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TRANSCRIPT
Vitro, S.A.B. de C.V. (BMV: VITROA) is the leading glass manufacturer in
Mexico and one of the world’s major companies in its industry, backed by
more than 100 years of experience.
Founded in 1909 in Monterrey, Mexico, the Company has subsidiaries
in the Americas, offering quality products and reliable services to meet the
needs of two businesses: glass containers and flat glass.
Companies of Vitro produce, process, distribute, and market a wide
range of glass articles, which are part of the daily life of thousands of peo-
ple. Vitro offers solutions for multiple markets, including food, beverage,
wine, liquor, beer, cosmetic, and pharmaceutical, as well as architectural
and automotive. The Company is also a supplier of raw material, machin-
ery, and equipment for industrial use.
As a socially responsible organization, Vitro works on several initiatives
aligned to its Sustainability Model, aiming to create a positive influence
in the economic, social, and environmental aspects relevant to its
stakeholders, in a responsible corporate management framework.
Content
2 Global Presence
4 Financial Highlights
6 Message from the Chairman of the Board
10 Message from the Chief Executive Officer
14 Board of Directors
18 Glass Conteiners
26 Flat Glass
34 Sustainable Development
42 Operating and Financial Analysis
49 Management’s Financial
Responsibility
50 Financial Statements
our company
1
VisionTo become a leading company in the glass industry, in terms of profitability, efficiency,
quality, and service.
MissionVitro is a customer-committed organization dedicated to provide value-added products
and services in profitable and growing markets.
ValuesCustomer Orientation:
The customer as the source and ultimate goal of our business.
Quality:
Constantly meet and exceed customer’s expectations.
Creativity and Innovation:
Permanently seek new ideas to create and improve our value-added products and services.
Integrity:
Meet and exceed expected ethical behavior.
Teamwork:
Connect efforts and talents across colleagues.
Vitro philosophy
2
global presenceVitro has advanced for over 100 years to become the leading glass manufacturer in Mexico and one of the world’s major companies in its industry.
Subsidiaries Glass ContainersVitro Envases Norteamérica
Industria del Álcali
Comercializadora Álcali
Servicios Industria del Álcali
Vidrio Lux
Vitro Packaging de México
Vitro Packaging
Servicios Integrales de Acabados
Fabricación de Máquinas
Vidriera Guadalajara
Vidriera Los Reyes
Vidriera Monterrey
Vidriera Querétaro
Vidriera Toluca
Flat GlassViméxico
Vitro Vidrio y Cristal
Vitro Automotriz
Vitro Flex
Vidrio Plano de Mexicali
Vidrio y Cristal del Noroeste
Vitrocar
Vitro Colombia
Cristales Inastillables de México
Vitro Flotado Cubiertas
Vidrio Plano de México Lan
Cristales Automotrices
In a joint-venture with the Posselt family,
who owns 49%)
Vitro Do Brasil Industria E Comercio
Productos de Valor Agregado en Cristal
3
Our products are common in the daily life of millions of people who buy products in glass containers, use vehicles with automotive glass, and live in dwellings that have the best architectural glass, just to mention some examples. Vitro has operations and direct distribution in 8 countries of the Americas. Furthermore, through solid business relations with the leading corporations in each of the markets we serve, our products reach over 30 countries around the world.
Argentina
Barbados
Bolivia
Brazil
Canada
Chile
Colombia
Costa Rica
Cuba
Ecuador
El Salvador
France
Germany
Greece
Guatemala
Honduras
Italy
Japan
Mexico
Nicaragua
Panama
Peru
Philippines
Poland
Puerto Rico
Russia
South Korea
Spain
Switzerland
Trinidad and Tobago
United Kingdom
United States
Uruguay
Venezuela
Our products
Mexico
Bolivia
Brazil
Colombia
Costa Rica
United States
Guatemala
Panama
Our facilities
4
Vitro, S.A.B de C.V. and Subsidiaries
financial highlights(In millions of mexican pesos under IFRS, except where indicated otherwise; dollar figures are in millions of US dollars).
US $ (1) % Ps (2) % 2013 2012 change(3) 2013 2012 change(3)
Income Statement Consolidated net sales $1,675 $1,759 (4.8) $ 21,538 $23,112 (6.8) Domestic 1,062 1,118 (5.0) 13,657 14,599 (6.5) Export 560 588 (4.7) 7,205 7,822 (7.9) Foreign subsidiaries 52 53 (0.3) 676 691 (2.3)
Operating income before other (EBIT) 210 179 16.8 2,680 2,363 13.4
Net income 49 208 576 2,605
Net income of majority interest 50 211 582 2,651
Net income of majority interest earnings per common share (4) 0.14 0.61 1.68 7.65 EBITDA (5) 355 341 4.3 4,553 4,481 1.6
Balance Sheet Total assets 2,555 2,705 (5.5) 33,434 35,074 (4.7)Total liabilities 2,067 2,308 (10.4) 27,047 29,926 (9.6)
Stockholders’ equity 488 397 23.1 6,387 5,148 24.1
Stockholders’ equity of majority interest 390 300 29.9 5,099 3,895 30.9
Financial Indicators
Debt / EBITDA (times) 3.6 3.4 3.6 3.3
Net Debt (7) / EBITDA (times) 3.0 2.8 3.1 2.7
Interest Coverage (times) 2.7 1.8 2.6 1.8 (EBITDA / total net financial expense) EBIT Margin (%) 12.5 10.2 12.4 10.2
EBITDA Margin (%) 21.2 19.4 21.1 19.4
Personnel 15,279 16,229 (5.9) 15,279 16,229 (5.9)
Capital expenditures (6) 139 85 62.4 1,782 1,118 59.4
(1) Dollar figures reported herein are in nominal dollars resulting from dividing each month’s nominal pesos by that month’s ending exchange rate. (2) Financial data is presented in nominal pesos.(3) Change from 2012 to 2013. (4) Based on the weighted average shares outstanding.(5) EBITDA = earning before other, interest, taxes plus depreciation and amortization, and provision for employee retirement obligations.(6) Represents the capital expeditures carried out during the year, for which differs of the investments presented in the cash flow. (7) Debt net to cash and equivalents Financial statements were prepared according to International Financial Reporting Standards (IFRS).
1,67
5
1,32
1
1,50
0 1,68
4
1,75
9
La información �nanciera de los años 2009 y 2010 está preparada bajo Normas Mexicanas de Información Financiera (NIFS); la correspondiente a 2011, 2012 y 2013 está preparada bajo IFRS.
09 10 11 12 1321
0
138
139 15
7 179
09 10 11 12 13
355
262
281
338
341
09 10 11 12 13
4,55
3
3,55
3
3,55
8 4,22
0
4,48
1
09 10 11 12 13
2,68
0
1,87
4
1,76
6
1,96
9 2,36
3
09 10 11 12 13
21,5
38
17,8
85
18,9
54 20,9
51
23,1
12
09 10 11 12 13
5
The financial information for the years 2009 and 2010 is prepared under Mexican Financial Reporting Standards (MFRS); the one corresponding to 2011, 2012, and 2013 is prepared under International Financial Reporting Standards (IFRS).
Consolidated net sales
Operating income (EBIT)
EBITDA
Dollars
Dollars
Dollars
Pesos
Pesos
Pesos
6
2013 was crucial in our company’s history. Based on the satisfactory progress of our various agreements with creditors and partners to conclude the financial restructuring process, Vitro positioned itself in the ideal conditions to advance with firm steps towards profitability and sustainable growth.
message from the chairman of the board
Dear Shareholders:
Reaching agreements helped to eliminate the
last uncertainty barriers that diverted us from
the road towards future growth. The goal was
reached and it was time to advance, to con-
centrate our efforts in the business operation,
and to prove to our stakeholders that our daily
actions are aimed at turning Vitro into the best
option to work with and do business.
On March 2013, the Board of Directors
appointed Adrián Sada Cueva as Chief Exec-
utive Officer. Based on an assessment of his
profile and experience, it was determined that
he is the appropriate candidate to lead the
organization in this new stage. This consid-
eration had the favorable opinion of the Cor-
porate Practices Committee, composed in its
entirety of Independent Directors. Likewise,
Mr. David M. Martínez Guzmán and Mr. Ricardo
Guajardo Touché were elected to the Board of
Directors and other Directors were also ratified
in the General Ordinary Shareholders’ Meeting
held on April 29, 2013.
In 2013, we carried out several actions
that enabled us to strengthen the financial
position required by the organization to capi-
talize the opportunities that arise. Our goal is
to continue and reinforce a tight collaboration
with our clients to comply with their needs and
work as a team with them to meet the expec-
tations of consumers in all the markets where
they participate.
On September 5, 2013, the Company held
a Special General Shareholders’ Meeting in
which it was authorized to amend its bylaws
to include the participation of foreigners in Vi-
tro, as well as the merger of its subsidiaries
FIC Regiomontano, S.A.P.I. de C.V. (“FIC”) and
Compañía Vidriera, S.A. de C.V. (“COVISA”) into
Vitro, S.A.B. de C.V., process considered when
our restructuring plan concluded.
With the foregoing, the corporate stat-
utes of Vitro were adjusted so that it can
also carry out the activities performed by
said companies. The purpose of the merger
is to optimize financial and administrative
resources, while covering the debt service
more efficiently without affecting operations
or the stakeholders involved in its value
chain. Additionally, one of the agreements
entered into by Vitro and its financial partner
Fintech is complied with.
Said merger became effective on January
1, 2014, as determined by the Special General
8
Shareholders’ Meeting held on December 11,
2013. As a result of the merger, the capital
stock of Vitro increased 20 percent, same that
subsequently became property of Fintech in
compliance with the agreements reached on
March 2013.
Another element that supports our com-
mitment to ensuring the viability of the orga-
nization as a business and to strengthening
its financial position was the prepayment
on the Mandatory Convertible Debentures
(“MCDs”) that otherwise would have matured
on December 2015. The aggregate unpaid
balance, including accrued interest and dis-
count for the advance payment, was $123
million dollars.
This action provides our shareholders with
the certainty that the contingency of a possible
conversion of this instrument into shares of the
Company has been eliminated. Furthermore,
by making the advance payment we obtained a
5 percent discount and eliminated a debt that
had an annual cost of 12 percent.
Consistent with directing Vitro to a con-
solidated level of financial stability, a new is-
suance program was successfully completed
on November 2013, guaranteed by the trade
receivable of four of our subsidiaries. The is-
suance, with a face value of $1,200 million
pesos, a three-year maturity, and an interbank
equilibrium interest rate plus 1.7 percent, has
two AAA ratings granted by Standard & Poor’s
and HR Ratings.
These instruments have a great financial
strength resulting from the diversification of
the portfolio in the markets served by Vitro and
from the large number of clients, leaders in
their sectors. Consequently, Vitro’s total debt
closed at $1,262 million dollars at December
31, 2013.
The implementation of the agreements
and their duties, as well as the outstanding
performance of the organization, has been re-
flected in the confidence of the capital market
in our Company. I am pleased to inform that
the share price at December 31, 2013 quoted
at $33.50 pesos, practically double its value
on December 2012, which was $16.27 pesos
at that time.
All these efforts plus the cost and expense
reduction programs, directed at resource opti-
mization; the selective investment in our tras-
actions; and the disinvestment on non-strate-
gic assets, have maintained the Company in
the right path, without changing the attention
of our operations and with the firm conviction
of creating value for our shareholders and
stakeholders.
Even within these positive advances, 2013
presented challenging conditions to our
company. The late establishment of govern-
mental reforms in our country slowed down
the growth dynamics in some sectors where
we participate and markets evolved with
great caution.
According to data of the International
Monetary Fund (“IMF”), Mexico’s gross do-
mestic product at the closing of the year was
merely 1.2 percent above the one recorded
in 2012. This as a result of the downward
adjustments made throughout the year on
projections that were originally more positive.
The performance of economies in other coun-
tries where we participate also reflected little
growth. Under these circumstances, at Vitro
we seek to implement the financial and busi-
ness strategies that will enable us to continue
in the direction we have set.
Also in 2013, we made investments of
$139 million dollars, therewith ensuring
that our production plants, machinery, and
equipment are in optimal conditions to prop-
erly and timely meet our clients’ demands.
This provides the Company with competitive
advantages to timely respond to market re-
quirements and under high quality and special-
ization standards.
9
Vitro has the necessary basis to be the best option in all aspects for its stakeholders. We have great human talent, financial strategies to cover debt according to payment capacity, continuous improvement programs in operations and product innovation, and, most importantly, the trust and loyalty of our clients.
The sum of all initiatives that we have undertaken
has improved our financial condition. The cre-
ation of greater certainty has favored our clients
to turn to us to form part of their new projects.
After several strategic actions and de-
cisions taken during the year, some of them
difficult, it gratifies me to inform that the
mandate of the Board of Directors has been
complied with by focusing Vitro on the devel-
opment of its business lines with a sound finan-
cial structure that creates value for you on the
long term.
Creating value is not limited to having
a sound financial condition and operations
functioning correctly. Both are just a part of
the process. Therefore, we assume our social
responsibility and work for the sustainable de-
velopment of our communities.
I am pleased to announce that, for the
sixth consecutive year, our company received
the CSR Seal that, among other things, rec-
ognizes that the Company operates with the
highest standards on responsible and com-
mitment corporate management. The compa-
ny also holds the Sustainable Company Seal
endorsed by the Mexican Stock Exchange
(“BMV”), which recognizes the initiatives in
favor of the environment, social action, and
corporate governance.
Our adherence to the strictest applicable
corporate governance practices is congru-
ent with our duty to deliver value in the long
term to our shareholders and stakeholders.
As a result, the Self-Evaluation System of
the Board of Directors and its Committees
was implemented in 2013, hence guaran-
teeing that the strategic decisions of the
Company are taken objectively and for your
benefit.
During 2014, the results of the evaluation
will be submitted to the Corporate Practices
Committee in order to define an action plan to
handle the results produced. The implement-
ation, which is anonymous and digital, is intend-
ed to be made on an annual basis.
Moreover, the Finance and Planning
Committee turned into the new Chairman-
ship Committee, responsible for advising and
monitoring certain strategic projects of the
Chief Executive Office. With this, the expertise
of the Directors is capitalized through a flex-
ible and dynamic integration to the emerging
needs of the organization.
In summary, during 2013 we were not
only capable of advancing and performing the
financial and operating agreements following
the conclusion of the restructuring process; we
also concluded its implementation satisfactori-
ly. This is an example of the seriousness, com-
mitment, and responsibility of the executive
team and all collaborators for making Vitro an
organization whose presence will continue to
transcend in time.
Vitro has the necessary basis to be the
best option in all aspects for its stakeholders.
We have great human talent, financial strate-
gies to cover debt according to payment ca-
pacity, continuous improvement programs in
operations and product innovation, and, most
importantly, the trust and loyalty of our clients.
Dear shareholders, on behalf of the Board
of Directors, I thank you for your support in the
resolutions taken. We reiterate our commit-
ment to always act for the benefit of the Com-
pany so it can consolidate as a profitable and
sustainable organization within a transparency
and corporate ethics framework.
Sincerely,
Adrián Sada González
Chairman of the Board
Vitro, S.A.B. de C.V.
March 11, 2014
10
2013 was a year that meant closing cycles and also opening new horizons, a transition and prog-ress period in which decisions were made to strengthen the operational and financial bases of our business.
message from the chief executive officer
Dear shareholders:
It is very satisfactory to me to share with you
several of the most outstanding events of 2013
and the actions implemented to lead the Com-
pany to a profitable and sustainable growth, on
a solid and reliable financial condition.
During the first quarter of 2013, corre-
sponding transactions were carried out to
definitively conclude the financial restructuring
process. The agreements published at that
time, granted Vitro the necessary flexibility to
advance on its operational performance and in
configuring a debt level according to the Com-
pany’s payment capabilities.
Last April, a change in the organizational
structure was implemented with the purpose
of accelerating decision-making and focusing
activities towards our businesses. This recon-
figuration modified an organizational level,
providing important operational and economic
benefits to Vitro.
Furthermore, on July we completed the
prepayment of Mandatory Convertible Deben-
tures (“MCDs”) amounting to $123 million dollars.
As a result, we eliminated the possibility of such
notes being converted to 20 percent of Vitro’s
capital stock, significantly reducing any uncer-
tainty for our shareholders.
It is important to note that this payment
was possible given the Company’s good li-
quidity position, due both to the positive per-
formance of the business and to the sale of
corporate property.
At the beginning of the year, it was evident
that 2013 would be challenging for our opera-
tions from a commercial point of view. On one
part, the demand volume for containers in the
beer segment was perceived as weak.
In addition, some automotive clients of the orig-
inal equipment segment decided to reassign
their platforms with other suppliers at the final
phase of our restructuring process.
Moreover, the political environment and
uncertainty, linked to the recently approved
reforms, caused a weak economic growth in
Mexico. The increase recorded in the price
of natural gas was another factor that had a
strong impact on our operations.
Given the circumstances, we embraced
the task of implementing a series of initiatives
to mitigate a potential negative impact. Conse-
quently, we launched a cost reduction program
that contributed $38 million dollars.
Likewise, we managed to increase our sales
7 percent on all segments of the Containers busi-
ness, beer excluded, thus reducing the effects re-
sulting from the change in demand in said market.
12
Also, we attained an increase of 32 percent on
the exports of the Flat Glass business related to
the construction market, lessening the decline
in the consumption of float glass by our auto-
motive subsidiary.
As a result of the aforementioned efforts
and notwithstanding the decline in sales, from
$1,759 million dollars in 2012 to $1,675 mil-
lion in 2013 due to the demand contraction, our
Operating income before other (“EBIT”) reflects
an increase of 17 percent, year-over-year, with
$210 million dollars in 2013 to $179 million at
the previous closing.
In this same regard, the Operating Flow
(“EBITDA”) closed at $355 million dollars, an
increase of 4 percent, year-over-year, in relation
to 2012 when it reached $341 million dollars.
Also, our Net Operating Flow rose 28 percent,
from $293 million dollars in 2012 to $375 mil-
lion in 2013.
The foregoing enabled us to invest in
operations in a total amount of $139 million
dollars throughout the year, which helps to
position Vitro more competitively in the markets
where we participate.
We have been capable to face adversity once
again. We view problems as opportunities and
use creativity to find solutions, all to comply with
our main purpose: create value for you and for
the rest of our stakeholders.
At the year’s closing, we can conclude that
we had favorable results despite the highly chal-
lenging environment. Even when our sales had
a slight decrease, the initiatives we undertook
in the financial field, as well as operating initia-
tives, have created a solid base for a stronger
and more stable Vitro.
Awards
Our Company also received different recog-
nitions and certificates that confirm us as an
organization committed to innovation, quality,
social responsibility, and creation of value.
For third consecutive year, Vitro is
among the best companies to work for in
Mexico according to the list of Super Com-
panies prepared by the magazine Expansion.
Accordingly, our plants of Vidrio y Cristal
Mexicali, Vidrio Plano de Mexico Lan, and
Vidriera Los Reyes were recognized by the
Great Place to Work Institute (“GPTWI”) in its
2013 ranking.
Among the awards we received is the
one granted by the World Packaging Organ-
isation (“WPO”) to the container for the fra-
grance Diviníssima No.1. Also, we obtained
47 awards in the 28th Annual Contest “En-
vase y Embalaje Estelar” organized by the
Asociación Mexicana de Envase y Embalaje
(“AMEE”, Mexican Containers and Packag-
ing Association).
Additionally, two more containers were
awarded by the Glass Packaging Institute
(“GPI”). One of them stands out for having
received the President’s Choice Award, given
for the first time.
Regarding ecological matters, the Sec-
retaría de Medio Ambiente y Recursos Natu-
rales (“SEMARNAT”, Ministry of Environment
and Natural Resources of Mexico) recognized
Vitro for its project for mitigating greenhouse
gas emissions obtaining level GEI3, which is
the highest recognition level of the Greenhouse
Gas Emissions Program (“GEI”, for its acronym
in Spanish).
Dear shareholders: Vitro is an organization with proven experience and a solid financial condition. The enthusiasm of our team, added to the capacity and effi-ciency of our processes, compel me to confirm that we are in the right road to strengthen the leadership of our business in the markets we service.
13
Also, the Company received for a sixth con-
secutive time the CSR Seal (“ESR”, for its
acronym in Spanish) granted by the Centro
Mexicano para la Filantropía (“Cemefi”). We
also preserved for a third year the Sustain-
able Company Seal endorsed by the Mexican
Stock Exchange.
With the conclusion of the transition period,
we are at a new stage where we advance with
the necessary vitality to lead our company to
success and commendable recognition of over
100 years of experience.
Forecasts
As every year, forecasts for 2014 entail big
challenges and opportunities. We view as an
opportunity the prospect of an increment in the
production of the automotive industry in Mexi-
co in the medium and long term. Similarly, we
expect a growing demand in the construction
market in the United States.
Without a doubt, the energy reform imple-
mented in Mexico will position our industry in
a more attractive manner in the medium term,
as a result of the economic growth expectation
estimated for Mexico. Furthermore, we expect
it will create greater natural gas availability at
competitive costs in the future.
Challenges related to a greater inflationary
pressure, attributed to the cost of natural gas
and other energy products, are among the main
challenges for 2014.
Likewise, we have anticipated that we will
work very closely with our clients in the beverage
segment to face the effects of the special tax on
sugary beverages for such products in Mexico.
In the Flat Glass business we will encoun-
ter greater pressure resulting from more com-
petition in the automotive market, where an
increase in the production capacity of our com-
petitors is foreseen.
Dear shareholders: Vitro is an organization
with proven experience and a solid financial
condition. The enthusiasm of our team, added
to the capacity and efficiency of our processes,
compel me to confirm that we are in the right
road to strengthen the leadership of our busi-
ness in the markets we service.
Lastly, on behalf of all of us that form
part of this company, I express our gratitude
and acknowledgment to all shareholders,
clients, suppliers, and creditors for their
confidence. We ratify our commitment to
continue working arduously, making our
company your best option.
Sincerely,
Adrián Sada Cueva
Chief Executive Officer
Vitro, S.A.B. de C.V.
March 11, 2014
14
board of directors
Adrián Sada González 1944
Member since 1984
Chairman of the Board
Board Member of Alfa, Gruma, Cydsa, Consejo Mexicano de Hombres de Negocios (“CMHN”), and Grupo de Industriales
de Nuevo León.
Álvaro Fernández Garza 1968
Member since 2011
Chief Executive Officer of Alfa and Board Member of Alfa and Cydsa. He is also a Board Member of the Executive
Committee of Universidad de Monterrey, Museo de Arte Contemporáneo de Monterrey (“MARCO”), and Georgetown
University
Tomás González Sada 1943
Member since 1980
Chairman of the Board and Chief Executive Officer of Cydsa, Vice President of Instituto Mexicano para la Competitividad
(“IMCO”), Honorary Consul of Japan at Monterrey, Mexico, as well as Treasurer of the Martínez Sada Foundation and
Member of the Regional Board of Banco de México. He is also a Board Member of Consejo Mexicano de Hombres de
Negocios (“CMHN”) and Member of the Patronage of Cáritas de Monterrey.
Ricardo Guajardo Touché 1948
Member since 2013
Chairman of Solfi and Board Member of BBVA Bancomer, Valores de Monterrey, Bimbo, Liverpool, Alfa, Grupo Aeropor-
tuario del Sureste, Coppel, and Coca-Cola Femsa. He has served in various executive positions for companies such as
BBVA Bancomer, Valores de Monterrey, Femsa, and Grupo AXA.
Mario Laborín Gómez 1952
Member since 2010
Chairman of ABC Holding, Chief Executive Officer of Bacomext (2006-2008), Chief Executive Officer of Nacional Financie-
ra (2000-2008), Chief Executive Officer of Bancomer and Chairman of its brokerage firm (1991-2000), as well as Chair-
man and Founder of Mexder (1998-2000) and Co-Founder and Chief Executive Officer of Grupo Vector (1986-1990).
He served as Board Member of TV Azteca, Cervecería Cuauhtémoc, Transportación Marítima Mexicana, Bancomer, Bolsa
Mexicana de Valores, Mexder, Indeval, Xignux, Megacable, Cydsa, and Gruma.
15
Ricardo Martín Bringas 1960
Member since 2007
President of the Corporate Practices Committee
Chief Executive Officer and Board Member of Organización Soriana, as well as Board Member of Teléfonos de México,
Aeroméxico, Grupo Financiero Banamex, Grupo Senda, Madisa, Consejo Mexicano de Hombres de Negocios (“CMHN”),
Grupo de Empresarios de Nuevo León, and Asociación Nacional de Tiendas de Autoservicio y Departamentales (“ANTAD”).
He has also served as Chairman of the Patronage for Hospital Regional Materno Infantil.
David Martínez Guzmán 1957
Member since 2013
Managing Director of Fintech Advisory Limited and Board Member of Alfa.
Guillermo Ortiz Martínez 1948
Member since 2010
Chairman of Grupo Financiero Banorte, as well as Founder and President of Guillermo Ortiz y Asociados. He is Member
of the Group of Thirty and Board Member of Bombardier, Grupo Aeroportuario del Sureste, Mexichem, Grupo Comercial
Chedraui, and Weatherford International Ltd., as well as Member of the International Board of Zurich Insurance Group.
He served as Chairman of the Bank for International Settlements (2009); Governor of Banco de México (1998-2009), and
Secretary of Finance and Public Credit in the Mexican Federal Government (1994-1997). At the International Monetary
Fund, he chaired the External Panel for the Review of the Fund’s Risk Management Framework (2010-2011) and also
served as Managing Director (1984-1988).
Jaime Rico Garza 1957
Member since 2008
Chief Executive Officer and Chairman of the Board of Vitro Europa and Vitro Global, as well as Board Member and
Vice-President of Vitro Cristalglass (2007-2012).
Adrián G. Sada Cueva 1975
Member since 2010
Chief Executive Officer
Board Member of Empresas Comegua, Club Industrial de Monterrey, Confederación Patronal de la República Mexicana
(“COPARMEX”) Nuevo León, Grupo Financiero Banorte, and Banco Mercantil del Norte, as well as Member of the Gen-
eral Board of Universidad de Monterrey and Board Member of Cámara de la Industria de Transformación (“CAINTRA”)
16
Nuevo León. He is also a Board Member of civil organizations such as Pronatura Noreste, Organización Vida Silvestre,
Salinas del Pacífico, and Club Deportivo Cazadores Monterrey. At Vitro, he has held the executive positions of President
of the Glass Containers business unit (2012-2013), Chief Operating Officer of Glass Containers (2011), Vice President
of Administration and Finance of Vitro’s Glass Containers business unit (2009-2010), Chief Executive Officer of Vitro
Automotriz (2006-2008), and President of Vitro Cristalglass (2003-2005).
Federico Sada Melo 1979
Member since 2009
Director of Exports & Value-Added Products of Vitro’s Flat Glass business unit. He is also a Board Member of Instituto
de Empresa Alumni.
Jaime Serra Puche 1951
Member since 1998
President of SAI Consultores, Founder of Aklara (Electronic Auctions), Centro de Arbitraje de México (“CAM”), and the
Mexico NAFTA Fund (Private Capital Fund). He has served as Board Member of Fondo México, Tenaris, Grupo Modelo,
and Alpek, as well as Member of Yale University’s Patronage (1994-2001). He held several positions in the Mexican
Federal Government (1986-1994), as Undersecretary of Revenue, Secretary of Trade, and Secretary of Finance.
Currently, he co-chairs the President’s Council on International Activities of Yale University and he is a Trustee for the
Trilateral Commission.
Joaquín Vargas Guajardo 1954
Member since 2000
President of the Audit Committee
Chairman of the Board of Grupo MVS Comunicaciones and Grupo CMR. He is also Board Member of Grupo Financiero
Santander, Grupo Costamex, El Universal, Consejo Superior de la Universidad Panamericana, Grupo Aeroportuario del
Pacífico, and Médica Sur.
He served as Chairman of Cámara Nacional de la Industria de Radio y Televisión (2000-2001), Chairman of
Asociación Mexicana de Restaurantes (1985-1987), and Chairman of Asociación de Directores de Cadenas de
Restaurantes (1989).
Alejandro F. Sánchez Mújica 1954
Secretary of the Board since 2007
Board Member of several Mexican and foreign companies and associations, such as Empresas Comegua and The
University of Texas Lady Bird Johnson Wildflower Center. Currently, he is a Senior Partner of Rivera Gaxiola, Carrasco y
Barrera y Sánchez Mújica, as well as Secretary of the Parque Ecológico Chipinques’s Patronage. He served as Vitro’s Ex-
ecutive Vice President and General Counsel (2005-2013), Senior Partner at Thompson & Knight (2003-2005), General
Counsel of Grupo Pulsar/Savia (1982-2003), General Counsel of Grupo Kuo’s Petrochemical business unit (1975-1981)
and Legal Manager of Indeval (1973-1975).
17
Audit CommitteeChairman Joaquín Vargas Guajardo *
Guillermo Ortiz Martínez *
Jaime Serra Puche *
Jonathan Davis Arzac**
Secretary Claudio L. Del Valle Cabello ***
Corporate Practices CommitteeChairman Ricardo Martín Bringas *
Joaquín Vargas Guajardo*
Guillermo Ortiz Martínez *
Secretary Alejandro F. Sánchez Mújica***
Chairmanship CommitteeChairman Adrián Sada González
Adrián Sada Cueva
Secretary Claudio L. Del Valle Cabello ***
* Independent Director
** Financial Expert, not a Member
*** Secretary, not a Member
committees of the board of directors
18
24EBIT GROWTHIncrease in million dollars.
5CERTIFIEDPLANTS
After the implementations of the food safety program in 2013,
under FSSC.
19
glass containers
Containers advances consistently and provides comprehensive services to our clients in the bev-erage, beer, wine and liquor, perfume, cosmetics, and pharmaceutical industries. We have a history and a vocation of service that validate our undoubt-ed leadership in the production of glass containers in Mexico.
1,148SALES USD$
Consolidated net sales for 2013, in million dollars.
20
Overview of 2013
An important year filled with challenges and op-
portunities, especially in the container business.
Notwithstanding the challenging economic and
operating environment, the results at the closing
of the year were favorable.
The economic downturn caused by the de-
lay in approving important structural reforms in
Mexico, in addition to two strong natural disas-
ters that impacted the country and affected our
logistics network during the third quarter, were
a true challenge.
Likewise and as we had anticipated, the
beer segment was not as dynamic as it was in
2012, when the launch of new presentations
by our clients in that industry resulted in an
atypical sales volume. However, in 2013 we
had a good general performance in the rest of
the segments.
Furthermore, there was an important spike
in the price of natural gas, one of our most
important supplies. Despite this increase that
affected our results, we were able to counter-
act the adverse effect through the strict cost
reduction programs that our collaborators have
successfully implemented.
We have always seen obstacles as areas of
opportunity. As a result, once again, our innova-
tive capacity greatly helped our products go into
previously unexplored lines of business.
In 2013, new product development
amounted to an 11 percent share in sales for
this business, which meant 24 percent more
new proposals compared to 2012, if we exclude
Percentage growth in new products, excluding the beer segment.
24NEW PRODUCTS
21
the beer segment that had an atypical behavior,
as we have already mentioned.
Another remarkable success was our in-
creased market share in the juice line of busi-
ness, as well as the growing volume of return-
able containers and the progressive spike in the
nostalgia market in the United States, both for
the soft drink industry.
With regard to the perfume, cosmetics, and
pharmaceutical containers segment, we had
moderate growth, particularly as a result of a
contraction in such industry, which has caused
a good part of our clients to reduce volumes vis-
à-vis this situation; this is not the case in the nail
polish and pharmaceutical containers subdivi-
sion, which showed an excellent performance.
From the technological point of view, our ma-
chines and equipment are designed to fulfill
large volume demands and they likewise
have the flexibility to produce small orders.
Thus, we have the capacity to service clients
whose container orders are smaller, or more
specialized.
On this regard, in 2013 we consolidated
important projects that allow us to produce
small orders, while at the same time having the
capacity to combine them with larger produc-
tion, therefore, we provide our services to clients
with diverse requirements.
In line with our vision of staying in the
leadership of the glass industry, we perma-
nently analyze the trends and needs of the
market. We place special care on efficiency,
On this regard, in 2013 we consolidated important projects that allow us to produce small orders, while at the same time having the capacity to combine them with larger production
In line with our vision of staying in the leadership
of the glass industry, we perma-nently analyze the trends and needs
of the market.
22
quality, and service, with the firm conviction of
reducing flaws in our operations, business dy-
namics and internal development.
Last June, we completed the renovation
of one of the furnaces at Vidriera Queréta-
ro, one of our plants in the central region
of Mexico. This improvement represents an
increase in the capacity and useful life of
the furnace, which now has more advanced
technology to monitor each stage of the
process, guaranteeing consistency in the
quality and shape of all the containers being
produced.
With its startup, Vitro strengthens the
competitive advantage that distinguishes
us, having the capacity to fulfill the strictest
market requests and to adequately respond
to the most diverse needs for containers of
all kinds.
At our facilities in Bolivia, we also started
a major maintenance and expansion program
with which Vidrio Lux will be prepared to service
not only the local market but the glass container
industry for the whole region. Our expectation is
to complete this project during the first quarter
of 2014.
For the purpose of advancing in our com-
mitment to protect consumer health and to gua-
rantee the safety of our products during their life
cycle, all the container plants in Mexico were
certified under the Food Safety System Certifi-
cation (“FSSC”) 22000. This international plat-
form guarantees compliance with the highest
quality and safety standards for our products.
23
In the glass container business, creativity, orig-
inality, and functionality are qualities that jointly
provide greater added value to the product they
will contain. Thus, our marketing, commercial,
and design departments work in synchroniza-
tion to offer tailor made strategies for the differ-
ent categories and clients.
From the coordinated efforts and the cre-
ative minds of our design team, the Asociación
Mexicana de Envase y Embalaje (“AMEE”)
granted us 47 awards in recognition of our qual-
ity, safety, service, and innovation. One of our
containers for the food segment was especially
distinguished for obtaining the highest rating
issued by the jury.
At the international level, the Glass Pack-
aging Institute (“GPI”), in its annual Clear
Choice Awards event, presented awards for
two containers designed and produced by Vi-
tro: one in the cosmetics and perfume catego-
ry, where our containers have been undisputed
leaders for over a decade, and another one
received the President’s Choice Award, given
for the first time, for having successfully recon-
verted from another material to glass.
Likewise, the World Packaging Organisa-
tion (“WPO”) recognized one of our containers
in the beauty category. The results in these
contests speak for themselves, Vitro has a
consolidated position in the industry as a result
of its capacity to fulfill the needs of its clients in
a specialized manner.
A clear example of this was also the ap-
plication of bi-oriented polypropylene (“BOPP”)
film labels in a curvy glass container. Vitro is the
first glass company in the world to achieve this,
an unprecedented action that places us in front
of our competitors.
With advances such as these, we reaffirm
our leadership and commitment to fulfill our cli-
ents’ requirements in the best possible way.
Another specialized market sector in which
we strongly participate is Premium Containers,
mainly in the wine and liquor segment, focused
on a knowledgeable and demanding consump-
tion niche which enjoys exclusive cutting edge
products. In these cases, our production capac-
ity with small orders offers an additional com-
petitive advantage that puts us in a favorable
position in the market.
Vitro Packaging, our subsidiary in the United
States entrusted with servicing our container
clients in such country, also had an excellent
performance. It had monthly sales records
during seven periods throughout the year.
Focusing on operational excellence, the
container plants have started transforming their
operations with the Continuous Improvement
Model, to have the same work method based on
best practices.
This is how we seek to increase client sat-
isfaction, elevate quality levels, and increase
productivity through control and measurement
tools for each process. This Model brings the
flexibility of our capabilities to serve our clients
in an even better way.
Given that we are aware of the multiple
unique characteristics of glass containers:
In the glass container business, creativity, origi-nality, and functionality are qualities that jointly
provide greater added value to the product they will contain. Thus, our marketing, commercial, and
design departments work in synchronization to offer tailor made strategies for the different cate-
gories and clients.
they are 100 percent recyclable, do not pol-
lute, do not keep odors, preserve integral
tastes and are easy to clean, among other
virtues, since 2011, we have made efforts to
also promote glass appreciation among con-
sumers in Mexico, through our Movimiento de
la Transparencia.
Balance
A clear and standardized work methodology
based on operational discipline, strict cost con-
trol programs, solid commercial strategies, and
the great capacity of our people are the tools that
helped us get through the challenges that Con-
tainers faced during 2013.
At year’s closing, the business reported
consolidated sales of $1,148 million dollars,
3 percent less than the $1,188 million dollars
achieved in 2012. It is important to restate that
during 2012, the beer container segment expe-
rienced atypical growth due to one of our clients
in such sector having made an important launch
of new presentations, which established an
extraordinary sales base in 2012. If we isolate
such factor, growth when compared to 2012
was 7 percent.
In terms of profitability, our EBIT increased
from $151 million dollars to $188 million dollars,
24 percent more than 2012, and our EBITDA re-
flects a 12 percent increase, at $296 million dol-
lars for 2013, in contrast to $265 million dollars
in 2012.
These results benefited from the strict cost
reduction programs, operational efficiency, tax
24
stimuli for job creation, and the cash proceeds
from an insurance policy; these last two are non-
recurring events.
Forecasts
2014 is expected to be a challenging year for
our business. Some of our Mexican clients that
produce soft drinks, juice, and food with high
caloric content will be affected by the newly im-
plemented tax reform. The foregoing will result
in challenges to the growth in sales volume, and
will lead us to come up with strategies that will
allow us to turn this threat into an opportunity.
We expect that the reduced performance in the
cosmetics industry will continue, therefore we
are ready to open up to new opportunities. We
have competitive advantages and will make the
most of all the capabilities of our human and
material resources.
We will continue on the road of innovation
and of new product development, venturing into
new categories, anticipating our clients’ needs,
and keeping up to date with consumer trends
and preferences.
With regard to the operations, we will con-
tinue reinforcing our capabilities, with continu-
12EBITDAIncrease in million dollars.
25
ous update and maintenance of our equipment
and machinery in the plants that so require it.
Likewise, our Continuous Improvement Model
will continue its maturing process and will help
further strengthen our position as a leader in the
production of glass containers.
We feel confident vis-à-vis an increasingly ag-
gressive competition in the way in which prod-
ucts and services are offered. We trust that we
will carry on based on our experience that dates
back more than a century in the industry and
the profound knowledge we have of the market.
Our operational strategies will be the best basis
to advance and consolidate Vitro’s leadership
for the years to come.
We will continue on the road of innovation and of new product development, venturing into new categories, anticipating our clients’ needs, and keeping up to date with consumer trends and preferences. With regard to the operations,
we will continue reinforcing our capabilities, with continuous update and mainte-nance of our equipment and machinery in the plants that so require it.
We feel confident vis-à-vis an increasingly aggressive competition in the way in which
products and services are offered. We trust that we will carry on based on
our experience that dates back more than a century in the
industry and the pro-found knowledge
we have of the market.
27
Flat Glass advances as a leader in added value products by manufacturing, processing, marketing, distributing, and installing glass for the construction and automobile industries, both in the original equip-ment and the replacement markets, with reliable ex-perience in the Americas and the capacity to service the most demanding clients across the globe.
flat glass
525
US
D$
SALESConsolidated net sales
for 2013, in millions dollars.
28
100CAPACITY
Vidrio y Cristal sold its entire scheduled production in spite
the decrease in the automotive sector.
29
Overview of 2013
Flat Glass experienced a year of contrasts,
with a combination of internal and external
challenges that encouraged us to redouble
our efforts, strengthen our business strate-
gies, and communicate even more closely
with our clients.
Vidrio y Cristal was collaterally affected due
to the considerable decrease in sales that the
automotive glass sector experienced, given that
the former supplies to the latter.
Given this context, actions were taken to
minimize the impact. The sales department
went searching for other external markets,
which allowed us to place 100 percent of the
scheduled capacity.
If we do a year by year comparison, the
sales result in 2013 was very similar to 2012,
which showed record figures. In the last pe-
riod we registered a slight increase as a con-
sequence of improvements in efficiency, an
area where we have worked hard and whose
results are now starting to positively impact in
productivity.
Facing adversity, we have concentrated
in advancing within the businesses where
we have a greater added value. In any set-
back, our collaborators find a powerful rea-
son to further exploit their creativity to the
fullest and design commercial and marketing
stratetegies that increase our market share,
diversifying our portfolio with ever more spe-
cialized products.
In line with continuous improvement and
aiming to maintain us as the frontrunner in
the development of architectural glass, this
year we launched the Templex® and Hydro-
clean® crystals to expand the array of pos-
sibilities that we offer to architects, interior
designers, and installers.
Templex® is a product that, in addition to
having the capacity to reflect light and thereby
controlling the illumination, offers more safety
since it may be cooled once it has been pro-
cessed. Likewise, it helps in esthetic differentia-
tion, especially on crystal facades.
In turn, Hydroclean® is a solution that
may be applied to any of Vitro’s crystals to
avoid the adhesion of water, oil, and other liq-
uids on surfaces. This waterproofing treatment
does not alter the appearance of the crystal,
it creates surfaces that are easier to clean,
reduces the formation of mustiness and bacte-
ria, generates greater resistance to stains and
scratches, in addition to reducing the mainte-
nance costs of crystals.
The term for penetration and placement in
the market is long, but we believe that the se-
lectivity of professionals in this field will facilitate
a rapid engagement with users, who continually
seek greater comfort and wellbeing in differen-
tiated spaces.
Some examples of this are the architectur-
al projects in which we participated this year,
which stand out for their great scope. The first
corresponds to the remodeling of all the offices
of Nacional Monte de Piedad in Mexico, which
started in 2013. With this project, more than
300 establishments of that private assistance
institution will install a laminated crystal called
Sentryglass®, which offers maximum safety
against impact.
The second case is the remodeling of all the
light train stations and of line 5 of the Metrobus
in Mexico City. Here, Templex® and Vitrospan®
crystals were installed, offering safety and har-
mony in such spaces due to the sensation of
more lighting.
Flat Glass is prepared to provide the best
products and solutions for our clients’ requests.
Its continuous improvement programs and
the optimization of resources are its greatest
strength.
In spite of the auto industry having grown
in Mexico, 2013 was a complex year for us
in the segment. Internal activity decreased due
Facing adversity, we have concen-trated in advancing within the busines-ses where we have a greater added value. In any setback, our collaborators find a powerful reason to further exploit their creativity to the fullest and design commercial and marketing stratetegies that increase our market share, diversifying our portfo-lio with ever more specialized products.
30
to the loss of platforms that we suffered from
some assembly plants throughout the past
three years.
For this reason we were highly disciplined
to adjust to the size of the business, reorga-
nizing the production line pursuant to the
agreements reached in advance, we adapted
the structure and reduced the cost and ex-
penses budget, limiting it to investments and
procurement that were strictly necessary for
the operation.
In this same period, several assembly
plants stated their worries due to the compa-
ny’s financial position and, at the same time, the
auto industry rebounded towards 2013, there-
fore, as was to be expected, demand grew so
large that some of our clients opted for different
supply alternatives with providers from other
countries, particularly those in Asia.
Based on our work and after the completion
of the company’s financial restructuring, almost
immediately we recovered participation in new
contracts and obtained platforms. For the clos-
ing of 2013, we have already completed import-
ant transactions that will allow us to advance
in this market. Given the dynamics of the auto
industry, these achievements will be reflected in
2015 and 2016.
Since we are fully aware that the North
American region is highly competitive in the
auto glass industry, in Vitro we do not lower
our guard. Our brands have an excellent rep-
utation thanks to the price, quality and service
competitiveness we offer. Proof of this is that,
100CERTIFIED
All our automotive glass production facilities are certified under the ISO 14000 and ISO/TS
16949 standards.
31
on several occasions, our logistics, product de-
velopment and customer service services have
been recognized by the auto assembly plants
we serve.
The design and technology departments
are always aware of client needs for their new
models. Furthermore, we make sure to have
all the certifications that the industry demands
according to the nature of the product. Expert
auditors visit us continuously to validate that
our plants comply with the necessary condi-
tions and requirements and that the quality and
industrial safety programs are executed in the
best possible way.
Clear examples of the foregoing are the
Industria Limpia and ISO 140001 certifications,
which all of our auto glass subsidiaries have.
Currently, with the backing of the ISO/TS 16949
standard, the leading assembly plants demand
high quality, productivity, and continuous im-
provement standards in their products. We are
pleased to report that our plants are certified
under such parameter.
With regard to investments, starting on
2009, we set forth a technological plan for the
automotive facilities, considering the devel-
opment of a new furnace for laminating com-
pressed windshields, whose installation we
expect to complete during the first quarter of
2014. The equipment that will regulate the su-
perficial control process of the windshields, was
designed and produced with technology owned
100 percent by Vitro.
Based on our work and after the completion of the company’s financial restructuring, almost immediate-ly we recovered participation in new contracts and obtained platforms.
33
In turn, in the automotive glass replacement
sector we took up the task of venturing, in a
more structured manner, into the United States
market, which meant an increase in export sales
for these products.
Additionally, the incremental sales of the
sector in Brazil have helped us confirm the
plans to continue venturing into such market
as an additional business; the results for 2012
demonstrated that there is a fair potential for
development in this region, as well as in Ecua-
dor and Colombia.
Balance
Due to several factors such as the increase in
the cost of natural gas, the expected decrease
in original equipment sales, a strong competi-
tion and a marked price pressure from archi-
tectural glass imports, the Flat Glass business’
results were affected.
For fiscal year 2013, the net consolidated
sales of Flat Glass totaled $525 million dollars,
compared to $576 million dollars reported on
2012, a 9 percent difference. Even though
sales for the architectural segment and for Vi-
tro Colombia were practically identical to their
previous level, Vidrio y Cristal’s margins were
lower and sales for the auto glass segment fell
by 20 percent.
EBIT suffered a 26 percent reduction, clos-
ing in at $23 million dollars compared to $32
million dollars for the previous year. With regard
to EBITDA, the final figures report a 20 percent
year to year reduction, going from $72 million
dollars in 2012 to $58 million dollars at the
closing of 2013.
Forecasts
Looking forward we see a challenging year, with
increasingly stronger competition. The automo-
tive sector promises significant growth in the
Mexican market, even if in 2013 the economy
suffered a downturn. However, according to fi-
nancial analysts, Mexico’s growth expectations
have an upward trend.
At Flat Glass, we are prepared to face the
challenges that arise; we have the capacity, in-
frastructure, and human talent to offer products
and services with a high added value.
For the architectural market we will aim to
strengthen our presence with more attractive
specialized glass options that offer competitive
advantages over traditional glass.
Additionally, based on the service and
the quality of our products, we will strength-
en the trust and loyalty of our clients. As ev-
idence of this, we will launch the Vitro 360°
Program.
Through this initiative we will offer tech-
nical and practical advice on different useful
areas for our clients, in addition to conveying
the industry’s best processes and the most
advanced work tools. The consolidation of our
clients through projects such as this one re-
inforces our value chain in the construction
market.
We have also set the goal to strengthen the
decoration and matting equipment that we have
in Monterrey and Mexico City, to produce glass
with anti-reflection layers. The purpose is to be
increasingly efficient, so that our products main-
tain first place in preference.
With regard to the auto industry, we see
growth trends and therefore, we will continue
strengthening our business relationship with
current clients through a timely response to
their requests and by supplying auto crystals of
the upmost quality.
Given the renewed presence of Japanese and
European assembly plants in Mexico, we will
strive to become their local suppliers, demon-
strating the advantages that this entails, such
as: logistics, quality control and personalized
service aspects. We have the experience and
innovative capacity to be the most attractive
option in new platforms.
For the spare parts market business, our
bet is to continue growing in the United States
through the Crinamex® brand, which is high-
ly recognized for the quality of its products.
In the Andean region there are good growth
forecasts, focused on the crystal line for
buses, thanks to local governments that are
generating attractive incentives to use public
transportation.
In summary, 2014 will be as challenging a
year as the one before it. However, we are still
confident that the accumulated experience, as
well as advenced furnace and machinery tech-
nology, the talent of the human team and the
reputation of our products, are the tools to ad-
vance towards the goals we have set.
2014 will be as challenging a year as the one before it. However, we are still confident that the accumu-lated experience, as well as advenced furnace and machinery technology, the talent of the human team and the reputation of our products, are the tools to advance towards the goals we have set.
35
sustainabledevelopment
100COMMITTED
We have the CSR Seal since 2007.
To endorse more than 100 years of commitment with stakeholders, we implemented a series of initiatives that allow us to advance towards im-provements in the quality of life of the commu-nities that surround us, as well as in that of our collaborators.
36
With the Vitro Sustainability Model as the frame-
work for our actions, we capitalized on the ef-
forts to make a positive change in the econom-
ic, social and environmental conditions of such
groups, guided at all times by a responsible
corporate management.
In 2013, we carried out a comprehensive
review of the priority Social Responsibility proj-
ects, and we set forth a work plan for each of
these through the Sustainability Committee,
comprised of representatives from strategic
areas of Vitro, whose main objective is to
generate an active forum for discussion and
decision making on this subject.
Comprehensive Competitiveness
We are an organization that is committed to the
client. Our products offer sustainable solutions
to the new needs of consumers.
As a result, we have achieved an undoubt-
ed position as a competitive and responsible
company vis-à-vis the different stakeholders
that are linked to Vitro through its economic
activities.
In line with the vocation to improve our
processes on a permanent basis, we renewed
our internal regulations to have a comprehen-
sive policy of quality and safety that, when
added to the already existent broad review
processes, reaffirms the hygiene of our prod-
ucts. Thus, we guarantee that our containers
do not alter or contaminate the products they
contain, nor do they damage consumers.
With the Movimiento de la Transparencia,
a campaign to promote the responsible con-
sumption of glass bottled products, we inform
the community on the benefits and advantages
of this material that, in addition to being 100
percent recyclable, preserves all the properties
of the products it contains.
We promote a sustainable development
that generates comprehensive benefits for our
entire value chain. In 2013, we focused efforts
on supplier development through supply alter-
natives that permit the incorporation of new
technologies and work methods.
Vitro’s leadership as a responsible business
partner was recognized by the Centro Mexicano
para la Filantropía (“Cemefi”) due to the excel-
lent results of our suppliers Magid de México
and Agronegocios de Monterrey, which received
the CSR Seal for the second and third consecu-
tive year, respectively.
Both developed their own social respon-
sibility management schemes as part of our
program for integration with the supply chain.
The teams of both organizations are now distin-
37
guished for being proactive towards the needs
of their own stakeholders.
Our own advances were also recognized
in 2013 in different venues. For the sixth year
in a row we were granted the CSR Seal as a
consequence of the scope of our sustainable
development promotion programs.
We also preserved the Sustainable Compa-
ny Seal by the Mexican Stock Exchange, based
on the joint evaluation made by the independent
rating agency Empowerment Responsible In-
vestment (“EIRIS”) and the Centro de Excelencia
en Gobierno Corporativo of Anahuac del Sur
University, in Mexico.
This process included the review of man-
agement policies and systems, exceeding
the average rating published for 3,500 companies
across the globe.
Likewise, Vitro has been listed as one the
ten companies with the greatest advances in im-
plementing and managing Social Responsibility
in Mexico. The foregoing as part of the ranking
published every year by Mundo Ejecutivo maga-
zine, which is made in collaboration with Centro
IDEARSE para la Responsabilidad Social y Suste-
ntabilidad de la Empresa of Anahuac University,
whose assessment methodology is based on the
ISO 26000 international standard.
Human Attitude
We build and maintain healthy labor, business,
and institutional relationships, based on respect
and commitment. This way, we advance in pro-
moting the human aspect of the job to contrib-
ute towards the progress of people and their
communities.
Vitro has the oldest advisory program of its
kind to access housing in Mexico. More than 60
years after it was created, the initiative shows
positive results, which has been the case since
day one.
In 2013, we processed 1,345 loans for
Vitro employees, reaching the loan number
30,000 in the history of the initiative. This way,
we contribute towards increasing the quality of
life of our collaborators and their families.
For the purpose of building a favorable
work environment in which our collaborators
can develop their maximum potential, we
have integrated all processes for develop-
We are an organization that is committed to the client. Our products offer sustainable solutions to the new needs of consumers.
30,000HOUSING LOANS
We achieved a historic record with our housing program for
employees.
38
ment and professional growth in the Talento
Vitro program.
This human development model concen-
trates processes for attracting and assigning
talent, setting, monitoring and evaluating
performance objectives, evaluating skills, cal-
ibrating, setting development objectives, and
performance feedback.
Likewise, in 2013 we implemented a
new Safety Leadership Model as a strategy to
strengthen proactive participation in preventing
accidents. Our priority on this subject is to pro-
tect the collaborators, who provide their talent
in our facilities; therefore we have established
strict protocols to prevent accidents.
Vitro has one of the lowest Accident In-
dex in Mexican industry. In 2013, this rate was
180 points, which is far below the standard of
1,360 points for the manufacturing industry,
according to data from the Instituto Mexicano
del Seguro Social.
The good performance of our work
centers is reinforced by the certifications
granted by the Business Alliance for Secure
Commerce (“BASC”) and the Customs-Trade
Partnership Against Terrorism (“C-TPAT”)
programs. In 2013, our 14 export plants lo-
cated in Mexico had their certifications re-
newed in both programs, by demonstrating
that they comply with the adequate condi-
tions to operate safely.
Vitro promotes people’s comprehensive
development, for this reason we sponsor
educational, cultural, recreational, and
quality of life projects in our communities.
The Museo del Vidrio (“MUVi”) received
more than 7,000 visitors in 2013, who had
the opportunity to access our permanent col-
lection that displays the three dimensions of
glass production as a human activity: History,
Art, and Science.
Through the free access that MUVi offers
every Sunday of the year, more than 3,000 vis-
itors benefited from Vitro’s contribution on this
regard. Additionally, to promote greater access
for children to culture, we kept an agreement
with the Secretaría de Educación Pública so
that children could receive a preferential fee
of just $5 pesos when they attend in school
groups.
To find out more about the activities of the
MUVIi, go to http://www.museodelvidrio.com.
Through Formación Educativa (“FEAC”), we
offer excellent educational services to close to
1,500 students of the Monterrey Metropolitan
Area in four institutions: Andres G. Sada Kin-
dergarten, Roberto G. Sada Elementary School,
Industrial del Vidrio Elementary School, and Ro-
mulo Garza High School.
Likewise, Vitro collaborators participate
in the Salva una Vida, Dona un Minuto collec-
tion program of the Mexican Red Cross, which
guarantees the operation of some of the ser-
vices that such organization offers for free to
the community.
Thus, we are the company with the great-
est number of volunteers in the State of Nuevo
León, including more than 900 collaborators
from our plants located in the Garcia munici-
pality in 2013, in addition to 822 others from
different Vitro plants that already took part in
this initiative in Monterrey.
The Environment
Vitro advanced towards transforming its pro-
cesses, which are increasingly efficient and
clean. With this commitment in mind, we
abide by the highest standards of quality and
respect for the environment, with a clear fo-
cus on optimization as a characteristic that
distinguishes us in our daily operations. Like-
wise, national and international certifications
validate our environmental commitment and
practices.
Currently, 50 percent of our operating
plants in Mexico have the Industria Limpia cer-
tification granted by the Procuraduría Federal
de Protección al Medio Ambiente (“PROFEPA”).
Additionally, four Vitro Automotriz plants (Vitro
Flex, VAU ATX, VAU CIM, and VAU Aguascalien-
tes) and Industria del Álcali preserved the ISO
140001 certification.
The advances of our innovative environ-
mental practices continue, producing positive
results. In 2013, Vitro was also recognized for
its use of recycled glass material and for reduc-
ing more than 6,000 tons of greenhouse gas
emissions (“GEI”) in 2011 as a result of the
“Emission reduction through the use of cullet in
the glass casting process” project.
This program, implemented by Vidrio y Cris-
tal, was put in place for the purpose of mitigating
the emissions from our operations to the air and
allowed Vitro to reach the highest level of the
Programa GEI México, for its efforts in monitoring
and reducing greenhouse gas emissions to the
atmosphere.
Beyond improving the efficiency of our pro-
cesses and mitigating their impacts, we also
implemented actions aimed at preserving the
environment through conservation projects in
the community.
Located 60 kilometers south of Monterrey,
Mexico, Vitro Parque El Manzano is a recre-
Vitro advanced towards transforming its processes, which are increasingly effi-cient and clean. With this commitment in mind, we abide by the highest stan-dards of quality and respect for the environment, with a clear focus on optimiza-tion as a characteristic that distinguishes us in our daily operations
39
We consolidated the good performance of our volunteering program in reforestation.
9,000TREES PLANTED
40
ational park with a surface of 585 hectares of
pine and holm oak forest. In 2013, more than
51,000 visitors attended its premises, whose
access fees were used for activities aimed at
forest improvements.
In its facilities, it has a human team spe-
cialized in engaging in actions aimed at the
preservation of flora and fauna, as well as at
preventing, fighting, and controlling fires and
plagues that could affect the park and the sur-
rounding areas.
To find out more about Vitro Parque El Manzano,
we invite you to visit our website
http://www.vitroparqueelmanzano.com.
Our direct support to conservation is chan-
neled through Organización Vida Silvestre
(“OVIS”), a nonprofit organization created by Vi-
tro for the purpose of implementing projects that
protect wildlife species so that they are preserved
for future generations.
OVIS has 38,303 private hectares of con-
servation in Mexico, distributed through four
Environmental Management Units (“UMA”), in
addition to 15,372 leased hectares to improve
its conservation capacity in the State of Sonora.
With this, it reached a total of 53,675
hectares where more than 1,000 wildlife
species are protected, 97 of which are locat-
ed in some of the risk categories that identify
them as endangered. These species include
the Mexican gray wolf and the black bear, for
example.
To find out more about OVIS’ activities, go to
http://www.ovis.org.mx.
We also promote NOW! Alliance for Re-
forestation, coordinated by OVIS, under our
Naturalmente Vitro program, focused on urban
and endemic vegetable species, which seeks
to increase the quality of life in cities through
planning, creating and preserving green areas.
This project has evolved to become the
most important corporate volunteering program
of the organization. Every collaborator that so
wishes, has the option of formally adopting a
tree, with the commitment to take care of it, and
in exchange receives a certificate that specifies
the place where she or he will plant it.
From its implementation in 2007, Nat-
uralmente Vitro has registered the voluntary
adoption of more than 35,000 trees with sur-
vival rates of up to 86 percent, a figure that
is significantly higher than other reforestation
initiatives.
We protect more than one thousand endangered species.
ENDANGERED SPECIES1,000
41
In 2013, more than 2,700 volunteers from Vi-
tro in Mexico and Bolivia, together with their
families, adopted slightly over 9,000 trees that
mean opportunities to form environmental val-
ues in their children, in addition to providing
great environmental benefits, such as cleaner
air, temperature regulation, and higher rainwater
collection.
Glass provides us an excellent opportuni-
ty to contribute responsibly to the community
since it is 100 percent recyclable and it reinte-
grates completely to its own industrial process.
Based on these characteristics, strategic to
achieve sustainable development, we continue
promoting our permanent flat glass and glass
containers recycling programs, which represent
the most important effort of its kind in Mexico
with over 182,000 tons recovered in 2013.
Such volume is equivalent 365,000 cu-
bic meters, which remain available in the final
waste disposal centers for other materials. This
volume is enough to fill 15 times the Mayan pyr-
amid of Kukulkán in Chichen Itzá, Mexico.
On a yearly basis, we strengthen and create
new joint ventures for recycling with educational
institutions, hospitals, nonprofit organizations,
clients, municipalities, and commercial estab-
lishments, all through our Embracing a More
Transparent World initiative.
Responsible Corporate Management
It is very important for us to maintain timely
compliance in strict adherence to the highest
management and corporate governance stan-
dards. This means that our efforts are focused
on carrying out a Responsible Corporate Man-
agement.
With these actions, Vitro advances in its de-
pendable performance in response to the con-
cerns of its shareholders, collaborators, clients,
investors, suppliers, and other stakeholders.
The Board of Directors is the body respon-
sible for setting the strategies, policies and
guidelines for the optimal direction of Vitro’s
businesses, and the entities that it controls, as
well as for the overview of its management, di-
rection and execution.
In 2013, the Finance and Planning Commit-
tee was reconfigured to become the new Chair-
manship Committee, entrusted with advising
and following up on different strategic projects
of the Chief Executive Officer.
This change will make it possible to capitalize
on the experience of its members through a flexi-
ble and dynamic integration, focused on the needs
of the Committee, according to the initiatives that
the Board entrusts to it.
Likewise, in 2013 we implemented the
Self-Evaluation System of the Board and its
Committees as a mechanism to evaluate
their actions, ensuring that the strategic
decisions of the Company will be taken ob-
jectively and for the benefit of all of Vitro’s
shareholders.
During 2014 the first results will be pre-
sented to the Corporate Practices Committee as
a complement to such practice, for the purpose
of setting an action plan to fulfill the needs de-
tected in this process. Likewise, to reaffirm our
permanent commitment to improving transpar-
ency in the organization, it will be applied for a
second time.
The Self-Evaluation System of the Board
and its Committees is the institutional tool
through which the proper functioning of the
Board of Directors is ensured and the interests
of the shareholders and all the stakeholders are
cared for. For further detail on the advances to
the initiatives implemented by Vitro on the sub-
ject of Sustainable Development, visit the 2013
Sustainable Development Report, available on
May 2014 at http://www.vitro.com.
It is very important for us to maintain timely com-pliance in strict adherence to the highest manage-ment and corporate governance standards. This means that our efforts are focused on carrying out a Responsible Corporate Management.
42
While macroeconomic indicators in 2012 showed certain stability, volatility in some emerging markets during 2013 created uncertainty among investors, moving portfolio positions in those markets to economies with a greater strength perception. The result of was reflected, among other things, in the weakening of currencies of such economies and in the contraction of their markets towards the second half of 2013.
operating and financial analysis
Consequently, the worldwide Gross Domestic
Product (“GDP”) growth showed a downward
trend. According to the International Monetary
Fund (“IMF”), 2013 Global GDP growth was 3.0
percent, compared to 2012 figures. This reduc-
tion was caused by factors such as the increase
in the current account shortfall in Asian markets
and the increase of the past due portfolio of
Chinese banks, in addition to the persistent un-
certainty of a more restrictive monetary policy in
the United States.
In Mexico, in spite of the moderate growth
outlook at the beginning of 2013 and the
expectation for the approval of diverse structural
reforms presented by the Federal Government
in the second half of the year, the GDP growth
maintained a downward trend, with recurrent
adjustments in the development forecast
throughout 2013 by the Secretaría de Hacienda
y Crédito Público (“SHCP”).
According to figures of the Instituto Nacion-
al de Estadística y Geografía (“INEGI”) the Gross
Domestic Product Growth Ratio in 2013 was
1.1 percent, as a result of international eco-
nomic slowdown and a lower internal public ex-
pense. For 2014, SHCP’S forecasts estimate a
GDP growth level of approximately 3.9 percent,
supported by the performance of the manufac-
turing and export industries.
Even when there is a favorable outlook
from governmental agencies, the concurrence
of different factors might affect growth fore-
casts. Among such factors we can list: un-
certainty on the result of the strategies by the
United States Federal Reserve (“FED”) in rela-
tion to the withdrawal of incentives, fear of the
slowdown of economies such as the People’s
Republic of China and some other emerging
markets, as well as weak conditions that pre-
vailed in certain European economies like the
Spanish economy.
GDP Growth 2011 2012 2013
Mexico 3.9% 3.9% 1.1%
United State 1.8% 2.8% 1.9%
Global 3.9% 3.2% 3.0%
43
As of December 31, 2013, the closing rate
was $13.08 Mexican pesos per U.S. dollar
compared to $12.97 pesos per dollar at the
closing of 2012, resulting in a 0.9 percent
peso depreciation, year-over-year. Howev-
er, in its annual average, the exchange rate
was appreciated 2.0 percent, registering an
exchange rate of $12.87 pesos per dollar in
2013 compared with $13.13 pesos per dollar
during 2012.
The peso-dollar exchange rate fluctuation
at the closing of 2013 was mainly affected by
the growth uncertainty in some markets and
the prospect of incentive reduction by the FED,
which drove a leak of capital from emerging
markets. The peso-dollar parity for 2014 might
show certain improvement, which will depend
to a large extent on the upturn level registered
in the economy of the United States, whose
indicators have shown a positive tendency in
recent dates.
In 2011 and the first half of 2012, gas prices
reflected a downward trend, derived primar-
ily from the economic slowdown prospects in
emerging countries. However, from its lowest
point in May 2012, gas prices indicated an
upward trend until it reached $3.70 dollars
per million BTU (MMBTU) at the closing of
2013. This increase was driven, among other
causes, by a growing demand, particularly in
developing nations, and a limited growth in
their production.
Consolidated Operating Results
Amounts shown in dollars in this section are
expressed in nominal dollars, which are ob-
tained from dividing nominal pesos for each
period by the exchange rate published by the
Mexican Central Bank (Banco de México) at
the end of each period. Financial reporting of
years 2009 and 2010 is prepared under Mexi-
can Financial Reporting Standards (FRS), while
years 2011, 2012, and 2013 are reported un-
der IFRS.
Sales
Consolidated net sales for the period ending
on December 31, 2013, were$1,675 million
dollars, compared with $1,759 million dollars
during 2012, which represented a decrease of
4.8 percent.
While the Glass Containers business dis-
played a strong performance in all of its seg-
ments, excluding the beer segment that had
an atypical sales volume in 2012, the Com-
pany results were affected by the expected
lower sales volume of automotive glass, as
well as a lower demand by some clients of the
cosmetic industry.
Similarly, during the third quarter of 2013
the Company’s performance was affected by
adverse climate conditions in most of Mexico
during September, affecting the distribution of
some products, and their sales, and therefore
consolidated results.
Glass Containers
In 2013, the different segments of the Glass
Containers business had a strong perfor-
mance, driven by higher sales volume in the
domestic market, excluding the beer segment
given its atypical sales volume in 2012, as well
as for a more robust price mix, particularly in
the wine and liquor, soft beverages and food
segments. On its part, the sales volume of
the export segment maintained a stable level
which, together with the price mix, allowed to
2011 2012 2013
In�ation in Mexico (Based on the National Consumer Price Index) 3.8% 3.6% 4.0%
In�ation in U.S. (Based on the National Consumer Price Index) 3.0% 2.0% 1.5%
U.S. / MexicoIn�ation Differential 0.8% 1.6% 2.5%
Devaluation(Appreciation) of the Mexican Peso 13.1% (7.2%) 0.9%
Natural Gas Prices
dec
09
mar
10
jun
10
sep
10
dec
10
mar
11
jun
11
sep
11
dec
11
mar
12
jun
12
sep
12
dec
12
mar
13
jun
13
sep
13
dec
13
6
5
4
3
2
1
0
US
$ /
MM
BT
U
44
maintain a sales level slightly above the one
recorded in 2012.
Notwithstanding the sales decrease in
the beer segment, particularly in the domes-
tic market, and weaker sales among several
customers of the cosmetic segment that af-
fected the positive results of this business,
Glass Containers sales during 2013 were
$1,148 million dollars, representing a de-
crease of 3.3 percent compared to $1,188
million dollars in 2012.
Flat Glass
Even though Float Glass segment of this busi-
ness had a positive performance in 2013, with
stable domestic sales and an increase in export
sales in spite of the high import tariffs in mar-
kets such as Brazil, the Automotive Glass seg-
ment had a decrease in its sales, mainly as a
result of the decision of some clients to diversify
part of their purchase volume, resolution taken
in the last phase of the restructuring process of
the Company.
This resulted in a sales decrease at the
Flat Glass business to $525 million dollars
in 2013, representing an 8.8 percent reduc-
tion form the $576 million dollars obtained
in 2012.
Operating income before other
(EBIT) and EBITDA
The consolidated Operating income before other
(EBIT) increased 16.8 percent to $210 million
dollars in 2013, compared with $179 million
dollars during 2012, while its margin increased
by 230 basis points to 12.5 percent, from 10.2
percent in the previous year.
The consolidated EBITDA increased
4.3 percent to $355 million dollars during
2013, compared with $341 million dollars
at the closing of 2012. This represented an
increase of 180 basis points in its margin,
reaching 21.2 percent, compared with 19.4
percent in 2012.
Furthermore, during 2013 cost reduction
initiatives implemented throughout the organi-
zation, lower legal costs of the Company, and
the recovery of an insurance claim related to
the incident at the facilities of Tractebel that
occurred in 2012, had a positive impact in
EBIT and EBITDA.
This counteracted the negative effect de-
rived from the increase in natural gas prices
recorded during 2013, as well as the effect of
a strong price competition in both the domestic
and export Flat Glass markets, as well as the
price mix in the different Glass Containers seg-
ments. Likewise, the negative impact derived
from a non-recurrent claim related to the re-
structuring process of the Company by one of
our clients, was also counteracted.
Total Financing Result
During 2013, the Total Financing Result of the
Company decreased to $130 million dollars,
compared with an expense of $190 million
dollars recorded in 2012. This reduction was
consequence mainly of a lower result in other
financial expenses as a reflection of the de-
crease in expenses related to the restructuring
process, and a lower foreign exchange loss that
was reduced from $34 million dollars in 2012
to $6 million dollars in 2013. Likewise, a lower
interest expense of $91 million dollars in 2013,
compared with $109 million dollars in the previ-
ous year, also contributed to the total financing
result decrease.
Taxes
In 2013, the Company registered Income Tax of
$18 million dollars, compared with a benefit of
$100 million dollars in 2012. While the accrued
Income Tax during 2013 decreased to $68 mil-
lion dollars, compared with $76 million dollars in
2012, the benefit recorded in deferred Income
Tax was also lower than in 2013, compared to
the previous year where there was a favorable
effect consequence of the restructuring process
of the debt.
Consolidated Net Income
Consolidated Net Income of 2013 was $49
million dollars, reflecting the positive effect of a
higher EBIT of $210 million dollars, compared
with $179 million dollars in 2012, as well as
a lower Total Financing Result of $130 million
dollars, compared with $190 million dollars
in 2012. This off-set the negative effect of an
Income Tax of $18 million dollars, in compar-
Consolidated SalesMillions of dollars
1,67
513
1,75
9
12
1,68
4
11
1,50
0
10
1,32
1
09
ContainersMillions of dollars
1,14
8
13
1,18
8
12
1,12
4
11
982
10
919
09
Flat GlassMillions of dollars
525
13
576
12
547
11
513
10
396
09
45
ison to a benefit of $100 million dollar in the
previous year.
During 2012, the Consolidated Net Income
was $208 million dollars, driven mainly by the
effect of the restructuring process.
Capital Expenditures
In 2013, the Company had Capital Expendi-
tures of $139 million dollars, which repre-
sented an increase of 62 percent, compared
with $85 million dollars invested in 2012. Of
this amount, the Glass Containers business
represented 87 percent, mainly invested
in capacity increase of the furnaces at the
Queretaro and Bolivia facilities, among oth-
ers, as well as scheduled repairs of furnaces
and molds used to produce containers, and
maintenance and general repairs in various
plants. The remaining 13 percent corre-
sponded to the Flat Glass business, which
was used for repairs and maintenance of
different plants, capacity improvements of
some production lines in the automotive
segment, and in valued-added products and
tooling for the latter.
Consolidated Financial Position
As of December 31, 2013, the total debt with
cost of the Company was $$1,262 million dol-
lars, compared with $1,153 million dollars at
the closing of 2012, which represented an in-
crease of $109 million dollars or 9.5 percent.
The net debt of the company, calculated by
subtracting the cash and cash equivalents, was
$1,071 million dollars, compared with $944
million dollars in 2012, which represented an
increase of $124 million dollars.
Debt performance reflects the net effect
of the issuance of a note for $235 million
dollars on April 8, 2013 by a subsidiary of
Vitro in compliance with one of the agree-
ments to end the restructuring process of
the Company, and the advance payment of
the MCDs, which mature on 2015, made on
July11, 2013 for a total amount of $123 mil-
lion dollars, keeping the Company in a com-
petitive financial condition and extending its
debt maturity profile.
Stock Performance
Performance of shares representing the eq-
uity of the Company (VITROA) in the Mexican
Stock Exchange (“BMV”, for its acronym in
Spanish: Bolsa Mexicana de Valores) main-
tained the positive rate it had shown since
2012. Both the Company’s capability to of-
fer high-quality goods, retain an exceptional
service for all its clients, and achieve solid
operating results, as well as the satisfactory
fact of attaining the termination of its restruc-
turing process, were reflected in the inves-
tor market confidence and made the share’s
price reach maximum levels of $35.30 pesos
per share during 2013.
The price of Vitro’s shares in the BMW was
as follows:
KEY DEVELOPMENTS
FINANCIAL CONDITION AND
RESTRUCTURING PROCESS
Vitro concludes agreements that defin-
itively end all actions and considers its
restructuring process finished.
On March 1, 2013 Vitro reached several
agreements that allowed it to definitively end its
debt restructuring process, thereby ending all
legal actions between the Company and certain
creditors, in Mexico and in the United States.
These agreements consisted of an agreement
entered into by and between Vitro and some
Creditors that did not consent to the restruc-
turing plan and other plans involved, and a
separate agreement by and between Vitro and
its financial partner, Fintech.
The key terms of the agreement reached with the aforementioned creditors consisted of the following:1. Fintech, acquired from the members of the
Ad Hoc Group all their holdings of notes
EBITMillions of dollars
210
13
179
12
157
11
139
10
138
09
EBITDAMillions of dollars
355
13
341
12
338
11
281
10
262
09
Capital Expenditure Millions of dollars
139
13
85
12
103
11
77
10
43
09
2013 BMV Share Pesos
Min Max
First Quarter 16.79 35.30
Second Quarter 25.41 29.99
Third Quarter 23.67 30.50
Fourth Quarter 28.50 33.50
46
and paid to the trustees and to the Ad Hoc
Group members an amount that covered
fees, costs, and expenses incurred by the
managers of the trust and the Ad Hoc
Group members.
2. Vitro withdrew from collection actions for
expenses and court costs against non-con-
senting creditors, and lawsuits filed in the
United States, thus ending all proceedings
against it, and
3. As consideration for the withdrawal of the
awarded claims already issued and all le-
gal proceedings related to the requests for
involuntary bankruptcy in the United States,
Fintech received shares of a subsidiary of
Vitro representing up to 13 percent of its
equity, and a new note for $235 million dol-
lars with a 2 year maturity.
The terms of the agreement with Fintech were the following:1. Fintech acquired the substantial majori-
ty of the notes from the non-consenting
creditors and withdrew from the pro-
ceedings and legal actions against Vitro
and its subsidiaries in the United States
and in Mexico, relating to the acquired
notes, and consented to the Concurso
Plan approved by the Federal Courts of
Mexico with respect to these notes and
claims. This action increased the approv-
al rate of such plan to nearly 99 percent
of recognized creditors.
2. Vitro withdrew from collection actions for
expenses and court costs against non-con-
senting creditors, and lawsuits filed in the
United States, thus ending all proceedings
against it, and
3. As consideration for the withdrawal of the
awarded claims already issued and all le-
gal proceedings related to the requests for
involuntary bankruptcy in the United States,
Fintech received shares of a subsidiary of
Vitro representing up to 13 percent of its
equity, and a new note for $235 million dol-
lars with a 2 year maturity.
Later, on April 8, 2013, the Company an-
nounced that it had concluded the execution of
the transactions contemplated in the previously
mentioned agreements, ending all claims be-
tween Vitro and some of its creditors, both in
Mexico and in the United States.
As provided in the agreement with Fin-
tech, Fintech received a Note for $235 million
dollars with a two-year maturity, as well as
12.7 percent of shares representing the cap-
ital stock of Vitro’s affiliate called FIC Regio-
montano S.A.P.I. de C.V., as consideration for
the withdrawal of the awarded claims issued
by the Courts of the State of New York and
for ending the legal proceedings related to
the requests for involuntary bankruptcy in the
United States.
Vitro also announced that it had reached a
preliminary agreement with Fintech, subject to
shareholders’ approvals and to the procurement
of the consent of the regulatory governmental
authorities, to merge FIC into Vitro, which would
result in the exchange of Fintech’s shares in FIC
for 20 percent of Vitro’s shares.
The National Banking and Securities Com-
mission excludes Vitro’s Shareholders from the
duty to make a Public Offering of Shares of the
Capital Stock of Vitro, S.A.B. de C.V.
On August 16, 2013, the Company was
notified by the National Banking and Secu-
rities Commission (“CNBV”, for its acronym
in Spanish: Comisión Nacional Bancaria y de
Valores) of the authorization granted to the
group comprised by Adrián Sada González,
Esther Cueva de Sada, Adrián Sada Cueva,
Alejandra Sada González, Fintech Invest-
ments Limited, and Fintech Advisory Limited
(“Fintech”), integrated pursuant to the share-
holders agreement signed on December 15,
2009, to exempt them from the duty to make
a mandatory public offering of the acquisition
of shares representing the capital stock of Vi-
tro, S.A.B. de C.V.
RATE88%
Fixed Rate Floating Rate + Fixed Spread
Dec. 12
Dec. 13
Dec. 12
Dec. 13
Dec. 12
Dec. 13
90%
12%
10%
CURRENCY
SOURCE
91%
Dollars Pesos
91%
9%
9%
14%
Banks Market
28%
86%
72%
47
This resolution was issued in response to
the request made on July 11, 2013, ac-
cording to the agreement that in order to
conclude its financial restructuring was en-
tered into by and between the Company and
Fintech, whereby it was agreed that Fintech
or its affiliates would capitalize affiliate FIC
Regiomontano, S.A.P.I. de C.V., same that
subsequently would merge into Vitro, S.A.B.
de C.V., both transactions approved by the
Board of Directors of Vitro, its Audit and Cor-
porate Practices Committees, and its Share-
holders’ Meeting.
This exception, based on Article 102 of
the Securities Exchange Act (Ley del Mer-
cado de Valores), was requested to allow
the merger of FIC into Vitro for the benefit
of the shareholders of the Company, pro-
viding the necessary flexibility to continue
with its operations.
Vitro holds General Special
Shareholders’ Meeting
On September 5, 2013, the Company held a
General Special Shareholders’ Meeting that,
among other resolutions, approved the reduc-
tion of the variable part of the Capital Stock of
the Company and the respective cancellation
of 96,714,286 registered ordinary shares that
were held in the treasury to support the issu-
ance of MCDs issued in 2011 and that were
paid in advanced in July 2013.
In order to carry out the merger of FIC and
COVISA into Vitro, the amendment to their by-
laws was approved during this Special Meeting
to allow the participation of foreigners in the
Company and to adjust the corporate purpose
of Vitro so it can perform the activities carried
out by its subsidiary COVISA. The purpose of
the merger of the companies was to improve
the exploitation of financial, administrative, and
operating resources of the companies involved
and to allow Vitro to meet its debt more effi-
ciently, without affecting its operations, clients,
suppliers, and other stakeholders. The approval
of the merger facilitated the performance of one
of the commitments agreed between Vitro and
its creditor, Fintech.
Later, with the purpose of defining the im-
plementation of the process, the aforesaid agree-
ments were ratified in a General Special Share-
holders’ Meeting held on December 11, 2013.
The merger became effective on January 1,
2014 and was made given that all terms for the
merger of FIC and the conditions for the merger
of COVISA were met pursuant to the resolutions
of the General Special Shareholders’ Meeting.
As a result of the merger, Vitro’s capital
stock increased 20 percent, same that became
property of Fintech.
Voluntary Commercial Insolvency of
Vitro Packaging de Mexico and Chapter
15 in the United States
On October 26, 2011, the Fourth District
Court on Civil and Labor Matters of the State
of Nuevo Leon declared the voluntary com-
mercial insolvency of Vitro Packaging de
México, S.A. de C.V. (“VIP”). On June 30,
2011, VIP requested the protection of Chap-
ter 15 in the United States Bankruptcy Court.
On November 23, 2011, Judge Harlin D. Hale
of the United States Bankruptcy Court for the
Northern District of Texas acknowledged the
Commercial Insolvency of VIP, under Chap-
ter 15 of the United States Bankruptcy Law,
granting VIP protection on any action that
creditors, including dissenting noteholders,
could file.
On May 2, 2013, the Fourth District Court
on Civil and Labor Matters in the city of Mon-
terrey, Nuevo, under the responsibility of Judge
Sandra Elizabeth Lopez Barajas, pronounced a
final judgment approving the restructuring plan
of VIP, which had been proposed by the concil-
iator and had been previously approved in turn
by a majority of the recognized creditors and
the Company.
This judgment concluded the Commercial
Insolvency of the company declared on October
26, 2011. After this decision, the Company has
focused on the implementation of its terms.
Commercial Insolvency Request
of Vitro Cristalglass
On June 5, 2012, Vitro Cristalglass, S.L. (Vitro
Cristalglass), subsidiary in Spain, requested the
declaration of the commercial insolvency before
Commercial Court No. 6 of Madrid, given the
unfavorable condition of the European market
in past years.
On July 6, 2012, Commercial Court No. 6 of
Madrid declared the Commercial Insolvency
of Vitro Cristalglass, appointing the insolvency
Practitioner on July 9, 2012, who through his
report issued on November 12, 2012, recom-
mended the liquidation of the Company.
On February 19, 2013, the liquidation
request of Vitro Cristalglass, S. L. was filed in
Court No. 6 of Madrid, Spain, which was ap-
proved; therefore, as from February 27, 2013,
Vitro Cristalglass was in liquidation phase.
Vitro makes an advanced
payment of its MCDs
On July 11, 2013, Vitro made an advanced
payment of the MCDs that matured on 2015,
taking advantage of the benefit of a 5 percent
discount. These debentures were issued by Vitro
in compliance with the restructuring agreement
entered into by and between the company and
its recognized creditors, agreement that was
approved by the Mexican federal courts on Feb-
ruary 3, 2012.
If these debentures had not been fully
paid on or prior to the date of their maturi-
ty, they would have been mandatorily con-
vertible into shares for 20 percent of Vitro’s
capital stock, hence that by making this pay-
ment the Company eliminated this possibil-
ity, thus granting greater certainty to Vitro’s
shareholders.
The aggregated outstanding balance, in-
cluding interest, of these convertible deben-
tures, which had a fixed interest rate of 12
percent per annum, was $123 million dollars
accrued at the prepayment date. The financial
capacity that the Company had to effectuate
this prepayment has enabled it to strengthen its
financial structure and to maintain healthy cov-
erage rations.
For the realization of this payment, Vitro
used resources obtained from the sale of one
part of the land where its corporate offices are
located, as well as the sale of other non-oper-
ating assets, in addition to the recovery of the
withheld client portfolio, among others.
48
OTHER EVENTS
Changes in Vitro’s Executive Team
On March 20, 2013, Vitro announced that its
Board of Directors had appointed Mr. Adrian
Sada Cueva as new Chief Executive Officer,
in substitution of Mr. Hugo A. Lara Garcia.
For this appointment, the Board assessed Mr.
Sada’s profile and experience and considered
that he was the suitable person to lead the
company in its new stage. Also, it considered
the favorable opinion of the Corporate Prac-
tices Committee, integrated in its entirety by
independent directors.
Later, on May 1, 2013, Mr. David Gonza-
lez Morales, who held the position of Flat Glass
President, opted to retire, while on August 15,
2013 Mr. Alejandro F. Sanchez Mujica, who held
the position of Executive VP Legal and General
Counsel of the Company since 2005, opted to
resign from this position.
These changes in the executive team of
the Company favored the consolidation and
optimization of the organizational structure of
Vitro by eliminating to chief executive officers,
the business thus directly reporting to the
Chief Executive Officer. This has contributed to
a more slender organizational structure and to
accelerate decision-making for the benefit of
the organization, and the corresponding sav-
ings in the structure.
Vitro strengthens its liquidity
with the sale of one part of
its corporate land
On April 25, 2013, the Company announced the
sale of one part of the land and buildings where
its corporate offices are located in the munici-
pality of San Pedro Garza Garcia, Nuevo Leon,
which generated resources in approximately
$36 million dollars.
According to the new business strategy,
focused on working more efficiently and closer
to the business operations and reinforcing the
purpose of reducing costs, spaces started to be
refurbished at Vitro’s plants to, eventually, relo-
cate corporate personnel. Furthermore, it was
decided to use the sale’s proceeds for modern-
izing equipment and technological innovation in
its production plants, and to reduce debt.
The Company will keep in said land the
facility where its executive offices are found
and, as part of the agreement, Vitro’s use of the
building of its corporate offices during a fixed
term is contemplated.
According to the business strategy of the
company, the cost reduction and optimization
program will be maintained, as well as the dis-
incorporation of non-productive assets to chan-
nel a bigger budget to improve its plants and to
reduce debt.
Vitro was recognized by the World Pack-
aging Organization (WPO) for the design of the
container of the fragrance Diviníssima No. 1,
produced for its customer Omnilife.
This recognition confirms the Company’s
commitment to continue designing and produc-
ing original containers that exceed its clients’
expectations, as is the case of Diviníssima No.
1. This container has been greatly accepted by
Latin American consumers and Hispanic com-
munities all around the world, making it the
most emblematic symbol of the Angelíssima
makeup and skincare line.
The Diviníssima No. 1 container was also
awarded in Mexico by the Mexican Containers
and Packaging Association (Asociación Mexi-
cana de Envase y Embalaje) as the best design
for fragrances in the country, and received the
award as “2013 Stellar Container”, not only for
achieving excellent creativity, innovation, and
technology standards, but because it represents
a sustainable, attractive, and easy-to-use option
for consumers.
Also, it was recognized by the Polish maga-
zine “Packaging Polska Magazine” as one of the
most innovating containers in the cosmetic cat-
egory, as it combines perfectly glass distribution
and engravings to conceive the pure image of a
diamond.
49
management’s financial responsibility
One of Management’s responsibilities is the
preparation of the financial statements of the
Company and the additional financial informa-
tion included in this Report. This responsibility
includes ensuring that such financial statements
and their notes are made in strict compliance
with International Financial Reporting Standards
in effect (“IFRS”).
The Company has an administrative and
computing structure that it considers suffi-
cient to provide reasonable assurance in the
regard that the records substantially reflect
the transactions derived from its operations.
Also, it has an internal control department
that validates the adequate use of assets and
also avoids material impairment of the Com-
pany’s assets.
To verify that the internal control is suffi-
cient and adequate under the circumstances,
the Company has policies and procedures in
place and communications within the organi-
zation and frequently validates their correct im-
plementation through auditing programs in all
material cycles of the business.
The financial statements of the Company
were audited by Galaz, Yamazaki, Ruiz Urqui-
za, S.C., member of Deloitte Touche Tohmatsu,
independent public accountants; its audit was
conducted according to Generally Accepted
Auditing Standards. The complete report of the
external auditors is included in this document
for further information on this Report.
The Audit Committee of our Board of Direc-
tors, among other duties, ensures that Manage-
ment complies with the applicable regulations
for the proper record and disclosure of the
transactions it executes.
The Audit Committee convenes periodically
with Management, internal auditors, and exter-
nal auditors. The Audit Committee selects, au-
thorizes the compensation, and supervises the
work of the firm that audits our financial state-
ments. Furthermore, said Committee is the only
one that has the capacity to authorize the hiring
of the independent auditor for any service other
than or supplementary to audit works.
External and internal auditors have free and
total access to the Audit Committee and gather
with the latter to discuss its functions, internal
controls, and issues related to financial reports.
Adrián Sada Cueva
Chief Executive Officer
Claudio L. Del Valle Cabello
Chief Administrative & Financial Officer
March 11, 2014
50
GALAZ, YAMAZAKI,RUIZ URQUIZA, S.C.LÁZARO CÁRDENAS 2321 PONIENTE, PBRESIDENCIAL SAN AGUSTÍN66260 GARZA GARCÍA, N.L.MÉXICO
TEL: + 52 (81) 8133 7300FAX: + 52 (81) 8133 7383WWW.DELOITTE.COM/MX
Independent Auditors’ ReportTo the Board of Directors and Stockholders of Vitro, S.A.B. de C.V.Garza García, N.L. Mexico
We have audited the accompanying consolidated financial statements of Vitro, S. A. B. de C. V. and Subsidiaries (the Company), which com-
prise the consolidated statements of financial position as of December 31, 2012 and 2013, and the consolidated statements of comprehensive
income, changes in stockholders’ equity and cash flows for the years then ended, 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 (IFRS), issued by the International Accounting Standards Board (IASB), and for such internal controls as management deems neces-
sary for the preparation of consolidated financial statements that are free of material misstatement, whether due to fraud or error
Independent Auditors’ 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 evidence supporting 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 opinion.
51
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Vitro, S. A. B. de C. V. and Subsidiaries
as of December 31, 2012 and 2013, and their financial performance and their cash flows for the years then ended, in accordance with International
Financial Reporting Standards.
Debt restructuring process of Vitro S.A.B. de C.V. (Vitro)
As explained in Note 2 a), through an agreement reached on March 1, 2013, formalized on April 8, 2013, the legal proceedings in both Mexico and the
United States of America (USA) that opposed the restructuring process were terminated.
Translation from Mexican pesos to U.S. dollars
Our audit included a review of the arithmetical translation of the amounts in Mexican pesos into U.S. dollars and, in our opinion, was performed in confor-
mity with the basis established in Note 3 c) to the consolidated financial statements for the year ended December 31, 2013. The amounts in U.S. dollars
are presented solely for the convenience of the user.
Other Matter
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
Carlos Javier Vázquez Ayala, C.P.A.
March 11, 2014
52
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated statements of financial positionAs of December 31, 2012 and 2013 (Millions of Mexican pesos)
ASSETS
Cash and cash equivalents 18 $ 2,449 $ 2,199 US$ 168
Trade accounts receivable, net 6, 18 3,237 2,709 207
Recoverable taxes 18 158 323 25
Other current assets 5 864 846 64
Inventories, net 7 3,327 3,258 249
Assets available for sale and discontinued operations 8, 22 1,037 49 4
Current assets 11,072 9,384 717
Investment in associated companies 9 1,034 925 71
Investment property 11 309 309 24
Lands and buildings 10 5,369 5,347 409
Machinery and equipment 10 8,397 8,126 621
Investments in process 10 526 972 74
Deferred income taxes 18, 26 7,723 7,883 602
Intangibles and other long-term assets 12 644 488 37
Long-term assets 24,002 24,050 1,838
Total assets $ 35,074 $ 33,434 US$ 2,555
TRANSLATION INTO MILLIONS OF U.S. DOLLARS DECEMBER 31, NOTES 2012 2013 2013
DECEMBER 31,
See accompanying notes to consolidated financial statements.
53
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated statements of financial positionAs of December 31, 2012 and 2013 (Millions of Mexican pesos)
LIABILITIES
Bank loans 13, 18 $ 1,155 $ 1,006 US$ 77
Short-term maturity of long-term debt 14, 18 645 480 37
Trade accounts payable 18 1,230 1,143 87
Accrued expenses and provisions 15, 18 3,099 1,166 89
Interest payable 18 337 447 34
Other short-term liabilities 5, 18 948 2,517 192
Liability associated with discontinued operations 22 416 - -
Short-term liability 7,830 6,759 516
Long-term debt 14 13,153 15,030 1,149
Employee benefits 16 2,220 1,175 90
Taxes payable 18 3,661 4,075 311
Other liabilities 17, 18 3,062 8 1
Long-term liability 22,096 20,288 1,551
Total liabilities 29,926 27,047 2,067
STOCKHOLDERS’ EQUITY
Capital stock 21 4,590 4,590 351
Repurchased shares 21 (250) (3) (1)
Additional paid-in capital 21 1,231 1,544 118
Other components of comprehensive income 21 (460) (398) (30)
Accumulated losses 21 (1,216) (634) (48)
Controlling interest 3,895 5,099 390
Non-controlling interest 21 1,253 1,288 98
Stockholders’ equity 5,148 6,387 488
Liabilities and Stockholders’ equity $ 35,074 $ 33,434 US$ 2,555
TRANSLATION INTO MILLIONS OF U.S. DOLLARS DECEMBER 31, NOTES 2012 2013 2013
DECEMBER 31,
Claudio L. Del Valle CabelloChief Financial and Administrative Officer
Adrián Sada CuevaChief Executive Officer
See accompanying notes to consolidated financial statements.
54
Continuing operations: Revenues $ 23,112 $ 21,538 US$ 1,646 Cost of sales 16,857 15,273 1,167 Gross profit 6,255 6,265 479 Administrative expenses 2,059 1,766 135 Distribution and sale expenses 1,833 1,819 139 Income before other expenses, net 2,363 2,680 205 Other expenses, net 24 1,241 80 6 Operating income 1,122 2,600 199 Financial cost, net 25 2,535 1,738 133 Gain from debt restructuring 14a 3,413 - - Equity in income of associated companies 9 48 (75) (6) Income before income taxes 2,048 787 60 Income taxes expense (benefit) 26 (1,308) 211 16 Income from continuing operations 3,356 576 44
Discontinued operations: Loss from discontinued operations, net of taxes 22 751 - - Income of the year $ 2,605 $ 576 US$ 44 Other components of comprehensive income: 21 Items that will not be reclassified to profit or loss: Actuarial remeasurements of the defined benefit obligation, net of taxes 16 $ (186) $ 87 US$ 7 Total items that will not be reclassified to profit or loss $ (186) $ 87 US$ 7
Items that can be reclassified to profit or loss: Differences from translation for foreign operations 21 $ (183) $ 16 US$ 1 Total items that can be reclassified to profit or loss (183) 16 1 Total other components of comprehensive income (369) 103 8Total comprehensive income of the year $ 2,236 $ 679 US$ 52Total income of the year attributable to: Controlling interest 21 $ 2,651 $ 582 US$ 45 Non-controlling interest 21 (46) (6) (1)Total income of the year $ 2,605 $ 576 US$ 44 Total comprehensive income of the year attributable to: Controlling interest 21 $ 2,349 $ 644 US$ 49 Non-controlling interest 21 (113) 35 3Total comprehensive income of the year $ 2,236 $ 679 US$ 52 Earnings (loss) per common share arising from continuing operations and discontinued operations: 21 Basic earnings per share $ 7.65 $ 1.54 US$ 0.12 Diluted earnings per share $ 6.24 $ 1.53 US$ 0.12Earnings per share arising from continuing operations: Basic earnings per share $ 9.79 $ 1.54 US$ 0.12 Diluted earnings per share $ 7.91 $ 1.53 US$ 0.12Loss per share from discontinued operations Basic loss per share $ (2.14) $ - US$ - Diluted loss per share $ (1.67) $ - US$ -
Claudio L. Del Valle CabelloChief Financial and Administrative Officer
Adrián Sada CuevaChief Executive Officer
See accompanying notes to consolidated financial statements.
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated statements of profit or loss and other comprehensive incomeFor the years ended December 31, 2012 and 2013 (Millions of Mexican pesos, except the amounts per share)
TRANSLATION INTO MILLIONS OF U.S. DOLLARS, EXCEPT THE AMOUNTS PER NOTES 2012 2013 SHARE 2013
YEAR ENDED DECEMBER 31,
55
Cash flows in operating activities: Income before income taxes $ 2,048 $ 787 US$ 60 Adjustments for: Income from debt restructuring and provision for onerous agreement 10d, 14a (2,944) (97) (7) Depreciation and amortization 10 2,038 1,783 136 Loss and allowance for doubtful accounts on sale of fixed assets 24 125 (84) (6) Loss from impairment of assets available for sale 10e, 24 27 - - Loss from impairment of long-lived assetsn 10e, 24 693 209 16 Financial products (68) (194) (15) Equity in income of associated companies 9 (48) 75 6 Financial instruments 76 (22) (2) Foreign exchange loss 51 56 4 Interest payable 2,055 1,824 139 4,053 4,337 331Changes in working capital: Trade accounts receivable 116 523 40 Inventories (120) 63 5 Suppliers (283) (85) (6) Other short-term operating assets and liabilities (120) (178) (13) Employee benefits (298) (495) (38) (705) (172) (12) Income taxes (145) (164) (13) Discontinued operation (57) - -
Cash flows provided by operating activities 3,146 4,001 306
Cash flows in investing activities: Purchase of machinery and equipment 10 (1,010) (1,855) (142) Sale of property, machinery and equipment 339 372 28 Restricted cash 71 (42) (3) Intangibles and other assets (24) 71 5 Interest collected 68 112 9 Discontinued operation 2 - -Cash flows used in investing activities (554) (1,342) (103) Cash flows in financing activities: Short-term loans repaid (28) (161) (12) Interest paid (1,347) (1,351) (103) Dividends paid to non-controlling interest (2) - - Long-term loans obtained 2 1,419 108 Payment of long-term loans (70) (2,841) (217) Payment for restructuring approval (953) - - Derivative financial instruments (126) 28 2 Discontinued operation (8) - -Cash flows used in financing activities (2,532) (2,906) (222) Net increase in cash and cash equivalents: 60 (247) (19) Cash and cash equivalents as of January 1, 2,392 2,449 187 Effect of exchange fluctuations (3) (3) -Cash and cash equivalents as of December 31, $ 2,449 $ 2,199 US$ 168
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated statements of cash flowsFor the years ended December 31, 2012 and 2013 (Millions of Mexican pesos)
Claudio L. Del Valle CabelloChief Financial and Administrative Officer
Adrián Sada CuevaChief Executive Officer
See accompanying notes to consolidated financial statements.
TRANSLATION INTO MILLIONS OF U.S DOLLARS NOTAS 2012 2013 2013
YEAR ENDED DECEMBER 31,
56
Vitro, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ EquityFor the years ended December 31, 2012 and 2013 (Millions of Mexican pesos)
Balances as of January 1, 2012 $ 4,590 $ 981 $ 213 $ (371) $ (3,867) $ 1,546 $ 1,369 $ 2,915
Dilution of non-controlling
interest
Decrease of non-controlling
interest (3) (3)
Comprehensive income (loss):
Other components of
comprehensive (loss)
of the year (122) (180) (302) (67) (369)
Net consolidated income
(loss) of the year 2,651 2,651 (46) 2,605
Comprehensive income
(loss) of the year - - (122) (180) 2,651 2,349 (113) 2,236
Balance as of
December 31, 2012 4,590 981 91 (551) (1,216) 3,895 1,253 5,148
Placement of shares
(note 21b) 560 560 560
Comprehensive income (loss):
Other components of
comprehensive loss of
the year (24) 86 62 41 103
Net consolidated income
(loss) of the year 582 582 (6) 576
Comprehensive income
(loss) of the year (24) 86 582 644 35 679
Balances as of
December 31, 2013 $ 4,590 $ 1,541 $ 67 $ (465) $ (634) $ 5,099 $ 1,288 $ 6,387
Claudio L. Del Valle CabelloChief Financial and Administrative Officer
Adrián Sada CuevaChief Executive Officer
See accompanying notes to consolidated financial statements.
REPURCHASED SHARES AND ADDITIONAL TRANSLATION NON- TOTAL CAPITAL PAID-IN OF FOREIGN ACTUARIAL ACCUMULATED CONTROLLING CONTROLLING STOCKHOLDERS’ STOCK CAPITAL OPERATIONS REMEASUREMENTS LOSSES INTEREST INTEREST EQUITY
57
1. Company’s activity Vitro, S.A.B. de C.V. (“Vitro” and jointly with its subsidiaries the “Company”), is a holding company whose subsidiaries are engaged in the
manufacture of glass and offer products to satisfy the needs of two types of business: glass containers and flat glass. Vitro’s subsidiaries
process, distribute and commercialize a broad range of flat glass goods for architectural and automotive use; glass containers for food and
beverage, wine, liquors, cosmetics and pharmaceutical markets; similarly, they are engaged in the manufacture of raw material, equipment
and capital goods for industrial use. Vitro’s corporate offices are located at Keramos #225 poniente, Colonia Del Prado, Monterrey, Nuevo
Léon, Mexico 64410.
2. Significant eventsa) Restructuring process As a result of the incompliance with the payment of principal and interest of the Company’s debt in 2010, certain bondholders
brought a series of lawsuits forward in the State of New York, whereby they demanded the payment of unpaid principal and
accrued interest by Vitro.
During the same year, the Company brought a Voluntary Bankruptcy Lawsuit in Mexico with a previous restructuring plan (“Bankruptcy
Plan”) in order to reach an agreement on the total debt amount and the manner it would be paid. The Company went into bankruptcy in
April 2011 and subsequently requested the recognition of such proceeding as the main proceeding under chapter 15 of the United States
of America (“USA”) Bankruptcy Law, which was granted in July 2011. Beginning in April 2011 and July 2011, the Company’s assets
were protected against any collection action in Mexico and the USA, respectively.
In February 2012, the Company was notified about the Bankruptcy Sentence and the acceptance of the Bankruptcy Plan in Mexico, which
was implemented in the same month.
Notwithstanding the Bankruptcy approved in Mexico, the bondholders that were still against accepting such Bankruptcy Plan, continued
legal processes and negotiating with the Company in both Mexico and the USA.
After presenting evidence in the State of New York, Vitro and its guarantor subsidiaries were sentenced to pay the principal, accrued
interest and legal expenses and costs. However, through November 2012, such sentence could not be executed, first due to the
Bankruptcy Plan process, and subsequently to the commencement of the approval process in the USA of the sentence issued by the
Mexican Court that approved the Bankruptcy Plan.
This approval request was denied in the first instance in June 2012, as well as in the appeal thereto in November 2012. Additionally
the order of a temporary suspension of any enforcement action from July 2011 was withdrawn in December 2012. Consequently, the
processes in New York were resumed and the plaintiff bondholders continued with the enforcement process.
On the other hand, certain bondholders requested an Involuntary Bankruptcy sentence for Vitro and its guarantor subsidiaries in December
2010, which was refused because it was not applicable in May 2011 in the first instance and in May 2012 in the second instance.
Consequently, the plaintiffs were sentenced to compensate the damaged caused to Vitro and its guarantor subsidiaries. Accordingly, in
December 2012, Vitro and the respondent subsidiaries demanded the amount of US$1,600 as a restitution of damages.
Vitro, S.A.B. de C.V. and Subsidiaries
Notes to consolidated financial statements As of December 31, 2012 and 2013 (Millions of Mexican pesos)
58
Through an agreement entered into on March 1, 2013 and executed on April 8 2013, the parties managed to put an end to
the judicial proceedings in both Mexico and in the USA. Accordingly, most of the bondholders who still opposed the Bankruptcy
Plan will receive 2018 Notes, as well as the Mandatorily Convertible Debentures (“MCDs”) and cash amounts foreseen in the
Bankruptcy Plan.
The foregoing was achieved because Fintech Investments Limited (“Fintech”) acquired from the bondholders who opposed the
restructuring process all 2012, 2013, and 2017 bonds which were owned by them.
This way, Vitro and Fintech reached an agreement to terminate the judicial proceedings in Mexico and in the USA, including sentences
to pay the amount claimed plus interest and legal costs in that country and in Mexico. In exchange, Vitro also terminated the judicial
proceedings in the USA and Mexico against those bondholders.
Through the agreement reached with Fintech, FIC Regiomontano, S.A.P.I. de C.V. (“FIC”, Vitro’s subsidiary) acting as principal of Vitro
and the guarantor subsidiaries of the 2012, 2013 and 2017 bonds mentioned in the Bankruptcy Plan, would pay to Fintech US$360
through the issuance of a note in the amount of US$235 at an annual interest rate of 8%, maturing in 2 years and will capitalize
the remnaining balance resulting that Fintech will be the owner of up to 13% of FIC’s outstanding shares. On the other hand, also
in April 2013, Vitro reached a preliminary agreement with Fintech, subject to the approval from the stockholders and obtaining the
authorizations of the governmental regulatory authorities to merge FIC with Vitro, which if approved, would result in the exchange
of the shares of Fintech in FIC for 20% of Vitro’s shares. The necessary government approvals to proceed with such merger were
obtained during the third quarter of 2013; in addition, they were approved and ratified by the stockholders through the General
Stockholders’ Meetings held on September 5 2013 and December 11, 2013.
b) Collection rights securitization plan On November 15, 2013, the Company completed its issuance of new Stock Exchange Trust Certificates of $1,200 at the interbank
equilibrium interest rate (“TIIE”), plus 1.7% for a three-year term. These certificates are backed up by collection rights of some of
its subsidiaries.
With this securitization plan, among other debts, the two current issuances in the stock market supported by collection rights of the
Containers business unit were prepaid, as well as a private issuance of Preferred Securities supported by collection rights of the Flat Glass
business unit (note 18iii).
c) Appointment of Adrián Sada Cueva to Chief Executive Officer On March 20, 2013 Vitro announced that the Board of Directors appointed Adrián Sada Cueva to Chief Executive Officer.
d) Merger of companies At a General Extraordinary Stockholders’ Meeting held on September 5, 2013, the merger of FIC and Compañía Vidriera, S.A. de C.V.
(“COVISA”), as merged companies, with Vitro as the holding company, was approved (“Merger”). The approval of the merger allows
complying with one of the agreed-upon commitments between Vitro and its creditor, Fintech, in virtue of which Vitro has enhanced its
viability as a going concern and has strengthened its financial position (note 21c).
The Extraordinary General Stockholders’ Meeting on December 11, 2013 agreed, among other resolutions, to ratify the agreements
entered into at the aforementioned Stockholders’ Meeting on September 5, and considers that the merger will take full effect on January
1, 2014 (note 28).
e) Failures in the generation of energy supplied by Tractebel On March 3, 2012, Tractebel Energía de Monterrey S. de R.L. de C.V. (“Tractebel”), electric power and steam supplier, suffered an
explosion in its facilities. The economic consequence that affected the Company was an increase in the cost of electric power, which at
the close of fiscal year 2012 was approximately US$25.8 million, which resulted in a spread between the fares contracted with Tractebel
and the back-up fare contracted with the Federal Electricity Commission. On May 14, 2013, Tractebel and the Company reached an
59
agreement whereby both parties retracted all lawsuits and claims related to the incident, and the latter agreed the payment of credit
memos to the Company. The net cost overrun resulting from these events was approximately $89, which was recognized in the results
of the fiscal years ended December 31, 2012 and 2013.
f) Contracting derivative financial instrument On January 8, 2013, the Company contracted a derivative financial instrument (“DFI”) to continue covering its needs for natural gas in
its production processes, choosing Macquarie Bank Limited (“Macquarie”) on a contract for 9,900,000 MMBTU at an average fare of
US$3.49, and a maturity on December 31, 2013 (note 18v).
g) Prepaid MCD’s On June 11, 2013, Vitro presented an irrevocable notice to make the advance payment of mandatorily convertible debentures
maturing in 2015, which were issued by Vitro in compliance with the restructuring agreement on February 3, 2012 held
between Vitro and its creditors. The total unpaid balance of these convertible debentures, including interest, was prepaid on
July 11, 2013 (note 14a).
h) Treasury stock write-off Pursuant to the Extraordinary General Stockholders’ Meeting on September 5, 2013, a reduction of the Company’s variable capital stock
was approved, through the write-off of 96,714,286 common stock held in Treasury to support the issuance of mandatorily convertible
debentures in 2011 (notes 2g and 14a).
i) Voluntary bankruptcy of Vitro Cristalglass, S.L. in Spain On February 19, 2013, the dissolution of Vitro Cristalglass, S. L. was requested at the Court Num. 6 in Madrid, Spain. Such
request was approved and beginning February 27, 2013, Vitro Cristalglass is at a dissolution stage; therefore, it ceased to
consolidate the Company’s financial statements (note 22). As of December 31, 2013, the Company is not liable for anything
arising from such proceeding.
3. Basis of preparation and consolidationa) Basis of preparation The consolidated financial statements as of December 31, 2012 and 2013 and for the years then ended, were prepared based on
International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).
The accompanying consolidated financial statements were prepared based on historical costs, which includes the disclosure of the
deemed cost, except for certain financial instruments which are recorded based on their amortized cost or fair value, and investment
properties which are recorded at fair value. The historical cost is generally based on the fair value of the consideration granted in
exchange of the assets.
i. New and amended IFRSs that impact balances reported and/or disclosures in the financial statements.
This year, the Company applied a series of new and amended IFRSs issued by the International Accounting Standards Committee
(IASB), which are described as follows.
Amendments to IFRS 7, Disclosures – Offsetting Financial Assets and Financial Liabilities
The Group has applied the amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities for the
first time in the current year. The amendments to IFRS 7 require companies to disclose information about offsetting rights
and related arrangements for recognized financial instruments under an enforceable master netting agreement or similar
arrangement.
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The amendments to IFRS 7 have been applied retrospectively. As the Company does not have any financial asset or liability subject
to offsetting agreements as of the date of these financial statements, the application of the amendments has had no material impact
on the disclosures or on the amounts recognized in the consolidated financial statements.
New and amended standards on consolidation, joint arrangements, associates, and disclosures
In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27
(as revised in 2011) Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures.
Subsequent to the issuance of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain
transitional guidance on the first-time application of the standards.
In the current year, the Company has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) jointly with
the amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance.
The impact of the application of these standards is set out below:
Impact of the application of IFRS 10
IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial
statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an investor
has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its
involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for
an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in IFRS 10 to explain when
an investor has control over an investee.
Management made an assessment as of the date of the initial application of IFRS 10 as to whether or not the Company has
control over Empresas Comegua, S.A. and Subsidiaries (“Comegua”) in accordance with the new definition of control and
the related guidance set out in IFRS 10. Specifically, Vitro has interests of 49.72% in Comegua (note 9). The remaining
percentage of Comegua’s common shares is owned by a group of Centro American stockholders, who hold most of the voting
rights. Therefore, as the Company has no power to alter the variable returns derived from Comegua’s interests, it has no
control over such entity.
Based on the requirements of IAS 28 Investments in Associates and Joint Ventures, the Company has significant influence on
Comegua, as it has the power to participate in taking financial and operating decisions, without having most of the decision-
making rights.
For the other entities where Vitro has interests, including specific-purpose entities, no change on the entities controlled by Vitro
because of the adoption of IFRS 10 was identified.
Impact of the application of IFRS 11
IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC-13 Jointly Controlled
Entities – Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (revised in 2011).
IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for.
Under IFRS 11, there are only two types of joint arrangements: – joint operations and joint ventures.
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The classification of joint arrangements under IFRS 11 is determined based on the rights and obligations of parties to the joint
arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties, and, if
applicable, other facts and circumstances.
The Company’s management reviewed and assessed the classification of the Company’s investments, and determined that it does
not have joint arrangements.
Impact of the application of IFRS 12
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates
and/or unconsolidated structured entities. In general, the application of IFRS 12 has resulted in more extensive disclosures in the
consolidated financial statements in relation to significant judgments and assumptions to determine the nature of the interests in
other entities.
IFRS 13 Fair Value Measurement
Vitro has applied IFRS 13 for the first time in the current year. IFRS 13 establishes a single source of guidance for fair value
measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement
requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require
or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions
that are within the scope of IFRS 2, Share-based Payment, leasing transactions that are within the scope of IAS 17, Leases, and
measurements that have some similarities to fair value but are not fair value (e.g. net realizable value for the purposes of measuring
inventories or value in use for impairment assessment purposes).
The Company has assets measured at fair value such as DFI’s and investment properties. The application of IFRS 13 did not have a
significant impact on the manner in which Management measures these assets.
ii. New and revised IFRS’s issued but not in effect
The Company has not applied the following new and revised IFRS that have not been implemented because they are not
mandatory.
IFRS 9, Financial Instruments
IFRS 9, Financial Instruments, issued in November 2009, amended in October 2010, introduces new requirements for the classification
and measurement of financial assets and financial liabilities, and derecognition.
The primary requirements of IFRS 9 are as follows:
• All recognized financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and Measurement,
are required to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within
a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are
solely payments of principal and interest on the outstanding principal are generally measured at amortized cost at the end of
subsequent accounting periods. All other debt investments and equity investments are measured at fair value at the end of
subsequent accounting periods.
• • The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the
accounting for changes in fair value of a financial liability (designated as at FVTPL) attributable to changes in the credit risk
of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at FVTPL, the amount of change in
the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other
comprehensive income, unless the 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 credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the
change in fair value of the financial liability designated as at FVTPL was recognized in profit or loss.
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IFRS 9 issued in November 2013, introduces a new chapter on hedge accounting, putting in place a new hedge accounting model
that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and
non-financial risk exposures. In addition, it allows an entity to apply solely the requirements introduced in IFRS 9 (2010) for the
presentation of gains and losses on financial liabilities designated as at fair value through profit or loss without applying the other
requirements of IFRS 9, meaning that the portion of the change in fair value related to changes in the entity’s own credit risk can
be presented in other comprehensive income rather than within profit or loss.
As IFRS 9 (2013) removes the mandatory effective date of IFRS 9 (2013), IFRS 9 (2010) and IFRS 9 (2009), leaving the effective
date open, pending the finalization of the impairment, classification and measurement requirements, the Company has decided
that the adoption of this standard will take place until IFRS 9 is completed. It is not practicable to provide a reasonable estimate
of the effect of IFRS 9 until these phases have been concluded in their final version to be issued.
Amendments to IFRS 10 and IFRS 12 and IAS 27, Investment Entities
Amendments to IFRS 10 define an investment entity and require that the Company meets the definition of an investment entity for
the purposes of not consolidating its subsidiaries but instead measuring them at fair value with changes in profit or loss, both in
the consolidated and separate financial statements.
To qualify as an investment entity, a Company is required to:
• Obtain funds from one or more investors for the purpose of providing them with professional investment management
services.
• Commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment
income, or both.
• Measure and evaluate performance of substantially all of its investments on a fair value basis.
The Company’s management does not anticipate that the investment entities amendments will have any effect on the consolidated
financial statements, as none of the subsidiaries of Vitro is classified as an investment entity.
Amendments to IAS 19, Employee Benefits (revised in 2011)
Amendments to IAS 19 (2011) with regards to employee contributions on defined benefit plans, clarify the requirements that
relate to how contributions from employees or third parties that are linked to the service should be attributed to periods of service.
In addition, it permits a practical record if the amount of the contributions is independent from the number of years of service in
which contributions can, but are not required, to be recognized as a reduction in the service cost in the period in which the related
service is rendered. These amendments are effective for annual periods beginning on or after July 1, 2014. The amendments to
this standard have not been early adopted by the Company and no material effects are expected due to their adoption.
Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 32 clarify the application of existing requirements for offsetting financial assets and financial liabilities.
Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of offsetting recognized amounts”
and “is intended to settle the net amount, or realize the asset and settle the liability simultaneously”.
Company’s management estimates that the application of this revised standard on offsetting financial assets and liabilities will not
have any material effect on the presentation of the consolidated statement of financial situation.
Improvements to IAS 36, Impairment of Assets
Amendments to IAS 36 reduce the circumstances in which the recoverable amount of assets or cash-generating units is required
to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in
determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a
present value technique. The amendments to this standard have not been early adopted by the Company and no material effects
are expected due to their adoption.
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Amendments to IAS 39, Financial Instruments: Recognition and Measurement
Amendments to IAS 39 clarify that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided
certain criteria are met. A novation indicates an event where the original parties to a derivative agree that one or more settling
counterparties replace their original counterparty to become a new counterparty to any of the parties. In order to apply the
amendments and continue hedge accounting, novation to a central counterparty (CPP)must happen as a consequence of laws or
regulations or the introduction thereof. The amendments to this standard have not been early adopted by the Company and no
material effects are expected on the consolidated financial statements due to their adoption.
Annual improvements to 2010-2012 Cycle
Annual Improvements to 2010-2012 Cycle make amendments to: IFRS 2, Share-Based Payment, by amending the definitions
for consolidation (irrevocability) of concessions and market conditions, and adding definitions for performance condition and
service condition; IFRS 3, Business Combinations, which require that contingent considerations classified as an asset or
liability are measured at fair value at the reporting date; IFRS 8, Operating Segments, requires disclosure of the judgments
made by management in applying the aggregation criteria to operating segments, clarifying that reconciliations of segment
assets are required solely if assets are reported regularly; IFRS 13, Fair Value Measurement, clarifies that the issuance of
IFRS 13 and the amendments to IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and
payables on an undiscounted basis (amendment to conclusion bases solely); IAS 16, Property, Plant and Equipment and IAS
38, Intangible Assets, clarifying that the gross amount of property, plant and equipment is adjusted in a manner consistent
with a revaluation of the carrying amount; and IAS 24, Related Party Disclosures, clarifying how payments to entities providing
management services are to be disclosed. These improvements are applicable to annual periods beginning on or after 1 July
2014. The Company has yet to complete its evaluation of whether these improvements will have a significant impact on its
consolidated financial statements.
Annual improvements to 2011-2013 Cycle
Annual Improvements to 2011-2013 Cycle makes amendments to the following standards: IFRS 1, First-time adoption of IFRS,
clarifying which versions of IFRSs can be used on initial adoption (amendments to conclusion bases solely); IFRS 3, clarifying that
the standard excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint
arrangement itself; IFRS 13, clarifying the scope of the portfolio exception of paragraph 52 of the standard, which allows an entity
to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received for
selling a net long position or at which a net short position would be transferred, both for a particular risk exposure in an orderly
transaction between market participants at the measurement date under current market conditions; IAS 40, Investment Property,
clarifying the interrelationship of IFRS 3 and IAS 40 when classifying a property as an investment property or as an owner-occupied
property. These improvements are applicable to annual periods beginning on or after 1 July 2014. The Company has yet to
complete its evaluation of whether these improvements will have a significant impact on its consolidated financial statements,
except for improvements to IFRS 1, which is a standard applicable solely to first-time adopters, and therefore no impacts are
expected at a consolidated level for the Company.
IFRIC 21 “Levies”
IFRIC 21 Levies, provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are
accounted for in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and those where the timing and
amount of the levy is certain. The interpretation identifies the binding event for the recognition of a liability as the activity that triggers
the payment of the levy in accordance with the relevant legislation. In addition, it provides the following guidance in the recognition
of a levy payment liability, where the liability is recognized progressively if the binding event occurs over a period of time, and if an
obligation is triggered on reaching a minimum threshold, the liability is recognized when that minimum threshold is reached. This
interpretation is effective for periods beginning on or after January 1, 2014, with early adoption permitted. The Company has not early
adopted this IFRIC. The Company has yet to complete its evaluation of whether this interpretation will have a material impact on its
consolidated financial statements.
b) Basis of consolidation of financial statements The consolidated financial statements include those of Vitro, S.A.B. de C. V., and of subsidiaries and special-purpose entities
(“SPE”) on which it has control. Control is achieved when the Company: 1) has the power over the entity; 2) it is exposed, or has
rights to variable returns from its involvement with the investee; and 3) has the ability to use its power to affect its returns. Power
is the actual ability to direct relevant activities of an entity. Intercompany balances and transactions have been eliminated in these
consolidated financial statements. Investments in unconsolidated associates where there is material influence are accounted for
using the equity method (note 9).
As of December 31, 2012 and 2013, the main Mexican entities, except otherwise indicated, controlled by the Company are as
follows:
FLAT GLASS CONTAINERS CORPORATE
(1) As of December 31, 2012, Vitro Cristalgalss, S.L. located in Spain, is presented as an asset available for sale and in the liquidation process (notes 8 and 22).
(2) Company with operation in Colombia.
(3) Company with operations in the USA
(4) Company with operations in Bolivia.
The Company’s proportion of voting rights in entities on which it has control is similar to its shareholding.
Special purpose entities The Company maintains one SPE’s through which it securitizes the accounts receivable of some of its subsidiaries through the
issuance of stock certificates. The Company does not have equity holding in these SPE´s; however, it is consolidated based on the
control exercised on such entity.
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FIC Regiomontano, S.A.P.I., de C.V. (100%)
Aerovitro, S.A. de C.V. (100%)
Clínica Vitro, A.C. (100%)
Vitro Assets Corp. (100%) (3)
Viméxico, S.A. de C.V. (91.80%)
Vidrio y Cristal del Noroeste, S.A. de C.V. (91.80%)
Vitro Flotado Cubiertas, S.A. de C.V. (91.80%)
Vidrio Plano de México, S.A. de C.V. (91.80%)
Vitro Flex, S.A. de C.V. (91.80%)
Cristales Automotrices, S.A. de C.V. (46.81%)
Vitro Colombia, S.A. (91.80%) (2)
Vitro Cristalglass, S.L. (99.29%) (1)
Vitro Automotriz, S.A. de C.V. (99.92%)
Vitro Vidrio y Cristal, S.A. de C.V (99.99%)
Productos de Valor Agregado en Cristal, S.A. de C.V. (55%)
Vitro Envases Norteamérica, S.A. de C.V. (100%)
Fabricación de Máquinas, S.A. de C.V. (100%)
Compañía Vidriera, S.A. de C.V. (100%)
Vidriera Monterrey, S.A. de C.V. (100%)
Vidriera Guadalajara, S.A. de C.V. (100%)
Vidriera Los Reyes, S.A. de C.V. (100%)
Vidriera Querétaro, S.A. de C.V. (100%)
Vidriera Toluca, S.A. de C.V. (100%)
Vitro Packaging, LLC. (100%) (3)
Vitro Packaging México, S. A. de C.V. (100%)
Industria del Álcali, S.A. de C.V. (100%)
Vidrio Lux, S.A. (100%) (4)
Comercializadora Álcali, S.A. de C.V. (100%)
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c) Functional and reporting currency The accompanying consolidated financial statements are presented in Mexican pesos (“Mx. peso”).
The recording and functional currencies of foreign transactions are as follows:
COMPANIES IN: RECORDING CURRENCY FUNCTIONAL CURRENCY
Mexico Mx. peso Mx. peso
USA U.S. dollar U.S. dollar
Europe Euro Euro
Central America and South Local Local
In addition, only for the ease of the user, the consolidated financial statements for the year ended December 31, 2013 were translated
into U.S. dollars at the exchange rate of $13.0843 Mx. pesos per U.S. dollar, determined by Banco de México to be used on December
31, 2013. This arithmetical translation should not be considered as a statement that the amounts expressed in Mx. pesos can be
translated into U.S. dollars at that or any other exchange rate.
When these financial statements and notes thereto refer to Mexican pesos or “$”, they refer to millions of Mexican pesos, and when they
refer to U.S. dollars or “US$,” they refer to millions of dollars of the United States of America.
d) Use of estimates and judgments The accompanying consolidated financial statements have been prepared in conformity with IFRS, which require that management
make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related
disclosures. The Company’s management, upon applying professional judgment, considers that estimates made and assumptions
used were adequate under the circumstances; however, actual results may differ from such estimates.
The related estimates and assumptions are reviewed continuously. Changes to accounting estimates are recognized in the period in
which the estimate is changed if the change affects solely that period, or the current period and future periods if the review affects
both current and future periods.
Critical accounting judgments and key uncertainty sources, when applying the estimates performed as of the date of the consolidated
financial statements, and that have a significant risk of resulting in an adjustment to the carrying amount of assets and liabilities
during the following financial period are as follows:
i. Evaluations to determine the recoverability of accounts receivable
The Company performs an allowance for doubtful accounts, considering its internal control process and factors such as the
customers’ financial and operating situation, and the economic conditions of the country. Such allowance is reviewed periodically
and the condition of accounts due is determined considering terms and conditions set forth in the agreements.
ii. Evaluations to determine obsolete and slow-moving inventories
The Company performs a reserve for obsolete and/or slow-moving inventories, considering its internal control process and
operating and market factors of its products. This reserve is reviewed periodically and is determined considering the turnover and
consumption of raw materials, work-in-process and finished goods, which are affected by changes in production process and by
changes in the market conditions in which the Company operates.
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iii. Evaluations to determine recoverability of deferred tax assets
As part of the tax analysis carried out by the Company, the projected tax result is determined annually based on the judgments and
estimates of future transactions to conclude on the likelihood of recoverability of deferred tax assets.
iv. Useful lives of intangible assets and land and buildings and machinery and equipment
Useful lives of intangible assets and of land and buildings and machinery and equipment are used to determine the amortization
and depreciation of assets and are defined according to the analysis by internal and external specialists. Useful lives are periodically
reviewed, at least once a year, and are based on the current conditions of assets and the estimate of the period during which
they will continue to generate economic benefits to the Company. If there are changes in the estimate of useful lives, the carrying
amount of assets is affected prospectively, as well as the amortization or depreciation expense, as applicable.
v. Impairment of long-lived assets
The carrying amount of long-lived assets is reviewed for impairment in case that situations or changes in the circumstances
indicate that it is not recoverable. If there are impairment indicators, a review is carried out to determine whether the carrying
amount exceeds is recoverability value and whether it is impaired. In the impairment evaluation, assets are grouped in the cash
generating unit to which they belong. The recoverable amount of the cash generating unit is calculated as the present value of
future cash flows that the assets are expected to produce. There will be impairment if the recoverable value is less than the
carrying amount.
The Company defines the cash generating units and also estimates the periodicity and cash flows that it should generate.
Subsequent changes in grouping cash generating units, or changes in the assumptions underlying the estimate of cash flows or
the discount rate, could impact the carrying amounts of the respective assets.
The value-in-use calculations require the Company to determine future cash flows generated by cash generating units and an
appropriate discount rate to calculate the present value thereof. The Company uses income cash flows projections using market
condition estimates, future pricing determination of its products and volumes of production and sales. In addition, for the purposes
of the discount and perpetuity growth rate, the Company uses market risk premium indicators and long-term growth expectations
in the market it operates.
The Company estimates a discount rate before taxes for the purposes of the goodwill impairment test, which reflects current
evaluations of the time value of money and the specific risks to the asset for which estimates of future cash flows have not
been adjusted. The discount rate estimated by the Company is based on the weighted average cost of capital of similar entities.
In addition, the discount rate estimated by the Company reflects the return that investors would require if they had to take an
investment decision on an equivalent asset in generation of cash flows, time and risk profile.
The Company annually reviews the circumstances that give rise to an impairment loss to determine whether such circumstances
have changed or have generated reversal conditions. If affirmative, the recoverable value is calculated and, if applicable, the
reversal of the impairment previously recognized.
Internal and external indicators are subject to evaluation annually.
vi. Employee benefits from retirement
The Company uses assumptions to determine the best estimate for these benefits. Assumptions and estimates are established in
conjunction with independent actuaries. These assumptions include demographic hypothesis, discount rates and expected increases
in remunerations and future permanence, among others. Although the assumptions are deemed appropriate, a change in such
assumptions could affect the value of the employee benefit liability and the results of the period in which it occurs.
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vii. Contingencies
Due to their nature, contingencies can solely be solved when they occur, or one or more future events or one or more uncertain events
that are not entirely controlled by the Company do not occur. The evaluation of such contingencies significantly requires exercising
judgments and estimates on the possible result of such future events. The Company evaluates the possibility of losing lawsuits and
contingencies according to estimates carried out by its legal advisors. These estimates are reconsidered periodically (notes 14 and 19).
e) Classification of costs and expensesCosts and expenses presented in the consolidated statements of comprehensive income were classified according to their function.
4. Summary of significant accounting policies The significant accounting policies of the Company are as follows:
a) Recognition of the effects of inflat The Company recognizes the effects of inflation in hyperinflationary economies where there are economic characteristics such
as: a) the interest rates, wages and prices are linked to a price index, b) the population does not consider monetary amounts
in terms of the local currency, but it does so in terms of a relatively stable foreign currency, c) the accumulated inflation rate
of the past three years approximates or exceeds 100%, among others. These features are not restrictive to the analysis made
by the Company to determine if the economy in which it operates is considered hyperinflationary.
The Company did not recognize inflationary effects for the years ended December 31, 2012 and 2013, given that economic
conditions in which it operates do not represent those of a hyperinflationary economy.
b) Foreign currency The individual financial statements of each of the Company’s subsidiaries are presented in the currency of the primary economic
environment in which the subsidiary operates (its functional currency). To consolidate the financial statements of foreign subsidiaries,
they are translated from the functional currency into the reporting currency. The financial statements are translated into Mexican pesos
(reporting currency), considering the following methodology:
− The transactions where the recording and functional currency is the same, translate their financial statements using the following
exchange rates: (i) the closing exchange rate for assets and liabilities and (ii) the weighted average historical exchange rate for
revenues, costs and expenses, as they are deemed representative of the existing conditions at the transactions date. Translation
effects resulting from this process are recorded in other components of comprehensive income (loss). The adjustments related to
goodwill and fair value generated from the acquisition of a foreign transaction are deemed assets and liabilities of such transaction
and are translated at the exchange rate in effect at yearend.
− Non-monetary items recorded at fair value denominated in foreign currency, are reconverted to the exchange rates in effect at
the date the fair value was determined. Non-monetary items calculated in terms of historical cost, in foreign currency, are not
reconverted.
− Foreign currency transactions are recorded at the exchange rate in effect at the applicable translation date. Monetary assets and
liabilities denominated in foreign currency are stated at the exchange rate in effect at the balance sheet date. Exchange fluctuations
are recorded in the consolidated statement of comprehensive income.
Net investment hedging in a foreign business The Company applies hedge accounting to foreign currency differences arising between the functional currency of the foreign subsidiary
and the functional currency of the parent company (Mexican pesos), regardless of whether the net investment is maintained directly or
through a sub-parent company.
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During the current year, the Company designated certain debt agreements in foreign currency as a hedge of the following net investments
abroad:
- American Assets Holding Co.
- Vitro Packaging Inc.
- Vitro Chemical Fiber and Mining
- Diex Services Limited
- Empresas Comegua, S.A. and subsidiaries
Foreign currency differences arising from the conversion of a financial liability designated as hedging of a net investment in a foreign
business are recognized in other components of comprehensive income, in the effects of conversion caption, to the extent the hedging
is effective. To the extent the hedging is not effective such differences are recognized in earnings. Where a portion of the hedge of a net
investment is eliminated, the amount corresponding to the translation effects is transferred to profit or loss as part of the income or loss from
elimination. The hedge accounting resulted in a net credit (charge), net of taxes, directly in the stockholders’ equity of December 31, 2012
and 2013 for $67 and $(44), respectively.
c) Cash and cash equivalents Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term investments in securities, highly liquid
and easily convertible into cash in a period no longer than three months. Cash is stated at nominal value and cash equivalents are valued
at fair value. Any cash equivalent which liquidity is longer than three months is presented on the other current assets line item. Any cash
equivalent that cannot be disposed of is classified as restricted cash.
d) Financial instruments Financial assets and liabilities are measured at fair value. The costs of the transaction that are directly attributable to the acquisition or
issuance of a financial asset or liability (different from financial assets and liabilities recognized at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets and liabilities at their initial recognition. The costs of the transaction
directly attributable to the acquisition of financial assets or liabilities that are recognized at fair value through profit or loss are recognized
immediately in the income or loss of the year.
Financial assets All financial assets are recognized and written off at the trade date, where a purchase or sale of a financial asset is under an agreement,
which terms require the delivery of the asset within a term that is generally established by the corresponding market, and are initially
valued at fair value, plus the transaction costs, except for those financial assets classified as at fair value with changes through profit or
loss, which are initially valued at fair value, without including the transaction costs.
Financial assets are classified within the following specific categories: “financial assets valued at fair value through profit or loss,”
“financial assets held to maturity,” “loans and accounts receivable,” “financial assets available for sale” and “other”. The classification
depends on the nature and purpose of the financial assets and is determined upon initial recognition.
Financial assets and liabilities are offset and the net amount is presented in the statement of financial situation when, and solely when,
the Company has the legal right to offset the amounts and intends to either settle on a net basis, or realize the asset and settle the liability
simultaneously.
i. Financial assets valued at fair value through profit or loss
A financial asset is presented at fair value through profit or loss if it is classified as held for trading purposes or if it is designated
as such at its initial recognition. Financial assets are designated at fair value through profit or loss if the Company manages such
investments and make purchase and sale decisions based on their fair value and according to the Company’s investment or risk
management. In the initial recognition, the costs attributable to the transaction are recognized in profit or loss as incurred. Financial
assets at fair value through profit or loss are valued at fair value, and changes in fair value are recognized in profit or loss.
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ii. Financial assets held to maturity
If the Company intends and is able to hold to maturity debt instruments that are traded in an active market, then such financial assets
are classified as held to maturity. Financial assets held to maturity are initially recognized at fair value plus costs directly attributable
to the transaction. Subsequent to the initial recognition, the financial assets held to maturity are valued at amortized cost using the
effective interest method, less impairment losses.
iii. Loans and accounts receivable
Loans and accounts receivable are financial assets with fixed or determined payments, which are not traded in an active market. Such
assets are initially recognized at fair value plus costs directly attributable to the transaction. Subsequent to the initial recognition, the
loans and accounts receivable are measured at amortized cost using the effective interest method, less impairment losses. Interest
income is recognized applying the effective interest rate, except for short-term accounts receivable, in case interest recognition is
insignificant.
iv. Financial assets available for sale
Financial assets available for sale are non-derivative financial assets designated as held for sale and that are not classified in any of
the aforementioned categories, such as equity instruments and certain debt instruments. Such assets are initially recognized at fair
value plus the costs directly attributable to the transaction. After the initial recognition, they are valued at fair value and changes other
than impairment losses or exchange differences in equity instruments available for sale are recognized in comprehensive income
within stockholders’ equity. When an investment is written off or it is impaired, the accumulated loss or gain of the comprehensive
income account is transferred to profit or loss.
v. Other
Other non-derivative financial instruments are valued at amortized cost using the effective interest method, less impairment
loss. Investment in equity instruments that are not traded in any stock exchange are valued mainly using valuation techniques
such as analysis of discounted cash flows, option price setting models and comparisons to other transactions and instruments
that are substantially equal. In cases where fair value cannot be measured reliably, investments are recorded at cost less
impairment losses.
Impairment of financial assets Financial assets other than the financial assets valued at fair value through profit or loss are subject to impairment tests at the end
of each reporting period. Financial assets are deemed impaired when there is objective evidence that, as a consequence of one
or more events occurring after the initial recognition of the financial asset, the estimated future cash flows of the financial asset
have been affected.
For traded equity instruments classified as held for sale, a significant or extended fall of the fair value of values below their cost is deemed
objective impairment evidence.
For all the other financial assets, the objective impairment evidence could include:
− Significant financial difficulties of the issuer or counterpart,
− Default on payment of interest or principal, or
− It is probable that the borrower will go bankrupt or have a financial reorganization.
For certain categories of financial assets, such as trade accounts receivable, the assets that have been subject to impairment tests and have
not been impaired individually, are included in the impairment evaluation on a collective basis. Within the objective evidence that an account
receivable portfolio could be impaired, the Company’s past experience with respect to collection, an increase in the number of late payments
that exceed the average loan period, and the changes observed in the international and local economic conditions correlated to the default on
payments, could be included.
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For financial assets recorded at amortized cost, the amount of impairment loss recognized is the difference between the carrying
amount of the asset and the present value of future collections, discounted at the original effective interest rate of the financial
asset. The carrying amount of the financial asset is reduced for the impairment loss for all financial assets, except for trade
accounts receivable, where the carrying amount is reduced through an account for allowance doubtful accounts. When a doubtful
account is deemed uncollectible, it is eliminated against the allowance. The subsequent recovery of the previously eliminated
amounts is converted to credits against the allowance. Changes in the carrying amount of the allowance account are recognized
in profit or loss.
When a financial asset deemed held for sale is impaired, the accumulated gains or losses previously recognized in other comprehensive
income are reclassified to current earnings. Except for equity instruments held for sale, if in a subsequent period, the amount of
impairment loss is decreased and such decrease can be objectively related to an event occurring after the recognition of the
impairment, the previously recognized impairment loss is reversed through profit or loss to the extent the carrying amount of the
investment at the date the impairment was reversed does not exceed the amortized cost that would result if the impairment had not
been recognized.
With respect to equity instruments held for sale, impairment losses previously recognized in profit or loss are not reversed through them. Any
increase in the fair value after the recognition of the impairment loss is recognized in other comprehensive income.
Financial liabilities
Financial liabilities at fair value with changes through profit or loss
A financial liability at fair value with changes through profit or loss is a financial liability classified as held for trade purposes or is
designated as at fair value with changes through profit or loss.
A financial liability is classified as held for trade purposes if:
- It is acquired mainly in order to repurchase it in the near future; or
- It is part of an identified financial instruments portfolio managed jointly, and for which there is evidence of a recent pattern of taking
short-term profits; or
- It is a derivative that has not been designated as a hedging instrument or does not meet the conditions to be effective.
A financial liability that is not a financial liability held for trade purposes could be designated as a financial liability at fair value with
changes through profit or loss at the initial recognition time if:
- Thereby any inconsistency in the valuation or in the recognition that otherwise would arise from its valuation on different basis is
significantly eliminated or reduced; or
- The return from financial liabilities or a group of assets and financial liabilities are managed and assessed based on their fair value,
according to an investment or risk management strategy that the entity has documented, and information is internally provided on
that group, based on its value; or
- It is part of an agreement that includes one or more embedded derivative instruments, and IAS 39 “Financial Instruments: Recognition
and Measurement” allows that the entire hybrid agreement (asset or liability) is designated as at fair value with changes through profit
or loss.
Financial liabilities at fair value with changes through profit or loss are recorded at fair value, recognizing any gain or loss arising from the
remeasurement in the consolidated statements of comprehensive income.
Other financial liabilities
Other financial liabilities, including loans, are initially valued at fair value, net of costs of the transaction, and are subsequently valued at
amortized cost using the effective interest method, and interest expenses are recognized on an effective return base.
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The effective interest rate method is a method for the calculation of the amortized cost of a financial liability and of the assignment of the
financial expense along the period concerned. The effective interest rate is the rate that exactly discounts the estimated cash payments
along the expected life of the financial liability (or, where adequate, in a shorter period) which represents the net amount in books of the
financial liability at its initial recognition.
Derecognition of financial liabilities
The Company writes off financial liabilities if, and solely if, the obligations are met, cancelled or expired.
e) Convertible debt denominated in foreign currency The debt potentially convertible to the Company’s shares denominated in foreign currency is presented as a liability, because when it is
converted, a fixed number of shares will be converted to a variable amount of cash in a different functional currency, where the amount
of the debt is being forgiven.
f) Inventories Inventories are valued at the average purchase price or average production cost, provided they do not exceed the net realizable value.
Cost of sales is determined applying these averages upon sale.
Net realizable value is the sale value estimated during the regular course of business, less estimated termination costs and sale costs.
The Company uses the absorption cost system to determine the cost of inventories of production-in-progress and finished goods, which
includes both direct costs and those indirect costs and expenses related to production processes.
g) Assets available for sale Long-term assets are classified as available for sale if their carrying amount will be recovered through a sale transaction and not though
their continuous use. This condition is deemed met solely when the sale is highly probable and the asset (or group of assets for sale) is
available for immediate sale in its current condition. They are presented in the consolidated statements of financial position as short term,
according to the realization plans, and they are recorded at the lessor of their carrying amount or fair value less costs of sale.
h) Discontinued operations A discontinued operation is a Company’s business component that represents a significant business line or a separate operational
geographical area that has been sold, is available for sale or has been abandoned, or is a subsidiary acquired exclusively for re-
sale. The classification as a discontinued operation takes place upon sale or liquidation, or when the operation meets the criteria
for its classification as available for sale, whichever occurs first. When an operation is classified as a discontinued operation, the
consolidated statements of comprehensive income and cash flows are restructured as if the operation had been discontinued from
the beginning of the comparative period.
i) Investment in associated companies An associated company is a company in which the Company has significant influence. Significant influence is the power to participate
in the definition of financial and operating policies of an entity, but it does not have control or joint control on such policies.
The results, assets and liabilities of the associated company are incorporated in the Company’s consolidated financial statements
under the equity method, except when the investment is classified as available for sale, in which case its value is recognized
according to subsection g) above. Under the equity method, an investment in an associated company is recognized in the consolidated
statements of financial position at cost and is adjusted through the recognition of its comprehensive income or loss in proportion
to the Company’s shareholding in such associated company. When the comprehensive loss of an investment in an associated
company exceeds the Company’s equity in its capital, the Company discontinues the recognition of such losses. Additional losses are
recognized up to the amount of the Company’s obligations and legal commitments for its equity such associated company.
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Any excess of acquisition cost of the Company’s equity in an associated company on the net fair value of identifiable assets, liabilities and
contingent liabilities of such associated company is recognized as goodwill, which is included at the carrying amount of such investment.
Any excess of net fair value of the identifiable assets, liabilities and
j) Lands and buildings, machinery and equipment Lands, buildings, machinery and equipment held for use in production for rendering services or for administrative purposes are
recognized in the consolidated statement of financial position at historical costs, less accumulated depreciation or accumulated
impairment losses.
Depreciation is recorded in earnings and is calculated using the straight-line method based on the remaining useful lives of the
assets, which are reviewed every year jointly with the residual values, and the effect of any change in the recorded estimate is
recognized on a prospective basis. The assets related to capital leases are depreciated in the shorter period between the lease and
their useful lives, unless it is reasonably certain that the Company will obtain the ownership at the end of the lease period.
The estimated useful lives for the main classes of fixed assets that correspond to current and comparative periods are as
follows:
YEARS
Buildings 15 to 50
Machinery and equipment 3 to 30
When components of a building, machinery and/or equipment have different useful lives, they are recorded as separate items (significant
components) of buildings, machinery and equipment.
Gains or losses from the sale of a land, building, machinery and equipment item are determined comparing the gain or loss obtained
from the sale to the carrying amount of such item; such gain or loss is recognized net within other (income) expenses in the consolidated
statements of comprehensive income.
Investments in process are recorded at cost less any impairment loss recognized. The cost of assets constructed by the own entity
include the cost of materials and direct labor, any other cost directly attributable to the process of making to asset be suitable for
the use foreseen, as well as the cost for dismantling, removing items, restoring the place where they are located, and the costs for
capitalized loans, according to the Company’s policy. The depreciation of these assets, as in other properties, commences when
the assets are ready for use in the place and conditions necessary to be able to operate in the way intended by the Company’s
management.
k) Investment property Investment properties are those held to obtain rents and increase in value (including investment properties in construction for such
purposes) and are initially valued at acquisition cost, including the costs incurred in the related transactions. After the initial recognition,
investment properties are valued at fair value. The fair value of the investment properties is determined annually through appraisals
performed by an expert appraiser, who uses different valuation techniques such as observable markets, amortized costs, among others.
Gains or losses arising from changes in the fair value of the investment properties are included in other (income) expenses in the
consolidated statements of comprehensive income in the period in which they arise.
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An investment property is eliminated upon disposal or when it is permanently retired from use and no future economic benefits are
expected from the disposal. Any gain or loss arising from the derecognition of the property (calculated as the difference between net
income from disposal and the carrying amount of the asset) is recognized in earnings in the consolidated statements of comprehensive
income in the period in which the property is derecognized.
l) Leases Leases are classified as capital leases when the terms of the lease substantially transfer to the lessee all the risks and benefits inherent
to the property. All the other leases are classified as operating leases.
Assets under capital leases are recognized as assets of the group at fair value at the beginning of the lease, or at present value of the
minimum lease payments, the least. The liability corresponding to the lessor is included in the consolidated statements of financial
situation as part of long-term debt.
Lease payments are distributed between the financial costs and the reduction of the lease obligation so as to achieve a constant rate on
the remaining balance of the liability. Financial expenses are expensed directly, unless they are directly attributable to qualifying assets,
in which case are capitalized in accordance with the Company’s policy for costs on loans (note 5 m).
Payments for operating lease rents are expenses using the straight-line method during the lease term, unless another systematic sharing
basis results more representative to reflect more adequately the pattern of lease benefits to the user.
m) Borrowing costs The costs for loans directly attributable to the acquisition, construction or production of qualifying assets, which are assets that require
a substantial period until they are ready to use, are added to the cost of those assets. Capitalization of costs for loan ceases at the time
that the assets are available for use. Exchange rate fluctuations arising from the procurement of funds in foreign currency are capitalized
to the extent that they are deemed adjustment to the interest cost. The income obtained from the temporary investment of specific
loans outstanding to be used in qualifying assets, is deducted for costs for loans eligible for capitalization. All other borrowing costs are
recognized in earnings in the period they are incurred.
n) Intangible assets Intangible assets with finite lives Intangible assets that are acquired by the Company, and which have finite useful lives, are recorded at cost less accumulated
amortization and accumulated impairment losses; they are mainly included in the cost of software for administrative use. The
estimated useful lives and amortization method are reviewed at the end of each year, and the effect of any change in the recorded
estimate is recognized prospectively.
Goodwill Goodwill arises from a business combination and is recognized as an asset at the date control is acquired (acquisition date). Goodwill
is the excess of the consideration transferred on the fair value at the acquisition date of the identifiable assets acquired and liabilities
assumed. When the fair value of the identifiable net assets of the acquired exceeds the sum of the consideration transferred, the amount
of such excess is recognized in the consolidated statement of comprehensive income as a gain on purchase. Goodwill is not amortized
and is subject to annual impairment tests.
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For purposes of the evaluation of the impairment, goodwill is assigned to each of the cash generating units for which the Company
expects to obtain benefits. If the recoverable amount of the cash-generating unit is less than the amount in books of the unit, the
impairment loss is allocated first in order to reduce the amount in books of the goodwill allocated to the unit and then to the other assets
of the unit, proportionally, on the basis of the amount in books of each asset in the unit. Impairment loss recognized for the purposes of
the goodwill cannot be reversed in a subsequent period.
Upon disposal of a subsidiary, the amount attributable to the goodwill is included in the determination of the profit or loss on
the disposal.
o) Impairment of tangible and intangible assets, excluding goodwill The Company reviews the book values of its tangible and intangible assets to determine if there is any indicator that those assets
have suffered any impairment loss. If there is any indicator, the recoverable amount of the asset is calculated in order to determine
the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the cash generating unit to which such asset belongs. When you can identify a reasonable and
consistent basis of distribution, corporate assets are also assigned to the individual cash generating units, or otherwise, are assigned
to the smallest group of cash generating units for which a reasonable and sound distribution base can be identified. The intangible
assets that have an indefinite useful life are subject to impairment tests at least annually, and whenever there is an indicator that the
asset may have been impaired.
The recoverable amount is the higher between the fair value less cost to sell it and the value in use. In assessing value in use,
estimated future cash flows are discounted at their present value using a discount rate before taxes that reflects the current market
assessment with respect to the time value of money and the specific risks of the asset for which future cash flows estimates have not
been adjusted.
If it is estimated that the recoverable amount of an asset (or cash-generating unit) is less than its carrying amount, the carrying amount
of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognized in earnings.
When an impairment loss is reversed subsequently, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, in such a way that the increased carrying amount does not exceed the carrying amount that would
have been determined if an impairment loss had not been recognized for such asset (or cash-generating unit) in prior years.
p) Derivative financial instruments and hedging operations The Company’s activities expose it to a variety of financial risks, including: foreign exchange risk, interest rates and price risk, such as
generic goods, mainly that of natural gas.
The Company’s policy is to contract derivative (“DFI’s”) and non- derivative financial instruments in order to mitigate and cover the
exposure to which it is exposed, given its productive and financial transactions. The Company designates these instruments either as fair
value hedges, cash flow hedges or hedge of a net investment in a foreign operation.
There is a Risk Committee which is responsible for enforcing risk management policies, as well as for monitoring the proper use of
financial instruments contracted by the Company. The Committee is composed by several of the Company’s officials.
The Company recognizes all derivatives in the statement of financial position at fair value, regardless of the intention of its holding.
In the case of hedging derivatives, the accounting treatment depends on whether the hedging is of fair value or cash flow. DFI’s
negotiations may include considerations agreements, in which case, the resulting amounts are presented on a net basis.
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The fair value of financial instruments is determined by recognized market prices and when instruments are not traded in a market; it
is determined by technical valuation models recognized in the financial field using inputs such as price, interest rate and exchange rate
curves, which are obtained from different sources of reliable information.
When derivatives are contracted in order to cover risks and comply with all the hedge accounting requirements, their designations
are documented describing the purpose, features, accounting recognition and how the measurement of effectiveness will be
carried out.
The designated hedging derivative recognizes changes in fair value as follows: (1) in fair value, the fluctuations both of the
derivative and the hedged item are valued against profit or loss, (2) in cash flows, they are temporarily recognized in comprehensive
income and are reclassified to profit or loss when the hedged item affects them, (3) when the hedge is an investment in a foreign
subsidiary, the effective portion is recognized in comprehensive income (loss) as part of an adjustment for conversion. The
ineffective portion of the change in fair value is recognized in the profit or loss of the period, within the net financial cost if it is
a derivative financial instrument and, if it is not, it is recognized in comprehensive income (loss) until the investment is sold or
transferred.
Derivative financial instruments, which the Company maintains, have not been designated as a hedge for accounting purposes. The
fluctuation in the fair value of these derivative financial instruments is recognized in current earnings within net financial cost.
As detailed in subsection b) herein, the Company applies hedge accounting to foreign currency differences arising between the foreign
currency for its foreign transactions and the holding entity’s functional currency, regardless of whether the net investment is held directly
or through a sub-holding. .
q) Embedded derivatives The Company reviews all the contracts entered into to identify embedded derivatives that must be separated from the host contract
for their valuation and accounting recording purposes. When an embedded derivative is identified in another financial instruments or
in a contract (host contracts), it is treated as a separate derivative when its risks and characteristics are not closely related to the host
contract and when such contract is not recorded at its fair value with changes through profit or loss.
An embedded derivative is presented as a long-term asset or liability if the remaining maturity date of the hybrid instrument to
which is related is 12 months or more, and its realization or realization is not expected during those 12 months. Other embedded
derivatives are presented as assets or liabilities in the short term. The Company has no relevant embedded derivatives in the
reporting period.
r) Provisions Provisions are recognized for current obligations that arise from a past event, that will probably result in the use of economic
resources, and that can be reasonably estimated. For the purpose of accounting records, provisions are discounted to present value
when the discount effect is material. Provisions are classified as current or non-current according to the estimated time period to
meet the obligations that are covered. When the recovery of a third of some or all the economic benefits required to settle a provision
is expected, an account receivable is recognized as an asset, if it is virtually certain that the payment will be received and the amount
of the account receivable can be valued reliably.
s) Income tax Income tax (ISR) and, through December 31, 2013, business flat tax (IETU) (see note 26 that describes the changes related to the
Tax Reform which eliminates IETU) in current earnings include current taxes and deferred taxes. Current taxes and deferred taxes are
recognized in earnings, except when they are related to a business combination, or items recognized directly in stockholders’ equity,
or in the comprehensive income account.
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Current ISR is the tax expected to be paid or received. The ISR payable in the fiscal year is determined according to the legal and tax
requirements, applying tax rates enacted or substantially enacted as of the report date, and any adjustment to the tax payable with
respect to prior years.
Deferred ISR is recorded using the assets and liabilities method, which compares the accounting and tax values of the Company’s
assets and liabilities and deferred taxes are recognized with respect to the temporary differences between such values. No deferred
taxes are recognized for the following temporary differences: the initial recognition of assets and liabilities in a transaction other than
a business acquisition and that does not affect the accounting or tax result, and differences related to investments in subsidiaries and
joint ventures to the extent it is probable that they will not be reversed in a foreseeable future. In addition, deferred taxes for taxable
temporary differences arising from the initial recognition of goodwill are not recognized. Deferred taxes are calculated using rates
that are expected to apply to temporary differences when they are reversed, based on enacted laws or which have been substantially
enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax assets and liabilities, and they correspond to the income tax levied by the same tax authority and to the same tax entity, or on
different tax entities, but intend to settle the current tax assets and liabilities caused on a net basis or their tax assets and liabilities
are simultaneously materialized.
A deferred asset is recognized for tax loss carryforwards, tax credits and deductible temporary differences, to the extent that it is probable
that there is taxable income to which they can be applied. Deferred assets are reviewed at the reporting date and are reduced to the
extent the realization of the corresponding tax benefit is no longer likely.
t) Employee benefitsi. Defined benefit plans
A defined benefit plan is a benefit plan at the end of a labor relationship different from one of defined contributions. The
Company’s net obligations with respect to the defined-benefit pension plans are calculated separately for each plan, estimating
the amount of future benefit accrued by employees in return for their services in ongoing and past periods; that benefit is
discounted to determine its present value, and the costs for the services that have not been recognized and the fair value of the
plan assets are deducted. The discount rate is the yield at the reporting date of the government bonds that have maturity dates
approximate to the maturities of the Company’s obligations which are denominated in the same currency in which benefits
are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method.
When the calculation results in a benefit for the Company, the recognized asset is limited to the net total of unrecognized past
service costs and the present value of the economic benefits available in the form of future refunds from the plan or reductions
in future contributions to the plan plus the plan assets. To calculate the present value of the economic benefits, the minimum
funding requirements applicable to the Company’s plan are considered. An economic benefit is available to the Company if it
can be realized during the life of the plan, or upon settlement of the plan obligations.
When the benefits of a plan are improved, the portion of the improved benefits relating to past services by employees is
recognized in profit or loss using the straight-line method over the average period until it acquires the right to the benefits. In
so far as the right of benefits takes place, the expense is recognized in profit or loss.
The Company recognizes actuarial remeasurements derived from defined benefit plans in the comprehensive income account,
in the period in which they occur, and they are never recycled to profit and loss.
ii. Benefits from termination
Termination benefits are recognized as an expense when the Company commitment can be evidenced, without real possibility
of reversing, with a detailed formal plan either to terminate employment before the normal retirement date, or else, to provide
benefits for termination as a result of an offer that is made to encourage voluntary retirement. The benefits from termination in
cases of voluntary retirement are recognized as an expense, solely if the Company has made an offer of voluntary retirement, the
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offer is likely to be accepted, and the number of acceptances can be estimated reliably. If the benefits are payable no later than
12 months after the reporting period, then they are discounted at present value.
iii. Short term-benefits
Short-term employee benefit obligations are not discounted and are expensed as services are rendered.
A liability is recognized for the amount expected to be paid under short-term cash bonus plans if the Company has a legal
or assumed obligation to pay these amounts as a result of past services provided by the employee and the obligation can be
estimated reliably.
u) Statutory employee profit sharing (“PTU”) PTU is recognized in the earnings of the fiscal year in which it is incurred and is presented within operating income.
v) Share-based payments Vitro had a share incentive plan that allows it to grant stock options to certain executive employees and directors. The last stock
options issued by the Company were in effect up to February 2012.
w) Revenue recognition Revenues and related costs are recognized in the period in which: i) the risks and rewards are transferred to customers, which
generally coincides with the delivery of products to customers in satisfaction of orders; ii) there is no ownership or effective
control on the goods sold; iii) revenues and related costs can be measured reliably and iv) the economic benefits to the Company
are probable.
x) Revenues and financial costs Financial income includes income interest on invested funds, changes in the fair value of financial assets at fair value through profit or
loss, and exchange gains. Interest income is recognized in income as earned, using the effective interest method.
Financing costs include interest expenses on loans, effect of the discount by the passage of time on provisions, exchange losses, changes
in the fair value of financial assets at fair value through profit or loss and impairment losses recognized on financial assets. The borrowing
costs that are not directly attributable to the acquisition, construction or production of a qualifying asset, are recognized in earnings using
the effective interest method.
Exchange gains and losses are reported on a net basis.
y) Earnings per share The Company presents information about basic and diluted earnings per share (“EPS”) corresponding to its common stock. The
basic EPS is calculated by dividing the earning or loss attributable to stockholders that hold Company’s common stock by the
weighted average outstanding common stock during the period, adjusted for the own shares held. The diluted EPS are calculated
by adjusting the earning or loss attributable to stockholders that hold common shares and the weighted average number of
outstanding shares, adjusted for the own shares held, for the effect of the dilution potential of all common shares, which include
convertible instruments and options on shares granted to employees.
z) Government grants Government grants, subsidies, incentives or concessions are not recognized until there is reasonable assurance that the Company
will comply with the conditions related to them and that the grant will be received. Government grants are recognized in profit or loss
on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grant, subsidy,
incentive or concession is intended to compensate, or subsequently if the reasonable assurance of receiving such benefit is not
confirmed in the moment the expense is incurred.
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Government grants, subsidies, incentives or concessions whose purpose is to compensate previously incurred costs or expenses, or
those whose purpose is to financially support the Company through pardoning costs or expenses, are recognized in profit or loss of
the fiscal year of the transaction, net of the expense that gave rise to such benefit.
During the fiscal year ended December 31, 2013, the Company applied the decree whereby different income tax, rights and enjoyment
benefits are granted. These benefits were recognized within operating income.
5. Other current assets and other short-term liabilities The balances of other current assets as of December 31, 2012 and 2013 are as follows:
DECEMBER 31,
2012 2013
Sundry debtors $ 242 $ 267
Prepayments 264 179
Prepayment of inventories 96 96
Current portion of restricted cash 262 304
Total other current assets $ 864 $ 846
Restricted cash is as follows:
DECEMBER 31,
2012 2013
Land lease guarantee (note 10d) $ 74 $ 75
Accounts receivable financing programs 95 194
Fund withheld according to court order (note 14b) 69 -
Other 24 35
Total restricted cash $ 262 $ 304
The balances of other short – term liabilities as of December 31, 2012 and 2013 are as follows:
DECEMBER 31,
2012 2013
Taxes payable $ 279 $ 240
Sundry creditors (note 23d) 514 2,057
Contributions payable 155 220
Total other short-term liabilities $ 948 $ 2,517
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6. Trade accounts receivable Trade accounts receivable consists of the following:
DECEMBER 31,
2012 2013
Costumers (1) (2) $ 3,372 $ 2,873
Less allowance for doubtful accounts and others (135) (164)
$ 3,237 $ 2,709
(1) Includes $2,153 and $1,856 as of December 31, 2012 and 2013, respectively, that were contributed to a trust as a guarantee for the accounts receivable financing
programs and that although they are included in the consolidation, they are legally independent.
(2) Includes $436 as of December 31, 2012, which was withheld abroad according to court orders related to the restructuring process (note 14a).
7. Inventories Inventories consist of the following:
DECEMBER 31,
2012 2013
Work in process and finished goods $ 2,362 $ 2,278
Raw materials 425 439
Packing material 95 92
Spare parts 130 162
Refractories 209 136
Inventory-in-transit and others 106 151
$ 3,327 $ 3,258
Due to inventory obsolescence and slow movement, as of December 31, 2012 and 2013, inventories are reduced to their net realizable value
by $198 and $178, respectively; this reserve mainly decreases the finished goods, work in process and raw materials line items.
As of December 31, 2012, inventories include $ 176 of guaranteed inventory for a short-term financing transaction conducted by purchasing
and selling inventory. As of December 31, 2013 the Company does not have this financing operation (notes 2b and 18iii).
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8. Assets available for sale and discontinued operations As December 31, 2012 and 2013, assets available for sale and discontinued operation are as follows:
DECEMBER 31,
2012 2013
Land $ 416 $ 49
Buildings 205 -
Assets in discontinued operations 416 -
$ 1,037 $ 49
Assets available for sale mainly include land, administrative buildings and commercial warehouses, which are expected to not be used in
the subsequent 12 months. The plan to sell the assets has commenced. As of December 31, 2012 and 2013, no impairment losses were
recognized at the time of classifying the assets as available for sale.
The assets and their associated liabilities in discontinued operations correspond to balances for Vitro Cristalglass as of December 31, 2012
(note 2i and 22).
9. Investment in associated companies Investment in associated companies is as follows:
ASSOCIATE’S MAIN COUNTRY OF SHAREHOLDING NAME ACTIVITY OPERATION 2012 2013 PERCENTAGE
Empresas Comegua, S.A. Production of glass Panama, Guatemala, and subsidiaries containers Nicaragua y Costa Rica $ 1,031 $ 925 49.72% Other investments Installation of flat
in associates glass Mexico 3 - 45.47%
$ 1,034 $ 925
The condensed statements of financial position and condensed statements of comprehensive income of Empresas Comegua, S.A. and Subsidiaries,
investment in associate which belongs to the packing segment, as of December 31, 2012 and 2013 and for the years then ended are:
DECEMBER 31,
2012 2013
Condensed statements of financial position: Assets:
Current assets $ 1,341 $ 1,111
Long-term assets 2,294 2,161
Total assets $ 3,635 $ 3,272
Liabilities:
Current liabilities $ 711 $ 774
Non-current liabilities 848 637
Total liabilities $ 1,559 $ 1,411
DECEMBER 31,
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YEAR ENDED DECEMBER 31,
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME: 2012 2013
Net sales $ 2,930 $ 2,691
Costs and expenses 2,776 2,817
Income taxes 58 16
Net income (loss) $ 96 $ (142)
Company’s equity $ 48 $ (71)
10. Land and buildings, machinery and equipment and investments in process
Below is a summary of the composition of these items:
DECEMBER 31,
2012 2013
Land $ 2,085 $ 2,203
Buildings 10,654 10,797
Accumulated depreciation (7,370) (7,653)
5,369 5,347
Machinery and equipment 29,654 30,176
Accumulated depreciation (21,257) (22,050)
8,397 8,126
Investments in process 526 972
$ 14,292 $ 14,445
MACHINERY AND INVESTMENTS COST OR VALUATION LAND BUILDINGS EQUIPMENT IN PROCESS FINAL BALANCE
Balance as of January 1, 2012 $ 2,538 $ 11,103 $ 30,426 $ 840 $ 44,907
Additions - 45 1,267 (307) 1,005
Disposals (17) (51) (1,330) (1) (1,399)
Capitalized borrowing cost - - - 5 5
Discontinued operation (36) (208) (642) - (886)
Reclassifications (397) (222) 19 (11) (611)
Translation effect (3) (13) (86) - (102)
Balance as of December 31, 2012 2,085 10,654 29,654 526 42,919
Additions - 25 1,364 414 1,803
Disposals - - (176) - (176)
Capitalized borrowing cost - - - 32 32
Impairment loss - - (665) - (665)
Reclassifications 120 130 22 - 272
Translation effect (2) (12) (23) - (37)
Balance as of December 31, 2013 $ 2,203 $ 10,797 $ 30,176 $ 972 $ 44,148
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ACCUMULATED DEPRECIATION MACHINERY AND INVESTMENTS AND IMPAIRMENT LAND BUILDINGS EQUIPMENT IN PROCESS FINAL BALANCE
Balance as of January 1, 2012 $ - $ 7,027 $ 20,833 $ - $ 27,860
Depreciation of the year - 264 1,676 - 1,940
Impairment loss - 237 456 - 693
Disposals - (27) (1,177) - (1,204)
Discontinued operation - (63) (480) - (543)
Reclassifications - (63) 15 - (48)
Translation effect - (5) (66) - (71)
Balance as of December 31, 2012 - 7,370 21,257 - 28,627
Depreciation of the year - 244 1,424 - 1,668
Impairment loss - - (456) - (456)
Disposals - - (152) - (152)
Reclassifications - 47 (3) - 44
Translation effect - (8) (20) - (28)
Balance as of December 31, 2013 $ - $ 7,653 $ 22,050 $ - $ 29,703
a) Capitalized borrowing cost During fiscal years 2012 and 2013, the Company capitalized interest on loans as a supplement to the cost of machinery and
equipment of $5 and $32, respectively. The interest capitalization rates used for fiscal years 2012 and 2013 were 8.31% and
7.93%, respectively, which correspond to the corporate average rates considered as generic loans. The Company did not capitalize
any amount corresponding to exchange fluctuations as an adjustment to interest rates during the fiscal years ended December 31,
2012 and 2013.
b) Transactions that did not require cash flows During 2012, the Company made investments of $48 in operating machinery and equipment, which were contracted as capital
lease, and did not require a cash disbursement. During fiscal year 2013, this type of transactions was not conducted.
c) Sale of land Sale to Lar Crea Residencial, I. S. de R. L. (“LAR”)
In December 2006, the Company sold a parcel of land located in Mexico City for US$ 100 million, of which 80% was settled upon
the sale and the remaining amount would be settled at the date the land would be delivered. As of December 2008, the Company
has fulfilled all the requirements requested in the respective agreement. In 2009, US$ 5 million was received, and the payment of
the remaining amount was demanded through legal means. On August 16, 2010, the Court released the purchaser from paying
the remaining amount demanded. The Company appealed such decision and obtained a favorable verdict on January 11, 2011.
Through the sentence on June 22, 2011, the Court issued another verdict determining partially applicable the action exercised by
the Company. Against such verdict dated June 22, 2011, both parties filed a direct writ of amparo, whereby the purchaser was
granted the Shelter and Protection of the Federal Justice from the Court issuing a new verdict considering that established by the
federal authority. The amparo filed by the Company was denied. On January 10, 2012, the Court issued a new verdict, determining
again partially applicable the action exercised by the Company, sentencing the purchaser to pay a portion of the remaining amount
outstanding. In August and September 2012, the Company received payments totaling US$7.5 million, ending such incident.
83
d) Onerous contracts (note 15) In December 2009, the Company concluded a transaction of US$75 with Fintech Advisory Limited (Fintech), through the
creation of a Mexican trust (“Real Property Trust “). Vitro, S.A.B. de C.V. and its subsidiaries, Industria del Álcali, S.A. de
C.V., Vidriera Guadalajara, S.A. de C.V., Vidriera Monterrey, S.A. de C.V., Vidriera Querétaro, S.A. de C.V., Vidriera Los Reyes,
S.A. de C.V. and Vidriera Toluca, S.A. de C.V. contributed seven real properties (industrial lands) to the Real Property Trust,
receiving US$75 in cash contributed by Fintech to acquire these assets. In addition, the Company entered into a 15-year
lease agreement that allows it to continue to use the assets. The Company has the right to repurchase the tile for these real
properties in exchange for US$126 under certain circumstances (land repurchase option). If the Company fails to make any
payment under the terms of the lease agreement or if other events specified in the agreement occurred, Fintech would have
the right to sell such assets to third parties (assuming that the Company has not repurchased the industrial lands), except
to competition or creditors. If Fintech exercises its right to sell or lease the real properties, this could adversely affect the
Company’s business. In addition, after the execution of the plan to substantially restructure the entire debt of Vitro executed
in February 2012, and that the Company has not exercised the repurchase option for the aforementioned lands, Fintech
can exercise one of the two options to exchange the rights on the real property rights for common shares of Vitro and/or of
a sub-holding subsidiary. If the related option on Vitro’s common shares were exercised, it would be of up to a maximum
of 93,099,849 shares, which are currently in the Pension Trust, valued according to the valuation formula set forth in the
agreement, and would leave Fintech with a maximum of up to 24% of Vitro’s capital stock. If these common shares are not
sufficient to cover the purchase option of US$75, the rest of the purchase option would be covered upon delivery to Fintech
of the necessary shares of the sub-holding subsidiary, valued according to the formula set forth in the option agreement.
Similarly, if for reasons beyond Fintech’s control, the latter cannot receive shares of the sub-holding subsidiary, Vitro would
have to pay in cash the difference according to the formula set forth in the agreement. Alternatively, Fintech may select to
exercise the option, exclusively on the shares of the sub-holding subsidiary. Solely one of the options can be exercised;
however, as of December 31, 2013, this option is no longer in effect
As of December 31, 2013, Fintech’s options expire four years after the restructuring plan was executed. If Fintech exercised the
option relating to Vitro’s common shares, an agreement between Fintech and the stockholders controlling the Company would
continue into effect, and would remain in force while Fintech has at least 5% of the Company’s equity.
The Company has recognized as onerous the aforementioned agreement with Fintech, where the consideration payable for the
industrial lands is above its market value as of December 31, 2012 and 2013 for approximately US$37 and US$28, respectively.
The loss (income) related to the onerous agreement was recognized within other expenses in operating income of fiscal years
2012 and 2013.
e) Impairment Year 2012
During fiscal year 2012, due to market dynamics and the problems arising from the approval of the judgment of the Bankruptcy
in the United States, the Company reviewed the recoverable amount of productive fixed assets. This analysis resulted in an
impairment loss in the operating segment of flat glass of $693, which was recognized in profit and loss.
Except for the impairment recognized in the assets held for sale and permanent idle assets, the recoverable amount of the assets
assessed was determined based on the value in use. The discount rates used in the calculation of the value in use of the impaired
units of the flat glass segment were 9.10% and 9.33% for 2012.
84
Year 2013
During fiscal year 2013, the Company’s management made the decision to impair certain permanent idle assets. The amount of
impaired assets in the segments of Flat Glass, Containers and Others, was $100, $9, and $2, respectively, and they correspond
to assets related to production processes. Additionally, in the Containers segment, $98 was impaired, which correspond to the
remaining balance in such company’s books of certain assets replaced during the year.
Impairment was recognized in the other (income) loss, net line item of fiscal years ended December 31, 2012 and 2013.
11. Investment property As of December 31, 2012 and 2013, the investment property amounts to $309; such assets are mainly composed of lands and buildings.
The fair value of investment properties was calculated based on Level 2 of the fair value hierarchy (note 18iv).
During the fiscal year ended December 31, 2012, changes to fair value increased by $3, which were recognized in other (income)
expenses, net of the fiscal year. During the fiscal year ended December 31, 2013, there were no significant changes in the fair value of
investment properties.
12. Intangibles and other long-term assets The balances as of December 31, 2012 and 2013 of $644 and $488, respectively are mainly composed of administrative software and fixed
asset advances.
During the years ended December 31, 2012 and 2013, the payments related to administrative software were recorded within cost of sales
and operating expenses; such payments amounted to $116 and $115, respectively.
Goodwill As of December 31, 2012 and 2013 no goodwill has been recorded.
Balance as of January 1, 2012 $ 601
Impairment loss (566)
Translation effect (35)
Balance as of December 31, 2012 $ -
As of December 31, 2012, and due to the events mentioned in note 22, the goodwill balance was written off and its corresponding impairment
is presented under discontinued operations of the year.
13. Bank loans As of December 31, 2012 and 2013, bank loans amount to $1,155 and $1,006, respectively. These loans are composed of debt payable in
U.S. dollars at different interest rates. These loans include US$63.4 related to the debt mentioned in note 19c.
As of December 31, 2012 and 2013, the Company’s average weighted rates for short-term loans were 5.50% and 5.69%, respectively.
14. Long-term debt Long-term debt consists of the following:
DECEMBER 31,
2012 2013
I. Foreign subsidiaries (payable in U.S. dollars):
Capital leases with a variable interest rate based on the FTD (Fixed Term Deposits) rate,
plus a surcharge between 4.25 % and 6.5%, maturing at different dates through 2014. $ 2 $ 1
II. Vitro and Mexican Subsidiaries (payable in U.S. dollars):
Capital lease with a fixed interest rate of 10.7494%, maturing at different dates
through 2016. 48 37
Unsecured debt with a variable interest rate of London Interbank
Offered Rate (“LIBOR”) + 8%, maturing at different dates through 2014. 272 144
Sundry leases with different interest rates, maturing at different dates
through 2015. 52 42
Bonds secured by subsidiaries with an interest rate of 8%, maturing in 2018. 10,563 10,659
Mandatorily convertible debentures secured by subsidiaries, with an interest rate
of 12%, maturing in 2015. 1,562 -
Secured notes at a fixed interest rate of 5.75% for a period of eighteen months,
and from the nineteen month, at a variable rate based on the Reference Rate (“RR”),
plus a surcharge of 5.75%, maturing on different dates through 2023. - 51
Bonds guaranteed by capital stock subsidiaries at an interest rate of 8%, maturing in 2015 (note 14a). - 3,075
III. Vitro and Mexican Subsidiaries (payable in Mexican pesos):
Secured notes with a variable interest rate based on TIIE, plus a surcharge of 3.25%,
maturing at different dates through 2014. 299 299
Accounts receivable financing program of the containers segment. Note secured with accounts
receivable with an interest rate of TIIE + 2%, maturing in 2014. (1) 700 -
85
86
Accounts receivable financing program of the flat glass segment. Note secured with
accounts receivable with an interest rate of TIIE + 4%, maturing in 2014. (1) 300 -
Accounts receivable financing program. Note guaranteed by accounts
receivable at TIIE + 1.7%, maturing in 2016. (1) - 1,200
Unsecured debt and variable interest rate between 9.05% and 9.25%,
with different maturities through 2016. 27
Debt issuance costs (1) - (25)
Total long-term debt 13,798 15,510
Less short-term maturities 645 480
Long-term debt, excluding current maturities $ 13,153 $ 15,030
(1) On November 15, 2013, the Company completed its new issuance of Stock Exchange Trust Certificates for $1,200 at TIIE plus 1.7% for a term of three years. These cer- tificates are backed up by collection rights of certain subsidiaries. With this securitization plan, the two accounts receivable financing programs of the containers and flat glass segments were paid beforehand, among other debts, as well as a short-term financing transaction with a guarantee of inventories maintained in the flat glass segment.
As of December 31, 2013, interest rates TIIE, LIBOR and DTF were 3.79%, 0.24% and 2.67%, respectively.
a) Voluntary bankruptcy request As a result of the default in the payment of capital and interest of the Company’s debt, in 2010, some bondholders filed a series of
lawsuits in the State of New York, whereby they claimed the payment of the principal and interest accrued and unpaid by Vitro.
During the same year, the Company began a Voluntary Bankruptcy Process in Mexico, with a previous restructuring plan (Bankruptcy
Plan), in order to reach an agreement on the total amount of debt and the form it would be paid. The Company declared bankruptcy in
April 2011 and subsequently requested the recognition of this process as the main process under Chapter 15 of the Bankruptcy Law of
the United States of America (“USA”), which was granted in July 2011 (approval process). Beginning April and July 2011, the Company’s
assets were protected against any act of collection in Mexico and the United States of America, respectively.
In February 2012, the Company was notified about the Bankruptcy Sentence and the acceptance of the Bankruptcy Plan in Mexico. On
February 23, 2012, Vitro issued new notes in U.S. dollars maturing in 2018 with an interest rate of 8% (the “2018 Notes”) and mandatorily
convertible debentures maturing in 2015, with an interest rate of 12% (the “MCD´s”), and made a payment for cash restructuring in favor
of the trusts set up for payments to third parties, which will issue credit memos linked to the corresponding new notes and will deliver
them, as well as the restructuring payment, to holders of the debt recognized in the Bankruptcy procedure, who have agreed to the
bankruptcy plan. Additionally, another trust that will maintain the considerations for the restructuring was set up in favor of the holders
of the recognized debt that did not agree to the bankruptcy plan, to be delivered to these holders, who will subsequently sign and deliver
the corresponding receipt and acknowledgement.
With the approval of the Bankruptcy Plan, the District Court: (i) discharged the obligations of Vitro and its subsidiaries according to: (1)
the 2012 Bonds maturing February 1, 2012, with an interest rate of 8.625%; (2) the 2013 Bonds, maturing on November 1, 2013 with
an interest rate of 11.75%, (3) the 2017 Bonds, maturing on February 1, 2017, with a rate of 9.125% and (4) other debt instruments;
and (ii) ordered Vitro to issue the 2018 Notes in favor of its unsecured creditors, which are guaranteed by Vitro’s subsidiaries, the MCD´s
maturing in 2015, and to pay fees for agreement to the restructuring.
87
The balances of the debt before the restructuring and of the new debt as of February 23, 2012, are as follows:
FEBRUARY 23, 2012
DEBT BEFORE RESTRUCTURING NEW DEBT
Debt $ 17,936 $ 10,380
Interest 4,349 -
MCD’s - 1,396
$ 22,285 $ 11,776
The following restructuring effects were recognized in the profit or loss for the year ended December 31, 2012.
Debt cancellation $ 10,509
Payment of consent and restructuring (2,072)
Retraction provision (notes 15 and 17) (4,823)
Other (201)
Gain from debt restructuring $ 3,413
In the agreements of the 2018 Notes and the aforementioned MCD’s, the Company undertakes certain restrictions to do or not to do;
in addition, if certain financial ratios are not met on a consolidated basis, its ability to pay dividends and invest in fixed assets, among
others, is limited. Under the restrictions in such agreements, during 2012 and 2013 the Company was limited to pay dividends. In
addition, for 2012 and 2013, the Company is limited to a basket of US$100 of additional debt and an annual maximum of US$120
of investments in fixed assets. In the event that this amount of investment is not dispensed, it can be used in the two subsequent
years. In addition, such agreements request certain calculations primarily based on the Company’s cash movements, which could
result in the prepayment of all or part of the aforementioned 2018 Notes 2018 and MCD’s. As of December 31, 2012 and 2013,
the result of these calculations does not support the need for advance payments.
Financing agreements do not restrict the Company’s ability of debt refinancing.
Notwithstanding the Bankruptcy approved in Mexico, bondholders that still opposed to accept the Bankruptcy Plan, continued their
judicial proceedings and negotiating with the Company in both Mexico and the U.S.A.
After the completion of the processes in the State of New York, Vitro and its guarantor subsidiaries were sentenced to the payment
of capital and accrued interest, and the payment of expenses and legal costs. However, until November of 2012, this sentence could
not be executed, first of all because of the Bankruptcy process, and subsequently, due to the approval process in the United States
of America of the sentence issued by the Mexican Court approved by the Bankruptcy Plan.
This approval request described in previous paragraphs was denied at first instance in June 2012, as well as in the appeal
thereof in November 2012; in addition, the temporary suspension of any enforcement action was withdrawn in December 2012.
As a result of the foregoing, processes in New York were resumed and the plaintiff bondholders continued with the enforcement
proceedings.
88
In addition, certain bondholders requested the Bankruptcy Declaration of Vitro and some of its subsidiaries in December 2010, which
was rejected for being irrelevant in May 2011 in first instance, and in 2012 at second instance. As a consequence, plaintiffs were
sentenced to compensate the damage that was caused to both Vitro and the defendant subsidiaries. Thus, in December 2012, Vitro and
the defendant subsidiaries demanded US$1,600 as a restitution of damages.
At the close of fiscal year 2012, resulting from the adverse outcome in the approval process and the effects it could have on the
Company’s operations outside of Mexico, it continued to evaluate its options and recognized a provision in the income of the year in
the estimated amount that it would pay for the retraction of all legal proceedings open in both Mexico and in the USA (notes 15 and
17). Such retraction provision does not affect the fulfillment of the financial ratios that the Company undertakes as of December 31,
2012 and 2013.
On March 1, 2013, the parties reached an agreement to put an end to the proceedings in both Mexico and in the United States.
Accordingly, most of the bondholders who still opposed the Bankruptcy Plan will receive the 2018 Notes, the MCD’s and cash amounts
foreseen in the Bankruptcy Plan.
The foregoing was reached because Fintech Investments Limited (Fintech) acquired from bondholders who opposed the restructuring
process, all 2012, 2013, and 2017 bonds owned by them.
In this manner, Vitro and Fintech reached an agreement to terminate the judicial proceedings in Mexico and in the USA, including payment
of the claimed total sentences plus interest and legal costs in that country and in Mexico. In Exchange, Vitro also terminated the judicial
proceedings in the USA and Mexico against those bondholders.
Similarly, FIC Regiomontano, S.A.P.I. de C.V. (hereinafter “FIC”), acting as principal of the guarantor subsidiaries of the 2012, 2013
and 2017 bonds mentioned in the Bankruptcy Plan, will pay to Fintech US$360 as consideration for the retraction of the judgments and
termination of the legal procedures related to requests for involuntary bankruptcy in the United States of America. To this effect, on April
8, 2013, a Note of US$235 was issued, maturing in two years, and the remaining amount will be capitalized by the issuance of 12.7%
shares representing FIC’s capital stock.
Pursuant to the stockholders’ meetings in September and December 2013, an agreement with Finch to merge FIC with Vitro (note 2d)
was approved and ratified, which results in an exchange of Fintech’s shares in FIC for 20% of Vitro’s shares. This merger took place on
January 1, 2014 (note 28b).
On June 11, 2013, the Company presented the irrevocable notice to make the advance payment of the MCD’s issued in compliance
with the restructuring agreement held with creditors. The total unpaid balance, including interest on these convertible debentures,
which had an annual fixed interest rate of 12%, amounted to US$122.4 cumulative to July 11, 2013, date at which such obligations
were prepaid.
b) Voluntary Bankruptcy of Vitro Packaging de Mexico, S.A. de C.V. and Chapter 15 in the USA On June 29, 2011, Vitro Packaging de México, S.A. de C.V. (VPM) requested Voluntary Bankruptcy from the Fourth Federal Court
of Civil and Labor Matters in the State of Nuevo León, in order to obtain protection for its operations and assets from possible legal
actions. On October 26, 2011, the Fourth District Court in Civil and Labor Matters of the city of Monterrey stated the Voluntary
Bankruptcy of VPM.
In January 2011, some of Vitro’s bondholders requested an Order of Attachment on any asset of the Company in the USA. On June 30,
2011, VPM requested the protection of Chapter 15 from the USA Bankruptcy Court, requesting recognition of the voluntary Bankruptcy
under the USA Bankruptcy Code.
89
On November 23, 2011, Judge Harlin D. Hale, of the Bankruptcy Court of the USA for the Northern District of Texas, recognized the
bankruptcy of VPM, under Chapter 15 of the Bankruptcy Law in the USA, granting protection to VPM on any action that creditors,
including dissident bondholders, could carry out.
In April 2012, the District Court in Civil and Labor Matters in the State of Nuevo Leon issued the statement of recognition, ranking and
priority of credits, granting recognition of the final list of creditors, which did not include the group of dissident creditors.
Through letters dated May 2, 2012, Wilmington Trust N.A., Aurelius and others, as well as US Bank, N.A., appealed against the verdict
identified in the preceding paragraph. Consequently, dated June 11, 2012, the Second Unit Court of the Fourth Circuit Court confirmed
the admission of the appeal.
Regarding the judicial approval process in the U.S.A., in December 2012, creditors that claimed VPM’s guarantee within the
Vitro process, brought an action to conclude the approval process and be able to take control of the assets that this Company
might have in the U.S.A. On March 1, 2013, the parties reached an agreement whereby the parties terminate the judicial
processes, granting each other certain concessions and waiving legal actions in both directions. The deadline to implement
these agreements concluded on April 12, 2013. Consequently, creditors not recognized in Vitro’s process will withdraw their
objections in this VPM’s process.
As of December 31, 2013, VPM bankruptcy process has been completely finished in Mexico, and it is waiting for the confirmation of the
judgment in the judicial approval process the USA.
15. Accrued expenses and provisions As December 31, 2012 and 2013, accrued expenses and provisions were as follows:
DECEMBER 31,
2012 2013
Debt restructuring provision (note 14a) $ 1,777 $ -
Onerous agreement provision (note 10d) 469 372
Wages and benefits payable 228 160
Services and other accounts payable 142 135
Otros gastos por pagar 483 499
$ 3,099 $ 1,166
As of December 31, 2012, the long-term portion of the debt restructuring provision is presented in other liabilities (note 17).
16. Employee benefitsa) Defined plan benefits The Company has a defined pension plan covering staff which consists of a single payment or a monthly pension, calculated based on
the sum of a basic pension, an additional factor by seniority and an additional factor for income equal to or less than the maximum limit
used for the Mexican Social Security Institute.
90
The retirement ages are:
− Normal.- 65 year old employees with 20 years or more of service.
− Anticipated.- 60 year old employees with a minimum of 20 years of service, reducing the pension to a percentage per each year
earlier than 65 years.
− Early.- 50 year old employees with a minimum of 10 years of service, reducing the pension to a percentage according to their age
at retirement.
− Sum 100.- With the approval of the Technical Committee, employees that complete 100 years by the sum of the age and the years of service.
− Deferred.- Employees that do not accept the retirement when reaching 65 years old lose any right to receive a pension plan.
The Company’s plan also covers seniority premiums which consist of a lump sum payment of day’s wage for each year worked, calculated
using the most recent salary, not to exceed twice the legal minimum wage established by law. The related liability and annual cost of such
benefits are calculated by an independent actuary on the basis of formulas defined in the plans using the projected unit credit method.
The Company is not exposed to unusual risks related to the plan assets.
b) The present values of these obligations and rates used for their calculation are:
DECEMBER 31,
2012 2013
Defined benefit obligation $ 4,234 $ 3,995
Plan assets (2,014) (2,820)
Net projected liability $ 2,220 $ 1,175
As of December 31, 2012 and 2013, the main actuarial hypotheses used were as follows:
DECEMBER 31,
2012 2013
Discount rate 6.25% 7.00%
Expected rate of return of asset * 6.25% 7.00%
Salary increase rate ** 3.50% 3.50%
* It is calculated using the effect of the rate of return applied to the fund value without considering the investment strategy thereof. ** The salary increase rate is equivalent to the expected inflationary increase.
The average duration of defined benefit obligations is approximately 17 years.
The following table shows future cash flows for benefits expected to be paid in the following ten years:
PAYMENTS EXPECTED IN THE YEARS: AMOUNT
2014 $ 495
2015 329
2016 333
2017 331
2018 330
2019 to 2023 1,482
$ 3,300
91
These amounts are based on current data and reflect future services expected, as the case may be. Benefit payments are
based on the assumptions that inactive participants retire at 65 years old, and other actuarial hypothesis, that they do it along
a 10-year period.
c) Movements in defined benefit obligations during the year are as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Defined benefit obligations as of January 1, $ 3,944 $ 4,234
Service cost 73 82
Interest cost 273 247
Actuarial remeasurements 409 (140)
Benefits paid (392) (382)
Other (73) (55)
Defined benefit obligations as of December 31, $ 4,234 $ 3,995
The amounts recognized in current earnings and in other comprehensive income are as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Amount recognized in earnings $ 222 $ 217
Amount recognized in comprehensive income $ 262 $ (125)
d) Changes in the fair value of the plan assets:
YEAR ENDED DECEMBER 31,
2012 2013
Fair value of the plan assets as of January 1, $ 1,616 $ 2,014
Expected yield 124 112
Actuarial (losses) gains 147 (15)
Company contributions 461 1,149
Benefits paid (334) (440)
Fair value of the plan assets as of December 31, $ 2,014 $ 2,820
92
Estimated contributions payable related to defined benefits during the following fiscal year is $482.
The categories of the plan assets as of December 31, 2012 and 2013 are as follows:
FAIR VALUE OF ACTUAL YIELD RATE PLAN ASSETS
2012 2013 2012 2013
Equity instruments 41.4% 4.75% $ 1,103 $ 1,876
Debt instruments (6.0%) 2.63% 911 944
$ 2,014 $ 2,820
The return rate on plan assets is determined based on a composition of 67% of Vitro’s shares and 33% in investments in securities. As
of December 31, 2012 and 2013, the plan assets include 65,974,893 and 109,939,238 (note 21b) Vitro’s shares, respectively, whose
fair values amount to $1,103 and $1,876, respectively. As of December 31, 2013, 85% of Vitro’s shares are valued at contract value
(note 10d), and the other shares are valued at market value.
e) The determination of the defined benefits obligation is carried out using actuarial hypotheses such as discount rates and wage increases.
The sensitivity analysis shown below was developed based on the reasonableness of possible changes with respect to the actuarial
hypotheses as of December 31, 2013, maintaining the other used hypotheses constant.
The amounts included in the following table represent income or (expense), as the case may be.
RESULTS
Increase in discount rate of 1% $ 275
Decrease in discount rate of 1% (315)
Wage increase of 1% (70)
The sensitivity analysis shown above may not represent actual changes in defined benefits obligations, as actuarial hypotheses are
correlated to each other, and they are not likely to vary in an isolated manner.
17. Other liabilities The other long-term liabilities as of December 31, 2012 and 2013 are as follows:
DECEMBER 31,
2012 2013
Debt restructuring provision (note 14a) $ 3,046 $ -
Other liabilities 16 8
$ 3,062 $ 8
93
18. Financial instruments The Company has identified the following financial instruments:
DECEMBER 31,
2012 2013
Financial assets
Cash and cash equivalents $ 2,449 $ 2,199
Restricted cash 262 304
Accounts receivable and other financial assets 11,736 11,472
Financial liabilities
Measured at amortized cost 27,706 25,872
The Company is exposed to market risks (interest rate risk and foreign exchange risk), credit risk and liquidity risk, which are managed in a
centralized manner. The Board of Directors establishes and monitors the policies and procedures to measure and manage these risks, which
are described below.
i. Market risk Market risk is the risk of changes in market prices, such as exchange rates, interest rates, commodities and equity instruments. The
objective of market risk management is to manage and control exposures to market risks within acceptable parameters, at the same time
that yields are optimized.
Interest rate risk As of December 31, 2013, the Company has contracted debt obligations which accrue interest primarily to a fixed rate and to a lesser
extent based on the average interbank interest rate (TIIE) or the interbank rate offered in London (LIBOR). The Company’s interest rate
risk is considered moderate, as 83% of this debt is contracted at fixed rates.
Foreign exchange risk The Company conducts transactions in foreign currency, similarly, most of the contracted debt is denominated in U.S. dollars,
consequently, exposure to exchange risk arises. This exposure can result from changes in the economic, monetary and/or tax policies,
liquidity in global markets, international and local political events, among others.
The Company’s management designated certain liabilities as economic hedges of investments in foreign companies; therefore, the
corresponding exchange fluctuation is directly recorded in stockholders’ equity up to the amount in which the contracted funding covers
the investment.
The financial assets and liabilities denominated in millions of U.S. dollars as of December 31, 2012 and 2013 are as follows:
DECEMBER 31,
2012 2013
Current assets US$ 198 US$ 203
Non-current assets 5 5
Current liabilities 393 385
Non-current liabilities 1,181 1,054
Liability position, net US$ 1,371 US$ 1,231
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As of December 31, 2012 and 2013, the Company considers the assets and liabilities denominated in other foreign currencies other than
U.S. dollar are not material.
The exchange rates of the Mexican peso with respect to the U.S. dollar, used to prepare these consolidated financial statements, were as follows:
U.S. DOLLAR
December 31, 2012 $ 12.9658
December 31, 2013 13.0843
As of March 11, 2014, date of issuance of the consolidated financial statements, the exchange rate of the Mexican peso with respect
to the U.S. dollar was $ 13.2248. Sensitivity analysis to foreign exchange risk The following table shows the sensitivity analysis carried out by the Company, considering strengthening or weakening by 5% of the U.S. dollar
against the Mexican peso and their effects on the results of the fiscal year. The percentage used to analyze the sensitivity to foreign exchange
risk is the scenario that represents the Management’s evaluation of the fairness of possible variations in the currency exchange rate.
The amounts included in the following table represent income or an (expense), as the case may be.
RESULTS
Strengthening of Mx. peso by 5% of
U.S. dollar $ 805
Weakening of Mx. peso by 5% of
U.S. dollar $ (805)
ii. Credit risk Credit risk refers to the risk that a customer or counterpart breaches its contractual obligations resulting in financial loss to the Company
and arises mainly from trade accounts receivable and investments in the Company’s securities.
Trade accounts receivable and other accounts receivable The Company continuously performs credit evaluations to its clients and adjusts the limits of credit based on the credit history and current
creditworthiness. Also, it monitors the collections and payments from customers, and has an allowance for doubtful accounts based on
historical experience and on some specific aspect that has been identified. While these allowances for doubtful accounts have historically been
within the Company’s expectations and within the established allowance, there is no guarantee that it will continue to have the same level of
allowances for doubtful accounts that it has had in the past. An important variation in the experience of the Company’s allowances for doubtful
accounts could have a significant impact on the consolidated results of operations and therefore on the consolidated financial position.
The Company’s exposure to credit risk is affected mainly by the individual characteristics of each customer. However, the Company’s
management also believes the demographics of its customer base, which includes the risk of non-compliance of the industry and country
in which customers operate, as these factors can influence the credit risk, particularly in deteriorated economic circumstances.
As of December 31, 2013, the maximum exposure to credit risk is $3,237. In addition, the Company has guarantees on certain
balances of trade accounts receivable whose performance does not fully meet Management’s expectations.
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The Company has no concentration of credit risk, as consolidated sales to a single customer were not superior to 5% with respect
to total sales.
Below is the classification of trade accounts receivable overdue and impaired, according to their age at the date of the report:
DECEMBER 31, 2012 DECEMBER 31, 2013
BALANCE GROSS IMPAIRED GROSS IMPAIRED
0 to 90 days $ 410 $ 343 1
Over 90 days 386 $ 111 112 $ 112
$ 796 $ 111 $ 455 $ 113
iii. Liquidity risk Liquidity risk represents the possibility that the Company has difficulties to comply with its obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset.
The Company’s approach to manage its liquidity risk is to ensure, to the extent possible, always having enough liquidity to meet its
obligations when they fall due, without affecting the performance of the business or damage the image and reputation of Vitro.
The Company’s Board of Directors is responsible for establishing an appropriate framework of liquidity risk management according
to the Company’s needs. The Company manages its liquidity risk by maintaining bank reserves and through a constant monitoring
of cash flows.
The Company has a securitization program of trade accounts receivable for an amount of $1,200, maturing in 2016 (note 14).
In previous years, the Company’s main source of liquidity has been predominantly cash generated from operating activities in each
one of the business units and sale of certain assets. In addition, in note 8 to the accompanying consolidated financial statements, the
assets that the Company has designated as available for sale are detailed, which also support the reduction of this risk.
Following are the contractual maturities of the debt as of December 31, 2013 and the related interest:
LESS THAN 1 YEAR 1 TO 3 YEARS 3 TO 5 YEARS
Maturities at fixed interest rates
In U.S. dollars $ 1,211 $ 6,692 $ 10,496
Maturities at variable interest rates
In U.S. dollars 152 - -
In Mx. pesos 375 1,271 -
In other currencies 3 28 40
Total financial liabilities $ 1,741 $ 7,991 $ 10,536
The amounts shown in the table above were calculated according to the following procedure: a) repayments of principal in foreign
currency were translated into Mexican pesos at the exchange rate in effect at the reporting date; and (b) interest payments were
calculated using the interest rate in effect at the same date and were translated into Mexican pesos using the exchange rate referred
to above, as applicable.
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iv. Fair value of financial instruments The fair value of financial instruments that are presented below has been determined by the Company using the information
available in the market or other valuation techniques which require judgment to develop and interpret the estimates of fair
values. It also uses assumptions that are based on market conditions existing at each of the balance sheet dates. Consequently,
the estimated amounts presented are not necessarily indicative of the amounts that the Company could realize in a current
market exchange.
The levels that cover 1 to 3, based on the degree to which the financial instruments fair value is observed, are:
− Level 1 are those derived from quoted prices (not adjusted) in active markets for identical assets or liabilities;
− Level 2 are those derived from indicators other than quoted prices included within Level 1, but which include indicators that are
observable for an asset or liability, either directly to prices quoted or indirectly; i.e. derived from these prices; and
− Level 3 are those derived from valuation techniques that include indicators for assets and liabilities, which are not based on
observable market information (non-observable indicators).
The Company’s amounts of cash and cash equivalents, as well as accounts receivable and payable to third parties and related parties,
and the current portion of bank loans and long-term debt approach their fair value, as they have short term maturities. The Company’s
long-term debt is recorded at amortized cost and consists of debt that bears interest at fixed and variable rates which are related to
market indicators. To obtain and disclose the fair value of long-term debt, different sources and methodologies are used such as:
market quotation prices or quotations of agents for similar instruments; other valuation techniques for the cases of those liabilities
that have no price in the market and is not feasible to find quotes of agents for similar instruments.
Below are the fair values of the debt, together with the carrying amount that are shown in the consolidated statement of financial
position:
DECEMBER 31, 2012 DECEMBER 31, 2013
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
Debt (recorded at amortized cost):
Bank debt and loans $ 14,953 $ 11,865 $ 16,516 $ 16,294
The fair value of derivative financial instruments was calculated based on Level 2 of the fair value hierarchy. During the fiscal years
ended December 31, 2012 and 2013, there were no transfers between Level 1 and 2 inputs.
v. Other market price risks In the ordinary course of business, the Company has historically contracted swaps and other derivative instruments in order to
mitigate and to cover its exposure to fluctuations in the price of natural gas. The percentage of covered estimated fuel consumption
has varied from 10% to 100%. The percentage of consumption covered and covered prices constantly change according to the
conditions of the market based on the Company’s needs and to the use of alternative fuels in their production processes.
DFI’s that the Company maintained placed during fiscal years 2012 and 2013 were swaps, which were acquired by the need to
economically cover the fluctuation in the price of natural gas that the Company’s plants use. These DFI’s were not designated as a
hedge for accounting purposes; therefore, fluctuations in fair value are recognized in current earnings within net financial cost.
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As of December 31, 2012 and 2013, the Company has not contracted DFI’s. On January 8, 2013, the Company contracted
a derivative financial instrument to continue to cover its natural gas needs for its production processes, which was in effect
through December 31, 2013. At the date of issuance of these consolidated financial statements, the Company has not
contracted DFI’s.
The positions that were in force and their characteristics are shown for the years ended December 31, 2012 and 2013:
DECEMBER 31,
2012 2013
Derivative financial instruments
Type of instrument Swap Swap
Type of underlying instrument Natural gas Natural gas
Annual notional in MMBTUs 14,000,000 9,900,000
Average price US$ 3.39 US$ 3.49
Initial date 01-01-12 02-01-13
Maturity date 12-31-12 12-31-13
The effects of the aforementioned DFI’s in profit and loss of fiscal years ended December 31, 2012 and 2013 are described in note 25.
19. Contingenciesa) In October 2000, some of the Company’s subsidiaries with plants around Monterrey, Mexico and the area of Mexico City, entered into
a power-purchase agreement for 15 years, for approximately 90 Megawatts of electricity and 1.3 million tons of steam per year with
Tractebel Energy of Monterrey, S. de R.L. de C.V.
b) In December 2006, Viméxico (formerly Vitro Plan) held a General Extraordinary Stockholders’ Meeting, whereby the stockholders
approved the merger of Vitro Plan with Viméxico, which was a creditor of Vitro Plan. As a result of the merger, all assets, rights, liabilities
and obligations of Vitro Plan were taken by Viméxico. Prior to the merger, Vitro Plan was a 65% owned subsidiary of Vitro, and Pilkington
Group LTD (Pilkington) owned the remaining 35%. From the merger, Viméxico became 91.8% owned subsidiary of Vitro, while Pilkington
has the remaining 8.2%.
Although this merger took full effect obtaining all the corresponding approvals and having been performed all the acts, publications
and registrations, Pilkington, which voted against the approval, brought an objection legal procedure in January 2007. In
February 2008, in the first instance, in June 2008, in the second instance, and finally, in February 2009, denying the stay and
protection requested by Pilkington, the Company was notified that the action of opposition exercised by Pilkington had been
declared inadmissible, as a final verdict and not subject to appeal, with regard to the resolutions adopted by a majority at the
General Extraordinary Stockholders’ Meeting held in 2006. Accordingly, the aforementioned resolutions are valid and binding on all
stockholders, even the dissident.
On the other hand, in the first week of December 2007, the Company was notified of a new lawsuit from Pilkington, in which the nullity
of the aforementioned General Extraordinary Stockholders’ Meeting is demanded, which in addition to be contrary to that sustained in the
previous trial, it is performed after that in the first trial, Pilkington expressly abandoned this action.
On February 2, 2011, the evidence linked to the stock registry of Vitro Plan and that linked to the Board of Directors’ meetings minutes
book were evidenced. In such proceeding, a warning was made effective to Viméxico, and was deemed certain that affirmed by Pilkington
in relation to such evidence; however, Viméxico was summoned to such proceeding, reason by which it will challenge it as it is null.
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Furthermore, the term to appeal this decision and to promote an incident of proof against such claims is passing. In addition to this, there
is a sentence by a collegiate court, as res judicata, that stated otherwise to Pilkington affirmations.
The allegations were presented and through a judgment issued on September 19, 2011, the judge of origin issued a verdict whereby all
of the benefits to the defendants were acquitted and sentenced to Pilkington to pay costs and expenses; however, the resolution has not
been personally notified to the parties.
Subsequently, on May 4, 2012, the plaintiff was personally notified of this decision and it filed a motion for appeal against the final
judgment, which the Second Collegiate Court in Civil matters of the Fourth Circuit denied to Pilkington, reason by which the final judgment
that resolved the trial was firm and unchangeable in favor of Viméxico.
Through a judgment dated November 30, 2012, the motion for appeal filed by Vitro against the decision dated March 18, 2009 was
considered unfounded, by means of which the defense of res judicata was considered inappropriate; the notification of such resolution is
outstanding.
The appeal court judgment in favor of Viméxico, S.A. de C.V., whereby the inappropriateness of the nullity of the resolutions adopted at
the General Stockholders’ Meeting of Vitro Plan S.A. de C.V. is ratified, was issued on February 22, 2013.
At the date of these interim consolidated financial statements, the Company is waiting for the damages against Pilkington to be
established, given the favorable outcome for Viméxico, S.A. de C.V.
c) On March 28, 2012, Vitro packaging North America, S.A. de C.V. (VENA) and FIC Regiomontano, S.A.P.I. de C.V (FIC), subsidiaries of
Vitro, received a lawsuit from Crédit Agricole Corporate and Investment Bank (hereinafter Calyon) demanding the return of the transactions
and transfers of assets that were transmitted from VENA to FIC.
Calyon, on September 28, 2012, filed a motion for appeal, where the Ninth Civil Court of the Superior Court of Justice of the State of
Nuevo Leon confirmed the admission of that appeal. On July 22, 2013 the decision which denied the amparo requested by Calyon was
notified, considering the matter definitely concluded; however, as it is a resolution that resolved as to the form and not as to the substance,
at the date of issuance of the consolidated financial statements, Vitro has not received any notification of any legal proceedings filed by
Ceylon; therefore the Company continues negotiating with Calyon.
d) On June 29, 2011, Vitro Packaging de México, S.A. de C.V. (VPM) requested Voluntary Bankruptcy from the Fourth Federal
Court of Civil and Labor Matters in the State of Nuevo León, in order to obtain protection for its operations and assets from
possible legal actions. On October 26, 2011, the Fourth District Court in Civil and Labor Matters of the city of Monterrey stated
the Voluntary Bankruptcy of VPM, being appointed the Mediator for this process on November 7, 2011 and commencing the
VPM reconciling period.
In January 2011, some of Vitro’s bondholders requested an Order of Attachment on any asset of the Company in the USA. On June 30,
2011, VPM requested the protection of Chapter 15 from the USA Bankruptcy Court, requesting recognition of the voluntary Bankruptcy
under the USA Bankruptcy Code.
On July 1, 2011, at the request of VPM, the Bankruptcy Court granted a measure of temporary protection (“VPM TRO”), restricting VPM’s
creditors, including holders of Vitro’s bonds, from beginning or continuing with collection actions in the USA against VPM. Among other
things, VPM’s TRO has the effect of suspending orders of attachment on VPM’s accounts receivable from certain customers in the USA.
Such restraining order was extended by the Bankruptcy Court to July 15, 2011.
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On July 15, 2011, with the consent of Ad Hoc Group of bondholders, the Bankruptcy Court extended the protection order given through
VPM’s VPM until the Bankruptcy Court grants or refuses the recognition of VPM’s Bankruptcy.
On November 23, 2011, Judge Harlin D. Hale, of the Bankruptcy Court of the USA for the Northern District of Texas, recognized the
bankruptcy of VPM, under Chapter 15 of the Bankruptcy Law in the USA, granting protection to VPM on any action that creditors,
including dissident bondholders, could carry out.
In April 2012, the District Court in Civil and Labor Matters in the State of Nuevo Leon issued the statement of recognition, ranking and
priority of credits, granting recognition of the final list of creditors, which did not include the group of dissident creditors.
Through letters dated May 2, 2012, Wilmington Trust N.A., Aurelius and others, as well as US Bank, N.A., appealed against the verdict
identified in the preceding paragraph. Consequently, dated June 11, 2012, the Second Unit Court of the Fourth Circuit Court confirmed
the admission of the appeal under the number 9/2011.
Through a letter filed on September 26, 2012, the insolvent and sundry creditors, which together represented more than 90% of recognized
loans, requested an extension by 90 additional days from October 3, 2012, which was granted by an official decree on October 1, 2012.
Through a judicial decree dated December 21, 2012, the Mediator exhibited the proposed bankruptcy agreement signed by most of the
recognized creditors, putting it in full view of them by a 5-day period for the parties to present the objections related to the authenticity
of the expression of consent.
Through a letter dated January 2, 2013, Vitro Packaging de Mexico, S.A. de C.V. requested not to affirm its expression of consent with
respect to the bankruptcy agreement.
Last January 21, 2013, the Fourth District Judge in Civil and Labor Matters in the State of Nuevo León, issued a decision where it was
rejected the Bankruptcy Plan filed by the creditors and makes some subpoenas that must be met so that the authority accepts the
aforementioned Bankruptcy Plan were made.
Regarding the judicial approval process in the U.S.A., this process began in July 2011. Last December, 2012, creditors who claimed the
VPM’s guarantee within Vitro’s process, brought an action to conclude the approval process and be able to take control of the assets
that the Company might have in the United States of America. Last March 1, 2013, an agreement was reached, whereby the parties put
an end to the judicial processes, granting each other certain concessions and waiving legal actions in both directions. The deadline to
implement these agreements concluded on April 12, 2013. Consequently, creditors not recognized in Vitro’s process will withdraw their
objections in this VPM’s process.
At the date of issuance of the consolidated financial statements, VPM’s bankruptcy process has been entirely concluded.
e) During November 2012, creditors of the Company engaged in a process of involuntary bankruptcy under Chapter 11 of the Bankruptcy
Law of the USA. The respondent companies are:
Vitro Asset Corp , Vitro Chemicals, Fibers & Mining, LLC, Troper Services, Inc, Amsilco Holdings, Inc, B.B.O. Holdings, Inc, Binswanger
Glass Company , Crisa Corporation , V-MX Holdings, LLC and Vitro Packaging, LLC.
On August 28, 2013, a restructuring plan was presented, which was approved and executed; however the Texas Bankruptcy Court has
not legalized the exit of these companies from the bankruptcy process filed; such legalization is expected to be issued during the first
quarter of 2014 (note 28c).
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20. Operating leases The Company has entered various operating lease agreements relating mainly to the lease of warehouses and equipment which represented
charges to the profit or loss of 2012 and 2013 for $484 and $469, respectively. Certain lease agreements have purchase and/or renewal
options at market value at the end of their term, which exercise is not certain at the reporting date.
The estimated future obligations derived from these agreements are as follows:
AMOUNT
2014 $ 342
2015 282
2016 240
2017 192
2018 165
2019 and thereafter 963
21. Capital and reserves Capital management risk The Company’s objective on managing its capital structure is to safeguard its ability to continue as a going concern, and at the same time
maximize the return to its stockholders through a proper balance in their funding sources. In order to maintain this structure, the Company
carries out various actions such as: managing and controlling the dividends paid to stockholders, cancelling and/or issuing new shares and/or
debt, or the investment or disinvestment in assets.
The Company’s capital structure consists of debt (notes 13 and 14) and capital.
The Company, through the Board of Directors, assesses the cost and risks associated with its capital structure at least three times a year.
This assessment is primarily based on the proportions of debt, debt to EBITDA of the past 12 months, and interest coverage. The proportion
of debt represents the debt ratio to total assets; the EBITDA is calculated based on the income before other income and expenses and adding
the virtual items reflected in the statement of comprehensive income, within the cost of sales and operating expenses, mainly depreciations,
amortizations and the seniority premium and pension plan reserves. Lastly, the interest coverage is calculated by dividing the EBITDA by the
interest expense of the last twelve months interest expense of the analyzed period.
Vitro has a long-term goal of maintaining financial ratios 0.5 times, less than 3 times, and greater than 3 times for its indebtedness
ratios, debt to EBITDA and interest coverage, respectively. As of December 31, 2013, the results of the calculation of each one of the
aforementioned financial ratios mentioned were of 0.49 times for the indebtedness ratio, 3.6 times for debt to EBITDA and 3.4 times for
interest coverage.
Common stock structurea) As of December 31, 2012, Vitro’s capital stock consists of 483,571,429 common shares with no par value, of which 386,857,143 are
fully subscribed and paid, and 96,714,286 are issued, not subscribed or paid, and remained in treasury to face the conversion of MCD’s
(note 14a).
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Pursuant to a resolution at the General Extraordinary Stockholders’ Meeting on September 5, 2013, a reduction of the Company’s variable
capital was approved through the cancellation of 96,714,286 common shares held in treasury to face the issuance of mandatorily
convertible debentures in 2011. Such debentures were fully paid during July 2013 (notes 2g and 14a). Therefore, as of December 31,
2013, Vitro’s common stock consists of 386,857,143 common shares with no par value.
b) As of December 31, 2012, Vitro’s repurchased shares and in Treasury, fully subscribed and paid, were 40,203,500, of which
39,758,000 correspond to common shares included in the stock option plan trust. On March 27, 2013, Vitro performed the transfer
of the 39,758,000 Vitro’s Series A shares owned by the stock option trust identified under the Administration Agreement Num.
4037-09 with Skandia Vida, S.A. de C.V. (Trust 4037) in favor of the pension trust identified under the Administration Agreement
Num. 428-09 with Skandia Vida, S.A. de C.V.by virtue of the cancellation and termination of the Trust 4037. This transfer caused an
increase in Vitro’s outstanding shares of $247 and a premium for placement of shares of $313; the total effect of $560 was recorded
as a capital increase and a decrease in pension liabilities.
c) At a General Extraordinary Stockholders’ Meeting held on September 5, 2013, the merger of FIC and COVISA, as merged
companies, with Vitro as a holding company, was approved, which sought to improve the use of financial, administrative and
operating resources of the companies involved, and will allow Vitro to cope with its debt in a more efficient manner, without
affecting its operations, customers, suppliers and other stakeholders. On the other hand, the approval of the merger allows
meeting one of the commitments agreed between Vitro and its creditor Fintech, by virtue of which Vitro has enhanced its viability
as a going concern and has strengthened its financial position. To achieve these objectives, it is authorized: a) the adequacy of
Vitro’s business purpose so that it can carry out the activities performed by COVISA, and b) the reform to Vitro’s bylaws to adopt
the foreigner admission clause.
The merger will take full effect as soon as the later of 90 days elapsing from the date of registration of the special meeting minute in the
Public Registry of Commerce or January 1, 2014 occurs, subject, in addition, in the case of COVISA, to the fulfillment of certain conditions
precedent.
The approved resolutions will allow meeting the agreements reached at the end of the Company’s financial restructuring process, for
which Fintech will perform a capitalization at FIC in the amount of US$125, which shall take place before the day the merger takes effect,
and Fintech will receive in exchange 12.7% of the shares representing FIC’s capital stock (note 14a). These shares will be exchanged
to Fintech for the corresponding percentage of Vitro’s shares on the date the merger takes effect, according to the exchange factor
approved by the Meeting.
It was not necessary to carry out a public offering of shares (“POS”) on the occasion of the capitalization of FIC, which in turn would lead
to Fintech along with a group of stockholders to control more than 30 percent of the Company’s shares, as at request of such group of
stockholders, last August 15, 2013, the National Banking and Securities Commission issued an official letter whereby notified them that
under the term of Article 102, Section III of the Securities Market Law, it excepted them from the obligation of carrying out such POS.
At the Extraordinary General Stockholders’ Meeting on December 11, 2013, stockholders agreed, among other resolutions, to enter into
and sign a merger agreement, which contemplates that it will take full effect on January 1, 2014. Before the merger, FIC carried out the
aforementioned capitalization (note 28a).
d) Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income of the
year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical pesos). The legal
reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be replenished if it is
reduced for any reason.
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e) Stockholders’ equity, except for restated paid-in capital and tax retained earnings will be subject to ISR payable by the Company at the
rate in effect upon distribution. Any tax paid on such distribution may be credited against annual and estimated ISR of the year in which
the tax on dividends is paid and the following two fiscal years.
Balances of the controlling interests in the tax accounts of the stockholders’ equity corresponding to the capital contribution account and
the consolidated net taxable income account amounted to $2,822 and $3,118 as of December 31, 2012, and $2,934 and $2,638 as of
31 December 2013, respectively.
f) During fiscal years ended December 31, 2012 and 2013, no dividends were declared.
g) Other components of comprehensive income
Effect of translation of foreign transactions The movement of the period is recorded when translating the financial statements from the functional currency to the reporting currency.
During the period, there were no other movements affecting the cumulative balance of the translation effect recognized within the
stockholders’ equity.
Actuarial remeasurements Actuarial remeasurements are recognized as other components of comprehensive income. During the period, the actuarial
remeasurements corresponded solely to variations in actuarial assumptions for both the labor liability and the plan assets and are
presented net of income taxes.
Following is an analysis of the movements of the other comprehensive income accounts of the controlling interests:
TRANSLATION OF TOTAL OTHER FOREIGN ACTUARIAL COMPREHENSIVE OPERATIONS REMEASUREMENTS INCOME
Balance as of January 1, 2012 $ 213 $ (371) $ (158)
Comprehensive income movement (122) (180) (302)
Balance as of December 31, 2012 91 (551) (460)
Comprehensive income movement (24) 86 62
Balance as of December 31, 2013 $ 67 $ (465) $ (398)
h) Non-controlling interest is as follows:
DECEMBER 31,
2012 2013
Capital stock $ 418 $ 418
Additional paid-in capital 589 589
Translation of foreign operations 176 216
Actuarial remeasurements (9) (8)
Retained earnings 79 73
$ 1,253 $ 1,288
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i) Share-based payments The Company established a stock option plan for its executives and employees in March 1998 (the Plan). The Plan specified the amounts
of shares, time and initial exercise price. Options can be exercised beginning in the 5th year and the life of these options is 10 years. The
last options issued matured in February 2012.
j) Basic earnings per share The earnings and number of common shares used for the calculation of the basic earnings per share are as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Earning attributable to controlling interests $ 3,393 $ 582
Loss from discontinued operations attributable
to controlling interests (742) -
Earnings for calculation of basic earnings per share $ 2,651 $ 582
Weighted average of common shares for calculation of
the basic earnings per share 346,653,643 377,152,931 Basic earnings per share:
Earnings per share from continuing operations $ 9.79 $ 1.54
Loss per share from discontinued operations $ (2.14) $ -
k) Diluted earnings per share The earnings used for the calculation of the diluted earnings per share are as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Earnings attributable to controlling interests $ 3,393 $ 582
MCD’s interest, net of taxes 113 71
Adjusted earnings attributable to controlling interests 3,506 653
Loss from discontinued operations attributable to the controlling
interests (742) -
Earning for calculation of diluted earnings per share $ 2,764 $ 653
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The number of common shares used for the calculation of the diluted earnings per share is as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Weighted average of common shares for the calculation
of earnings per share 346,653,643 377,152,931
Weighted average of potential shares to be issued and/or subscribed and paid:
Per exercisable MCD’s (note 14a) 96,714,286 50,874,364
Weighted average of common shares for calculation of
diluted earnings per share 443,367,929 428,027,295 Diluted earnings per share:
Earnings per share from continuing operations $ 7.91 $ 1.53
Loss per share from discontinued operations $ (1.67) $ -
22. Discontinued operationsVitro America, LLC
On June 17, 2011, substantially all assets of Vitro America, LLC were sold; therefore, it was disclosed as a discontinued operation in the
consolidated statements of comprehensive income and cash flows for comparability purposes. The sale resulted from an auction process
approved and supervised by a court. As of December 31, 2012, in the consolidated statements of financial position, this transaction is
presented within the assets held for sale and disctontinued operations line item, and as a discontinuing operation in the consolidated statements
of income and the other items line item within the consolidated statement of cash flows.
Vitro Cristalglass S. L. Due to the unfavorable situation of the European market in the past years, particularly of the construction market, whose impact has been a
severe economic crisis, Vitro Cristalglass’ operation was affected, resulting in a deficiency since 2009. On June 5, 2012, Vitro Cristalglass filed
for a bankruptcy protection with the Commercial Court No. 6 of Madrid, obtaining it on July 6, 2012. Vitro Cristalglass stopped the producton
of finished products on June 2012. Similarly, on July 9, the Bankruptcy Administrator was defined, who issued his report on November 12,
2012, and recommended to proceed with the liquidation of Vitro Cristalglass.
On February 19, 2013, the request for liquidation of Vitro Cristalglass was filed before the Court No. 6 of Madrid, Spain. The request was
approved and from February 27, 2013, Vitro Cristalglass is in liquidation, reason why from that date it ceased to consolidate the Company’s
financial statements . As of December 31, 2013, the Company does not have any responsibility derived from this process.
The Company ranked Vitro Cristalglass as discontinued operation from June 2012, as it fulfilled the requirements for accounting for
abandonment of assets on such date. As of December 31, 2012, in the consolidated statements of financial position, this transaction is
presented within the assets available for sale and discontinued operations line item, and as a discontinued operation in the consolidated
statements of income and on the other items line item within the consolidated statements of cash flows.
As a consequence of the above, Vitro Cristalglass recognized as of December 31, 2012 a loss of $751 (US$56) mainly arising from a goodwill
and long-lived assets impairment of $686 (US$53).
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The main activity of Vitro Cristalglass, a company that belonged to the flat glass segment, was the production of Flat Glass for architecture,
houses or buildings.
Below is condensed financial information from the statement of financial position, the statement of comprehensive income and cash flows of
Vitro Cristalglass, which have been reclassified and identified separately as discontinued operation.
Condensed statement of financial position as of December 31, 2012:
Assets:
Cash and cash equivalents $ 46
Accounts receivable 37
Inventories 58
Other accounts receivable 53
Fixed assets 222
Total assets $ 416
Liabilities:
Trade accounts payable $ 41
Bank loans 375
Total liabilities 416
$ -
Condensed statements of comprehensive income from discontinued operations for the year ended December 31, 2012:
Revenues $ 301
Cost of sales 308
Gross loss (7)
Operating expenses 134
Loss before other income (141)
Other income, net (12)
Operating loss (129)
Interest cost, net 57
Loss before income taxes (186)
Income taxes (24)
Net loss (162)
Loss on the disposal process, net of taxes 589
Net loss from discontinued operations $ (751)
Condensed cash flows from discontinued operations for the year ended December 31, 2012:
Cash flows used in operating activities $ (57)
Cash flows provided by investing activities 2
Cash flows used in financing activities (8)
Decrease in cash $ (63)
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23. Related parties Transactions with related parties, carried out in the ordinary course of business, were as follows:
a) Products sold.- Company sells floated glass products and glass containers to various companies, whose stockholders are members
of the Board of Directors. For the years ended December 31, 2012 and 2013, the total amount of these sales was approximately $150
and $40, respectively.
In addition, the Company conducts the following transactions with Empresas Comegua, S.A., associated company:
YEAR ENDED DECEMBER 31,
2012 2013
Sales:
Spare parts, machinery and equipment $ 3 $ 1
Services and technical advisory 25 23
Finished goods 1 -
$ 29 $ 24
During the fiscal year ended December 31, 2013, the Company received services from Fintech for US$360 (notes 2a, 14a and 21c).
Additionally, the Company paid rent for certain properties for $108 (note 10d).
b) Purchase of food coupons.- The Company purchases food coupons for its staff from a self-service store, of which one of
our advisors is a stockholder. For the years ended December 31, 2012 and 2013, the amount of those purchases was $113 and
$118, respectively.
c) Compensation.- For the years ended December 31, 2012 and 2013, the total compensation for the services provided by our
advisors and directors was approximately $137 and $174, respectively. This amount includes fees, wages, variable compensation
and retirement bonuses.
d) Balances receivable and payable.- As of December 31, 2012 and 2013, balances receivable from and payable to related parties
and associates are as follows:
DECEMBER 31,
2012 2013
Accounts receivable
Related companies (note 23a) $ 20 $ 2
Empresas Comegua (note 23a) 6 -
26 2
Accounts payable
Empresas Comegua (note 23a) - 1
Self-service store (note 23b) 10 9
Accounts receivable, net $ 16 $ 10
As of December 31, 2013, the Company has a balance payable to Fintech for US$125 (notes 5, 21c and 28a).
In addition to, the Company has a balance payable of $30 related to a leasing of certain property (note 10d).
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24. Other expenses, net The analysis of other expenses, net is as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Impairment of long-lived assets (note 10e) $ 693 $ 209
Provision for onerous contract (notes 10d and 17) 469 (97)
Loss (gain) on sale of assets 125 (84)
Loss from impairment of assets held for sale (note 10e) 27 -
Profit on sale of scrap (44) (53)
Reorganization expenses 10 106
Other income (39) (1)
$ 1,241 $ 80
25. Financial cost, net Below is a breakdown of the most significant items that compose financial cost:
YEAR ENDED DECEMBER 31,
2012 2013
Interest expenses $ 1,502 $ 1,364
Financial products (68) (194)
Restatement of taxes on tax consolidation 142 179
Derivative financial transactions 76 (22)
Exchange loss, net 472 130
Interest expense, net of employee benefits 148 135
Bank commissions 50 42
Other financial expenses, net 213 104
$ 2,535 $ 1,738
26. Income taxes
a) In Mexico, the Company is subject to ISR and through 2013, to IETU
ISR.- The rate was 30% in 2013 and 2012, and as a result of the new 2014 ISR law (2014Tax Law), the rate will continue at 30% in 2014
and thereafter. The Company incurred ISR on a consolidated basis through 2013 with its Mexican subsidiaries. As a result of the 2014 tax
reform, the tax consolidation regime was eliminated and the Company and its subsidiaries have the obligation to pay the deferred income
tax determined as of that date, which will be paid pursuant to the transitional provisions of the new Law, beginning in fiscal year 2014 to
fiscal year 2023; i.e., during the following ten years.
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The Company chose to determine deferred income tax of fiscal years from 2008 through 2013, by applying Section XVIII of transitory
Article 9 of the 2014 Law, applying the provisions of Article 71-A of the ISR, which is abrogated, and make the payment under the terms
of Article 70-A of said Act. Similarly, deferred tax for fiscal year 2007 and prior fiscal years which was subject to the payment scheme
contained in Article 4, Section VI of the transitory provisions of the Income Tax Law published in the Federal Official Gazette on December
7, 2009, must continue to pay the tax that it differed under the consolidation scheme, until such payment is concluded.
IETU.- This tax applies to the sale of goods, the provision of independent services and the granting of of temporary use or enjoyment
of goods, less certain authorized deductions under the terms defined in said Law. Both income and deductions, and certain tax credits
are determined based on cash flows of each fiscal year at a rate of 17.5%. Beginning 2014, IETU was abrogated.
Unlike ISR, IETU through 2013 was incurred individually by the holding company and its affiliates. Current income tax was the
greater of ISR and IETU through 2013.
b) Income taxes recognized in earnings are analyzed as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Current ISR $ 947 $ 871
Deferred ISR (2,255) (660)
$ (1,308) $ 211
c) The reconciliation between the Company’s actual ISR rate and that established in the Law, expressed as a percentage of income before
income taxes, is analyzed as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Actual rate (64)% 27% Foreign companies (2) (8) Inflation 3 21 Valuation allowance for tax losses (4) (23) Gain on debt restructuring 114 - Exchange rates - 26 Nondeductible expenses (17) (13)
Rate established in the Law 30% 30%
The movements of the deferred tax balance in the fiscal year are as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Opening balance $ 5,559 $ 7,723 Income tax applied to income 2,255 660 Deferred tax on tax consolidation - (498) Discontinued operations (93) - Actuarial remeasurements 70 (37) Effect of hedges and restatement (68) 35 $ 7,723 $ 7,883
109
d) The main temporary differences that gave rise to deferred ISR in the consolidated statements of financial position are analyzed as follows:
DECEMBER 31,
2012 2013
Accounts receivable $ 466 $ 344
Employee benefits 1,021 927
Tax losses 4,027 5,443
Intangible assets 788 852
Fixed assets (713) (314)
Derivative financial instruments 222 238
Inventories 82 89
Provision for debt restructuring and onerous agreement 1,484 -
Other 346 304
$ 7,723 $ 7,883
As of December 31, 2013, the Company has tax loss carryforwards of $20,656, which have the right to be applied to future income
and expire as follows:
EXPIRATION IN: AMOUNT
2014 $ 252
2015 150
2016 324
2017 144
2018 2,203
2019 2,490
2020 1,909
2021 3,746
2022 3,278
2023 6,160
$ 20,656
During 2012, the Company, as part of its restructuring process mentioned in note 14b, amortized $629 related to tax loss carryforwards
of Vitro, S.A.B. de C.V.
In the determination of deferred ISR, according to the preceding subsections, the effects of tax loss carryforwards of $3,298 were
included; however they were not recognized as assets because there is no high probability that they can be recovered. In addition, foreign
subsidiaries have accumulated tax losses for which deferred ISR of $235 was recognized.
e) The income taxes recognized in other components of comprehensive income are analyzed as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Hedging and restatement effect $ (68) $ 35
Effect of benefit plan actuarial remeasurements 70 (37)
Total income taxes recognized in other components of comprehensive income $ 2 $ (2)
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27. Operating segments An operating segment is a Company’s component that is engaged in business activities for which it can earn income and incur
expenses, including income and expenses relating to transactions with any of the other components of the Company. All the operation
results of the operating segments are reviewed periodically by the Company’s management to make decisions on the resources that
must be distributed to the segment and assess their performance.
Transactions between segments are determined based on comparable prices to those that would be used with or between independent
parties in comparable transactions.
The accounting, administrative and operating policies are the same as those described by Vitro. The Company evaluates the performance
of its segments based on operating income. Sales and transfers between segments are recorded in each segment as if they were made
to third parties; i.e. at market prices.
The segments reporting in Vitro are strategic business units that offer different products. These segments are managed separately;
each requires its own system of production, technology, and marketing and distribution strategies. Each market serves to different
customer bases.
The Company has two operating segments to be reported: Containers and Flat Glass. The primary products of each one of the segments are:
SEGMENT PRIMARY PRODUCTS
Glass containers Glass containers, carbonate and sodium bicarbonate, precision components,
as well as machinery and molds for the glass industry.
Flat glass Flat glass for the construction and automotive industries.
As holding, corporate and other companies are not classified as an operating segment according to IFRS 8 “Operating segments”, they are
classified in the “Others” column.
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a) Following certain information is presented by segments:
YEAR ENDED DECEMBER 31, 2012
OTHERS AND GLASS CONTAINERS FLAT GLASS SUBTOTAL ELIMINATIONS CONSOLIDATED
Total sales $ 15,608 $ 7,559 $ 23,167 $ 236 $ 23,403
Sales to other segments 291 - 291 - 291
Consolidated net sales 15,317 7,559 22,876 236 23,112
Income before other (income)
expenses, net 1,985 418 2,403 (40) 2,363
Interest income 1,102 63 1,165 (1,097) 68
Interest expenses 1,199 484 1,683 372 2,055
Gain (loss) on debt
restructuring (4,003) (820) (4,823) 8,236 3,413
Equity in income of
associates - 3 3 45 48
Income (loss) before
income taxes (2,308) (964) (3,272) 5,320 2,048
Income taxes (626) (453) (1,079) (229) (1,308)
Loss from discontinued operations,
net of taxes - 964 964 (213) 751
Depreciation and amortization 1,512 497 2,009 29 2,038
Investment in fixed assets 726 284 1,010 - 1,010
Loss from impairment of
long-lived assets - 693 693 - 693
AS OF DECEMBER 31, 2012
OTHERS AND GLASS CONTAINERS FLAT GLASS SUBTOTAL ELIMINATIONS CONSOLIDATED
Investment in associates $ - $ 3 $ 3 $ 1,031 $ 1,034
Total assets 50,837 16,553 67,390 (32,316) 35,074
Total liabilities 41,469 16,580 58,049 (28,123) 29,926
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YEAR ENDED DECEMBER 31, 2013
OTHERS AND GLASS CONTAINERS FLAT GLASS SUBTOTAL ELIMINATIONS CONSOLIDATED
Total sales $ 14,760 $ 6,755 $ 21,515 $ 130 $ 21,645
Sales to other segments 89 18 107 0 107
Consolidated net sales 14,671 6,737 21,408 130 21,538
Income before other (income)
expenses, net 2,403 306 2,709 (29) 2,680
Interest income 4,667 913 5,580 (5,386) 194
Interest expenses 843 382 1,225 599 1,824
Equity in income of
associates - (4) (4) (71) (75)
Income (loss) before
income taxes 6,060 500 6,560 (5,773) 787
Income taxes 1,642 8 1,650 (1,439) 211
Depreciation and amortization 1,342 419 1,761 22 1,783
Investment in fixed assets 1,485 255 1,740 115 1,855
Loss from impairment of
long-lived assets 95 100 195 14 209
AS OF DECEMBER 31, 2013
OTHERS AND GLASS CONTAINERS FLAT GLASS SUBTOTAL ELIMINATIONS CONSOLIDATED
Investment in associates $ - $ - $ - $ 925 $ 925
Total assets 49,277 15,260 64,537 (31,103) 33,434
Total liabilities 35,017 14,998 50,015 (22,968) 27,047
b) Geographical information Mexico export sales, substantially negotiated in U.S. dollars, are conducted mainly with the USA and Europe and were as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Export sales in millions of U.S. dollars US$ 588 US$ 560
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Consolidated net sales conducted by the Company to a single customer were not higher than 10% during the fiscal years ended
December 31, 2012 and 2013.
Certain geographical information regarding the Company’s transactions is summarized as follows:
YEAR ENDED DECEMBER 31,
2012 2013
Net sales to customers (1) in:
Mexico $ 14,599 $ 13,657
Abroad, mainly to the USA 8,513 7,881
(1) According to the country where the Company is located.
The geographic information of land and buildings, machinery and equipment, and investments in process is summarized as follows:
DECEMBER 31,
2012 2013
Lands and buildings, machinery and equipment and investments in process:
Mexico $ 14,006 $ 14,110
Abroad 286 335
The other non-current assets other than monetary items are summarized as follows:
DECEMBER 31,
2012 2013
Intangible asset:
Mexico $ 357 $ 236
Abroad 9 19
28. Subsequent eventsa) Capital increase Derived from the capitalization described in note 21c, Vitro issued 96,714,286 common shares, without par value, representing Vitro’s
variable capital. As of January 1, 2014, the Company’s capital stock, after the issuance of shares, amounts to 483,571,429 shares.
b) Merger of companies On January 1, 2014, the merger of FIC and COVISA with Vitro took full effect, fulfilling certain conditions precedent for the case of COVISA
(note 21c). From this date, FIC and COVISA ceased to exist as independent companies.
114
FIC, as an independent legal entity, as of December 31, 2013, had tax loss carryforwards which generated a deferred tax asset.
The right to use these tax loss carryforwards in the future is lost as an accounting-tax effect resulting from the merger.
c) Involuntary bankruptcy process under chapter 11 On February 21, 2014, the Bankruptcy Court for the Northern District of the State of Texas ordered the formal completion
of the bankruptcy processes of the subsidiaries in the U.S.A, which resorted to Chapter 11 of the Bankruptcy Law of that
country, as the requirements of the restructuring plan approved by the creditors were fulfilled. Accordingly, the subsidiaries
Vitro Asset Corp., with Vitro Chemicals, Fibers Mining, LLC, Troper Services, Inc., Amsilco Holdings, Inc., B.B.O. Holdings, Inc.,
Binswanger Glass Company, Crisa Corporation, V-MX Holdings, LLC and Vitro Packaging, LLC., concluded the process initiated
on November 17, 2010.
29. Authorization to issue the financial statements On March 11, 2014, the issuance of the accompanying consolidated financial statements and notes thereto was authorized by Adrián Sada
Cueva, Chief Executive Officer, and Claudio L. Del Valle Cabello, Chief Financial and Administrative Officer.
These consolidated financial statements are subject to the approval at the ordinary stockholders’ meeting, where they may be modified, based
on provisions set forth in the Mexican General Corporate Law.
Claudio L. Del Valle CabelloChief Financial and Administrative Officer
Adrián Sada CuevaChief Executive Officer
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shareholder informationCorporate HeadquartersKeramos 225 PonienteCol. Del Prado, 64410Monterrey, Nuevo León, MexicoTel. (52) 81 8863 1600www.vitro.com
Financial Community Contact Jesús MedinaInvestor RelationsTel. (52) 81 8863 1730e-mail: [email protected]
Media ContactRodrigo EstradaCorporate Communications and Social Responsibility Tel. (52) 81 8863 1661e-mail: [email protected]
Legal Contact Javier ArechavaletaLegalTel. (52) 81 8863 1524Fax: (52) 81 8863 1515e-mail: [email protected]
U.S. Contact Breakstone GroupKay Breakstone / Susan BorinelliTel. (646) 330-5907e-mail: [email protected]: [email protected]
Independent Auditors Galaz, Yamazaki, Ruiz Urquiza, S.C.Member of Deloitte Touche Tohmatsu LimitedLázaro Cárdenas 2321 Poniente, PBResidencial San Agustín, 66220San Pedro Garza García, Nuevo León, MexicoTel. (52) 81 8133 7300Fax: (52) 81 8133 7383www.deloitte.com/mx
Exchange ListingBolsa Mexicana de Valores (BMV), MexicoTicket SymbolVITROA
This annual report makes reference to different trademarks that are property of their respective owners with the sole purpose of informing shareholders and the general public about Vitro’s performance in its various industrial and commercial activities, pursuant with legal requirements applicable to companies listed on the stock market.
This document may contain certain forward-looking statements and information relating to Vitro, S.A.B. de C.V. (“Vitro” or “the Company”) and its subsidiaries that reflect the current views and/or expectations of Vitro and its management with respect to its performance, business, and future events. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results or events, performance or achievements, and may contain words like “be-lieve”, “anticipate”, “expect”, “estimate, “could”, “envisage”, “potential”, “will likely result”, or any other words or phrases of similar meaning. Such statements are subject to a number of risks, uncertainties, and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates, and intentions expressed in this document. In no event, neither Vitro nor any of its subsidiaries, affiliates, shareholders, directors, officers, agents, or employees shall be liable before any third-party (including investors) for any investment or business decision or any other type made or action taken in reliance on the information and statements contained in this document or for any consequential, special or similar damages.
This document and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without Vitro’s prior written consent.Des
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Dividend PolicyResolutions regarding the declaration, amount, and payment of div-idends are determined by the majority of the voting stock at the Or-dinary Shareholders’ Meeting. Generally these determinations are based on the recommendation of the Board of Directors. The terms and conditions of the dividends payment declared by the correspond-ing Ordinary Shareholders’ Meeting are generally approved by the Board of Directors, taking into account the current financial conditions of the Company.