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 April , 2004
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Commission File Number: 001-13196
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DESC, S.A. DE C.V.
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(Translation of registrant's name into English)
PASEO DE LOS TAMARINDOS 400-B, BOSQUES DE LAS LOMAS, 05120 MEXICO, D.F., MEXICO
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(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 |X| Form 40-F
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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 |X|
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
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1. English translation of Registrant's press release dated April 30, 2004
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ITEM 1
[Desc logo]
DESC'S INDEPENDENT AUDITORS' REPORT
Mexico City, April 30, 2004 - DESC, S.A. de C.V.'s (NYSE: DES; BMV: DESC)
Independent Auditors' Report to the Board of Directors and Stockholders of Desc,
S.A. de C.V. confirms the announcements made during the first quarter of 2004
regarding the successful conclusion of Desc's financial restructuring and the
accelerated adoption of Bulletin C-15.
Independent Auditors' Report to the Board of Directors and Stockholders of Desc,
S.A. de C.V.:
We have audited the accompanying consolidated balance sheets of Desc, S.A de
C.V. and subsidiaries (collectively referred to as the "Company") as of December
31, 2002, and 2003, and the related consolidated statements of income (loss),
changes in stockholders' equity and changes in financial position for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements of the
Company for the year ended December 31, 2001, were audited by other auditors who
expressed an unqualified opinion in their report dated March 12, 2002.
We did not audit the financial statements of the chemical and food segments,
which statements reflect total assets constituting 42% of consolidated total
assets as of December 31, 2002, and 2003, and total revenues constituting 53%
and 54%, respectively, of consolidated total revenues for the years then ended.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for those entities, is based solely on the reports of such other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in Mexico (and in the United States of America). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the reports of the other auditors provide a reasonable basis for our
opinion.
As mentioned in Notes 1b. and 11 to the accompanying consolidated financial
statements, in December 2003 the Company satisfactorily concluded negotiations
to restructure a significant portion of its short and long-term debt.
As mentioned in Note 4a. to the accompanying consolidated financial statements,
as of December 31, 2003 the Company early adopted the provisions of new Bulletin
C-15, "Impairment of the Value of Long-lived Assets and their Disposal", which
establishes that an impairment loss has occurred if the present value of
estimated net future cash flows of a cash generating unit is less than the book
value of long-lived assets, tangible or intangible. The effect in thousands of
pesos derived from the application of this principle was the recognition of
Ps.712,457 of impairment in the value of certain property, plant and equipment
and Ps.898,891 of impairment in the value of the goodwill of certain
subsidiaries. The charge to 2003 results was Ps.1,384,294, net of a reduction of
Ps.227,054 in the related deferred income tax liability.
In our opinion, based on our audit and the reports of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Desc, S.A. de C.V. and subsidiaries as of December 31,
2002, and 2003, and the results of their operations, changes in their
stockholders' equity and changes in their financial position for the years then
ended in conformity with accounting principles generally accepted in Mexico.
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Our audits also comprehended the translation of the Mexican peso amounts into
U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2a. The translation of the financial
statement amounts into U.S. dollars and the translation of the financial
statements into English have been made solely for the convenience of readers in
the United States of America.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member firm of Deloitte Touche Tohmatsu
CPC Luis Javier Fernandez Barragan
March, 26, 2004
As reference, the notes mentioned on the paragraphs above, are included:
NOTE 1b - Significant events - In December 2003 the Company satisfactorily
concluded the agreement with bank creditors to refinance syndicated loans and a
significant part of the Company's short-term debt. The total amount of the
restructured debt was approximately $667,000 ($445,700 and Ps.1,223,000 of
long-term loans and $112,000 of revolving credit and letters of credit), which
represents around 63% of the Company's consolidated debt. The terms of the
negotiation include maturity of the debt after five years and a grace period of
30 months as of January 2004 for payment of principal. The interest rates
obtained for the dollar debt are LIBOR rate plus a variable interest margin,
while the rate for the Mexican peso debt is TIIE (Interbank interest rate) plus
a variable interest margin (see Note 11).
NOTE 11 - Debt refinancing - As mentioned in Note 1, during December 2003, an
agreement was satisfactorily reached with the bank creditors to refinance the
Company's syndicated loans and most of its short-term debt. The most important
terms of the financial restructuring signed on December 23, 2003 are indicated
below:
a.Syndicated loan of $445.7 million at the LIBOR interest rate plus a variable
margin depending on the index obtained in the consolidated debt to operating
profit financial ratio, less depreciation and amortization, which fluctuates
between 1.625 and 4.000, with maturities between 2006 and 2008. As of December
31, 2003, the variable margin is 3.5. The interest will be payable on a monthly
or quarterly basis b.Syndicated loan of Ps.1,223 million, at an interest rate
equal to TIIE plus a variable margin depending on the index obtained in the
consolidated debt to operating profit financial ratio, less depreciation and
amortizations, which fluctuates between 1.125 and 4.000, with maturities from
2006 to 2008, respectively. As of December 31, 2003 the variable margin
determined is 3.5. The interest will be payable on a monthly basis.
c.Credit of $112 million, divided into two tranches, (i) $100 million revolving
credit, at the LIBOR interest at rate plus a variable margin depending on the
index obtained in the consolidated debt to operating profit financial ratio,
less depreciation and amortization, which fluctuates between 1.375 and 3.50, and
(ii) $12 million credit letters, both with maturity in 2006. As of December 31,
2003 the Company has applied dispositions against the tranche of $100 million,
and the variable interest margin determined is 3.0. The interest will be payable
on a monthly or quarterly basis.
As part of the conditions negotiated, the operating subsidiaries and certain
holding subsidiaries were considered jointly and severally liable and guarantors
for the debt, and a package of concrete guarantees was created consisting of
fixed assets, accounts receivable of the real estate sector and stock in certain
subsidiaries.
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NOTE 4a - Adoption of accounting principles - The Company early adopted the
provisions of new Bulletin C-15, "Impairment in the value of long-lived assets
and their disposal" ("C-15"). C-15 establishes, among other issues, that in the
presence of indicators of impairment of a long-lived asset in use, whether
tangible or intangible, including goodwill, entities must determine the possible
loss from impairment, unless they have evidence clearly demonstrating that such
indicators are of a temporary nature. To calculate the loss from impairment
requires the determination of the recovery value, now defined as the higher of
the net selling price of a cash generating unit and its use value, which is the
present value of future net cash flows, at an appropriate discount rates. In the
provisions prior to C-15, net future cash flows referenced to the purchasing
power in effect at the evaluation date were used, without requiring the
discounting of such flows. The effect derived from the application of this new
principle was the recognition of Ps.712,457 of impairment in the value of
certain property, plant and equipment and Ps.898,891 of impairment in the value
of the goodwill of certain subsidiaries. The charge to 2003 results was
Ps.1,384,294, net of a reduction of Ps.227,054 in the related deferred income
tax liability, presented in the statement of income under the heading "Change in
accounting principle".
Contacts:
Marisol Vazquez Mellado
Jorge Padilla Ezeta
Tel: (5255) 5261-8044
jorge.padilla@desc.com.mx
www.desc.com.mx
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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.
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(Registrant)
Date: April 30, 2004 By /s/ Arturo D'Acosta Ruiz
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Name: Arturo D'Acosta Ruiz
Title: Chief Financial Officer
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