A
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|
March 2011
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|
Adrián Sada González
|
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|
25,134,357
|
(2)(7)
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|
|
7.01
|
%
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|
|
90,400
|
|
|
|
90,400
|
|
|
|
13.00
|
|
|
|
N/A
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|
March 2011
|
|
|
|
|
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|
|
|
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
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|
|
|
|
|
|
|
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|
|
430,000
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|
|
|
430,000
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|
|
|
11.00
|
|
|
|
N/A
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|
June 2010
|
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|
|
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|
|
|
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|
|
550,000
|
|
|
|
137,500
|
|
|
|
8.27
|
|
|
|
N/A
|
|
|
March 2011
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|
|
|
|
|
|
|
|
|
|
|
550,000
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|
|
|
275,000
|
|
|
|
7.53
|
|
|
|
N/A
|
|
|
March 2012
|
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|
Federico Sada González
|
|
|
24,801,235
|
(3)
|
|
|
6.92
|
%
|
|
|
90,400
|
|
|
|
90,400
|
|
|
|
13.00
|
|
|
|
N/A
|
|
|
March 2011
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
|
|
|
|
|
|
|
|
|
|
|
430,000
|
|
|
|
107,500
|
|
|
|
11.00
|
|
|
|
N/A
|
|
|
June 2010
|
|
|
|
|
|
|
|
|
|
|
|
550,000
|
|
|
|
137,500
|
|
|
|
8.27
|
|
|
|
N/A
|
|
|
March 2011
|
|
|
|
|
|
|
|
|
|
|
|
550,000
|
|
|
|
275,000
|
|
|
|
7.53
|
|
|
|
N/A
|
|
|
March 2012
|
|
|
|
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|
|
Tomás González Sada
|
|
|
*
|
|
|
|
*
|
|
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|
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|
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|
|
Andrés Yarte Cantú
|
|
|
*
|
|
|
|
*
|
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|
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|
|
|
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|
|
Gustavo Madero Muñoz
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
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|
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|
Carlos Represas de Almeida
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
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|
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|
|
Jaime Serra Puche
|
|
|
*
|
|
|
|
*
|
|
|
|
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|
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|
|
|
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|
|
Carlos Muñoz Olea
|
|
|
3,789,800
|
|
|
|
1.06
|
%
|
|
|
|
|
|
|
|
|
|
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|
Joaquín Vargas Guajardo
|
|
|
*
|
|
|
|
*
|
|
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|
|
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|
|
|
|
|
Alejandro Garza Lagüera
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Manuel Güemez de la Vega
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Julio Escámez Ferreiro
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlos Bremer Gutierrez
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo Martin Bringas
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaime Rico Garza
|
|
|
*
|
|
|
|
*
|
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claudio Del Valle Cabello
|
|
|
*
|
(7)
|
|
|
*
|
|
|
|
15,100
|
|
|
|
15,100
|
|
|
|
13.00
|
|
|
|
N/A
|
|
|
March 2011
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
28,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
15,000
|
|
|
|
11.00
|
|
|
|
N/A
|
|
|
June 2010
|
|
|
|
|
|
|
|
|
|
|
|
59,000
|
|
|
|
14,750
|
|
|
|
8.27
|
|
|
|
N/A
|
|
|
March 2011
|
|
|
|
|
|
|
|
|
|
|
|
60,500
|
|
|
|
30,250
|
|
|
|
7.53
|
|
|
|
N/A
|
|
|
March 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enrique Osorio López
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alejandro Sánchez Mújica
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugo Lara García
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David González Morales
|
|
|
*
|
|
|
|
*
|
|
|
|
26,000
|
|
|
|
26,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roberto Rubio Barnes
|
|
|
*
|
|
|
|
*
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
14.88
|
|
|
|
45.78
|
|
|
March 2009
|
|
|
|
*
|
|
Beneficially owns less than one percent of our shares.
|
|
(1)
|
|
Reported as a group with his wife, Mrs. María Nelly González de Sada.
|
71
|
|
|
(2)
|
|
Reported as a group with his wife, Mrs. Esther Cueva de Sada, and his son, Adrián
Sada Cueva.
|
|
(3)
|
|
Reported as a group with his wife, Mrs. Liliana Melo de Sada, his sons, Messrs.
Federico Sada Melo and Mauricio Sada Melo, and his daughter, Ms. Liliana Sada Melo.
|
|
(4)
|
|
For purposes of calculating percentage of shares outstanding, we use the number of
our shares outstanding that was 358,389,574 shares, which is the number equal to our
386,357,143 issued shares minus the shares held as treasury stock.
|
|
(5)
|
|
The options listed below are options to purchase our shares.
|
|
(6)
|
|
All the options are exercisable.
|
|
(7)
|
|
In addition to the shares set forth below, Mssers Adrián Sada González and Claudio
del Valle Cabello may be deemed to be beneficial owners of the 17,464,614 shares held by our
Stock Option Trust, as they are members of the Technical Committee of the Stock Option Trust
and share the right to vote and the right to sell the shares held by the Stock Option Trust
with the other member of the Technical Committee.
|
See Item 6. Directors, Senior Management and EmployeesDirectors and Senior Management
CompensationEmployee Stock Option Plan for a discussion of the only arrangement providing our
employees with equity-based compensation.
72
EMPLOYEES
As of December 31, 2007, we employed 24,442 people, more than 70% of whom were located in
Mexico.
The following table sets forth, for the periods indicated, the period end and average number
of employees of each of our two operating business units and our corporate offices.
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Business Unit
|
|
Period End
|
|
|
Average
|
|
|
Period End
|
|
|
Average
|
|
|
Period End
|
|
|
Average
|
|
Glass Containers
|
|
|
10,296
|
|
|
|
10,683
|
|
|
|
12,426
|
|
|
|
11,918
|
|
|
|
13,967
|
|
|
|
13,717
|
|
Flat Glass
|
|
|
9,664
|
|
|
|
9,712
|
|
|
|
8,998
|
|
|
|
9,288
|
|
|
|
9,488
|
|
|
|
8,965
|
|
Other
(1)
|
|
|
94
|
|
|
|
210
|
|
|
|
0
|
|
|
|
69
|
|
|
|
0
|
|
|
|
0
|
|
Corporate Offices
|
|
|
823
|
|
|
|
798
|
|
|
|
870
|
|
|
|
819
|
|
|
|
987
|
|
|
|
815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,877
|
|
|
|
21,403
|
|
|
|
22,294
|
|
|
|
22,094
|
|
|
|
24,442
|
|
|
|
23,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Other is comprised by Bosco which we sold on April 1, 2005 and our metal flatware
business, which we sold in October 2006, and which were previously included in our
Glassware reportable segment.
|
The following table sets forth, for the periods indicated, our employees by geographic
location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Business Unit
|
|
Period End
|
|
|
Average
|
|
|
Period End
|
|
|
Average
|
|
|
Period End
|
|
|
Average
|
|
Mexico
|
|
|
15,322
|
|
|
|
15,902
|
|
|
|
15,979
|
|
|
|
16,101
|
|
|
|
18,070
|
|
|
|
17,063
|
|
United States
|
|
|
2,675
|
|
|
|
2,684
|
|
|
|
2,729
|
|
|
|
2,716
|
|
|
|
2,632
|
|
|
|
2,676
|
|
Rest of the world
|
|
|
2,880
|
|
|
|
2,817
|
|
|
|
3,586
|
|
|
|
3,277
|
|
|
|
3,740
|
|
|
|
3,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,877
|
|
|
|
21,403
|
|
|
|
22,294
|
|
|
|
22,094
|
|
|
|
24,442
|
|
|
|
23,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relation with Labor Unions
In Mexico, all of our workers (others than our
empleados de confianza
) are currently
affiliated with labor unions. Labor relations in each manufacturing facility in Mexico are governed
by separate collective bargaining agreements which were entered into between the relevant
subsidiary and a union selected by the employees of the relevant facility. The terms of the
collective bargaining agreements are renegotiated every two years, except for wages, which are
negotiated every year. For over 60 years, we have not experienced any strikes that materially
affected our overall operations in Mexico and management believes that it has a good relationship
with its employees and the labor unions to which they are affiliated.
In the United States, a majority of our workers are currently affiliated with labor unions.
Management believes that it has a good relationship with its employees in the United States and the
labor unions to which they are affiliated.
73
Item 7. Major Shareholders and Related Party Transactions
Unless the context otherwise requires, in the section entitled Major Shareholders of this
Item 7 the words we,, us, our, and ours refer to Vitro, S.A.B. de C.V. and not its
consolidated subsidiaries.
MAJOR SHAREHOLDERS
As of April 17, 2008, the date of our most recent general ordinary shareholders meeting,
386,857,143 of our shares were issued of which 358,389,574 of our shares were issued and
outstanding. See Item 10. Additional InformationMexican Corporate Law and By-LawsCapital
Structure. As of such date, 28,467,569 of our shares were held as treasury stock, 17,464,614 of
our shares were held by the Stock Option Trust, and 47,541,076 of our shares were held by the
Pension Plan Trust. Under Mexican corporate law, shares held as treasury stock are not considered
outstanding. Under Mexican corporate law, the our shares held by the Stock Option Trust are
considered issued and outstanding and therefore are entitled to receive dividends and vote on
matters on which other of our shares are entitled to vote. However, for accounting purposes, the
shares held by the Stock Option Trust are considered treasury stock and therefore not outstanding.
Under Mexican corporate law, the shares held by the Pension Plan Trust are considered issued and
outstanding for all purposes. Accordingly, all information relating to Major Shareholders and the
voting rights relating to our common stock, includes all shares held by the Stock Option Trust and
the Pension Plan Trust.
We have one class of American Depositary Shares ADSs, registered under the Securities Act.
Our ADSs are evidenced by American Depositary Receipts ADRs, and each of our ADSs represents
three Ordinary Participation Certificates CPOs. Each CPO represents one of our shares. Our ADSs
and CPOs have no voting rights with respect to the underlying shares, but have all the economic
rights relating to those shares. The trustee that holds our shares represented by CPOs is required
to vote those shares in the same manner as the majority of our shares not so held that are voted in
the relevant shareholders meeting. This has the effect of increasing the voting power of holders
of our shares (other than the trustee) in excess of the percentage of our shares held by such
holders. Therefore, the voting power exercisable by our major shareholders may be greater than the
percentage of our shares outstanding held by them. As of April 17, 2008, 59.9 million of our shares
were represented by CPOs.
The following table sets forth our major shareholders and their shareholdings as of April 17,
2008.
|
|
|
|
|
|
|
|
|
Name
|
|
Shares Outstanding
(1)
|
|
|
% of Shares Outstanding
(1)(2)
|
|
Pension Plan Trust
|
|
|
47,541,076
|
|
|
|
13.27
|
|
Stock Option Trust
|
|
|
17,464,614
|
|
|
|
4.87
|
|
Mr. Adrián Sada Treviño
(3) (4)
|
|
|
17,664,652
|
|
|
|
4.93
|
|
Mr. Adrián Sada González
(5)
|
|
|
25,134,357
|
|
|
|
7.01
|
|
Mr. Federico Sada González
(6)
|
|
|
24,801,235
|
|
|
|
6.92
|
|
Ms. Alejandra Sada González
|
|
|
21,646,821
|
|
|
|
6.04
|
|
|
|
|
(1)
|
|
All of the shares that may be issued upon exercise of our outstanding options are held by our
Stock Option Trust, and all of our outstanding options are currently exercisable. Therefore,
shares outstanding and the calculation of percentage of shares outstanding include all our
outstanding options.
|
|
(2)
|
|
Calculation of percentage of shares outstanding based upon 386,357,143 shares issued shares
minus 28,467,569 held as treasury stock.
|
|
(3)
|
|
Reported as a group with his wife, Mrs. María Nelly González de Sada. Mr. Adrián Sada Treviño
and Mrs. Maria Nelly Gonzalez de Sada disclaim beneficial ownership with respect to the shares
held by their children and their childrens families.
|
|
(4)
|
|
Mrs. María Nelly Sada de Yarte, her children and her childrens spouses collectively hold
12,770,807 of our shares, representing 3.56% of our issued and outstanding shares, which are
not included in the table above. Mrs. María Nelly Sada de Yarte is a daughter of Mr. Adrián
Sada Treviño and Mrs. María Nelly González de Sada.
|
|
(5)
|
|
Reported as a group with his wife, Mrs. Esther Cueva de Sada, and his son Adrián Sada Cueva.
In addition to the shares set forth below, Mr. Adrián Sada González may be deemed to be a
beneficial
owner of the 17,464,614 shares held by our Stock Option Trust, as a member of the Technical
Committee of the Stock Option Trust who shares the right to vote and the right to sell the
shares held by the Stock Option Trust with the other member of the Technical Committee.
|
|
(6)
|
|
Reported as a group with his wife, Mrs. Liliana Melo de Sada, his sons Messrs. Federico Sada
Melo and Mauricio Sada Melo, and his daughter, Ms. Liliana Sada Melo.
|
74
We were informed a few days prior to our April 17th,
2008 Annual General Ordinary Shareholders Meeting (the “Shareholders Meeting”) that a group of persons,
including, Mr. Alfredo Harp Helu (“Mr. Harp”), Chairman of the Board of Grupo Financiero Banamex,
S.A. and Mr. Roberto Hernandez Ramirez (“Mr. Hernandez”), Chairman of the Board of Banco Nacional
de México, S.A., Institución de Banca Múltiple (“Banamex”), a subsidiary of Grupo Financiero
Banamex, S.A. (the “Harp Group”) had acquired 27% of our outstanding common shares and claimed that they
were entitled to appoint two members of the Board of Directors at the Shareholders Meeting.
Prior to the Shareholders Meeting, and in accordance with
the Mexican Law of the Securities Market, brokerage houses, including Acciones y Valores Banamex, S.A. de C.V. Casa de
Bolsa, the brokerage house subsidiary of Grupo Financiero Banamex, S.A. (“Accival”) and GBM Grupo
Bursátil Mexicano, S.A. de C.V., Casa de Bolsa (“GBM”), provided us with their respective lists of
shareholders owning Vitro common shares held at the brokerage houses. We were also informed prior to the Shareholders
Meeting that the lists provided by Accival and GBM contained the shares owned by entities purportedly controlled by the
Harp Group. Based upon the Accival list of Vitro shareholders, Banamex was the sole owner of an aggregate of 14.9% of
our outstanding common shares and was seeking to vote all of these shares at the Shareholders Meeting.
In accordance with article 48 of the Mexican Law of the
Securities Market, our by-laws prohibit the acquisition by any person, or group acting in concert, either directly or
through CPOs or ADRs, of more than 9.9% of our outstanding common shares, without the prior written approval of our
Board of Directors. Our by-laws further provide that any transfer of common shares, CPOs or ADRs or the entering into
agreements, or the taking of other acts, whether oral or written, which create mechanisms or arrangements under which
the number of votes covered by such agreements or actions is more than 9.9% of our outstanding common shares, also
requires the prior written approval of our Board of Directors. The approval of our Board of Directors of such
ownership, the entering into of such agreements or the taking of such actions is based upon consideration by the Board
of Directors of various factors set forth in our by-laws, including the best interest of the Company’s business
and the potential increase of investment value for our shareholders, as provided by the Mexican Law of the Securities
Market.
In the event of any such purchase of our common shares,
CPOs or ADRs or the entering into of such agreements or taking of any such actions covering our common shares without
complying with the provisions of our by-laws, the common shares are not entitled to any voting right or authority in
the Shareholders Meetings of the Company, or any right or authority to exercise any other corporate rights.
Further, in such event, the Company will not register, acknowledge or provide any value to the share deposit
certificates issued by any financial institution or securities deposit certificates in Mexico, to evidence the right of
attendance at any shareholders meeting.
75
Pursuant to our by-laws, our common shares may only be
owned by Mexican citizens or by Mexican companies or entities that do not allow any direct or indirect foreign
participation. Persons that are not Mexican citizens or Mexican companies or entities that allow any direct or indirect
foreign participation, may not directly or indirectly own our common shares, and non Mexican investors may acquire an
economic interest in our common shares by the ownership of our CPOs or ADRs. In accordance with our by-laws, the
acquisition of our common shares by any person that is not a Mexican citizen or by Mexican companies or entities that
allow any direct or indirect foreign participation would be null and void, and we would have the right to cancel such
common shares.
Therefore, in accordance with our by-laws, and based upon
the Accival list of our shareholders, the common shares owned by Banamex, an indirect subsidiary of a U.S. public
company, may be deemed to be null and void and not entitled to any corporate right.
In addition, in the event that any other common shares held either directly or indirectly by the Harp Group
are owned by any person or a group acting in concert, that owns more than 9.9% of our common shares, or are held under
agreements or mechanisms covering more than 9.9% of our common shares, such common shares may also not
be entitled to any voting rights or other authority or right to exercise any other corporate rights, unless such
ownership is approved by our Board of Directors.
The Company, on June 23, 2008, initiated litigation
against Banamex in Mexican courts seeking to enforce the provisions of its by-laws. The Company believes, based upon
the advice of Rivera Gaxiola y Asociados, S.C., that although Mexican courts have not previously considered a similar
matter, the courts would determine that our by-law provisions are valid and, once the relevant facts involved confirm
that Banamex is the owner of 14.9% of our common shares, the courts should declare the acquisition by Banamex of such
common shares null and void. As part of this litigation, the Mexican courts have granted a petition by Vitro to
temporarily suspend the trading and exercise of any corporate rights by Banamex of such common shares, pending
definitive resolution of the lawsuit filed by Vitro.
76
RELATED PARTY TRANSACTIONS
Certain Arrangements with Respect to Real Estate
The Company uses real estate owned by relatives of certain directors and senior managers to
meet with customers, suppliers or for other business purposes. The Company pays an annual fee for
the right to use these properties for a specified number of days per year. Additionally, it has
agreed to pay maintenance and operating costs. In 2005, 2006 and 2007, the aggregate amounts paid
as annual fees were approximately Ps. 10 million ($0.9 million).
Goods Sold to or Purchased from Certain Companies
The Company sells flat glass products and glass containers to certain companies whose
shareholders are directors and senior managers of the Company. In 2005, 2006 and 2007, the
aggregate amount of these sales was Ps. 59 million, Ps. 58 million and Ps. 69 million,
respectively.
The Companys subsidiary Comegua sells glass containers to Cervecería Centroamericana and to
Cervecería de Costa Rica, subsidiaries of its partners in such company. In 2005, 2006 and 2007, the
aggregate amount of these sales was $13 million, $11 million and $9 million, respectively.
Sale of Real Estate
In 2007, a member of the Companys Board of Directors purchased an unused parcel of real
estate from one of its subsidiaries. The price of the real estate was $5.4 million. The Company
received several offers for the property and such member of the Board made the highest offer. The
transaction was approved by the Companys Audit Committee in accordance with its charter at the
time.
77
Item 8. Financial Information
Consolidated Financial Statements
See Item 18. Financial Statements and pages F-1 to F-175 for a copy of our audited
consolidated financial statements as of December 31, 2006 and 2007 and for the years ended December
31, 2005, 2006 and 2007.
Export Sales
The following table sets forth, for the periods presented, a breakdown of our domestic sales,
export sales and sales attributable to our foreign subsidiaries. Financial data set forth in the
following table has been restated in millions of constant pesos as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
Corporate
|
|
|
% of
|
|
|
|
|
|
|
% of
|
|
|
|
Glass
|
|
|
Consolidated
|
|
|
Flat
|
|
|
Consolidated
|
|
|
and other
(1)
|
|
|
Consolidated
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Containers
|
|
|
Net Sales
|
|
|
Glass
|
|
|
Net Sales
|
|
|
eliminations
|
|
|
Net Sales
|
|
|
Consolidated
|
|
|
Net Sales
|
|
|
|
(Ps. millions)
|
|
|
|
|
|
(Ps. millions)
|
|
|
|
|
|
(Ps. millions)
|
|
|
|
|
|
(Ps. millions)
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic sales
|
|
Ps.
|
8,371
|
|
|
|
57
|
%
|
|
Ps.
|
3,974
|
|
|
|
29
|
%
|
|
Ps.
|
361
|
|
|
|
100
|
%
|
|
Ps.
|
12,706
|
|
|
|
44
|
%
|
Export sales
|
|
|
4,028
|
|
|
|
28
|
%
|
|
|
1,946
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
5,974
|
|
|
|
21
|
%
|
Foreign subsidiaries
|
|
|
2,240
|
|
|
|
15
|
%
|
|
|
7,671
|
|
|
|
57
|
%
|
|
|
|
|
|
|
|
|
|
|
9,911
|
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
Ps.
|
14,639
|
|
|
|
100
|
%
|
|
Ps.
|
13,591
|
|
|
|
100
|
%
|
|
Ps.
|
361
|
|
|
|
100
|
%
|
|
Ps.
|
28,591
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic sales
|
|
Ps.
|
8,145
|
|
|
|
58
|
%
|
|
Ps.
|
3,296
|
|
|
|
25
|
%
|
|
Ps.
|
433
|
|
|
|
100
|
%
|
|
Ps.
|
11,875
|
|
|
|
42
|
%
|
Export sales
|
|
|
3,921
|
|
|
|
28
|
%
|
|
|
2,463
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
6,384
|
|
|
|
23
|
%
|
Foreign subsidiaries
|
|
|
1,915
|
|
|
|
14
|
%
|
|
|
7,702
|
|
|
|
57
|
%
|
|
|
|
|
|
|
|
|
|
|
9,617
|
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
Ps.
|
13,982
|
|
|
|
100
|
%
|
|
Ps.
|
13,461
|
|
|
|
100
|
%
|
|
Ps.
|
433
|
|
|
|
100
|
%
|
|
Ps.
|
27,876
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic sales
|
|
Ps.
|
7,546
|
|
|
|
61
|
%
|
|
Ps.
|
2,855
|
|
|
|
21
|
%
|
|
Ps.
|
517
|
|
|
|
100
|
%
|
|
Ps.
|
10,918
|
|
|
|
41
|
%
|
Export sales
|
|
|
3,413
|
|
|
|
28
|
%
|
|
|
3,574
|
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
6,987
|
|
|
|
26
|
%
|
Foreign subsidiaries
|
|
|
1,390
|
|
|
|
11
|
%
|
|
|
7,272
|
|
|
|
53
|
%
|
|
|
|
|
|
|
|
|
|
|
8,662
|
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
Ps.
|
12,349
|
|
|
|
100
|
%
|
|
Ps.
|
13,701
|
|
|
|
100
|
%
|
|
Ps.
|
517
|
|
|
|
100
|
%
|
|
Ps.
|
26,567
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Other is comprised by Bosco which we sold on April 1, 2005 and our metal flatware
business, which we sold in October 2006, and which we previously included in our Glassware
reportable segment.
|
Legal Proceedings
As part of the disposal in August 1996 of Anchor, in a transaction approved by the U.S.
Bankruptcy Court, we entered into a term sheet which contemplated an agreement pursuant to which we
would provide to the PBGC a limited guaranty of Anchors unfunded pension liability. For more
information regarding the terms of the guaranty, see Item 5. Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesPBGC Matter.
On April 15, 2002, New Anchor filed a pre-negotiated plan of reorganization under Chapter 11
of the U.S. Bankruptcy Code. On August 8, 2002, an amended plan of reorganization was confirmed,
pursuant to which the plan resulting from the merger of the covered pension plans was terminated
and the obligations thereunder were assumed by the PBGC in exchange for cash, securities and a
commitment of reorganized New Anchor to make certain future payments.
On June 20, 2003, the PBGC wrote to us, asserting that the plan had been terminated effective
as of July 31, 2002, with an estimated unfunded liability of $219 million. The PBGC stated that the
value of the recovery from New Anchor and reorganized New Anchor amounts to no more than
$122.25 million; it alleged that the recovery that it secured in the bankruptcy was insufficient
and that an underfunding in excess of our limited guaranty had occurred. Accordingly, in its
letter, the PBGC demanded payments pursuant to the term sheet of $7 million on or before August 1,
2003 and of $3.5 million semiannually through August 1, 2011. We intend to contest this liability.
There are various issues concerning such demand and certain defenses that may be asserted by us.
Management is currently evaluating these issues and defenses. At this point, it is not possible to
reasonably estimate the amounts
that will ultimately be payable in response to such demand. When management is able to
reasonably estimate those amounts, we will establish an appropriate accounting reserve. As of this
date, we have not established any reserves in connection with such potential liability.
78
The Company is also involved in a legal proceeding initiated by Urbanizaciones Gamma, S.A. de
C.V. (Gamma) in May 2005 alleging failure on the part of Vitrocrisa, our former joint venture
with Libbey, to vacate warehouse space, which was leased to Vitrocrisa by Gamma pursuant to a lease
agreement, upon the expiration of the lease term. Pursuant to the terms of the lease agreement,
Vitrocrisa vacated the premises upon the expiration of the lease term. Gammas claim is in the
amount of Ps. 1.8 million per month, starting from December 2003, plus standard penalties and
interest as specified in the lease agreement. Pursuant to the sale agreement between the Company
and Libbey executed in connection with the sale of Vitrocrisa, the Company agreed to assume
responsibility for 81.625% of any damages arising from this legal proceeding, with Libbey assuming
responsibility for the remainder of any such damages. We do not believe that the outcome of this
litigation, even if not determined in our favor, will have a material adverse effect on our
financial position and results of operations.
On December 11, 2006 the shareholders of Vitro Plan concluded the extraordinary meeting upon a
second call to approve the merger of Vitro Plan into Viméxico. Viméxico, a subsidiary of Vitro,
held a $135 million loan receivable from Vitro Plan. At the meeting, resolutions were adopted
approving (a) the merger of Vitro Plan into Viméxico based on financial information as of
October 31, 2006, with Viméxico as the surviving entity, and (b) the cancellation upon delivery of
existing Vitro Plan stock certificates in exchange for Viméxico stock certificates, using a ratio
of 7.19319816 shares of Viméxico common stock per share of Vitro Plan common stock.
Prior to the merger, Vitro Plan was a direct 65%-owned subsidiary of Vitro. As a result of the
merger, Viméxico is a direct 91.8%-owned subsidiary of Vitro. Prior to the merger, Pilkington owned
a 35% equity interest in Vitro Plan and, as a result of the merger, owns an 8.2% equity interest in
Viméxico. Pilkington voted against the adoption of the shareholder resolutions approving the
merger. Under the merger, the outstanding $135 million intercompany indebtedness owed by Vitro Plan
was cancelled, reducing the debt of Viméxico, as a surviving party to the merger (excluding any
guarantees of the 2012 Senior Notes, the 2017 Senior Notes and the 2013 Senior Notes) to a level
that could more readily be supported by its cash flow from operations.
On January 16, 2007, Pilkington commenced litigation, challenging and opposing, among other
claims, the resolutions adopted at the December 11, 2006 extraordinary meeting approving the
merger. On February 28, 2008, the court denied all of Pilkingtons claims and declared the merger
valid. Pilkington has filed an appeal of this decision. Which on June 26, 2008 was resolved by the Appeals Court confirming the
denial of all claims by Pilkington and ratifying in all respects the decision issued by the lower court, including, as a consequence, the
validity of the merger and the obligation to pay litigation costs and attorneys fees. However, Pilkington still has one last
opportunity to challenge such rulings through an Amparo procedure (which is a constitutional challenge held before federal court).
Additionally, on December 6, 2007, Pilkington commenced another litigation, alleging, among
other claims, that the December 11, 2006 extraordinary meeting was invalid and, therefore, the
resolutions adopted at such meeting and the merger agreement are invalid. This litigation is at an
early stage and we do not expect any decision by the courts during 2008.
On June 23, 2008, we initiated litigation against
Banamex requesting the court to declare null and void the acquisition and ownership of any of Vitro’s common
shares owned by Banamex in accordance with our by laws which only allow ownership of our common shares by any person
that is a Mexican citizen or to any Mexican companies or entities that do not allow any direct or indirect foreign
participation.
The Company believes, based upon the advice of
Rivera Gaxiola y Asociados, S.C., that although Mexican courts have not previously considered a similar matter,
the courts would determine that our by-laws provisions are valid, once the relevant facts involved confirm
that Banamex is the owner of 14.9% of our common shares, the courts should declare the acquisition by Banamex of
such common shares null and void. As part of this litigation, the Mexican courts have granted a petition by
Vitro to temporarily suspend the trading and exercise of any corporate rights by Banamex of such common shares, pending
definitive resolution of the lawsuit filed by Vitro. See “Section 7. Major Shareholders”.
Dividend Policy
Holders of the majority of our issued and outstanding Shares, acting at a general ordinary
shareholders meeting, determine whether dividends are to be paid by Vitro and the amount and date
of their payment. This decision is generally, but not necessarily, based on the recommendation of
Vitros Board of Directors. The Board of Directors, taking into account our financial position
generally determines and proposes to the general ordinary shareholders meeting the timing for the
payment of the dividends See Item 3. Key InformationSelected Consolidated Financial
InformationDividends per Share for the dividends we have paid since 2003.
Significant Changes
Since the date of our annual financial statements no significant change in our financial
information has occurred.
79
Item 9. The Offer and Listing
Unless the context otherwise requires, in this Item 9 the words we, us, our and ours
refer to Vitro, S.A.B. de C.V. and not its consolidated subsidiaries or the entities with which it
consolidated.
LISTING DETAILS
We are registered as a public company in Mexico. Our shares are listed on the Mexican Stock
Exchange, where they trade under the symbol VITROA. Our ADSs are listed on the NYSE and trade
under the symbol VTO. On November 29, 2006 Vitro changed its name as approved a general
extraordinary stockholders meeting from Vitro, S.A. de C.V. to Vitro, S.A.B. de C.V. due to a
requirement of the Ley del Mercado de Valores, which we refer to as Mexican Law of the Securities
Market, issued on June 28, 2006. This new law requires every company that is listed on the BMV, to
include Bursátil (publicly traded) in their legal name or use the letter B after S.A.
The following table sets forth, for each year in the five year period ended December 31, 2007,
the reported highest and lowest market quotation in nominal pesos on the Mexican Stock Exchange for
our shares, and the high and low sales price in nominal dollars on the NYSE for our ADSs. There is
no public market outside of Mexico for our shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMV
|
|
|
NYSE
|
|
|
|
Pesos per Share
(1)(2)
|
|
|
U.S. dollars per ADS
(2)(3)
|
|
Year
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
Ps.
|
11.63
|
|
|
Ps.
|
7.03
|
|
|
$
|
3.10
|
|
|
$
|
2.00
|
|
2004
|
|
|
14.66
|
|
|
|
9.75
|
|
|
|
4.02
|
|
|
|
2.47
|
|
2005
|
|
|
14.58
|
|
|
|
7.33
|
|
|
|
4.08
|
|
|
|
2.07
|
|
2006
|
|
|
20.30
|
|
|
|
8.35
|
|
|
|
5.55
|
|
|
|
2.19
|
|
2007
|
|
|
30.99
|
|
|
|
19.06
|
|
|
|
8.53
|
|
|
|
5.16
|
|
|
|
|
(1)
|
|
Source: Infosel.
|
|
(2)
|
|
Not adjusted for dividends.
|
|
(3)
|
|
Each of our ADSs indirectly represents three of our shares.
|
The following table sets forth, for each quarter in the three year period ended December 31,
2007, and for the first quarter of 2008, the reported highest and lowest market quotation in
nominal pesos on the Mexican Stock Exchange for our shares and the high and low sales price in
nominal dollars on the NYSE for our ADSs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMV
|
|
|
NYSE
|
|
|
|
Pesos per Share
(1)(2)
|
|
|
U.S. dollars per ADS
(2)(3)
|
|
Year
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Ps.
|
12.93
|
|
|
Ps.
|
9.01
|
|
|
$
|
3.45
|
|
|
$
|
2.40
|
|
Second Quarter
|
|
|
9.90
|
|
|
|
7.33
|
|
|
|
2.63
|
|
|
|
2.07
|
|
Third Quarter
|
|
|
14.07
|
|
|
|
7.90
|
|
|
|
3.88
|
|
|
|
2.23
|
|
Fourth Quarter
|
|
|
14.58
|
|
|
|
9.83
|
|
|
|
4.08
|
|
|
|
2.71
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Ps.
|
14.55
|
|
|
Ps.
|
9.90
|
|
|
$
|
4.06
|
|
|
$
|
2.71
|
|
Second Quarter
|
|
|
11.32
|
|
|
|
8.35
|
|
|
|
3.10
|
|
|
|
2.19
|
|
Third Quarter
|
|
|
13.62
|
|
|
|
9.33
|
|
|
|
3.70
|
|
|
|
2.51
|
|
Fourth Quarter
|
|
|
20.30
|
|
|
|
12.38
|
|
|
|
5.55
|
|
|
|
3.32
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Ps.
|
24.68
|
|
|
Ps.
|
19.06
|
|
|
$
|
6.72
|
|
|
$
|
5.16
|
|
Second Quarter
|
|
|
29.58
|
|
|
|
24.47
|
|
|
|
8.30
|
|
|
|
6.63
|
|
Third Quarter
|
|
|
30.99
|
|
|
|
24.84
|
|
|
|
8.53
|
|
|
|
6.63
|
|
Fourth Quarter
|
|
|
28.61
|
|
|
|
19.10
|
|
|
|
7.88
|
|
|
|
5.25
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Ps.
|
24.00
|
|
|
Ps.
|
16.90
|
|
|
$
|
6.58
|
|
|
$
|
4.70
|
|
|
|
|
(1)
|
|
Source: Infosel.
|
|
(2)
|
|
Not adjusted for dividends.
|
|
(3)
|
|
Each of our ADSs indirectly represents three of our shares.
|
80
The following table sets forth, for each month in the six-month period ended May 31, 2008 and
for the first 23 days of June, the reported highest and lowest market quotation in nominal pesos on
the Mexican Stock Exchange for our shares and the high and low sales price in nominal dollars on
the NYSE for our ADSs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMV
|
|
|
NYSE
|
|
|
|
Pesos per Share
(1)(2)
|
|
|
U.S. dollars per ADS
(2)(3)
|
|
Month
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
December 2007
|
|
Ps.
|
24.10
|
|
|
Ps.
|
19.80
|
|
|
$
|
6.65
|
|
|
$
|
5.46
|
|
|
January 2008
|
|
Ps.
|
24.00
|
|
|
Ps.
|
16.90
|
|
|
$
|
6.58
|
|
|
$
|
4.70
|
|
|
February
|
|
|
19.40
|
|
|
|
18.31
|
|
|
|
5.37
|
|
|
|
5.10
|
|
|
March
|
|
|
19.16
|
|
|
|
17.46
|
|
|
|
5.41
|
|
|
|
4.70
|
|
|
April
|
|
|
20.01
|
|
|
|
18.67
|
|
|
|
5.78
|
|
|
|
5.29
|
|
|
May
|
|
|
18.94
|
|
|
|
17.82
|
|
|
|
5.45
|
|
|
|
5.12
|
|
|
June (through June 23, 2008)
|
|
|
19.73
|
|
|
|
17.59
|
|
|
|
5.73
|
|
|
|
5.10
|
|
|
|
|
(1)
|
|
Source: Infosel.
|
|
(2)
|
|
Not adjusted for dividends.
|
|
(3)
|
|
Each of our ADSs indirectly represents three of our shares.
|
81
MARKETS
Trading on the Mexican Stock Exchange
The Mexican Stock Exchange, located in Mexico City, is the only stock exchange in Mexico.
Operating continuously since 1907, it is organized as a corporation whose shares are held by
brokerage firms, which are the sole authorized entities to trade on the exchange. Trading on the
Mexican Stock Exchange takes place electronically through the centralized automated system of the
exchange, which is open each business day between the hours of 8:30 a.m. and 3:00 p.m., Mexico City
time. Most transactions in listed Mexican securities take place through the Mexican Stock Exchange.
Trades on or off the Mexican Stock Exchange involving ten percent or more of an issuers
outstanding capital stock must be reported to the CNBV, which in turn must notify the Mexican Stock
Exchange of such trade. Directors, officers and other insiders must report to the CNBV any and all
transactions undertaken with respect to securities of the issuer with which they are related. In
addition, directors, officers and other insiders holding stock representing 5% or more of the
outstanding capital stock of the related issuer may not buy or sell such stock within a period of
three months from the date of their last purchase or sale.
The Mexican Stock Exchange publishes a daily official price list (
Boletín Diario de Precios y
Cotizaciones
) that includes price information on each listed security traded that day. The Mexican
Stock Exchange operates a system of automatic temporary suspensions of trading in shares of a
particular issuer as a means of controlling excessive price volatility. Each day a price band is
established with upper and lower limits. If during the day a bid or offer is accepted at a price
outside this price band, trading in the shares is automatically suspended for one hour. Suspension
periods in effect at the close of trading are not carried over to the next trading day. Our shares,
as well as other securities of Mexican issuers that are publicly traded in the United States,
however, are not subject to the above-described temporary suspension of trading rules dictated by
the Mexican Stock Exchange. In addition, the Mexican Stock Exchange may also suspend trading of a
security, including securities not subject to the automatic suspension systems, for up to five days
if it determines that disorderly trading is occurring with respect to such security; such
suspension may be extended beyond five days if so approved by the CNBV.
Trading on the New York Stock Exchange
Since November 19, 1991, our ADSs have been listed on the NYSE. Since May 6, 1992, each of our
ADSs represents three CPOs issued by a Mexican trust, which we refer to as the CPO Trust.
Nacional Financiera is the trustee for the CPO Trust and we refer to it as the CPO Trustee. Each
CPO represents economic interests, but does not grant voting rights, in one of our shares held in
the CPO Trust. The ADSs are evidenced by ADRs. ADRs evidencing ADSs are issued by Bank of New York,
as depositary, which we refer to as the Depositary, pursuant to the Deposit Agreement dated as of
June 24, 2005 among Vitro, S.A.B de C.V., the CPO Trustee, the Depositary and all registered
holders, from time to time, of the ADRs issued thereunder. An ADR may evidence any number of ADSs.
As of April 17, 2008, approximately 12% of our outstanding shares were publicly held through
CPOs and approximately 6% of our outstanding shares were publicly held through ADSs. Holders of
ADSs and CPOs have no voting rights with respect to the underlying shares, but have all economic
rights relating to those shares. Pursuant to the Trust Agreements dated as of November 24, 1989 and
November 28, 1990, Nacional Financiera, as CPO Trustee, is required to vote our shares held by the
CPO Trust in the same manner as the majority of our shares that are not so held that are voted at
the relevant meeting. Consequently, under Mexican law, holders of CPOs and ADSs are not able to
exercise voting or other rights granted to minorities. However, if a Mexican national acquires
CPOs, it may request from the CPO Trustee the cancellation of such CPOs and delivery of the
underlying shares.
82
Item 10. Additional Information.
Unless the context otherwise requires, in this Item 10 the words we, us, our and ours
refer to Vitro, S.A.B. de C.V. and not its consolidated subsidiaries or the entities with which it
consolidated.
MEXICAN CORPORATE LAW AND BY-LAWS
Set forth below is a brief summary of certain provisions of our by-laws and applicable Mexican
law. This summary does not purport to be complete and is qualified by reference to our by-laws and
applicable Mexican law.
General Information and Corporate Purpose
We were incorporated on August 27, 1936 as Fomento de Industria y Comercio, S.A., a
corporation (
sociedad anónima
) formed under the laws of Mexico as the holding company for our then
operating companies, among them Vidriera Monterrey, S.A., which was incorporated on December 6,
1909. The incorporation deed was registered on October 3, 1936 in the
Registro Público de la
Propiedad y del Comercio de Monterrey
, which we refer to as the Public Registry of Commerce of
Monterrey, as entry number 139, volume 82, book 3. On May 9, 1980, we changed our corporate name
to Vitro, S.A. and the deed pursuant to which our name was changed was registered in the Public
Registry of Commerce of Monterrey on June 9, 1980 as entry number 1,224, volume 117, book 4. We
adopted the variable capital corporate form on March 30, 1998 and the deed pursuant to which we
adopted such corporate form was registered in the Public Registry of Commerce of Monterrey on April
1, 1998 as entry number 2,091, volume 207-42, book 4. On December 7, 2006 we changed our corporate
name to Vitro, S.A.B. de C.V., and the deed number 17,738, pursuant to which our name was changed
was registered in the Public Registry of Commerce of Monterrey on December 15, 2006, with the
electronic entry number 1062*9.
Our corporate domicile is San Pedro Garza García, State of Nuevo León, Mexico and our
principal executive offices are located at Ave. Ricardo Margáin Zozaya 400, Col. Valle del
Campestre, San Pedro Garza García, Nuevo León, 66265 Mexico.
Pursuant to the second clause of our by-laws, our principal corporate purposes are (i) to
subscribe for, dispose of or acquire shares of capital stock, bonds,
obligaciones
, certificates,
promissory notes, securities granting optional rights and other securities (
títulos valor
) and
other documents issued in series or
masa
and, in general, to carry on all such transactions
permitted by law, (ii) to acquire or offer the shares representing our capital stock in accordance
with the applicable law and the policies and resolutions of our Board of Directors regarding the
acquisition and placement of shares of our capital stock through the Mexican Stock Exchange or
through any other markets in which such shares are listed, (iii) to enter into contracts and
transactions of a civil, mercantile, credit or financial nature including derivative transactions,
repurchase agreement (
reportos
) and trusts (
fideicomiso
) in accordance with applicable law, (iv) to
enter into loan agreements and to guarantee (as surety or otherwise), and grant liens to secure,
the indebtedness of our subsidiaries and our affiliated or associated companies and, with the
approval of our Board of Directors, of any other person, (v) to issue, accept, endorse and
guarantee
por aval
negotiable instruments issued by us, our subsidiaries and our associated or
affiliated companies and, with the approval of our Board of Directors, of any other third party,
(vi) to render all kinds of services and to carry out analyses and studies with respect to the
promotion, enhancement and restructuring of our subsidiaries and our associated or affiliated
companies, (vii) to acquire, transfer, enlarge, modify, repair, maintain, administer, dispose of
and lease such tangible property, real estate or
derechos reales
and
derechos personales
necessary
for our operation and (viii) generally, to enter into agreements, to carry out transactions and to
perform all acts necessary or convenient for the achievement of our fundamental corporate purposes.
Directors and Shareholders Conflict of Interest
The provisions of Mexican law described below govern issues relating to conflicts of interests
that may arise between us, on the one hand, and our directors, the Secretary of the Board of
Directors, and shareholders, on the other. Clause 42 of our by-laws states that any issue not
expressly provided for in our by-laws will be governed by the Mexican Law of the Securities Market
and Mexican General Law of Corporations. Pursuant to article 34 of the Mexican Law of the
Securities Market, any of our directors or the Secretary of the Board of Directors who has a
conflict of interest with us with respect to a transaction must disclose such fact to our other
directors, must not be part and abstain from any discussions or voting on such transaction. Article
37 of the Mexican Law of the Securities Market states that any of our directors that does not
comply with the requirements described in the immediately foregoing sentence will be liable to us
for any damages suffered by us arising out of such transaction.
83
Under article 52 of the Mexican Law of the Securities Market, any of our shareholders that has
a conflict of interest with us with respect to a transaction must abstain from voting on such
transaction. Any of our shareholders that does not comply with the requirement described in the
immediately foregoing sentence will be liable to us for any damages suffered by us arising out of
such transaction, but only if the transaction would not have been approved without such
shareholders favorable vote.
Related Party Transactions and Certain Other Transactions
Pursuant to article 28 of the Mexican Law of the Securities Market and article 29 of our
by-laws, our Board of Directors must approve, with the prior opinion of the Corporate Practices
Committee the transactions between Vitro or its subsidiaries and our related parties.
Pursuant to article 29 section 14 (c) of our by-laws, our Board of Directors must approve,
with the prior opinion of the corresponding Corporate Practices Committee the unusual or sporadic
transactions or the transactions involving (i) the acquisition or disposition of 5% or more of our
consolidated assets, (ii) guarantees or loans in an amount exceeding 5% of our consolidated assets.
Investments in debt securities will be excluded if they comply with the corresponding Board of
Directors policies. Pursuant to article 29 section 14 (b) of our by-laws, no Board of Directors
approval is needed in the following transactions, so long the policies and guidelines approved by
the Board of Directors are followed: (i) transactions where the amount involved is not material to
the Company or our subsidiaries, (ii) transactions among the Company and its subsidiaries made in
the ordinary course of business, at fair market value or appraised by external independent
appraisals and (iii) transactions with employees, so long as they are made on an arms length basis
or as part of their labor fringe benefits.
In addition, our by-laws require that our key executive directors (Key Executive Directors)
obtain the authorization from our Board of Directors with the prior approval of our Audit Committee
to enter into any transaction with Vitro or its subsidiaries outside the ordinary course of
business.
Our Business Conduct and Professional Responsibility Code requires our employees to disclose
any circumstance which is or appears to be a conflict of interest between our employees and us.
Directors Compensation
Article 13 and 22 of our by-laws and article 181 of the Mexican General Law of Corporations
require that a majority of our shares present at the annual general ordinary shareholders meeting
determine our directors compensation for the immediately subsequent year.
Capital Structure
As a
sociedad anónima bursátil de capital variable
, a portion of our capital must be fixed
capital and we may have variable capital.
Our fixed capital amounts to Ps. 324 million, represented by 324,000,000 of our class I Series
A shares and our variable capital amounts to Ps. 63 million, represented by 62,857,143 of our class
II Series A shares.
Pursuant to our by-laws and Mexican law, our shares may be held only by Mexican investors. No
share can be owned directly or indirectly by non-Mexican investors. However, non-Mexican investors
may acquire an economic interest in our shares by holding CPOs. Any acquisition of our shares by
non-Mexican investors in violation of our by-laws or Mexican law would be null and void and could
even be cancelled. See Item 10. Additional InformationMexican Corporate Law and
By-LawsDescription of CPOs.
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Share Registration and Transfer
Our shares are evidenced by share certificates in registered form. Our shareholders may hold
their shares in the form of physical certificates or indirectly through institutions that have an
account with S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., which we refer to
as Indeval. Brokers, banks or other entities approved by the CNBV, which we collectively refer to
as Indeval Depositors, may maintain accounts at Indeval. We maintain a registry of our
shareholders who have either received physical certificates evidencing our shares or are holding
our shares through an Indeval Depositors. Only persons listed in such registry and persons holding
statements issued by Indeval or an Indeval Depositor evidencing ownership of our shares will be
recognized as our shareholders, as long as they are not holding shares in violation of our by-laws.
Limitation on Acquiring Shares
In accordance with
article 48 of the Mexican Law of The Securities Market, our bylaws prohibit
the acquisition by any person, or group acting in concert either
directly or through CPOs or ADRs, of more than 9.9% of our outstanding
shares without the prior written approval of our Board of Directors.
The above applies to, among other things: a) the purchase or acquisition by any mean of Series
A shares representing the capital stock of the Company or any other Series issued or to be issued
by the Company, including CPOs whose underlying value is provided by shares issued by the Company;
share deposit certificates or any other document that evidences rights over share of the Company;
b) the purchase or acquisition of any right of the holders of Series A shares or any other
Series to be issued by the Company in the future; c) any agreement or legal act which intends to
limit or results in the transfer of any other right of the stockholders of the Company, including
financial derivatives, as well as any other act that involves the loss or limitation of the voting
rights granted by the shares representing the capital stock of the Company; and d) a purchase or
acquisition intended by one or more interested parties acting as a group or who are related to one
another,
de facto or de jure,
to take decisions as a group, partnership or consortium.
The prior written approval by our Board of Directors referred to above, is required
notwithstanding whether the purchase or acquisition of any share, securities and/or rights is
executed in or out of the Mexican Stock Exchange, directly or indirectly through public offer,
private offer or through any other way, in one or several transactions of any nature,
simultaneously or successive, in Mexico or abroad.
Also, the prior written approval by the Board of Directors is required for entering into
agreements, or taking other acts, whether oral or written, which create mechanisms or arrangements
under which the number of votes covered by such agreements or actions is more than 9.9% of our
outstanding shares. The approval of our Board of Directors of such ownership, the entering into of
such agreements or the taking of such actions is based upon considerations set forth in our bylaws,
as provided by the Mexican Law of the Securities Market.
The agreements by minority shareholders to appoint a director are not subject to the above.
Such agreements shall be subject to the Mexican Law of the Securities Market and shall not be
enforceable against the Company in prejudice of the other shareholders or the economic or business
interest of the Company.
In the event of
any purchase of shares of our common stock CPOs or ADRs or the entering into of such
agreements or taking of such actions covering shares of our common stock without complying with the
provisions of our bylaws, the common shares shall not be entitled to any voting right or authority in the
Shareholders Meetings of the Company, nor any authority to exercise any other corporate right.
Further, in such event, the Company will not register, acknowledge or provide any value to the
share deposit certificates issued by any financial institution or securities deposit certificates
in the country, to evidence the right of attendance at a Shareholders Meeting.
All of the provisions mentioned above shall not apply to: a) hereditary transfer of shares;
and b) increases in the percentages of stock equity due to any reductions or increases of the
capital stock approved by the Shareholders Meeting, except for any merger with entities affiliated
with a corporate group different than the one headed by the Company.
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Voting Rights; Preferences and Restrictions
Although at least 50% of our outstanding shares acting at a general extraordinary
shareholders meeting must approve the issuance of new series or classes of our common stock, whose
terms may contain certain preferences or impose certain restrictions, no such series of our common
stock has been issued. Each of our shares entitles the holder thereof to one vote at each of our
general shareholders meetings. However, the holders of CPOs or ADSs are not entitled to the voting
rights appurtenant to our shares underlying their CPOs or ADSs. For a detailed description of this
limitation, see Item 10. Additional InformationMexican Corporate Law and By-LawsDescription of
CPOs.
So long as our shares are registered at the Securities Section of the RNV we may not issue
shares of common stock that do not grant a right to vote or limit other corporate rights without
the approval of (i) the CNBV and (ii) at least 50% of our outstanding shares acting at a general
extraordinary shareholders meeting. Pursuant to article 7 of our by-laws, there may not exist
outstanding shares of our common stock whose terms are different than
the terms of our shares in excess of 25% of outstanding capital stock provided however, that
the CNBV may authorize the increase of the foregoing limit by an additional 25% of our outstanding
capital stock, which the CNBV considers that are actually trading and provided further that such
additional shares must be non voting or otherwise restricted shares and must be converted into our
common shares within five years of their issuance.
Dividends
At each of our annual general ordinary shareholders meetings, our CEO must submit our
consolidated financial statements for the previous fiscal year, together with the external
auditors opinion, to our shareholders for their consideration and approval. If our shareholders
approve such financial statements, they must determine, subject to the immediately following
sentence, the allocation of our distributable earnings for the preceding fiscal year. Pursuant to
our by-laws, 5% of our net income in any year must be allocated to a legal reserve fund until such
fund reaches an amount equal to at least 20% of our capital. Allocation to the legal reserve is
determined without reference to inflation adjustments required by Mexican FRS. Thereafter, a
majority of our shareholders present at such annual general ordinary shareholders meeting may
allocate all or a portion of the remainder of our net income to a reserve fund for the repurchase
of our shares or for the creation of other reserve funds.
Those of our shares that are fully paid and outstanding at the time a dividend or other
distribution is declared are entitled to share equally in such dividend or other distribution.
Those of our shares that are partially paid are entitled to share in a dividend or distribution in
the same proportion that such shares have been paid at the time of the declaration of such dividend
or distribution. In accordance with the
Código de Comercio
, which we refer to as the Mexican Code
of Commerce, our shareholders have five years to claim their dividends, beginning on the date the
dividends are declared payable. If the dividends are not claimed during such period, a
shareholders right to the dividend is extinguished. For a description of dividend rights
applicable to holders of CPOs, see Item 10. Additional InformationMexican Corporate Law and
By-LawsDescription of CPOs.
Pursuant to article 17 of the Mexican General Law of Corporations, any agreement which
excludes one or more of our shareholders from receiving its proportional share of our distributable
net income is unenforceable.
Liquidation
Upon our dissolution, one or more liquidators, which will wind up our affairs, must be
appointed by a majority of our shares present at a general extraordinary shareholders meeting.
Those of our shares that are fully paid and outstanding at the time of our dissolution will be
entitled to share equally in any distribution upon liquidation. Those of our shares that are
partially paid at the time of our dissolution will be entitled to share in a liquidation
distribution in the same manner as they would in a dividend distribution.
Employees Mandatory Share in the Companys Profits
Pursuant to Mexican law, each of us and our subsidiaries with employees must pay to such
employees 10% of the previous years taxable income of such entity (as computed for these
purposes), pursuant to such law.
86
Capital Reduction
Our shares are subject to redemption in connection with a reduction in our capital. Our
capital may be reduced in the following situations: (i) to absorb losses, (ii) to return paid-in
capital to shareholders, (iii) to redeem our shares with retained earnings, (iv) to release
shareholders with respect to subscribed but unpaid shares, (v) as a result of a violation of clause
fifth of its by-laws, and (vi) upon a purchase of our shares conducted in accordance with article 8
of our by-laws. A reduction in clauses (i) to (vi) above must be approved by at least 50% of our
outstanding shares acting at a general extraordinary shareholders meeting. The reduction of
variable capital must be approved by majority in the general ordinary shareholdersmeeting.
The capital reduction described in clause (i) of the foregoing paragraph must be on a pro rata
basis among all of our outstanding shares. Upon such capital reduction, we are not required to
cancel the redeemed shares.
In the event of a capital reduction described in clause (ii) of foregoing paragraph, we will
select which of our shares will be canceled by lot before a Notary Public or an authorized
mercantile official (
corredor titulado
). Resolutions regarding any such capital reduction must be
published three times in the official gazette of our corporate domicile, which currently is San
Pedro, Garza García, Nuevo León, allowing at least ten days after each publication.
Pursuant to article 136 of the Mexican General Law of Corporation, if we redeem our shares as
described in clause (iii) of the foregoing paragraph, such redemption must be effected through: (i)
the acquisition of such shares pursuant to public offer made on the Mexican Stock Exchange, or if
a price and offer terms were determined by our shareholders, acting at a general extraordinary
shareholders meeting or, our Board of Directors acting on their behalf by lot before a Notary
Public or an authorized mercantile official (
corredor titulado
) or (ii) pursuant to clause 9 of our
bylaws, on a pro rata basis among all of our outstanding shares, so that after the redemption is
made, each of our shareholders will have the same ownership percentage of our outstanding shares
that he, she or it had before the redemption. The redeemed shares must be canceled and our capital
stock must be reduced accordingly.
A capital reduction described in clause (iv) of the foregoing paragraph must be published
three times in the official gazette of our corporate domicile, which is currently San Pedro, Garza
García, Nuevo León, allowing at least ten days after each publication.
In case of a violation of clause fifth of its by-laws, in connection with the exclusion of
foreign direct or indirect investment (other than through CPOs or ADSs), Vitro is also entitled
and compelled to reduce its capital, in an amount equal to such infringing investment.
Pursuant to article 50 of the Mexican Law of the Securities Market the shareholders of the
variable portion of the capital stock a of corporation (
sociedad anónima bursátil
) do not have
the right of withdrawal (
derecho de retiro
) referred to in article 220 of the Mexican General Law
of Corporation.
Purchase by us of our Shares
We may also decrease the number of outstanding shares by purchasing our shares in the Mexican
Stock Exchange at prevailing market prices. Purchases would have the effect of reducing either (i)
shareholders equity or (ii) paid-in capital. In accordance with our by-laws and the terms of
article 56 of the Mexican Law of the Securities Market, we may acquire our shares through the
Mexican Stock Exchange, at the current market price, provided that such purchase is accounted for
either (i) as a reduction of our shareholders equity (if we choose to cancel the purchased shares)
or (ii) as a reduction of our paid-in capital (if we choose to hold the purchased shares as
treasury stock).
Our shareholders, acting at our annual general ordinary shareholders meeting, must resolve,
for each year, the maximum amount we may use to purchase our shares. The aggregate amount we may
use to purchase our shares may not exceed our cumulative retained earnings. Our Board of Directors
may recommend to our annual general ordinary shareholders meeting the maximum amount we may use to
purchase our shares.
87
Purchase Obligation
In accordance with our by-laws, if our registration with the RNV is canceled, whether by
request of the CNBV or by our initiative with the prior approval of an extraordinary shareholders
meeting, the shareholders holding at least a 95% of our shares (with or without the right to vote)
must make a public offer to purchase all other outstanding shares prior to effectiveness of such
cancellation. In addition, if less than all of the outstanding shares are sold pursuant to the
public offer to purchase, such shareholders must place in trust, for at least six months, the
amount necessary to purchase all other outstanding shares.
The price at which such shares must be purchased is the higher of (i) the average closing
quotation price made for the 30 trading days prior to the date at which the purchase will become
effective, during a period which shall not be greater than six months and (ii) the book value per
share, as reflected in the last quarterly report filed with the CNBV and the Mexican Stock
Exchange. If the numbers of days on which the shares have been traded during the period set forth
in the preceding paragraph is less than 30 days, the number of days on which the shares were
effectively traded shall be used instead for purposes of calculating the purchase price of the
shares and if no trades were was made during such period the purchase must be done at book value.
Notwithstanding the foregoing, the shareholders holding a majority of our shares having the right
to make decisions, regardless their voting right at general shareholders meetings are not required
to make such public offer if at least 95% of our shares present at the relevant general
shareholders meeting approve the delisting of our shares from the Mexican Stock Exchange.
If there is one or more series of shares trading, the average closing quotation price
mentioned above must be calculated for each series and the price at which such shares must be
purchased must be the highest average closing quotation price.
Capital Increase; Preemptive Rights
At least 50% of our outstanding shares acting at a general extraordinary shareholders meeting
may authorize an increase of the fixed portion of our capital and a majority of our shares present
at a general ordinary shareholders meeting may increase the variable portion of our capital.
Capital increases and decreases must be recorded in our
Libro de Variaciones de Capital,
which we
refer to as the Variations of Capital Stock Book
.
An increase in our capital cannot be effected
if the shares representing our then existing capital have not been paid in full. Our capital may be
increased either through (i) contributions made by existing or new shareholders, (ii) the
capitalization of share-related premiums or advances previously made by our shareholders, (iii) the
capitalization of retained earnings or valuation reserves or (iv) the capitalization of our
indebtedness.
In the event of a capital increase, a holder of issued and outstanding shares has a
preferential right to subscribe for a sufficient number of our shares to maintain such holders
existing proportional holdings of our shares. Preemptive rights must be exercised within 15 days
following the publication of notice of the capital increase in the
Periódico Oficial del Estado de
Nuevo León
. Under Mexican law, such preferential rights may be assigned.
Pursuant to article 53 of the Mexican Law of Securities Market, our shareholders are not
entitled to preferential rights to subscribe for our authorized but unissued shares issued in
connection with a public offering.
Appraisal Rights
The Mexican General Law of Corporations provides that upon the adoption, at a general
extraordinary shareholders meeting, of any of the resolutions described in the following
paragraph, dissenting shareholders will have the right to have the shares they hold appraised and
to compel us to redeem such shares at the appraised price, subject to the satisfaction of certain
terms and conditions. The appraisal price will be determined by the proportion of shares submitted
for appraisal to our net worth as stated in our financial statements approved at the most recent
general ordinary shareholders meeting.
Such appraisal rights are triggered by shareholders resolutions approving (i) changes in our
corporate purpose, (ii) our reincorporation in a jurisdiction other than Mexico or (iii) our
transformation from one corporate form to another. Dissenting shareholders must perfect their
appraisal rights by making a request for appraisal of their shares within 15 days following the
date on which the meeting adopting the relevant resolution adjourns.
88
Modification of Shareholders Rights
The rights appurtenant to our shares may be modified only through a resolution adopted by at
least 50% of our outstanding shares acting at a general extraordinary shareholders meeting.
Shareholders Meetings and Resolutions
General shareholders meetings may be ordinary meetings or extraordinary meetings. General
extraordinary meetings are those called to consider (i) those matters specified in Article 182 of
the Mexican General Law of Corporations, (ii) redemption of our shares with retained earnings,
(iii) approval of the maximum amount of capital increase and the terms of the issuance of
treasury shares pursuant to the Mexican Law of the Securities Market, (iv) cancellation of the
registration of our shares with the Securities Section of the RNV, which shall be approved by at
least 95% of our outstanding shares with or without vote and the previous approval of the CNBV, (v)
authorization of clauses that prevent the acquisition of shares that grant the control either
directly or indirectly to third parties of our shares as established in the Mexican Law of the
Securities Market so long as 5% of the present shares do not vote against it and (vi) any other
matter stated in the applicable law and the bylaws. General shareholders meetings called to
consider all other matters, including increases and decreases of the variable portion of our
capital, are ordinary meetings.
A general ordinary shareholders meeting must be held at least once a year within the first
four months following the end of the prior fiscal year. The annual general ordinary shareholders
meeting is held every year to discuss (i) the annual reports of the Corporate Practices Committee,
the Audit Committee and any other
Committee of the Board of Directors, (ii) the CEOs annual report including the external
auditors audited financial statements, (iii) the Board of Directors opinion on the CEOs annual
report, (iv) the report referred to in article 172 section b) of the Mexican General Law of
Corporations, which shall include the principal policies and accounting criteria used in the
preparation of the financial information, (v) the report on the activities and operations where the
Board of Directors was involved pursuant to the Mexican Law of Securities Market, (vi) the
application of the balance of the profit and loss statement, (vii) the maximum amount of resources
that may be used for the acquisition of shares or negotiable instruments representing such shares
with the limitation that the total amount may not exceed the total amount of net earnings,
including the retained earnings, (viii) the appointment and removal of the members of our Board of
Directors , the qualification of their independence and their compensation and (ix) the appointment
or removal of the President of the Corporate Practices Committee and of the President of the Audit
Committee A general ordinary shareholders meeting may be called and held at any time to (i) to
approve the transactions made by the Company or its subsidiaries during the fiscal year, if the
transaction represents 25% or more of the consolidated assets according to the financial statements
of the immediately previous quarter and that due to their terms may be consider as one transaction
in the understanding that at such stockholders meeting all holders of shares may vote whether their
vote is limited or not, (ii) to approve an increase or decrease of the variable portion of our
capital, with the obligation of formalizing the resolution before the public notary, except as
provided in clause eighth of our by-laws and (iii) any other matter where the General
Extraordinary Shareholders Meeting is not competent or any matter established in the applicable
law or our bylaws. At any such general ordinary shareholders meeting, any shareholder or group of
shareholders holding 10% or more of our outstanding shares may appoint one of our directors. A
majority of our shares present at the annual general ordinary shareholders meeting must determine
the number of directors that will comprise the Board of Directors for the immediately subsequent
fiscal year. The directors elected at the annual general ordinary shareholders meeting serve for a
renewable term of one year. If at the end of the one year term of office any of our directors is
not reelected at the annual general shareholders meeting or if a director resigns and there is no
designation of a substitute or the most recently elected one has not taken office, then the prior
director will continue to serve for up to a maximum term of 30 calendar days. Thereafter, the Board
of Directors may appoint provisional directors that will be ratified or substituted at the next
shareholders meeting.
The quorum for a general ordinary shareholders meeting convened at the first call is at least
50% of our outstanding shares entitled to vote at such meeting and action may be taken by holders
of a majority of our shares present at such meeting. If a quorum is not present, a subsequent
meeting may be called at which a quorum shall exist regardless of the number of our shares present
at such subsequent meeting and action may be taken by a majority of our shares present at such
subsequent meeting. The quorum for a general extraordinary shareholders meeting convened at the
first call is at least 75% of our shares entitled to vote at such meeting. If a quorum is not
present, subsequent meetings may be called at which at least 50% of our shares entitled to vote at
such subsequent meeting will constitute a quorum. Whether on first or subsequent calls to a
meeting, actions at a general extraordinary shareholders meeting may be taken only by at least 50%
of our outstanding shares, except for the cancellation of the registration of our shares with the
Securities Section of the RNV or the delisting of our shares from the Mexican Stock Exchange, which
actions may only be taken by at least 95% of our outstanding shares.
89
General shareholders meetings may be called by (i) our Board of Directors through its
President or Secretary, by the Corporate Practices Committee, or the Audit Committee , (ii) 10% of
our shares entitled to vote at such meeting by means of a request to the President of our Board of
Directors, the President of the Corporate Practices Committee or the President of the Audit
Committee to call such a meeting, (iii) a Mexican court if our Board of Directors or the Corporate
Practices Committee or Audit Committee does not comply with a request as described in clause (ii)
above and (iv) any of our shareholders, if no general shareholders meeting has been held for two
consecutive years or if any of the following matters has not been addressed at a general
shareholders meeting within such two year period: (a) the annual report of our CEO regarding our
financial statements, (b) the allocation of our net income, (c) the appointment of our directors
and qualification of their independence, (d) the compensation of our directors, (e) the annual
reports on activities performed by the Committees, (f) Board of Directors reports on operations
and activities where the latter intervened during the year, (g) Board of Directors report pursuant
to article 172 paragraph b) of the Mexican General Law of Corporations, (h) report on tax
compliance and (i) appointment of the Presidents of the Audit and Corporate Practices Committees.
Notice of general shareholders meetings must be published in the
Periódico Oficial del Estado de
Nuevo León
or in a newspaper of wide distribution in Monterrey, Mexico at least 15 calendar days
prior to a general shareholders meeting. Only shareholders who are registered in our Share
Registry and have deposited their shares at our offices or those who comply with the Mexican Law of
Securities Market and our by-laws will be admitted as a shareholder to a general shareholders
meeting. In order to attend and participate in a general shareholders meeting, each shareholder
must obtain from our Secretary a certificate acknowledging his, her or its status as a shareholder
at
least 48 hours before the date of the general shareholders meeting. A shareholder may be
represented by an attorney-in-fact who holds a duly granted proxy or power-of-attorney.
In accordance with article 51 of the Mexican Law of the Securities Market, at least 20% of our
shares entitled to vote on a particular matter may oppose in court any shareholder action with
respect to such matter, by filing a complaint with a court of law within 15 days after the
adjournment of the general shareholders meeting at which such action was adopted. Such relief is
only available to holders (i) who were entitled to vote on, or whose rights as shareholders were
adversely affected by, the challenged shareholder action and (ii) whose shares were not represented
when the action was taken or, if represented, voted against it.
Under article 38 of the Mexican Law of the Securities Market, we must initiate an action for
civil liabilities against one or more of our directors upon the approval of a resolution of our
shareholders to that effect. If our shareholders approve such a resolution, the persons against
whom such action is brought will immediately cease to be one of our directors. Additionally, at
least 5% of our outstanding shares may directly initiate such an action against our directors.
Asset Acquisitions and Divestitures
Pursuant to our by-laws, our Board of Directors has the exclusive and non assignable power to
approve transactions involving (i) the acquisition or disposition of 5% or more of our total assets
and (ii) guarantees by us in an amount exceeding 5% of our total assets.
Description of CPOs
The following is a description of certain provisions of (i) the Trust Agreement dated as of
November 24, 1989, between Nacional Financiera, as CPO Trustee, and us, which we refer to as the
First Trust Agreement, (ii) the Trust Agreement dated as of November 28, 1990, between Nacional
Financiera, as CPO Trustee, and us, which we refer to as the Second Trust Agreement and, together
with the First Trust Agreement, the CPO Trust Agreements, (iii) the public deed dated as of
November 29, 1990, which evidences the issuance of CPOs by the CPO Trustee pursuant to the CPO
Trust Agreements and which deed is registered with, and may be examined at, the
Registro Público
del Comercio de la Ciudad de México, D.F.
, which deed we refer to as the First CPO Deed, (iv) the
public deed dated as of June 24, 1998 which evidences the issuance of CPOs by the CPO Trustee
pursuant to the CPO Trust Agreements and which deed is registered with, and may be examined at, the
Registro Público del Comercio de la Ciudad de México, D.F.
, which deed we refer to as the Second
CPO Deed, and (v) applicable provisions of the
Ley General de Títulos y Operaciones de
Credito
,
which we refer to as the Negotiable Instruments Law. We refer to the First CPO Deed and
the Second CPO Deed together as the CPO Deeds. This description does not purport to be complete
and is qualified in its entirety by reference to the CPO Trust Agreements, the CPO Deeds and the
provisions of Mexican law referred to in this description.
90
The CPO Trust Agreements established a master trust that enables non-Mexican investors to
acquire CPOs representing economic interests in our shares. The trust is necessary because, under
our by-laws, our shares may not be purchased or held directly or indirectly by non-Mexican
investors, other than through these mechanisms.
The terms of the CPO Trust Agreement were authorized by an official communication dated
November 27, 1990 from the
Dirección General de Inversiones Extranjeras de la Comisión Nacional de
Inversiones Extranjeras
. The CPO Trust Agreement is registered with the
Registro Nacional de
Inversiones Extranjeras
, which we refer to as the National Registry of Foreign Investment. An
official communication of the CNBV authorized the issuance of CPOs by the CPO Trustee pursuant to
the CPO Trust Agreements.
CPOs, which are negotiable instruments under Mexican law, have been issued by the CPO Trustee
pursuant to the terms of the CPO Trust Agreements and the CPO Deeds and may be redeemed as
described in Deposit and Withdrawal of our shares. Each CPO represents an economic interest in
one of our shares held in the CPO Trust. Currently, the maximum number of CPOs that can be issued
pursuant to the CPO Deeds is 200,000,000. Holders of CPOs are not entitled to exercise any voting
rights with respect to our shares held in the CPO Trust. Such rights are exercisable by the CPO
Trustee pursuant to the terms of the CPO Trust Agreements. Pursuant to the
Ley de Inversión
Extranjera
, which we refer to as the Foreign Investment Law, the CPO Trust Agreement qualifies as
a neutral investment trust because, among other things, voting rights in respect of the
underlying shares are exercisable only by the CPO Trustee and not by the holders of the CPOs.
Deposit and Withdrawal of our Shares
Holders of our shares may deliver such shares to the account of the CPO Trustee at Indeval and
receive in return CPOs delivered by the CPO Trustee pursuant to the CPO Trust Agreements. All of
our shares delivered to the CPO Trustee will be held in trust by the CPO Trustee in accordance with
the terms and conditions of the CPO Trust Agreements. We will deem the CPO Trustee to be the holder
of the shares delivered to the CPO Trustee. Transfer of ownership of those of our shares that
underlie CPOs will be effected through the records maintained by Indeval and Indeval Participants.
The CPO Trustee will deliver CPOs in respect of our shares transferred as described above. All
of the CPOs are evidenced by a single certificate, which we refer to as the Global CPO, which has
been issued to and deposited with Indeval, acting as depositary. Ownership of CPOs deposited with
Indeval will be shown on, and transfer of the ownership of such CPOs will be effected through,
records maintained by Indeval and Indeval Participants. Holders of CPOs are not entitled to receive
physical certificates evidencing such CPOs but may request statements issued by Indeval and Indeval
Participants evidencing ownership of CPOs. Holders of CPOs that are non-Mexican investors are not
entitled to withdraw the shares that are held in the CPO Trust and represented by CPOs.
Holders of CPOs may sell their CPOs (i) to a non-Mexican investor, in which case the
non-Mexican investor will become the transferee of such CPOs or (ii) to a Mexican investor, through
the Mexican Stock Exchange, in which case the Mexican investor would be the transferee of the
shares underlying such CPOs directly or, by keeping such shares deposited at an account at Indeval,
such CPOs will be held by the CPO Trustee pending delivery.
Dividends, Other Distributions and Preemptive and Other Rights
Holders of CPOs are entitled to receive the economic benefits related to the shares underlying
such CPOs, including those dividends or distributions approved by our shareholders, and to receive
the proceeds from the sale of such shares at the termination of the CPO Trust Agreement. See Item
10. Additional InformationMexican Coporate Law and By-LawsTermination of the CPO Trust. The CPO
Trustee, through Indeval, will distribute cash dividends and other cash distributions received by
it with respect to our shares held in the CPO Trust to the holders of the CPOs in proportion to
their respective holdings in the same currency in which they were received. Dividends paid with
respect to our shares underlying CPOs will be distributed to CPO holders by Indeval on the business
day following the date on which Indeval receives the funds on behalf of the CPO Trustee.
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If a distribution by us consists of a stock dividend on our shares, such distributed shares
will be transferred to Indeval on behalf of the CPO Trustee, and held in the CPO Trust. The CPO
Trustee will distribute to the holders of outstanding CPOs, in proportion to their holdings,
additional CPOs in an aggregate number equal to the aggregate number of our shares received by the
CPO Trustee as the stock dividend. If the maximum amount of CPOs that may be delivered under the
CPO Deeds would be exceeded as a result of a dividend on our shares, a new CPO deed will be entered
into setting forth that new CPOs (including those CPOs exceeding the number of CPOs authorized
under the CPO Deed) may be issued. If the CPO Trustee receives any distribution with respect to our
shares held in the CPO Trust (other than in the form of cash or additional shares), the CPO Trustee
will adopt such method as it may deem legal, equitable and practicable to effect the distribution
of such property. If we offer, or cause to be offered, to the holders of our shares, the right to
subscribe for additional shares, subject to applicable law, the CPO Trustee will offer to each
holder of CPOs the right to instruct the CPO Trustee to subscribe for such holders proportionate
share of such additional shares (subject to such holder providing the CPO Trustee (through Indeval)
with the funds necessary to subscribe for such additional shares). If an offering of rights occurs
and CPO holders provide the CPO Trustee with the necessary funds, the CPO Trustee (through Indeval)
will subscribe for the corresponding number of our shares, which will be placed in the CPO Trust
(to the extent possible), and deliver additional CPOs (through Indeval) in respect of such shares
to the applicable CPO holders pursuant to the CPO Deeds or, if applicable, through a new CPO deed.
Holders of ADSs may exercise preemptive rights only if we register any newly issued shares
under the Securities Act of 1933, as amended, or qualify for an exemption from registration. We
intend to evaluate at the time of any offering of preemptive rights the costs and potential
liabilities associated with registering additional shares and we may decide not to register any
additional shares under the Securities Act of 1933. In such case, holders of our ADSs would not be
able to exercise any preemptive rights.
According to Mexican law, dividends or other distributions and the proceeds from the sale of
our shares held in the CPO Trust that are not received or claimed by a CPO holder within three
years from the receipt of such dividends or distributions by the CPO Trustee or ten years from such
sale will become the property of the Mexican
Secretaría de Salud.
Changes Affecting our Shares
With respect to our shares, upon any change in par value, a stock split, any other
reclassification, a merger or consolidation affecting us, or if we pay dividends by distributing
shares or other goods different from our shares, the CPO Trustee shall determine, in an equitable
and proportional manner, any required amendments to be made to the CPO Trust, the CPO Deeds and the
CPOs, as well as to the instruments representing such CPOs. If in connection with a redemption of
our shares, any of our shares held in the CPO Trust are called for redemption, the CPO Trustee
will, in accordance with the instructions of the CPO Technical Committee (as defined in
Administration of the CPO Trust) determine, in any manner deemed to be legal, equitable and
practicable, the CPOs that are to be redeemed (in a number equal to the number of our shares held
in the CPO Trust called for redemption) and pay the holders of such CPOs their proportionate share
of the consideration paid by us in respect thereof.
Voting of our Shares
Holders of CPOs are not entitled to exercise any voting rights with respect to our shares held
in the CPO Trust. Such voting rights are exercisable only by the CPO Trustee, which is required by
the terms of the CPO Trust to vote such shares in the same manner as a majority of our outstanding
shares that are not held in the CPO Trust are voted at the relevant shareholders meeting. Because
CPOs grant no voting rights to holders thereof, such holders do not have the benefit of any rights
(including minority protection rights) granted under applicable law or our by-laws to holders of
our shares.
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Administration of the CPO Trust
Pursuant to the terms of the CPO Trust Agreement, the CPO Trustee administers the CPO Trust
under the direction of a technical committee. The technical committee of the CPO Trust, which we
refer to as the CPO Technical Committee, consists of five members and their respective
alternates. Each of the following entities appoints one member of the CPO Technical Committee: the
Comisión Nacional de Inversiones Extranjeras
, the Mexican Stock Exchange, the
Asociación Mexicana
de Casas de Bolsa
, the Common Representative (as defined below) and the CPO Trustee. Actions taken
by the CPO Technical Committee must be approved by a majority of the members present at any meeting
of such committee, at which at least the majority of the members are present. Banca Santander
Serfín, Sociedad Anónima, Institución de Banca Múltiple, Grupo Financiero Serfín, has been
appointed as the common representative of the holders of CPOs and we refer to it as the Common
Representative.
Pursuant to the Negotiable Instruments Law, the duties of the Common Representative include,
among others (i) verifying the due execution and terms of the CPO Trust Agreements, (ii) verifying
the existence of our shares being held in the CPO Trust, (iii) authenticating the Global CPO,
(iv) exercising the rights of the CPO holders in connection with the payment of any dividend or
distribution to which such CPO holders are entitled, (v) undertaking any other action to protect
the rights, actions or remedies to which CPO holders are entitled, (vi) calling and presiding over
CPO holders general meetings, each of which we refer to as a CPO General Meeting, and
(vii) carrying out the decisions adopted thereat. The Common Representative may request from the
CPO Trustee
all information and data necessary for the performance of its duties. The CPO holders,
by a resolution adopted at a duly held CPO General Meeting, may (i) revoke the appointment of the
Common Representative and appoint a substitute Common Representative and (ii) instruct the Common
Representative to undertake certain actions.
Holders of CPOs representing at least 10% of the aggregate number of outstanding CPOs may
request that the Common Representative call a CPO General Meeting, including in such request the
order of business for such meeting. Announcements of CPO General Meetings shall be published in the
Diario Oficial de la Federación
and in one of the newspapers with the widest distribution in the
domicile of the CPO Trustee, which is currently México City, at least ten days in advance of the
date on which the CPO General Meeting is scheduled. Announcements of CPO General Meetings shall
include the order of business for such meetings.
In order for holders of CPOs to be entitled to attend CPO General Meetings, such holders must
request a statement from Indeval or an Indeval Participant, not less than two days prior to the
date on which such meeting is scheduled evidencing their holdings of CPOs and must submit such
statement to the institution designated for such purpose in the notice for such meeting on or
before the day prior to the date on which such meeting is scheduled. Persons appointed by an
instrument in writing as representatives for a holder of CPOs will be entitled to attend CPO
General Meetings.
At CPO General Meetings, each holder of a CPO will be entitled to one vote per CPO owned by
him, her or it. Resolutions of the CPO holders must be approved by at least a majority of CPOs
present at a CPO General Meeting at which there is a quorum. A quorum at a CPO General Meeting
initially is constituted by holders of a majority of CPOs delivered and, if no quorum is present at
such meeting, any CPOs present at a subsequently called CPO General Meeting shall constitute a
quorum. Resolutions adopted by the required number of CPO at a duly convened CPO General Meeting
will bind all CPOs, including absent and dissident holders.
Certain matters must be approved at a special CPO General Meeting at which, for the first
call, at least 75% of the CPOs delivered must be present, and resolutions with respect to such
matters must be approved by a majority of CPOs present at such meeting. Such matters include
appointment and revocation of the Common Representative and the granting of consents, waivers or
grace periods to the CPO Trustee. If a quorum is not present with respect to a CPO General Meeting
discussing any such matters, a subsequent meeting may be called at which action may be taken
regardless of the percentage of delivered CPOs present at such meeting.
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Enforcement of Rights of CPO Holders
In accordance with the Negotiable Instruments Law, CPO holders may, with certain limitations,
individually and directly exercise certain rights with respect to CPOs. Such rights include the
right to cause the CPO Trustee to distribute dividends or other distributions received by it
(directly or through Indeval), to cause the Common Representative to protect the rights to which
the CPO holders are entitled and to enforce such rights and to bring actions against the Common
Representative for civil liabilities in the event of willful misconduct.
Status of CPO Holders
The CPO Trust Agreements and the CPO Deeds provide that any investor deemed a non-Mexican
investor acquiring CPOs shall be considered under the CPO Trust Agreement, by virtue of its
acquisition of CPOs, to be a Mexican national with respect to its holdings of CPOs and shall be
deemed to have agreed not to invoke the protection of its own government. If such protection is
invoked, such CPO holder will forfeit its CPOs to the Mexican government. A holder of CPOs is
deemed to have invoked the protection of the home government of such holder by, for example, asking
such government to interpose a diplomatic claim against the Mexican government with respect to the
CPO holders rights or by bringing suit in its home jurisdiction against the Mexican government
with respect to such rights. CPO holders will not be deemed to have waived any of their other
rights, including any rights such holders may have under the United States securities laws or
pursuant to the terms and provisions of the CPOs.
Termination of the CPO Trust
The CPO Trust Agreement and the CPOs issued under the CPO Deeds will expire 30 years after the
date of execution of the CPO Trust Agreement. The CPO Trustee will commence the procedure for the
termination of the CPO Trust Agreement 12 months prior to its expiration. At the time of such
termination, the CPO Trustee will sell our shares held in the CPO Trust and will distribute the
proceeds of such sale to the holders of the CPOs on a pro rata basis in accordance with the number
of CPOs owned by each holder. The CPO Trust may also be terminated upon a resolution approved by a
majority of the CPOs present at a CPO General Meeting. Notwithstanding the foregoing, the CPO Trust
Agreement cannot be terminated if any dividends or other distributions previously received by the
CPO Trustee remain unpaid to the CPO holders.
Upon the expiration of the CPO Trust Agreement, subject to obtaining the applicable
authorizations from the Mexican government, the CPO Trustee and any CPO holder may execute a new
trust agreement with the same terms as the CPO Trust Agreement. There can be no assurances that a
new trust agreement will be executed. In such a case, our shares represented by the CPOs owned by
any holder who executes the new trust agreement will be transferred by the CPO Trustee to the new
trust created pursuant to such new trust agreement, and new ordinary participation certificates
issued under the new trust agreement will be issued by the trustee and delivered to such holder.
Limitations Affecting ADSs Holders
Each of our shares is entitled to one vote at general shareholders meetings. Holders of ADRs
and CPOs are not entitled to vote the underlying shares. Voting rights with respect to the
underlying shares are exercisable only by the CPO Trustee, which is required to vote all such
shares in the same manner as the majority of our shares that are not held in the CPO Trust are
voted at the relevant meeting.
Our by-laws prohibit direct or indirect ownership of our shares by non-Mexican nationals. Any
acquisition of our shares in violation of such provision would be null and void under Mexican law
and such shares would be cancelled and our capital accordingly reduced. Non-Mexican nationals may,
however, hold an economic interest in our shares through a neutral investment trust such as the CPO
Trust.
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MATERIAL CONTRACTS
Divestitures
See Item 4. Information on the CompanyBusinessStrategic Sales of Non-Core Businesses and
Assets, for a summary of the terms of the agreements governing the divestiture of certain of our
subsidiaries.
Indebtedness
See Item 5. Operating and Financial Review and ProspectsLiquidity and Capital
ResourcesIndebtedness and Item 5. Operating and Financial Review and ProspectsOff-Balance Sheet
Arrangements for a summary of the terms of the agreements and instruments governing our and our
subsidiaries material indebtedness.
Off-Balance Sheet Arrangements
See Item 5. Operating and Financial Review and ProspectsOff-Balance Sheet Arrangements for
a description of our and our subsidiaries off-balance sheet arrangements.
EXCHANGE CONTROLS
See Item 3. Key InformationRisk FactorsRisk Factors Relating to Economies in Which We
ParticipateIf foreign currency exchange controls and restrictions are imposed, we may not be able
to service our debt in U.S. dollars, which exposes investors to foreign currency exchange risk
.
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MATERIAL TAX CONSEQUENCES
The following summary contains a description of material U.S. federal income tax and Mexican
federal income tax consequences of the purchase, ownership, sale or other disposition of our ADSs
or CPOs by a holder who or which is a citizen or resident of the United States, a U.S. domestic
corporation or a person or entity that otherwise will be subject to U.S. federal income tax on a
net income basis in respect of our ADSs or CPOs. This discussion does not purport to be a
description of all of the possible tax considerations that may be relevant to the purchase,
ownership, sale or other disposition of our ADSs or CPOs.
Mexican Federal Income Taxation
The following general summary of Mexican taxes is based on Mexican federal income tax laws in
force on the date of this annual report, which laws are subject to change. It is not intended to
constitute a complete analysis of the tax consequences under Mexican law of the purchase,
ownership, sale or other disposition of our ADSs or CPOs by persons or entities which are not
residents of Mexico for tax purposes.
This summary is limited to non-residents of Mexico, as defined below, who own our ADSs or
CPOs. Each prospective investor should consult his, her or its own tax adviser as to the tax
consequences of an investment in, the ownership of, and the disposition of, our ADSs or CPOs,
including the effects of any Mexican, United States or any other jurisdictions federal, state or
local tax laws (including, without limitation, income, estate and gift tax consequences in any of
these jurisdictions).
For purposes of this summary, the term Non-Resident Holder means a holder that is not a
resident of Mexico and does not hold our ADSs or CPOs in connection with the conduct of a trade or
business through a permanent establishment in Mexico. For purposes of Mexican tax law, an
individual is a resident of Mexico if he or she has established his or her domicile in Mexico, or
if he or she has another domicile outside Mexico but his or her center of vital interest (as
defined under the Mexican Fiscal Code) is located in Mexico. In addition to certain other
circumstances, it is considered that the center of vital interests of an individual is located in
Mexico, if more than 50% of that persons total income during a calendar year originates from
within Mexico and/or the individuals main center of professional activities is in Mexico. A
Mexican citizen is presumed to be a resident of Mexico unless such person can demonstrate that he
or she is not a tax resident. A legal entity is a resident of Mexico if it has its principal place
of business or its place of effective management located in Mexico. If a legal entity or an
individual is deemed to have a permanent establishment in Mexico for tax purposes, all income
attributable to such a permanent establishment will be subject to Mexican taxes, in accordance with
applicable tax laws.
Our ADSs, CPOs and Shares
Taxation of Cash Distributions
Pursuant to the Mexican Income Tax Law, dividends or profits distributed by entities organized
in Mexico will not be subject to income tax if such profits were previously taxed at the entity
level. Otherwise such entities shall compute the income tax owed on such profits at the then
effective tax rate and pay such taxes to the Ministry of Finance and Public Credit. In 2007 and
thereafter, the effective tax rate will be 28%. Non-residents of Mexico will not be subject to
income tax on dividends or profits paid by a Mexican company.
Taxation of Sale or Other Disposition
For Non-Resident Holders, proceeds from the sale or disposition of ADSs or CPOs made through
an authorized stock exchange (such as the NYSE) recognized under a tax treaty to which Mexico is a
party and, meeting certain additional requirements are exempt from Mexican tax, provided that the
shares of the issuer of such stock are sold or disposed of through a stock market holding a
concession under the Mexican Law of the Securities Market.
In the case of a public offer to purchase shares, there is a taxation exemption of gains
realized by stockholders who held the applicable shares at the time such securities were registered
in the
Registro Nacional de Valores
. Such exemption shall only apply if five years have elapsed
from the initial placement of such shares on an authorized stock exchange or on a stock exchange
recognized under a tax treaty to which Mexico is a party. Shares are deemed placed on an authorized
stock exchange when at least 35% of the capital stock of such issuer have been placed on such
authorized stock exchange.
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If a sale of our shares is made by a Non-Resident Holder on a stock
exchange in Mexico, who fails to satisfy the requirements mentioned in this paragraph, taxes
will be withheld at a rate of 5%, with no deduction, on the gross revenue realized by the seller.
Non-Resident Holders may instead elect to have tax withheld equal to 20% of the net profit realized
from the sale of our shares. In either case, the tax would be withheld by the party selling the
shares through a stock market holding a concession under the Mexican Law of the Securities Market.
Non-Resident Holders are exempt from income tax in Mexico arising from the sale or other
disposition of our ADSs or CPOs, provided the sale satisfies the requirements in the first
paragraph of this section. If the sale of our ADSs or CPOs by a Non-Resident Holder fails to
satisfy the requirements in that paragraph, the transaction will be subject to Mexican federal tax
at a rate of 25% of the gross amount realized, with no deduction. If the Non-Resident Holder has a
representative in Mexico according to the Income Tax Law, and such stockholder is a resident of a
country which is not deemed subject to a territorial tax regime or a territory with a preferred tax
regime, such stockholder may instead apply the maximum tax rate of 28% on the net profit realized.
In addition, such stockholder is required to file an opinion of a public accountant registered with
the tax authorities setting forth such accountants opinion that the tax was computed in accordance
with the applicable provisions.
According to the Tax Treaty (as defined below), gains realized by a resident of the United
States (a U.S. Stockholder) from the sale of stock (such as our CPOs or ADSs) may only be taxed
in Mexico if, during the 12 month period preceding such sale, the U.S. Stockholder owned, directly
or indirectly, at least 25% of our capital stock. Otherwise such gain to a U.S. Stockholder will
not be subject to income tax in Mexico.
United States Federal Income Taxation
The following summary of United States federal income taxes is based on United States federal
income tax laws in force on the date on which this annual report is filed, which laws are subject
to change, possibly with retroactive effect. It describes the material United States federal income
tax consequences of the purchase, ownership, sale or other disposition of our ADSs or CPOs, as the
case may be, by:
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a citizen or resident of the United States;
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a corporation (or entity taxable as a corporation) organized or created in the
United States, any of its constituent states or their respective political
subdivisions, as the case may be;
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an estate the income of which is subject to United States federal income tax
regardless of its source; or
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a trust if a court within the United States is able to exercise primary supervision
over its administration and one or more United States persons have the authority to
control all substantial decisions of the trust (each, a United States Holder).
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This section applies only to holders who hold ADSs or CPOs as capital assets (generally,
property held for investment) under the Internal Revenue Code of 1986, as amended, (the Code).
This section does not provide a complete analysis, listing or other description of all of the
possible tax consequences of the purchase, ownership, sale or other disposition of our ADSs or
CPOs, as the case may be, and does not address tax consequences to persons with a special tax
status such as dealers or traders in securities or currencies, United States Holders whose
functional currency is not the U.S. dollar, persons holding our ADSs or CPOs as part of a hedge,
straddle, conversion or other integrated transaction, banks, insurance companies, real estate
investment trusts (REITs), regulated investment companies (RICs), tax-exempt entities, certain
United States expatriates or corporations owning at least 10% of the total combined voting power of
our capital stock.
If a partnership holds our ADSs or CPOs, the tax treatment of a partner will generally depend
upon the status of the partner and upon the activities of the partnership. A partner of a
partnership holding our ADSs or CPOs should consult his, her or its own tax advisor.
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Investors should consult their tax advisors with respect to the tax consequences of the
purchase, ownership, sale or other disposition of our ADSs or CPOs including consequences under
foreign, state and local tax laws.
For United States federal income tax purposes, a United States Holder of one of our ADSs
generally will be treated as the beneficial owner of three CPOs. Each of our CPOs will represent an
economic interest in one of our
shares. The ADSs are evidenced by ADRs (see Item 9. The Offer and ListingMarketsTrading on
the New York Stock Exchange).
Our ADSs, CPOs and Shares
Taxation of Cash Distributions and Distributions of Stock
The gross amount of any distribution (other than in liquidation), including the fair market
value of all distributions of our ADSs or CPOs whenever a holder may elect to receive cash
distributions in lieu of distributions of our ADSs or CPOs, that you receive with respect to our
ADSs or CPOs (before reduction for any Mexican tax, if any, withheld from such distributions)
generally will be includible in your gross income on the day on which the Depositary receives such
distribution on behalf of the holder of the applicable ADSs or CPOs. Depending on the amount of the
dividend and the amount of the United States Holders tax basis in the applicable ADSs or CPOs,
distributions will be taxed in the following manner.
To the extent that distributions paid by us with respect to the underlying shares do not
exceed our earnings and profits (E&P), as calculated for United States federal income tax
purposes, such distributions will be taxed as dividends. To the extent that distributions by us
exceed our E&P, such distributions will be treated as a tax-free return of capital by both
individual and corporate United States Holders to the extent of each such United States Holders
basis in our ADSs or CPOs they hold, and will reduce such United States Holders basis in such ADSs
or CPOs on a dollar-for-dollar basis (thereby increasing any gain or decreasing any loss on a
disposition of such ADSs or CPOs). To the extent that the distributions exceed the United States
Holders basis in our ADSs or CPOs they hold, each such individual or corporate United States
Holder will be taxed as having recognized gain on the sale or disposition of such ADSs or CPOs. See
Item 9. The Offer and ListingMarketsOur ADSs, CPOs and sharesTaxation of Sale or Other
Disposition.
We anticipate that any distributions on our ADSs and CPOs will be made in pesos, and any
dividends so paid generally will be includible in a United States Holders gross income in a U.S.
dollar amount calculated by reference to the exchange rate in effect on the day the CPO Trustee or
Depositary, as applicable, receives the dividend. It is expected that the Depositary will, in the
ordinary course, convert pesos received by it as distributions on our ADSs or CPOs into U.S.
dollars. To the extent that the Depositary does not convert the pesos into U.S. dollars at the time
that such United States Holder is required to include the distribution into gross income for United
States federal income tax purposes, such United States Holder may recognize foreign exchange gain
or loss, taxable as ordinary income or loss, on the later conversion of the pesos into U.S.
dollars. The gain or loss recognized will generally be based upon the difference between the
exchange rate in effect when the pesos are actually converted and the spot exchange rate in
effect at the time the distribution is included in such United States Holders gross income and any
gain will generally be treated as United States-source income for United States foreign tax credit
limitation purposes.
Dividends paid by us will generally be treated as foreign source income for United States
foreign tax credit limitation purposes. Subject to certain limitations, United States Holders
generally may elect to claim a foreign tax credit against their United States federal income tax
liability for foreign tax withheld (if any) from dividends received in respect of our ADSs or CPOs,
as applicable. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. For this purpose, dividends paid in respect of our ADSs or
CPOs, as applicable, generally will be passive income and therefore any United States federal
income tax imposed on these dividends cannot be offset by excess foreign tax credits that such
United States Holders may have from foreign source income not qualifying as passive income,
respectively. United States Holders that do not elect to claim a foreign tax credit may instead
claim a deduction for foreign tax withheld (if any).
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Distributions of our shares to the CPO Trustee with respect to its holdings of our shares and
distributions of our ADSs and CPOs to United States Holders with respect to their holdings of our
ADSs and CPOs, as the case may be (such previously held ADSs or CPOs, Old Stock), that are
pro rata with respect to their holdings of Old Stock will generally not be subject to United States
federal income tax (except with respect to cash received in lieu of fractional shares, CPOs and
ADSs). The basis of our CPOs and ADSs so received will be determined by allocating the
United States Holders adjusted basis in the Old Stock between the Old Stock and the CPOs and ADSs
so received.
Taxation of Sale or Other Disposition
Unless a nonrecognition provision applies, a United States Holder will recognize capital gain
or loss upon a sale or other disposition of our ADSs or CPOs in an amount equal to the difference
between the amount realized on their disposition and such United States Holders basis in our ADSs
or CPOs. Under current law, capital gains realized by corporate and individual taxpayers are
generally subject to United States federal income taxes at the same rate as ordinary income, except
that long-term capital gains realized by individuals, trusts and estates are subject to federal
income taxes at a maximum rate of 15% currently. Certain limitations exist on the deductibility of
capital losses by both corporate and individual taxpayers. Capital gains and losses on the sale or
other disposition by a United States Holder of our ADSs or CPOs generally should constitute gains
or losses from sources within the United States.
For cash basis United States Holders who receive foreign currency in connection with a sale or
other taxable disposition of our ADSs or CPOs, as applicable, the amount realized will be based on
the U.S. dollar value of the foreign currency received with respect to such ADSs or CPOs as
determined on the settlement date of such sale or other taxable disposition.
Accrual basis United States Holders may elect the same treatment required of cash basis
taxpayers with respect to a sale or other taxable disposition of our ADSs or CPOs, as applicable,
provided that the election is applied consistently from year to year. Such election may not be
changed without the consent of the United States Internal Revenue Service. Accrual basis
United States Holders who or which do not elect to be treated as cash basis taxpayers (pursuant to
the United States Treasury Department Regulations applicable to foreign currency transactions) for
this purpose may have a foreign currency gain or loss for United States federal income tax purposes
because of differences between the U.S. dollar value of the foreign currency received prevailing on
the date of the sale or other taxable disposition of our ADSs or CPOs, as applicable, and the date
of payment. Any such currency gain or loss generally will constitute gain or loss from sources
within the United States and generally will be treated as ordinary income or loss and would be in
addition to gain or loss, if any, recognized on the sale or other taxable disposition of our ADS or
CPOs, as applicable.
Passive Foreign Investment Company Considerations
We believe that we are not currently, and we do not expect to become, a passive foreign
investment company (PFIC) for U.S. federal income tax purposes. Because this determination is
made annually at the end of each of our taxable years and is dependent upon a number of factors,
some of which are beyond our control, including the value of our assets and the amount and type of
our income, there can be no assurance that we will not become a PFIC. In general, a corporation
organized outside the United States will be treated as a PFIC for United States federal income tax
purposes in any taxable year in which either (a) at least 75% of its gross income is passive
income or (b) on average at least 50% of the value of its assets is attributable to assets that
produce passive income or are held for the production of passive income. If a United States Holder
owns our ADSs or CPOs at a time when we become a PFIC and is not eligible to make or does not make
certain elections with respect to our ADSs or CPOs, such United States Holder could be liable for
additional taxes and interest charges upon certain distributions by us or upon a sale, exchange or
other disposition of such shares at a gain, whether or not we continue to be a PFIC.
Deposits, Withdrawals and Pre-Releases
Deposits and withdrawals by United States Holders of our CPOs in exchange for our ADSs and of
our ADSs in exchange for our CPOs will not be subject to any United States federal income tax. The
United States Treasury Department, however, has expressed concerns that parties involved in
transactions where depositary shares are pre-released may be taking actions that are not consistent
with the claiming of foreign tax credits by the holders of the applicable ADSs. Accordingly, the
analysis of the credibility of Mexican taxes described above could be affected by future actions
that may be taken by the United States Treasury Department.
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United States Backup Withholding and Information Reporting
In general, information reporting requirements will apply to payments of dividends on our ADSs
or CPOs and the proceeds of certain sales of our ADSs or CPOs in respect of United States Holders
other than certain exempt persons (such as corporations). A 28% backup withholding tax will apply
to such payments if the United States Holder fails to provide a correct taxpayer identification
number or other certification of exempt status or, with respect to certain payments, the
United States Holder fails to report in full all dividend and interest income
and the United States Internal Revenue Service notifies the payer of such under-reporting.
Amounts withheld under the backup withholding rules may be credited against a holders
United States federal tax liability, and a refund of any excess amounts withheld under the backup
withholding rules may be obtained by filing the appropriate claim form with the United States
Internal Revenue Service.
Tax Treaties
The benefits of treaties for avoidance of double taxation shall only be applicable to
taxpayers who can demonstrate that they are tax residents in the applicable country for tax
purposes and who comply with the conditions of the respective treaty.
A Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income and a Protocol thereto (as amended by two additional Protocols, the Tax
Treaty) between the United States and Mexico became effective on January 1, 1994. Provisions of
the Tax Treaty that may affect the taxation of certain United States Holders are included above.
The United States and Mexico have also entered into an agreement that covers the exchange of
information with respect to tax matters.
In addition, Mexico has in effect similar tax treaties with Argentina, Australia, Austria,
Belgium, Brazil, Canada, Chile, China, the Czech Republic, Denmark, Ecuador, Finland, France,
Germany, Greece, Indonesia, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Netherlands, New
Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Spain, Sweden, Switzerland and the
United Kingdom.
100
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of the Securities Exchange Act of
1934, as amended, which we refer to as the Exchange Act, and file the following with the SEC:
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annual reports on Form 20-F;
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certain other reports or information that we make public under Mexican law, file
with the CNBV and the Mexican Stock Exchange or distribute to our shareholders; and
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other information.
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You may access and read our SEC filings through the SECs Internet site at http://www.sec.gov.
This site contains reports and other information that we file electronically with the SEC.
You may also read and copy any reports or other information that we file with the SEC at the
SECs public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. In addition, materials filed
by us may also be inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements and are not required to file proxy statements with
the SEC. In addition, our officers, directors and principal shareholders are exempt from the
reporting and short swing profit recovery provisions contained in Section 16 of the Exchange Act.
You may obtain copies of any of our SEC filings or any other document described in this annual
report by requesting them in writing or by telephone at the following address and phone number:
Vitro, S.A.B. de C.V.
Ave. Ricardo Margáin Zozaya 400,
Col. Valle del Campestre, San Pedro Garza García,
Nuevo León, 66265 México
Attention: Investor Relations Department
Telephone number: (52-81) 8863-1200
You may obtain additional information about us through our web site at http://www.vitro.com.
The information contained therein is not part of this annual report.
101
DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
Pursuant to Section 303A.11 of the Listed Company Manual of the New York Stock Exchange
(NYSE), we are required to provide a summary of the significant ways in which our corporate
governance practices differ from those required for U.S. companies under the NYSE listing
standards.
The table below discloses the significant differences between our corporate governance
practices and the NYSE standards.
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NYSE Standards
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Our Corporate Governance Practices
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Director Independence
.
Majority
of board of directors must be
independent.
§303A.01
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Director Independence
.
Pursuant to the
Mexican Law of the Securities Market,
our shareholders are required to appoint
a Board of Directors in which at least
25% of its members must be independent
as defined under the Mexican Law of the
Securities Market. However, Vitro has a
Board of Directors composed of sixteen
members, out of whom ten are
independent, this is, 56.2% are
considered independent directors. The
Ordinary Shareholders Meeting is
required to make a determination as to
the independence of our directors and
the CNBV has a term of 30 days to
challenge such determination. The
definition of independence under Mexican
law differs from the NYSE standards.
Under Article 26 of the Mexican Law of
the Securities Market, a director is not
independent if such director is:
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(i) Key Executive Directors, an employee
or the subsidiaries of the Company (one
year cooling off period);
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(ii) a person who has a significant
influence or authority over the Company,
the Companys affiliates or the
corporate group to which the Company
belongs;
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(iii) a shareholder who is part of a
group of persons who has control
over the Company.
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(iv) an important client, supplier,
debtor or creditor (or a partner,
director or employee thereof). A client
and supplier is considered important
where its sales to or purchases from the
company represents more than 10% of the
clients or suppliers total sales or
purchases. A debtor or creditor is
considered important whenever its loan
or credit from to the company represents
more than 15% of the debtors or
creditors total assets;
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(v) an employee of a non-profit entity
that receives contributions from the
company that represent more than 15% of
the total contributions received;
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(vi) a CEO or other high ranking officer
of another company in which the issuers
CEO or other high ranking officer is a
member of the Board of Directors; or
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(vii) a family member related to any
of the persons mentioned above in (i)
through (iv).
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Family member includes a persons
relative of up to four degrees of
consanguinity, affinity or civil, or a
persons spouse or partner, in the case
of (i) and (iv) above.
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102
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NYSE Standards
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Our Corporate Governance Practices
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Executive Sessions.
Non-management directors must
meet regularly in executive
sessions without management.
Independent directors should
meet alone in an executive
session at least once a year.
Also, §303A.03requires a process
for interested parties to
communicate their concerns to
non-management directors.
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Executive Sessions
.
Our non-management
directors have not held executive
sessions without management in the past,
and under our bylaws and applicable
Mexican law, they are not required to do
so.
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Nominating/Corporate Governance
Committee.
Nominating/corporate
governance committee of entirely
independent directors is
required. The committee must
have a written charter
specifying the purpose, duties
and evaluation procedures of the
committee. §303A.04
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Nominating Committee
.
We do not have a
nominating committee or corporate
governance committee. We are not
required to have a nominating/corporate
governance committee, and it is not
expressly recommended by the Mexican Law
of the Securities Market. However the
charter of the Corporate Practices
Committee provides that this Committee
shall supervise the composition of the
Board and ensure compliance with the
maximum number of members and with the
minimum number of independent directors,
as provided by Mexican law.
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Compensation Committee.
Compensation committee of
independent directors is
required, which must evaluate
and approve executive officer
compensation. The committee must
have a charter specifying the
purpose, duties and evaluation
procedures of the committee.
§303A.05
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Compensation Committee
.
The relevant
compensation matters are brought to the
attention of the Corporate Practices
Committee, such as the (i) appointment
and removal of the CEO and his or her
total compensation, as well as the total
compensation of the Chairman of the
Board of Directors; (ii) approval of the
policies for the appointment and total
compensation of the other Key Executive
Directors and (iii) approval of the
maximum percentage of wages and salary
increases per year.
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Our committee does not produce a report
on executive compensation. However the
charter of the Corporate Practices
Committee specifies its duties in this
regard.
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Audit Committee.
Audit committee
satisfying the independence and
other requirements of Rule 10A-3
under the Exchange Act and the
more stringent requirements
under the NYSE standards is
required. §§303A.06, 303A.07.
The audit committee must be
composed of a minimum of three
independent directors, one of
whom must have accounting or
related financial management
expertise. The committee must
have written charter specifying
the purpose, duties and
evaluation procedures of the
committee. Additionally, a
listed company must have an
internal audit function to
assess risk management processes
and the companys system of
internal control.
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Audit Committee
.
We have an audit
committee of four members plus a
non-member financial expert. Each member
of the audit committee is independent,
as independence is defined under the
Mexican Law of the Securities Market,
and also meets the independence
requirements of Rule 10A-3 under the
U.S. Securities Exchange Act of 1934, as
amended. Our audit committee operates
primarily pursuant to a written charter
adopted by our Board of Directors.
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Equity Compensation Plans.
Equity compensation plans
require shareholder approval,
subject to limited exemptions.
§§303A.08 , 312.03 & 312.04
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Equity Compensation Plans.
Shareholder
approval is not expressly required under
Mexican law or our bylaws for the
adoption and amendment of an
equity-compensation plan. However, the
Mexican Law of the Securities Market
require shareholder approval under
certain circumstances.
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103
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NYSE Standards
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Our Corporate Governance Practices
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Shareholder Approval for
Issuance of Securities.
Shareholder approval is
required, subject to limited
exceptions, for issuance of
common stock, or of any
securities convertible into or
exercisable for common stock
(even if not listed on the
NYSE), (1) to a director,
officer or substantial security
holder of the company (each, a
Related Party), (2) to a
subsidiary, affiliate or other
closely-related person of a
Related Party, (3) to a company
or entity in which a Related
Party has a substantial
interest, if the number of
shares of common stock to be
issued, or if the number of
shares of common stock into
which the securitiesmay be
convertible or exercisable
exceeds one percent of the
number of shares of common stock
or one percent of the voting
power outstanding before such
issuance, (4) that have voting
power equal to at least 20% of
the outstanding common stock
voting power before such
issuance, (5) that will increase
the number of outstanding shares
of common stock by at least 20%
of the number of outstanding
shares before such issuance or
(6) that will result in a change
of control of the issuer.
§§312.03(b)-(e) & 312.04
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Shareholder Approval for Issuance of
Securities
.
Mexican law and our bylaws
require us to obtain shareholder
approval of the issuance of equity
securities.
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Code of Business Conduct and
Ethics.
Corporate governance
guidelines and a code of
business conduct and ethics are
required, with prompt disclosure
of any waiver for directors or
executive officers. The
guidelines and code must be
disclosed and publicly available
and the code must contain compliance standards and
procedures that will facilitate
the effective operation of the
code. §§303 A.09 & 303A.10
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Code of Business Conduct and Ethics.
We
have adopted a code of ethics, which has
been accepted by all of our directors
and executive officers and other
personnel. Our Corporate Practices
Committee monitors the applicability of
our code of ethics, and may propose
amendments to the same, according to its
charter. A copy of our code of ethics is
available on our web site: www.vitro.com.
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Solicitation of Proxies.
Solicitation of proxies and
provision for proxy materials is
required for all meetings of
shareholders. Copies of such
proxy solicitations are to be
provided to NYSE. §§402.01 &
402.04-.06
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Solicitation of Proxies
.
Pursuant to the
provisions of the Mexican Law of the
Securities Market, beginning on the
date when the notice to the shareholders
meeting is published, we immediately and
free of any charge, make available to
the shareholders the documents and
information related to each item of the
meeting agenda.
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Likewise, pursuant to the Mexican Law of
the Securities Market, in order for the
shareholders to be represented in the
shareholders meetings, we elaborate and
make available to them power of attorney
forms that contain at least: The name
of the Company, the items of the agenda
and some blank spaces to be filled in by
the shareholders to instruct their
representatives how to exercise such
power of attorney.
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104
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NYSE Standards
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Our Corporate Governance Practices
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Website Requirements.
The
company must maintain a website
that includes printable versions
of board committee charters,
corporate governance guidelines
and the code of business conduct
and ethics. Additionally, a
foreign private issuer must
include on its website English
language disclosure of
significant differences between
its corporate governance
practices and the NYSE
standards. §§303A.11 & 303A.14
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Website Requirements
. Pursuant to the
applicable Mexican Law, we are not
required to maintain printable versions
of any document at our website nor
information of significant differences
between our corporate practices and NYSE
standards. Additionally, we are not
required to have information available
other than in Spanish. Under Mexican
Law, we are required to maintain an
updated website in Spanish that includes
our current bylaws, our annual and
quarterly reports and compliance report
with the corporate governance code
(
código de mejores prácticas
corporativas
), material corporate
restructuring and information
about relevant events. Additionally,
our website contains Spanish printable
versions of the charters of the
Corporate Practices Committee, the Audit
Committee and the Finance and Planning
Committee as well as of the compliance
report with the corporate governance
code and of the code of ethics. We also
have available at our website the
English version of the significant
differences between our corporate
governance practices and the NYSE
standards.
|
AVAILABLE INFORMATION
We file reports, including annual reports on Form 20-F, and other information with the SEC
pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may
read and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. As a foreign private issuer, we have been required to make
filings with the SEC by electronic means since November 2002. Any filings we make electronically
will be available to the public over the Internet at the SECs web site at www.sec.gov and at our
web site at http://www.vitro.com. (This URL is intended to be an inactive textual reference only.
It is not intended to be an active hyperlink to our web site. The information on our web site,
which might be accessible through a hyperlink resulting from this URL, is not and shall not be
deemed to be incorporated into this Annual Report.)
105
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures About Market Risk
Our business activities require that we hold or issue financial instruments which expose us to
market fluctuations of interest rates and foreign currency exchange rates. To minimize our exposure
to these risks, we utilize financial derivative instruments. We enter into derivative transactions
for periods and amounts consistent with related underlying exposures. We do not enter into
derivative transactions for arbitrage or speculative purposes. See note 3 e) and 8 to our
consolidated financial statements.
Debt Subject to Market Risk
The table below sets forth information, as of December 31, 2007, regarding our debt
obligations with maturities originally extending for more than one year and that are sensitive to
changes in interest rates or foreign currency exchange rates. For these debt obligations, the table
presents scheduled principal payments according to their respective maturity dates. The fair value
of long-term fixed-rate debt is based on (i) if there is an observable market, the quoted market
prices for the debt instrument (for example, the 2012 and 2017 Senior Notes) or (ii) if there is
not an observable market, the present value of future cash flows, discounted back using the yield
curve that applies to the most recent issuance of a comparable instrument. The financial data set
forth in the following table has been restated in millions of constant pesos as of December 31,
2007.
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Fair
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Expected Maturity Date
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2008
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2009
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2010
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2011
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2012
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Thereafter
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Total
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Value
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(million, except for percentages)
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Fixed-Rate Debt:
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Dollar-denominated
(1)
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Ps.
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332
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Ps.
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7
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Ps.
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7
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Ps.
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8
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Ps.
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3,231
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Ps.
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9,981
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Ps.
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13,566
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Ps.
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12,944
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Weighted-average coupon
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10.20
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%
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Floating-Rate Debt:
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Dollar-denominated
(1)
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Ps.
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249
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Ps.
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117
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Ps.
|
63
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Ps.
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64
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Ps.
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64
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Ps.
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235
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Ps.
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792
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Ps.
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792
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Weighted-average interest rate
|
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LIBOR plus 1.66
|
%
|
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Euro-denominated
(2)
|
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Ps.
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230
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Ps.
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11
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Ps.
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10
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Ps.
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9
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Ps.
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6
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Ps.
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11
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Ps.
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278
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Ps.
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278
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Weighted-average interest rate
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Euribor plus 1.02
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%
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Peso-denominated
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Ps.
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131
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Ps.
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150
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Ps.
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Ps.
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Ps.
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Ps.
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Ps.
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282
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Ps.
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282
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Weighted-average interest rate
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CETES plus 3.25
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%
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(1)
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The principal amount of our dollar-denominated debt was translated to pesos at
Ps.10.8662 per U.S. dollar, the Free Exchange Rate as of December 31, 2007.
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(2)
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The principal amount of our euro-denominated debt was translated at Ps. 15.9526 per
euro, the exchange rate as of December 31, 2007.
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106
Interest Rate Risk
In the ordinary course of business, we enter into interest rate swap agreements to hedge
future interest payments.
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Notional
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Company
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Company
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Amount
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pays interest
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receives interest
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Fair Value
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Derivative financial instruments
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(million)
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rate (in pesos)
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rate (in US$)
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Period
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Asset
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Interest rate options
|
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Cross currency swaps
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US$
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150
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TIIE + 1.08 %
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8.63
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%
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February 2007 to February 2012
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Ps.
|
23
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Cross currency swaps
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US$
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350
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TIIE + 1.62 %
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9.13
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%
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February 2007 to February 2012
|
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58
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|
Cross currency swaps
|
|
US$
|
350
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TIIE + 1.60 %
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9.13
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%
|
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February 2007 to February 2012
|
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61
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|
Cross currency swaps
|
|
US$
|
150
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TIIE + 1.06 %
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8.63
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%
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February 2007 to February 2012
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24
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Interest rate swaps
|
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Ps.
|
3,294
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8.10 %
|
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TIIE (in pesos)
|
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February 2007 to February 2012
|
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28
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Total interest rate options (1)
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Ps.
|
194
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(1)
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The derivative asset related to the Companys interest rate options includes payments made
by the Company of Ps. 349 million, which resulted in a net loss of Ps. 155 million, and is
presented in total comprehensive financing result.
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As of March 31, 2008, we have entered into swap arrangements under which all interest
payments, until 2012, on $500 million principal amount of our outstanding debt were swapped from a
fixed dollar rate to a variable peso rate and interest payments on another $500 million principal
amount of our outstanding debt were swapped from a fixed dollar rate to a fixed peso rate. In the
ordinary course of business, we also enter into currency swap and option agreements to hedge our
exposure to foreign currency exchange rate variations.
Foreign Currency Exchange Rate Risk
In the ordinary course of business, we entered into currency swap and option agreements to
hedge our exposure to foreign currency exchange rate variations. The table below sets forth
information, as of December 31, 2007, regarding our currency swaps and options used to hedge our
exposure to U.S. dollar exchange rate risk.
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Notional
|
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Amount
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Fair Value
|
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Derivative financial instruments
|
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(million)
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Period
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Asset
|
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Foreign exchange options
|
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Exotic instruments
|
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US$
|
266
|
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January to April 2008
|
|
Ps.
|
2
|
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Natural Gas Price Risk
The Company enters into different derivative agreements with several counterparties to protect
ourselves against the volatility of natural gas prices. NYMEX natural gas prices have increased
from an average price of $3.22 during 2003 to an average price of $7.12 during 2007, representing a
cumulative increase of 120%. The closing price of natural gas on the New York Mercantile Exchange
(NYMEX) as of June 23, 2008 was $13.20 per MMBTU.
The Companys actual natural gas consumption is approximately 20 million MMBTUs per year.
In order to try to limit our exposure to the volatility of natural gas prices, we entered into
hedges with several financial and other institutions. As of December 31, 2007, we had hedges on the
price of natural gas for approximately 20% of our expected consumption needs in Mexico. As of
December 31, 2007, the fair market value of these hedges was a liability of Ps. 550 million.
107
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
Fair Value
|
|
|
|
Amount
|
|
|
|
|
Asset
|
|
Derivative financial instruments
|
|
(MMBTUs)
|
|
|
Period
|
|
(Liability)
|
|
Natural gas contracts
|
|
|
|
|
|
|
|
|
|
|
Capped swap (2)
|
|
|
8,040,000
|
|
|
January to December 2008
|
|
Ps.
|
(556
|
)
|
Swaps
|
|
|
1,640,000
|
|
|
January to December 2008
|
|
|
6
|
|
Options
|
|
|
4,800,000
|
|
|
January to December 2008
|
|
|
10
|
|
Exotic
|
|
|
8,400,000
|
|
|
January to December 2008
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
Total natural gas contracts
|
|
|
|
|
|
|
|
Ps.
|
(550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
In December 2007, the Company entered into a natural gas capped swap and executed an
option to receive a prepayment from the counterparty for Ps. 534 million, which will be
repaid throughout 2008. The net loss from the transaction was Ps. 22 million, which is
recorded in total comprehensive financing result. In January 2008, the Company entered into
a contrary position to that of the natural gas capped swap it acquired in 2007, offsetting
the market risks from such instrument.
|
108
Item 12. Description of Securities Other than Equity Securities
Not applicable.
Item 13. Defaults, Dividend Arrearages and Delinquencies
Covenant Compliance
The indentures that govern the terms of our indebtedness contain restrictive covenants that
are customary for similar indebtedness. Such covenants include restrictions on our ability to (i)
incur additional indebtedness unless, at the time of the incurrence, we satisfy certain conditions,
(ii) pay dividends above a certain permitted amount or make other restricted payments, (iii) grant
certain liens on our assets, (iv) make certain investments and (v) take part in certain merger,
consolidation and asset sale transactions.
As of December 31, 2007, under the restrictive covenants of our current indentures, we are
prohibited from incurring any additional debt (other than certain permitted exceptions) and from
making certain investments (other than certain permitted investments). Such restrictions on debt
incurrance and investments do not represent an event of default under our indentures nor do they
allow the lenders to accelerate the maturity of the debt under such indentures.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
(a) Disclosure Controls and Procedures
We have evaluated, with the participation of our chief executive officer, chief administrative
officer, and chief financial officer, the effectiveness of our disclosure controls and procedures
as of December 31, 2007. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control objectives. Based upon
our evaluation, our chief executive officer, chief administrative officer, and chief financial
officer concluded that our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the applicable rules and forms, and that it is accumulated and communicated to our
management, including our chief executive officer, chief administrative officer, and chief
financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Managements Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. Under the supervision and with the participation of our management, including our chief
executive officer, chief administrative officer and chief financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control
¾
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The evaluation included a review of the
documentation of controls, evaluation of the design effectiveness of controls, and testing of the
operating effectiveness of controls.
Our internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our
management and directors; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on our financial statements.
109
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. Based on our evaluation
under the framework in Internal Controls
¾
Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission, our management concluded that our internal
control over financial reporting was effective as of December 31, 2007.
The effectiveness of our internal control over financial reporting as of December 31, 2007 has
been audited by Galaz, Yamazaki, Ruiz Urquiza, S.C., Member of Deloitte Touche Tohmatsu, an
independent registered public accounting firm, as stated in their report below.
(c) Attestation Report of the Registered Public Accounting Firm
We have audited the internal control over financial reporting of Vitro, S.A.B. de C.V. and
subsidiaries (the Company) as of December 31, 2007, based on criteria established in
Internal
ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
110
In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2007, based on the criteria established in
Internal
ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of and for the year ended
December 31, 2007 of the Company, and our report dated June 23, 2008 expressed an unqualified
opinion on those financial statements and includes explanatory paragraphs regarding (1) the
adoption of Bulletin C-10, Derivative Financial Instruments and Hedging Activities (2) the nature
and effect of differences between Mexican Financial Reporting Standards and accounting principles
generally accepted in the United States of America (3) the adoption of Statement of Financial
Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R) and (4) that our
audit also comprehended the translation of Mexican peso amounts into U.S. dollar amounts in
conformity with the basis stated in note 2 a) to such consolidated financial statements.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
/s/: Jorge Alberto Villarreal
C.P.C. Jorge Alberto Villarreal
Monterrey, N.L., Mexico
June 23, 2008
(d) Changes in Internal Control Over Financial Reporting
During 2007, there were no changes in our internal control over financial reporting that
either materially affected, or would be reasonably likely to have a material effect, on our
internal control over financial reporting other than (i) improvements made to our internal controls
to address material weaknesses identified by us as of December 31, 2006 in the financial reporting
cycle, specifically with regards to the calculation of deferred income taxes and the conversion of
financial statements of foreign subsidiaries to Mexican FRS, and (ii) the Genesis Project
implementation, including the ERP conversion, across Vitros global operating model. See Item 3.
Key InformationRecent DevelopmentsGenesis Project.
Item 16. Reserved
Item 16A. Audit Committee Financial Expert
As required by the regulations issued by the CNBV, on August 26, 2004, the Audit Committee
engaged Mr. Alfonso González Migoya as the
experto financiero
(financial expert), serving as
advisor to the Audit Committee of our Board of Directors. Although the attributes necessary to be
an
experto financiero
for purposes of the CNBVs regulation are not the same attributes necessary
to be an audit committee financial expert under the rules and regulations issued by the SEC and
the listing standards of the NYSE, Mr. Alfonso González meets all the requisite qualifications to
be an audit committee financial expert, except that he is not a member of our Board of Directors.
He receives compensation from us for his services rendered to the Audit Committee.
None of our directors meet the qualifications to be an audit committee financial expert (as
defined under the rules and regulations of the SEC and the listing standards of the NYSE). We
consider that the current number and composition of our Board of Directors is appropriate to
effectively govern us and set our strategic direction. In addition, in accordance with the
guidelines of the Mexican
Código de Mejores Prácticas Corporativas
, or best corporate practices
code, we have decided not to increase the size of our Board of Directors, which would have allowed
us to include a Director meeting the qualifications to be an audit committee financial expert on
our Board of Directors and Audit Committee.
111
Item 16B. Code of Ethics
We have adopted a code of ethics (as defined under the rules and regulations of the SEC) that
applies to our principal executive officer, principal financial officer and principal accounting
officer, among others. The code of ethics became effective on February 1, 2004 and is available on
our website at www.vitro.com. If the provisions of the code of ethics that applies to our principal
executive officer, principal financial officer or principal accounting officer are amended, or if a
waiver therefrom is granted, we will disclose such amendment or waiver on our website
at the same address. As part of our Code of Ethics, on March 2005, we launched our anonymous
internet submission system where all of our employees can denounce violations to the Code of
Ethics, the website of this system is www.silentwhistle.com/. On the same date, a toll free number
was enabled to also receive such complaints; this toll free number is 001-877-LEALTAD (532-5823).
Since the effectiveness of the code of ethics, it has not been amended nor have any waivers
therefore been granted.
Item 16C. Principal Accountant Fees and Services
The following table sets forth, for the periods indicated, the aggregate fees billed to us by
Galaz, Yamazaki, Ruiz Urquiza, S.C., Member of Deloitte Touche Tohmatsu, which we refer to as
Deloitte, our independent registered public accounting firm for (i) Audit Fees, (ii)
Audit-Related Fees, (iii) Tax Fees and (iv) Other Fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
(Ps. Millions)
|
|
Audit Fees
|
|
Ps.
|
57.1
|
|
|
|
88
|
%
|
|
Ps.
|
42.1
|
|
|
|
81
|
%
|
Audit-Related Fees
|
|
|
5.6
|
|
|
|
9
|
%
|
|
|
7.9
|
|
|
|
15
|
%
|
Tax Fees
|
|
|
2.4
|
|
|
|
4
|
%
|
|
|
2.1
|
|
|
|
4
|
%
|
Other Fees
|
|
|
0.0
|
|
|
|
0
|
%
|
|
|
0.2
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Ps.
|
65.1
|
|
|
|
100
|
%
|
|
Ps.
|
52.3
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Fees.
The amount set forth as Audit Fees in the table above represents fees billed to us
by Deloitte in connection with their audit of our annual consolidated financial statements,
including the audit of our internal control over financial reporting, and the audit of the
financial statements of each one of our subsidiaries.
Audit-Related Fees.
The amount set forth as Audit-Related Fees in the table above represents
fees billed to us by Deloitte in connection with attestation services related to the issuance of
comfort letters related with our financing activities during 2005, 2006, and 2007 and services
related to the review of our disclosure controls and procedures.
Tax Fees.
The amount set forth as Tax Fees in the table above represents fees billed to us by
Deloitte in connection with tax advice and compliance services.
Other Fees.
The amount set forth as Other Fees in the table above represents fees billed to
us by Deloitte in connection with the auditing of payments made to the workers social security
system (
seguro social
) and foreign trade services.
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee is responsible for hiring, compensating and supervising the work of
Deloitte, our independent auditor. Generally, all services that Deloitte performs for us have to be
authorized by our Audit Committee before the performance of those services begins. In some
instances, however, we may use the
de minimis
exception provided for in the SEC regulations for
non-auditing services. In any case, those amounts have never constituted more than 5% of such
services. In each such instance, we will inform our Audit Committee regarding, and present for
ratification, such services at the next meeting of our Audit Committee.
112
Item 16D. Exemption from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
As of December 31, 2007 28,352,169 of our shares are held as treasury stock in addition to
17,464,614 of our shares held in the Stock Option Trust, which are treated as treasury shares
for accounting purposes and under Mexican corporate law are considered issued and outstanding.
Item 17. Financial Statements
We are furnishing financial statements pursuant to the instructions of Item 18 of Form 20-F.
Item 18. Financial Statements
The
consolidated financial statements of Vitro, S.A.B. de C.V. and its subsidiaries and
those of Viméxico, S.A. de C.V. and subsidiaries as of
December 31, 2006 and 2007 and for each of the three years in
the period ended December 31, 2007, attached to this annual report have been audited by
Galaz, Yamazaki, Ruiz Urquiza, S.C., Members of Deloitte Touche Tohmatsu, independent registered
public accountants, as stated in their reports.
Index to Financial Statements:
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
Vitro, S.A.B. de C.V. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
F-1
|
|
|
|
|
|
|
|
|
|
F-3
|
|
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
|
|
F-6
|
|
|
|
|
|
|
|
|
|
F-7
|
|
|
|
|
|
|
|
|
|
F-8
|
|
|
|
|
|
|
Viméxico, S.A. de C.V. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
F-83
|
|
|
|
|
|
|
|
|
|
F-84
|
|
|
|
|
|
|
|
|
|
F-85
|
|
|
|
|
|
|
|
|
|
F-86
|
|
|
|
|
|
|
|
|
|
F-87
|
|
|
|
|
|
|
|
|
|
F-88
|
|
|
|
|
|
|
113
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Vitro, S.A.B. de C.V.
Garza Garcia, N.L., Mexico
We have audited the accompanying consolidated balance sheets of Vitro, S.A.B. de C.V. and
subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated
statements of income, changes in stockholders equity and changes in financial position for each of
the three years in the period ended December 31, 2007, all expressed in millions of constant
Mexican pesos as of December 31, 2007. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Mexico and with
the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
Effective January 1, 2005, as mentioned in Note 3 a), the Company adopted the provisions of
Bulletin C-10, Derivative Financial Instruments and Hedging Activities, and recognized the
cumulative effect of a change in accounting principles of Ps. 124 million, net of tax.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Vitro S.A.B. de C.V. and subsidiaries as of December 31, 2007 and 2006,
and the results of their operations, changes in their stockholders equity and changes in their
financial position for each of the three years in the period ended December 31, 2007 in conformity
with Mexican Financial Reporting Standards.
Mexican Financial Reporting Standards vary in certain significant respects from accounting
principles generally accepted in the United States of America. The application of the latter would
have affected the determination of net income for each of the three years in the period ended
December 31, 2007, and the determination of stockholders equity as of December 31, 2007 and 2006,
to the extent summarized in Note 24.
As disclosed in Note 24 m) to the accompanying consolidated financial statements, the Company
adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards
No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan
amendment of FASB Statements No. 87, 88, 106, and 132(R), effective December 31, 2006.
Our audit also comprehended the translation of the Mexican peso amounts into U.S. dollar amounts
and, in our opinion, such translation has been made in conformity with the basis stated in Note 2
a. The translation of the financial statement amounts into U.S. dollars and the translation of the
financial statements into English have been made solely for the convenience of readers.
F-1
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of December 31,
2007, based on the criteria established in
Internal ControlIntegrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 23,
2008 expressed an unqualified opinion on the Companys internal control over financial reporting.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
/s/: Jorge Alberto Villarreal
C.P.C. Jorge Alberto Villarreal
Monterrey, N.L., Mexico
June 23, 2008
F-2
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Balance Sheets
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
(Convenience
|
|
|
|
|
|
|
|
|
|
|
|
Translation)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
Ps.
|
1,222
|
|
|
Ps.
|
1,638
|
|
|
US$
|
151
|
|
Trade receivables, net
|
|
|
1,383
|
|
|
|
1,629
|
|
|
|
150
|
|
Retained undivided interests in securitized receivables
|
|
|
1,223
|
|
|
|
968
|
|
|
|
89
|
|
Derivative financial instruments
|
|
|
343
|
|
|
|
425
|
|
|
|
39
|
|
Taxes receivable
|
|
|
136
|
|
|
|
559
|
|
|
|
52
|
|
Other receivables
|
|
|
886
|
|
|
|
1,797
|
|
|
|
165
|
|
Inventories, net
|
|
|
3,982
|
|
|
|
4,120
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
9,175
|
|
|
|
11,136
|
|
|
|
1,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings, net
|
|
|
8,763
|
|
|
|
8,426
|
|
|
|
776
|
|
Machinery and equipment, net
|
|
|
6,722
|
|
|
|
7,812
|
|
|
|
718
|
|
Construction in progress
|
|
|
838
|
|
|
|
1,603
|
|
|
|
148
|
|
Goodwill
|
|
|
788
|
|
|
|
873
|
|
|
|
80
|
|
Intangible employee retirement obligation asset
|
|
|
357
|
|
|
|
338
|
|
|
|
31
|
|
Deferred taxes
|
|
|
887
|
|
|
|
1,030
|
|
|
|
95
|
|
Other assets
|
|
|
1,165
|
|
|
|
969
|
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
19,520
|
|
|
|
21,051
|
|
|
|
1,937
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
28,695
|
|
|
Ps.
|
32,187
|
|
|
US$
|
2,962
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
Federico Sada G.
|
|
Claudio L. Del Valle C.
|
|
Enrique Osorio L.
|
President and Chief Executive Officer
|
|
Chief Administrative Officer
|
|
Chief Financial Officer
|
F-3
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Balance Sheets
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
(Convenience
|
|
|
|
|
|
|
|
|
|
|
|
Translation)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
319
|
|
|
Ps.
|
398
|
|
|
US$
|
37
|
|
Current maturities of long-term debt
|
|
|
66
|
|
|
|
545
|
|
|
|
50
|
|
Trade payables
|
|
|
2,197
|
|
|
|
2,462
|
|
|
|
227
|
|
Accrued expenses
|
|
|
1,124
|
|
|
|
1,441
|
|
|
|
132
|
|
Derivative financial instruments
|
|
|
140
|
|
|
|
767
|
|
|
|
70
|
|
Other current liabilities
|
|
|
989
|
|
|
|
1,527
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
4,835
|
|
|
|
7,140
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
12,441
|
|
|
|
13,975
|
|
|
|
1,286
|
|
Employee retirement obligations
|
|
|
1,564
|
|
|
|
1,245
|
|
|
|
115
|
|
Deferred taxes
|
|
|
252
|
|
|
|
236
|
|
|
|
22
|
|
Other long-term liabilities
|
|
|
237
|
|
|
|
205
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
14,494
|
|
|
|
15,661
|
|
|
|
1,441
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
19,329
|
|
|
|
22,801
|
|
|
|
2,098
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock: no par value, 386,857,143 shares issued and
outstanding in 2006 and 2007
|
|
|
387
|
|
|
|
387
|
|
|
|
36
|
|
Restatement of capital stock
|
|
|
7,245
|
|
|
|
7,245
|
|
|
|
666
|
|
|
|
|
|
|
|
|
|
|
|
Restated capital stock
|
|
|
7,632
|
|
|
|
7,632
|
|
|
|
702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock (45,874,816 shares in 2006 and 45,816,783 in 2007)
|
|
|
(621
|
)
|
|
|
(622
|
)
|
|
|
(57
|
)
|
Additional paid-in capital
|
|
|
2,437
|
|
|
|
2,437
|
|
|
|
224
|
|
Shortfall in restatement of capital
|
|
|
(21,090
|
)
|
|
|
(21,154
|
)
|
|
|
(1,947
|
)
|
Cumulative initial effect of deferred taxes
|
|
|
(1,810
|
)
|
|
|
(1,810
|
)
|
|
|
(166
|
)
|
Minimum labor liability adjustment
|
|
|
(492
|
)
|
|
|
(326
|
)
|
|
|
(30
|
)
|
Retained earnings reserved for reacquisition of Vitro shares
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
184
|
|
Retained earnings
|
|
|
19,418
|
|
|
|
19,269
|
|
|
|
1,774
|
|
|
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
7,474
|
|
|
|
7,426
|
|
|
|
684
|
|
Minority interest in consolidated subsidiaries
|
|
|
1,892
|
|
|
|
1,960
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
9,366
|
|
|
|
9,386
|
|
|
|
864
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
Ps.
|
28,695
|
|
|
Ps.
|
32,187
|
|
|
US$
|
2,962
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Operations
(Millions of constant Mexican pesos as of December 31, 2007, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Convenience
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation)
|
|
|
|
Year ended December 31,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
26,567
|
|
|
Ps.
|
27,876
|
|
|
Ps.
|
28,591
|
|
|
US$
|
2,631
|
|
Cost of sales
|
|
|
19,198
|
|
|
|
20,230
|
|
|
|
20,187
|
|
|
|
1,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
7,369
|
|
|
|
7,646
|
|
|
|
8,404
|
|
|
|
773
|
|
Selling, general and administrative expenses
|
|
|
5,530
|
|
|
|
5,529
|
|
|
|
5,700
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,839
|
|
|
|
2,117
|
|
|
|
2,704
|
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive financing result
|
|
|
1,500
|
|
|
|
2,276
|
|
|
|
1,660
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) after financing result
|
|
|
339
|
|
|
|
(159
|
)
|
|
|
1,044
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income), net
|
|
|
494
|
|
|
|
(229
|
)
|
|
|
869
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before taxes
|
|
|
(155
|
)
|
|
|
70
|
|
|
|
175
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
|
(519
|
)
|
|
|
228
|
|
|
|
44
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
364
|
|
|
|
(158
|
)
|
|
|
131
|
|
|
|
12
|
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
480
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
3
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting principle, net of tax
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
Ps.
|
243
|
|
|
Ps.
|
291
|
|
|
Ps.
|
131
|
|
|
US$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority income (loss)
|
|
Ps.
|
180
|
|
|
Ps.
|
(110
|
)
|
|
Ps.
|
144
|
|
|
US$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss)
|
|
|
63
|
|
|
|
401
|
|
|
|
(13
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
243
|
|
|
Ps.
|
291
|
|
|
Ps.
|
131
|
|
|
US$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (based on weighted average
shares outstanding of 273,116,069 for 2005,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
289,636,496 for 2006 and 341,042,193 for 2007):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
Ps.
|
1.33
|
|
|
Ps.
|
(0.54
|
)
|
|
Ps.
|
0.38
|
|
|
US$
|
0.04
|
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
1.66
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
0.01
|
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting principle, net of tax
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority (income) loss
|
|
|
(0.66
|
)
|
|
|
0.38
|
|
|
|
(0.42
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss)
|
|
Ps.
|
0.23
|
|
|
Ps.
|
1.39
|
|
|
Ps.
|
(0.04
|
)
|
|
US$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Financial Position
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of US dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Convenience Translation)
|
|
|
|
Year ended December 31,
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
Ps.
|
364
|
|
|
Ps.
|
(158
|
)
|
|
Ps.
|
131
|
|
|
US$
|
12
|
|
Add (deduct) non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,854
|
|
|
|
1,795
|
|
|
|
1,414
|
|
|
|
130
|
|
Provision for employee retirement obligations
|
|
|
348
|
|
|
|
419
|
|
|
|
261
|
|
|
|
24
|
|
Early extinguishment of employee retirement obligations
|
|
|
18
|
|
|
|
8
|
|
|
|
97
|
|
|
|
9
|
|
Amortization of debt issuance costs
|
|
|
219
|
|
|
|
198
|
|
|
|
170
|
|
|
|
16
|
|
Loss (gain) from sale of subsidiaries and associated companies
|
|
|
137
|
|
|
|
(68
|
)
|
|
|
11
|
|
|
|
1
|
|
Impairment of long-lived assets
|
|
|
385
|
|
|
|
393
|
|
|
|
122
|
|
|
|
11
|
|
Loss (gain) from sale of long-lived assets
|
|
|
6
|
|
|
|
(795
|
)
|
|
|
47
|
|
|
|
4
|
|
Assignment of Vitro Club Trust
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark-to market of derivative financial instruments
|
|
|
(130
|
)
|
|
|
(109
|
)
|
|
|
216
|
|
|
|
20
|
|
Deferred taxes and workers profit sharing
|
|
|
(743
|
)
|
|
|
49
|
|
|
|
(351
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
1,732
|
|
|
|
2,118
|
|
|
|
195
|
|
Decrease (increase) in trade receivables
|
|
|
714
|
|
|
|
(14
|
)
|
|
|
(207
|
)
|
|
|
(19
|
)
|
(Increase) decrease in inventories
|
|
|
(169
|
)
|
|
|
223
|
|
|
|
(308
|
)
|
|
|
(28
|
)
|
Increase in trade payables
|
|
|
11
|
|
|
|
173
|
|
|
|
243
|
|
|
|
22
|
|
Change in other current assets and liabilities
|
|
|
(441
|
)
|
|
|
(443
|
)
|
|
|
429
|
|
|
|
39
|
|
Employee retirement obligations
|
|
|
(311
|
)
|
|
|
(589
|
)
|
|
|
(472
|
)
|
|
|
(43
|
)
|
Income (loss) from discontinued operations
|
|
|
3
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
278
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by operating activities
|
|
|
2,085
|
|
|
|
1,081
|
|
|
|
1,803
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term bank loans
|
|
|
3,103
|
|
|
|
4,893
|
|
|
|
2,650
|
|
|
|
244
|
|
Proceeds from long-term bank loans
|
|
|
5,865
|
|
|
|
1,481
|
|
|
|
14,289
|
|
|
|
1,315
|
|
Amortization in real terms of bank loans
|
|
|
(550
|
)
|
|
|
(564
|
)
|
|
|
(545
|
)
|
|
|
(50
|
)
|
Payment of short-term bank loans
|
|
|
(4,406
|
)
|
|
|
(3,472
|
)
|
|
|
(4,864
|
)
|
|
|
(448
|
)
|
Payment of long-term bank loans
|
|
|
(5,824
|
)
|
|
|
(5,472
|
)
|
|
|
(9,459
|
)
|
|
|
(870
|
)
|
Debt issuance costs
|
|
|
(199
|
)
|
|
|
(23
|
)
|
|
|
(293
|
)
|
|
|
(27
|
)
|
Issuance of capital stock
|
|
|
|
|
|
|
578
|
|
|
|
|
|
|
|
|
|
Dividends paid to stockholders of Vitro, S.A.B. de C.V.
|
|
|
(99
|
)
|
|
|
(95
|
)
|
|
|
(136
|
)
|
|
|
(13
|
)
|
Dividends paid to minority interest
|
|
|
(96
|
)
|
|
|
(66
|
)
|
|
|
(79
|
)
|
|
|
(7
|
)
|
Sale (purchase) of treasury stock
|
|
|
8
|
|
|
|
69
|
|
|
|
(1
|
)
|
|
|
|
|
Other financing activities
|
|
|
(23
|
)
|
|
|
75
|
|
|
|
487
|
|
|
|
45
|
|
Discontinued operations
|
|
|
(90
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by financing activities
|
|
|
(2,311
|
)
|
|
|
(2,616
|
)
|
|
|
2,049
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and equipment
|
|
|
(1,107
|
)
|
|
|
(1,252
|
)
|
|
|
(2,695
|
)
|
|
|
(248
|
)
|
Proceeds from sale of land, buildings, machinery and equipment
|
|
|
31
|
|
|
|
1,693
|
|
|
|
72
|
|
|
|
7
|
|
Restricted cash
|
|
|
1
|
|
|
|
419
|
|
|
|
(331
|
)
|
|
|
(30
|
)
|
Investment in subsidiaries
|
|
|
|
|
|
|
(218
|
)
|
|
|
(181
|
)
|
|
|
(17
|
)
|
Proceeds from sale of subsidiaries and associated companies
|
|
|
170
|
|
|
|
1,214
|
|
|
|
37
|
|
|
|
3
|
|
Capital distribution to minority interest
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
Other long-term assets
|
|
|
|
|
|
|
(359
|
)
|
|
|
(36
|
)
|
|
|
(3
|
)
|
Deferred charges
|
|
|
(76
|
)
|
|
|
(92
|
)
|
|
|
(302
|
)
|
|
|
(28
|
)
|
Discontinued operations
|
|
|
(191
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by investing activities
|
|
|
(1,172
|
)
|
|
|
1,317
|
|
|
|
(3,436
|
)
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(1,398
|
)
|
|
|
(218
|
)
|
|
|
416
|
|
|
|
39
|
|
Balance at beginning of year
|
|
|
2,838
|
|
|
|
1,440
|
|
|
|
1,222
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
1,440
|
|
|
Ps.
|
1,222
|
|
|
Ps.
|
1,638
|
|
|
US$
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Stockholders Equity
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock and
|
|
|
|
|
|
|
initial
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
|
|
|
additional
|
|
|
Shortfall
|
|
|
effect of
|
|
|
labor
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
paid-in
|
|
|
in restatement
|
|
|
deferred
|
|
|
liability
|
|
|
Retained
|
|
|
Minority
|
|
|
Stockholders
|
|
|
|
stock
|
|
|
capital
|
|
|
of capital
|
|
|
taxes
|
|
|
adjustment
|
|
|
earnings
|
|
|
interest
|
|
|
equity
|
|
Balance at
January 1, 2005
|
|
Ps.
|
7,566
|
|
|
Ps.
|
471
|
|
|
Ps.
|
(20,882
|
)
|
|
Ps.
|
(1,810)
|
|
|
Ps.
|
(466)
|
|
|
Ps.
|
20,984
|
|
|
Ps.
|
3,114
|
|
|
Ps.
|
8,977
|
|
Dividends (Ps. 0.32 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
|
|
|
|
|
(99
|
)
|
Revoked dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
164
|
|
Decrease in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85
|
)
|
|
|
(85
|
)
|
Sale of treasury stock
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
15
|
|
|
|
63
|
|
|
|
169
|
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2005
|
|
|
7,566
|
|
|
|
479
|
|
|
|
(20,858
|
)
|
|
|
(1,810
|
)
|
|
|
(451
|
)
|
|
|
21,112
|
|
|
|
3,198
|
|
|
|
9,236
|
|
Dividends (Ps. 0.32 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
(95
|
)
|
Decrease in minority interest
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(609
|
)
|
|
|
(540
|
)
|
Dilution of minority interest
|
|
|
|
|
|
|
687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(687
|
)
|
|
|
|
|
Sale of treasury stock
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
Issuance of capital stock
|
|
|
66
|
|
|
|
512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
578
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
(41
|
)
|
|
|
401
|
|
|
|
(10
|
)
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2006
|
|
|
7,632
|
|
|
|
1,816
|
|
|
|
(21,090
|
)
|
|
|
(1,810
|
)
|
|
|
(492
|
)
|
|
|
21,418
|
|
|
|
1,892
|
|
|
|
9,366
|
|
Dividends (Ps. 0.37 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
|
|
|
|
(136
|
)
|
Decrease in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
(57
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
166
|
|
|
|
(13
|
)
|
|
|
125
|
|
|
|
214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2007
|
|
Ps.
|
7,632
|
|
|
Ps.
|
1,815
|
|
|
Ps.
|
(21,154
|
)
|
|
Ps.
|
(1,810
|
)
|
|
Ps.
|
(326
|
)
|
|
Ps.
|
21,269
|
|
|
Ps.
|
1,960
|
|
|
Ps.
|
9,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Vitro, S.A.B. de C.V. and Subsidiaries
Notes to Consolidated Financial Statements
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007, except per share amounts)
1.
|
|
Activities of the Company
|
|
|
|
Vitro, S.A.B. de C.V. (Vitro) is a Mexican holding company, and together with its subsidiaries
serves multiple product markets, including construction and automotive glass; food and beverage,
wine, liquor, cosmetics and pharmaceutical glass containers. Vitros subsidiaries also produce
raw materials and equipment and capital goods for industrial use which are vertically integrated
into the Glass Containers business unit.
|
|
2.
|
|
Basis of presentation and principles of consolidation
|
|
a)
|
|
Basis of presentation
|
|
|
|
|
The accompanying consolidated financial statements of Vitro and its subsidiaries (the
Company) are prepared on the basis of Mexican Financial Reporting Standards (NIFs or
Mexican FRS).
|
|
|
|
|
The consolidated financial statements presented herein are expressed in millions of
constant Mexican pesos as of December 31, 2007. However, solely for the convenience of
users, the consolidated financial statements as of and for the year ended December 31,
2007, have been translated into United States of America (US) dollars at the rate of Ps.
10.8662 per dollar, the rate of exchange determined by the Banco de México (Mexicos
Central Bank) on December 31, 2007. Such arithmetical translation should not be construed
as a representation that the peso amounts shown could be converted into US dollars at such
rate or at any other rate.
|
|
|
|
|
In the financial statements and these notes, references to pesos or Ps. correspond to
Mexican pesos, and references to dollars or US$ correspond to dollar of United States of
America (the United States).
|
|
|
b)
|
|
Consolidated subsidiaries
|
|
|
|
|
Those companies in which Vitro holds, directly or indirectly, more than 50% of the capital
stock, or which Vitro controls, are included in the consolidated financial statements. For
those companies in which Vitro has joint control, the proportionate consolidation method is
used. This method consists of consolidating on a proportionate basis the assets,
liabilities, stockholders equity and revenues and expenses (see note 20 f). All
significant intercompany balances and transactions have been eliminated in consolidation.
|
F-8
|
|
|
At December 31, 2007, the main subsidiaries the Company consolidates are:
|
|
|
|
|
|
FLAT GLASS
|
|
GLASS CONTAINERS
|
|
|
Viméxico S.A. de C.V. (1)
|
|
Vitro Envases Norteamérica, S.A. de C.V.
|
|
|
(91.8%)
|
|
(100%)
|
|
CORPORATE
|
Vitro Vidrio y Cristal, S.A. de C.V.
|
|
Compañía Vidriera, S.A. de C.V.
|
|
Vitro Corporativo, S.A. de C.V.
|
|
|
|
|
|
- Productos de Valor Agregado en Cristal,
S.A de C.V. (55%) (3)
|
|
Vidriera Monterrey, S.A. de C.V.
|
|
Servicios y Operaciones
Financieras Vitro, S.A. de
C.V.
|
|
|
|
|
|
|
|
Vidriera Guadalajara, S.A. de C.V.
|
|
|
|
|
|
|
|
Vitro Automotriz, S.A. de C.V.
|
|
Vidriera Los Reyes, S.A. de C.V.
|
|
Aerovitro, S.A. de C.V.
|
|
|
|
|
|
Distribuidora Nacional de Vidrio, S.A. de C.V.
|
|
Vitro Cosmos, S.A. de C.V. (4)
|
|
|
|
|
|
|
|
Vidrio Plano de México, S.A. de C.V.
|
|
Vidriera Querétaro, S.A. de C.V.
|
|
|
|
|
|
|
|
Vitro Flex, S.A. de C.V.
|
|
Vidriera Toluca, S.A. de C.V.
|
|
|
|
|
|
|
|
Vidrio y Cristal del Noroeste, S.A. de C.V. (2)
|
|
Vitro Packaging, Inc.
|
|
|
|
|
|
|
|
Cristales Automotrices, S.A. de C.V. (51%)
|
|
Empresas Comegua S.A. (49.7%)
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Vitro Flotado Cubiertas, S.A. de C.V.
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Vidrio Lux, S.A.
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Vitro America, Inc.
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Industria del Álcali, S.A. de C.V.
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Vitro Colombia, S.A.
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Comercializadora Álcali, S. de R.L. de C.V.
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Vitro Cristalglass, S.L. (60%)
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- Vitro Chaves Industria de Vidro, S.A. (60%)
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Fabricación de Máquinas, S.A. de C.V.
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(1)
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Merger of Vitro Plan, S.A. de C.V. (Vitro Plan) with Viméxico, S.A. de C.V.
(Viméxico)
On October 18, 2006, Vitro and its subsidiary Vitro Corporativo, S.A. de
C.V. (Vicorp) incorporated Viméxico as a Mexican corporation and, on October 30,
2006, Vitro transferred, as a capital contribution to Viméxico, an account receivable
from Vitro Plan in the amount of US$ 135 million. Following the capital contribution,
on December 8, 2006, Vicorp and Vitro, as shareholders of Viméxico, adopted a unanimous
resolution approving the merger of Vitro Plan into Viméxico. On December 11, 2006, the
shareholders of Vitro Plan concluded an extraordinary general shareholders meeting
approving the merger of Vitro Plan into Viméxico based on financial information as of
October 31, 2006, with Viméxico as the surviving entity. This merger became effective
in December 2006 (see note 12 f).
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As a consequence of the merger, all assets, rights, liabilities and obligations of Vitro
Plan were assumed by Viméxico and all agreements, contracts and proceedings (legal or
otherwise) to which Vitro Plan was a party were assumed by Viméxico, resulting in
Viméxicos total indebtedness of US$ 228 million as of the date of the merger. Prior to
the merger, Vitro Plan was a direct 65% owned subsidiary of Vitro, and Pilkington Group
LTD (Pilkington) owned a 35% in Vitro Plan. As a result of the merger, Viméxico is now
a direct 91.8% owned subsidiary of Vitro, and Pilkington owns an 8.2% equity interest in
Viméxico. Due to the merger, the account receivable for US$ 135 million was cancelled in
its entirety.
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(2)
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On July 24, 2007, Viméxico acquired the remaining 50% of the outstanding
shares of Vitro AFG, S.A. de C.V. (Vitro AFG) from AFG Industries Inc. (AFG
Industries), in order to assume
control and increase its ownership to 100%, subsequently changing its legal name to
Vidrio y Cristal del Noroeste, S.A. de C.V., (see note 20 f).
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F-9
(3)
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On August 29, 2007, Vitro Vidrio y Cristal, S.A. de C.V. (Vitro VyC), a
subsidiary of Viméxico acquired 55% of the outstanding shares of Productos de Valor
Agregado en Cristal, S.A. de C.V. (PVA), (see note 20 e).
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(4)
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In December 2007, the Companys subsidiary Vidriera México, S.A. de C.V.
changed its legal name to Vitro Cosmos, S.A. de C.V.
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c)
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Translation of financial Statements of foreign subsidiaries
In order to consolidate
the financial statements of foreign subsidiaries, the effects of inflation were taken into
consideration in accordance with Bulletin B-10, Recognition of the Effects of Inflation
in Financial Information, as amended. Such companies financial statements are translated
into Mexican pesos using the current rate method. The assets, liabilities, stockholders
equity and the statement of operations accounts are translated into Mexican pesos using
the exchange rate as of the date of the most recent balance sheet presented. The
cumulative translation adjustment is included in shortfall in restatement of capital as a
component of stockholders equity.
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d)
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Comprehensive income (loss)
Represents changes in stockholders equity during
the year, for concepts other than distributions and activity in contributed common stock,
and is comprised of the net income (loss) of the year, plus other comprehensive income
(loss) items of the same period, which are presented directly in stockholders equity
without affecting the consolidated statements of income. Other comprehensive income (loss)
items consist of the shortfall in restatement of capital, the translation effects of
foreign subsidiaries and the additional minimum labor liability adjustment.
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e)
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Classification of costs and expenses
Costs and expenses presented in the consolidated
statements of operations were classified according to their function which allows for the
analysis of the Companys gross margin. The Company continues to present operating income
in the statement of operations as it is an important financial indicator within the
industry and helps to evaluate the Companys performance. Operating income includes
ordinary income and expenses as well as operating expenses. Such presentation is comparable
with what was utilized for the years ended December 31, 2005 and 2006.
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F-10
3.
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Summary of significant accounting policies
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The accompanying consolidated financial statements have been prepared in conformity with NIFs,
which require that management make certain estimates and use certain assumptions that affect the
amounts reported in the financial statements and their related disclosures; however, actual
results may differ from such estimates. The Companys management, upon applying professional
judgment, considers that estimates made and assumptions used were adequate under the
circumstances. The significant accounting policies of the Company are as follows:
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a)
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Changes in accounting policies
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Statement of income
Beginning January 1, 2007, the Company adopted new NIF B-3, Statement
of Income, which now classifies revenues, costs and expenses into ordinary and
non-ordinary. Ordinary items are derived from primary activities representing an entitys
main source of revenues. Non-ordinary items are derived from activities other than those
representing an entitys main source of revenues. Consequently, the classification of
certain transactions as special and extraordinary was eliminated; these items are now part
of other income and expenses and non-ordinary items, respectively. Statutory employee profit
sharing (PTU) should now be presented as an ordinary expense and no longer presented
within income taxes. According to Interpretation of Financial Information Standards Number
4, Presentation of Statutory Employee Profit Sharing in the Statement of Income (INIF
4), PTU should be included within other income and expenses. The main effect of adopting
this interpretation was the reclassification of current and deferred PTU for 2005 and 2006
of Ps. 51 and Ps. 55, respectively, to other income and expenses.
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Related parties
Beginning January 1, 2007, the Company adopted NIF C-13, Related
Parties, which broadens the concept related parties to include a) the overall business in
which the reporting entity participates; b) close family members of key management or
prominent executives; and c) any fund created in connection with a labor-related
compensation plan. NIF C-13 also requires the following disclosures: 1) that the terms and
conditions of consideration paid or received in transactions carried out between related
parties be equivalent to those of similar transactions carried out between independent
parties and the reporting entity, only if sufficient evidence exists; 2) benefits granted to
the entitys key management or prominent executives. Notes to the 2005 and 2006
consolidated financial statements were amended to comply with the new provisions.
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Capitalization of comprehensive financing result
Beginning January 1, 2007, the Company
adopted NIF D-6, Capitalization of Comprehensive Financing Result, which establishes
general capitalization standards. Some of these standards include: a) mandatory
capitalization of comprehensive financing result (CFR) directly attributable to the
acquisition of qualifying assets; b) when financing in domestic currency is used to acquire
assets, yields obtained from temporary investments before the capital expenditure is made
are excluded from the amount capitalized; c) a methodology to calculate capitalizable CFR
relating to funds from generic financing; d) regarding land, CFR may be capitalized if land
is developed; and e) conditions that must be met to capitalize CFR and rules indicating when
CFR should no longer be capitalized. In 2007, the Company capitalized CFR of Ps. 10
directly attributable to the acquisition of qualifying assets. Through 2006, CFR was
charged to current earnings.
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Derivative financial instruments and hedging operations
Effective January 1, 2005, the
Company adopted the provisions of Bulletin C-10, Derivative Financial Instruments and
Hedging Activities, and the effect was a charge to the cumulative effect of the change in
accounting principle in 2005 of Ps. 124, net of tax.
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b)
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Recognition of the effects of inflation
The Company restates its consolidated
financial statements to Mexican peso purchasing power of the most recent balance sheet date
presented. Accordingly, the consolidated financial statements of the prior year, which are
presented for comparative purposes,
have also been restated to Mexican pesos of the same purchasing power and, therefore, differ
from those originally reported in the prior year.
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F-11
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Vitros Mexican subsidiaries use the Indice Nacional de Precios al Consumidor (Mexican
National Consumer Price Index, or NCPI), published by Banco de México. For Vitros foreign
subsidiaries, except as noted below, the Consumer Price Index All Urban Consumers All
Items, Unadjusted (CPI) published by the US Labor Department is used to restate the
financial statements, and the restated financial statements are translated into Mexican
pesos using the applicable exchange rate at the end of the last period presented, except in
the case of the Companys subsidiaries located in Spain for which it applies the Price
Consumption Index (PCI), published by the National Institute of Statistics of Spain before
translation into Mexican pesos using the exchange rate of the Euro.
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Recognition of the effects of inflation results mainly in inflationary gains or losses on
monetary and nonmonetary items that are presented in the financial statements as follows:
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Shortfall in restatement of capital
This item, which is an element of
stockholders equity, represents the accumulated effect of holding nonmonetary
assets and the effect of the initial monetary position gain or loss. The cumulative
effect of holding nonmonetary assets represents the difference between the specific
values of nonmonetary assets in excess of or below the increase attributable to
general inflation.
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Monetary position result
Monetary position result reflects the result of
holding monetary assets and liabilities during periods of inflation. Values stated
in current monetary units decrease in purchasing power over time. This means that
losses are incurred by holding monetary assets, whereas gains are realized by
maintaining monetary liabilities. The net effect is presented in the statements of
operations as part of the total comprehensive financing result. For foreign
subsidiaries the result from monetary position is calculated using the CPI, except
in the case of the Companys subsidiaries located in Spain for which it applies the
PCI.
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Statement of Changes in Financial Position
Bulletin B-12, Statement of Changes in
Financial Position, requires presentation of the sources and uses of funds during the
period measured as the differences, in constant pesos, between the beginning and ending
balances of balance sheet items adjusted by the excess (shortfall) in restatement of
capital. As required by Bulletin B-12, the monetary effect and the effect of changes in
exchange rates are considered cash items in the determination of resources generated from
operations due to the fact they affect the purchasing power of the entity.
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c)
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Cash and cash equivalents
Consist mainly of bank deposits in checking accounts and
readily available investments of highly liquid short-term investments. They are valued at
the lower of acquisition cost plus accrued yields or estimated net realizable value and are
recognized in results of operations as they accrue.
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d)
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Investments in securities
According to its intent, from the date of acquisition, the
Company classifies its investments in securities instruments in any of the following
categories: (1) trading, when the Company intends to trade debt and equity instruments in
the short-term, before their maturity, if any.
These investments are stated at fair value; any fluctuations in the value of these
investments are recognized in current earnings; (2) held-to-maturity, when the Company
intends to and is financially capable of holding financial instruments until their maturity.
These investments are recognized and maintained at amortized cost; and (3)
available-for-sale, investments that include those that are classified neither as trading
nor held-to-maturity. These investments are stated at fair value; any unrealized gains and
losses resulting from valuation, net of income tax, are recorded as a component of other
comprehensive income within stockholders equity and reclassified to current earnings upon
their sale or maturity. The monetary position resulting from the effects of inflation on
available-for-sale investments is recorded as a component of other comprehensive income.
Fair value is determined using prices quoted in recognized markets. If such instruments are
not traded, fair value is determined by applying recognized technical valuation models.
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F-12
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Investments in securities classified as held-to-maturity and available-for-sale are subject
to impairment tests. If there is evidence that the reduction in fair value is other than
temporary, the impairment is recognized in current earnings.
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Financial liabilities derived from the issuance of debt instruments are recorded at the
value of the obligations they represent. Any expenses, premiums and discounts related to the
issuance of debt financial instruments are amortized over the life of the instruments.
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e)
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Derivative financial instruments
The Company states all derivatives at fair value in
the balance sheet, regardless of the purpose for holding them. Fair value is determined
using prices quoted in recognized markets. If such instruments are not traded, fair value
is determined by applying recognized valuation techniques.
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When derivatives are entered into to hedge risks, and such derivatives meet all hedging
requirements, their designation is documented at the beginning of the hedging transaction,
describing the transactions objective, characteristics, accounting treatment and how the
ineffectiveness of the instrument will be measured.
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Changes in the fair value of derivative instruments designated as hedges for accounting
purposes are recognized as follows: (1) for fair value hedges, changes in both the
derivative instrument and the hedged item are recognized in current earnings; (2) for cash
flow hedges, changes in the derivative instrument are temporarily recognized as a component
of other comprehensive income and then reclassified to current earnings when affected by the
hedged item. Any ineffective portion of the change in fair value is immediately recognized
in current earnings, within total comprehensive financing result, regardless of whether the
derivative instrument is designated as a fair value hedge or a cash flow hedge.
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The Company uses interest rate swaps, foreign currency forward contracts and different
natural gas derivative instruments to manage its exposure to these market risks. The Company
formally documents all hedging relationships, including their objectives and risk management
strategies to carry out derivative transactions.
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F-13
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While certain derivative financial instruments are contracted for hedging from an economic
point of view, they are not designated as hedges for accounting purposes because they do not
meet all of the requirements and are instead classified as held-for-trading for accounting
purposes. Changes in fair value of such derivative instruments are recognized in current
earnings as a component of total comprehensive financing result.
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The Company reviews all contracts entered into to identify embedded derivatives that should
be segregated from the host contract for purposes of valuation and recognition. When an
embedded derivative is identified and the host contract has not been stated at fair value
and adequate elements for its valuation exist, the embedded derivative is segregated from
the host contract, stated at fair value and classified as trading or designated as a
financial instrument for hedging. Initial valuation and changes in the fair value of the
embedded derivatives at the closing of each period are recognized in current earnings.
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f)
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Inventories and cost of sales
Inventories are stated at the lower of replacement cost
using the latest purchase price method without exceeding net realizable value. Cost of
sales is restated using replacement cost or the latest production cost at the time of the
sale.
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g)
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Land, buildings, machinery and equipment
Expenditures for land, buildings, machinery
and equipment, including renewals and improvements that extend useful lives, are
capitalized and restated using the NCPI. The initial balance to apply the NCPI was the net
replacement value of the Companys long-lived asset as of December 31, 1996. For machinery
and equipment purchased in a foreign country, the restatement is based on the inflation
index mentioned above and the exchange rate at the end of each period.
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Beginning on January 1, 2007, the carrying value of qualifying assets includes the
capitalization of total comprehensive financing result.
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Depreciation is calculated using the straight-line method based on the remaining estimated
useful lives of the related assets. Depreciation begins in the month in which the asset is
placed in service. The estimated useful lives of the assets are as follows:
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Years
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Buildings
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20 to 50
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Machinery and equipment
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3 to 30
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F-14
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Maintenance and repair expenses are recorded as costs and expenses in the period incurred.
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h)
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Impairment of long-lived assets in use
The Company reviews the carrying amounts of
long-lived assets in use when an impairment indicator suggests that such amounts might not
be recoverable, considering the greater of the present value of future net cash flows or
the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed
the greater of the amounts
mentioned above. The impairment indicators considered for these purposes are, among others,
the operating losses or negative cash flows in the period if they are combined with a
history or projection of losses, depreciation and amortization charged to results, which in
percentage terms in relation to revenues are substantially higher than that of previous
years, obsolescence, reduction in the demand for the products manufactured, competition and
other legal and economic factors.
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i)
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Provisions
Provisions are recognized for current obligations that result from a past
event, are probable to result in the use of economic resources, and can be reasonably
estimated.
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j)
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Goodwill
Goodwill represents the excess of cost over fair value of subsidiaries as of
the date of acquisition. It is restated using the NCPI and at least once a year is subject
to impairment tests.
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k)
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Employee retirement obligations
Seniority premiums, pension plans and severance
payments are recognized as costs over the expected service period of employees and are
calculated by independent actuaries using the projected unit credit method at net discount
rates. Accordingly, the liability is being accrued which, at present value, will cover the
obligation from benefits projected to the estimated retirement date of the Companys
employees.
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l)
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Share-based payment plans
The Company has equity incentive plans that permit the
Company to grant stock options and nonvested shares (equity awards) to certain employees
and directors of the Company. The Company recognizes the fair value of equity awards
computed at the awards grant date over the period in which the requisite service is
rendered.
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m)
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Foreign currency balances and transactions for Mexican subsidiaries
Foreign currency
transactions are recorded at the applicable exchange rate in effect at the transaction
date. Monetary assets and liabilities denominated in foreign currency are translated into
Mexican pesos at the applicable exchange rate in effect at the balance sheet date. Exchange
fluctuations are recorded as a component of net comprehensive financing result in the
consolidated statements of operations.
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n)
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Revenue recognition
Revenues and related costs are recognized in the period in which
risks and rewards of ownership of the inventories are transferred to customers, which
generally coincides with the shipment of products to customers in satisfaction of orders.
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o)
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Statutory employee profit sharing (PTU)
Statutory employee profit sharing is
recorded in the results of the year in which it is incurred and presented under other
income and expenses in the accompanying consolidated statements of income. Deferred PTU is
derived from temporary differences between the accounting result and income for PTU
purposes and is recognized only when it can be reasonably assumed that such difference will
generate a liability or benefit, and there is no indication that circumstances will change
in such a way that the liabilities will not be paid or benefits will not be realized.
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F-15
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p)
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Income taxes
Income taxes are recorded in the results of the year in which they are
incurred. Beginning October 2007, based on its financial projections, the Company must
determine whether it will essentially incur income tax (ISR) or the new Business Flat Tax
(IETU) and, accordingly,
recognize deferred taxes based on the tax it will pay. Deferred taxes are calculated by
applying the corresponding tax rate to the applicable temporary differences resulting from
comparing the accounting and tax bases of assets and liabilities and including, if any,
future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets
are recorded only when there is a high probability of recovery.
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Tax on assets (IMPAC) paid that is expected to be recoverable is recorded as an advance
payment of ISR and is presented in the balance sheet increasing the deferred ISR asset.
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q)
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Earnings (loss) per share
Basic earnings (loss) per common share are calculated by
dividing consolidated net income (loss) of majority stockholders by the weighted average
number of shares and equivalent common shares outstanding during the year. Diluted earnings
per share are determined by adjusting consolidated net income and common shares on the
assumption that the entitys commitments to issue or exchange its own shares would be
realized. Diluted earnings per share is not presented for periods in which the effect of
including common stock equivalents is anti-dilutive or periods in which the Company records
a net loss from continuing operations as was the case in 2006. In 2005 and 2007 diluted
earnings per share was not presented as it is the same as basic earnings per share.
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r)
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Foreign subsidiaries as economic hedges
The Companys management designated some of
its foreign subsidiaries as economic hedges. The resulting exchange rate fluctuation is
presented in the shortfall in restatement of capital within stockholders equity to the
extent the net investment in the foreign subsidiary covers the debt. The result from
monetary position is measured using inflation factors from the designated subsidiarys
country of origin. The effect related to this charge to the results of operations for 2005,
2006 and 2007 was a (charge) credit of Ps. (93), Ps. (13) and Ps. 16, respectively.
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4.
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Discontinued operations
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On June 16, 2006, the Company completed the sale of its 51% equity ownership interest in
Vitrocrisa Holding, S. de R.L. de C.V. and subsidiaries, Crisa Libbey S.A. de C.V. and Crisa
Industrial, LLC, (together Vitrocrisa) to Libbey, Inc. (Libbey), the owner of the other 49%
equity interest, recognizing a gain on the sale of Ps. 480. The Company received proceeds of
approximately US$ 119 million from this divestiture, comprised of US$ 80 million in cash from
the sale of its equity interest, approximately US$ 28 million from the payment of intercompany
receivables and US$ 11 million from the repayment of intercompany debt. As a part of this
transaction, all of the liabilities of Vitrocrisa were assumed by Libbey, including bank debt of
US$ 62 million as of May 31, 2006, except for labor liabilities of approximately US$ 27 million.
Vitrocrisa, which was previously presented as one of the Companys reportable segments, is
presented as a discontinued operation as its disposition represented the termination of a
significant activity of the Company.
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F-16
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The following table discloses Vitrocrisas condensed statements of operations for the periods
presented:
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Year ended
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Period from
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December 31,
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January 1, to
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Condensed statements of operations:
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2005
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June 16, 2006
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Net sales
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Ps.
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2,349
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Ps.
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1,033
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Cost of sales
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2,008
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861
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Gross profit
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341
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|
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172
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Selling, general and administrative expenses
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|
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277
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|
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129
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|
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Operating income
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|
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64
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43
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Total comprehensive financing result
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52
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102
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Other expenses (income), net
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12
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(5
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)
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Income tax benefit
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(3
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)
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(23
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)
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Net income (loss)
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Ps.
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3
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Ps.
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(31
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)
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a)
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Trade receivables are recorded net of an allowance for doubtful accounts and other
discounts of Ps. 277 and Ps. 301 at December 31, 2006 and 2007, respectively.
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b)
|
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At December 31, 2006 and 2007, the Company recorded Ps. 57 and Ps. 388, respectively,
as restricted cash. In 2006, the amount represents the collateral held with one of its
counterparties in its natural gas hedges, and in 2007 includes cash deposited in a trust
to pay principal and interest related to the Companys 2011 Vena Bond, which will be paid
in July 2008. Restricted cash is included in other current receivables.
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c)
|
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Sales of receivables Vitro Cristalglass, S.L. (Vitro Cristalglass), a subsidiary
of the Company, has entered into revolving factoring program agreements to sell trade
accounts receivable with several financial institutions. In accordance with the terms of
some of these agreements, the Company has the obligation to reimburse for uncollected
receivables in the case of non-payment of customers. As of December 31, 2006 and 2007 the
maximum capacity available under these programs was US$ 35 million and US$ 45 million,
respectively. At such dates Vitro Cristalglass had sold approximately US$ 21 million and
US$ 16 million of trade receivables, respectively.
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d)
|
|
Securitization of trade receivables:
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|
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Securitization of Vitro Envases Norteamérica, S.A. de C.V. (VENA) trade
receivables On March 31, 2005, Compañía Vidriera, S.A. de C.V., Industria del
Álcali, S.A. de C.V. and Comercializadora Álcali, S. de R.L. de C.V., all subsidiaries
of VENA, closed a five-year non-recourse revolving accounts receivable facility,
through which such companies obtained approximately Ps. 550 (nominal amount) and US$
19 million. The VENA subsidiaries entered into an agreement to sell all of their trade
accounts receivable, on a revolving basis, to a trust (the Trust, a qualifying
special purpose entity) that was formed prior to the execution of this
agreement for the sole purpose of buying and selling accounts receivable and is
designed to be bankruptcy remote.
|
F-17
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|
|
The Ps. 550 (nominal amount) was obtained through
the issuance of certified preferred securities (
certificados bursátiles preferentes
)
that trade on the Mexican Stock Exchange (BMV) issued by the Trust, and US$ 19
million in subordinated notes issued in United States of America, which are guaranteed
by the Company. The interest payments and eventual principal reimbursement on the
certificados bursátiles preferentes
and the subordinated notes are payable from the
collection of the receivables originated by the VENA subsidiaries and sold to the
Trust. At December 31, 2006 and 2007 the gross receivables sold to the Trust totaled
Ps. 1,074 and Ps. 1,075, respectively, and are reflected as a reduction of trade
accounts receivable. The estimated fair value of the retained undivided interests in
securitized receivables at December 31, 2006 and 2007 was Ps. 529 and Ps. 312,
respectively.
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Securitization of Viméxico (formerly Vitro Plan) trade receivables On
August 22, 2005, Viméxico, the holding company of our flat glass segment, closed a
private issuance of promissory notes in the United States for US$ 21.5 million, at an
interest rate of 6.5%. Viméxico entered into an agreement to sell all of its trade
accounts receivable, on a revolving basis, to a trust (the Trust, a qualifying
special purpose entity) that was formed prior to the execution of this agreement for
the sole purpose of buying and selling accounts receivable and is designed to be
bankruptcy remote. The interest payments and eventual principal reimbursement will be
provided from the collection of the receivables originated by four subsidiaries of
Viméxico and sold to the Trust, which are: Distribuidora Nacional de Vidrio, S.A. de
C.V., Vitro Flotado Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de C.V. and Vitro
Vidrio y Cristal, S.A. de C.V. At December 31, 2006 and 2007, the gross receivables
sold to the Trust totaled Ps. 574 and Ps. 580, respectively, and are reflected as a
reduction of trade accounts receivable. The estimated fair value of the retained
undivided interests in securitized receivables at December 31, 2006 and 2007 was Ps.
332 and Ps. 346, respectively.
|
|
|
|
During 2004, Vitro America, Inc. (Vitro America) closed a contract for
selling all their accounts receivable, on a revolving basis, to VVP Funding, a
wholly-owned subsidiary of Vitro America. VVP Funding is a special-purpose entity that
was formed prior to the execution of this agreement for the sole purpose of buying and
selling accounts receivable and is designed to be bankruptcy remote. Vitro America and
VVP Funding entered an agreement with an unrelated major financial institution whereby
VVP Funding sells, on a revolving basis and subject to the maintenance of certain
financial and receivables based ratios, an undivided percentage ownership in all
eligible accounts receivable, as defined, for consideration composed of cash up to a
maximum amount of US$ 40 million and retained undivided interests in securitized
receivables. The transfer of undivided ownership interests from VVP Funding to the
unrelated major financial institution for cash consideration is accounted for as a
sale of receivables. Effective April 16, 2007, the new agreement was signed and
amended to increase the maximum selling amount from US$ 40 million to US$ 50 million.
The agreement expires in April 2008 but is subject to annual renewal approval by the
financial institution. As of December 31, 2006 and 2007, the gross receivables sold
totaled approximately US$ 78 million and US$ 76 million, respectively and are
reflected as a reduction of trade accounts receivable. The estimated fair
value of the retained undivided interests in securitized receivables at December 31,
2006 and 2007 was US$ 32 million and US$ 29 million, respectively.
|
F-18
6.
|
|
Inventories
|
|
|
|
Inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
Semi-finished and finished products
|
|
Ps.
|
2,836
|
|
|
Ps.
|
2,643
|
|
Raw materials
|
|
|
603
|
|
|
|
641
|
|
Packaging materials
|
|
|
70
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
3,509
|
|
|
|
3,333
|
|
Spare parts
|
|
|
259
|
|
|
|
304
|
|
Refractory
|
|
|
34
|
|
|
|
55
|
|
Merchandise in transit
|
|
|
131
|
|
|
|
358
|
|
Other
|
|
|
49
|
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
3,982
|
|
|
Ps.
|
4,120
|
|
|
|
|
|
|
|
|
7.
|
|
Land, buildings, machinery and equipment
|
|
a)
|
|
Land, buildings, machinery and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
Land
|
|
Ps.
|
3,660
|
|
|
Ps.
|
3,645
|
|
Buildings
|
|
|
10,540
|
|
|
|
10,585
|
|
Accumulated depreciation
|
|
|
5,437
|
|
|
|
5,804
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
8,763
|
|
|
Ps.
|
8,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
Ps.
|
24,865
|
|
|
Ps.
|
25,403
|
|
Accumulated depreciation
|
|
|
18,143
|
|
|
|
17,591
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
6,722
|
|
|
Ps.
|
7,812
|
|
|
|
|
|
|
|
|
|
|
|
The Company reviewed the operating conditions of certain of its fixed assets and determined
to extend their estimated remaining useful life, which resulted in a decrease in
depreciation expense of Ps. 78 in 2007.
|
|
|
b)
|
|
In 2007, the Company capitalized CFR of Ps. 10 directly attributable to the acquisition
of qualifying assets. Through 2006, all CFR was charged to current earnings.
|
|
|
c)
|
|
Sale of real estate
On December 14, 2006, Vitro sold real estate located in Mexico
City used by Compañía Vidriera, S.A. de C.V. (COVISA) for US$ 100 million, 80% payable on
the date of sale and the remainder payable on the delivery date of the property. COVISA
uses these premises to manufacture glass containers for cosmetics and perfume products. The
Company is in the process of relocating this production to another facility in Toluca,
Mexico. In connection with the sale of the
property, the Company has agreed to deliver the real estate within 24 months following the
sale, free and clear of all buildings and fixtures, as well as any environmental claims,
recording reserves of Ps. 56 for the estimated asset retirement costs and prepaid rent of
Ps. 62 for the estimated fair value of the rental expense over the 24 months.
|
F-19
|
|
|
The Company
also has an option to extend the delivery date for an additional 12 months for an annual
rental payment of US$ 11.2 million. Vitro has also guaranteed up to US$ 80 million in favor
of the purchaser payable in the event that the property is not delivered to the purchaser
within 36 months following the sale. As of the issuance date of these consolidated financial
statements, the Company estimates that its delivery of the land will be completed by
December 2008.
|
|
d)
|
|
Sale of corporate building
On November 28, 2006, the Company sold one of the
buildings located at its corporate headquarters in Garza Garcia, N.L., Mexico, for Ps. 128.
|
8.
|
|
Derivative financial instruments
|
|
|
|
While the Companys derivative financial instruments are primarily entered from an economic
point of view, they are not designated as hedges because they do not meet all of the accounting
requirements and are therefore classified as trading for accounting purposes.
|
|
|
|
At December 31, 2007, the Companys derivative financial instruments had the following
positions:
|
|
a)
|
|
Trading derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
|
|
Derivative financial
|
|
Amount
|
|
|
|
|
Fair Value
|
|
instruments
|
|
(million)
|
|
|
Period
|
|
Asset
|
|
Foreign exchange options
|
|
|
|
|
|
|
|
|
|
|
Exotic instruments
|
|
US$
|
266
|
|
|
January to April 2008
|
|
Ps.
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
Derivative financial
|
|
Amount
|
|
|
pays interest
|
|
|
receives interest
|
|
|
|
|
Fair Value
|
|
instruments
|
|
(million)
|
|
|
rate (in pesos)
|
|
|
rate (in US$)
|
|
|
Period
|
|
Asset
|
|
Interest rate options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps
|
|
US$
|
150
|
|
|
TIIE + 1.08 %
|
|
|
8.63
|
%
|
|
February 2007 to February 2012
|
|
Ps.
|
23
|
|
Cross currency swaps
|
|
US$
|
350
|
|
|
TIIE + 1.62 %
|
|
|
9.13
|
%
|
|
February 2007 to February 2012
|
|
|
58
|
|
Cross currency swaps
|
|
US$
|
350
|
|
|
TIIE + 1.60 %
|
|
|
9.13
|
%
|
|
February 2007 to February 2012
|
|
|
61
|
|
Cross currency swaps
|
|
US$
|
150
|
|
|
TIIE + 1.06 %
|
|
|
8.63
|
%
|
|
February 2007 to February 2012
|
|
|
24
|
|
Interest rate swaps
|
|
Ps.
|
3,294
|
|
|
8.10 %
|
|
TIIE (in pesos)
|
|
February 2007 to February 2012
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest rate options (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
|
Fair Value
|
|
|
|
Amount
|
|
|
|
|
Asset
|
|
Derivative financial instruments
|
|
(MMBTUs)
|
|
|
Period
|
|
(Liability)
|
|
Natural gas contracts
|
|
|
|
|
|
|
|
|
|
|
Capped swap (2)
|
|
|
8,040,000
|
|
|
January to December 2008
|
|
Ps.
|
(556
|
)
|
Swaps
|
|
|
1,640,000
|
|
|
January to December 2008
|
|
|
6
|
|
Options
|
|
|
4,800,000
|
|
|
January to December 2008
|
|
|
10
|
|
Exotic
|
|
|
8,400,000
|
|
|
January to December 2008
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
Total natural gas contracts
|
|
|
|
|
|
|
|
Ps.
|
(550
|
)
|
|
|
|
|
|
|
|
|
|
|
F-20
|
|
|
|
|
|
|
Fair Value
|
|
Summary of derivative financial
|
|
Asset
|
|
instruments
|
|
(Liability)
|
|
Foreign exchange options
|
|
Ps.
|
2
|
|
Interest rate options
|
|
|
194
|
|
Natural gas contracts
|
|
|
(550
|
)
|
Embedded
|
|
|
12
|
|
|
|
|
|
Total derivative financial instruments
|
|
Ps.
|
(342
|
)
|
|
|
|
|
(1)
|
|
The derivative asset related to the Companys interest rate options, includes
payments made by the Company of Ps. 349, which resulted in a net loss of Ps. 155, and
is presented in total comprehensive financing result.
|
(2)
|
|
In December 2007, the Company entered into a natural gas capped swap and
executed an option to receive a prepayment from the counterparty for Ps. 534, which
will be repaid throughout 2008. The net loss from the transaction was Ps. 22, which is
recorded in total comprehensive financing result. In January 2008, the Company entered
into a contrary position to that of the natural gas capped swap it acquired in 2007,
offsetting the market risks from such instrument.
|
|
b)
|
|
Embedded derivatives The Company identified embedded derivatives within certain of
its supply contracts. As of December 31, 2007, the amount recognized for these instruments
was an asset and a credit to total comprehensive financing result of Ps. 12.
|
9.
|
|
Short-term borrowings
|
|
|
|
At December 31, 2006 and 2007, the short-term borrowings denominated in foreign currency (US
dollars and euros) totaled Ps. 319 and Ps. 398, respectively. During 2007, the Companys
weighted average interest rate for short-term borrowings denominated in US dollars was 7.75%
and denominated in euros 3.29%.
|
|
|
|
As disclosed in note 10 c), the Company issued US$ 700 million of senior guaranteed notes due
February 1, 2017 and US$ 300 million of senior guaranteed notes due February 1, 2012. Upon
completion of this transaction, at December 31, 2006, Ps. 2,380 of short-term borrowings were
refinanced and have therefore been reclassified as long-term debt.
|
F-21
|
a)
|
|
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
I. Foreign Subsidiaries (payable in US dollars):
|
|
|
|
|
|
|
|
|
Secured debt, floating interest rate based on LIBOR
plus a spread of 3.15%, principal payable in several installments
through 2009.
|
|
Ps.
|
61
|
|
|
Ps.
|
52
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt, floating interest rate based on LIBOR
plus a spread between 1.25% and 1.75%, principal payable in several
installments through 2017.
|
|
|
233
|
|
|
|
544
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt, floating interest rate based on
Fixed Term Deposits (DTF) plus a spread of 6%,
principal payable in several installments through 2012.
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt, fixed interest rate of 10.7494%, principal payable
in several installments through 2016.
|
|
|
87
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
II. Foreign Subsidiaries (payable in euros):
|
|
|
|
|
|
|
|
|
Secured debt, floating interest rate based on EURIBOR
plus a spread ranging from 0.80% to 1.25%, principal payable in
several installments through 2008.
|
|
|
7
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt, floating interest rate based on EURIBOR
plus a spread ranging from 0.625% to 2.5%, principal payable in
several installments through 2011.
|
|
|
55
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
III. Vitro and Mexican Subsidiaries (payable in US dollars):
|
|
|
|
|
|
|
|
|
Secured debt, floating interest rate based on LIBOR
plus a spread ranging from 2.5% to 4.0%, principal payable in
several installments through 2007.
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured debt, floating interest rate based on LIBOR
plus a spread ranging from 0.25% and 2.95%, principal
payable in several installments through 2009, which was paid in 2007.
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.75% Senior secured guaranteed notes due in 2008.
|
|
|
2,762
|
|
|
|
326
|
|
|
|
|
|
|
|
|
|
|
Senior secured term loan, floating interest rate based on LIBOR plus
a spread of 6.25%, principal payable in several installments through
2010, which was prepaid in 2007.
|
|
|
1,628
|
|
|
|
|
|
F-22
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
11.375% Guaranteed senior unsecured notes due in 2007.
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.75% Guaranteed senior unsecured notes due in 2013.
|
|
|
2,509
|
|
|
|
2,434
|
|
|
|
|
|
|
|
|
|
|
8.625% Guaranteed senior unsecured notes due in 2012.
|
|
|
|
|
|
|
3,222
|
|
|
|
|
|
|
|
|
|
|
9.125% Guaranteed senior unsecured notes due in 2017.
|
|
|
|
|
|
|
7,506
|
|
|
|
|
|
|
|
|
|
|
IV. Vitro and Mexican Subsidiaries (payable in Mexican pesos):
|
|
|
|
|
|
|
|
|
Unsecured medium-term notes, floating interest
rate based on 182-day Mexican treasury bonds (CETES) plus a spread
of 3.25%, principal payable in 2008 and 2009.
|
|
|
744
|
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
V. Vitro debt issuance (payable in US dollars):
|
|
|
|
|
|
|
|
|
Refinanced short-term borrowings (note 9)
|
|
|
2,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,507
|
|
|
|
14,520
|
|
Less current maturities
|
|
|
66
|
*
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
12,441
|
|
|
Ps.
|
13,975
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
As a result of the debt issuance disclosed in note 10 c), a portion of the long-term debt
was refinanced and therefore, in 2006, Ps. 1,998 of current maturities have been reclassified
as long-term debt.
|
|
|
|
As of December 31, 2007, the interest rates of EURIBOR, CETES, TIIE, LIBOR and DTF were
4.684%, 7.4669%, 7.9250%, 4.6788% and 9.15%, respectively.
|
F-23
|
|
|
The schedule of contractual principal payments of long-term debt as of December 31, 2007 is
as follows:
|
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
2009
|
|
Ps.
|
285
|
|
2010
|
|
|
81
|
|
2011
|
|
|
81
|
|
2012
|
|
|
3,301
|
|
2013 and thereafter
|
|
|
10,227
|
|
|
|
|
|
|
|
Ps.
|
13,975
|
|
|
|
|
|
|
b)
|
|
Certain of the Companys long-term debt agreements contain limitations including the
restriction of payments to repurchase shares, limitation on dividends, limitation on leans
and certain financial covenants that if the Company does not meet at a consolidation
levels, its ability to incur additional debt is restricted. As of December 31, 2007 such
restrictions did not represent an event of default on the credit facilities nor did it
allow the lenders to accelerate the maturity of the debt under such credit facilities.
|
|
|
|
|
As of December 31, 2007, the Company is restricted to a maximum of US$ 100 million of
additional debt for working capital needs, capital expenditures and interest payments, US$25
million for capital expenditures secured by liens and an additional US$25 million for any
other purpose. The financing contracts do not restrict the Companys ability to refinance
debt.
|
|
c)
|
|
Vitro debt issuance
On February 1, 2007, Vitro S.A.B. de C.V. successfully closed an
offering, of US$1.0 billion of senior guaranteed notes (the Notes) principally to
refinance existing third-party debt at the Vitro holding company level, substantially all
of the third-party debt at its subsidiary VENA and certain third-party debt at some of
Viméxicos subsidiaries.
|
|
|
|
|
The Notes were issued in two tranches: US$700 million of senior guaranteed notes due
February 1, 2017, callable after year 2012, at a coupon of 9.125% and US$300 million of
senior unsecured notes due February 1, 2012, non-callable for the notes life, at a coupon
of 8.625%. The notes pay interest semiannually and are guaranteed by VENA and its
wholly-owned subsidiaries and by Viméxico and its wholly-owned subsidiaries.
|
F-24
11.
|
|
Employee retirement obligations
|
|
|
|
The disclosures relating to the Companys pension plans, seniority premiums and severance
payments required by Bulletin D-3, calculated as described in note 3 k), together with certain
actuarial assumptions utilized, are presented below as of December 31, 2006 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
Ps.
|
2,118
|
|
|
Ps.
|
2,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
Ps.
|
2,774
|
|
|
Ps.
|
3,319
|
|
Plan assets at fair value
|
|
|
(1,290
|
)
|
|
|
(1,548
|
)
|
|
|
|
|
|
|
|
Unfunded status
|
|
|
1,484
|
|
|
|
1,771
|
|
Unrecognized items:
|
|
|
|
|
|
|
|
|
Prior service costs and plan amendments
|
|
|
(174
|
)
|
|
|
(242
|
)
|
Unrecognized transition obligation
|
|
|
(249
|
)
|
|
|
(181
|
)
|
Changes in assumptions and adjustments from experience
|
|
|
(528
|
)
|
|
|
(899
|
)
|
|
|
|
|
|
|
|
Projected net liability
|
|
Ps.
|
533
|
|
|
Ps.
|
449
|
|
|
|
|
|
|
|
|
Additional minimum liability adjustment
|
|
Ps.
|
1,031
|
|
|
Ps.
|
796
|
|
|
|
At December 31, 2007, the plan assets presented above, include 47.5 million shares of Vitro.
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Assumptions:
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
5.00
|
%
|
Expected rate of return on plan assets
|
|
|
7.0
|
%
|
|
|
7.0
|
%
|
Rate of compensation increase
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Net periodic cost:
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
Ps.
|
60
|
|
|
Ps.
|
73
|
|
|
Ps.
|
96
|
|
Interest cost
|
|
|
136
|
|
|
|
143
|
|
|
|
149
|
|
Amortization of transition obligation
|
|
|
97
|
|
|
|
100
|
|
|
|
42
|
|
Amortization of prior service costs
and plan amendments
|
|
|
15
|
|
|
|
11
|
|
|
|
14
|
|
Amortization of changes in
assumptions and adjustments from
experience
|
|
|
101
|
|
|
|
149
|
|
|
|
145
|
|
Actual return on plan assets
|
|
|
(43
|
)
|
|
|
(49
|
)
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost*
|
|
Ps.
|
366
|
|
|
Ps.
|
427
|
|
|
Ps.
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
At December 31, 2005, 2006 and 2007 includes Ps. 18, Ps. 8 and Ps. 97, respectively, for the
early extinguishment of retirement obligations and also includes Ps. 68, Ps. 108 and Ps. 49 for
severance payments, respectively.
|
F-25
|
|
The unrecognized items are being amortized over the average remaining service lives of the
Companys employees. The amortization period of unrecognized items is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Amortization of unrecognized items (in years):
|
|
2006
|
|
|
2007
|
|
Prior service costs and plan amendments
|
|
|
15
|
|
|
|
14
|
|
Transition obligation
|
|
|
4
|
|
|
|
6
|
|
Changes in assumptions and adjustments from experience
|
|
|
15
|
|
|
|
14
|
|
12.
|
|
Commitments and contingencies
|
|
a)
|
|
In October 2000, several subsidiaries of Vitro, which have facilities throughout
Monterrey, Mexico and the Mexico City area, entered into a 15-year energy purchase
agreement for approximately 90 megawatts of electricity and 1.3 million tons of steam per
year with Tractebel Energía de Monterrey, S. de R.L. de C.V. (Tractebel).
|
|
b)
|
|
The Company has several non-cancelable operating lease agreements for the rent of
warehouses and equipment. Rental expense for the years ended December 31, 2005, 2006 and
2007 was Ps. 546, Ps. 527 and Ps. 541, respectively.
|
|
|
|
|
Future minimum lease payments under these agreements are as follows:
|
|
|
|
|
|
2008
|
|
Ps.
|
365
|
|
2009
|
|
|
334
|
|
2010
|
|
|
266
|
|
2011
|
|
|
171
|
|
2012
|
|
|
115
|
|
2013 and thereafter
|
|
|
132
|
|
|
c)
|
|
The Company is not a party to, and none of its assets are subject to, any pending legal
proceedings, nor is the Company subject to any contingent liabilities, other than as
described in notes 12 d) and f) and legal proceedings and contingent liabilities arising in
the ordinary course of business and against which the Company is adequately insured or
indemnified or which the Company believes are not material in the aggregate.
|
|
d)
|
|
As part of the disposal of Anchor Glass Containers Corporation (Anchor) in August
1996, in a transaction approved by the U.S. Bankruptcy Court, the Company entered into a
term sheet which contemplated an agreement pursuant to which the Company would provide to
the Pension Benefit Guaranty Corporation PBGC, a United States governmental agency that
guarantees pensions, a limited guaranty of Anchors unfunded pension liability. No payments
would be made under such a guaranty unless the PBGC terminated any of the covered pension
plans, and the guaranty would be payable only to the extent the PBGC could not otherwise
recover the unfunded liabilities from the entity that purchased Anchors assets New
Anchor. The amount of the guaranty was originally limited to US$ 70 million. Under the
guaranty, payments would not begin until August 1, 2002, and
would then generally be payable in equal semi-annual installments over the following 10
years. Payments would not bear interest. The amount and the term of the guaranty would be
proportionately reduced if the pension plans were terminated after January 31, 2002.
Beginning February 2002, the guaranty would be reduced by US$ 7 million semiannually until
August 1, 2006, when the guaranty would expire if the plans did not terminate.
|
F-26
|
|
|
On April 15, 2002, New Anchor filed a pre-negotiated plan of reorganization under Chapter 11
of the U.S. Bankruptcy Code. On August 8, 2002, an amended plan of reorganization was
confirmed, pursuant to which the plan resulting from the merger of the covered pension plans
was terminated, and the obligations thereunder were assumed by the PBGC in exchange for
cash, securities and a commitment of reorganized New Anchor to make certain future payments.
|
|
|
|
|
On June 20, 2003, the PBGC wrote to the Company, asserting that the plan had been terminated
effective as of July 31, 2002, with an estimated unfunded liability of US$ 219 million. The
PBGC stated that the value of the recovery from New Anchor and reorganized New Anchor
amounts to no more than US$ 122.25 million; it alleged that the recovery that it secured in
the bankruptcy was insufficient and that an underfunding in excess of the Companys limited
guaranty had occurred. Accordingly, to such letter, the PBGC demanded payments pursuant to
the term sheet of US$ 7 million on or before August 1, 2003 and of US$ 3.5 million
semiannually through August 1, 2011. The Company intends to contest this liability. There
are various issues concerning such demand and certain defenses that may be asserted by the
Company. Management is currently evaluating these issues and defenses. At this point, it is
not possible to reasonably estimate the amounts that will ultimately be payable in response
to such demand. When management is able to reasonably estimate those amounts, the Company
will establish an appropriate accounting reserve. As of this date, the Company has not
established any reserves in connection with such potential liability.
|
|
|
e)
|
|
Call/Put on shares of Vitro Cristalglass A group of individual investors owns a 40%
interest in Vitro Cristalglass. The Company has the option of purchasing the 40% minority
interest, which can be exercised beginning May 1, 2005 for fair value as calculated by
independent appraisers and cannot be less than 28.9 million euros (US$ 42.4 million as of
December 31, 2007). Additionally, the minority interest has a put option pursuant to which
they may require the Company to purchase all or part of their 40% interest in Vitro
Cristalglass, which can be exercised beginning on May 1, 2003 for 28.4 million euros (US$
41.8 million as of December 31, 2007), as adjusted to reflect inflation in Spain from 2003
through the time the put is exercised. As of December 31, 2007, the estimated fair value of
the 40% interest is higher than the option price held by Vitro.
|
|
f)
|
|
At a general extraordinary shareholders meeting of Vitro Plan held in December 2006,
the merger into Vitros subsidiary Viméxico was approved. Notwithstanding that this merger
has become fully effective, since all approvals were granted and the corresponding filings
were made, Pilkington, who voted against such merger, filled a lawsuit Viméxico.
|
|
|
|
|
In February 2008 Viméxico was notified of a ruling issued by the First District Court on
Civil and Labor matters that the lawsuit brought by Pilkington seeking to annul the
resolutions adopted at the general extraordinary shareholders meeting was unfounded. In its
ruling, the Court determined that all resolutions adopted at the general extraordinary
shareholders meeting were valid. Despite this ruling, Pilkington has appealed this
decision. Based on advice from its Mexican special litigation counsel, management continues
to believe that this lawsuit is without merit and expects to obtain another favorable
ruling.
|
F-27
13.
|
|
Foreign currency operations
|
|
a)
|
|
At December 31, 2007, the foreign currency denominated assets and liabilities of the
Companys Mexican subsidiaries consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
Mexican pesos
|
|
Monetary assets
|
|
US$
|
259
|
|
|
Ps.
|
2,813
|
|
Inventories
|
|
|
15
|
|
|
|
167
|
|
Fixed assets
|
|
|
332
|
|
|
|
3,606
|
|
Monetary liabilities
|
|
|
1,443
|
|
|
|
15,684
|
|
|
b)
|
|
Foreign currency operations of the Companys Mexican subsidiaries for the year ended
December 31, 2007, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
Mexican pesos
|
|
Exports
|
|
US$
|
601
|
|
|
Ps.
|
6,674
|
|
Imports
|
|
|
321
|
|
|
|
3,591
|
|
Interest expense, net
|
|
|
132
|
|
|
|
1,478
|
|
|
c)
|
|
The condensed financial information of the principal foreign subsidiaries of the
Company at December 31, 2007, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central and
|
|
|
|
|
|
|
United States
|
|
|
South America
|
|
|
Europe
|
|
Net sales
|
|
Ps.
|
8,794
|
|
|
Ps.
|
2,662
|
|
|
Ps.
|
2,432
|
|
Operating income
|
|
|
274
|
|
|
|
203
|
|
|
|
247
|
|
Total assets
|
|
|
2,996
|
|
|
|
3,489
|
|
|
|
2,403
|
|
Total liabilities
|
|
|
887
|
|
|
|
1,415
|
|
|
|
1,052
|
|
Capital expenditures
|
|
|
110
|
|
|
|
331
|
|
|
|
108
|
|
|
d)
|
|
The exchange rates of the Mexican peso against the US dollar and the Euro, used for
purposes of the Companys consolidated financial statements at the following dates were:
|
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
|
Euro
|
|
December 31, 2005
|
|
Ps.
|
10.6344
|
|
|
Ps.
|
12.5932
|
|
|
December 31, 2006
|
|
|
10.8116
|
|
|
|
14.2680
|
|
|
December 31, 2007
|
|
|
10.8662
|
|
|
|
15.9526
|
|
On March 14, 2008, the exchange rate was Ps. 10.7735 per US dollar and Ps. 16.7711 per
Euro.
F-28
|
a)
|
|
The capital stock of the Company consists of 386,857,143, ordinary, nominative, fully
paid common shares, without par value, at December 31, 2006 and 2007.
|
|
|
b)
|
|
Capital stock increase
On September 27, 2006, at an ordinary shareholders meeting,
the Companys shareholders approved an increase of Ps. 550 (nominal) in the variable
portion of the Companys capital stock. This capital increase was completed on October 31,
2006, through the issuance of 62,857,143 new shares at a price of Ps. 8.75 per share. The
offering was made primarily to current shareholders and holders of the Companys ADRs.
|
|
|
c)
|
|
The Company maintains an Employee Stock Option Plan established in March 1998 (the
Plan). The Plan specifies the amount of shares, time and initial exercise price, which
is equal to the average closing price on the BMV of the common shares on the 20 days prior
to the grant date, except for options issued during 2000, 2001 and 2002, which were Ps.
11.00, Ps. 8.27 and Ps. 7.53, respectively. The vesting period of the options is five
years and the life of such options is 10 years.
|
|
|
|
|
The following table summarizes the activity relating to the Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
1998
|
|
|
1999
|
|
|
2000
|
|
|
2001
|
|
|
1998 *
|
|
|
2002
|
|
|
outstanding
|
|
Options granted
during the year
|
|
|
2,813,300
|
|
|
|
2,893,000
|
|
|
|
4,851,900
|
|
|
|
3,204,800
|
|
|
|
940,950
|
|
|
|
3,941,950
|
|
|
|
|
|
|
Options cancelled
or exercised at
December 31, 2007
|
|
|
2,350,000
|
|
|
|
1,059,500
|
|
|
|
3,986,950
|
|
|
|
2,827,950
|
|
|
|
478,050
|
|
|
|
3,208,150
|
|
|
|
|
|
|
Options outstanding at
December 31, 2007
|
|
|
463,300
|
|
|
|
1,833,500
|
|
|
|
864,950
|
|
|
|
376,850
|
|
|
|
462,900
|
|
|
|
733,800
|
|
|
|
4,735,300
|
|
|
Initial exercise price
|
|
Ps.
|
31.31
|
|
|
Ps.
|
14.88
|
|
|
Ps.
|
11.00
|
|
|
Ps.
|
8.27
|
|
|
Ps.
|
13.00
|
|
|
Ps.
|
7.53
|
|
|
|
|
|
|
Exercise price at
December 31, 2007
|
|
Ps.
|
79.90
|
|
|
Ps.
|
45.78
|
|
|
Ps.
|
11.00
|
|
|
Ps.
|
8.27
|
|
|
Ps.
|
13.00
|
|
|
Ps.
|
7.53
|
|
|
|
|
|
*
|
|
During 2001 the Company
modified the exercise price of 940,950 options granted in 1998 to
Ps. 13.00.
|
|
|
|
The closing price of the Companys shares on the BMV on December 31, 2007 was Ps. 24.00.
|
|
|
|
|
The estimated fair value of the options was made on the grant date using the Black-Scholes
option-pricing model.
|
|
|
d)
|
|
Retained earnings include the statutory legal reserve. Mexican General Corporate Law
requires that at least 5% of net income of the year be transferred to the legal reserve
until the reserve equals 20% of capital stock at par value (historical pesos). The legal
reserve may be capitalized but may not be distributed unless the entity is dissolved. The
legal reserve must be replenished if it is reduced for any reason. At December 31, 2006
and 2007, the legal reserve, in historical pesos, was Ps. 72.
|
|
|
e)
|
|
At December 31, 2006 and 2007, the Company held 45,874,816 and 45,816,783,
respectively, treasury shares, which reduced the amount of total shares outstanding, and
included 17,555,747 and
17,464,614 shares held by the Stock Option Trust (see note 14 c) at December 31, 2006 and
2007, respectively.
|
F-29
|
f)
|
|
Stockholders equity, except restated paid-in capital and tax retained earnings, will
be subject to income tax at the rate in effect when a dividend is distributed. Any tax
paid on such distribution may be credited against annual and estimated income taxes of the
year in which the tax on dividends is paid and the following two fiscal years. At
December 31, 2007, the majority interest stockholders equity tax account, corresponding
to the contributed capital account and the net tax income account was Ps. 2,269 and Ps.
2,377, respectively.
|
|
|
g)
|
|
Dividends declared and paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend Amount
|
|
|
|
Stockholders meeting date
|
|
Nominal Value
|
|
|
Restated Value
|
|
|
Payment Date
|
March 17, 2005
|
|
Ps.
|
90
|
|
|
Ps.
|
99
|
|
|
April 2005
|
April 27, 2006
|
|
|
89
|
|
|
|
95
|
|
|
May 2006
|
March 28, 2007
|
|
|
133
|
|
|
|
136
|
|
|
April 2007
|
|
h)
|
|
Minority interest in consolidated subsidiaries consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
Capital stock
|
|
Ps.
|
456
|
|
|
Ps.
|
479
|
|
Shortfall in restatement of capital
|
|
|
(165
|
)
|
|
|
(183
|
)
|
Retained earnings
|
|
|
1,601
|
|
|
|
1,664
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
1,892
|
|
|
Ps.
|
1,960
|
|
|
|
|
|
|
|
|
|
i)
|
|
Majority stockholders equity consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
Nominal
|
|
|
|
|
|
|
Restated
|
|
|
|
Value
|
|
|
Restatement
|
|
|
Value
|
|
Capital stock
|
|
Ps.
|
387
|
|
|
Ps.
|
7,245
|
|
|
Ps.
|
7,632
|
|
Treasury stock
|
|
|
(298
|
)
|
|
|
(324
|
)
|
|
|
(622
|
)
|
Paid-in capital
|
|
|
1,147
|
|
|
|
1,290
|
|
|
|
2,437
|
|
Shortfall in restatement of capital
|
|
|
|
|
|
|
(21,154
|
)
|
|
|
(21,154
|
)
|
Cumulative effect of deferred taxes
|
|
|
(1,259
|
)
|
|
|
(551
|
)
|
|
|
(1,810
|
)
|
Minimum labor liability adjustment
|
|
|
(326
|
)
|
|
|
|
|
|
|
(326
|
)
|
Reserve for reacquisition of Vitro shares
|
|
|
|
|
|
|
2,000
|
|
|
|
2,000
|
|
(Accumulated deficit) retained earnings
|
|
|
(3,000
|
)
|
|
|
22,269
|
|
|
|
19,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
(3,349
|
)
|
|
Ps.
|
10,775
|
|
|
Ps.
|
7,426
|
|
|
|
|
|
|
|
|
|
|
|
F-30
15.
|
|
Total comprehensive financing result
|
|
|
|
The following represents a summary of the Companys total comprehensive financing result for
the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Interest expense on debt denominated in US dollars
|
|
Ps.
|
1,627
|
|
|
Ps.
|
1,634
|
|
|
Ps.
|
1,660
|
|
Interest expense on debt denominated in pesos
|
|
|
241
|
|
|
|
117
|
|
|
|
34
|
|
Interest expense on debt denominated in UDIs
|
|
|
130
|
|
|
|
63
|
|
|
|
|
|
Restatement of UDIs
|
|
|
37
|
|
|
|
20
|
|
|
|
|
|
Interest income
|
|
|
(172
|
)
|
|
|
(134
|
)
|
|
|
(175
|
)
|
Derivative financial instruments
|
|
|
17
|
|
|
|
337
|
|
|
|
201
|
|
Exchange (gain) loss
|
|
|
(417
|
)
|
|
|
224
|
|
|
|
94
|
|
Gain from monetary position
|
|
|
(455
|
)
|
|
|
(440
|
)
|
|
|
(471
|
)
|
Other financing expenses, net
|
|
|
492
|
|
|
|
455
|
|
|
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
1,500
|
|
|
Ps.
|
2,276
|
|
|
Ps.
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
|
Other expenses (income), net
|
|
|
|
The following represents a summary of the Companys other expenses (income), net for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Restructuring charges
|
|
Ps.
|
332
|
|
|
Ps.
|
61
|
|
|
Ps.
|
7
|
|
Impairment of long-lived assets
|
|
|
385
|
|
|
|
393
|
|
|
|
122
|
|
Loss (gain) from sale of long-lived assets
|
|
|
6
|
|
|
|
(795
|
)
|
|
|
47
|
|
Loss (gain) from sale of subsidiaries
|
|
|
137
|
|
|
|
(68
|
)
|
|
|
11
|
|
Assignment of Vitro Club Trust (1)
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
Early extinguishment of employee retirement
Obligations
|
|
|
18
|
|
|
|
8
|
|
|
|
97
|
|
Fees and costs for extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
488
|
|
Statutory employee profit sharing
|
|
|
51
|
|
|
|
55
|
|
|
|
54
|
|
Other
|
|
|
23
|
|
|
|
117
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
494
|
|
|
Ps.
|
(229
|
)
|
|
Ps.
|
869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Vitro Club holds land and facilities for our employees recreational
activities, which are held in a trust (the Trust). The Trust can only be assigned if
all of the participants name one entity as the sole beneficiary. In 2005, all the
participants named the Company as the sole beneficiary, and therefore the Company has the
right to take control of the Trust. The Company recorded the fair value of the assets and
recognized other income of Ps. 458.
|
F-31
17.
|
|
Tax loss carryforwards
|
|
|
|
At December 31, 2007, tax loss carryforwards consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Tax loss carryforwards
|
|
Expiration
|
|
Majority
|
|
|
Minority
|
|
Year
|
|
interest
|
|
|
interest
|
|
2010
|
|
Ps.
|
41
|
|
|
Ps.
|
4
|
|
2011
|
|
|
141
|
|
|
|
2
|
|
2012
|
|
|
249
|
|
|
|
14
|
|
2013
|
|
|
71
|
|
|
|
1
|
|
2014
|
|
|
261
|
|
|
|
17
|
|
2015
|
|
|
2
|
|
|
|
|
|
2016
|
|
|
2
|
|
|
|
|
|
2017
|
|
|
1
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
768
|
|
|
Ps.
|
50
|
|
|
|
|
|
|
|
|
18.
|
|
Income and asset taxes
|
|
a)
|
|
The Company is subject to ISR, and through 2007, to IMPAC on a consolidated basis in
proportion to Vitros voting interest in its subsidiaries. ISR is computed taking into
consideration the taxable and deductible effects of inflation, such as depreciation
calculated on restated asset values. Taxable income is increased or reduced by the effects
of inflation on certain monetary assets and liabilities through the inflationary component,
which is similar to the gain or loss from monetary position. As of 2007, the tax rate is
28% and in 2006 it was 29% and 30% in 2005. For ISR purposes, effective in 2005, cost of
sales is deducted instead of inventory purchases. Beginning in 2006 PTU is deductible when
paid.
|
|
|
|
|
In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year,
without deducting any debt amounts. Through 2006, IMPAC was calculated by applying 1.8% on
the net average of the majority of restated assets less certain liabilities, including
liabilities payable to banks and foreign entities. IMPAC is payable only to the extent
that it exceeded ISR payable for the same period.
|
|
|
|
|
On October 1, 2007, the IETU was enacted and went into effect on January 1, 2008. IETU
applies to the sale of goods, the provision of independent services and the granting of use
or enjoyment of goods, according to the terms of the IETU law, less certain authorized
deductions. The IETU payable is calculated by subtracting certain tax credits from the tax
determined. Revenues, as well as deductions and certain tax credits, are determined based
on cash flows generated beginning January 1, 2008. The IETU law establishes that the IETU
rate will be 16.5% in 2008, 17.0% in 2009, and 17.5% in 2010 and subsequently. In addition,
as opposed to ISR which allows for fiscal consolidation, companies that expect to incur
IETU must file individual returns.
|
|
|
|
|
Based on its financial projections, the Company estimates that it will pay only ISR in the
future. Therefore, the enactment of IETU did not have any effects on its consolidated
financial information, since it only recognizes deferred ISR.
|
F-32
|
b)
|
|
The income and asset tax expense (benefit) included in the Companys results are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Income tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
Ps.
|
116
|
|
|
Ps.
|
179
|
|
|
Ps.
|
395
|
|
Deferred
|
|
|
(923
|
)
|
|
|
(208
|
)
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(807
|
)
|
|
|
(29
|
)
|
|
|
250
|
|
Asset tax
|
|
|
288
|
|
|
|
257
|
|
|
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
(519
|
)
|
|
Ps.
|
228
|
|
|
Ps.
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To determine deferred income tax at December 31, 2005, 2006 and 2007, the Company applied
the different tax rates that will be in effect to temporary differences according to their
estimated dates of reversal.
|
|
|
c)
|
|
Net deferred tax assets presented in the consolidated balance sheets consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
Allowance for doubtful accounts
|
|
Ps.
|
94
|
|
|
Ps.
|
66
|
|
Reserve for employee retirement obligations
|
|
|
398
|
|
|
|
364
|
|
Tax loss carryforwards
|
|
|
533
|
|
|
|
229
|
|
Intangible asset
|
|
|
548
|
|
|
|
499
|
|
Fixed assets
|
|
|
(961
|
)
|
|
|
(617
|
)
|
Asset tax credit carryforwards
|
|
|
243
|
|
|
|
|
|
Derivative financial instruments
|
|
|
1
|
|
|
|
192
|
|
Inventories
|
|
|
19
|
|
|
|
43
|
|
Other
|
|
|
274
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,149
|
|
|
|
1,046
|
|
Valuation allowance
|
|
|
(514
|
)
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
Ps.
|
635
|
|
|
Ps.
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance:
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
Ps.
|
887
|
|
|
Ps.
|
1,030
|
|
Deferred tax liabilities
|
|
|
(252
|
)
|
|
|
(236
|
)
|
|
|
|
|
|
|
|
|
|
Ps.
|
635
|
|
|
Ps.
|
794
|
|
|
|
|
|
|
|
|
F-33
|
d)
|
|
Following is a reconciliation between the Companys effective income tax rate and the
statutory rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
335
|
%
|
|
|
326
|
%
|
|
|
25
|
%
|
Asset tax presented as income tax
|
|
|
142
|
|
|
|
(303
|
)
|
|
|
120
|
|
Intangible asset
|
|
|
(482
|
)
|
|
|
|
|
|
|
(28
|
)
|
Sale of subsidiaries
|
|
|
(38
|
)
|
|
|
462
|
|
|
|
8
|
|
Difference between tax and
accounting basis for monetary gain
|
|
|
(1
|
)
|
|
|
(23
|
)
|
|
|
(2
|
)
|
Foreign subsidiaries
|
|
|
(9
|
)
|
|
|
25
|
|
|
|
(5
|
)
|
Effect of reduction in statutory rate on deferred ISR
|
|
|
(21
|
)
|
|
|
(141
|
)
|
|
|
|
|
Valuation allowance
|
|
|
58
|
|
|
|
(198
|
)
|
|
|
(15
|
)
|
Nondeductible expenses
|
|
|
9
|
|
|
|
(22
|
)
|
|
|
(10
|
)
|
Other
|
|
|
37
|
|
|
|
(97
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory income tax rate
|
|
|
30
|
%
|
|
|
29
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
e)
|
|
Changes in stockholders equity for shortfall in restatement of capital and the
minimum labor liability adjustment are presented net of the deferred tax effect as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shortfall in restatement of capital
|
|
Ps.
|
20
|
|
|
Ps.
|
26
|
|
|
Ps.
|
66
|
|
Minimum labor liability adjustment
|
|
|
(6
|
)
|
|
|
19
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
14
|
|
|
Ps.
|
45
|
|
|
Ps.
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
19.
|
|
Related party transactions
|
|
|
|
The transactions with related parties, carried out in the ordinary course of business, were as
follows:
|
|
a)
|
|
Certain Arrangements with Respect to Real Estate
The Company uses real estate owned
by relatives of certain directors and senior managers to meet with customers, suppliers or
for other business purposes. The Company pays an annual fee for the right to use these
properties for a specified number of days per year. Additionally, it has agreed to pay
maintenance and operating costs. In 2005, 2006 and 2007, the aggregate amounts paid as
annual fees were approximately Ps. 10.
|
|
b)
|
|
Goods Sold to Certain Companies
The Company sells flat glass products and glass
containers to certain companies whose shareholders are directors and senior managers. In
2005, 2006 and 2007, the aggregate amount of these sales was Ps. 59, Ps. 58 and Ps. 69,
respectively.
|
|
|
|
|
The Companys subsidiary Comegua sells glass containers to Cervecería Centroamericana and to
Cervecería de Costa Rica, subsidiaries of its partners in such company. In 2005, 2006 and
2007, the aggregate amount of these sales was US$ 13 million, US$ 11 million and US$ 9
million, respectively.
|
|
|
c)
|
|
Sale of Real Estate
In 2007, a member of the Companys Board of Directors, purchased
an unused parcel of real estate from one of its subsidiaries. The price of the real estate
was US$ 5.4 million. The Company received several offers for the property and such
member of the Board made the highest
offer. The transaction was approved by the Companys Audit Committee in accordance with its
charter at the time.
|
F-34
|
d)
|
|
Compensation
For the years ended December 31, 2005, 2006 and 2007, the aggregate
compensation the Company paid to its directors and senior managers was approximately Ps.
149, Ps. 199 and Ps. 182, respectively. This amount includes fees, salaries, the use of
certain assets and services, and variable compensation.
|
20.
|
|
Business dispositions and acquisitions
|
|
a)
|
|
Sale of Química M, S.A. de C.V. (Química M)
On March 2, 2006, the Company sold
its 51% interest in Química M, to Solutia Inc. for US$ 20 million in cash. Solutia is now
the sole owner of this Mexican operation which was formed in 1995. Química M was a joint
venture between Vitro Plan and Solutia and is located near the city of Puebla, Mexico.
Química M is engaged in the production of PVB (polyvinyl butyral) interlayer, which is
used by major glass producers such as Vitro to make laminated glass for use in automobiles
and buildings.
|
|
|
b)
|
|
Acquisition of Vidrios Panameños, S. A. (VIPASA)
On April 20, 2006, the Company
announced that in a joint effort with its Central American partners and through its
subsidiary Empresas Comegua S.A. it had completed the acquisition of VIPASA, a glass
container company located in Panama for a purchase price of US$ 21 million. VIPASA is the
largest and most important glass container manufacturer for the beverage, liquor, food and
pharmaceutical industries in Panama and exports to more than 15 countries in the American
continent. VIPASAs sales in 2006 and 2007 reached approximately US$ 23 million and US$ 29
million, respectively.
|
|
|
c)
|
|
Sale of Vitrocrisa
As disclosed in note 4, on June 16, 2006 the Company completed
the sale of its 51% interest in Vitrocrisa to Libbey, recognizing a gain on the sale of
Ps. 480.
|
|
|
d)
|
|
Visteon Corporations retirement from Vitro Flex, S.A. de C
.V. (Vitro Flex) On
September 29, 2006, Vitro Plan, Vitros flat glass division, and Visteon Inc. (Visteon)
ended their joint venture agreement in Vitro Flex through a reimbursement and cancellation
of Visteons capital investment. Vitro Plan is now the sole owner of Vitro Flex. Vitro
Flex was a joint venture formed in 1979 with Fairlane Holdings (Fairlane), a Visteon
affiliate. Vitro Flex primarily manufactures tempered and laminated glass for use in Ford
vehicles. Fairlane will receive US$ 9.4 million for the 38% stake in Vitro Flex. An
initial payment of US$ 2 million was made on September 29, 2006, which will be followed by
four annual payments of US$ 1.85 million, starting on September 30, 2007. The transaction
is being funded by Vitro Flex with cash from operations. The difference between the
transaction value and the book value result in a credit of Ps. 70, recorded in the
majority stockholders equity. Vitro Flex together with Vitro Automotriz (VAU) will now
directly manage their relationship with Ford and will serve all Vitros automotive
customers. Under the prior structure, contractual restrictions limited Vitro Flexs
ability to use excess capacity for non Ford volumes.
|
|
|
e)
|
|
Acquisition of 55% of the shares of PVA
On August 29, 2007, Vitro Vidrio y Cristal,
S.A. de C.V., a subsidiary of Viméxico, acquired 55% of the outstanding shares of PVA, a
company dedicated to the installation of value added crystal products for Ps. 110. As a
result of the preliminary purchase price allocation, the Company recorded goodwill of Ps.
85.
|
F-35
|
f)
|
|
Acquisition of 50% of the shares of Vitro AFG
On July 3, 2007, Viméxico exercised its
option to acquire the remaining 50% of the outstanding shares of Vitro AFG from its joint
venture partner AFG Industries, a subsidiary of Asahi Glass Co. Limited (a Japanese
company) to assume control and increase its ownership to 100%. The transaction closed on
July 24, 2007 with Vitro paying AFG Industries US$ 6 million in cash and subsequently
changing Vitro AFGs legal name to Vidrio y Cristal del Noroeste, S.A. de C.V .
|
|
|
|
|
Vitro AFG, which is located in Mexicali, Baja California, Mexico, was formed in November
2003 as a 50/50 joint venture between Vitro and AFG Industries, with the closing of this
transaction, Viméxico terminated the joint venture and became the sole owner of this entity,
whose primary operations include the manufacture, processing and distribution of flat glass,
thereby increasing Vitros available production capacity by 78,000 tons.
|
|
|
|
|
In accordance with Bulletin B-7, Business Acquisitions, the acquisition was accounted for
using the purchase method. In conjunction with the acquisition, the Company recognized an
impairment charge of Ps. 91 related to the termination of the joint venture.
|
21.
|
|
Business segment data
|
|
|
|
The accounting policies of the Companys segments are the same as those followed by Vitro. The
Company evaluates the performance of its segments on the basis of operating income.
Intersegment sales and transfers are accounted for as if the sales and transfers were to third
parties, that is, at current market prices.
|
|
|
|
Vitros reportable segments are strategic business units that offer different products. The
segments are managed separately; each requires different manufacturing operations, technology
and marketing strategies; and each segment primarily serves a different customer base.
|
|
|
|
The Company has two reportable segments: Glass Containers and Flat Glass. The principal
products of each of the segments are summarized below:
|
|
|
|
Segment
|
|
Principal products
|
Glass Containers
|
|
Glass containers, sodium carbonate and bicarbonate, capital goods,
precision components and molds for glass industry.
|
Flat Glass
|
|
Flat glass for the construction and automotive industries.
|
F-36
The segment data presented below does not include discontinued operations for any of the
periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flat
|
|
|
Corporate &
|
|
|
|
|
|
|
Glass Containers
|
|
|
Glass
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
12,488
|
|
|
Ps.
|
13,704
|
|
|
Ps.
|
517
|
|
|
Ps.
|
26,709
|
|
Intersegment sales
|
|
|
139
|
|
|
|
3
|
|
|
|
|
|
|
|
142
|
|
Consolidated net sales
|
|
|
12,349
|
|
|
|
13,701
|
|
|
|
517
|
|
|
|
26,567
|
|
Operating income
|
|
|
1,327
|
|
|
|
514
|
|
|
|
(2
|
)
|
|
|
1,839
|
|
Total assets
|
|
|
14,668
|
|
|
|
13,494
|
|
|
|
4,775
|
|
|
|
32,937
|
|
Capital expenditures
|
|
|
622
|
|
|
|
468
|
|
|
|
17
|
|
|
|
1,107
|
|
Depreciation and amortization
|
|
|
1,139
|
|
|
|
668
|
|
|
|
47
|
|
|
|
1,854
|
|
Goodwill
|
|
|
|
|
|
|
773
|
|
|
|
|
|
|
|
773
|
|
Impairment
|
|
|
|
|
|
|
214
|
|
|
|
171
|
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
14,068
|
|
|
Ps.
|
13,462
|
|
|
Ps.
|
433
|
|
|
Ps.
|
27,963
|
|
Intersegment sales
|
|
|
86
|
|
|
|
1
|
|
|
|
|
|
|
|
87
|
|
Consolidated net sales
|
|
|
13,982
|
|
|
|
13,461
|
|
|
|
433
|
|
|
|
27,876
|
|
Operating income
|
|
|
1,853
|
|
|
|
418
|
|
|
|
(154
|
)
|
|
|
2,117
|
|
Total assets
|
|
|
13,937
|
|
|
|
11,401
|
|
|
|
3,357
|
|
|
|
28,695
|
|
Capital expenditures
|
|
|
894
|
|
|
|
338
|
|
|
|
20
|
|
|
|
1,252
|
|
Depreciation and amortization
|
|
|
1,160
|
|
|
|
595
|
|
|
|
40
|
|
|
|
1,795
|
|
Goodwill
|
|
|
3
|
|
|
|
785
|
|
|
|
|
|
|
|
788
|
|
Impairment
|
|
|
55
|
|
|
|
334
|
|
|
|
4
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
14,676
|
|
|
Ps.
|
13,605
|
|
|
Ps.
|
361
|
|
|
Ps.
|
28,642
|
|
Intersegment sales
|
|
|
37
|
|
|
|
14
|
|
|
|
|
|
|
|
51
|
|
Consolidated net sales
|
|
|
14,639
|
|
|
|
13,591
|
|
|
|
361
|
|
|
|
28,591
|
|
Operating income
|
|
|
2,054
|
|
|
|
782
|
|
|
|
(132
|
)
|
|
|
2,704
|
|
Total assets
|
|
|
17,040
|
|
|
|
12,835
|
|
|
|
2,312
|
|
|
|
32,187
|
|
Capital expenditures
|
|
|
2,328
|
|
|
|
324
|
|
|
|
43
|
|
|
|
2,695
|
|
Depreciation and amortization
|
|
|
870
|
|
|
|
480
|
|
|
|
64
|
|
|
|
1,414
|
|
Goodwill
|
|
|
3
|
|
|
|
870
|
|
|
|
|
|
|
|
873
|
|
Impairment
|
|
|
31
|
|
|
|
91
|
|
|
|
|
|
|
|
122
|
|
Export sales from Mexico, substantially all of which are denominated in US dollars, are mainly
to the United States, Canada and Europe and were as follows (in million of US dollars):
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2005
|
|
2006
|
|
|
2007
|
|
US$
|
588
|
|
US$
|
556
|
|
|
US$
|
601
|
|
|
|
|
|
|
|
|
F-37
Certain geographic information about the Companys operations is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Net sales
(1)
to customers in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
Ps.
|
10,919
|
|
|
Ps.
|
11,875
|
|
|
Ps.
|
12,707
|
|
All foreign countries, mainly the
United States, Canada and Europe
|
|
|
15,648
|
|
|
|
16,001
|
|
|
|
15,884
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Ps.
|
26,567
|
|
|
Ps.
|
27,876
|
|
|
Ps.
|
28,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net sales are attributed to countries based on the location of the
customer.
|
Consolidated net sales to any single external customer did not exceed more than 8% of Vitros
total consolidated net sales in a year presented.
Land and buildings, machinery and equipment geographical information is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Land and buildings, machinery
and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
Ps.
|
15,195
|
|
|
Ps.
|
13,842
|
|
|
Ps.
|
14,960
|
|
All foreign countries, mainly the
United States, Europe,
Central and South America
|
|
|
2,620
|
|
|
|
2,481
|
|
|
|
2,881
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Ps.
|
17,815
|
|
|
Ps.
|
16,323
|
|
|
Ps.
|
17,841
|
|
|
|
|
|
|
|
|
|
|
|
22.
|
|
New accounting principles
|
|
|
|
In 2007, the Mexican Board for Research and Development of Financial Information Standards
(CINIF) issued the following NIFs and Interpretations of Financial Reporting Standards
(INIF), which became effective for fiscal years beginning on January 1, 2008:
|
|
|
|
NIF B-2, Statement of Cash Flows.
|
|
|
|
|
NIF B-10, Effects of Inflation.
|
|
|
|
|
NIF B-15, Translation of Foreign Currencies.
|
|
|
|
|
NIF D-3, Employee Benefits.
|
|
|
|
|
NIF D-4, Income Taxes.
|
|
|
|
|
INIF 5, Recognition of the Additional Consideration Agreed to at the
Inception of a Derivative Financial Instrument to Adjust It to Fair Value.
|
|
|
|
|
INIF 6, Timing of Formal Hedge Designation.
|
|
|
|
|
INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash
Flow Hedge on a Forecasted Purchase of a Non-Financial Asset.
|
F-38
Some of the significant changes established by these standards are as follows:
|
|
|
NIF B-2, Statement of Cash Flows
This NIF establishes general rules for the
presentation, structure and preparation of a cash flow statement, as well as the
disclosures supplementing such statement, which replaces the statement of changes in
financial position. NIF B-2 requires that the statement show a companys cash inflows and
outflows during the period. Line items should be preferably presented gross. Cash flows
from financing activities are now presented below those from investing activities (a
departure from the statement of changes in financial position). In addition, NIF B-2
allows entities to determine and present their cash flows from operating activities using
either the direct or the indirect method.
|
|
|
|
|
NIF B-10, Effects of Inflation
CINIF defines two economic environments: a)
inflationary environment, when cumulative inflation of the three preceding years is 26% or
more, in which case, the effects of inflation should be recognized using the comprehensive
method; and b) non-inflationary environment, when cumulative inflation of the three
preceding years is less than 26%, in which case, no inflationary effects should be
recognized in the financial statements. Additionally, NIF B-10 eliminates the replacement
cost and specific indexation methods for inventories and fixed assets, respectively, and
requires that the cumulative gain or loss from holding non-monetary assets be reclassified
to retained earnings
,
if such gain or loss is realized; the gain or loss that is not
realized will be maintained in stockholders equity and charged to current earnings of the
period in which the originating item is realized.
|
|
|
|
|
NIF B-15, Translation of Foreign Currencies
NIF B-15 eliminates classification of
integrated foreign operations and foreign entities and incorporates the concepts of
accounting currency, functional currency and reporting currency. NIF B-15 establishes the
procedures to translate the financial information of a foreign subsidiary: i) from the
accounting to the functional currency; and ii) from the functional to the reporting
currency, and allows entities to present their financial statements in a reporting currency
other than their functional currency.
|
|
|
|
|
NIF D-3, Employee Benefits
This NIF includes current and deferred PTU. Deferred PTU
should be calculated using the same methodology established in NIF D-4. It also includes
the career salary concept and the amortization period of most items is reduced to five
years, as follows:
|
|
|
|
|
The following unrecognized items will be amortized over a 5-year period, or less, if
employees remaining labor life is less than 5 years:
|
|
|
|
The beginning balance of transition obligation for severance and retirement
benefits.
|
|
|
|
|
The beginning balance of prior service cost and plan amendments.
|
|
|
|
|
The beginning balance of gains and losses from seniority premiums and pension
benefits should be amortized over a 5-year period (net of the transition
obligation), with the option to fully amortize such item against the results of
2008.
|
|
|
|
The beginning balance of gains and losses from severance benefits should be amortized
against the results of 2008.
|
|
|
|
|
NIF D-4,
Income Taxes
This NIF relocates accounting for current and deferred PTU to
NIF D-3, eliminates the permanent difference concept, redefines and incorporates various
definitions and requires that the cumulative ISR effect be reclassified to retained
earnings, unless it is identified with some of the other comprehensive income items that
have not been applied against current earnings.
|
F-39
|
|
|
INIF 5, Recognition of the Additional Consideration Agreed to at the Inception of a
Derivative Financial Instrument to Adjust It to Fair Value
INIF 5 states that any
additional consideration agreed to at the inception of a derivative financial instrument to
adjust it to its fair value at that time should be part of the instruments initial fair
value and not subject to amortization as established by paragraph 90 of Bulletin C-10.
INIF 5 also establishes that the effect of the change should be prospectively recognized,
affecting results of the period in which this INIF becomes effective. If the effect of the
change is material, it should be disclosed.
|
|
|
|
|
INIF 6, Timing of Formal Hedge Designation
INIF 6 states that hedge designations may
be made as of the date a derivative financial instrument is contracted, or at a later date,
provided its effects are prospectively recognized as of the date when formal conditions are
met and the instrument qualifies as a hedging relationship. Paragraph 51 of Bulletin C-10
only considered the hedge designation at the inception of the transaction.
|
|
|
|
|
INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash Flow Hedge on
a Forecasted Purchase of a Non-Financial Asset
- INIF 7 states that the effect of a hedge
reflected in other comprehensive income or loss resulting from a forecasted purchase of a
non-financial asset should be capitalized within the cost of such asset, whose price is set
through a hedge, rather than reclassifying the effect to the results of the period affected
by the asset, as required by Paragraph 105 of Bulletin C-10. The effect of this change
should be recognized by applying any amounts recorded in other comprehensive income or loss
to the cost of the acquired asset, as of the effective date of this INIF.
|
|
|
At the date of issuance of these consolidated financial statements, the Company has not fully
assessed the effects of adopting these new standards on its financial information.
|
|
23.
|
|
Authorization of financial statements issuance
|
|
|
|
On February 29, 2008 the issuance of the consolidated financial statements was authorized by:
|
|
|
|
Federico Sada G.
President and Chief Executive Officer
|
|
|
|
Claudio L. Del Valle C.
Chief Administrative Officer
|
|
|
|
Enrique Osorio López
Chief Financial Officer
|
|
|
|
These consolidated financial statements are subject to approval at the ordinary stockholders
meeting, who may modify the financial statements, based on provisions set forth by the Mexican
General Corporate Law.
|
F-40
24.
|
|
Differences between Mexican FRS and U.S. generally accepted accounting principles
|
|
|
|
The Companys consolidated financial statements are prepared in accordance with Mexican FRS,
which differ in certain significant respects from accounting principles generally accepted in the
United States of America (U.S. GAAP). The Mexican FRS consolidated financial statements include
the effects of inflation as provided for under Bulletin B-10, (see note 3 b), whereas financial
statements prepared under U.S. GAAP are presented on a historical basis. However, the following
reconciliation to U.S. GAAP does not include the reversal of the adjustments required under
Bulletin B-10, permitted by the rules and regulations of the Securities and Exchange Commission
(the SEC). The application of Bulletin B-10 represents a comprehensive measure of the effects
of price level changes in the inflationary Mexican economy and, as such, is considered a more
meaningful presentation than historical cost-based financial reporting for both Mexican and U.S.
accounting purposes.
|
|
|
|
As mentioned in note 22, NIF B-10, Effects of Inflation, is effective January 1, 2008. NIF
B-10 revised the accounting for inflation such that the inflation accounting methods summarized
in note 3 b) will no longer apply unless the economic environment in Mexico qualifies as
inflationary for purposes of Mexican FRS. Given the cumulative inflation in Mexico for the
three years ended December 31, 2007, the Mexican economic environment will not qualify as
inflationary in 2008, thereby eliminating inflationary accounting in the Companys consolidated
Mexican FRS financial statements. This will result in the elimination of certain reconciling
items between Mexican FRS and U.S. GAAP in 2008 and thereafter as discussed in inserts (e) and
(h) below.
|
|
|
|
The other differences between Mexican FRS and U.S. GAAP and the effect on consolidated net income
(loss) and consolidated stockholders equity are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
|
|
|
|
Year ended December 31,
|
|
|
millions)
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
(Convenience
|
|
|
|
(Ps. millions)
|
|
|
Translation)
|
|
Reconciliation of Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of majority interest as reported under Mexican FRS
|
|
Ps.
|
63
|
|
|
Ps.
|
401
|
|
|
Ps.
|
(13
|
)
|
|
US$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority interest (see a)
|
|
|
(61
|
)
|
|
|
26
|
|
|
|
17
|
|
|
|
2
|
|
Deferred income taxes (see b)
|
|
|
(436
|
)
|
|
|
54
|
|
|
|
55
|
|
|
|
5
|
|
Negative goodwill and reduction in depreciation expense (see c)
|
|
|
112
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
Deferred workers profit sharing (see d)
|
|
|
43
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
Monetary position result on deferred income taxes and deferred
workers profit sharing (see e)
|
|
|
27
|
|
|
|
44
|
|
|
|
31
|
|
|
|
3
|
|
Capitalization of interest (see f)
|
|
|
56
|
|
|
|
72
|
|
|
|
16
|
|
|
|
1
|
|
Amortization of capitalized interest (see f)
|
|
|
(28
|
)
|
|
|
(36
|
)
|
|
|
(36
|
)
|
|
|
(3
|
)
|
Effect of applying Bulletin B-10 (see h)
|
|
|
(184
|
)
|
|
|
(187
|
)
|
|
|
(36
|
)
|
|
|
(3
|
)
|
Effect of applying Bulletin B-15 (see i)
|
|
|
(12
|
)
|
|
|
34
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments (see j)
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (see k)
|
|
|
(1
|
)
|
|
|
(57
|
)
|
|
|
26
|
|
|
|
2
|
|
Employee retirement obligations (see m)
|
|
|
39
|
|
|
|
31
|
|
|
|
(15
|
)
|
|
|
(1
|
)
|
Purchase of Visteons capital investment (see n)
|
|
|
|
|
|
|
1
|
|
|
|
5
|
|
|
|
|
|
Sale of real estate (see o)
|
|
|
|
|
|
|
(815
|
)
|
|
|
429
|
|
|
|
39
|
|
Impairment of long-lived assets (see p)
|
|
|
(84
|
)
|
|
|
379
|
|
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(350
|
)
|
|
|
(475
|
)
|
|
|
482
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(287
|
)
|
|
Ps.
|
(74
|
)
|
|
Ps.
|
469
|
|
|
US$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
(US$
|
|
|
|
|
|
|
|
|
|
|
|
millions)
|
|
|
|
2006
|
|
|
2007
|
|
|
(Convenience
|
|
|
|
(Ps. millions)
|
|
|
Translation)
|
|
Reconciliation of Stockholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity reported under Mexican FRS
|
|
Ps.
|
9,366
|
|
|
Ps.
|
9,386
|
|
|
US$
|
864
|
|
Less minority interest included as stockholders equity
under Mexican FRS (see a)
|
|
|
(1,892
|
)
|
|
|
(1,960
|
)
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
Majority stockholders equity under Mexican FRS
|
|
|
7,474
|
|
|
|
7,426
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority interest (see a)
|
|
|
(63
|
)
|
|
|
(24
|
)
|
|
|
(2
|
)
|
Deferred income taxes (see b)
|
|
|
(858
|
)
|
|
|
(673
|
)
|
|
|
(62
|
)
|
Capitalization of interest (see f)
|
|
|
358
|
|
|
|
374
|
|
|
|
34
|
|
Accumulated amortization for capitalized interest (see f)
|
|
|
(149
|
)
|
|
|
(185
|
)
|
|
|
(17
|
)
|
Goodwill (see g)
|
|
|
124
|
|
|
|
124
|
|
|
|
11
|
|
Effect of applying Bulletin B-10 (see h)
|
|
|
4
|
|
|
|
3
|
|
|
|
|
|
Effect of applying Bulletin B-15 (see i)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
Discontinued operations (see k)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
Effect of SFAS No. 158 (see m)
|
|
|
(371
|
)
|
|
|
(895
|
)
|
|
|
(84
|
)
|
Employee retirement obligations (see m)
|
|
|
(88
|
)
|
|
|
(100
|
)
|
|
|
(7
|
)
|
Purchase of Visteons capital investment (see n)
|
|
|
(72
|
)
|
|
|
(67
|
)
|
|
|
(6
|
)
|
Sale of real estate (see o)
|
|
|
(815
|
)
|
|
|
(386
|
)
|
|
|
(36
|
)
|
Impairment of long-lived assets (see p)
|
|
|
263
|
|
|
|
253
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(1,764
|
)
|
|
|
(1,576
|
)
|
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity under U.S. GAAP
|
|
Ps.
|
5,710
|
|
|
Ps.
|
5,850
|
|
|
US$
|
538
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
|
Minority interest
|
|
|
|
|
Under Mexican FRS, minority interest in consolidated subsidiaries is presented as a
separate component within the stockholders equity section in the consolidated balance
sheet. For U.S. GAAP purposes, minority interest is not included in stockholders equity
and is presented below total liabilities and above the stockholders equity section in the
consolidated balance sheet.
|
|
|
|
|
As discussed in insert q(15) below, SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51, will be effective for the
Company beginning January 1, 2009. SFAS No. 160 modifies the presentation of minority
interest in the balance sheet (to be included within stockholders equity) and statement
of income similar to that of Mexican FRS, for which reason the Company anticipates that
this difference will no longer be applicable beginning January 1, 2009.
|
F-42
|
b)
|
|
Deferred income taxes
|
|
|
|
|
Under Mexican FRS as required by Bulletin D-4, Accounting for Income Tax, Tax on Assets
and Employee Statutory Profit Sharing, income taxes are charged to results as they are
incurred and the Company recognizes deferred income tax assets and liabilities for the
future consequences of temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective income tax bases, measured using
enacted rates. The effects of changes in the statutory rates are accounted for in the
period that includes the enactment date. Deferred income tax assets are also recognized
for the estimated future effects of tax loss carryforwards and asset tax credit
carryforwards. Deferred tax assets are recognized only when it is highly probable that
sufficient future taxable income will be generated to recover such deferred tax assets.
|
|
|
|
|
Under U.S. GAAP, as required by SFAS No. 109, Accounting for Income Taxes, the Company
recognizes deferred income tax assets and liabilities for the future consequences of
temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective income tax bases, measured using enacted rates. The
effects of changes in the statutory rates are accounted for in the period that includes
the enactment date. Deferred income tax assets are also recognized for the estimated
future effects of tax loss carryforwards and asset tax credit carryforwards.
|
|
|
|
|
The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income, projections of future taxable income over the periods
in which the deferred tax assets are deductible and tax planning strategies that would be
taken to prevent an operating loss or tax credit carryforward from expiring unused,
management believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the existing valuation allowance at December 31,
2007.
|
|
|
|
|
For U.S. GAAP purposes the Company recognizes deferred taxes each period for the changes
in the taxable portions of its distributable stockholders equity. The Companys policy is
to compare the deferred tax balance that would be required if all of
the stockholders
equity were distributed. This amount is compared to the total deferred tax balance
recorded prior to this adjustment. The difference between the amount recorded and the
amount calculated from the stockholders equity taxable accounts is recorded as an
adjustment to deferred taxes as of the balance sheet date.
|
|
|
|
|
For U.S. GAAP purposes the Company recognizes a deferred tax asset for the temporary
difference that exists between the book basis and the tax basis of its foreign
subsidiaries that legally own Vitros intellectual property at the applicable tax rate in
the foreign jurisdiction based on the expected reversal date. For Mexican FRS purposes,
the Company recognizes a deferred tax asset for the temporary difference that exists
between the book basis and the tax basis at the applicable rate in Mexico, which is where
it expects to recognize such benefits.
|
F-43
|
|
|
U.S. GAAP differences to the extent taxable are reflected in the U.S. GAAP deferred tax
balances. The significant components of deferred tax assets and liabilities, which differ
for U.S. GAAP from deferred tax assets and liabilities calculated under Mexican FRS, are
presented as follows:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
Deferred Tax Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
Ps.
|
267
|
|
|
Ps.
|
370
|
|
Discontinued operations
|
|
|
7
|
|
|
|
|
|
Sale of real estate
|
|
|
227
|
|
|
|
108
|
|
Purchase of Visteon capital investment
|
|
|
20
|
|
|
|
19
|
|
Buildings, machinery and equipment
|
|
|
(87
|
)
|
|
|
(72
|
)
|
Stockholders equity
|
|
|
(892
|
)
|
|
|
(776
|
)
|
Intellectual property
|
|
|
(342
|
)
|
|
|
(269
|
)
|
Other
|
|
|
(58
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
Ps.
|
(858
|
)
|
|
Ps.
|
(673
|
)
|
|
|
|
|
|
|
|
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48, Accounting for Uncertainty in Income Taxes. FIN 48 provides detailed guidance for
the financial statement recognition, measurement and disclosure of uncertain tax positions
recognized in an enterprises financial statements in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. FIN 48
requires an entity to recognize the financial statement impact of a tax position when it
is more likely than not that the position will be sustained upon examination. If the tax
position meets the more-likely-than-not recognition threshold, the tax effect is
recognized at the largest amount of the benefit that is greater than 50% likely of being
realized upon ultimate settlement. Any difference between the tax position taken in the
tax return and the tax position recognized in the financial statements using the criteria
above results in the recognition of a liability in the financial statements for the
unrecognized benefit. Similarly, if a tax position fails to meet the more-likely-than-not
recognition threshold, the benefit taken in the tax return will also result in the
recognition of a liability in the financial statements for the full amount of the
unrecognized benefit. FIN 48 became effective for fiscal years beginning after December
15, 2006 for public entities and their subsidiaries. The Company adopted FIN 48 as of
January 1, 2007, as required. The provisions of FIN 48 were applied to all tax positions
under SFAS No. 109 upon initial adoption. The impact of adopting this interpretation was
not material to the Companys consolidated financial position, results of operations or
cash flows.
It is the Companys policy to classify interest and penalties related to income tax
related matters within income tax expense and other expenses, respectively. The
Companys significant operations are all located in Mexico, the United States of America,
Panama, Guatemala, Costa Rica and Spain. The tax laws in these jurisdictions permit the
respective tax authorities to examine previously filed tax returns for the following
years:
|
|
|
|
|
|
|
|
|
Mexico
|
|
U.S.
|
|
Spain
|
|
Guatemala
|
|
Costa Rica
|
2003-2007
|
|
2003-2007
|
|
2004-2007
|
|
2004-2007
|
|
2005-2007
|
|
c)
|
|
Negative goodwill and reduction in depreciation expense
|
|
|
|
|
Through December 31, 2004, for purposes of Mexican FRS, the Company recorded as a
component of the consolidated statements of operations the amortization of the excess of
the adjusted book value over cost of certain acquisitions (negative goodwill). The period
of amortization for negative goodwill was 18 months.
|
|
|
|
|
Under U.S. GAAP, SFAS No. 141, Business Combinations, requires that any negative
goodwill (excess of fair value over cost) first be allocated to reduce long-lived assets
acquired and if any negative goodwill remains that amount is recognized as an
extraordinary gain.
|
|
|
|
|
Effective January 1, 2005, Bulletin B-7, conforms to the accounting established by U.S.
GAAP as it relates to the accounting for negative goodwill.
|
F-44
|
d)
|
|
Deferred workers profit sharing
|
|
|
|
|
In accordance with Mexican FRS the Company determines the provision for deferred workers
profit sharing by applying the partial accrual method of Bulletin D-4 applicable to
temporary differences between the financial and adjusted tax income that are expected to
reverse within a defined period. For U.S. GAAP purposes the Company accrues for workers
profit sharing based on a liability approach similar to accounting for income taxes under
SFAS No. 109.
|
|
|
|
|
As discussed in note 22, NIF D-3, Employee Benefits, is effective beginning January 1,
2008, which will require companies to calculate deferred PTU using a similar balance sheet
methodology similar to that required by U.S. GAAP.
|
|
|
e)
|
|
Monetary position result on deferred income taxes and deferred workers profit
sharing
|
|
|
|
|
The monetary position result is determined by (i) applying the annual inflation factor to
the net monetary position of the U.S. GAAP adjustments at the beginning of the period,
plus (ii) the monetary position effect of such adjustments during the period, determined
in accordance with the weighted average inflation factor.
|
|
|
|
|
As discussed in the introduction to this note as well as note 22, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future.
|
|
|
f)
|
|
Capitalization of interest
|
|
|
|
|
Under Mexican FRS beginning January 1, 2007, the Company adopted NIF D-6, Capitalization
of Comprehensive Financing Result, accordingly the capitalization of the comprehensive
financing result (interest expense, foreign exchange results and monetary position result)
generated by borrowings obtained to finance investment directly attributable to the
acquisition of qualifying assets is mandatory. Prior to the adoption of NIF D-6, the
Company did not capitalize the comprehensive financing result as it was optional.
|
|
|
|
|
In accordance with SFAS No. 34, Capitalization of Interest Cost, if the comprehensive
financing result is incurred during the construction of qualifying assets, capitalization
is required as part of the cost of such assets. Accordingly, until December 31, 2006 a
reconciling item for the capitalization of a portion of the comprehensive financing result
was included in the U.S. GAAP reconciliation of the majority net income and majority
stockholders equity. The amortization expense and related accumulated amortization of
such items generates a difference compared to Mexican FRS.
|
|
|
|
|
Beginning on January 1, 2007, a reconciling item is generated for borrowings denominated
in US dollars, related to the foreign exchange results and monetary position result, which
is capitalized under Mexican FRS and not for U.S. GAAP. If the borrowings are denominated
in Mexican pesos, the amount of interest to be capitalized as noted above is reduced by
the gain on monetary position associated with the debt.
|
F-45
|
g)
|
|
Goodwill
|
|
|
|
|
As mentioned in note 3 j), under Mexican FRS, until December 31, 2004 goodwill represented
the excess of cost over book value of subsidiaries as of the date of acquisition and was
restated using the NCPI and amortized using the straight-line method over 20 years.
Beginning on January 1, 2005, goodwill represents the excess of cost over fair value of
subsidiaries as of the date of acquisition. Goodwill is restated using the NCPI and at
least once a year is subject to impairment tests, as it ceased to be amortized under the
provisions of Bulletin B-7 (see note 3 j).
|
|
|
|
|
In accordance with SFAS No. 142, Goodwill and Other Intangibles Assets, beginning in
2002 goodwill and indefinite-lived assets are also no longer subject to amortization, but
rather are subject at least once a year to impairment tests.
|
|
|
|
|
The difference between Mexican FRS and U.S. GAAP as it relates to this item is due to the
accumulate amortization of goodwill recorded under Mexican FRS that has been reversed in
the reconciliation of stockholders equity for purposes of U.S. GAAP.
|
|
|
|
|
The changes in the carrying amount of goodwill for the years ended December 31, 2006 and
2007 are as follows:
|
|
|
|
|
|
Balance as of December 31, 2005
|
|
Ps.
|
763
|
|
Changes for effects of inflation and exchange rates
|
|
|
83
|
|
|
|
|
|
Balance as of December 31, 2006
|
|
|
846
|
|
Acquisition
(1)
|
|
|
85
|
|
Changes for effects of inflation and exchange rates
|
|
|
63
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
Ps.
|
994
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company recorded goodwill of Ps. 85 related to the acquisition of 55%
of the shares of Productos de Valor Agregado en Cristal, S.A. de C.V (see note 20 e).
|
|
h)
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
As discussed in note 3 g), under Mexican FRS Bulletin B-10 allows the restatement of the
value of machinery and equipment purchased in a foreign country using the consumer price
index of the country of origin and the period-end exchange rate. For U.S. GAAP purposes,
such restatement is based on the NCPI.
|
|
|
|
|
As discussed in the introduction to this note as well as note 22, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future. Further, even
during inflationary periods, the alternate methodology described above has been eliminated
by NIF B-10.
|
|
|
i)
|
|
Effect of applying Bulletin B-15
|
|
|
|
|
In 1997, the IMCP issued Bulletin B-15, Foreign Currency Transactions and Translation of
Financial Statements of Foreign Operations, which specifies the procedures to be applied
in the consolidation of foreign subsidiaries by Mexican companies for (i) current year
amounts and (ii) prior year amounts, presented for comparative purposes. Vitros
accounting policies for the consolidation of its
foreign subsidiaries are described in notes 2 c) and 3 b). Such policies conform to the
requirements of Bulletin B-15.
|
F-46
|
|
|
The Company believes that the application of the methodology of Bulletin B-15 to translate
the current year amounts for foreign operations does not result in a difference between
Mexican FRS and U.S. GAAP that must be reconciled in order to comply with the rules and
regulations of the SEC. However, there are two methods allowed under Bulletin B-15 to
restate prior year amounts for foreign subsidiaries. Vitro uses the method that
reconsolidates prior year balances by restating foreign subsidiaries using the current
inflation rate in the foreign country and translating into pesos using the year-end
exchange rate. We believe that this methodology of Bulletin B-15 used to restate prior
years balances for comparative purposes does not conform to the requirements of SEC Rule
3-20e of Regulation S-X, which requires all amounts in financial statements to be
presented in the same reporting currency. Accordingly, in filings with the SEC, we are
including an adjustment for the difference in methodologies of restating prior year
balances. These amounts Ps. (12) and Ps. 34 in 2005 and 2006, respectively, in the
reconciliation of net income, and Ps. (71) in 2006 in the reconciliation of stockholders
equity represent the differences between (i) the balance if all amounts were adjusted by
applying the NCPI, and (ii) the balance used in the primary financial statements to comply
with Bulletin B-15.
|
|
|
j)
|
|
Derivative financial instruments
|
|
|
|
|
As of January 1, 2005, in accordance with Mexican FRS, as mentioned in note 3 a), the
Company values and records all derivative instruments and hedging activities according to
Bulletin C-10, which establishes similar accounting treatment as described in SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. Prior to the
implementation of Bulletin C-10, financial instruments entered into for hedging purposes
were valued using the same valuation criteria of the underlying assets or liabilities
hedged, and the effect of such valuation was recognized in net income, net of costs,
expenses or income from the assets or liabilities whose risks were being hedged.
|
|
|
|
|
The Company determined that the accounting for derivative financial instruments is the
same for Mexican FRS and U.S. GAAP as they relate to their consolidated financial
statements as of and for the years ended December 31, 2005, 2006 and 2007. The effects of
the initial application of Bulletin C-10 were already reflected in the U.S. GAAP financial
statements for 2004. Therefore, the cumulative effect of the change in accounting
principle is reconciled out of the amounts presented in the U.S. GAAP income statement for
2005.
|
|
|
k)
|
|
Discontinued operations
|
|
|
|
|
Mexican FRS as defined by Bulletin C-15, Impairment of Long-lived Assets and their
Disposal, requires the asset group being disposed of to be presented as a discontinued
operation only if its operations are individually significant to the consolidated
operations. Bulletin C-15 defines the discontinuance of an operation as the process of
final interruption of a significant business activity of an entity and establishes that
the discontinuation of an operation implies the final interruption of a significant
activity of the entity that leads to the sale, abandonment, exchange or return to
stockholders of long-lived assets originally intended for use, in addition to other assets
and liabilities related to the operation. Therefore, the analysis of the significance of
the disposed business is performed without considering the eventual gain or loss on sale
or aggregating each business
being disposed with other businesses sold, and instead considers only the significance of
the business activity of the relevant business being sold.
|
F-47
|
|
|
U.S. GAAP as defined by SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, requires that an entity report as discontinued operations those
components of its business that have been classified as held for sale. A component of an
entity is defined as comprising operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest of the
business. Individually insignificant disposals of a component of an entity should be
aggregated for purposes of assessing materiality for all periods presented. Therefore,
individually insignificant dispositions should be aggregated and reported as discontinued
operations under SFAS No. 144 beginning in the period the impact of the dispositions is
material to the financial statements of any period presented. This evaluation should also
include the effect of the gain or loss on sale of the component.
|
|
|
|
|
As a result of the differences identified above between U.S. GAAP and Mexican FRS, the
following components of the Companys business were presented as discontinued operations
for U.S. GAAP purposes and were not under Mexican FRS due to their low level of
significance.
|
|
|
|
On April 1, 2005, the Company sold 100% of its interest in Plásticos Bosco, S.A.
de C.V. and Inmobiliaria de la Suerte, S.A. de C.V., which it refers to collectively
as Bosco, its subsidiaries engaged in the manufacturing and distribution of plastic
tubes and disposable thermo fold ware and industrial products, to Convermex, S.A. de
C.V., which it refers to as Convermex, for US$10 million in cash. The consolidated
net sales and operating loss of Bosco were approximately Ps. 112 and Ps. 8,
respectively, during the period beginning on January 1, 2005 and ending on April 1,
2005. The Company recorded a loss for the sale of Bosco of Ps. 137.
|
|
|
|
|
On March 2, 2006, the Company sold its 51% interest in Química M, to Solutia Inc.
for US$ 20 million in cash, recognizing a gain on sale of Ps. 101 under Mexican FRS
and Ps. 100 under U.S. GAAP. Solutia is now the sole owner of this Mexican operation,
which was formed in 1995. Química M was previously included in our Flat Glass
reportable segment.
|
Basis difference between U.S. GAAP and Mexican FRS
The basis of the assets and
liabilities under U.S. GAAP of the entities mentioned above at the time of their sale was
different from the basis of such assets and liabilities under Mexican FRS; accordingly,
the gain recorded on disposal of such entities under U.S. GAAP differs from that under
Mexican FRS.
Disclosures of discontinued operations
The following table discloses the condensed
statements of operations of the Companys discontinued operations (includes Vitrocrisa,
which is considered to be a discontinued operation under both Mexican FRS and U.S. GAAP)
for purposes of U.S. GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
|
|
Vitrocrisa
|
|
|
Química M
|
|
|
Total
|
|
Condensed Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Ps.
|
1,033
|
|
|
Ps.
|
82
|
|
|
Ps.
|
1,115
|
|
Cost of sales
|
|
|
861
|
|
|
|
75
|
|
|
|
936
|
|
General, administrative and selling expenses
|
|
|
130
|
|
|
|
5
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
42
|
|
|
|
2
|
|
|
|
44
|
|
Total financing cost and other expenses
|
|
|
(96
|
)
|
|
|
(2
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax
|
|
|
(54
|
)
|
|
|
|
|
|
|
(54
|
)
|
Income tax benefit (expense)
|
|
|
23
|
|
|
|
(1
|
)
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
Ps.
|
(31
|
)
|
|
Ps.
|
(1
|
)
|
|
Ps.
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
F-48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005
|
|
|
|
BOSCO
|
|
|
Vitrocrisa
|
|
|
Química M
|
|
|
Total
|
|
Condensed Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Ps.
|
112
|
|
|
Ps.
|
2,345
|
|
|
Ps.
|
644
|
|
|
Ps.
|
3,101
|
|
Cost of sales
|
|
|
102
|
|
|
|
2,004
|
|
|
|
540
|
|
|
|
2,646
|
|
General, administrative and selling expenses
|
|
|
18
|
|
|
|
277
|
|
|
|
40
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(8
|
)
|
|
|
64
|
|
|
|
64
|
|
|
|
120
|
|
Total financing cost and other expenses
|
|
|
(2
|
)
|
|
|
(63
|
)
|
|
|
(6
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income tax
|
|
|
(10
|
)
|
|
|
1
|
|
|
|
58
|
|
|
|
49
|
|
Income tax (expense) benefit
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
(18
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
Ps.
|
(11
|
)
|
|
Ps.
|
4
|
|
|
Ps.
|
40
|
|
|
Ps.
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
l)
|
|
Deconsolidation of Comegua
|
|
|
|
|
For Mexican FRS purposes, based on: (a) the Companys control over the CEO whose function
is to govern the operating decisions and financial policies of Comegua; (b) the Companys
sole right to propose the CEO for designation by the Board of Directors of Comegua; and
(c) the Companys sole right to remove the CEO, the Company concludes that it controls
Comegua as defined by Bulletin B-8, Consolidated and Combined Financial Statements and
Valuation of Permanent Investments in Shares and therefore, Comegua should be
consolidated in accordance with Mexican FRS.
|
|
|
|
|
For U.S. GAAP purposes, the Company has determined that the control it retains over the
management of the annual budget of Comegua is not unilateral and is not sufficient to meet
all of the technical requirements for consolidation. The Companys position is based on
the guidance provided by EITF 96-16, Investors Accounting for an Investee When the
Investor Has a Majority of the Voting Interest but the Minority Shareholder or
Shareholders Have Certain Approval or Veto Rights. Under EITF 96-16, such approval and
veto rights held by the minority shareholders of Comegua, including the approval of annual
budget, qualify as substantive participating rights and therefore do not allow the Company
to consolidate Comegua in its financial statements for U.S. GAAP purposes. Therefore, the
Companys investment in Comegua is recorded by applying the equity method in the Companys
U.S. GAAP consolidated financial statements. (See insert q(3)).
|
|
|
m)
|
|
Employee retirement obligations
|
|
|
|
|
The Company maintains defined benefit pension plans for all of its subsidiaries and
provides for seniority premiums and severance payments (severance indemnities) for all of
its Mexican subsidiaries. For its Mexican FRS consolidated financial statements, the
Company applies Bulletin D-3. Prior to 2006, the accounting treatment for pensions and
seniority premiums set forth in this Bulletin is substantially the same as those set forth
in SFAS No. 87, Employers Accounting for Pensions. The Company records the pension cost
determined by actuarial computations, as described in notes 3 k) and 11. Significant
assumptions (weighted-average rates) used in determining net periodic pension cost and the
Companys related pension obligations for 2007 and 2006 are also described in note 11.
|
F-49
|
|
|
Severance indemnities Under Mexican FRS, effective 2005 revised Bulletin D-3 requires
the recognition of a severance indemnity liability calculated based on actuarial
computations. Similar recognition criteria under U.S. GAAP are established in SFAS No.
112, Employers Accounting for Post employment Benefits, which requires that a liability
for certain termination benefits provided under an ongoing benefit arrangement such as
these statutorily mandated severance indemnities, be
recognized when the likelihood of future settlement is probable and the liability can be
reasonably estimated. Mexican FRS allows for the Company to amortize the transition
obligation related to the adoption of revised Bulletin D-3 over the expected service life
of the employees. However, U.S. GAAP required the Company to recognize such effect upon
initial adoption, which results in a difference in the amount recorded under the two
accounting principles. The tables below reflect the requirements under U.S. GAAP, which
applies SFAS No. 112 standard for all years presented.
|
|
|
|
|
The Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R),
in its December 31, 2006 consolidated financial statements. This statement requires
companies to (1) fully recognize, as an asset or liability, the over funded or under
funded status of defined pension and other postretirement benefit plans; (2) recognize
changes in the funded status through other comprehensive income in the year in which the
changes occur; and (3) provide enhanced disclosures. There is no impact on results of
operations or cash flows. Retrospective application of this standard is not permitted.
|
|
|
|
|
A reconciliation of the Companys employee retirement obligations from Mexican FRS to U.S.
GAAP is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Employee retirement obligations under Mexican FRS
|
|
Ps.
|
1,563
|
|
|
Ps.
|
1,245
|
|
Effect of SFASB No 158 adjustment
|
|
|
863
|
|
|
|
1,220
|
|
Effect of retirement obligations
|
|
|
88
|
|
|
|
100
|
|
Additional minimum liability adjustment under Mexican FRS
(1)
|
|
|
(1,030
|
)
|
|
|
(796
|
)
|
Comeguas employee retirement obligations (see l)
|
|
|
(80
|
)
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
Employee retirement obligations under U.S. GAAP
|
|
Ps.
|
1,404
|
|
|
Ps.
|
1,686
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes Ps. 492 and Ps. 448 recognized in stockholders equity, net of the
deferred income tax of Ps. 182 and Ps. 123 as of December 31, 2006 and 2007, respectively.
|
For purposes of determining the cost of its pension plans, seniority premiums and severance
indemnities under U.S. GAAP, the Company applies SFAS No. 87, as amended by SFAS No. 158,
and SFAS No. 112. The Company uses a December 31 measurement date for its pension plans,
seniority premiums and severance indemnities. The additional pension disclosures required
by SFAS No. 132(R), Employers Disclosures about Pensions and Other Postretirement
Benefits, as amended by SFAS No. 158, which are applicable to the Company, are presented
below:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
Ps.
|
2,679
|
|
|
Ps.
|
2.694
|
|
Service cost
|
|
|
71
|
|
|
|
74
|
|
Interest cost
|
|
|
143
|
|
|
|
150
|
|
Amendments
|
|
|
|
|
|
|
378
|
|
Actuarial losses
|
|
|
186
|
|
|
|
208
|
|
Benefits paid
|
|
|
(385
|
)
|
|
|
(351
|
)
|
Settlements
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
|
2,694
|
|
|
|
3,235
|
|
|
|
|
|
|
|
|
Changes in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
720
|
|
|
|
1,290
|
|
Contribution of cash and securities
|
|
|
449
|
|
|
|
328
|
|
Return on plan assets
|
|
|
380
|
|
|
|
184
|
|
Benefits paid
|
|
|
(259
|
)
|
|
|
(253
|
)
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
(1)
|
|
|
1,290
|
|
|
|
1,549
|
|
|
|
|
|
|
|
|
Employee retirement obligations- unfunded status
|
|
Ps.
|
1,404
|
|
|
Ps.
|
1,686
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes approximately Ps. 1,139 and Ps. 914 as of December 31, 2007
and 2006, respectively of Vitro common stock (47,472,678 shares).
|
F-50
Net periodic pension cost for 2005, 2006 and 2007 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Service cost
|
|
Ps.
|
61
|
|
|
Ps.
|
71
|
|
|
Ps.
|
74
|
|
Interest cost
|
|
|
137
|
|
|
|
143
|
|
|
|
150
|
|
Return on plan assets
|
|
|
(44
|
)
|
|
|
(49
|
)
|
|
|
(88
|
)
|
Net amortization and deferral
|
|
|
172
|
|
|
|
243
|
|
|
|
86
|
|
Settlement cost
|
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
Ps.
|
326
|
|
|
Ps.
|
408
|
|
|
Ps.
|
339
|
|
|
|
|
|
|
|
|
|
|
|
The unrecognized items included in accumulated other comprehensive income (AOCI) as of
December 31, 2007 are as follows:
|
|
|
|
|
|
|
2007
|
|
Unrecognized items included in AOCI:
|
|
|
|
|
Transition obligation
|
|
Ps.
|
142
|
|
Prior service cost
|
|
|
181
|
|
Net actuarial gain
|
|
|
897
|
|
|
|
|
|
Unrecognized items
|
|
Ps.
|
1,220
|
|
|
|
|
|
|
|
|
|
|
Unrecognized items included in AOCI, net of tax of Ps. 342
|
|
Ps.
|
878
|
|
|
|
|
|
The amounts related to the Companys employee retirement obligations recognized in other
comprehensive income, arising during 2007 and as a result of being recognized as components
of net periodic cost for the period are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition
|
|
|
Prior service
|
|
|
Net actuarial
|
|
|
|
|
|
|
obligation
|
|
|
cost
|
|
|
gain
|
|
|
Total
|
|
Balance as of December 31, 2006
|
|
Ps.
|
160
|
|
|
Ps.
|
174
|
|
|
Ps.
|
529
|
|
|
Ps.
|
863
|
|
Amounts arising during the period
|
|
|
6
|
|
|
|
23
|
|
|
|
516
|
|
|
|
545
|
|
Curtailment / Settlement effect
|
|
|
|
|
|
|
(2
|
)
|
|
|
(100
|
)
|
|
|
(102
|
)
|
Amounts recognizad as components
of net periodic cost
|
|
|
(24
|
)
|
|
|
(14
|
)
|
|
|
(48
|
)
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
Ps.
|
142
|
|
|
Ps.
|
181
|
|
|
Ps.
|
897
|
|
|
Ps.
|
1,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts in accumulated other comprehensive income expected to be recognized as components
of net periodic service cost during 2008 are summarized below:
|
|
|
|
|
Transition Obligation
|
|
Ps.
|
23
|
|
Prior Service cost
|
|
|
18
|
|
Net Actuarial gain
|
|
|
40
|
|
F-51
|
|
|
The trust assets consist of fixed income and variable funds, valued at market value. As of
December 31, 2006 and 2007, the pension plan assets were invested in the following financial
instruments:
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Fixed Rate:
|
|
|
|
|
|
|
|
|
Federal Government instruments
|
|
|
29
|
%
|
|
|
25
|
%
|
Variable Rate:
|
|
|
|
|
|
|
|
|
Equity securities traded on the Mexican Stock Exchange
|
|
|
71
|
%
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
We develop our expected long-term rate of return assumption based on the historical experience
of our portfolio and the review of projected returns by asset class on broad, publicly traded
equity and fixed-income indices. The composition of the objective portfolio is consistent with
the share composition of the portfolios of five of the best-known international companies
located in Mexico that manage long-term funds.
|
|
|
|
|
Contributions to the pension plans amounted to Ps. 449 and Ps. 328 as of December 31, 2006 and
2007, respectively. The Company estimates that the contributions to the pension plan funds
during 2008 are expected to be approximately Ps. 261. Expected benefit payments for our
pension plans, seniority premium and severance indemnities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
Seniority
|
|
|
Severance
|
|
December 31,
|
|
Pension
|
|
|
Premium
|
|
|
Indemnities
|
|
2008
|
|
Ps.
|
261
|
|
|
Ps.
|
10
|
|
|
Ps.
|
27
|
|
2009
|
|
|
259
|
|
|
|
9
|
|
|
|
24
|
|
2010
|
|
|
299
|
|
|
|
9
|
|
|
|
21
|
|
2011
|
|
|
228
|
|
|
|
9
|
|
|
|
19
|
|
2012
|
|
|
229
|
|
|
|
9
|
|
|
|
17
|
|
2013 2017
|
|
|
1,108
|
|
|
|
46
|
|
|
|
57
|
|
|
|
|
As discussed in note 22, NIF D-3, Employee Benefits, is effective January 1, 2008. The
Company is in the process of determining what effects, if any, adoption of this new NIF will
have on this reconciling item.
|
|
|
n)
|
|
Purchase of Visteons capital investment
|
|
|
|
|
In connection with the termination of the joint venture agreement between Viméxico and Visteon
discussed in note 20 d), under Mexican FRS as established in Bulletin B-7, Business
Acquisitions the Company recognized the difference between the price paid and the book value
of Ps. 70 as a credit in the majority stockholders equity. Under U.S. GAAP, in accordance
with SFAS No. 141, Business Combinations the excess over cost of Ps. 90 was allocated as a
pro rata reduction of the acquired assets.
|
F-52
|
o)
|
|
Sale of real estate
|
|
|
|
|
As disclosed in note 7 c) on December 14, 2006, Vitro sold real estate located in Mexico City
used by COVISA for US$ 100 million, 80% payable on the date of sale and the remainder payable
on the delivery date of the property. In connection with the sale of the property, the Company
agreed to deliver the real estate within 24 months following the sale, free and clear of all
buildings and fixtures, as well as any
environmental claims, recording reserves of Ps. 56 for the estimated asset retirement costs
and prepaid rent of Ps. 62 for the estimated fair value of the rental expense over the 24
months. Vitro is obligated to refund the US$ 80 million to the purchaser in the event that
the property is not delivered to the purchaser within 24 months following the sale. A third
party financial institution has guaranteed the repayment of the purchase price in the event
Vitro does not deliver the property by such time and fails to refund the purchase price to the
purchaser. Under U.S. GAAP, in accordance with SFAS No. 66, Accounting for Sales of Real
Estate, SFAS No. 13, Leases and SFAS No. 98, Accounting for Leases as a result of the
Companys level of continuing involvement the gain on the sale of the land has been deferred
and is being recognized in earnings during the two years over which the Company continues to
utilize the property. During 2007, the Company recognized Ps. 429 in earnings related to this
transaction.
|
|
|
|
|
The depreciation estimates of the fixed assets that will be disposed of as a result of the
real estate sale have been adjusted to reflect the use of the assets over their shortened
useful lives. Such change in estimate is being accounted for prospectively. For purposes of
Mexican FRS, the Company wrote off the net book value of the fixed assets against the gain on
sale.
|
|
|
|
|
For U.S. GAAP purposes, a difference results due to the depreciation expense related to the
fixed assets that were written off under Mexican FRS.
|
|
|
p)
|
|
Impairment of long-lived assets
|
|
|
|
|
For U.S. GAAP purposes, in accordance with SFAS No. 144, long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The carrying amount of an asset is not recoverable when the
estimated future undiscounted cash flows expected to result from the use of the asset are less
than the carrying value of the asset. Impairment is recorded when the carrying amount of the
asset exceeds its fair value. Impairment charges and asset write-downs are presented in
selling, general and administrative expenses in operating income in our U.S. GAAP consolidated
financial statements.
|
|
|
|
|
For Mexican FRS purposes, in accordance with Bulletin C-15, the Company reviews the carrying
amounts of long-lived assets in use when an impairment indicator suggests that such amounts
might not be recoverable, considering the greater of the present value of future net cash
flows or the net sales price upon disposal. Impairment is recorded when the carrying amount of
the asset exceeds the greater of the amounts mentioned above. Impairment charges and asset
write-downs are presented in other expenses in our Mexican FRS consolidated financial
statements.
|
|
|
|
|
In 2005 and 2006, for Mexican FRS purposes, while performing its annual impairment test using
its best estimates based on reasonable and supportable assumptions and projections, the
Company recorded an impairment charge of Ps. 111 and Ps. 334, respectively within its Flat
Glass reportable segment as the carrying amount of the long-lived assets exceeded the present
value of their future discounted cash flows. For U.S. GAAP purposes no impairment charge was
recorded as the assets were considered to be recoverable given that the estimated undiscounted
cash flows expected to result from the use of the assets were greater then the carrying value
of the asset.
|
F-53
|
|
|
In 2005 for U.S. GAAP purposes, based on fair value appraisals received, the Company recorded
an impairment charge of Ps. 195 for land and buildings located at its corporate offices
classified as available for sale in accordance with SFAS No. 144. This charge is recorded in
operating income for U.S. GAAP purposes. Under Mexican FRS, the assets did not meet the
definition of held for sale as required by
Bulletin C-15 as such assets were still in use by the Company at that time. The discounted
cash flow model utilized by the Company did not result in an impairment charge for Mexican FRS
purposes. During 2006 as disclosed in note 7 d), Vitro sold one of its buildings located at
its corporate headquarters recognizing a loss on sale of Ps. 138 under Mexican FRS and PS. 93
under U.S. GAAP.
|
|
|
|
|
As a result of the transactions described above, differences result between Mexican FRS and
U.S. GAAP due to the depreciation expense on fixed assets being recorded each year.
|
|
|
q)
|
|
Other differences and supplemental U.S. GAAP disclosures
|
|
1.
|
|
Accounts receivable securitizations
|
|
|
|
|
The Company has included additional disclosures in accordance with SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
primarily related to the retained interests in the securitized financial assets. See below
for the additional disclosures required by SFAS No. 140:
|
|
|
|
In 2004, VVP entered into an agreement to sell of its accounts receivable, on a
revolving basis, to VVP Funding, a wholly owned subsidiary of VVP. VVP Funding is a
special-purpose entity that was formed prior to the execution of this agreement for the
sole purpose of buying and selling accounts receivable and is designed to be bankruptcy
remote and self liquidating. Also, during 2004, VVP and VVP Funding entered into
agreement with an unrelated financial institution whereby VVP Funding, on a revolving
basis and subject to the maintenance of certain financial and receivables-based ratios,
sells an undivided percentage ownership in all eligible accounts receivable, as
defined, for consideration composed of cash, up to a maximum amount of US$ 40 million,
and retain undivided interests in securitized receivables. The transfer of undivided
ownership interests from VVP Funding to the unrelated major financial institution for
cash consideration is accounted for as a sale of receivables in accordance with SFAS
No. 140. Effective April 16, 2007, a new agreement was signed and amended to increase
the maximum selling amount from US$ 40 million to US$ 50 million. The agreement expires
in April 2008 but is subject to annual renewal approval by the financial institution.
|
|
|
|
|
The gross receivables sold, totaling approximately US$ 78 million and US$ 76 million at
December 31, 2006 and 2007, respectively, are reflected as a reduction of trade accounts
receivable. Estimated fair value of the retained undivided interests securitized
receivables at December 31, 2007 and 2006, totaled US$ 29 million and US$ 32 million and
was determined based on expected credit losses and allowance of 3%, expected average
receivable collection time of 52 days, and expected short-term commercial paper rates of
2.3% per annum. The Company has completed a sensitivity analysis on the estimated fair
value of the retained undivided interests with the objective of measuring the change in
value associated with changes in individual key variables. A 10% increase in expected
credit losses and allowance, to 3.3%, would decrease the year-end valuation by
approximately US$ 151 million, and 20% increase in expected credit losses and allowances,
to 3.6%, would decrease the year-end valuation by approximately US$ 302 million.
Similarly, 10 or 20% adverse fluctuations in either average receivable collection times or
expected short-term commercial paper rates would not significantly affect the recorded
fair value of the retained undivided interests. This sensitivity analysis is hypothetical
and should be used with caution. Changes in fair value based on a 10 or 20% variation
should not be extrapolated because the relationship of the change in assumption to the
change in fair value may not always be linear.
|
F-54
|
|
|
Proceeds received by the Company from the revolving securitizations aggregated to US$ 492
million and US$ 498 million for the years ended December 31, 2006 and 2007, respectively,
and are included in cash flows from operating activities. Securitization fees totaled US$
3 million for the years ended December 31, 2006 and 2007 and are included in general and
administrative expenses. Delinquencies on securitized rec eivables, representing amounts
over 60 days past due, totaled US$ 9 million and US$ 12 million at December 31, 2006 and
2007, respectively with credit losses totaling US$ 2 million for the years then ended. VVP
continues to service the securitized receivables, receiving compensation that is
approximately equal to its cost of such servicing plus a reasonable profit margin;
accordingly, no servicing assets or liabilities are recorded. For the years ended December
31, 2006 and 2007, the Company received servicing fees totaling US$ 0.6 million each year.
|
|
|
|
|
Securitization of VENA trade receivables. On March 31, 2005, Compañía Vidriera, S.A.
de C.V., Industria del Álcali, S.A. de C.V. and Comercializadora Álcali, S. de R.L. de
C.V., all subsidiaries of VENA, closed a revolving accounts receivable facility, through
which such companies obtained Ps. 550 (nominal amount) and US$ 19 million. The VENA
subsidiaries entered into an agreement to sell all of their trade accounts receivable, on
a revolving basis during four years, to a
fideicomiso
(the Mexican Trust, a qualifying
special purpose entity) that was formed prior to the execution of this agreement for the
sole purpose of buying and selling accounts receivable and is designed to be bankruptcy
remote. The Ps. 550 (nominal amount) was obtained through the issuance of certified
preferred securities (
certificados bursátiles preferentes
) that trade on the Mexican
Stock Exchange issued by the Mexican Trust, and US$ 19 million in subordinated notes,
which have a payment guarantee by Vitro. The interest payments and eventual principal
reimbursement on the
certificados bursátiles preferentes
and the subordinated notes are
payable from the collection of the receivables originated by the VENA subsidiaries and
sold to the Mexican Trust. The transfer of undivided ownership interests from VENA to the
unrelated major financial institution for cash consideration is accounted for as a sale
of receivables in accordance with SFAS No. 140.
|
|
|
|
|
At December 31, 2006 and 2007, the gross receivables sold to the Trust totaled Ps. 1,074
and Ps. 1,075 respectively, and are reflected as a reduction of trade accounts receivable.
The estimated fair value of the retained undivided interests in securitized receivables at
December 31, 2006 and 2007 was Ps. 529 and Ps. 312, respectively. The Company has
completed a sensitivity analysis on the estimated fair value of the retained undivided
interests with the objective of measuring the change in value associated with changes in
individual key variables. A 0.01% increase in the 12-month peak 3-month average loss
ratio from the May 31, 2007 amount to 0.76% would result in a reduction in the
availability equal to 0.13% of eligible funds.
|
|
|
|
|
Proceeds received by the Company from the revolving securitizations aggregated to Ps.
8,434 and Ps. 9,065 for the years ended December 31, 2006 and 2007, and are included in
cash flows from operating activities. Delinquencies on securitized receivables,
representing amounts over 60 days past due, totaled Ps. 22 in 2006 and Ps. 28 in 2007.
VENA continues to service the securitized receivables, receiving compensation that is
approximately equal to its cost of such servicing plus a reasonable profit margin;
accordingly, no servicing assets or liabilities are recorded. For the years ended December
31, 2007 and 2006, the Company received servicing fees totaling Ps. 31 and Ps. 26,
respectively.
|
F-55
|
|
|
Securitization of Viméxico (formerly Vitro Plan) trade receivables. On August 22,
2005, Dinavisa, Vitro Flotado Cubiertas, S.A. de C.V. (VFC), Vidrio y Cristal and VAU,
all subsidiaries of Viméxico, closed a five year revolving accounts receivable facility
through which such companies
obtained US$ 21.5 million. The Viméxico subsidiaries entered into an agreement to sell all
of its trade accounts receivable, on a revolving basis, to a Mexican Trust that was formed
prior to the execution of this agreement for the sole purpose of buying and selling
accounts receivable and is designed to be bankruptcy remote. The US$ 21.5 million was
obtained through a private issuance of notes in the United States. The interest payments
and eventual principal reimbursement will be provided from the collection of the
receivables originated by four subsidiaries of Viméxico and sold to the Mexican Trust. The
transfer of undivided ownership interests from Viméxico to the unrelated major financial
institution for cash consideration is accounted for as a sale of receivables in accordance
with SFAS No. 140.
|
|
|
|
|
At December 31, 2006 and 2007, the gross receivables sold to the Trust totaled Ps. 574 and
Ps. 580, respectively and are reflected as a reduction of trade accounts receivable. The
estimated fair value of the retained undivided interests in securitized receivables at
December 31, 2006 and 2007 was Ps. 332 and Ps. 346, respectively. The Company has
completed a sensitivity analysis on the estimated fair value of the retained undivided
interests with the objective of measuring the change in value associated with changes in
individual key variables. A 0.01% increase in the 12-month peak 3-month average loss ratio
from the May 31, 2006 amount to 3% would result in a reduction in the availability equal
to 0.10% of eligible funds.
|
|
|
|
|
Proceeds received by the Company from the revolving securitizations aggregated to Ps. 560
and US$ 286 million dollars and Ps. 856 and US$ 152 million dollars for the years ended
December 31, 2006 and 2007, respectively, and are included in cash flows from operating
activities. Delinquencies on securitized receivables, representing amounts over 60 days
past due, totaled Ps. 56 and US$ 1 million dollars, and Ps. 16 and US$ 1 million dollars
at December 31, 2006 and 2007, respectively. Viméxico continues to service the securitized
receivables, receiving compensation that is approximately equal to its cost of such
servicing plus a reasonable profit margin; accordingly, no servicing assets or liabilities
are recorded. For the years ended December 31, 2006 and 2007, the Company received
servicing fees totaling Ps. 11.
|
|
(a)
|
|
Gain or loss on sale of assets The gain or loss on sale of assets that do not
meet the definition of a component of a business as described in SFAS No. 144 are
included in operating income in the Companys U.S. GAAP consolidated financial
statements. Gains or losses on sales of assets not presented as discontinued operations
under Mexican FRS are included in other expenses in the Companys consolidated Mexican
FRS financial statements (see note 16).
|
|
|
(b)
|
|
Classification of workers profit sharing Under Mexican FRS, statutory employee
profit sharing is presented under other income and expenses. In the Companys U.S. GAAP
statements of operations, workers profit sharing expense is classified as an operating
expense.
|
|
|
(c)
|
|
Restructuring charges During 2006 and 2007, the Company restructured certain
operating units and its corporate and administrative functions. For Mexican FRS purposes
the corresponding costs met the definition of a restructuring charge and were included in
other expenses in the Companys consolidated financial statements, but for U.S. GAAP
purposes the Company applied SFAS No. 112. These costs are included in general and
administrative expenses in the accompanying U.S. GAAP consolidated statements of
operations.
|
F-56
|
3.
|
|
Equity method investments Through July 27, 2007, the Company accounted for its
50% joint venture investments in Vitro AFG under the equity method for US GAAP purposes
and under proportionate consolidation method for Mexican FRS. Subsequent to acquiring
the remaining 50% of the outstanding shares and assuming complete control over its
operations, the Company began to consolidate its wholly-owned subsidiary (see note 20 f)
for both Mexican FRS and U.S. GAAP. In addition, as mentioned in note 24 l) we account
for Comegua under the equity method for U.S. GAAP purposes.
|
|
|
|
Summary information of the Companys equity method investments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31,
|
|
|
|
2006
|
|
|
2007*
|
|
|
2006
|
|
|
2007
|
|
|
|
AFG
|
|
|
Comegua
|
|
Current assets
|
|
Ps.
|
42
|
|
|
|
|
|
|
Ps.
|
1,348
|
|
|
Ps.
|
1,117
|
|
Total assets
|
|
|
884
|
|
|
|
|
|
|
|
2,467
|
|
|
|
2,863
|
|
Current liabilities
|
|
|
402
|
|
|
|
|
|
|
|
384
|
|
|
|
539
|
|
Total liabilities
|
|
|
434
|
|
|
|
|
|
|
|
968
|
|
|
|
1,326
|
|
Stockholders equity
|
|
|
450
|
|
|
|
|
|
|
|
1,499
|
|
|
|
1,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31,
|
|
|
|
2006
|
|
|
2007*
|
|
|
2006
|
|
|
2007
|
|
|
|
AFG
|
|
|
Comegua
|
|
Net sales
|
|
Ps.
|
224
|
|
|
Ps.
|
368
|
|
|
Ps.
|
1,789
|
|
|
Ps.
|
2,127
|
|
Net income (loss)
|
|
|
14
|
|
|
|
(134
|
)
|
|
|
14
|
|
|
|
38
|
|
Cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
Ps.
|
2
|
|
|
|
(6
|
)
|
|
Ps.
|
107
|
|
|
Ps.
|
344
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
225
|
|
|
|
380
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
(344
|
)
|
|
|
(694
|
)
|
|
|
|
*
|
|
For the period from January 1 through July 27, 2007.
|
|
|
|
Under U.S. GAAP, as of December 31, 2006 the Companys investment in AFG was Ps. 225 and the
investment in Comegua was Ps. 745 and Ps. 763 as of December 31, 2006 and 2007, respectively.
|
|
4.
|
|
Weighted-average interest rates The weighted-average interest rates on short-term
borrowings outstanding as of December 31, 2005, 2006 and 2007 were approximately 7.31%,
8.85% and 7.75%, respectively.
|
|
|
5.
|
|
Fair value of financial instruments SFAS No. 107, Disclosures about Fair Value
of Financial Instruments, requires disclosure of the estimated fair values of certain
financial instruments. The carrying amounts and estimated fair values of the Companys
significant financial instruments not previously disclosed in these financial statements
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2007
|
|
|
|
Carrying
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
319
|
|
|
Ps.
|
319
|
|
|
Ps.
|
398
|
|
|
Ps.
|
398
|
|
Long-term debt
(1)
|
|
|
12,507
|
|
|
|
13,036
|
|
|
|
14,520
|
|
|
|
13,948
|
|
|
|
|
(1)
|
|
Includes current portion of long-term debt.
|
F-57
|
|
|
The fair value of short-term borrowings approximates their carrying value due to their
short maturities. The fair value of the US (dollar denominated) publicly traded long-term
debt was Ps.
7,567 and Ps. 13,067 as of December 31, 2006 and 2007, respectively, and its related book
value was Ps. 7,038 and Ps. 13,639 respectively. The fair value of the remaining long-term
debt approximates its book value of Ps. 5,469 and Ps. 881 as of December 31, 2006 and
2007, respectively.
|
|
|
|
|
The fair value of long-term debt was determined using available quoted market prices or
other appropriate valuation methodologies that require considerable judgment in
interpreting market data and developing estimates. Accordingly, the estimates presented
above on long-term financial instruments are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the estimated
fair value amounts.
|
|
|
|
|
The fair value information presented herein is based on information available to
management as of December 31, 2006 and 2007. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial statements since
that date and, therefore, the current estimates of fair value may differ significantly
from the amounts presented herein.
|
|
|
6.
|
|
Earnings per share in accordance with U.S. GAAP Earnings per share in accordance
with U.S. GAAP is based on the provisions of SFAS No. 128, Earnings Per Share. The
methodologies required by Mexican FRS and U.S. GAAP as it relates to the calculation and
presentation of the Companys basic and diluted earnings per share differs only in the
net income (loss) utilized for purposes of the calculation.
|
|
|
|
|
Income (loss) per common share computed in accordance with U.S. GAAP is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Basic and diluted income (loss) per share from
continuing operations
|
|
Ps.
|
(0.66
|
)
|
|
Ps.
|
(1.92
|
)
|
|
Ps.
|
1.37
|
|
Discontinued operations
|
|
|
(0.38
|
)
|
|
|
1.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per common share
|
|
Ps.
|
(1.04
|
)
|
|
Ps.
|
(0.26
|
)
|
|
Ps.
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
Comprehensive income Under U.S. GAAP, SFAS No. 130, Reporting Comprehensive
Income, establishes standards for reporting and display of comprehensive income and its
components. Vitros items of other comprehensive income are: loss from holding
nonmonetary assets, unrealized gain (loss) on long-term investments, the currency
translation adjustment and the amortization of unrecognized items related to its labor
obligations.
|
|
|
|
|
See note 24 r), for consolidated financial statements presented on a U.S. GAAP basis,
which reflect the provisions of SFAS No. 130, Reporting Comprehensive Income. There
were no reclassification adjustments for any of the periods presented.
|
|
|
8.
|
|
Share-based Payment In 2006 the Company adopted and currently applies SFAS No.
123(R), Share-Based Payment, in accounting for its share-based payment awards. The
Companys employee stock option plan was adopted in 1998. The disclosures required under
U.S. GAAP as they relate to this plan are included in note 14 c).
|
F-58
|
9.
|
|
Restrictions that limit the payment of dividends by the registrant The Company
derives substantially all of its operating income from advances, fees, interest and
dividends paid to the Company by its subsidiaries. Accordingly, in paying the principal
of, premium, if any, interest on, and additional amounts, if any, with respect to the
Companys indebtedness, the Company relies on income from advances, fees, interest and
dividends from its subsidiaries, as well as income from the disposition of one or more
of its subsidiaries, interests therein or assets thereof. Therefore, the Companys
subsidiaries ability to pay such dividends or make such distributions are subject to (i)
such subsidiaries having net income and the requisite amount of paid-in capital under
Mexican law, (ii) such subsidiaries shareholders (including the Companys joint venture
partners) having approved the payment of such dividends at the annual general ordinary
shareholders meeting and (iii) applicable laws and, in certain circumstances,
restrictions contained in joint venture and debt agreements. At December 31, 2007 and
2006, the net assets of the Companys subsidiaries were not restricted.
|
|
|
10.
|
|
Concentration of credit risk The Company sells products to customers primarily in
Mexico, the U.S. and Europe, although no single customer accounted for more than 8% of
consolidated net sales in 2007, 2006 and 2005, the Company has customers that are
significant to its business units and to its consolidated financial statements taken as a
whole. The Companys three largest customers accounted for approximately 15% of its
consolidated net sales in 2007, 2006 and 2005. The Company conducts periodic evaluations
of its customers financial condition and generally does not require collateral. The
Company does not believe that significant risk of loss from a concentration of credit
risk exists given the large number of customers that comprise its customer base and their
geographical dispersion. The Company also believes that its potential credit risk is
adequately covered by the allowance for doubtful accounts.
|
|
|
11.
|
|
Irrevocable Standby Letters of Credit As of December 31, 2006 and 2007 VVP
Holdings Corp. (one of the Companys U.S. subsidiaries), had outstanding irrevocable
standby letters of credit issued, for insurance purposes, totaling US$18 and US$13,
respectively.
|
|
|
12.
|
|
Vicap Notes 11 3/8% Vicap Notes registered under the U.S. Securities Act of 1933
were issued by Vicap (now known as SOFIVSA), the Companys 100% owned finance subsidiary,
and fully and unconditionally guaranteed by Vitro. There are no restrictions on the
ability of Vitro to obtain funds from SOFIVSA by dividend or loan. The Vicap Notes were
repaid prior to their maturity date in March 2007.
|
|
|
13.
|
|
Major Maintenance Activities The provisions of FASB Staff Position AUG AIR.1
Accounting for Planned Major Maintenance became effective on January 1, 2007; this
guidance prohibits the use of the accrue-in-advance method of accounting for planned
major maintenance. The adoption of this standard did not have a material impact on the
Companys consolidated financial position or results of operations.
|
|
|
14.
|
|
Under Mexican FRS, the Company presents a consolidated statement of changes in
financial position in accordance with Bulletin B-12, Statement of Changes in Financial
Position, which identifies the generation and application of resources by the
differences between beginning and ending balance sheet items presented in constant
Mexican pesos. Bulletin B-12 also requires that monetary and foreign exchange gains and
losses be treated as cash items for the determination of resources generated by operating
activities.
|
F-59
|
|
|
In accordance with U.S. GAAP, the Company follows SFAS No. 95, Statement of Cash Flows,
which is presented in historical Mexican pesos, without the effects of inflation.
|
|
|
|
|
As mentioned in note 22, NIF B-2, Statement of Cash Flows, is effective January 1, 2008.
NIF B-2 requires that the statement show a companys cash inflows and outflows during
the period and establishes general rules for the presentation, structure and preparation
of a cash flow statement and replaces the statement of changes in financial position on a
prospective basis.
|
|
|
15.
|
|
Recently Issued Accounting Standards
|
|
|
|
|
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities including an
amendment of FASB Statement No. 115. SFAS No. 159 gives the Company the irrevocable
option to carry most financial assets and liabilities at fair value that are not currently
required to be measured at fair value. If the fair value option is elected, changes in
fair value would be recorded in earnings at each subsequent reporting date. SFAS No. 159
is effective for the Companys 2008 fiscal year. The Company is currently evaluating the
impact the adoption of this statement could have on its financial condition, results of
operations and cash flows.
|
|
|
|
|
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement. SFAS
No. 157 defines fair value, establishes a framework for the measurement of fair value, and
enhances disclosures about fair value measurements. The Statement does not require any new
fair value measures. The Statement is effective for fair value measures already required
or permitted by other standards for fiscal years beginning after November 15, 2007. The
Company is required to adopt SFAS No. 157 beginning on January 1, 2008. SFAS No. 157 is
required to be applied prospectively, except for certain financial instruments. Any
transition adjustment will be recognized as an adjustment to opening retained earnings in
the year of adoption. On February 12, 2008, the FASB issued FSP FAS 157-1 and FSP FAS
157-2, which remove leasing transactions accounted for under SFAS No. 13, Accounting for
Leases from the scope of SFAS No. 157 and partially defer the effective date of SFAS No.
157 as it relates all nonrecurring fair value measurements of nonfinancial assets and
nonfinancial liabilities until fiscal years beginning after November 15, 2008. The
Company is currently evaluating the impact of adopting SFAS No. 157 on its results of
operations and financial position.
|
|
|
|
|
In December 2007, the FASB issued SFAS No. 141(R), Business Combinationsa replacement of
FASB No. 141. SFAS No. 141(R) requires (a) a company to recognize the assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree at fair value as
of the acquisition date; and (b) an acquirer in preacquisition periods to expense all
acquisition-related costs. SFAS No. 141(R) requires that any adjustments to an acquired
entitys deferred tax asset and liability balance that occur after the measurement period
be recorded as a component of income tax expense. The presentation and disclosure
requirements must be applied retrospectively to provide comparability in the financial
statements. Early adoption is prohibited. SFAS No. 141(R) is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15,
2008. The impact of this standard is dependant upon the level of future acquisitions.
|
F-60
|
|
|
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. SFAS No. 160 (a) amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a
subsidiary (to be included
within stockholders equity) and the deconsolidation of a subsidiary; (b) changes the way
the consolidated income statement is presented; (c) establishes a single method of
accounting for changes in a parents ownership interest in a subsidiary that do not result
in deconsolidation; (d) requires that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated; and (e) requires expanded disclosures in the consolidated
financial statements that clearly identify and distinguish between the interests of the
parents owners and the interests of the noncontrolling owners of a subsidiary. SFAS No.
160 must be applied prospectively but to apply the presentation and disclosure
requirements must be applied retrospectively to provide comparability in the financial
statements. Early adoption is prohibited. SFAS No. 160 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December 15, 2008.
The impact of this standard is dependant upon the level of future acquisitions.
|
|
|
|
|
In September 2006, the FASBs Emerging Issues Task Force reached a consensus on Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 provides guidance on the
accounting for arrangements in which an employer owns and controls the insurance policy
and has agreed to share a portion of the cash surrender value and/or death benefit with
the employee. This guidance requires an employer to record a postretirement benefit, in
accordance with FASB Statement No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion-1967, if there is an
agreement by the employer to share a portion of the proceeds of a life insurance policy
with the employee during the postretirement period. This guidance is effective for
reporting periods beginning after December 15, 2007. The Company is in the process of
assessing the impact of adopting EITF 06-4 on its consolidated financial position and
results of operations; however, the Company currently expects that additional liabilities
may be required to be recognized upon implementation of the consensus based on the current
terms of certain life insurance arrangements with executive officers of the Company.
|
|
|
16.
|
|
Subsequent event
|
|
|
|
|
By resolution adopted by the Ordinary General Shareholders Meeting on April 17, 2008, the
Company paid on May 12, 2008 a cash dividend in an amount of Ps. 0.40 per share, for a
total amount of Ps. 143 million.
|
|
|
r)
|
|
Comparative consolidated financial statements U.S. GAAP
|
F-61
CONSOLIDATED BALANCE SHEETS
U.S. GAAP BASIS
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
Ps.
|
1,081
|
|
|
Ps.
|
1,491
|
|
Trade receivables, net
|
|
|
1,042
|
|
|
|
1,293
|
|
Retained undivided interests in securitized receivables
|
|
|
1,249
|
|
|
|
968
|
|
Other receivables
|
|
|
1,167
|
|
|
|
2,589
|
|
Inventories
|
|
|
3,537
|
|
|
|
3,720
|
|
Deferred income taxes
|
|
|
140
|
|
|
|
634
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
8,216
|
|
|
|
10,695
|
|
Investment in unconsolidated and associated companies
|
|
|
970
|
|
|
|
764
|
|
Land and buildings, net
|
|
|
7,992
|
|
|
|
7,884
|
|
Machinery and equipment, net
|
|
|
6,150
|
|
|
|
7,179
|
|
Construction in progress
|
|
|
822
|
|
|
|
1,539
|
|
Goodwill
|
|
|
846
|
|
|
|
994
|
|
Other assets
|
|
|
1,101
|
|
|
|
930
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
26,097
|
|
|
Ps.
|
29,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
185
|
|
|
Ps.
|
253
|
|
Current maturities of long-term debt
|
|
|
57
|
|
|
|
485
|
|
Trade payables
|
|
|
2,035
|
|
|
|
2,339
|
|
Sundry creditors
|
|
|
849
|
|
|
|
2,209
|
|
Accrued expenses
|
|
|
969
|
|
|
|
1,346
|
|
Current portion of unrealized gain on sale of real estate
|
|
|
524
|
|
|
|
484
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
4,619
|
|
|
|
7,116
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
12,063
|
|
|
|
13,439
|
|
Employee retirement obligations
|
|
|
1,404
|
|
|
|
1,686
|
|
Unrealized gain on sale of real estate
|
|
|
502
|
|
|
|
|
|
Deferred income taxes
|
|
|
466
|
|
|
|
477
|
|
Other long-term liabilities
|
|
|
218
|
|
|
|
205
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
14,653
|
|
|
|
15,807
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
19,272
|
|
|
|
22,923
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiaries
|
|
|
1,115
|
|
|
|
1,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
5,710
|
|
|
|
5,850
|
|
|
|
|
|
|
|
|
Total liabilities, minority interest in
consolidated subsidiaries and stockholders
equity
|
|
Ps.
|
26,097
|
|
|
Ps.
|
29,985
|
|
|
|
|
|
|
|
|
F-62
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. GAAP BASIS
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
24,292
|
|
|
Ps.
|
25,655
|
|
|
Ps.
|
26,159
|
|
Cost of sales
|
|
|
17,570
|
|
|
|
18,875
|
|
|
|
18,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
6,722
|
|
|
|
6,780
|
|
|
|
7,730
|
|
Selling, general and administrative expenses, net
|
|
|
5,891
|
|
|
|
5,344
|
|
|
|
5,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
831
|
|
|
|
1,436
|
|
|
|
2,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,390
|
|
|
|
2,487
|
|
|
|
2,138
|
|
Interest income
|
|
|
(163
|
)
|
|
|
(133
|
)
|
|
|
(169
|
)
|
Exchange loss (gain), net
|
|
|
(417
|
)
|
|
|
214
|
|
|
|
83
|
|
Gain from monetary position
|
|
|
(447
|
)
|
|
|
(536
|
)
|
|
|
(504
|
)
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
1,363
|
|
|
|
2,032
|
|
|
|
1,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income after financing cost
|
|
|
(532
|
)
|
|
|
(596
|
)
|
|
|
976
|
|
Other income (expenses), net
|
|
|
415
|
|
|
|
52
|
|
|
|
(491
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before taxes
|
|
|
(117
|
)
|
|
|
(544
|
)
|
|
|
485
|
|
Income and asset tax (benefit) expense
|
|
|
(144
|
)
|
|
|
175
|
|
|
|
(74
|
)
|
Minority interest
|
|
|
(216
|
)
|
|
|
150
|
|
|
|
(107
|
)
|
Share in earnings of unconsolidated associated companies
|
|
|
6
|
|
|
|
15
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
(183
|
)
|
|
|
(554
|
)
|
|
|
469
|
|
Discontinued operations including a (loss) gain on
disposal of discontinued operations of Ps. (137) in
2005 and Ps. 513 in 2006, net of taxes of Ps. (4) and
Ps. (86) respectively
|
|
|
(104
|
)
|
|
|
480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
Ps.
|
(287
|
)
|
|
Ps.
|
(74
|
)
|
|
Ps.
|
469
|
|
|
|
|
|
|
|
|
|
|
|
F-63
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
U.S. GAAP BASIS
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
Stockholders equity at the beginning of the year
|
|
Ps.
|
5,375
|
|
|
Ps.
|
4,913
|
|
|
Ps.
|
5,710
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
(287
|
)
|
|
|
(74
|
)
|
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
|
22
|
|
|
|
|
|
|
|
(282
|
)
|
Gain from holding nonmonetary assets
|
|
|
37
|
|
|
|
(126
|
)
|
|
|
(141
|
)
|
Cumulative translation adjustment
|
|
|
(18
|
)
|
|
|
1
|
|
|
|
11
|
|
Deferred income taxes
|
|
|
(439
|
)
|
|
|
(67
|
)
|
|
|
259
|
|
Deferred workers profit sharing
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
(96
|
)
|
|
|
(34
|
)
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(487
|
)
|
|
|
(226
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(774
|
)
|
|
|
(300
|
)
|
|
|
348
|
|
Bulletin B-15 adjustments
|
|
|
241
|
|
|
|
(45
|
)
|
|
|
(72
|
)
|
SFAS No. 158 adjustment
|
|
|
|
|
|
|
(131
|
)
|
|
|
|
|
Canceled dividends
|
|
|
164
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid
|
|
|
(100
|
)
|
|
|
(95
|
)
|
|
|
(136
|
)
|
Sale of treasury stock
|
|
|
7
|
|
|
|
70
|
|
|
|
|
|
Issuance of capital stock
|
|
|
|
|
|
|
577
|
|
|
|
|
|
Dilution of minority interest
|
|
|
|
|
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity at the end of the year
|
|
Ps.
|
4,913
|
|
|
Ps.
|
5,710
|
|
|
Ps.
|
5,850
|
|
|
|
|
|
|
|
|
|
|
|
F-64
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. GAAP BASIS*
(Millions of nominal pesos)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations in constant pesos
|
|
Ps.
|
(183
|
)
|
|
Ps.
|
(554
|
)
|
|
|
469
|
|
Effect of constant pesos and monetary gain
|
|
|
(370
|
)
|
|
|
(453
|
)
|
|
|
(532
|
)
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations in nominal pesos
|
|
|
(553
|
)
|
|
|
(1,007
|
)
|
|
|
(63
|
)
|
Add (deduct) non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
200
|
|
|
|
(145
|
)
|
|
|
108
|
|
Depreciation and amortization
|
|
|
1,636
|
|
|
|
1,718
|
|
|
|
1,400
|
|
Provision for employee retirement obligations and other
long-term liabilities
|
|
|
293
|
|
|
|
377
|
|
|
|
344
|
|
Amortization of debt issuance costs
|
|
|
200
|
|
|
|
188
|
|
|
|
166
|
|
Share in earnings of unconsolidated associated companies
|
|
|
(6
|
)
|
|
|
(13
|
)
|
|
|
(17
|
)
|
Dividends received from unconsolidated associated companies
|
|
|
17
|
|
|
|
12
|
|
|
|
28
|
|
Fair value of derivative financial instruments
|
|
|
(123
|
)
|
|
|
(107
|
)
|
|
|
208
|
|
Gain on execution of Vitro Clubs trust
|
|
|
(424
|
)
|
|
|
|
|
|
|
|
|
Gain from sale of subsidiaries
|
|
|
|
|
|
|
34
|
|
|
|
12
|
|
Write-off and loss (gain) from sale of fixed assets
|
|
|
428
|
|
|
|
48
|
|
|
|
(371
|
)
|
Deferred income tax and workers profit sharing
|
|
|
(323
|
)
|
|
|
71
|
|
|
|
(404
|
)
|
Exchange (gain) loss
|
|
|
(373
|
)
|
|
|
197
|
|
|
|
145
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in trade payables
|
|
|
97
|
|
|
|
213
|
|
|
|
278
|
|
Decrease (increase) in trade receivables
|
|
|
616
|
|
|
|
26
|
|
|
|
(181
|
)
|
(Increase) decrease in inventories
|
|
|
(170
|
)
|
|
|
320
|
|
|
|
(265
|
)
|
Changes in other current assets and liabilities
|
|
|
(482
|
)
|
|
|
(471
|
)
|
|
|
465
|
|
Employee retirement obligations
|
|
|
(282
|
)
|
|
|
(557
|
)
|
|
|
(472
|
)
|
Net income (loss) from discontinued operations
|
|
|
31
|
|
|
|
(30
|
)
|
|
|
|
|
Operating assets and liabilities from discontinued operations
|
|
|
151
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
933
|
|
|
|
903
|
|
|
|
1,383
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of land, buildings, machinery and equipment
|
|
|
29
|
|
|
|
1,342
|
|
|
|
71
|
|
Investment in land, buildings, machinery and equipment
|
|
|
(978
|
)
|
|
|
(1,009
|
)
|
|
|
(2,146
|
)
|
Sale of subsidiaries and associated companies
|
|
|
157
|
|
|
|
1,049
|
|
|
|
38
|
|
Investment subsidiaries
|
|
|
|
|
|
|
|
|
|
|
(177
|
)
|
Restricted cash
|
|
|
1
|
|
|
|
385
|
|
|
|
(327
|
)
|
Discontinued operations
|
|
|
(178
|
)
|
|
|
20
|
|
|
|
|
|
Capital distribution to minority interest
|
|
|
|
|
|
|
(21
|
)
|
|
|
(21
|
)
|
Deferred charges and other long-term assets
|
|
|
(64
|
)
|
|
|
(86
|
)
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(1,033
|
)
|
|
|
1,680
|
|
|
|
(2,878
|
)
|
|
|
|
|
|
|
|
|
|
|
F-65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings
|
|
|
2,820
|
|
|
|
4,603
|
|
|
|
2,413
|
|
Proceeds from long-term debt
|
|
|
5,606
|
|
|
|
840
|
|
|
|
13,581
|
|
Payment of short-term borrowings
|
|
|
(3,927
|
)
|
|
|
(3,191
|
)
|
|
|
(4,644
|
)
|
Payment of long-term debt
|
|
|
(5,278
|
)
|
|
|
(5,419
|
)
|
|
|
(9,201
|
)
|
Debt issuance costs
|
|
|
(183
|
)
|
|
|
(23
|
)
|
|
|
(285
|
)
|
Issuance of capital stock
|
|
|
|
|
|
|
556
|
|
|
|
|
|
Sale (purchase) of treasury stock
|
|
|
7
|
|
|
|
67
|
|
|
|
(1
|
)
|
Dividends paid to stockholders of Vitro
|
|
|
(90
|
)
|
|
|
(92
|
)
|
|
|
(133
|
)
|
Dividends paid to minority interests
|
|
|
(67
|
)
|
|
|
(20
|
)
|
|
|
(47
|
)
|
Other financing activities
|
|
|
|
|
|
|
|
|
|
|
279
|
|
Discontinued operations
|
|
|
(4
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(1,116
|
)
|
|
|
(2,698
|
)
|
|
|
1,962
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(1,216
|
)
|
|
|
(115
|
)
|
|
|
467
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
(47
|
)
|
|
|
26
|
|
|
|
(18
|
)
|
Balance at beginning of year
|
|
|
2,394
|
|
|
|
1,131
|
|
|
|
1,042
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
1,131
|
|
|
Ps.
|
1,042
|
|
|
Ps.
|
1,491
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities reflects net cash
payments of interest and income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
Ps.
|
1,773
|
|
|
Ps.
|
1,694
|
|
|
Ps.
|
1,369
|
|
Income taxes
|
|
|
246
|
|
|
|
20
|
|
|
|
441
|
|
|
|
|
*
|
|
This consolidated statement of cash flows on the basis of nominal pesos is presented to
fulfill disclosure requirements of the International Practices Task Force of the American
Institute of Certified Public Accountants.
|
F-66
Schedule II Valuation and Qualifying Accounts Mexican FRS
For the years ended December 31, 2007, 2006 and 2005
Millions of constant Mexican pesos as of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the
|
|
|
|
|
|
|
|
|
|
|
Changes for
|
|
|
|
|
|
|
beginning of
|
|
|
|
|
|
|
|
|
|
|
effects of
|
|
|
Balance at the end
|
|
|
|
year
|
|
|
Additions
|
|
|
Deductions
|
|
|
inflation
|
|
|
of the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
Ps.
|
213
|
|
|
Ps.
|
115
|
|
|
Ps.
|
(59
|
)
|
|
Ps.
|
(7
|
)
|
|
Ps.
|
262
|
|
Deferred tax valuation allowance
|
|
|
269
|
|
|
|
159
|
|
|
|
(132
|
)
|
|
|
(10
|
)
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
482
|
|
|
Ps.
|
274
|
|
|
Ps.
|
(191
|
)
|
|
Ps.
|
(17
|
)
|
|
Ps.
|
548
|
|
Year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
Ps.
|
203
|
|
|
Ps.
|
72
|
|
|
Ps.
|
(55
|
)
|
|
Ps.
|
(7
|
)
|
|
Ps.
|
213
|
|
Deferred tax valuation allowance
|
|
|
628
|
|
|
|
192
|
|
|
|
(526
|
)
|
|
|
(25
|
)
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
831
|
|
|
Ps.
|
264
|
|
|
Ps.
|
(581
|
)
|
|
Ps.
|
(32
|
)
|
|
Ps.
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
Ps.
|
136
|
|
|
Ps.
|
105
|
|
|
Ps.
|
(39
|
)
|
|
Ps.
|
1
|
|
|
Ps.
|
203
|
|
Deferred tax valuation allowance
|
|
|
737
|
|
|
|
34
|
|
|
|
(118
|
)
|
|
|
(25
|
)
|
|
|
628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
873
|
|
|
Ps.
|
139
|
|
|
Ps.
|
(157
|
)
|
|
Ps.
|
(24
|
)
|
|
Ps.
|
831
|
|
F-67
25.
|
|
Guarantor and non-guarantor financial information
|
|
|
|
As disclosed in note 10 c), the Company issued US$ 700 million of senior guaranteed notes due
February 1, 2017 callable after year 2012 at a coupon of a 9.125% and US$ 300 million of senior
unsecured notes due February 1, 2012 not callable for the notes life at a coupon of 8.65%
(together the Notes) principally to refinance existing third-party debt at the Vitro holding
company level, substantially all of the third-party debt at its subsidiary VENA and certain
third-party debt at its subsidiary Viméxico.
|
|
|
|
The obligations of the Company pursuant to each series of the Notes, including any repurchase
obligation resulting from a change of control, are unconditionally guaranteed, jointly and
severally, on an unsecured basis, by VENA and its wholly-owned subsidiaries and Viméxico and its
wholly-owned subsidiaries.
|
|
|
|
The following Vitro subsidiaries are designated as guarantors as of December 31, 2007; Viméxico,
VENA, Vitro Corporativo, S.A. de C.V., Vitro Envases Holding, S.A. de C.V., Taller de Colección
Vitro, S.A. de C.V., Servicios Corporativos de Edificaciones, S.A. de C.V, Vidriera Monterrey, S.A.
de C.V., Vidriera Los Reyes, S.A. de C.V., Vidriera Guadalajara, S.A. de C.V., Vidriera Querétaro,
S.A. de C.V., Vitro Cosmos, S.A. de C.V., Vidriera Toluca, S.A. de C.V., Compañía Vidriera, S.A. de
C.V., Fabricación de Máquinas, S.A. de C.V., Servicios Integrales de Acabados, S.A. de
C.V., Inmobiliaria Loma del Toro, S.A. de C.V., Industria del Alcali, S.A. de C.V.,
Comercializadora Alcali, S. de R.L. de C.V., Vidrio Lux, S.A., Vitro Packaging, Inc., Vitro
Europa, Ltd., American Asset Holdings, Corp., Crisa Holding Corp., Troper Inc., Troper Services,
Inc., Amsilco Holdings, Inc., BBO Holdings, Inc., Crisa Corp., Vitro Automotriz, S.A. de
C.V., Vitro Flex, S.A. de C.V, Distribuidora Nacional de Vidrio, S.A. de C.V., Vitro Vidrio y
Cristal, S.A. de C.V., Vitro Flotado Cubiertas, S.A. de C.V., Distribuidor Vidriero Lan, S.A. de
C.V., Vitrocar, S.A. de C.V., Cristales Inastillables de México, S.A. de C.V., Vidrio Plano de
México, S.A. de C.V., VVP Holdings Corp., VVP Autoglass, Inc., Vitro America, Inc., Super Sky
Products, Inc., Super Sky International, Inc., VVP Finance Corp., Super Sky Constructors, Inc.,
Vitro Colombia, S.A., VVP Europa Holdings, B.V., Vitro do Brasil Industria e Comercio, Ltda., Vitro
Chemicals, Fibers and Mining, Inc., Vitro Global, Ltd, Servicios y Operaciones Financieras Vitro,
S.A. de C.V., Vidrio y Cristal del Noroeste, S.A de C.V., Vidrio Plano, S.A. de C.V., Distribuidora
de Vidrio y Cristal, S.A. de C.V., and Vidrio Plano de Mexicali, S.A. de C.V.
|
|
|
|
The following condensed consolidating financial information includes separate columnar information
for:
|
|
|
|
Vitro (the parent company issuer),
|
|
|
|
|
Vitros combined wholly-owned guarantors,
|
|
|
|
|
Consolidated information for Viméxico and its subsidiaries (Viméxico and its
wholly-owned guarantor and non-guarantor subsidiaries the guarantor and non-guarantor
financial information for Viméxico and its subsidiaries is included in note 22 of
Viméxicos consolidated financial statements),
|
|
|
|
|
Vitros combined non-guarantors (combined amounts of Vitros non-guarantor subsidiaries
not already included in the consolidated Viméxico column), and
|
|
|
Investments in subsidiaries are accounted for by Vitro under the equity method for purpose of the
supplemental consolidating information. The principal elimination entries eliminate the parent
companys investment in subsidiaries and intercompany balances and transactions.
|
F-68
|
a)
|
|
Supplemental condensed consolidating balance sheets presented in accordance with Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, trade receivables and other current assets
|
|
Ps.
|
2,046
|
|
|
Ps.
|
2,941
|
|
|
Ps.
|
1,090
|
|
|
Ps.
|
4,189
|
|
|
Ps.
|
(6,296
|
)
|
|
Ps.
|
3,970
|
|
Retained undivided interests in securitized
receivables
|
|
|
|
|
|
|
530
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
1,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
|
|
|
1,578
|
|
|
|
2,049
|
|
|
|
355
|
|
|
|
|
|
|
|
3,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
2,046
|
|
|
|
5,049
|
|
|
|
3,832
|
|
|
|
4,544
|
|
|
|
(6,296
|
)
|
|
|
9,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
11,427
|
|
|
|
1,809
|
|
|
|
|
|
|
|
|
|
|
|
(13,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
1,908
|
|
|
|
7,145
|
|
|
|
5,758
|
|
|
|
1,501
|
|
|
|
11
|
|
|
|
16,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
|
|
1,037
|
|
|
|
477
|
|
|
|
167
|
|
|
|
(794
|
)
|
|
|
887
|
|
Other assets
|
|
|
904
|
|
|
|
1,068
|
|
|
|
1,079
|
|
|
|
53
|
|
|
|
(794
|
)
|
|
|
2,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
14,239
|
|
|
|
11,059
|
|
|
|
7,314
|
|
|
|
1,721
|
|
|
|
(14,813
|
)
|
|
|
19,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
16,285
|
|
|
Ps.
|
16,108
|
|
|
Ps.
|
11,146
|
|
|
Ps.
|
6,265
|
|
|
Ps.
|
(21,109
|
)
|
|
Ps.
|
28,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
|
|
|
Ps.
|
|
|
|
Ps.
|
263
|
|
|
Ps.
|
122
|
|
|
Ps.
|
|
|
|
Ps.
|
385
|
|
Trade payables
|
|
|
|
|
|
|
1,148
|
|
|
|
977
|
|
|
|
121
|
|
|
|
(49
|
)
|
|
|
2,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities
|
|
|
4,402
|
|
|
|
298
|
|
|
|
343
|
|
|
|
|
|
|
|
(5,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
292
|
|
|
|
2,968
|
|
|
|
2,734
|
|
|
|
1,936
|
|
|
|
(5,677
|
)
|
|
|
2,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
4,694
|
|
|
|
4,414
|
|
|
|
4,317
|
|
|
|
2,179
|
|
|
|
(10,769
|
)
|
|
|
4,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
3,484
|
|
|
|
6,456
|
|
|
|
416
|
|
|
|
2,085
|
|
|
|
|
|
|
|
12,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations and other
long-term liabilities
|
|
|
633
|
|
|
|
1,425
|
|
|
|
459
|
|
|
|
377
|
|
|
|
(841
|
)
|
|
|
2,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
4,117
|
|
|
|
7,881
|
|
|
|
875
|
|
|
|
2,462
|
|
|
|
(841
|
)
|
|
|
14,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
8,811
|
|
|
|
12,295
|
|
|
|
5,192
|
|
|
|
4,641
|
|
|
|
(11,610
|
)
|
|
|
19,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
7,474
|
|
|
|
3,813
|
|
|
|
4,516
|
|
|
|
1,624
|
|
|
|
(9,953
|
)
|
|
|
7,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
1,438
|
|
|
|
|
|
|
|
454
|
|
|
|
1,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
7,474
|
|
|
|
3,813
|
|
|
|
5,954
|
|
|
|
1,624
|
|
|
|
(9,499
|
)
|
|
|
9,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
Ps.
|
16,285
|
|
|
Ps.
|
16,108
|
|
|
Ps.
|
11,146
|
|
|
Ps.
|
6,265
|
|
|
Ps.
|
(21,109
|
)
|
|
Ps.
|
28,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, trade receivables and other
current assets
|
|
Ps.
|
6,227
|
|
|
Ps.
|
5,962
|
|
|
Ps.
|
1,302
|
|
|
Ps.
|
921
|
|
|
Ps.
|
(8,364
|
)
|
|
Ps.
|
6,048
|
|
Retained undivided interests in
securitized
receivables
|
|
|
|
|
|
|
312
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
|
|
968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
|
|
|
1,824
|
|
|
|
2,000
|
|
|
|
296
|
|
|
|
|
|
|
|
4,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
6,227
|
|
|
|
8,098
|
|
|
|
3,958
|
|
|
|
1,217
|
|
|
|
(8,364
|
)
|
|
|
11,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
11,269
|
|
|
|
1,678
|
|
|
|
|
|
|
|
|
|
|
|
(12,947
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
2,198
|
|
|
|
8,183
|
|
|
|
5,777
|
|
|
|
1,866
|
|
|
|
(183
|
)
|
|
|
17,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
|
|
636
|
|
|
|
570
|
|
|
|
5
|
|
|
|
(181
|
)
|
|
|
1,030
|
|
Other assets
|
|
|
9,538
|
|
|
|
984
|
|
|
|
1,363
|
|
|
|
117
|
|
|
|
(9,822
|
)
|
|
|
2,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
23,005
|
|
|
|
11,481
|
|
|
|
7,710
|
|
|
|
1,988
|
|
|
|
(23,133
|
)
|
|
|
21,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
29,232
|
|
|
Ps.
|
19,579
|
|
|
Ps.
|
11,668
|
|
|
Ps.
|
3,205
|
|
|
Ps.
|
(31,497
|
)
|
|
Ps.
|
32,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
131
|
|
|
Ps.
|
326
|
|
|
Ps.
|
281
|
|
|
Ps.
|
205
|
|
|
Ps.
|
|
|
|
Ps.
|
943
|
|
Trade payables
|
|
|
|
|
|
|
1,148
|
|
|
|
1,221
|
|
|
|
176
|
|
|
|
(83
|
)
|
|
|
2,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities
|
|
|
4,905
|
|
|
|
344
|
|
|
|
391
|
|
|
|
76
|
|
|
|
(5,716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other
current liabilities
|
|
|
2,946
|
|
|
|
4,524
|
|
|
|
2,993
|
|
|
|
665
|
|
|
|
(7,393
|
)
|
|
|
3,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
7,982
|
|
|
|
6,342
|
|
|
|
4,886
|
|
|
|
1,122
|
|
|
|
(13,192
|
)
|
|
|
7,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
13,313
|
|
|
|
|
|
|
|
127
|
|
|
|
535
|
|
|
|
|
|
|
|
13,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
and other long-term liabilities
|
|
|
511
|
|
|
|
9,138
|
|
|
|
608
|
|
|
|
283
|
|
|
|
(8,854
|
)
|
|
|
1,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
13,824
|
|
|
|
9,138
|
|
|
|
735
|
|
|
|
818
|
|
|
|
(8,854
|
)
|
|
|
15,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
21,806
|
|
|
|
15,480
|
|
|
|
5,621
|
|
|
|
1,940
|
|
|
|
(22,046
|
)
|
|
|
22,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
7,426
|
|
|
|
4,099
|
|
|
|
4,453
|
|
|
|
1,265
|
|
|
|
(9,817
|
)
|
|
|
7,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
1,594
|
|
|
|
|
|
|
|
366
|
|
|
|
1,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
7,426
|
|
|
|
4,099
|
|
|
|
6,047
|
|
|
|
1,265
|
|
|
|
(9,451
|
)
|
|
|
9,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
Ps.
|
29,232
|
|
|
Ps.
|
19,579
|
|
|
Ps.
|
11,668
|
|
|
Ps.
|
3,205
|
|
|
Ps.
|
(31,497
|
)
|
|
Ps.
|
32,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-70
|
b)
|
|
Supplemental condensed consolidating statements of operations presented in accordance with
Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2005
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of subsidiaries
|
|
Ps.
|
265
|
|
|
Ps.
|
11,921
|
|
|
Ps.
|
13,704
|
|
|
Ps.
|
1,891
|
|
|
Ps.
|
(1,214
|
)
|
|
Ps.
|
26,567
|
|
Cost of sales
|
|
|
|
|
|
|
8,420
|
|
|
|
9,962
|
|
|
|
1,100
|
|
|
|
(284
|
)
|
|
|
19,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
89
|
|
|
|
2,238
|
|
|
|
3,228
|
|
|
|
785
|
|
|
|
(810
|
)
|
|
|
5,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
471
|
|
|
|
656
|
|
|
|
383
|
|
|
|
10
|
|
|
|
(20
|
)
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses, net
|
|
|
(378
|
)
|
|
|
357
|
|
|
|
451
|
|
|
|
(47
|
)
|
|
|
111
|
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
23
|
|
|
|
(51
|
)
|
|
|
(749
|
)
|
|
|
159
|
|
|
|
99
|
|
|
|
(519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
before change in accounting principle
|
|
|
60
|
|
|
|
301
|
|
|
|
429
|
|
|
|
(116
|
)
|
|
|
(310
|
)
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
principle, net of tax
|
|
|
|
|
|
|
(94
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
102
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
|
|
63
|
|
|
|
207
|
|
|
|
297
|
|
|
|
(113
|
)
|
|
|
(211
|
)
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income (loss)
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss)
|
|
Ps.
|
63
|
|
|
Ps.
|
207
|
|
|
Ps.
|
112
|
|
|
Ps.
|
(113
|
)
|
|
Ps.
|
(20
|
6)
|
|
Ps.
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of subsidiaries
|
|
Ps.
|
566
|
|
|
Ps.
|
12,923
|
|
|
Ps.
|
13,462
|
|
|
Ps.
|
2,255
|
|
|
Ps.
|
(1,330
|
)
|
|
Ps.
|
27,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
|
8,979
|
|
|
|
9,959
|
|
|
|
1,313
|
|
|
|
(21
|
)
|
|
|
20,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
87
|
|
|
|
2,315
|
|
|
|
3,085
|
|
|
|
871
|
|
|
|
(829
|
)
|
|
|
5,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
374
|
|
|
|
1,242
|
|
|
|
631
|
|
|
|
49
|
|
|
|
(20
|
)
|
|
|
2,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income), net
|
|
|
3
|
|
|
|
13
|
|
|
|
450
|
|
|
|
114
|
|
|
|
(809
|
)
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
150
|
|
|
|
212
|
|
|
|
(77
|
)
|
|
|
46
|
|
|
|
(103
|
)
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
|
(48
|
)
|
|
|
162
|
|
|
|
(586
|
)
|
|
|
(138
|
)
|
|
|
452
|
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
31
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
|
|
401
|
|
|
|
162
|
|
|
|
(586
|
)
|
|
|
(169
|
)
|
|
|
483
|
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income (loss)
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
(298
|
)
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss)
|
|
Ps.
|
401
|
|
|
Ps.
|
162
|
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(169
|
)
|
|
Ps.
|
781
|
|
|
Ps.
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of subsidiaries
|
|
Ps.
|
775
|
|
|
Ps.
|
13,487
|
|
|
Ps.
|
13,605
|
|
|
Ps.
|
2,511
|
|
|
Ps.
|
(1,787
|
)
|
|
Ps.
|
28,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
|
9,255
|
|
|
|
9,578
|
|
|
|
1,556
|
|
|
|
(202
|
)
|
|
|
20,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
100
|
|
|
|
2,360
|
|
|
|
3,245
|
|
|
|
859
|
|
|
|
(864
|
)
|
|
|
5,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
803
|
|
|
|
797
|
|
|
|
443
|
|
|
|
66
|
|
|
|
(449
|
)
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses, net
|
|
|
(2
|
)
|
|
|
544
|
|
|
|
91
|
|
|
|
56
|
|
|
|
180
|
|
|
|
869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
|
(113
|
)
|
|
|
360
|
|
|
|
152
|
|
|
|
36
|
|
|
|
(391
|
)
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
|
(13
|
)
|
|
|
171
|
|
|
|
96
|
|
|
|
(62
|
)
|
|
|
(61
|
)
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income (loss)
|
|
|
|
|
|
|
|
|
|
|
182
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority (loss) income
|
|
Ps.
|
(13
|
)
|
|
Ps.
|
171
|
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
(62
|
)
|
|
Ps.
|
(23
|
)
|
|
Ps.
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-72
|
c)
|
|
Supplemental condensed consolidating statements of changes in financial position presented in
accordance with Mexican FRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2005
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
Ps.
|
60
|
|
|
Ps.
|
301
|
|
|
Ps.
|
429
|
|
|
Ps.
|
(116
|
)
|
|
Ps.
|
(310
|
)
|
|
Ps.
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6
|
|
|
|
1,071
|
|
|
|
668
|
|
|
|
109
|
|
|
|
|
|
|
|
1,854
|
|
Provision for employee retirement obligations
|
|
|
|
|
|
|
268
|
|
|
|
83
|
|
|
|
15
|
|
|
|
|
|
|
|
366
|
|
Amortization of debt issuance costs
|
|
|
98
|
|
|
|
100
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
Write-off and loss from sale of assets
|
|
|
|
|
|
|
197
|
|
|
|
220
|
|
|
|
1
|
|
|
|
(27
|
)
|
|
|
391
|
|
Others non-cash charges
|
|
|
277
|
|
|
|
(859
|
)
|
|
|
(1,068
|
)
|
|
|
106
|
|
|
|
350
|
|
|
|
(1,194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in inventories
|
|
|
|
|
|
|
61
|
|
|
|
(266
|
)
|
|
|
13
|
|
|
|
23
|
|
|
|
(169
|
)
|
Changes in other current assets and liabilities
|
|
|
(221
|
)
|
|
|
498
|
|
|
|
671
|
|
|
|
52
|
|
|
|
(435
|
)
|
|
|
565
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(247
|
)
|
|
|
(58
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
operating activities
|
|
|
220
|
|
|
|
1,390
|
|
|
|
700
|
|
|
|
174
|
|
|
|
(399
|
)
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans, net
|
|
|
(2,057
|
)
|
|
|
1,045
|
|
|
|
(646
|
)
|
|
|
(296
|
)
|
|
|
142
|
|
|
|
(1,812
|
)
|
Other financing activities
|
|
|
2,550
|
|
|
|
(973
|
)
|
|
|
625
|
|
|
|
(319
|
)
|
|
|
(2,382
|
)
|
|
|
(499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
financing activities
|
|
|
493
|
|
|
|
72
|
|
|
|
(21
|
)
|
|
|
(615
|
)
|
|
|
(2,240
|
)
|
|
|
(2,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery
and equipment
|
|
|
|
|
|
|
(550
|
)
|
|
|
(468
|
)
|
|
|
(98
|
)
|
|
|
9
|
|
|
|
(1,107
|
)
|
Proceeds from sale of land, machinery
and equipment
|
|
|
|
|
|
|
1
|
|
|
|
31
|
|
|
|
9
|
|
|
|
(10
|
)
|
|
|
31
|
|
Restricted cash
|
|
|
|
|
|
|
(122
|
)
|
|
|
1
|
|
|
|
122
|
|
|
|
|
|
|
|
1
|
|
Investments in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of subsidiaries
and associated companies
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
170
|
|
Other investing activities
|
|
|
(2,734
|
)
|
|
|
(152
|
)
|
|
|
(100
|
)
|
|
|
359
|
|
|
|
2,360
|
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by
investing activities
|
|
|
(2,565
|
)
|
|
|
(823
|
)
|
|
|
(536
|
)
|
|
|
392
|
|
|
|
2,360
|
|
|
|
(1,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and
cash equivalents
|
|
|
(1,852
|
)
|
|
|
639
|
|
|
|
143
|
|
|
|
(49
|
)
|
|
|
(279
|
)
|
|
|
(1,398
|
)
|
Balance at beginning of year
|
|
|
1,854
|
|
|
|
329
|
|
|
|
180
|
|
|
|
196
|
|
|
|
279
|
|
|
|
2,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
2
|
|
|
Ps.
|
968
|
|
|
Ps.
|
323
|
|
|
Ps.
|
147
|
|
|
Ps.
|
-
|
|
|
Ps.
|
1,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
Ps.
|
(48
|
)
|
|
Ps.
|
162
|
|
|
Ps.
|
(586
|
)
|
|
Ps.
|
(138
|
)
|
|
Ps.
|
452
|
|
|
Ps.
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
11
|
|
|
|
1,049
|
|
|
|
598
|
|
|
|
137
|
|
|
|
|
|
|
|
1,795
|
|
Provision for employee retirement obligations
|
|
|
|
|
|
|
279
|
|
|
|
138
|
|
|
|
3
|
|
|
|
|
|
|
|
427
|
|
Amortization of debt issuance costs
|
|
|
77
|
|
|
|
84
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
198
|
|
Write-off and loss from sale of assets
|
|
|
(882
|
)
|
|
|
(56
|
)
|
|
|
465
|
|
|
|
58
|
|
|
|
13
|
|
|
|
(402
|
)
|
Other non-cash charges
|
|
|
(833
|
)
|
|
|
(1,408
|
)
|
|
|
(384
|
)
|
|
|
3
|
|
|
|
2,494
|
|
|
|
(128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in inventories
|
|
|
|
|
|
|
(165
|
)
|
|
|
451
|
|
|
|
(73
|
)
|
|
|
10
|
|
|
|
223
|
|
Changes in other current assets and liabilities
|
|
|
2,284
|
|
|
|
(393
|
)
|
|
|
(815
|
)
|
|
|
(77
|
)
|
|
|
(1,284
|
)
|
|
|
(285
|
)
|
Employee retirement obligations
|
|
|
|
|
|
|
(406
|
)
|
|
|
(188
|
)
|
|
|
(2
|
)
|
|
|
7
|
|
|
|
(589
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
operating activities
|
|
|
609
|
|
|
|
(847
|
)
|
|
|
(284
|
)
|
|
|
(89
|
)
|
|
|
1,692
|
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks loans, net
|
|
|
(1,506
|
)
|
|
|
358
|
|
|
|
(2,214
|
)
|
|
|
202
|
|
|
|
26
|
|
|
|
(3,134
|
)
|
Issuance of capital stock
|
|
|
578
|
|
|
|
|
|
|
|
1,526
|
|
|
|
|
|
|
|
(1,526
|
)
|
|
|
578
|
|
Other financing activities
|
|
|
(26
|
)
|
|
|
5
|
|
|
|
469
|
|
|
|
438
|
|
|
|
(946
|
)
|
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by
financing activities
|
|
|
(954
|
)
|
|
|
363
|
|
|
|
(219
|
)
|
|
|
640
|
|
|
|
(2,446
|
)
|
|
|
(2,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery
and equipment
|
|
|
(507
|
)
|
|
|
(848
|
)
|
|
|
(330
|
)
|
|
|
(116
|
)
|
|
|
549
|
|
|
|
(1,252
|
)
|
Proceeds from sale of land, machinery
and equipment
|
|
|
1,404
|
|
|
|
504
|
|
|
|
339
|
|
|
|
53
|
|
|
|
(607
|
)
|
|
|
1,693
|
|
Restricted cash
|
|
|
|
|
|
|
35
|
|
|
|
281
|
|
|
|
103
|
|
|
|
|
|
|
|
419
|
|
Investments in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(218
|
)
|
|
|
|
|
|
|
(218
|
)
|
Proceeds from sale of subsidiaries
and associated companies
|
|
|
681
|
|
|
|
65
|
|
|
|
177
|
|
|
|
|
|
|
|
291
|
|
|
|
1,214
|
|
Other investing activities
|
|
|
(562
|
)
|
|
|
(5
|
)
|
|
|
(117
|
)
|
|
|
(376
|
)
|
|
|
521
|
|
|
|
(539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
investing activities
|
|
|
1,016
|
|
|
|
(249
|
)
|
|
|
350
|
|
|
|
(554
|
)
|
|
|
754
|
|
|
|
1,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
671
|
|
|
|
(733
|
)
|
|
|
(153
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
2
|
|
|
|
968
|
|
|
|
323
|
|
|
|
147
|
|
|
|
|
|
|
|
1,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
673
|
|
|
Ps.
|
235
|
|
|
Ps.
|
170
|
|
|
Ps.
|
144
|
|
|
Ps.
|
|
|
|
Ps.
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Viméxico
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-
Owned
|
|
|
and
|
|
|
Non-
|
|
|
And
|
|
|
Vitro
|
|
For the year ended December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
Ps.
|
(13
|
)
|
|
Ps.
|
171
|
|
|
Ps.
|
96
|
|
|
Ps.
|
(62
|
)
|
|
Ps.
|
(61
|
)
|
|
Ps.
|
131
|
|
Depreciation and amortization
|
|
|
15
|
|
|
|
771
|
|
|
|
480
|
|
|
|
148
|
|
|
|
|
|
|
|
1,414
|
|
Provision for employee retirement obligations
|
|
|
0
|
|
|
|
176
|
|
|
|
57
|
|
|
|
28
|
|
|
|
|
|
|
|
261
|
|
Amortization of debt issuance costs
|
|
|
24
|
|
|
|
142
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
31
|
|
|
|
|
|
|
|
122
|
|
Loss (gain) from sale of long-lived assets
|
|
|
|
|
|
|
(89
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
191
|
|
|
|
47
|
|
Derivative financial instruments
|
|
|
87
|
|
|
|
100
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
216
|
|
Deferred taxes
|
|
|
(113
|
)
|
|
|
(183
|
)
|
|
|
(104
|
)
|
|
|
3
|
|
|
|
47
|
|
|
|
(351
|
)
|
Other non-cash charges
|
|
|
296
|
|
|
|
22
|
|
|
|
20
|
|
|
|
|
|
|
|
(230
|
)
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in trade receivables
|
|
|
|
|
|
|
171
|
|
|
|
(194
|
)
|
|
|
(39
|
)
|
|
|
(145
|
)
|
|
|
(207
|
)
|
(Increase) decrease in inventories
|
|
|
|
|
|
|
(334
|
)
|
|
|
(19
|
)
|
|
|
42
|
|
|
|
3
|
|
|
|
(308
|
)
|
Increase (decrease) in trade payables
|
|
|
|
|
|
|
|
|
|
|
223
|
|
|
|
55
|
|
|
|
(35
|
)
|
|
|
243
|
|
Changes in other current assets and liabilities
|
|
|
741
|
|
|
|
(462
|
)
|
|
|
105
|
|
|
|
(32
|
)
|
|
|
77
|
|
|
|
429
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(351
|
)
|
|
|
(101
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in) operating
activities
|
|
|
1,037
|
|
|
|
134
|
|
|
|
632
|
|
|
|
154
|
|
|
|
(154
|
)
|
|
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks loans, net
|
|
|
9,959
|
|
|
|
(7,839
|
)
|
|
|
(270
|
)
|
|
|
243
|
|
|
|
(22
|
)
|
|
|
2,071
|
|
Debt issuance cost
|
|
|
(76
|
)
|
|
|
(208
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
(293
|
)
|
Dividends paid
|
|
|
(136
|
)
|
|
|
|
|
|
|
(51
|
)
|
|
|
(101
|
)
|
|
|
73
|
|
|
|
(215
|
)
|
Other financing activities
|
|
|
(10,266
|
)
|
|
|
7,939
|
|
|
|
261
|
|
|
|
134
|
|
|
|
2,418
|
|
|
|
486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by financing
activities
|
|
|
(519
|
)
|
|
|
(108
|
)
|
|
|
(69
|
)
|
|
|
276
|
|
|
|
2,469
|
|
|
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and equipment
|
|
|
(306
|
)
|
|
|
(1,919
|
)
|
|
|
(324
|
)
|
|
|
(445
|
)
|
|
|
299
|
|
|
|
(2,695
|
)
|
Proceeds from sale of land, machinery and equipment
|
|
|
|
|
|
|
239
|
|
|
|
131
|
|
|
|
1
|
|
|
|
(299
|
)
|
|
|
72
|
|
Restricted cash
|
|
|
|
|
|
|
(322
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
(331
|
)
|
Investments in subsidiaries
|
|
|
(144
|
)
|
|
|
|
|
|
|
(181
|
)
|
|
|
|
|
|
|
144
|
|
|
|
(181
|
)
|
Proceeds from sale of subsidiaries and associated
companies
|
|
|
12
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
Other long-term assets
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
|
|
(85
|
)
|
|
|
(36
|
)
|
Deferred charges
|
|
|
|
|
|
|
(80
|
)
|
|
|
(206
|
)
|
|
|
(16
|
)
|
|
|
1
|
|
|
|
(302
|
)
|
Other investing activities
|
|
|
|
|
|
|
2,336
|
|
|
|
|
|
|
|
38
|
|
|
|
(2,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by investing
activities
|
|
|
(438
|
)
|
|
|
279
|
|
|
|
(540
|
)
|
|
|
(422
|
)
|
|
|
(2,315
|
)
|
|
|
(3,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
80
|
|
|
|
305
|
|
|
|
23
|
|
|
|
8
|
|
|
|
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
673
|
|
|
|
235
|
|
|
|
170
|
|
|
|
144
|
|
|
|
|
|
|
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
753
|
|
|
Ps.
|
540
|
|
|
Ps.
|
193
|
|
|
Ps.
|
152
|
|
|
Ps.
|
|
|
|
Ps.
|
1,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
|
d)
|
|
Supplemental condensed consolidating financial information reconciled from Mexican FRS to U.S.
GAAP:
|
|
|
As disclosed in note 24, the Companys reconciliation from Mexican FRS to U.S. GAAP does not
eliminate the effects of inflation as it represents a comprehensive measure of the effects of price
level changes in the inflationary Mexican economy and, as such, is considered a more meaningful
presentation than historical cost-based financial reporting for both Mexican and U.S. accounting
purposes.
|
|
|
|
The other differences between Mexican FRS and U.S. GAAP and the effects on consolidated net income
(loss) and consolidated stockholders equity as it relates to the Companys guarantor and
non-guarantor subsidiaries are presented below (see note 24 for a description of such differences):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-
Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
For the year ended December 31, 2005
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of majority interest as
reported under Mexican FRS
|
|
Ps.
|
63
|
|
|
Ps.
|
207
|
|
|
Ps.
|
112
|
|
|
Ps.
|
(113
|
)
|
|
Ps.
|
(206
|
)
|
|
Ps.
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority
interest (see note 24 a)
|
|
|
|
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes (see note 24 b)
|
|
|
81
|
|
|
|
(130
|
)
|
|
|
(387
|
)
|
|
|
|
|
|
|
|
|
|
|
(436
|
)
|
Negative goodwill and reduction in depreciation
expense
(see note 24 c)
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
Deferred workers profit sharing
(see note 24 d)
|
|
|
|
|
|
|
59
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
43
|
|
Monetary position result on deferred income
taxes and deferred workers profit sharing
(see note 24 e)
|
|
|
|
|
|
|
29
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
(see note 24 f)
|
|
|
|
|
|
|
38
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
Amortization of capitalized interest
(see note 24 f)
|
|
|
|
|
|
|
(22
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
Effect of applying Bulletin B-10
(see note 24 h)
|
|
|
|
|
|
|
(114
|
)
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
(184
|
)
|
Effect of applying Bulletin B-15 (see note 24 i)
|
|
|
(8
|
)
|
|
|
21
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(18
|
)
|
|
|
(12
|
)
|
Derivative financial instruments
(see note 24 j)
|
|
|
(145
|
)
|
|
|
136
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (see note 24 k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Employee retirement obligations
(see note 24 m)
|
|
|
|
|
|
|
31
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
Impairment of long-lived assets
(see note 24 p)
|
|
|
(149
|
)
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(350
|
)
|
|
|
46
|
|
|
|
(207
|
)
|
|
|
(1
|
)
|
|
|
162
|
|
|
|
(350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(287
|
)
|
|
Ps.
|
253
|
|
|
Ps.
|
(95
|
)
|
|
Ps.
|
(114
|
)
|
|
Ps.
|
(44
|
)
|
|
Ps.
|
(287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-
Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
For the year ended December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) of majority interest as reported
under Mexican FRS
|
|
Ps.
|
401
|
|
|
Ps.
|
162
|
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(169
|
)
|
|
Ps.
|
781
|
|
|
Ps.
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority
interest (see note 24 a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes (see note 24 b)
|
|
|
233
|
|
|
|
(137
|
)
|
|
|
(182
|
)
|
|
|
|
|
|
|
140
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Negative goodwill and reduction in depreciation
expense (see note 24 c)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred workers profit sharing (see note 24 d)
|
|
|
|
|
|
|
(36
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
Monetary position result on deferred income taxes
and deferred workers profit sharing (see note 24 e)
|
|
|
(2
|
)
|
|
|
33
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest (see note 24 f)
|
|
|
|
|
|
|
63
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized interest (see note 24 f)
|
|
|
|
|
|
|
(28
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10 (see note 24 h)
|
|
|
|
|
|
|
(119
|
)
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-15 (see note 24 i)
|
|
|
1
|
|
|
|
17
|
|
|
|
4
|
|
|
|
|
|
|
|
12
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (see note 24 k)
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations (see note 24 m)
|
|
|
|
|
|
|
20
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
Visteons capital investment (see note
24 n)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate (see 24 o)
|
|
|
(815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets (See note 24 p)
|
|
|
|
|
|
|
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(475
|
)
|
|
|
(187
|
)
|
|
|
144
|
|
|
|
|
|
|
|
43
|
|
|
|
(475
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(74
|
)
|
|
Ps.
|
(25
|
)
|
|
Ps.
|
(630
|
)
|
|
Ps.
|
(169
|
)
|
|
Ps.
|
824
|
|
|
Ps.
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
For the year ended December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income of majority interest as reported
under Mexican FRS
|
|
Ps.
|
(13
|
)
|
|
Ps.
|
171
|
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
(62
|
)
|
|
Ps.
|
(23
|
)
|
|
Ps.
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority
interest
(see note 24 a)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
21
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
(see note 24 b)
|
|
|
(120
|
)
|
|
|
110
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
102
|
|
|
|
55
|
|
Monetary position result on deferred income
taxes and deferred workers profit sharing
(see note 24 e)
|
|
|
(10
|
)
|
|
|
24
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
(see note 24 f)
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized interest
(see note 24 f)
|
|
|
|
|
|
|
(32
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
(see note 24 h)
|
|
|
|
|
|
|
(15
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
(see note 24 k)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
(see note 24 m)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
Purchase of Visteons capital investment
(see note 24 n)
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real state
(see note 24 o)
|
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets
(see note 24 p)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
482
|
|
|
|
95
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
36
|
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) under U.S. GAAP
|
|
Ps.
|
469
|
|
|
Ps.
|
266
|
|
|
Ps.
|
(140
|
)
|
|
Ps.
|
(62
|
)
|
|
Ps.
|
13
|
|
|
Ps.
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Total stockholders equity reported under
Mexican FRS
|
|
Ps.
|
7,474
|
|
|
Ps.
|
3,813
|
|
|
Ps.
|
5,954
|
|
|
Ps.
|
1,624
|
|
|
Ps.
|
(9,499
|
)
|
|
Ps.
|
9,366
|
|
Less minority interest included as
stockholders equity under Mexican FRS (see
note 24 a)
|
|
|
|
|
|
|
|
|
|
|
(1,438
|
)
|
|
|
|
|
|
|
(454
|
)
|
|
|
(1,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholders equity under Mexican FRS
|
|
|
7,474
|
|
|
|
3,813
|
|
|
|
4,516
|
|
|
|
1,624
|
|
|
|
(9,953
|
)
|
|
|
7,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority
interest (see note 24 a)
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
(12
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes (see note 24 b)
|
|
|
277
|
|
|
|
(773
|
)
|
|
|
(510
|
)
|
|
|
5
|
|
|
|
143
|
|
|
|
(858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest (see note 24 f)
|
|
|
|
|
|
|
315
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
358
|
|
Accumulated amortization of capitalized interest
(see note 24 f)
|
|
|
|
|
|
|
(131
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
1
|
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (see note 24 g)
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10 (see note 24 h)
|
|
|
|
|
|
|
(16
|
)
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-15 (see note 24 i)
|
|
|
(71
|
)
|
|
|
|
|
|
|
119
|
|
|
|
|
|
|
|
(119
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations (see note 24 k)
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of SFASB No. 158 (see note 24 m)
|
|
|
|
|
|
|
(220
|
)
|
|
|
(131
|
)
|
|
|
(20
|
)
|
|
|
|
|
|
|
(371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations (see note 24 m)
|
|
|
|
|
|
|
(57
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
Purchase of Visteons capital investment
(see note 24 n)
|
|
|
|
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real state (see note 24 o)
|
|
|
(815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets (see note 24 p)
|
|
|
(149
|
)
|
|
|
13
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(1,764
|
)
|
|
|
(869
|
)
|
|
|
(109
|
)
|
|
|
(15
|
)
|
|
|
993
|
|
|
|
(1,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity under U.S. GAAP
|
|
Ps.
|
5,710
|
|
|
Ps.
|
2,944
|
|
|
Ps.
|
4,407
|
|
|
Ps.
|
1,609
|
|
|
Ps.
|
(8,960
|
)
|
|
Ps.
|
5,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Total stockholders equity reported under
Mexican FRS
|
|
Ps.
|
7,426
|
|
|
Ps.
|
4,099
|
|
|
Ps.
|
6,047
|
|
|
Ps.
|
1,265
|
|
|
Ps.
|
(9,451
|
)
|
|
Ps.
|
9,386
|
|
Less minority interest included as stockholders
equity under Mexican FRS (see note 24 a)
|
|
|
|
|
|
|
|
|
|
|
(1,594
|
)
|
|
|
|
|
|
|
(366
|
)
|
|
|
(1,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholders equity under Mexican FRS
|
|
|
7,426
|
|
|
|
4,099
|
|
|
|
4,453
|
|
|
|
1,265
|
|
|
|
(9,817
|
)
|
|
|
7,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority interest
(see note 24 a)
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
|
|
|
|
25
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes (see note 24 b)
|
|
|
146
|
|
|
|
(524
|
)
|
|
|
(541
|
)
|
|
|
6
|
|
|
|
240
|
|
|
|
(673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest (see note 24 f)
|
|
|
|
|
|
|
332
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
374
|
|
Accumulated amortization of capitalized interest
(see note 24 f)
|
|
|
|
|
|
|
(163
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (see note 24 g)
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
(see note 24 h)
|
|
|
|
|
|
|
21
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of SFAS No. 158 (see note 24 m)
|
|
|
|
|
|
|
(711
|
)
|
|
|
(163
|
)
|
|
|
(21
|
)
|
|
|
|
|
|
|
(895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
(see note 24 m)
|
|
|
|
|
|
|
(61
|
)
|
|
|
(38
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Visteons capital investment (see note
24 n)
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real state (see note 24 o)
|
|
|
(386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets
(see note 24 p)
|
|
|
(149
|
)
|
|
|
12
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(1,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(1,576
|
)
|
|
|
(1,094
|
)
|
|
|
(342
|
)
|
|
|
(16
|
)
|
|
|
1,452
|
|
|
|
(1,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity under U.S. GAAP
|
|
Ps.
|
5,850
|
|
|
Ps.
|
3,005
|
|
|
Ps.
|
4,111
|
|
|
Ps.
|
1,249
|
|
|
Ps.
|
(8,365
|
)
|
|
Ps.
|
5,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-80
|
e)
|
|
Supplemental U.S. GAAP Cash Flow Information
|
|
|
|
|
The classifications of cash flows under MFRS and U.S. GAAP are basically the same in respect of the
transactions presented under each caption. The nature of the differences between Mexican MFRS and
U.S. GAAP in the amounts reported is primarily due to (i) the elimination of inflationary effects
in the variations of monetary assets and liabilities arising from financing and investing
activities, against the corresponding monetary position result in operating activities, (ii) the
elimination of exchange rate fluctuations resulting from financing and investing activities,
against the corresponding unrealized foreign exchange gain or loss included in operating
activities, and (iii) the recognition in operating, financing and investing activities of the U.S.
GAAP adjustments.
|
|
|
|
|
For the Guarantors, the following table summarizes the cash flow items as required under SFAS No.
95 provided by (used in) operating, financing and investing activities for the years ended December
31, 2005, 2006 and 2007, giving effect to the U.S. GAAP adjustments, excluding the effects of
inflation required by Bulletin B-10 and Bulletin B-15. The following information is presented, in
millions of pesos, on a historical peso basis and it is not presented in pesos of constant
purchasing power.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2005
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash (used in)
provided by operating
activities
|
|
Ps.
|
(21
|
)
|
|
Ps.
|
995
|
|
|
Ps.
|
615
|
|
|
Ps.
|
(28
|
)
|
|
Ps.
|
(628
|
)
|
|
Ps.
|
933
|
|
Net cash provided by
(used in) financing
activities
|
|
|
678
|
|
|
|
209
|
|
|
|
33
|
|
|
|
146
|
|
|
|
(2,182
|
)
|
|
|
(1,116
|
)
|
Net cash (used in)
investing activities
|
|
|
(2,317
|
)
|
|
|
(636
|
)
|
|
|
(525
|
)
|
|
|
(165
|
)
|
|
|
2,610
|
|
|
|
(1,033
|
)
|
|
|
|
Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2005
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
Ps.
|
787
|
|
|
Ps.
|
762
|
|
|
Ps.
|
535
|
|
|
Ps.
|
668
|
|
|
Ps.
|
(979
|
)
|
|
Ps.
|
1,773
|
|
|
Income taxes paid
|
|
|
(34
|
)
|
|
|
162
|
|
|
|
104
|
|
|
|
58
|
|
|
|
(44
|
)
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash provided by
(used in) operating
activities
|
|
Ps.
|
427
|
|
|
Ps.
|
(657
|
)
|
|
Ps.
|
(293
|
)
|
|
Ps.
|
(72
|
)
|
|
Ps.
|
1,498
|
|
|
Ps.
|
903
|
|
Net cash (used in)
provided by financing
activities
|
|
|
(1,049
|
)
|
|
|
181
|
|
|
|
(142
|
)
|
|
|
770
|
|
|
|
(2,458
|
)
|
|
|
(2,698
|
)
|
Net cash provided by
(used in) investing
activities
|
|
|
1,270
|
|
|
|
(181
|
)
|
|
|
308
|
|
|
|
(695
|
)
|
|
|
978
|
|
|
|
1,680
|
|
F-81
|
|
|
Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2006
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
Ps.
|
549
|
|
|
Ps.
|
863
|
|
|
Ps.
|
658
|
|
|
Ps.
|
723
|
|
|
Ps.
|
(1,099
|
)
|
|
Ps.
|
1,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
(1,847
|
)
|
|
|
1,675
|
|
|
|
151
|
|
|
|
29
|
|
|
|
12
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net cash provided by
(used in) operating
activities
|
|
Ps.
|
547
|
|
|
Ps.
|
629
|
|
|
Ps.
|
549
|
|
|
Ps.
|
(30
|
)
|
|
Ps.
|
(312
|
)
|
|
Ps.
|
1,383
|
|
Net cash (used in)
provided by financing
activities
|
|
|
(4
|
)
|
|
|
(879
|
)
|
|
|
(7
|
)
|
|
|
141
|
|
|
|
2,711
|
|
|
|
1,962
|
|
Net cash (used in)
provided by investing
activities
|
|
|
(438
|
)
|
|
|
582
|
|
|
|
(505
|
)
|
|
|
(116
|
)
|
|
|
(2,401
|
)
|
|
|
(2,878
|
)
|
|
|
|
Net cash flow from operating activities reflects cash payments for interest and income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Consolidated
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Viméxico and
|
|
|
Non-
|
|
|
and
|
|
|
Vitro
|
|
As of December 31, 2007
|
|
Vitro
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
Ps.
|
914
|
|
|
Ps.
|
1,492
|
|
|
Ps.
|
373
|
|
|
Ps.
|
88
|
|
|
Ps.
|
(1,498
|
)
|
|
Ps.
|
1,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
(581
|
)
|
|
|
834
|
|
|
|
204
|
|
|
|
10
|
|
|
|
(26
|
)
|
|
|
441
|
|
F-82
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Viméxico, S.A. de C.V.
Garza García, N. L., Mexico
We have audited the accompanying consolidated balance sheets of Viméxico, S.A. de C.V. and
Subsidiaries (the Company) as of December 31, 2006 and 2007, and the related consolidated
statements of operations, changes in stockholders equity and changes in financial position for
each of the three years in the period ended December 31, 2007 (all expressed in millions of
constant Mexican pesos as of December 31, 2007). These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Mexico and with
the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
As disclosed in Note 1 to the accompanying financial statements, at the Extraordinary General
Shareholders meeting held on December 11, 2006, it was agreed to merge the Company with Vitro
Plan, S.A. de C.V. (Vitro Plan), an affiliate under the common control of Vitro, S.A.B. de C.V..
Subsequent to the merger, the Company remained as the surviving entity and assumed all the rights
and obligations of the newly merged entity. As the transaction was entered into between entities
under common control, the financial statements and related disclosures of the merged entity were
presented as if the two subsidiaries had been combined as of the earliest period presented, with
intercompany transactions eliminated.
Effective January 1, 2005 as mentioned in Note 3 a) to the accompanying consolidated financial
statements, the Company adopted the provisions of Bulletin C-10, Derivative Financial Instruments
and Hedging Activities, and recognized the cumulative effect of a change in accounting principle
of Ps. 132 million, net of tax.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of Viméxico, S.A. de C.V. and Subsidiaries as of December 31, 2006 and 2007,
and the results of their operations, changes in their stockholders equity and changes in their
financial position for each of the three years in the period ended December 31, 2007 in conformity
with Mexican Financial Reporting Standards.
Mexican Financial Reporting Standards vary in certain significant respects from accounting
principles generally accepted in the United States of America. The application of the latter would
have affected the determination of net income for each of the three years in the period ended
December 31, 2007, and the determination of stockholders equity as of December 31, 2006 and 2007,
to the extent summarized in Note 21.
As disclosed in Note 21 to the accompanying consolidated financial statements, the Company adopted
the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of
FASB Statements No. 87, 88, 106, and 132(R), effective December 31, 2006.
The accompanying financial statements have been translated into English for the convenience of
readers in the United States of America.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
C.P.C. Gricelda García Ruiz
Monterrey, N.L. Mexico
March 14, 2008 (June 23, 2008 as to Notes 21 and 22)
F-83
Viméxico, S.A. de C.V. and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
Ps.
|
170
|
|
|
Ps.
|
193
|
|
Trade receivable, net
|
|
|
438
|
|
|
|
670
|
|
Retained undivided interests in securitized receivables
|
|
|
693
|
|
|
|
656
|
|
Recoverable taxes
|
|
|
119
|
|
|
|
8
|
|
Other accounts receivable
|
|
|
363
|
|
|
|
431
|
|
Inventories
|
|
|
2,049
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
3,832
|
|
|
|
3,958
|
|
Land and buildings
|
|
|
2,854
|
|
|
|
2,658
|
|
Machinery and equipment
|
|
|
2,743
|
|
|
|
2,943
|
|
Construction in progress
|
|
|
161
|
|
|
|
176
|
|
Goodwill
|
|
|
776
|
|
|
|
861
|
|
Intangible employee retirement obligation asset
|
|
|
56
|
|
|
|
72
|
|
Deferred taxes
|
|
|
477
|
|
|
|
570
|
|
Other assets
|
|
|
247
|
|
|
|
430
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
7,314
|
|
|
|
7,710
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
11,146
|
|
|
Ps.
|
11,668
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
203
|
|
|
Ps.
|
254
|
|
Current maturities of long-term debt
|
|
|
60
|
|
|
|
27
|
|
Trade payables
|
|
|
977
|
|
|
|
1,221
|
|
Accrued expenses
|
|
|
343
|
|
|
|
391
|
|
Derivative financial instruments
|
|
|
25
|
|
|
|
70
|
|
Accounts and notes payables to affiliates
|
|
|
2,258
|
|
|
|
2,285
|
|
Other accounts payable
|
|
|
451
|
|
|
|
638
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
4,317
|
|
|
|
4,886
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
416
|
|
|
|
127
|
|
Long-term notes payables to affiliates
|
|
|
|
|
|
|
294
|
|
Employee retirement obligations
|
|
|
138
|
|
|
|
39
|
|
Deferred tax liabilities
|
|
|
89
|
|
|
|
76
|
|
Other liabilities
|
|
|
232
|
|
|
|
199
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
875
|
|
|
|
735
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,192
|
|
|
|
5,621
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Capital stock
|
|
|
4,721
|
|
|
|
4,721
|
|
Shortfall in restatement of capital
|
|
|
(2,493
|
)
|
|
|
(2,537
|
)
|
Cumulative initial effect of deferred taxes
|
|
|
(1,644
|
)
|
|
|
(1,644
|
)
|
Minimum labor liability adjustment
|
|
|
(96
|
)
|
|
|
(29
|
)
|
Retained earnings
|
|
|
4,028
|
|
|
|
3,942
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
4,516
|
|
|
|
4,453
|
|
Minority interest in consolidated subsidiaries
|
|
|
1,438
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
5,954
|
|
|
|
6,047
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
Ps.
|
11,146
|
|
|
Ps.
|
11,668
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
Ing. Hugo A. Lara García
Chief Executive Officer
|
|
Ing. Jorge Mario Guzmán Guzmán
Chief Financial Officer
|
F-84
Viméxico, S.A. de C.V. and Subsidiaries
Consolidated Statements of Operations
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
13,704
|
|
|
Ps.
|
13,462
|
|
|
Ps.
|
13,605
|
|
Cost of sales
|
|
|
9,962
|
|
|
|
9,959
|
|
|
|
9,578
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,742
|
|
|
|
3,503
|
|
|
|
4,027
|
|
Operating expenses
|
|
|
3,228
|
|
|
|
3,085
|
|
|
|
3,245
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
514
|
|
|
|
418
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive financing result:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
577
|
|
|
|
724
|
|
|
|
472
|
|
Exchange gain (loss)
|
|
|
32
|
|
|
|
(28
|
)
|
|
|
(86
|
)
|
Derivative financial instruments gain (loss)
|
|
|
7
|
|
|
|
(28
|
)
|
|
|
3
|
|
Gain from monetary position
|
|
|
155
|
|
|
|
149
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
383
|
|
|
|
631
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) after financing cost
|
|
|
131
|
|
|
|
(213
|
)
|
|
|
339
|
|
Other expenses, net
|
|
|
451
|
|
|
|
450
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before taxes
|
|
|
(320
|
)
|
|
|
(663
|
)
|
|
|
248
|
|
Income taxes (benefit) expense
|
|
|
(749
|
)
|
|
|
(77
|
)
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting principle
|
|
|
429
|
|
|
|
(586
|
)
|
|
|
96
|
|
Cumulative effect of change in accounting principle, net of tax
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the year
|
|
Ps.
|
297
|
|
|
Ps.
|
(586
|
)
|
|
Ps.
|
96
|
|
|
|
|
|
|
|
|
|
|
|
Minority income
|
|
Ps.
|
185
|
|
|
Ps.
|
188
|
|
|
Ps.
|
182
|
|
Net majority income (loss)
|
|
|
112
|
|
|
|
(774
|
)
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
Ps.
|
297
|
|
|
Ps.
|
(586
|
)
|
|
Ps.
|
96
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-85
Viméxico, S.A. de C.V. and Subsidiaries
Consolidated Statements of Changes in
Financial Position
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
Ps.
|
429
|
|
|
Ps.
|
(586
|
)
|
|
Ps.
|
96
|
|
Add (deduct) non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
668
|
|
|
|
598
|
|
|
|
480
|
|
Provision for employee retirement obligations
|
|
|
70
|
|
|
|
138
|
|
|
|
57
|
|
Early extinguishment of employee retirement obligations
|
|
|
13
|
|
|
|
1
|
|
|
|
20
|
|
Amortization of debt issuance costs
|
|
|
21
|
|
|
|
37
|
|
|
|
4
|
|
Gain from sale of subsidiaries and associated companies
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
Impairment of long-lived assets
|
|
|
181
|
|
|
|
334
|
|
|
|
91
|
|
Loss (gain) from sale of long-lived assets
|
|
|
39
|
|
|
|
131
|
|
|
|
(55
|
)
|
Mark-to-market of derivative financial instruments
|
|
|
(116
|
)
|
|
|
(28
|
)
|
|
|
29
|
|
Deferred taxes and employee profit sharing
|
|
|
(952
|
)
|
|
|
(257
|
)
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353
|
|
|
|
268
|
|
|
|
618
|
|
Decrease (increase) in trade receivables
|
|
|
508
|
|
|
|
148
|
|
|
|
(194
|
)
|
(Increase) decrease in inventories
|
|
|
(266
|
)
|
|
|
451
|
|
|
|
(19
|
)
|
Increase in trade payables
|
|
|
33
|
|
|
|
1
|
|
|
|
223
|
|
Increase (decrease) in retained undivided interests in securitized receivables
|
|
|
(327
|
)
|
|
|
(19
|
)
|
|
|
37
|
|
Change in other current assets and liabilities
|
|
|
457
|
|
|
|
(945
|
)
|
|
|
68
|
|
Employee retirement obligations
|
|
|
(58
|
)
|
|
|
(188
|
)
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by used in operating activities
|
|
|
700
|
|
|
|
(284
|
)
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable to affiliated companies
|
|
|
740
|
|
|
|
448
|
|
|
|
317
|
|
Proceeds from short-term bank loans
|
|
|
1,679
|
|
|
|
1,317
|
|
|
|
557
|
|
Proceeds from long-term bank loans
|
|
|
848
|
|
|
|
47
|
|
|
|
145
|
|
Amortization in real terms of bank loans
|
|
|
(98
|
)
|
|
|
(64
|
)
|
|
|
(24
|
)
|
Payment of short-term bank loans
|
|
|
(1,575
|
)
|
|
|
(1,837
|
)
|
|
|
(564
|
)
|
Payment of long-term bank loans
|
|
|
(1,500
|
)
|
|
|
(1,677
|
)
|
|
|
(384
|
)
|
Debt issuance costs
|
|
|
(57
|
)
|
|
|
(2
|
)
|
|
|
(9
|
)
|
Issuance of capital stock
|
|
|
|
|
|
|
1,526
|
|
|
|
|
|
Dividends paid to minority interest
|
|
|
(79
|
)
|
|
|
(54
|
)
|
|
|
(51
|
)
|
Other financing activities
|
|
|
21
|
|
|
|
77
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
Net resources used in financing activities
|
|
|
(21
|
)
|
|
|
(219
|
)
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and equipment
|
|
|
(468
|
)
|
|
|
(330
|
)
|
|
|
(324
|
)
|
Proceeds from sale of land, buildings, machinery and equipment
|
|
|
31
|
|
|
|
339
|
|
|
|
131
|
|
Restricted cash
|
|
|
1
|
|
|
|
281
|
|
|
|
(9
|
)
|
Investment in subsidiaries
|
|
|
(9
|
)
|
|
|
|
|
|
|
(181
|
)
|
Proceeds from sale of subsidiaries and associated companies
|
|
|
|
|
|
|
177
|
|
|
|
|
|
Capital distribution to minority interest
|
|
|
11
|
|
|
|
(109
|
)
|
|
|
|
|
Long-term accounts receivables
|
|
|
(3
|
)
|
|
|
96
|
|
|
|
53
|
|
Other long-term assets
|
|
|
6
|
|
|
|
(2
|
)
|
|
|
(4
|
)
|
Deferred charges
|
|
|
(105
|
)
|
|
|
(102
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by investing activities
|
|
|
(536
|
)
|
|
|
350
|
|
|
|
(540
|
)
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
143
|
|
|
|
(153
|
)
|
|
|
23
|
|
Balance at beginning of year
|
|
|
180
|
|
|
|
323
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
323
|
|
|
Ps.
|
170
|
|
|
Ps.
|
193
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-86
Viméxico, S.A. de C.V. and Subsidiaries
Consolidated Statements of Changes in
Stockholders Equity
For the years ended December 31, 2005, 2006 and 2007
(Millions of Mexican constant pesos as of December 31, 2007)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shortfall in
|
|
|
Cumulative
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restatement of
|
|
|
initial effect of
|
|
|
labor liability
|
|
|
Retained
|
|
|
Minority
|
|
|
Stockholders
|
|
|
|
Capital stock
|
|
|
capital
|
|
|
deferred taxes
|
|
|
adjustment
|
|
|
earnings
|
|
|
interest
|
|
|
equity
|
|
Balance as of
January 1, 2005
|
|
Ps.
|
3,195
|
|
|
Ps.
|
(2,541
|
)
|
|
Ps.
|
(1,644
|
)
|
|
Ps.
|
(101
|
)
|
|
Ps.
|
4,690
|
|
|
Ps.
|
1,470
|
|
|
Ps.
|
5,069
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79
|
)
|
|
|
(79
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
5
|
|
|
|
112
|
|
|
|
196
|
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
December 31, 2005
|
|
|
3,195
|
|
|
|
(2,547
|
)
|
|
|
(1,644
|
)
|
|
|
(96
|
)
|
|
|
4,802
|
|
|
|
1,587
|
|
|
|
5,297
|
|
Issuance of
capital stock
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,526
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
|
|
(54
|
)
|
Decrease in
minorityinterest
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(325
|
)
|
|
|
(256
|
)
|
Comprehensive loss
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
(774
|
)
|
|
|
230
|
|
|
|
(559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
December 31, 2006
|
|
|
4,721
|
|
|
|
(2,493
|
)
|
|
|
(1,644
|
)
|
|
|
(96
|
)
|
|
|
4,028
|
|
|
|
1,438
|
|
|
|
5,954
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
(51
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
67
|
|
|
|
(86
|
)
|
|
|
207
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
December 31, 2007
|
|
Ps.
|
4,721
|
|
|
Ps.
|
(2,537
|
)
|
|
Ps.
|
(1,644
|
)
|
|
Ps.
|
(29
|
)
|
|
Ps.
|
3,942
|
|
|
Ps.
|
1,594
|
|
|
Ps.
|
6,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-87
Viméxico, S.A. de C.V. and Subsidiaries
Notes to Consolidated Financial Statements
For the years ended December 31, 2005, 2006 and 2007
(Millions of constant Mexican pesos as of December 31, 2007)
1
|
|
Activities of the company
|
|
|
|
Viméxico, S.A. de C.V. (Viméxico) and subsidiaries (the Company), a 91.8% subsidiary of
Vitro, S.A.B. de C.V. (Vitro or the Parent Company), was incorporated on October 18,
2006, as a Mexican Company, which, through its subsidiaries, is mainly dedicated to the
manufacturing and selling of float glass in the architectural and automotive industries.
|
|
|
|
At the Extraordinary General Shareholders meeting held on December 11, 2006, it was agreed
to merge the Company with Vitro Plan, S.A. de C.V. a subsidiary under the common control of
Vitro. Subsequent to the merger, the Company remained as the surviving entity and assumed all
the rights and obligations of the newly merged entity. As the transaction was entered into
between entities under common control, the financial statements and related footnote
disclosures of the merged entity were presented as if the two subsidiaries had been combined
as of the earliest period presented, with intercompany transactions eliminated (see Note
11e).
|
|
2
|
|
Basis of presentation and principles of consolidation
|
|
a.
|
|
Basis of presentation
|
|
|
|
|
The consolidated financial statements are prepared on the basis of Mexican Financial
Reporting Standards (NIFs or Mexican FRS).
|
|
|
|
|
All references in the consolidated financial statements and accompanying notes, to pesos
or Ps. correspond to Mexican pesos, and references to dollars or US$ correspond to
dollar of United States of America (the United States).
|
F-88
|
b.
|
|
Consolidated subsidiaries
|
|
|
|
|
Those companies in which Viméxico holds, directly or indirectly, more than 50% of the
capital stock, or which it controls, are included in the consolidated financial
statements. For those companies in which Viméxico has joint control, the proportionate
consolidation method is used. This method consists of consolidating on a proportionate
basis the assets, liabilities, stockholders equity and revenues and expenses. All
significant intercompany balances and transactions have been eliminated upon
consolidation. The main subsidiaries the Company consolidates as of December 31, 2007,
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
% interest in the capital
|
|
|
|
stock
|
|
|
|
2006
|
|
|
2007
|
|
Vidrio Plano de México, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Vidrio Plano, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Cristales Inastillables de México, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Vitro Flex, S.A. de C.V.(1)
|
|
|
100
|
|
|
|
100
|
|
Cristales Centroamericanos, S.A.
|
|
|
100
|
|
|
|
100
|
|
Distribuidora Nacional de Vidrio, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
V.V.P. Holdings Corporation.
|
|
|
100
|
|
|
|
100
|
|
Cristales Automotrices, S.A. de C.V.
|
|
|
51
|
|
|
|
51
|
|
Distribuidor Vidriero Lan, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Vitro Automotriz, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Vitro Vidrio y Cristal, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Productos de Valor Agregado en Cristal, S.A. de C.V.(4)
|
|
|
|
|
|
|
55
|
|
Vitro Flotado Cubiertas, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Tecnológica Vitro Vidrio y Cristal, Ltd
|
|
|
100
|
|
|
|
100
|
|
IP Vitro Vidrio y Cristal, Ltd
|
|
|
100
|
|
|
|
100
|
|
VVP Europa Holdings BV
|
|
|
100
|
|
|
|
100
|
|
Vitro Cristalglass, S.L.
|
|
|
60
|
|
|
|
60
|
|
Vitro Chaves Industria de Vidrio, S.A.
|
|
|
60
|
|
|
|
60
|
|
Vidrio Plano de Mexicali, S.A. de C.V.
|
|
|
100
|
|
|
|
100
|
|
Vidrio y Cristal del Noroeste, S.A. de C.V.(2)
|
|
|
50
|
|
|
|
100
|
|
Vitro America, Inc.
|
|
|
100
|
|
|
|
100
|
|
Vitro Colombia, S.A.
|
|
|
100
|
|
|
|
100
|
|
Química M, S.A. de C.V.(3)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On September 29, 2006, the Company assumed 100% control of Vitro Flex,
S.A. de C.V. (see Note 17).
|
|
(2)
|
|
On July 24, 2007, the Company acquired the remaining 50% of the
outstanding shares of Vitro AFG, S.A. de C.V. (Vitro AFG) from AFG Industries
Inc. (AFG Industries), in order to assume control and increase its ownership to
100%, subsequently changing its legal name to Vidrio y Cristal del Noroeste, S.A.
de C.V. (see Note 17).
|
|
(3)
|
|
On March 2, 2006, the Company sold its 51% interest in the capital
stock of this company (see Note 17).
|
|
(4)
|
|
On August 29, 2007, Vitro Vidrio y Cristal, S.A. de C.V. (Vitro VyC),
a subsidiary of Viméxico acquired 55% of the outstanding shares of Productos de
Valor Agregado en Cristal, S.A. de C.V. (PVA) (see Note 17).
|
|
c.
|
|
Translation of financial statements of foreign subsidiaries
|
|
|
|
|
In order to consolidate the financial statements of foreign subsidiaries, the effects of
inflation were taken into consideration in accordance with Bulletin B-10, Recognition
of the Effects of Inflation in Financial Information, as amended. Such companies
financial statements are translated into Mexican pesos using the current rate method.
The assets, liabilities, stockholders equity and the statement of operations accounts
are translated into Mexican pesos using the exchange rate as of the date of the most
recent balance sheet presented. The cumulative translation adjustment is included in
shortfall in restatement of capital as a component of stockholders equity.
|
F-89
|
d.
|
|
Comprehensive income (loss)
|
|
|
|
|
Represents changes in stockholders equity during the year, for concepts other than
distributions and activity in contributed common stock, and is comprised of the net
income (loss) of the year, plus other comprehensive income (loss) items of the same
period, which are presented directly in stockholders equity without affecting the
consolidated statements of operations. Other comprehensive income (loss) items consist
of the shortfall in restatement of capital, the translation effects of foreign
subsidiaries and the additional minimum labor liability adjustment.
|
|
|
e.
|
|
Classification of costs and expenses
|
|
|
|
|
Costs and expenses presented in the consolidated statements of operations were
classified according to their function which allows for the analysis of the Companys
gross margin. The Company continues to present operating income in the statements of
operations as it is an important financial indicator within the industry and helps to
evaluate the Companys performance. Operating income includes ordinary income and
expenses as well as operating expenses. Such presentation is comparable with what was
utilized for the years ended December 31, 2005 and 2006.
|
3
|
|
Summary of significant accounting policies
|
|
|
|
The accompanying consolidated financial statements have been prepared in conformity with
NIFs, which require that management make certain estimates and use certain assumptions that
affect the amounts reported in the financial statements and their related disclosures;
however, actual results may differ from such estimates. The Companys management, upon
applying professional judgment, considers that estimates made and assumptions used were
adequate under the circumstances. The significant accounting policies of the Company are as
follows:
|
|
a.
|
|
Changes in accounting policies:
|
|
|
|
|
Statement of income
Beginning January 1, 2007, the Company adopted new NIF B-3,
Statement of Income, which now classifies revenues, costs and expenses into ordinary
and non-ordinary. Ordinary items are derived from primary activities representing an
entitys main source of revenues. Non-ordinary items are derived from activities other
than those representing an entitys main source of revenues. Consequently, the
classification of certain transactions as special and extraordinary was eliminated;
these items are now part of other income and expenses and non-ordinary items,
respectively. Statutory employee profit sharing (PTU) should now be presented as an
ordinary expense and no longer presented with income taxes. According to Interpretation
of Financial Information Standards Number 4, Presentation of Statutory Employee Profit
Sharing in the Statement of Income (INIF 4), PTU should be included within other
income and expenses. The main effect of adopting this interpretation was the
reclassification of current and deferred PTU for 2005, 2006 and 2007 of Ps. 25, Ps. 26
and Ps. 24 respectively, to other income and expenses.
|
F-90
|
|
|
Related parties
Beginning January 1, 2007, the Company adopted NIF C-13, Related
Parties, which broadens the concept related parties to include a) the
overall business in which the reporting entity participates; b) close family members of
key management or prominent executives; and c) any fund created in connection with a
labor-related compensation plan. NIF C-13 also requires the following disclosures: 1)
that the terms and conditions of consideration paid or received in transactions carried
out between related parties be equivalent to those of similar transactions carried out
between independent parties and the reporting entity, only if sufficient evidence
exists; 2) benefits granted to the entitys key management or prominent executives.
Notes to the 2005 and 2006 consolidated financial statements were amended to comply with
the new provisions.
|
|
|
|
|
Capitalization of comprehensive financing result
Beginning January 1, 2007, the
Company adopted NIF D-6, Capitalization of Comprehensive Financing Result, which
establishes general capitalization standards. Some of these standards include: a)
mandatory capitalization of comprehensive financing result (CFR) directly attributable
to the acquisition of qualifying assets; b) when financing in domestic currency is used
to acquire assets, yields obtained from temporary investments before the capital
expenditure is made are excluded from the amount capitalized; c) a methodology to
calculate capitalizable CFR relating to funds from generic financing; d) regarding land,
CFR may be capitalized if land is developed; and e) conditions that must be met to
capitalize CFR and rules indicating when CFR should no longer be capitalized. The
Company did not have any qualifying assets in 2007 and therefore it did not capitalize
CFR during the period.
|
|
|
|
|
Derivative financial instruments and hedging operations
Effective January 1, 2005, the
Company adopted the provisions of Bulletin C-10, Derivative Financial Instruments and
Hedging Activities, and recognized the cumulative effect of a change in accounting
principle in 2005 of Ps. 132, net of tax.
|
|
|
b.
|
|
Recognition of the effects of inflation
The Company restates its consolidated
financial statements to Mexican peso purchasing power of the most recent balance sheet
date presented. Accordingly, the consolidated financial statements of the prior year,
which are presented for comparative purposes, have also been restated to Mexican pesos
of the same purchasing power and, therefore, differ from those originally reported in
the prior year.
|
|
|
|
|
Viméxicos Mexican subsidiaries use the Indice Nacional de Precios al Consumidor
(Mexican National Consumer Price Index, or NCPI), published by Banco de México. For
Viméxicos foreign subsidiaries , except as noted below, the Consumer Price Index All
Urban Consumers All Items, Unadjusted (CPI) published by the United States Labor
Department is used to restate the financial statements, and the restated financial
statements are translated into Mexican pesos using the applicable exchange rate at the
end of the last period presented, except in the case of the Companys subsidiaries
located in Spain, for which it applies the Price Consumption Index (PCI), published by
the National Institute of Statistics of Spain before translation into Mexican pesos
using the exchange rate of the Euro.
|
F-91
|
|
|
Recognition of the effects of inflation results mainly in inflationary gains or losses
on monetary and nonmonetary items that are presented in the consolidated financial
statements as follows:
|
|
|
|
Shortfall in restatement of capital
This item, which is an element of
stockholders equity, represents the accumulated effect of holding nonmonetary
assets and the effect of the initial monetary position gain or loss. The cumulative
effect of holding nonmonetary assets represents the difference between the specific
values of nonmonetary assets in excess of or below the increase attributable to
general inflation.
|
|
|
|
|
Monetary position result
Monetary position result reflects the result of
holding monetary assets and liabilities during periods of inflation. Values stated
in current monetary units decrease in purchasing power over time. This means that
losses are incurred by holding monetary assets, whereas gains are realized by
maintaining monetary liabilities. The net effect is presented in the statements of
operations as part of the total comprehensive financing result. For foreign
subsidiaries the result from monetary position is calculated using the CPI, except
in the case of the Companys subsidiaries located in Spain for which it applies the
PCI.
|
|
|
|
|
Statement of Changes in Financial Position Bulletin B-12
This statement
requires presentation of the sources and uses of funds during the period measured
as the differences, in constant pesos, between the beginning and ending balances of
balance sheet items adjusted by the excess (shortfall) in restatement of capital.
As required by Bulletin B-12, the monetary effect and the effect of changes in
exchange rates are considered cash items in the determination of resources
generated from operations due to the fact they affect the purchasing power of the
entity.
|
|
c.
|
|
Cash and cash equivalents
Consist mainly of bank deposits in checking accounts
and readily available investments of highly liquid short-term investments. They are
valued at the lower of acquisition cost plus accrued yields or estimated net realizable
value and are recognized in results of operations as they accrue.
|
|
|
d.
|
|
Investments in securities
According to its intent, from the date of acquisition
the Company classifies its investments in securities instruments in any of the following
categories: (1) trading, when the Company intends to trade debt and equity instruments
in the short-term, before their maturity, if any. These investments are stated at fair
value; any fluctuations in the value of these investments are recognized in current
earnings; (2) held-to-maturity, when the Company intends to and is financially capable
of holding financial instruments until their maturity. These investments are recognized
and maintained at amortized cost; and (3) available-for-sale, investments that include
those that are classified neither as trading nor held-to-maturity. These investments are
stated at fair value; any unrealized gains and losses resulting from valuation, net of
income tax, are recorded as a component of other comprehensive income within
stockholders equity and reclassified to current earnings upon their sale or maturity.
The monetary position resulting from the effects of inflation on available-for-sale
investments is recorded as a component of other comprehensive income. Fair value is
determined using prices quoted in recognized markets. If such instruments are not
traded, fair value is determined by applying recognized technical valuation models.
|
F-92
|
|
|
Investments in securities classified as held-to-maturity and available-for-sale are
subject to impairment tests. If there is evidence that the reduction in fair value is
other than temporary, the impairment is recognized in current earnings.
|
|
|
|
|
Financial liabilities derived from the issuance of debt instruments are recorded at the
value of the obligations they represent. Any expenses, premiums and discounts
related to the issuance of debt financial instruments are amortized over the life of the
instruments.
|
|
|
e.
|
|
Derivative financial instruments
The Company states all derivatives at fair
value in the balance sheet, regardless of the purpose for holding them. Fair value is
determined using prices quoted in recognized markets. If such instruments are not
traded, fair value is determined by applying recognized valuation techniques.
|
|
|
|
|
When derivatives are entered into to hedge risks, and such derivatives meet all hedging
requirements, their designation is documented at the beginning of the hedging
transaction, describing the transactions objective, characteristics, accounting
treatment and how the ineffectiveness of the instrument will be measured.
|
|
|
|
|
Changes in the fair value of derivative instruments designated as hedges for accounting
purposes are recognized as follows: (1) for fair value hedges, changes in both the
derivative instrument and the hedged item are recognized in current earnings; (2) for
cash flow hedges, changes in the derivative instrument are temporarily recognized as a
component of other comprehensive income and then reclassified to current earnings when
affected by the hedged item. Any ineffective portion of the change in fair value is
immediately recognized in current earnings, within total comprehensive financing result,
regardless of whether the derivative instrument is designated as a fair value hedge or a
cash flow hedge.
|
|
|
|
|
The Company uses interest rate swaps, foreign currency forward contracts and different
natural gas derivative instruments to manage its exposure to these market risks. The
Company formally documents all hedging relationships, including their objectives and
risk management strategies to carry out derivative transactions.
|
|
|
|
|
While certain derivative financial instruments are contracted for hedging from an
economic point of view, they are not designated as hedges for accounting purposes
because they do not meet all of the requirements and are instead classified as
held-for-trading for accounting purposes. Changes in fair value of such derivative
instruments are recognized in current earnings as a component of total comprehensive
financing result.
|
|
|
|
|
The Company reviews all contracts entered into to identify embedded derivatives that
should be segregated from the host contract for purposes of valuation and recognition.
When an embedded derivative is identified and the host contract has not been stated at
fair value and adequate elements for its valuation exist, the embedded derivative is
segregated from the host contract, stated at fair value and classified as trading or
designated as a financial instrument for hedging. Initial valuation and changes in the
fair value of the embedded derivatives at the closing of each period are recognized in
current earnings.
|
|
|
f.
|
|
Inventories and cost of sales
Inventories are stated at the lower of
replacement cost using the latest purchase price method without exceeding net realizable
value. Cost of sales is restated using replacement cost or the latest production cost at
the time of the sale.
|
F-93
|
g.
|
|
Land, buildings, machinery and equipment
Expenditures for land, buildings,
machinery and equipment, including renewals and improvements that extend useful lives,
are capitalized and restated using the NCPI. The initial balance to apply the NCPI was
the net replacement value of the Companys long-lived asset as of December 31, 1996. For
machinery and equipment purchased in a foreign country, the restatement is based on the
inflation index mentioned above and the exchange rate at the end of each period.
|
|
|
|
|
Beginning on January 1, 2007, the carrying value of qualifying assets includes the
capitalization of total comprehensive financing result.
|
|
|
|
|
Depreciation is calculated using the straight-line method based on the remaining
estimated useful lives of the related assets. Depreciation begins in the month in which
the asset is placed in service. The estimated useful lives of the assets are as
follows:
|
|
|
|
|
|
Years
|
Buildings
|
|
20 to 50
|
Machinery and equipment
|
|
5 to 30
|
|
|
|
Maintenance and repair expenses are recorded as costs and expenses in the period
incurred.
|
|
|
h.
|
|
Impairment of long-lived assets in use
The Company reviews the carrying amounts
of long-lived assets in use when an impairment indicator suggests that such amounts
might not be recoverable, considering the greater of the present value of future net
cash flows or the net sales price upon disposal. Impairment is recorded when the
carrying amounts exceed the greater of the amounts mentioned above. The impairment
indicators considered for these purposes are, among others, the operating losses or
negative cash flows in the period if they are combined with a history or projection of
losses, depreciation and amortization charged to results, which in percentage terms in
relation to revenues are substantially higher than that of previous years, obsolescence,
reduction in the demand for the products manufactured, competition and other legal and
economic factors.
|
|
|
i.
|
|
Provisions
Provisions are recognized for current obligations that result from a
past event, are probable to result in the use of economic resources, and can be
reasonably estimated.
|
|
|
j.
|
|
Goodwill
Goodwill represents the excess of cost over fair value of subsidiaries
as of the date of acquisition. It is restated using the NCPI and at least once a year
is subject to impairment tests.
|
|
|
k.
|
|
Employee retirement obligations
Seniority premiums, pension plans and severance
payments are recognized as costs over the expected service period of employees and are
calculated by independent actuaries using the projected unit credit method at net
discount rates. Accordingly, the liability is being accrued which, at present value,
will cover the obligation from benefits projected to the estimated retirement date of
the Companys employees.
|
F-94
|
l.
|
|
Foreign currency balances and transactions for Mexican subsidiaries
Foreign
currency transactions are recorded at the applicable exchange rate in effect at the
transaction date. Monetary assets and liabilities denominated in foreign currency are
translated into Mexican pesos at the applicable exchange rate in effect at the balance
sheet date. Exchange fluctuations are recorded as a component of net comprehensive
financing result in the consolidated statements of operations.
|
|
|
m.
|
|
Revenue recognition
Revenues and related costs are recognized in the period in
which risks and rewards of ownership of the inventories are transferred to customers,
which generally coincide with the shipment of products to customers in satisfaction of
orders.
|
|
|
n.
|
|
Statutory employee profit sharing (PTU)
Statutory employee profit sharing is
recorded in the results of the year in which it is incurred and presented under other
income and expenses in the accompanying consolidated statements of income. Deferred PTU
is derived from temporary differences between the accounting result and income for PTU
purposes and is recognized only when it can be reasonably assumed that such difference
will generate a liability or benefit, and there is no indication that circumstances will
change in such a way that the liabilities will not be paid or benefits will not be
realized.
|
|
|
o.
|
|
Income taxes
Income taxes are recorded in the results of the year in which they
are incurred. Beginning October 2007, based on its financial projections, the Company
must determine whether it will essentially incur income tax (ISR) or the new Business
Flat Tax (IETU) and, accordingly, recognize deferred taxes based on the tax it will
pay. Deferred taxes are calculated by applying the corresponding tax rate to the
applicable temporary differences resulting from comparing the accounting and tax bases
of assets and liabilities and including, if any, future benefits from tax loss
carryforwards and certain tax credits. Deferred tax assets are recorded only when there
is a high probability of recovery.
|
|
|
|
|
Tax on assets (IMPAC) paid that is expected to be recoverable is recorded as an
advance payment of ISR and is presented in the consolidated balance sheet increasing the
deferred ISR asset.
|
|
|
p.
|
|
Foreign subsidiaries as economic hedges
The Companys management designated
some of its foreign subsidiaries as economic hedges. The resulting exchange rate
fluctuation is presented in the shortfall in restatement of capital within stockholders
equity to the extent the net investment in the foreign subsidiary covers the debt. The
result from monetary position is measured using inflation factors from the designated
subsidiarys country of origin. The effect related to this charge to the results of
operations for 2005, 2006 and 2007 was a (credit) charge of Ps. (53), Ps. 7 and Ps. 5,
respectively.
|
F-95
|
a.
|
|
Trade receivables are recorded net of an allowance for doubtful accounts and
other discounts of Ps. 182 and Ps. 237 as of December 31, 2006 and 2007, respectively.
|
|
|
b.
|
|
Sales of receivables
-
Vitro Cristalglass, S.L. (Vitro Cristalglass) a
subsidiary of the Company, has entered into revolving factoring program agreements to
sell trade accounts receivable with several financial institutions. In accordance with
the terms of some of these agreements, the Company has the obligation to reimburse for
uncollected receivables, in the case of non-payment of customers. As of December 31,
2006 and 2007 the maximum capacity available under these programs was US$ 35 million and
US$ 45 million, respectively. As of such dates Vitro Cristalglass had sold approximately
US$ 21 million and US$ 16 million of trade receivables, respectively.
|
|
|
c.
|
|
As of December 31, 2007, the Company had restricted cash of Ps. 9. The amount
represents the collateral held with Vitro Cistalglass in its loan with Banco Pastor in
Spain. Restricted cash is included in other current receivables.
|
|
|
d.
|
|
Securitization of trade receivables:
|
|
|
|
Securitization of the Viméxico (formerly Vitro Plan) accounts receivables
-
On
August 22, 2005, Distribuidora Nacional de Vidrio, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de C.V. and Vitro Vidrio y Cristal,
S.A. de C.V., subsidiaries of Viméxico entered into an accounts receivable
securitization agreement for five years, whereby they obtained approximately US$
21.5 million. Viméxicos subsidiaries held an agreement to sell all their accounts
receivable, on a revolving basis, through a trust designed specifically for this
transaction for the sole purpose of selling and buying accounts receivable, and was
designed to be legally isolated. Such amounts were obtained through a private
issuance of notes payable in the United States amounting to US$ 21.5 million
bearing interest at 6.5%. As of December 31, 2006 and 2007, the gross accounts
receivable transferred to the trust by the Company was Ps. 574 and Ps. 580,
respectively, and are reflected as a reduction of accounts receivable. The
estimated fair value of the rights retained in the portfolio securitization as of
December 31, 2006 and 2007 was Ps. 332 and Ps. 346, respectively.
|
|
|
|
|
During 2004, Vitro America, Inc. (Vitro America) closed a contract for selling
all their accounts receivable, on a revolving basis, to VVP Funding, a wholly-owned
subsidiary of Vitro America. VVP Funding is a special-purpose entity that was
formed prior to the execution of this agreement for the sole purpose of buying and
selling accounts receivable and is designed to be bankruptcy remote. Vitro America
and VVP Funding entered an agreement with an unrelated major financial institution
whereby VVP Funding sells, on a revolving basis and subject to the maintenance of
certain financial and receivables-based ratios, an undivided percentage ownership
in all eligible accounts receivable, as defined, for consideration composed of cash
up to a maximum amount of US$ 40 million and retained undivided interests in
securitized receivables. The transfer of undivided ownership interests from VVP
Funding to the unrelated major financial institution for cash consideration is
accounted for as a sale of receivables. Effective April 16, 2007, the new agreement
was signed and amended to increase the maximum selling amount from US$ 40 million
to US$ 50 million. The agreement expires in April 2008 but is subject to annual
renewal approval by the financial institution. As of December 31, 2006 and 2007,
the gross receivables sold totaled approximately US$ 78 million and US$ 76 million,
respectively and are reflected as a reduction of trade accounts receivable. The
estimated fair value of the retained undivided interests in securitized receivables
as of December 31, 2006 and 2007 was US$ 32 million and US$ 29 million,
respectively.
|
F-96
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
Semi-finished and finished products
|
|
Ps.
|
1,436
|
|
|
Ps.
|
1,228
|
|
Raw materials
|
|
|
460
|
|
|
|
494
|
|
Packaging materials
|
|
|
7
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
1,903
|
|
|
|
1,731
|
|
Spare parts
|
|
|
67
|
|
|
|
83
|
|
Merchandise in transit
|
|
|
66
|
|
|
|
170
|
|
Refractory and other
|
|
|
13
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
2,049
|
|
|
Ps.
|
2,000
|
|
|
|
|
|
|
|
|
As of December 31, 2006 and 2007, inventories include obsolescence reserves of Ps. 46 and Ps.
38, respectively.
6
|
|
Land, buildings, machinery and equipment
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Buildings
|
|
Ps.
|
4,657
|
|
|
Ps.
|
4,833
|
|
Accumulated depreciation
|
|
|
(2,246
|
)
|
|
|
(2,608
|
)
|
|
|
|
|
|
|
|
|
|
|
2,411
|
|
|
|
2,225
|
|
Land
|
|
|
443
|
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
2,854
|
|
|
Ps.
|
2,658
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
Ps.
|
9,215
|
|
|
Ps.
|
9,487
|
|
Accumulated depreciation
|
|
|
(6,472
|
)
|
|
|
(6,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
2,743
|
|
|
Ps.
|
2,943
|
|
|
|
|
|
|
|
|
|
|
The Company reviewed the operating conditions of certain of its fixed assets and determined
to extend their estimated remaining useful life, which resulted in a decrease in depreciation
expense of Ps. 56 in 2007.
|
|
7
|
|
Derivative financial instruments
|
|
a)
|
|
Derivative instruments entered into by Vitro Affiliates
|
|
|
|
|
Vitro Envases de Norteamérica, S.A. de C.V. (Vena), a wholly-owned subsidiary of
Vitro, entered into an agreement with Calyon Corporate and Investment Bank (Calyon) to
hedge their natural gas consumption needs and those of certain Vitro subsidiaries by
means of a capped swap and exercised an option to receive advanced payments, which will
be repaid to Calyon during 2008. Concurrently, Vena entered into a hedge contract with
the Company subject to a mercantile commission agreement whereby the Company would be
responsible for its related portion of the hedge contract with Calyon.
|
|
|
|
|
Vena entered into a hedge agreement with Credit Suisse First Boston (CSFB) to hedge
their natural gas consumption needs and those of certain Vitro subsidiaries.
Concurrently, Vena entered into a mercantile commission agreement whereby the Company
would be responsible for its related portion of the hedge contract with CSFB.
|
F-97
|
|
|
Vidriera Querétaro, S.A. de C.V. (Viquesa), a wholly-owned subsidiary of Vitro,
entered into a hedge agreement with Pemex Gas and Petroquímica Básica (Pemex) to hedge
their natural gas consumption needs and those of certain Vitro subsidiaries, by buying
and selling options and swaps. Concurrently, Viquesa entered into a hedge contract with
the Company subject to a mercantile commission agreement whereby the Company would be
responsible for its related portion of the hedge contract with Pemex.
|
|
|
|
|
Compañía Vidriera, S.A. de C.V. (Covisa), a wholly-owned subsidiary of Vitro, entered
into a hedge agreement with Citibank, N.A. (Citi) to hedge their natural gas
consumption needs and those of certain Vitro subsidiaries, by buying and selling complex
derivative instruments and swaps. Concurrently, Covisa entered into a hedge contract
with the Company subject to a mercantile commission agreement whereby the Company would
be responsible for its related portion of the hedge contract with Citi.
|
|
|
|
|
Vitro Cristalglass, a Vitro subsidiary, entered into an agreement with Compañía
Vidriera, S.A. de C.V. (COVISA), a wholly-owned subsidiary of Vitro, to hedge their
risk of foreign exchange fluctuations by buying forwards exchange rate contracts.
|
|
|
|
|
The fair value of the derivative financial instruments entered into between the Company
and the Vitro subsidiaries mentioned above was a liability of Ps. 70. The details of the
derivative financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
|
|
|
|
|
|
|
|
Fair Value
|
|
instruments Natural gas
|
|
|
|
|
|
|
|
Asset
|
|
contracts:
|
|
Notional Amount
|
|
Period
|
|
(Liability)
|
|
|
|
|
|
|
|
|
|
|
|
|
Capped swap
|
|
877,091 MMBTU
|
|
January to December 2008
|
|
Ps.
|
(61
|
)
|
Swaps
|
|
382,581 MMBTU
|
|
January to December 2008
|
|
|
1
|
|
Options
|
|
1,119,751 MMBTU
|
|
January to December 2008
|
|
|
2
|
|
Exotic instruments
|
|
1,959,562 MMBTU
|
|
January to December 2008
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
Total natural gas contracts
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward
|
|
10,000,000 Euros
|
|
January to December 2008
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
Total derivative financial instruments with affiliates
|
|
Ps.
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized a loss of Ps. 31 related to its derivative instruments that
expired during 2007, which was recognized in the comprehensive financing result.
|
|
|
b)
|
|
Embedded derivatives
:
|
|
|
|
|
The Company identified embedded derivatives within certain of its supply contracts. As
of December 31, 2007, the amount recognized for these instruments was an asset and a
credit to total comprehensive financing result of Ps. 11.
|
F-98
|
a.
|
|
As of December 31, 2006 and 2007, short-term bank loans were denominated in US
dollars. During 2007, the Companys weighted average interest rate for short-term
borrowings denominated in US dollars was 7.75%.
|
|
|
|
|
As disclosed in Note 8 c), on February 1, 2007, Vitro issued US$ 700 million of senior
guaranteed notes due February 1, 2017 and US$ 300 million of senior guaranteed notes due
February 1, 2012. Upon completion of this transaction, short-term borrowings as of
December 31, 2006 Ps. 313 were refinanced and have therefore been reclassified as
long-term debt.
|
|
|
b.
|
|
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Payable in US dollars:
|
|
|
|
|
|
|
|
|
Unsecured debt, interest rate based on LIBOR plus
2.25%, principal payable through 2007.
|
|
Ps.
|
313
|
|
|
|
|
|
Capitalizable capital lease obligations with
collateral and fixed interest rate of 10.749%, with
the principal maturing in 2016.
|
|
|
87
|
|
|
Ps.
|
78
|
|
Unsecured note, interest payable at LIBOR plus 1.2%,
principal payable in semiannual installments through
2007.
|
|
|
1
|
|
|
|
|
|
Unsecured debt, floating interest rate based on
LIBOR plus .25%, principal payable through 2008.
|
|
|
9
|
|
|
|
|
|
Payable in Euros:
|
|
|
|
|
|
|
|
|
Unsecured debt, floating interest rate based on
EURIBOR plus a spread between 0.75% and 2.5%,
principal payable in various installments through
2010.
|
|
|
37
|
|
|
|
63
|
|
Unsecured debt, floating interest rate based on
EURIBOR plus 1.5%, principal payable in various
installments through 2009.
|
|
|
6
|
|
|
|
|
|
Unsecured debt, floating interest rate based on
EURIBOR plus 1.125%, principal payable in various
installments through 2009.
|
|
|
5
|
|
|
|
|
|
Secured debt, floating interest rate based on
EURIBOR plus 8%, principal payable in various
installments through 2008.
|
|
|
11
|
|
|
|
3
|
|
Secured debt, floating interest rate based on
EURIBOR plus a spread between 1.25 and 1.10,
principal payable in various installments through
2008.
|
|
|
7
|
|
|
|
2
|
|
Payable in Colombian pesos:
|
|
|
|
|
|
|
|
|
Unsecured debt payable in Colombian pesos with a
rate DFT plus 6%, principal payable through 2011.
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
476
|
|
|
|
154
|
|
Less current maturities
|
|
|
60
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
416
|
|
|
Ps.
|
127
|
|
|
|
|
|
|
|
|
As of December 31, 2007, the interest rates of EURIBOR, CETES, TIIE, DFT and LIBOR were
4.684%, 7.4669%, 7.9250%, 4.6788% and 9.15%, respectively.
The schedule of contractual principal payments of long-term debt as of December 31, 2007
is as follows:
|
|
|
|
|
Year ending December 31,
|
|
Total
|
|
2009
|
|
Ps.
|
19
|
|
2010
|
|
|
19
|
|
2011
|
|
|
19
|
|
2012
|
|
|
18
|
|
2013 and thereafter
|
|
|
52
|
|
|
|
|
|
|
|
Ps.
|
127
|
|
|
|
|
|
F-99
|
|
|
Collateral Bank debt totaling Ps. 80 is secured by fixed assets with a book value of
Ps. 158 as of December 31, 2007.
|
|
|
c.
|
|
Vitro debt issuance
|
|
|
|
|
On February 1, 2007 Vitro successfully closed an offering, of US$1.0 billion of senior
guaranteed notes (the Notes) principally to refinance existing third-party debt at the
Vitro holding company level, substantially all of the third-party debt at its subsidiary
VENA and certain third-party debt at some of Viméxicos subsidiaries.
|
|
|
|
|
The Notes were issued in two tranches: US$ 700 million of senior guaranteed notes due
February 1, 2017, callable after year 2012, at a coupon of 9.125% and US$ 300 million of
senior unsecured notes due February 1, 2012, non-callable for the notes life, at a
coupon of 8.625%. The notes pay interest semiannually and are guaranteed by VENA and its
wholly-owned subsidiaries 100% and by Viméxico and its wholly-owned subsidiaries 100%.
|
9
|
|
Long-term notes payables to affiliates
|
|
|
|
As of December 31, 2007, notes payables to affiliates of Ps. 294 are payable in US dollars at
a fixed annual interest rate between 10% and 11% and mature from 2008 to 2017.
|
|
10
|
|
Employee retirement obligations
|
|
|
|
The disclosures relating to the Companys pension plans, seniority premiums and severance
payments required by Bulletin D-3 Labor Obligations, calculated as described in Note 3 k),
together with certain actuarial assumptions utilized, are presented below as of December 31,
2006 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
Ps.
|
347
|
|
|
Ps.
|
513
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
Ps.
|
648
|
|
|
Ps.
|
673
|
|
Plan assets at fair value
|
|
|
(441
|
)
|
|
|
(517
|
)
|
|
|
|
|
|
|
|
Unfunded status
|
|
|
207
|
|
|
|
156
|
|
Unrecognized transition obligation
|
|
|
(53
|
)
|
|
|
(34
|
)
|
Changes in assumptions and adjustments from experience
|
|
|
(173
|
)
|
|
|
(119
|
)
|
Prior service costs and plan amendments
|
|
|
(35
|
)
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected net asset
|
|
Ps
|
(54
|
)
|
|
Ps
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional minimum liability adjustment
|
|
Ps.
|
192
|
|
|
Ps.
|
117
|
|
|
|
|
|
|
|
|
As of December 31, 2007, the plan assets presented above, included 15.8 million shares of
Vitro.
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
5.00
|
%
|
Expected rate of return on plan assets
|
|
|
7.00
|
%
|
|
|
7.0
|
%
|
Rate of compensation increase
|
|
|
0
|
%
|
|
|
0
|
%
|
F-100
Net periodic cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Service cost
|
|
Ps.
|
31
|
|
|
Ps.
|
19
|
|
|
Ps.
|
45
|
|
Interest cost
|
|
|
32
|
|
|
|
33
|
|
|
|
31
|
|
Amortization of transition obligation
|
|
|
19
|
|
|
|
20
|
|
|
|
10
|
|
Amortization of prior service costs and plan amendments
|
|
|
3
|
|
|
|
2
|
|
|
|
2
|
|
Amortization of changes in assumptions and adjustments from experience
|
|
|
13
|
|
|
|
82
|
|
|
|
16
|
|
Actual return on plan assets
|
|
|
(15
|
)
|
|
|
(17
|
)
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
(1)
|
|
Ps.
|
83
|
|
|
Ps.
|
139
|
|
|
Ps.
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the years ended December 31, 2005, 2006 and 2007 includes Ps. 13, Ps. 1
and Ps. 20, respectively, for the early extinguishment of retirement obligations and
also includes Ps. 23, Ps. 78 and Ps. 23 for indemnification of personnel at the end of
the work relationship, respectively.
|
The unrecognized items are being amortized over the average remaining service lives of the
Companys employees. The remaining amortization period of unrecognized items is as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Remaining amortization period of unrecognized items (in years):
|
|
|
|
|
|
|
|
|
Prior service costs and plan amendments
|
|
|
14
|
|
|
|
19
|
|
Transition obligation
|
|
|
6
|
|
|
|
5
|
|
Changes in assumptions and adjustments from experience
|
|
|
15
|
|
|
|
16
|
|
11
|
|
Commitments and contingencies
|
|
a.
|
|
In October 2000, several subsidiaries of Viméxico, which have facilities
throughout Monterrey, Mexico and the Mexico City area, entered into a 15-year energy
purchase agreement for approximately 31 megawatts of electricity per year with Tractebel
Energía de Monterrey, S. de R.L. de C.V. (Tractebel).
|
|
|
b.
|
|
The Company has several non-cancelable operating lease agreements for the rent of
warehouses and equipment. Rental expense for the years ended December 31, 2005, 2006 and
2007 was Ps. 308, Ps. 297 and Ps. 365, respectively.
|
|
|
|
|
Future minimum lease payments under these agreements are as follows:
|
|
|
|
|
|
Year
|
|
Amount
|
|
2008
|
|
Ps.
|
273
|
|
2009
|
|
|
228
|
|
2010
|
|
|
178
|
|
2011
|
|
|
142
|
|
2012
|
|
|
115
|
|
2013 and thereafter
|
|
|
132
|
|
|
c.
|
|
The Company is not a party to, and none of its assets are subject to, any pending
legal proceedings, nor is the Company subject to any contingent liabilities, other than
as described in Note e) below. The Company believes that the legal proceedings and
contingent liabilities arising in the ordinary course of business and against which the
Company is adequately insured or indemnified are not material in the aggregate.
|
|
|
d.
|
|
Call/Put on shares of Vitro Cristalglass A group of individual investors owns a
40% interest in Vitro Cristalglass. The Company has the option of purchasing the 40%
minority interest, which can be exercised beginning May 1, 2005 for fair value as
calculated by independent appraisers and cannot be less than 28.9 million euros (US$
42.4 million as of December 31, 2007). Additionally, the minority interest has a put
option pursuant to which they may require the Company to purchase all or part of their
40% interest in Vitro Cristalglass, which can be exercised beginning on May 1, 2003 for
28.4 million euros (US$ 41.8 million as of December 31, 2007), as adjusted to reflect
inflation in Spain from 2003 through the time the put is exercised. As of
December 31, 2007, the estimated fair value of the 40% interest is higher than the
option price held by Viméxico (previously Vitro Plan).
|
F-101
|
e.
|
|
At a general extraordinary shareholders meeting of Vitro Plan held in December
2006, the merger into Vitros subsidiary Viméxico was approved. Notwithstanding that
this merger has become fully effective, since all approvals were granted and the
corresponding filings were made, Pilkington (the Companys minority shareholder), who
voted against such merger, has filed a lawsuit against Viméxico.
|
|
|
|
|
In February 2008, Viméxico was notified of a ruling issued by the First District Court
on Civil and Labor Matters that the lawsuit brought by Pilkington seeking to annul the
resolutions adopted at the general extraordinary shareholders meeting was unfounded. In
its ruling, the Court determined that all resolutions adopted at the general
extraordinary shareholders meeting were valid. Despite this ruling, Pilkington has
appealed this decision. Based on advice from its Mexican special litigation counsel,
management continues to believe that this lawsuit is without merit and expects to obtain
another favorable ruling.
|
12
|
|
Foreign currency operations and balances
|
|
|
|
As of December 31, 2007, the assets and liabilities of the Company denominated in foreign
currency consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
Mexican pesos
|
|
Monetary assets
|
|
US$
|
124
|
|
|
Ps.
|
1,348
|
|
Inventories
|
|
|
7
|
|
|
|
75
|
|
Fixed assets
|
|
|
121
|
|
|
|
1,318
|
|
Monetary liabilities
|
|
|
204
|
|
|
|
2,220
|
|
Foreign currency operations of the Companys Mexican subsidiaries for the year ended December
31, 2007, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
US dollars
|
|
|
Mexican pesos
|
|
Exports
|
|
US$
|
237
|
|
|
Ps.
|
2,590
|
|
Imports
|
|
|
61
|
|
|
|
671
|
|
Interest expense, net
|
|
|
4
|
|
|
|
45
|
|
The condensed financial information of the principal foreign subsidiaries of the Company as
of December 31, 2007 expressed in pesos, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
Central America
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Ps.
|
5,482
|
|
|
Ps.
|
422
|
|
|
Ps.
|
2,434
|
|
Operating income
|
|
|
70
|
|
|
|
31
|
|
|
|
314
|
|
Total assets
|
|
|
1,582
|
|
|
|
427
|
|
|
|
2,636
|
|
Total liabilities
|
|
|
912
|
|
|
|
158
|
|
|
|
1,111
|
|
Capital expenditure
|
|
|
107
|
|
|
|
17
|
|
|
|
108
|
|
F-102
The exchange rates of the Mexican peso against the US dollar and the Euro, used for purposes
of the Companys consolidated financial statements at the following dates were:
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
|
Euro
|
|
December 31, 2005
|
|
Ps.
|
10.6344
|
|
|
Ps.
|
12.5932
|
|
December 31, 2006
|
|
|
10.8116
|
|
|
|
14.2680
|
|
December 31, 2007
|
|
|
10.8662
|
|
|
|
15.9526
|
|
On March 14, 2008, the exchange rate was Ps.10.7735 pesos per US dollar and Ps. 16.7711 pesos
per Euro.
|
a.
|
|
The fixed portion of the Companys capital stock is represented by 1,503,510,000
series A ordinary, nominative, fully paid and issued common shares, without par value.
|
|
|
b.
|
|
At the ordinary shareholders meeting held on October 31, 2006, Vitro made a
capital contribution by capitalizing a loan owed to it by the Company and received
1,454,490,000 Series A shares, amounting to Ps. 1,526 (Ps.1,454 nominal) or US$ 135
million dollars.
|
|
|
c.
|
|
Retained earnings include the statutory legal reserve. Mexican General Corporate
Law requires that at least 5% of net income of the year be transferred to the legal
reserve until the reserve equals 20% of capital stock at par value (historical pesos).
The legal reserve may be capitalized but may not be distributed unless the entity is
dissolved. The legal reserve must be replenished if it is reduced for any reason. As of
December 31, 2005 and 2006, the legal reserve, in historical pesos was Ps. 25.
|
|
|
d.
|
|
Stockholders equity, except restated paid-in capital and tax retained earnings,
will be subject to income tax at the rate in effect when a dividend is distributed. Any
tax paid on such distribution may be credited against annual and estimated income taxes
of the year in which the tax on dividends is paid and the following two fiscal years.
|
|
|
|
|
At December 31, 2006 and 2007, the majority interest stockholders equity tax account
corresponding to the contributed capital account and the net consolidated tax income
account was Ps. 2,024 and Ps. 1,923, respectively.
|
|
|
e.
|
|
Minority interest in consolidated subsidiaries consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
Capital stock
|
|
Ps.
|
140
|
|
|
Ps.
|
147
|
|
Shortfall in restatement of capital
|
|
|
21
|
|
|
|
314
|
|
Retained earnings
|
|
|
1,089
|
|
|
|
951
|
|
Net income
|
|
|
188
|
|
|
|
182
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
1,438
|
|
|
Ps.
|
1,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Restructuring charges
|
|
Ps.
|
105
|
|
|
Ps.
|
13
|
|
|
Ps.
|
9
|
|
Impairment of long-lived assets
|
|
|
181
|
|
|
|
334
|
|
|
|
91
|
|
Loss (gain) from sale of long-lived assets
|
|
|
69
|
|
|
|
131
|
|
|
|
(55
|
)
|
Gain from sale of subsidiaries
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
Statutory employee profit sharing
|
|
|
25
|
|
|
|
26
|
|
|
|
24
|
|
Other
|
|
|
71
|
|
|
|
46
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
451
|
|
|
Ps.
|
450
|
|
|
Ps.
|
91
|
|
|
|
|
|
|
|
|
|
|
|
F-103
15
|
|
Tax loss carryforwards
|
|
|
|
As of December 31, 2007, tax loss carryforwards consist of the following:
|
|
|
|
|
|
Expiration Year
|
|
Amount
|
|
2010
|
|
Ps.
|
49
|
|
2011
|
|
|
19
|
|
2012
|
|
|
40
|
|
2013
|
|
|
4
|
|
2014
|
|
|
206
|
|
2015
|
|
|
2
|
|
2016
|
|
|
7
|
|
2017
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
471
|
|
|
|
|
|
16
|
|
Income and asset taxes
|
|
a.
|
|
The Company is subject to ISR, and through 2007, to IMPAC on an individual basis.
ISR is computed taking into consideration the taxable and deductible effects of
inflation, such as depreciation calculated on restated asset values. Taxable income is
increased or reduced by the effects of inflation on certain monetary assets and
liabilities through the inflationary component, which is similar to the gain or loss
from monetary position. As of 2007, the tax rate is 28% and in 2006 it was 29% and 30%
in 2005. For ISR purposes, effective in 2005, cost of sales is deducted instead of
inventory purchases. Beginning in 2006 PTU is deductible when paid.
|
|
|
|
|
In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year,
without deducting any debt amounts. Through 2006, IMPAC was calculated by applying 1.8%
on the net average of the majority of restated assets less certain liabilities,
including liabilities payable to banks and foreign entities. IMPAC is payable only to
the extent that it exceeded ISR payable for the same period.
|
|
|
|
|
On October 1, 2007, the IETU was enacted and went into effect on January 1, 2008. IETU
applies to the sale of goods, the provision of independent services and the granting of
use or enjoyment of goods, according to the terms of the IETU law, less certain
authorized deductions. The IETU payable is calculated by subtracting certain tax
credits from the tax determined. Revenues, as well as deductions and certain tax
credits, are determined based on cash flows generated beginning January 1, 2008. The
IETU law establishes that the IETU rate will be 16.5% in 2008, 17.0% in 2009, and 17.5%
in 2010 and subsequently. In addition, as opposed to ISR which allows for fiscal
consolidation, companies that expect to incur IETU must file individual returns.
|
|
|
|
|
Based on its financial projections, the Company estimates that it will pay only ISR in
the future. Therefore, the enactment of IETU did not have any effects on its
consolidated financial information, since it only recognizes deferred ISR.
|
F-104
|
b.
|
|
The income and asset tax expense (benefit) included in the Companys results are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Current income tax
|
|
Ps.
|
154
|
|
|
Ps.
|
172
|
|
|
Ps.
|
208
|
|
Deferred income tax
|
|
|
(913
|
)
|
|
|
(257
|
)
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(759
|
)
|
|
|
(85
|
)
|
|
|
104
|
|
Asset tax
|
|
|
10
|
|
|
|
8
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
(749
|
)
|
|
Ps.
|
(77
|
)
|
|
Ps.
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To determine deferred income taxes as of December 31, 2005, 2006 and 2007, the Company
applied the different tax rates that will be in effect to the temporary differences
according to their estimated dates of reversal.
|
|
c.
|
|
Net deferred tax assets presented in the consolidated balance sheets consist of
the following
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
Ps.
|
32
|
|
|
Ps.
|
25
|
|
Reserve for employee retirement obligation
|
|
|
86
|
|
|
|
53
|
|
Tax loss carryforwards
|
|
|
168
|
|
|
|
165
|
|
Asset tax credit carryforwards
|
|
|
27
|
|
|
|
1
|
|
Derivate financial instruments
|
|
|
14
|
|
|
|
18
|
|
Intangible asset
|
|
|
541
|
|
|
|
491
|
|
Other
|
|
|
119
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
987
|
|
|
|
853
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
486
|
|
|
|
283
|
|
Other
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
510
|
|
|
|
283
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
Ps.
|
477
|
|
|
Ps.
|
570
|
|
|
|
|
|
|
|
|
Deferred tax liabilities of foreign subsidiaries
|
|
Ps.
|
89
|
|
|
Ps.
|
76
|
|
|
|
|
|
|
|
|
|
d.
|
|
Following is a reconciliation between the Companys effective income tax rate and
the statutory rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Effective income tax rate
|
|
|
234
|
%
|
|
|
12
|
%
|
|
|
61
|
%
|
Asset tax included as income tax
|
|
|
3
|
|
|
|
|
|
|
|
(21
|
)
|
Intangible asset
|
|
|
(204
|
)
|
|
|
1
|
|
|
|
(17
|
)
|
Effect of reduction in statutory rate on deferred ISR
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
Foreign subsidiaries
|
|
|
6
|
|
|
|
4
|
|
|
|
17
|
|
Investment subsidy
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Other
|
|
|
(8
|
)
|
|
|
4
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory income tax rate
|
|
|
30
|
%
|
|
|
29
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
F-105
|
e.
|
|
Changes in stockholders equity for shortfall in restatement of capital and the
minimum labor liability adjustment are presented net of the deferred tax effect as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Shortfall in restatement of capital
|
|
Ps.
|
(42
|
)
|
|
Ps.
|
97
|
|
|
Ps.
|
98
|
|
Minimum labor liability adjustment
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ps.
|
(38
|
)
|
|
Ps.
|
92
|
|
|
Ps.
|
74
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
Business dispositions and acquisitions
|
|
a)
|
|
Sale of Química M, S.A. de C.V. (Química M)
On March 2, 2006, the Company
sold its 51% interest in Química M, to Solutia Inc. for US$20 million in cash. Solutia
is now the sole owner of this Mexican operation which was formed in 1995. Química M was
a joint venture between Vitro Plan and Solutia and is located near the city of Puebla,
Mexico. Química M is engaged in the production of PVB (polyvinyl butyral) interlayer,
which is used by major glass producers such as Vitro to make laminated glass for use in
automobiles and buildings. .
|
|
b)
|
|
Visteon Corporations retirement from Vitro Flex, S.A. de C.V. (Vitro Flex)
On September 29, 2006, Viméxico and Visteon Inc. (Visteon) ended their joint venture
agreement in Vitro Flex through a reimbursement and cancellation of Visteons capital
investment. Viméxico is now the sole owner of Vitro Flex. Vitro Flex was a joint venture
formed in 1979 with Fairlane Holdings (Fairlane), a Visteon affiliate. Vitro Flex
primarily manufactures tempered and laminated glass for use in Ford vehicles. Fairlane
will receive US$9.4 million for the 38% stake in Vitro Flex. An initial payment of US$2
million was made on September 29, 2006, which will be followed by four annual payments
of US$1.85 million, starting on September 30, 2007. The transaction is being funded by
Vitro Flex with cash from operations. The difference between the transaction value and
the book value result in a credit of Ps 70, recorded in majority stockholders equity.
Vitro Flex together with Vitro Automotriz (VAU) will now directly manage their
relationship with Ford and will serve all Vitros automotive customers. Under the prior
structure, contractual restrictions limited Vitro Flexs ability to use excess capacity
for non-Ford units.
|
|
c)
|
|
Acquisition of 55% of the shares of PVA
On August 29, 2007, Vitro VyC a
subsidiary of Viméxico, acquired 55% of the outstanding shares of PVA, a company
dedicated to the installation of value added crystal products for Ps 110. As a result of
the preliminary purchase price allocation, the Company recorded
goodwill of Ps. 85.
|
|
d)
|
|
Acquisition of 50% of the shares of Vitro AFG
On July 3, 2007, Viméxico
exercised its option to acquire the remaining 50% of the outstanding shares of Vitro AFG
from its joint venture partner AFG Industries, a subsidiary of Asahi Glass Co. Limited
(a Japanese company) to assume control and increase its ownership to 100%. The
transaction closed on July 24, 2007 with Vitro paying AFG Industries US$6 million in
cash and subsequently changing Vitro AFGs legal name to Vidrio y Cristal del Noroeste,
S.A. de C.V.
|
|
|
|
|
Vitro AFG, which is located in Mexicali, Baja California, Mexico, was formed in November
2003 as a 50/50 joint venture between Vitro and AFG Industries, with the closing of this
transaction, Viméxico terminated the joint venture and became the sole owner of this
entity, whose primary operations include the manufacture, processing
and distribution of flat glass, thereby increasing Vitros available production capacity
by 78,000 tons.
|
|
|
|
In accordance with NIF B-7, Business Acquisitions, the acquisition was accounted for
using the purchase method. In conjunction with the acquisition, the Company recognized
an impairment charge of Ps 91 related to the termination of the joint venture.
|
F-106
18
|
|
Transactions and balances with related parties
|
|
|
The main transactions and balances with affiliated companies not shown separately in the
financial statements are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
Trade receivables
|
|
Ps.
|
41
|
|
|
Ps.
|
21
|
|
|
Ps.
|
5
|
|
Other receivables
|
|
|
234
|
|
|
|
126
|
|
|
|
191
|
|
Trade payables
|
|
|
13
|
|
|
|
10
|
|
|
|
33
|
|
Net sales
|
|
|
2
|
|
|
|
1
|
|
|
|
14
|
|
Cost of sales
|
|
|
124
|
|
|
|
139
|
|
|
|
95
|
|
Operating expenses
|
|
|
238
|
|
|
|
231
|
|
|
|
200
|
|
Interest income
|
|
|
5
|
|
|
|
46
|
|
|
|
|
|
Exchange loss (gain)
|
|
|
(12
|
)
|
|
|
2
|
|
|
|
(6
|
)
|
Interest expense
|
|
|
306
|
|
|
|
454
|
|
|
|
325
|
|
Other (income) expenses, net
|
|
|
(6
|
)
|
|
|
(26
|
)
|
|
|
80
|
|
19
|
|
New accounting principles
|
|
|
|
In 2007, the Mexican Board for Research and Development of Financial Information Standards
(CINIF) issued the following NIFs and Interpretations of Financial Reporting Standards
(INIF), which became effective for fiscal years beginning on January 1, 2008:
|
|
|
|
NIF B-2, Statement of Cash Flows.
|
|
|
|
|
NIF B-10, Effects of Inflation.
|
|
|
|
|
NIF B-15, Translation of Foreign Currencies.
|
|
|
|
|
NIF D-3, Employee Benefits.
|
|
|
|
|
NIF D-4, Income Taxes
|
|
|
|
|
INIF 5, Recognition of the Additional Consideration Agreed to at the
Inception of a Derivative Financial Instrument to Adjust It to Fair Value.
|
|
|
|
|
INIF 6, Timing of Formal Hedge Designation.
|
|
|
|
|
INIF 7, Application of Comprehensive Income or Loss Resulting From a
Cash Flow Hedge on a Forecasted Purchase of a Non-Financial Asset.
|
F-107
|
|
Some of the significant changes established by these standards are as follows:
|
|
|
|
NIF B-2, Statement of Cash Flows. This NIF establishes general rules for the
presentation, structure and preparation of a cash flow statement, as well as the
disclosures supplementing such statement, which replaces the statement of changes in
financial position. NIF B-2 requires that the statement show a companys cash inflows
and outflows during the period. Line items should be preferably presented gross. Cash
flows from financing activities are now presented below those from investing
activities (a departure from the statement of changes in financial position). In
addition, NIF B-2 allows entities to determine and present their cash flows from
operating activities using either the direct or the indirect method.
|
|
|
|
NIF B-10, Effects of Inflation. CINIF defines two economic environments: a)
inflationary environment, when cumulative inflation of the three preceding years is 26%
or more, in which case, the effects of inflation should be recognized using the
comprehensive method; and b) non-inflationary environment, when cumulative inflation of
the three preceding years is less than 26%, in which case, no inflationary effects
should be recognized in the financial statements. Additionally, NIF B-10 eliminates the
replacement cost and specific indexation methods for inventories and fixed assets,
respectively, and requires that the cumulative gain or loss from holding non-monetary
assets be reclassified to retained earnings, if such gain or loss is realized; the gain
or loss that is not realized will be maintained in stockholders equity and charged to
current earnings of the period in which the originating item is realized.
|
|
|
|
NIF B-15, Translation of Foreign Currencies. NIF B-15 eliminates classification of
integrated foreign operations and foreign entities and incorporates the concepts of
accounting currency, functional currency and reporting currency. NIF B-15 establishes
the procedures to translate the financial information of a foreign subsidiary: i) from
the accounting to the functional currency; and ii) from the functional to the reporting
currency, and allows entities to present their financial statements in a reporting
currency other than their functional currency.
|
|
|
|
NIF D-3, Employee Benefits. This NIF include current and deferred PTU. Deferred
PTU should be calculated using the same methodology established in NIF D-4. It also
includes the career salary concept and the amortization period of most items is reduced
to five years, as explained below:
|
|
|
|
The following unrecognized items will be amortized over a 5-year period, or less, if
employees remaining labor life is less than 5 years:
|
|
|
|
The beginning balance of transition obligation for severance and retirement
benefits.
|
|
|
|
|
The beginning balance of prior service cost and plan amendments.
|
|
|
|
|
The beginning balance of gains and losses from seniority premiums and
pension benefits should be amortized over a 5-year period (net of the
transition obligation), with the option to fully amortize such item against
the results of 2008.
|
|
|
|
|
The beginning balance of gains and losses from severance benefits should be
amortized against the results of 2008.
|
|
|
|
NIF D-4, Income Taxes. This NIF relocates accounting for current and deferred PTU
to NIF D-3, eliminates the permanent difference concept, redefines and incorporates
various definitions and requires that the cumulative ISR effect be reclassified to
retained earnings, unless it is identified with some of the other comprehensive income
items that have not been applied against current earnings.
|
|
|
|
INIF 5, Recognition of the Additional Consideration Agreed to at the Inception of a
Derivative Financial Instrument to Adjust It to Fair Value. INIF 5 states that any
additional consideration agreed to at the inception of a derivative financial instrument
to adjust it to its fair value at that time should be part of the instruments initial
fair
value and not subject to amortization as established by paragraph 90 of Bulletin C-10.
INIF 5 also establishes that the effect of the change should be prospectively
recognized, affecting results of the period in which this INIF becomes effective. If
the effect of the change is material, it should be disclosed.
|
F-108
|
|
|
INIF 6, Timing of Formal Hedge Designation. INIF 6 states that hedge designations
may be made as of the date a derivative financial instrument is contracted, or at a
later date, provided its effects are prospectively recognized as of the date when formal
conditions are met and the instrument qualifies as a hedging relationship. Paragraph
51a) of Bulletin C-10 only considered the hedge designation at the inception of the
transaction.
|
|
|
|
INIF 7, Application of Comprehensive Income or Loss Resulting From a Cash Flow Hedge
on a Forecasted Purchase of a Non-Financial Asset. INIF 7 states that the effect of a
hedge reflected in other comprehensive income or loss resulting from a forecasted
purchase of a non-financial asset should be capitalized within the cost of such asset,
whose price is set through a hedge, rather than reclassifying the effect to the results
of the period affected by the asset, as required by Paragraph 105 of Bulletin C-10. The
effect of this change should be recognized by applying any amounts recorded in other
comprehensive income or loss to the cost of the acquired asset, as of the effective date
of this INIF.
|
|
|
At the date of issuance of these consolidated financial statements, the Company has not fully
assessed the effects of adopting these new standards on its financial information.
|
20
|
|
Authorization of financial statements issuance
|
|
|
|
On February 29, 2008 the issuance of the consolidated financial statements was authorized by:
|
|
|
|
Ing. Hugo A. Lara García
Chief Executive Officer
|
|
|
|
Ing. Jorge Mario Guzmán Guzmán
Chief Financial Officer
|
|
|
These consolidated financial statements are subject to approval at the ordinary stockholders
meeting, who may modify the financial statements, based on provisions set forth by the
Mexican General Corporate Law.
|
21
|
|
Differences between Mexican Financial Reporting Standards and accounting principles
generally accepted in the United States of America
|
|
|
|
The Companys consolidated financial statements are prepared in accordance with Mexican FRS,
which differ in certain significant respects from accounting principles generally accepted in
the United States of America (U.S. GAAP). The Mexican FRS consolidated financial statements
include the effects of inflation as provided for under Bulletin B-10, (see note 3 b), whereas
financial statements prepared under U.S. GAAP are presented on a historical basis. However,
the following reconciliation to U.S. GAAP does not include the reversal of the adjustments
required under Bulletin B-10, permitted by the
rules and regulations of the Securities and Exchange Commission (the SEC). The application
of Bulletin B-10 represents a comprehensive measure of the effects of price level changes in
the inflationary Mexican economy and, as such, is considered a more meaningful presentation
than historical cost-based financial reporting for both Mexican and U.S. accounting purposes.
|
F-109
|
|
As mentioned in Note 19, NIF B-10, is effective January 1, 2008. NIF B-10 revised the
accounting for inflation such that the inflation accounting methods summarized in note 3 b)
will no longer apply unless the economic environment in Mexico qualifies as inflationary
for purposes of Mexican FRS. Given the cumulative inflation in Mexico for the three years
ended December 31, 2007, the Mexican economic environment will not qualify as inflationary in
2008, thereby eliminating inflationary accounting in the Companys consolidated Mexican FRS
financial statements. This will result in the elimination of certain reconciling items
between Mexican FRS and U.S. GAAP in 2008 and thereafter as discussed in inserts (d) and (g)
below.
|
|
|
|
The other differences between Mexican FRS and U.S. GAAP and the effect on consolidated net
income (loss) and consolidated stockholders equity are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss) reported under Mexican FRS
|
|
Ps.
|
112
|
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority interest (see a)
|
|
|
2
|
|
|
|
|
|
|
|
3
|
|
Deferred income taxes (see b)
|
|
|
(387
|
)
|
|
|
(182
|
)
|
|
|
(37
|
)
|
Deferred workers profit sharing (see c)
|
|
|
(16
|
)
|
|
|
(15
|
)
|
|
|
|
|
Monetary position result on deferred income taxes and
deferred workers profit sharing (see d)
|
|
|
(2
|
)
|
|
|
13
|
|
|
|
17
|
|
Capitalization of interest (see e)
|
|
|
18
|
|
|
|
9
|
|
|
|
|
|
Amortization of capitalized interest (see e)
|
|
|
(6
|
)
|
|
|
(8
|
)
|
|
|
(4
|
)
|
Effect of applying Bulletin B-10 (see g)
|
|
|
(70
|
)
|
|
|
(68
|
)
|
|
|
(21
|
)
|
Effect of applying Bulletin B-15 (see h)
|
|
|
(7
|
)
|
|
|
4
|
|
|
|
|
|
Derivative financial instruments (see i)
|
|
|
188
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations (see j)
|
|
|
8
|
|
|
|
11
|
|
|
|
(7
|
)
|
Purchase of Visteons capital investment (see k)
|
|
|
|
|
|
|
1
|
|
|
|
5
|
|
Impairment of longlived assets (see l)
|
|
|
65
|
|
|
|
379
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(207
|
)
|
|
|
144
|
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) under U.S. GAAP
|
|
Ps.
|
(95
|
)
|
|
Ps.
|
(630
|
)
|
|
Ps.
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
F-110
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity reported under Mexican FRS
|
|
Ps.
|
5,954
|
|
|
Ps.
|
6,047
|
|
Less minority interest included as stockholders equity under Mexican FRS (See a)
|
|
|
(1,438
|
)
|
|
|
(1,594
|
)
|
|
|
|
|
|
|
|
Majority stockholders equity under Mexican FRS
|
|
|
4,516
|
|
|
|
4,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on minority interest (see a)
|
|
|
(51
|
)
|
|
|
(49
|
)
|
Deferred income taxes (see b)
|
|
|
(510
|
)
|
|
|
(541
|
)
|
Capitalization of interest (see e)
|
|
|
43
|
|
|
|
42
|
|
Accumulated amortization of capitalized interest (see e)
|
|
|
(19
|
)
|
|
|
(22
|
)
|
Goodwill (see f)
|
|
|
125
|
|
|
|
124
|
|
Effect of applying Bulletin B-10 (see g)
|
|
|
20
|
|
|
|
(18
|
)
|
Effect of applying Bulletin B-15 (see h)
|
|
|
(119
|
)
|
|
|
|
|
Effect of SFAS No. 158 (see j)
|
|
|
(131
|
)
|
|
|
(163
|
)
|
Employee retirement obligations (see j)
|
|
|
(31
|
)
|
|
|
(38
|
)
|
Purchase of Visteons capital investment (see k)
|
|
|
(71
|
)
|
|
|
(67
|
)
|
Impairment of longlived assets (see l)
|
|
|
399
|
|
|
|
390
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(345
|
)
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
Total stockholders equity under U.S. GAAP
|
|
Ps.
|
4,171
|
|
|
Ps.
|
4,111
|
|
|
|
|
|
|
|
|
|
a)
|
|
Minority interest
|
|
|
|
|
Under Mexican FRS, minority interest in consolidated subsidiaries is presented as a
separate component within the stockholders equity section in the consolidated balance
sheet. For U.S. GAAP purposes, minority interest is not included in stockholders equity
and is presented below total liabilities and above the stockholders equity section in
the consolidated balance sheet.
|
|
|
|
|
As discussed in insert (o) SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51, will be effective for the Company
beginning January 1, 2009. SFAS No. 160 modifies the presentation of minority interest
in the balance sheet and statement of income similar to that of Mexican FRS, for which
reason the Company anticipates that this difference will no longer be applicable
beginning January 1, 2009.
|
|
b)
|
|
Deferred income taxes
|
|
|
|
|
Under Mexican FRS as required by Bulletin D-4, Accounting for Income Tax, Tax on Assets
and Employee Statutory Profit Sharing, income taxes are charged to results as they are
incurred and the Company recognizes deferred income tax assets and liabilities for the
future consequences of temporary differences between the financial statement carrying
amounts of assets and liabilities and their respective income tax bases, measured using
enacted rates. The effects of changes in the statutory rates are accounted for in the
period that includes the enactment date. Deferred income tax assets are also recognized
for the estimated future effects of tax loss carryforwards and asset tax credit
carryforwards. Deferred tax assets are recognized only when it is highly probable that
sufficient future taxable income will be generated to recover such deferred tax assets.
|
F-111
|
|
|
Under U.S. GAAP, as required by SFAS No. 109, Accounting for Income Taxes, the Company
recognizes deferred income tax assets and liabilities for the future consequences of
temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective income tax bases, measured using enacted rates. The
effects of changes in the statutory rates are accounted for in the period that includes
the enactment date. Deferred income tax assets are also recognized for the estimated
future effects of tax loss carryforwards and asset tax credit carryforwards.
|
|
|
|
|
The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this assessment.
Based upon the level of historical taxable income, projections of future taxable income
over the periods in which the deferred tax assets are deductible and tax planning
strategies that would be taken to prevent an operating loss or tax credit carryforward
from expiring unused, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the existing valuation
allowance at December 31, 2007.
|
|
|
|
|
For U.S. GAAP purposes the Company recognizes deferred taxes each period for the changes
in the taxable portions of its distributable stockholders equity. The Companys policy
is to compare the deferred tax balance that would be required if all of the stockholders
equity were distributed. This amount is compared to the total deferred tax balance
recorded prior to this adjustment. The difference between the amount recorded and the
amount calculated from the stockholders equity taxable accounts is recorded as an
adjustment to deferred taxes as of the balance sheet date.
|
|
|
|
|
For U.S. GAAP purposes the Company recognizes a deferred tax asset for the temporary
difference that exists between the book basis and the tax basis of its foreign
subsidiaries that legally own Vitros intellectual property at the applicable tax rate in
the foreign jurisdiction based on the expected reversal date. For Mexican FRS purposes,
the Company recognizes a deferred tax asset for the temporary difference that exists
between the book basis and the tax basis at the applicable rate in Mexico, which is where
it expects to recognize such benefits.
|
|
|
|
|
U.S. GAAP differences as described in the reconciliations above, to the extent taxable
are reflected in the U.S. GAAP deferred tax balances.
|
|
|
|
|
In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No.
48, Accounting for Uncertainty in Income Taxes. FIN 48 provides detailed guidance for
the financial statement recognition, measurement and disclosure of uncertain tax
positions recognized in an enterprises financial statements in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. FIN 48
requires an entity to recognize the financial statement impact of a tax position when it
is more likely than not that the position will be sustained upon examination. If the tax
position meets the more-likely-than-not recognition threshold, the tax effect is
recognized at the largest amount of the benefit that is greater than 50% likely of being
realized upon ultimate settlement. Any difference between the tax position taken in the
tax return and the tax position recognized in the financial statements using the criteria
above results in the recognition of a liability in the financial statements for the unrecognized benefit. Similarly, if a tax position fails to
meet the more-likely-than-not recognition threshold, the benefit taken in the tax return
will also result in the recognition of a liability in the financial statements for the
full amount of the unrecognized benefit. FIN 48 became effective for fiscal years
beginning after December 15, 2006 for public entities and their subsidiaries. The
Company adopted FIN 48 as of January 1, 2007, as required. The provisions of FIN 48 were
applied to all tax positions under SFAS No. 109 upon initial adoption. The impact of
adopting this interpretation was not material to the Companys consolidated financial
position, results of operations or cash flows.
|
F-112
|
|
|
|
|
|
|
|
It is the Companys policy to classify interest and penalties related to income tax
related matters within income tax expense and other expenses, respectively. The Companys
significant operations are all located in Mexico, the United States of America and Spain.
The tax laws in these jurisdictions permit the respective tax authorities to examine
previously filed tax returns for the following years:
|
|
|
|
|
|
Mexico
|
|
U.S.
|
|
Spain
|
2003-2007
|
|
2003-2007
|
|
2004-2007
|
|
c)
|
|
Deferred workers profit sharing
|
|
|
|
|
In accordance with Mexican FRS the Company determines the provision for deferred workers
profit sharing by applying the partial accrual method of Bulletin D-4 applicable to
temporary differences between the financial and adjusted tax income that are expected to
reverse within a defined period. For U.S. GAAP purposes the Company accrues for workers
profit sharing based on a liability approach similar to accounting for income taxes under
SFAS No. 109.
|
|
|
|
|
As discussed in note 21, NIF D-3, Employee Benefits, is effective beginning January 1,
2008, which will require companies to calculate deferred PTU using a similar balance
sheet methodology similar to that required by U.S. GAAP.
|
|
d)
|
|
Monetary position result on deferred income taxes and deferred workers profit
sharing
|
|
|
|
|
The monetary position result is determined by (i) applying the annual inflation factor to
the net monetary position of the U.S. GAAP adjustments at the beginning of the period,
plus (ii) the monetary position effect of such adjustments during the period, determined
in accordance with the weighted average inflation factor.
|
|
|
|
|
As discussed in the introduction to this note as well as note 19, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future.
|
|
e)
|
|
Capitalization of interest
|
|
|
|
|
Under Mexican FRS beginning January 1, 2007, the Company adopted NIF D-6, Capitalization
of Comprehensive Financing Result, accordingly the capitalization of the comprehensive
financing result (interest expense, foreign exchange results and monetary position
result) generated by borrowings obtained to finance investment
directly attributable to the acquisition of qualifying assets is mandatory. Prior to the
adoption of NIF D-6, the Company did not capitalize the comprehensive financing result as
it was optional.
|
F-113
|
|
|
In accordance with SFAS No. 34, Capitalization of Interest Cost, if the comprehensive
financing result is incurred during the construction of qualifying assets, capitalization
is required as part of the cost of such assets. Accordingly, until December 31, 2006 a
reconciling item for the capitalization of a portion of the comprehensive financing
result was included in the U.S. GAAP reconciliation of the majority net income and
majority stockholders equity. The amortization expense and related accumulated
amortization of such items generates a difference compared to Mexican FRS.
|
|
|
|
|
Beginning on January 1, 2007, a reconciling item is generated for borrowings denominated
in U.S. dollars, related to foreign exchange results and the monetary position result,
which is capitalized under Mexican FRS and not for U.S. GAAP. If the borrowings are
denominated in Mexican pesos, the amount of interest to be capitalized as noted above is
reduced by the gain on monetary position associated with the debt.
|
|
|
f)
|
|
Goodwill
|
|
|
|
|
Under Mexican FRS, until December 31, 2004 goodwill represented the excess of cost over
book value of subsidiaries as of the date of acquisition and was restated using the NCPI
and amortized using the straight-line method over 20 years. Beginning on January 1, 2005,
goodwill represents the excess of cost over fair value of subsidiaries as of the date of
acquisition. Goodwill is restated using the NCPI and at least once a year is subject to
impairment test, as it ceased to be amortized under the provisions of Bulletin B-7
|
|
|
|
|
In accordance with SFAS No. 142, Goodwill and Other Intangibles Assets, beginning in
2002 goodwill and indefinite-lived assets are also no longer subject to amortization, but
rather are subject at least once a year to impairment tests.
|
|
|
|
|
The difference between Mexican FRS and U.S. GAAP as it relates to this item is due to the
accumulate amortization of goodwill recorded under Mexican FRS that has been reversed in
the reconciliation of stockholders equity for purposes of U.S. GAAP.
|
|
|
g)
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
As discussed in note 3 g), under Mexican FRS Bulletin B-10 allows the restatement of the
value of machinery and equipment purchased in a foreign country using the consumer price
index of the country of origin and the period-end exchange rate. For U.S. GAAP purposes,
such restatement is based on the NCPI.
|
|
|
|
|
As discussed in the introduction to this note as well as Note 19, beginning January 1,
2008 with the issuance of NIF B-10, the Company expects that the basic financial
statements under Mexican FRS will no longer include inflationary effects, for which
reason, this reconciling item will no longer be applicable in the future. Further, even
during inflationary periods, the alternate methodology described above has been
eliminated by NIF B-10.
|
F-114
|
h)
|
|
Effect of applying Bulletin B-15
|
|
|
|
|
In 1997, the IMCP issued Bulletin B-15, Foreign Currency Transactions and Translation of
Financial Statements of Foreign Operations, which specifies the procedures to be applied
in the consolidation of foreign subsidiaries by Mexican companies for (i) current year
amounts and (ii) prior year amounts, presented for comparative purposes. The Companys
accounting policies for the consolidation of its foreign subsidiaries are described in
notes 2 c) and 3 b). Such policies conform to the requirements of Bulletin B-15.
|
|
|
|
|
The Company believes that the application of the methodology of Bulletin B-15 to
translate the current year amounts for foreign operations does not result in a difference
between Mexican FRS and U.S. GAAP that must be reconciled in order to comply with the
rules and regulations of the SEC.
|
|
|
|
|
However, there are two methods allowed under Bulletin B-15 to restate prior year amounts
for foreign subsidiaries. Vitro uses the method that reconsolidates prior year balances
by restating foreign subsidiaries using the current inflation rate in the foreign country
and translating into pesos using the year-end exchange rate. Management believes that
this methodology of Bulletin B-15 used to restate prior years balances for comparative
purposes does not conform to the requirements of SEC Rule 3-20e of Regulation S-X, which
requires all amounts in financial statements to be presented in the same reporting
currency. Accordingly, in filings with the SEC, the Company includes an adjustment for
the difference in methodologies of restating prior year balances.
|
|
|
i)
|
|
Derivative financial instruments
|
|
|
|
|
As of January 1, 2005, in accordance with Mexican FRS, as mentioned in note 3 a), the
Company values and records all derivative instruments and hedging activities according to
Bulletin C-10 Derivative Financial Instruments and Hedging Activities, which
establishes similar accounting treatment as described in SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. Prior to the implementation of Bulletin
C-10, financial instruments entered into for hedging purposes were valued using the same
valuation criteria of the underlying assets or liabilities hedged, and the effect of such
valuation was recognized in net income, net of costs, expenses or income from the assets
or liabilities whose risks were being hedged.
|
|
|
|
|
The Company determined that the accounting for derivative financial instruments is the
same for Mexican FRS and U.S. GAAP as they relate to their consolidated financial
statements as of and for the year ended December 31, 2005, 2006 and 2007. The effects of
the initial application of Bulletin C-10 were already reflected in the U.S. GAAP
financial statements for 2004. Therefore, the cumulative effect of the change in
accounting principle is reconciled out of the amounts presented in the U.S. GAAP income
statement for 2005.
|
F-115
|
j)
|
|
Employee retirement obligations
|
|
|
|
|
The Company maintains defined benefit pension plans for all of its subsidiaries and
provides for seniority premiums and severance payments (severance indemnities) for all of
its Mexican subsidiaries. For its Mexican FRS consolidated financial statements,
the Company applies Bulletin D-3, Labor Obligations. Prior to 2006, the accounting
treatment for pensions and seniority premiums set forth in this Bulletin is substantially
the same as those set forth in SFAS No. 87, Employers Accounting for Pensions. The
Company records the pension cost determined by actuarial computations, as described in
notes 3 k) and 10. Significant assumptions (weighted-average rates) used in determining
net periodic pension cost and the Companys related pension obligations for 2007, 2006
and 2005 are also described in note 10.
|
|
|
|
|
The Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R),
in its December 31, 2006 consolidated financial statements. This statement requires
companies to (1) fully recognize, as an asset or liability, the over funded or under
funded status of defined pension and other postretirement benefit plans; (2) recognize
changes in the funded status through other comprehensive income in the year in which the
changes occur; and (3) provide enhanced disclosures. There is no impact on results of
operations or cash flows. Retrospective application of this standard is not permitted.
|
|
|
|
|
The Company has prepared a study of pension costs under U.S. GAAP based on actuarial
calculations using the same assumptions applied under Mexican FRS (see note 3 k). Prior
to the adoption of SFAS No. 158, there was no difference in the liabilities for pension
plans and seniority premiums between Mexican FRS and U.S. GAAP.
|
|
|
|
|
Severance indemnities Under Mexican FRS, effective 2005 revised Bulletin D-3 requires
the recognition of a severance indemnity liability calculated based on actuarial
computations. Similar recognition criteria under U.S. GAAP are established in SFAS No.
112, Employers Accounting for Postemployment Benefits, which requires that a liability
for certain termination benefits provided under an ongoing benefit arrangement such as
these statutorily mandated severance indemnities, be recognized when the likelihood of
future settlement is probable and the liability can be reasonably estimated. Mexican FRS
allows for the Company to amortize the transition obligation related to the adoption of
revised Bulletin D-3 over the expected service life of the employees. However, U.S. GAAP
required the Company to recognize such effect upon initial adoption, which results in a
difference in the amount recorded under the two accounting principles.
|
|
|
k)
|
|
Purchase of Visteons capital investment
|
|
|
|
|
In connection with the termination of the joint venture agreement between Viméxico and
Visteon discussed in note 17 b), under Mexican FRS as established in Bulletin B-7
Business Acquisitions, the Company recognized the difference between the price paid and
the book value of Ps 70 as a credit in the majority stockholders equity. Under U.S.
GAAP, in accordance with SFAS No. 141, Business Combinations the excess over cost of Ps
90 was allocated as a pro rata reduction of the acquired assets.
|
F-116
|
l)
|
|
Impairment of long-lived assets
|
|
|
|
|
For U.S. GAAP purposes, in accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The carrying amount of an asset is not
recoverable when the estimated future undiscounted cash flows expected to result from the
use of the asset are less than the carrying value of the asset. Impairment is recorded
when the carrying amount of the asset exceeds its fair value. Impairment charges and
asset write-downs are presented in selling, general and administrative expenses in
operating income in our U.S. GAAP consolidated financial statements.
|
|
|
|
|
For Mexican FRS purposes, in accordance with Bulletin C-15, Impairment of long-lived
assets, the Company reviews the carrying amounts of long-lived assets in use when an
impairment indicator suggests that such amounts might not be recoverable, considering the
greater of the present value of future net cash flows or the net sales price upon
disposal. Impairment is recorded when the carrying amount of the asset exceeds the
greater of the amounts mentioned above. Impairment charges and asset write-downs are
presented in other expenses in our Mexican FRS consolidated financial statements.
|
|
|
|
|
In 2005 and 2006, for Mexican FRS purposes, while performing its annual impairment test
using its best estimates based on reasonable and supportable assumptions and projections,
the Company recorded an impairment charge of Ps 111 and Ps 334, respectively as the
carrying amount of the long-lived assets exceeded the present value of their future
discounted cash flows. For U.S. GAAP purposes no impairment charge was recorded as the
assets were considered to be recoverable given that the estimated undiscounted cash flows
expected to result from the use of the assets were greater then the carrying value of the
asset.
|
|
|
|
|
In 2005 for U.S. GAAP purposes, based on fair value appraisals received the Company
recorded an impairment charge of Ps 45 for land and buildings located at its corporate
offices classified as available for sale in accordance with SFAS No. 144. This charge is
recorded in operating income for U.S. GAAP purposes. Under Mexican FRS, the assets did
not meet the definition of held for sale as required by Bulletin C-15 as such assets were
still in use by the Company at that time. The discounted cash flow analysis performed by
the Company did not result in an impairment charge for Mexican FRS purposes. During 2006
the Company sold one of its buildings located at its corporate headquarters recognizing a
loss on sale of Ps 138 under Mexican FRS and Ps 93 under U.S. GAAP.
|
|
|
m)
|
|
Reclassifications
|
|
|
|
|
Gain or loss on sale of assets The gain or loss on sale of assets that do not meet the
definition of a component of a business as described in SFAS No. 144 are included in
operating income in the Companys U.S. GAAP consolidated financial statements. Gains or
losses on sales of assets not presented as discontinued operations under Mexican FRS are
included in other expenses in the Companys consolidated Mexican FRS financial statements
(see note 14).
|
|
|
|
|
Classification of workers profit sharing Under Mexican FRS, statutory employee profit
sharing is presented under other income and expenses. In the Companys U.S. GAAP
statements of operations, workers profit sharing expense is classified as an operating
expense.
|
|
|
|
|
Restructuring charges During 2006 and 2007, the Company restructured certain operating
units and its corporate and administrative functions. For Mexican FRS
purposes the corresponding costs met the definition of a restructuring charge and were
included in other expenses in the Companys consolidated financial statements, but for
U.S. GAAP purposes the Company applied SFAS No. 112, Employers Accounting for
Postemployment Benefits. These costs are included in general and administrative expenses
in the accompanying U.S. GAAP consolidated statements of operations.
|
F-117
|
n)
|
|
Supplemental U.S. GAAP Cash Flow Information
|
|
|
|
|
The classifications of cash flows under Mexican FRS and U.S. GAAP are basically the same
in respect of the transactions presented under each caption. The nature of the
differences between Mexican FRS and U.S. GAAP in the amounts reported is primarily due to
(i) the elimination of inflationary effects in the variations of monetary assets and
liabilities arising from financing and investing activities, against the corresponding
monetary position result in operating activities, (ii) the elimination of exchange rate
fluctuations resulting from financing and investing activities, against the corresponding
unrealized foreign exchange gain or loss included in operating activities, and (iii) the
recognition in operating, financing and investing activities of the U.S. GAAP
adjustments.
|
|
|
|
|
The following table summarizes the cash flow items as required under SFAS No. 95,
Statement of Cash Flows, provided by (used in) operating, financing and investing
activities for the years ended December 31, 2005, 2006 and 2007, giving effect to the
U.S. GAAP adjustments, excluding the effects of inflation required by Bulletin B-10 and
Bulletin B-15. The following information is presented, in millions of pesos, on a
historical peso basis and it is not presented in pesos of constant purchasing power:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
Ps.
|
615
|
|
|
Ps.
|
(293
|
)
|
|
Ps.
|
549
|
|
Net cash provided by (used in) financing activities
|
|
|
33
|
|
|
|
(142
|
)
|
|
|
(7
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(525
|
)
|
|
|
308
|
|
|
|
(505
|
)
|
|
|
|
Net cash flow from operating activities reflects cash payments for interest and income
taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
Ps.
|
535
|
|
|
Ps.
|
658
|
|
|
Ps.
|
373
|
|
Income taxes paid
|
|
|
104
|
|
|
|
151
|
|
|
|
204
|
|
|
o)
|
|
Recently Issued Accounting Standards
|
|
|
|
|
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities including an
amendment of FASB Statement No. 115. SFAS No. 159 gives the Company the irrevocable
option to carry most financial assets and liabilities at fair value that are not
currently required to be measured at fair value. If the fair value option is elected,
changes in fair value would be recorded in earnings at each subsequent reporting date.
SFAS No. 159 is effective for the Companys 2008 fiscal year. The Company is currently
evaluating the impact the adoption of this statement could have on its financial
condition, results of operations and cash flows.
|
F-118
|
|
|
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurement. SFAS
No. 157 defines fair value, establishes a framework for the measurement of fair value,
and enhances disclosures about fair value measurements. The Statement does not require
any new fair value measures. The Statement is effective for fair value measures already
required or permitted by other standards for fiscal years beginning after November 15,
2007. The Company is required to adopt SFAS No. 157 beginning on January 1, 2008. SFAS
No. 157 is required to be applied prospectively, except for certain financial
instruments. Any transition adjustment will be recognized as an adjustment to opening
retained earnings in the year of adoption. On February 12, 2008, the FASB issued FSP FAS
157-1 and FSP FAS 157-2, which remove leasing transactions accounted for under SFAS No.
13, Accounting for Leases from the scope of SFAS No. 157 and partially defer the
effective date of SFAS No. 157 as it relates all nonrecurring fair value measurements of
nonfinancial assets and nonfinancial liabilities until fiscal years beginning after
November 15, 2008. The Company is currently evaluating the impact of adopting SFAS No.
157 on its results of operations and financial position.
|
|
|
|
|
In December 2007, the FASB issued SFAS No. 141(R), Business Combinationsa replacement
of FASB No. 141. SFAS No. 141(R) requires (a) a company to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at
fair value as of the acquisition date; and (b) an acquirer in preacquisition periods to
expense all acquisition-related costs. SFAS No. 141(R) requires that any adjustments to
an acquired entitys deferred tax asset and liability balance that occur after the
measurement period be recorded as a component of income tax expense. The presentation
and disclosure requirements must be applied retrospectively to provide comparability in
the financial statements. Early adoption is prohibited. SFAS No. 141(R) is effective
for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The impact of this standard is dependant upon the level of future
acquisitions.
|
|
|
|
|
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51. SFAS No. 160 (a) amends ARB 51 to
establish accounting and reporting standards for the noncontrolling interest in a
subsidiary (to be included within stockholders equity) and the deconsolidation of a
subsidiary; (b) changes the way the consolidated income statement is presented; (c)
establishes a single method of accounting for changes in a parents ownership interest in
a subsidiary that do not result in deconsolidation; (d) requires that a parent recognize
a gain or loss in net income when a subsidiary is deconsolidated; and (e) requires
expanded disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parents owners and the interests of the
noncontrolling owners of a subsidiary. SFAS No. 160 must be applied prospectively but to
apply the presentation and disclosure requirements must be applied retrospectively to
provide comparability in the financial statements. Early adoption is prohibited. SFAS
No. 160 is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. The impact of this standard is dependant upon
the level of future acquisitions.
|
F-119
|
|
|
In September 2006, the FASBs Emerging Issues Task Force reached a consensus on Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 provides guidance on the
accounting for arrangements in which an employer owns and controls the insurance policy
and has agreed to share a portion of the cash surrender value and/or death benefit with
the employee. This guidance requires an employer to record a postretirement benefit, in
accordance with FASB Statement No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions, or APB Opinion No. 12, Omnibus Opinion-1967, if there is
an agreement by the employer to share a portion of the proceeds of a life insurance
policy with the employee during the postretirement period. This guidance is effective for
reporting periods beginning after December 15, 2007. The Company is in the process of
assessing the impact of adopting EITF 06-4 on its consolidated financial position and
results of operations; however, the Company currently expects that additional liabilities
may be required to be recognized upon implementation of the consensus based on the
current terms of certain life insurance arrangements with executive officers of the
Company.
|
22.
|
|
Guarantor and non-guarantor financial information (Information for Viméxico)
|
|
|
|
As disclosed in note 8 c), the Vitro issued US$ 700 million of senior guaranteed notes due
February 1, 2017 callable after year 2012 at a coupon of a 9.125% and US$ 300 million of
senior unsecured notes due February 1, 2012 not callable for the notes ´ life at a coupon of
8.65% (together the Notes) principally to refinance existing third-party debt at the Vitro
holding company level, substantially all of the third-party debt at its subsidiary VENA and
certain third-party debt at its subsidiary Viméxico.
|
|
|
|
The obligations of the Vitro pursuant to each series of the Notes, including any repurchase
obligation resulting from a change of control, are unconditionally guaranteed, jointly and
severally, on an unsecured basis, by VENA and its wholly-owned subsidiaries and Viméxico and
its wholly-owned subsidiaries.
|
|
|
|
The following of Viméxicos subsidiaries are designated as guarantors as of December 31,
2007; Viméxico, Vitro Automotriz, S.A. de C.V., Vitro Flex, S.A. de C.V, Distribuidora
Nacional de Vidrio, S.A. de C.V., Vitro Vidrio y Cristal, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Distribuidor Vidriero Lan, S.A. de C.V., Vitrocar, S.A. de C.V.,
Cristales Inastillables de México, S.A. de C.V., Vidrio Plano de México, S.A. de C.V., VVP
Holdings Corp., VVP Autoglass, Inc., Vitro America, Inc., Super Sky Products, Inc., Super Sky
International, Inc., VVP Finance Corp., Super Sky Constructors, Inc., Vitro Colombia, S.A.,
VVP Europa Holdings, B.V., Vidrio y Cristal del Noroeste, S.A de C.V., Vidrio Plano, S.A. de
C.V., Distribuidora de Vidrio y Cristal, S.A. de C.V., and Vidrio Plano de Mexicali, S.A. de
C.V.
|
|
|
|
The following condensed consolidating financial information includes separate columnar
information for:
|
|
|
|
Viméxico (the holding company),
|
|
|
|
|
Viméxicos combined wholly-owned guarantors , and
|
|
|
|
|
Viméxicos combined non-guarantors.
|
|
|
|
|
Investments in subsidiaries are accounted for by Viméxico under the equity method for purpose
of the supplemental consolidating information. The principal elimination entries
eliminate the Viméxicos investment in subsidiaries and intercompany balances and
transactions.
|
F-120
|
a)
|
|
Supplemental condensed consolidating balance sheets presented in accordance with Mexican
FRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, trade receivables and other current
assets
|
|
Ps.
|
3,233
|
|
|
Ps.
|
741
|
|
|
Ps.
|
1,576
|
|
|
Ps.
|
(4,460
|
)
|
|
Ps.
|
1,090
|
|
Retained undivided interests in securitized
receivables
|
|
|
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
|
|
|
1,675
|
|
|
|
380
|
|
|
|
(6
|
)
|
|
|
2,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
3,233
|
|
|
|
3,109
|
|
|
|
1,956
|
|
|
|
(4,466
|
)
|
|
|
3,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
3,621
|
|
|
|
535
|
|
|
|
|
|
|
|
(4,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property plant and equipment, net
|
|
|
|
|
|
|
4,795
|
|
|
|
963
|
|
|
|
|
|
|
|
5,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
64
|
|
|
|
300
|
|
|
|
113
|
|
|
|
|
|
|
|
477
|
|
Other assets
|
|
|
31
|
|
|
|
774
|
|
|
|
692
|
|
|
|
(418
|
)
|
|
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
3,716
|
|
|
|
6,404
|
|
|
|
1,768
|
|
|
|
(4,574
|
)
|
|
|
7,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
6,949
|
|
|
Ps.
|
9,513
|
|
|
Ps.
|
3,724
|
|
|
Ps.
|
(9,040
|
)
|
|
Ps.
|
11,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
|
|
|
Ps.
|
72
|
|
|
Ps.
|
191
|
|
|
Ps.
|
|
|
|
Ps.
|
263
|
|
Trade payables
|
|
|
|
|
|
|
667
|
|
|
|
317
|
|
|
|
(7
|
)
|
|
|
977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities
|
|
|
18
|
|
|
|
347
|
|
|
|
83
|
|
|
|
(105
|
)
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
2,415
|
|
|
|
4,523
|
|
|
|
537
|
|
|
|
(4,741
|
)
|
|
|
2,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
2,433
|
|
|
|
5,609
|
|
|
|
1,128
|
|
|
|
(4,853
|
)
|
|
|
4,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
391
|
|
|
|
25
|
|
|
|
|
|
|
|
416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations and other
long-term liabilities
|
|
|
|
|
|
|
129
|
|
|
|
528
|
|
|
|
(198
|
)
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
520
|
|
|
|
553
|
|
|
|
(198
|
)
|
|
|
875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,433
|
|
|
|
6,129
|
|
|
|
1,681
|
|
|
|
(5,051
|
)
|
|
|
5,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
4,516
|
|
|
|
3,384
|
|
|
|
2,043
|
|
|
|
(5,427
|
)
|
|
|
4,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,438
|
|
|
|
1,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
4,516
|
|
|
|
3,384
|
|
|
|
2,043
|
|
|
|
(3,989
|
)
|
|
|
5,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
Ps.
|
6,949
|
|
|
Ps.
|
9,513
|
|
|
Ps.
|
3,724
|
|
|
Ps.
|
(9,040
|
)
|
|
Ps.
|
11,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, trade receivables and other current
assets
|
|
Ps.
|
1,947
|
|
|
Ps.
|
2,143
|
|
|
Ps.
|
1,818
|
|
|
Ps.
|
(4,606
|
)
|
|
Ps.
|
1,302
|
|
Retained undivided interests in securitized
receivables
|
|
|
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
|
|
|
|
|
1,529
|
|
|
|
471
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
1,947
|
|
|
|
4,328
|
|
|
|
2,289
|
|
|
|
(4,606
|
)
|
|
|
3,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
3,607
|
|
|
|
684
|
|
|
|
|
|
|
|
(4,291
|
)
|
|
|
|
|
Property plant and equipment, net
|
|
|
|
|
|
|
5,125
|
|
|
|
651
|
|
|
|
1
|
|
|
|
5,777
|
|
Deferred taxes
|
|
|
37
|
|
|
|
447
|
|
|
|
47
|
|
|
|
39
|
|
|
|
570
|
|
Other assets
|
|
|
30
|
|
|
|
1,048
|
|
|
|
726
|
|
|
|
(441
|
)
|
|
|
1,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
3,674
|
|
|
|
7,304
|
|
|
|
1,424
|
|
|
|
(4,692
|
)
|
|
|
7,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Ps.
|
5,621
|
|
|
Ps.
|
11,632
|
|
|
Ps.
|
3,713
|
|
|
Ps.
|
(9,298
|
)
|
|
Ps.
|
11,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
Ps.
|
|
|
|
Ps.
|
51
|
|
|
Ps.
|
230
|
|
|
Ps.
|
|
|
|
Ps.
|
281
|
|
Trade payables
|
|
|
|
|
|
|
799
|
|
|
|
486
|
|
|
|
(64
|
)
|
|
|
1,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liabilities
|
|
|
29
|
|
|
|
1,084
|
|
|
|
93
|
|
|
|
(815
|
)
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
|
1,139
|
|
|
|
5,544
|
|
|
|
172
|
|
|
|
(3,862
|
)
|
|
|
2,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,168
|
|
|
|
7,478
|
|
|
|
981
|
|
|
|
(4,741
|
)
|
|
|
4,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
79
|
|
|
|
48
|
|
|
|
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations and other
long-term liabilities
|
|
|
|
|
|
|
466
|
|
|
|
408
|
|
|
|
(266
|
)
|
|
|
608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
545
|
|
|
|
456
|
|
|
|
(266
|
)
|
|
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,168
|
|
|
|
8,023
|
|
|
|
1,437
|
|
|
|
(5,007
|
)
|
|
|
5,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total majority interest
|
|
|
4,453
|
|
|
|
3,609
|
|
|
|
2,276
|
|
|
|
(5,885
|
)
|
|
|
4,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,594
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
4,453
|
|
|
|
3,609
|
|
|
|
2,276
|
|
|
|
(4,291
|
)
|
|
|
6,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
Ps.
|
5,621
|
|
|
Ps.
|
11,632
|
|
|
Ps.
|
3,713
|
|
|
Ps.
|
(9,298
|
)
|
|
Ps.
|
11,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-122
b) Supplemental condensed consolidating statements of operations presented in accordance with
Mexican FRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2005
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of
subsidiaries
|
|
Ps.
|
156
|
|
|
Ps.
|
11,347
|
|
|
Ps.
|
3,168
|
|
|
Ps.
|
(967
|
)
|
|
Ps.
|
13,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
|
|
8,350
|
|
|
|
2,374
|
|
|
|
(762
|
)
|
|
|
9,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
9
|
|
|
|
2,722
|
|
|
|
486
|
|
|
|
11
|
|
|
|
3,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
52
|
|
|
|
241
|
|
|
|
25
|
|
|
|
65
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses, net
|
|
|
4
|
|
|
|
360
|
|
|
|
85
|
|
|
|
2
|
|
|
|
451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income and asset tax benefit
|
|
|
(30
|
)
|
|
|
(707
|
)
|
|
|
(11
|
)
|
|
|
(1
|
)
|
|
|
(749
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before change in accounting
principle
|
|
|
121
|
|
|
|
381
|
|
|
|
209
|
|
|
|
(282
|
)
|
|
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
principle, net of tax
|
|
|
(9
|
)
|
|
|
(121
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
|
112
|
|
|
|
260
|
|
|
|
208
|
|
|
|
(283
|
)
|
|
|
297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority income (loss)
|
|
Ps.
|
112
|
|
|
Ps.
|
260
|
|
|
Ps.
|
208
|
|
|
Ps.
|
(468
|
)
|
|
Ps.
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of
subsidiaries
|
|
Ps.
|
(699
|
)
|
|
Ps.
|
11,208
|
|
|
Ps.
|
2,788
|
|
|
Ps.
|
165
|
|
|
Ps.
|
13,462
|
|
Cost of sales
|
|
|
|
|
|
|
8,453
|
|
|
|
1,926
|
|
|
|
(420
|
)
|
|
|
9,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
10
|
|
|
|
2,625
|
|
|
|
483
|
|
|
|
(33
|
)
|
|
|
3,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
121
|
|
|
|
575
|
|
|
|
54
|
|
|
|
(119
|
)
|
|
|
631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses, net
|
|
|
(102
|
)
|
|
|
524
|
|
|
|
28
|
|
|
|
|
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income and asset tax expense(benefit)
|
|
|
46
|
|
|
|
(176
|
)
|
|
|
52
|
|
|
|
1
|
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
|
(774
|
)
|
|
|
(793
|
)
|
|
|
245
|
|
|
|
736
|
|
|
|
(586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority (loss) income
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(793
|
)
|
|
Ps.
|
245
|
|
|
Ps.
|
548
|
|
|
Ps.
|
(774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales and equity in earnings of
subsidiaries
|
|
Ps.
|
164
|
|
|
Ps.
|
11,123
|
|
|
Ps.
|
2,962
|
|
|
Ps.
|
(644
|
)
|
|
Ps.
|
13,605
|
|
Cost of sales
|
|
|
|
|
|
|
7,957
|
|
|
|
1,946
|
|
|
|
(325
|
)
|
|
|
9,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
6
|
|
|
|
2,724
|
|
|
|
545
|
|
|
|
(30
|
)
|
|
|
3,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing cost
|
|
|
187
|
|
|
|
431
|
|
|
|
91
|
|
|
|
(266
|
)
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses (income), net
|
|
|
1
|
|
|
|
74
|
|
|
|
17
|
|
|
|
(1
|
)
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense (benefit)
|
|
|
56
|
|
|
|
23
|
|
|
|
73
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income for the year
|
|
|
(86
|
)
|
|
|
(86
|
)
|
|
|
290
|
|
|
|
(22
|
)
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minority income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182
|
|
|
|
182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net majority (loss) income
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
290
|
|
|
Ps.
|
(204
|
)
|
|
Ps.
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-124
|
c)
|
|
Supplemental condensed consolidating statements of changes in financial position presented
in accordance with Mexican FRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-
Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2005
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before change in accounting principle
|
|
Ps.
|
112
|
|
|
Ps.
|
381
|
|
|
Ps.
|
210
|
|
|
Ps.
|
(274
|
)
|
|
Ps.
|
429
|
|
|
Depreciation and amortization
|
|
|
1
|
|
|
|
523
|
|
|
|
144
|
|
|
|
|
|
|
|
668
|
|
Provision for employee retirement obligations
|
|
|
|
|
|
|
32
|
|
|
|
51
|
|
|
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
21
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off and loss from sale of assets
|
|
|
9
|
|
|
|
157
|
|
|
|
54
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-cash charges
|
|
|
(175
|
)
|
|
|
(1,159
|
)
|
|
|
(67
|
)
|
|
|
333
|
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in inventories
|
|
|
|
|
|
|
(247
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
(266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other current assets and liabilities
|
|
|
(7
|
)
|
|
|
653
|
|
|
|
(23
|
)
|
|
|
48
|
|
|
|
671
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(33
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by operating
activities
|
|
|
(39
|
)
|
|
|
308
|
|
|
|
324
|
|
|
|
107
|
|
|
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans, net
|
|
|
(298
|
)
|
|
|
(431
|
)
|
|
|
83
|
|
|
|
|
|
|
|
(646
|
)
|
Other financing activities
|
|
|
(34
|
)
|
|
|
399
|
|
|
|
(144
|
)
|
|
|
404
|
|
|
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by financing
activities
|
|
|
(332
|
)
|
|
|
(39
|
)
|
|
|
(61
|
)
|
|
|
404
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and
equipment
|
|
|
|
|
|
|
(424
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
(468
|
)
|
Proceeds from sale of land, machinery and equipment
|
|
|
|
|
|
|
30
|
|
|
|
1
|
|
|
|
|
|
|
|
31
|
|
Restricted cash
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Other investing activities
|
|
|
371
|
|
|
|
165
|
|
|
|
(125
|
)
|
|
|
(511
|
)
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated (used in) investing activities
|
|
|
371
|
|
|
|
(228
|
)
|
|
|
(168
|
)
|
|
|
(511
|
)
|
|
|
(536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
48
|
|
|
|
95
|
|
|
|
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
143
|
|
|
|
37
|
|
|
|
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
|
|
|
Ps.
|
191
|
|
|
Ps.
|
137
|
|
|
Ps.
|
|
|
|
Ps.
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(793
|
)
|
|
Ps.
|
254
|
|
|
Ps.
|
727
|
|
|
Ps.
|
(586
|
)
|
Depreciation and amortization
|
|
|
1
|
|
|
|
487
|
|
|
|
110
|
|
|
|
|
|
|
|
598
|
|
Provision for employee retirement obligations
|
|
|
|
|
|
|
80
|
|
|
|
58
|
|
|
|
|
|
|
|
138
|
|
Amortization of debt issuance costs
|
|
|
34
|
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
37
|
|
Write-off and loss from sale of assets
|
|
|
|
|
|
|
477
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
465
|
|
Other non-cash charges
|
|
|
822
|
|
|
|
(444
|
)
|
|
|
22
|
|
|
|
(784
|
)
|
|
|
(384
|
)
|
Decrease in inventories
|
|
|
|
|
|
|
420
|
|
|
|
47
|
|
|
|
(16
|
)
|
|
|
451
|
|
Change in other current assets and liabilities
|
|
|
(35
|
)
|
|
|
(724
|
)
|
|
|
(227
|
)
|
|
|
171
|
|
|
|
(815
|
)
|
Employee retirement obligations
|
|
|
|
|
|
|
(101
|
)
|
|
|
(87
|
)
|
|
|
|
|
|
|
(188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
operating activities
|
|
|
48
|
|
|
|
(594
|
)
|
|
|
164
|
|
|
|
98
|
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans, net
|
|
|
(1,428
|
)
|
|
|
(653
|
)
|
|
|
(133
|
)
|
|
|
|
|
|
|
(2,214
|
)
|
Issuance of capital stock
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,526
|
|
Other financing activities
|
|
|
181
|
|
|
|
728
|
|
|
|
(159
|
)
|
|
|
(281
|
)
|
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by (used in)
financing activities
|
|
|
279
|
|
|
|
75
|
|
|
|
(292
|
)
|
|
|
(281
|
)
|
|
|
(219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and
equipment
|
|
|
|
|
|
|
(265
|
)
|
|
|
(65
|
)
|
|
|
|
|
|
|
(330
|
)
|
Proceeds from sale of land, machinery and
equipment
|
|
|
|
|
|
|
170
|
|
|
|
169
|
|
|
|
|
|
|
|
339
|
|
Restricted cash
|
|
|
|
|
|
|
279
|
|
|
|
2
|
|
|
|
|
|
|
|
281
|
|
Proceeds from sale of subsidiaries and
associated companies
|
|
|
219
|
|
|
|
|
|
|
|
3
|
|
|
|
(45
|
)
|
|
|
177
|
|
Other investing activities
|
|
|
(546
|
)
|
|
|
267
|
|
|
|
(66
|
)
|
|
|
228
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by
investing activities
|
|
|
(327
|
)
|
|
|
451
|
|
|
|
43
|
|
|
|
183
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
|
|
|
(68
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
191
|
|
|
|
132
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
|
|
|
Ps.
|
123
|
|
|
Ps.
|
47
|
|
|
Ps.
|
|
|
|
Ps.
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
290
|
|
|
Ps.
|
(22
|
)
|
|
Ps.
|
96
|
|
Depreciation and amortization
|
|
|
2
|
|
|
|
374
|
|
|
|
104
|
|
|
|
|
|
|
|
480
|
|
Provision for employee retirement obligations
|
|
|
|
|
|
|
45
|
|
|
|
12
|
|
|
|
|
|
|
|
57
|
|
Amortization of debt issuance costs
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
|
|
|
|
91
|
|
Loss (gain) from sale of long-lived assets
|
|
|
|
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
Derivative financial instruments
|
|
|
|
|
|
|
27
|
|
|
|
9
|
|
|
|
(7
|
)
|
|
|
29
|
|
Deferred taxes
|
|
|
21
|
|
|
|
(122
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(104
|
)
|
Other non-cash activities
|
|
|
102
|
|
|
|
(106
|
)
|
|
|
|
|
|
|
24
|
|
|
|
20
|
|
(Increase) decrease in trade receivables
|
|
|
2
|
|
|
|
(80
|
)
|
|
|
(271
|
)
|
|
|
155
|
|
|
|
(194
|
)
|
Decrease in inventories
|
|
|
|
|
|
|
138
|
|
|
|
(157
|
)
|
|
|
|
|
|
|
(19
|
)
|
(Decrease) increase in trade payables
|
|
|
|
|
|
|
96
|
|
|
|
186
|
|
|
|
(59
|
)
|
|
|
223
|
|
Change in other current assets and liabilities
|
|
|
12
|
|
|
|
235
|
|
|
|
(62
|
)
|
|
|
(80
|
)
|
|
|
105
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(100
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated by operating activities
|
|
|
53
|
|
|
|
370
|
|
|
|
198
|
|
|
|
11
|
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans, net
|
|
|
|
|
|
|
(331
|
)
|
|
|
61
|
|
|
|
|
|
|
|
(270
|
)
|
Debt issuance cost
|
|
|
|
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(9
|
)
|
Dividends paid to minority interest
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
16
|
|
|
|
(51
|
)
|
Other financing activities
|
|
|
(1,265
|
)
|
|
|
403
|
|
|
|
(54
|
)
|
|
|
1,177
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources (used in) generated by financing
activities
|
|
|
(1,265
|
)
|
|
|
65
|
|
|
|
(62
|
)
|
|
|
1,193
|
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in land, buildings, machinery and
equipment
|
|
|
|
|
|
|
(216
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
(324
|
)
|
Proceeds from sale of land, machinery and
equipment
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
131
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(9
|
)
|
Investment in subsidiaries
|
|
|
(67
|
)
|
|
|
(114
|
)
|
|
|
|
|
|
|
|
|
|
|
(181
|
)
|
Deferred charges
|
|
|
|
|
|
|
(175
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
(206
|
)
|
Other investing activities
|
|
|
1,279
|
|
|
|
(37
|
)
|
|
|
11
|
|
|
|
(1,204
|
)
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net resources generated (used in) by investing
activities
|
|
|
1,212
|
|
|
|
(411
|
)
|
|
|
(137
|
)
|
|
|
(1,204
|
)
|
|
|
(540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
|
|
|
|
24
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
23
|
|
Balance at beginning of year
|
|
|
|
|
|
|
123
|
|
|
|
47
|
|
|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
Ps.
|
|
|
|
Ps.
|
147
|
|
|
Ps.
|
46
|
|
|
Ps.
|
|
|
|
Ps.
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-127
|
d)
|
|
Supplemental condensed consolidating financial information reconciled from Mexican FRS to
U.S. GAAP:
|
The Companys reconciliation from Mexican FRS to U.S. GAAP does not eliminate the effects of
inflation as it represents a comprehensive measure of the effects of price level changes in the
inflationary Mexican economy and, as such, is considered a more meaningful presentation than
historical cost-based financial reporting for both Mexican and U.S. accounting purposes.
The other differences between Mexican FRS and U.S. GAAP and the effects on consolidated net income
(loss) and consolidated stockholders equity as it relates to the Companys guarantor and
non-guarantor subsidiaries are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net income of majority interest as
reported under Mexican FRS
|
|
Ps.
|
112
|
|
|
Ps.
|
260
|
|
|
Ps.
|
208
|
|
|
Ps.
|
(468
|
)
|
|
Ps.
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(6
|
)
|
|
|
(381
|
)
|
|
|
|
|
|
|
|
|
|
|
(387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred workers profit sharing
|
|
|
|
|
|
|
9
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(16
|
)
|
Monetary position result on
deferred income taxes and deferred
workers profit sharing
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
|
|
|
|
|
|
|
15
|
|
|
|
3
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized interest
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
|
|
(63
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-15
|
|
|
(8
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
15
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
|
|
|
|
|
6
|
|
|
|
2
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(208
|
)
|
|
|
|
|
|
|
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(207
|
)
|
|
|
(183
|
)
|
|
|
(31
|
)
|
|
|
214
|
|
|
|
(207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(95
|
)
|
|
Ps.
|
77
|
|
|
Ps.
|
177
|
|
|
Ps.
|
(254
|
)
|
|
Ps.
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income of majority interest
as reported under Mexican FRS
|
|
Ps.
|
(774
|
)
|
|
Ps.
|
(793
|
)
|
|
Ps.
|
245
|
|
|
Ps.
|
548
|
|
|
Ps.
|
(774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(119
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
(182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred workers profit sharing
|
|
|
|
|
|
|
(6
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
(15
|
)
|
Monetary position result on
deferred income taxes and deferred
workers profit sharing
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
|
|
|
|
|
|
|
8
|
|
|
|
1
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized interest
|
|
|
|
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
|
|
(62
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(68
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-15
|
|
|
3
|
|
|
|
4
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
4
|
|
Employee retirement obligations
|
|
|
|
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
11
|
|
Purchase of Visteons capital
investment
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of longlived assets
|
|
|
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
144
|
|
|
|
271
|
|
|
|
(12
|
)
|
|
|
(260
|
)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(630
|
)
|
|
Ps.
|
(521
|
)
|
|
Ps.
|
234
|
|
|
Ps.
|
288
|
|
|
Ps.
|
(630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
For the year ended December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income of majority interest as
reported under Mexican FRS
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
(86
|
)
|
|
Ps.
|
290
|
|
|
Ps.
|
(204
|
)
|
|
Ps.
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(103
|
)
|
|
|
63
|
|
|
|
3
|
|
|
|
|
|
|
|
(37
|
)
|
Monetary position result on deferred
income taxes and deferred workers
profit sharing
|
|
|
5
|
|
|
|
14
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized interest
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
|
|
(15
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Visteons capital investment
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of longlived assets
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(54
|
)
|
|
|
44
|
|
|
|
(8
|
)
|
|
|
(36
|
)
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income under U.S. GAAP
|
|
Ps.
|
(140
|
)
|
|
Ps.
|
(42
|
)
|
|
Ps.
|
282
|
|
|
Ps.
|
(240
|
)
|
|
Ps.
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity reported
under Mexican FRS
|
|
Ps.
|
4,516
|
|
|
Ps.
|
3,384
|
|
|
Ps.
|
2,043
|
|
|
Ps.
|
(3,989
|
)
|
|
Ps.
|
5,954
|
|
Less minority interest included as
stockholders equity under Mexican
FRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,438
|
)
|
|
|
(1,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholders equity under
Mexican FRS
|
|
|
4,516
|
|
|
|
3,384
|
|
|
|
2,043
|
|
|
|
(5,427
|
)
|
|
|
4,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51
|
)
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(162
|
)
|
|
|
(390
|
)
|
|
|
42
|
|
|
|
|
|
|
|
(510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
|
|
|
|
|
|
|
39
|
|
|
|
4
|
|
|
|
|
|
|
|
43
|
|
Accumulated amortization of capitalized
interest
|
|
|
|
|
|
|
(17
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
5
|
|
|
|
120
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
|
|
11
|
|
|
|
9
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-15
|
|
|
(118
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of adoption of SFAS No. 158
|
|
|
|
|
|
|
(76
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(24
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
(31
|
)
|
Purchase of Visteons capital investment
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of longlived assets
|
|
|
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(345
|
)
|
|
|
(53
|
)
|
|
|
110
|
|
|
|
(57
|
)
|
|
|
(345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity under U.S.
GAAP
|
|
Ps.
|
4,171
|
|
|
Ps.
|
3,331
|
|
|
Ps.
|
2,153
|
|
|
Ps.
|
(5,484
|
)
|
|
Ps.
|
4,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity reported
under Mexican FRS
|
|
Ps.
|
4,453
|
|
|
Ps.
|
3,609
|
|
|
Ps.
|
2,276
|
|
|
Ps.
|
(4,291
|
)
|
|
Ps.
|
6,047
|
|
Less minority interest included as
stockholders equity under Mexican FRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,594
|
)
|
|
|
(1,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Majority stockholders equity under
Mexican FRS
|
|
|
4,453
|
|
|
|
3,609
|
|
|
|
2,276
|
|
|
|
(5,885
|
)
|
|
|
4,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of the adjustments below on
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(259
|
)
|
|
|
(292
|
)
|
|
|
10
|
|
|
|
|
|
|
|
(541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of interest
|
|
|
|
|
|
|
38
|
|
|
|
4
|
|
|
|
|
|
|
|
42
|
|
Accumulated amortization of capitalized
interest
|
|
|
|
|
|
|
(20
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
5
|
|
|
|
119
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of applying Bulletin B-10
|
|
|
|
|
|
|
(23
|
)
|
|
|
5
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of SFAS No. 158
|
|
|
|
|
|
|
(130
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
(163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee retirement obligations
|
|
|
|
|
|
|
(28
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Visteons capital investment
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of longlived assets
|
|
|
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. GAAP adjustments
|
|
|
(342
|
)
|
|
|
(60
|
)
|
|
|
93
|
|
|
|
(33
|
)
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity under U.S.
GAAP
|
|
Ps.
|
4,111
|
|
|
Ps.
|
3,549
|
|
|
Ps.
|
2,369
|
|
|
Ps.
|
(5,918
|
)
|
|
Ps.
|
4,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-132
e)
Supplemental U.S. GAAP Cash Flow Information
The classifications of cash flows under Mexican FRS and U.S. GAAP are basically the same in respect
of the transactions presented under each caption. The nature of the differences between Mexican FRS
and U.S. GAAP in the amounts reported is primarily due to (i) the elimination of inflationary
effects in the variations of monetary assets and liabilities arising from financing and investing
activities, against the corresponding monetary position result in operating activities, (ii) the
elimination of exchange rate fluctuations resulting from financing and investing activities,
against the corresponding unrealized foreign exchange gain or loss included in operating
activities, and (iii) the recognition in operating, financing and investing activities of the U.S.
GAAP adjustments.
The following table summarizes the cash flow items as required under SFAS No. 95 provided by (used
in) operating, financing and investing activities for the years ended December 31, 2005, 2006 and
2007, giving effect to the U.S. GAAP adjustments, excluding the effects of inflation required by
Bulletin B-10 and Bulletin B-15. The following information is presented, in millions of pesos, on a
historical peso basis and it is not presented in pesos of constant purchasing power
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2005
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)
provided by operating
activities
|
|
Ps.
|
(74
|
)
|
|
Ps.
|
(71
|
)
|
|
Ps.
|
322
|
|
|
Ps.
|
438
|
|
|
Ps.
|
615
|
|
Net cash (used in)
provided by financing
activities
|
|
|
(215
|
)
|
|
|
441
|
|
|
|
(75
|
)
|
|
|
(118
|
)
|
|
|
33
|
|
Net cash provided by
(used in) investing
activities
|
|
|
289
|
|
|
|
(327
|
)
|
|
|
(169
|
)
|
|
|
(318
|
)
|
|
|
(525
|
)
|
Net cash flows from operating activities reflect cash payments for interest and income taxes as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2005
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
Ps.
|
116
|
|
|
Ps.
|
421
|
|
|
Ps.
|
69
|
|
|
Ps.
|
(71
|
)
|
|
Ps.
|
535
|
|
Income taxes paid
|
|
|
(10
|
)
|
|
|
35
|
|
|
|
49
|
|
|
|
30
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31
,
2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash provided by
(used in) operating
activities
|
|
Ps.
|
23
|
|
|
Ps.
|
(562
|
)
|
|
Ps.
|
137
|
|
|
Ps.
|
109
|
|
|
Ps.
|
(293
|
)
|
Net cash provided by
(used in) financing
activities
|
|
|
369
|
|
|
|
56
|
|
|
|
(183
|
)
|
|
|
(384
|
)
|
|
|
(142
|
)
|
|
Net cash (used in)
provided by investing
activities
|
|
|
(393
|
)
|
|
|
448
|
|
|
|
(22
|
)
|
|
|
275
|
|
|
|
308
|
|
F-133
Net cash flows from operating activities reflect cash payments for interest and income taxes as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31
,
2006
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Interest paid
|
|
Ps.
|
100
|
|
|
Ps.
|
602
|
|
|
Ps.
|
72
|
|
|
Ps.
|
(116
|
)
|
|
Ps.
|
658
|
|
Income taxes paid
|
|
|
(4
|
)
|
|
|
147
|
|
|
|
8
|
|
|
|
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31
,
2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash provided by
(used in) operating
activities
|
|
Ps.
|
6
|
|
|
Ps.
|
270
|
|
|
Ps.
|
229
|
|
|
Ps.
|
44
|
|
|
Ps.
|
549
|
|
Net cash (used in)
provided by financing
activities
|
|
|
(1,193
|
)
|
|
|
225
|
|
|
|
(47
|
)
|
|
|
1,008
|
|
|
|
(7
|
)
|
Net cash provided by
(used in) investing
activities
|
|
|
1,188
|
|
|
|
(470
|
)
|
|
|
(171
|
)
|
|
|
(1,052
|
)
|
|
|
(505
|
)
|
Net cash flows from operating activities reflect cash payments for interest and income taxes as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
Combined
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned
|
|
|
Non-
|
|
|
and
|
|
|
Viméxico
|
|
As of December 31, 2007
|
|
Viméxico
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Interest paid
|
|
Ps.
|
244
|
|
|
Ps.
|
522
|
|
|
Ps.
|
69
|
|
|
Ps.
|
(462
|
)
|
|
Ps.
|
373
|
|
Income taxes paid
|
|
|
16
|
|
|
|
174
|
|
|
|
14
|
|
|
|
|
|
|
|
204
|
|
F-134
Item 19. Exhibits
|
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
Page
|
|
1.01
|
|
|
Amended and restated by-laws (estatutos sociales) of
Vitro, S.A.B. de C.V., together with an English
translation
|
|
b
|
|
2.01
|
|
|
Form of Deposit Agreement among the Company,
Nacional Financiera S.N.C., Citibank, N.A. and all
registered holders from time to time of American
Depositary Receipts issued thereunder, including the
form of American Depositary Receipt
|
|
h
|
|
2.02
|
|
|
Trust Agreement dated November 28, 1990 between the
Common Shares Trustee, as grantor, and the CPO
Trustee (the CPO Trust Agreement), together with
an English translation
|
|
h
|
|
2.03
|
|
|
Public Deed dated November 29, 1990 (the Public
Deed), together with an English translation
|
|
h
|
|
2.04
|
|
|
Common Shares Trust Agreement
|
|
h
|
|
2.05
|
|
|
CPO Trust Agreement and Public Deed
|
|
h
|
|
2.06
|
|
|
Form of Certificado Bursátil
|
|
f
|
|
2.07
|
|
|
Indenture dated as of October 22, 2003 (2013
Indenture) between Vitro, S.A. de C.V. and Wachovia
Bank (including exhibits); including Form of 11.75%
Senior Note due 2013
|
|
e
|
|
2.08
|
|
|
Form of First Supplemental Indenture dated as of
October 23, 2006 to the 2013 Indenture between
Vitro, S.A. de C.V. and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
|
|
a
|
|
2.09
|
|
|
First Supplemental Indenture to the 2013 Indenture
dated as of February 1, 2007 among Vitro, S.A.B. de
C.V., the Guarantors party thereto and U.S. Bank
National Association as successor trustee to
Wachovia Bank, National Association
|
|
b
|
|
2.10
|
|
|
Second Supplemental Indenture to the 2013 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
|
|
b
|
|
2.11
|
|
|
Third Supplemental Indenture to the 2013 Indenture
dated as of January 16, 2008 between Vitro, S.A.B.
de C.V., the New Guarantors party thereto, the
Existing Guarantors party thereto and U.S. Bank
National Association as successor trustee to
Wachovia Bank, National Association
|
|
+
|
|
2.12
|
|
|
Fourth Supplemental Indenture to the 2013 Indenture
dated as of May 15, 2008 between Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and U.S. Bank National
Association as successor trustee to Wachovia Bank,
National Association
|
|
+
|
|
2.13
|
|
|
Trust Agreement between Banco Invex, S.A.,
Institucion de Banca Multiple, Invex Grupo
Financiero, as issuer and trustee, Distribuidora
Nacional de Vidrio, S.A. de C.V., Vitro Flotado
Cubiertas, S.A. de C.V., Vitro Automotriz, S.A. de
C.V., and Vitro Vidrio y Cristal, S.A. de C.V.,
dated August 3, 2005, in connection with the
issuance of the 6.46% Preferred Notes
|
|
c
|
|
2.14
|
|
|
Purchase Agreement between Banco Invex, S.A.,
Institucion de Banca Multiple, Invex Grupo
Financiero, as issuer, Distribuidora Nacional de
Vidrio, S.A. de C.V., Vitro Flotado Cubiertas, S.A.
de C.V., Vitro Automotriz, S.A. de C.V., Vitro
Vidrio y Cristal, S.A. de C.V., and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A. Rabobank
International, as purchaser, dated August 22, 2005,
in connection to the sale of 6.46% Preferred Notes
Summary of the document in English attached
|
|
c
|
|
2.15
|
|
|
Indenture dated as of February 1, 2007 between
Vitro, S.A.B. de C.V., the Guarantors party thereto
and The Bank of New York as Trustee (2012
Indenture)
|
|
b
|
|
2.16
|
|
|
Form of 8.625% Senior Note due 2012
|
|
b
|
114
|
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
Page
|
|
2.17
|
|
|
First Supplemental Indenture to the 2012 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V. the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
b
|
|
2.18
|
|
|
Second Supplemental Indenture to the 2012 Indenture
dated as of January 16, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
+
|
|
2.19
|
|
|
Third Supplemental Indenture to the 2012 Indenture
dated as of May 15, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
+
|
|
2.20
|
|
|
Indenture dated as of February 1, 2007 between
Vitro, S.A.B. de C.V., the Guarantors party thereto
and The Bank of New York as Trustee (2017
Indenture)
|
|
b
|
|
2.21
|
|
|
Form of 9.125% Senior Note due 2017
|
|
b
|
|
2.22
|
|
|
First Supplemental Indenture to the 2017 Indenture
dated as of April 27, 2007 among Vitro, S.A.B. de
C.V. the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
b
|
|
2.23
|
|
|
Second Supplemental Indenture to the 2017 Indenture
dated as of January 16, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
+
|
|
2.24
|
|
|
Third Supplemental Indenture to the 2017 Indenture
dated as of May 15, 2008 among Vitro, S.A.B. de
C.V., the New Guarantors party thereto, the Existing
Guarantors party thereto and the Bank of New York
|
|
+
|
|
4.01
|
|
|
Receivables Purchase Agreement dated as of May 7,
2004 among VVP Funding Corporation, Vitro America,
Inc., Windmill Funding Corporation, ABN Amro Bank
N.V. and Finacity Corporation
|
|
e
|
|
4.02
|
|
|
Receivables Sales Agreement dated as of May 7, 2004
between Vitro America, Inc. and VVP Funding
Corporation
|
|
e
|
|
4.03
|
|
|
Second Amendment to Receivables Purchase Agreement
dated as of May 5, 2006, among VVP Funding
Corporation, Vitro America, Inc., Windmill Funding
Corporation and ABN Amro Bank N.V.
|
|
e
|
|
4.04
|
|
|
Third Amendment to Receivables Purchase Agreement
dated as of April 16, 2007, among VVP Funding
Corporation, Vitro America, Inc., Windmill Funding
Corporation and ABN Amro Bank N.V.
|
|
b
|
|
4.05
|
|
|
Stock Purchase Agreement dated as of June 3, 2002
among Vitro, S.A. de C.V. Whirlpool Corporation and
Whirlpool Holdings, Inc.
|
|
f
|
|
4.06
|
|
|
Stock Purchase Agreement dated as of January 23,
2004 among Vitro, S.A. de C.V., Vitro Envases
Norteamérica, S.A. de C.V., Owens Corning and Owens
Corning VF Holdings, Inc.
|
|
e
|
|
4.07
|
|
|
Stock Purchase Agreement dated as of September 25,
2004 among Rexam plc, Rexam Overseas Holding Limited
and Vitro, S.A. de C.V.
|
|
d
|
|
4.08
|
|
|
Trust Agreement dated as of March 23, 2005 among
Compañía Vidriera, S.A. de C.V., Industria del
Álcali, S.A. de C.V., Comercializadora Álcali, S. de
R.L. de C.V., ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, División Fiduciaria
and Banco Invex, S.A., Institución de Banca
Múltiple, Invex Grupo Financiero; Assignment of
Rights dated as of March 23, 2005 among Compañía
Vidriera, S.A. de C.V., Industria del Álcali, S.A.
de C.V., Comercializadora Álcali, S. de R.L. de C.V.
and ABN AMRO Bank (México), S.A. Institución de
Banca Múltiple, Division Fiduciana;
Certificados
S
ubordinados
issued by ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, Division Fiduciaria,
together with English summary.
|
|
d
|
|
4.09
|
|
|
Guaranty dated as of March 31, 2005 among Vitro,
S.A.B. de C.V. and of the holders of the
Certificados
S
ubordinados
|
|
d
|
|
4.10
|
|
|
Purchase Agreement dated as of March 31, 2005 among
ABN AMRO Bank (México), S.A., Institución de Banca
Múltiple, División Fiduciaria, Compañía Vidriera,
S.A. de C.V., Industria del Álcali, S.A.de C.V.,
Comercializadora Álcali, S. de R.L. de C.V., and
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.
Rabobank International, New York Branch
|
|
d
|
115
|
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
Page
|
|
4.11
|
|
|
Placement Agent Agreement dated as of March 29, 2005
among Compañía Vidriera, S.A. de C.V., Industría del
Álcali, S.A. de C.V., Comercializadora Álcali, S. de
R.L. de C.V., ABN AMRO Bank (México), S.A.,
Institución de Banca Múltiple, División Fiduciaria,
and Banco Invex, S.A. Institución de Múltiple, Invex
Grupo Financiero
|
|
d
|
|
4.12
|
|
|
Letter of extension between Pilkington plc and Vitro
Vidrio y Cristal, S.A. de C.V., dated April 24, 2006
|
|
d
|
|
4.13
|
|
|
Stock Purchase Agreement of Vidrios Panameños S.A.
between the Sellers listed therein and Empresas
Comegua, S.A., dated April 4, 2006.
|
|
c
|
|
8.1
|
|
|
List of subsidiaries of Vitro, S.A.B. de C.V.
|
|
+
|
|
12.1
|
|
|
Certification of the Chief Executive Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
+
|
|
12.2
|
|
|
Certification of the Chief Financial Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
+
|
|
12.3
|
|
|
Certification of the Chief Administrative Officer of
Vitro, S.A.B. de C.V. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
+
|
|
13.1
|
|
|
Certification of the Chief Executive Officer, Chief
Financial Officer and Chief Administrative Officer
of Vitro, S.A.B. de C.V. pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the
Sarbanes Oxley Act of 2002.
|
|
+
|
|
|
|
+
|
|
Filed herewith.
|
|
a
|
|
Filed as an exhibit to the Registration Statement of Vitro,
S.A.B. de C.V. on Form F-4 (File No. 333-135546) and
incorporated herein by reference thereto.
|
|
b
|
|
Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2006 and incorporated
herein by reference thereto.
|
|
c
|
|
Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2005 and incorporated
herein by reference thereto.
|
|
d
|
|
Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2004 and incorporated
herein by reference thereto.
|
|
e
|
|
Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report on
Form 20-F for the year ended December 31, 2003 and incorporated
herein by reference thereto.
|
|
f
|
|
Filed as an exhibit to Vitro, S.A.B. de C.V.s annual report
for the year ended December 31, 2002 and incorporated herein by
reference thereto.
|
|
g
|
|
Filed as an exhibit to the Registration Statement of Vicap,
S.A. de C.V. on Form F-4 (File no. 333-9498) and incorporated
herein by reference thereto.
|
|
h
|
|
Filed as an exhibit to the Registration Statement of Vitro,
S.A. de C.V. on Form F-1 (File no. 33-43660) and incorporated
herein by reference thereto.
|
116
SIGNATURES
Vitro, S.A.B. de C.V. and Viméxico, S.A. de C.V., hereby certify that they meet all of the
requirements for filing on Form 20-F and that they have duly caused and authorized each of the
undersigned to sign this annual report on Form 20-F on their behalf.
Date:
June 27, 2008
|
|
|
|
|
|
VITRO, S.A.B. DE C.V.,
|
|
|
by
|
/s/ Federico Sada González
|
|
|
|
Name:
|
Federico Sada González
|
|
|
|
Title:
|
President and Chief Executive Officer
|
|
|
|
by
|
/s/ Claudio Del Valle Cabello
|
|
|
|
Name:
|
Claudio Del Valle Cabello
|
|
|
|
Title:
|
Chief Administrative Officer
|
|
|
|
|
|
by
|
/s/ Enrique Osorio López
|
|
|
|
Name:
|
Enrique Osorio López
|
|
|
|
Title:
|
Chief Financial Officer
|
|
|
|
VIMÉXICO, S.A. DE C.V.,
|
|
|
by
|
/s/ Claudio Del Valle Cabello
|
|
|
|
Name:
|
Claudio Del Valle Cabello
|
|
|
|
Title:
|
Chief Administrative Officer
|
|
117
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
2.11
|
|
|
Third Supplemental Indenture to the 2013 Indenture dated as of
January 16, 2008 between Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and U.S. Bank National Association as successor
trustee to Wachovia Bank, National Association
|
|
2.12
|
|
|
Fourth Supplemental Indenture to the 2013 Indenture dated as
of May 15, 2008 between Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and U.S. Bank National Association as successor
trustee to Wachovia Bank, National Association
|
|
2.18
|
|
|
Second Supplemental Indenture to the 2012 Indenture dated as
of January 16, 2008 among Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and the Bank of New York
|
|
2.19
|
|
|
Third Supplemental Indenture to the 2012 Indenture dated as of
May 15, 2008 among Vitro, S.A.B. de C.V., the New Guarantors
party thereto, the Existing Guarantors party thereto and the
Bank of New York
|
|
2.23
|
|
|
Second Supplemental Indenture to the 2017 Indenture dated as
of January 16, 2008 among Vitro, S.A.B. de C.V., the New
Guarantors party thereto, the Existing Guarantors party
thereto and the Bank of New York
|
|
2.24
|
|
|
Third Supplemental Indenture to the 2017 Indenture dated as of
May 15, 2008 among Vitro, S.A.B. de C.V., the New Guarantors
party thereto, the Existing Guarantors party thereto and the
Bank of New York
|
|
8.1
|
|
|
List of subsidiaries of Vitro, S.A.B. de C.V.
|
|
12.1
|
|
|
Certification of the Chief Executive Officer of Vitro, S.A.B.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
12.2
|
|
|
Certification of the Chief Financial Officer of Vitro, S.A.B.
de C.V. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
12.3
|
|
|
Certification of the Chief Administrative Officer of Vitro,
S.A.B. de C.V. pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
13.1
|
|
|
Certification of the Chief Executive Officer, Chief Financial
Officer and Chief Administrative Officer of Vitro, S.A.B. de
C.V. pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
|
118
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