1999

Transcription

1999

1999 Annual Report
Grupo Cementos de Chihuahua
People and Technology
The essence of our leadership
Contents
1
Financial Highlights
3
Letter from the Chairman
7
Mexico Division
10
Operation Centers
13
United States Division
17
Board of Directors
17
Executive Staff Members
18
Financial Information
Grupo Cementos de Chihuahua’s Samalayuca Plant received the 1999 National
Quality Award
The Samalayuca Plant is a world-class facility which has developed, in a relatively short period of
time, a quality system that allows it to offer its customers high added value, maintaining the
company’s high profitability, fostering environmental protection and encouraging its personnel’s
commitment.
Financial Highlights
2,349
1999
1998
Variation
2,189
1,765
Net Sales
2,349,455
2,189,163
7%
1,487,117
1,302,869
14%
862,338
886,294
-3%
653,247
617,664
6%
66,476
78,470
-15%
369,836
360,442
3%
1,572
Sales in Mexico
1,361
Sales in the United States
Operating Income
Comprehensive Financing Cost
Net Consolidated Income
Majority Net Income
369,741
360,339
96
95
3%
97
98
99
98
99
98
99
Net Sales
(million pesos)
Operating Income + Depreciation
829,639
795,249
4%
Total Assets
4,925,777
4,993,016
-1%
Total Liabilities
1,301,695
1,390,735
-6%
Total Stockholders’ Equity
3,624,082
3,602,281
1%
Majority Stockholders’ Equity
3,623,052
3,592,542
1%
10.86
10.70
1%
653
618
387
Book Value Per Share ($)*
Earnings Per Share ($)*
1.10
1.07
Current Assets/Current Liabilities (times)
4.26
3.73
Total Liabilities/Total Stockholders’ Equity (times)
0.36
0.39
Total Liabilities/Total Assets (times)
0.26
0.28
Operating Income/Net Sales
27.8%
28.2%
Net Consolidated Income/Net Sales
15.7%
16.5%
403
315
96
95
3%
97
Operating
Income
(million pesos)
370
360
258
194
262
*Basis 1999: 333,557,000 shares
95
Basis 1998: 335,609,000 shares
Majority Net
Income
Figures stated in thousands of Mexican pesos with purchasing power at December 31, 1999
(million pesos)
1
96
97
In 1999, the Samalayuca Plant
received two important
distinctions:The National
Quality Award and a special
recognition from The National
Export Award Committee
2
Letter from the Chairman
In 1999, the Mexican economy grew 3.7%, as a result of greater domestic spending by
the private sector and an increase in exports of goods and services. All productive sectors registered
growth, with the exception of mining. Growth in the construction industry was particularly significant, 4.5%.
The construction industry reached 1994 production levels, with a rise in the national cement output earmarked for the domestic market, which reached 28.4 million metric tons, 3.4% growth compared to 1998.
The National Consumer Price Index rose 12.32% during 1999, the lowest increase in the past five years.
At the same time, the Mexican peso registered a nominal appreciation of 3.47%, closing the year at 9.522
pesos to the dollar.The peso’s strength was one of the factors that contributed to controlling inflation growth.
Mexico’s international reserves at the end of the year topped 30.733 billion U.S. dollars, a 593-million dollar
increase over December 1998 levels.
The U.S. economy posted 4.2% growth, its eighth consecutive year of continuous growth. In addition,
1999 was its third consecutive year with growth above 4%, which had not occurred
since the 1976-1978 period. The rise in consumer prices in the United States was
2.68%.
The following section highlights GCC’s most important financial results during 1999:
Implementation of the ISO 14001
environmental quality standard
• Net sales were 2.349 billion pesos, 7.3% growth in real terms. Sales in the
was begun
Mexican market accounted for 63.3% of the total, while the rest was due to
transactions in the U.S. market.
• Operating income was 653.3 million pesos, a 5.8% real increase compared to
1998 results. During the year, the operating margin reached 27.8%.
• The operating cash flow was 829.6 million pesos, a 4.3% rise, representing 35.3%
of sales.
• Net financial expenses were 91.6 million pesos, 21.3% less than last year. The
Company’s comprehensive financing cost was 66.5 million pesos, 15.3% less than
last year, representing only 2.8% of sales.
• Net income was 369.8 million pesos, 2.6% higher than the previous year.
• The Company’s net debt at the end of 1999 was 399.0 million pesos, 40% less than
3
in 1998.This gives us considerable financial room to continue with
GCC’s growth. The Company’s net leverage was 11%, which
compares favorably with levels reported last year.
• Of the total volume of cement sales, 44% was sold in the domestic
market and the remainder in the U.S. market.
• Ready-mix concrete sales in volume terms rose both in the domes-
These results as a whole reflect the efforts and dedication of all
tic and the U.S. market, by 5.0% and 27.4%, respectively. About 67%
those who on a daily basis work in the companies that comprise
of ready-mix concrete sales corresponded to Mexico and the
Grupo Cementos de Chihuahua.
remainder to the U.S. market.
The sales volume obtained during the year presented the following characteristics:
• As a result of the investments undertaken during 1998 to increase
the production capacity of concrete block in Chihuahua and Ciudad
• The sales volume of domestic cement dropped 3.8%. It is important to note that the basis for comparison was very high, since
1998 volume growth was 20.2%. Despite the decline, sales in volume terms grew during each of the quarters, closing the year with
17.8% growth, when the fourth quarter of 1999 is compared with
the same period the previous year.
Juárez, the sales volume of this product grew 77.7%.
• The sales volume for aggregates posted a 2% increase.
I am proud to report that this year the Samalayuca Plant received
two distinctions, the most important of which was the National
Quality Award in the Large Industry category. The second was a special recognition from the National Export Award Committee. These
• Sales volumes in the U.S. market declined 9.4% due to the reductions in cement exports to the United States. This was part of a
strategy to reduce the impact of the antidumping tariff in GCC’s
results.
distinctions encourage us to continue improving the administrative and
productive processes used in our operations.
As part of this process, implementation began of a new integrated
business information system in all the companies comprising the
GCC invested the
equivalent of 194 million
pesos in the automation,
modernization and
acquisition of machinery
and equipment
4
Group. In addition, we continued implementing the ISO 14001 environmental quality stan-
1,807
1,680
dard in all of the Group’s operations.
1,552
One of the most important developments during the year was the review process, known
as “Sunset”, of the antidumping tariffs levied on imports of Mexican cement in the U.S. mar-
1,493
1,351
ket. If this review should result in a favorable ruling, GCC could reap significant savings by not
having to pay this import duty. A final ruling is expected for October 2000.
To continue offering our clients top quality products and remain a competitive company in
a global environment, GCC invested the equivalent of 194 million pesos in automating and
modernizing the Company’s plants, and in expanding the capacity of the vehicular fleet used
for distributing ready-mix concrete.
GCC’s operations were in no way affected by the Y2K phenomenon.The work undertak95
en jointly with clients and suppliers guaranteed that GCC’s operations would continue with-
97
96
98
99
Total Cement
Sales
out any setbacks.
(thousands of metric tons)
We are at the final stages of the process of obtaining the necessary permits for the construction of a new cement plant in Colorado.
851
Expectations of economic growth, for both Mexico and the United States, continue to be
763
favorable, which leads me to think that 2000 will be a good year for GCC. Furthermore, I am
convinced that the new millennium which we are entering will bring attractive opportunities
629
and challenges, which we will take advantage of to continue with the growth and good per-
407
formance of Grupo Cementos de Chihuahua.
275
On behalf of the Board of Directors, I would like to thank all of the Company’s personnel
and acknowledge their spirit of work and the efforts they have made. I thank our clients, suppliers, bankers, and shareholders for their constant support in the Company’s development.
96
95
97
98
99
Total Concrete
Sales
(thousands of cubic meters)
Cement sales volume
grew during each of the
Sincerely,
quarters, while ready-mix
concrete sales volume
Federico Terrazas
rose both in the domestic
Chairman of the Board of Directors
and the U.S. market
5
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Through its exports, the
foto que se necesita en esta
Samalayuca Plant accounted
fotografía tan bonita qu
for 46.5% of the cement
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6
Mexico Division
The Mexico Division posted 1.487 billion pesos in sales, a 14.1% increase in real terms.
This Division contributed 63.3% of GCC’s total revenue. Of the Division’s total revenue, 57.7% corresponded to cement sales, 19.5% to ready-mix concrete sales, and the rest to concrete block, aggregates,
and real estate.
The Division has three cement plants with a production capacity of 1.925 million metric tons, representing 81% of GCC’s total cement production capacity. During the year, the Division operated at 61%
of its installed capacity, selling 44% of the total volume of cement and 67% of the ready-mix concrete sold
by GCC during the year. It also provided 46.5% of the U.S. Division’s cement sales volume through
exports.
The volume of domestic cement sold was 3.8% less than last year and cement exports declined 26.3%.
This decrease was the result of the strategy to reduce the impact of the antidumping tariff. In addition,
42,780 metric tons of cement were obtained from domestic sources in the United States, thus allowing
for a reduction in tariff deposits.
The Samalayuca Plant was granted the National Quality
Ready-mix concrete sales volume
Award 1999.This plant lives a culture of total quality, works as a
rose 5.0% in 1999 compared
high-performance organization, and has personnel trained and
to 1998
involved in self-regulated work teams capable of making decisions, all of which has allowed the plant to continually improve
its processes, products, and services.Through the leadership of
its executives, this plant maintains an environment that promotes improvement in the performance, creativity, innovation,
and professional advancement of its personnel.
As part of the overall quality process, in all of the Division’s
business units, implementation began of an administrative model
based on the criteria of the National Quality Award in Mexico
and the Malcolm Baldrige Award in the United States. In addition, the Company’s management systems were improved and
work has continued in implementing high-performance systems
in those units where they have yet to be applied.
7
The Samalayuca Plant also received a special recognition from the
During 1999, with the aim of strengthening business operations in
1999 National Export Award committee, in which the efforts, creativi-
ready-mix concrete and concrete block, investments were undertaken
ty, consistency in the development of exports through quality products
for the equivalent of 3.8 million dollars. As part of these investments,
was highlighted. In addition, the plant obtained Clean Industry
special mention should be made of the purchase of office and distri-
Certification, granted by the Environment Ministry, as a result of its vol-
bution equipment, as well as new molds to expand GCC’s assortment
untary ecological audit.
of products.
In April 1999, the Chihuahua Plant began the operation of its cen-
Overall, the Mexico Division invested the equivalent of 13.1 million
tralized automated systems, placing it at the forefront in technology.
U.S. dollars in the acquisition and modernization of industrial, trans-
In addition, more than 100 million tons in limestone reserves were
acquired to guarantee long-term operations at the Chihuahua Plant.
portation, and computer equipment, necessary for the Company to
continue at the forefront in the industry, and with a competitive edge
in an environment marked by globalization.
The Division’s cement operations did not register a single accident during the year, reflecting the positive results of the training
programs used in the different plants.
The aggregates plants operated at full capacity. During the year, the
construction of a new aggregate plant was begun in the city of
Chihuahua, which is scheduled to begin operations during the second
The equivalent of 8.3 million dollars was invested in cement operations, mainly in modernizing the control rooms at the Chihuahua
and Ciudad Juárez plants, as well as in automating different equip-
half of 2000. With this plant, the production capacity for aggregates in
this city will increase 230%, with the goal of continuing to grow in this
market.
ment, acquiring industrial machinery, and in environmental control.
Sales of Chuviscar gypsum grew 93% compared to 1998, exceeding
Ready-mix concrete sales volume rose 5.0% compared to the previous year. As a result of the investments undertaken during 1998 to
75,000 tons. This represents 83% utilization of the plant’s installed
capacity, just two years after it began operations.
increase the production capacity for concrete blocks in Chihuahua and
Ciudad Juárez, the sales volume of this product rose 77.7%.
Real estate sales rose 37% compared to 1998. In Ciudad Juárez,
Chihuahua, the Parque Industrial North Gate was designed, covering
a surface area of 40 hectares. The industrial park is 90% completed
and will be ready for sale in 2000 and 2001.This park is expected to
generate sales of approximately 10 million dollars.
Transportadora Rarámuri continued with its project of replacing
equipment, having achieved the objective of using machinery with a
maximum life of seven years.
As part of the Group’s ecological policy, implementation began of
the ISO 14001 quality environmental standard in GCC’s companies. It
is expected that this standard will be implemented in all the companies comprising the Group in the year 2000.
The information systems area’s efforts enabled the Y2K transition to
be carried out successfully and without setbacks, guaranteeing the
uninterrupted functioning of GCC’s operations in both Mexico and
the United States.
For Grupo Cementos de Chihuahua, information systems and technology play a very important role in developing the Company’s oper-
8
ations and in the decision-making process. With this in mind, a project
was launched for implementing an integrated business information system.The first stage of the project will require an estimated investment of
4.5 million U.S. dollars and will consist in implementing an Enterprise
Resource Planning model for commercial, productive, financial and
human resources operations in all GCC companies, both in Mexico and
the United States.
The project includes the implementation of information technologies
with a reengineering focus that optimizes the business and decisionmaking processes. To achieve the efficient development of this project,
the Management Information Systems departments in the United States
and Mexico were consolidated, and computer hardware, software and
communications equipment were standardized.
In April 1999, the Chihuahua Plant initiated
Completion of the first stage of this project is scheduled for 2000 and
the operation of its centralized automation
will bring competitive benefits to GCC through improved customer
systems, placing it at the forefront in
service, cost reduction, improvements in productivity, efficiency in com-
technology
pany operations, and support in decision making.
2,531
594
2,482
470
Cement exports declined as
438
456
1,864
a result of the strategy to
1,323
reduce the impact of the
258
986
antidumping tariff
Cement Exports
95
97
96
98
99
Mexico Aggregates
Sales
9
96
95
97
98
99
Operation Centers
10
COLORADO
Denver
NUEVO
MEXICO
NEW MEXICO
Albuquerque
Tijeras
Alamogordo
Ruidoso
Las Cruces
El Paso
Cd. Juárez
TEXAS
Samalayuca
CHIHUAHUA
Chihuahua
Cement Plants
Concrete Operations
1 Samalayuca, Chih.
1 Chihuahua, Chih.
5 El Paso,Texas
1 El Paso,Texas
2 Chihuahua, Chih.
2 Cd. Juárez, Chih.
6 Las Cruces, New Mexico
2 Albuquerque, New Mexico
3 Cd. Juárez, Chih.
3 Cuauhtémoc, Chih.
7 Ruidoso, New Mexico
3 Denver, Colorado
4 Tijeras, New Mexico
4 Delicias, Chih.
8 Alamogordo, New Mexico
Distribution Terminals
11
The United States Division
sold 56% of GCC’s total
cement volume and 33% of its
ready-mix concrete
12
In 1999, sales of the United States Division totaled 89.8 million U.S. dollars.
Revenue was 1.1% less than in 1998, as a result of the decline in cement sales volume in the U.S. market.This reduction was due to lower imports of Mexican cement. However, part of the reduction in
revenue was compensated by an increase in ready-mix concrete sales volume.
This Division contributed 36.7% of GCC’s total revenue, and 56% of the Company’s total sales
volume for cement and 33% for ready-mix concrete. About 77.3% of the Division’s sales corresponded to cement and the rest to ready-mix concrete.
Cement sales volume fell 9.4% as a result of a 26.3%
decline in cement imports. Part of the decline in imports
was offset by the acquisition of cement from a U.S. pro-
Revenue from ready-mix
ducer.
concrete sales rose 33.8% as
Of all the cement sold by the Division in the U.S. market, 48.1% was supplied by the Tijeras, New Mexico plant,
a result of a 27.6% increase
in sales volumes
47.0% came from Mexico imports, and 4.9% was acquired
from a U.S. producer.
During the year, cement and clinker production in the
Tijeras plant -which has a 450,000- metric ton production
capacity- was the second largest in the facility’s history,
reaching 432,966 metric tons, and just 110 tons from its
record production. At the same time, a continuous
improvement program was implemented in this plant, which
resulted in better teamwork and increased productivity on
the part of the Company’s personnel.
Significant progress was made in the field of environmental protection. Highlights in this area include the approval of
an integral plan for the restoration of the quarry at the
Tijeras Plant by the Mining and Minerals Department of the
State of New Mexico.
13
Sales of the U.S. Division totaled
During the year, investments for 2.6 million dollars were made in the
Tijeras Plant to replace, modernize, and automate equipment, in addi-
89.8 million U.S. dollars,
tion to the acquisition of computer equipment.
representing 36.7% of GCC’s
Revenue from ready-mix concrete sales rose 33.8%, as a result of the
total revenue
27.6% increase in sales volume.The volume growth can be attributed to
a greater market share of the Rio Grande Materials subsidiary.
During 1999, operations were resumed for the production of aggregates at Rio Grande Materials, through an association with a company
in the industry.The decision was based on the requirements for aggregates necessary to satisfy our clients’ demand.This activity will strengthen the Company’s competitive position.
As part of the requirements for growth in the Division’s ready-mix
concrete operations, 1.5 million U.S. dollars were invested in equipment for the production and distribution of this product.
Investments totaling 7.3 million dollars were made in the United
The Tijeras Plant supplied 48.1%
of the cement sold by the
States Division.
In the area of information systems, the necessary actions were taken
so that both administrative support and production systems were fully
prepared to meet the requirements of the Y2K transition, which
occurred without any problems.
The project to build a new plant in Colorado is in the final stages
of obtaining the necessary permits. In addition, important progress
has been made in the plant’s design and in the pre-selection of production equipment.
In March, the U.S. Department of Commerce announced the final
results of the seventh administrative review of antidumping tariffs on
imports of Mexican cement. The final result of this review process,
which covered the period from August 1996 to July 1997, was a
49.58% weighted average margin, which is used to determine the corresponding deposits to cover the import duty.This margin will remain
in effect until the final result of the eighth review is released. The
Company’s U.S. subsidiary might have the right to a reimbursement,
since the deposits made in this period were higher than the tariff rate
resulting from the final review.
In August the preliminary results were obtained from the eighth
administrative review, which covers the period from August 1997 to
July 1998, resulting in a 45.39% tariff.The final decision is expected to
be made in March 2000.
14
Sales volume growth of ready-mix concrete was
the result of the market share increase of the
Rio Grande Materials subsidiary
Also in August, the U.S. International Trade Commission (ITC) began
the review process on the antidumping tariff on imports of Mexican
cement, known as “Sunset”.This review will determine if the tariff will be
eliminated as of December 31, 1999. If this is the case, deposits will no
A continuous improvement
longer be made and all those made since that date will be returned.
program was implemented
The U.S. Department of Commerce began the ninth administrative
review, which covers imports of Mexican cement in the period of August
at the Tijeras Plant, which
1998 to July 1999.
resulted in better team
During the year, 5.1 million U.S. dollars in deposits corresponding to
the antidumping tariff were made. In addition, 12.4 million dollars were
work and greater
budgeted for the same item, in anticipation of the final results of the
personnel productivity
eighth and ninth review processes.
15
“Expectations of economic
growth, for both Mexico and
the United States, continue to
be favorable, which leads me
to think that 2000 will be a
good year for GCC.”
Federico Terrazas
Chairman of the Board
16
Board of Directors
Chairman
Federico Terrazas Torres
Board Members
Alternate Board Members
Statutory Auditors
Mario de la Garza Caballero
Cosme Furlong Madero
Humberto Valles Hernández
Armando García Segovia
César Constain Van-Reck
Luis González Parás
Francisco Garza Zambrano
Ramiro Villarreal Morales
Miguel Márquez Prieto
Martha Márquez de Corral
Miguel Márquez Villalobos
Luis Márquez Villalobos
Héctor Medina Aguiar
Jorge Guajardo Touché
Salvador Terrazas Baeza
Federico Terrazas Becerra
Enrique Terrazas Torres
Alberto Terrazas Seyffert
Federico Terrazas Torres
Luis E.Terrazas Seyffert
Emilio Touché Fares
Sergio Rodríguez Alvarado
Lorenzo Zambrano Treviño
Héctor Tamez González
Alternate Statutory Auditors
Américo de la Paz de la Garza
Fernando Elizondo Barragán
Executive Staff Members
Salvador Terrazas Baeza
Roberto Moreno Vargas
Martha Rodríguez Rico
Corporate Director
Mexico Division Commercial Director
Corporate Treasurer
Manuel Milán Reyes
Daniel Méndez de la Peña
Ronald W. Hedrick
Mexico Division Concrete Operations
United States Division Cement
Director
Director
Operations Director
Enrique Escalante Ochoa
Jorge Hernández Carreón
William C. Webb
Mexico Division Director
Administrative Manager
United States Division Cement Sales
Francisco Ortega López
Rubén Jaén Tortajada
Engineering Director
Organizational Development Manager
Rogelio González Lechuga
Víctor Baylón Sáenz
Juárez and Samalayuca Plants Director
Engineering Manager
Juan Bueno Rascón
Jaime Fernández Horcasitas
Chihuahua Plant Director
Financial Planning Manager
and Marketing Director
Gary Romontio
Tijeras Plant Manager
17
Consolidated Financial Statements
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
Report
Consejo
of Independent
de Administración
Auditors
To the Stockholders of
Grupo Cementos de Chihuahua, S.A. de C.V. and Subsidiaries
We have examined the accompanying consolidated balance sheets of Grupo Cementos de Chihuahua, S.A. de C.V.
and subsidiaries at December 31, 1999 and 1998, and the related consolidated statements of income, changes in
stockholders’ equity and changes in financial position for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
The financial statements of some of the subsidiaries were examined by other independent public accountants. The
financial statements of these subsidiaries reflect total assets and operating income that represent 22.4% and 36.7% in
1999 and 22.1% and 43.7 % in 1998, respectively, of the related consolidated amounts. Insofar as our opinion relates
to the total amounts reported by these subsidiaries, it is based solely on the report of the other independent public
accountants.
We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards
require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of
material misstatement and are prepared in conformity with accounting principles generally accepted in Mexico. An
audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the 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.
In our opinion, based on our examinations and on the reports of the other independent public accountants, the
financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Grupo Cementos de Chihuahua, S.A. de C.V. and subsidiaries at December 31, 1999 and 1998, and the consolidated
results of their operations, changes in their stockholders’ equity and changes in their financial position for the years
then ended, in conformity with accounting principles generally accepted in Mexico.
As explained in greater detail in Note 1a to the accompanying financial statements, the Company observed the
requirements of Mexican Accounting Principles Bulletin B-15 “Transactions in Foreign Currency and Translation of
Financial Statements of Foreign Operations”, the effective date of which was January 1, 1998, and accordingly, changed
the method that it had been using to translate the financial statements of foreign subsidiaries.
C.P.C. Américo de la Paz
Mancera, S.C. / Ernst & Young International
Chihuahua, Chihuahua, Mexico, March 2, 2000
19
Consolidated Balance Sheets
Grupo Cementos de Chihuahua S.A. de C.V. and Subsidiaries
(THOUSANDS OF MEXICAN PESOS WITH PURCHASING POWER AT DECEMBER 31, 1999)
At December 31
1999
1998
Assets
Current assets:
Cash and cash equivalents
Ps.
589,394
Ps.
517,403
Accounts receivable:
Trade, net of allowance for doubtful
accounts of Ps. 24,491, Ps. 21,363
at December 31, 1999 and 1998
respectively
297,123
235,141
89,695
23,720
386,818
258,861
342,644
345,408
9,588
15,062
1,328,444
1,136,734
78,960
74,842
3,389,112
3,651,093
129,261
130,347
Tax refunds due and other accounts
receivable
Inventories
(NOTES 1e AND 3)
Prepaid expenses
Total current assets
Equity investments
(NOTES 1f AND 4)
Property, plant and equipment, net
(NOTES 1g AND 5)
Other assets
(NOTE 6)
Total assets
See accompanying notes.
20
Ps.
4,925,777
Ps.
4,993,016
At December 31
1999
1998
Liabilities and Stockholders’ Equity
Current liabilities:
Bank loans and current portion of
long-term debt
Ps.
(NOTE 7)
155,417
Ps.
123,911
Suppliers
68,492
109,407
Employee profit sharing
11,639
9,586
Other accounts payable and accrued liabilities
76,008
61,916
Total current liabilities
311,556
304,820
Long-term debt
832,950
1,052,783
(NOTE 7)
Labor obligations
(NOTES 1i AND 9)
Other long-term liabilities
(NOTE 14)
Total liabilities
Stockholders’ equity
34,315
28,666
122,874
4,466
1,301,695
1,390,735
547,520
547,520
2,485,376
2,485,376
128,569
64,649
(NOTES 1c AND 10)
Capital stock
Additional paid in capital
Reserve for repurchase of capital stock
(NOTE 10d)
Retained earnings
Deficit from restatement of stockholders’ equity
1,616,461
1,330,349
(1,671,808)
(1,364,964)
Effect of translation of foreign subsidiaries
147,193
169,273
Majority net income
369,741
360,339
Majority stockholders’ equity
3,623,052
3,592,542
Minority stockholders’ equity
1,030
9,739
3,624,082
3,602,281
Total stockholders’ equity
Total liabilities and stockholders’ equity
Ps.
4,925,777
Ps.
4,993,016
21
Consolidated Statements of Income
Year ended December 31
1999
Net sales
1998
Ps. 2,349,455
Ps. 2,189,163
1,454,796
1,362,695
Gross profit
894,659
826,468
Operating expenses
241,412
208,804
Operating income
653,247
617,664
66,476
78,470
202,067
141,036
384,704
398,158
Cost of sales
Comprehensive financing cost
(NOTE 11)
Other expenses, net
Income before income taxes
and asset tax and employee
profit sharing
Income taxes and asset tax
Employee profit sharing
(NOTE 13)
(NOTE 13)
Net income
Minority net income
Majority net income
Ps.
3,228
28,130
11,640
9,586
369,836
360,442
95
103
369,741
Ps.
360,339
Weighted average per shares outstanding
(in thousands)
Net income per share of capital stock
22
333,557
Ps.
1.10
335,609
Ps.
1.07
Consolidated Statements of Changes in Stockholders’ Equity
1999
1998
Capital Stock
Balance at beginning and end of year
Ps.
547,520
Ps.
547,520
Additional Paid in Capital
Balance at beginning and end of year
2,485,376
2,485,376
64,649
101,016
Reserve for Repurchase of Capital Stock
Balance at beginning of year
Increase of year
Repurchase of Company’s own shares
Re-placement of Company’s own shares
Balance at end of year
31,839
(10,986)
(36,367)
43,067
-
128,569
64,649
1,330,349
1,169,424
Retained Earnings
Transfer from majority net income
360,339
202,815
Dividends paid
(42,388)
(41,890)
(31,839)
-
1,616,461
1,330,349
(1,364,964)
(1,315,625)
(306,844)
(49,339)
(1,671,808)
(1,364,964)
Deficit from Restatement of Stockholders’
Equity
Result from holding net nonmonetary assets
23
Consolidated Statements of Changes in Stockholders’ Equity
1999
1998
Effect of Translation of Foreign Subsidiaries
169,273
150,584
Result from translation of foreign subsidiaries
(22,080)
18,689
147,193
169,273
Majority Net Income
360,339
202,815
Transfer to retained earnings
(360,339)
(202,815)
Majority net income
369,741
360,339
369,741
360,339
Total Majority Stockholders’ Equity
24
Ps.
3,623,052
Ps.
3,592,542
Consolidated Statements of Changes in Financial Position
1999
1998
Operating Activities
Net income
Ps.
369,741
Ps.
360,339
Items not requiring the use (provided)
of resources:
Depreciation and amortization
176,392
177,585
2,553
11,232
Allowance for decline in realizable
value of equity investments
Minority interest
(95)
(103)
548,591
549,053
Variances in:
Accounts receivable
(61,982)
(37,261)
Inventories
(11,018)
(88,550)
Other assets
(74,935)
63,894
Suppliers
(40,915)
(11,780)
Other accounts payable
109,508
9,106
469,249
484,462
(188,327)
103,540
(466)
63,041
Resources provided by operating activities
Financing Activities
Increase (decrease) in short and long-term bank loans
Related parties
Dividends paid
32,081
(36,367)
(42,388)
(41,890)
(199,100)
88,324
Resources (used) provided by
financing activities
Investing Activities
4,118
9,728
Purchase of property, plant and equipment
Equity investments
194,040
269,965
Resources used in investing activities
198,158
279,693
71,991
293,093
517,403
224,310
Net increase in cash and cash equivalents
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end of year
Ps.
589,394
Ps.
517,403
25
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(THOUSANDS OF MEXICAN PESOS WITH PURCHASING POWER AT DECEMBER 31, 1999 AND THOUSANDS OF U.S. DOLLARS, EXCEPT FOR PER SHARE VALUES AND EXCHANGE RATES)
1. Description of Significant Business Accounting Policies and Practices
Grupo Cementos de Chihuahua, S.A. de C.V. (hereinafter “the Company”) is the holding company whose subsidiaries are engaged primarily in producing and marketing ready-mix concrete and cement.
The Company is a wholly owned subsidiary of Control Administrativo Mexicano, S.A. de C.V.
ACCOUNTING POLICIES AND PRACTICES
Significant accounting policies and practices observed in the preparation of the financial statements are as follows:
a. Basis of Consolidation of Financial Statements
The accompanying consolidated financial statements include those of Grupo Cementos de Chihuahua, S.A.
de C.V. and its subsidiaries. The consolidated subsidiaries and corresponding equity interest owned are as
follows :
Percentage Equity Interest
at December 31
1999
1998
Cementos de Chihuahua, S.A. de C.V.
99.98
99.98
Materiales Industriales de Chihuahua, S.A. de C.V.
99.95
99.95
Transportadora Rarámuri, S.A. de C.V.
99.96
99.96
Concretos Premezclados de Chihuahua, S.A. de C.V.
99.89
99.89
Minera Rarámuri, S.A.
99.98
99.98
Construcentro de Chihuahua, S.A. de C.V.
99.98
99.98
Fincem, S.A. de C.V.
99.99
99.99
MEXICAN:
Eurotec de México, S.A. de C.V.
100.00
51.66
Promotora de Desarrollos Inmobiliarios, S.A. de C.V.
99.89
99.89
Vin Concreto de Chihuahua, S.A. de C.V.
99.98
99.98
GCC Cemento, S.A. de C.V.
99.98
-
100.00
-
GCC Ingeniería y Proyectos, S.A. de C.V.
26
Percentage Equity Interest
at December 31
1999
1998
FOREIGN ( LOCATED IN THE UNITED STATES ):
GCC of America, Inc.
100.00
100.00
Rio Grande Portland Cement, Corp.
100.00
100.00
Rio Grande Materials, Inc.
100.00
100.00
Mexcement, Inc.
100.00
100.00
Important intercompany balances, investments and transactions were eliminated in the consolidated financial statements.
At December 1, 1999, there was a spin-off of GCC Cemento, S.A. de C.V., from Cementos de Chihuahua, S.A.
de C.V.
GCC Ingeniería y Proyectos, S.A. de C.V. was incorporated on August 27, 1999 to carry out and manage
industrial engineering projects both in Mexico and abroad.
In 1999, the Company acquired a 100% equity interest in Eurotec de México, S.A. de C.V. The price paid
per share was similar to the book value of the share acquired.
In conformity with Mexican accounting principles as set forth in Bulletin B-15, “Transactions in Foreign
Currency and Translation of Financial Statements of Foreign Operations”, the effective date of which is
January 1, 1998, the Company translated the financial statements of its foreign subsidiaries as follows:
• The financial statements were restated at December 31, 1999 based on the U.S. consumer price index
(CPI).The current year monetary effect was determined based on the annual inflation factor derived from
the CPI.
• Balance sheet and income statement accounts were translated using the prevailing exchange rate at the
end of the year.Translation adjustments are reflected in a separate stockholders’ equity item known as “Effect
of Translation of Foreign Subsidiaries.”
The financial statements for the year ended December 31, 1998 as originally issued have been reexpressed
in constant pesos with purchasing power at December 31, 1999, as follows:
• Figures of the parent company and its Mexican subsidiaries were restated using the 1998 inflation factor
of 1.1232 derived from Mexico’s National Consumer Price Index.
• U.S. dollar figures reported by foreign subsidiaries were restated using the 1998 U.S. inflation factor of
1.026. Constant U.S. dollar amounts at December 31, 1999 were translated at the prevailing exchange rate
at the end of the reporting period, which was Ps. 9.50 per U.S. dollar.
27
b. Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires, management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and amounts of revenues and expenses during the reporting period. Actual results could differ
from these estimates.
c. Recognition of the Effects of Inflation
The Company recognizes the effects of inflation on financial information as required by Mexican accounting principles stipulated in Bulletin B-10,“Accounting Recognition of the Effects of Inflation on Financial Information,” as
amended, issued by the Mexican Institute of Public Accountants. Bulletin B-10 requires that all financial information presented be expressed in constant pesos with purchasing power at the latest balance sheet date.
The Company elected to use the specific-cost method to restate inventories.
Capital stock, contributed capital as a result of restructuring, stock premium, reserve for repurchase of shares
and retained earnings were restated on the basis of adjustment factors obtained from the NCPI.
The significant inflation accounting concepts and procedures are described below:
• Net Monetary Effect
This represents the effect of inflation on monetary assets and liabilities.The net monetary effect of each year
is included in the statement of income under the item “Comprehensive Financing Cost”.
• Deficit from Restatement of Stockholders’ Equity
This consists of the accumulated result from monetary position and of the accumulated result from holding nonmonetary assets.The result from holding non-monetary assets represents the difference between the increase
in the specific value of non-monetary assets and the increase in the value of such assets based only on inflation.
d. Cash and Cash Equivalents
Cash equivalents are carried at cost plus accrued interest, similar to market value.
e. Inventories and Cost of Sales
Inventories are stated at estimated replacement cost, which includes only variable manufacturing expenses
(direct-costing method).The stated value of inventories is not in excess of market value.
This item includes land and the development expenses incurred in order to sell the land on a short-term basis,
which have been restated to reflect replacement values based on an appraisal made by independent experts.
Cost of sales represents the estimated replacement cost of inventories at the time of their sale, restated in
constant pesos at the balance sheet date.
Fixed manufacturing expenses incurred in the 1999 and 1998 fiscal years in the amount of Ps. 475,510 and
Ps. 463,132, respectively, are included in cost of sales.
28
f. Equity Investments
Equity investments in entities in which the Company has an equity interest ranging from 20% to 50% and over
which it exercises significant influence are valued using the equity method. Equity investments in entities in which
the Company has less than a 20% equity interest are carried at cost and restated using the NCPI.
g. Property, Plant and Equipment
Imported machinery, computer and automotive equipment are stated at their current estimated value based
on the rate of inflation in the country of origin and the prevailing exchange rate at the balance sheet date
(i.e., specific restatement factors).
Machinery and equipment of domestic origin are restated using the NCPI.
At December 31, 1999, approximately 76% of machinery and equipment was restated based on specific factors.
Depreciation is computed on the restated value of fixed assets using the straight-line method based on the
estimated useful lives of the assets as determined by management periodically (See Note 5).
Comprehensive financing costs incurred during the building and installation period are capitalized and restated using the NCPI.
h. Exchange Differences
Transactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transactions. Exchange differences determined from the date of the transactions to the time of their settlement
or valuation at the balance sheet date are charged or credited to income.
The Company’s foreign currency position at the end of each year and the exchange rates used to translate
foreign currency denominated balances are disclosed in Note 8.
i. Labor Obligations
Under Mexican labor law, the Company has a liability for severance payments accruing to workers in certain circumstances. It is the policy to charge termination payments to costs and expenses of the year in which
the decision to dismiss a worker is made. The liability for seniority premiums is recognized periodically on
the basis of actuarial computations.
j. Income Taxes and Employee Profit Sharing
It is the Company’s policy to provide for income taxes and employee profit sharing based on taxable
income, taking into consideration the effect of important non-recurring temporary differences in income for
tax and financial reporting purposes.
k. Recognition of Revenue
Revenue from sales of cement is recognized at the time the product is shipped and billed to the customer.
Revenue from sale of concrete is recognized when the product is delivered at the construction site.
29
l. Earnings Per Share of Capital Stock
Earnings per share of capital stock are calculated based on the average weighted number of shares of capital stock issued and outstanding.
2. Related Parties
In the years ended December 31, 1999 and 1998, the Company had the following transactions with related companies:
1999
1998
Financing income
Ps.
2,049
Ps.
4,032
Other expenses, net
Ps.
6,289
Ps.
5,506
3. Inventories
Inventories consist of the following at:
December 31
1999
Finished goods
Ps. 59,910
Work in process
1998
Ps.
60,427
13,705
27,388
Raw materials and supplies
115,164
122,191
Land held for sale
153,865
135,402
Ps. 342,644
Ps. 345,408
The allowance for obsolete and slow-moving inventories at December 31, 1999 and 1998 is Ps. 65 and Ps. 233,
respectively and has been deducted from “Raw materials and supplies.”
30
4. Equity Investments
The Company’s equity investments consist of the following at:
December 31
1999
Promotora de Hospitales Mexicanos, S.A. de C.V.
Ps.
Mexalit, S.A.
1998
43,328
Ps.
26,528
35,673
26,528
Grupo Financiero Serfin, S.A., net of allowance
for decline in value of securities of Ps. 34,303
in 1999 and Ps. 31,750 in 1998
-
2,868
Promotora de Infraestructura de México, S.A. de C.V.
3,389
5,152
Servicios de Previsión Integral, S.A. de C.V.
4,426
4,426
Other
1,289
195
Ps.
78,960
Ps.
74,842
The Company charged to income for the years ended December 31, 1999 and 1998 an allowance of Ps. 2,553
and Ps.11,232, respectively, for a decline in the value of its equity interest in Grupo Financiero Serfin, S.A.This was
the result of a decline in the market value of the shares of the investee on the Mexican Stock Exchange (Bolsa
Mexicana de Valores).
5. Property, Plant and Equipment
Property, plant and equipment consist of the following at:
December 31
1999
Buildings
Ps.
Machinery and equipment
1998
1,289,384
Ps.
3,477,617
1,276,688
3,850,930
Furniture and fixtures
100,041
92,939
Automotive equipment
313,747
323,173
5,180,789
5,543,730
(2,253,966)
(2,286,745)
2,926,823
3,256,985
Land
310,707
279,080
Investment projects
150,846
108,215
736
6,813
Accumulated depreciation
Net value
Advances to suppliers
Ps.
3,389,112
Ps.
3,651,093
31
At December 31, 1999, the net replacement value of property, plant and equipment based on the NCPI is
Ps. 1,421,488.
Investment projects at December 31, 1999 and 1998 refer to the construction of a cement plant in Pueblo,
Colorado, as well as expansion and recognition of work areas of the plants located in Chihuahua, Chih.
Management expects to finish these projects in 2000 and during the first quarter of 2001.The approximate amount
to be invested is $170 million U.S. dollars.
The Company capitalized in machinery and equipment, the comprehensive cost of financing of Ps. 52,656, which is
expected to be amortized in twenty-six years.
Depreciation and amortization charged to operations for the years ended at December 31, 1999 and 1998 was
Ps. 176,392 and Ps. 177,585, respectively.
Depreciation was computed considering the estimated remaining useful lives of the assets determined by management. Such lives are as follows:
Estimated Remaining Useful Life
December 31,1999
Buildings
31 years
Machinery and equipment
15 years
Furniture and fixtures
6 years
Automotive equipment
6 years
6. Other Assets
Other assets consist of the following:
December 31
1999
1998
Goodwill, net of accumulated amortization
of Ps. 8,709, Ps. 7,287 at December 31, 1999
and 1998, respectively.
Preoperating expenses and software licenses
Slow-moving spare parts inventories
Ps.
30,314
38,567
31,930
35,817
6,788
15,585
Intangible asset
18,756
17,408
Other assets
34,836
29,607
Ps. 129,261
Ps. 130,347
Goodwill is amortized under the straight-line method over a period of 15 to 20 years.
32
Ps.
7. Bank Loans
An analysis of bank loans and long term debt is as follows:
1999
Maturity
Current Portion
Interest
Loans
Currency
Rate
Dollar
Libor+1.25
of Long-term
Long-term
Debt
Debt
Amount
Revolving
Comerica Bank,
N.A.
Ps.
508,250
Ps.
82,650
Ps.
425,600
Secured by Capital Assets
The Chase Manhattan
Bank, N.A.
Dollar
Libor+0.375
130,029
23,640
106,389
Chase Bank, A.G.
Dollar
Libor+0.75
31,733
5,936
25,797
Dollar
Libor+.375%
15,667
4,476
11,191
24,764
7,708
17,056
266
266
First National Bank
of Maryland
Banca Serfin, S.A.
Dollar
7.20%-7.76%
Banca Serfin, S.A.
Dollar
Libor+1.75
Bancomer, S.A.
Dollar
7.28%
Banorte, S.A.
Peso
Cetes+2.7
Bilbao Vizcaya, S.A
Peso
Banorte, S.A.
Peso
Banamex, S.A
-
1,840
1,840
-
11,275
2,460
8,815
CPP+1.5
3,520
1,006
2,514
Cetes+2.7
8,250
1,800
6,450
Peso
Cetes+2.25
52,000
1,857
50,143
Banamex, S.A.
Peso
Cetes+ 2.25
81,482
12,699
68,783
Banamex, S.A.
Peso
Cetes+2.6
57,473
8,730
48,743
Banamex, S.A.
Peso
Cetes+2.6
59,199
-
59,199
Banco Bital, S.A.
Peso
Tiie+1
Working Capital Loans
Ps.
2,619
349
2,270
988,367
Ps. 155,417
Ps. 832,950
33
1998
Maturity
Current Portion
Interest
Loans
Currency
Rate
Dollar
Libor+1.25
of Long-term
Long-term
Debt
Debt
Amount
Revolving
Comerica Bank,
N.A.
Ps.
576,060
Ps.
53,700
Ps.
522,360
Secured by Capital Assets
The Chase Manhattan
Bank, N.A.
Dollar
Libor+0.375
179,869
27,671
152,198
Chase Bank, A.G.
Dollar
Libor+0.75
44,091
6,948
37,143
Banca Serfin, S.A.
Dollar
7.20%-7.76%
38,008
9,022
28,986
Banca Serfin, S.A.
Dollar
Libor+1.75
3,069
2,921
Bancomer, S.A.
Dollar
Libor+2.25
2,330
2,330
148
-
Bancomer, S.A.
Dollar
7.28%
6,460
4,307
2,153
Bilbao Vizcaya, S.A.
Peso
CPP+1.5
6,067
2,113
3,954
Banca Serfin, S.A.
Peso
Lider+2.25
108
108
Banorte, S.A.
Peso
Cetes+2.7
13,815
1,151
Banorte, S.A.
Peso
CPP+2.7
10,108
Banamex, S.A
Peso
Cetes+2.25
58,405
Banamex, S.A.
Peso
Cetes+ 2.25
66,491
-
66,491
Banamex, S.A.
Peso
Cetes+2.6
99,840
8,320
91,520
68,639
4,086
64,553
3,334
392
2,942
Ps. 1,176,694
Ps. 123,911
Ps. 1,052,783
842
-
12,664
9,266
58,405
Working Capital Loans
Banamex, S.A.
Peso
Cetes+2.6
Banco Bital, S.A.
Peso
Tiie+1
Maturities on the long-term debt at December 31, 1999 are as follows:
Year Ending
Amount
December 31
Maturing
2001
Ps.
2002
258,696
2003
157,656
2004
149,558
2005
49,807
There after
51,010
Ps.
34
166,223
832,950
At December 31, 1999, the long-term debt due under the revolving note is guaranteed by the assets of Rio Grande
Portland Cement Corp. and Rio Grande Materials Inc.
The bank loans and long-term debt contain restrictive covenants and require that certain financial ratios be maintained. At December 31, 1999 and 1998 all of the related covenants and obligations imposed under the loan agreements have been fulfilled.
8. Foreign Currency Position
The Company has the following U.S. dollar denominated assets and liabilities at December 31, 1999 and 1998:
(Thousands of U.S. Dollars)
1999
Current assets
USD
Non-current assets
1998
63,705
USD
59,643
149,230
126,471
USD 212,935
USD 186,114
Short-term liabilities
18,281
15,959
Long-term liabilities
74,622
73,798
Total liabilities
92,903
89,757
Total assets
USD 120,032
Net long position
USD
96,357
The exchange rates used to translate the U.S. dollar denominated assets and liabilities to Mexican pesos at December
31, 1999 and 1998 were Ps. 9.50 and Ps. 9.90, respectively.The exchange rate at March 2, 2000 is Ps. 9.36.
Machinery and equipment is mostly imported. An analysis is as follows:
1999
1998
Amount
Currency
Amount
in Foreign
Exchange
in Foreign
Exchange
Currency
Rate
Currency
Rate
U.S. dollar
Ps.
97,256
Ps.
9.5000
Ps.
82,423
Ps.
9.9000
German mark
Ps.
34,864
Ps.
5.0293
Ps.
35,589
Ps.
5.9987
Danish crown
Ps.
34,807
Ps.
4.8247
Ps.
39,762
Ps.
5.3886
Swiss franc
Ps.
1,096
Ps.
6.1414
Ps.
1,181
Ps.
6.9936
Italian lira
Ps. 2,576,860
Ps
.0.0050
Ps. 2,614,558
Ps.
0.0060
Swedish crown
Ps.
1,997
Ps.
1.1396
Ps.
2,083
Ps.
1.2388
Spanish peseta
Ps. 1,099,952
Ps.
0.0591
Ps. 1,132,872
Ps.
0.0683
35
At December 31, 1999 foreign currency denominated exports, principally by the subsidiary Cementos de Chihuahua,
S.A. de C.V., were USD 22,102 (thousand).
9. Labor Obligations
The Company recognizes the liability for seniority premiums based on actuarial computations, using the projected
unit-credit method.
The net period cost and the components of the seniority premium plan allowance at December 31, 1999 and
1998 are as follows:
1999
1998
Current benefit obligation
Ps.
34,051
Ps.
28,666
Projected benefit obligation
Ps.
39,488
Ps.
32,295
Unamortized transition liability
Ps.
19,112
Ps.
17,489
Plan assets
Ps.
231
Ps.
256
Ps.
3,844
Ps.
(10)
Net projected liability
Ps.
15,559
Ps.
10,985
Additional liability
Ps.
18,756
Ps.
17,785
Unamortized variances in assumptions and
experience adjustments
Net period cost
Ps.
5,601
Ps.
5,458
Intangible asset
Ps.
18,756
Ps.
17,408
The unamortized items will be amortized over a period of twelve years from 1999.
The significant assumptions in determining the net period cost are as follows at :
December 31
Real Rates
1999
1998
Discount rate
4.50%
4.50%
Rate of pay increases
1.00%
1.00%
10. Stockholders’ Equity
a. Capital stock is variable. The fixed minimum is Ps. 134,960, represented by 337,400,000 shares with no
par value.
b. At a regular stockholders’ meeting held on April 27, 1999, it was decided to pay a cash dividend of
Ps. 39,939, at the nominal rate of Ps. 0.12 per share (Ps. 42,388 adjusted for inflation).
36
c. At a regular stockholders’ meeting held on April 28, 1998, it was decided to pay a cash dividend of
Ps. 33,641, at the nominal rate of Ps. 0.10 per share (Ps. 41,890 adjusted for inflation).
d. During the year, the Company repurchased its own shares on various occasions for a total of $10,986,
(1,614,000 shares were acquired and 5,577,000 shares, replaced leaving 606,000 treasury shares of $4,285,
representing 0.17% of current shares). At December 31, 1999, the Company has a total of 336,794,000
shares issued and outstanding. The balance available for the repurchase of shares is $128,569. The maximum term for replacement of shares among public investors is not to exceed one year from the date of
acquisition. Such term may be extended for three additional months, with the prior approval of the
National Banking and Securities Commission. In the event that replacement of shares is not completed
within that period of time, the Company will have to decrease its capital stock.
e. An analysis of stockholders´ equity items, excluding the deficit from restatement of stockholders´ equity
and effect of translation of foreign subsidiaries, are as follows:
At December 31, 1999
Restatement
Historical
Capital stock
Ps.
134,960
Increment
Ps.
412,560
Total
Ps.
547,520
Contributed capital as a
result of restructuring
Stock premium
462,736
1,414,709
1,877,445
160,634
447,297
607,931
Reserve for repurchase of capital
60,000
68,569
128,569
Retained earnings
stock
851,349
765,112
1,616,461
Net majority income
354,776
14,965
369,741
2,024,455
Ps. 3,123,212
Total
Ps.
Ps.
5,147,667
37
At December 31, 1999
Restatement
Historical
Capital stock
Ps.
134,960
Increment
Ps.
412,560
Total
Ps.
547,520
Contributed capital as a
result of restructuring
462,736
1,414,709
1,877,445
160,634
447,297
607,931
30,000
34,649
64,649
Retained earnings
597,702
732,647
1,330,349
Net majority income
293,480
66,859
360,339
1,679,512
Ps. 3,108,721
Stock premium
Reserve for repurchase of capital
stock
Total
Ps.
Ps.
4,788,233
In conformity with the Mexican Corporations Act, at least 5% of the net income of the year must be appropriated to increase the legal reserve.This practice must be continued each year until the legal reserve reaches 20% of capital stock issued and outstanding.
f. Effective January 1, 1999, the corporate income tax rate was increased from 34% to 35%. However, corporate taxpayers have the option of deferring a portion so that the tax payable will represent 30% of taxable income (32% in 1999). The earnings on which there is a deferral of taxes must be controlled in a socalled “Net Reinvested Tax Profit” account (CUFINRE). This is basically to clearly identify the earnings on
which the taxpayer has opted to defer payment of corporate income tax.
If the Company opts for this tax deferral, starting in the year 2000 earnings shall be considered to be distributed first from the CUFINRE and any excess shall be paid from the “Net Tax Profit” account (CUFIN)
so as to pay the 5% deferred tax (3% for 1999).
Any distribution of earnings in excess of the above-mentioned account balances will be subject to payment
of 35% corporate income tax.
In addition, effective January 1, 1999, cash dividends obtained by individuals or residents abroad will be subject to a 5% withholding tax on the amount of the dividend multiplied by 1.5385 (1.515 for dividends paid
from the determined balance of the CUFIN account at December 31, 1998).
38
11. Comprehensive Financing Cost
Comprehensive financing cost consists of the following:
December 31
1999
Interest income
1998
Ps. (41,672)
Ps. (27,372)
133,235
143,720
Interest expense
Exchange differences, net
Net monetary effect
2,625
31,914
(27,712)
(69,792)
Ps.
66,476
Ps.
78,470
12. Segment Information
The Company is a Mexican corporation that operates in only one segment, which is the production and marketing of hydraulic cement and ready-mix concrete.
The Company’s U.S. dollar transactions are carried out by its wholly owned U.S. subsidiaries.
In the list below, the column on Mexico includes all of the domestic transactions.
1999
Eliminations
United
and Others
Mexico
States
Adjustments
Ps. 1,487,117
Ps. 862,338
555,984
Consolidated
Net Sales:
Unaffiliated customers
Inter-area transfer
Pretax income
Ps.
-
Ps. 2,349,455
-
(555,984)
-
Ps. 2,043,101
Ps. 862,338
Ps.(555,984)
Ps. 2,349,455
Ps. 373,410
Ps.
14,709
Ps. (3,415)
Ps
.384,704
Ps. 131,779
Ps.
44,613
Ps.
Ps.
176,392
Ps. 3,821,454
Ps.1,107,612
Depreciation and
amortization
Total assets
-
Ps. (3,289)
Ps. 4,925,777
39
1998
Eliminations
United
and Other
Mexico
States
Adjustments
Ps. 1,302,869
Ps. 886,294
683,618
Consolidated
Net Sales:
Unaffiliated customers
Inter-area transfer
Pretax income
Ps.
-
Ps. 2,189,163
-
(683,618)
-
Ps. 1,986,487
Ps. 886,294
Ps.(683,618)
Ps .2,189,163
Ps. 354,845
Ps.
49,698
Ps. (6,385)
Ps.
398,158
Ps. 125,193
Ps.
52,392
Ps.
Ps.
177,585
Ps .4,003,453
Ps. 998,306
Depreciation and
amortization
Total assets
-
Ps. (8,743)
Ps. 4,993,016
13. Income Tax, Asset Tax and Employee Profit Sharing
a. Companies in Mexico are subject to payment of both income tax and the asset tax. In the year ended
December 31, 1998, the Company and its subsidiaries began to determine corporate income tax and asset
tax on a consolidated basis, except for GCC Ingeniería y Proyectos, S.A. de C.V., which will begin to consolidate in 2000.
Various changes in tax consolidation rules went into effect in January 1999. One of the most important of
these changes refers to the reduction in the equity interest in subsidiaries to 60%.The Company does not
expect these changes to have a significant impact on future tax results.
b. In the years ended December 31, 1999 and 1998, some of the subsidiaries of Grupo Cementos de
Chihuahua, S.A. de C.V. reported taxable income for a total of Ps. 231,410 and Ps. 198,665, respectively,
against which they carried forward operating tax losses from prior years. The related tax benefit derived
from these carryforwards was Ps. 79,100 and Ps. 67,547, respectively.
c. The 1.8% asset tax (which is a minimum income tax) is payable on the average value of most assets net
of certain liabilities. At December 31, 1999 and 1998, some subsidiaries had to pay the asset tax in the
amount of Ps. 1,335 and Ps. 23, respectively.
40
An analysis through 1999 of the available asset tax refund that may be requested in future years whenever
income tax exceeds the asset tax payable is as follows:
Year in
Refund
which Asset
Restated
Expiration
Tax was Paid
Amount
Date
1990
8,528
2000
1991
Ps.
214
2001
1993
70
2003
1994
43
2004
1995
2,403
2005
1996
3,046
2006
1997
471
2007
1998
27
2008
1999
1,398
2009
Ps. 16,200
d. At December 31, 1999 Grupo Cementos de Chihuahua, S.A. de C.V. and some of its subsidiaries have
operating tax losses of approximately Ps. 68,993 that may be carried forward against taxable income of
future years. An analysis is as follows:
Year in which
Year in which
Loss was
Carryforward
Amount of Loss
Restated to
Incurred
Expires
December 31, 1999
1994
2004
Ps.
1995
2005
26,038
1996
2006
227
1997
2007
24
1998
2008
7,059
1999
2009
34,685
Ps.
960
68,993
Book and tax results are not the same due primarily to temporary differences in income for financial and
tax reporting purposes and to permanent differences.
The more important temporary differences refer to certain asset and liability provisions. The more important permanent differences refer to the inflation component, expenses that do not meet tax requirements,
and the effects of inflation on the financial information.
41
Mexican Accounting Principles Bulletin D-4, “Accounting for Income Tax, Asset Tax and Employee Profit
Sharing”, became effective January 1, 2000.The new bulletin modifies the rules with respect to the determination of deferred income tax (deferred taxes). Basically, the new bulletin requires that deferred taxes be determined on virtually all temporary differences in balance sheet accounts for financial and tax reporting purposes, using the income tax rate in effect at the time the financial statements are issued.Through December 31,
1999, deferred taxes were recognized only on temporary differences that were considered to be non recurring and that had a known turnaround time.
The accumulated effect of these new requirements at the beginning of 2000 is to be applied to stockholders’ equity, without restatement of prior years.
The company is quantifying the impact of Bulletin D-4.The effect is expected to decrease stockholders’ equity. Also, in the future Bulletin D-4 is expected to increase the income tax provision for the current year.
The new bulletin does not significantly affect the accounting for employee profit sharing.
Employee profit sharing is calculated basically on tax results, exclusive of the inflation component and the
restatement of depreciation expense.
14. Antidumping Duties
In 1990, the United States Department of Commerce (DOC) imposed an antidumping duty order on imports of
Gray Portland Cement and clinker from Mexico. As a result, beginning September 1994, RGPC has been subject
to the payment of estimated antidumping duty deposits (which are expensed as incurred) on imports of gray portland and clinker from Mexico.
The Mexican Government initiated a formal complaint against the United States Government under the General
Agreement on Tariffs and Trade (GAAT) for alleged violations of GATT obligations in the antidumping case. On July
9, 1992, a dispute settlement panel formed under the auspices of the GATT determined that the United States
violated the GATT antidumping code and its own antidumping law, by imposing antidumping duties on Mexican
cement. The panel stated that the United States must revoke the antidumping order and refund all antidumping
duties have been paid. Although this GATT panel decision is not independently enforceable under United States
law, since November 1992, the United States and Mexican Goverments have been engaged in consultations seeking a settlement that would include implementation of the GATT panel recommendations.
From October 1995 through April 1997, the DOC performed its Fifth Administrative Review, covering sales of
imported Mexican cement made during the period from August 1994 through July 1995.The DOC published its
final determination on April 1997, establishing a dumping margin rate of 73.69%. On June 1997, RGPC requested
a review by NAFTA Panel of DOC final determination on the Review. In June 1999, the NAFTA binational panel
decided, among other minor issues, that the DOCF incorrectly compared sales of both bulk and bagged cement
in Mexico with only bulk cement in the United States, and instructed the DOC to recalculate the dumping margin for the fifth review excluding from the comparisons the bagged cement in Mexico. In November 1999, the
DOC issued its final results of the review pursuant to the Panel’s instructions, calculating a dumping margin of
42
44.89% (a decrease from the original 73.69%).The DOC is still reviewing comments submitted by the parties. Once
the DOC finishes its review it will publish its final results and will instruct the United States Customs Service to
assess antidumping duties in an amount approved by the DOC.
From October 1996 through March 1999, the DOC performed its Sixth, Seventh and Eighth Administrative
Reviews, covering sales of imported Mexican cement, made during the period from August 1995 through July 1998.
The DOC published its final determination for the Sixth Review on March 1998, establishing a dumping margin rate
of 37.49%.The DOC published its final determination for the Seventh Review on March 1999, establishing a dumping margin rate of 49.58% (the current deposit rate). RGPC has requested a review by a NAFTA Panel of the
DOC’s final determination on the Sixth and Seventh Administrative Reviews.This deposit rate will remain in effect
until the eighth review is completed, and a new dumping margin will be calculated.
In October 1999, the DOC initiated its Ninth Administrative Review, covering sales of imported Mexican cement,
made during the period from August 1998 through July 1999.
On August 2, 1999 the International Trade Commission of the United States (ITC) initiated the Sunset Review of the
antidumping order on Gray Portland Cement and clinker from Mexico.The ITC will review the potential effect of revoking the order on the United States cement industry. Should it decide that revoking the order will not cause injury or
threat of injury to the United States Cement Industry, the ITC will revoke the antidumping order, in this case, it will
instruct customs to cease collecting antidumping deposits, and to refund all deposits made after December 31, 1999.
Should the actual margin on the different administrative reviews be determined to be less than the amount of
antidumping duties already deposited with the U.S. Customs Service, the difference, together with interest, will be
refunded to RGPC. Should the actual margin be determined to be greater than the initial margin, then additional
payments, including interest, will be required.
RGPC has estimated to the best of its ability, the potential refunds or liabilities for the different administrative
reviews, and depending on the final decisions by the NAFTA panels regarding the comparison of sales made in sack
versus sales made in bulk. Except for the Fifth Review, sufficient information is not currently available to RGPC to
reasonably estimate the outcome of the many appeals of the administrative reviews, or the administrative decisions
in the pending Eighth and Ninth Reviews. During 1999 RGPC funded an irrevocable trust with $10,000,000 for
estimated antidumping costs in excess of amounts paid as of December 31, 1999. The purpose of the trust is to
pay estimated antidumping duty liabilities resulting from prior year reviews. As of December 31, 1999 and 1998,
RGPC has accrued an additional $2,428,000 and $879,000, respectively for estimated antidumping costs in excess
of amounts paid to the DOC and to the irrevocable trust. These amounts are included in other long-term liabilities in the accompanying consolidated balance sheets.
15. Commitments and Contingencies
In 1996 the subsidiary Rio Grande Portland Cement, Corp. (RGPC) submitted a plan to the state of New Mexico, as
required in terms of the state’s mining act.This plan addresses the proposed use for the plant site at the conclusion of
cement operations and any required reclamation of the land. The estimated plant closure cost is USD 4,800,000. At
December 31, 1999, the Company has provided USD 415,000 for closure costs.
43
The Annual Stockholders’ Meeting of Grupo Cementos de
Chihuahua, S.A. de C.V. was held at 5:00 p.m. on April 25, 2000, at the Hotel
Westin Soberano located at Barrancas del Cobre 3211, Chihuahua, Chihuahua.
Shares representing the capital stock of Grupo Cementos de Chihuahua,
S.A. de C.V. are listed on the Mexican Stock Exchange (BMV) under the ticker
symbol GCC.
For additional information regarding the Company or decisions taken in the
Annual Stockholders’ Meeting, please contact GCC’s Planning Department at
Vicente Suárez y Sexta, Colonia Nombre de Dios, 31110, Chihuahua, Chih.,
México.
Telephone: (1) 424 33 55 (1) 424 31 00 Fax: (1) 424 35 16
(1) 424 33 55
(1) 424 31 00
Fax:
(1) 424 35 16
Independent Auditors
Mancera, S.C., Ernst & Young
Av. Universidad 1304-A Col. Centro
Chihuahua, Chihuahua
31000 México
Telephone: (1) 413 61 57(1) 413 61 57(1) 413 61 57(1) 413 61 57(1) 413 61
(1) 413 61 57
44
Headquarters Office:
Vicente Suárez y Sexta,
Colonia Nombre de Dios, 31110,
Graphic Design:
www.milenio3.com.mx • Photography: Jorge Pablo de Aguinaco • Printer: Champagne Fine Printing
Chihuahua. Chih., Mexico
Tel.:
(1) 424 33 55
(1) 424 31 00
Fax:
(1) 424 35 16

1999

Transcription

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