Concentrating... 1999 annual report ... on the markets’ needs c o n t e n t s C o m p a n i e s 1 Financial Highlights 2 C h a i rm a n’s Letter 4 C E O ’s Letter 6 B o a rd of D i re c t o rs 8 Fl at Glass 1 0 Glass Containers 1 4 Household Pro d u c t s 1 8 D ive rse Industries 2 2 G l a s swa re 2 6 C o rp o rate Citize n s h i p 3 0 Te ch n o l ogy 3 2 C F O ’s Letter 3 4 S t o ck P e r fo rm a n c e 3 6 I n d ependent Au d i t o r ’s Rep o rt 3 7 C o n s o l i d ated Financial Stat e m e n t s 3 8 S h a reholder Info rm at i o n 6 3 perfil company corporativo profile Vitro, S.A. de C.V. (NYSE: VTO and BMV: VITROA), through its subsidiary companies, is a major participant in five distinct businesses: flat glass, glass containers, household products, glassware and diverse industries. Vitro’s subsidiaries serve multiple product markets, including construction and automotive glass, wine, liquor, cosmetics, pharmaceutical, food and beverage glass containers, household appliances, fiberglass, plastic and aluminum containers, and glassware for commercial, industrial and consumer uses. Founded in 1909, Monterrey, Mexico-based Vitro has joint ventures with 12 major world-class manufacturers, that provide its subsidiaries with access to international markets, distribution channels and state-of-the-art technology. Vitro’s subsidiaries do business throughout the Americas, with facilities and distribution centers in seven countries, and export products to more than 70 countries. v i t r o 1 9 9 9 companies flat glass glass containers household products Companies Companies Companies Vitro Plan + Pilkington, PLC (Great Britain) 1965 - 35% Empresas Comegua S.A. (Guatemala and Costa Rica) Vitromatic + Whirlpool Corporation (USA) 1987 - 49% Auto Cristales de Oriente + Cervecería Centroamericana, S.A. (Guatemala) & Sourdillon de México* + Sourdillon Auto Templex Cervecería de Costa Rica, S.A. (Costa Rica) International (France) 1995 - 66% Cristakar 1964 - 50.3% Crolls Mexicana Cristales Automotrices Metalúrgica Oriental Viplásticos Cristales Centroamericanos (Guatemala) Procesadora de Materias Primas Industrializables Industrias Acros Whirlpool Cristales Inastillables de México Vidriera Guadalajara Comercial Acros Whirlpool Distribuidora Nacional de Vidrio Vidriera Los Reyes Química "M" + Solutia Inc. (USA) 1995 - 49% Vidriera Mexicali Products Shatterproof de México Vidriera México Refrigerators, washers, ranges, molds, plastic components. Vidrio Plano Vidriera Monterrey Distributes clothes dryers, washers, dishwashers, Vidrio Plano de México Vidriera Querétaro refrigerators and mixers. Vidrios Templados Colombianos (Colombia) VidrieraToluca Vitro Colombia Vidrio Lux (Bolivia) Vitro Flex + Ford Motor Company (USA) Vitro Packaging, Inc. (USA) 1979 - 38% Vitro Flotado Products VVP America (USA) Glass containers Super Sky (USA) ACI Distribution (USA) Binswanger Glass (USA) Binswanger Mirror (USA) diverse industries glassware Glasscraft (USA) Companies Companies Ampolletas (Enbosa) + Kimble, Inc. (USA) 1978 - 49% Vitrocrisa Holding + Libbey Inc. (USA) 1997 - 49% Products Float, patterned and fabricated architectural glass, solar Envases de Borosilicato del Sur Vitrocrisa control glass, automotive glass, mirror glass, glass table Kimble-Enbosa* (USA) + Kimble, Inc. (USA) 1989 - 51% Crisa Libbey tops and polyvinyl butyral film. Envases Cuautitlán Fabricación de Cubiertos Fabricación de Máquinas Crisa Corporation (USA) Industria del Álcali Crisa Industrial (USA) Manufacturas, Ensamblajes y Fundiciones + General Electric Company (Mexico) 1997 - 49% Products Plásticos Bosco Glassware for the retail, foodservice and industrial markets Regioplast* + Owens Illinois, Inc. (USA) 1993 - 50% including drink-ware, bake-ware, dinnerware, stemware, Vitro OCF + Owens Corning (USA) 1957 - 40% ornamental, hand-made, candleholders, blender jars, coffee Vitro Fibras carafes, lighting products, stainless-steel and silver-plated Vitro-American National Can + American National Can flatware. Holding Corp. (USA) 1994 - 50% Vitro Chemical, Fibers and Mining (USA) * Not a consolidated company Products Fiberglass products, sodium carbonate, sodium The reference to the term "Joint Venture" in this Report does not imply or infer the definition of "Joint Venture" set forth in the bicarbonate, sodium chloride, calcium chloride, International Accounting Standards, it refers to those corporations ampoules, vials, laboratory glassware, plastic containers, in whichVitro owns at least 50 percent ofthe shares and one or aluminum cans, disposable plasticware, equipment, more third parties (either domestic or foreign) own the remaining shares of the corresponding corporation. We believe our usage of machinery, molds and components for the glass and the term "Joint Venture" is consistent with international business other industries. and legal practice standards. 11 financial highlights (In millions of constant pesos as of December 31, 1999, except where indicated otherwise; dollar figures are in millions of US dollars(1)). December 31, 1999 (Ps.) 1999 (US$) % change (2) 1998 % change (3) 1997 Income Statement(4) Consolidated net sales $ 25,879 US$ 2,627 (4.0) $ 26,958 1.5 $ 26,570 Export sales (millions of US dollars) 749 9.3 685 6.4 644 Operating income 3,871 390 (15.6) 4,588 0.9 4,548 Total financing cost 297 30 (89.8) 2,911 121.7 1,313 Other income (1,094) (113) (466.8) (193) 4 Share in net income of unconsolidated associated companies 21 2 320.0 5 (97.8) 227 Gain (loss) in value of shares in trust (1,070) 53 Income before income tax and PSW 2,501 249 496.9 419 (88.1) 3,519 Income tax and PSW 1,650 169 46.1 1,129 (15.2) 1,331 Net income (loss) from continuing operations 851 80 (710) 2,188 Income on disposal of discontinued operations 504 5 3 73.2 291 (72.9) 1,075 Extraordinary item 139 15 27.5 109 (65.5) 316 Net income (loss) for the year 1,494 148 (310) 3,631 Net income (loss) of the majority interest 644 62 (829) 2,941 Balance Sheet Current assets $ 7,272 US$ 766 (6.7) $ 7,793 1.1 $ 7,706 Total assets 31,283 3,294 (8.3) 34,114 (5.3) 36,024 Current liabilities 5,726 603 (12.9) 6,577 12.3 5,854 Total liabilities 20,051 2,111 (10.0) 22,275 3.8 21,450 Stockholders’ equity 11,232 1,183 (5.1) 11,839 (18.8) 14,574 Stockholders’ equity of majority interest 7,283 767 (6.9) 7,827 (24.3) 10,342 Capital expenditures 1,657 167 (34.8) 2,540 37.5 1,847 Personnel 32,535 (2.4) 33,320 0.6 33,136 Financial Indicators Operating income / sales (%) 14.96% 14.85% 17.01% 17.11% Sales / assets (times) 0.83 0.80 0.81* 0.74** Current assets / current liabilities (times) 1.27 1.27 1.20* 1.33** Total liabilities / stockholders’ equity (times) 1.79 1.79 1.85* 1.46** (1) Dollar figures reported herein are in nominal dollars resulting from dividing each month’s nominal pesos by that month’s ending exchange rate,except as indicated. (2) Change from 1998 to 1999. (3) Change from 1997 to 1998. (4) The amounts of Income Statement have been restated to present Anchor and Mining Operations as a discontinued operation. * Calculated using constant pesos as of December 31,1998. ** Calculated using constant pesos as of December 31,1997. v i t r o 1 9 9 9 financial highlights 33 chairman’s letter To Our Shareholders: In light of the general economic and competitive environment, 1999 was a positive year for Vitro. The path we have traveled over the last five years has had its up and downs. Like all major companies worldwide, Vitro is part of the global marketplace, and the domestic and international economic and financial climate resulted in some critical moments that have affected our performance. It is important to emphasize Vitro’s sound financial position. As of December 31, 1999, we reduced our debt to US$1.6 billion, after reaching US$2.4 billion in mid-1996. We recorded a net profit in 1999, after reporting losses in 1998. We consider our ability to maintain our cash flow (in dollars) at 1998 levels, despite an overvalued peso and greater competition in our traditional containers and flat glass businesses, a significant accomplishment. We are well positioned to meet the challenges Our strong 1999 results in household products and glassware show that we are well positioned to meet the challenges of a competitive business climate that requires high quality and productivity. The soft drink market is still important to the glass container business, but this is changing because soft drink producers now prefer bottles made of other materials. Today, glass soft-drink bottles do not capitalize on Vitro’s technological advantages, and do not generate the returns that the company has set as its short and medium-term goals. Special edition and commemorative bottles are better suited to Vitro’s competencies in this consumer market. I can say the same for the wine and liquor market, which has shown good performance and allows us to compete in important sectors. Under the circumstances, 1999 was a positive year for Vitro v i t r o 1 9 9 9 The Mexican flat glass market has also attracted competitors, business is dollar-based, the company has provided year-over-year particularly from South America’s weakest economies. Although financial data in both dollars and pesos. In this way, you can better this competition is aided in part by the peso’s temporary strength, evaluate the company’s achievements. It is important to note the our flat glass division has taken the necessary steps to reallocate Mexican government is expected to take the necessary steps to its production capacity and increase its efficiency.