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, 1999
------
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 [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form 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-___________.
<PAGE>
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: August 2, 1999 By /s/ Ernesto Vega Velasco
-------------- ------------------------------
(Signature)*
Name: Ernesto Vega Velasco
Title: Chief Financial Officer
- -------------------------------------------
* Print the name and title under the
signature of the signing officer.
2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Item Page Number
---- -----------
<S> <C> <C>
1. Press release announcing signing by registrant's subsidiary Girsa of
final agreements establishing strategic alliance with Repsol Quimica in
solution synthetic rubber business........................................ 4
2. Press release announcing second quarter 1999 results...................... 5
3. Update of registrant's Y2K readiness program
(as of July 27, 1999) ................................................ 11
</TABLE>
3
Exhibit 1
[desc logo]
NEWS RELEASE
FOR FURTHER INFORMATION:
Arturo D'Acosta / Maria Ana Alvarez Amy O'Leary
Citigate Dewe Rogerson
DESC, S.A. de C.V. 212-419-8341
011-525-261-8000 E-Mail: [email protected]
Web Site: www.desc.com.mx
E-Mail: [email protected]
DESC, S.A. DE C.V., ANNOUNCES SECOND QUARTER 1999 RESULTS
NET SALES FOR THE SEMESTER REACH PS.11,189 MILLION AND NET
MAJORITY INCOME GROWS TO PS.1,297 MILLION.
Mexico, D.F. July 28, 1999.- DESC, S.A. de C.V. (NYSE: DES;
BMV: DESC) today reported its consolidated results for the first half and second
quarter of 1999.
CONSOLIDATED RESULTS FOR FIRST HALF, JANUARY - JUNE 1999 AND 1998.
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
%
1999 1998 CHANGE
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales 11,188.6 11,049.6 1.3%
Exports (US$) 454.4 404.8 12.3%
Operating profit 1,597.7 1,605.6 -0.5%
Operating Margin 14.3% 14.5%
EBITDA (1) 2,041.2 2,071.8 -1.5%
EBITDA US$ (2) 207.9 200.8 3.5%
Net Majority Income 1,296.8 421.9 207.4%
EPS (last 12 months) 1.25 0.94 33.0%
EBITDA/per share (last 12 months) 2.82 2.71 4.1%
-------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
4
Exhibit 2
The numbers for the first half continued to show significant improvements with
good results in the Autoparts and Real Estate sectors. However, this was offset
by lower results in the Petrochemical and Food sectors. Given the appreciation
of the Mexican peso, results in peso terms reflect lower growth than in dollars;
that is why we believe it is important to point out that in dollars, sales and
operating income grew by 6.1% and 4.9% respectively, and that EBITDA increased
to US$ 207.9 millon during the semester with an annual growth of 3.5%. Net
Majority Income showed a strong increase when compared with the previous year,
growing to Ps.1,296.8 million during 1999.
SECOND QUARTER 1999 RESULTS
CONSOLIDATED RESULTS FOR THE SECOND QUARTER - 1999 AND 1998
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
%
1999 1998 CHANGE
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales 5,788.1 5,700.8 1.5%
Exports (US$) 234.1 205.5 13.9%
Operating Profit 882.0 910.9 -3.2%
Operating Margin 15.2% 16.0%
EBITDA (1) 1.066.6 1,148.4 -7.1%
EBITDA US$ (2) 112.4 111.4 1.0%
Net Majority Income 501.2 227.9 120.0%
----------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
Consolidated net sales in the second quarter of 1999 grew 1.5% due to a
significant rebound in the Real Estate and Food sectors, which compensated for
the decrease in Petrochemicals. Operating Margin in the second quarter of 1999
reflects decreased margins in the Petrochemical and Food sectors, which were
partially offset by increases in the other sectors. Exports grew to US$ 234.1
million, which represents 38.4% of consolidated sales. EBITDA in dollar terms
grew 1.0%, reaching US$ 112.4 million.
5
<PAGE>
SECOND QUARTER 1999 RESULTS BY SECTOR
AUTOPARTS (UNIK)
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
% %
ACCUM. TO JUNE CHANGE 2ND. QUARTER CHANGE
- -------------------------- -----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,794.6 4,742.2 1.1% Net Sales 2,394.1 2,390.6 0.1%
315.7 279.3 13.0% Exports (US$) 161.7 139.4 16.0%
769.0 679.5 13.2% Operating Profit 373.7 367.2 1.8%
16.0% 14.3% Operating Margin 15.6% 15.4%
978.6 919.2 6.5% EBITDA (1) 453.5 489.9 -7.4%
99.1 89.2 11.1% EBITDA US$ (2) 47.8 47.6 0.4%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
In peso terms, sales in this sector remained nearly equal to 1998 levels, and in
dollar terms, sales for the quarter reached US$ 252.3 million, which is an
annual increase of 8.4%. This is due principally to the strong growth in new
contracts for diverse export-oriented product lines, which continued to show a
strong growth of 16.0% compared to the previous year, and represented 64.1% of
total sales in this sector. Operating profit increased 10.5% in dollar terms,
reaching US$ 39.4 million during the second quarter of 1999, compared to US$
35.7 million obtained in the same period in 1998. Operating margin showed a
swift recovery when compared with 1998, reaching 15.6% during 1999, due to
productivity improvements. It is important to note that the margin registered a
small decrease compared with the first quarter of this year, decreasing from
16.5% in the first quarter to 15.6%, due mainly to the effect of exchange rate
appreciation. EBITDA improved by 0.4%, reaching US$ 47.8 million in 1999,
compared with US$ 47.6 million in the same period in 1998.
PETROCHEMICALS (GIRSA)
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
% %
ACCUM. TO JUNE CHANGE 2ND. QUARTER CHANGE
- -------------------------- -----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,512.4 1,825.7 -17.2% Net Sales 770.1 963.7 -20.1%
48.6 67.1 -12.7% Exports (US$) 30.7 35.7 -13.8%
209.6 330.7 -36.6% Operating Profit 122.6 213.4 -42.5%
13.9% 18.1% Operating Margin 15.9% 22.1%
288.0 414.2 -30.5% EBITDA (1) 157.4 255.8 -38.5%
29.4 40.2 -26.9% EBITDA US$ (2) 16.6 24.8 -33.2%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
Sales in this sector decreased 20.1% to Ps.770.1 million during the second
quarter 1999 compared to the same period in 1998. This decrease is due to the
6
<PAGE>
fact that, as a result of the petrochemical cycle, 1999 prices are below 1998
levels, which gave as a result a decrease in exports of 13.8%. Operating profit
decreased 42.5% due to the fall in sales prices, which was greater than the drop
in the prices of raw materials. It is important to note that compared with the
first quarter of the year, the operating margin registered an improvement,
growing from 11.7% in the first quarter to 15.9% in the second quarter. This can
be attributed to lower price volatility, an increase in sales volumes of
synthetic rubber and a strict cost/expense control. EBITDA in dollars decreased
during the quarter by 33.2% compared to the same period in 1998, from US$ 24.8
million in the second quarter of 1998 to US$ 16.6 million in the second quarter
of 1999.
DIVERSIFIED PRODUCTS (GIRSA)
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
% %
ACCUM. TO JUNE CHANGE 2ND. QUARTER CHANGE
- -------------------------- -----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,785.6 1,789.2 -0.2% Net Sales 918.1 900.5 2.0%
38.2 37.8 1.1% Exports (US$) 19.0 19.8 -4.0%
255.4 238.8 6.9% Operating Profit 139.1 117.7 18.1%
14.3% 13.3% ` Operating Margin 15.1% 13.1%
305.9 286.9 6.7% EBITDA (1) 164.6 141.8 16.1%
31.1 27.8 11.8% EBITDA US$ (2) 17.3 13.8 25.2%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)EBITSA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
Sales in the Diversified Product sector improved by 2.0% compared with the
second quarter of 1998, reaching Ps.918.1 million. This is due to the
recuperation in volumes seen principally in water proofing products and products
related to the construction industry. Exports in this sector were US$ 19.0
million, which when compared with the US$ 19.8 million obtained in the 1998
period represents a decrease of 4.0%. As a result of improved volumes and strict
cost/expense control, operating profit reached Ps.139.1 million, an improvement
of 18.1% compared to the 1998 period. The operating margin also increased
compared to the previous year's period to 15.1% for the second quarter of 1999
from 13.1% for the second quarter of 1998. EBITDA in dollar terms grew 25.2% to
reach US$ 17.3 million in the second quarter of 1999 compared to US$ 13.8
million for the same quarter in 1998.
7
<PAGE>
FOOD (AGROBIOS)
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
% %
ACCUM. TO JUNE CHANGE 2ND. QUARTER CHANGE
- -------------------------- -----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2,622.2 2.257.4 16.2% Net Sales 1,355.2 1,183.7 14.5%
41.9 20.6 103.3% Exports (US$) 22.5 10.5 113.9%
195.9 227.7 -14.0% Operating Profit 112.8 124.3 -9.2%
7.5% 10.1% Operating Margin 8.3% 10.5%
282.2 308.1 -8.4% EBITDA (1) 148.2 164.7 -10.0%
28.8 29.9 -3.8% EBITDA US$ (2) 15.6 16.0 -2.3%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
Sales in peso terms in this sector grew 14.5% in the second quarter of 1999
compared to the second quarter of 1998 and in dollar terms reached US$ 142.8
million, which represents an increase of 24.1% compared to the same period last
year. The sales growth for this sector is principally due to improved volumes
and the consolidation of the ASF and Nair operations. Exports for the quarter
grew 113.9% in comparison to the same period in the previous year, reaching US$
22.5 million, due to the inclusion of ASF. Operating profit decreased 9.2% to
Ps.112.8 million, due to the fact, among other things, that although prices of
pork improved, they were unable to reach the prices seen in 1998. Chicken prices
also decreased in comparison with the previous year. As a result of the
aforementioned factors, operating margin for the second quarter was 8.3%,
significantly higher than the margin for the first quarter of 1999 of 6.6%,
reflecting the positive results of the tight spending control system implemented
by this sector. EBITDA in dollar terms decreased 2.3% to US$ 15.6 million in the
second quarter of 1999 from US$ 16.0 million for the same period in 1998.
REAL ESTATE (DINE)
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
% %
ACCUM. TO JUNE CHANGE 2ND. QUARTER CHANGE
- -------------------------- -----------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
473.7 434.8 8.9% Net Sales 350.6 262.3 33.6%
185.2 164.5 12.6% Operating Profit 141.4 118.0 19.8%
39.1% 37.8% Operating Margin 40.3% 45.0%
200.1 174.8 14.5% EBITDA (1) 148.8 123.5 20.5%
20.8 16.8 24.1% EBITDA US$ (2) 15.7 11.8 32.9%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)EBITDA: OPERATING PROFIT + DEPRECIATION AND AMORTIZATION.
(2)EBITDA US$: CALCULATED USING THE MONTHLY FIGURES IN CURRENT PESOS DIVIDED BY
THE AVERAGE MONTHLY EXCHANGE RATE. THIS CALCULATION IS APPLICABLE TO ALL DOLLAR
DENOMINATED FIGURES IN THIS EARNINGS RELEASE, WITH THE EXCEPTION OF EXPORTS.
During the second quarter, the Real Estate sector showed a strong recovery with
sales growth of 33.6% in comparison to the same period in the previous year,
reaching Ps.350.6 million. The increase in revenues was derived principally from
8
<PAGE>
the `Bosques de Santa Fe' project, which has shown an excellent development, and
to a lesser extent to the income from `Centro Comercial Santa Fe'. The operating
profit increased 19.8% during the second quarter of 1999 to Ps.141.4 million
from Ps.118.0 million in the comparable 1998 period. The operating margin for
the 1999 quarter reached 40.3%. EBITDA in dollars grew 32.9%, reaching US$ 15.7
million, compared with US$ 11.8 million during the same period in 1998.
PROCESS OF SYSTEM ADAPTATION TO YEAR 2000 (Y2K)
In accordance with the Comision Nacional Bancaria y de Valores (C.N.B.V.) and
with the Securities and Exchange Commission (SEC), we would like to inform you
that we have updated the information presented at the end of last quarter, and
will continue to inform the public on our system adaptation process for the Year
2000 (Y2K). This report is presented separately from the aforementioned
authorities and can be found at our Website, the address of which appears at the
beginning of this press release. This information is updated quarterly.
ONE PAGE OF TABLES TO FOLLOW
9
<PAGE>
DESC S.A. DE C.V.
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND 1998
(Millions of Constant Mexican Pesos as of June 30, 1999)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents Ps. 1,718.0 Ps. 1,088.0
Other current assets 7,324.2 7,286.2
Total current assets 9,042.2 8.374.2
FIXED ASSETS 17,179.4 16,689.0
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES 123.0 180.5
OTHER ASSETS 2,308.6 2,871.8
Total assets 28,653.2 28,115.5
CURRENT LIABILITIES
Bank loans and current portion of long term debt Ps. 3,187.8 Ps. 4,514.4
Other current liabilities 3,321.7 3,207.9
LONG TERM LIABILITIES 7,410.4 6,329.5
Total liabilities 13,919.9 14,051.8
STOCKHOLDERS' EQUITY
Mayority stockholders' equity 10,915.3 11,112.7
Minority stockholders' equity 3,818.0 2.951.0
Total stockholders' equity 14,733.3 14.063.7
- ------------------------------------------------------------------ ------- ------------- ------- ------------
DESC S.A. DE C.V.
CONSOLIDATED STATEMENT OF INCOME AS OF JUNE 30, 1999 AND 1998
(Millions of Constant Mexican Pesos as of June 30, 1999)
NET SALES 11,188.6 11,049.6
OPERATING PROFIT Ps. 1,597.7 Ps. 1,605.6
COMPREHENSIVE FINANCIAL RESULT (612.2) 688.2
EQUITY IN UNCONSOLIDATED SUBSIDIARIES - -
PROVISIONS FOR TAXES AND EMPLOYEE PROFIT SHARING 450.1 254.0
NET CONSOLIDATED REPORT Ps. 1,669.9 Ps. 650.2
ALLOCATION FOR NET CONSOLIDATED REPORT
Mayority interest Ps. 1,296.8 Ps. 421.9
Minority interest Ps. 373.1 Ps. 228.3
- ------------------------------------------------------------------ ------- ------------- ------- ------------
COVENANT RATIOS
Interest coverage ratio 4.86 5.19
Total Debt / Capitalization 0.42 0.42
Earnings pre share (last 12 months) Ps. 1.25 Ps. 0.94
Book Value Ps. 7.32 Ps. 7.34
Earnings per ADS (last 12 months) US$ 2.64 US$ 1.79
FX RATE AT THE END OF THE QUARTER 9.4409 8.9800
- ------------------------------------------------------------------ ------- ------------- ------- ------------
TOTAL OUTSTANDING SHARES
Series "A" 618,768,900 42%
Series "B" 554,096,760 37%
Series "C" 317,865,765 21%
-------------------- ---------------- -------------
TOTAL 1,490,731,425 100%
</TABLE>
10
Exhibit 3
YEAR 2000 READINESS
At Desc, we are aware that the inability of systems to recognize the year 2000
is a problem that affects not only information systems and computers, but also
can affect diverse areas of an organization, among them, manufacturing systems,
data exchange systems, distribution and logistic systems, administrative and
strategic planning areas, financial systems, controlling, and services. To solve
the year 2000 issues that affect Desc and to ensure that we will continue
operating profitably and without interruption through the change in millenniums,
Desc has implemented a year 2000 readiness program, which is under the direct
supervision of senior management and is an area of high priority for the
company.
Our Y2K readiness program began by identifying in general terms the systems in
all our areas of operations that could be affected by the change in millenniums,
so that they would be included in the program. These systems include automated
manufacturing systems, information systems, systems for the generation of
financial and stock exchange reports, systems for data exchange with customers
and suppliers, systems for tracking raw material and other requirements, systems
that control building services such as elevators, accesses, fire-prevention and
security, logistic and distribution systems, and payroll and accounting systems.
We then established five phases for the implementation of our program,
consisting of: (1) awareness, (2) assessment and planning, (3) correction of
systems and equipment, (4) testing and validation, and (5) installation and
contingency plans. We are pleased to report that as a result of senior
management's commitment to the timely execution of the program, the readiness
program has achieved significant advances in a timely fashion.
Management believes that because the equipment and operational systems used by
most of the company's subsidiaries is relatively new and is routinely
modernized, the most significant risk to the company's year 2000 readiness is
that third parties, such as suppliers, customers and financial institutions, may
not achieve year 2000 readiness on a timely basis. Consequently the company is
directing significant efforts to conducting audits and performing compatibility
tests and is working with members of the financial sector, including banks,
brokerage firms and insurance companies, to ensure that their systems are Y2K
compliant and compatible with those of the company. With respect to systems
operated by the Mexican government, the Mexican government has provided
assurance that these will be Y2K compliant on a timely basis. However, the
company cannot assure that all third parties with which it interacts will
achieve Y2K readiness on time.
11
<PAGE>
OVERVIEW
In the document disclosed on October 26, 1998 named: "year 2000 readiness"
(which is included), it was clearly established Desc's compromise in achieving
year 2000 (Y2K) readiness in a timely and efficient way; in order to continue
with an efficient and profitable operation for investors and also to obtain
competitive advantages as a result of the correction of obsolete systems and the
reengineering process involved in solving Y2K problems.
The present document intends to give a follow-up on the state of Y2K readiness
as of July 27,1999. It is important to say that in general terms our program has
been working as first established, and that the senior's management compromise
in achieving this readiness has been as strong as in the early stages of our
program. We are aware that time to finish the project is coming close to an end,
and for such reason, the project's schedule is more intense every day that goes
by.
<TABLE>
<CAPTION>
================================================================================================================
Sector Budgeted costs for Y2K Accumulated costs until July 1998
(approximation)
================================================================================================================
================================================================================================================
<S> <C> <C>
Autoparts US$ 7,605,694 US$ 6,000,000
================================================================================================================
Petrochemicals and diversified Products 1,874,228 682,407
================================================================================================================
Real estate 71,000 51,080
================================================================================================================
Food 1,643,000 1,333,000
================================================================================================================
Corporate (holding company) 10,000 10,000
================================================================================================================
Total 11,203,922 8,077,207
================================================================================================================
</TABLE>
(1) The figures shown include (ASF) Authentic Specialty Foods from the food
sector
All costs are given in dollars
12
<PAGE>
STATE OF READINESS FOR EACH SECTOR ACCORDING TO THEIR PROGRAM.
Based on the activities calendar, Desc is performing according to this program.
We are confident that all the efforts being made will not compromise the
business due to internal Y2K issues. Next we show the readiness status for each
sector.
AUTOPARTS
As mentioned on the last release, this sector is about to conclude its
correction plan having contemplated more than 90% of this phase. Almost all of
the readiness and contingency plans are above 85% completed, and/or ready for
deployment. The "day zero" plan is almost complete, in which all of the major
and critical business-Y2K-issues are carefully analyzed, and contingencies with
government, suppliers, clients and other third parties are covered, is almost
complete as well. As mentioned before, this sector expects to complete its
compliance by the third quarter of 1999.
PETROCHEMICALS AND DIVERSIFIED PRODUCTS
This sector is performing according to schedule, with very important
reductions in their estimated and real costs. Internal revisions are being made
thought the company to ensure corporate Y2K strategy, and problem resolution. By
the third quarter a significant amount of the budget will have been spent mainly
in consulting fees, for the entire readiness and revision program. Contingency
plans are being reviewed, and a special care is being taken with suppliers,
government, clients and financial institutions. This sector expects to complete
its compliance by the fourth quarter 1999.
REAL ESTATE
The real estate sector is performing as planned. The correction phase
is more than 80% complete. Contingency plans are done, and full Y2K readiness
program is over 88% complete, and ensured through a strict quality control
process driven by the company in compliance with corporate standards. We are
confident that our real estate sector should reach compliance by the fourth
quarter 1999.
FOOD
In this report we have included Authentic Specialty Foods (ASF), after
carefully reviewing its operations. We are confident that all major problems
have been dealt with, due to the strong modernization process in most
operations. All major suppliers have participated in the process, and
contingency plans are the main objective for the next quarter. Due to the
current progress in these areas, the food sector should be compliant before the
end of the fourth quarter 1999.
CORPORATE HEADQUARTERS
A full assessment with suppliers, financial institutions, services, and
government has been made. All of the correction stages are done, and even though
our operations rely on new or recently acquired services or equipment, we are
re-testing and re-ensuring their quality. All major operations have been tested,
and are compliant with our program. We will also begin operations with a new
financial tool and some other business driven operations, which are fully
compliant, and replace the already tested systems. This is not for Y2K purposes,
but for strategic corporate directions. Contingency plans for all major
operations are expected to become available by the end of the third quarter
1999. Full Y2K compliance is expected to occur on the fourth quarter 1999.
CONCLUSION
Desc is working on the Y2K problem, and what remains to be accomplished is no
less important that the major steps taken since 1996. We strongly believe that
all of our major plans will be accomplished on time and ahead of critical dates.
We are very pleased with all the effort made by government, clients, suppliers,
financial institutions, and third parties, to ensure operations well beyond
2000, reducing our risks. Nonetheless, since we cannot respond for third
parties, a major effort is being made to ensure operations even when third
parties fail to resolve their own Y2K problems.
13
