Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 6-K

 


 

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

15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of July , 2004

 

Commission File Number: 001-13196

 


 

Desc, S.A. de C.V.

(Translation of registrant’s name into English)

 


 

Paseo de los Tamarindos 400-B, Bosques de las Lomas, 05120 Mexico, D.F., Mexico

(Address of principal executive office)

 


 

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

 

Form 20-F      ü            Form 40-F              

 

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

 

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

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.    Yes  ¨    No  þ

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

 



The following is included in this report on Form 6-K:

 

   

Item


1.   English Translation of a Press Release, dated July 21, 2004, announcing Registrant’s Second Quarter 2004 results
2.   Consolidated Financial Statements of Registrant, at June 30, 2004 and 2003, in the format required to be filed with the Mexican Stock Exchange

 

2


Item 1

 

LOGO

 

DESC ANNOUNCES SECOND QUARTER 2004 RESULTS

 

Mexico City, July 21, 2004 - Desc, S.A. de C.V. (NYSE: DES; BMV: DESC) announced today its results for the second quarter ended June 30, 2004 (2Q04). Except as noted below, all figures were prepared according to generally accepted accounting principles in Mexico (Mexican GAAP). Unless otherwise noted below, the 2Q03 results have been adjusted to exclude the financial figures for Desc’s aluminum wheel and adhesive and sealant businesses and the Chiluca real estate project, which were sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without these divested businesses and real estate project and, thus, unless otherwise noted comparisons below are to the adjusted 2Q03 figures.

 

The results for 2Q04 demonstrate Desc’s efforts under a strict expense control to return to profitability by following its strategic plan and focusing on its core businesses. This is reflected in the strength of Desc’s balance sheet as well as in the stabilization of cash flows.

 

Highlights

 

Sales and exports were 11.7% and 15.3% higher, respectively, when compared to 2Q03.

 

Operating expenses reached 14.6% of sales, which represents a reduction of 9.9% when compared to 2Q03.

 

EBITDA reached US$50 million, which represents an increase of 58.1% when compared to 2Q03.

 

Volume and sales prices increased, which partially offset the rise in raw material costs.

 

There were significant improvements in Desc’s financial situation, such as a reduction in the debt level and an optimization of its average cost of financing.

 

Desc prepaid US$279 million of its debt, thereby reducing its total debt by approximately 26.6%.

 

Internal cash flow generation completely financed working capital and part of the debt reduction.

 

DESC, S.A. DE C.V. and SUBSIDIARIES

Table 1. Consolidated Figures

(Figures in millions of constant Pesos (Ps.) and U.S. dollars (US$))

 

Desc, S.A. de C.V. And Subsidiaries

 

     2Q04

   

Adjusted

2Q035


    2Q04 vs.
Adjusted
2Q035


   

Actual

2Q03


  

2Q04 vs.
Actual

2Q03


    1Q04

    2Q04 vs.
1Q04


 

Sales (Ps.) 3

   5,680     4,862     16.8 %   5,999    -5.3 %   5,360     6.0 %

Sales (US $) 1

   498     446     11.7 %   550    -9.3 %   486     2.6 %

Exports (US $) 2

   241     209     15.3 %   212    13.7 %   232     4.0 %

Operating Income (Ps.) 3

   243     23     960.2 %   461    -47.3 %   248     -1.8 %

Operating Income (US $) 1

   21     2     858.1 %   42    -49.6 %   23     -5.2 %

Operating Margin

   4.3 %   0.5 %                    4.6 %      

EBITDA (Ps.) 3, 4

   572     351     62.8 %   805    -29.0 %   564     1.3 %

EBITDA (US $) 1, 4

   50     32     58.1 %   74    -32.0 %   51     -1.7 %

Net Majority Income (Ps.) 3

   -140     -163     -14.1 %   131    -207.6 %   -117     19.7 %

Net Majority Income (US $) 1

   -12     -15     -20.0 %   12    -204.4 %   -11     9.1 %

1 Figures in U.S. dollars for sales, operating income, EBITDA and net income are calculated using monthly figures in current pesos divided by the average monthly exchange rate.
2 All export figures are based on real sales invoiced in U.S. dollars.
3 All figures in this report are expressed in constant pesos as of June 30, 2004.
4 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.
5 The Adjusted 2Q03 totals exclude the financial figures for Desc’s aluminum wheel and adhesive and sealant businesses and the Chiluca real estate project, which were sold. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without these divested businesses and real estate project.


Second Quarter 2004 Results

 

EBITDA

 

Consolidated EBITDA1 in dollars totaled US$50 million in 2Q04. This represents a significant increase of 58.1% when compared to 2Q032 and a 27.3% increase in the first half of 2004 compared to the same period in 2003, which reflects the improvement in all of the sectors’ results. In addition, it demonstrates that results have stabilized during the last two quarters.

 

LOGO


1 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.
2 The adjusted 2003 information excludes the financial figures for Desc’s aluminum wheel and adhesive and sealant businesses and the Chiluca real estate project, which were sold. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without these divested businesses and real estate project.

 

Operating Expenses

 

During 2Q04, there was a marked reduction in operating expenses of 9.9% when compared to 2Q031, which is in-line with the goals established at the beginning of 2004.

 

LOGO


1 The adjusted 2003 information excludes the financial figures for Desc’s aluminum wheel and adhesive and sealant businesses and the Chiluca real estate project, which were sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without these divested businesses and real estate project.

 

2

 

www.desc.com.mx


Second Quarter 2004 Results

 

Debt Structure

 

During 2Q04, Desc’s total debt declined by US$279 million, or 26.6%, when compared to 1Q04, from US$1,048 million to US$769 million.

 

Table 2. Debt Breakdown

(Figures in millions of U.S. dollars)

 

     Mar-31-03

   Jun-30-03

   Sep-30-03

   Dec-31-03

   Mar-31-04

   Jun-30-04

Cash

   103    82    117    62    61    36

Total Debt

   1,082    1,069    1,084    1,052    1,048    769

Net Debt

   979    987    967    990    987    733

Interest Coverage

   2.6x    2.45x    2.7x    2.9x    2.9x    2.7x

Leverage Ratio*

   4.9x    4.8x    5.5x    4.9x    4.9x    4.1x

* The Leverage Ratio is equal to (Total Debt less Cash plus US$50 million) / EBITDA for the last 12 months.

As of 4Q03, the way of calculating the Leverage Ratio changed, and in order for all the figures to be comparable, all previous quarters were recalculated.

 

As a result of the proceeds from the capital increase and cash generated by Desc’s businesses, Desc made debt prepayments totaling US$279 million. The prepayments reduced net debt by approximately 25.7%, leaving a balance of US$733 million. Notably, in the last 18 months, the total debt has decreased by US$409 million.

 

These prepayments were applied in the following manner: US$162 million towards long-term bank credit agreements, US$40 million towards revolving bank credit agreements (both were part of the credit agreements restructured last December), US$74 million towards Desc’s 8.75% coupon bond due October 2007, and US$3 million towards other credit agreements.

 

The following is a breakdown of Desc’s total debt:

 

LOGO

 

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www.desc.com.mx


Second Quarter 2004 Results

 

As of June 30, 2004, the total debt mix was 67% dollar-denominated, 9% peso-denominated and 24% in UDIS and the debt maturity profile was 95% long-term and 5% short-term. The average cost of debt as of that date was 5.17% for the dollar-denominated debt and 8.86% for the peso-denominated debt.

 

LOGO

 

Financing expenses were US$15.3 million in 2Q04, which represents a decline of 16.8% when compared to 1Q04. In addition, due to debt prepayments, the new interest rate for Desc’s credit agreements restructured last December, applicable as of 2Q04, are as follows: LIBOR + 250 basis points for the dollar debt facility, TIIE + 250 basis points for the peso debt facility, and LIBOR + 250 basis points for the revolving credit facility.

 

Sales and Exports

 

During 2Q04, dollar-denominated sales increased 11.7% compared to 2Q03, from US$446 million to US$498 million. Similarly, there was an increase of 10.1% in dollar-denominated sales during the first half of 2004 when compared to the first half of 2003.

 

LOGO

 

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Second Quarter 2004 Results

 

Total exports totaled US$241 million in 2Q04, which represents an increase of 15.3% when compared to 2Q03. The main drivers were the increases in export sales in the Automotive, Chemical and Food sectors, which were 4.0%, 33.4% and 18.6%, respectively, higher than in 2Q03. For the first half of 2004 compared to 2003, the increase was 12.2%.

 

Operating Income

 

Consolidated operating income in dollars posted a notable increase in 2Q04 totaling US$21 million, which is US$19 million higher than in 2Q03 and US$23 million higher than in the first half of 2003.

 

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Second Quarter 2004 Results

 

Results by Sector

 

Automotive Sector

 

Table 3 shows the figures obtained for the Automotive Sector.

 

Table 3. Automotive Sector Results

(Figures in millions of constant pesos (Ps.) and U.S. dollars (US$))

 

Automotive Sector

 

     2Q04

    Adjusted
2Q032


    2Q04 vs.
Adjusted
2Q032


    Actual
2Q03


   2Q04 vs.
Actual
2Q03


    1Q04

    2Q04 vs.
1Q04


 

Sales (Ps.)

   2,067     1,889     9.4 %   1,924    7.4 %   2,177     -5.1 %

Sales (US $)

   181     173     4.7 %   176    2.8 %   197     -7.9 %

Exports (US $)

   122     117     4.0 %   120    1.6 %   133     -8.4 %

Operating Income (Ps.)

   34     55     -37.3 %   44    -21.5 %   141     -75.7 %

Operating Income (US $)

   3     5     -39.8 %   4    -24.8 %   13     -76.7 %

Operating Margin

   1.7 %   2.9 %         0          6.5 %      

EBITDA (Ps.) 1

   216     237     -8.9 %   234    -7.6 %   319     -32.3 %

EBITDA (US $) 1

   19     22     -12.8 %   21    -11.5 %   29     -34.5 %

1 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.
2 The Adjusted 2Q03 totals exclude the financial figures for Desc’s aluminum wheel business, which was sold. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested business.

 

During the second quarter of 2004 sales reached US$181 million, an increase of 4.7% compared to 2Q03. This is attributed to a higher sales volume (i) from the Tractor Project related to the cardan shaft, forge and axle businesses and (ii) in the gear business for Dana related to the BMW X5 platform.

 

Revenues for this period decreased 7.9% compared to 1Q04 due primarily to the unplanned strike at a Volkswagen plant, which impacted Desc’s constant velocity joint business, and a contraction in the aftermarket.

 

Operating income in dollars decreased by 39.8% in 2Q04 compared to 2Q03, which is attributed to sharp increases in the prices of raw materials (steel and scrap, including transportation costs payable by Desc) that affected Desc’s transmission, wheel, forging and foundry businesses.

 

The negative effect of steel prices has been partially offset by a reduction in expenses resulting from Desc’s administrative and operating restructuring implemented at the end of 2003. In addition, negotiations with customers continue in an effort to pass on these cost increases to customers.

 

Export sales were US$122 million, which represents a 4.0% increase compared to the same period last year. This was due to increased sales stemming from the Tractor Project and increased gear sales.

 

Average capacity utilization during 2Q04 was 59%. However, there were plants operating at 80% capacity or in some cases, above capacity, such as Desc’s axle, gear, cardan shaft and foundry businesses.

 

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Second Quarter 2004 Results

 

Chemical Sector

 

Table 4 shows the figures for the Chemical Sector.

 

Table 4. Chemical Sector Results

(Figures in millions of constant pesos (Ps.) and U.S. dollars (US$))

 

Chemical Sector

 

     2Q04

    Adjusted
2Q032


    2Q04 vs.
Adjusted
2Q032


    Actual
2Q03


   2Q04 vs.
Actual
2Q03


    1Q04

    2Q04 vs.
1Q04


 

Sales (Ps.)

   2,196     1,681     30.7 %   1,956    12.3 %   1,867     17.6 %

Sales (US $)

   193     154     25.5 %   179    7.4 %   169     13.8 %

Exports (US $)

   88     66     33.7 %   66    33.7 %   71     23.9 %

Operating Income (Ps.)

   73     7     885.1 %   56    31.6 %   32     128.1 %

Operating Income (US $)

   6     1     475.2 %   5    25.4 %   3     119.4 %

Operating Margin

   3.3 %   0.4 %                    1.7 %      

EBITDA (Ps.) 1

   157     86     81.7 %   143    9.6 %   112     40.2 %

EBITDA (US $) 1

   14     8     79.4 %   13    4.7 %   10     35.2 %

1 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.
2 The Adjusted 2Q03 totals exclude the financial figures for Desc’s adhesive and sealant businesses, which was sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested business.

 

Sales reached US$193 million in 2Q04, representing an increase of 25.5% compared to 2Q03 and 13.8% with respect to 1Q04, due mainly to higher sales volumes in all of Desc’s chemicals businesses, as well as increased prices.

 

The principal raw material costs continue to increase due to rising oil and butadiene monomer prices (as result of a scarcity of butadiene monomer in the international market, because the main suppliers of this raw material continue with allocation plans due to the imbalance that exists between supply and demand. This plan has been aggravated by the temporary exit of one of Repsol’s production units, a situation that has further increased prices.

 

The higher operating margins are fundamentally due to the rise in sales volume, an improved performance of the plants through greater installed capacity utilization, as is the case with phosphates, laminates and particle boards, as well as stricter controls in operating expenses.

 

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www.desc.com.mx


Second Quarter 2004 Results

 

Food Sector

 

Table 5 shows the figures obtained in the Food Sector.

 

Table 5. Food Sector Figures

(Figures in millions of constant pesos (Ps.) and U.S. dollars (US$))

 

Food Sector

 

     2Q04

    2Q03

    2Q04 vs.
2Q03


    1Q04

    2Q04 vs.
1Q04


 

Sales (Ps.)

   1,084     932     16.3 %   1,017     6.5 %

Sales (US $)

   95     85     11.4 %   92     3.0 %

Exports (US $)

   31     26     18.6 %   27     12.7 %

Operating Income (Ps.)

   87     26     236.2 %   58     51.6 %

Operating Income (US $)

   8     2     219.8 %   5     48.1 %

Operating Margin

   8.1 %   2.8 %         5.7 %      

EBITDA (Ps.) 1

   127     68     88.5 %   95     33.5 %

EBITDA (US $) 1

   11     6     80.0 %   9     30.2 %

1 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.

 

Branded Products

 

During 2Q04, sales increased 4.7% in comparison to 2Q03, which is principally due to higher sales in most of Desc’s food product lines, including: “Del Fuerte” brand tomato paste, a 16% increase in sales in comparison to 2Q03 and a market share of 65.9%; “Embasa” brand ketchup with a market share of 23%; and “Zuko” and “Livean” brand powdered beverage mix continue growing successfully with increases in volume of 80% and 97%, respectively, in comparison to 2Q03.

 

In the domestic market, sales volume increased by 10% in comparison to the previous year. The products with the greatest growth are: tomato paste 17%, ketchup 18%, jellies 9%, tuna 19%, powered beverage mix 79%, gelatin 10% and coffee 7%.

 

In our U.S. business (Authentic Specialty Foods), sales to supermarkets increased 4.3% in comparison to 2Q03; sales to restaurants increased by 14.6% in comparison to 2Q03; and sales to fast food restaurants grew by 9.4% in comparison to 2Q03.

 

Desc has increased the prices for some of its food products, which has been offset in part by an increase in raw material costs. Tuna prices have increased 21% year-to-date to counteract the increases in fish, packaging and soybean oil.

 

In comparison to 2Q03, operating income in 2Q04 increased by 137.1% due to improved sales, improved costs from plant efficiency and the use of fresh tomatoes, in addition to positive changes in operations and the strict control of expenses that compensated for the increases in raw material and packaging costs.

 

At the Santa Rosa Plant, Desc invested in a project to develop healthy vegetable products in a new and modern container. The new plant for processing and packing foods was equipped in a record time for Desc of 5 months by Corfuerte and Tetra Pak, which is a leader in the food processing and packing field. In the first phase, a new line of vegetables was introduced to the market: potato cubes, chayote, zucchini and carrots, which complement an existing line of vegetable salads, baby corn, peas and carrots, and baby peas.

 

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Second Quarter 2004 Results

 

The launching of the new line of Del Fuerte vegetables in innovative packaging, Tetra Recart by Tetra Pak, marks the beginning of a new era for Desc of a healthy foods category. Its weight and shape brings several advantages to retailers during its distribution and display. For the consumer, it provides safety, ease in opening, and convenience in its handling and use. For Corfuerte, this is an extremely important step towards becoming a modern, leading company in its field.

 

Pork Business

 

Pork prices continued the upward trend through 2Q04, increasing 23.2% compared to 2Q03, which offset the increases in grain and soy paste costs. This resulted in an improved operating margin which rose from 2.7% in 2Q03 to 10.5% in 2Q04. Another positive effect was the improved sales in the export market due to higher export sales to Japan.

 

Sales volume for the quarter decreased by 14.9% in comparison to the same period last year due to the closing of the Bajío operations in May.

 

The capacity utilization rate remains 100% in the southeast region given the strong demand levels.

 

The following table provides the operating margins of Desc’s branded products and pork businesses:

 

Table 6. Food Sector – Relevant Figures

 

     2Q04

    2Q03

    2Q04 vs.
2Q03


 

Branded Products

                  

Sales (millions of US$)

   57     55     4.7 %

Operating Margin

   6.5 %   2.9 %      

Pork Business

                  

Sales (millions of US$)

   38     31     23.2 %

Operating Margin

   10.5 %   2.7 %      

 

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www.desc.com.mx


Second Quarter 2004 Results

 

Real Estate Sector

 

Table 7 shows figures for the Real Estate Sector.

 

Table 7. Real Estate Sector Figures

(Figures in millions of constant pesos (Ps.) and U.S. dollars (US$))

 

Real Estate Sector

 

     2Q04

    Adjusted
2Q032


    2Q04 vs.
Adjusted
2Q032


    Actual
2Q03


   2Q04 vs.
Actual
2Q03


    1Q04

    2Q04 vs.
1Q04


 

Sales (Ps.)

   332     347     -4.2 %   1,173    -71.7 %   292     13.7 %

Sales (US $)

   29     32     -9.9 %   107    -72.9 %   27     9.4 %

Operating Income (Ps.)

   69     -42     NA     458    -85.0 %   41     66.2 %

Operating Income (US $)

   6     -4     NA     33    -85.7 %   4     55.3 %

Operating Margin

   20.7 %   -12.1 %                    14.2 %      

EBITDA (Ps.) 1

   74     -35     NA     464    -84.0 %   47     58.5 %

EBITDA (US $) 1

   6     -3     NA     33    -84.8 %   4     48.8 %

1 “EBITDA”, as used in this press release, is Operating Income (Loss) plus the sum of Depreciation and Amortization, all of which are presented under generally accepted principles in Mexico. EBITDA is presented herein because Desc believes it provides useful information regarding Desc’s ability to service its debt. “EBITDA” should not be considered in isolation or as a substitute for Desc’s consolidated income statements or other financial statements prepared in accordance with Mexican GAAP or as a measure of profitability or liquidity. Please refer to the section entitled Non-GAAP Financial Reconciliation Tables for a reconciliation of EBITDA to Operating Income.
2 The Adjusted 2Q03 totals exclude the financial figures for the Chiluca real estate project, which was sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested real estate project.

 

Sales in 2Q04 reached US$29 million, equivalent to a 9.4% increase compared to the previous quarter. 2Q04 revenue decreased 9.9% in comparison to 2Q03.

 

Sales for 2Q04 were attributable to the following projects:

 

  Punta Mita 74.8%

 

  Santa Fe Shopping Center Reserve 20.4%

 

  Bosques de Santa Fe 4.8%

 

Operating income totaled US$6 million in 2Q04, compared to the loss recorded in 2Q03.

 

The Punta Mita project continues enjoying excellent acceptance in the market. During the second quarter, Desc sold a beachfront lot, three golf course lots and six villas. In addition, negotiations were completed for the sale of land in front of the golf course for the development of 125 villas, which will be developed over the next five years.

 

The three remaining lots in the Santa Fe Shopping Center Reserve were sold, leaving no remaining lots for sale.

 

In Bosques de Santa Fe, practically no single-family lots remain in inventory, while 18 residential lots and approximately 200 multi-family units remain for sale.

 

Contacts:    Marisol Vázquez-Mellado Mollón/Jorge Padilla Ezeta
     Tel.: (5255) 5261 8000
     investor.relation@desc.com.mx

 

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Second Quarter 2004 Results

 

àà Financial Tables Follow àà

 

FINANCIAL INDICATORS

 

     2Q04

    1Q04

    4Q03

    3Q03

    2Q03

    1Q03

 

Interest Coverage

   2.7x     2.9x     2.9x     2.7x     2.45x     2.6x  

Short-Term Debt

   5 %   3 %   3 %   29 %   27 %   23 %

Long-Term Debt

   95 %   97 %   97 %   71 %   73 %   77 %

Peso & Udi-denominated debt

   33 %   31 %   30 %   30 %   32 %   31 %

Dollar-denominated debt

   67 %   69 %   70 %   70 %   68 %   69 %

 

TOTAL OUTSTANDING SHARES

 

“A” Shares

   1,166,108,597    51.10 %

“B” Shares

   1,115,690,363    48.90 %

Total

   2,281,798,960    100.00 %

 

Non-GAAP Financial Reconciliation Tables1

 

Desc, S.A. de C.V. And Subsidiaries

Figures in millions of constant pesos (Ps.) and U.S. Dollars (US$)

 

     2Q04

   Adjusted
2Q031


   2Q04 vs
Adjusted
2Q031


    Actual
2Q03


   2Q04 vs
Actual
2Q03


    1Q04

   2Q04 vs.
4Q03


 

Operating Income (Ps.)

   243    23    960.2 %   461    -47.3 %   248    -1.8 %

Operating Income (US $)

   21    2    858.0 %   42    -49.6 %   23    -5.2 %

Depreciation and Amortization (Ps.)

   329    328    0.3 %   344    0.3 %   316    4.1 %

Depreciation and Amortization (US $)

   29    30    -0.3 %   32    -3.3 %   28    3.6 %

EBITDA (Ps.)

   572    351    62.8 %   805    -29.0 %   564    1.3 %

EBITDA (US $)

   50    32    55.1 %   74    -32.0 %   51    -1.7 %

1 The Adjusted 2Q03 totals exclude the financial figures for Desc’s aluminum wheel and adhesive and sealant businesses and the Chiluca real estate project, which were sold. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without these divested businesses and real estate project.

 


1 2003 Figures do not include operations from the Aluminum Wheel, Adhesive and Sealant businesses, as well as real estate projects sold.

 

11

 

www.desc.com.mx


Second Quarter 2004 Results

 

Automotive Sector

 

Figures in millions of constant pesos (Ps.) and U.S. Dollars (US$)

 

     2Q04

   Adjusted
2Q031


   2Q04 vs
Adjusted
2Q031


    Actual
2Q03


   2Q04 vs
Actual
2Q03


    1Q04

   2Q04 vs.
1Q04


 

Operating Income (Ps.)

   34    55    -37.3 %   44    -21.5 %   141    -75.7 %

Operating Income (US $)

   3    5    -39.8 %   4    -24.8 %   13    -76.7 %

Depreciation and Amortization (Ps.)

   182    182    0.0 %   190    0.0 %   178    2.2 %

Depreciation and Amortization (US $)

   16    17    -5.9 %   17    -5.9 %   16    0.0 %

EBITDA (Ps.)

   216    237    -8.9 %   234    -7.6 %   319    -32.3 %

EBITDA (US $)

   19    22    -12.8 %   21    -11.5 %   29    -34.5 %

1 The Adjusted 2Q03 totals exclude the financial figures for Desc’s aluminum wheel business, which was sold. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested business.

 

Chemical Sector

 

Figures in millions of constant pesos (Ps.) and U.S. Dollars (US$)

 

     2Q04

   Adjusted
2Q031


   2Q04 vs
Adjusted
2Q031


    Actual
2Q03


   2Q04 vs
Actual
2Q03


    1Q04

   2Q04 vs.
1Q04


 

Operating Income (Ps.)

   73    7    885.1 %   56    31.6 %   32    128.1 %

Operating Income (US $)

   6    1    475.2 %   5    25.4 %   3    119.4 %

Depreciation and Amortization (Ps.)

   84    79    6.3 %   87    6.3 %   80    5.0 %

Depreciation and Amortization (US $)

   8    7    14.3 %   8    14.3 %   7    14.3 %

EBITDA (Ps.)

   157    86    81.7 %   143    9.6 %   112    40.2 %

EBITDA (US $)

   14    8    79.4 %   13    4.7 %   10    35.2 %

1 The Adjusted 2Q03 totals exclude the financial figures for Desc’s adhesive and sealant businesses, which was sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested business.

 

Food Sector

 

Figures in millions of constant pesos (Ps.) and U.S. Dollars (US$)

 

     2Q04

   2Q03

   2Q04 vs
2Q03


    1Q04

   2Q04 vs.
1Q04


 

Operating Income (Ps.)

   87    26    236.2 %   58    51.6 %

Operating Income (US $)

   8    2    219.8 %   5    48.1 %

Depreciation and Amortization (Ps.)

   40    42    -4.8 %   37    8.1 %

Depreciation and Amortization (US $)

   3    4    -25.0 %   4    -25.0 %

EBITDA (Ps.)

   127    68    88.5 %   95    33.5 %

EBITDA (US $)

   11    6    80.0 %   9    30.2 %

 

12

 

www.desc.com.mx


Second Quarter 2004 Results

 

Real Estate Sector

 

Figures in millions of constant pesos (Ps.) and U.S. Dollars (US$)

 

     2Q04

   Adjusted
2Q031


   2Q04 vs
Adjusted
2Q031


    Actual
2Q03


   2Q04 vs
Actual
2Q03


    1Q04

   2Q04 vs.
1Q04


 

Operating Income (Ps.)

   69    -42    NA     458    -85.0 %   41    66.2 %

Operating Income (US $)

   6    -4    NA     33    -85.7 %   4    55.3 %

Depreciation and Amortization (Ps.)

   5    7    -28.6 %   6    -28.6 %   6    -16.6 %

Depreciation and Amortization (US $)

   0    1    -28.5 %   0    -100.0 %   0    0.0 %

EBITDA (Ps.)

   74    -35    NA     464    -84.0 %   47    58.5 %

EBITDA (US $)

   6    -3    NA     33    -84.8 %   4    48.8 %

1 The Adjusted 2Q03 totals exclude the financial figures for the Chiluca real estate project, which was sold in 2003. Management believes that investors can better evaluate and analyze Desc’s historical and future business trends if they consider results of operations without this divested real estate project.

 

13

 

www.desc.com.mx


Second Quarter 2004 Results

 

Desc, S.A. de C.V. and Subsidiaries

 

Consolidated Balance Sheets

(In millions of constant pesos, as of June 30, 2004).

 

     2004

   2003

   %

 

Assets

                

Current Assets:

                

Cash and Short Term Investments

   410    889    -53.8 %

Account Receivable (net)

   5,454    4,842    12.6 %

Inventories and Other Assets

   3,231    3,165    2.1 %

Total Current Assets

   9,095    8,896    2.2 %

Long-term Accounts Receivable

   1,201    1,115    7.7 %

Land held for development and real estate projects

   3,619    3,755    -3.6 %

Fixed Assets

   11,384    13,567    -16.1 %

Deferred Assets (net)

   630    1,586    -60.3 %

Other Assets

   1,222    1,135    7.7 %

Total Assets

   27,151    30,054    -9.7 %

Liabilities

                

Current Liabilities:

                

Banks Loans

   433    3,087    -86.0 %

Suppliers

   2,130    2,210    -3.6 %

Taxes to be paid

   261    683    -61.9 %

Other Liabilities

   1,664    1,605    3.7 %

Total Current Liabilities

   4,488    7,585    -40.8 %

Long-Term Debt

   8,428    8,541    -1.3 %

Deferred Taxes

   817    1,458    -44.0 %

Other

   812    593    37.0 %

Total Liabilities

   14,545    18,177    -20.0 %

Stockholders’ Equity

                

Capital Stock

   30    18    66.7 %

Paid-in Surplus

   3,810    1,170    225.5 %

Restatement of Paid-In Capital Stock

   11,913    11,242    6.0 %

Cumulative effect of restatement, net

   -6,774    -4,455    52.0 %

Total Majority Interest

   8,979    7,975    12.6 %

Minority Interest

   3,627    3,902    -7.1 %

Total Stockholders’ Equity

   12,606    11,877    6.1 %

Total Liabilities and Stockholders’ Equity

   27,151    30,054       

 

14

 

www.desc.com.mx


Second Quarter 2004 Results

 

Desc, S.A. de C.V. and Subsidiaries

 

Consolidated Income Statements

(In millions of constant pesos, as of June 30, 2004)

 

The financial figures below have not been adjusted to exclude

the operations and businesses divested in 2003.

 

     2Q04

    2Q03

    Var.

 

Net Sales

   5,680     5,999     -5.3 %

Cost of Sales

   4,607     4,587     0.4 %

Gross Profit

   1,073     1,412     -24.0 %

Operating Expenses

                  

Administrative and Selling Expenses

   830     951     -12.7 %

Operating Income

   243     461     -47.3 %

Interest Expense

   174     189     -7.9 %

Interest Income

   (9 )   (5 )   80.0 %

Exchange Gain (loss), net

   120     (175 )   NA  

Gain on Monetary Position

   4     (43 )   NA  

Others

   63     85     -25.9 %

Comprehensive Financial Result

   352     51     590.2 %

Other Expenses

   (33 )   (24 )   37.5 %

Income before Provisions

   (76 )   434     NA  

Provisions for:

                  

Income and Asset Tax

   45     95     -52.6 %

Employee Profit Sharing

   16     16     0.0 %

Deferred Income Taxes

   (29 )   117     NA  

Total Taxes

   32     228     -86.0 %

Net Consolidated Income

   (108 )   206     NA  
     32     75     -57.3 %

Minority Interest

   —       —          

Majority Net Income

   (140 )   131     NA  

12 months Net Income per Share

   (1.57 )   (0.74 )      

Number of shares outstanding:

   2,282     1,369        

(Thousands of shares)

                  

Operating Income+Depreciation

   572     805     -29.0 %

 

15

 

www.desc.com.mx


Second Quarter 2004 Results

 

This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that reflect the current views of Desc’s management with respect to future events. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” and “should” and similar expressions generally are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and changes in circumstances. Actual results may differ materially from present expectations as a result of many factors, including, but not limited to, changes in global and domestic political, economic, business, competitive, market and regulatory factors, the cyclicality of the autoparts and chemicals industries and other factors which are described under the heading “Risk Factors” in Desc’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. Desc does not assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made.

 

16

 

www.desc.com.mx


Item 2

 

CONSOLIDATED BALANCE SHEET

AT JUNE 31 OF 2004 AND 2003

(Thousands of Pesos)

 

REF S

  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


    SECOND QUARTER
OF LAST YEAR


 
          Amount

   %

    Amount

   %

 
1   

TOTAL ASSETS

   27,151,029    100 %   30,053,694    100 %
2   

CURRENT ASSETS

   9,095,899    34 %   8,896,265    30 %
3   

CASH AND SHORT-TERM INVESTMENTS

   410,327    2 %   889,109    3 %
4   

ACCOUNTS AND DOCUMENTS RECEIVABLE (NET)

   4,315,397    16 %   3,210,043    11 %
5   

OTHER ACCOUNTS AND DOCUMENTS RECEIVABLE

   1,138,904    4 %   1,631,972    5 %
6   

INVENTORIES

   3,231,271    12 %   3,165,141    12 %
7   

OTHER CURRENT ASSETS

   0    0 %   0    0 %
8   

LONG-TERM

   5,014,730    18 %   4,933,724    18 %
9   

ACCOUNTS AND DOCUMENTS RECEIVABLE (NET)

   1,201,117    4 %   1,114,568    4 %
10   

INVESTMENT IN SHARES OF SUBSIDIARIES AND NON-CONSOLIDATED ASSOCIATED

   194,767    1 %   64,531    0 %
11   

OTHER INVESTMENTS

   3,618,846    13 %   3,754,625    14 %
12   

PROPERTY, PLANT AND EQUIPMENT

   11,383,968    42 %   13,567,342    45 %
13   

PROPERTY

   6,213,991    23 %   7,165,834    26 %
14   

MACHINERY AND INDUSTRIAL EQUIPMENT (NET)

   15,931,791    59 %   17,025,203    57 %
15   

OTHER EQUIPMENT

   3,205,217    12 %   2,038,840    8 %
16   

ACCUMULATED DEPRECIATION

   -14,352,452    -53 %   -13,673,523    -45 %
17   

CONSTRUCTION IN PROGRESS

   385,421    1 %   1,010,988    4 %
18   

DEFERRED ASSETS (NET)

   629,524    2 %   1,585,676    5 %
19   

OTHER ASSETS

   1,026,908    4 %   1,070,687    4 %
20   

TOTAL LIABILITIES

   14,545,163    100 %   18,176,868    100 %
21   

CURRENT LIABILITIES

   4,487,785    31 %   7,585,060    42 %
22   

SUPPLIERS

   2,129,715    15 %   2,209,928    12 %
23   

BANK LOANS

   432,832    3 %   3,087,291    17 %
24   

STOCK MARKET LOANS

   0    0 %   0    0 %
25   

TAXES TO BE PAID

   260,536    2 %   683,277    4 %
26   

OTHER CURRENT LIABILITIES

   1,664,702    11 %   1,604,564    9 %
27   

LONG-TERM LIABILITIES

   8,428,230    58 %   8,540,851    47 %
28   

BANK LOANS

   6,106,382    42 %   6,216,861    34 %
29   

STOCK MARKET LOANS

   2,321,848    16 %   2,323,990    13 %
30   

OTHER LOANS

   0    0 %   0    0 %
31   

DEFERRED LOANS

   816,768    6 %   1,457,860    8 %
32   

OTHER LIABILITIES

   812,380    6 %   593,097    3 %
33   

CONSOLIDATED STOCK HOLDERS’ EQUITY

   12,605,866    100 %   11,876,826    100 %
34   

MINORITY INTEREST

   3,627,089    29 %   3,902,319    33 %
35   

MAJORITY INTEREST

   8,978,777    71 %   7,974,507    67 %
36   

CONTRIBUTED CAPITAL

   15,752,956    125 %   12,430,641    105 %
37   

PAID-IN CAPITAL STOCK (NOMINAL)

   29,663    0 %   17,798    0 %
38   

RESTATEMENT OF PAID-IN CAPITAL STOCK

   11,913,228    95 %   11,242,453    95 %
39   

PREMIUM ON SALES OF SHARES

   3,810,065    30 %   1,170,390    10 %
40   

CONTRIBUTIONS FOR FUTURE CAPITAL INCREASES

                      
41   

CAPITAL INCREASE (DECREASE)

   -6,774,179    -54 %   -4,456,134    -38 %
42   

RETAINED EARNINGS AND CAPITAL RESERVE

   17,525,927    139 %   18,348,606    154 %
43   

REPURCHASE FUND OF SHARES

   907,079    7 %   907,079    8 %
44   

EXCESS (SHORTFALL) IN RESTATEMENT OF HOLDER’S EQUITY

   -24,950,088    -198 %   -23,504,957    -198 %
45   

NET INCOME FOR THE YEAR

   -257,097    -2 %   -206,862    -2 %

 

1

 

www.desc.com.mx


CONSOLIDATED BALANCE SHEET

BREAKDOWN OF MAIN CONCEPTS

(Thousands of Pesos)

 

REF S


  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


    SECOND QUARTER
OF LAST YEAR


 
          Amount

   %

    Amount

   %

 

3

  

CASH AND SHORT-TERM INVESTMENTS

   410,327    100 %   889,109    100 %

46

  

CASH

   251,337    61 %   359,870    40 %

47

  

SHORT-TERM INVESTMENTS

   158,990    39 %   529,239    60 %

18

  

DEFERRED ASSETS (NET)

   629,524    100 %   1,585,676    100 %

48

  

AMORTIZED OR REDEEMED EXPENSES

   0    0 %   0    0 %

49

  

GOODWILL

   629,524    100 %   1,585,676    100 %

50

  

DEFERRED TAXES

   0    0 %   0    0 %

51

  

OTHERS

   0    0 %   0    0 %

21

  

CURRENT LIABILITIES

   4,487,785    100 %   7,585,060    100 %

52

  

FOREIGN CURRENCY LIABILITIES

   2,095,229    47 %   4,445,223    59 %

53

  

MEXICAN PESOS LIABILITIES

   2,392,556    53 %   3,139,837    41 %

24

  

STOCK MARKET LOANS

   0    0 %   0    0 %

54

  

COMMERCIAL PAPER

   0    0 %   0    0 %

55

  

CURRENT MATURITIES OF MEDIUM TERM NOTES

   0    0 %   0    0 %

56

  

CURRENT MATURITIES OF BONDS

   0    0 %   0    0 %

26

  

OTHER CURRENT LIABILITIES

   1,664,702    100 %   1,604,564    100 %

57

  

OTHER CURRENT LIABILITIES WITH COST

   0    0 %   0    0 %

58

  

OTHER CURRENT LIABILITIES WITHOUT COST

   1,664,702    100 %   1,604,564    100 %

27

  

LONG-TERM LIABILITIES

   8,428,230    100 %   8,540,851    100 %

59

  

FOREIGN CURRENCY LIABILITIES

   5,215,237    62 %   5,040,093    59 %

60

  

MEXICAN PESOS LIABILITIES

   3,212,993    38 %   3,500,758    41 %

29

  

STOCK MARKET LOANS

   2,321,848    100 %   2,323,990    100 %

61

  

BONDS

        0 %        0 %

62

  

MEDIUM TERM NOTES

   2,321,848    100 %   2,323,990    100 %

30

  

OTHER LOANS

                      

63

  

OTHER LOANS WITH COST

   0    0 %   0    0 %

64

  

OTHER LOANS WITHOUT COST

   0    0 %   0    0 %

31

  

DEFERRED LOANS

   816,768    100 %   1,457,860    100 %

65

  

NEGATIVE GOODWILL

   0    0 %   0    0 %

66

  

DEFERRED TAXES

   816,768    100 %   1,457,860    100 %

67

  

OTHERS

   0    0 %   0    0 %

32

  

OTHER LIABILITIES

   812,380    100 %   593,097    100 %

68

  

RESERVES

   0    0 %   0    0 %

69

  

OTHERS LIABILITIES

   812,380    100 %   593,097    100 %

44

  

EXCESS (SHORTFALL) IN RESTATEMENT OF STOCK HOLDERS’ EQUITY

   -24,950,088    100 %   -23,504,957    100 %

70

  

ACCUMULATED INCOME DUE TO MONETARY POSITION

   0    0 %   0    0 %

71

  

INCOME FROM NON-MONETARY POSITION ASSETS

   -24,950,088    100 %   -23,504,957    100 %

 

2

 

www.desc.com.mx


CONSOLIDATED BALANCE SHEET

OTHER CONCEPTS

(Thousands of Pesos)

 

REF S


 

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


   SECOND QUARTER
OF LAST YEAR


         Amount

   Amount

72

 

WORKING CAPITAL

   4,608,114    1,311,205

73

 

PENSIONS FUND AND SENIORITY PREMIUMS

   405,503    579,269

74

 

EXECUTIVES (*)

   0    0

75

 

EMPLOYERS (*)

   4,257    5,794

76

 

WORKERS (*)

   9,482    10,262

77

 

CIRCULATION SHARES (*)

   2,281,798,960    1,369,079,376

78

 

REPURCHASED SHARES (*)

   0    0

(*) THESE AMOUNTS ARE EXPRESSED IN UNITS

 

3

 

www.desc.com.mx


CONSOLIDATED INCOME STATEMENT

FROM JANUARY THE 1ST TO JUNE 30 OF 2004 AND 2003

(Thousands of Pesos)

 

REF R


  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


    SECOND QUARTER
OF LAST YEAR


 
          Amount

   %

    Amount

   %

 

1

  

NET SALES

   11,039,893    100 %   11,345,785    100 %

2

  

COST OF SALES

   8,898,956    81 %   8,780,722    77 %

3

  

GROSS INCOME

   2,140,937    19 %   2,565,063    23 %

4

  

OPERATING EXPENSES

   1,650,044    15 %   1,876,196    17 %

5

  

OPERATING INCOME

   490,893    4 %   688,867    6 %

6

  

TOTAL FINANCING COST

   487,853    4 %   502,916    4 %

7

  

INCOME AFTER FINANCING COST

   3,040    0 %   185,951    2 %

8

  

OTHER FINANCIAL OPERATIONS

   -5,922    0 %   59,761    1 %

9

  

INCOME BEFORE TAXES AND WORKERS’ PROFIT SHARING

   8,962    0 %   126,190    1 %

10

  

RESERVE FOR TAXES AND WORKERS’ PROFIT SHARING

   164,571    1 %   324,684    3 %

11

  

NET INCOME AFTER TAXES AND WORKERS’ PROFIT SHARING

   -155,609    -1 %   -198,494    -2 %

12

  

SHARE IN NET INCOME OF SUBSIDIARIES AND NON-CONSOLIDATED ASSOCIATES

   905    0 %   0    0 %

13

  

CONSOLIDATED NET INCOME OF CONTINUOUS

   -156,514    -1 %   -198,494    -2 %

14

  

INCOME OF DISCONTINUOUS OPERATIONS

   12,333    0 %   -73,317    -1 %

15

  

CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS

   -168,847    -2 %   -125,177    -1 %

16

  

EXTRAORDINARY ITEMS NET EXPENSES (INCOME)

   0    0 %   0    0 %

17

  

NET EFFECT AT THE BEGINNING OF THE YEAR BY CHANGES IN ACCOUNTING PRINCIPLES

   0    0 %   0    0 %

18

  

NET CONSOLIDATED INCOME

   -168,847    -2 %   -125,177    -1 %

19

  

NET INCOME OF MINORITY INTEREST

   88,250    1 %   81,685    1 %

20

  

NET INCOME OF MAJORITY INTEREST

   -257,097    -2 %   -206,862    -2 %

 

4

 

www.desc.com.mx


CONSOLIDATED INCOME STATEMENT

BREAKDOWN OF MAIN CONCEPTS

(Thousands of Pesos)

 

REF R


  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


    SECOND QUARTER
OF LAST YEAR


 
          Amount

   %

    Amount

   %

 

1

  

NET SALES

   11,039,893    100 %   11,345,784    100 %

21

  

DOMESTIC

   5,733,754    52 %   6,584,851    58 %

22

  

FOREIGN

   5,306,139    48 %   4,760,933    42 %

23

  

TRANSLATED INTO DOLLARS (***)

   473,262    4 %   427,862    4 %

6

  

TOTAL FINANCING COST

   487,853    100 %   502,916    100 %

24

  

INTEREST PAID

   476,147    98 %   526,319    105 %

25

  

EXCHANGE LOSSES

   117,317    24 %   77,536    15 %

26

  

INTEREST EARNED

   11,434    2 %   -17,052    -3 %

27

  

EXCHANGE PROFITS

   0    0 %   0    0 %

28

  

GAIN DUE TO MONETARY POSITION

   -134,138    -27 %   -121,567    -24 %

42

  

LOSS IN UDI’s ACTUALIZATION

   39,961    8 %   37,680    7 %

43

  

PROFIT IN UDI’s ACTUALIZATION

   0    0 %   0    0 %

8

  

OTHER FINANCIAL OPERATIONS

   -5,922    100 %   59,761    100 %

29

  

OTHER NET EXPENSES (INCOME) NET

   -5,922    100 %   59,761    100 %

30

  

(PROFIT) LOSS ON SALE OF OWN SHARES

   0    0 %   0    0 %

31

  

(PROFIT) LOSS ON SALE OF SHORT-TERM INVESTMENTS

   0    0 %   0    0 %

10

  

RESERVE FOR TAXES AND WORKERS’ PROFIT SHARING

   164,571    100 %   324,684    100 %

32

  

INCOME TAX

   114,227    69 %   186,987    58 %

33

  

DEFERRED INCOME TAX

   6,748    4 %   97,904    30 %

34

  

WORKERS’ PROFIT SHARING

   43,596    26 %   39,793    12 %

35

  

DEFERRED WORKERS’ PROFIT SHARING

   0    0 %   0    0 %

 

5

 

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CONSOLIDATED INCOME STATEMENT

OTHER CONCEPTS

(Thousands of Pesos)

 

REF R


  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


   SECOND QUARTER
OF LAST YEAR


          Amount

   Amount

36

  

TOTAL SALES

   11,472,901    11,925,242

37

  

NET INCOME OF THE YEAR

   0    0

38

  

NET SALES (**)

   21,803,153    21,235,403

39

  

OPERATION INCOME (**)

   658,198    900,252

40

  

NET INCOME OF MAJORITY INTEREST (**)

   -2,486,697    -1,168,694

41

  

NET CONSOLIDATED INCOME (**)

   -2,286,450    -1,286,431
                

(**) BASED ON INFORMATION FOR THE LAST TWELVE MONTHS

 

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CONSOLIDATED INCOME STATEMENT

FROM APRIL THE 2ND TO JUNE THE 30th OF 2004 AND 2003

(Thousands of Pesos)

 

REF R


  

CONCEPTS


   SECOND QUARTER
PRESENT YEAR


     SECOND QUARTER
OF LAST YEAR


 
          Amount

    %

     Amount

   %

 

1

  

NET SALES

   5,680,059     100 %    5,999,042    100 %

2

  

COST OF SALES

   4,607,230     81 %    4,586,583    76 %

3

  

GROSS INCOME

   1,072,829     19 %    1,412,459    24 %

4

  

OPERATING EXPENSES

   829,556     15 %    951,054    16 %

5

  

OPERATING INCOME

   243,273     4 %    461,405    8 %

6

  

TOTAL FINANCING COST

   351,765     6 %    51,038    1 %

7

  

INCOME AFTER FINANCING COST

   -108,492     -2 %    410,367    7 %

8

  

OTHER FINANCIAL OPERATIONS

   -45,052     -1 %    53,744    1 %

9

  

INCOME BEFORE TAXES AND WORKERS’ PROFIT SHARING

   -63,440     -1 %    356,623    6 %

10

  

RESERVE FOR TAXES AND WORKERS’ PROFIT SHARING

   32,406     1 %    228,313    4 %

11

  

NET INCOME AFTER TAXES AND WORKERS’ PROFIT SHARING

   -95,846     -2 %    128,310    2 %

12

  

SHARE IN NET INCOME OF SUBSIDIARIES AND NON-CONSOLIDATED ASSOCIATES

   (479 )   0 %    0    0 %

13

  

CONSOLIDATED NET INCOME OF CONTINUOUS

   -96,325     -2 %    128,310    2 %

14

  

INCOME OF DISCONTINUOUS OPERATIONS

   12,038     0 %    -77,487    -1 %

15

  

CONSOLIDATED NET INCOME BEFORE EXTRAORDINARY ITEMS

   -108,363     -2 %    205,797    3 %

16

  

EXTRAORDINARY ITEMS NET EXPENSES (INCOME)

   0     0 %    0    0 %

17

  

NET EFFECT AT THE BEGINNING OF THE YEAR BY CHANGES IN ACCOUNTING PRINCIPLES

   0     0 %    0    0 %

18

  

NET CONSOLIDATED INCOME

   -108,363     -2 %    205,797    3 %

19

  

NET INCOME OF MINORITY INTEREST

   32,111     1 %    75,269    1 %

20

  

NET INCOME OF MAJORITY INTEREST

   -140,474     -2 %    130,528    2 %

 

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CONSOLIDATED INCOME STATEMENT

BREAKDOWN OF MAIN CONCEPTS

(Thousands of Pesos)

 

REF R


  

CONCEPTS


   SECOND QUARTER
OF PRESENT YEAR


    SECOND QUARTER
OF LAST YEAR


 
          Amount

   %

    Amount

   %

 
1    NET SALES    5,680,059    100 %   5,999,042    100 %
21    DOMESTIC    2,932,984    52 %   3,684,672    61 %
22    FOREIGN    2,747,075    48 %   2,314,370    39 %
23    TRANSLATED INTO DOLLARS (***)    241,175    4 %   212,180    4 %
6    TOTAL FINANCING COST    351,765    100 %   51,038    100 %
24    INTEREST PAID    236,979    67 %   274,969    539 %

25

   EXCHANGE LOSSES    117,621    33 %   -167,681    -329 %
26    INTEREST EARNED    9,181    3 %   5,419    11 %
27    EXCHANGE PROFITS    0    0 %   0    0 %
28    GAIN DUE TO MONETARY POSITION    4,222    1 %   -43,325    -85 %
29    LOSS IN UDI’s ACTUALIZATION    2,124    1 %   0    0 %
     PROFIT IN UDI’s ACTUALIZATION    0    0 %   7,506    15 %
8    OTHER FINANCIAL OPERATIONS    -45,052    100 %   53,744    100 %
29    OTHER NET EXPENSES (INCOME) NET    -45,052    100 %   53,744    100 %
30    (PROFIT) LOSS ON SALE OF OWN SHARES    0    0 %   0    0 %
31    (PROFIT) LOSS ON SALE OF SHORT-TERM INVESTMENTS    0    0 %   0    0 %
10    RESERVE FOR TAXES AND WORKERS’ PROFIT SHARING    32,406    100 %   228,313    100 %
32    INCOME TAX    44,886    139 %   91,653    40 %
33    DEFERRED INCOME TAX    -29,063    -90 %   120,308    53 %
34    WORKERS’ PROFIT SHARING    16,583    51 %   16,352    7 %
35    DEFERRED WORKERS’ PROFIT SHARING    0    0 %   0    0 %

 

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CONSOLIDATED CASH FLOW STATEMENT

FROM JANUARY THE 1ST TO JUNE 30 OF 2004 AND 2003

(Thousands of Pesos)

 

REF C


 

CONCEPTS


  SECOND
QUARTER OF
PRESENT YEAR


  SECOND
QUARTER OF
LAST YEAR


        Amount

  Amount

1   CONSOLIDATED NET INCOME   -168,847   -125,177
2   +(-) ITEMS ADDED TO INCOME WHICH DO NOT REQUIRE USING CASH   722,226   692,252
3   CASH FLOW FROM NET INCOME OF THE YEAR   553,379   567,075
4   CASH FLOW FROM CHANGE IN WORKING CAPITAL   -597,137   -561,445
5   CASH GENERATED (USED) IN OPERATING ACTIVITIES   -43,758   5,630
6   CASH FLOW FROM EXTERNAL FINANCING   -3,131,518   -1,273,166
7   CASH FLOW FROM INTERNAL FINANCING   2,649,128   0
8   CASH FLOW GENERATED (USED) BY FINANCING   -482,390   -1,273,166
9   CASH FLOW GENERATED (USED) IN INVESTMENT ACTIVITIES   204,793   -385,874
10   NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS   -321,355   -1,653,410
11   CASH AND SHORT-TERM INVESTMENTS AT THE BEGINNING OF PERIOD   731,682   2,542,519
12   CASH AND SHORT-TERM INVESTMENTS AT THE END OF PERIOD   410,327   889,109

 

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CONSOLIDATED CASH FLOW STATEMENT

BREAKDOWN OF MAIN CONCEPTS

(Thousands of Pesos)

 

REF C


 

CONCEPTS


  SECOND QUARTER OF
PRESENT YEAR


  SECOND
QUARTER OF
LAST YEAR


        Amount

  Amount

2   + (-) ITEMS ADDED TO INCOME WHICH DO NOT REQUIRE   722,226   692,252
13   DEPRECIATION AND AMORTIZATION FOR THE YEAR   645,440   692,252
14   + (-) NET INCREASE (DECREASE) IN PENSIONS FUND AND SENIORITY PREMIUMS   0   0
15   + (-) NET LOSS (PROFIT) IN MONEY EXCHANGE   0   0
16   + (-) NET LOSS (PROFIT) IN ASSETS AND LIABILITIES ACTUALIZATION   0   0
17   + (-) OTHER ITEMS   76,786   0
4   CASH FLOW FROM CHANGE IN WORKING CAPITAL   -597,137   -561,445
18   + (-) DECREASE (INCREASE) IN ACCOUNT RECEIVABLE   -654,773   -975,479
19   + (-) DECREASE (INCREASE) IN INVENTORIES   81,268   80,262
20   + (-) DECREASE (INCREASE) IN OTHER ACCOUNT RECEIVABLE   -44,519   159,020
21   + (-) INCREASE (DECREASE) IN SUPPLIER ACCOUNT   194,732   1,419
22   + (-) INCREASE (DECREASE) IN OTHER LIABILITIES   -173,845   173,333
6   CASH FLOW FROM EXTERNAL FINANCING   -3,131,518   -1,273,166
23   + SHORT-TERM BANK AND STOCK MARKET FINANCING   -14,890   -1,080,126
24   + LONG-TERM BANK AND STOCK MARKET FINANCING   -3,116,628   -193,040
25   + DIVIDEND RECEIVED   0   0
26   + OTHER FINANCING   0   0
27   (-) BANK FINANCING AMORTIZATION   0   0
28   (-) STOCK MARKET AMORTIZATION   0   0
29   (-) OTHER FINANCING AMORTIZATION   0   0
7   CASH FLOW FROM INTERNAL FINANCING   2,649,128   0
30   + (-) INCREASE (DECREASE) IN CAPITAL STOCKS   2649128    
31   (-) DIVIDENDS PAID   0   0
32   + PREMIUM ON SALE OF SHARES   0   0
33   + CONTRIBUTION FOR FUTURE CAPITAL INCREASES   0   0
9   CASH FLOW GENERATED (UTILIZED) IN INVESTMENT ACTIVITIES   204,793   -385,874
34   + (-) DECREASE (INCREASE) IN STOCK INVESTMENTS OF A PERMANENT NATURE   -128,255   0
35   (-) ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT   84,646   -205,837
36   (-) INCREASE IN CONSTRUCTIONS IN PROGRESS   308,820   -180,037
37   + SALE OF OTHER PERMANENT INVESTMENTS   0   0
38   + SALE OF TANGIBLE FIXED ASSETS   0   0
39   + (-) OTHER ITEMS   -60,418   0

 

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RATIOS

CONSOLIDATED

 

REF P


  

CONCEPTS


   SECOND QUARTER OF
PRESENT FINANCIAL
YEAR


   SECOND QUARTER OF
PREVIOUS FINANCIAL
YEAR


     YIELD                    
1    NET INCOME TO NET SALES    -1.53    %    -1.1    %
2    NET INCOME TO STOCK HOLDERS’ EQUITY (**)    -27.7    %    -14.66    %
3    NET INCOME TO TOTAL ASSETS (**)    -8.42    %    -4.28    %
4    CASH DIVIDENDS TO PREVIOUS YEAR NET INCOME    0    %    0    %
5    INCOME DUE TO MONETARY POSITION TO NET INCOME    -79.44    %    -97.12    %
     ACTIVITY                    
6    NET SALES TO NET ASSETS (**)    0.8    TIMES    0.71    TIMES
7    NET SALES TO FIXED ASSETS (**)    1.92    TIMES    1.57    TIMES
8    INVENTORIES ROTATION (**)    5.48    TIMES    5.22    TIMES
9    ACCOUNTS RECEIVABLE IN DAYS OF SALES    61    DAYS    44    DAYS
10    PAID INTEREST TO TOTAL LIABILITIES WITH COST (**)    8.75    %    0    %
     LEVERAGE                    
11    TOTAL LIABILITIES TO TOTAL ASSETS    53.57    %    60.48    %
12    TOTAL LIABILITIES TO STOCK HOLDERS’ EQUITY    1.15    TIMES    1.53    TIMES
13    FOREIGN CURRENCY LIABILITIES TO TOTAL LIABILITIES    50.26    %    52.18    %
14    LONG-TERM LIABILITIES TO FIXED ASSETS    74.04    %    62.95    %
15    OPERATING INCOME TO INTEREST PAID    1.03    TIMES    1.31    TIMES
16    NET SALES TO TOTAL LIABILITIES (**)    1.5    TIME    1.17    TIME
     LIQUIDITY                    
17    CURRENT ASSETS TO CURRENT LIABILITIES    2.03    TIME    1.17    TIME
18    CURRENT ASSETS LESS INVENTORY TO CURRENT LIABILITIES    1.31    TIME    0.76    TIME
19    CURRENTS ASSETS TO TOTAL LIABILITIES    0.63    TIME    0.49    TIME
20    AVAILABLE ASSETS TO CURRENT LIABILITIES    9.14    %    11.72    %
     CASH FLOW                    
21    CASH FLOW FROM NET INCOME TO NET SALES    5.01    %    5    %
22    CASH FLOW FROM CHANGES IN WORKING CAPITAL TO NET SALES    -5.41    %    -4.95    %
23    CASH GENERATED (USED) IN OPERATING TO INTEREST PAID    -0.09    TIME    0.01    TIME
24    EXTERNAL FINANCING TO CASH GENERATED (USED) IN FINANCING    649.17    %    100    %
25    INTERNAL FINANCING TO CASH GENERATED (USED) IN FINANCING    -549.17    %    0    %
26    ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT TO CASH GENERATED (USED) IN INVESTMENT ACTIVITIES    41.33    %    53.34    %

(**) BASED ON INFORMATION FOR THE LAST TWELVE MONTHS

 

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DATA PER SHARE

 

REF D

  

CONCEPTS


   SECOND QUARTER OF
PRESENT FINANCIAL
YEAR


   SECOND QUARTER OF
PREVIOUS FINANCIAL
YEAR


          Amount

        Amount

    
1    BASIC PROFIT PER ORDINARY SHARE (**)      -1.57           -0.74     
2    BASIC PROFIT PER PREFERENT SHARE (**)      0           0     
3    DILUTED PROFIT PER ORDINARY SHARE (**)      0           0     
4    CONTINUOUS OPERATING PROFIT PER COMMON SHARE(**)      0           0     
5    EFFECT OF DISCONTINUOUS OPERATING ON CONTINUOUS OPERATING PROFIT PER SHARE (**)    $ 0.00         $ 0.00     
6    EFFECT OF EXTRAORDINARY PROFIT AND LOSS ON CONTINUOUS OPERATING PROFIT PER SHARE (**)      0           0     
7    EFFECT BY CHANGES IN ACCOUNTING POLICIES ON CONTINUOUS OPERATING PROFIT PER SHARE (**)      0           0     
8    CARRYING VALUE PER SHARE      3.93           5.82     
9    CASH DIVIDEND ACCUMULATED PER SHARE      0           0     
10    DIVIDEND IN SHARES PER SHARE      0    SHARES      0    SHARES
11    MARKET PRICE TO CARRYING VALUE      3.26    TIME      0.72    TIME
12    MARKET PRICE TO BASIC PROFIT PER ORDINARY SHARE (**)      0    TIME      0    TIME
13    MARKET PRICE TO BASIC PROFIT PER PREFERENT SHARE (**)      0           0     

(**) TO CALCULATE THE DATA PER SHARE USE THE NET INCOME FOR THE LAST TWELVE MONTHS

 

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Auditor Notes

 

[ENGLISH TRANSLATION]

 

SIGNIFICANT ACCOUNTING POLICIES

 

THE ACCOUNTING POLICIES FOLLOWED BY THE COMPANY ARE IN CONFORMITY WITH MEXICAN GAAP, WHICH REQUIRE MANAGEMENT TO MAKE CERTAIN ESTIMATES AND USE CERTAIN ASSUMPTIONS TO DETERMINE THE VALUATION OF SOME OF THE BALANCES INCLUDED IN THE FINANCIAL STATEMENTS AND TO MAKE THE DISCLOSURES REQUIRED FOR INCLUSION THEREIN. ALTHOUGH ACTUAL RESULTS MAY DIFFER FROM THOSE ESTIMATES, MANAGEMENT BELIEVES THAT THE ESTIMATES AND ASSUMPTIONS USED WERE APPROPRIATE IN THE CIRCUMSTANCES.

 

THE SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE COMPANY ARE AS FOLLOWS:

 

CHANGES IN ACCOUNTING POLICIES – IN 2001 THE NEW BULLETIN C-2 “FINANCIAL INSTRUMENTS”, WENT INTO EFFECT. THIS BULLETIN ESTABILSHES THE METHODOLOGY FOR VALUING AND RECORDING FINANCIAL INSTRUMENTS, AND REQUIRES RECOGNITION OF ALL EFFECTS OF THE FINANCIAL INSTRUMENTS CONTRACTED ON THE BALANCE SHEET AS EITHER ASSETS OR LIABILITIES, UNDER NET COMPREHENSIVE FINANCIAL RESULT. THE FINANCIAL INSTRUMENTS THAT HAVE BEEN DESIGNATED AND EFFECTIVELY FUNCTION AS HEDGING OF ASSETS AND LIABILITIES OR FUTURE TRANSACTIONS WILL AFFECT THE ASSETS, LIABILITIES OR THE RESPECTIVE TRANSACTIONS WHEN THEY ARE REALIZED, SETTLED OR TAKE PLACE, RESPECTIVELY.

 

AS OF 2001, INTERNATIONAL ACCOUNTING STANDARD 40, “INVESTMENT PROPERTIES,” ENTERED INTO EFFECT ON A SUPPLEMENTAL BASIS, ESTABLISHING VALUATION CRITERIA FOR PROPERTIES WHOSE PURPOSE IS TO GENERATE PROFITS OR INCREASE VALUE OR BOTH. PURSUANT TO CIRCULAR 55 ISSUED BY THE MEXICAN INSTITUTE OF PUBLIC ACCOUNTANTS, THE VALUATION MODEL APPLICABLE TO MEXICO IS THE COST MODEL, WHICH ESTABLISHES THAT SUCH PROPERTIES MUST BE VALUED AT ACQUISITION AND/OR CONSTRUCTION COST AND ARE RESTATED BY APPLYING THE NPCI, LESS THE RESPECTIVE ACCUMULATED DEPRECIATION.

 

BEGINNING JANUARY 2000, THE COMPANY ADOPTED THE PROVISIONS OF NEW BULLETIN D-4, “ACCOUNTING FOR INCOME AND ASSET TAXES AND EMPLOYEE PROFIT SHARING”. THE EFFECT OF THE ADOPTION WAS TO RECOGNIZE, AN INITIAL LONG-TERM LIABILITY FOR DEFERRED INCOME TAXES AFFECTING STOCKHOLDERS’ EQUITY UNDER “CUMULATIVE EFFECT OF INITIAL RECOGNITION OF DEFERRED INCOME TAXES”.

 

AS A RESULT OF THE IMPLEMENTATION OF THE ADOPTION OF BULLETIN D-4 MENTIONED ABOVE, THE COMPANY CHANGED ITS METHOD FOR RECORDING THE EFFECT FROM TAX CONSOLIDATION. UNTIL 1999, IT WAS RECORDED IN THE YEAR IN WHICH THE RESPECTIVE ANNUAL CONSOLIDATED TAX RETURN WAS FILED. BEGINNING IN 2000, THIS BENEFIT IS RECORDED IN RESULTS OF THE YEAR IN WHICH THE BENEFIT IS GENERATED.

 

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BASIS OF CONSOLIDATION – THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THOSE OF DESC AND THE SUBSIDIARIES IN WHICH THERE IS STOCKHOLDING AND ADMINISTRATIVE CONTROL. ALL SIGNIFICANT INTERCOMPANY TRANSACTIONS AND BALANCES HAVE BEEN ELIMINATED IN THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS.

 

THE EQUITY IN NET INCOME (LOSS) AND CHANGES IN STOCKHOLDERS’ EQUITY OF THOSE SUBSIDIARIES THAT WERE ACQUIRED OR SOLD, HAS BEEN INCLUDED IN THE FINANCIAL STATEMENTS AS OF OR UP TO THE DATE ON WHICH THE TRANSACTIONS TOOK PLACE AND WAS RESTATED IN TERMS OF THE PURCHASING POWER AS OF THE END OF THE LATEST PERIOD.

 

INVESTMENTS IN SHARES OF ASSOCIATED COMPANIES AND UNCONSOLIDATED SUBSIDIARIES ARE RECORDED USING THE EQUITY METHOD.

 

TRANSLATION OF FINANCIAL STATEMENTS OF SUBSIDIARIES – THE FINANCIAL STATEMENTS OF FOREIGN SUBSIDIARIES, WHOSE OPERATIONS ARE NOT AN INTEGRAL PART OF THE MEXICAN COMPANIES (“FOREIGN ENTITIES”), ARE RESTATED FOR THE INFLATION RATE OF THE RESPECTIVE FOREIGN COUNTRY AND ARE TRANSLATED INTO MEXICAN PESOS AT THE EXCHANGE RATE IN EFFECT AT THE END OF THE YEAR. THE FINANCIAL STATEMENTS OF FOREIGN SUBSIDIARIES, WHOSE OPERATIONS ARE AN INTEGRAL PART OF THE MEXICAN COMPANIES (“INTEGRATED FOREIGN OPERATIONS”), ARE TRANSLATED USING YEAR-END EXCHANGE RATES FOR MONETARY ITEMS AND HISTORICAL EXCHANGE RATES FOR NONMONETARY ITEMS, AND THE TRANSLATED FINANCIAL STATEMENTS ARE THEN RESTATED USING THE NATIONAL CONSUMER PRICE INDEX (NCPI) OF MEXICO. THE EFFECTS OF TRANSLATING FOREIGN ENTITIES ARE RECORDED DIRECTLY IN STOCKHOLDERS’ EQUITY IN THE “CUMULATIVE EFFECT OF RESTATEMENT” ACCOUNT. THE EFFECTS OF TRANSLATING INTEGRATED FOREIGN OPERATIONS ARE INCLUDED IN THE “INTEGRAL FINANCING RESULT” OF THE YEAR IN THE “MONETARY POSITION GAIN” ACCOUNT. SUCH EFFECTS ARE NOT SIGNIFICANT.

 

RECOGNITION OF THE EFFECTS OF INFLATION – THE COMPANIES RESTATE ALL OF THEIR FINANCIAL STATEMENTS IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THE END OF THE LATEST PERIOD, THEREBY COMPREHENSIVELY RECOGNIZING THE EFFECTS OF INFLATION. THE PRIOR YEAR AMOUNTS PRESENTED HEREIN DIFFER FROM THOSE ORIGINALLY REPORTED IN TERMS OF MEXICAN PESOS OF THE RESPECTIVE YEAR. CONSEQUENTLY, ALL FINANCIAL STATEMENT AMOUNTS ARE COMPARABLE, BOTH FOR THE CURRENT AND THE PRIOR YEAR, BECAUSE ALL ARE STATED IN TERMS OF MEXICAN PESOS OF THE SAME PURCHASING POWER.

 

CASH EQUIVALENTS – INVESTMENTS IN MARKETABLE SECURITIES CONSIST MAINLY OF ACCEPTANCES, BANK PROMISSORY NOTES, AND PAPER ISSUED BY THE MEXICAN AND UNITED STATES OF AMERICA GOVERNMENTS, AT MARKET (COST PLUS ACCRUED INTEREST).

 

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INVENTORIES AND COST OF SALES – INVENTORIES ARE ORIGINALLY RECORDED AT THEIR ACQUISITION OR MANUFACTURING COST AND RESTATED TO THEIR SPECIFIC NET REPLACEMENT COST WITHOUT EXCEEDING NET REALIZABLE VALUE. SUBSTANTIALLY ALL SUBSIDIARIES COMPUTE COST OF SALES USING THE REPLACEMENT COST AT THE TIME OF SALE.

 

LAND HELD FOR DEVELOPMENT AND REAL ESTATE PROJECTS – UNDEVELOPED LAND REPRESENTS LAND RESERVES THAT, TOGETHER WITH DEVELOPED LAND AND ONGOING AND COMPLETED PROJECTS, ARE CONSIDERED NON-CURRENT INVENTORIES, SINCE THEY ARE HELD FOR SALE. THEY INCLUDE ACQUISITION, DEVELOPMENT AND CONSTRUCTION COSTS AND ARE RESTATED IN U.S. DOLLARS BASED ON THE SLIPPAGE OF THE MARKET EXCHANGE RATE FOR THE PURPOSE OF SHOWING VALUES IN ACCORDANCE WITH THE CURRENT SITUATION OF THE REAL ESTATE MARKET.

 

THE COMPANY CAPITALIZES THE NET COMPREHENSIVE FINANCING COST ON DEBT USED TO FINANCE REAL ESTATE PROJECTS IN PROGRESS, IN ADDITION TO THEIR CONSTRUCTION AND DEVELOPMENT COSTS.

 

INVESTMENT IN SHARES – INVESTMENT IN SHARES HAS BEEN RECORDED USING THE EQUITY METHOD, BASED ON THE FINANCIAL STATEMENTS PREPARED ON THE SAME BASIS AS THOSE OF THE COMPANY, AND IS PRESENTED UNDER OTHER ASSETS IN THE BALANCE SHEET.

 

PROPERTY, PLANT AND EQUIPMENT – THESE ITEMS IS RECORDED AT ACQUISITION COST AND IS RESTATED BY USING NCPI FACTORS. FOR FOREIGN FIXED ASSETS, THEIR ACQUISITION COST IS RESTATED FOR INFLATION OF THE COUNTRY OF ORIGIN AND THE FLUCTUATION OF THE MEXICAN PESO AGAINST SUCH CURRENCY IS CONSIDERED.

 

DEPRECIATION IS CALCULATED BY THE STRAIGHT-LINE METHOD BASED ON THE REMAINING USEFUL LIVES OF THE ASSETS.

 

THE COMPANIES CAPITALIZE THE NET COMPREHENSIVE FINANCING COST ON DEBT USED TO FINANCE CONSTRUCTION IN PROGRESS AND THE INSTALLATION OF EQUIPMENT, UNTIL THEY ARE PLACED IN SERVICE.

 

IMPAIRMENT OF FIXED ASSETS – THE AMOUNTS SHOWN IN THE ACCOMPANYING CONSOLIDATED STATEMENTS OF INCOME BASICALLY REFER TO THE REDUCTION IN VALUE OF PROPERTY AND EQUIPMENT OF SOME PRODUCTION FACILITIES, IN ORDER TO REFLECT THEIR REALIZABLE VALUE IN ACCORDANCE WITH THE CURRENT SITUATION OF SUCH BUSINESSES.

 

GOODWILL – THE GOODWILL RESULTING FROM ACQUISITIONS MADE IN EXCESS OF BOOK VALUE IS AMORTIZED OVER PERIODS RANGING FROM FIVE TO 20 YEARS, THE TERMS OVER WHICH THE BENEFITS FROM THE INVESTMENT WILL BE REALIZED.

 

FINANCIAL INSTRUMENTS – FINANCIAL ASSETS AND LIABILITIES RESULTING FROM ANY TYPE OF FINANCIAL INSTRUMENT, EXCEPT FOR INVESTMENTS IN FINANCIAL INSTRUMENTS HELD TO MATURITY, ARE PRESENTED IN THE BALANCE SHEET AT FAIR VALUE. THE EFFECTS OF THE

 

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VALUATION OF A FINANCIAL ASSET OR LIABILITY ARE RECOGNIZED IN RESULTS OF OPERATIONS OF THE RESPECTIVE PERIOD. INVESTMENTS IN FINANCIAL INSTRUMENTS HELD TO MATURITY ARE VALUED AT ACQUISITION COST. THE COSTS AND YIELDS OF FINANCIAL INSTRUMENTS ARE RECOGNIZED IN RESULTS OF THE PERIOD IN WHICH THEY OCCUR.

 

DERIVATE FINANCIAL INSTRUMENTS – THE INTERNAL CONTROL SYSTEM ESTABLISHED BY THE COMPANY INCLUDES POLICIES AND PROCEDURES TO MANAGE ITS EXPOSURE TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES USING DERIVATIVE FINANCIAL INSTRUMENTS. THESE INSTRUMENTS ARE TRADED ONLY WITH AUTHORIZED INSTITUTIONS AND READING LIMITS HAVE BEEN ESTABLISHED FOR EACH INSTITUTION. THE COMPANY DOES NOT CARRY OUT TRANSACTIONS WITH DERIVATIVE FINANCIAL INSTRUMENTS FOR THE PURPOSE OF SPECULATION.

 

THE DERIVATIVE FINANCIAL INSTRUMENTS CURRENTLY USED BY THE COMPANY ARE PRIMARILY HEDGE CONTRACTS TO REDUCE ITS EXPOSURE TO EXCHANGE RATE FLUCTUATIONS. PREMIUMS PAID ARE AMORTIZED OVER THE TERM OF THE DERIVATIVE FINANCIAL INSTRUMENT USING THE UNPAID BALANCE OF THE LIABILITY BEING HEDGED.

 

DERIVATIVE FINANCIAL INSTRUMENTS IDENTIFIED AS HEDGES ARE VALUED BY APPLYING THE SAME VALUATION CRITERIA USED FOR THE ASSETS OR LIABILITIES HEDGED, AND THE EFFECTS OF THEIR VALUATION ARE RECOGNIZED IN RESULTS OF OPERATIONS, NET OF COSTS, EXPENSES, OR REVENUE FROM THE ASSETS OR LIABILITIES WHOSE RISKS ARE BEING HEDGED. THE FINANCIAL ASSETS OR LIABILITIES GENERATED BY THESE INSTRUMENTS ARE PRESENTED IN THE BALANCE SHEET AS A REDUCTION OF THE LIABILITIES OR ASSETS WHOSE RISKS ARE BEING HEDGED.

 

INCOME TAX, ASSET TAX AND EMPLOYEE PROFIT SHARING – INCOME TAX (ISR) AND EMPLOYEE STATUTORY PROFIT-SHARING (PTU) ARE RECORDED IN RESULTS OF THE YEAR IN WHICH THEY ARE INCURRED. DEFERRED INCOME TAX ASSETS AND LIABILITIES ARE RECOGNIZED FOR TEMPORARY DIFFERENCES RESULTING FROM COMPARING THE BOOK AND TAX VALUES OF ASSETS AND LIABILITIES, PLUS ANY FUTURE BENEFITS FROM TAX LOSS CARRYFORWARDS DEFERRED INCOME TAX ASSETS ARE REDUCES BY ANY BENEFITS THAT, IN THE OPINION OF MANAGEMENT, WILL PROBABLY NOT BE REALIZED. DEFERRED PTU IS DERIVED FROM TEMPORARY DIFFERENCES BETWEEN THE BOOK RESULT AND INCOME FOR PTU PURPOSES AND IS RECOGNIZED ONLY WHEN IT CAN BE REASONABLY ASSUMED THAT THEY WILL GENERATE A LIABILITY OR BENEFIT, AND THERE IS NO INDICATION THAT THIS SITUATION WILL CHANGE IN SUCH A WAY THAT THE LIABILITIES WILL NOT BE PAID OR BENEFITS WILL NOT BE REALIZED.

 

THE ASSET TAX PAID THAT IS EXPECTED TO BE RECOVERABLE IS RECORDED AS AN ADVANCE PAYMENT OF INCOME TAX AND IS PRESENTED ON THE BALANCE SHEET WITH DEFERRED ISR.

 

EMPLOYEE RETIREMENT OBLIGATIONS – THE LIABILITY FROM SENIORITY PREMIUMS, PENSIONS AND RETIREMENT PAYMENTS, WHICH IS SIMILAR TO A PENSION, IS RECORDED AS ACCRUED, AND IS CALCULATED BY INDEPENDENT

 

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ACTUARIES BASED ON THE PROJECTED CREDIT UNIT METHOD, AT REAL INTEREST RATES. THEREFORE, THE LIABILITY IS BEING RECOGNIZED WHICH, AT PRESENT VALUE, IS EXPECTED TO COVER THE OBLIGATION FOR THESE BENEFITS AT THE ESTIMATED RETIREMENT DATE OF ALL THE COMPANIES’ EMPLOYEES. SEVERANCE PAYMENTS ARE CHARGED TO RESULTS WHEN THEY ARE DETERMINED TO BE PAYABLE.

 

RESTATED STOCKHOLDERS’ EQUITY – THIS ITEM CONSISTS OF MONETARY POSITION RESULT ACCUMULATED THROUGH THE FIRST RESTATEMENT OF THE FINANCIAL STATEMENTS AND THE GAIN (LOSS) FROM HOLDING MONETARY ASSETS, BECAUSE PRICE LEVELS INCREASED ABOVE (BELOW) INFLATION.

 

REVENUE RECOGNITION – REVENUES OF THE SUBSIDIARIES OF THE AUTOPARTS, CHEMICAL AND FOOD SECTORS ARE RECOGNIZED WHEN THE INVENTORIES ARE DELIVERED OR SHIPPED TO CUSTOMERS AND CUSTOMERS ASSUME RESPONSIBILITY FOR THEM.

 

THE REAL ESTATE SECTOR RECOGNIZES THE REVENUES AND COSTS FROM SALES OF URBANIZED PLOTS OF LAND IN RESULTS WHEN THE SALES ARE FORMALIZED AND THE DEPOSITS SECURING THE TRANSACTION ARE RECEIVED. THE INDIVIDUAL ASSIGNMENT OF THE COST OF THE LAND AND REAL ESTATE PROJECT TAKES INTO CONSIDERATION THE RELATIVE SELLING PRICE OF THE TOTAL PROJECT SO AS TO MAINTAIN THE SAME PROFIT MARGIN THROUGHOUT THE PROJECT.

 

REVENUES AND COSTS FROM REAL ESTATE PROJECTS ARE RECORDED ORIGINALLY AS A DEFERRED CREDIT FOR CONSTRUCTION COMMITMENTS AND AS REAL ESTATE PROJECTS IN PROCESS, AND ARE RECOGNIZED IN RESULTS BASED ON THE “PERCENTAGE OF COMPLETION” METHOD. THEREFORE, REVENUE IS MATCHED WITH COSTS INCURRED TO REACH THE STAGE OF COMPLETION TO TERMINATE THE PROJECT. IF THE LAST ESTIMATED COSTS DETERMINED EXCEED THE TOTAL REVENUES CONTRACTED, THE RESPECTIVE PROVISION IS CHARGED TO RESULTS OF THE YEAR.

 

INTEGRAL FINANCIAL RESULT – THIS REPRESENTS THE NET EFFECT OF INTEREST EARNED AND INCURRED, EXCHANGE GAINS AND LOSSES AND MONETARY POSITION GAIN OR LOSS ON, WHICH IS THE RESULT OF MAINTAINING MONETARY ASSETS AND LIABILITIES WHOSE REAL PURCHASING POWER IS MODIFIED BY THE EFFECTS OF INFLATION.

 

FOREIGN CURRENCY TRANSACTIONS ARE RECORDED AT THE EFFECTIVE EXCHANGE RATE AT THE DATE THE TRANSACTIONS ARE CARRIED OUT AND FOREIGN CURRENCY ASSETS AND LIABILITIES ARE ADJUSTED TO THE EXCHANGE RATE EFFECTIVE AT YEAR-END.

 

INCOME PER SHARE – BASIC INCOME (LOSS) PER ORDINARY SHARE IS CALCULATED BY DIVIDING CONSOLIDATED NET INCOME (LOSS) OF MAJORITY STOCKHOLDERS BY THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE YEAR.

 

COMPREHENSIVE INCOME (LOSS) – COMPREHENSIVE INCOME (LOSS) IS COMPRISED OF THE NET CONSOLIDATED INCOME FOR THE PERIOD PLUS

 

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(LESS) ANY GAINS OR LOSSES THAT UNDER SPECIFIC ACCOUNTING REGULATIONS ARE RECORDED DIRECTLY IN STOCKHOLDERS’ EQUITY, SUCH AS THE GAIN OR LOSS FROM HOLDING NONMONETARY ASSETS.

 

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STOCK EXCHANGE CODE: DESC

   QUARTER: 2    YEAR: 2004

 

Annex 3

SHARE OWNERSHIP

 

COMPANY NAME


  

MAIN ACTIVITIES


   NUMBER OF SHARES

   OWNERSHIP

  

TOTAL AMOUNT

(Thousands of Pesos)


SUBSIDIARIES


                  ACQUISITION COST

   PRESENT VALUE

BOSQUES DE LAS LOMAS, S.A. DE C.V.

   Real Estate Sector    34,051,500    100.00    71,069    71,069

OPERADORA DE NAYARIT, S.A. DE C.V.

   Real Estate Sector    49    78.12    115,392    115,392

PROMOCIONES BOSQUES, S.A. DE C.V.

   Real Estate Sector    100,402,106    99.99    411,021    411,021

CORPORATIVO DINE, S.A. DE C.V

   Real Estate Sector    2,344,119,922    99.99    10,460    10,460

HOLDING DICOMEX, S.A. DE C.V

   Real Estate Sector    70,870,000    50.00    89,140    89,140

TURISTICA AKKO, S.A. DE C.V.

   Real Estate Sector    9,998    99.98    -1,844    -1,844

BOSQUES DE SANTA FE, S.A. DE C.V.

   Real Estate Sector    1,361    99.92    -52,591    -52,591

CAÑA DE SANTA FE, S.A DE C.V.

   Real Estate Sector    202,939,999    73.00    905,958    905,958

INMOBILIARIA DINE, S.A. DE C.V.

   Real Estate Sector    36,710,199    99.99    93,143    93,143

CANTILES DE MITA

   Real Estate Sector    115,003,237    98.09    2,106,739    2,106,739

CLUB DE GOLF PUNTA MITA, S.A. DE C.V.

   Real Estate Sector    12,410,869    87.69    126,657    126,657

DESC AUTOMOTRIZ, S.A. DE C.V.

   Autoparts Sector    700,968,215    100.00    3,180,400    3,180,400

CORFUERTE, S.A. DE C.V.

   Food Sector    901,413,494    99.34    456,187    456,187

AGROKEN, S.A. DE C.V.

   Food Sector    584,434,261    99.99    579,412    579,412

AUTHENTIC SPECIALITY FOODS

   Food Sector    316,236    99.93    388,070    388,070

AGROBIOS CORPORATIVO

   Food Sector    550,000    99.99    34,813    34,813

CID CENTRO DE INVESTIGACION Y DESARROLLO

   Chemicals Sector    190,386,960    99.99    23,354    23,354

DIRECCION IRSA, S.A. DE C.V.

   Chemicals Sector    4,201,800    99.99    -63,383    -63,383

FENOQUIMIA, S.A. DE C.V.

   Chemicals Sector    5,000,000    99.97    -316,523    -316,523

FORESTACIONES OPERATIVAS DE MEXICO, S.A.

   Chemicals Sector    31,658    99.98    10,030    10,030

GIRSA CORPORATIVO, S.A. DE C.V.

   Chemicals Sector    41,510,000    99.99    10,801    10,801

GIRSA CONCENTRADORA S.A. DE C.V.

   Chemicals Sector    615,124,721    99.99    827,537    827,537

H2ORIZONTES, S.A. DE C.V.

   Chemicals Sector    50,000    99.89    -14,666    -14,666

QUIMIR, S.A. DE C.V.

   Chemicals Sector    1,930,987    99.99    125,686    125,686

RESIRENE, S.A. DE C.V.

   Chemicals Sector    236,058,979    99.99    180,842    180,842

TECNO INDUSTRIA RF, S.A. DE C.V.

   Chemicals Sector    10,675,000    99.99    7,575    7,575

REXCEL, S.A. DE C.V.

   Chemicals Sector    1,001,000    99.99    94,017    94,017

DYNASOL ELASTOMEROS, S.A. (ESPAÑA)

   Chemicals Sector    1    50.00    435,515    435,515

DYNASOL GESTION, S.A.

   Chemicals Sector    1    50.00    2,323    2,323

DYNASOL, L.L.C.

   Chemicals Sector    1    50.00    18,552    18,552

INDUSTRIAS NEGROMEX, S.A. DE C.V.

   Chemicals Sector    585,833,830    99.99    727,988    727,988

PLASTIGLAS DE MEXICO, S.A. DE C.V.

   Chemicals Sector    200,778,201    94.99    102,331    102,331

BIOQUIMEX NATURAL, S.A. DE C.V.

   Chemicals Sector    470,328,749    99.99    -10,240    -10,240

AEROPYCSA, S.A. DE C.V.

   Service Companies    458,329,279    99.99    109,548    109,548

CORPORATIVO ARCOS DESC, S.A. DE C.V.

   Service Companies    260,524,996    99.99    57,680    57,680

DESC CORPORATIVO, S.A. DE C.V.

   Service Companies    266,253,830    99.99    -180,977    -180,977

BIG SOFT, S.A. DE C.V.

   Service Companies    8,612,508    99.99    7,445    7,445

PACIFIC INTERNATIONAL AIRWAYS, S.A. DE C.V.

   Service Companies    244,498    99.99    1,486    1,486

SERVICIOS CORPORATIVOS ARCOS, S.A.DE C.V.

   Service Companies    449    99.77    1,653    1,653

OTHER SUBSIDIARIES (4) (NO. OF SUBS.:)

        1    0    0    0

Associates

                        

1. Others

                  10,672,600    10,672,600

OTHERS

   SERVICE    1    100    194,767    194,767
          0    0    0    0

Other Permanent Investments

                       3,618,846

Total

                       14,486,213

 

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STOCK EXCHANGE CODE:DESC

  QUARTER: 2   YEAR: 2004

 

Annex 5

CREDITS BREAKDOWN

(Thousands of Pesos)

 

Credit Type / Institution


   Amortization Date

   Rate of Interest

   Denominated in Pesos

Banks


         Until 1 Year

   More Than 1 Year

                    LT

Financial Institutions

                   

IFC

   15-Feb-06    3.300    0    0

IFC

   15-Sep-09    4.900    0    0

IFC

   15-Sep-09    10.350    0    0

DEG

   28-Dec-06    4.125    0    0

CITIBANK NA (Syndicate)

   23-Jun-06    3.820    0    0

CITIBANK NA (Syndicate)

   23-Dec-08    3.800    0    0

BBVA BANCOMER (Syndicate)

   23-Dec-08    9.609    0    845,755

Varios Arrend.

   31-Dec-10    8.400    0    0

BANCO SANTANDER MEXICANO

   31-Jan-07    10.024    3,263    5,697

BANCO SANTANDER MEXICANO

   31-Jan-07    7.797    1,029    1,640

INBURSA

   31-Aug-04    12.540    15,000    0

INBURSA

   28-Feb-07    12.900    5,004    29,996

BANAMEX-CITIBANK

   16-May-08    8.061    1,603    8,057

COMERICA BANK

   26-Jul-04    2.670    0    0

COMERICA BANK

   13-Dec-04    3.895    0    0

COMERICA BANK

   9-Jul-04    2.630    0    0

COMERICA BANK

   19-Jul-04    2.630    0    0

COMERICA BANK

   9-Aug-04    2.830    0    0

COMERICA BANK

   20-Jul-04    2.630    0    0

COMERICA BANK

   9-Jul-04    2.600    0    0

COMERICA BANK

   20-Jul-04    2.830    0    0
              
  

TOTAL BANKS

             25,899    891,145
              
  

 

Credit Type / Institution


   Amortization Date

   Rate of Interest

   Amortization of Credits in Foreign Currency with National Entities (Thousands of $)

         Time Interval

Banks


         Current Year

   Until 1 Year

   Until 2 Years

   Until 3 Years

   Until 4 Years

   Until 5 Years

               ST         LP               

Financial Institutions

                                       

IFC

   15-Feb-06    3.300    0    0    0    0    0    0

IFC

   15-Sep-09    4.900    0    0    0    0    0    0

IFC

   15-Sep-09    10.350    0    0    0    0    0    0

DEG

   28-Dec-06    4.125    0    0    0    0    0    0

CITIBANK NA (Syndicate)

   23-Jun-06    3.820    0    0    0    0    0    0

CITIBANK NA (Syndicate)

   23-Dec-08    3.800    0    0    0    0    0    0

BBVA BANCOMER (Syndicate)

   23-Dec-08    9.609    0    0    0    0    0    0

Varios Arrend.

   31-Dec-10    8.400    0    0    0    0    0    0

BANCO SANTANDER MEXICANO

   31-Jan-07    10.024    0    0    0    0    0    0

BANCO SANTANDER MEXICANO

   31-Jan-07    7.797    0    0    0    0    0    0

INBURSA

   31-Aug-04    12.540    0    0    0    0    0    0

INBURSA

   28-Feb-07    12.900    0    0    0    0    0    0

BANAMEX-CITIBANK

   16-May-08    8.061    0    0    0    0    0    0

COMERICA BANK

   26-Jul-04    2.670    0    0    0    0    0    0

COMERICA BANK

   13-Dec-04    3.895    0    0    0    0    0    0

COMERICA BANK

   9-Jul-04    2.630    0    0    0    0    0    0

COMERICA BANK

   19-Jul-04    2.630    0    0    0    0    0    0

COMERICA BANK

   9-Aug-04    2.830    0    0    0    0    0    0

COMERICA BANK

   20-Jul-04    2.630    0    0    0    0    0    0

COMERICA BANK

   9-Jul-04    2.600    0    0    0    0    0    0

COMERICA BANK

   20-Jul-04    2.830    0    0    0    0    0    0
              
  
  
  
  
  

TOTAL BANKS

             0    0    0    0    0    0
              
  
  
  
  
  

Credit Type / Institution


   Amortization Date

   Rate of Interest

   Amortization of Credits in Foreign Currency with foreign entities (Thousands of $)

         Time Interval

Banks


         Current Year

   Until 1 Year

   Until 2 Years

   Until 3 Years

   Until 4 Years

   Until 5 Years

               ST         LP               

Financial Institutions

                                       

IFC

   15-Feb-06    3.300    8,232    8,232    16,479    0    0    0

IFC

   15-Sep-09    4.900    37,056    37,056    74,124    74,124    74,124    111,169

IFC

   15-Sep-09    10.350    49,416    49,416    98,821    98,821    98,821    148,247

DEG

   28-Dec-06    4.125    2,383    1,211    2,410    1,226    0    0

CITIBANK NA (Syndicate)

   23-Jun-06    3.820    0    0    691,782    0    0    0

CITIBANK NA (Syndicate)

   23-Dec-08    3.800    0    0         251,774    1,713,117    1,713,117

BBVA BANCOMER (Syndicate)

   23-Dec-08    9.609    0    0    0    0    0    0

Varios Arrend.

   31-Dec-10    8.400    3,110    0    6,676    7,356    8,105    24,944

BANCO SANTANDER MEXICANO

   31-Jan-07    10.024    0    0    0    0    0    0

BANCO SANTANDER MEXICANO

   31-Jan-07    7.797    0    0    0    0    0    0

INBURSA

   31-Aug-04    12.540    0    0    0    0    0    0

INBURSA

   28-Feb-07    12.900    0    0    0    0    0    0

BANAMEX-CITIBANK

   16-May-08    8.061    0    0    0    0    0    0

COMERICA BANK

   26-Jul-04    2.670    57,649    0    0    0    0    0

COMERICA BANK

   13-Dec-04    3.895    92,238    0    0    0    0    0

COMERICA BANK

   9-Jul-04    2.630    18,217    0    0    0    0    0

COMERICA BANK

   19-Jul-04    2.630    12,567    0    0    0    0    0

COMERICA BANK

   9-Aug-04    2.830    17,675    0    0    0    0    0

COMERICA BANK

   20-Jul-04    2.630    5,938    0    0    0    0    0

COMERICA BANK

   9-Jul-04    2.600    3,793    0    0    0    0    0

COMERICA BANK

   20-Jul-04    2.830    2,744    0    0    0    0    0
              
  
  
  
  
  

TOTAL BANKS

             311,018    95,915    890,292    433,301    1,894,167    1,997,477
              
  
  
  
  
  

 

LISTED IN THE MEXICAN STOCK EXCHANGE


   Amortization Date

   Rate of Interest

   Denominated in Pesos

         Until 1 Year

   More Than 1 Year

UNSECURED DEBT

                   

UDIBONOS

   10/21/2006    9.00    0    1,105,368

UDIBONOS

   7/13/2007    8.20    0    1,216,480
              
  
               0    2,321,848
              
  

TOTAL STOCK EXCHANGE

                   

SUPPLIERS

                   

OTHERS

             852,066    0
              
  

TOTAL SUPPLIERS

             852,066    0
              
  

OTHERS

             1,254,055    0
                   

OTHER CURRENT LIABILITIES AND OTHER CREDITS

             1,254,055    0
                   
               2,132,020    3,212,993
              
  

 

LISTED IN THE MEXICAN STOCK EXCHANGE


   Amortization Date

   Rate of Interest

   Amortization of Credits in Foreign Currency with National Entities (Thousands of $)

         Time Interval

         Current Year

   Until 1 Year

   Until 2 Years

   Until 3 Years

   Until 4 Years

   Until 5 Years

UNSECURED DEBT

                                       

UDIBONOS

   10/21/2006    9.00    0    0    0    0    0    0

UDIBONOS

   7/13/2007    8.20    0    0    0    0    0    0
              
  
  
  
  
  
               0    0    0    0    0    0
              
  
  
  
  
  

TOTAL STOCK EXCHANGE

                                       

SUPPLIERS

                                       

OTHERS

             0    0    0    0    0    0
              
  
  
  
  
  

TOTAL SUPPLIERS

             0    0    0    0    0    0
              
  
  
  
  
  

OTHERS

             0    0    0    0    0    0
              
  
  
  
  
  

OTHER CURRENT LIABILITIES AND OTHER CREDITS

             0    0    0    0    0    0
              
  
  
  
  
  
               0    0    0    0    0    0
              
  
  
  
  
  

LISTED IN THE MEXICAN STOCK EXCHANGE


   Amortization Date

   Rate of Interest

   Amortization of Credits in Foreign Currency with foreign entities (Thousands of $)

         Time Interval

         Current Year

   Until 1 Year

   Until 2 Years

   Until 3 Years

   Until 4 Years

   Until 5 Years

UNSECURED DEBT

                                       

UDIBONOS

   10/21/2006    9.00    0    0    0    0    0    0

UDIBONOS

   7/13/2007    8.20    0    0    0    0    0    0
              
  
  
  
  
  
               0    0    0    0    0    0
              
  
  
  
  
  

TOTAL STOCK EXCHANGE

                                       

SUPPLIERS

             0                         
              
                        

OTHERS

             0    1,277,649    0    0    0    0
              
  
  
  
  
  

TOTAL SUPPLIERS

             0    1,277,649    0    0    0    0
              
  
  
  
  
  

OTHERS

             0    410,647    0    0    0    0
              
       
  
  
  

OTHER CURRENT LIABILITIES AND OTHER CREDITS

             0    410,647    0    0    0    0
              
       
  
  
  
               311,018    1,784,211    890,292    433,301    1,894,167    1,997,477
              
  
  
  
  
  

 

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STOCK EXCHANGE CODE:DESC

  QUARTER:2   YEAR: 2004

 

Annex 6

MONETARY POSITION IN FOREIGN EXCHANGE

(Thousands of Pesos)

 

     DOLLARS (1)

   OTHER CURRENCIES

  

TOTAL

THOUSANDS OF
PESOS


TRADE BALANCE


   THOUSANDS OF
DOLLARS


   THOUSANDS OF
PESOS


   THOUSANDS OF
DOLLARS


   THOUSANDS OF
PESOS


  

TOTAL ASSETS

   373,716    4,308,835    0    0    4,308,835

LIABILITIES POSITION

   671,242    7,739,214    0    0    7,739,214

SHORT TERM LIABILITIES POSITION

   182,173    2,100,395    0    0    2,100,395

LONG TERM LIABILITIES POSITION

   489,069    5,638,819    0    0    5,638,819

NET BALANCE

   -297,525    -3,430,379    0    0    -3,430,379

 

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STOCK EXCHANGE CODE:DESC

  QUATER:2   YEAR: 2004

 

Annex 7

INTEGRATION AND INCOME CALCULATION BY MONETARY POSITION

(Thousands of Pesos)

 

MONTH


   MONETARY
ASSETS


   MONETARY
LIABILITIES


   (ASSET)
LIABILITIES
MONETARY
POSITION


   MONTHLY
INFLATION


   MONTHLY
(PROFIT)
AND LOSS


JANUARY

   8,510,174    17,409,609    -8,899,435    0.62    55,176

FEBRUARY

   8,113,410    16,999,728    -8,886,318    0.60    53,318

MARCH

   8,464,305    17,284,129    -8,819,824    0.34    29,987

APRIL

   8,433,157    17,308,405    -8,875,248    0.15    13,313

MAY

   8,971,625    15,240,257    -6,268,632    -0.25    -15,672

JUNE

   9,046,923    15,147,581    -6,100,658    0.16    9,761

JULY

                        

AUGUST

                        

SEPTEMBER

                        

OCTOBER

                        

NOVEMBER

                        

DECEMBER

                        

UPDATED INFORMATION

                        

CAPITALIZATION

                       -11,745

FOREIGN CORP.

                        

OTHER

                        

TOTAL

                       134,138

 

22

 

www.desc.com.mx


STOCK EXCHANGE CODE:DESC

  QUATER:1   YEAR: 2004

 

Bonds and Medium Term Notes Listing in Stock Market (1)

 

Annex 8

 

Financial Covenants Based on Issuances or Instruments

 

-1 Interest Coverage.

 

The amount obtained by dividing the sum of (i) the consolidated operating profit plus depreciation and amortization during the immediately prior 4 full fiscal quarters by (ii) consolidated financial expense during such period. The borrower will not permit the ratio to be less than 2.25 for such period.

 

-2 Capitalization.

 

The amount obtained by dividing, (i) total debt with cost minus cash plus fifty million dollars, by (ii) net assets plus total debt with cost minus cash plus fifty million dollars. The borrower will not permit the ratio to be higher than .55 times.

 

-3 Leverage Ratio.

 

The amount obtained by dividing (i) total debt with cost minus cash plus fifty million dollars, by (ii) the sum of the consolidated operating profit plus depreciation and amortization during the immediately prior 4 full fiscal quarters. The borrower will not permit the ratio to exceed 4.35 times.

 

Current Status of Financial Covenants

 

(1) Interest Coverage.

   2.67

(2) Capitalization.

   0.40

(3) Leverage Ratio.

   4.09

 

23

 

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MEXICAN STOCK EXCHANGE

SIFIC / ICS

 

STOCK EXCHANGE CODE:DESC

   QUARTER:2    YEAR: 2004

 

PLANTS, COMMERCE CENTERS OR DISTRIBUTION CENTERS

 

ANNEX 9   CONSOLIDATED

 

   

PLANT OR CENTER


  

ECONOMIC ACTIVITY


   PLANT
CAPACITY
(1)


  

UTILIZATION

%


 
    EJES TRACTIVOS, S.A. DE C.V.    REAR AXLES ASSEMBLY (ENSAMBLADO)    320    22 %
    EJES TRACTIVOS, S.A. DE C.V.    REAR AXLES TRACTOR LINE (PIECES)    565    92 %
    PISTONES MORESA, S.A. DE C.V. (SALTILLO)    PISTONS (PIECES)    1,200    72 %
    PISTONES MORESA, S.A. DE C.V. (CELAYA)    PISTONS (PIECES)    11,800    35 %
    MORESTANA, S.A. DE C.V.    TAPPETS (PIECES)    14,238    51 %
    PISTONES MORESA, S.A. DE C.V.    PISTON PINS (PIECES)    23,500    46 %
    ENGRANES CONICOS, S.A. DE C.V.    GEARS (SETS)    933    91 %
    PRODUCTOS ESTAMPADOS DE MEXICO, S.A. DE C.V.    STAMPED (A) (STROKES)    32,000    24 %
    VELCON, S.A. DE C.V.    CONSTANT VELOCITY JOINTS (PIECES)    2,900    64 %
    TRANSMISIONES TSP, S.A DE C.V.    TRANSMISSIONS (MEDIUM & HEAVY TRANSMISSIONS)    69    34 %
    TREMEC, S.A. DE C.V.    TRANSMISSIONS (LIGHT TRANSMISSIONS)    282    57 %
    TREMEC, S.A. DE C.V.    TRANSMISSIONS (HEAVY DUTTY COMPOMENTS)    2,267    55 %
    CARDANES, S.A. DE C.V.    PROPELLER SHAFTS ASSEMBLY (ENSAMBLE) (PIECES)    585    50 %
    CARDANES, S.A. DE C.V.    PROPELLER SHAFTS TRACTOR LINE (PIECES)    756    84 %
    HAYES WHEELS ACERO, S.A. DE C.V.    STEEL WHEELS (PIECES)    6,100    38 %
    AUTOMETALES, S.A. DE .CV.    IRON FOUNDRY (TONS.)    24    82 %
    TF VICTOR, S.A. DE C.V.    GASKETS, SEALS, MOTOR PARTS (PIECES)    24,275    42 %
    FORJAS SPICER, S.A. DE C.V.    PRECISION FORGES (TONS.)    50    72 %

1

  COATZACOALCOS, VER.    POLYSTYRENE (TONS)    75,000    94 %

2

  XICOHTZINGO,TLAX.    POLYSTYRENE (TONS)    75,000    63 %

3

  ALTAMIRA, TAMPS. (Dynasol)    SYNTHETIC RUBBER (TONS)    84,000    99 %

4

  ALTAMIRA, TAMPS. (INSA)    SYNTHETIC RUBBER (TONS)    96,000    82 %

5

  ALTAMIRA, TAMPS. (PARATEC)    SYNTHETIC RUBBER (TONS)    24,000    57 %

6

  COATZACOALCOS, VER.    PHOSPHATE (TONS)    100,000    100 %

7

  TULTITLAN, EDO. MEX.    PHOSPHATE (TONS)    85,000    68 %

8

  LECHERIA, EDO. MEX.    PHOSPHATE (TONS)    40,000    42 %

9

  ALTAMIRA, TAMPS.    CARBON BLACK (TONS)    120,000    99 %

10

  OCOYOACAC, EDO. MEX.    ACRYLIC SHEET (TONS)    7,740    100 %

11

  SAN LUIS POTOSI. S.L.P.    ACRYLIC SHEET (TONS)    5,007    100 %

12

  LERMA, EDO. MEX.    MELAMINE LAMINATES (K M2)    4,700    81 %

13

  ZITACUARO, MICH.    PARTICLE BOARD (K M2)    10,270    100 %

 

OBSERVACIONES:

 

MEXICAN STOCK EXCHANGE

SIFIC / ICS

 

STOCK EXCHANGE CODE:DESC

  QUARTER:2   YEAR: 2004

 

PLANTS, COMMERCE CENTERS OR DISTRIBUTION CENTERS

ANNEX 9

 

   

PLANT OR CENTER


  

ECONOMIC ACTIVITY


   PLANT
CAPACITY
(1)


   UTILIZATION
%


 
1   MERIDA    MILL (ton/month)    25,000    85 %
2   IRAPUATO    MILL (ton/month)    12,000    15 %
3   PENINSULA    HOG (thousands)    35    100 %
4   MÉRIDA    SLAUGHTER HOUSE    222    90 %
5   PENJAMO    SLAUGHTER HOUSE    125    100 %
7   MOCHIS (SANTA ROSA)    FRESH TOMATO PROCESSING (TONS/DAY IN 100 DAYS)    3,000    6 %
8        TOMATO PRODUCTS IN TETRABRIK CONTAINER (MILLION OF CASES)    6    93.0 %
    MOCHIS (LA CORONA)    CANNED VEGETABLES (TONS)    72,567    40 %
         CANNED VEGETABLES (MILLIONS OF CASES)    7    40 %
9   MAZATLAN    TUNA (thousands boxes)    2,500    74.0 %
    OAXACA    COFEE (TONS/MONTH)    212.00    56.8 %
10   ROSEMEAD, CALIFORNIA    SALSA & CANNED VEGETABLES (thousands lb)    166,226    23.0 %
11                     
12                     

 

24

 

www.desc.com.mx


MEXICAN STOCK EXCHANGE

SIFIC / ICS

 

STOCK EXCHANGE CODE:DESC

   QUARTER: 2    YEAR: 2004

 

MAIN RAW MATERIALS

 

ANNEX 10    CONSOLIDATED

 

     DOMESTIC

 

MAIN SUPPLIERS


  

FOREIGN


  

MAIN SUPPLIERS


   DOM.
SUBST.


   COST
PRODUCTION
%


1    LAMINATE   HYLSA, S. A. DE C.V.    STEEL    MC STEEL    NO     
2    STEEL   INDUSTRIAS CH, S. A.    STEEL    MITSUBISHI    YES     
3    ALUMINUM   NACOBRE    LAMINATE    NISHO OWAI    NO     
4    COLOR PAINTS   P.P.G. INDUSTRIAS DE MEXICO, S. A. DE C.V.    STEEL    TOTH INDUSTRIES    NO     
5    LAMINATE   AHMSA    AUTOMOTIVE PARTS    DANA CO.    NO     
6    COLOR PAINTS   DUPONT DE MEXICO    FORGE    GSB FORJA    NO     
7    RODAMIENTOS   KOYO DE MEXICO    LAMINATE    DAEWOO CORP.    NO     
8    RODAMIENTOS   TIMKEM    ALUMINUM    REYNOLDS METAL    YES     
9    LAMINATE   GENERAL MOTORS    RODAMIENTOS    THE TIMKEN CO.    NO     
10             FORGE    THYSSEN PRECISION FORGE    NO     
11                             
12                             
13    STYRENE   PEMEX    STYRENE    STERLING, MITSUI          
14    BUTADIEN        BUTADIEN    SHELL, POLIMERI EUROPA, BP CHEMICAL,          
15                  EQUISTAR, SABIC, REPSOL QUIMICA          
16    METHANOL   PEMEX    METHANOL    CELANESE, PETROCEL          
17    TOLUEN   PEMEX                    
18                             
19    NATURAL GAS   PEMEX                    
20    PHOSPHORIC
ACID
MERCANTILE
  RHODIA MEXICANA                    
21    PHOSPHORIC
ACID
(TECHNICAL)
  RHODIA MEXICANA                    
22             ACETOCYANOHIDRINE    BP CHEMICAL          
23                             
24    FRESH
JALAPEÑO
  OWN PRODUCTION & FRESH MARKET ( VARIOUS )                    
25    FRESH
TOMATO
  OWN PRODUCTION & FRESH MARKET ( VARIOUS )                    
26    FRESH
TOMATILLO
  OWN PRODUCTION & FRESH MARKET ( VARIOUS )                    
27    TETRABRIK
CONTAINER
  TETRAPAK                    
28    METALLIC
CAN
  GRUPO ZAPATA                    
29    METALLIC
CAN
  ZAPATA ENVASES                    
30    CORN OIL   ARANCIA CORN PRODUCTS                    
31    SHIPPING
CARTON
  CELULOSA Y CORRUGADOS                    
32    SHIPPING
CARTON
  EMPAQUE DE CARTON TITAN                    
33             TOMATO PASTE    MORNING STAR    OK     
34             REYNOLD´S ITEMS    REYNOLDS          
35    VARIOUS                        
36    METALLIC
CAN
  ENVASES DE SINALOA                    
37    DIESEL   PEMEX                    
38             VEGETABLES    RIO FARMS          
39             VEGETABLES    WOOLF ENTERPRISES          
40             PACKAGING MATERIAL - GLASS    OWENS BROCKWAY          
41             PACKAGING MATERIAL - CANS    PECHINEY PLASTIC          
42    HOG GENETIC   PIC                    
              GRAIN    CARGILL    OK     

 

25

 

www.desc.com.mx


STOCK EXCHANGE CODE:DESC

   QUARTER: 2    YEAR: 2004

 

Annex 11

 

SALES DISTRIBUTION BY PRODUCT

DOMESTIC SALES

 

MAIN PRODUCTS


   Total Production

   SALES

  

MARKET SHARES (%)


   MAIN

   VOLUME

   AMOUNT

   VOLUME

   AMOUNT

      TRADEMARKS

   CUSTOMERS

AUTOPARTS SECTOR

        0    0    1,384,499               

CHEMICAL SECTOR

        0    0    2,272,167               

FOOD SECTOR

        0    0    1,445,463               

REAL ESTATE SECTOR

        0    0    624,691               

COMPANIES OF OTHER SERVICES

        0    0    6,934               
                   
              

TOTAL

                  5,733,754               
                   
              

 

SALES DISTRIBUTION BY PRODUCT

FOREIGN SALES

 

MAIN PRODUCTS


   Total Production

   SALES

   MARKET SHARES (%)

   MAIN

   VOLUME

   AMOUNT

   VOLUME

   AMOUNT

      TRADEMARKS

   CUSTOMERS

AUTOPARTS SECTOR

        0    0    2,858,922               

CHEMICAL SECTOR

        0    0    1,791,182               

FOOD SECTOR

        0    0    656,035               
                   
              

TOTAL

                  5,306,140               
                   
              

 

26

 

www.desc.com.mx


STOCK EXCHANGE CODE:DESC

  QUARTER: 2   YEAR: 2004

 

INTEGRATION OF THE PAID SOCIAL CAPITAL STOCK

CHARACTERISTICS OF THE SHARES

 

Series


   Nominal
Value


   Valid
Cupon


   Number of Shares

   Capital Stock
(Thousands of
Pesos)


         Fixed Portion

   Variable Portion

   Mexican

   Unrestricted

   Fixed

   Variable

A

   0.01300    20    1,166,108,597         —      1,166,108,597    15,159     

B

   0.01300    20         1,115,690,363    —      1,115,690,363         14,504
                    —                      

Total

             1,166,108,597    1,115,690,363    —      2,281,798,960    15,159    14,504
              
  
  
  
  
  

 

TOTAL NUMBER OF SHARES REPRESENTING THE PAID-IN CAPITAL STOCK ON THE DATE THE INFORMATION IS SENT:

 

2,281,798,960

 

SHARES PROPORTION BY:

CPO´S:

UNITS:

ADRS´s:

GDRS´s:

ADS´s:

GDS´s:

 

          Repurchased own shares

    
          Market value of the share

Series


   Number of
Shares


   At repurchase

   At Quarter

 

27

 

www.desc.com.mx


General Data of the Issuer:    
Corporate Name:   Desc, S.A. de C.V.
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   eloy.vega@desc.com.mx
Internet Address   www.desc.com.mx
Fiscal Data of the Issuer:    
RFC of Company:   DES9405182F1
Domicile:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Responsibility for Payments:    
Name:   Lic. Jorge Francisco Padilla Ezeta
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   jorge.padilla@desc.com.mx
Data with respect to officers:    
Mexican Stock    
Exchange equivalent:   Chairman of the Board of Directors
Title at company:   Chairman and Chief Executive Officer
Name:   Mr. Fernando Senderos Mestre
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
Mexican Stock    
Exchange equivalent:   General Manager
Title at company:   Chief Executive Corporate Area
Name:   Ing. Juan Marco Gutierrez Wanless
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   juan.gwanless@desc.com.mx
Mexican Stock    
Exchange equivalent:   Chief Financial Officer
Title at company:   Director of Finance
Name:   Lic. Arturo D’Acosta Ruiz
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   arturo.dacosta@.desc.com.mx
Mexican Stock    
Exchange equivalent:   Officer in Charge of Sending Quarterly Financial Information
Title at company:   Corporate Manager of Financial Information
Name:   Lic. Jorge Francisco Padilla Ezeta
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   jorge.padilla@desc.com.mx
Mexican Stock    
Exchange equivalent:   Alternate Officer in Charge of Sending Quarterly Financial Information
Title at company:   Corporate Comptroller
Name:   Lic. Eduardo Philibert Garza
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-96
E-Mail:   eduardo.philibert@desc.com.mx
Mexican Stock    
Exchange equivalent:   Officer Responsible for Legal Affairs
Title at company:   General Counsel
Name:   Lic. Ramon Estrada Rivera
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-97
E-Mail:   ramon.estrada@desc.com.mx
Mexican Stock    
Exchange equivalent:   Secretary of the Board of Directors
Title at company:   Secretary of the Board of Directors
Name:   C.P. Ernesto Vega Velasco
Address:   Bosque de Ciruelos No. 130 Room 1203
City:   Bosques de las Lomas
Zip Code:   11700
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-60
E-Mail:   ernesto.vega@desc.com.mx
Mexican Stock    
Exchange equivalent:   Officer in Charge of Providing Information to Investors
Title at company:   Corporate Manager of Financial Information
Name:   Lic. Jorge Francisco Padilla Ezeta
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-97
E-Mail:   jorge.padilla@desc.com.mx
Mexican Stock    
Exchange equivalent:   Officer Authorized to Send Information via Emisnet
Title at company:   Chief Financial Officer
Name:   Lic. Arturo D’Acosta Ruiz
Address:   Paseo de los Tamarindos 400-B
City:   Bosques de las Lomas
Zip Code:   5120
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-98
E-Mail:   arturo.dacosta@desc.com.mx
Mexican Stock    
Exchange equivalent:   Officer Authorized to Send Relevant Events via Emisnet
Title at company:   Secretary of the Board of Directors
Name:   C.P. Ernesto Vega Velasco
Address:   Bosque de Ciruelos No. 130 Room 1203
City:   Bosques de las Lomas
Zip Code:   11700
State:   Mexico, D.F.
Telephone:   52-61-80-00
Fax:   52-61-80-60
E-Mail:   ernesto.vega@desc.com.mx

 

28

 

www.desc.com.mx


SIGNATURES

 

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

 

       

Desc, S.A. de C.V.

       

      (Registrant)

Date: July 28, 2004

 

By

 

/s/ Arturo D’Acosta Ruiz


       

      (Signature)

   

Name:

 

Arturo D’Acosta Ruiz

   

Title:

 

Chief Financial Officer