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• ANNUAL REPORT 2013
FINANCIAL AND OPERATIONAL HIGHLIGHTS
2013
2012
36,866
39,223
(888)
389
Consolidated Net Loss
(2,582)
(408)
Consolidated Comprehensive Net Loss
(2,762)
(822)
Total Current Assets
13,135
12,627
Property, Plant and Equipment, Net
43,871
42,298
Total Assets
63,217
62,538
Total Current Liabilities
24,244
24,010
Total Non - Current Liabilities
17,027
14,653
Total Liabilities
41,271
38,663
Total Stockholder's Equity
21,946
23,875
3.514
3.230
4.156
3.880
Income Statement
(Million pesos)
Net Sales
Operating (Loss) Income
Balance Sheet
(Million pesos)
Sales Volume
(Million metric tons)
Total Steel Products
Production
(Million metric tons)
Liquid Steel
1
MESSAGE TO OUR SHAREHOLDERS
A
t the beginning of 2013 Mexico entered a new dynamic of change in
the area of economy and politics, with reforms that are due, in the near
future, to begin producing results that will make possible a better overall
performance and development of the country.
The Energy Reform is of special importance, which is expected to allow Mexico to attract important investments in the sector, while also exploiting resources that, until now, have remained untouched, such as
shale gas and shale oil.
Thanks to this reform, AHMSA may access the coal-associated gas reserves in its deposits in the State of
Coahuila, and optimistically awaits the specifications of the secondary laws in regard to the rights for
mining concessionaires in shale gas.
In the specific case of steel, adverse market conditions prevailed during the year 2013 in the global market, with an excess production worldwide, depressed prices, and entry of steel into the Mexican market
under unfair trade conditions.
As a result of this situation, dialogues are being held with current Federal authorities, and the Secretariat
of Economy (Secretaría de Economía) has given heed to the sector, taking action to implement antidumping measures and establishing the Automatic Notification of Import system, which, by including the Mill
Certificate, avoids the triangulation of steel in the country.
2
In addition, along these lines, work is being carried on to define a Mexican standard, establishing parameters that external producers must
comply with, in order to guarantee a level playing
field with the domestic industry, primarily—for
example—in environmental issues.
The Federal Government has shown an interest in
encouraging a policy of “domestic content” and
the sector has established an agreement in that
regard with the Mexican Petroleum Company
[Petróleos Mexicanos] (PEMEX), to ensure the use
of domestic steel in its projects and contracts,
and work is ongoing to reach similar agreements
with the Federal Electricity Commission [Comisión
Federal de Electricidad] (CFE) and the National
Water Commission (Comisión Nacional del Agua).
In addition to the adverse conditions, in the case
of Altos Hornos de México, the results have been
affected by a much longer learning curve at the
Steckel Mill, which is the primary unit of Fénix Project, with a resulting delay in the positive effect of
the new plate line.
The commissioning of the Mill, in the month of July,
made it possible for the Company to show government officials, businessmen, and community
representatives the magnitude of the industrial
effort involved in Fénix Project.
Over the course of the year 2013, the investment
required for the acquisition of new equipment and
technologies for this project was completed, and
during 2014 the Electric Arc Furnace and the fourth Continuous Casting unit should enter operations.
Similarly, the process began for the expansion of
Altos Hornos de México’s Sinter Plant, in order to
process up to one million metric tons annually of
lump iron ore coming from the Pacific deposits,
which will represent important annual savings as
a result of avoiding the importation of ore.
Other facilities also contribute to this, such as the
degasification and normalization units, which will
increase the added value of the steel products,
making it possible to supply specific niches of the
domestic market.
During the period negotiations were carried on with
Mexican Petroleum Company [Petróleos Mexicanos]
(PEMEX) for the sale of the assets of the fertilizer firm
Agronitrogenados. This operation was finalized near
the end of 2013 and will be reflected in the financial
results for the year 2014.
After this divestiture, AHMSA focused its projections
primarily on mining development, an area which
offers a greater potential performance in relation
to steelworks, in that the options lie especially in the
value added to the current product lines.
AHMSA continues to stand as a company whose
financial results are very susceptible to production volumes, due to the fixed costs represented
by its mines. Therefore, the company maintains
a constant search for business opportunities in its
deposits.
Thus, during the year, 3 to 4 million metric tons
of new reserves were detected in Real del Monte
and Pachuca, with a content of 7 to 8 ounces of
silver equivalent per metric ton.
At the same time, the direct cyanidation tests for
processing the company’s tailings were successfully completed, with a recovery level of over 70%
of the metal content of gold and silver, and more
than 120 million ounces of reserves.
In regard to the exploitation of the copper deposits in Israel, the company completed 90% of
the engineering of details and refining tests, thus
moving into the stage of construction of the processing plant, with a capacity for generating 30
thousand metric tons of cathodes annually, with a
purity of 99.999%.
Along with other activities in the steelworks and
in the mines area, the operations of these units
should bring about new synergies to expand
the margins of profitability, with a much larger
EBITDA in the group.
Alonso Ancira Elizondo
Executive Chairman of the Board
June, 2014
3
F
or Altos Hornos de México, 2013 was a year of mixed signals: positive in terms
of its productive consolidation—with the commissioning of the main units of
the Fénix Project, and on the other hand, difficult on account of the negative
conditions in the domestic and world markets, which continued to be depressed in
terms of demand and pricing.
Nevertheless, as a fruit of its labors in terms of guaranteeing an internationally certified
quality in its steel products, the company placed its entire production on the market.
In 2013, the Fénix Project, destined to maximize AHMSA’s potential and launched in 2008
with in-house resources, entered its final stage of installation and operation of new equipment, making it possible to manufacture products with greater specifications, and that raised
the nominal capacity of the company to over 5 million metric tons of liquid steel annually.
Within this framework, on July 18, 2013,
will operate in 2014, strengthen AHMSA’s
Mexico’s President, Enrique Peña Nieto,
position as the largest integrated steel-
commissioned the Steckel Plate Line, which
works in Mexico, and the one with the
is the main component of the equipment that
highest production capacity, the greatest
make up the Fénix Project, which, due to its
operational flexibility, and internationally
magnitude, represents the most important
certified quality.
industrial initiative in Mexico in recent years.
The strengthening of the steelworks faciliThe new Continuous Casting Machine 4 has
ties of the company, along with the discov-
now been added. This is a single strand unit
ery of new coal and iron reserves, is further
with the capacity for generating slabs up
boosted as a result of the Energy Reform
to 96 inches wide to feed the Steckel Mill,
approved by the Federal Legislature.
which can produce wide plate and coiled
plate in dimensions and specifications that,
An essential change in the country’s Energy
up until now, have been imported.
Policy will allow the company to increase its
productive potential, by taking advantage
4
Jointly, the two new units: the Electric Arc
of the amount of gas present on their con-
Furnace, and the Ladle Metallurgy, which
cessions, within the magnitude and modali-
ties allowed by the regulatory laws of the
is released to the atmosphere for safety
legal reform mentioned above.
reasons. In the event that the secondary
legislation turns out to be favorable, its ex-
In its current mining concessions in the state
ploitation will represent a highly positive
of Coahuila, AHMSA holds important prov-
economic impact for the development of
en reserves of methane gas, part of which
Mexico, Coahuila, and the company.
AHMSA CONCESSIONS
Mexico
United States
Texas
Coahuila de Zaragoza
Concession
Area
Nuevo León
0
0
25
50
50
75
100
100
Kms
Miles
AHMSA concession area, Sabinas Basin, 29,000 Km2
AHMSA CONCESSIONS EAGLE FORD WELLS
5
Cooling beds, Steckel Mill.
OPERATIONS
Steel
Production of liquid steel
(millions of metric tons)
2009 2010201120122013
2.9903.6903.8063.8804.156
I
n 2013 Altos Hornos de México (AHMSA) achieved the greatest
production in its industrial history, with a total volume of 4,155,648
metric tons, surpassing by 7% the volume achieved in 2012.
The new global record in liquid steel production implied record production levels in various
departments of the company, such as the blast furnace department, BOF 1 and BOF 2 shops,
continuous casting, plate line and structural shapes, among others, to obtain 3,500,959 metric tons of finished products, and ship a total of 3,554,308 metric tons of AHMSA products
to the market.
An outstanding event of the year was the commissioning of the new Plate Line with the
Steckel Mill, a unit that was inaugurated on July 18, 2013 by the country’s President, and
that since that date has progressively increased its production within the process of operational start up.
6
With this new unit,
AHMSA has consolidated its leadership as
a reliable supplier of
steel plate in sheets
and coils for the metal
working industry, with a
program for producing over 800 thousand
metric tons in 2014.
Official commissioning ceremony for the Steckel Mill, presided over by Mexican President,
Enrique Peña Nieto.
Likewise, the new Continuous Casting Ma-
The results of the manufacturing of the vari-
chine 4 entered operations in December,
ous AHMSA products reflect an increase
and at the end of that month, 96-inch-wide
in the productivity of the different lines,
(2.43 m) slab was processed for the first time
as well as in the yield of raw materials.
to produce plate in coil with a weight of close
In this regard, Blast Furnace 6 decreased
to 30 metric tons on the Steckel Mill. Also, at
its consumption of coke per ton of pig iron
the beginning of 2014, hot commissioning be-
produced (Coke Rate), by requiring only
gan on the Ladle Furnace, for treatment of the
428.11 kg/t as compared to 441.8 kg/t,
steel. Both units are part of Fénix Project.
the minimum level registered in 2011.
Annual production records
2013 record
Previous record
(metric tons)
(metric tons)
Peletizer
4,568,354
4,547,388 (2012)
Blast Furnace 6
1,550,257
1,507,782 (2012)
Net total pig iron
3,688,498
3,452,902 (2012)
Desulphurization Plant
3,046,226
2,840,765 (2012)
Liquid Steel BOF 2
3,295,092
3,091,762 (2012)
Steelmaking shops
4,155,648
3,880,055 (2012)
Continuous Casting (slab)
3,996,358
3,724,420 (2012)
Hot Strip Line
2,691,688
2,596,003 (2011)
680,215
609,864 (2012)
1,744,556 1,675,344 (2011)
210,304
204,422 (2012)
Plate (includes Steckel Mill)
Hot Rolled Coil Structural Shapes
7
MINING
A
HMSA groups its extractive operations at its subsidiary, Minera del Norte
(MINOSA), which through its primary units supplies iron and metallurgical
coal to the steel plants, and steam coal to the Federal Electricity Commission
[Comisión Federal de Electricidad] (CFE). In addition, it operates deposits of silver,
gold, copper and associated minerals, both in Mexico and in Israel.
The MICARE Unit of Minera del Norte, which exploits steam coal deposits, produced
7,224,451 metric tons of run-of-mine coal in 2013. This is 16,722 metric tons more than in
2012, and operations were maintained, both in underground and in open pit mines.
Production of the Minera del Norte (MINOSA) Units
2013
8
MICARE
MIMOSA
MINOSA
CEMESA
Real del Monte
(Metric tons
run-of-mine coal)
(Metric tons
run-of-mine coal)
(Metric tons iron ore
concentrate and lump)
(Metric tons iron ore
concentrate)
(Silver equivalent
ounces)
7,224,451 4,967,6403,744,000 477,879 265,886
2012
7,207,729 4,626,3143,390,478 429,015---
Difference
+ 16,722
+ 341,326 +353,522
+ 48,864
---
For its part, the MIMOSA Unit, which also
operates underground and open pit metallurgical coal mines, reached a production
of 4,967,640 metric tons of run-of-mine
coal. This number surpasses the amount produced in 2012 by 341,326 metric tons.
In the iron area, the MINOSA Unit, which
includes the Hercules, La Perla, and Pacific
area deposits, reached a production of
3,573,000 metric tons of concentrate, and
171,000 metric tons of lump iron ore which
were shipped to the AHMSA steelworks.
That level of production represents a total
increase, including concentrate and lump
iron ore, of 353,522 metric tons.
The CEMESA Unit, which operates an iron
ore deposit in the city of Durango, registered 477,879 metric tons of concentrate.
The total for 2013 surpassed that obtained
in 2012 by 48,864 metric tons. The generation of construction aggregates was
539,941 metric tons.
Meanwhile, the Real del Monte Unit completed the rehabilitation of the Loreto processing plant with cutting edge technology,
for refining gold and silver, and reached a
production of 208, 016 ounces of silver and
946 ounces of gold.
9
SALES
Steel Sales
(millions of metric tons)
2009 2010201120122013
2.7123.2063.2993.2303.514
A
ccording to the information provided by the Iron and Steel National Chamber
[Cámara Nacional de la Industria del Hierro y el Acero] (CANACERO), the apparent
national consumption of steel products decreased by slightly less than 7% in 2013.
Notwithstanding that fall in internal consumption, AHMSA increased its sales in the domestic,
co-exportation and exportation markets, with the placement of 3 million 514 thousand metric tons of steel products. This amount exceeds the 3 million 230 thousand commercialized in
2012 by 8.8%. In volume, these sales are the highest historically achieved by the company,
thus maintaining national leadership in the generation of flat products.
In addition to the contraction in consumption, AHMSA faced a negative situation due to artificially low prices caused by unfair trade imports, primarily from Asia and Eastern Europe.
10
The company presented applications for re-
During the period, Altos Hornos de México
views before the Secretary of Economy (SE)
increased its manufacturing of plate, hot
for antidumping and/or elusion for cold-
rolled coil, cold rolled coil, tinplate, tin-free
rolled coil and plate in sheet and coil, ob-
steel, and structural shapes, placed on the
taining the first positive resolutions toward
market fundamentally through distributors
the end of 2013 and beginning of 2014,
and industrial clients.
with definite quotas in some of the cases,
and preliminary ones in others.
Furthermore, beginning in July of 2013, with
the commissioning of the Plate Line and its
As an important response of the Secre-
Steckel Mill, AHMSA ex-
tary of Economy in the face of the issues
panded its product
that the Mexican steel industry faces,
and in the framework of the actions taken against unfair trade
practices, an automatic import
notification requirement took
effect beginning in January
of 2014. This instrument of
public law makes it possible
to prevent and avoid unfair
trade practices. There are
113 tariff codes in the steelworks sector that were made
subject to this mechanism.
11
catalogue with new dimensions, grades, and
specifications, and included coiled plate as
a line product.
Through its subsidiary, Nacional de Acero
(NASA), the company promoted on the
market, a modular system for do-it-yourself
housing construction called ACERHOGAR,
based on a light, easy-to-assemble, economic steel structure that saves building time
and is sustainable.
Developed by professionals from AHMSA
and NASA, thanks to its modular nature, the
ACERHOGAR concept grows according to
the needs of the user and offers an economical, safe option that is adaptable to
the materials available in each region.
of presentations in universities and professional associations to promote the use of
steel in construction, in order to affirm the
virtues of steel products among current generations of civil engineers and architects. In
2013, 46 courses and lectures were given
As the result of a decision by Federal au-
in 23 associations and universities, with an
thorities, and to demonstrate the virtues of
attendance of 2,350 people.
the system, Nacional de Acero manufactured and installed 80 ACERHOGAR homes
As far as sales of steam coal, Minera del
for a like number of families in the moun-
Norte (MINOSA), sold 5,686,593 metric
tainous region of the State of Guerrero.
tons in 2013. By comparison, this subsidiary
sold 6,886,040 metric tons in 2012. The de-
12
In support of steel marketing, the Depart-
crease of over one million metric tons was
ment of Sales and Marketing maintained,
due to a fall in demand by the Comisión
for the fifth consecutive year, the program
Federal de Electricidad (CFE).
INVESTMENTS
• Steel
D
uring 2013, 144.8 million dollars were invested
in the AHMSA steelworks, primarily in the areas
of Pig Iron, Steel, Rolling, and execution of the
programs for rehabilitation, scheduled maintenance,
replacement of assets and normal improvements, as
well as the development of ecology projects.
It is worth mentioning the investment that made it possible to start up the new plate line with
the Steckel Mill to produce sheet and coil, as well as the initial commissioning of the fourth
continuous casting machine. Work continued on the installation of the Electric Arc Furnace and
the Ladle Furnace, as part of the main equipment of the Fénix Project, at the same time as
other developments related to the infrastructure to support the new equipment.
As a supplement to the direct investments, in April, the French Company Air Liquide, a world
leader in the generation of industrial gases, carried out the commissioning of Oxygen Plant 6,
constructed on the basis of an agreement subscribed with AHMSA, within the facility of the
steelworks.
13
Continuous Casting Machine 4.
Along these lines, in May a memorandum of
understanding was signed with the Austrian
industrial group Voestalpine, in order to ensure the supply of Hot Briquetted Iron (HBI)
required by the new Electric Arc Furnace.
In addition, during the year projects were
executed with a focus on optimizing the
industrial processes, as well as investments
in environmental projects on the entire productive chain, from mines to the steelworks
plants.
In April AHMSA presented recognitions to
four companies, out of 400 evaluated, for
having obtained in 2012 the highest score
in the Contractors Evaluation System (SEC),
geared toward measuring the level of performance in time and quality, of the works
and services awarded by AHMSA to third
parties and executed on projects in the
company and its subsidiaries.
Ladle Metallurgy.
14
• Mining
Investments were made in the various units of Minera del Norte (MINOSA) in the amount of
118.6 million dollars, primarily in order to ensure the complete present and future supply,
mainly of iron and coal.
At the MICARE Unit, 34.6 million dollars were applied, of which 25.8 million dollars were for
the purchase of long wall equipment and 6.5 million for mining groundwork.
In turn, at the MIMOSA Unit, 55.4 million dollars were invested, primarily in the acquisition
of equipment for operations in
open pit and underground deposits, as well as basic engineering, construction of accesses, exploration and
conditioning of mines.
Investments were made
in the Hércules and
La Perla Units in the
amount of 12.7 million dollars. It is
worthy of noting
that the inves-
15
tment at Hércules is to increase production
The CEMESA Unit made investments for 3.5
of 380 thousand metric tons annually on the
million dollars and the Real del Monte Unit
average, by separating the concentration
invested 5.4 million dollars mainly in the
processes by different minerals, as well as
Loreto beneficiation plant.
extending the underground mining in Tajo Teseo and replacing pipeline in the Ferroduct.
Within the framework of the state visit
made to Mexico by the Israeli President,
At La Perla 3.2 million dollars were inves-
Shimon Peres, on November 27, Minera del
ted for the purchase of equipment that will
Norte signed an agreement with the Israeli
make it possible to increase production of
firm Aqwise, for the construction of a waste
iron concentrate.
water treatment plant in its Cerro de Mercado
Signing of the agreement for the construction of a water treatment plant at the CEMESA Unit,
witnessed by Shimon Peres, of Israel, and Enrique Peña Nieto, of México.
16
Unit in Durango. President Enrique Peña Nieto
ties, in the framework of the company’s phi-
witnessed the signing of the document.
losophy of social responsibility.
As new developments, Minera del Norte
Through its subsidiary, Minera del Norte, in
began to prepare the steam coal deposit
April AHMSA subscribed an agreement with
known as Dos Repúblicas, located near the
the Chinese Company Xingxing Hanfang
city of Eagle Pass, Texas, on the border with
Minning Investment Co. Limited for the sup-
Piedras Negras, Coahuila. Seven million do-
ply of 10 million metric tons annually of iron
llars were invested for this purpose.
ore concentrates for 20 years, from the deposits that the company
operates in various states
of the country.
With President Enrique
Peña Nieto as a witness
during a tour of Asia, the
contract was signed by
Alonso Ancira Elizondo,
Executive Chairman of
the Board of AHMSA,
and Liu Mingzhong, Pre
sident of Xingxing Hanfang
Minning Investment.
Open pit coal deposit at “Dos Repúblicas”, in Eagle Pass, Texas.
This mine will be operated as an open
pit, and according to projections, in its initial stage, holds 19.2 million metric tons
of mineable deposits of steam coal. The
project contemplates a total investment
of 147.3 million dollars for this stage,
and plans are to begin coal extraction in
March, 2015.
In addition to the strictly productive areas,
investments were channeled to various
activities for improvement of the environment and quality of life of the company’s
personnel and the surrounding communi-
17
FINANCIAL RESULTS
I
n 2013, the consolidated annual revenue resulting from total net sales of AHMSA
and Subsidiaries rose to 36,866 million pesos. This amount is lower than the
39,223 million pesos in 2012, reflecting the adverse market conditions resulting
from the contraction of international demand, and the importation of large volumes
of steel under unfair trade conditions, with artificially low prices.
During the period, the accumulated EBITDA reached 162.5 million dollars (2,074 million
pesos), a lower number as compared to 282.2 million dollars (3,697 million pesos) recorded
in 2012.
Operating loss was 888 million pesos, and the consolidated net loss for the year ascended
to 2,582 million pesos, compared to an operating income of the 389 million pesos, and the
consolidated net loss of 408 million pesos, recorded in 2012.
Consolidated comprehensive net loss in
19% in selling and administrative expenses,
2013 was 2,762 million pesos, as com-
when comparing 2013 with 2012.
pared to 2012 in which the loss was 822
million pesos.
During the period, 275.1 million dollars
were invested in various steelworks and min-
18
In spite of those results, a positive impact
ing projects. Part of these cash flows were
was obtained, by achieving a reduction of
allocated to Fénix Project, an investment
program supported by in-house financing
and aimed at maximizing the Company’s
efficiency and profitability.
The main objective is to increase production by 40%, thus ensuring full long term
viability of the liability restructuring plan.
As of December 31, 2013, 1,390 million
dollars has been invested directly in the
project.
For AHMSA and its Subsidiaries, having
their own coal and iron deposits continues
to be an important competitive advantage, by making possible a more flexible cost scale than other steelworks in
the world, that face constant variations in
prices of raw materials.
19
CERTIFICATIONS
A
s an endorsement of its high level of competitiveness worldwide,
the company maintained its AHMSA Management System (SAA), a
cutting edge concept that integrates ISO-9001 in quality; ISO-14001
in environmental care; and OSHAS-18001 in health and safety.
In this context, during 2013, the certification of international standards was renewed in the
majority of its processes, and beginning in 2014, the international standard NR-480 certification was added for steel plate for use in naval applications.
This certification programs reinforced the
company to enter new market niches, in this
case, to substitute the importation of plate
destined for domestic shipyards, which represent an attractive market niche, due to
the ship replacement program.
Our subsidiaries, Nacional de Acero (NASA),
the MICARE, MIMOSA, Hércules, La Perla
and CEMESA de Minera del Norte Units,
maintained their operations in compliance
with the ISO-9001:2008 certification.
Field visit for certification of the NR-480 international standard
for Steel plate designed for naval applications.
20
For the fourth consecutive
year the company obtained
the “Silver Level” recognition
as a Reliable Supplier for
Caterpillar, subsequent to an
audit of the hot rolling process, under requirements of
the specific standard for that
company, CAT MQ-11005.
QUALITY AND NEW PRODUCTS
D
uring the year continued to improve the quality
indexes in the steel plants, and metallurgical tests
were run for the design of 11 new steels.
Two of those steels were incorporated to our products catalog, with a potential for annual
sales of over 200 thousand metric tons. Simultaneously, the supplier development program was
maintained, with 94 projects concluded in 2013.
21
RECOGNITIONS
A
s a result of permanent programs and efforts in the areas
of quality, training, human development, environment,
and community relations, AHMSA and its companies
received various recognitions during the year 2013.
The members of the Work Group “Aleación” [Alloy] of the Monclova Unit of Nacional de Acero
(NASA), obtained first place in the XIX National Team Work Forum 2013, with the participation
of 34 teams from various States of Mexico.
In recognition of their successful results,
the AHMSA Center for Technological
Liaison and Technology Management
received a recognition from the Federal Government in the category of Trai
ning and Employment, during the Fifth
Edition of the Company-Liaison Award.
This initiative was coordinated by the
Federal Secretariat of Public Education (SEP) and the Secretariat of Labor
and Social Welfare (STPS).
For its part, ANTAIR—AHMSA’s
airline subsidiary—received the
endorsement from Eurocopter de
México and Turbomeca México
to establish a strategic alliance
and operate the first Ecureuil service center for helicopters in the
northern region of the country, located at the Venustiano Carranza
International Airport, of Frontera,
Coahuila, adjacent to the city of
Monclova. Since 2009 ANTAIR has
owned its own maintenance workshop authorized by the General
Civil Aviation Agency of Mexico
(DGAC).
22
SOCIAL RESPONSIBILITY
T
hroughout the year, the program for support to neighboring communities was
maintained, with the implementation of various activities for improvement
of the quality of life, as well as recreational, cultural and sports events for
the benefit of the workers and the rest of the population, through programs
designed jointly with the authorities at various levels of government, as well as with
community organizations.
The consistent participation of the Cleaning Commission for the Central Region of the State of
Coahuila, is worthy of special mention. This system collects urban waste and operates a landfill
which serves the cities of Monclova, Castaños, Frontera, San Buenaventura and Nadadores in
the State of Coahuila.
23
Likewise, interaction was maintained with the Civil Protection
systems of the various municipalities.
In the area of education, the initiative of the MATT Foundation
(Mexicans & Americans Thinking
Together Foundation Inc.) stands
out for having started the second
stage of the “Yes al Inglés” (“Yes
to English”) program, which issues
a certificate validated by the
Universities of Texas A&M San
Atty. Alonso Ancira Elizondo at the beginning of the
second stage of “Yes to English”.
Antonio and Incarnate Word San
Antonio, to incorporate 26,500
students at 76 campuses.
In the area of culture, activities continued in the areas of
influence of the company, with
130 presentations and the attendance of over 50 thousand
people at various entertainment
events, courses and expositions.
Movie theatre hall at La Perla.
Likewise, AHMSA and the civil organization of the Patronage of the Municipal Archive of Monclova, Coahuila completed
work on the rescue of historic documents
of the Municipal Archives of Nadadores
and Sacramento.
At the Hércules Unit, Minera del Norte
launched operations at Radio Minera,
XH-HCC at 97.3 FM, a radio broadcasting station for the service of the
Rescue of municipal archives of Nadadores and Sacramento, Coahuila.
community and surrounding regions,
as part of the comprehensive life quality improvement program implemented
24
by the company. A swimming pool was reconditioned in order to improve the recreational
options for the population of that semi-desert
AVE FENIX
region in northern Coahuila.
At La Perla mine in the city of Camargo,
Chihuahua, a movie theater with high level
technology was inaugurated, and will also
function as an audiovisual hall for local educational institutions.
Coinciding with the inauguration of the
Steckel Mill, a monumental structure representing the Phoenix bird was installed at the
BALNEARIO
area of the entrance to the company. This is
a sculpture that is 15 meters tall and has a
25 meters wing-span, created by the native
Coahuilan artist Rogelio Madero.
The structure symbolizes the spirit with which
technicians and operators of Altos Hornos de
México got involved in Fénix Project in order
to incorporate the production lines with new
and advanced technologies that re-empower
the productive strengths of the company.
25
ENVIRONMENTAL ACTIONS
F
or Altos Hornos de México and its companies, environmental
management, geared toward the mitigation of the impact of its
operations and the improvement of the surroundings, has been
maintained as a central element of the business philosophy, focused on
achieving a totally sustainable industrial operation.
In this regard, during 2013, in coordination with the Secretariat of Environment and Natural
Resources (SEMARNAT) and the Mexican Accreditation Entity (EMA), the Second Seminar on
Greenhouse Gas Effects was held for the purpose of creating awareness of the need for
actions focused on controlling the effects of climate control.
The Federal Environmental
Protection Agency (PROFEPA)
recognized the commitment
and the progress achieved by
AHMSA as a participant in the
Environmental Leadership for
Competitiveness Program, in
which it placed among the 10
Mexican businesses with the
greatest engagement.
26
In turn, the MIMOSA Unit of Minera del
Norte (MINOSA) received the recognition
and endorsement from the United Nations
Organization (ONU) to operate an incineration system burning methane gas extracted during operations, thus decreasing
atmospheric emissions and generating a
positive impact on global warming.
Through this procedure, the MIMOSA Unit
annually destroys 8.9 million cubic meters
of methane, equivalent to 130 thousand
metric tons annually of carbon dioxide, or
the emissions of 115 thousand automobiles.
At the same time, work continued on the
regeneration of the flora and fauna, with
a total of 35 thousand trees planted at
the steelworks and mines, as well as in
urban areas in various cities, and 4,200
head of deer and desert bighorn sheep
were accounted for on the five ecological
ranches.
Among other activities, this program includes the reforestation, conservation and
operation of the flora
and fauna on company’s own ranches, the
genetic improvement
of cattle of small producers, and support
of the urban wooded
areas in the Central
and Northern regions,
as well as the Monclova City Zoo.
27
In the mined and reforested areas, over
25,000 native species such as mezquite,
huisache, agave, pecan, blackbrush acacia,
and Guatemalan fir, among others were
obtained from the company’s own nurseries
and planted.
In this regard, the Environmental Agency
of Coahuila (SEMA) and AHMSA signed
an agreement in order to jointly strengthen
the State Network of Plant Nurseries. This is
a reforestation Project driven by the State
Government.
28
Financial Section
2013 Operating Results compared to those of 2012
Sales Volume
Steel Segment. The sales volume of steel products in 2013 was 3,514 thousand metric tons, an increase
of 8.8% compared to the 3,230 thousand metric tons of steel products sold in 2012. The export sales
volume increased 37.0%, from 390 thousand metric tons in 2012 to 534 thousand metric tons in 2013.
Coal Segment. In 2013, AHMSA sold a volume of 5,687 thousand metric tons of steam coal, a decrease of 17.4% compared to the 6,886 thousand metric tons sold in 2012.
Net Sales
AHMSA’s total net sales in 2013 were Ps.36,866 million, a decrease of 6.01% compared to AHMSA’s
total net sales of Ps.39,223 million in 2012.
Steel Segment. Net sales of the steel segment (including other sales) decreased 5.01%, from Ps.34,672
million in 2012 to Ps.32,936 million in 2013, even though there was an increase in the volume of metric
tons sold, the sales price had a significant decline. AHMSA’s average sales price per metric ton of steel
products decreased 12.8%, from Ps.10,485 in 2012 to Ps.9,145 in 2013.
Export sales represented 14.1% of the revenue from steel sales in 2013 (15.2% of the sales volume
of steel products for that year) compared to 10.0% of revenue from AHMSA’s steel sales in 2012
(12.1% of the sales volume of steel products for that year).
In 2013 and 2012, AHMSA reported other sales of Ps.802 million and Ps.805 million, respectively.
Other sales in the steel segment were mainly of by-products of the coke and crude iron waste plants.
Coal Segment. Steam coal sales were Ps.3,930 million during 2013 compared to Ps.4,551 million in
2012, a decrease of 13.6% due to lower sales volume. The steam coal´s price per tonne increased
4.5%, from Ps.660 in 2012 to Ps.690 in 2013.
Cost of Sales, Depreciation, Gross Profit
Cost of sales (excluding depreciation) increased slightly 0.1%, from Ps.32,162 million in 2012 to
Ps.32,206 million in 2013, including a decrease in the cost of sales of the coal segment. As a net sales
percentage, it increased from 82.0% in 2012 to 87.4% in 2013.
Depreciation increased 2.9%, from Ps.3,011 million (7.7% of net sales) in 2012 to Ps.3,097 million
(8.4% of net sales) in 2013.
31
AHMSA’s consolidated gross profit decreased 61.4%, from Ps.4,050 million in 2012 to Ps.1,563 million in 2013.
Steel Segment. Cost of sales (excluding depreciation) for AHMSA’s steel segment increased 0.6%, from
Ps.29,218 million in 2012 to Ps.29,395 million in 2013. The purchase of imported raw material increased.
Energy costs increased 11.6% in 2013 compared to 2012. In 2012 it represented 17.8% of the steel
segment net sales while in 2013 it represented 21.2%. The foregoing was mainly due to the increase
in consumption and prices of natural gas.
The depreciation charge in this segment increased 2.8%, from Ps.2,582 million (7.5% of the steel
segment net sales) in 2012 to Ps.2,655 million (8.1% of the steel segment net sales) in 2013.
Based on the aforementioned factors, AHMSA reported a gross profit in the steel segment of Ps.885
million (2.7% of the steel segment net sales) in 2013, compared to a gross profit of Ps.2,872 million
(8.3% of the steel segment net sales) in 2012.
Coal Segment. Cost of sales (excluding depreciation) of AHMSA’s coal segment decreased 13.9%,
from Ps.3,267 million (71.8% of steam coal net sales) in 2012 to Ps.2,811 million (71.5% of steam
coal net sales) in 2013.
Furthermore, energy costs increased 3.1%, from Ps.572 million (12.6% of the coal segment net sales)
in 2012 to Ps.590 million (15.0% of the coal segment net sales) in 2013, mainly due to the increase
in the electric power and fuel consumption with respect to 2012.
Labor costs decreased from Ps.858 million (18.8% of the coal segment net sales) in 2012 to Ps.795
million (20.2% of the coal segment net sales) in 2013.
The depreciation charge in this segment increased 2.8%, from Ps.429 million (9.4% of the coal segment net sales) in 2012 to Ps.441 million (11.2% of the coal segment net sales) in 2013.
AHMSA reported a gross profit in its steam coal segment of Ps.678 million (17.2% of the coal segment
net sales) in 2013, compared to a gross profit of Ps.855 million (18.8% of the steam coal net sales)
in 2012.
Selling and Administrative Expenses
Selling and administrative expenses represented 8.0% and 9.5% of AHMSA’s net sales in 2013 and
2012, respectively, a decrease of 19.1%, from Ps.3,668 million in 2012 compared to Ps.2,966 million
in 2013.
32
Steel Segment. AHMSA’s steel segment selling and administrative expenses decreased 21.1%, from
Ps.3,540 million (10.2% of the steel segment net sales) in 2012 to Ps.2,794 million (8.5% of the steel
segment net sales) in 2013.
Coal Segment. AHMSA’s coal segment selling and administrative expenses decreased 4.4%, from
Ps.180 million in 2012 (3.9% of the coal segment net sales) to Ps.172 million in 2013 (4.4% of the
coal segment net sales).
Operating Income
In 2013, AHMSA’s operating (loss) income was Ps.(888) million ((2.4%) of net sales) compared to
operating (loss) income of Ps.389 million in 2012 (1.0% of net sales).
Steel Segment. Operating (loss) income for AHMSA’s steel segment was Ps.(1,441) million in 2013,
compared to operating (loss) income of Ps.(669) million in 2012.
Coal Segment. Operating (loss) income for AHMSA’s coal segment was Ps.553 million in 2013, compared to operating (loss) income of Ps.682 million in 2012.
Financial Expense and Income
Financial expense and income includes: (i) interest income from investments in cash and financial instruments (ii) interest paid for financing and financial instruments, and (iii) exchange gains or losses related
to financial monetary assets and liabilities denominated in foreign currency.
Interest income decreased from Ps.191 million in 2012 to Ps.72 million in 2013, mainly due to a decrease on investments in cash equivalents.
Interest expense recorded a slight increase from Ps.726 million in 2012 to Ps.734 million in 2013.
The Company held in 2013 and 2012 a net financial monetary liability position in foreign currency.
During 2012, the Mexican peso was appreciated compared to the U.S. dollar, resulting in a net financial exchange gain of Ps.11 million; on the contrary in 2013 the Mexican peso was depreciated
compared to the U.S. dollar, resulting in a net loss of Ps.164 million.
During 2012, the Company obtained a gain of Ps.13 million from the valuation effect of derivative
financial instruments.
33
Based on these factors, the total amount of financial expense and income, including exchange fluctuations, resulted in losses in 2013 and 2012 of Ps.826 million and Ps.511 million, respectively.
Income Taxes
AHMSA recorded a loss before income taxes of Ps.1,700 million and Ps.82 million in 2013 and 2012,
respectively.
Taxes for Mexican companies in 2013 and 2012 are based on their profits and cash flows. Income
Tax “(ISR)” is computed taking into consideration the taxable and deductible effects of inflation and
the rate was 30%.
In 2014, a new Special Tax on Mining “(DESM)” is added to the holders of mining concessions, which
can be determined by applying the rate of 7.5% on the difference from reducing certain deductions
from taxable income for ISR purposes. DESM is deductible for ISR purposes; therefore, the net effect
is the deferred tax recorded as of December 31, 2013, which was 5.25%.
Beginning on January 1, 2014, the Business Flat Tax “(IETU)” was abrogated; therefore, up to December 31, 2013, this tax was incurred both on revenues and deductions and certain tax credits based on
cash flows from each year. The respective rate was 17.5%. In 2008, the Asset Tax Law was repealed;
however, under certain circumstances, the Tax on Assets “(IMPAC)” paid in the ten years prior to the
year in which ISR is paid, may be recovered, according to the terms of the law.
The current income tax is the greater of ISR and IETU up to 2013.
In 2013 and 2012, AHMSA reported current ISR of Ps.230 million and Ps.617 million, respectively.
AHMSA recorded a provision for deferred ISR expense of Ps.217 million in 2013, compared to a
benefit of Ps.280 million in 2012.
In 2013, the Company recorded a provision for deferred DESM expense of Ps.690 million.
As of December 31, 2013 and 2012, the Company recorded a tax provision for not accumulating
inflation gains during 2000 to 2003 related to liabilities in the Suspension of Payments. In 2013, some
favourable judgments on lawsuits brought for this concept were obtained; therefore, the provision of
Ps.338 was written off, including surcharges and restatements of Ps.115, generating a gain of Ps.223
million because of that cancellation.
34
In Mexico, ISR is calculated individually for AHMSA and each one of its subsidiaries. As of December
31, 2013, AHMSA, as an individual Company, has tax loss carryforwards of Ps.390 million.
Consolidated Net Loss
AHMSA recorded a consolidated net loss of Ps.2,582 million and Ps.408 million in 2013 and 2012,
respectively.
Consolidated Comprehensive Net Loss
AHMSA recorded a consolidated comprehensive net loss of Ps.2,762 million and Ps.822 million in
2013 and 2012, respectively.
35
Altos Hornos de México, S. A. B. de C. V. and Subsidiaries
(A Subsidiary of Grupo Acerero del Norte, S. A. de C. V.)
Consolidated Financial Statements for the Years Ended December 31, 2013
and 2012, and Independent Auditors’ Report Dated March 21, 2014
37
Galaz, Yamazaki,
Ruiz Urquiza, S.C.
San Buenaventura 505
Colonia Los Pinos
25720, Monclova, Coah.
México
Independent Auditors’ Report
to the Board of Directors and Stockholders of
Altos Hornos de México, S. A. B. de C. V.
Tel: +52 (866) 635 0075
Fax: +52 (866) 635 1761
www.deloitte.com/mx
We have audited the accompanying consolidated financial statements of Altos Hornos de México, S. A. B.
de C. V. and its subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of operations and other comprehensive
results, statements of changes in stockholders’ equity and cash flows for the years ended December 31,
2013 and 2012, and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal controls as management determines is necessary to enable the
preparation of consolidated financial statements that are free of material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with International Standards on Auditing. Those standards require
that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
Company’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Member of
Deloitte Touche Thomatsu
38
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Altos Hornos de México, S. A. B. de C. V. and subsidiaries as of December 31, 2013 and 2012 and
their financial performance and their cash flows for the years then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Other Matters
As mentioned in Note 2 to the consolidated financial statements, on May 25, 1999, the Company obtained
a suspension of payments sentence from the judicial authorities, which as of the date of the accompanying
consolidated financial statements is still in the process of a resolution and has caused significant economic
effects. To solve the situation of the suspension of payments, the majority of the creditors have to accept a
preventive payment agreement, which has not occurred. The Company depends on the satisfactory result
of such situation to continue as a going concern. The consolidated financial statements do not include those
adjustments related to the assets valuation and classification or the liability classification and determination
that may be necessary in the event the Company cannot continue as a going concern.
The accompanying consolidated financial statements have been translated into English for the convenience
of readers.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited
C. P. C. Daniel Castellanos Cárdenas
March 21, 2014
39
ALTOS HORNOS DE MÉXICO, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2013 AND 2012
(Millions of Mexican pesos (Ps.))
Assets
Current assets:
Cash and cash equivalents..............................................................................
Financial instruments.......................................................................................
Trade accounts receivable, net........................................................................
Due from related parties, net............................................................................
Other accounts receivable, net........................................................................
Inventories........................................................................................................
Prepaid expenses............................................................................................
Available-for-sale assets..................................................................................
Total current assets.......................................................................................
Non-current:
Due from related parties, net............................................................................
Other long-term receivables.............................................................................
Guaranty deposits............................................................................................
Investments in shares of associates and joint ventures...................................
Property, plant and equipment, net..................................................................
Intangible assets, net.......................................................................................
Other assets, net..............................................................................................
Total non-current assets................................................................................
Total assets...................................................................................................
Notes
8
9
10
25
11
12
2013
Ps.
16
25
11
13
14
15
16
Ps.
2012
800 Ps.
81
1,746
150
902
7,115
113
2,228
13,135
1,798
130
2,002
504
726
7,302
165
12,627
179
185
698
112
43,871
4,091
946
50,082
63,217 Ps.
156
157
570
117
42,298
4,333
2,280
49,911
62,538
13,488 Ps.
552
1,935
3,857
729
212
3,471
24,244
13,488
552
1,361
3,912
476
156
4,065
24,010
2,434
117
7,221
7,255
17,027
951
229
6,642
6,831
14,653
41,271
38,663
6,129
521
18,304
(2,569)
(753)
21,632
314
6,129
18,707
(403)
(573)
23,860
15
21,946
23,875
63,217 Ps.
62,538
Liabilities and stockholders' equity
Current liabilities:
Financing debt in suspension of payments......................................................
Interest payable in suspension of payments....................................................
Financing debt………………………………………………………………………
Due to suppliers...............................................................................................
Taxes payable..................................................................................................
Due to related parties.......................................................................................
Other payables and provisions.........................................................................
Total current liabilities....................................................................................
Non-current liabilities:
Financing debt………………………………………………………………………
Other payables and provisions…………….......................................................
Employee retirement obligations......................................................................
Deferred income taxes.....................................................................................
Total non-current liabilities.............................................................................
17
Ps.
17
25
18
17
18
19
20
Total liabilities................................................................................................
Commitments and contingencies…………………………………………………
Stockholders' equity:
Capital stock.....................................................................................................
Additional capital contribution..........................................................................
Retained earnings from prior years..................................................................
Loss for the year..............................................................................................
Other comprehensive income items.................................................................
Controlling interest.........................................................................................
Noncontrolling interest……………………………………………………………
32
22
23
Total stockholders' equity..............................................................................
Total liabilities and stockholders' equity.........................................................
Ps.
The accompanying notes are an integral part of these consolidated financial statements.
40
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE RESULTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(Millions of Mexican pesos (Ps.), except per share data)
Notes
Net sales........................................................................................................
26
2013
Ps.
Cost of sales..................................................................................................
Depreciation...................................................................................................
Gross profit............................................................................................…
Selling and administrative expenses..............................................................
Other income, net……………………………………………………………….…
27
Operating (loss) income..........................................................................
2012
36,866
Ps.
39,223
32,206
3,097
32,162
3,011
1,563
4,050
2,966
3,668
(515)
(7)
(888)
389
Interest expense............................................................................................
Interest income..............................................................................................
Foreign exchange loss (gain), net……..........................................................
Income on derivative financial instruments....................................................
28
28
734
(72)
164
826
726
(191)
(11)
(13)
511
Equity in income of associates and joint ventures.........................................
13
(14)
(40)
(1,700)
(82)
882
326
(2,582)
(408)
(1)
(34)
(90)
(3)
(145)
(180)
(321)
(414)
Loss before income taxes……………………………………………………
Income taxes expense...................................................................................
20
Consolidated net loss for the year...........................................................
OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX:
Items that may be reclassified subsequently to profit or loss:
Translation effects of foreign subsidiaries……………………………………
Valuation of financial instruments………………………………………………
Items that will not be reclassified subsequently to profit or loss:
Actuarial losses of employee benefits from termination and retirement……
23
Consolidated comprehensive net loss.....................................................
Ps.
(2,762)
Ps.
(822)
Distribution of consolidated comprehensive net loss for the year:
Controlling interest..................................................................................
Noncontrolling interest............................................................................
Ps.
Ps.
Ps.
(2,749)
(13)
(2,762)
Ps.
(817)
(5)
(822)
Ps.
(7.68)
Ps.
(2.28)
Basic loss per share.....…………………………………………………………
Weighted average shares outstanding (000's)..............................................
357,873
357,873
41
42
-
Noncontrolling interest withdrawal
Ps.
Ps.
Ps.
6,129
-
-
-
6,129
-
-
6,129
Capital
Stock
Ps.
Ps.
Ps.
0
521
-
-
521
-
-
-
Additional
Capital
Contribution
Ps.
Ps.
Ps.
15,735
-
(2,569)
-
18,304
-
(403)
18,707
Retained
Earnings
Ps.
Ps.
Ps.
(753)
-
(180)
-
(573)
-
(414)
(159)
Other
Comprehensive
Items
357,872,502
-
Comprehensive loss
Balances as of December 31, 2013
-
Additional capital contribution for transfer
of net assets between entities under
common control
357,872,502
-
Noncontrolling interest contribution
-
357,872,502
Comprehensive loss
Shares
Outstanding
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Millions of Mexican pesos (Ps.), except for shares outstanding)
Ps.
Ps.
Ps.
21,632
-
(2,749)
521
23,860
-
(817)
24,677
Total
Controlling
Interest
Ps.
Ps.
Ps.
20
(5)
314
(3)
(13)
315
15.00
-
Noncontrolling
Interest
Ps.
Ps.
Ps.
21,946
(3)
(2,762)
836
23,875
20
(822)
24,677
Total
Stockholders'
Equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Mexican pesos (Ps.))
Operating activities:
Resources generated by operations:
Loss before income taxes................................................................................................................ Ps.
Items related to investing activities:
Depreciation and amortization......................................................................................................
Equity in income of associated and joint ventures.......................................................................
(Gain) loss on sales of property, plant and equipment, net..........................................................
Other allowance…………………………………………..................................................................
Interest income.............................................................................................................................
Items related to financing activities:
Market value of derivative financial instruments...........................................................................
Interest expense...........................................................................................................................
2013
2012
(1,700)
Ps.
(82)
3,622
(14)
(11)
(503)
(72)
3,604
(40)
36
41
(191)
734
2,056
(13)
726
4,081
(5)
255
434
85
206
52
374
755
(37)
373
57
134
(88)
315
(50)
(219)
411
43
(220)
270
(19)
39
395
1,015
120
3
(355)
(85)
31
810
(1,035)
(31)
166
2,579
Net cash flow from operating activities................................................................................
2,866
6,660
Investing activities:
Additions to property, plant and equipment..................................................................................
Cash provided by sales of property, plant and equipment........................……….…..…..............
Acquisition of subsidiary........................……….…..………………................................................
Dividend from associated companies........................……….…..…..............................................
Investment in shares of associated companies………………………………………………………
Guaranty deposits...............…......................................................................................................
Interest received...........................................................................................................................
Other assets, net…......................................................................................................................
Intangible assets, net…................................................................................................................
(3,078)
57
(701)
30
(11)
(128)
11
48
(281)
(4,426)
12
30
(5)
(58)
9
(490)
(557)
Net cash flow used in investing activities.............................................................................
(4,053)
(5,485)
Financing activities:
Financing debt..............................................................................................................................
Financial debt paid.......................................................................................................................
Noncontrolling interest (withdrawal) contribution..........................................................................
Interest paid..................................................................................................................................
1,174
(661)
(3)
(347)
302
(458)
20
(161)
Net cash flow used in financing activities.............................................................................
163
(297)
(Decrease) increase in cash and cash equivalents..............................................................
(1,024)
878
Adjustments to cash flow due to exchange rate fluctuations........................................................
26
(207)
Cash and cash equivalents:
Beginning of year.........................................................................................................................
1,798
1,127
(Increase) decrease in:
Financial instruments for trading purposes..................................................................................
Trade accounts receivable, net.......................................................................…..........................
Due from related parties, net........................................................................................................
Other short and long term accounts receivable, net.....................................................................
Inventories, net.............................................................................................................................
Prepaid expenses.........................................................................................................................
Increase (decrease) in:
Due to suppliers...........................................................................................................................
Taxes payable..............................................................................................................................
Due to related parties..................….............................................................................................
Other payables and provisions.....................................................................................................
Advances from customers............................................................................................................
Provision for employee retirement obligations, net......................................................................
Other long-term payables.............................................................................................................
Cash flow (used) in operating activities
Income tax paid............................................................................................................................
Interest expenses paid.................................................................................................................
Interest income received..............................................................................................................
End of year...................................................................................................................................
Ps.
800
Ps.
1,798
43
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTESTO
TOCONSOLIDATED
CONSOLIDATEDFINANCIAL
FINANCIALSTATEMENTS
STATEMENTS
NOTES
ASOF
OFDECEMBER
DECEMBER31,
31,2013
2013AND
AND2012
2012
AS
millionsofofMexican
Mexicanpesos
pesos(Ps.)
(Ps.)and
andmillions
millionsofofU.S.
U.S.dollars
dollars(US$))
(US$))
(In(Inmillions
Note1.1.
Note
Natureofofbusiness
business
Nature
AltosHornos
HornosdedeMéxico,
México,S.A.B.
S.A.B.dedeC.V.
C.V.(AHMSA)
(AHMSA)and
andsubsidiaries’
subsidiaries’(collectively
(collectivelythe
the“Company”)
“Company”)is isa a
Altos
Mexicancompany
companyand
andsubsidiary
subsidiaryofofGrupo
GrupoAcerero
Acererodel
delNorte,
Norte,S.A.
S.A.dedeC.V.
C.V.(“GAN”)
(“GAN”)and
andisisa apublicly
publiclytraded
traded
Mexican
variablecapital
capitalcorporation
corporationlisted
listedononthe
theBolsa
BolsaMexicana
MexicanadedeValores,
Valores,S.A.B.
S.A.B.dedeC.V.
C.V.(“BMV”,
(“BMV”,the
theMexican
Mexican
variable
StockExchange).
Exchange).The
Themain
mainactivity
activityisisthe
theproduction
productionand
andsale
saleofofflat
flatsteel
steelproducts
productsand
andstructural
structuralsections.
sections.
Stock
AHMSA’saddress
addressis isProlongación
ProlongaciónJuárez
JuárezS/N,
S/N,Monclova,
Monclova,Coahuila.
Coahuila.
AHMSA’s
Note2.2.
Note
Suspensionofofpayments
paymentsand
anddebt
debtrestructuring
restructuring
Suspension
SuspensionofofPayments
Payments
a)a) Suspension
1999,both
boththe
theadverse
adversesituation
situationaffecting
affectingthe
theworld
worldsteel
steelindustry
industrycombined
combinedwith
withthe
theCompany’s
Company’shigh
high
InIn1999,
indebtednessofofapproximately
approximatelyUS$1,900
US$1,900(the
(the“DEBT”)
“DEBT”)resulted
resultedininthe
theCompany’s
Company’snoncompliance
noncompliancewith
with
indebtedness
certainfinancial
financialcovenants;
covenants;therefore
thereforeononApril
April26,
26,1999,
1999,the
theCompany
Companybegan
begana aprocess
processtotorenegotiate
renegotiatewith
withitsits
certain
creditorsand
andrestructure
restructurethe
thedebt
debtaccording
accordingtotoitsitspayment
paymentcapacity.
capacity. AsAssuch,
such,the
theCompany
Companysuspended
suspended
creditors
payments
of
the
principal
and
interest
on
all
its
debts.
Because
some
of
its
creditors
filed
lawsuits
against
the
payments of the principal and interest on all its debts. Because some of its creditors filed lawsuits against the
Company,
on
May
24,
1999,
AHMSA
and
various
subsidiaries
(see
Note
3
c))
requested
a
judicial
Company, on May 24, 1999, AHMSA and various subsidiaries (see Note 3 c)) requested a judicial
declarationofofsuspension
suspensionofofpayments
paymentsstatus
status(“Suspension
(“SuspensionofofPayments”),
Payments”),which
whichwas
wasgranted
grantedononMay
May25,
25,
declaration
1999bybythe
theFirst
FirstJudge
Judgeofofthe
theFirst
FirstInstance
InstanceCourt
CourtininMonclova,
Monclova,Coahuila
Coahuila(the
(the“COURT”).
“COURT”).The
TheSuspension
Suspensionofof
1999
Paymentsrepresents
representsananevent
eventofofdefault
defaultunder
underseveral
severalofofthe
theCompany’s
Company’sDEBT
DEBTagreements.
agreements.
Payments
TheSuspension
SuspensionofofPayments
Paymentsprimarily
primarilyresulted
resultedininthe
thefollowing:
following:
The
liabilitieswere
weredeclared
declareddue
dueand
andpayable
payableasasofofMay
May25,
25,1999;
1999;therefore,
therefore,asasofofDecember
December31,
31,2013
2013
I. I. AllAllliabilities
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
and 2012, the balance of Ps.14,951 is reported as a current liability.
foreigncurrency
currencydenominated
denominatedliabilities
liabilitiesexisting
existingatatthe
thetime
timewere
wereconverted
convertedinto
intoMexican
Mexicanpesos
pesosatatthe
the
II.II. AllAllforeign
exchangerate
rateinineffect
effectasasofofMay
May25,
25,1999
1999(see
(seeNote
Note24).
24).
exchange
Creditorsare
areprohibited
prohibitedfrom
fromtaking
takingany
anyaction
actiontotocollect
collectdebts
debtsarising
arisingfrom
fromtransactions
transactionsprior
priortotothe
the
III.III. Creditors
SuspensionofofPayments.
Payments.
Suspension
lawsuitsfiled
filedforforthe
thecollection
collectionofofany
anymonetary
monetaryobligations
obligationswere
weresuspended,
suspended,except
exceptforfortax
tax
IV.IV. AllAlllawsuits
obligationsand
andlabor
laborobligations.
obligations.Secured
Secureddebt
debt(in(inthe
thecase
casethat
thatsuch
suchdebt
debtwas
wasrecognized
recognizedbybythe
the
obligations
COURT)continues
continuesaccruing
accruinginterest
interestuntil
untilthe
thevalue
valueofofthe
thesecurity
securityinterest
interestisisreached.
reached.
COURT)
V.
A
trustee
was
appointed
by
the
COURT
to
supervise
operations.
The
Company’s
managementretained
retained
V. A trustee was appointed by the COURT to supervise operations. The Company’s management
administrativecontrol
controland
andcontinued
continuedoperations
operationsininthe
theordinary
ordinarycourse
courseofofbusiness
businessunder
underthe
thetrustee’s
trustee’s
administrative
supervision.
supervision.
Theconvertible
convertiblenote
noteholders
holderslost
losttheir
theirright
righttotoexchange
exchangetheir
theirnotes
notesforforAHMSA’s
AHMSA’scapital
capitalstock.
stock.
VI.VI. The
VII.Debt
Debtagreements
agreementsnot
notguaranteed
guaranteedbybymortgages
mortgagesand/or
and/orpledges
pledgesceased
ceasedtotoaccrue
accrueinterest
interestfrom
fromthe
thedate
date
VII.
theSuspension
SuspensionofofPayments.
Payments.
ofofthe
VIII.During
During2013
2013and
and2012,
2012,the
theCompany
Companymade
madedisbursements
disbursementsforfordebt
debtrestructuring
restructuringand
andSuspension
Suspensionofof
VIII.
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
Payment mainly for professional advisory fees, which amounted to Ps.115 and Ps.303, respectively,
and
were
recorded
in
selling
and
administrative
expenses
in
the
consolidated
statements
of
operations
and were recorded in selling and administrative expenses in the consolidated statements of operations
andother
othercomprehensive
comprehensiveresults.
results.The
Thecumulative
cumulativeamount
amountrelated
relatedtotothese
theseexpenses
expensesasasofofDecember
December
and
31,2013
2013was
wasPs.2,807
Ps.2,807(nominal
(nominalvalue).
value).
31,
AHMSA’sstock
stockwas
wassuspended
suspendedfrom
fromtrading
tradingononthe
theBMV
BMVand
andthe
theCompany’s
Company’sAmerican
AmericanDepositary
Depositary
IX.IX. AHMSA’s
Receipts(“ADR’s”)
(“ADR’s”)were
weredelisted
delistedfrom
fromthe
theNew
NewYork
YorkStock
StockExchange.
Exchange.
Receipts
AHMSAhas
hasproposed
proposeda apreventive
preventivepayment
paymentagreement,
agreement,which
whichhas
hastotobebeapproved
approvedbybymost
mostofofitsitscreditors
creditors
AHMSA
with
the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
couldbebe
with the right to vote as a final agreement recognized by the judge, with the possibility that AHMSA could
declared
bankrupt
if
the
creditors
reject
such
plan.
declared bankrupt if the creditors reject such plan.
11
44
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V. STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTES AS
TO OF
CONSOLIDATED
FINANCIAL
DECEMBER 31, 2013 AND STATEMENTS
2012
(In millions of Mexican pesos (Ps.) and millions of U.S. dollars (US$))
The effects in the consolidated financial statements that may arise due to the final negotiations with creditors
are unknown.
Note
1.
Nature of business
b) Restructuring
plan of the
DEBT
Altos
Hornos de México,
S.A.B.
de C.V. (AHMSA) and subsidiaries’ (collectively the “Company”) is a
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
On November
2011, AHMSA
service
agreement
with Barclays
continue
variable
capital 1,
corporation
listed signed
on the a
Bolsa
Mexicana
de Valores,
S.A.B.Capital
de C.V.(“Barclays”)
(“BMV”, thetoMexican
the
debt
restructuring
negotiations
with
its
creditors.
Stock Exchange). The main activity is the production and sale of flat steel products and structural sections.
AHMSA’s address is Prolongación Juárez S/N, Monclova, Coahuila.
AHMSA and most of its creditors reached a base understanding to proceed to document its debt in order to
request from the related court the corresponding settlement, from three years, of 100 per cent of the debts
under
established
by the Suspension
of Payments Law which AHMSA invoked. Such
Note
2. the terms
Suspension
of payments
and debt restructuring
understanding will be legalized through a legal agreement that will be filed with the authorities as soon as the
documentation
has been gathered by most of the creditors. AHMSA and its creditors are actively
a)related
Suspension
of Payments
working on this purpose.
In 1999, both the adverse situation affecting the world steel industry combined with the Company’s high
AHMSA continues
to allocate its
cash flows
Project Fénix,
an in
investment
programnoncompliance
supported withwith
own
indebtedness
of approximately
US$1,900
(theto “DEBT”)
resulted
the Company’s
financing
and
aimed
to
maximize
the
Company’s
efficiency
and
profitability
with
an
increase
of
40%
of
its
certain financial covenants; therefore on April 26, 1999, the Company began a process to renegotiate with its
production
(see
Note 3a)),the
which
the to
fullits
long-term
of theAsliability
plan.
creditors
and
restructure
debtensures
according
paymentviability
capacity.
such, restructuring
the Company
suspended
The Company’s
ability
continue
as a and
goingvarious
concernsubsidiaries
will depend(see
on whether
Company,
on May
24, to1999,
AHMSA
Note 3 the
c)) Company
requestedsuccessfully
a judicial
completes
the
DEBT
restructuring
process
and
resolves
the
issues
related
to
the
Suspension
declaration of suspension of payments status (“Suspension of Payments”), which was granted of
on Payments
May 25,
mentioned
thisJudge
note. of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension of
1999
by the in
First
Payments represents an event of default under several of the Company’s DEBT agreements.
Note
3.
Other
eventsprimarily resulted in the following:
The
Suspension
of
Payments
Investment
the Fénix
Project
I.a) All
liabilitiesinwere
declared
due and payable as of May 25, 1999; therefore, as of December 31, 2013
the currency
Board ofdenominated
Directors approved
investment
in the
Project,
objective
II.In 2006,
All foreign
liabilitiesthe
existing
at the time
wereFénix
converted
into whose
Mexican
pesos atistheto
materialize
the
maximum
potential
of
the
mining
and
steel
making
industry
chain
through
the
renovation
exchange rate in effect as of May 25, 1999 (see Note 24).
and/or
acquisition
of
equipment
and
systems
to
allow
increasing
the
liquid
steel
production
capacity
by
III. Creditors are prohibited from taking any action to collect debts arising from transactions prior to the
approximately
40%,
to
reach
4.75
million
tons
a
year.
The
estimated
total
investment
in
this
project
will
be
Suspension of Payments.
approximately
Decemberof31,
2013,
US$1,390
has been
invested
and there
are additional
IV.
All lawsuitsUS$1,500.
filed for As
theofcollection
any
monetary
obligations
were
suspended,
except
for tax
commitments
US$43.
obligationsofand
labor obligations. Secured debt (in the case that such debt was recognized by the
COURT) continues accruing interest until the value of the security interest is reached.
the project’s
primary by
equipment,
there
is a blast operations.
furnace designed
by the Company,
an electric
arc
V.Among
A trustee
was appointed
the COURT
to supervise
The Company’s
management
retained
furnace,
a
ladle
metallurgy,
a
continuous
caster
machine,
a
plate
mill,
and
an
oxygen
plant.
Similarly,
administrative control and continued operations in the ordinary course of business under the trustee’s
different
facilities will be upgraded or modernized to increase their capacity, and new iron and coal ore mines
supervision.
will
be
developed
supplement
the their
current
in order their
to ensure
raw material
supply
that the steel
VI. The convertibletonote
holders lost
rightones,
to exchange
notes the
for AHMSA’s
capital
stock.
plant
will
require.
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased to accrue interest from the date
of the Suspension of Payments.
Since
2007,2013
the Company
competitive
awarded for
twodebt
agreements
to the
German
company
VIII.
During
and 2012,through
the Company
madebidding
disbursements
restructuring
and
Suspension
of
Siemens
VAI mainly
for an aggregate
of €$241
million fees,
Euroswhich
to acquire
the primary
steeland
making
machinery
for this
Payment
for professional
advisory
amounted
to Ps.115
Ps.303,
respectively,
project.
as a result
of a and
tender,
ICA Fluor Daniel,
S. deinR.L.
de C.V. was awarded
an of
agreement
for
and Similarly,
were recorded
in selling
administrative
expenses
the consolidated
statements
operations
the construction
work
required
to
install
the
new
equipment,
whose
value
is
approximately
US$505.
and other comprehensive results. The cumulative amount related to these expenses as of December
31, 2013 was Ps.2,807 (nominal value).
To date,
the following
equipment
has from
commenced
(i) and
in 2011,
the new furnace
with aDepositary
capacity of
IX.
AHMSA’s
stock was
suspended
trading operations:
on the BMV
the Company’s
American
1.5 Receipts
million tonnes
per
year
commenced
operations,
and
(ii)
in
2013,
the
steckel
plate
mill
with
capacity
to
(“ADR’s”) were delisted from the New York Stock Exchange.
generate one million tonnes of spread or rolled steel plate on an annual basis, as well as a plant of oxygen
with a capacity
of 1,600
of oxygen
peragreement,
day, commenced
AHMSA
has proposed
a tonnes
preventive
payment
which operations.
has to be approved by most of its creditors
with the right to vote as a final agreement recognized by the judge, with the possibility that AHMSA could be
The Company
estimated
that the
other
equipments
that conforms to the Phoenix project will commence
declared
bankrupt
if the creditors
reject
such
plan.
operations in the second half of 2014.
1
2
45
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b) Acquisition of Agro Nitrogenados
Note 1.
Nature of business
On November 30, 2013, through its subsidiary Minera del Norte, S.A. de C.V. ("MINOSA"), 81% of the
shares
Agro Nitrogenados,
S.A. dedeC.V.
("AGROS")
through
the capitalization
of liabilities
Altos of
Hornos
de México, S.A.B.
C.V.
(AHMSA)was
andcompleted
subsidiaries’
(collectively
the “Company”)
is a
charged
to
AGROS
and
in
favor
of
MINOSA
(see
Note
25).
AGRO
is
a
Mexican
company
engaged
the
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publiclyintraded
production,
distribution
and sale
petrochemical
products
whichtheinMexican
2013
variable capital
corporation
listedofonfertilizers
the Bolsaand
Mexicana
de Valores,
S.A.B.(explosives),
de C.V. (“BMV”,
concluded
its
process
of
Bankruptcy
in
which
it
was
involved
since
2009;
currently,
it
is
in
the
final
process
of
ending
the
Strike
that
the
workers
began
in
1999,
having
paid
termination
to
said
workers
who
were
on
strike
in 2013.
AsNote
this 2.
is a transaction
between
companiesand
under
common
control, the difference between the carrying
Suspension
of payments
debt
restructuring
amount of the equity interest acquired in AGROS and the acquisition cost was directly recognized in the
statement
of changes
in shareholders’ equity as additional contributed capital of Ps.521.
a) Suspension
of Payments
On
AGROS
entered
intothe
with
Pro-Agroindustria,
S.A. de C.V.
(PEMEX'
affiliated
In December
1999, both 20,
the 2013,
adverse
situation
affecting
world
steel industry combined
with the
Company’s
high
company)
an
asset
buy-sell
agreement
subject
to
certain
conditions
precedent,
where
AGROS
sells its
indebtedness of approximately US$1,900 (the “DEBT”) resulted in the Company’s noncompliance
with
industrial
plant located
in the Laguna
deon
Pajaritos,
Veracruz,
ataUS$275
dollars. with its
certain financial
covenants;
therefore
April 26,Coatzacoalcos,
1999, the Company
began
processmillion
to renegotiate
creditors and restructure the debt according to its payment capacity. As such, the Company suspended
c)payments
Lifting ofofthe
of Payments
theSuspension
principal and
interest oninallthe
its subsidiaries
debts. Because some of its creditors filed lawsuits against the
The
subsidiaries
that suspended
payments,
all currently
merged
MINOSA,which
are now
of such
declaration
of suspension
of payments
status
(“Suspension
of with
Payments”),
wasout
granted
onprocess
May 25,
since
2008,
and
as
of
December
31,
2012,
most
of
the
debts
which
payments
had
been
suspended
haveof
1999 by the First Judge of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension
already
been
paid,
except
those
where
the
creditor
has
not
demanded
payment.
AsThe
of the
date of these
consolidated
financial
statements,
the balance payable for this concept is Ps.6. As of
Suspension
of Payments
primarily
resulted
in the following:
December 31, 2012, the balance was Ps.50.
I.
All liabilities were declared due and payable as of May 25, 1999; therefore, as of December 31, 2013
In the and
agreement
with
creditors,
a three-year
term is as
setaforth
for liability.
the payment thereof, and that MINOSA's
2012, the
balance
of Ps.14,951
is reported
current
assets
guarantee
the
liabilities
for
the
Suspension
of
Payments
by
these
has pesos
concluded
II. All foreign currency denominated liabilities existing at the time werecompanies;
converted this
into term
Mexican
at the
and allexchange
creditors rate
that in
appeared
were
paid
without
any
controversy.
In
the
opinion
of
the
Company's
legal
effect as of May 25, 1999 (see Note 24).
advisors,
this agreement
was performed,
claim
could arise
the outstanding
amountprior
of Ps.6,
III. Creditors
are prohibited
from takingand
any any
action
to collect
debtsfor
arising
from transactions
to the
which has
been
reserved
by
the
Company
for
this
purpose.
IV. All lawsuits filed for the collection of any monetary obligations were suspended, except for tax
d) Foreign
investments
obligations
and labor obligations. Secured debt (in the case that such debt was recognized by the
AHMSA
Israel
V. A Steel
trustee
was LTD
appointed by the COURT to supervise operations. The Company’s management retained
This subsidiary
located in Israel, has invested in certain projects, primarily in Arava Mines, LTD (100%
supervision.
ownership)
dedicated
to the
exploration
of right
a copper
mine and
Aqwise
Water
Technologies,
LTD (50.1%
VI. The convertible note
holders
lost their
to exchange
their
notes for
AHMSA’s
capital stock.
ownership)
dedicated
to
the
development
of
a
residual
water
treatment
technology.
As
of
December
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased to accrue interest from the 31,
date
2013 and
2012,
AHMSA of
has
accumulated advanced funds of US$182 and US$154, respectively, to these
of the
Suspension
Payments.
subsidiaries,
the2012,
copper
preparation
exploration resources.
VIII. Duringmainly
2013 in
and
themine
Company
madeand
disbursements
for debt restructuring and Suspension of
Mexicans
Americans
Trading
Together,
Inc (“MATT Biz”)
and&were
recorded
in selling
and administrative
expenses in the consolidated statements of operations
Subsidiary
in thewas
United
States
of America
(“USA”) to allow for greater strategic presence in the media for
31, 2013
Ps.2,807
(nominal
value).
the
group.
As
of
December
31,
2013
and
2012,
MATT
incurred
US$32
IX. AHMSA’s stock was suspended from trading
on Biz
the has
BMV
and theaccumulated
Company’s expenses
American ofDepositary
and US$27,
respectively,
arising
from
the
support
of
a
non
-profit
company
dedicated
to
encouraging
the
Receipts (“ADR’s”) were delisted from the New York Stock Exchange.
Mexican and American bicultural community to understand and resolve the main problems between the two
nations,
activity
that is consistent
with the
group’s
international
presence
AHMSA
has proposed
a preventive
payment
agreement,
which
has tostrategy.
be approved by most of its creditors
46
3
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
2012
Additionally, this subsidiary has invested US$17.5 in shares of MeetMe, Inc. (“MeetMe”), a public company
in the
of one
of the largest bicultural Hispanic community Internet sites. This investment was
Note
1. USA, owner
Nature
of business
classified as an available for sale equity security and as of December 31, 2013 and 2012 the market value is
US$5.6
and US$9.8,
respectively
(seeC.V.
Note(AHMSA)
9). Also, in
January
2008, MATT
Biz contributed
a loan of US$5
Altos
Hornos
de México,
S.A.B. de
and
subsidiaries’
(collectively
the “Company”)
is a
to
MeetMe
convertible
to
notes
(warrants)
at
an
exercise
price
of
US$2.75
dollar
per
share
that
matured
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly
tradedin
2016. During
first quarter
of on
2013,
loan
was settled
by MeetMe;
therefore,
warrants
were not
variable
capital the
corporation
listed
the the
Bolsa
Mexicana
de Valores,
S.A.B.
de C.V. the
(“BMV”,
the Mexican
exercised.
As of December 31, 2013, through this same subsidiary, US$7.4 has been invested in Boom Financial, Inc.
(“Boom”) (formerly m-Via Inc.), which is engaged in sending money through cell phones. Such investment is
recorded
the equity method,
whichand
as of
December
31, 2013 is US$0.5.
Note
2. through
Suspension
of payments
debt
restructuring
a) Suspension of Payments
Note 4.
Basis of presentation
a) New and revised
International
Financial (the
Reporting
Standards
indebtedness
of approximately
US$1,900
“DEBT”)
resulted(“IFRS”)
in the Company’s noncompliance with
In May 2011,
the International
Accounting
Boardcapacity.
(IASB) issued
a package
of five standards
on
creditors
and restructure
the debt
accordingStandards
to its payment
As such,
the Company
suspended
consolidation
that
are
mandatorily
effective
for
an
accounting
period
that
begins
on
or
after
January
1,
2013.
The new standards
are: of
joint
arrangements,
associates and
disclosures was
comprising
IFRS25,
10
declaration
of suspension
payments
status (“Suspension
of Payments”),
whichissued
was granted
on May
Consolidated
Financial
Statements,
IFRS
11
Joint
Arrangements,
IFRS
12
Disclosure
of
Interests
in
Other
1999 by the First Judge of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension of
Entities, IFRS
13 Fair
Measurement,
19 of
(asthe
revised
in 2011)
Employee
Benefits, IAS 27 (as
Payments
represents
an Value
event of
default under IAS
several
Company’s
DEBT
agreements.
revised in 2011) Separate Financial Statements, IAS 28 (as revised in 2011) Investments in Associates and
Joint
Ventures and
IFRIC 20primarily
Strippingresulted
Costs ininthe
The
Suspension
of Payments
theProduction
following: Phase of a Surface Mine. Subsequent to the
issue of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain
guidance
the first-time
application
I.transitional
All liabilities
were on
declared
due and
payable of
asthe
of standards.
May 25, 1999; therefore, as of December 31, 2013
AHMSA
and alldenominated
its subsidiaries
("the Company")
applied
theseconverted
new standards
having pesos
no significant
II.In 2013,
All foreign
currency
liabilities
existing at the
time were
into Mexican
at the
effects
on
the
consolidated
financial
statements,
except
for
the
reclassification
of
cost
of
sales and
administration
andprohibited
sale expenses
to financial
expenses,
of the
financial
the liability prior
for benefits,
III.
Creditors are
from taking
any action
to collect
debts
arisingcost
fromoftransactions
to the
termination
and
retirement
of
Ps.323
and
Ps.52,
respectively.
b) Basis
of preparation
obligations
and labor obligations. Secured debt (in the case that such debt was recognized by the
financial statements
havetobeen
prepared
on the The
historical
cost basis
except for
certain
V.TheAconsolidated
trustee was appointed
by the COURT
supervise
operations.
Company’s
management
retained
financial
instruments
that
are
measured
at
revalued
amounts
or
fair
values
at
the
end
of
each
reporting
period,
as explained in the accounting policies below.
supervision.
VI. The convertible note holders lost their right to exchange their notes for AHMSA’s capital stock.
Historical
cost is generally
based onby
themortgages
fair valueand/or
of thepledges
consideration
in exchange
for goods
and
VII.
Debt agreements
not guaranteed
ceasedgiven
to accrue
interest from
the date
services.
Fair
value
is
defined
as
the
price
that
would
be
received
for
selling
an
asset
or
be
paid
for
transferring
a liability
in anthe
orderly
transaction
between market
participants
at theand
valuation
date. ofIn
VIII.
During 2013
and 2012,
Company
made disbursements
for debt
restructuring
Suspension
estimating
themainly
fair value
of an asset or
a liability,
thewhich
Company
takes to
intoPs.115
account
thePs.303,
characteristics
of the
Payment
for professional
advisory
fees,
amounted
and
respectively,
asset
or
liability
if
market
participants
would
take
those
characteristics
into
account
when
pricing
the
asset
and were recorded in selling and administrative expenses in the consolidated statements of operationsor
liability
the measurement
date.
and atother
comprehensive
results. The cumulative amount related to these expenses as of December
c) Basis
of consolidation
IX.
AHMSA’s
stock was suspended from trading on the BMV and the Company’s American Depositary
The consolidated financial statements incorporate the financial statements of AHMSA and those of its
subsidiaries
where it holds
control as
of December
31, 2013
andhas
2012
andapproved
for the years
thenofended.
Control
AHMSA
has proposed
a preventive
payment
agreement,
which
to be
by most
its creditors
is achieved
where
a) hasrecognized
power overbythe
b) is
orthat
hasAHMSA
rights, tocould
variable
with
the right to
vote the
as aCompany:
final agreement
theinvestee,
judge, with
theexposed,
possibility
be
returns from
its involvement
withreject
the investee,
and c) has the ability to use its power to affect its returns.
declared
bankrupt
if the creditors
such plan.
1
4
47
ALTOS
HORNOS
ALTOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
NOTES
NOTESTO
TOCONSOLIDATED
FINANCIALSTATEMENTS
STATEMENTS
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that
there
to one or
of the three elements of control listed above.
Noteare
1. changesNature
of more
business
When
thanS.A.B.
a majority
of the(AHMSA)
voting rights
an investee,(collectively
it has power
the investee
AltosAHMSA
Hornos has
de less
México,
de C.V.
and ofsubsidiaries’
theover
“Company”)
is a
when
the voting
rights
sufficient
to giveAcerero
it the practical
ability
the relevant
the
Mexican
company
andare
subsidiary
of Grupo
del Norte,
S.A. to
de direct
C.V. (“GAN”)
and isactivities
a publiclyoftraded
investee
AHMSA listed
considers
allBolsa
relevant
facts and
circumstances
whether
or not
variableunilaterally.
capital corporation
on the
Mexicana
de Valores,
S.A.B.indeassessing
C.V. (“BMV”,
the Mexican
AHMSA’s
voting rights
an activity
investeeis are
sufficient toand
give
it power,
including:
a) the
of AHMSA’s
Stock Exchange).
The in
main
the production
sale
of flat steel
products
and size
structural
sections.
holding
of voting
rights
relative to theJuárez
size and
holdings of the other vote holders; b) potential
AHMSA’s
address
is Prolongación
S/N,dispersion
Monclova,ofCoahuila.
voting rights held by AHMSA, other vote holders or other parties; c) rights arising from other contractual
arrangements; and d) any additional facts and circumstances that indicate that AHMSA has, or does not
have,
to directofthe
relevant and
activities
the time that decisions need to be made, including
Notethe
2. current ability
Suspension
payments
debt at
restructuring
voting patterns at previous shareholders’ meetings.
AHMSA's significant subsidiaries and associated companies are as follows:
Subsidiaries:
indebtedness of approximately US$1,900 (the “DEBT”) resulted in the Company’s noncompliance with
 creditors
MINOSAand
which,
through the
its mines,
conducts the
following
activities
in itsAs
different
restructure
debt according
to its
payment
capacity.
such, divisions:
the Company suspended
- Mining ofoniron
ore 24,
used1999,
by AHMSA
in the
of steel products.
Company,
May
AHMSA
andproduction
various subsidiaries
(see Note 3 c)) requested a judicial
declaration of suspension of payments status (“Suspension of Payments”), which was granted on May 25,
- Mining
metallurgical
that Instance
is used byCourt
AHMSA
in its steelCoahuila
process.(the “COURT”). The Suspension of
1999
by theofFirst
Judge of coal
the First
in Monclova,
- Mining of steam coal used by the Comisión Federal de Electricidad (“Mexican Federal Power
orPayments
“CFE”) to produce
its following:
thermoelectric plants.
TheCommission”
Suspension of
primarily electricity
resulted ininthe
 I. Nacional
de Acero,
de C.V.
whose
is the
partial as
distribution
and 31,
sale2013
of
All liabilities
were S.A.
declared
due (“NASA”)
and payable
as ofmain
Mayactivity
25, 1999;
therefore,
of December
AHMSA’s
steelthe
products
domesticismarket.
and 2012,
balanceinofthe
Ps.14,951
reported as a current liability.
II. All foreign currency denominated liabilities existing at the time were converted into Mexican pesos at the
exchange
effect
as of
May 25, 1999
Note(“RDM”)
24). and Compañía Minera el Baztán, S.A. de
 Compañía
de rate
Realindel
Monte
y Pachuca,
S.A. (see
de C.V.
III.C.V.,
Creditors
are prohibited
from
takingisany
to collect
debts arising
prior
to the
(“BAZTAN”)
whose main
activity
the action
exploration
and exploitation
of from
gold transactions
and silver, and
copper
Suspension
of Payments.
deposits,
respectively.
obligationsownership
and laborin obligations.
Secured
the case
that such debt was recognized by the
The Company’s
MINOSA, NASA,
RDMdebt
and(in
BAZTAN
is 100%.
V. venture:
A trustee was appointed by the COURT to supervise operations. The Company’s management retained
Joint
supervision.
 Línea
Coahuila-Durango, S.A. de C.V. (“LCD”) is a railroad company and a 50% joint venture with
VI.
The convertible
to exchange
their notes
for AHMSA’scoal
capital
stock.
Industrias
Peñoles, note
S.A. holders
de C.V.lost
Itstheir
mainright
activity
is the transport
of metallurgical
to AHMSA’s
steel
VII.
Debt agreements
producing
facilities. not guaranteed by mortgages and/or pledges ceased to accrue interest from the date
During intercompany
2013 and 2012,
the Company
made disbursements
AllVIII.
significant
balances
and transactions
have been eliminated.
and were investment
recorded ininselling
administrative
expenses
in the consolidated
statements
of operations
The Company’s
LCD isand
accounted
for by the
equity method,
because it is
a joint venture.
2013
was Ps.2,807
(nominal value).
Income31,and
expenses
of subsidiaries
acquired or disposed of during the year are included in the
IX. AHMSA’s
stock was
suspendedand
from
trading
on the BMV
and from
the Company’s
Depositary
consolidated
statements
of operations
other
comprehensive
results
the effectiveAmerican
date of acquisition
(“ADR’s”)
were
delisted as
from
the New York Stock Exchange.
and upReceipts
to the effective
date
of disposal,
appropriate.
AHMSA has proposed a preventive payment agreement, which has to be approved by most of its creditors
48
5
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
DECEMBER 31, 2013 AND 2012
The condensed balance sheet to the date of AGROS incorporation, subsidiary acquired during 2013, is as
follow:
Note
1.
Nature of business
Altos Hornos de México, S.A.B. de C.V. (AHMSA) and subsidiaries’ 2013
(collectively the “Company”) is a
Available-for-sale
2,228
Ps. S.A.B.
variable capital corporation
listed onassets
the Bolsa Mexicana de Valores,
de C.V. (“BMV”, the Mexican
current
assets
118 and structural sections.
Stock Exchange). Other
The main
activity
is the production and sale of flat steel products
AHMSA’s addressDeferred
is Prolongación
income Juárez
taxes S/N, Monclova, Coahuila.
419
2,765
Total assets
Ps.
Note 2.
Suspension
of payments and debt restructuring
Total liabilities
Ps.
1,141
a)
Suspension of Payments
Stockholders' equity
1,624
liabilities
and stockholders'
2,765 with the Company’s high
Ps.
In 1999, both the Total
adverse
situation
affecting the equity
world steel industry
combined
The non-controlling
interesttherefore
can be initially
at either
fair value began
or proportional
interest
of the controlling
certain
financial covenants;
on Aprilvalued
26, 1999,
the Company
a process
to renegotiate
with its
interest and
over restructure
the fair value
of theaccording
net identifiable
assets of
the acquired
company.
The election
of the
creditors
the debt
to its payment
capacity.
As such,
the Company
suspended
valuationofbase
is carriedand
outinterest
individually
each transaction.
Subsequent
to thefiled
acquisition,
the carrying
payments
the principal
on all for
its debts.
Because some
of its creditors
lawsuits against
the
amount ofon
theMay
controlling
interests
represents
the amount
of such (see
interest
upon
recognition,
plus the
Company,
24, 1999,
AHMSA
and various
subsidiaries
Note
3 initial
c)) requested
a judicial
portion of of
non-controlling
subsequent
to the consolidated
statement
of was
changes
in stockholders’
declaration
suspension ofinterest
payments
of Payments”),
which
granted
on May 25,
equity.
Comprehensive
income
is
attributed
to
the
non-controlling
interest,
even
though
it
gives rise toof a
1999 by the First Judge of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension
deficiencyrepresents
therein. an event of default under several of the Company’s DEBT agreements.
Payments
The Suspension of Payments primarily resulted in the following:
Note 5.
Significant accounting policies summary
I.
Theand
accompanying
consolidated
financial
statements
been
prepared in accordance with International
2012, the balance
of Ps.14,951
is reported
as ahave
current
liability.
Financial
Reporting
Standards
released
by
IASB,
which
require
that
certain
estimates
II. All foreign currency denominated liabilities existing at the time were management
converted intomake
Mexican
pesos
at the
andexchange
use certain
assumptions
that
affect
the
amounts
reported
in
the
financial
statements
and
their
related
rate in effect as of May 25, 1999 (see Note 24).
disclosures;
however,
actual
results
may
differ
from
such
estimates.
The
Company’s
management,
III. Creditors are prohibited from taking any action to collect debts arising from transactions prior to upon
the
applying
professional
judgment, considers that estimates made and assumptions used were adequate under
Suspension
of Payments.
the All
circumstances
(seefor
Note
IV.
lawsuits filed
the6).collection of any monetary obligations were suspended, except for tax
obligations and labor obligations. Secured debt (in the case that such debt was recognized by the
TheCOURT)
significant
accounting
policies
of theuntil
Company
are of
asthe
follows:
continues
accruing
interest
the value
security interest is reached.
V. A trustee was appointed by the COURT to supervise operations. The Company’s management retained
a) administrative
Cash and cashcontrol
equivalents
and continued operations in the ordinary course of business under the trustee’s
supervision.
Cash
cash equivalents
bank deposits
in for
checking
accounts
and short-term
VI.
Theand
convertible
note holdersconsist
lost theirmainly
right toofexchange
their notes
AHMSA’s
capital stock.
investments,
highly
liquid
and
easily
convertible
into
cash,
which
are
subject
to
insignificant
value
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased to accrue interest from
thechange
date
risks.
Cash
is
stated
at
nominal
value
and
cash
equivalents
are
measured
at
fair
value;
any
fluctuations
in
value
are recognized
the consolidated
statements
of operationsfor
anddebt
other
comprehensive
VIII.
During
2013 and in
2012,
the Company
made disbursements
restructuring
and results.
Suspension of
b) and
Financial
assets in selling and administrative expenses in the consolidated statements of operations
were recorded
Financial
assets
and financial
liabilities
31, 2013
was Ps.2,807
(nominal
value).are recognized when the Company becomes a party to the
contractual
provisions
of the
instrument.
IX.
AHMSA’s
stock was
suspended
from trading on the BMV and the Company’s American Depositary
Financial assets and financial liabilities are initially measured at fair value.
Financial
assets
areas
classified
into the following
specified
categories:
(i)the
financial
assets
‘atAHMSA
fair value
through
with
the right
to vote
a final agreement
recognized
by the
judge, with
possibility
that
could
be
profit orbankrupt
loss', (ii)if‘held-to-maturity'
investments,
declared
the creditors reject
such plan. (iii) ‘available-for-sale' financial assets and (iv) ‘loans and
receivables'. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
1
6
49
ALTOS
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
NOTES
NOTESTO
TOCONSOLIDATED
FINANCIALSTATEMENTS
STATEMENTS
The effective interest method is a method of calculating the amortized cost of a debt instrument and of
allocating
income
the relevant period. The effective interest rate is the rate that exactly
Note 1. interestNature
of over
business
discounts estimated future cash receipts through the expected life of the debt instrument, or, where
appropriate,
a shorter
period,S.A.B.
to the net
amount on
recognition.
Altos Hornos
de México,
de carrying
C.V. (AHMSA)
andinitial
subsidiaries’
Income
recognized
on an effective
basis
for debtdeinstruments
other de
than
those
financial
assets
variableis capital
corporation
listed on interest
the Bolsa
Mexicana
Valores, S.A.B.
C.V.
(“BMV”,
the Mexican
classified
as
at
fair
value
through
profit
or
loss.
(i) Financial assets classified as at fair value through profit or loss.
ANote
financial
classified asofatpayments
fair value through
profit
or loss if:
2. asset isSuspension
and debt
restructuring
It has been of
acquired
principally for the purpose of selling it in the near term; or
a)  Suspension
Payments
 On both
initialthe
recognition
it is partaffecting
of a portfolio
of identified
financial
instruments
thatCompany’s
the Company
In 1999,
adverse situation
the world
steel industry
combined
with the
high
manages
together
and
has
a
recent
actual
pattern
of
short-term
profit-taking;
or
 It isand
a derivative
thatthe
is not
designated
as acapacity.
hedging instrument.
creditors
restructure
debt
accordingand
to effective
its payment
As such, the Company suspended
ACompany,
financial asset
than1999,
a financial
assetand
heldvarious
for trading
may be designated
as 3at c))
fair requested
value through
profit
on other
May 24,
AHMSA
subsidiaries
(see Note
a judicial
ordeclaration
loss upon initial
recognition
if:
of suspension of payments status (“Suspension of Payments”), which was granted on May 25,
 Suchrepresents
designation
or significantly
reduces
a measurement
or recognition
inconsistency that
Payments
aneliminates
event of default
under several
of the
Company’s DEBT
agreements.
would otherwise arise; or
 The financial asset forms part of a group of financial assets or financial liabilities or both, which is
managed
its declared
performance
is evaluated
value
basis, therefore,
in accordance
the Company's
I.
All
liabilitiesand
were
due and
payable on
as aoffair
May
25, 1999;
as ofwith
December
31, 2013
documented
risk management
or investment
and liability.
information about the grouping is provided
and
2012, the balance
of Ps.14,951
is reportedstrategy,
as a current
internally
on that basis;
or
II. All
foreign currency
denominated
liabilities existing at the time were converted into Mexican pesos at the
It forms are
partprohibited
of a contract
or more
embedded
derivatives,
and IAS 39, prior
Financial
III.  Creditors
fromcontaining
taking anyone
action
to collect
debts arising
from transactions
to the
Instruments:
Suspension
of Recognition
Payments. and Measurement, permits the entire combined contract (asset or liability)
to be
designated
fair collection
value through
profitmonetary
or loss. obligations were suspended, except for tax
IV. All
lawsuits
filed as
for atthe
of any
Financial
assets classified
as at fair
value
through
profit
or loss
are stated
at fair value, with any
COURT)
continues
accruing interest
until
the value
of the
security
interest
is reached.
losses
arisingbyon
recognized
in profit
or loss. The
net gain or
loss
V. A gains
trusteeorwas
appointed
theremeasurement
COURT to supervise
operations.
The Company’s
management
retained
recognized incontrol
profit or
loss
incorporates
any dividend
interestcourse
earnedofon
the financial
and is
administrative
and
continued
operations
in the or
ordinary
business
underasset
the trustee’s
included in the other (income) expenses, net in the consolidated statements of operations and other
supervision.
comprehensive
results.
VI. The
convertible note
holders lost their right to exchange their notes for AHMSA’s capital stock.
(ii) Held-to-maturity
investments
of the Suspension
of Payments.
VIII. During 2013 and 2012, the Company made disbursements for debt restructuring and Suspension of
Held-to-maturity
investments
are non-derivative
assets
with fixed
or determinable
payments
and
Payment mainly
for professional
advisory financial
fees, which
amounted
to Ps.115
and Ps.303,
respectively,
fixed maturity
dates
that the
Company
the positiveexpenses
intent and
to hold to maturity.
Subsequent
to
and were
recorded
in selling
and has
administrative
in ability
the consolidated
statements
of operations
initial recognition,
held-to-maturityresults.
investments
are measured
at amortized
the effective
interest
and other comprehensive
The cumulative
amount
related to cost
theseusing
expenses
as of December
method
less
anywas
impairment.
31,
2013
Ps.2,807 (nominal value).
IX. AHMSA’s stock was suspended from trading on the BMV and the Company’s American Depositary
(iii) Available-for-sale
financial
Receipts (“ADR’s”)
wereassets
delisted from the New York Stock Exchange.
Available-for-sale
financial
assets are payment
non-derivatives
that are
either
as available-for-sale
or are
AHMSA has proposed
a preventive
agreement,
which
hasdesignated
to be approved
by most of its creditors
not
classified
(a) loans
and agreement
receivables,recognized
(b) held-to-maturity
investments
or (c) financial
assetscould
at fairbe
with
the rightas
to vote
as a final
by the judge,
with the possibility
that AHMSA
value
through
profit or
loss.
declared
bankrupt
if the
creditors reject such plan.
50
7
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
Listed redeemable notes held by the Company that are traded in an active market are classified as availablefor-sale
statedofatbusiness
fair value at the end of each reporting period. The profits or losses in the carrying
Note
1. and are
Nature
amount of available-for-sale financial assets are recognized in other comprehensive income. When the
investment
or isdedetermined
to beand
impaired,
the cumulative
loss previously
Altos
Hornos isdedisposed
México, of
S.A.B.
C.V. (AHMSA)
subsidiaries’
(collectivelygain
the or
“Company”)
is a
accumulated
in
other
comprehensive
income
is
reclassified
to
the
consolidated
statements
of
operations
and
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly
traded
other
comprehensive
results.
variable capital corporation listed on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV”, the Mexican
Dividendsaddress
on available-for-sale
instruments
are recognized
AHMSA’s
is Prolongaciónequity
Juárez
S/N, Monclova,
Coahuila. in profit or loss when the Company's right
to receive the dividends is established.
(iv) Loans
and Suspension
receivables of payments and debt restructuring
Note
2.
accounts of
receivable,
a)Trade
Suspension
Paymentsloans and other accounts receivable with fixed or determinable payments that
are not quoted in an active market are classified as loans and receivables. Loans and receivables are
at the
amortized
using affecting
the effective
interest
method,
lesscombined
any impairment.
income
Inmeasured
1999, both
adversecost
situation
the world
steel
industry
with the Interest
Company’s
highis
recognized
by
applying
the
effective
interest
rate.
Impairment
financial assets
creditors
andofrestructure
the debt according to its payment capacity. As such, the Company suspended
Financial on
assets,
than those
at and
fair value
profit or
loss,
are3 assessed
for indicators
Company,
May other
24, 1999,
AHMSA
variousthrough
subsidiaries
(see
Note
c)) requested
a judicialof
impairment
at
the
end
of
each
reporting
period.
Financial
assets
are
considered
to
be
impaired
when
there
declaration of suspension of payments status (“Suspension of Payments”), which was granted on May
25,is
objective
evidence
that,
as
a
result
of
one
or
more
events
that
occurred
after
the
initial
recognition
of
the
financial
asset,
the
estimated
future
cash
flows
of
the
investment
have
been
affected.
ForSuspension
available-for-sale
equity primarily
investments,
a significant
or prolonged decline in the fair value of the security
The
of Payments
resulted
in the following:
below its cost is considered to be objective evidence of impairment.
I.
Theand
carrying
amount
of trade
accounts
reducedliability.
through the use of an allowance account.
2012, the
balance
of Ps.14,951
is receivable
reported asisa current
When
a
trade
receivable
is
considered
uncollectible,
it
is
written
off againstintothe
allowance
II. All foreign currency denominated liabilities existing at the time were converted
Mexican
pesosaccount.
at the
Subsequent
recoveries
of
amounts
previously
written
off
are
credited
against
the
allowance
account.
in the
amount
the allowance
account
are recognized
in profit
loss.
III.Changes
Creditors
arecarrying
prohibited
fromoftaking
any action
to collect
debts arising
fromortransactions
prior to the
When
an available-for-sale
is considered
to be impaired,
cumulative gains
IV.
All lawsuits
filed for the financial
collectionasset
of any
monetary obligations
were suspended,
except orforlosses
tax
previously
recognized
in other
comprehensive
arethe
reclassified
profit debt
or loss
in the
period. by the
obligations
and labor
obligations.
Securedincome
debt (in
case thattosuch
was
recognized
assets
measured
at amortized
if, in aoperations.
subsequentThe
period,
the amount
of the impairment
V.ForAfinancial
trustee was
appointed
by the
COURT tocost,
supervise
Company’s
management
retained
lossadministrative
decreases and
the
decrease
can
be
related
objectively
to
an
event
occurring
after
the
was
control and continued operations in the ordinary course of business underimpairment
the trustee’s
recognized,
the
previously
recognized
impairment
loss
is
reversed
through
profit
or
loss
to
the
extent
that
the
supervision.
carrying
amount
of
the
investment
at
the
date
the
impairment
is
reversed
does
not
exceed
what
the
amortized
cost would not
have
been had the
impairmentand/or
not been
recognized.
VII.
Debt agreements
guaranteed
by mortgages
pledges
ceased to accrue interest from the date
In respect
available-for-sale
securities,
losses
recognized
in profit
or loss of
are
VIII.
During of
2013
and 2012, theequity
Company
madeimpairment
disbursements
forpreviously
debt restructuring
and
Suspension
not Payment
reversed through
profit
or
loss.
Any
increase
in
fair
value
subsequent
to
an
impairment
loss
is
recognized
mainly for professional advisory fees, which amounted to Ps.115 and Ps.303, respectively,
in other
comprehensive
and were
recorded inincome.
selling and administrative expenses in the consolidated statements of operations
Derecognition
of financial
31, 2013 was
Ps.2,807assets
(nominal value).
TheReceipts
Company
derecognizes
a financial
when
theStock
contractual
rights to the cash flows from the asset
(“ADR’s”)
were delisted
fromasset
the New
York
Exchange.
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset tohas
another
party.a Ifpreventive
the Company
neither
transfers nor
retains
substantially
all by
themost
risksof
and
AHMSA
proposed
payment
agreement,
which
has to
be approved
its rewards
creditorsof
ownership
and
continues
to
control
the
transferred
asset,
the
Company
recognizes
its
retained
interest
the
with the right to vote as a final agreement recognized by the judge, with the possibility that AHMSA couldinbe
asset
and
an
associated
liability
for
amounts
it
may
have
to
pay.
If
the
Company
retains
substantially
all
the
risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the
financial asset and also recognizes a collateralized borrowing for the proceeds received.
1
8
51
ALTOSNOTES
HORNOS
MÉXICO, S.A.B.
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TOAS
CONSOLIDATED
STATEMENTS
OF DECEMBERFINANCIAL
31, 2013 AND
2012
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and
the
sum
received and receivable and the cumulative gain or loss that had been
Note
1. of the consideration
Nature of business
recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
Altos Hornos de México, S.A.B. de C.V. (AHMSA) and subsidiaries’ (collectively the “Company”) is a
c)Mexican
Inventories,
net and
of salesof Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
company
and cost
subsidiary
Inventories
are stated
at main
the lower
of average
cost or realizable
includingand
a portion
of fixed
and
Stock Exchange).
The
activity
is the production
and salevalue.
of flatCosts,
steel products
structural
sections.
variable
indirect
costs,
are
assigned
to
inventories
through
the
most
appropriate
method
for
the
particular
class of inventory, most of them being valued using the average cost method. Net realizable value
represents the estimated selling price for inventories less all estimated costs of completion and costs
necessary
the sale. of payments and debt restructuring
Note 2. to make
Suspension
The
records
an allowance for operating materials (materials and spare parts) aged over 36 months
a) Company
Suspension
of Payments
or when other qualitative factors indicate that they have been damaged.
Scrap
inventory,ofa by-product
of AHMSA’s
production
process,
is reused
as secondary
materials, andwith
is
indebtedness
approximately
US$1,900
(the “DEBT”)
resulted
in the
Company’sraw
noncompliance
valued
at
the
average
cost
of
acquisition,
less
the
cost
incurred
to
process
it
and
the
recovery
cost.
Purchased
scraprestructure
is valued at
thedebt
average
cost oftoacquisition.
creditors and
the
according
its payment capacity. As such, the Company suspended
The
costs incurred
removing
and waste
during the
underground
to access
ore
Company,
on Mayin 24,
1999, soil
AHMSA
and various
subsidiaries
(seemining
Note 3production
c)) requested
a judicial
deposits
are regularly
knownofaspayments
long wall status
costs and
are capitalized
in produced
(mined)
They
declaration
of suspension
(“Suspension
of Payments”),
which
wasinventory.
granted on
Mayare
25,
valued
using
incurred
are charged
results
of the year Coahuila
when the(the
underlying
mineral
sold, whichof
1999 by
thecosts
First Judge
of and
the First
InstancetoCourt
in Monclova,
“COURT”).
TheisSuspension
normally
occurs
within aan
period
thanunder
twelveseveral
months.
Payments
represents
eventofofless
default
of the Company’s DEBT agreements.
When
an impairment
indicator suggests
that the in
carrying
amounts of inventories might not be recoverable,
The Suspension
of Payments
primarily resulted
the following:
the Company reviews such carrying amounts, estimates the net realizable value, based on the most reliable
evidence
available were
at thatdeclared
time. Impairment
is recorded
if the
net
realizable
value is less
the book31,
value.
I.
All liabilities
due and payable
as of
May
25,
1999; therefore,
as ofthan
December
2013
Impairment
indicators
considered
for these
purposes
among
others, obsolescence, a decrease in
and 2012,
the balance
of Ps.14,951
is reported
as are,
a current
liability.
market
prices,
damage,
and
a firm commitment
sell. at the time were converted into Mexican pesos at the
II. All
foreign
currency
denominated
liabilitiestoexisting
d)III.Investments
in associates
joint
ventures
Creditors are
prohibitedand
from
taking
any action to collect debts arising from transactions prior to the
An
is an filed
entity for
overthe
which
the Company
significant
influencewere
and that
is neitherexcept
a subsidiary
IV.associate
All lawsuits
collection
of any has
monetary
obligations
suspended,
for tax
nor anobligations
interest inand
a joint
Significant
influence
thecase
power
participate
in the
financialbyand
laborventure.
obligations.
Secured
debt (inisthe
thattosuch
debt was
recognized
the
operating
policycontinues
decisions accruing
of the investee
is not
joint
controlinterest
over those
policies.
COURT)
interestbut
until
the control
value oforthe
security
is reached.
A jointadministrative
venture is a contractual
arrangement
whereby the
andcourse
other parties
undertake
economic
control and
continued operations
in Company
the ordinary
of business
underanthe
trustee’s
activitysupervision.
that is subject to joint control (i.e. when the strategic financial and operating policy decisions relating
toVI.
the The
activities
of thenote
jointholders
venture
the to
unanimous
of for
theAHMSA’s
parties sharing
control). Joint
convertible
lostrequire
their right
exchange consent
their notes
capital stock.
venture
arrangements
that
involve
the
establishment
of
a
separate
entity
in
which
each
venture
an
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased to accrue interest from has
the date
interestofare
referred
to
as
jointly
controlled
entities.
the Suspension of Payments.
The results
and mainly
assets for
andprofessional
liabilities of advisory
associates
or joint
ventures
are to
incorporated
these consolidated
Payment
fees,
which
amounted
Ps.115 andin Ps.303,
respectively,
financial
usinginthe
equity
method
of accounting.
Under
the consolidated
equity method,
an investment
in an
andstatements
were recorded
selling
and
administrative
expenses
in the
statements
of operations
associate
a joint
venture is initially
recognized
in the consolidated
statement
financial position
at cost
and or
other
comprehensive
results.
The cumulative
amount related
to theseofexpenses
as of December
31, 2013thereafter
was Ps.2,807
(nominalthe
value).
and adjusted
to recognize
Company’s share of the profit or loss and other comprehensive
IX. AHMSA’s
stock was
suspended
trading
on the in
BMV
and the Company’s
Depositary
income
of the associate
or joint
venture, from
less any
impairment
the individual
value of theAmerican
investments.
Any excess of the cost of acquisition over the Company's share of the net fair value of the identifiable assets,
AHMSAand
hascontingent
proposed aliabilities
preventive
payment
agreement,
hasrecognized
to be approved
most
of its creditors
liabilities
of an
associate
or a jointwhich
venture
at the by
date
of acquisition
is
with
the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
could
recognized as goodwill, which is included within the carrying amount of the investment. When necessary,
thebe
declared
bankrupt
if the
rejectis such
plan.
entire
carrying
amount
of creditors
the goodwill
tested
for impairment. Any excess of the Company's share of the
net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
1
52
9
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTESTO
TOCONSOLIDATED
FINANCIALSTATEMENTS
STATEMENTS
NOTES
When the Company transacts with its associate or a joint venture, profits and losses resulting from the
transactions
with
the associate
or joint venture are recognized in the Company's consolidated financial
Note
1.
Nature
of business
statements only to the extent of interests in the associate that are not related to the Company.
e) Property,
plantand
andsubsidiary
equipment,
Mexican
company
of net
Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
Property,
plant and
equipment
recorded
initially
Properties
in the sections.
course of
Stock
Exchange).
The main
activityare
is the
production
and at
saleacquisition
of flat steelcost.
products
and structural
construction
for
production,
supply
or
administrative
purposes
are
carried
at
cost,
less
any
recognized
impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in
accordance with the Company's accounting policy.
Note 2.
Suspension of payments and debt restructuring
Depreciation commences when the assets are ready for their intended use and is computed using the
method
applying the estimated useful lives of the assets. Freehold land is not depreciated.
a)straight-line
Suspension
of Payments
estimated
useful
livessituation
and residual
values
reviewed
at the end
of eachwith
reporting
period, with
the
InThe
1999,
both the
adverse
affecting
theare
world
steel industry
combined
the Company’s
high
effect
of
any
changes
in
estimate
accounted
for
on
a
prospective
basis.
Assets held
finance
are depreciated
over their
expectedAsuseful
on the same
basis as
creditors
and under
restructure
theleases
debt according
to its payment
capacity.
such,lives
the Company
suspended
owned assets
over theand
lease
term.on all its debts. Because some of its creditors filed lawsuits against the
payments
of theorprincipal
interest
Any gain or
loss arising ofonpayments
the disposal
retirement ofofan
item of property,
plant
and equipment
declaration
of suspension
statusor(“Suspension
Payments”),
which was
granted
on May 25,is
determined
as the
difference
between
theCourt
salesinproceeds
the carrying
amount of
asset andofis
1999
by the First
Judge
of the First
Instance
Monclova,and
Coahuila
(the “COURT”).
Thethe
Suspension
recognized
in profit oranloss.
Payments
represents
event of default under several of the Company’s DEBT agreements.
TheSuspension
Company records
its repair
and maintenance
in current earnings as incurred. Major repairs and
The
of Payments
primarily
resulted in thecosts
following:
replacements that increase the useful life of an asset and its productive capacity are capitalized and
overwere
the declared
remainingdue
useful
of theas
assets.
repairs
consist as
of of
equipment
restorations,
I.depreciated
All liabilities
andlife
payable
of MayMajor
25, 1999;
therefore,
December
31, 2013
renovations,
replacements,
refurbishing,
and/or
and 2012,partial
the balance
of Ps.14,951
is reported
as arenovations.
current liability.
Costs
and loans
to 1999
the period
of construction
and installation of qualifying property,
exchange
rate directly
in effectattributable
as of May 25,
(see Note
24).
machinery
areto amortized
in the
average
depreciation prior
term toof the
the
III.
Creditorsand
areequipment
prohibited are
fromcapitalized,
taking any and
action
collect debts
arising
from transactions
corresponding
Suspensionassets.
of Payments.
f) obligations
Non-currentand
assets
classified
as held
for saledebt (in the case that such debt was recognized by the
labor
obligations.
Secured
and disposal
classified operations.
as held forThe
sale
if their carrying
amount
will be
V.Non-current
A trustee assets
was appointed
by the groups
COURTare
to supervise
Company’s
management
retained
recovered
principally
through
sale transaction
rather
through continuing
use. This under
condition
deemed
administrative
control
andacontinued
operations
in than
the ordinary
course of business
the istrustee’s
as met
only when the asset (or disposal group) is available for immediate sale in its present condition subject
supervision.
onlyThe
to terms
that are
usual
and lost
customary
fortosales
of such
asset
(or for
disposal
group)
andstock.
its sale is highly
VI.
convertible
note
holders
their right
exchange
their
notes
AHMSA’s
capital
probable.
Management
must
be
committed
to
the
sale,
which
should
be
expected
to
qualify
for recognition
the date
as aofcompleted
sale
within
one
year
from
the
date
of
classification.
When
the Company
to aadvisory
sale planfees,
involving
of controltoofPs.115
a subsidiary,
all of the
assets and
Payment
mainly is
forcommitted
professional
whichloss
amounted
and Ps.303,
respectively,
liabilities
of that
subsidiary
are and
classified
as held expenses
for sale when
the criteria described
are met,
and were
recorded
in selling
administrative
in the consolidated
statementsabove
of operations
regardless
of whether
the Company
willThe
retain
a non-controlling
interest to
in these
its former
subsidiary
after
the sale.
and other
comprehensive
results.
cumulative
amount related
expenses
as of
December
Non-current
disposal groups)
classified
sale
measuredAmerican
at the lower
of their
IX.
AHMSA’sassets
stock (and
was suspended
from trading
on as
the held
BMVforand
theare
Company’s
Depositary
previous
carrying
amount
and
fair value
less
sell.Stock Exchange.
Receipts
(“ADR’s”)
were
delisted
from
thecosts
New to
York
g) Leasing
AHMSA
has proposed a preventive payment agreement, which has to be approved by most of its creditors
Leases bankrupt
are classified
financereject
leases
whenever
declared
if theas
creditors
such
plan. the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee. All other leases are classified as operating leases.
1
10
53
ALTOSNOTES
HORNOS
MÉXICO, S.A.B.FINANCIAL
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
OF DECEMBER 31, 2013 AND 2012
Assets held under finance leases are initially recognized as assets of the Company at their fair value at the
inception
or, of
if lower,
at the present value of the minimum lease payments. The corresponding
Note 1. of the lease
Nature
business
liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.
Lease
payments
areand
apportioned
finance
expenses
andS.A.
reduction
the lease
so as
to
Mexican
company
subsidiarybetween
of Grupo
Acerero
del Norte,
de C.V.of(“GAN”)
andobligation
is a publicly
traded
achieve
a
constant
rate
of
interest
on
the
remaining
balance
of
the
liability.
Finance
expenses
are
recognized
immediately
in profitThe
or loss,
they
areproduction
directly attributable
assets, inand
which
case they
are
Stock Exchange).
mainunless
activity
is the
and sale to
of qualifying
flat steel products
structural
sections.
capitalized
in
accordance
with
the
Company's
general
policy
on
borrowing
costs
(see
subsection
t).
Contingent rentals are recognized as expenses in the periods in which they are incurred.
Operating
areofrecognized
expense
on a straight-line basis over the lease term.
Note 2. lease payments
Suspension
payments as
andan
debt
restructuring
Contingent rentals arising under operating leases are recognized as an expense in the period in which they
are
a) incurred.
h)In Intangible
assets
1999, both
the adverse situation affecting the world steel industry combined with the Company’s high
Intangible
assets covenants;
consist of therefore
expenditures
whose
benefits
will be received
the future
and comprise
certain financial
on April
26, 1999,
the Company
began ainprocess
to renegotiate
with its
intangible
with defined
are subject
amortization.
creditorsassets
and restructure
thelives,
debtwhich
according
to its to
payment
capacity. As such, the Company suspended
Mine
exploration
expenses
are applied
to current
earningsubsidiaries
as incurred (see
until the
date
Company,
on May
24, 1999,
AHMSA
and various
Note
3 the
c)) economic
requestedfeasibility
a judicial
study
is
performed.
Once
the
economic
feasibility
is
confirmed
and
the
ore
reserves
are
confirmed
declaration of suspension of payments status (“Suspension of Payments”), which was granted as
on proven
May 25,
and
probable,
all the
costs
incurred
in the underground
minesCoahuila
are capitalized
in Mine The
preparation
andof
1999
by the First
Judge
of the
First Instance
Court in Monclova,
(the “COURT”).
Suspension
development
costs.
Barren
material
in
the
open
pit
mines
is
removed
before
the
ore
is
extracted.
These
are
known as pre-production stripping costs and the Company capitalizes them in Mine preparation and
development
costs.ofCosts
incurred
in mine
preparation
development are amortized based on a depletion
The Suspension
Payments
primarily
resulted
in the and
following:
factor, determined by the proven ore reserves.
I.
An intangible
asset
derecognized
on disposal,
or when
futureliability.
economic benefits are expected from use
and 2012,
theisbalance
of Ps.14,951
is reported
as ano
current
orII.disposal.
Gains
or
losses
arising
from
derecognition
of
an
intangible
measured
as the pesos
difference
All foreign currency denominated liabilities existing at the time wereasset,
converted
into Mexican
at the
between
the
net
disposal
proceeds
and
the
carrying
amount
of
the
asset,
and
are
recognized
in
profit
or loss
when
asset isare
derecognized.
III. the
Creditors
prohibited from taking any action to collect debts arising from transactions prior to the
i) IV.Impairment
of tangible
intangible
assets
All lawsuits
filed forand
the
collection
of any monetary obligations were suspended, except for tax
At the COURT)
end of each
reporting
period,interest
the Company
the
its tangible and intangible
continues
accruing
until thereviews
value of
thecarrying
securityamounts
interest of
is reached.
assets
determine
whether there
is any
indication
that those
assets have
suffered anmanagement
impairment loss.
If
V. Atotrustee
was appointed
by the
COURT
to supervise
operations.
The Company’s
retained
any such
indication
exists,
the
recoverable
amount
of
the
asset
is
estimated
in
order
to
determine
the
extent
of the supervision.
impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual
asset,
the convertible
Company estimates
thelost
recoverable
of the
unitcapital
to which
the asset
VI. The
note holders
their right toamount
exchange
theircash-generating
notes for AHMSA’s
stock.
belongs.
When
a
reasonable
and
consistent
basis
of
allocation
can
be
identified,
corporate
assets
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased to accrue interest fromare
thealso
date
allocated
to
individual
cash-generating
units,
or
otherwise
they
are
allocated
to
the
smallest
group
of
cashof the Suspension of Payments.
generating
units
for which
a reasonable
and consistent
allocation basis
berestructuring
identified. and Suspension of
VIII. During
2013
and 2012,
the Company
made disbursements
forcan
debt
Intangible
with indefinite
useful
and intangible
assets
not consolidated
yet availablestatements
for use areoftested
for
and assets
were recorded
in selling
and lives
administrative
expenses
in the
operations
impairment
at
least
annually,
and
whenever
there
is
an
indication
that
the
asset
may
be
impaired.
Recoverable
amount
the higher
of fair from
valuetrading
less costs
to sell
andand
value
use. In assessing
value
in use,
IX. AHMSA’s
stockis was
suspended
on the
BMV
theinCompany’s
American
Depositary
the estimated
future
cash
flows
are
discounted
to
their
present
value
using
a
pre-tax
discount
rate
that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the
estimates
future cash
flows havepayment
not beenagreement,
adjusted. which has to be approved by most of its creditors
AHMSA
hasofproposed
a preventive
If declared
the recoverable
of an asset
cash-generating
unit) is estimated to be less than its carrying
bankruptamount
if the creditors
reject(or
such
plan.
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognized immediately in profit or loss.
1
54
11
TO DE
CONSOLIDATED
FINANCIAL
STATEMENTS
ALTOSNOTES
HORNOS
MÉXICO, S.A.B.
DE C.V. AND
SUBSIDIARIES
Based on current prices and certain indicators, as of December 31, 2013 and 2012, the Company’s
management
performed
annual impairment study concluding that no impairment charge was necessary;
Note
1.
Nature ofits
business
however, given the economic environment in which the Company operates and the uncertainties in the
restructuring
the Company
continue
to monitor
for potential impairment.
Altos
Hornos process,
de México,
S.A.B. dewill
C.V.
(AHMSA)
and subsidiaries’
j) Other
assets,
net
variable
capital
corporation
listed on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV”, the Mexican
Disposal address
assets are
classified as held
forS/N,
sale Monclova,
if their carrying
amount will be recovered principally through a
AHMSA’s
is Prolongación
Juárez
Coahuila.
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is
highly probable and the non-current asset (or disposal group) is available for immediate sale in its present
condition.
Note
2.
assets of
classified
as held for sale are measured at the lower of their previous carrying amount and
a)Disposal
Suspension
Payments
fair value less costs to sell.
Laminating rollers
are stated atUS$1,900
the initial acquisition
costresulted
and areinamortized
based on
units of production
indebtedness
of approximately
(the “DEBT”)
the Company’s
noncompliance
with
determined
by
the
Company's
management.
The Company maintains housing for its employees at its remote mine locations, charging a minimum
monthly rent. Employee housing developments are recorded at the cost of construction and/or acquisition,
and depreciated over 20 years using the straight-line method.
k) Derivative financial instruments
The Company’s policy is not to carry out transactions with derivative financial instruments for the purpose of
speculation.
I.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognized in profit or loss immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge
relationship.
- Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of the host contracts and the host contracts are not
measured at fair value through profit or loss.
supervision.
- Hedge accounting
The Company designates certain hedging instruments, which include derivatives, embedded derivatives and
non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges
of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are
accounted for as cash flow hedges.
At the inception of the hedge relationship, the Company documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for undertaking
various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the
Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or
cash flows of the hedged item attributable to the hedged risk.
112
55
ALTOSNOTES
HORNOS
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
- Fair value hedges
Note 1.
Nature of business
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized
inAltos
profit Hornos
or loss immediately,
togetherdewith
any(AHMSA)
changes in
thesubsidiaries’
fair value of (collectively
the hedged asset
or liability that
de México, S.A.B.
C.V.
and
the “Company”)
is a
are
attributable
to
the
hedged
risk.
The
change
in
the
fair
value
of
the
hedging
instrument
and
change
in
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is athe
publicly
traded
the
hedged
item
attributable
to
the
hedged
risk
are
recognized
in
the
line
of
the
consolidated
statements
of
operations
and otherThe
comprehensive
to the
Stock Exchange).
main activityresults
is the relating
production
andhedged
sale ofitem.
flat steel products and structural sections.
Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging
instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting.
The
fair2. value adjustment
to of
thepayments
carrying amount
the hedged item arising from the hedged risk is
Note
Suspension
and debtofrestructuring
amortized to profit or loss from that date.
- Cash flow hedges
The
effective portion
of changes inUS$1,900
the fair value
derivatives
that are
and qualify
as cash flow
indebtedness
of approximately
(theof“DEBT”)
resulted
in designated
the Company’s
noncompliance
with
hedges
is
recognized
in
other
comprehensive
income
and
accumulated
under
the
heading
of
cashwith
flowits
certain financial covenants; therefore on April 26, 1999, the Company began a process to renegotiate
hedging
reserve.
The gain orthe
loss
relating
to the to
ineffective
portion
is recognized
immediately
in profit
or loss.
creditors
and restructure
debt
according
its payment
capacity.
As such,
the Company
suspended
Amounts
previously
recognized
comprehensive
and accumulated
are reclassified
to
Company,
on May
24, 1999,in other
AHMSA
and variousincome
subsidiaries
(see Note in3 equity
c)) requested
a judicial
profit
or
loss
in
the
periods
when
the
hedged
item
is
recognized
in
profit
or
loss,
in
the
same
line
as
the
recognized
hedged
item. However,
the hedged
transaction
in the recognition
of a non-of
1999 by the
First Judge
of the Firstwhen
Instance
Court inforecast
Monclova,
Coahuilaresults
(the “COURT”).
The Suspension
financial
asset
or
a
non-financial
liability,
the
gains
and
losses
previously
recognized
in
other
comprehensive
income and accumulated in equity are transferred from equity and included in the initial measurement of the
cost
the non-financial
asset orprimarily
non-financial
liability.
TheofSuspension
of Payments
resulted
in the following:
Hedge
accounting
discontinued
when
thepayable
Company
revokes
the1999;
hedging
relationship,
when the hedging
I.
All
liabilities is
were
declared due
and
as of
May 25,
therefore,
as of December
31, 2013
instrument
expires
is sold, of
terminated,
exercised,
when it liability.
no longer qualifies for hedge accounting.
and 2012,
theorbalance
Ps.14,951 or
is reported
asor
a current
Any
loss recognized
in other comprehensive
income
andtime
accumulated
in equity
that time
remains
II. gain
All or
foreign
currency denominated
liabilities existing
at the
were converted
intoat
Mexican
pesos
at the
in equity
and
is
recognized
when
the
forecast
transaction
is
ultimately
recognized
in
profit
or
loss.
When a
forecast
transaction
is no longer
expected
to occur,
or debts
loss accumulated
equity is recognized
III. Creditors
are prohibited
from
taking any
actionthe
to gain
collect
arising from in
transactions
prior to the
immediately
in
profit
or
loss.
l) Provisions
Provisions
are recognized
whenby
the
Company
a presentoperations.
obligation (legal
or constructive)
as a result
of a
V. A trustee
was appointed
the
COURT has
to supervise
The Company’s
management
retained
past event,
it is probable
thatand
thecontinued
Companyoperations
will be required
settle the
obligation,
and aunder
reliable
administrative
control
in the to
ordinary
course
of business
theestimate
trustee’s
can besupervision.
made of the amount of the obligation.
The
recognized as
provision isby
themortgages
best estimate
of the
consideration
settle from
the present
VII.amount
Debt agreements
notaguaranteed
and/or
pledges
ceased torequired
accrue to
interest
the date
obligation
at
the
end
of
the
reporting
period,
taking
into
account
the
risks
and
uncertainties
surrounding
the
obligation.
When
a provision
is the
measured
using
the cash
flows estimated
to settle
the present
itsof
VIII. During
2013
and 2012,
Company
made
disbursements
for debt
restructuring
and obligation,
Suspension
carrying
amount mainly
is the present
value of those
cashfees,
flows.which amounted to Ps.115 and Ps.303, respectively,
Payment
for professional
advisory
m) Direct
benefits
and employee
other comprehensive
Direct
employee stock
benefits
calculatedfrom
based
on the
employees,
considering
their
IX. AHMSA’s
wasare
suspended
trading
onservices
the BMVrendered
and the by
Company’s
American
Depositary
most recent
salaries.
The
liability
is recognized
asYork
it accrues.
These benefits include mainly statutory
Receipts
(“ADR’s”)
were
delisted
from the New
Stock Exchange.
employee profit sharing (“PTU”) payable, compensated absences, such as vacation and vacation premiums.
n)with
Employee
the rightretirement
to vote as obligations
a final agreement recognized by the judge, with the possibility that AHMSA could be
Payments to defined contribution retirement benefit plans are recognized as an expense when employees
have rendered service entitling them to the contributions.
1
56
13
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
2012
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected
unit 1.
credit method,
with
Note
Nature
of actuarial
businessvaluations being carried out at the end of each annual reporting period.
Changes in defined benefit obligations and fair value of the plan assets (excluding interest) are recognized in
the period
which
they occur;
actuarial gains
and losses are
immediately
Altos
Hornosin de
México,
S.A.B. therefore,
de C.V. (AHMSA)
and subsidiaries’
(collectively
the recognized
“Company”)through
is a
comprehensive
income.
Actuarial
losses
of
employee
benefits
for
termination
and
retirement
are
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly that
traded
recorded
in
other
comprehensive
income
(loss)
are
immediately
recognized
in
shareholders'
equity
and
are
not reclassified
earnings.
Past service
cost is recognized
in profit or
loss
in the period
of a
Stock
Exchange).toThe
main activity
is the production
and sale immediately
of flat steel products
and
structural
sections.
plan
amendment.
Net
interest
is
calculated
by
applying
the
discount
rate
at
the
beginning
of
the
period
to
the
net defined benefit liability or asset. Defined benefit costs are categorized as follows:
 Service cost (including current service cost, past service cost, as well as gains and losses on
Note 2.
curtailments and settlements).
Net interestofexpense
or income.
a) Suspension
Payments
 Remeasurement.
The Company
the firstUS$1,900
two components
of defined
benefit
costs
in profit ornoncompliance
loss in the linewith
item
indebtedness
of presents
approximately
(the “DEBT”)
resulted
in the
Company’s
employee
benefits
expense.
Gains
and
losses
for
reduction
of
service
are
accounted
for
as
past
service
costs. and restructure the debt according to its payment capacity. As such, the Company suspended
creditors
The retirement
benefit
recognized
the consolidated
sheet3represents
the actual
deficit
Company,
on May
24, obligation
1999, AHMSA
and in
various
subsidiariesbalance
(see Note
c)) requested
a judicial
or
surplus
in
the
Company’s
defined
benefit
plans.
Any
surplus
resulting
from
this
calculation
is
limited
the
declaration of suspension of payments status (“Suspension of Payments”), which was granted on Mayto25,
present
value
of
any
economic
benefits
available
in
the
form
of
refunds
from
the
plans
or
reductions
in
future
contributions
to the plans.
Payments
represents
an event of default under several of the Company’s DEBT agreements.
A liability
for a termination
benefit
is recognized
earlier of when the Company can no longer withdraw
The
Suspension
of Payments
primarily
resulted in at
thethe
following:
the offer of the termination benefit and when the Company recognizes any related restructuring costs.
I.
o) and
PTU2012, the balance of Ps.14,951 is reported as a current liability.
PTU is recorded in the results of the year in which it is incurred and presented under cost of sales and selling
and administrative expenses in the consolidated statements of operations and other comprehensive results.
The Company has determined the PTU based on the profit calculated according with fraction I of article 10 of
the Income Tax Law.
p) Financial liabilities
administrative
and continued
in the
ordinarya course
under
the trustee’s
Financial
liabilitiescontrol
are recognized
when operations
the Company
becomes
part of of
thebusiness
contractual
provisions
of the
supervision.
instruments.
Financial liabilities are initially valued at fair value. Transaction costs that are directly attributable to the
acquisition or issuance of financial liabilities are added or deducted from the fair value of the financial
liabilities, if applicable, at the initial recognition. Transaction costs directly attributable to the acquisition of
financial liabilities at fair value with changes in profit or loss are immediately recognized in profit or loss.
Debt or equity instruments are classified as financial liabilities or as equity in conformity with the essence of
the agreement.
Financial liabilities are classified as financial liabilities at fair value with changes through profit or loss or as
other financial liabilities.
- Financial liabilities at fair value through profit or loss
Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held
for trading or it is designated as at fair value through 1profit or loss.
14
57
ALTOSNOTES
HORNOS
MÉXICO, S.A.B.
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
A financial liability is classified as held for trading if:
Note 1.
Nature of business
 It has been acquired principally for the purpose of repurchasing it in the near term; or
 Altos
On initial
recognition
it is S.A.B.
part of adeportfolio
of identified
financial
instruments
that the the
Company
manages
Hornos
de México,
C.V. (AHMSA)
and
subsidiaries’
(collectively
“Company”)
is a
together
and
has
a
recent
actual
pattern
of
short-term
profit-taking;
or
 variable
It is a derivative
that is notlisted
designated
effective
as a de
hedging
instrument.
capital corporation
on theand
Bolsa
Mexicana
Valores,
S.A.B. de C.V. (“BMV”, the Mexican
AAHMSA’s
financial liability
than a financial
liability
for trading
may be designated as at fair value through
addressother
is Prolongación
Juárez
S/N, held
Monclova,
Coahuila.
profit or loss upon initial recognition if:
Such designation eliminates or significantly reduces a measurement or recognition inconsistency that
Note 2.
would otherwise arise; or
 a) The
financial liability
forms part of a group of financial assets or financial liabilities or both, which is
Suspension
of Payments
managed and its performance is evaluated on a fair value basis, in accordance with the Company's
riskadverse
management
or investment
and industry
information
about the
is provided
In documented
1999, both the
situation
affecting thestrategy,
world steel
combined
withgrouping
the Company’s
high
internally
on
that
basis;
or
 certain
It forms
part covenants;
of a contract
containing
one
more
derivatives,
andtoIAS
39, Financial
financial
therefore
on April
26, or
1999,
theembedded
Company began
a process
renegotiate
with its
Instruments:
Recognition
Measurement,
the entire
combined
contract
or liability)
to
creditors
and restructure
theand
debt
according to permits
its payment
capacity.
As such,
the (asset
Company
suspended
be designated
as at fairand
value
through
loss. Because some of its creditors filed lawsuits against the
payments
of the principal
interest
on profit
all itsor
debts.

Financial
liabilities
at fair value
through profit
or loss
are statedofatPayments”),
fair value, with
anywas
gains
or losses
arising
declaration
of suspension
of payments
status
(“Suspension
which
granted
on May
25,
on1999
remeasurement
recognized
in
profit
or
loss
of
the
consolidated
statements
of
operations
and
otherof
by the First Judge of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension
comprehensive
results. an
The
net gain
or loss
recognized
or loss incorporates
any interest paid on the
Payments represents
event
of default
under
several in
ofprofit
the Company’s
DEBT agreements.
financial liability.
- Other financial liabilities
I.
Other and
financial
(including
borrowings
and trade
otherliability.
payables) are subsequently measured at
2012,liabilities
the balance
of Ps.14,951
is reported
as aand
current
amortized
cost
using
the
effective
interest
method.
The
method is
a method
of calculating
the amortized
cost of
a financial
liability
and
III. effective
Creditorsinterest
are prohibited
from
taking any
action to collect
debts arising
from
transactions
prior
to of
the
allocating
interest
expense
over
the
relevant
period.
The
effective
interest
rate
is
the
rate
that
exactly
discounts
estimatedfiled
future
payments ofthrough
the expected
life of were
the financial
liability
to the
IV. All lawsuits
for cash
the collection
any monetary
obligations
suspended,
except
fornet
tax
carrying
amount onand
initial
recognition.
obligations
labor
obligations. Secured debt (in the case that such debt was recognized by the
Write
off ofwas
financial
liabilities
A trustee
appointed
by the COURT to supervise operations. The Company’s management retained
The Company writes off financial liabilities if, and only if, the obligations are met, cancelled or expire. The
supervision.
difference between the carrying amount of the financial liability written off and the consideration paid and
payable is recognized in profit or loss.
q) Income taxes
mainly
for professional
which
amounted
to Ps.115
and Ps.303, respectively,
IncomePayment
tax expense
represents
the sum advisory
of the taxfees,
currently
payable
and deferred
tax.
comprehensive
results.
The cumulative
amount
related toFlat
these
as of
December
Incomeand
Taxother
(“ISR”),
the Special Tax
on Mining
(“DESM”) and
the Business
Taxexpenses
(“IETU”) are
recorded
in
31,
2013
was
Ps.2,807
(nominal
value).
the results of the year they are incurred. IETU was abrogated beginning January 1, 2014. Deferred ISR and
IX. AHMSA’s
stock was
suspended
trading on tax
the BMV
and
Company’s
Americandifferences
Depositary
DESM
are calculated
by applying
thefrom
corresponding
rate to
thetheapplicable
temporary
Receipts
(“ADR’s”) were
delisted from
York
resulting
from comparing
the accounting
andthe
taxNew
bases
of Stock
assetsExchange.
and liabilities, except for those differences
arising from the initial recognition of the corresponding asset or liability which did not affect the accounting
AHMSA
hastax
proposed
a preventive
paymentthe
agreement,
which
tocarryforwards.
be approved by most of its creditors
profit
nor the
profit (loss)
and, if applicable,
benefits from
taxhas
loss
declared
bankrupt
thedeferred
creditorstax
reject
suchis plan.
The
carrying
amountif of
assets
reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
1
- V.
58
15
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which
is settled
or the asset realized, based on tax rates (and tax laws) that have been enacted
Note
1. the liability
Nature
of business
or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and
assets
reflects
tax consequences
that would
follow
from
the manner(collectively
in which thethe
Company
expects,
Altos
Hornos
dethe
México,
S.A.B. de C.V.
(AHMSA)
and
subsidiaries’
“Company”)
is aat
the
end
of
the
reporting
period,
to
recover
or
settle
the
carrying
amount
of
its
assets
and
liabilities.
Deferred
tax asset
and
deferred
are offset
when
a legal
right toand
offset
short-term
assets
Stock
Exchange).
The
main
activitytax
is liability
the production
and
salethere
of flatissteel
products
structural
sections.
with
short-term
liabilities,
and
when
they
refer
to
income
taxes
corresponding
to
the
same
tax
authority
and
the Company intends to settle its assets and liabilities on a net base.
Current
taxes of
arepayments
recognized
asdebt
income
or expense in earnings, except where they refer to
Note
2. and deferred
Suspension
and
restructuring
items recognized outside earnings, either in other comprehensive income or directly in stockholders’ equity.
The tax on assets (“IMPAC”) that is expected to be recovered is recorded as an advanced payment of ISR
is presented
the consolidated
balance sheets
in the
deferred
income
taxes.with the Company’s high
Inand
1999,
both the in
adverse
situation affecting
the world
steel
industry
combined
Deferred
tax liabilities
aretherefore
recognized
for 26,
taxable
differences
with investments
certain
financial
covenants;
on April
1999,temporary
the Company
began aassociated
process to renegotiate
with itsin
subsidiaries
associates,
and interests
in to
joint
where
Company
is able to
control the
creditors
and and
restructure
the debt
according
itsventures,
payment except
capacity.
Asthe
such,
the Company
suspended
reversal of
the principal
temporary
difference
and
probable
that the
temporary
difference
not reverse
the
payments
of the
and
interest on
allititsisdebts.
Because
some
of its creditors
filedwill
lawsuits
againstinthe
foreseeable
Deferred
assets and
arising
from deductible
temporary
differences
associateda with
such
Company,
onfuture.
May 24,
1999,tax
AHMSA
various
subsidiaries
(see Note
3 c)) requested
judicial
investments
interestsofare
only recognized
to the extent
it is probable
will on
beMay
sufficient
declaration
of and
suspension
payments
of that
Payments”),
which that
wasthere
granted
25,
taxable
profits
which
to utilize
the Court
benefits
of the temporary
and they
expectedofto
1999
by the
Firstagainst
Judge of
the First
Instance
in Monclova,
Coahuiladifferences
(the “COURT”).
The are
Suspension
reverse inrepresents
the foreseeable
future.
Payments
an event
of default under several of the Company’s DEBT agreements.
r) Suspension
Foreign currency
balances
and transactions
The
of Payments
primarily
resulted in the following:
of financial
statements
of foreign
subsidiaries:
I. - Translation
All liabilities
were declared
due and
payable
as of May 25, 1999; therefore, as of December 31, 2013
financialdenominated
statements ofliabilities
each subsidiary
thetime
Company
are prepared
in the currency
the
II.TheAllindividual
foreign currency
existing atofthe
were converted
into Mexican
pesos atofthe
primary
economic
in which
they
operate
(their functional currency). For purposes of the
exchange
rate inenvironment
effect as of May
25, 1999
(see
Note 24).
financial
statements,
income
the to
financial
of each
subsidiary
are expressed
III.consolidated
Creditors are
prohibited
from taking
anyand
action
collect position
debts arising
from
transactions
prior to thein
Mexican
pesos,ofwhich
is the Company’s functional currency and the reporting currency of the consolidated
Suspension
Payments.
financial
statements.
IV.
All lawsuits
filed for the collection of any monetary obligations were suspended, except for tax
ForCOURT)
presentation
purpose
of this
consolidated
financial
foreign
subsidiaries translate their
continues
accruing
interest
until the value
of thestatements,
security interest
is reached.
statements
prepared
theCOURT
currency
in which transactions
to the
functional retained
currency,
V.financial
A trustee
was appointed
byinthe
to supervise
operations. are
The recorded
Company’s
management
using
the following
exchange
rates: 1) the
closing inexchange
rate course
in effect
the balance
date for
administrative
control
and continued
operations
the ordinary
of at
business
under sheet
the trustee’s
monetary
assets and liabilities; 2) the historical exchange rate for non-monetary assets and liabilities and
supervision.
stockholders’
equity;
and
3) thelost
rate
upon
in thetheir
statement
income for
revenues,
VI.
The convertible
note
holders
their
rightaccrual
to exchange
notes forofAHMSA’s
capital
stock. costs and
expenses,
except those
from by
non-monetary
items pledges
that are ceased
translated
using the
historical
VII.
Debt agreements
not arising
guaranteed
mortgages and/or
to accrue
interest
from exchange
the date
rateoffor
the
related
non-monetary
item.
Translation
effects
are
recorded
in
the
year
results.
Subsequently,
to
translate
financial
statements
from themade
functional
currency to
pesos, theand
following
exchange
VIII.
Duringthe
2013
and 2012,
the Company
disbursements
forMexican
debt restructuring
Suspension
of
rates
are used:
1) the
exchange
rate infees,
effect
at the
balance sheet
date and
for assets
and
liabilities, 2)
Payment
mainly
forclosing
professional
advisory
which
amounted
to Ps.115
Ps.303,
respectively,
historical
exchange
for stockholders’
equityexpenses
and 3) the
date
of accrualstatements
of revenues,
costs and
and were
recordedrates
in selling
and administrative
in the
consolidated
of operations
expenses.
Translation
effects are
recorded
in stockholders’
equity.
and other
comprehensive
results.
The cumulative
amount
related to these expenses as of December
- Foreign
currency
and transactions
IX.
AHMSA’s
stockbalances
was suspended
Foreign currency balances and transactions except for the balances recorded at the time of the Suspension
of Payments,
as mentioned
in Notepayment
2 a) II, are
translatedwhich
into Mexican
at thebyexchange
rate
in effect
AHMSA
has proposed
a preventive
agreement,
has to bepesos
approved
most of its
creditors
at the
revenues
andrecognized
expenses. by
Monetary
assets
andpossibility
liabilities denominated
in foreign
with
the transaction
right to votedate
as afor
final
agreement
the judge,
with the
that AHMSA could
be
currencybankrupt
are translated
into Mexican
using the closing exchange rate in effect at the date of the most
declared
if the creditors
rejectpesos
such plan.
recent balance sheet date. Non-monetary items carried at fair value that are denominated in foreign
1
16
59
currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Note 1.
Nature of business
Exchange rate fluctuations are recorded in the consolidated statements of operations and other
comprehensive results, except for differences in exchange rate arising from loans denominated in foreign
currencies related to assets under construction for future productive use, which are included in the cost of
those assets when they are considered as an adjustment to costs of interest on these loans denominated in
foreign currencies.
s) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
Note 2.
estimated customer returns, rebates and other similar allowances.
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at
which time all the following conditions are satisfied: i) the Company has transferred to the buyer the
significant risks and rewards of ownership of the goods; ii) the Company retains neither continuing
managerial involvement to the degree usually associated with ownership nor effective control over the goods
sold; iii) the amount of revenue can be measured reliably; iv) it is probable that the economic benefits
associated with the transaction will flow to the Company; and v) the costs incurred or to be incurred in
respect of the transaction can be measured reliably.
Revenues are recognized in the period in which the items are shipped or delivered to customers, which
generally occurs with domestic sales. Revenues from export sales shipped by land are recognized when the
inventory is delivered to the Mexican border, and from overseas exports, when loaded on a ship. Revenues
from rendering services are recognized during the period in which they are rendered.
Dividend income from investments is recognized when the shareholder's right to receive payment has been
I.
established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to
the Company and the amount of income can be measured reliably.
t) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use
or sale.
supervision.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
u) Basic losses per share
Basic losses per share has been calculated by dividing the net comprehensive loss of controlling interest by
the weighted average number of shares outstanding during the year.
Since the convertibility of the convertible bonds is limited by the Suspension of Payments, no diluted
earnings per share are calculated.
1
60
17
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
2012
Note 6.
Critical accounting judgments and key sources of estimation uncertainty
Note 1.
Nature of business
For the preparation of the consolidated financial statements in conformity with IFRS, the directors are
required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
AHMSA’s
address
is Prolongación
Juárez S/N, are
Monclova,
Coahuila.
The estimates
and
underlying assumptions
reviewed
on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods.
Note 2.
The information on such judgments and estimates is included in the accounting policies and/or notes to the
a)consolidated
Suspension
of Payments
financial
statements. Following is a summary of the main judgments and estimates used:
Ina)1999,
bothplant
the adverse
situation affecting the world steel industry combined with the Company’s high
Property,
and equipment
certain
financial covenants;
therefore
on machinery
April 26, 1999,
Companyis began
a process
to renegotiate
with itsof
The estimated
useful life of
property,
and the
equipment
used to
determine
the depreciation
creditors
and restructure
debt
according
to its topayment
capacity.
As such, by
thethe
Company
suspended
assets. Such
useful livestheare
defined
according
technical
studies prepared
Company’s
internal
payments
of the
principal where
and interest
on all
its debts.also
Because
some ofDetermined
its creditors useful
filed lawsuits
against
the
specialized
personnel,
external
specialists
participate.
lives are
reviewed
Company,
May
1999,
andconditions
various subsidiaries
3 c)) requested
a judicial
periodicallyonand
are24,
based
on AHMSA
the current
of the assets(see
and Note
the estimate
of the period
during
declaration
suspension
payments
of Payments”),
granted
on May 25,
which theyofwill
continue toofgenerate
economic
benefits. If there
are changeswhich
in thewas
useful
lives estimate,
the
1999
by the First
Judge
of carrying
the First amount
InstanceofCourt
in Monclova,
(thecould
“COURT”).
The Suspension
of
depreciation
amount
and
property,
plant andCoahuila
equipment
be affected
prospectively.
b) Employee retirement obligations
Assumptions are used to determine the best estimate of these benefits. Such estimates, like the
jointly
with independent
actuaries.
These as
assumptions
include
the
I.assumptions,
All liabilitiesare
wereestablished
declared due
and payable
as of May 25,
1999; therefore,
of December
31, 2013
demographic
ratesisand
expected
in remunerations and future permanence,
and 2012, hypothesis,
the balance discount
of Ps.14,951
reported
as a increases
current liability.
others.currency
Even though
the assumptions
areatestimated
to beconverted
appropriate,
change pesos
theretoatcould
II.among
All foreign
denominated
liabilities used
existing
the time were
intoaMexican
the
affect
the value
of in
theeffect
employee
benefit
and
the 24).
statements of operations and other comprehensive
exchange
rate
as of May
25,liabilities
1999 (see
Note
results
of the period
in which from
it occurs.
III.
Creditors
are prohibited
taking any action to collect debts arising from transactions prior to the
c) Ore
IV.
All reserves
lawsuits filed for the collection of any monetary obligations were suspended, except for tax
TheCOURT)
Company
appliesaccruing
judgments
anduntil
makes
estimates
the determination
of its ore reserves and
continues
interest
the value
of the in
security
interest is reached.
resources,
based
on
methods
and
standards
recognized
in
the
mining
industry,
and are performed
V. A trustee was appointed by the COURT to supervise operations. The Company’s management
retainedby
competent
internal
personnel,
supported
by
historical
experiences.
The
reports
that
support
these
estimates
are supervision.
prepared periodically. The Company periodically reviews such estimates supported by recognized
external
experts to certify
its ore reserves.
VI. The convertible
note holders
lost their right to exchange their notes for AHMSA’s capital stock.
VII.
Debt
agreements
not
guaranteed
by mortgages
and/or pledges
ceased tovalid
accrue
interest
from
date
There are several uncertainties on estimating
ore reserves.
The assumptions
at the
time of
thethe
estimate
of
the
Suspension
of
Payments.
can significantly change when new information is available. Changes in ore quotations, foreign exchange
VIII.
During
2013 and
2012,
the Company
madeestimates
disbursements
debt restructuring
and Suspension
of
rates,
production
costs,
metallurgical
recovery
or in for
discount
rates can change
the economic
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
status of the reserves and, lastly, they can result in the restatement of the reserves.
other comprehensive
The of
cumulative
amount related
expenses
of Decemberof
Oreand
reserves
are used in theresults.
calculation
the amortization
of coststoofthese
preparation
andasdevelopment
31,
2013
was
Ps.2,807
(nominal
value).
mines, in the calculation for the determination of the provision for remediation of mine sites and for the
IX.
AHMSA’s
stock was
analysis
of impairment
of suspended
mining units.from trading on the BMV and the Company’s American Depositary
d) Provision for remediation of mining places
with
the rightcosts
to vote
a final
agreement
recognized
by the
judge,obligations
that
AHMSA
be
Estimated
for as
closing
mining
units for
the legal and
implicit
required to
restore
the could
operating
declared
if the creditors
reject
suchinplan.
locationsbankrupt
are recognized
at present
value
the period in which they are incurred. Estimated remedial costs
include dismantling and removal of structures, remediation of mines, operation facilities, as well as
reparation and reforestation of the affected areas.
1
18
61
ALTOSNOTES
HORNOS
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
The provisions for the remediation of mining places are performed at present value using a risk-free rate at
the
time1.the obligation
is recognized,
Note
Nature
of businessand are based on the understanding of the legal requirements and the
Company’s social responsibility policy. Environmental costs are estimated also using the work of internal
specialists.
Management
applies
its judgment
experience
estimate dismantling
costs
the mine lives.
Altos Hornos
de México,
S.A.B.
de C.V. and
(AHMSA)
and to
subsidiaries’
(collectively
thein“Company”)
is a
Costs
incurred
in corporation
future periods
may
from the
provisioned
amounts.
In addition,
changes
that
variable
capital
listed
ondiffer
the Bolsa
Mexicana
de Valores,
S.A.B.
de C.V. future
(“BMV”,
the Mexican
may
arise
in
the
applicable
legal
environment
and
regulations,
changes
in
mine
live
estimates
and
discount
rates
may affect
the carrying
amountJuárez
of the provision.
AHMSA’s
address
is Prolongación
S/N, Monclova, Coahuila.
e) Contingencies
Note 2.
Due to their nature, contingencies can solely be solved when one or more future events or one or more
uncertain
facts that of
are
not entirely under the Company’s control occur or not occur. The assessment of such
a) Suspension
Payments
contingencies significantly requires exercising judgments and estimates on the possible result of such future
events.
Theboth
Company
assesses
the possibility
lawsuits
and combined
having contingencies
according high
to
In 1999,
the adverse
situation
affecting of
thelosing
worlditssteel
industry
with the Company’s
the
estimates
performed
by
its
legal
advisors.
Such
assessments
are
reconsidered
periodically.
f) creditors
Impairment
tangible and
assets to its payment capacity. As such, the Company suspended
andofrestructure
theintangible
debt according
Determining
and intangible
assets
are impaired
requires
an Note
estimation
the value ina use
of
Company, whether
on Maytangible
24, 1999,
AHMSA and
various
subsidiaries
(see
3 c))ofrequested
judicial
the
cash-generating
units.
The
value
in
use
calculation
requires
the
Company’s
management
to
estimate
the
future
flows
to arise
the Court
cash-generating
unit
and a suitable
discountThe
rateSuspension
in order toof
1999cash
by the
Firstexpected
Judge of the
First from
Instance
in Monclova,
Coahuila
(the “COURT”).
calculate
present
value.
Note
Transactions
did not
affectincash
flows
The7.
Suspension
of Paymentsthat
primarily
resulted
the following:
During
theliabilities
years ended
31,and
2013
and 2012,
Company
acquired
equipment
of Ps.1,855
I.
All
were December
declared due
payable
as ofthe
May
25, 1999;
therefore,
as of December
31, and
2013
Ps.275,
respectively,
through of
financial
leasing
or otheras
similar
financing
(See Note 17).
and
2012, the balance
Ps.14,951
is reported
a current
liability.
These exchange
acquisitions
are
statements
rate
in reflected
effect as in
of the
Mayconsolidated
25, 1999 (see
Note 24).of cash flows along the lease life through the
payment
of
rents
and/or
payments
of
the
financing.
Note
Cash
andforcash
IV. 8.All lawsuits
filed
the equivalents
collection of any monetary obligations were suspended, except for tax
Cash and
cash equivalents
consist interest
of the following:
COURT)
continues accruing
until the value of the security interest is reached.
2013
administrative control and continued operations in the
ordinary course 2012
of business under the trustee’s
supervision.
Cash
and
bank deposits…………......................
390
217capital stock.
Ps. for AHMSA’s
VI.
The
convertible
note holders lost their right toPs.
exchange their
notes
Cash
equivalents…….…..….…….....................
410
1,581
800 Ps.
1,798
Ps.
Note 21
discloses
the Company’s
exposure
to the fees,
interest
rate amounted
risk.
Payment
mainly
for professional
advisory
which
to Ps.115 and Ps.303, respectively,
Note 9.31, 2013 was
Financial
instruments
Ps.2,807
(nominal value).
The short
term financial
consist
theNew
following:
Receipts
(“ADR’s”)instruments
were delisted
fromofthe
York Stock Exchange.
2012
AHMSA has proposed a preventive payment agreement, 2013
which has to be approved
Available
for saleifequity
securities….…............
74 Ps.
128
declared
bankrupt
the creditors
reject such plan.Ps.
Trading.……………………….……....................
7
2
81 Ps.
130
Ps.
1
62
19
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
The financial instruments available for capital sale correspond to 2.8 millions of shares issued by MeetMe,
which
the National
Association of Securities Dealers Automated Quotation (“NASDAQ”) (see Note
Note
1. is listed in
Nature
of business
3d)), valued at their fair value of Ps.74 and Ps.128 as of December 31, 2013 and 2012, respectively.
The Company’s trading financial instruments portfolio consist in investments mainly in U.S. dollars in highly
graded qualified commercial papers, such as bank, government and corporate bonds.
Note 10.
Trade accounts receivable
Trade accounts receivable arise from the sale of products and services to unrelated third parties. Trade
accounts receivable, including balances with the Company’s largest customers, are as follows:
Note 2.
a)
2013
2012
Grupo Abinsa………………………….………….…….... Ps.
281 Ps.
251
In 1999,
bothUniversales
the adversedesituation
the world steel industry combined
with the
Envases
México, affecting
S.A. de C.V………....
88
16 Company’s high
indebtedness
of
approximately
US$1,900
(the
“DEBT”)
resulted
in
the
Company’s
noncompliance
with
Grupo Zapata................................................................
64
14
certain
financial
covenants;
therefore
on
April
26,
1999,
the
Company
began
a
process
to
renegotiate
with
its
Grupo Greenbrier..........................................................
62
37
creditors
and
restructure
the
debt
according
to
its
payment
capacity.
As
such,
the
Company
suspended
Aceromex, S.A. de C.V.……..…………….................…
60
68
payments
of they principal
anddeinterest
on all S.A.
its debts.
Because some of its
against the
Ingeniería
Maquinaria
Guadalupe,
de C.V…
59creditors filed lawsuits
34
Company,
on
May
24,
1999,
AHMSA
and
various
subsidiaries
(see
Note
3
c))
requested
a judicial
Grupo Trinity.................................................................
58
63
declaration
of
suspension
of
payments
status
(“Suspension
of
Payments”),
which
was
granted
on
May 25,
Grupo Prolamsa...……………...…………………………
51
200
1999Grupo
by theRussel………………………..……………………
First Judge of the First Instance Court in Monclova, Coahuila50
(the “COURT”). The
Suspension
of
6
Payments
represents
an
event
of
default
under
several
of
the
Company’s
DEBT
agreements.
Grupo Anáhuac……….……………...………..…………
47
46
Cargill Steel Service Center, Inc...................................
The Suspension
of Payments primarily resulted in the following:
Grupo Caterpillar...........................................................
40
105
39
5
Grupo Triple S Steel Supply..........................................
36
2
I. Grupo
All liabilities
were declared due and payable as of May 25, 1999; therefore,
as of December
31, 2013
Ternium……………….……………………………
34
6
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
Industrias Gutiérrez, S.A. de C.V………….......……….
32
28
II. Grupo
All foreign
currency denominated liabilities existing at the time were 32
converted into Mexican
pesos at the
Villacero……………….……................................
121
exchange
rate
in
effect
as
of
May
25,
1999
(see
Note
24).
Aceros del Toro, S.A. de C.V……………...…………….
30
14
III. Grupo
Creditors
are prohibited from taking any action to collect debts arising
from transactions
prior to the
Ferrebarniedo.....................................................
30
55
Suspension
of
Payments.
Industrias John Deere, S.A. de C.V..............................
25
27
IV. Flex
All lawsuits
filed forS.the
collection
of any monetary obligations22were suspended,
N Gate México,
de R.L.
de C.V…………...……
14 except for tax
obligations
and
labor
obligations.
Secured
debt
(in
the
case
that
such
debt
was
recognized by the
Procesa Acero, S.A. de C.V………………....................
22
12
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
Grupo O’neal Steel Inc…………………...………………
22
3
V. Hyundai
A trusteeTranslead……………..………………………....
was appointed by the COURT to supervise operations. The
retained
22Company’s management
40
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
Tubos y Lámina S.A. de C.V…………………………….
21
supervision.
Arco
Metal, S.A. de C.V. ………………...………………
12
53
VI. Grupo
The convertible
note holders lost their right to exchange their notes for
Gimsa…………….........…………………………..
12 AHMSA’s capital
40 stock.
VII. Other.............................................................................
Debt agreements not guaranteed by mortgages and/or pledges ceased
to
accrue
interest
601
854 from the date
1,852
2,114
VIII. Less
During
2013 and for
2012,
the Company
made disbursements for (106)
debt restructuring
and Suspension of
– Allowance
doubtful
accounts……….……….
(112)
1,746 Ps.
2,002
Ps.
other
comprehensive
The
cumulative
amount
related to
these expenses as of December
Theand
trade
accounts
receivableresults.
disclosed
above
are valued
at amortized
cost.
IX.
AHMSA’s
stock
was suspended
from trading
the BMV
the for
Company’s
American
Depositary
Trade
accounts
receivable
disclosed above
includeon
amounts
(seeand
below
aged analysis)
that are
past due
Receipts
wereperiod
delisted
York Stock
Exchange.
at the
end of (“ADR’s”)
the reporting
for from
whichthe
theNew
Company
has not
recognized an allowance for doubtful debts
because there has not been a significant change in credit quality and the amounts (which include interest
AHMSA
proposed
a preventive
payment
agreement,
which
has to be approved
by most
of not
its creditors
accruedhas
after
the receivables
are due)
are still
considered
recoverable.
The Company
does
have any
with
the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
couldthem
be
collateral or other credit improvements to those balances, nor does it have the legal right to offset
declared
bankrupt
if
the
creditors
reject
such
plan.
against any amount that the Company owes to the counterpart, except because as of December 31, 2013
and 2012, there are accounts receivable of Ps.59 related to the Suspension of Payments liability, as well as
Ps.175 in 2013, which guarantee financial. (See Note1 17b)).
20
63
ALTOS
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Age of receivables that are past due but not impaired:
Note 1.
Nature of business
2013
2012
Ps.C.V. (“GAN”)
Mexican
and subsidiary of Grupo Acerero del Norte, S.A. de
andPs.
is a publicly1,816
traded
1,518
Current company
balance………………………………….………..……………..
variable
capital
corporation
listed on the Bolsa Mexicana de Valores, S.A.B. de C.V.
228 (“BMV”, the Mexican
186
Overdue
balance,
but collectible..………….………….………….......
Stock
Exchange).
main activity
the production and sale of flat steel products106
and structural sections.
112
Overdue
balanceThe
for doubtful
debtsis……….…………….….………..
AHMSA’s address is Prolongación Juárez S/N, Monclova, Coahuila. Ps.
1,852 Ps.
2,114
Note
2.
Suspension
of payments
Age
of receivables
of overdue balance,
but collectible:
a)
2013
2012
Ps.
Ps.
158 noncompliance
111
1-59 days……………………………………………...……….……….
indebtedness
of approximately US$1,900 (the “DEBT”) resulted in the Company’s
with
2
60-120
days…………………...………………………………............
certain financial covenants; therefore on April 26, 1999, the Company began a process to renegotiate with6its
More than
(Includes the
Ps.59
in Suspension
Payments)….…
68Company suspended
69
creditors
and120
restructure
debt
according toofits
payment capacity. As such, the
186the
payments of the principal and interest on all its debts. Because some Ps.
of its creditors228
filed Ps.
lawsuits against
Change
in the
the First
allowance
andInstance
allowance
for doubtful
accounts:
1999 by
Judgereserve
of the First
Court
in Monclova,
Coahuila (the “COURT”). The Suspension of
2013
2012
Balance at beginning of the year ……………................................. Ps.
112 Ps.
105
I. Impairment
All liabilities
wererecognized
declared due
and payable as of May 25, 1999; therefore, as 5
of December 31, 15
2013
losses
on receivables……………………...
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
Amounts written off during the year as uncollectible…...................
(11)
(8)
II. All foreign currency denominated liabilities existing at the time were
pesos at the
Balance at end of the year………………………………………….… Ps.
106 Ps.
112
In determining
theofrecoverability
Suspension
Payments. of a trade receivable, the Company considers any change in the credit
quality
of
the
trade
receivable
fromcollection
the date credit
was
initially granted
up to were
the end
of the reporting
period.
IV. All lawsuits filed for the
of any
monetary
obligations
suspended,
except
for tax
As of COURT)
December
31, 2013
and 2012,
theuntil
accounts
receivable
from the
Company’s
10 main customers
continues
accruing
interest
the value
of the security
interest
is reached.
represent
46%
and
51%,
respectively.
supervision.
Note
Other note
accounts
receivable
VI. 11.
The convertible
holders
The balance
in other accounts
receivable consists of the following:
of the Suspension
of Payments.
2013
2012 and Ps.303, respectively,
Payment mainly for professional advisory fees, which
amounted to Ps.115
Recoverable
117
Ps.
Ps. to these expenses
and other taxes…………………..……………
comprehensive results. The cumulative
amount313
related
as of December
Non31,
realized
value
added
tax,
net……………...
295
277
2013 was Ps.2,807 (nominal value).
Loans
to employees……………………………...
217and the Company’s
226 American Depositary
IX.
AHMSA’s
stock was suspended from trading on the BMV
Other……………………………………………….
102
131
927
751
Less – Allowance
for doubtful
accounts……….
(25)by most of its creditors
AHMSA
has proposed
a preventive
payment agreement, which(25)
has to be approved
902 with
726 that AHMSA could be
Ps. by the judge,
Ps. the possibility
with the right to vote as a final agreement recognized
64
1
21
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
The balance in other non-current accounts receivable consists of the following:
Note 1.
Nature of business
2013
2012 the “Company”) is a
Altos Hornos de México, S.A.B. de C.V. (AHMSA) and subsidiaries’
(collectively
Loans
to employees……………………………...
148 Ps.
Ps.
variable
capital
corporation listed on the Bolsa Mexicana
de Valores,
S.A.B. de C.V.125
(“BMV”, the Mexican
Other……………………………………………….
37
32 structural sections.
Stock Exchange). The main activity is the production and sale of flat steel products and
185 Ps.
157
Ps.
AHMSA’s address is Prolongación Juárez S/N, Monclova,
Coahuila.
The Company grants loans to its workers to acquire or improve their houses, or sells houses that were built
for them,
whose
amount will of
bepayments
recoveredand
in a debt
maximum
term of 10 years, bearing annual interest of 6% on
Note
2.
Suspension
restructuring
unpaid balances, pursuant to a collective bargaining agreement.
Note 12.
indebtedness
of Inventories
approximately US$1,900 (the “DEBT”) resulted in the Company’s noncompliance with
Inventories
of thethe
following:
creditors
andconsist
restructure
debt according to its payment capacity. As such, the Company suspended
2012
declaration of suspension of payments status (“Suspension 2013
of Payments”), which
was granted on May 25,
Finished
goods………………….….....................
1,475 Ps.DEBT agreements.
1,457
Ps. of the Company’s
Payments
represents
an event of default under several
Operating materials…………………..................
1,092
1,193
1,410
The Production-in-process……………….……..........
Suspension of Payments primarily resulted in the following: 1,506
Iron ore…………………………….......................
779
890
coal………………………...............
513 therefore, as 752
I. Metallurgical
All liabilities were
declared due and payable as of May 25, 1999;
of December 31, 2013
Goods-in-transit….………..................................
181
348
coal………………………........................
II. Steam
All foreign
currency denominated liabilities existing at the time632
were converted into425
Mexican pesos at the
Other
raw materials……..……………................
576
416
exchange
of long
preparation..…..….….….....
361 arising from transactions
411
III. Costs
Creditors
are walls
prohibited
from taking any action to collect debts
prior to the
7,115 Ps.
7,302
Ps.
and31,labor
debt (in
thePs.755
case that
debt
was recognized
by the
As obligations
of December
2013obligations.
and 2012,Secured
the Company
has
and such
Ps.361
of inventories
to guarantee
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
financial liabilities (see Note 17 b)).
supervision.
VI.
The
note holders
lost their
to exchange
their ventures
notes for AHMSA’s capital stock.
Note
13.convertible
Investment
in shares
of right
associates
and joint
the Suspension
of Payments.
Theofinvestment
in shares
of associates and joint ventures consists of the following:
and were recorded in selling and administrative expenses
in the consolidated
statements of operations
2013
2012
31, 2013
(nominal value).
LCD
(see was
NotePs.2,807
4c)….……………………..……..
94 Ps.
94
Ps.
IX. Boom
AHMSA’s
was suspended from trading on the BMV and7 the Company’s 18
American Depositary
(see stock
Note 3d)..........................................
Receipts
(“ADR’s”)
were
delisted
from
the
New
York
Stock
Exchange.
Other……………………………………………....
11
5
112 Ps.
117
Ps.
1
22
65
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Summarized financial information with respect to the Company's associates and joint ventures is set out
below:
Note 1.
Nature of business
2013
2012
Total assets……………………………………………….……………….
388
Mexican
company and subsidiary of Grupo Acerero del Norte, S.A. dePs.
C.V. (“GAN”)
andPs.
is a publicly 472
traded
140
147
Total
liabilities…………………………………………….….……………
248
325
Net assets……………………………………………………….………...
Stock
Exchange). The main activity is the production and sale of flat Ps.
steel products
andPs.
structural sections.
112 Ps.
117
Company's share of net assets………………………………………… Ps.
Note
2.
Suspension of payments and debt restructuring Ps.
Net sales…………………………………………………………………..
540 Ps.
530
(Loss) income for the year……………..……………………………….. Ps.
(60) Ps.
135
Ps.
Ps.
Company's share
of profits……………………………………………...
14 noncompliance
40with
indebtedness
of approximately
US$1,900 (the “DEBT”) resulted in the Company’s
Investment
in shares
of associates
and
joint ventures
valued using
the equity
method.
creditors and
restructure
the debt
according
to its ispayment
capacity.
As such,
the Company suspended
LCD
conducts
transactions
concession
by the
Federal
through
the
Company,
onitsMay
24, 1999,through
AHMSAa and
various granted
subsidiaries
(see
Note Government
3 c)) requested
a judicial
Secretariat
and Transportation
for the operation
and exploitation
the short
route
declarationofofCommunications
suspension of payments
of Payments”),
which was of
granted
on May
25,
Coahuila-Durango,
and rendering
of the
publicCourt
railroad
transportation
service
sale andThe
lease
of assetsof
1999 by the First Judge
of the First
Instance
in Monclova,
Coahuila
(theand
“COURT”).
Suspension
related
thereto
for an initial
period
of 30 years,
and exclusive
for 18 years,
which
began in 1995. LCD’s
Payments
represents
an event
of default
under several
of the Company’s
DEBT
agreements.
activity is regulated by the Railroad Service Regulatory Law.
Note
Property,
plant and
I. 14.
All liabilities
were declared
dueequipment
and payable as of May 25, 1999; therefore, as of December 31, 2013
The
of the balance
at the beginning
and endatofthe
thetime
years
2013
and 2012into
of the
property,
plant
II. reconciliation
All foreign currency
denominated
liabilities existing
were
converted
Mexican
pesos
at the
and equipment
consisted
of
the
following:
Translation
Costs for
Suspension of Payments. 2012
Additions
effect
retirement
2013
IV.
All lawsuits filed for the collection of any monetary obligations were suspended, except for tax
Investment:
Secured 1debt
debtPs.was recognized
by the
Ps. obligations.
Landobligations and labor
2,459 Ps.
- Ps. that such
(14)
2,446
Ps. (in the case
Buildings
14,667
70 value of the security
COURT) continues accruing
interest until the
interest(29)
is reached.14,708
and equipment
3
(959)
74,632
V.Machinery
A trustee
was appointed by65,384
the COURT10,204
to supervise operations.
The Company’s
management
retained
Machinery and equipment
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
under finance lease
2,130
1,630
(22)
3,738
supervision.
Furniture
and fixtures
569
6
575
Vehicles
527 their right to
14 exchange their
- notes for AHMSA’s
(2)
VI.
The convertible note holders lost
capital 539
stock.
Airplanes
1,277 by mortgages
47
1,324from the date
VII.
Debt agreements not guaranteed
and/or pledges
ceased to accrue
interest
Computers
692
1
(3)
690
Construction-in-progress
14,848
(7,228)
7,620
VIII. During
2013 and 2012, the
Company made
restructuring 106,272
and Suspension of
102,553
4,745 disbursements
3 for debt(1,029)
Total investments
Depreciation:
Buildings
10,971
255
(29)
11,197
and other comprehensive results.
The cumulative
amountrelated to these
expenses
as of December
46,699
2,398
1
(899)
48,199
31,
2013
was
Ps.2,807
(nominal
value).
525
IX.
AHMSA’s
stock was suspended from trading
American
under
finance lease
320 on the BMV
- and the Company’s
(12)
833 Depositary
Furniture
and fixtures
509 from the New
12 York Stock Exchange.
521
Receipts
(“ADR’s”) were delisted
Vehicles
Airplanes
428
469
35
54
-
(2)
-
461
523
AHMSA
has proposed a preventive
whichhas to be approved
by most
of its creditors
Computers
654payment agreement,
15
(2)
667
with the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
could be
Total depreciation
60,255
3,089
1
(944)
62,401
Net investment
66
Ps.
42,298 Ps.
1,656 Ps.
23
1
2 Ps.
(85)
Ps.
43,871
NoteInvestment:
1.
Land
2011
Nature of business
Ps.
Translation
effect
Additions
2,346 Ps.
129 Ps.
(3) Ps.
Costs for
retirement
(13)
2012
Ps.
2,459
335 and subsidiaries’
(5)
(15)
14,667
AltosBuildings
Hornos de México, S.A.B. 14,352
de C.V. (AHMSA)
(collectively
the “Company”)
is a
65,895
2,035
(33)
(2,513)
65,384
Mexican
company
and
subsidiary
of
Grupo
Acerero
del
Norte,
S.A.
de
C.V.
(“GAN”)
and
is
a
publicly
traded
variable
corporation listed on
the Bolsa Mexicana
de Valores,
S.A.B. de C.V.
(“BMV”,
the Mexican
undercapital
finance lease
2,089
41
2,130
Furniture
and fixtures
17 and sale of(4)
(2) and structural
569 sections.
Stock
Exchange).
The main activity is558
the production
flat steel products
Vehiclesaddress is Prolongación Juárez
507 S/N, Monclova,
33
(3)
(10)
527
AHMSA’s
Coahuila.
Airplanes
Computers
Construction-in-progress
Note 2. Total investments
Suspension
of
1,216
685
12,748
100,396
payments
and
61
22
2,100
4,773 restructuring
(48)
debt
(15)
(2,568)
1,277
692
14,848
102,553
Depreciation:
Buildings
10,746
240
(15)
10,971
46,875
2,269
(5)
(2,440)
46,699
In 1999,
bothand
the
adverse situation affecting the world steel industry combined with the Company’s high
Machinery
equipment
under financeoflease
273
252
525
indebtedness
approximately US$1,900
(the “DEBT”)
resulted- in the Company’s
noncompliance
with
Furniture
and fixtures
16
(3) began a process
(2)
509
certain
financial
covenants; therefore 498
on April 26, 1999,
the Company
to renegotiate
with its
Vehicles
400
41
(3)
(10)
428
creditors
and restructure the debt according
to its53payment capacity.
As such, -the Company
Airplanes
416
469suspended
payments
of
the
principal
and
interest
on
all
its
debts.
Because
some
of
its
creditors
filed
lawsuits
Computers
659
11
(16)
654against the
Totalon
depreciation
59,867 and various
2,882
(11) (see Note
(2,483)
60,255 a judicial
Company,
May 24, 1999, AHMSA
subsidiaries
3 c)) requested
a)
Ps.
Ps.
Net investment
1,891 Ps.
(37) Ps.
(85) Ps.
1999 by the
First Judge of the First40,529
Instance Court
in Monclova, Coahuila
(the “COURT”).
The42,298
Suspension of
As of December 31, 2013 and 2012, the significant construction-in-progress is related to the Fénix Project,
where
Ps.5,210of
and
Ps.11,955,
respectively,
invested,
(see Note 3 a)).
The
Suspension
Payments
primarily
resultedwere
in the
following:
and 2012,
Company
US$3.3
US$4.7,
respectively,
its 31,
airplanes,
I.In 2013
All liabilities
werethe
declared
due invested
and payable
as ofand
May
25, 1999;
therefore, in
as renovating
of December
2013
which
usedthe
bybalance
the Company’s
directors
and officers
to travel
to different geographic locations where the
andare
2012,
of Ps.14,951
is reported
as a current
liability.
conducts
business.
Thus, itliabilities
maintains
the necessary
security
standards into
to transport
officers.
II.Company
All foreign
currency
denominated
existing
at the time
were converted
Mexicanitspesos
at the
As of
December
2013 and
2012,
the any
net balance
property,
plant
and equipment
includesprior
Ps.917
and
III.
Creditors
are 31,
prohibited
from
taking
action toofcollect
debts
arising
from transactions
to the
Ps.1,011,
respectively,
for
costs
for
capitalized
loans.
During
2013
and
2012,
loan
costs
of
Ps.17
and
Ps.8,
respectively,
have
been
IV.
All lawsuits
filed
forcapitalized.
the collection of any monetary obligations were suspended, except for tax
As of
December
31, 2013
and 2012,
theuntil
Company
had
assets
at their net realizable
COURT)
continues
accruing
interest
the value
of nonproductive
the security interest
is valued
reached.
of Ps.30was
andappointed
Ps.34, respectively.
V.value
A trustee
As of
December 31, 2013 and 2012, the Company had a balance of a financial lease for machinery and
supervision.
equipment
of Ps.1,349
Ps.1,605,
respectively,
whose titles
of ownership
guarantee
financial lease
VI. The convertible
noteand
holders
lost their
right to exchange
their notes
for AHMSA’s
capitalthe
stock.
liability
as
mentioned
in
Note
17
b).
During
the year,
saledisbursements
of equipment required
the construction
of an Oxygen
VIII.
During
2013 the
andCompany
2012, thecompleted
Company the
made
for debt for
restructuring
and Suspension
of
Plant
to Air Liquide
S. deadvisory
R.L. de fees,
C.V. ("Air
and
for
Payment
mainly de
for Mexico,
professional
whichLiquide"),
amounted
to entered
Ps.115 into
and supply
Ps.303,agreements
respectively,
various
Oxygen
Plants in
located
the Company's
facilities,in and
that were built
to meet the
Company's
and were
recorded
sellingwithin
and administrative
expenses
the consolidated
statements
of operations
production
needs
in exchangeresults.
for fixedThe
payments
for the
supply
of oxygen
to beexpenses
received,as
which
are in line
and other
comprehensive
cumulative
amount
related
to these
of December
with31,
the2013
Company's
production
capacity.
Such
transactions
were
recorded
as
capital
leases
for
a
value of
was Ps.2,807 (nominal value).
Ps.1,610
(see
Note
17
b)).
Due to the Suspension of Payments mentioned in Note 2a), AHMSA cannot sell its property, plant and
equipment
the aexpressed
of the COURT.
AHMSA
haswithout
proposed
preventiveauthorization
payment agreement,
which has to be approved by most of its creditors
24
1
67
ALTOS
HORNOS
DEDE
MÉXICO,
S.A.B.
DEDE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
MÉXICO,
S.A.B.
C.V.
AND
SUBSIDIARIES
NOTES
TOTO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES
CONSOLIDATED
FINANCIAL
STATEMENTS
The average annual depreciation rates used were as follows:
Note 1.
Nature of business
2013
2012
Buildings………………………………………………………………………….
2%and is a publicly 2%
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”)
traded
Machinery
and equipment………………………………………………………
4% (“BMV”, the Mexican
4%
variable capital
corporation listed on the Bolsa Mexicana de Valores, S.A.B. de C.V.
Furniture
and fixtures……………………………………………………………
11%and structural sections.
11%
Stock Exchange).
The main activity is the production and sale of flat steel products
Vehicles………………….……………………………………………………….
14%
13%
Airplanes..……………….……………………………………………………….
5%
4%
Computers…………..……………………………………………………………
24%
13%
Capitalized
3%
4%
Note 2. loan costs……………...……………………………………………
a)
Note
15. both Intangible
assets
In 1999,
the adverse
The
intangible
assets
consisted
of the following:
certain
financial
covenants;
therefore
on April 26, 1999, the Company began a process to renegotiate with its
2013 some of its creditors
2012 filed lawsuits against the
payments of the principal and interest on all its debts. Because
Mining, stripping
and development
costs...……
2,659
2,901
Ps.
Ps.
declaration
of suspension
of payments
of Payments”),
which
was granted on May 25,
Pachuca
tailing
Note
30)………..….
1,432
1,432
1999
by the
First dams
Judge(see
of the
First
Instance Court in Monclova,
Coahuila (the “COURT”).
The Suspension of
4,333
Ps.
Ps. DEBT agreements.
Payments represents an event of default under several
of the 4,091
Company’s
The
Suspension
of Payments
resulted
in theisfollowing:
The
specific-life
intangible
assetprimarily
of the Jales
Pachuca
represented by gold and silver tails owned by RDM,
located in the city of Pachuca, Hidalgo, which value is supported by a study prepared by an expert in the
I.
Allmatter.
liabilities
were the
declared
duesemester
and payable
as of May
25, 1999;for
therefore,
of December
31, will
2013
subject
During
second
of 2013
the samples
the oreasreduction
tailings
commence.
III.rollforward
Creditorsofare
from
taking any
actionstripping
to collect
debts
arising from
prior to the
The
theprohibited
Company’s
unamortized
mining,
and
development
coststransactions
were as follows:
IV. All lawsuits filed for the collection of any monetary obligations Accumulated
were suspended, except for tax
obligations and labor
obligations. Secured debt (inInvestment
the case that such
debt was recognized
amortization
Total by the
Concept
Ps. operations.
Ps. Company’s
Ps.
V.Balance
A trustee
appointed
by the COURT to supervise
retained
as ofwas
January
1, 2012……………………...
6,613 The
(3,686) management
2,927
supervision.
Additions………….……………………………………
557
557
VI.
The convertible note holders lost their right to exchange their
notes for AHMSA’s
Transfers……………..………………………………..
(1,532)
1,532capital stock.
VII.
Debt
agreements
not guaranteed
by mortgages and/or pledges
the date
Effect
of foreign
currency
exchange differences…..
(23)ceased to accrueinterest from (23)
Amortization…………………………………………..
(593)
(593)
VIII.
During
and 2012,
the Company made disbursements 33
for debt restructuring
Mines
sites 2013
remediation
reserve…….………………
- and Suspension
33 of
and were
in 31,
selling
and administrative expenses 5,648
in the consolidated
Balance
as of recorded
December
2012………………….
(2,747)
2,901
Additions………….……………………………………
281
281
IX.
AHMSA’s
stock
was suspended
from trading on the BMV and
Effect
of foreign
currency
exchange differences…..
2 the Company’s- American Depositary
2
Amortization…………………………………………..
(525)
(525)
5,931 Ps.
(3,272) Ps.
2,659
Balance as of December 31, 2013………...………. Ps.
68
25
1
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
The Company has carried out the following significant mine developments:
Note 1.
Nature of business
Extractable
Altos Hornos de México, S.A.B. de Reserves
C.V. (AHMSA) and Unamortized
subsidiaries’ balances
(Millions/Tons)
2013
variable capital corporation listed on Unaudited
the Bolsa Mexicana de
Valores, S.A.B.2012
Steam
coal:
Ps.
Zacatoza
pit
61 Ps.
153
AHMSA’s
address
is Prolongación Juárez3.2
S/N, Monclova,
Coahuila.
Other pits
4.6
91
112
Mine VII
26.8
983
1,087
Dos
mine
19.2
1,008
916
Note
2. Repúblicas
Suspension
of payments
2,143
2,268
coal:
a)Metallurgical
Suspension
of Payments
Mine V
6.3
70
135
Mine VII
20.7 the world steel industry
275
308 the Company’s high
In 1999,
both the adverse situation affecting
combined with
Mine
X
130.5
71
39 noncompliance with
indebtedness of approximately US$1,900 (the “DEBT”) resulted in the Company’s
Pits
3.9
30
38 to renegotiate with its
certain financial covenants; therefore on April 26, 1999, the Company began a process
446
520 Company suspended
creditors and restructure the debt according to its payment capacity.
As such, the
Iron ore: of the principal and interest on all its debts. Because some of its creditors filed lawsuits against the
payments
Prometeo
pit
65 (see Note 3 c))
88 requested a judicial
Company,
onunderground
May 24, 1999,
AHMSA 0.6
and various subsidiaries
Other of suspension of payments status (“Suspension of Payments”),
2 granted on May 25,
declaration
which was
65
90 The Suspension of
1999 by the First Judge of the First Instance Court in Monclova, Coahuila
(the “COURT”).
Payments
an event of default under several of the Company’s DEBT agreements.
Gold and represents
Silver:
Santa Gertrudis mine
5
23
Ps.
Total
2,659 Ps.
2,901
I.
II.Note
All16.
foreign currency
denominated liabilities existing at the time were converted into Mexican pesos at the
Other assets
III.
Creditors
are prohibited
taking any action to collect debts arising from transactions prior to the
Other
assets consisted
of thefrom
following:
IV. All lawsuits filed for the collection of any monetary
obligations were
suspended, except for tax
2013
2012
COURT)rollers
continues
interest until the value
interest is reached.
Ps. of the security
Laminating
(Noteaccruing
5 j))………………...……
351 Ps.
345
V.Costs
A trustee
was
appointed
by
the
COURT
to
supervise
operations.
The
Company’s
of long walls preparation (Note 5 c))……..
187
72management retained
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
Employee housing developments (Note 5 j))…...
158
165 under the trustee’s
supervision.
Prepaid expenses for goods………………………
123
882
VI.
The convertible
note holders lost their right to exchange their63
notes for AHMSA’s62capital stock.
Restricted
cash……………....…………………….
VII.
Debt agreements
not guaranteed
by mortgages and/or pledges
Long-lived
assets available
for sale …..………...
55 ceased to accrue
663 interest from the date
of theexpenses
Suspension
of Payments.
Prepaid
for services………….………..
32
VIII.
Duringinstruments
2013 and (Note
2012, 3d))….………....…...
the Company made disbursements for
Financial
- debt restructuring
52 and Suspension of
Payment mainly for professional advisory fees, which amounted
to Ps.115 and7 Ps.303, respectively,
Other…………………………………………………
9
and were recorded in selling and administrativePs.
expenses 946
in the Ps.
consolidated
2,280
31, 2013
was Ps.2,807
value).
In 2012,
advance
payments(nominal
for goods
include an advance payment of Ps.614 (US$46.9) granted to Basilisk
IX.
AHMSA’s
stock
was
suspended
trading
onobligations
the BMV and
the Company’s
Tres, S.A. de C.V. for the credit rights from
of certain
bank
of AGROS
(See NoteAmerican
25 b)). Depositary
Within the assets available for sale in 2012 are Ps.607, that are related to the value of the equipment for an
AHMSA
preventive by
payment
agreement,
to be approved
by most
of its creditors
oxygen has
plantproposed
that was aconstructed
Air Liquide
México which
within has
AHMSA’s
facilities. This
equipment
was sold
with
the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
could
be
to Air Liquide in Ps. 592 once was installed and operating correctly (See Note 14). During 2012, Air
Liquide
declared
bankrupt
if
the
creditors
reject
such
plan.
made an advance payment of Ps.510 for the acquisition of this equipment (see Note 18).
1
26
69
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Restricted cash consist mainly in bank deposits related to financial liabilities in Suspension of Payments
which
may not
withdraw.
Notethe
1. Company
Nature
of business
Assets
forMéxico,
sale in S.A.B.
the short
Ps.2,228and
correspond
to the
carrying amount
of AGROS'
Altos available
Hornos de
de term
C.V. of
(AHMSA)
subsidiaries’
(collectively
the “Company”)
is a
industrial
plant
(see
Note
3
b)).
The
rollforward
of theThe
Company’s
employee
developments
rollers
were
as follows:
Stock
Exchange).
main activity
is the housing
production
and sale ofand
flat laminating
steel products
and
structural
sections.
Employee
Additions
Additions
Housing
retirements,
retirements,
net restructuring
2012
net
2013
Notedevelopments
2.
Suspension of 2011
payments and debt
Ps.
Investment………………..
405 Ps.
42 Ps.
447 Ps.
- Ps.
447
Accumulated amortization
(258)
(24)
(282)
(7)
(289)
Ps. the world
Ps. industry
Ps.
Ps.
18steel
165combined
(7) Company’s
158
In 1999, both the adversePs.situation147
affecting
with the
high
creditors andLaminating
restructurerollers
the debt according to its Balance,
paymentnet
Ps.
Balance
as ofon
December
2011……..…….….
310
Company,
May 24,31,1999,
AHMSA and various
subsidiaries
(see Note 3 c)) requested a judicial
Acquisitions….……….…………………………….
65Payments”), which was granted on May 25,
declaration of suspension of payments status (“Suspension of
Amortization………………………...………………
(30)Coahuila (the “COURT”). The Suspension of
1999 by the First Judge of the First Instance Court in Monclova,
Balance
as of
Decemberan31,
2012……..…….….
Payments
represents
event
of default under several of the345
Company’s DEBT agreements.
Acquisitions….……….…………………………….
61
Amortization………………………...………………
(55)
351
Balance as of December 31, 2013……….......… Ps.
I.
and 2012,Financing
the balance
of Ps.14,951 is reported as a current liability.
Note 17.
debt
exchange
in effect as of
25, 1999 (see Note 24).
a) Financing
debtrate
in Suspension
of May
Payments
of Payments.
Due toSuspension
the Company’s
financial situation mentioned in Note 2 a), the DEBT as of December 31, 2013 and
IV. ofAllPs.13,488
lawsuits isfiled
for theascollection
any Other
monetary
obligations
wereunder
suspended,
except
for tax
2012
presented
a current of
liability.
disclosures
required
accounting
provisions
obligations
andrelevant,
labor obligations.
Secured
debt (instate
the case
that such debt
was recognized
by the
are not
considered
due to the
Company’s
of Suspension
of Payments
and DEBT
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
restructuring.
control
continued
operationsand
in the
ordinary
businessfor
under
the trustee’s
Given administrative
the Company is
on a and
suspension
of payments
there
are nocourse
future of
maturities
its liabilities
on
supervision.
suspension,
it is not feasible to determine the fair value of these financial liabilities.
Debt agreements
not guaranteed by mortgages and/or pledges ceased to accrue interest from the date
b)VII.
Financing
debt
VIII. During
2012, the Company made disbursements for debt restructuring and Suspension of
Financing
debt2013
is as and
follows:
and were
recorded in selling and administrative
in the
Institution
Currency expenses
Interest
rateconsolidated
2013
2012
31, 2013
Financial
lease:was Ps.2,807 (nominal value).
IX. AHMSA’s
stock was suspended U.S.
fromdollar
trading on the7.75%
BMV and the Ps.
Company’s909
American
Depositary
Ps.
1,110
Caterpillar
Crédito
Receipts (“ADR’s”) were delisted U.S.
from dollar
the New York Stock
Air Liquide
8.00%Exchange.
1,521
-
70
AHMSA
has proposed a preventive payment agreement, which has to be approved by most of its creditors
Bank
loans:
with
the
right
recognized
judge,
that AHMSA could
Banco Afirme to vote as a final agreement
Mexican
pesos by the
TIIE
+ 5.5with
pts the possibility 54
80 be
declared
bankrupt
if
the
creditors
reject
such
plan.
Banco Afirme
Mexican pesos
TIIE + 4.9 pts
209
250
Caterpillar Crédito
U.S. dollar
7.75%
283
53
1
27
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V. STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTES AS
TO OF
CONSOLIDATED
FINANCIAL
2012
Institution
Currency
Interest rate
2013
2012
Note 1.
Nature of business
Other financing debt:
Almacenadora
Mexican
pesosand subsidiaries’
TIIE+ 5.5 pts(collectively the
698“Company”) is559
Altos
Hornos deAfirme
México, S.A.B. de C.V.
(AHMSA)
a
Coutinho
& Ferrostal
U.S.
dollar del Norte,
7.5%
Mexican
company
and México
subsidiary of Grupo
Acerero
S.A. de C.V. (“GAN”) and222
is a publicly tradedVariouscapital corporation listed on theVarious
473
260
variable
Bolsa Mexicana deVarious
Valores, S.A.B. de C.V. (“BMV”,
the Mexican
4,369
2,312
Current portion
(1,935)
(1,361)
AHMSA’s
address is Prolongación Juárez S/N, Monclova, Coahuila.
Ps.
2,434 Ps.
951
Long-term of financing debt
Note
Suspension
of payments
Since2.2009, MINOSA
has obtained
heavy equipment
under financial leasing from Caterpillar Crédito, S.A. de
C.V. for its mining operations of Ps.2,335, which will be paid in a term of 5 years, and includes a purchase
a)option
Suspension
of Ps.24 of
at Payments
the end of the last year. MINOSA’s financial lease obligations are guaranteed by the
lessor’s title of ownership on the leased assets.
indebtedness
of approximately
US$1,900
(thePlants
“DEBT”)
in the
noncompliance
withto
In 2013, supply
of oxygen began
to Oxygen
thatresulted
Air Liquide
hasCompany’s
within AHMSA's
facilities and
certain
covenants; therefore
on April
26,for
1999,
the Company
a process
renegotiate
with its
which financial
supply agreements
were entered
into
20 years.
These began
agreements
are to
classified
as financial
creditors
and restructure
the debt
according
paymentwas
capacity.
the Company
suspended
leases; therefore,
a long-term
financial
liabilitytoofitsPs.1,610
recordedAsatsuch,
the inception
of the lease,
which
payments
of the
interest
on all of
its the
debts.
Because
some
of itsvalue
creditors
filed
lawsuitspayments
against the
corresponds
to principal
the lesserand
of the
fair value
plants
and the
present
of the
minimum
for
Company,
on May
the lease (see
Note 24,
14). 1999, AHMSA and various subsidiaries (see Note 3 c)) requested a judicial
1999
by the
Judge
of the First
Instance
in Monclova,
Coahuila
(the S.A.,
“COURT”).
The resources
Suspension
of
In 2012
andFirst
2011,
MINOSA
obtained
linesCourt
of credit
from Banco
AFIRME,
and such
were
Payments
represents
an eventmaturing
of defaultinunder
several
of the Company’s
agreements.
used to finance
investments,
5 years.
The unpaid
balance asDEBT
of December
31, 2012 of one credit
for Ps. 250 was entirely presented in a short term because certain do-not obligations had not been met. On
The
Suspension
of Payments
primarily
resulted
the following: waiver from the bank, for this reason in 2013
February
28, 2013,
the Company
obtained
theincorresponding
was classified on accordance with its maturity.
I.
and 2012,
the balance
of Ps.14,951
is reported
as Crédito,
a currentS.A.
liability.
In 2012,
MINOSA
obtained
a loan from
Caterpillar
de C.V. aggregating US$27, and such
II.resources
All foreign
denominated
existing
at the in
time
were converted
into Mexican
pesos
at the
will currency
be used to
construct aliabilities
power plant,
maturing
6 years.
As of December
31, 2013,
US$25.9
has exchange
been disposed.
Suspension
of Payments. Afirme, S.A. and Coutinho & Ferrostal Mexico, S.A. de C.V. are related to
Liabilities
with Almacenadora
IV.
All lawsuits
filed for
the collection
of inventories
any monetary
obligations
marketing
transactions
structured
to finance
(see Note
12). were suspended, except for tax
COURT)
continues
accruing
interest
until the S.A.
value(Polish
of the security
is reached.
In 2012,
MINOSA
obtained
a loan
from FAMUR,
supplier)interest
of US$19.3,
and such resources were
V.used
A to
trustee
was
appointed
by the Such
COURT
supervise
operations.
management
retained
acquire
mining
equipment.
loantobears
interest
at LIBORThe
plusCompany’s
3 points, maturing
in 7 years.
The
administrative
and continued
unpaid
balance as control
of December
31, 2013 operations
is Ps. 216. in the ordinary course of business under the trustee’s
supervision.
VI.
The subsidiaries
convertible note
lost additional
their right credit
to exchange
their notes
AHMSA’s
Certain
haveholders
exercised
lines, mainly
with for
trade
portfoliocapital
which stock.
balance payable
VII.
Debt
agreements
not guaranteed
as of
December
31, 2013
is Ps.208. by mortgages and/or pledges ceased to accrue interest from the date
VIII.
2013
2012, thelease
Company
made
for other
debt restructuring
and
of
TheDuring
fair value
of and
the financial
liabilities
anddisbursements
the value of the
bank liabilities
areSuspension
approximately
Payment
professional advisory fees, which amounted to Ps.115 and Ps.303, respectively,
equal
to their mainly
carryingfor
amount.
and other
comprehensive
results. The
cumulative
amount
Minimum
commitments
under capitalized
financial
leases
are asrelated
follows:to these expenses as of December
IX. AHMSA’s stock was suspended from trading on the2013
BMV and the Company’s
American Depositary
2012
Lease obligations creditors………………………… Ps.
3,633 Ps.
1,201
AHMSA
hasinterest……………………………………
proposed a preventive payment agreement, which
has to be approved
Unearned
(1,254)
(91)
with Present
the right value
to vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
of obligations………..………….
2,379
1,110 that AHMSA could be
declared
bankrupt
if
the
creditors
reject
such
plan.
Current portion of obligations……...……………….
(615)
(490)
1,764 Ps.
620
Long-term portion of financial lease obligations…. Ps.
1
28
71
ALTOS
HORNOS
DEDE
MÉXICO,
S.A.B.
DEDE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
MÉXICO,
S.A.B.
C.V.
AND
SUBSIDIARIES
NOTES
TOTO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES
CONSOLIDATED
FINANCIAL
STATEMENTS
The long-term portion of financing debt as of December 31, 2013 matures as follows:
Note 1.
Nature of business
Year ending
December
Balance
Altos Hornos de México, S.A.B.
de 31,
C.V. (AHMSA) and
subsidiaries’ (collectively the “Company”) is a
Ps. del Norte, S.A.
436 de C.V. (“GAN”) and is a publicly traded
2015
Mexican company and subsidiary
of Grupo Acerero
2016
291
variable capital corporation listed
on the Bolsa Mexicana de Valores,
S.A.B. de C.V. (“BMV”, the Mexican
2017
Stock Exchange). The main activity is the production and sale 293
of flat steel products and structural sections.
2018
247
AHMSA’s address is Prolongación
Juárez S/N, Monclova, Coahuila.
2019 and thereafter
1,167
Ps.
2,434
Note 2.
Note 18.
Other payables and provisions
a) The balance of the other payables and provisions consists of the following:
2013
indebtedness of approximately US$1,900 (the “DEBT”)
resulted in the 2012
Company’s noncompliance with
Ps. As such,
creditorsfrom
and customers.....................................
restructure the debt according toPs.
its payment
capacity.
Advances
1,690
1,264the Company suspended
payments
of the principal and interest on all its debts. Because
some of its creditors
Tax
matters............................................................
522
860 filed lawsuits against the
Company,
on May 24, 1999, AHMSA and various subsidiaries
(see Note 573
3 c)) requested a judicial
Employee
benefits……….……..............................
402
declaration
of suspension
of payments status (“Suspension 129
of Payments”), which
Mines
sites remediation
reserve.……………….....
173was granted on May 25,
1999 by the
First Judge
of the First Instance Court in Monclova,
The Suspension of
Hoogovens
Technical
Services…………….……...
82Coahuila (the “COURT”).
82
Payments
represents
event
of default under
MINOSA
creditors
lifted an
from
the Suspension
of several of the Company’s DEBT agreements.
Payments............................................................
50
50
The Suspension
of Payments primarily resulted in the following:5
Damage
repair reserve……………..….…….…...
34
Air Liquide (see Note 16)…………..……..….........
510
I.
All liabilities were declared due and payable as of May591
25, 1999; therefore,
as of December 31, 2013
Other......................................................................
519
and 2012, the balance of Ps.14,951 is reported
Ps. as a current
Ps.
3,471 liability.
4,065
exchange
rate
in effect as
May
25, 1999 (see Note 24).
The advances
from
customers
areofas
follows:
2013
2012
obligations
labor obligations. SecuredPs.
debt (in the581
casePs.
that such debt
Tubacero,
S.A. de and
C.V…………………….………..
256 was recognized by the
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
Grupo PROLAMSA………………………….………
402
393
V.
A
trustee
was
appointed
by
the
COURT
to
supervise
operations.
The
Company’s
Almacenadora Afirme, S.A de C.V………..……….
283
523 management retained
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under the trustee’s
Fortacero, S.A. de C.V……………………….……..
160
supervision.
Grupo POLESA….…………………………..……...
73
6
VI. The
convertible
holders lost their right to exchange their
Grupo
Ferre
Barniedo note
……………………….…….
66 notes for AHMSA’s
- capital stock.
VII.
Debt
agreements
not
guaranteed
by
mortgages
and/or
pledges
ceased
to
accrue
interest from the date
Aceros Corey, S.A. de C.V....................................
39
Others....................................................................
86
86
VIII. During 2013 and 2012, the Company made
and Suspension of
Ps. disbursements
Ps. debt restructuring
1,690 for
1,264
As of December 31, 2013 and 2012, the Company recorded a tax provision for not accumulating inflation
gains during 2000 to 2003 related to liabilities in the Suspension of Payments of Ps.522 and Ps.860,
respectively, including Ps.272 and Ps.387, respectively, of restatement and surcharge (see Note 28). In
2013, some favourable judgments on lawsuits brought for this concept were obtained; therefore, the
provision of Ps.338 was written off, including surcharges and restatements of Ps.115.
As of December 31, 2013 and 2012, the suspension-of-payment balances in the supplier accounts and other
accounts payable aggregate Ps.896.
72
29
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V. AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
As of December 31, 2013 and 2012, the rollforward of the Company’s provision balances was as follows:
Note 1.
Nature of business
Additions
(cancellations),
Payments
2013
Altos Hornos de México, S.A.B. de C.V.2012
(AHMSA) and
subsidiaries’net
(collectively
the “Company”)
is a
Ps.
Ps.
Ps.
Tax matters..................................
- Ps.
522
variable
capital corporation listed on the Bolsa860
Mexicana de Valores,(338)
S.A.B. de C.V. (“BMV”,
the Mexican
Employee
benefits………………..
573
402
(573)
402
Mines
sites
remediation
reserve,
short and long term……….......
402
(176)
(38)
188
Damage repair reserve…...……..
34
(29)
5
Other………..…………………......
29
16
45
Note 2.
Ps.
1,898 Ps.
(96)
(640)
1,162
a)
Additions
2011
(cancellations),
net
Payments
2012
In 1999, both the adverse situation affecting the world steel industry combined
high
Ps.
Ps.
Tax matters..................................
757
103 aPs.
- Ps.
certain
financial covenants; therefore on April 26,
1999, the Company began
process to renegotiate
with860
its
Employee
benefits………………..
536
573
(536)
573
Mines sitesofremediation
payments
the principalreserve,
and interest on all its debts. Because some of its creditors filed lawsuits against the
short
and
long
term……….......
345
(11)
402
Company, on May
24, 1999, AHMSA and various
subsidiaries (see68Note 3 c)) requested
a judicial
Damage
repair
reserve…...……..
34
34
Other………..…………………......
14
38
(23)
1999 by the First Judge of the First Instance Court in Monclova, Coahuila (the “COURT”). The Suspension 29
of
Ps.
Ps.
1,686
782
(570)
1,898
Payments represents an event of default
under
several
of the Company’s
DEBT agreements.
b)
The
other payables
and provisions
long-term
of the following:
The
Suspension
of Payments
primarily
resultedconsist
in the following:
201325, 1999; therefore,
2012 as of December 31, 2013
All liabilities were declared due and payable as of May
Ps.
Ps. converted
Mines
sites
remediation
59 were
229
II. All
foreign
currencyreserve………………...…
denominated liabilities existing
at the time
into Mexican pesos at the
Minesexchange
rights..........................................................
rate in effect as of May 25, 1999 (see Note 24). 58
Ps. to collect
Ps.arising from
117
229transactions prior to the
III. Creditors are prohibited from taking any action
debts
IV. All
filed for retirement
the collection
of any monetary obligations were suspended, except for tax
Note
19. lawsuits
Employee
obligations
According
to Mexican
labor
laws, the
Company
pays
seniority
to all employees
COURT)
continues
accruing
interest
until the
value
of thepremiums
security interest
is reached.who have stopped
working
after 15
years
or morebyofthe
service.
Additionally,
retirement
paymentsmanagement
are made based
on
V. A trustee
was
appointed
COURT
to supervisevoluntary
operations.
The Company’s
retained
certain
conditions, incontrol
addition
to pension
benefits
for both
administrative
and unionized
personnel.
administrative
and
continued
operations
in the
ordinary course
of business
supervision.
The
values ofnote
employee
benefits
from
termination
andtheir
retirement
were
comprised
of the
following:
VI. present
The convertible
holders
lost their
right
to exchange
notes for
AHMSA’s
capital
stock.
2013
2012
Ps. which 7,437
Ps. to Ps.115
Defined
benefit mainly
obligation…………………...…...…
6,845
Payment
for professional advisory fees,
amounted
and Ps.303, respectively,
Plan assets
at fair
value........................................
(216)
(203)
and were
recorded
in selling and administrative expenses
in the consolidated
Ps.
Ps. to these
7,221
6,642
Unfunded
status……………………………………..
and other
comprehensive results. The cumulative
amount
related
expenses as of December
IX. principal
AHMSA’s
stock was used
suspended
from trading
onactuarial
the BMVvaluations
and the were
Company’s
American Depositary
The
assumptions
for the purposes
of the
as follows:
2013
2012
AHMSA has proposed a preventive payment agreement, which has
% to be approved
% by most of its creditors
declared rate(s)……………………………………………………
bankrupt if the creditors reject such plan.
Discount
6.50%
6.50%
Expected rate(s) of salary increase.........................................
6.00%
5.80%
Return of plan assets…...........................................................
6.50%
6.50%
1
I.
30
73
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Discount rates of projected benefit obligations were determined considering the information of Mexican
government
rates and
duration of the obligations at the close of each year.
Note 1. bond Nature
of the
business
Net
costHornos
for the period
includes
the following
Altos
de México,
S.A.B.
de C.V.items:
(AHMSA) and subsidiaries’ (collectively the “Company”) is a
2013de C.V. (“BMV”, the
2012Mexican
variable capital corporation listed on the Bolsa Mexicana de Valores, S.A.B.
Ps.
Ps.
Service
costs……………..................................…………………..
333
333
AHMSA’s
393
388
Interest cost.....................….......…………………………………..
Less - Actual return on plan assets...................………………….
(13)
(13)
Ps.
Ps.
Net
periodic
713
708
Note
2. cost ……...…….......................................................
a) Suspension
of Payments
Amounts
recognized
of the net cost of the period in the consolidated statements of operations and other
comprehensive results are as follows:
In 1999, both the adverse situation affecting the world steel industry combined
2013 with the Company’s
2012 high
certain
financial covenants; therefore on April 26, 1999, the Company
to renegotiate 243
with its
Ps. began a process
Ps.
Cost
of sales……………………………………………………..…..
286
creditors
restructureexpenses…………………….….…….
the debt according to its payment capacity. As such,
47the Company suspended
90
Selling
and and
administrative
payments
of the principal
and interest on all its debts. Because some of its creditors
Interest
expenses,
net…………………….…..........................…..
380 filed lawsuits against
375 the
Company, on May 24, 1999, AHMSA and various subsidiaries
3 c)) Ps.
requested a 708
judicial
Ps.(see Note713
1999 bytothe
Judge
of the
Instance
Courtobligation:
in Monclova, Coahuila (the “COURT”). The Suspension of
Changes
theFirst
present
value
of First
the defined
benefit
2013
2012
Ps.
Ps.
Defined benefit obligation as of January 1,…………………..…..
6,845
5,875
I.
333
333
Service costs……………………………………………….….…….
Payments……………………………………...........……………….
(290)
(214)
Interest cost.....................….......…………………………………..
393
388
Actuarial loss on the obligation ………….…..........................…..
156
463
III. Creditors are prohibited from taking any action to collect debts
arising from transactions
prior to the
Ps.
Ps.
Defined benefit obligation as of December 31,……...….….……
7,437
6,845
Changes
to the fairand
value
of plan
assets: Secured debt (in the case that such debt was recognized by the
obligations
labor
obligations.
2013is reached.
2012
COURT) continues accruing interest until the value of the security interest
Ps. course of 203
Ps.under the trustee’s
Plan assets
at fair value
as ofand
January
1,…..………...…………..
179
administrative
control
continued
operations in the ordinary
business
13
13
Expected
yield……….……………….…………………….….…….
supervision.
Actuarial
gains
generated
……………….……….…........………..
11
Ps.
Ps.
Plan
assets
at
fair
value
as
of
December
31,…..………………..
216
203
The
pension
and
seniority
premium
assets
are held
in a trust and
mainly of short-term
Mexicanof
VIII.
Duringplan
2013
and
2012, the
Company
made
disbursements
for consist
debt restructuring
and Suspension
government
securities
at their fair
value. fees,
The Company
does not
a formal
fundingrespectively,
policy to
Payment
mainly valued
for professional
advisory
which amounted
to have
Ps.115
and Ps.303,
make contributions
to the plan;
instead,
are based expenses
on the available
flows. statements of operations
and were recorded
in selling
andthey
administrative
in the cash
consolidated
Significant
actuarial
for thevalue).
determination of the defined obligation are discount rate, expected
31, 2013
was assumptions
Ps.2,807 (nominal
salary
increase and
mortality.
The sensitivity
analyses
haveand
been
on reasonably
IX. AHMSA’s
stock
was suspended
from trading
onbelow
the BMV
thedetermined
Company’sbased
American
Depositary
possible
changes
of the respective
assumptions
the end
of the reporting period, while holding all
Receipts
(“ADR’s”)
were delisted
from the occurring
New Yorkat
Stock
Exchange.
other assumptions constant.
Under
Mexican
the agreement
Company recognized
must makebypayments
to 2% ofthat
its AHMSA
workers’could
dailybe
with the
right tolegislation,
vote as a final
the judge,equivalent
integrated
to aif defined
contribution
planplan.
that is part of the retirement savings system. The expense in
declared salary
bankrupt
the creditors
reject such
2013 and 2012 was Ps.252 and Ps.236, respectively.
74
31
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
2012
Note 20.
Income taxes
Note 1.
Nature of business
a) ISR, DESM and IETU
The Company
is and
subject
to ISRofand
certain
subsidiaries
DESM,
and(“GAN”)
to IETU
through
2013. traded
ISR is
Mexican
company
subsidiary
Grupo
Acerero
del Norte,toS.A.
de C.V.
and
is a publicly
computed
taking
into
consideration
the
taxable
and
deductible
effects
of
inflation
and
the
rate
is
30%.
In 2014, aaddress
new Special
Tax on Mining
("DESM”)
is addedCoahuila.
to the holders of mining concessions, which can be
AHMSA’s
is Prolongación
Juárez
S/N, Monclova,
determined by applying the rate of 7.5% on the difference from reducing certain deductions from taxable
income for ISR purposes. DESM is deductible for ISR purposes; therefore, the net effect is the deferred tax
recorded
31,ofwhich
was 5.25%.
Note
2. as of December
Suspension
payments
was eliminated
as of 2014; therefore, up to December 31, 2013, this tax was incurred both on
a)IETU
Suspension
of Payments
revenues and deductions and certain tax credits based on cash flows from each year. The respective rate
17.5%.
2008,
the Asset
Tax Law
was repealed;
under combined
certain circumstances,
IMPAC paid
Inwas
1999,
bothInthe
adverse
situation
affecting
the worldhowever,
steel industry
highin
the
ten
years
prior
to
the
year
in
which
ISR
is
paid,
may
be
recovered,
according
to
the
terms
of
the
law.
The current
tax isthe
thedebt
greater
of ISR and
IETU
up to 2013.
creditors
andincome
restructure
according
to its
payment
The provision
income
taxes expense
presented
in the consolidated
of operations
and
Company,
on for
May
24, 1999,
AHMSA (benefit)
and various
subsidiaries
(see Note statements
3 c)) requested
a judicial
other
comprehensive
results
is
as
follows:
Payments represents an event of default under several of the Company’s 2013
DEBT agreements. 2012
617
Current
ISR...………………………………………………......
230 Ps.
The
Suspension
of Payments primarily resulted in the following: Ps.
Deferred ISR………….…………...........……………………..
217
(280)
from
tax contingency
…………………………..………...
(223)as of December 31, 2013
I.ISRAll
liabilities
were declared
due and payable as of May 25, 1999; therefore,
Current
IETU…...…………….………………………………...
1
4
and 2012,
the balance of Ps.14,951 is reported as a current liability.
IETU………………..…………….…………………..
(33)into Mexican pesos(15)
II.Deferred
All foreign
currency denominated liabilities existing at the time were converted
at the
Deferred
DESM………………………………………………..
690
exchange
Ps.
Ps.
326
882
b) Tax
loss carryforwards
and recoverable
IV.
All lawsuits
filed for the
collection ofasset
any tax
monetary obligations were suspended, except for tax
As of
December
31, 2013,
the Company
hasthe
tax
lossofcarryforwards
for income
tax and recoverable asset
COURT)
continues
accruing
interest until
value
the security interest
is reached.
of which
indexedbyforthe
inflation.
carryforwards
are calculated
based management
on the resultsretained
of each
V.tax,Aalltrustee
wasare
appointed
COURTSuch
to supervise
operations.
The Company’s
subsidiary
of AHMSA,
rather
on a consolidated
A summary
of of
those
balances
of the trustee’s
Company
administrative
control
and than
continued
operations inbasis.
the ordinary
course
business
under
andsupervision.
its subsidiaries is presented below:
Tax Loss
Recoverable
VII. Debt agreements not guaranteed by mortgages
and/or pledges ceased
to accrue interest from the date
Expiration of Payments.
Carryforwards
Asset Tax
of the Suspension
Ps.
Ps. to Ps.115 and 6Ps.303, respectively,
Payment mainly
fees, which
2014 for professional advisory
167amounted
and were recorded
in selling and administrative expenses
of operations
2015
129 in the consolidated statements
5
results. The cumulative amount
as of December
2016
126 related to these expenses
7
31, 2013 was
Ps.2,807 (nominal value).
2017
143
12
IX. AHMSA’s stock
BMV and the Company’s -American Depositary
2018 was suspended from trading on the
503
2019 were delisted from the New York Stock
402 Exchange.
2020
311
AHMSA has proposed
which has to be approved by- most of its creditors
2021 a preventive payment agreement, 536
with the right to 2022
vote as a final agreement recognized by the
AHMSA could be
316judge, with the possibility that
declared bankrupt
if the creditors reject such plan.
2023
1,193
Ps.
Ps.
3,826
30
1
32
75
ALTOS
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
c) Deferred income taxes
Note 1.
Nature of business
The deferred taxes liabilities are as follows:
Mexican company and subsidiary of Grupo Acerero del 2013
Norte, S.A. de C.V.2012
(“GAN”) and is a publicly traded
Ps.
Ps.steel products
Deferred
ISR………….………….....…..…………..
6,565of flat
6,798 and structural sections.
Stock Exchange).
The main activity is the production
and sale
Deferred
DESM……………………………………..
690
Deferred IETU………………….…………………...
33
Ps.
7,255 Ps.
6,831
Note 2.
I) Deferred ISR
The tax effects of temporary differences that generated deferred ISR assets (liabilities) are as follows:
indebtedness of approximately US$1,900 (the “DEBT”)
resulted in the 2012
Company’s noncompliance with
2013
certain financial
Deferred
assets: covenants; therefore on April 26, 1999, the Company began a process to renegotiate with its
creditors
and
restructure
the debt according
to its payment capacity. As such, the Company suspended
Employee
benefits
from termination
and
Ps. Because
Ps.of its creditors
payments
of
the
principal
and
interest
on
all
its
some
1,806
1,867 filed lawsuits against the
retirement……………………………………….debts.
Company,
on
May
24,
1999,
AHMSA
and
various
subsidiaries
(see
Note
3 c)) requested a judicial
Advances from customers………….….............
592
495
declaration
of
suspension
of
payments
status
(“Suspension
of
Payments”),
which
Tax loss carryforwards..........................………
862
54was granted on May 25,
1999
by the First
Judge of the First Instance Court in Monclova,
The Suspension of
Provisions
and reserves...................................
580Coahuila (the “COURT”).
375
Payments
represents an event of default under several of the Company’s
DEBT 103
agreements.
Inventories...................................................….
68
Deferred DESM………………………………….
207
The
Suspension
of Payments
primarily resulted in the following:
Current
employee
benefits……….…………….
114
161
Others……………………...…………….……….
64
20
I.
All liabilities:
liabilities were declared due and payable as of May 25, 1999; therefore, as of December 31, 2013
Deferred
and 2012,
balance
of Ps.14,951 is reported as a(10,333)
current liability.
Property,
plantthe
and
equipment.........................
(9,283)
II.Intangible
All foreign
currency
denominated
liabilities
existing
at
the
time were converted
assets.………..........................…….
(495)
(551)into Mexican pesos at the
exchange
rate ininstruments……..……....…
effect as of May 25, 1999 (see Note 24). Derivative
financial
(19)
III.Investment
Creditorsinare
prohibited
from taking
any action to collect
shares
of associated
companies
(30)debts arising from
(20) transactions prior to the
Ps.
(6,565) Ps.
(6,798)
obligationsdifference
and laborthat
obligations.
debt
(inliability
the case
such debt
the
The temporary
created Secured
a deferred
ISR
for that
property,
plant was
and recognized
equipment by
was
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
originated mainly from the application of the accelerated depreciation according to the tax dispositions, only
A trustee
appointed
upV.to the
amountwas
entitled
to deduct.
supervision.
Changes
in the deferred ISR balance for the years ended December 31, are as follows:
VII. Debt agreements not guaranteed by mortgages and/or pledges ceased
from the date
2013 to accrue interest
2012
VIII. During
2013 and 2012, the Company made disbursements
restructuring
of
Ps. for debt
Ps. and Suspension
Beginning
balance…......................................……………......
(6,798)
(7,212)
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
Deferred income tax provision………….................................
(217)
280
and
were recorded in selling and administrative expenses in the consolidated
AGROS
acquisition……………………………………………...
419 statements of operations
and otherofcomprehensive
Other concepts
comprehensiveresults.
results:The cumulative amount related to these expenses as of December
31, 2013
wasfrom
Ps.2,807
(nominal
value).
Actuarial
losses
employee
benefits
from
IX. termination
AHMSA’s and
stock
was
suspended
from trading on the BMV and the Company’s
American Depositary
retirement………………………...……...
12
133
Receipts
(“ADR’s”)
were
delisted
from
the
New
York
Stock
Exchange.
Financial instruments value…………………..…………….
19
1
Ps.
Ps.
(6,565)
(6,798)
76
1
33
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
Deferred ISR recognized in equity is as follows:
Note 1.
2013
Nature of business
2012
Ps.
Ps. “Company”)220
Employee
benefits
from termination
retirement
effect..
232 the
Altos
Hornos
de México,
S.A.B. deand
C.V.
(AHMSA)
and subsidiaries’
(collectively
is a
Financial
instruments
value…………………………………..
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly (19)
traded
Ps.
232
201
variable capital corporation listed on the Bolsa Mexicana de Valores,
S.A.B. de
C.V. Ps.
(“BMV”, the Mexican
The reconciliation
the statutory
and S/N,
effective
ISR rates
expressed as a percentage of income before
AHMSA’s
address is of
Prolongación
Juárez
Monclova,
Coahuila.
income taxes for the years ended December 31, is as follows:
Note 2.
a)
Suspension of payments and debt restructuring 2013
Statutory
income tax rate.…………………………..
Suspension
of Payments
30%
2012
30%
DESM………………………………………………….
(41)
In 1999, both
the adverse situation affecting the world steel industry combined
high
IETU…………………………………….……………..
2
(13)
indebtedness
noncompliance
with
Tax balances
restatement
effect….………………..
49
certain financial
covenants;
therefore on
April 26, 1999, the Company began3a process to renegotiate
with its
Taxrestructure
effect due to
changes……………..………
(27)such, the Company
(12)
creditors and
therate
debt
according to its payment capacity. As
suspended
Inflationary
component……………….…………......
payments of
the principal
and interest on all its debts. Because some of its(12)
creditors filed (184)
lawsuits against the
expenses…………….……………...
(73)
Company, Nondeductible
on May 24, 1999,
AHMSA and various subsidiaries (see(20)
Note 3 c)) requested
a judicial
of accelerated
depreciation…………………
(5)which was granted
(66) on May 25,
declaration Effects
of suspension
of payments
status (“Suspension of Payments”),
in income
of First
associated
companies………..
(1) “COURT”). (49)
1999 by theEquity
First Judge
of the
Instance
Court in Monclova, Coahuila (the
The Suspension of
Other...…………………………..……………………..
19 agreements.
(80)
Payments represents
an event of default under several of the Company’s DEBT
Effective rate.……….…………………………………
(52%)
(398%)
Until 2012, tax provisions contemplated a reduction in the ISR rate of 29% in 2014 and 28% from 2015, and
I. these
All rates
liabilities
declared
due and differences
payable asaccording
of May 25,
therefore, reversal
as of December
2013
werewere
applied
to temporary
to 1999;
their estimated
date. The31,
new
ISR
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
Law, which goes into effect beginning 2014, does not contemplate the reduction in the ISR rate; therefore, a
II.rateAll
currency
liabilities
existingresulting
at the time
were
converted
into to
Mexican
at the
offoreign
30% was
applieddenominated
to all temporary
differences,
in an
additional
charge
results pesos
of Ps.455.
III. Creditors
are DESM
prohibited from taking any action to collect debts arising from transactions prior to the
II) Deferred
IV.
for thedifferences
collection that
of generated
any monetary
obligations
were (liabilities)
suspended,
for tax
TheAll
taxlawsuits
effects offiled
temporary
deferred
DESM assets
areexcept
as follows:
2013
COURT) continues accruing interest until the value of the
Ps.in the ordinary
administrative
and continued operations
Property,
plant andcontrol
equipment..............................
(714) course of business under the trustee’s
supervision.
Intangible
assets.………..........................………...
(124)
VI.
The convertible note holders lost their right to exchange their 23
Inventories………..............................................….
VII.
Debt agreements
not guaranteed by mortgages and/or pledges
Provisions
and reserves........................................
31 ceased to accrue interest from the date
of theemployee
Suspension
of Payments.
Current
benefits……….………………...
62
VIII.
During 2013 and 2012, the Company made disbursements32for debt restructuring and Suspension of
Other……………….……...............................…….
Payment mainly for professional advisory fees,
to Ps.115 and Ps.303, respectively,
Ps.which amounted
(690)
and
comprehensive
III) other
Deferred
IETU
IX.
was suspended
from
trading
on the
BMV and
Company’s
American
Depositary
TheAHMSA’s
tax effectsstock
of temporary
differences
that
generated
deferred
IETUthe
assets
(liabilities)
are as follows:
2012
Ps.by the judge,
with
the right
to vote
a final agreement recognized
Property,
plant
and as
equipment..............................
(39)with the possibility that AHMSA could be
declared
bankrupt if the creditors reject such plan.
Inventories………..............................................….
(6)
Payable accounts………...............................…….
12
Ps.
(33)
1
34
77
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Note 21.
Financial risk management
Note 1.
Nature of business
AHMSA is exposed to the following risks associated with its use of financial instruments:
 Mexican
Credit risk
company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
 variable
Liquidity
risk corporation listed on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV”, the Mexican
capital
 Stock
Market
risk
Exchange).
The main activity is the production and sale of flat steel products and structural sections.
This note presents information on the Company’s exposure to each one of the aforementioned risks, the
Company’s objectives, policies and processes to measure and manage risks, and the administration of the
Note 2. capital.
Suspension
of payments
and
debt restructuring
Company’s
Several sections
of these
consolidated
financial statements include more quantitative
disclosures.
a) Risk management framework.
78
The
Board of Directors
is generally
responsible
for establishing
supervising
Company’s risk
indebtedness
of approximately
US$1,900
(the “DEBT”)
resulted and
in the
Company’sthenoncompliance
with
management
framework.
The
Board
of
Directors
has
established
different
Committees
wherebywith
theits
certain financial covenants; therefore on April 26, 1999, the Company began a process to renegotiate
Company’s
risksrestructure
are managed.
the Audit
Company’s
risk management
policies
are
creditors and
the Through
debt according
to Committee,
its payment the
capacity.
As such,
the Company
suspended
developed
monitored,
Boardon
ofall
Directors
is Because
periodically
advised.
paymentsand
of the
principaland
andthe
interest
its debts.
some
of its creditors filed lawsuits against the
The
Company’s
risk management
policies
are established
to ofidentify
and analyze
the risks
faced
declaration
of suspension
of payments
status
(“Suspension
Payments”),
which was
granted
on by
Maythe
25,
1999 by the
First Judge
of the Firstlimits
Instance
in Monclova,
Coahuila
Company,
to establish
appropriate
and Court
controls
and to monitor
risks(the
and“COURT”).
to respectThe
theSuspension
limits. Risk of
Payments represents
an event
of default
under several
of the
Company’s
DEBT agreements.
management
policies and
systems
are periodically
revised
to reflect
the changes
in the market conditions
and Company’s activities. The Company, through training, standards and management procedures, intends
Suspension
of Payments
primarily resulted
the following:where all the employees understand their
to The
develop
a disciplined
and constructive
controlin environment
functions and obligations.
I.
and 2012, Audit
the balance
of Ps.14,951
is reported
as a current
liability.
The Company’s
Committee
supervises
the manner
in which
Management monitors the compliance
II.
All
foreign
currency
denominated
liabilities
existing
at
the
time
were
converted
Mexican
pesos
with the Company’s risk management policies and procedures, and
verifies
that into
it agrees
with
the at
riskthe
exchange
rate
in
effect
as
of
May
25,
1999
(see
Note
24).
management framework in relation to the risks faced by the Company. The Company’s Audit Committee
III. Creditors
prohibited
any action to
collectAudit
debtscarries
arisingout
from
transactions
prior
to the
receives
supportare
from
Internal from
Audit taking
as a supervisor.
Internal
both
routine and
special
reviews of the risk management controls and procedures, and reports the results to the Audit Committee.
b) Credit risk
Credit administrative
risk representscontrol
the financial
loss riskoperations
for the Company
if a customer
or business
counterpart
of a
and continued
in the ordinary
course of
under
thefinancial
trustee’s
instrument
does
not
meet
its
contractual
obligations,
and
mainly
arises
from
the
Company’s
accounts
supervision.
receivable
investments
in securities.
VI. The and
convertible
note holders
Trade accounts
receivableofand
other accounts receivable
of the Suspension
Payments.
The Company’s
exposure
to a credit advisory
risk is mainly
affected
by the to
individual
characteristics
of each
Payment mainly
for professional
fees, which
amounted
Ps.115 and
Ps.303, respectively,
customer.
considers the
industryinand
where statements
the customers
operate
and Nevertheless,
were recordedManagement
in selling andalso
administrative
expenses
the sector
consolidated
of operations
as a non-compliance
risk, as these
factors
have influence
on the to
credit
risk,
particularly
the
results.
The can
cumulative
amount related
these
expenses
as ofunder
December
current31,
deteriorated
economic(nominal
circumstances.
2013 was Ps.2,807
value). Approximately 24 per cent of the Company’s revenues are
attributable
to sale
transactions
with solely
sixtrading
customers.
However,
Management
believes
that there
is no
IX. AHMSA’s
stock
was suspended
from
on the
BMV and
the Company’s
American
Depositary
delisted
from
York
Stock Exchange.
risk concentration
due towere
the low
credit
risktheofNew
these
customers,
which is determined according to the
Company’s credit policies (see Note 10).
withCredit
the right
to vote as
a final
agreementarecognized
by under
the judge,
witheach
the possibility
that AHMSA
could be
The
Committee
has
implemented
credit policy
which
new customer
is individually
declared
bankrupt
if
the
creditors
reject
such
plan.
analyzed with respect to its solvency before offering it the Company’s payment and delivery standard terms
and conditions. The Company’s review includes visits to the customer’s facilities, review of its financial
1
35
statements, commercial references and credit insurance; the latter if the sector is considered at medium or
high1.risk. Credit
limits of
are
established to each customer, which represent the amount of maximum credit,
Note
Nature
business
which requires the approval by the Credit Committee. These limits are revised annually or every time
customers
an increase
of credit.and
Customers
that do
not satisfythe
the“Company”)
Company’s credit
Altos
Hornosrequest
de México,
S.A.B. ofdetheir
C.V.line
(AHMSA)
subsidiaries’
(collectively
is a
policies
can
solely
conduct
transactions
through
advance
payments.
Over Exchange).
65 per cent The
of the
customers
the Company
over 10 years,
and
Stock
main
activity have
is theconducted
productiontransactions
and sale ofwith
flat steel
productsduring
and structural
sections.
there
is
no
bankruptcy
or
losses
from
doubtful
accounts
with
them
in
the
last
10
years.
When
monitoring
the
customers’ credit risk, they are grouped according to their credit characteristics, including the sector to which
they belong, geographical location, type of industry, maturity and financial ratios.
Note 2.
As part of the Management’s risks implementation, beginning 2008, insuring customers that according to the
a)sectors
Suspension
of Payments
or industry
represent more risk, was included in the credit policy.
InThe
1999,
both
theare
adverse
the world
steelin industry
combined
withthe
theCompany
Company’s
goods
sold
subjectsituation
to qualityaffecting
guarantees,
such that
case of quality
issues,
canhigh
have
indebtedness
of approximately
US$1,900
(theguarantee
“DEBT”) resulted
Company’s
noncompliance
with
complaints that
according to the
Company’s
manuals in
arethe
accepted
or refused.
The Company
certain
financial
covenants;
on April
26, 1999,
began
process
renegotiate
with its
requests
guarantees
from therefore
its customers
according
to the
the Company
risk degree
and atheir
credittorating
determined
for
creditors
restructure
theaccording
debt according
to its payment
each oneand
of the
customers
to the Company’s
creditcapacity.
policies. As such, the Company suspended
Company,
on May
24,
1999, AHMSA
and
various an
subsidiaries
(see
Note
3 c))
requested
judicial
The Company
has a
provision
policy that
represents
estimate of
claims
from
trade
accounts areceivable
declaration
of
suspension
of
payments
status
(“Suspension
of
Payments”),
which
was
granted
on
May
25,
and other investment accounts receivable. The main factors of this provision are a component of specific
1999
by
the
First
Judge
of
the
First
Instance
Court
in
Monclova,
Coahuila
(the
“COURT”).
The
Suspension
of
losses that corresponds to individual significant exposures.
Investments in financial assets
The Company limits its exposure to credit risk by investing solely in equity and solely with counterparts that
have a high credit rating of investment grade: at least A1 for securities in national currency and BBB- or
for foreign
currency.
There is
an Investment
which
ensuresinto
theMexican
compliance
the
II.higher
All foreign
currency
denominated
liabilities
existing atCommittee
the time were
converted
pesoswith
at the
investment
policy
and
constantly
monitors
the
credit
rates.
As
the
Company
has
solely
invested
in
securities
withCreditors
high credit
rates,
management
does any
not foresee
that
any counterpart
does
not transactions
meet its obligations.
III.
are
prohibited
from taking
action to
collect
debts arising
from
prior to the
I.
Guarantees
IV.
All lawsuits filed for the collection of any monetary obligations were suspended, except for tax
DueCOURT)
to its procedural
of Suspension
Payments,
AHMSA,
individually,
unable to provide financial
continuesstatus
accruing
interest untilofthe
value of the
security
interest is is
reached.
thirdappointed
parties. by the COURT to supervise operations. The Company’s management retained
V.guarantees
A trusteetowas
c) Liquidity
risk
supervision.
Liquidity
risk represents
the possibility
that the Company
has difficulties
comply
with from
its obligations
VII.
Debt agreements
not guaranteed
by mortgages
and/or pledges
ceased to to
accrue
interest
the date
of the Suspension
of Payments.
associated
with its financial
liabilities that are settled by delivering cash or another financial asset. The
VIII.
During 2013
and 2012,
the Company
forextent
debt restructuring
of
Company’s
approach
to manage
its liquiditymade
risk isdisbursements
to ensure, to the
possible, thatand
it willSuspension
have sufficient
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
liquidity to meet its obligations when they fall due, in both regular and extraordinary conditions, without
and were
recorded in
selling
administrative
expenses in
the consolidated statements of operations
incurring
unacceptable
losses
or and
putting
at risk the Company’s
reputation.
2013 was
Ps.2,807a (nominal
value). and control of commitments which helps it to monitor cash flow
The31,
Company
maintains
strict monitoring
IX.
AHMSA’s
stock
was
suspended
the BMV andRegularly,
the Company’s
American
Depositary
requirements and optimize yields in from
cash trading
from itsoninvestments.
the Company
makes
sure of
Receipts
(“ADR’s”)
were
delisted
from
the
New
York
Stock
Exchange.
having sufficient cash available to cover the operating expenses foreseen, including the payment of its
financial obligations. The foregoing excludes the possible impact of extreme circumstances that are not
AHMSA
has foreseeable,
proposed a preventive
payment
agreement,
has
to Note
be approved
reasonably
such as natural
disasters,
amongwhich
others
(see
17b)). by most of its creditors
1
36
79
ALTOSNOTES
HORNOS
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
d) Market risk
Note 1.
Nature of business
Market risk is the risk that changes in market prices such as exchange rates, interest rates and equity
instruments
maydeaffect
the Company’s
income
or the value
of its financial
instruments.
objective is
of a
Altos Hornos
México,
S.A.B. de C.V.
(AHMSA)
and subsidiaries’
(collectively
theThe
“Company”)
market
riskcompany
management
is to manage
and control
exposures
to S.A.
market
within acceptable
parameters,
Mexican
and subsidiary
of Grupo
Acerero
del Norte,
de risks
C.V. (“GAN”)
and is a publicly
traded
atvariable
the same
time yields
are optimized.
capital
corporation
listed on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV”, the Mexican
AHMSA’sRisk
Exchange
Forty per cent of the Company’s revenues are in U.S. dollars and sixty per cent in Mexican pesos. Therefore,
Note
2.
payments
debt for
restructuring
the
exchange
riskSuspension
to which theofCompany
is and
exposed
sales, purchases and loans denominated in U.S.
dollars is reduced. There is an exchange risk for certain transactions conducted in other currencies, mainly
Euros.
In 1999,
the adverse
situation
thethat
world
steelwith
industry
Company’s
high
Loans
are both
generally
denominated
in affecting
currencies
agree
thosecombined
of cash with
flowsthearising
from the
indebtedness
of
approximately
US$1,900
(the
“DEBT”)
resulted
in
the
Company’s
noncompliance
with
Company’s transactions, especially Mexican pesos and U.S. dollars. The foregoing provides an economic
certain
financial
covenants;
therefore
on
April
26,
1999,
the
Company
began
a
process
to
renegotiate
with
hedging without the need to contract derivatives and, therefore, under these circumstances, hedgingits
accounting is not applicable.
Regarding other monetary assets and liabilities denominated in foreign currency, the Company makes sure
that
its by
net
is of
maintained
at an acceptable
level through
the(the
purchase
andThe
sale
of foreignof
1999
theexposure
First Judge
the First Instance
Court in Monclova,
Coahuila
“COURT”).
Suspension
currencies
at
exchange
rates
of
spot
transactions
to
cover
short-term
unforeseen
events.
Given
a possible of
increase
in the
depreciation
of the Mexican peso against the U.S. dollar, we
The Suspension
Payments
primarily
resultedof
in 10%
the following:
estimate that the value of our foreign currency balance would increase Ps.390 in 2013 and Ps.120 in 2012,
which
result in
a loss
of the exchange
currencies
by May
such25,
amounts.
I. would
All liabilities
were
declared
due and payable
as of
1999; therefore, as of December 31, 2013
Interest
risk currency denominated liabilities existing at the time were converted into Mexican pesos at the
II. Allrate
foreign
The
monitorsfrom
the behavior
of interest
rates
and debts
assesses
its exposure
to their fluctuations
III. Company
Creditorsactively
are prohibited
taking any
action to
collect
arising
from transactions
prior to the
on loans.
The decisions
of having loans at fixed or variable rates are determined case by case and depend
Suspension
of Payments.
onIV.
the All
market
conditions
and the
expectations
the time ofobligations
contractingwere
the loans.
Currently,
67% of
lawsuits
filed for
collectionthereof
of anyat monetary
suspended,
except
forthe
tax
obligations
obligations. Secured debt (in the case that such debt was recognized by the
Company’s
debt isand
at a labor
fixed rate.
trustee wasfinancial
appointed
by theare
COURT
to supervise
operations.(see
TheNote
Company’s
management
retained
AsV.theACompany’s
liabilities
in Suspension
of Payments
2), there
is no interest
rate
risk. administrative control and continued operations in the ordinary course of business under the trustee’s
supervision.
VI. market
The convertible
note holders lost their right to exchange their notes for AHMSA’s capital stock.
Other
price risks
of the
Suspension
of Payments.
The risk
of equity
instrument
price arises from equity instruments available for sale held to comply in part
VIII.the
During
2013 and portion
2012, the
made disbursements
debt restructuring
with
non-financed
of Company
the Company’s
defined benefitfor
pension
obligations. and
TheSuspension
Company’sof
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
management monitors the combination of debt and equity instruments in its investment portfolio,respectively,
based on
and were
recorded
in selling
and administrative
expensesportfolio
in the consolidated
operations
the market
indexes.
Material
investments
within the Company’s
are managedstatements
individuallyofand
all the
and
other
comprehensive
results.
The
cumulative
amount
related
to
these
expenses
as
of
December
decisions on purchase and sale of instruments are approved by the Investment Committee.
IX. main
AHMSA’s
was suspended
from trading
BMV and
the inCompany’s
American
Depositary
The
goal ofstock
the Company’s
investment
policy iton
to the
maximize
yields,
order to meet
the Company’s
Receipts
(“ADR’s”)
were
delisted from
the New York
Stocksupport
Exchange.
non-financed
defined
benefit
obligations;
Management
receives
from external advisors to this effect.
According to the policy, certain investments are recorded at fair value through earnings, because its
AHMSA hasis proposed
a preventive
agreement,
to be approved by most of its creditors
performance
actively monitored
and payment
are managed
on a fairwhich
valuehas
basis.
declared
bankrupt
theenter
creditors
reject such plan.
The
Company
does ifnot
into commodities
agreements other than to cover their expected use and sale
requirements. Such agreements are not settled in a net manner.
1
80
37
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
e) Equity management
Note 1.
Nature of business
The Company does not have a formal policy to manage equity; however, management seeks for maintaining
an adequate
basis S.A.B.
to satisfy
Company’s
and strategic
needs and
the market
Altos
Hornos equity
de México,
dethe
C.V.
(AHMSA)operating
and subsidiaries’
(collectively
themaintain
“Company”)
is a
participants’
trust.and
The
foregoing
is achieved
effective
monitoring
Company’s
Mexican
company
subsidiary
of Grupo
Acererowith
del Norte,
S.A.management,
de C.V. (“GAN”)
and is a the
publicly
traded
revenues
and income,
andlisted
long-term
plans that
finance mainly
Company’s
cash
variable
capital
corporation
on theinvestment
Bolsa Mexicana
de Valores,
S.A.B. the
de C.V.
(“BMV”,operating
the Mexican
flows.Exchange).
With these The
measures,
the Company
intends to and
reach
a constant
increase
in profits.
Stock
main activity
is the production
sale
of flat steel
products
Note 22.
Stockholders’ equity
Note 2.
Common stock consists of the following as of December 31, 2013 and 2012:
In 1999, both the adverse situation affecting the world steel industry
combined
with the Company’s high
Number
of
indebtedness of approximately US$1,900 (the “DEBT”) resulted inshares
the Company’s noncompliance
with
Book value
creditors
and restructure the debt according to its payment capacity.
As such, the
Ps. Company suspended
Fixed capital……………………………………….……………….
36,668,998
250
payments
of
the
principal
and
interest
on
all
its
debts.
Because
some
of
its
creditors
filed lawsuits2,190
against the
Variable capital………………………….…………………………
321,203,504
Company,
on May
24, 1999, AHMSA and various subsidiaries (see Note- 3 c)) requested3,689
a judicial
Restatement
effect.………………………………..………….…...
declaration of suspension of payments status (“Suspension of Payments”),
which
was
granted
on
May 25,
Ps.
357,872,502
6,129
As of December 31, 2013 and 2012, common stock consisted of 357,872,502 ordinary nominative shares,
The
Suspension
of Payments
primarily and
resulted
the following:
without
par value,
fully subscribed
paid.in There
is one series of shares, of which 36,668,998 are
classified as fixed capital and 321,203,504 as variable capital. According to the Company’s bylaws, the
I.variable
All liabilities
declared
payable
as of capital.
May 25,There
1999; is
therefore,
as of December
capital were
cannot
exceeddue
tenand
times
its fixed
no distinction
between 31,
the 2013
rights
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
associated with the Company’s variable and fixed capital.
exchange
in effect
May 25,ordinary
1999 (see
Note 24). meeting on April 18, 2011, an increase in the
Pursuant
to a rate
resolution
of as
theofgeneral
stockholders’
III.
Creditors
are
prohibited
from
taking
any
action
to collect
debtstoarising
from transactions
prior toof the
Company’s variable capital of Ps.7,114 was approved,
subject
the condition
that the lifting
the
Suspension
of
Payments.
Company’s legal process of suspension of payments is definitely declared. If applicable, 125,056,783 nonIV.
lawsuits
filed
for the
collection
of any
monetary
were
suspended,
except for they
tax
par All
value
ordinary
shares
will be
issued, and
as long
as the obligations
related capital
increase
is not subscribed,
and labor
debt (in the case
thatonsuch
debt
recognized
the
will obligations
remain in treasury.
At obligations.
the ordinary Secured
general shareholders'
meeting
March
22,was
2013,
the term by
to carry
continues
accruing interest
until the period
value of
out COURT)
such increase
was extended
to an additional
ofthe
3 years.
administrative
control
andrestated
continued
operations
thetaxordinary
of business
under the
trustee’s
Stockholders’
equity,
except
paid-in
capital in
and
retainedcourse
earnings,
will be subject
to income
tax
supervision.
payable by the Company at the rate in effect upon distribution. Any tax paid on such distribution, may be
VI.
The convertible
holders
their right
to exchange
theirthe
notes
capital
stock.and the two
credited
against thenote
income
tax lost
payable
for the
year in which
taxfor
onAHMSA’s
the dividend
is paid
VII.
Debt
agreements
not
guaranteed
by
mortgages
and/or
pledges
ceased
to
accrue
interest
thesubject
date
fiscal years following such payment. Beginning 2014, dividends to individuals and foreigners from
will be
of
the
Suspension
of
Payments.
to an additional tax of 10% on the base of the net tax income account arisen from that date.
Payment mainly
forinclude
professional
advisory
whichtoamounted
to Ps.115
andLaw,
Ps.303,
Accumulated
earnings
the legal
reservefees,
according
the General
Corporate
whichrespectively,
requires that
and
were
recorded
in
selling
and
administrative
expenses
in
the
consolidated
statements
operations
at least 5% of net income of the year be transferred to a legal reserve until the reserve equals of
20%
of capital
stock at par value. 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, 2013
and 2012, the legal reserve, was Ps.105 (nominal value).
During the
Payments,payment
the Company
cannotwhich
distribute
dividends
or reduce
equity
AHMSA
hasSuspension
proposed aofpreventive
agreement,
has to
be approved
by most
of in
itscash.
creditors
1
38
81
ALTOS
HORNOS
DEDE
MÉXICO,
S.A.B.
DEDE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
MÉXICO,
S.A.B.
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
The balances of the stockholders’ equity tax accounts are as follows:
Note 1.
Nature of business
2013
2012
Ps. del Norte,
Contributed
capital account…………………........
55,127
53,022 and is a publicly traded
Mexican company
and subsidiary of Grupo Acerero
S.A.Ps.
de C.V. (“GAN”)
Net
tax
income
account………....…………………
1,818
variable capital corporation listed on the Bolsa Mexicana de Valores, S.A.B.1,790
Ps.
Ps. steel products
54,812 and structural sections.
Stock Exchange). The main activity is the production
and56,945
sale of flat
The total amount of the balances of the shareholders’ equity tax accounts exceeds stockholders’ equity in
the consolidated balance sheet.
Note 2.
As of December 31, 2013 and 2012, the following Company’s subsidiaries have noncontrolling interest:
AGROS
19%, Hojalata
Mexicana, S.A. de C.V. 49%, Antair, S.A. de C.V. 24%, Hullera Mexicana, S.A. de
a) Suspension
of Payments
C.V. 5% and Aq-wise 45%.
Note
23. financial
Other
comprehensive
results
certain
covenants;
therefore on
April 26, 1999, the Company began a process to renegotiate with its
payments of the
principal
and interest
its debts. Because
some of
itsyear,
creditors
lawsuits
against
the
Comprehensive
loss
represents
changesoninall
stockholders’
equity during
the
as afiled
result
of activity
other
Company,
on May
24, 1999,
AHMSA common
and various
than
distributions
and activity
in contributed
stock.subsidiaries (see Note 3 c)) requested a judicial
1999comprehensive
by the First Judge
of the
Firstaccumulated
Instance Court
in Monclova,
Coahuila
(the
“COURT”). The Suspension of
Other
income
(loss)
balance
items consist
of the
following:
The Suspension of Payments primarily resulted in the
Movements
following: during the
year
2011
Movements
during the
year
2013
2012
Items that may be reclassified subsequently to profit or loss:
I.Translation
All liabilities
due and payable Ps.
as of May
25, 1999;
asPs.
of December
effects ofwere
foreigndeclared
subsidiaries………….………..
Ps.
117 Ps.
(90)therefore,
27
(1) Ps.31, 2013
26
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
Valuation of financial instruments available for sale.……….
37
(3)
34
(34)
II. thatAllwillforeign
currency subsequently
denominated
liabilities
Items
not be reclassified
to profit
or loss:existing at the time were converted into Mexican pesos at the
Defined
employeerate
benefits
effect……………………………..
(243)
(321)
(564)
(145)
(709)
exchange
in effect
as of May 25, 1999 (see Note
24).
LossCreditors
on purchaseare
of equity
of noncontrolling
interest............
(70) transactionsprior to(70)
III.
prohibited
from taking
any action to (70)
collect debts arising
from
the
Ps. (159) Ps.
Total
(414) Ps.
(573) Ps.
(180) Ps.
(753)
COURT) continues
accruing balances
interest until
the
value of the security interest is reached.
Note 24.
Foreign currency
and
transactions
control
and continued operations in the ordinary course of business under the trustee’s
Foreignadministrative
currency balances
were:
supervision.
their notes2012
for AHMSA’s capital stock.
VI. The convertible note holders lost their right to exchange
2013
VII.
Debt
agreements
not
guaranteed
by
mortgages
and/or
pledges
ceased
to accrue interest from the date
Monetary assets:
of
the
Suspension
of
Payments.
U.S.dollar………………..........................…. US$
164 US$
170
Monetary liabilities:
U.S.dollar…………......................................
456
257
Other currencies…………...........................
6
6
462
263
US$New York
(298)
US$
Receipts (“ADR’s”) were delisted from the
Stock
Exchange.(93)
82
39
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
DECEMBER 31,FINANCIAL
2013 AND STATEMENTS
2012
The Company’s principal transactions denominated in foreign currency for the years ended December 31,
were1.as follows:Nature of business
Note
2013 the “Company”)
2012is a
Altos Hornos de México, S.A.B. de C.V. (AHMSA) and subsidiaries’ (collectively
3,362
Export sales………………………………...........................................
Mexican
company and subsidiary of Grupo Acerero del Norte, S.A. de Ps.
C.V. (“GAN”)4,155
and isPs.
a publicly traded
Ps. the Mexican
variable
capital
corporation
listed
the Bolsa Mexicana de Valores, Ps.
S.A.B. de C.V.
(“BMV”,
Purchases
of parts,
minerals,
etc.on
…….........………………………...
4,935
5,934
Stock
Exchange).
main net……………………........……………..
activity is the production and sale of flat steel
sections.4
Ps. products and
Ps.
Interest
(expense)The
income,
(10) structural
AHMSA’s
address is Prolongación Juárez S/N, Monclova, Coahuila. Ps.
Other fees......................………………………..................................
151 Ps.
170
The following table summarizes export sales by geographic area:
Note 2.
a)
2013
2012
Ps.
America………………..…………………………………………………
4,088 Ps.
3,362
Europe……………………………………………………………………
67
Ps.
Ps.
4,155
3,362
The exchange
rates forand
theinterest
Mexican
peso
published
by Banco
deitsMéxico
with
respect
to against
the foreign
payments
of the principal
on all
its debts.
Because
some of
creditors
filed
lawsuits
the
currencieson
indicated
above
are as
follows:and various subsidiaries (see Note 3 c)) requested a judicial
Company,
May 24,
1999,
AHMSA
March
December
31,
December
May 25,The Suspension of
1999 by the First Judge of the
First21,
Instance
Court in Monclova,
Coahuila31,
(the “COURT”).
2014
2013
2012
1999
U.S.
dollar………..........
13.17 resulted in the
13.08
13.01
9.36
The
Suspension
of Payments primarily
following:
British pound ….…...….
22.07
21.42
20.81
15.09
yen………....
0.13
0.16
0.08
I.Japanese
All liabilities
were declared due
and payable as 0.13
of May 25, 1999; therefore,
as of December
31, 2013
EURO………...……......
18.19 is reported 17.80
9.91
and 2012, the balance of Ps.14,951
as a current liability.16.91
(Israel)………….
3.78liabilities existing
3.71
N/A pesos at the
II.Shekel
All foreign
at the time were 3.41
As of
March 21,
the unaudited
foreign
similar
to thatfrom
of December
31, 2013.
III.
Creditors
are2014,
prohibited
from taking
anycurrency
action toposition
collectisdebts
arising
transactions
prior to the
As explained
in Note
II, as
a result of
Payments,
all debt
denominated
in afor
foreign
IV.
All lawsuits
filed 2fora) the
collection
of the
anySuspension
monetary of
obligations
were
suspended,
except
tax
currency
as of and
May labor
25, 1999
was converted
into
Mexican
at the
rate in effect
on
obligations
obligations.
Secured
debt
(in thepeso
caseamounts
that such
debtexchange
was recognized
by the
thatCOURT)
date. Since
the
final
effects
of
the
Suspension
of
Payments
are
not
known,
the
liabilities
denominated
in
continues accruing interest until the value of the security interest is reached.
foreign
currencies
could
increase
or
decrease.
Note
25.
Transactions and balances with related parties
supervision.
Related
include:
a joint venture
where theand/or
reporting
entityceased
is involved,
b) Board
Members,
VII.
Debt parties
agreements
nota)
guaranteed
by mortgages
pledges
to accrue
interest
from theclosed
date
relatives
to
key
personnel
of
management
or
relevant
managers;
and
c)
funds
derived
of
a
remuneration
planDuring
for labor
obligations
to employees
mentioned
in Note 19.
VIII.
2013
and 2012,
the Company
made disbursements
Payment
mainly
for
professional
advisory
fees,
which
amounted
Ps.115
a) Transactions with related parties for the years ended December 31,to2013
and and
2012Ps.303,
were asrespectively,
follows:
and other comprehensive results. The cumulative amount
related to these expenses as of December
2013
Other
IX. AHMSA’s stock was suspended from trading on the BMV and
the Company’s American Depositary
related
Receipts (“ADR’s”) were delisted Holding
from the NewAssociated
York Stock Exchange.
parties
Total
Income:
Sales……..…..………………. Ps.
- Ps.
- Ps.
64 Ps.
64
Ps.
Ps.
Ps.
Ps.
Administrative
services……...
24
24
Guarantee fees…………....... Ps.
15 Ps.
- Ps.
- Ps.
15
Ps.
Ps.
Other..................................... Ps.
- Ps.
13
13
1
40
83
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
ALTOS
HORNOS
DE
MÉXICO,
S.A.B.
DE
C.V.
AND
SUBSIDIARIES
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
Note 1.
Nature of business
Holding
Associated
Other
related
parties
Total
Expenses:
Rail
road transportation
Mexican
company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
Ps.
Ps.
Ps.
Ps.
334(“BMV”, the Mexican
334 de
services……………………..
variable capital corporation listed on the -Bolsa Mexicana
Valores, -S.A.B. de C.V.
Ps.
Ps.
Ps.
Ps.
Materials
and
supplies.…..….
374
Stock Exchange). The main activity is the production and sale of flat steel products 374
Ps. Juárez- S/N,
Ps. Monclova,- Coahuila.
Ps.
Advertising………..…...……..
34 Ps.
34
AHMSA’s address is Prolongación
Services…………………….... Ps.
- Ps.
- Ps.
11 Ps.
11
Ps.
Ps.
Ps.
Ps.
Guarantee fees………….......
39
39
Note 2.
Air transportation services..... Ps.
- Ps.
- Ps.
21 Ps.
21
Ps.
Ps.
Ps.
Ps.
Other…..................................
26
26
2012 combined with the Company’s high
In 1999, both the adverse situation affecting the world steel industry
Other noncompliance with
indebtedness of approximately US$1,900 (the “DEBT”) resulted in the Company’s
related to renegotiate with its
certain financial covenants; therefore on April 26, 1999, the Company began a process
Affiliated As such,
parties
creditors and restructure the debtHolding
according toAssociated
its payment capacity.
the CompanyTotal
suspended
payments
of
the
principal
and
interest
on
all
its
debts.
Because
some
of
its
creditors
filed
lawsuits
against
the
Income:
Ps. AHMSA - and
Ps. various subsidiaries
Ps.
Company, on May 24, 1999,
(see Ps.
Note 3 c))
a judicial
Sales……..…..……………….
- Ps.
4,383
77 requested
4,460
declaration ofservices……...
suspension of Ps.
payments status
of Payments”),
on 23
May 25,
Ps.
Administrative
- Ps. (“Suspension
23 Ps.
- Ps.which was
- granted
1999 by the First Judge of thePs.
First InstancePs.
Court in Monclova,
Coahuila
(the
“COURT”).
The
Suspension
of
Guarantee fees………….......
15
- Ps.
- Ps.
- Ps.
15
Other..................................... Ps.
- Ps.
- Ps.
- Ps.
15 Ps.
15
Other
related
I.
All liabilities were declared due
and payable
as of May 25,Affiliated
1999; therefore,
as of December
Holding
Associated
parties
Total31, 2013
Expenses:
Rail road transportation
II. All foreign currency denominated
liabilities
existing at the
time were converted
into Mexican
pesos at the
- Ps.
312 Ps.
- Ps.
- Ps.
312
services…………………….. Ps.
Ps.
Ps.
Ps.
Materials
and supplies.…..….
- Ps. debts arising
- Ps. from338
338to the
III. Creditors
are prohibited from takingany action to collect
transactions prior
Ps.
Ps.
Ps.
Ps.
Ps.
Advertising………..…...……..
27
27
Ps.
Ps.
Ps.
Ps.
Ps.
IV. All lawsuits filed for the collection- of any monetary
obligations
except
for tax
Services……………………....
- were suspended,
129
129
obligations
and labor obligations.
Secured
recognized39by the
Ps.
Ps. debt (in- the
Ps. case thatsuch
Ps. debt was
Guarantee
fees………….......
39
- Ps.
COURT) continues
accruing
Ps. interest -until
Ps.the value of- the
Ps.security interest
Air transportation
services.....
- Ps. is reached.
24 Ps.
24
Ps.
Ps.
Other…..................................
- Ps.
- Ps.of business
40 Ps.
40
administrative control and continuedoperations in the
ordinary course
supervision.
b)VI.NetThe
amounts
due tonote
andholders
from affiliated
companies
were as their
follows:
convertible
lost their
right to exchange
2013
2012
Due
from
related
parties,
short-term:
VIII.
During
2013
and 2012,
the Company made disbursements for debt restructuring and Suspension of
Ps. which amounted
Grupo Payment
Agromex, mainly
S.A. defor
C.V.................................
118 Ps. to Ps.115 and
- Ps.303, respectively,
professional advisory fees,
Aerodiplomatic,
de C.V.
……..…….................
6
and wereS.A.
recorded
in selling
and administrative expenses in6 the consolidated statements
of operations
Promotora
Vivienda
México, S.A.
de C.V….…..
2
2
and de
other
comprehensive
results.
The cumulative amount related
to these expenses
as of December
Compañía
Mercantil
Río Hondo,
S.A. devalue).
C.V….....
2
2
31, 2013
was Ps.2,807
(nominal
Distribuidora
ESSEX,
S.A.
de
C.V..
….……….......
1
2 American Depositary
IX. AHMSA’s stock was suspended from trading on the BMV and the Company’s
Coahuila
Industrial
Minera,
S.A.
de
C.V.
(“CIMSA”)
423
GAN.........................................................................
55
Other.......................................................................
27by most of its creditors
AHMSA has proposed a preventive payment agreement, which34
has to be approved
163 with the possibility
517 that AHMSA could be
with the right to vote as a final agreement recognized by the judge,
Less
– Allowance
forifdoubtful
accounts
……………
(13)
(13)
declared
bankrupt
the creditors
reject
such plan.
Ps.
150 Ps.
504
Total
84
41
1
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
2013
2012
Note 1.
Nature of business
Due from related parties, long-term:
Ps.and subsidiaries’
177 Ps.(collectively153
Loans
to key de
management…………………….……..
Altos
Hornos
México, S.A.B. de C.V. (AHMSA)
the “Company”) is a
Compañía
Mercantil
Río
Hondo,
S.A.
de
C.V……...
2 C.V. (“GAN”) and
3 is a publicly traded
Mexican company and subsidiary of Grupo Acerero del Norte, S.A. de
AGROS……..………………………..........................
503
Stock Exchange). The main activity is the production and sale of 179
flat steel products 659
Less
–
Allowance
for
doubtful
accounts
………..….
(503)
AHMSA’s address is Prolongación Juárez S/N, Monclova, Coahuila. Ps.
179 Ps.
156
Total
Due2.
to related Suspension
parties, short-term:
Note
90 Ps.
Coahuila Industrial Minera, S.A. de C.V. (“CIMSA”) Ps.
58
a)GAN.........................................................................
LCD……..................................................................
38
40
ESSEX,
S.A. desituation
C.V………....................
15 combined with21the Company’s high
InComercial
1999, both
the adverse
affecting the world steel industry
MeetMe....................................................................
- the Company’s78noncompliance with
indebtedness
of approximately US$1,900 (the “DEBT”) resulted in
Other........................................................................
11 began a process17
certain
financial covenants; therefore on April 26, 1999, the Company
to renegotiate with its
Ps.
creditors and restructureTotal
the debt according to its payment
capacity.
As such, the156
Company suspended
212 Ps.
Company,
on May
24, paid
1999,
AHMSA
and various
subsidiaries
3 c)) requested
During 2008,
AHMSA
Ps.218
to Afianzadora
Insurgentes
on (see
behalfNote
of AGROS
to release athejudicial
pledge
declaration
of
suspension
of
payments
status
(“Suspension
of
Payments”),
which
was
granted on
May
25,
granted on AHMSA’s entire pelletizing plant (essential asset for its regular operations).
This
pledge
1999
by the before
First Judge
of the Firstdeclared
Instancethe
Court
in Monclova,
Coahuila and
(the the
“COURT”).
Suspension
of
originated
the Company
Suspension
of Payments
processThe
does
not imply any
Payments
violation. represents an event of default under several of the Company’s DEBT agreements.
The
Payments
primarily
resulted
the following:
OnSuspension
October 31,of2012,
MINOSA
entered
into a in
conditional
surrogacy and third-party payment agreement with
Basilisk three, S. A. de C. V., and others, whereby MINOSA acquires the credit rights of certain AGROS'
I. bank
Allobligations
liabilities were
declaredfor
due
and payable
as of(US$70.6).
May 25, 1999;
therefore,
of December
31, 20135,
in exchange
payment
of Ps.921
The transfer
wasascompleted
on February
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
2013, once MINOSA made the payment established.
exchange
rate
in effectpaid
as ofPs.300
May 25,
(see
Note 24).
In August
2013,
MINOSA
to 1999
CIMSA
to acquire
additional credit rights charged to AGROS.
Suspension
of Payments.
From
2010 to November
2013, MINOSA made contributions in cash to AGROS in the aggregate of Ps.350.
obligations and
Secured
debt (inthe
the
case
that such
debt was
the
Conservatively,
untillabor
2012obligations.
the Company
had reserved
total
accounts
receivable
fromrecognized
AGROS ofby
Ps.503
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
as uncollectible, as the latter was in a process of bankruptcy. As AGROS concluded this process in 2013,
V.thisAreserve
trustee was
was written
appointed
the COURT
to supervise
operations.
The Company’s
management
retained
off, by
recognizing
income
of Ps.503
in the consolidated
statements
of operations
and
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
other comprehensive results.
supervision.
VI.
Thetoconvertible
note holders
lost are
theirrelated
right totoexchange
their
notes forover
AHMSA’s
capital
Loans
key managerial
personnel
loans with
maturities
one year
and stock.
are denominated
VII.
Debtdollars.
agreements
not guaranteed
by mortgages
and/or pledges ceased to accrue interest from the date
in U.S.
The interest
rate is LIBOR
plus 3 points.
VIII.
and 2012,
theinterest
Company
madeCETES
disbursements
forby
debt
TheDuring
liability2013
with CIMSA
bears
at 28-day
multiplying
1.2.restructuring and Suspension of
were recorded
in selling
and GAN
administrative
expenses
in the of
consolidated
statements
of Company
operationsof
As and
of December
31, 2013
and 2012,
has a debt
in Suspension
Payments in
favor of the
and
other
comprehensive
results.
The
cumulative
amount
related
to
these
expenses
as
of
Decemberde
Ps.107, which is presented net of accounts payable to own GAN. As of December 31, 2009, Promotora
31, 2013
was Ps.2,807
(nominal
value). Sabinas, S.A. de C.V. and Inmobiliaria Hispanoamericana, S.A.
Vivienda
México,
S.A. de C.V.,
Inmobiliaria
IX.
AHMSA’s
stock
was suspended
fromantrading
on the
and the
Company’s
Depositary
de C.V.
(all GAN
subsidiaries)
extended
agreement
withBMV
AHMSA,
securing
assets American
owned by them
valued
were
delisted from
the NewinYork
Stock Exchange.
at US$26.7,
pursuant to
an appraisal
conducted
December
1999, (with a book value as of December 31,
2013 of Ps.86) whereby GAN and its subsidiaries would settle the aforementioned debt within 5 years,
AHMSA
has proposed
a preventive
payment Alternatively,
agreement, which
hascould
to beexercise
approved
bycollateral
most of guarantee
its creditorson
unless both
parties agreed
to an extension.
AHMSA
the
with
the
right
to
vote
as
a
final
agreement
recognized
by
the
judge,
with
the
possibility
that
AHMSA
could be
the assets secured by GAN in the second degree.
Since February 1997, AHMSA has been paying GAN a 2.5% commission on bank loans and advances from
customers where GAN is the guarantor.
1
42
85
Employee direct benefits granted to the Company’s key management were Ps.501 and Ps.465 for years
2013
and
Note
1. 2012, respectively.
Nature of business
Note
26. company
Net sales
Mexican
and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”) and is a publicly traded
Net
salesExchange).
were as follows:
Stock
The main activity is the production and sale of flat steel products and structural sections.
2013
2012
Ps.
Steel………..………….…………...........……………………..
32,134 Ps.
33,866
Note 2.
Steam coal……………….…..…………….…………………..
3,925
4,551
By-products…………………………………………………….
217
268
Energy services………………………………………………..
39
56
Services...……….…………………………………………......
290
217
Other
sales…....…………….……..…..….…………………...
261
265 with
indebtedness
noncompliance
Ps.
Ps.
36,866
39,223
The
Company
receives
advances
from on
customers
and Because
portfolio advance
payments
exchange
a cash
payments
of the
principal
and interest
all its debts.
some of its
creditorsinfiled
lawsuitsfor
against
the
discount
and on
are May
recorded
decreasing
the and
earnings.
Such
discount is(see
calculated
to theaperiod
Company,
24, 1999,
AHMSA
various
subsidiaries
Note 3 according
c)) requested
judicial
elapsed
between
the advance
payment receipt
and the loan of
term
after the delivery
of the
product.
Cash
declaration
of suspension
of payments
Payments”),
which was
granted
on May
25,
discounts
those
that make
their payments
the term established
in the of
1999 by are
the also
First granted
Judge oftothe
Firstcustomers
Instance Court
in Monclova,
Coahuilabefore
(the “COURT”).
The Suspension
loan
policies.represents
The discounts
granted
for under
these several
concepts
were
Ps.312 and
Ps.214
in 2013 and 2012,
Payments
an event
of default
of the
Company’s
DEBT
agreements.
respectively.
Note
Other
income
I. 27.
All liabilities
were
declared due and payable as of May 25, 1999; therefore, as of December 31, 2013
Other
expenses
the following:
II. (income)
All foreign
currencyinclude
denominated
liabilities existing at the time were converted into Mexican pesos at the
2012 prior to the
III. Creditors are prohibited from taking any action to collect debts2013
arising from transactions
Ps.
Fixed
impairment
34 for tax
IV. assets
All lawsuits
filed ………..………….…………..........
for the collection of any monetaryPs.
obligations weresuspended,
except
(Gain) obligations
loss on fixedand
assets
sales…………..………….........
(11)debt was recognized2 by the
labor
obligations. Secured debt (in the case that such
Allowance
for doubtful
accounts
......………………….........
(503)is reached.
COURT)
continues
accruing
interest until the value of the security interest
Other
(1)
(43)retained
V. income………….....…………..….……….….………...
A trustee was appointed by the COURT to supervise operations. The Company’s
management
Ps.
(515)
administrative control and continued operations in the Ps.
ordinary course
of business
under the(7)
trustee’s
supervision.
VII. 28.
Debt agreements
guaranteed
mortgages and/or pledges ceased to accrue interest from the date
Note
Financialnot
expense
and by
income
VIII. During 2013 and 2012, the Company made disbursements for 2013
debt restructuring and
Suspension of
2012
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
Interest expense:
and
were
recorded
in
selling
and
administrative
expenses
in
the
consolidated
statements
of
operations
Ps.
Ps.
Employee retirement obligations interest cost……………...
380
375
and
other
comprehensive
results.
The
cumulative
amount
related
to
these
expenses
as
of
December
Financing debt interest…………...........……………………..
308
123
31, 2013
Ps.2,807
(nominal value).
Surcharges
and was
updates
taxes……………………………….
106
18
IX.
AHMSA’s
stock
was
suspended
from trading on the BMV and the (115)
Company’s American Depositary
Tax matters (see Note 18)……..……………………………..
105
Receipts
(“ADR’s”) were delisted from the New York Stock Exchange. 39
Guarantee
fees………………………………………………...
39
Other…………………………………………………………….
16
66
AHMSA has proposed a preventive payment agreement, which
Ps. has to be approved
734 Ps.
726
43
1
86
ALTOS
HORNOS
DE MÉXICO, S.A.B.
DE C.V.STATEMENTS
AND SUBSIDIARIES
NOTES
TO CONSOLIDATED
FINANCIAL
NOTESAS
TOOF
CONSOLIDATED
FINANCIAL
STATEMENTS
2013
2012
Interest
Note
1. income:
Nature of business
Ps.
Income on tax matters……..…………...……………………..
15 Ps.
81
Interest
income
cash equivalents………………………...
22 the “Company”)46is a
Altos
Hornos
de on
México,
S.A.B. de C.V. (AHMSA) and subsidiaries’ (collectively
Moratorium
interests…………………………………………..
(9) and is a publicly traded
29
Mexican
company
and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”)
Guarantee
feescorporation
paid………...………………………………...
15
variable
capital
listed on the Bolsa Mexicana de Valores, S.A.B. de15
C.V. (“BMV”, the Mexican
Other…………………………………………………………….
Stock
Exchange). The main activity is the production and sale of flat steel products
29 and structural sections.
20
Ps.
72 Ps.
191
Note
Note2.29.
Suspension
Operating lease
a)Operating
Suspension
ofwhere
Payments
leases
the Company participates as a lessee mainly correspond to leases of mobile heavy
equipment whose lease periods are 1 to 5 years. 98% of the operating leases can be cancelled with no
Inpenalties.
1999, both
adversehas
situation
affecting
the world equipment
steel industry
combined
with theasCompany’s
high
Thethe
Company
the option
of purchasing
leased
and classified
operating leases
indebtedness
approximately
US$1,900
(the “DEBT”) resulted in the Company’s noncompliance with
at the date ofof
expiration
of the lease
periods.
creditors
and restructure
the debt
according
its and
payment
such,
the Company
suspended
The operating
lease expense
for fiscal
years to
2013
2012 capacity.
was Ps.268As
and
Ps.301,
respectively.
Company,
on May
24, 1999,
and various
subsidiaries (see Note 3 c)) requested a judicial
Non-cancellable
operating
leaseAHMSA
commitments
are:
1999 by the First Judge of the FirstMaturity
Instance Court in Monclova,
Coahuila (the “COURT”). The Suspension of
Amount
Payments represents an event of default
under
several
of
the
Company’s
2014
10 DEBT agreements.
Ps.
2015
10
The Suspension of Payments primarily
resulted in the following:
2016
10
2017
10
I.
All liabilities were declared due and payable asPs.
of May 25, 1999;
40 therefore, as of December 31, 2013
Note 30.
Mineral reserves (unaudited)
III.TheCreditors
are mines
prohibited
from under
taking aany
action to agreement
collect debts
from transactions
prior with
to the
Company’s
operate
concession
forarising
exploration
and exploitation
the
Suspension
of
Payments.
Mexican Mining Board. These licenses operate under terms of 50 years. In 2013 and 2012, the amounts
IV.
filedwere
for Ps.480
the collection
of any
monetary obligations were suspended, except for tax
paidAllforlawsuits
these rights
and Ps.434,
respectively.
continues
accruing
the value
of the
security
is reached.
TheCOURT)
term “reserves”
refers
to theinterest
part ofuntil
mineral
resource
that
can beinterest
economically
and legally extracted at
V.the Atime
trustee
was
appointed
by
the
COURT
to
supervise
operations.
The
Company’s
management
retained
the estimate is prepared. These estimates have been prepared by the Company’s
technical
division
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
engineers following evaluation methods generally used in the international mining industry, which include
supervision.
standard
geological mapping, drilling, sampling, assaying and geological modeling.
VII.
agreements
notreserves
guaranteed
by mortgages
and/or
to accrue
interest
the date
TheDebt
estimated
mineral
at each
of the mines
are pledges
restated ceased
periodically,
based
on thefrom
results
of the
of
the
Suspension
of
Payments.
explorations conducted. Additionally, they are reviewed by independent external consultants in mining,
VIII.
During
2013
and 2012,
the Company
disbursements
for debt
restructuring
and
Suspension
of
geology
and
reserves
calculations
in order made
to confirm
and verify such
estimates.
The last
reviews
conducted
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
by experts were held in March 2012 for the coal ore mines, and in December 2011 for the iron ore mines,
andon
were
selling and
administrative expenses in the consolidated statements of operations
based
the recorded
CanadianinStandard
43-101.
2013 was Ps.2,807
(nominal
value). classifies its different mining and salable mineral reserves as
As 31,
of December
31, 2013,
the Company
IX.
AHMSA’s
stock
was
suspended
proven and probable, as follows:
Receipts (“ADR’s”) were delisted from theUnaudited
New York millions
Stock Exchange.
of metric tons)
Mining
Salable
Years
AHMSA Mineral
has proposed a Proven
preventive payment
has to be approved
to sale
Probable agreement,
Total whichProven
Probable by most
Totalof its creditors
Iron ore
114.5
0.2
114.7
35.5
0.6
36.1
9
Steam coal
76.0
0.0
76.0
59.6
0.0
59.6
12
Metallurgical coal
160.0
4.1
164.1
63.5
0.7
64.2
38
1
44
87
ALTOS
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
NOTES
NOTESTO
TOCONSOLIDATED
FINANCIALSTATEMENTS
STATEMENTS
Mining
Nature
of business
(Unaudited thousands of metric tons)
Salable
Concentrated sales
Years
Mineral
to sale
Proven Probable
Total
Proven Probable
Total
Proven Probable
Total
Copper
1,840S.A.B.
2,604
573(AHMSA)
1,380 and 1,953
19 (collectively
46
16 is a
Altos
Hornos 764
de México,
de C.V.
subsidiaries’
the65“Company”)
Note 1.
Proven
reserves
the exploitable
economic
part
of the mineral
resources
measured
havethe
at least
a
variable
capital are
corporation
listed on
the Bolsa
Mexicana
de Valores,
S.A.B.
de C.V. that
(“BMV”,
Mexican
preliminary
viability study.
Thisactivity
study should
include adequate
information
on products
mining, processing,
metallurgy,
Stock Exchange).
The main
is the production
and sale
of flat steel
and structural
sections.
economics,
and other
factors
that S/N,
demonstrate,
the moment of the report presentation, that the
AHMSA’s address
is pertinent
Prolongación
Juárez
Monclova,atCoahuila.
economic extraction is justified.
Probable
are the exploitable
economic
the mineral resources suitable that have at least a
Note 2. reservesSuspension
of payments
and part
debtofrestructuring
preliminary viability study. This study should include adequate information on mining, processing, metallurgy,
economics,
and other
pertinent factors that demonstrate, at the moment of the report presentation, that the
a) Suspension
of Payments
economic extraction is justified (CIM Definition Standards).
For
iron ore, we of
believe
there are US$1,900
396 million (the
additional
tonsresulted
that are inclassified
as resources.
Currently, we
indebtedness
approximately
“DEBT”)
the Company’s
noncompliance
with
have
a drilling
program
and an
exhaustive
metallurgical
research
program,
purpose
is to integrate
certain
financial
covenants;
therefore
on April
26, 1999, the
Company
beganwhose
a process
to renegotiate
with its
most
of these
intothe
thedebt
proven
reservestoclassification
the results
are received.
creditors
andresources
restructure
according
its payment as
capacity.
Asconfirming
such, the this
Company
suspended
Company,
on Mayhas
24,resources
1999, AHMSA
various
subsidiaries
(see 43-101,
Note 3prepared
c)) requested
a judicial
The
RDM subsidiary
certifiedand
under
the Canadian
standard
by an expert
in
declaration
suspension
of payments
statusat(“Suspension
of Payments”),
was granted
May
25,
the
matter in of
2008.
The resources
are located
the tailing dam
and amount which
to 95 million
tons ofon
gold
and
1999ore
byof
the
First
Judge
of grams
the First
Court in Monclova, Coahuila (the “COURT”). The Suspension of
silver
0.19
and
39.32
perInstance
ton, respectively.
In 2009, a Prefeasibility study and other Feasibility study in 2012 on this ore, prepared by the same expert,
The Suspension
of Payments
primarily
resulted
in the following:
classified
it as minable
reserves,
reporting
a recovery
of 70% and 62% for silver and gold, respectively;
therefore, after a new processing in a new plant, 10.6 tonnes of gold and 2,443 tonnes of silver would be
I.
obtained.
II. 31.
All foreignSummary
liabilities
existing at
the time were converted into Mexican pesos at the
Note
of financial data
by industry
segment
III. table
Creditors
prohibited
from taking
anyinformation
action to collect
arising
from transactions
prior to the
The
belowareprovides
certain
financial
relateddebts
to the
Company’s
industry segments.
Suspension
of Payments.
Intersegment
transactions
were not significant.
obligations and labor obligations. Secured debt (in the case that
such debt was recognized
by the
2013
2012
COURT)
continues
accruing
interest
until
the
value
of
the
security
interest
is
reached.
Net sales:
V. A trustee was appointed by the COURT to supervise operations.
The32,593
Company’s
retained
Ps.
Ps. management
Steel………………………………........……………………..
34,364
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
Steam coal………………………..…………………………..
3,930
4,551
supervision.
Other……………………………….………………………….
343
308
VI. The convertible note holders lost their right to exchange Ps.
their notes for
AHMSA’s
Ps. capital stock.
36,866
39,223
of the Suspension
of Payments.
Consolidated
net (loss) income
for the year:
VIII.
During
2013
and
2012,
the Company made disbursements
for debt
restructuring
and Suspension
of
Ps.
Ps.
(2,535)
(311)
Steel………………………………........……………………..
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
Steam coal………………………..…………………………..
383
293
and were recorded in selling and administrative expenses in the consolidated
operations
Other……………………………………….………………….
(430) statements of(390)
and other comprehensive results. The cumulative amount
these expenses
as of(408)
December
Ps. related to
Ps.
(2,582)
Depreciation and amortization (1):
Ps.
2,849 Ps.
2,758
Steel………………………………........……………………..
Steam coal………………………..…………………………..
707
778
Other……………………………………….………………….
66
68
Ps.
Ps.
3,622
3,604
88
1
45
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
2013
2012
Capital
Note
1. expenditures:
Nature of business
Ps.
Steel………………………………........……………………..
2,639 Ps.
3,975
Steam
coal………………………..…………………………..
439
280is a
Altos
Hornos
de México, S.A.B. de C.V. (AHMSA) and subsidiaries’ (collectively
the “Company”)
Other……………………………………….………………….
- and is a publicly 171
Mexican
company and subsidiary of Grupo Acerero del Norte, S.A. de C.V. (“GAN”)
traded
Ps.
variable capital corporation listed on the Bolsa Mexicana de Valores,
S.A.B.3,078
de C.V.Ps.(“BMV”, the 4,426
Mexican
Interest income:
AHMSA’s
Ps.
74 Ps.
190
Steel………………………………........……………………..
Steam coal………………………..…………………………..
(2)
1
Ps.
72 Ps.
191
Note 2.
a)Interest
Suspension
of Payments
expense:
Ps.
697 Ps.
649
Steel………………………………........……………………..
In 1999,
the adverse situation affecting the world steel industry combined36with the Company’s71
high
Steamboth
coal………………………..…………………………..
indebtedness
noncompliance 6with
Other……………………………………….………………….
1
certain financial covenants; therefore on April 26, 1999, the Company
began a process
to renegotiate with
Ps.
734 Ps.
726 its
payments
of the
interest
on all its debts.
Because
somerespectively.
of its creditors filed lawsuits against the
(1) Includes
Ps.principal
525 andand
Ps.593
of amortization
in 2013
and 2012,
declaration
of suspension
of of
payments
status Other
(“Suspension
Payments”), such
whichas
was
granted
on May 25,
The financial
information
the segment
includesoftransactions
electric
generation
that
1999
by
the
First
Judge
of
the
First
Instance
Court
in
Monclova,
Coahuila
(the
“COURT”).
The
Suspension
of
stopped operating in July 2013, the copper mines of AHMSA Steel and the subsidiaries in the United States
Payments
represents
an
event
of
default
under
several
of
the
Company’s
DEBT
agreements.
among others.
The
Suspension
of Payments
primarily
resulted
thecorresponds
following: to steel segment.
Equity
in earnings
of associated
companies
of in
LCD
I. Sales
All liabilities
were declared
due largest
and payable
of May 25,
1999; therefore,
as of
December
31, 2013
to the Company’s
twenty
steel as
customers
together
represented
46%
and 42%,
of the
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
Company’s total steel sales for the years ended December 31, 2013 and 2012, respectively. In 2013 and
II.2012,
All no
foreign
currency
denominated
liabilities
existing
at the total
time revenues.
were converted into Mexican pesos at the
customer
represented
over 10%
of the
Company’s
Suspension
of
Payments. and contingencies
Note
32.
Commitments
I) Commitments
V.a) Coal
A trustee
was
appointed by the COURT to supervise operations. The Company’s management retained
supply
agreement
supervision.
In December
2012, MINOSA executed a supply agreement with CIC Corporativo Industrial Coahuila, S.A.
VI.
holders lost
their right
to exchange
notes
de The
C.V.convertible
(“CICSA”)note
(non-related
party),
whereby
CICSA their
would
sellfortoAHMSA’s
CFE, oncapital
termsstock.
and conditions
VII.
Debt
agreements
not
guaranteed
by
mortgages
and/or
pledges
ceased
to
accrue
interest
the dateof
established by an agreement between CICSA and CFE, a minimum of 32.2 million tons and from
a maximum
of
the
Suspension
of
Payments.
40 million tons of coal supplied by MINOSA for a term of 6 years, at a sales price calculated based on the
VIII.
During
2013and
andadjusted
2012, the
made
disbursements
forinflation
debt restructuring
and rate
Suspension
of
quality
of coal
by Company
an escalation
clause
that reflects
and exchange
fluctuations.
Payment
mainly
for
professional
advisory
fees,
which
amounted
to
Ps.115
and
Ps.303,
respectively,
Under the supply agreement, MINOSA delivers coal to CICSA, for resale to CFE, at a discounted price of
0.1%.
31,of2013
was Ps.2,807
(nominal
value).
b) As
December
31, 2013,
AHMSA
has provided guarantees to affiliated companies amounting to Ps.438
IX.
AHMSA’s
stock
was
suspended
(nominal value).
c) As of December 31, 2013, the Company had commitments of US$176 related to investment projects in
AHMSA
proposed
a preventive
agreement, which has to be approved by most of its creditors
additionhas
to the
mentioned
in Note 3 payment
a).
1
46
89
ALTOSNOTES
HORNOS
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
d) The Company has entered into professional service contracts with external consultants, whose
professional
fees,Nature
in some
cases, are contingent on the successful outcome of the transaction. As of
Note 1.
of business
December 31, 2013, contingent payments which the Company does not expect to pay during 2014
amounted
to US$15.
Altos Hornos
de México, S.A.B. de C.V. (AHMSA) and subsidiaries’ (collectively the “Company”) is a
e)variable
As of December
31, 2013, listed
the Company
had commitments
US$312,
US$30
year
capital corporation
on the Bolsa
Mexicana de ofValores,
S.A.B.
de and
C.V.US$116
(“BMV”,for
thethe
Mexican
2014,
2015
and
2016
onwards,
respectively,
related
to
the
acquisition
of
raw
materials.
f) On June 14, 2013, an agreement between the Company and Air Liquide was entered into, whereby the
latter shall construct a new Oxygen Plant within the Company's facilities, with a capacity of 650 tonnes of
oxygen
per day, and
AHMSA agrees
to purchase
for 20 years from the end of the construction of
Note 2.
Suspension
of payments
and the
debtoxygen
restructuring
the Plant, expected by June 2015.
a)
II)InContingencies
1999, both the adverse situation affecting the world steel industry combined with the Company’s high
a)certain
Tax assessments:
financial covenants; therefore on April 26, 1999, the Company began a process to renegotiate with its
Aspayments
of December
2013, and
thereinterest
are taxonassessments
Ps.84 (nominal
value)
fromfiled
several
governmental
of the31,
principal
all its debts. of
Because
some of its
creditors
lawsuits
against the
agencies,
which
is
still
being
appealed
by
the
Company.
The
Company’s
management,
on the opinion
legal counsel
and(the
the resolution
certain
cases inof
1999
by the First
Judge of thebased
First Instance
Court of
in its
Monclova,
Coahuila
“COURT”).ofThe
Suspension
favor
of
the
Company,
expects
that
possible
liability
that
could
arise
will
not
result
in
cash
disbursements.
b)The
As Suspension
of December
2013, primarily
fixed assets
owned
by following:
the Company with a book value of approximately
of 31,
Payments
resulted
in the
Ps.3,036 are securing bonds, tax assessments, and scheduled tax payment agreements, which in terms of
tax
the guarantees
are indue
the process
of being
released,
partial
forgiveness
was
granted. 31, 2013
I. liabilities,
All liabilities
were declared
and payable
as of
May 25,as
1999;
therefore,
as of
December
c)II.AHMSA
has voluntary
environment liabilities
protection
agreements
with were
the Federal
Bureau
of Environmental
All foreign
existing
at the time
converted
into Mexican
pesos at the
Protection
(“PROFEPA”)
that
set
forth
the
activities
that
AHMSA
must
carry
out
in
terms
of contamination
control.
The estimated
investment
to perform
agreements
is US$190,
including projects
III. Creditors
are prohibited
from amount
taking any
action tothe
collect
debts arising
from transactions
prior to to
the
controlSuspension
emissions toofthe
atmosphere,
and
water
cleaning
and
recirculation,
primarily.
Some
of
the
Company
Payments.
projects
in progress
committed
therefore,
PROFEPA
could
startsuspended,
the process except
to checkfor
and
IV. Allare
lawsuits
filed but
for behind
the collection
of to;
any
monetary
obligations
were
tax
in its case
to cancel
thelabor
related
agreements.
obligations
and
obligations.
Secured debt (in the case that such debt was recognized by the
InV.
addition,
in September
2010,by
the
PROFEPA
Bureau
of Environmental
Protection)
performed
an
A trustee
was appointed
the
COURT to(Federal
supervise
operations.
The Company’s
management
retained
extraordinary
inspection
to
five
departments
on
four
different
subjects,
in
order
to
comply
with
the
authorities’
observations.
To date, of the 20 opposed administrative proceedings, 18 have concluded satisfactorily and
supervision.
the
proceedings
have been
closed, lost
remaining
solely
2 proceedings
about for
theAHMSA’s
atmosphere
topic
opened; the
VI. The convertible
note holders
their right
to exchange
their notes
capital
stock.
incompliance
with
the
programs
and
commitments
presented
in
the
resolutions
would
result
in
a
recidivism,
the date
giving of
rise
to
a
partial
or
total
closing
of
the
facilities
of
the
areas
reviewed
by
the
PROFEPA.
Currently,
AHMSA
is working
the Company
observations
included
in the proceeding,
where thoseand
which
approachof
VIII. During
2013 on
andmeeting
2012, the
made
disbursements
for debt restructuring
Suspension
was notPayment
valid were
challenged
through
appeals
for
review.
mainly for professional advisory fees, which amounted to Ps.115 and Ps.303, respectively,
For projects
aimed
to reduce wastewater
and
to optimize
the use
of water
to expenses
reduce theasextraction
in
and other
comprehensive
results. The
cumulative
amount
related
to these
of December
aquifers,
there
is
a
global
advance
of
50%
with
a
termination
date,
for
all
the
strategies,
in
2014.
In March
2012,
the Ministry
of Environment
and
Natural
Resources authorized AHMSA a “sole
Receipts
(“ADR’s”)
were delisted
from the New
York
Stock Exchange.
environmental license” that considers investments in air and water line items, where programs of projects
previously
agreed
upon with
PROFEPA
and CNA
are included,
scheduling
established
until
AHMSA has
proposed
a preventive
payment
agreement,
whichand
has whose
to be approved
byismost
of its creditors
August
2015.
Beginning March 2012, the Company followed the procedure before the PROFEPA to obtain the clean
industry certificate for heavy profiles, which satisfactorily concluded the agreement.
1
90
47
ALTOSHORNOS
HORNOSDE
DEMÉXICO,
MÉXICO,S.A.B.
S.A.B.DE
DEC.V.
C.V.AND
ANDSUBSIDIARIES
SUBSIDIARIES
ALTOS
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
d) Some creditors have initiated legal proceedings against the Company, such as to convert the Suspension
of Payments
into
bankruptcy
proceedings. These lawsuits have been duly responded to by the Company
Note
1.
Nature
of business
and are in process. Management believes that such proceedings will be rejected by the court.
e) MINOSA
is undergoing
lawsuits
related
to third
parties
affected
miningand
operations.
Company
Mexican
company
and subsidiary
of Grupo
Acerero
del Norte,
S.A.
de C.V.by
(“GAN”)
is a publicly
traded
management,
based
on
the
opinion
of
its
legal
advisors
and
the
fact
that
certain
favorable
resolutions
have
already
been
granted,
expects
that
the
possible
obligation
not
demand
the
use
of
economic
resources.
Note 33.
New accounting principles
Note 2.
In 2013, the International Accounting Standards Board enacted the following IFRS becoming into effect on
1, 2014:of Payments
a)January
Suspension
2
9, Financial
Instruments
InIFRS
1999,
both the adverse
Amendmentsof
to IFRS
9 and IFRS
7, Mandatory
of IFRS
9 and
Transition noncompliance
Disclosures3
indebtedness
approximately
US$1,900
(the effective
“DEBT”) date
resulted
in the
Company’s
with
1
Amendments
IFRS 10, IFRS
12 and
Entities began a process to renegotiate with its
certain
financialtocovenants;
therefore
on IAS
April27,
26,Investment
1999, the Company
1
Amendments
to IAS 32, Offsetting
Financial Assets
and Financial
Liabilities
creditors
and restructure
the debt according
to its payment
capacity.
As such, the Company suspended
Company,
on annual
May 24,
1999,
AHMSA
(see application
Note 3 c))permitted.
requested a judicial
¹ Effective for
periods
beginning
on orand
aftervarious
January subsidiaries
1, 2014, with earlier
declaration
of suspension
payments
of with
Payments”),
which was
granted on May 25,
² Effective for
annual periodsofbeginning
onstatus
or after(“Suspension
January 1, 2017,
earlier application
permitted.
3
1999
by thefor
First
Judge
of the
First Instance
Court
in Monclova,
Coahuila
“COURT”).
The Suspension of
Effective
annual
periods
beginning
on or after
January
1, 2016, with
earlier(the
application
permitted.
IFRS 9, Financial Instruments
IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of
I. financial
All liabilities
due and payable
as of
Mayto25,
1999;requirements
therefore, asfor
of the
December
31, 2013
assets.were
IFRSdeclared
9 was amended
in October
2010
include
classification
and
and
2012,
the
balance
of
Ps.14,951
is
reported
as
a
current
liability.
measurement of financial liabilities and for derecognition.
rate of
in effect
as of May 25, 1999 (see Note 24).
Keyexchange
requirements
IFRS 9:
Suspension
of financial
Payments.
 All
recognized
assets that are within the scope of IAS 39 Financial Instruments: Recognition and
IV. Measurement
All lawsuits filed
for the to
collection
of any monetary
suspended,
except for tax
are required
be subsequently
measured obligations
at amortizedwere
cost or
fair value. Specifically,
debt
obligations and
obligations.
Securedmodel
debt whose
(in the objective
case thatis such
debtthe
was
recognized
byflows,
the
investments
that labor
are held
within a business
to collect
contractual
cash
COURT)
continues
accruing
interest
of payments
the securityofinterest
is reached.
and
that have
contractual
cash
flowsuntil
thatthe
arevalue
solely
principal
and interest on the principal
V. outstanding
A trustee was
appointed
by
the
COURT
to
supervise
operations.
The
Company’s
retained
are generally measured at amortized cost at the end of subsequent management
accounting periods.
All
administrative
control
and
continued
operations
in
the
ordinary
course
of
business
under
the
trustee’s
other debt investments and equity investments are measured at their fair value at the end of subsequent
supervision.periods. In addition, under IFRS 9, companies may make an irrevocable election to present
accounting
subsequent changes in the fair value of an equity investment (that is not held for trading) in other
comprehensive income, with only dividend income generally recognized in net income (loss).
 With
regard
to theformeasurement
financial
liabilities
as Ps.115
of fair value
through respectively,
profit or loss,
Payment
mainly
professional of
advisory
fees,
which designated
amounted to
and Ps.303,
IFRS
9
requires
that
the
amount
of
change
in
the
fair
value
of
the
financial
liability
that
is
attributable
and were recorded in selling and administrative expenses in the consolidated statements of operationsto
changes
the credit riskresults.
of thatThe
liability
is presented
other tocomprehensive
income,
unless the
and otherincomprehensive
cumulative
amountinrelated
these expenses
as of December
recognition
of
the
effects
of
changes
in
the
liability’s
credit
risk
in
other
comprehensive
income
would
create
or
enlarge
an
accounting
mismatch
in
profit
or
loss.
Changes
in
fair
value
attributable
to
a
financial
liability’s
risk are
subsequently
to profit
or loss. Under IAS 39, the entire amount of
Receipts credit
(“ADR’s”)
werenot
delisted
from thereclassified
New York Stock
Exchange.
the change in the fair value of the financial liability designated as fair value through profit or loss is
presented
in profit or
loss.
AHMSA
has proposed
a preventive
payment agreement, which has to be approved by most of its creditors
1
48
91
ALTOSNOTES
HORNOS
DE C.V. AND
SUBSIDIARIES
TODE
CONSOLIDATED
STATEMENTS
NOTES TOAS
CONSOLIDATED
FINANCIAL
STATEMENTS
Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities
Note 1.
Nature of business
The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the
definition
of an investment
not de
to consolidate
its subsidiaries
but instead
to measure
subsidiaries is
at a
Altos Hornos
de México,entity
S.A.B.
C.V. (AHMSA)
and subsidiaries’
(collectively
theits“Company”)
fair
value
through
profit
or
loss
in
its
consolidated
and
separate
financial
statements.
ToStock
qualify
as an investment
entity,
the is
Company
is required
Exchange).
The main
activity
the production
and to:
sale of flat steel products and structural sections.
 Obtain funds from one or more investors for the purpose of providing them with professional investment
management services.
 Note
Commit
investor(s) that
its business
is to invest funds solely for returns from capital
2. to its Suspension
of payments
andpurpose
debt restructuring
appreciation, investment income, or both.
 a)Measure
and evaluate
performance of substantially all of its investments on a fair value basis.
Suspension
of Payments
The
Company’s
management
does notaffecting
anticipate
thesteel
investment
amendments
will have any
In 1999,
both the
adverse situation
the that
world
industryentities
combined
high
effect
on the Group’s
consolidated US$1,900
financial statements
as theresulted
Company
notCompany’s
an investment
entity.
indebtedness
of approximately
(the “DEBT”)
in isthe
noncompliance
with
Amendments
to restructure
IAS 32, Offsetting
Financial
Assets
and
Financial
LiabilitiesAs such, the Company suspended
creditors and
the debt
according
to its
payment
capacity.
The
amendments
to IAS
clarifyAHMSA
the requirements
relating
to the offset
financial
and financial
Company,
on May
24, 32
1999,
and various
subsidiaries
(see of
Note
3 c)) assets
requested
a judicial
liabilities.
Specifically,
the amendments
clarify
the(“Suspension
meaning of ‘currently
has a legally
of setdeclaration
of suspension
of payments
status
of Payments”),
which enforceable
was grantedright
on May
25,
off’
andby
‘simultaneous
realization
and Instance
settlement’.
1999
the First Judge
of the First
Court in Monclova, Coahuila (the “COURT”). The Suspension of
The Company’s management does not anticipate that the application of these amendments to IAS 32 will
have
significant impact
on the primarily
Company’s
consolidated
financial statements.
TheaSuspension
of Payments
resulted
in the following:
AtI.the All
date
of issuance
the accompanying
consolidated
financial
statements,
theasCompany
has not
liabilities
were of
declared
due and payable
as of May
25, 1999;
therefore,
of December
31,fully
2013
assessed
effects
of adopting
these newisstandards
on atheir
financial
information.
andthe
2012,
the balance
of Ps.14,951
reported as
current
liability.
Note
statements
issuance
authorization
III. 34.
Creditors Financial
are prohibited
from taking
any action
to collect debts arising from transactions prior to the
On
21, 2014,filed
the for
issuance
of the consolidated
financial obligations
statements were
was authorized
by except
the Board
IV.March
All lawsuits
the collection
of any monetary
suspended,
for of
tax
Directors
and is and
subject
to obligations.
the approval
of the debt
ordinary
stockholders’
meeting,
may modifybythe
obligations
labor
Secured
(in the
case that such
debt who
was recognized
the
consolidated
financial
statements,
onuntil
provisions
setofforth
the General
Law.
COURT)
continues
accruingbased
interest
the value
the by
security
interestCorporate
is reached.
******
administrative control and continued operations
in the ordinary course of business under the trustee’s
supervision.
1
92
49

Untitled

Transcription

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